**UNITED STATESSECURITIES AND EXCHANGE COMMISSION**

**Washington,D.C. 20549**

**FORM 20-F**

**o**                                  Registration Statement pursuant tosection 12(b) or 12(g) of the Securities Exchange Act of 1934

**or**

**x**                               Annual report pursuant to section 13 or15(d) of the Securities Exchange Act of 1934

**Forthe Fiscal Year Ended December 31, 2006**

**or**

**o**                                  Transition report pursuant to section 13 or 15(d) of the Securities ExchangeAct of 1934

**Forthe transition period from                  to                 **

**or**

**o**                                  Shell Company report pursuant to section 13 or 15(d) of theSecurities Exchange Act of 1934

**Commissionfile number: 333-141113**

**BRITANNIA BULK PLC**

(Exact name of registrantas specified in its charter)

**England and Wales—RegisteredNo: 03842976**

(State or otherjurisdiction of incorporation or organization)

**Dexter House, 2 Royal MintCourt, London, EC3N 4QNUnited Kingdom**

(Address of principalexecutive offices)

**Tel No: + 44 (0) 20 72644900**

(Registrant’s telephonenumber, including area code)

Securities registeredpursuant to Section 12(b) of the Act:

| **Title of each class** | ** ** | **Name of each exchange on which registered** |
|-------------------------|------------|-----------------------------------------------|
| None                    |       | None                                          |

 

**Securities registered pursuant to Section 12(g) ofthe Act:**None

**Securities for which there is a reporting obligationpursuant to Section 15(d) of the Act:**

**11%Senior Secured Notes due 2011**

Indicate the number ofoutstanding shares of each of the issuer’s classes of capital or common stockas of the close of the period covered by the annual report: 8,683,357 as of December 31,2006.

Indicate by check mark ifthe registrant is a well-known seasoned issuer, as defined by Rule 405 ofthe Securities Act. Yes o   No x

If this report is an annualor transition report, indicate by check mark if the registrant is not requiredto file reports pursuant to Section 13 or 15(d) of the SecuritiesExchange Act of 1934. Yes o   No x

Indicate by check markwhether the registrant (1) has filed all reports required to be filed by Section 13or 15(d) of the Securities Exchange Act of 1934 during the preceding 12months (or for such shorter period that the registrant was required to filesuch reports), and (2) has been subject to such filing requirements forthe past 90 days. Yes x   No o

Indicate by check markwhether the registrant is a large accelerated filer, an accelerated filer or anon-accelerated filer (as defined in Rule 12b-2 of the ExchangeAct):

| Large accelerated filer  o | Accelerated  filer  o | Non-accelerated  filer  x |
|--------------------------------------|---------------------------------|-------------------------------------|

 

Indicate by check markwhich financial statement item the registrant has elected to follow. Item 17 o   Item 18 x

If this is an annualreport, indicate by check mark whether the registrant is a shell company (asdefined in Rule 12b-2 of the Exchange Act). Yes o   No x

**Documents incorporated byreference. None**

 

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**TABLEOF CONTENTS**

|                                                      | ** ** | ** **                                                    | ** ** | **Page** |
|------------------------------------------------------|------------|---------------------------------------------------------------|------------|----------|
| Cautionary Note Regarding Forward Looking Statements |       | 4                                                             |
| **PART I**                                      |       |                                                          |
| Item 1.                                              |       | Identity of  Directors, Senior Management and Advisers        |       | 6        |
| Item 2.                                              |       | Offer  Statistics and Expected Timetable                      |       | 6        |
| Item  3.                                             |       | Key  Information                                              |       | 6        |
|                                                 |       | A.   Selected  Financial Data                       |       | 6        |
|                                                 |       | B.   Capitalisation  and Indebtedness               |       | 9        |
|                                                 |       | C.   Reasons  for the Offer and the Use of Proceeds |       | 9        |
|                                                 |       | D.   Risk  Factors                                  |       | 9        |
| Item 4.                                              |       | Information on the  Company                                   |       | 24       |
|                                                 |       | A.   History  and Development of the Company        |       | 24       |
|                                                 |       | B.   Business  Overview                             |       | 25       |
|                                                 |       | C.   Organisational  Structure                      |       | 36       |
|                                                 |       | D.   Property,  Plant and Equipment                 |       | 36       |
| Item 4A.                                             |       | Unresolved Staff  Comments                                    |       | 36       |
| Item 5.                                              |       | Operating and  Financial Review and Prospects                 |       | 37       |
| Item 6.                                              |       | Directors,  Senior Management and Employees                   |       | 49       |
|                                                 |       | A.   Directors  and Senior Management               |       | 49       |
|                                                 |       | B.   Compensation                                   |       | 50       |
|                                                 |       | C.   Board  Practices                               |       | 51       |
|                                                 |       | D.   Employees                                      |       | 51       |
|                                                 |       | E.   Share  Ownership                               |       | 52       |
| Item 7.                                              |       | Major  Shareholders and Related Party Transactions            |       | 53       |
|                                                 |       | A.   Major  Shareholders                            |       | 53       |
|                                                 |       | B.   Related  Party Transactions                    |       | 53       |
|                                                 |       | C.   Interests  of Experts and Counsel              |       | 55       |
| Item 8.                                              |       | Financial Information                                         |       | 55       |
|                                                 |       | B.   Significant  Changes                           |       | 55       |
| Item 9.                                              |       | The Offer and Listing                                         |       | 55       |
|                                                 |       | A.   Offer  and Listing Details                     |       | 55       |
|                                                 |       | B.   Plan  of Distribution                          |       | 55       |
|                                                 |       | C.   Markets                                        |       | 55       |
|                                                 |       | D.   Selling  Shareholders                          |       | 56       |
|                                                 |       | E.   Dilution                                       |       | 56       |
|                                                 |       | F.   Expenses  of the Issue                         |       | 56       |
| Item 10.                                             |       | Additional  Information                                       |       | 56       |
|                                                 |       | A.   Share  Capital                                 |       | 56       |
|                                                 |       | B.   Memorandum  and Articles of Association        |       | 56       |
|                                                 |       | C.   Material  Contracts                            |       | 60       |
|                                                 |       | D.   Exchange  Controls                             |       | 62       |
|                                                 |       | E.   Taxation                                       |       | 62       |
|                                                 |       | F.   Dividends  and Paying Agents                   |       | 69       |
|                                                 |       | G.   Statement  by Experts                          |       | 69       |
|                                                 |       | H.   Documents  on Display                          |       | 69       |
|                                                 |       | I.     Subsidiary Information                  |       | 69       |
| Item 11.                                             |       | Quantitative  and Qualitative Disclosures about Market Risk   |       | 71       |
|                                                      |            |                                                               |            |          |  |  |

2

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| Item 12.          |   | Description of  Securities other than Equity Securities                       |   | 71 |
|-------------------|--------|-------------------------------------------------------------------------------|--------|----|
|              |   | A.   Debt  Securities                                               |   | 71 |
|              |   | B.   Warrants  and Rights                                           |   | 74 |
|              |   | C.   Other  Securities                                              |   | 74 |
|              |   | D.   American  Depositary Shares                                    |   | 74 |
| **PART II**  |   |                                                                          |
| Item 13.          |   | Defaults,  Dividend Arrearages and Delinquencies                              |   | 75 |
| Item 14.          |   | Material  Modifications to the Rights of Security Holders and Use of Proceeds |   | 75 |
| Item 15.          |   | Controls and  Procedures                                                      |   | 75 |
| Item 16A.         |   | Audit  Committee Financial Expert                                             |   | 75 |
| Item  16B.        |   | Code  of Ethics                                                               |   | 75 |
| Item 16C.         |   | Principal  Accountant Fees and Services                                       |   | 75 |
| Item 16D.         |   | Exemptions  from the Listing Standards for Audit Committees                   |   | 76 |
| Item 16E.         |   | Purchases of  Equity Securities by the Issuer and Affiliated Purchasers       |   | 76 |
| **PART III** |   |                                                                          |
| Item 17.          |   | Financial Statements                                                          |   | 77 |
| Item 18.          |   | Financial Statements                                                          |   | 77 |
| Item  19.         |   | Exhibits                                                                      |   | 77 |

 

3

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**CAUTIONARY NOTEREGARDING FORWARD LOOKING STATEMENTS**

This documentcontains or incorporates by reference a number of forward looking statementswithin the meaning of Section 27A of the United States Securities Act of1933, as amended, and Section 21E of the United States Securities ExchangeAct 1934, as amended, with respect to:

·       financialcondition;

·       resultsof operations;

·       competitivepositions;

·       thefeatures and functions of and markets for the products and services we offer;and

·       ourbusiness plan and strategies.

This annual report includes “forward-lookingstatements” as defined by U.S. federal securities laws, with respect to ourfinancial condition, results of operations and business and our expectations orbeliefs concerning future events. Words such as, but not limited to, “believe,”“expect,” “anticipate,” “estimate,” “intend,” “plan,” “targets,” “projects,” “likely,”“will,” “would,” “could” and similar expressions or phrases may identifyforward-looking statements.

All forward-looking statements involve risks anduncertainties. The occurrence of the events described in this annual report,and the achievement of the expected results associated therewith, depend onmany events, some or all of which are not predictable or within our control. Ouractual results may differ materially from our expected results.

Factors that maycause our actual results to differ from our expected results include:

·       ourability to timely identify and acquire additional vessels as needed and onterms we deem reasonable;

·       oursubstantial debt after the offering of our $185 million senior secured notesdue 2011, referred to herein as the Notes;

·       ourability to generate cash to service our debt;

·       theextent to which we can implement our business strategy;

·       changesin demand and rate levels for the transportation services we offer, changes inservices offered by our competitors, dependence on a limited fleet andconcentration on a single market;

·       politicaland economic factors and recessions in the regions and countries in which weoperate;

·       seasonalityof the market;

·       restrictivecovenants under the Notes;

·       decreasesin shipping volumes, including Russian coal for export;

·       compliancewith safety and environmental protection and other governmental requirements;

·       increasedinspection procedures and strict regulatory controls;

·       escalationof insurance costs;

·       currencyexchange risks;

·       catastrophiclosses and other liabilities;

·       thearrest of our vessels by maritime claimants;

4

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·       disruptionto our business or markets arising from severe weather conditions, naturaldisasters, international security or public health concerns and acts ofterrorism or war;

·       theloss of our key management personnel;

·       legalor other proceedings to which we are subject; and

·       ourability to continue to charter-in vessels as needed at acceptable rates.

We have based these statements on assumptions andanalyses formed by applying our experience and perception of historical trends,current conditions, expected future developments and other factors we believeare appropriate under the circumstances. All future written and verbal forward-lookingstatements attributable to us or any person acting on our behalf are expresslyqualified in their entirety by the cautionary statements contained or referredto in this section.

You should not unduly rely on these forward-lookingstatements in this annual report, as they speak only as of the date of thisannual report. Except as required by law, we undertake no obligation, and specifically decline any obligation, topublicly release any revisions to these forward-looking statements to reflectevents or circumstances occurring after the date of this annual report or toreflect the occurrence of unanticipated events.

See the information under the heading “Item 3. KeyInformation—Risk Factors” for a discussion important factors that could affectour financial performance or could cause actual results to differ materiallyfrom estimates contained in forward-looking statements. These factors and the other risk factors described in this annual reportare not necessarily all of the important factors that could cause actualresults or developments to differ materially from those expressed in any of ourforward-looking statements. Other unknown or unpredictable factors alsocould harm our results. Consequently, there can be no assurance that actualresults or developments anticipated by us will be realized or, even ifsubstantially realized, that they will have the expected consequences to, oreffects on, us. Given these uncertainties, prospective investors are cautionednot to place undue reliance on such forward-looking statements.

5

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**PART I**

**ITEM 1.**                IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS

Not Applicable.

**ITEM 2.**                OFFER STATISTICS AND EXPECTED TIMETABLE

Not Applicable.

**ITEM 3.**                KEY INFORMATION

**A.   SELECTED FINANCIAL DATA**

The selectedconsolidated historical financial data of Britannia Bulk Plc as of and for theyears ended December 31, 2006, 2005 and 2004 are derived from our auditedconsolidated financial statements. The data in the selected consolidatedhistorical financial data should be read together with, and is qualified in itsentirety by reference to, the historical consolidated financial statements andthe accompanying notes included in this annual report. The financialinformation should also be read together with “Item 5.—Operating and FinancialReview and Prospects” included elsewhere in this annual report.

| ** **                                            | ** ** | **Year ended December 31,** | ** ** |
|-------------------------------------------------------|------------|--------------------------------------------|------------|
| ** **                                            | ** ** | **2006**                                   | ** ** | **2005** | ** ** | **2004** | ** ** |
| ** **                                            | ** ** | **($ in thousands)**             | ** ** |
| **STATEMENT OF OPERATIONS DATA:**                     |       |                                       |       |   |   |   |   |
| **Revenues:**                                         |       |                                       |       |   |   |   |   |
| Contract of affreightment and voyage  revenues        |       | $                                          | 172,242    |   | $ | 144,318 |   | $ | 39,869 |   |
| Time charter revenues                                 |       | 12,909                                     |       | 33,295 |   | 654 |   |
| Demurrage and other revenues                          |       | 6,352                                      |       | 6,972 |   | 1,602 |   |
| Total revenues                                        |       | 191,503                                    |       | 184,585 |   | 42,125 |   |
| **Operating expenses:**                               |       |                                       |       |   |   |   |   |
| Voyage expenses                                       |       | $                                          | 71,840     |   | $ | 49,347 |   | $ | 11,893 |   |
| Charter hire expenses                                 |       | 75,723                                     |       | 95,937 |   | 16,322 |   |
| Commissions                                           |       | 4,316                                      |       | 4,265 |   | 1,083 |   |
| Vessel operating expenses                             |       | 12,870                                     |       | 12,137 |   | 2,802 |   |
| Depreciation and amortization                         |       | 10,894                                     |       | 9,341 |   | 1,114 |   |
| General and administrative                            |       | 9,410                                      |       | 3,666 |   | 148 |   |
| Expense to related parties                            |       | —                                     |       | 131 |   | 799 |   |
| Foreign currency transaction gains and  losses, net   |       | (202                                       | )          | 120 |   | 88 |   |
| Total operating expenses                              |       | 184,851                                    |       | 174,944 |   | 34,249 |   |
| **Operating income:**                                 |       | 6,652                                      |       | 9,641 |   | 7,876 |   |
| Minority interest expense                             |       | (72                                        | )          | (28 | ) | — |   |
| Interest income                                       |       | 1,096                                      |       | 272 |   | 23 |   |
| Interest expense                                      |       | (5,122                                     | )          | (1,353 | ) | (271 | ) |
| **Income before taxes:**                              |       | 2,554                                      |       | 8,532 |   | 7,628 |   |
| Provision for taxes                                   |       | (160                                       | )          | (284 | ) | (49 | ) |
| **Net income:**                                       |       | $                                          | 2,394      |   | $ | 8,248 |   | $ | 7,579 |   |
| Weighted average number of common shares  outstanding |       | 8,683,289                                  |       | 5,697,612 |   | 207,720 |   |
| Basic earnings per common share                       |       | $                                          | 0.28       |   | $ | 1.45 |   | $ | 36.49 |   |

6

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| **CASH FLOWS FROM OPERATING ACTIVITIES:**                                             |   |     |    |    |   |    |   |
|---------------------------------------------------------------------------------------|--------|----------|---------|---------|--------|---------|--------|
| Net income                                                                            |   | $        | 2,394   |    | $      | 8,248   |   | $ | 7,579 |   |
| **Adjustments to reconcile net income to net  cash provided by operating activities** |   |     |    |    |   |    |   |
| Depreciation  and amortization                                                        |   | 10,894   |    | 9,341   |   | 1,114   |   |
| Amortization  of Note discount and debt issuance costs                                |   | 822      |    | —  |   | —  |   |
| Interest income on vessel acquisition  account                                        |   | (252     | )       | —  |   | —  |   |
| Minority interest                                                                     |   | 72       |    | 28      |   | —  |   |
| **Changes in operating assets and liabilities:**                                      |   |     |    |    |   |    |   |
| Due from charters                                                                     |   | 3,375    |    | (5,557  | )      | (4,481  | )      |
| Inventories                                                                           |   | (1,316   | )       | (1,063  | )      | (599    | )      |
| Prepaid expenses                                                                      |   | (2,654   | )       | (749    | )      | (321    | )      |
| Other current assets                                                                  |   | (604     | )       | 1       |   | (9      | )      |
| Payments for drydockings                                                              |   | (5,205   | )       | (2,089  | )      | (6,381  | )      |
| Accounts payable, accrued expenses and  other liabilities                             |   | 6,664    |    | 1,307   |   | 4,742   |   |
| Deferred revenue                                                                      |   | (1,340   | )       | 4,504   |   | 1,066   |   |
| Taxes payable                                                                         |   | 170      |    | 231     |   | 49      |   |
| Other                                                                                 |   | 14       |    | 208     |   | 163     |   |
| Net cash provided by operating activities                                             |   | $        | 13,034  |    | $      | 14,410  |   | $ | 2,922 |   |
| **Cash flows from investing activities:**                                             |   |     |    |    |   |    |   |
| Payments and deposits for vessels and  other fixed assets                             |   | (2,321   | )       | (27,748 | )      | (24,888 | )      |
| Payments for acquisitions, net of cash  acquired                                      |   | —   |    | (102    | )      | —  |   |
| Funding of the vessel acquisition account                                             |   | (140,000 | )       | —  |   | —  |   |
| Net cash used in investing activities                                                 |   | (142,321 | )       | (27,850 | )      | (24,888 | )      |
| **Cash flows from financing activities:**                                             |   |     |    |    |   |    |   |
| Amounts (paid to) received from related  parties                                      |   | (131     | )       | (668    | )      | 15,817  |   |
| Proceeds from borrowings                                                              |   | $        | 173,201 |    | $      | 19,500  |   | $ | 15,962 |   |
| Payments of deferred financing costs                                                  |   | (6,827   | )       | (216    | )      | (487    | )      |
| Repayment of borrowings                                                               |   | (26,200  | )       | (9,262  | )      | —  |   |
| Issuance of common stock                                                              |   | 13       |    | 1,160   |   | —  |   |
| Net cash provided by financing activities                                             |   | $        | 140,056 |    | $      | 10,514  |   | $ | 31,292 |   |
| **Net increase (decrease) in cash**                                                   |   | 10,769   |    | (2,926  | )      | 9,326   |   |
| Cash and cash equivalents at beginning of  year                                       |   | 6,401    |    | 9,327   |   | 1       |   |
| Cash and cash equivalents at end of year                                              |   | $        | 17,170  |    | $      | 6,401   |   | $ | 9,327 |   |
| **Supplementary cash flow information**                                               |   |     |    |    |   |    |   |
| Cash paid for interest                                                                |   | $        | 1,120   |    | $      | 1,169   |   | $ | 271 |   |
| Cash paid for taxes                                                                   |   | 482      |    | 53      |   | —  |   |
| **BALANCE SHEET DATA:**                                                               |   |     |    |    |   |    |   |
| **Assets**                                                                            |   |     |    |    |   |    |   |
| Current  assets                                                                       |   |     |    |    |   |    |   |
| Cash and cash equivalents                                                             |   | 17,170   |    | $       | 6,401  |    | $      | 9,327 |   |
| Vessel acquisition account                                                            |   | 138,133  |    | —  |   | —  |   |
| Due from charters, net                                                                |   | 6,717    |    | 10,092  |   | 4,484   |   |
| Inventories                                                                           |   | 3,199    |    | 1,883   |   | 599     |   |
| Prepaid expenses                                                                      |   | 3,724    |    | 1,070   |   | 321     |   |

7

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| Other current  assets                                                                                                                                                                                    |   | 633     |    | 29     |   | 30     |   |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|---------|---------|--------|--------|--------|--------|
| **Total current assets**                                                                                                                                                                                 |   | 169,576 |    | 19,475 |   | 14,761 |   |
| Vessels and  other fixed assets, net                                                                                                                                                                     |   | 42,682  |    | 47,678 |   | 24,169 |   |
| Deferred  drydocking costs, net                                                                                                                                                                          |   | 4,899   |    | 3,271  |   | 5,986  |   |
|                                                                                                                                                                                                     |   | 47,581  |    | 50,949 |   | 30,155 |   |
| **Other assets**                                                                                                                                                                                         |   |    |    |   |   |   |   |
| Investments                                                                                                                                                                                              |   | 58      |    | 39     |   | — |   |
| Deposit on  vessel                                                                                                                                                                                       |   | 2,119   |    | — |   | — |   |
| Goodwill                                                                                                                                                                                                 |   | —  |    | 33     |   | — |   |
| Deferred  financing costs, net                                                                                                                                                                           |   | 6,656   |    | 356    |   | 324    |   |
| **Total assets**                                                                                                                                                                                         |   | $       | 225,990 |   | $      | 70,852 |   | $ | 45,240 |   |
| **Liabilities and shareholders’ equity**                                                                                                                                                            |   |    |    |   |   |   |   |
| **Current liabilities**                                                                                                                                                                                  |   |    |    |   |   |   |   |
| Accounts  payable                                                                                                                                                                                        |   | 4,571   |    | $      | 2,219  |   | $      | 1,953 |   |
| Accrued  expenses and other liabilities                                                                                                                                                                  |   | 8,702   |    | 4,390  |   | 2,792  |   |
| Deferred  revenue                                                                                                                                                                                        |   | 4,230   |    | 5,570  |   | 1,066  |   |
| Taxes payable                                                                                                                                                                                            |   | 450     |    | 280    |   | 49     |   |
| Amounts due  to related parties                                                                                                                                                                          |   | —  |    | 131    |   | 799    |   |
| Loans from  shareholders                                                                                                                                                                                 |   | —  |    | — |   | 10,053 |   |
| Current  portion of long-term debt                                                                                                                                                                       |   | —  |    | 11,520 |   | 7,672  |   |
| **Total current  liabilities**                                                                                                                                                                           |   | 17,953  |    | 24,110 |   | 24,384 |   |
| Long-term  debt, net of current portion                                                                                                                                                                  |   | 173,496 |    | 14,680 |   | 8,290  |   |
| **Total liabilities**                                                                                                                                                                                    |   | 191,449 |    | 38,790 |   | 32,674 |   |
| Minority  interest                                                                                                                                                                                       |   | 107     |    | 35     |   | — |   |
| **Shareholders’ equity:**                                                                                                                                                                           |   |    |    |   |   |   |   |
| Common stock  (£1 par value, stated at $1.79; 10,000,000 shares authorized; 8,683,357,  8,682,357, 2,767,519 shares issued and outstanding at December 31, 2006,  2005 and 2004, respectively) |   | 15,543  |    | 15,541 |   | 4,954  |   |
| Additional  paid-in capital                                                                                                                                                                              |   | 648     |    | 637    |   | 11     |   |
| Retained  earnings                                                                                                                                                                                       |   | 18,243  |    | 15,849 |   | 7,601  |   |
| **Total shareholders’  equity**                                                                                                                                                                     |   | 34,434  |    | 32,027 |   | 12,566 |   |
| **Total liabilities and  shareholders’ equity**                                                                                                                                                     |   | $       | 225,990 |   | $      | 70,852 |   | $ | 45,240 |   |

 

***Exchange Rates***

For a discussion of the impact of currency fluctuations on Britannia’sconsolidated results of operations and combined financial position, see “Item 5.—Operatingand Financial Review and Prospects”.

The following tables illustrate, for the periods and dates indicated,certain information concerning the Non Buying Rate for pounds sterlingexpressed in US dollars per £1.00 and for the euro expressed in US dollarsper €1.00. Informationconcerning the U.S. dollar exchange rate is based on the noon buying rate inNew York City for cable transfers in foreign currencies as certified forcustoms purposes by the Federal Reserve Bank of New York, or Noon Buying Rate. Suchrates are provided solely for convenience and no representation is made thatU.S. dollars were, could have been, or could be, converted into British Poundsor Euros at these rates or at any other rate. Such rates were not used byBritannia in the preparation of its audited consolidated financial statementsincluded elsewhere in this annual report. The Non Buying Rate on April 18,2007 was £1.00 = $2.0041 and €1.00 = $1.3574.

8

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**USdollars per £1.00—Noon Buying Rates**
|                                                                                    | ** ** | **$ per £ Exchange Rate** | ** ** |
|------------------------------------------------------------------------------------|------------|----------------------------------------------------|------------|
| ** **                                                                         | ** ** | **Period-end**                                     | ** ** | **High** | ** ** | **Low** | ** ** | **Average (1)** | ** ** |
| ***Year  ended 31 December,***                                                     | ** ** |                                               | ** ** | ** ** |   | ** ** | ** ** | ** ** | ** ** |   | ** ** | ** ** |   |
| 2006                                                                               | ** ** |                                               | 1.9586     |   |   | 1.9394 |   | 1.7256 |   |   | 1.8582 | ** ** |   |
| 2005                                                                               | ** ** |                                               | 1.2188     |   |   | 1.9292 |   | 1.7138 |   |   | 1.8147 | ** ** |   |
| 2004                                                                               | ** ** |                                               | 1.9160     |   |   | 1.9482 |   | 1.7544 |   |   | 1.8356 | ** ** |   |
| ***Month***                                                                        | ** ** |                                               |       |   |   |   |   |   |   |   |   | ** ** |   |
| April 2007 (through  April 18, 2007)       | ** ** |                                               | 2.0041     |   |   | 2.0061 |   | 1.9608 |   |   | 1.9800 | ** ** |   |
| March 2007                                                                    | ** ** |                                               | 1.9685     |   |   | 1.9694 |   | 1.9235 |   |   | 1.9474 | ** ** |   |
| February 2007                                                                 | ** ** |                                               | 1.9613     |   |   | 1.9699 |   | 1.9445 |   |   | 1.9589 | ** ** |   |
| January 2007                                                                  | ** ** |                                               | 1.9611     |   |   | 1.9847 |   | 1.9305 |   |   | 1.9587 | ** ** |   |

 

**USdollars per**€1.00—Noon Buying Rates
|                                                                                    | ** ** | **$ per **€ Exchange Rate | ** ** |
|------------------------------------------------------------------------------------|------------|----------------------------------------------------|------------|
| ** **                                                                         | ** ** | **Period-end**                                     | ** ** | **High** | ** ** | **Low** | ** ** | **Average (1)** | ** ** |
| ***Year  ended 31 December,***                                                     | ** ** |                                               | ** ** | ** ** |   | ** ** | ** ** | ** ** | ** ** |   | ** ** | ** ** |   |
| 2006                                                                               | ** ** |                                               | 1.3197     |   |   | 1.3327 |   | 1.1860 |   |   | 1.2661 | ** ** |   |
| 2005                                                                               | ** ** |                                               | 1.1842     |   |   | 1.3476 |   | 1.1667 |   |   | 1.2400 | ** ** |   |
| 2004                                                                               | ** ** |                                               | 1.3538     |   |   | 1.3625 |   | 1.1801 |   |   | 1.2478 | ** ** |   |
| ***Month***                                                                        | ** ** |                                               |       |   |   |   |   |   |   |   |   | ** ** |   |
| April 2007 (through  April 18, 2007)       | ** ** |                                               | 1.3574     |   |   | 1.3574 |   | 1.3363 |   |   | 1.3449 | ** ** |   |
| March 2007                                                                    | ** ** |                                               | 1.3374     |   |   | 1.3374 |   | 1.3094 |   |   | 1.3246 | ** ** |   |
| February 2007                                                                 | ** ** |                                               | 1.3230     |   |   | 1.5246 |   | 1.2935 |   |   | 1.3080 | ** ** |   |
| January 2007                                                                  | ** ** |                                               | 1.2998     |   |   | 1.5286 |   | 1.2904 |   |   | 1.2993 | ** ** |   |

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(1)          Theaverage of the Noon Buying Rates on the last day of each month during therelevant period.

**B.   CAPITALISATIONAND INDEBTEDNESS**

Not applicable.

**C.   REASONSFOR THE OFFER AND USE OF PROCEEDS**

Not applicable.

**D.   RISKFACTORS**

*The key risks to our business are included below. Additionalrisks not presently known to us or that we currently deem immaterial may alsoimpair our business. The risks described below are not the only risks that weface. Additional risks and uncertainties not currently known to us or that wecurrently deem to be immaterial may also impair our business operations. Theoccurrence of any of the events described in this section or any of these risksmay have a material adverse effect on our business, financial condition,results of operations and cash flows.*

**RISKS RELATING TOOUR BUSINESS**

***We are a recentlyformed company with a limited history of operations.***

We are a recently formedcompany and have a limited performance record, operating history and historicalfinancial statements upon which to evaluate our operations or our ability toimplement and 

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achieveour business strategy. We cannot assure you that we will be successful inimplementing our business strategy, which would adversely affect our results ofoperations and financial condition.

***We depend on theBaltic coal trade for a large part of our revenues and a decline in coal demandmay negatively impact our results.***

We depend on the Baltic coal trade for a large part ofour revenues and a decline in coal demand may cause a decrease in the coaltrade, which may result in a decrease in demand for our vessels. The principalfactors affecting demand for coal are outside of our control, and the nature,timing and degree of changes in economic conditions are unpredictable.

The principalfactors that influence demand for coal include:

·       therelative price and availability of other methods of producing electricitycompared against coal;

·       weatherconditions;

·       environmentaland other regulatory developments;

·       governmentactions such as controls on imports, exports and prices, new forms of taxationand increased government regulation;

·       globaland regional economic and political conditions; and

·       developmentsin international trade.

For example, the warmer temperatures in Europe duringthe winter months of 2006 and early 2007 had an adverse impact on the overalldemand for coal.

Our ability to employ asignificant portion of our vessels will depend upon, among other things, thethen current state of the coal trade. If rates are low when our vessels’contracts expire, or when we are trying to employ newly acquired vessels, wemay be forced to charter them at reduced rates or even possibly a rate wherebywe incur a loss, which may reduce our earnings or adversely affect ourfinancial condition.

***The operation ofdrybulk carriers has certain unique operational risks, which can result indamage to vessels, equipment and cargoes.***

The operation of certain ship types, such as drybulkcarriers, has certain unique risks. With a drybulk carrier, the cargo itselfand its interaction with the ship creates risks. By their nature, drybulkcargoes are often heavy, dense, easily shifted and react badly to waterexposure. In addition, from December to May, many of our typical traderoutes are ice-covered. These conditions increase the risk to vessel and crewsafety as vessels are more difficult to navigate and may be damaged by the ice.Furthermore, drybulk carriers are often subjected to battering treatment withgrabs, jackhammers (to pry encrusted cargoes out of the hold) and smallbulldozers during unloading operations. This treatment may cause damage to thevessel. Vessels damaged due to treatment during unloading procedures may bemore susceptible to breaching at sea and hull breaches in drybulk carriers maylead to the flooding of the vessels’ holds. If a drybulk carrier suffersflooding in its forward holds the bulk cargo may become so dense andwaterlogged that its pressure may buckle the vessels’ bulkheads leading to theloss of the vessel. If we are unable to adequately maintain our vessels we maybe unable to prevent these events. We also may experience collisions from timeto time with other vessels, tugs or barges which may result in significantdamage to our fleet. In addition, the loss of any of our vessels could harm ourreputation as a safe and reliable vessel owner and operator.

If our vessels sufferdamage, they may need to be repaired at a drydocking facility. The costs ofrepairs are unpredictable and can be substantial. In addition, space atdrydocking facilities is sometimes limited 

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and notall drydocking facilities are conveniently located. We may be unable to findspace at a suitable drydocking facility or we may be forced to travel to adrydocking facility that is distant from the relevant vessel’s position. Theloss of earnings while our vessels are being repaired, repositioned and forcedto wait, as well as the actual cost of these repairs, would decrease ourearnings and reduce the amount of cash that we have available for interestpayments. We may not have insurance that is sufficient to cover all or any ofthese costs or losses and may have to pay costs not covered by our insurance.Any of these circumstances or events could negatively impact our business,financial condition and results of operations.

***We may not be ableto grow or effectively manage our growth, which could cause us to incuradditional indebtedness and other liabilities and adversely affect ourbusiness.***

A principal focusof our business strategy is to grow by expanding our business. We intend toacquire additional drybulk vessels with a significant portion of the proceeds fromthe offering of the Notes. The addition of these vessels to our fleet willresult in a significant increase in the size of our fleet and imposesignificant additional responsibilities on our management and staff. As weexpect our fleet to grow further, we may be required to increase the number ofour personnel. We will also have to increase our customer base to providecontinued employment for the new vessels. Our future growth will depend on anumber of factors, some of which we can control and some of which we cannot.These factors include our ability to:

·       locateand acquire suitable vessels;

·       identifyand consummate acquisitions or establish joint ventures;

·       integrateacquired vessels successfully with our existing operations;

·       expandour customer base;

·       manageour expansion, including improving and growing our financing and operatingsystems;

·       recruitsuitable additional seafarers and shore-based administrative andmanagement personnel; and

·       generatesufficient capital or obtain required financing for our existing and newoperations.

Growing any business through acquisitions presentsnumerous risks, including undisclosed liabilities and obligations, thepossibility that indemnification agreements, if any, will be unenforceable orinsufficient to cover potential losses and difficulties associated withimposing common standards, controls, procedures and policies, difficultyobtaining additional qualified personnel, managing relationships with customersand suppliers and integrating newly acquired operations into existinginfrastructures. Future acquisitions could result in the incurrence ofadditional indebtedness and liabilities that could have a material adverseeffect on our business, results of operations, cash flows and financialcondition. In addition, competition from other buyers for vessels as asignificant increase in day rates available to vessel owners could reduce ouracquisition opportunities or cause us to pay a higher price than we mightotherwise pay. We cannot assure you that we will be successful in executing ourgrowth plans or that we will not incur significant expenses and losses inconnection with these plans.

It is customary for newbuildings to have warranties for a period of time after delivery. Since weintend to purchase secondhand vessels, we do not expect these vessels to havethe benefit of such warranties.

***We may be unable toattract and retain key management personnel and other employees in the shippingindustry, which may negatively affect the effectiveness of our management andour results of operations.***

To a significant extent,our success depends upon the abilities and efforts of our management team andour ability to hire and retain key members of our management team.Specifically, individuals on our management team have established strongrelationships with many of our significant customers, which in 

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somecases predate such executive’s employment with us. The loss of any of theseindividuals could adversely affect our business prospects and financialcondition, and relationships with those customers for which such departingexecutive had an established relationship. In addition, difficulty in hiringand retaining personnel could adversely affect our business, results ofoperations, cash flows and financial condition.

***Purchasing andoperating previously owned vessels and the aging of our fleet may result inunexpected repair costs, increased operating costs and reduced fleetutilization.***

Our current business strategy includes the acquisitionand operation of previously owned vessels, including the vessels we haverecently acquired and those for which we have Memoranda of Agreement for theacquisition of such vessels. While we have the right to inspect previouslyowned vessels prior to purchase and have performed such inspection when wedeemed it advisable to do so, such an inspection does not provide us with thesame knowledge about their condition that we would have if these vessels hadbeen built for and operated exclusively by us. Previously owned vessels mayhave conditions or defects that we were not aware of when we bought the vesselsand that may require us to incur costly repairs to the vessels, particularlysince second-hand vessels generally do not receive the benefit ofwarranties. If this were to occur, such hidden defects or problems may beexpensive to repair when detected and, if not detected, may result in accidentsor other incidents for which we may become liable to third parties. Repairs mayrequire us to put a vessel into drydock, which would reduce our fleetutilization and increase our costs. We do not expect to receive the benefit ofwarranties on previously owned vessels.

Our fleet as at April 15,2007 has a combined capacity of 395,907 dwt and an average age of20.3 years. In general, the costs to maintain a vessel in good operatingcondition increase with the age of the vessel. Older vessels are typically lessfuel-efficient and more costly to maintain than more recently constructedvessels due to improvements in engine technology. Cargo insurance rates alsoincrease with the age of a vessel, making older vessels more expensive and lessdesirable to charterers and shippers. Governmental regulations, includingenvironmental regulations, safety or other equipment standards relating to theage of vessels may also require expenditures for alterations, or the additionof new equipment, to our vessels and may restrict the type of activities inwhich our vessels may engage or how and when vessels need to be dismantled anddisposed of. We cannot assure you that, as our vessels age, market conditionswill justify those expenditures or enable us to operate our vessels profitablyduring the remainder of their useful lives.

***The shippingindustry has inherent operational risks that may not be adequately covered byour insurance.***

We procure insurance forour fleet against risks commonly insured against by vessel owners andoperators. Our current insurance includes hull and machinery insurance, warrisk insurance, protection and indemnity insurance, which includes environmentaldamage and pollution insurance, and insurance against loss of hire, whichcovers business interruptions that result in the loss of use of a vessel. Wecan give no assurance that we are adequately insured against all risks that wemay face or that our insurers will pay a particular claim. Even if ourinsurance coverage is adequate to cover our losses, we may not be able totimely obtain a replacement vessel in the event of a loss. Furthermore, we maynot be able to maintain or obtain adequate insurance coverage at reasonablerates for our fleet. We may also be subject to calls, or premiums, in amountsbased not only on our own claim records but also the claim records of all othermembers of the protection and indemnity associations through which we receiveindemnity insurance coverage for tort liability. Our insurance policies alsocontain deductibles, limitations and exclusions that may increase our costs.

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***We depend upon afew significant customers for a large part of our revenues, and the loss of oneor more of these customers could materially adversely affect our businessprospects, results of operations and financial performance.***

We have derived, andexpect to continue to derive, a significant part of our revenue from a smallnumber of key customers. For example, two of our customers accounted for 30% ofour revenues for the year ended December 31, 2006. If one or more of ourkey customers, (i) is unable to perform under one or more contracts or charterswith us and we are unable to find a suitable replacement contract or charter, exercisescertain rights to terminate a contract or charter, or (iii) decides not tocontract for or charter our vessels in the future, we could suffer a loss ofrevenues that could materially adversely affect our business, financialcondition and results of operations. Furthermore, if we lose a key customer, wemay be unable to obtain contracts or charters on comparable terms or may becomesubject to the volatile spot market, which is highly competitive and subject tosignificant price fluctuations.

***Our operatingresults are subject to seasonal fluctuations, which could affect our operatingresults and our ability to make interest payments.***

We operate our vessels inmarkets that have seasonal variations in demand and, as a result, in charterhire rates. This seasonality may result in quarter-to-quarter volatility in ouroperating results. The drybulk carrier market is typically stronger in the falland winter months in anticipation of increased consumption of coal and otherraw materials in the northern hemisphere during the winter months. In addition,unpredictable weather patterns in these months tend to disrupt vesselscheduling and supplies of certain commodities. As a result, drybulk shippingrates have historically been lower during the fiscal quarters ended June 30and September 30, and, conversely, have historically been higher in fiscalquarters ended December 31 and March 31. This seasonality couldmaterially affect our operating results in the future, particularly for thoseperiods in which drybulk shipping rates are expected to be lower.

***We depend on COAs,which could lock us in at unfavorable rates for our shipping services for acertain amount of time.***

Historically, we havedepended in large part on COAs and expect we will continue to utlize thesecontracts in the future to achieve our business strategy. While COAs provide arelatively stable and predictable source of income, they fix the rate we arepaid for our drybulk shipping services. Once we have entered into a COA,factors beyond our control may cause the rates we are paid under that COA tobecome unprofitable. Nevertheless, we would be obligated to continue to performat these rates for the terms of the COA. The requirement to perform thesecontracts on the terms of the COA regardless of intervening factors could havea material adverse effect on our business, results of operations and financialcondition.

***Our businessstrategy includes chartering-in vessels, which could result in material adverseeffects on our business, results of operations and financial condition.***

Our business strategydepends in part on our ability to charter-in vessels. If we are not able tofind vessels to charter-in in the future, or to charter-in vessels at what wedeem to be a reasonable rate, we may need to achieve our business strategy andwe may experience a material adverse effect on our business, results ofoperations and financial condition. In addition, if we charter-in a vessel andshipping rates were to subsequently decrease substantially or we were unable tofind immediate employment for that vessel, our obligation under the charter topay above-market rates would remain which would adversely affect ourresults of operations and financial condition.

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***Labor interruptions could disrupt our business***

Our vessels are crewed byseafarers who generally have one-year employment contracts with us. Industrialaction or other labor unrest could prevent or hinder our operations from beingcarried out normally and if such interest or other action is not resolved in atimely and cost-effective manner could have a material adverse effect on our business,results of operations, cash flows and financial condition.

***Because we generatenearly all of our revenues in U.S. dollars, but incur some of our expenses inother currencies, exchange rate fluctuations could adversely impact our resultsof operations and financial condition.***

In 2006, we generatedapproximately 99% of our revenues in U.S. dollars but incurred approximately81% of our expenses in U.S dollars and 19% in currencies other than the U.S.dollar, primarily the British Pound, the Euro, and Danish Kroner. A change inexchange rates could adversely impact our results of operations and financialcondition.

***Government actionin Russia could create a difficult business climate which could adverselyaffect our business prospects, results of operations and financial performance.***

Certain actions by theRussian government could create a difficult business climate in Russia. Thegovernment has considerable discretion with respect to certain actions, such aswithdrawal of licenses, tax audits and criminal prosecutions. If such steps aretaken against producers or exporters of Russian coal, the amount of Russiancoal that is exported through the Baltic could be limited. If the governmentwere to take action that would affect the export of Russian coal through theBaltic, such action would have a material adverse effect on our business,results of operations and financial condition.

***It may be difficultto serve process on or enforce a United States judgment against our officers,our directors and us.***

We are a public limitedcompany incorporated under the laws of England and Wales. All of the Company’sdirectors and executive officers live outside of the United States.Substantially all of the assets of the Company’s directors and officers and theCompany’s assets are located outside the United States. As a result, it may notbe possible for you to serve process on such persons or the Company in theUnited States or enforce judgments obtained in U.S. courts against them orthe Company to the extent assets located in the United States are insufficientto satisfy the judgments. In addition, there is uncertainty as to whether thecourts of the United Kingdom would (i) enforce judgments of United Statescourts obtained against us or our officers and directors predicated on thecivil liability provisions of the United States federal or statesecurities laws, or (ii) entertain original actions brought in courts inthe United Kingdom against us or our officers and directors predicated onUnited States federal or state securities laws. As a result, it may bedifficult for you to enforce judgments obtained in courts within or outside theUnited States against our directors and officers, including actions predicatedupon the civil liability provisions of the federal securities laws of theUnited States.

***If we cannotcompletely utilise proceeds from the offering of the Notes to acquire vesselsand expand our fleet, we will be obligated to use the proceeds remaining in theVessel Acquisition Account to offer to redeem some of the Notes.***

As of the date hereof, wehave expended approximately $70 million, and committed a further $47.4 million,of the $140 million available to us from proceeds of the offering of the Notesto acquire vessels. We intend to use the remainder of the available proceedsfrom the offering of the Notes to acquire vessels and expand our existingfleet. We have not yet identified all of the potential vessels that we intendto acquire and we will have broad discretion to determine the cost, age, sizeand other characteristics of the vessels we may acquire. Further, we intend toconduct customary diligence with respect to these 

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acquisitionsand, as a result, suitable acquisition opportunities may not be immediatelyavailable or available in a reasonable time. We cannot predict precisely howlong it will take to deploy the remaining funds raised from the offering of theNotes to acquire these new vessels. We expect lower returns compared to vesselacquisitions in the same time period on these proceeds during that period ascompared to what returns might have been achieved assuming a fully employedfleet of acquired vessels during the same period. If, as of December 1,2008, at least $125 million of the initial funds deposited in the VesselAcquisition Account have not been used to purchase additional vessels inaccordance with the indenture governing the Notes, the difference between thefunds that have been so expended and the initial deposit must be used to makean offer to purchase Notes at a price of 101% of the accreted value, plusaccrued interest. Any such offered funds that are not used to repurchase Notesin such offer will remain in the Vessel Acquisition Account.

**INDUSTRY SPECIFICRISK FACTORS**

***The internationaldrybulk shipping industry is cyclical and volatile, which may lead toreductions and volatility in our charter or contract rates, vessel values andresults of operations.***

The international drybulk shipping industry iscyclical, with attendant volatility in charter hire rates, contract rates forCOAs and profitability. The degree of charter hire and contract rate volatilityamong different types of drybulk carriers has varied widely. Although charterhire rates for drybulk vessels have declined from their peak levels, they arestill high relative to historic levels. Fluctuations in charter and contractrates result from changes in the supply and demand for vessel capacity andchanges in the supply and demand for the major commodities carried by marinevessels internationally. The factors affecting supply and demand for vesselsand supply and demand for products or materials transported by drybulk carriersare outside of our control, and the nature, timing and degree of changes inindustry conditions are unpredictable.

The factors thatinfluence demand for drybulk carriers include:

·       supplyand demand for drybulk products;

·       thedistance drybulk products are to be moved by sea;

·       theglobalization of manufacturing;

·       globaland regional economic and political conditions;

·       changesin global production of drybulk cargoes;

·       developmentsin international trade;

·       changesin seaborne and other transportation patterns, including changes in thedistances over which cargoes are transported;

·       environmentaland other regulatory developments; and

·       currencyexchange rates.

The factors thatinfluence the supply of drybulk carriers include:

·       thenumber of newbuilding deliveries;

·       thescrapping rate of older vessels;

·       thecosts of building new vessels and drydocking vessels for repair;

·       changesin environmental and other regulations that may limit the useful life ofvessels;

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·       thenumber of vessels that are out of service;

·       vesselcasualties; and

·       portor canal congestion/closure.

Our ability to recharter or recontract our drybulkcarriers upon the expiration or termination of their current time charters orCOAs and the charter or contract rates payable under any renewal or replacementcharters or COAs will depend upon, among other things, the then current stateof the drybulk carrier market and the demand for the cargoes we carry,primarily coal. If the drybulk carrier market or the coal market is in a lowperiod when our vessels’ charters or contracts expire, or we are trying tocharter, or enter into COAs, with respect to newly acquired vessels, we may beforced to charter or contract them at reduced rates or even possibly a ratewhereby we incur a loss, which may reduce our earnings or make our earningsvolatile.

In addition, because themarket value of our vessels may fluctuate significantly, we may incur losseswhen we sell vessels, which may adversely affect our earnings. If we sellvessels at a time when vessel prices have fallen and before we have recorded animpairment adjustment to our financial statements, the sale may be at less thanthe vessel’s carrying amount on our financial statements, resulting in a lossand a reduction in earnings.

***Charter rates fordrybulk carriers have been at historically high levels recently and futuregrowth will depend on continued growth in the world economy.***

Charter hire rates fordrybulk vessels are at or near historic levels. We anticipate that futuredemand for our drybulk carriers and drybulk charter rates will be dependent, inpart, upon continued economic growth in the Asia Pacific region and the rest ofthe world, seasonal and regional changes in demand and changes to the capacityof the world fleet. The capacity of the world fleet is likely to increase andthere can be no assurance that economic growth will continue, the failure ofwhich would create an oversupply of vessels to transport declining volumes ofdrybulk commodities. Adverse economic, political, social or other developmentscould also have a material adverse effect on our business, results ofoperations, cash flows and financial condition.

***The internationaldrybulk shipping industry is highly competitive, and we may not be able tocompete successfully for charters with new entrants or established companieswith greater resources.***

We employ our vessels in ahighly competitive market that is capital intensive and highly fragmented.Competition arises primarily from other vessel owners, some of whom havesubstantially greater resources than we do. Competition for the transportationof drybulk cargo by sea is intense and depends on price, location, size, age,condition and the acceptability of the vessel and its operators to thecharterers. Due in part to the highly fragmented market, competitors withgreater resources could enter the drybulk shipping industry and operate largerfleets through consolidations or acquisitions and may be able to offer lowerrates than we are able to offer.

***Rising fuel prices may adversely affect our profits***

We bear the cost of fuel used to power our vessels inmany of our shipping operations, including when our vessels are subject toCOAs. The price and supply of fuel are unpredictable and fluctuate based onevents outside our control, including geopolitical developments, overall supplyand demand for oil and gas, actions by OPEC and other oil and gas producers,war and unrest in oil producing countries and regions, regional productionpatterns and environmental concerns. A substantial increase in the cost of fuelmay adversely affect our profitability and reduce the competitiveness of ourbusiness versus other forms of transportation such as truck or rail.

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***We aresubject to regulation and liability under environmental and operational safetylaws that could require significant expenditures and affect our cash flows andnet income.***

Our business and the operation of ourvessels are materially affected by government regulation in the form ofinternational conventions and treaties, regional, national, state and localenvironmental and operational safety laws and regulations in force in thejurisdictions in which our vessels operate, including those described below, aswell as in the country or countries of their registration. Because suchconventions, treaties, laws and regulations are often revised, we cannotpredict the ultimate cost of compliance or the impact thereof on the resale priceor useful life of our vessels. Additional conventions, treaties, laws andregulations may be adopted which could limit our ability to do business orincrease the cost of our doing business and which may materially adverselyaffect our operations. We are required by various governmental and quasi-governmentalagencies to obtain certain permits, licenses, certificates and otherauthorizations with respect to our operations, and some of the conditionsimposed by such governments and agencies to obtain or renew such authorizationsmay include requirements or conditions outside of our control.

The operation of our vessels is affected bythe requirements set forth in the International Maritime Organization’s, or IMO’s,International Management Code for the Safe Operation of Ships and PollutionPrevention, or the ISM Code. The ISM Code requires ship owners and bareboatcharterers to develop and maintain an extensive “Safety Management System” thatincludes, among other things, the adoption of safety and environmentalprotection policies setting forth instructions and procedures for safeoperation and describing procedures for casualty and emergency management. Anyfailure on our part to comply with the ISM Code may subject us to increasedliability, may invalidate existing insurance or decrease available insurancecoverage for the affected vessels, and may result in a denial of access to, ordetention in, certain ports.

Many countries have ratified and follow theliability scheme adopted by the IMO and set out in the International Conventionon Civil Liability for Oil Pollution Damage of 1969, as amended (the “CLC”),and the Convention for the Establishment of an International Fund for OilPollution of 1971, as amended. Under these conventions, a vessel’s registeredowner is strictly liable for pollution damage caused in the territory(including the territorial waters) of a contracting state by discharge ofpersistent oil, subject to certain exceptions. Many of the countries that haveratified the CLC have increased the liability limits through a 1992 Protocol tothe CLC. The right to limit the amount of liability is also forfeited under theCLC where the spill is caused by the owner’s actual fault or privity and, underthe 1992 Protocol, where the spill is caused by the owner’s intentional orreckless conduct. Vessels trading to contracting states must provide evidenceof insurance coverage. In jurisdictions where the CLC has not been adopted,various national legislative schemes or common law govern, and liability isimposed either on the basis of fault or in a manner similar to the CLC.

Other international conventions may berelevant in certain circumstances, including the 1973/1978 InternationalConvention for the Prevention of Pollution from Ships and the InternationalConvention for the Safety of Life at Sea. Various requirements underinternational conventions are also implemented directly through nationallegislation.

The United States Oil Pollution Act of 1990(“OPA”), established an extensive regulatory and liability regime for theprotection and cleanup of the environment from oil spills. OPA affects allowners and operators whose vessels trade in the United States, its territoriesand possessions or whose vessels operate in U.S. waters. OPA allows for potentiallyunlimited liability without regard to fault of vessel owners, operators andbareboat charterers for all containment and clean-up costs and other damagesarising from discharges or threatened discharges of oil from their vessels,including bunkers (fuel), in U.S. waters. OPA also expressly permitsindividual states to impose their own liability regimes with regard tohazardous materials and oil pollution materials occurring within theirboundaries.

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These requirements can affect the resalevalue or useful lives of our vessels, require a reduction in cargo-capacity,ship modifications or operational changes or restrictions, lead to decreasedavailability of insurance coverage for environmental matters or result in thedenial of access to certain jurisdictional waters or ports, or detention in,certain ports. Under local, national and foreign laws, as well as internationaltreaties and conventions, we could incur material liabilities, includingcleanup obligations, in the event that there is a release of pollutants fromour vessels or otherwise in connection with our operations. We could alsobecome subject to personal injury or property damage claims relating to therelease of or exposure to hazardous materials associated with our current orhistoric operations. Violations of or liabilities under environmentalrequirements also can result in substantial penalties, fines and othersanctions, including in certain instances, seizure or detention of our vessels.

In addition, incomplying with OPA 90, IMO regulations, EU directives and other existing lawsand regulations and those that may be adopted, shipowners may incur significantadditional costs in meeting new maintenance and inspection requirements, indeveloping contingency arrangements and the associated plans for potentialspills and in obtaining insurance coverage. Government regulation of vessels,particularly in the areas of safety and environmental requirements, can beexpected to become stricter in the future and to require significant capitalexpenditures for our vessels to remain in compliance, or even to lead to thescrapping or selling of certain vessels altogether. For example, variousjurisdictions are considering regulating the management of ballast water toprevent the introduction of non-indigenous species considered to be invasive.In addition, as a result of accidents such as the November 2002 oil spillfrom the motor tanker Prestige, a 26 year old single-hull tanker (whichwas owned by a company unrelated to us), we believe that regulation of theshipping industry will continue to become more stringent and more expensive forus and our competitors. Future accidents can be expected in the industry, andsuch accidents or other events could be expected to result in the adoption ofeven stricter laws and regulations, which could limit our operations or ourability to do business and which could have a material adverse effect on ourbusiness and financial results.

***Compliance withsafety rules and other regulations administered by classification societiesmay be very costly.***

The hull and machinery of large, ocean going commercial vessels must becertified as being “in class” by a classification society authorized by avessel’s country of registry. The classification society certifies that avessel is safe and seaworthy in accordance with the applicable rules andregulations of that registry.

An ocean going drybulk vessel must undergo annual surveys, intermediatesurveys and special surveys. In lieu of a special survey, a vessel’s machinerymay be placed on a continuous survey cycle, under which the machinery would besurveyed periodically over a five-year period. Our vessels are on specialsurvey cycles for hull inspection and continuous survey cycles for machineryinspection. Every vessel is also required to be drydocked every two to threeyears for inspection of the vessel’s underwater parts. In addition to theshipyard costs and the cost of the vessel’s out-of-service time, thesescheduled surveys may be very costly depending upon deficiencies that may berecorded by the classification society prior to re-certifying the vesselas “in class.”

If any vessel required to be inspected by aclassification society does not maintain its class or fails any annual,intermediate or special surveys, the vessel may be unable to trade betweencertain ports or may otherwise be unemployable, which would negatively impactour business, results of operations, cash flows and financial condition.

***Increasedinspection procedures and tighter import and export controls could increasecosts and disrupt our business.***

International shipping is subject tovarious security and customs inspection and related procedures in countries oforigin and destination. Inspection procedures can result in the seizure of thecontents of our 

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vessels, delaysin the loading, offloading or delivery and the levying of customs duties, finesor other penalties against us.

It is possiblethat changes to inspection procedures could impose additional financial andlegal obligations on us, including significant time delays. Furthermore,changes to inspection procedures could also impose additional costs andobligations on our customers and may, in certain cases, render the shipment ofcertain types of cargo uneconomical or impractical. Any such changes or developmentsmay have a material adverse effect on our business, results of operations, cashflows and financial condition.

***Worldevents could affect our results of operations and financial condition***

Terroristattacks such as those in New York on September 11, 2001 and in London on July 7,2005, as well as the threat of future terrorist attacks in the United States,United Kingdom or elsewhere, may cause uncertainty in the world’s financialmarkets and may affect our business, operating results and financial condition.Terrorists have specifically targeted vessels in the past, and there can be noassurance they will not do so in the future. The continuing conflict in Iraqmay also lead to additional acts of terrorism and armed conflict around theworld, which may contribute to further economic instability in the globalfinancial markets. These uncertainties could also adversely affect our abilityto obtain additional financing on terms acceptable to us or at all. Any ofthese occurrences could have a material adverse impact on our business, resultsof operations, cash flows, costs and financial condition.

***Compliancewith safety and other vessel requirements imposed by classification societiesmay be very costly.***

The hull and machinery of large, ocean-goingcommercial vessels must be certified as being “in class” by a classificationsociety authorized by its country of registry. The classification societycertifies that a vessel is safe and seaworthy in accordance with the applicablerules and regulations of the country of registry of the vessel.

A drybulk vessel must undergo annualsurveys, intermediate surveys and special surveys. In lieu of a special survey,a vessel’s machinery may be placed on a continuous survey cycle, under whichthe machinery would be surveyed periodically over a five-year period. Ourvessels are on special survey cycles for hull inspection and continuous surveycycles for machinery inspection. Every vessel is also required to be drydockedevery two to three years for inspection of the underwater parts of such vessel.

If any vesseldoes not maintain its class or fails any annual, intermediate or specialsurvey, the vessel will be unable to trade between ports and will beunemployable, which would negatively impact our business, results ofoperations, cash flows and financial condition.

***Maritimeclaimants could arrest our vessels, which could interrupt our cash flow.***

Certain claimants may be entitled to amaritime lien against a vessel for unsatisfied debts, claims or damages. Suchliens may arise in support of, among other things, claims by unpaid shipbuilders or ship repairers remaining in possession of the vessel, claims forsalvage, claims for damage caused by a vessel in collision, claims for seamen’swages, master’s wages and other employment benefits and master’s disbursementsand claims for pilotage, as well as potential claims for necessary goods andservices supplied to a vessel. This list should not be regarded as definitiveor exhaustive, as the categories of claims giving rise to maritime liens, andthe ranking of such liens, vary from one jurisdiction to another.

In many jurisdictions, a claimant may seekto obtain security for its claim by arresting a vessel through foreclosureproceedings. The arrest or attachment of one or more of our vessels couldinterrupt our cash flow and require us to pay large sums of money to have thearrest lifted.

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In addition, in some jurisdictions, underthe “sister ship” theory of liability, it may be possible for a claimant toarrest both the vessel subject to the claimant’s maritime lien and any “associated”vessel, which is any vessel owned or controlled by the same owner. Claimantscould try to assert “sister ship” liability against one vessel in our fleet forclaims relating to another of our vessels.

***Governmentscould requisition our vessels during a period of war or emergency, resulting ina loss of earnings.***

A governmentcould requisition one or more of our vessels for title or hire. Requisition fortitle occurs when a government takes control of a vessel and becomes the owner,while requisition for hire occurs when a government takes control of a vesseland effectively becomes the charterer at dictated charter rates. Generally,requisitions occur during a period of war or emergency, although governmentsmay elect to requisition vessels in other circumstances. Although we would beentitled to compensation in the event of a requisition of one or more of ourvessels, the amount and timing of payment would be uncertain. Government requisitionof one or more of our vessels may negatively impact our business, results ofoperations, cash flows and financial condition.

***Risks Relating to OurIndebtedness***

***Theindenture governing the Notes imposes significant operating and financialrestrictions on us that may limit our ability to successfully operate ourbusiness.***

Theindenture governing the Notes will impose significant operating and financialrestrictions on us, including those that limit our ability to engage in actionsthat may be in our long term interests. These restrictions limit our abilityto, among other things:

·       incuradditional debt;

·       paydividends or make other restricted payments;

·       create orpermit certain liens;

·       makeinvestments;

·       sellvessels or certain other assets;

·       create orpermit restrictions on the ability of our restricted subsidiaries to paydividends or make other distributions to us;

·       engage intransactions with affiliates; and

·       consolidateor merge with or into other companies or sell all or substantially all of ourassets.

In addition, we will be required to usespecified portions of our excess cash flow, if any, to make annual offers torepurchase Notes, as described under “Item 12A.—Description of Securities OtherThan Equity Securities—Debt Securities—Excess Cash Flow”.

Theserestrictions, among others, could limit our ability to finance our futureoperations or capital needs, make acquisitions or pursue available businessopportunities. For more information on these restriction and the Notes, see “Item12A.—Description of Securities Other Than Equity Securities—Debt Securities”.

***In theevent of foreclosure, the proceeds from a sale of the collateral securing theNotes may not be sufficient to satisfy amounts due on the Notes.***

The Notes aresecured by, among other things, a first priority lien in favor of the trusteefor the benefit of the holders of the Notes on our existing vessels, whichinclude seven drybulk vessels, five barges and four tugs, the vessels to beacquired with the net proceeds from the issuance of the Notes. The amount 

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tobe received from a foreclosure or similar disposition of the collateral willdepend upon numerous factors including market and economic conditions, theavailability of buyers, the timing and manner of sale and similar factors.There can be no assurance that the collateral can or will be liquidated in ashort period of time or at all. As a result, we cannot assure you that theproceeds of any sale of the collateral would be sufficient to satisfy amountsdue on our indebtedness and the Notes. If the proceeds from the sale of thecollateral are not sufficient to repay all amounts due on our indebtedness andthe Notes, the holders of our indebtedness and the Notes would have only asenior unsecured claim against our remaining assets. Furthermore, thecollateral will likely decline in value over time.

***We are a holding company, and we depend onthe ability of our subsidiaries to distribute funds to us in order to satisfyour financial obligations, including the payment of interest on the Notes.***

We are aholding company, and our subsidiaries conduct all of our operations or own allof our operating assets. We have no significant assets other than the equityinterests in our subsidiaries. As a result, our ability to satisfy our financialobligations, including the payment of interest on the Notes, depends on theability of our subsidiaries to distribute funds to us.

***We have a substantial amount of indebtedness following the offering ofNotes, which adversely affects our cash flow and our ability to operate ourbusiness.***

As of December 31,2006, we had total outstanding indebtedness equal to $185 million. In addition,we intend to enter into a revolving credit agreement in the future. We may alsoincur additional debt, which may be secured in certain circumstances, toacquire vessels in the future.

Our level of debt could have important consequences for our business,results of operations and ability to effectively service such indebtedness,including the following:

·       we mayhave difficulty borrowing money in the future for acquisitions, capitalexpenditures or to meet our operating expenses or other general corporateobligations;

·       we willneed to use a substantial portion of our cash flows to pay interest on ourdebt, which will reduce the amount of money we have for operations, workingcapital, capital expenditures, expansion, acquisitions or general corporate orother business activities;

·       we mayhave a higher level of debt than some of our competitors, which may put us at acompetitive disadvantage;

·       we may bemore vulnerable to economic downturns and adverse developments in our industryor the economy in general; and

·       our debt level could limit our flexibility in planning for, orreacting to, changes in our business and the industry in which we operate.

***To service our indebtedness, we require asignificant amount of cash. Our ability to generate cash depends on manyfactors beyond our control, and any failure to meet our debt obligations couldharm our business, financial condition and results of operations.***

Our ability toservice our indebtedness and fund future capital expenditures depends on ourability to generate cash from operations. This ability is, to a certain extent,subject to general economic, financial, competitive, legislative, regulatoryand other factors that are beyond our control. We cannot assure you that ourbusiness will generate sufficient cash flow from operations in an amountsufficient to enable us to service our indebtedness, or to fund our otherliquidity needs. If our cash flow and capital resources are insufficient tofund our debt obligations, we may be forced to sell assets, seek additionalequity or debt capital or restructure our debt. We cannot assure you that anyof these remedies could, if necessary, be effected on commercially reasonableterms, or at all. In addition, any failure to make scheduled payments 

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ofinterest and principal on the Notes would result in a reduction of our creditrating, which could harm our ability to incur additional indebtedness onacceptable terms. Our cash flow and capital resources may be insufficient forpayment of interest on and principal of our debt in the future, includingpayments on the Notes, and any such alternative measures may be unsuccessful ormay not permit us to meet scheduled debt service obligations, which could causeus to default on our obligations and could impair our liquidity.

***We may not be able to repurchase the Notesupon a change of control.***

Upon theoccurrence of a change of control, holders of the Notes will have the right torequire us to repurchase all or any part of such holders’ Notes at a priceequal to 101% of the accreted value of the Notes, plus accrued and unpaidinterest, if any, to the date of purchase. We may not have sufficient funds atthe time of the change of control to make the required repurchases. The sourceof any funds for any repurchase required as a result of a change of controlwill be our available cash or cash generated from our business operations orother sources, including borrowings, sales of assets, sales of equity or fundsprovided by a new controlling entity. We cannot assure you, however, thatsufficient funds would be available at the time of any change of control tomake any required repurchases of the Notes tendered.

***A court may void the guarantees of theNotes or subordinate the guarantees to other obligations of the guarantors.***

Althoughstandards may vary depending upon applicable law, a court could void all or aportion of the guarantees of the Notes or subordinate the guarantees to otherobligations of the guarantors. If the claims of the holders of the Notesagainst any guarantor were voided or held to be subordinated in favor of othercreditors of that guarantor, the other creditors would be entitled to be paidin full before any payment could be made on the Notes. If one or more of theguarantees is voided or subordinated, we cannot assure you that after providingfor all prior claims, there would be sufficient assets remaining to satisfy theclaims of the holders of the Notes.

***Maritime liens may arise and take priorityover the liens securing the Notes.***

If maritimeliens are attached to our vessels, such liens may take priority over the lienssecuring the Notes. Maritime liens, such as liens for unpaid crew wages orpersonal injuries, may attach without any court action, registration ordocumentation and accordingly their existence cannot necessarily be identified.Maritime liens that attach to the collateral would reduce the amount availableto our noteholders for recovery in the event of a default on the Notes.

***Insolvency could adversely affect theability of holders of the Notes to enforce their rights under the Notes.***

There is a riskunder English law that if we and/or our English subsidiaries were to go intoliquidation, administration or other insolvency proceedings (“Insolvency”) theability of the holders of the Notes to recover in full or in part may beimpaired. In particular:

·       uponInsolvency, there may be inadequate funds available to pay the holders of theNotes in full or in part. Insofar as the holders of the Notes are securedcreditors in an Insolvency, there may be inadequate funds to pay securedcreditors;

·       secureddebts pursuant to floating charges will rank in priority after the expenses ofthe liquidation and preferential debts (e.g. certain occupational pensionobligations and amounts owed to employees);

·       a certainproportion of assets covered by any floating charge is “ring fenced” and madeavailable pro-rata to unsecured creditors (which may include the holders of theNotes for those purposes). The exact amount will depend upon the total value ofour and our relevant subsidiaries’ property. Currently the total amount ringfenced cannot exceed £600,000. It is always possible that this amount might beincreased by subsequent legislation; and

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·       underEnglish insolvency law, an administrator or liquidator (“Office Holder”) of acompany has certain powers to apply to an English court to challenge certaintransactions entered into by a company. In particular:

·        asa transaction at an undervalue: where a company has, within the period oftwo years ending with the onset of insolvency, entered into a transactionwith any person at an undervalue, the Office Holder may apply to the court foran order to restore the position to what it would have been if the company hadnot entered into that transaction. A company enters into a transaction with aperson at an undervalue if the company makes a gift to that person or otherwiseenters into a transaction with that person on terms that provide for the companyto receive no consideration, or if the company enters into a transaction withthat person for a consideration the value of which, in money or money’s worth,is significantly less than the value, in money or money’s worth, of theconsideration provided by the company; and

·        asa preference: where a company has at a relevant time (within six monthsending with the onset of insolvency or two years in the case of a “connectedperson”) given a preference to any person, the Office Holder may apply to thecourt for an order to restore the position to what it would have been if thecompany had not given that preference. A company gives a preference to a personif that person is one of the company’s creditors or a surety or guarantor forany of the company’s debts or other liabilities, and if the company doesanything or suffers anything to be done which, in either case, has the effectof putting that person into a position which, in the event of the company goinginto insolvent liquidation, will be better than the position he would have beenin if that thing had not been done.

Upon such an application, the court must make suchorder as it thinks fit but the court must not make such an order in respect of (i) atransaction at an undervalue if it is satisfied that the company which enteredinto the transaction did so in good faith and for the purpose of carrying onits business, and that, at the time it did so, there were reasonable groundsfor believing that the transaction would benefit the company; or (ii) apreference given to any person unless the company which gave the preference wasinfluenced in deciding to give it by a desire to produce, in relation to thatperson, the effect of putting that person into a position which, in the eventof the company going into insolvent liquidation, would be better than theposition he would otherwise have been in.

It should be noted that pursuant to the European UnionRegulation on Insolvency Proceedings 2000, the courts of the member state inwhich the debtor’s centre of main interests is situated has jurisdiction toopen insolvency proceedings. There is a presumption that the centre of maininterests will be where the company’s registered office is located, but thispresumption can be rebutted by evidence to the contrary. In addition, thecentre of main interests to the company may change over time. There istherefore a risk that if, on the facts at the time the relevant company isinsolvent, the centre of our main interests or those of our relevant subsidiarymay not be England but another member state. In those circumstances we and/orthe relevant subsidiary as appropriate will be subject to insolvencyproceedings and the insolvency laws of that member state. Further, subsidiaryinsolvency proceedings may be commenced in other EU states.

Insofar as a claim is accepted by the Liquidator,there may be a significant delay in obtaining any payment from the Liquidatoras it will inevitably take the Liquidator time to realise the company’s assets.This delay is unlikely to be compensated in interest. The holders of Notes mayreceive in exchange for their claims the recovery that could be substantiallyless than the amount of their claims, or even nothing, and any such recoverycould be in the form of cash, new debt instruments or some other security.Further, the Liquidator’s ability to enforce security or collateral on behalfof the relevant company may be compromised by defects, procedural restrictions,consent of third parties and practical considerations as stated with therealisation of assets.

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Insofar as assets exist in the form of vessels orcargoes, these may be subject to arrest in foreign jurisdictions, and thedisposition of those assets will be subject to foreign law and procedure. It istherefore impossible to predict whether and to what extent the value of thoseassets will be available to any liquidator.

It is impossible topredict what recovery, if any, would be available to a holder of the Note in aninsolvency.

***Changesin law may affect the Notes***

No assurance can be given asto the impact of any possible change to U.S., English, Danish, Panamanian orLuxembourg law, tax, regulatory or administrative practice after the date ofthis document.

**ITEM 4.**                INFORMATIONON THE COMPANY

**A.   HISTORYAND DEVELOPMENT OF THE COMPANY**

We are a public limited company organized in theUnited Kingdom on September 13, 1999 and commenced operations in 2004. Ourfounder is our Chief Executive Officer, Mr. Arvid Tage. Mr. Tage and certainother directors and members of senior management hold in excess of 90% of ouroutstanding equity interests. For more information on our major shareholdersand share capital, please see “Item 7.— Major Shareholders and RelatedParty Transactions”. Our technical management is provided through our majority-ownedsubsidiary, Svendborg Ship Management A/S. Substantially all of our tugs andbarges are owned by our wholly-owned Danish subsidiary, Britannia Bulk DK A/S,and each of our drybulk vessels, as well as one of our tugs, is owned by one ofour wholly-owned subsidiaries incorporated in Panama. See “Item 4C—OrganizationalStructure”.

We were primarily incorporated to concentrate on handysize business but have now entered the Panamax sector, as well as theoceangoing barge sector, in order to further extend our expanding portfolio ofcharterers. Five of our oceangoing drybulk carriers were acquired in 2004 andthe first half of 2005. In December 2005, we took delivery of three tugboats and four barges. In October 2006 and February 2007,respectively, we acquired an additional barge and tug. In 2007, following thecompletion of our offering of Notes, we purchased two Panamax vessels andexpect to take delivery of an additional Panamax and Handysize vessel in May2007. For more information on our fleet, please see “Item 4.B Business Overview—OurFleet and Operations”.

On November 16, 2006, we completed a privateplacement of $185 million in aggregate principal amount of our 11% senior securednotes due 2011. The Notes were issued pursuant to an Indenture in a transactionexempt from the registration requirements under the Securities Act. The Noteswere sold within the United States only to qualified institutional buyers inreliance on Rule 144A under the Securities Act, and outside the UnitedStates only to non-U.S. persons in reliance on Regulation S under theSecurities Act. The Notes will mature on December 1, 2011 and interest ispayable on the Notes on each June 1 and December 1, beginning June 1,2007. The Notes are guaranteed on a senior secured basis by all of the existingsubsidiaries and certain of our future subsidiaries. 

Pursuant to a registration rights agreement, we andour subsidiaries filed an exchange offer registration statement on Form F-4with the SEC with respect to an offer to exchange the Notes for substantiallyidentical notes that are registered under the Securities Act. The exchangeoffer registration statement on Form F-4 was declared effective on March 9,2007. In addition, on March 14, 2007, we commenced an offer to exchangesubstantially similar registered notes for the Notes. This exchange offer wascompleted on April 11, 2007 with all outstanding unregistered notesexchanged for registered notes. The description set forth above is qualified inits entirety by the indenture, the form of Notes and the 

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registration rightsagreement, which are filed as exhibits to the exchange offer registrationstatement on Form F-4. 

On April 12, 2007, Britannia and certain of themajor shareholders entered into a share purchase agreement whereby NorthWestern (Neva) Limited agreed to sell all of its outstanding ordinary shares inthe Company for approximately $8.25 million. These shares will be purchased byboth the Company and each of the other major shareholders a party to suchagreement. For more information on this share purchase transaction, please see “Item7.-Major Shareholders and Related Party Transactions”.

Our principal executiveand registered office is located at Dexter House, 2nd Floor, 2 Royal MintCourt, London EC3N 4QN, United Kingdom. Our telephone number at that address is011 44 20 7264 4900. Our corporate website address is *http://www.britbulk.com*. The informationcontained in or accessible from our corporate website is not part of thisoffering circular.

**B.   BUSINESSOVERVIEW**

Britannia Bulk Plc is an international provider ofdrybulk transportation services with a focus on transporting drybulkcommodities from the Baltic region. Our existing fleet, as at April 15,2007, consists of seven drybulk vessels, five barges and four tugs. In additionto the vessels we own, we routinely charter-in vessels to increase our servicecapacity and maximize overall profitability. 

We derive our revenue primarily from thetransportation of coal and other drybulk cargoes in the Baltic region. Thisregion represents a niche market in the international drybulk shippingindustry, with unique characteristics such as a predominance of short-haultrades, substantial regulatory requirements and icy conditions. Drybulktransportation in this region is an expanding market, which has increasedsubstantially in recent years due to increased exports of Russian coal toEurope. A significant portion of our revenue is earned under fixed pricecontracts of affreightment, or COAs, under which we deliver certain amounts ofcargo for our customers over terms ranging from four weeks to two years. 

Our management teamprovides the strategic and commercial management of our fleet. A majority ofour management team has worked together for approximately 13 years,including 11 years prior to joining us. Our team has a diverseinternational background and speaks a variety of languages, which enables us tomore effectively communicate and develop deeper relationships with ourwide-ranging base of customers. The technical aspects of our operations aremanaged by our majority-owned subsidiary, Svendborg Ship Management A/S,or Svendborg, which has extensive expertise in vessel operations in the Balticregion.

***Our Competitive Strengths***

We believe our competitive strengths include:

*StrongClient Relationships Through a Customer-Oriented Approach.**  *Wemaintain strong relationships with a number of high-quality customers,including Glencore, SUEK, and Weglokoks. In 2006, we were one of Glencore’slargest carriers, by number of shipments completed. Through these corerelationships and our ability to meet our customers’ shipping needs utilizingcreative solutions, we believe we have established ourselves as one of thepreferred drybulk carriers in the Baltic. In addition to vessel operation andchartering, we also provide clients with solutions to potential issuesinvolving drybulk transportation, including port modifications, crew trainingand resource optimization. We believe this service results in a stronger relationshipwith our customers that enhances our customer retention and creates newbusiness opportunities.

*StableCash Flows from COAs and High Renewal Rates.**  *Asignificant portion of our revenue is generated through COAs with terms of upto two years. COAs are generally at fixed rates, providing us with relativelyvisible, stable and predictable cash flows in the near to medium term.Substantially all of our owned vessel fleet services capacity is employedthrough COAs. We also enjoy stable cash flows due to 

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repeat business fromexisting customers. Tonnage shipped for repeat customers represents over 75% ofour overall tonnage shipped for the year ended December 31, 2006. Webelieve this repeat business is due to our familiarity with, local regulationsand conditions, including load and discharge ports, and our reputation forreliability.

*BalticRegion Operational Expertise.**  *TheBaltic drybulk market is characterized by many unique requirements. As a resultof our extensive experience in this market, we are familiar with the increasedregulatory and safety requirements, local port conditions, stringent portinspections, crewing regulations and icy conditions. Our management and ourtechnical managers, Svendborg, have substantial experience in this market andgenerally have been able to safely operate vessels in this environment. Webelieve our market position generally improves during the winter months as asubstantial number of our competitors are either unable or unwilling to operatein icy conditions.

*Experienced and MotivatedManagement Team and Employees.**  *Ourmanagement team has extensive experience averaging approximately 17 yearsof experience in the marine freight industry. In addition, our shore-basedemployees together speak more than ten languages, which we believe greatlyenhances our marketing opportunities, customer relationships and provision ofservices in the highly diverse Baltic region. Further, our technical managementis performed in-house by Svendborg. Our management team is highly incentivizedas certain members own a substantial majority of the equity interests in theCompany.

***Our Business Strategy***

We intend to increase our profitability and strengthenour core business through the following principal strategies.

*EmphasizeCustomer-Oriented Solutions.**  *We intendto provide our services as one of the most efficient and highest qualitytransportation solution providers in the Baltic drybulk market. We activelywork with our customers to determine the best transportation solution to meettheir specific shipping requirements as well as consult with these customers toresolve potential transportation and logistical issues. In addition, weroutinely utilize chartered-in vessels in order to better serve ourcustomers’ needs.

*Focuson Baltic Region Niche.**  *We intend to continue our focus ondrybulk transportation in and out of the Baltic, as demand for drybulk shippingservices is expanding. We believe our management team, as well as Svendborg,have unique experience and operational capabilities in this region that givesus a competitive advantage over many competitors who focus on standard drybulkroutes and cargoes. Our fleet expansion is expected to further strengthen ourposition as one of the most well-recognized carriers in the Baltic region.

*ExpandService Offerings and Customer Base.**  *Throughour existing fleet and proposed acquisition of additional vessels, we intend topursue growth and expansion opportunities with existing and new customers. AsEuropean imports of Russian coal continue to increase, we expect our existingcustomers to require additional drybulk transportation services. Additionally,much of the port development in Russia is focused on being able to load largervessels. We intend to utilize our acquisitions to meet these needs as well asexpand our customer base to other customers in the region.

*Optimize OperationsThrough COAs and Chartering-In Vessels.**  *Ourbusiness and operational strategies seek to optimize our operations throughobtaining COAs and chartering-in vessels. We believe this strategy willcontinue to provide us with stable and visible cash flows, while allowing us tobetter serve our customers’ needs through greater flexibility to activelymanage our fleet.

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***Our Fleet and Operations***

*Fleet*

Our initial fleet consisted of three Handymax and twoHandysize drybulk vessels, which we acquired in 2004 and the first half of 2005.In December 2005, we took delivery of three tug boats and four barges andin October 2006, an additional barge. In 2007, we acquired and have takendelivery of two additional Panamax bulkers and a tug. In addition, we havecontracted for the purchase of a third Panamax bulker and Handysize vessel for$36.7 million and $10.75 million, respectively. We expect to take delivery ofthe third Panamax and Handymax vessels in May 2007. Substantially all ofthe acquisition costs associated with the purchase of these vessels have been fundedfrom the net proceeds of the sale and issuance of the Notes. Our existing fleethas a combined capacity of approximately 395,907 dwt.

Thefollowing table lists the vessels in our existing fleet.

| **Vessel Name** | ** ** | ** ** | ** ** | **Year Built** | ** ** | **Date Acquired**  | ** ** | **Price**  | ** ** | **DWT** | ** ** |
|----------------------|------------|------------|------------|---------------------|------------|-------------------------|------------|------------|------------|---------|------------|
| *Drybulk Vessels:*   |       |       |       |                |       |                    |       |       |       |    |       |
| Explorer II          |       |       | 1977       |                |       | November 30,  2004 |       | $          | 2,100,000  |    | 39,814     |   |
| Challenger II        |       |       | 1977       |                |       | September 30, 2004 |       | 2,100,000  |       | 39,814  |       |
| Adventure II         |       |       | 1980       |                |       | May 27, 2004       |       | 7,100,000  |       | 38,871  |       |
| Voyager II           |       |       | 1986       |                |       | November 26, 2004  |       | 13,775,515 |       | 33,288  |       |
| Discovery II         |       |       | 1984       |                |       | April 18, 2005     |       | 11,500,000 |       | 32,813  |       |
| Navigator II         |       |       | 1998       |                |       | February 28, 2007  |       | 28,500,000 |       | 69,146  |       |
| Endeavour II         |       |       | 1994       |                |       | April 10, 2007     |       | 36,735,000 |       | 70,000  |       |
| Endurance II (1)     |       |       | 1994       |                |       | May, 2007          |       | 36,735,000 |       | 70,000  |       |
| Commander II (1)     |       |       | 1983       |                |       | May, 2007          |       | 10,750,000 |       | 31,431  |       |
| *Barges:*            |       |       |       |                |       |                    |       |       |       |    |       |
| Drejoe II            |       |       | 1991       |                |       | December 1,  2005  |       | $          | 2,138,000  |    | 15,709     |   |
| Hjortoe II           |       |       | 1992       |                |       | December 1, 2005   |       | 2,138,000  |       | 15,709  |       |
| Sioe II              |       |       | 1991       |                |       | December 1, 2005   |       | 2,138,000  |       | 15,709  |       |
| Skaroe II            |       |       | 1992       |                |       | December 1, 2005   |       | 2,138,000  |       | 15,709  |       |
| Iholm II             |       |       | 1979       |                |       | October 2, 2006    |       | 1,400,000  |       | 9,330   |       |
| *Tugs:*              |       |       |       |                |       |                    |       |       |       |    |       |
| Bregninge II         |       |       | 1984       |                |       | December 1,  2005  |       | $          | 1,584,000  |    | —     |   |
| Troense II           |       |       | 1983       |                |       | December 1, 2005   |       | 1,584,000  |       | —  |       |
| Vindeby II           |       |       | 1981       |                |       | December 1, 2005   |       | 1,584,000  |       | —  |       |
| Vornaes II           |       |       | 1970       |                |       | February 9, 2007   |       | 1,000,000  |       | —  |       |

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(1)          Wehave entered into an agreement for the purchase of this vessel and expect totake delivery of such vessel on or about May 1, 2007.

*Drybulk Vessels*

Our drybulk vesselsprincipally focus on the transportation of coal from exporters in Russia toend-users in northern and western Europe. Coal shipments accounted forapproximately 80% of our total tons shipped for the fiscal year ended December 31,2006. In addition to shipping coal, our vessels also transport grains and minorbulks, including steel products, iron ore, forest products and fertilizers. Twoof our drybulk vessels are Ice Classed, which permits them to operate in shippinglanes with icy conditions. Certain of our vessels are geared, which means theyare built with on-board cranes that enable them to load and discharge cargo incountries and ports with limited infrastructure.

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*Tugs and Barges*

Our tugs and barges are principallyused to serve ports that are too small to accept traditional drybulk vessels.Our tugs are used to push the barges, with the typical route being the intra-Baltic.Customers for these vessels include Danish and German power companies thatoften utilize special ports and discharging facilities. In addition, thesevessels are less expensive to operate than traditional drybulk vessels. Thisadditional capacity has permitted us to expand our areas of operation andincrease our market share in the Baltic region.

*Operations*

A significant portion of our revenue is generatedthrough COAs. We also employ substantially all of our owned fleet servicecapacity through COAs. In addition, a significant amount of additional singlevoyage business is obtained through relationships with our COA customers. TheseCOA customers, through COAs and single voyage charters, accounted forapproximately 75% of our total tons shipped for the year ended December 31,2006.

COAs are contracts between a carrier of cargo and acustomer pursuant to which the carrier agrees to ship up to a certain amount ofcargo for the customer between certain designated ports. COAs provide us withminimum and maximum tonnage demand at a fixed price for the term of thecontract, while our customers receive guaranteed transportation capacity at afixed price. We believe the coal trade in the Baltic region often relies onCOAs rather than voyage or time charters because of the predominance ofshort-haul trades and the fixed contractual relationships between producers andend-users of coal. The terms of our COAs typically range from four weeks to twoyears. Because COAs do not specify the vessel required to transport the drybulkcommodities, we maintain the flexibility to deploy our fleet in the most advantageousand economical manner. As of December 31, 2006, we have secured COAs forthe shipment of over 6.5 million tons of cargo, of which 5.9 million tonsare scheduled to be shipped in 2007 and 0.6 million tons are scheduled tobe shipped in 2008.

COAs in the Baltic region are negotiated year round,but the majority of the contracts are bid for during the months of October throughDecember. Warm weather during 2006 these contracts have been delayed due to thespecial nature of the Baltic drybulk trade, companies often generate repeatbusiness based on the quality of the service provided. We have achieved highlevels of repeat business, which we believe is due to the quality of ourvessels and the services we provide. When our vessels are serving COAs, we areresponsible for paying all voyage expenses, including the cost of bunkers (fueloil) and port and canal charges.

Our business and operational strategies include bothowning and chartering-in vessels. Our owned vessels provide us with basecapacity from which we can meet our long-term COA obligations, gain exposure tocharterers in the market and make credible bids for COAs. Our vessel ownershipalso reduces our tax liability in the U.K.’s tonnage tax system. We believethat employment for our fleet under COAs provides a unique opportunity togenerate stable and visible cash flows while providing us with the flexibilityto actively manage our fleet.

We routinely charter ourdrybulk carriers to customers for time charters and charter-in vesselsunder time charters to increase our service capacity. A time charter involvesthe hiring of a vessel from its owner for a period of time pursuant to acontract under which the vessel owner places its ship (including its crew andequipment) at the disposal of the charterer. Under a time charter, thecharterer pays a fixed daily charter hire rate and bears all voyage expenses,including the cost of bunkers and port and canal charges. Subject to anyrestrictions in the contract, the charterer determines the type and quantity ofcargo to be carried and the ports of loading and discharging. The technicaloperation and navigation of the vessel remains the responsibility of the vesselowner, which is generally responsible for the vessel’s operating expenses,including the cost of crewing, insuring, repairing and maintaining the vessel,costs of spares and 

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consumablestores, tonnage taxes and other miscellaneous expenses. In connection with thecharter of each of our vessels, we pay commissions ranging from 1.25% to 8.0%of the total daily charter hire rate of each charter to unaffiliated shipbrokers and to in-house ship brokers associated with the charterers, dependingon the number of brokers involved with arranging the relevant charter.

*TechnicalManagement*

In 2005, we acquired 68% of Svendborg, with itsemployees owning the remainder of its outstanding share capital. Svendborg andits Danish affiliate are based in Svendborg, Denmark, with 18 employeesaveraging over 20 years of experience and an additional five consultants. Ithas experience managing several types of drybulk vessels, includingtweendeckers, tugs and barges and bulk carriers and manages no vessels exceptthose owned by our subsidiaries.

Svendborg carries out the critical ship managementfunctions of vessel maintenance, crewing, shipyard supervision and financialmanagement services for our fleet. Svendborg establishes key performanceindicators to facilitate regular monitoring of our operational performance. Weset targets on an annual basis to drive continuous improvement, and we reviewperformance indicators monthly to determine if remedial action is necessary toreach our targets. We believe that the adoption of common equipment standardsprovides operational efficiencies, including with respect to crew training andvessel management, equipment operation and repair and spare part ordering.

Svendborg’s particular expertise is operating vesselsin icy and ice-covered conditions. This allows us to compete effectively forcharter or contract opportunities requiring capabilities that many of our peersin the drybulk industry do not presently possess or are unable to provide. Inaddition, Svendborg’s office is located in an area known as the Great Belt,where many of our vessels routinely operate. This proximity to our vesselsallows Svendborg to quickly respond to issues arising on our vessels.

Currently, Svendborg exclusively manages our vesselsbut may in the future manage vessels for other parties. From time to time,Svendborg is engaged by parties such as the World Food Program, United Nationsand the U.S. Armed Forces governments and supranational organizations to aid inthe development of logistics.

Safety and environmentalcompliance are among our top operational priorities. Svendborg has achievedcertification under the standards of the International Standards Organization(or ISO). Svendborg Marine Surveyors A/S has achieved ISO 9001 certificationunder Lloyds Register Copenhagen. Svendborg and Britannia Bulk DK A/S haveachieved International Standards Management (or ISM) certification underIsthmus Business Shipping (IBS) and Lloyds Register Copenhagen, respectively.As part of our ISM Code compliance, all of our vessels’ safety managementcertificates are maintained through ongoing internal audits by Svendborg MarineSurveyors A/S.

***Employees***

We have a team of 43 shore-basedemployees, including 18 at Svendborg and its Danish affiliate, and fiveconsultants. Our personnel have substantial shipping experience and togetherspeak over 10 languages. In addition, we currently have approximately 200seafaring employees.

***Competition***

Our business fluctuates inline with the main patterns of trade of the major dry bulk cargoes and variesaccording to changes in the supply and demand for these items. We operate inmarkets that are highly competitive and significantly affected by supply anddemand. We compete for charters on the basis of price, vessel location, size,age and condition of the vessel, as well as on our reputation as an owner andoperator. We compete with other owners of dry bulk carriers in the Panamax andsmaller class sectors dry 

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bulkcarriers. Ownership of dry bulk carriers is highly fragmented and is dividedamong approximately 1,500 independent bulk carrier owners. Our principalcompetitors are Polish Steamship Company, Murmansk Shipping, ESL Shipping and anumber of other operators.

***Permits and Authorizations***

We are required by various governmental and quasi-governmentalagencies to obtain certain permits, licenses, certificates and otherauthorizations with respect to our vessels. The kinds of permits, licenses,certificates and other authorizations required for each vessel depend uponseveral factors, including the commodity transported, the waters in which thevessel operates, the nationality of the vessel’s crew and the age of thevessel. We believe that we have all material permits, licenses, certificatesand other authorizations necessary for the conduct of our operations. However,additional or amended laws and regulations and related guidance, environmentalor otherwise, may be adopted which could limit our ability to do business orincrease the cost of our doing business.

A variety of governmentand private entities subject our vessels to both scheduled and unscheduledinspections. These entities include the local port authorities (U.S. CoastGuard, harbor master or equivalent), classification societies, flag stateadministrations (countries of registry), charterers, and terminal operators.Certain of these entities require us to obtain permits, licenses andcertificates for the operation of our vessels. Failure to maintain necessarypermits or appropriate approvals could require us to incur substantial costs ortemporarily suspend the operation of one or more of our vessels in one or moreports.

***Environmental and Other Regulations***

Governmental and other regulation significantlyaffects the ownership and operation of drybulk carriers. A variety ofgovernment and private entities subject drybulk vessels to both scheduled andunscheduled inspections. These entities include the local port authorities(United States Coast Guard, harbor master or equivalent), classificationsocieties, flag state administrations (country of registry), charterers or COAcounterparties, and terminal operators. Certain of these entities will requireus to obtain permits, licenses and certificates for the operation of ourvessels. Failure to maintain necessary permits or approvals could require us toincur substantial costs or temporarily suspend the operation of one or more ofour vessels.

The heightened level ofenvironmental and quality concerns among funders, insurance underwriters,regulators and charterers may lead to greater inspection and safetyrequirements on all vessels and may accelerate the scrapping of older vesselsthroughout the drybulk shipping industry as well as increasing the costs ofdismantling vessels. Increasing environmental concerns have created a demandfor vessels that conform to stricter environmental standards. We are requiredto maintain operating standards for all of our vessels that emphasizeoperational safety, quality maintenance, continuous training of officers andcrews and compliance with local and international regulations.

*InternationalMaritime Organization*

The International Maritime Organization, or IMO, hasnegotiated international conventions that impose liability for oil pollution ininternational waters and a signatory’s territorial waters. This includes the1973/78 International Convention for the Prevention of Pollution from Ships(the “1973/78 MARPOL Convention”). Several Annexes have been agreed upon underMARPOL covering the prevention of pollution by oil, noxious liquids, garbage,etc. In September 1997, the IMO adopted Annex VI to the InternationalConvention for the Prevention of Pollution from Ships to address air pollutionfrom ships. Annex VI was ratified in May 2004, and became effective in May 2005.Annex VI, set limits on emissions from ship exhausts and prohibits deliberateemissions of ozone depleting substances, such as 

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chlorofluorocarbons. AnnexVI also includes a global cap on the sulfur content of fuel oil and allows forspecial areas to be established with more stringent controls on sulfuremissions. These requirements have been adopted by the European Union inDirective 2005/33/EC (amending Directive 1999/32/EC), which requires, amongother things, a 0.1% sulfur limit for fuels used by seagoing ships while atberth in EU ports as of 2010. The vessels that we currently own and that wewill acquire will be in compliance with Annex VI regulations.

The operation of drybulkcarriers is also affected by the requirements set forth in the IMO’s ManagementCode for the Safe Operation of Ships and Pollution Prevention, or ISM Code. TheISM Code requires ship owners and bareboat charterers to develop andmaintain an extensive “Safety Management System” that includes the adoption ofa safety and environmental protection policy setting forth instructions andprocedures for safe operation and describing procedures for dealing withemergencies. The failure of a ship owner or bareboat charterer to comply withthe ISM Code may subject such party to increased liability, may decreaseavailable insurance coverage for the affected vessels and may result in adenial of access to, or detention in, certain ports.

*The United StatesOil Pollution Act of 1990*

The United States Oil Pollution Act of 1990, or OPA,established an extensive regulatory and liability regime for the protection andcleanup of the environment from oil spills. OPA affects all owners andoperators whose vessels trade in the United States, its territories andpossessions or whose vessels operate in United States waters, which includesthe United States’ territorial sea and its two hundred nautical mile exclusiveeconomic zone. Under OPA, vessel owners, operators and bareboat charterers are “responsibleparties” and are jointly, severally and strictly liable (unless the spillresults solely from the act or omission of a third party, an act of God or anact of war) for all containment and clean-up costs and other damages arisingfrom discharges or threatened discharges of oil from their vessels. OPA definesthese other damages broadly to include:

·       naturalresources damage and the costs of assessment thereof;

·       realand personal property damage;

·       netloss of taxes, royalties, rents, fees and other lost revenues;

·       lostprofits or impairment of earning capacity due to property or natural resourcesdamage; and

·       netcost of public services necessitated by a spill response, such as protectionfrom fire, safety or health hazards, and loss of subsistence use of naturalresources.

OPA limits the liability of responsible parties to thegreater of $600 per gross ton or $0.5 million per drybulk vessel that isover 300 gross tons (subject to possible adjustment for inflation). Theselimits of liability do not apply if an incident was directly caused byviolation of applicable United States federal safety, construction or operatingregulations or by a responsible party’s gross negligence or willful misconduct,or if the responsible party fails or refuses to report the incident or tocooperate and assist in connection with oil removal activities. Legislation iscurrently pending in the United States Congress that would increase theselimits of liability to $950 per gross ton or $800,000.

We intend to maintain pollution liability coverageinsurance in the amount of $1 billion per incident for each of ourvessels. If the damages from a catastrophic spill were to exceed this insurancecoverage, that could have an adverse effect on our business.

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OPA requires owners and operators ofvessels entering and operating in U.S. territorial waters to establish andmaintain with the United States Coast Guard evidence of financialresponsibility sufficient to meet their potential liabilities under OPA. CurrentU.S. Coast Guard regulations require evidence of financial responsibility inthe amount of $900 per gross ton, which includes the OPA limitation onliability of $600 per gross ton and the Comprehensive Environmental Response,Compensation, and Liability Act (CERCLA) liability limit of $300 per gross ton.Under the regulations, vessel owners and operators may evidence their financialresponsibility by showing proof of insurance, surety bond, self-insurance orguaranty. Under OPA, an owner or operator of a fleet of vessels is requiredonly to demonstrate evidence of financial responsibility in an amountsufficient to cover the vessels in the fleet having the greatest maximumliability under OPA.

The United States Coast Guard regulationsconcerning certificates of financial responsibility provide, in accordance withOPA, that claimants may bring suit directly against an insurer or guarantorthat furnishes certificates of financial responsibility. In the event that suchinsurer or guarantor is sued directly, it is prohibited from asserting anycontractual defense that it may have had against the responsible party and islimited to asserting those defenses available to the responsible party and thedefense that the incident was caused by the willful misconduct of theresponsible party. Certain organizations, which had typically providedcertificates of financial responsibility under pre-OPA laws, including themajor protection and indemnity organizations, have declined to furnish evidenceof insurance for vessel owners and operators if they are subject to directactions or required to waive insurance policy defenses. However, certificatesof financial responsibility are currently readily available on commercial termsfrom other providers.

The United States Coast Guard’s financialresponsibility regulations may also be satisfied by evidence of surety bond,guaranty or by self-insurance. Under the self-insurance provisions, the shipowner or operator must have a net worth and working capital, measured in assetslocated in the United States against liabilities located anywhere in the world,that exceeds the applicable amount of financial responsibility. The Companywill comply with the United States Coast Guard regulations by providing acertificate of responsibility from third party entities that are acceptable tothe United States Coast Guard evidencing sufficient self-insurance.

OPAspecifically permits individual states of the United States to impose their ownliability regimes with regard to oil pollution incidents occurring within theirboundaries, and some states have enacted legislation providing for unlimitedliability for oil spills. In some cases, states that have enacted suchlegislation have not yet issued implementing regulations defining vesselsowners’ responsibilities under these laws. We intend to comply with allapplicable state regulations in the ports where our vessels call.

*Other Environmental Initiatives*

In September 2005, the European Unionpromulgated Directive 2005/35, which provided for civil and criminal liabilityfor oil spills. That directive is subject to a legal challenge that has beenreferred to a tribunal at the European Court of Justice. A decision is notexpected in that appeal until January 2007.

Although the United States is not a partythereto, many countries have ratified and follow the liability scheme adoptedby the IMO and set out in the International Convention on Civil Liability forOil Pollution Damage, 1969, as amended, or the CLC, and the Convention for theEstablishment of an International Fund for Oil Pollution of 1971, as amended.Under these conventions, a vessel’s registered owner is strictly liable forpollution damage caused on the territorial waters of a contracting state bydischarge of persistent oil (subject to certain exceptions). The right to limitliability is forfeited under the CLC where the spill is caused by the owner’sactual fault or privity and, under the 1992 Protocol, where the spill is causedby the owner’s intentional or reckless conduct. Vessels trading to contractingstates must provide evidence of insurance covering the limited liability of theowner. In jurisdictions where the CLC has not been adopted, 

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variouslegislative schemes or common law govern, and liability is imposed either onthe basis of fault or in a manner similar to the CLC.

On June 14, 2006, the Protocol onPreparedness, Response and Co-operation to Pollution Incidents by Hazardous andNoxious Substances, 2000 (OPRC-HNS Protocol) was ratified. This Protocolfollows the principles of the International Convention on Oil PollutionPreparedness, Response and Co-operation, 1990 and is intended to provide aglobal framework for international cooperation in combating major incidents orthreats of marine pollution from “Hazardous and Noxious” substances. That termgenerally applies to any substance other than oil that is likely to createhazards to human health, marine life or interfere with legitimate uses of theseas. Vessels will be required to develop a shipboard emergency plan to dealspecifically with incidents involving these substances. Parties to theconvention will be required to adopt implementing legislation. We cannot assureyou that the costs of complying with the requirements of this convention willnot be material. Under the terms of the protocol, these requirements will comeinto force and effect on June 14, 2007.

In 2004, theEuropean Community issued regulation 725/2004 to implement SOLAS X1-2 andthe ISPS Code.

*Vessel Security Regulations*

Sincethe terrorist attacks of September 11, 2001, there have been a variety ofinitiatives intended to enhance vessel security. On November 25, 2002, theU.S. Maritime Transportation Security Act of 2002, or the MTSA, came intoeffect. To implement certain portions of the MTSA, in July 2003, theUnited States Coast Guard issued regulations requiring the implementation ofcertain security requirements aboard vessels operating in waters subject to thejurisdiction of the United States. Similarly, in December 2002, amendmentsto the International Convention for the Safety of Life at Sea, or SOLAS,created a new chapter of the convention dealing specifically with maritimesecurity. The new chapter came into effect in July 2004 and imposesvarious detailed security obligations on vessels and port authorities, most ofwhich are contained in the newly created International Ship and Port FacilitiesSecurity Code or ISPS Code. Among the various requirements are:

·       on-boardinstallation of automatic information systems, or AIS, to enhancevessel-to-vessel and vessel-to-shore communications;

·       on-boardinstallation of ship security alert systems;

·       thedevelopment of vessel security plans; and

·       compliancewith flag state security certification requirements.

The United States Coast Guard regulations,intended to align with international maritime security standards, exemptnon-United States vessels from MTSA vessel security measures provided suchvessels have on board a valid International Ship Security Certificate, or ISSC,that attests to the vessel’s compliance with SOLAS security requirements andthe ISPS Code. We will implement and comply with the various security measuresaddressed by the MTSA, SOLAS and the ISPS Code to the extent they areapplicable to us or our vessels.

In ECRegulation 725/2004, the European Community issuedregulation 725/2004 to implement SOLA5 X1-2 and the ISPS Code.

*Inspection by Classification Societies*

Every large, commercial seagoing vesselmust be “classed” by a classification society. The classification societycertifies that the vessel is “in class,” signifying that the vessel has beenbuilt and maintained in accordance with the rules of the classificationsociety and complies with applicable rules and regulations of 

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the vessel’scountry of registry and the international conventions of which that country isa member. In addition, where surveys are required by international conventionsand corresponding laws and ordinances of a flag state, the classificationsociety will undertake them on application or by official order, acting onbehalf of the authorities concerned.

The classification society also undertakeson request other surveys and checks that are required by regulations andrequirements of the flag state. These surveys are subject to agreements made ineach individual case and /or to the regulations of the country concerned.

Formaintenance of the class, regular and extraordinary surveys of hull, machinery,including the electrical plant, and any special equipment classed are requiredto be performed as follows:

·       *AnnualSurveys*.   For seagoing ships, annual surveysare conducted for the hull and the machinery, including the electrical plantand where applicable for special equipment classed, at intervals of12 months from the date of commencement of the class period indicated inthe certificate.

·       *IntermediateSurveys*.   “Mini” special surveys are referredto as intermediate surveys and typically are conducted two and one-half yearsafter commissioning and each class renewal. Intermediate surveys may be carriedout on the occasion of the second or third annual survey. At the intermediatesurvey, subject to the age of the vessel, all of the vessel’s departments arethoroughly examined, and ultrasonic measurements of steel plates are carriedout as per classification requirements. Should the thickness be found to beless than class rules, the classification society will recommend steelrenewals.

·       *Class RenewalSurveys*.   Class renewal surveys, alsoknown as special surveys, are carried out for the ship’s hull, machinery,including the electrical plant and for any special equipment classed, at theintervals indicated by the character of classification for the hull. At the specialsurvey the vessel is thoroughly examined, including audio-gauging todetermine the thickness of the steel structures. Should the thickness be foundto be less than class requirements, the classification society would prescribesteel renewals. Substantial amounts of money may have to be spent for steelrenewals to pass a special survey if the vessel experiences excessive wear andtear. In lieu of the special survey every five years, a ship owner has theoption of arranging with the classification society for the vessel’s hull ormachinery to be on a continuous survey cycle, in which every part of the vesselwould be surveyed within a five year cycle. At an owner’s application, thesurveys required for class renewal may be split according to an agreed scheduleto extend over the entire period of class. This process is referred to ascontinuous class renewal.

All areas subject to survey as defined bythe classification society are required to be surveyed at least once per classperiod, unless shorter intervals between surveys are prescribed elsewhere. Theperiod between two subsequent surveys of each area must not exceed five years.

Most vessels are also drydocked every 30 to36 months for inspection of the underwater parts and for repairs relatedto inspections. If any defects are found, the classification surveyor willissue a “recommendation”, which must be rectified by the ship owner withinprescribed time limits.

Most insuranceunderwriters make it a condition for insurance coverage that a vessel be certifiedas “in class” by a classification society that is a member of the InternationalAssociation of Classification Societies (IACS). Our tugs and barges, with theexception of the Vornaes, and all of our drybulk vessels are certified as being“in class” by Registro Italiano Navale (RINA) (Italian Classification Society)or any other society member of IACS as applicable, and all secondhand vesselsthat we purchase must be certified prior to their delivery.

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*Quality Control and Crewing Requirements*

The ParisMemorandum of Understanding on Port State Control enforces IMO and ILOlegislation concerning ships operating in the Baltic region. Its requirementsmean that ships must be maintained to higher standards than ships operating inother areas of the world. In addition, it is advisable for vessels tradingunder icy conditions to employ a Master and Chief Engineer who are trained todeal with such conditions.

*New Fuel Oil Requirements*

European Unionregulations currently require a maximum sulfur limit of 1.5% in bunker fuelconsumed by vessels operating in the Baltic with new regulations requiringfurther reduced sulfur limits in 2007. Therefore, drybulk carriers that usestandard bunkers are either less likely to operate in the Baltic, or will incuradditional costs because they must take on board bunker fuel that complies withthe sulfur limit, often in addition to the bunker fuel already on board.

***Risk of Loss and Liability Insurance***

*General*

The operationof any cargo vessel includes risks such as mechanical failure, structuraldamage to the vessel, collision, personal injuries, property loss, cargo lossor damage and business interruption due to political circumstances in foreigncountries, hostilities and labor strikes. In addition, there is always aninherent possibility of marine disaster, including oil spills and otherenvironmental mishaps, and the liabilities arising from owning and operating vesselsin international trade. OPA, which can impose virtually unlimited liabilityupon owners, operators and demise charterers of any vessel trading in theUnited States exclusive economic zone for certain oil pollution accidents inthe United States, has made liability insurance more expensive for ship ownersand operators trading in the U.S. market. We carry insurance against loss ofhire, which protects against business interruption following a loss under ourhull and machinery policy. This policy does not protect us from businessinterruptions caused by any other losses. While we believe that our presentinsurance coverage is adequate, not all risks can be insured, and there can beno guarantee that any specific claim will be paid, or that we will always beable to obtain adequate insurance coverage at reasonable rates.

*Hull and Machinery Insurance and War RiskInsurance*

We haveobtained marine hull and machinery and war risk insurance, which include damageto a vessel’s hull and machinery, collisions and the risk of actual orconstructive total loss, for all of our vessels. The vessels are each coveredup to at least fair market value with a deductible of $125,000 per incident.Under regular circumstances, salvage and towing expenses are covered in connectionwith casualties. We also arranged increased value and freight interest coveragefor each vessel. Under this coverage, in the event of total loss or totalconstructive loss of a vessel, we will be able to recover for amounts notrecoverable under the hull and machinery policy.

*Protection and Indemnity Insurance*

Protection and Indemnity insurance isprovided by mutual protection and indemnity associations, or P&I Clubs,which cover our third party liabilities in connection with our shippingactivities. This includes third-party liability and other expenses andclaims in connection with injury or death of crew, passengers and other thirdparties, loss or damage to cargo, damage to other third-party property,pollution arising from oil or other substances, wreck removal and relatedcosts. Subject to the “capping” discussed below, our coverage, except forpollution, is unlimited.

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Our currentprotection and indemnity insurance coverage for pollution is $1 billionper vessel per incident. The thirteen P&I Clubs that comprise theInternational Group of P&I Clubs insure more than 90% of the world’scommercial tonnage and have entered into a pooling agreement to reinsure eachassociation’s liabilities. Each P&I Club has capped its exposure to thispooling agreement at $1 billion. As a member of a P&I Club, which is amember of the International Group, we are subject to calls payable to theassociations based on its claim records as well as the claim records of allother members of the individual associations and members of the pool of P&IClubs comprising the International Group.

***Website***

We maintain awebsite at *http://www.britbulk.com*.The information contained in or accessible from our corporate website is notpart of this annual report.

**C.   ORGANISATIONALSTRUCTURE**

We maintain offices in London, England and Svendborg, Denmark. Ourcorporate structure is organized into two principal groups: vessel andtechnical management, and vessel ownership and operations. All of oursubsidiaries are wholly-owned except Svendborg Ship Management A/S, ofwhich we own 68% of its outstanding ordinary shares, and Britannia Bulkers Plc,of which we own 99.99% of its outstanding ordinary shares. The following table setsforth our corporate structure:

| **Company Name**             | ** ** | ** ** | ** ** | **Percentage  Owned** | ** ** | **Country of  Incorporation** | ** ** | **Principal Activity**        | ** ** |
|-----------------------------------|------------|------------|------------|-----------------------|------------|------------------------------------|------------|------------------------------------|------------|
| Britannia  Bulkers Plc            |       |       | 99.99%     |                  |       | England and Wales                  |       | Ship operator                      |       |
| BBL  Denmark Holding A/S          |       |       | 100%       |                  |       | Denmark                            |       | Holding company                    |       |
| Britannia  Bulk S.A.              |       |       | 100%       |                  |       | Panama                             |       | Ship owner and operator            |       |
| Flagship  Maritime S.A.           |       |       | 100%       |                  |       | Panama                             |       | Ship owner and operator            |       |
| Baltic  Navigation Company S.A.   |       |       | 100%       |                  |       | Panama                             |       | Ship owner and operator            |       |
| Danmar  Shipping S.A.             |       |       | 100%       |                  |       | Panama                             |       | Ship owner and operator            |       |
| Northern  Star Navigation S.A.    |       |       | 100%       |                  |       | Panama                             |       | Ship owner and operator            |       |
| Great  Belt Shipping Company S.A. |       |       | 100%       |                  |       | Panama                             |       | Ship owner and operator            |       |
| Channel  Bulk Services S.A.       |       |       | 100%       |                  |       | Panama                             |       | Ship owner and operator            |       |
| Navigator  Bulk Services S.A.     |       |       | 100%       |                  |       | Panama                             |       | Ship owner and operator            |       |
| Atlantic  Bulk Services S.A.      |       |       | 100%       |                  |       | Panama                             |       | Ship owner and operator            |       |
| Western  Bulk Services S.A.       |       |       | 100%       |                  |       | Panama                             |       | Ship owner and operator            |       |
| International  Bulk Services S.A. |       |       | 100%       |                  |       | Panama                             |       | Ship owner and operator            |       |
| Unity  Bulk Services S.A.         |       |       | 100%       |                  |       | Panama                             |       | Ship owner and operator            |       |
| Britannia  Bulk DK A/S            |       |       | 100%       |                  |       | Denmark                            |       | Tugs and barges owner and operator |       |
| Britannia  Bulkers A/S            |       |       | 100%       |                  |       | Denmark                            |       | Ship operator                      |       |
| Svendborg  Ship Management A/S    |       |       | 68%        |                  |       | Denmark                            |       | Ship management                    |       |
| Svendborg  Marine Surveyors A/S   |       |       | 100%       |                  |       | Denmark                            |       | Marine surveyor                    |       |
| Inspecciones  Maritimas S.A.      |       |       | 100%       |                  |       | Costa Rica                         |       | Marine  surveyor                   |       |

 

**D.   PROPERTY,PLANT AND EQUIPMENT**

We lease officespace in London, United Kingdom where our principal office is located and weown real estate property in Svendborg, Denmark, where our Danish officebuilding is located. Our interests in the vessels in our fleet are our onlyother material properties.

**ITEM 4A.**        UNRESOLVEDSTAFF COMMENTS

None.

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**ITEM 5.**                OPERATINGAND FINANCIAL REVIEW AND PROSPECTS

***The following operatingand financial review and prospects should be read in conjunction with ourhistorical consolidated financial statements and accompanying notes includedelsewhere in this report. This discussion contains forward-looking statementsthat reflect our current views with respect to future events and financialperformance. Our actual results may differ materially from those anticipated inthese forward-looking statements as a result of certain factors, such as thoseset forth in the section entitled “Cautionary Note Regarding Forward LookingStatements” and “Item 3D.-Risk Factors” included elsewhere in this annualreport***

***Overview***

**We are an internationalprovider of drybulk transportation services with a focus on transportingdrybulk commodities from the Baltic region. Our fleet consists of sevendrybulk, five barges and four tugs. In addition, we have contracted for thepurchase of a third Panamax bulker and Handysize vessel and expect to takedelivery of each of these vessels on or about May 1, 2007. See “RecentDevelopments” below. We also routinely charter—in additional vessels toincrease vessel capacity and maximize overall profitability. We were formed in1999 and commenced operations in 2004.**

**We primarily derive ourrevenues from the transportation of drybulk cargoes, including coal, from theBaltic region. The region represents a niche market in the internationaldrybulk shipping industry, with unique characteristics such as a predominanceof short haul trades, substantial regulatory requirements and icy conditions. Drybulktransportation in this region is an expanding market and has increasedsubstantially in recent years due to increased exports of Russian coal toEurope. We are also exploring opportunities to provide our services to existingcustomers and new customers outside of the Baltic region.**

**We generate revenue by charging customers for the transportation anddistribution of their products utilizing our fleet of owned and chartered-invessels. These services are generally provided under the following three basictypes of contractual relationships: (i) time charters, (ii) COAs and (iii) spotcharters. A significant portion of our revenue is earned through COAs. COAs arecontracts between a shipper of cargo and a customer pursuant to which theshipper agrees with the customer to transport up to a certain amount of cargobetween designated ports. COAs generally provide us with a minimum and maximumtonnage demand at a fixed price for the term of the contract, while ourcustomers receive guaranteed transportation capacity at a fixed price. Webelieve that the coal trade in the Baltic region often relies on COAs ratherthan voyage or time charters primarily because of the predominance of shorthaul trades and the fixed contractual relationships between producers and endusers of coal. The terms of the COAs typically range from four weeks to twoyears. Since COAs do not specify the vessel required to transport the drybulkcommodities, we maintain the flexibility to deploy our fleet in the mostadvantageous and economical manner.**

***Recent Developments***

**Since December 31,2006, we have acquired two Panamax vessels and a tug for an aggregate purchaseprice of approximately $66.2 million. We took delivery of the Panamax vessels onFebruary 27, 2007 and April 10, 2007, respectively, and acquired thetug on February 9, 2007. The purchase price of the two Panamaxvessels was $28.5 million and $36.7 million and the tug’s purchase price was $1million.**

**We have also contractedfor the purchase of a third Panamax bulker and Handysize vessel for $36.7million and $10.75 million, respectively. We expect to take delivery of thethird Panamax and Handymax vessels in May 2007.**

**On April 12, 2007, Britannia and certain of the major shareholdersentered into a share purchase agreement whereby North Western (Neva) Limitedagreed to sell all of its outstanding ordinary shares in the Company forapproximately $8.25 million. These shares will be purchased by both the Companyand**

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**each of the other major shareholders a party to suchagreement. For more information on this share purchase transaction, please see “Item7.—Major Shareholders and Related Party Transactions”.**

***Factors Affecting our Results ofOperations***

**Our operating results depend upon a number of factors, including amongother things demand for our services, operational data, voyage revenues andexpenses, and vessel operating expenses. In addition, our results of operationsare impacted by certain factors as described under “Cautionary Note RegardingForward Looking Statements” and “Item 3D.—Risk Factors” included elsewhere inthis annual report.**

*Demand for OurServices*

**Our revenues are primarily dependent upon the demand for drybulkshipping services, principally throughout the Baltic region. The demand for ourservices is significantly impacted by the demand for movement of our mostimportant cargoes, including coal, fertilizers, steel products, grains andscrap. A material change in the demand for these products can significantlyaffect our overall fleet utilization and our overall results of operations. Forexample, demand for coal in the United Kingdom was significantly lower duringthe fourth quarter of 2006 as compared with the same period in 2005 due towarmer temperatures throughout Europe. As a result, the reduction in overalldemand for coal adversely impacted the number of shipments and volume of coalthat we transported during this period as well as the number of COAs that weentered into for the following year.**

*OperationalData*

**We believe the following data are important measures affecting ourresults of operations:**

***Ownership days.  ******We define ownershipdays as the total number of days in a period during which each vessel in ourfleet was in our possession, including off-hire days associated with majorrepairs, drydockings or special or intermediate surveys. Ownership days are anindicator of the overall size of our fleet during a period and affect both theamount of revenues and the amount of expenses that we record during thatperiod.***

***Available days.  ******We define availabledays as the total number of days in a period during which each vessel in ourfleet was in our possession, net of off-hire days associated with majorrepairs, drydockings or special or intermediate surveys. The shipping industryuses “available days” to measure the number of days in a period during whichvessels actually generate revenues.***

***Fleet utilization.  ******We calculate fleetutilization by dividing the number of our voyage days during a period by thenumber of calendar days during that period. The shipping industry uses fleetutilization to measure a company’s efficiency in finding suitable employmentfor its vessels and minimizing the amount of days that its vessels are off-hirefor reasons such as scheduled repairs, vessel upgrades, drydockings or specialor intermediate surveys.***

***Spot Charter Rates.  ******Spot charter rates arevolatile and fluctuate on a seasonal and year to year basis. Fluctuations arecaused by imbalances in the availability of cargoes for shipment and the numberof vessels available at any given time to transport these cargoes.***

***TCE Rates.  ******We define TCE rates asour revenues (net of voyage expenses and commissions) divided by the number ofour available days during the period, which is consistent with industrystandards. TCE rate is a common shipping industry performance measure usedprimarily to compare daily earnings generated by vessels on time charters withdaily earnings generated by vessels on voyage charters and COAs, becausecharterhire rates for vessels on voyage charters and COAs are generally notexpressed in per-day amounts. Because the amount of voyage expenses we incurfor a particular charter depends upon the form of the charter depends upon theform of the charter, we use TCE rates to improve the comparability betweenperiod of reported revenues that are generated by the different forms ofcharter.***

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***Daily vessel operatingexpenses.  ******We define daily vesseloperating expenses to include crew wages and related costs, the cost ofinsurance expenses relating to repairs and maintenance (excluding drydocking),the costs of spares and consumable stores, tonnage taxes and othermiscellaneous expenses. Daily vessel operating expenses are calculated bydividing vessel operating expenses by the ownership days for the relevantperiod.***

**The following table reflects our ownership days, off hiredays, operating days, fleet utilization, TCE rates and daily vessel operatingexpenses for the period indicated.**

| **Vessel Name**                   | ** ** | ** ** | ** ** | **Ownership  Days** | ** ** | **Available  Days** | ** ** | **Operating  Days** | ** ** | **Fleet  Utilization** | ** ** | **TCE Rates** | ** ** | **Daily Vessel  Operating  Expenses** | ** ** |
|----------------------------------------|------------|------------|------------|---------------------|------------|---------------------|------------|---------------------|------------|------------------------|------------|--------------------|------------|--------------------------------------------|------------|
| *Year ended  December 31, 2004*   | * *   |       | * *   | * *            |       |                | * *   | * *            |       |                   | * *   | * *           |       |                                       | * *   | * * |   |   | * * | * * |   |   | * * | * * |   |
| Explorer  II (1)                       |       |       | 32         | * *            |       |                | 24         | * *            |       |                   | 24         | * *           |       |                                       | 100        | *%* |   |   | $ | 21,867 | * * |   |   | $ | 4,739 | * * |   |
| Challenger  II (1)                     |       |       | 93         | * *            |       |                | 92         | * *            |       |                   | 92         | * *           |       |                                       | 100        | *%* |   |   | $ | 24,178 | * * |   |   | $ | 5,839 | * * |   |
| Adventure  II                          |       |       | 219        | * *            |       |                | 219        | * *            |       |                   | 219        | * *           |       |                                       | 100        | *%* |   |   | $ | 16,974 | * * |   |   | $ | 4,870 | * * |   |
| Voyager  II                            |       |       | 36         | * *            |       |                | 36         | * *            |       |                   | 36         | * *           |       |                                       | 100        | *%* |   |   | $ | 21,845 | * * |   |   | $ | 9,986 | * * |   |
| *Year ended December 31, 2005*    | * *   |       | * *   | * *            |       |                | * *   | * *            |       |                   | * *   | * *           |       |                                       | * *   | * * |   |   | * * | * * |   |   | * * | * * |   |
| Explorer  II                           |       |       | 365        | * *            |       |                | 365        | * *            |       |                   | 365        | * *           |       |                                       | 100        | *%* |   |   | $ | 21,581 | * * |   |   | $ | 4,381 | * * |   |
| Challenger  II                         |       |       | 365        | * *            |       |                | 365        | * *            |       |                   | 365        | * *           |       |                                       | 100        | *%* |   |   | $ | 19,850 | * * |   |   | $ | 4,246 | * * |   |
| Adventure  II                          |       |       | 365        | * *            |       |                | 264        | * *            |       |                   | 264        | * *           |       |                                       | 100        | *%* |   |   | $ | 17,952 | * * |   |   | $ | 4,888 | * * |   |
| Voyager  II                            |       |       | 365        | * *            |       |                | 365        | * *            |       |                   | 365        | * *           |       |                                       | 100        | *%* |   |   | $ | 16,885 | * * |   |   | $ | 6,372 | * * |   |
| Discovery  II                          |       |       | 250        | * *            |       |                | 250        | * *            |       |                   | 250        | * *           |       |                                       | 100        | *%* |   |   | $ | 12,722 | * * |   |   | $ | 8,211 | * * |   |
| *Year ended December 31, 2006*    | * *   |       | * *   | * *            |       |                | * *   | * *            |       |                   | * *   | * *           |       |                                       | * *   | * * |   |   | * * | * * |   |   | * * | * * |   |
| Explorer  II                           |       |       | 365        | * *            |       |                | 304        | * *            |       |                   | 304        | * *           |       |                                       | 100        | *%* |   |   | $ | 13,748 | * * |   |   | $ | 5,759 | * * |   |
| Challenger  II                         |       |       | 365        | * *            |       |                | 318        | * *            |       |                   | 318        | * *           |       |                                       | 100        | *%* |   |   | $ | 12,074 | * * |   |   | $ | 5,102 | * * |   |
| Adventure  II                          |       |       | 365        | * *            |       |                | 365        | * *            |       |                   | 365        | * *           |       |                                       | 100        | *%* |   |   | $ | 12,263 | * * |   |   | $ | 4,450 | * * |   |
| Voyager  II                            |       |       | 365        | * *            |       |                | 304        | * *            |       |                   | 304        | * *           |       |                                       | 100        | *%* |   |   | $ | 15,484 | * * |   |   | $ | 6,449 | * * |   |
| Discovery  II                          |       |       | 365        | * *            |       |                | 365        | * *            |       |                   | 365        | * *           |       |                                       | 100        | *%* |   |   | $ | 13,724 | * * |   |   | $ | 4,924 | * * |   |
| Tugs &  Barges (in aggregate) |       |       | 365        | * *            |       |                | 365        | * *            |       |                   | 365        | * *           |       |                                       | 100        | *%* |   |   | $ | 30,345 |  (2) |   |   | $ | 10,317 |  (2) |   |

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(1)          In connection with the acquisition of the subsidiaries owning thesevessels, we assumed drydocking expenses incurred by the previous owners priorto us taking delivery of the vessels.

(2)          Due tothe complementary nature of these vessels, we did not prepare separate TCErates and daily vessel operating expenses but are presenting aggregate valuesinstead.

*VoyageRevenues*

Our voyage revenues are driven primarily bythe number of vessels in our fleet, the number of voyage days  during which our vessels generate revenuesand the dayrates under our charters. These voyage revenues and dayrates may besignificantly affected by a number of factors, including the overall size andnumber of vessels in our fleet; supply and demand in the drybulk transportationmarket; strategic and successful positioning of vessels to maximize voyagerevenues; amount of off-hire time that our vessels experience undergoingdrydocking, repairs, maintenance and upgrade work; and the age, condition andspecifications of the vessels in our fleet.

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Vesselsoperating on period time charters provide more predictable cash flows, but canyield lower profit margins than vessels operating in the spot charter marketduring periods characterized by favorable market conditions. Vessels operatingin the spot charter market generate revenues that are less predictable and morevolatile but may enable us to capture increased profit margins during periodsof improvements in charter rates. Involvement in this spot charter marketincreases the relative volatility in our cash flows from operations and exposesus to the risk of declining charter rates, which may have a materially adverseimpact on our financial performance. If we employ vessels on period timecharters, future spot market rates may be higher or lower than the rates atwhich we have employed our vessels on period time charters. The drybulk vesselsacquired and those to be acquired will each operate under charters extendingfor a minimum two-year period commencing on the date we took delivery of suchvessel at charter rates described above or elsewhere in this annual report.

*VoyageExpenses*

We incur voyage expenses that include portand canal charges, fuel (bunker) expenses and brokerage commissions payable tounaffiliated parties. Port and canal charges and bunker expenses primarilyincrease in periods during which vessels are employed on COAs and voyagecharters because these expenses are for the account of the vessel owner.

As is common in the shipping industry, wealso pay brokerage commissions ranging from 1.25% to 8% of the total dailycharterhire or per ton rate of each charter or contract to unaffiliated shipbrokers and in-house brokers associated with the customers, depending on thenumber of brokers involved with arranging the charter or contract. We believethat the amounts and the structures of our commissions are consistent withindustry practices.

We expect thatthe overall amount of our voyage expenses will increase in the future due tothe increase in the number of vessels in our fleet.

*Vessel OperatingExpenses*

Vesseloperating expenses include crew wages and related costs, insurance, expensesrelating to repairs and maintenance, spare and consumable stores, tonnage taxesand other miscellaneous expenses. Our vessel operating expenses, which generallyrepresent fixed costs, have historically increased as a result of the increasein the size of our fleet. We expect that the amount of our total voyageoperating expenses will increase due to the increase in the number of vesselsin our fleet.

*Depreciationand Amortization*

We depreciateour vessels on a straight-line basis over their estimated useful livesdetermined to be 25 years from the date of their initial delivery from theshipyard for the vessels and barges, and 30 years for the tugs. Depreciation isbased on cost less the estimated residual value. We capitalize the costsassociated with a drydocking and amortize these costs on a straight-line basisover the period when the next drydocking becomes due, which is typically 30months. Regulations and/or incidents may change the estimated dates of nextdrydockings. Vessels that are beyond their useful life will be depreciated on astraight-line basis from the date of acquisition to the scheduled date of thenext special survey (including any IACS Classification Society acceptedextension). We expect depreciation charges to increase due to the plannedexpansion of our fleet.

*Generaland Administrative Expenses*

We incurgeneral and administrative expenses, including our onshore vessel—relatedexpenses, payroll, office leases, legal and accounting fees, and other general expenses.We expect general and administrative expenses to increase as a result of theexpansion of our fleet, growing business, and costs 

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associatedwith running a public reporting company, including the preparation ofdisclosure documents, director and employee compensation, incremental directorand officer liablilty insurance costs, legal and accounting costs, and costsrelated to compliance with applicable United States securities laws andaccounting principles.

***TrendInformation***

**In the first quarter of 2006, our industry experienced a weaker dayrateenvironment as compared to 2005 resulting in a decrease in voyage revenues pervessel in our fleet. Tonnage transported by us, however, increased in 2006 asresult of our increased fleet size, coupled with a rise in demand for ourservices. Our total expenses also increased due to an increase in the numberof  vessels we own and charter-in, higherbunker costs, and substantially increased port costs. We believe that this risein total revenues, tonnage transported and total expenses are likely toincrease in the future as a result of our expanding fleet size and the overallincrease in demand for our services.**

***Lack of Historical Operating Data forVessels before their acquisition***

Consistent with shipping industry practice,other than inspection of the physical condition of the vessels and examinationsof classification society records, there is no historical financial duediligence process performed when we acquire vessels. We do not obtain thehistorical operating data for the vessels from the sellers as that informationis rarely material to our decision to acquire the vessel, nor do we believe itwould be helpful to our securityholders in assessing our business or prospects.Most vessels are sold under a standardized agreement, which, among otherthings, provides the buyer with the right to inspect the vessel and the vessel’sclassification society records. The standard agreement does not give the buyerthe right to inspect, or receive copies of, the historical operating data ofthe vessel. Prior to the delivery of a purchased vessel, the seller typicallyremoves from the vessel all records, including past financial records and accountsrelated to the vessel. In addition, any technical management agreement betweenthe seller’s technical manager and the seller is or will be automaticallyterminated and the vessel’s trading certificates are revoked by its flag statefollowing a change in ownership.

We typically acquire our vessels free ofcharter. However, pursuant to the terms of the indenture governing our Notes,we have found it advantageous in certain circumstances to assume a time charteror extend an existing charter on the vessel that we acquire. This determinationof whether to assume or novate an existing charter will be made on acase-by-case basis and will depend on the specifics of the charter underconsideration as well as the prevailing market at the time of the acquisition.

Consistent with shipping industry practice,we treat the acquisition of a vessel (whether acquired with or free of charter)as the acquisition of an asset rather than a business. Where a vessel has beenunder a voyage charter, the vessel is delivered to the buyer free of charter,and it is rare in the shipping industry for the last charterer of the vessel inthe hands of the seller to continue as the first charterer of the vessel in thehands of the buyer. In most cases, when a vessel is under time charter and thebuyer wishes to assume that charter, the vessel cannot be acquired without thecharterer’s consent and the buyer entering into a separate direct agreementwith the charterer to assume the charter. The purchase of a vessel itself doesnot transfer the charter, because it is a separate service agreement betweenthe vessel owner and the charterer.

We haveentered into new charter contracts with our customers that commenced upondelivery of the vessels to us. In purchasing each vessel, we were required totake the following steps before the vessel could commence operations:

·       replaceall hired equipment on board, such as gas cylinders and communicationsequipment;

·       negotiateand enter into new insurance contracts for the vessel through our insurance brokers;

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·       registerthe vessel under a flag state and perform the related inspections in order toobtain new trading certificates from the flag;

·       implementa new planned maintenance program for the vessel.

·       changeclassifications; and

·       assure that the new technical manager obtains new certificates forcompliance with the safety and vessel security regulations of the flag state.

***Results of Operations***

***Year Ended December 31, 2006 Comparedto the Year Ended December 31, 2005.***

*Voyage Revenues.*   Totalvoyage revenues for the year ended December 31, 2006 were $191.5 millioncompared with $184.6 million for the year ended December 31, 2005, anincrease of $6.9 million or 3.7%. The increase in revenues was largely due toan increase in our total chartered-in tonnage transported offset by a weakeningdayrate market from 2005 to 2006 and a decrease in total voyage days.

Our chartered-in tonnage increased from 5,630days for the year ended December 31, 2005 to 5,824 days for the year endedDecember 31, 2006 resulting from an increase in overall demand in thedrybulk shipping market. Offsetting this increase, the total voyage days forour owned fleet decreased to 7,228 days for the year ended December 31,2006 compared with 7,341 days for the year ended December 31, 2005. Thedecrease in voyage days was primarily a result of three of our vesselsincurring 169 days of drydocking time during the year ended December 31,2006.

*Voyage Expenses.*   Totalvoyage expenses for the year ended December 31, 2006 were $71.8 millioncompared with $49.3 million for the year ended December 31, 2005, anincrease of $22.5 million or 45.6%. This increase is primarily a result of anincrease in bunker and port costs, and the total number of voyages performed. Specifically,bunker costs increased by $11.5 million for 2006 as compared to 2005 due torising oil prices and port costs rose by $7.6 million in 2006 as a result of asubstantial rise in port charges.

*Vessel Operating Expenses.*   Totalvessel operating expenses for the year ended December 31, 2006 were $12.9million compared with $12.1 million for the year ended December 31, 2005,an increase of $0.8 million or 6.6%. This overall increase was primarilyattributable to the expansion in fleet size. Daily vessel operating expensesper vessel (excluding tugs and barges) for the year ended December 31,2006 were $5,337 compared with $5,620 for the year ended December 31,2005, a decrease of $283 or 5.0%. This decrease is largely a result of theimplementation of stronger cost control measures. Total daily operatingexpenses for the tugs and barges for 2006, in the aggregate, were $10,317 andno comparable information for 2005 is available as the tugs and barges wereacquired in December 2005.

*Depreciation and Amortization.*   Depreciation and amortization for the year ended December 31,2006 was $10.9 million compared with $9.3 million for the year ended December 31,2005, an increase of $1.6 million or 17.2%. This increase in depreciation andamortization is a result of the impact of the acquisition of tugs and barges inDecember 2005, as well as the sale and issuance of the Notes and thecapitalization of the associated fees and expenses.

*General and Administrative Expenses.*   General and administrative expenses for the year ended December 31,2006 were $9.4 million compared to $3.7 million for the year ended December 31,2005, an increase of $5.7 million or 154%. This increase is largely a result ofa substantial increase in payroll and office costs, including the expansion orour technical management team and the addition of 11 employee in connectionwith the acquisition of equity in Svendborg Ship Management A/S. Salary costsincreased during 2006 by approximately $2.9 million due to our increasingnumber of employees and office costs rose by approximately $1.0 million for thesame period as a result of a higher employee headcount and 

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operating anadditional office in Svendborg, Denmark. In addition, we also experiencedincreased costs associated with travel, and legal and accounting fees andexpenses.

*Interest and Finance Costs.*   Interestand finance costs were $5.1 million for the year ended December 31,2006 compared to $1.4 million for the year ended December 31, 2005, anincrease of $3.7 million or 264%. The increase in these costs were a result ofcosts associated with financing the acquisition of tugs and barges in December 2005and the issuance of the Notes in November 2006.

*InterestIncome.*   Interest income for theyear ended December 31, 2006 was $1.1 million compared to $0.3 millionduring the year ended December 31, 2005, an increase of $0.8 million or 267%.This increase was due to higher levels of liquidity and cash availableresulting in interest earned from our deposits.

***Year ended December 31, 2005 comparedto the year ended December 31, 2004***

*Voyage Revenues.*   Voyagerevenues for the year ended December 31, 2005 were $184.6 million comparedto $42.1 million for 2004, an increase by $142.5 million or 338%. This increasewas a result of an increase in our fleet size as well as an increased level inchartering-in activities. A portion of our COAs performed during 2005 werecontracted during 2004 and reflected the strong dayrate environment in 2004,which reduced the Company’s exposure to the general decline of the dayratemarket during 2005.

*Voyage Expenses.*   Voyageexpenses for the year ended December 31, 2005 were $49.3 compared to$11.9, an increase of $37.4 million or 314%. This increase was largelyattributable to the higher charter hire expenses resulting from the increasednumber of chartered-in days. During 2004, at the request of some of ourcustomers, we chartered-in a number of Panamax vessels on period time charters,some of which subsequently became unprofitable.

*Vessel Operating Expenses.*   Vesseloperating expenses for the year ended December 31, 2005 were $12.1 millioncompared to $2.8 million for the year ended December 31, 2004, an increaseof $9.3 million or 332%. Daily vessel operating expenses per vessel decreasedby $739, or 11.6%, to $5,620 for 2005 compared to $6,359 for 2004. Thisdecrease is primarily due to implementing certain cost control measures.

*Depreciation and Amortization.*   Depreciation and amortization for the year ended December 31,2005 was $9.3 million compared to $1.1 million, an increase of $8.2 million or745%. This increase was principally a result of the increase in our owned fleetand the resulting depreciation and amortization associated with owning vessels.

*General and Administrative Expenses.*   General and administrative expenses for the year ended December 31,2005 were $3.7 million compared to $0.1 million for the year ended December 31,2004, an increase of $3.6 million. This increase is primarily due to anincrease in our employees and associated costs therewith.

*Interest Cost.*   Interest cost for the year ended December 31, 2005 was$1.4 million compared with $0.3 million for the year ended December 31,2004, an increase of $1.1 million or 367%. This increase reflects theadditional costs associated with the financing of the Discovery II vessel. Inaddition, we incurred costs associated with a working capital facility that wasrepaid with proceeds from the issuance of our senior secured notes.

***Liquidityand Capital Resources***

Our sources of liquidity include cashbalances, cash flow from operations and other debt and equity issuances. Ourprimary sources of funds for our short-term liquidity needs will be cash flowfrom operations and available cash balances. Our long-term sources of fundswill also be cash from operations, and other debt or equity financings. Ourliquidity needs fluctuate depending on a number of factors, 

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including costsassociated with fuel and port fees; demand for our services and the volume ofchartering-in voyages that we may undertake. To date, our principal use offunds has been expenditures to establish and expand our fleet, maintain thequality of our vessels, comply with international shipping standards andenvironmental laws and regulations, fund working capital requirements, makeprincipal repayments on outstanding loan facilities, and pay dividends. Ourmanagement believes that its current cash balance and anticipated cash flowfrom operations will be adequate to meet our liquidity requirements for thenext year. Our ability to meet our long-term liquidity requirements will dependin large part on our future performance, which is subject to many factorsbeyond our control. See “Risk Factors-Risks Related to Our Business.”

We have also considered entering into aworking capital credit facility and may execute such an agreement should suchadditional liquidity be advantageous or a preferable form of liquidity. Atpresent, our liquidity requirements have not necessitated an additional sourceof funding and, as such, we have not entered into any such arrangement with acommercial bank. We will continue to monitor not only our performance andliquidity needs, but also the commercial market, to determine whether a workingcapital facility would be advantageous or helpful as we seek to execute ourbusiness strategy and growth plans.

Our business is capital intensive and itsfuture success will depend on our ability to maintain a high-quality fleetthrough the acquisition of newer drybulk carriers and the selective sale ofolder drybulk carriers. These acquisitions will be principally subject tomanagement’s expectation of future market conditions as well as our ability toacquire drybulk carriers on favorable terms.

On November 16,2006, we completed a private placement of $185 million in aggregate principalamount of our 11% senior secured notes due 2011. The Notes were issued pursuantto an Indenture in a transaction exempt from the registration requirementsunder the Securities Act. The Notes were sold within the United States only toqualified institutional buyers in reliance on Rule 144A under theSecurities Act, and outside the United States only to non-U.S. persons inreliance on Regulation S under the Securities Act. The Notes will mature on December 1,2011 and interest is payable on the Notes on each June 1 and December 1,beginning June 1, 2007. The Notes are guaranteed on a senior secured basisby all of the existing subsidiaries and certain of our future subsidiaries.

***Cash Flows from Operating, Investing andFinancing Activities***

*Sources and Uses of Cash for theTwelve-Month Period Ended December 31, 2006*

Our cash and cash equivalents increased to$17.2 million as of December 31, 2006, compared to $6.4 million as of December 31,2005 and to $9.3 million as of December 31, 2004. Working capital equalscurrent assets minus current liabilities, including the current portion oflong-term debt. Our working capital surplus was $151.6 million as of December 31,2006 as a result of the sale and issuance of the Notes. As of December 31,2006, $138.1 million remained in the vessel acquisition account for thepurchase of additional vessels.

Our net cash from operating activitiesduring 2006 was $13.0 million compared to $14.4 million during 2005. Thisdecrease was primarily due to a weakened drybulk dayrate environment during2006. In addition, we incurred $5.2 million in drydocking costs related toExplorer II, Challenger II and Voyager II which adversely affected our overallnet cash from operating activities for the year ended December 31, 2006.

Our net cash used in investing activitiessubstantially increased in 2006 to $142.3 million which reflects the funding ofthe vessel acquisition account of $140.0 million from the proceeds of the saleand issuance of the Notes and a prepayment in connection with the acquisitionof one of our vessels. In comparison and for the year ended December 31, 2005,our net cash used in investing activities was $27.9 million, which amounts areassociated with the acquisition of certain vessels and our tugs and barges.

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Our net cashfrom financing activities was $140.1 million for the year ended December 31,2006 compared to $10.5 million during the year ended December 31, 2005.The change in cash provided by financing activities relates to (i) netproceeds of $173.2 million from the sale and issuance of the Notes, (ii) capitalizing$6.8 million in fees and expenses associates with the sale and issuance of theNotes; and (iii) repayment of long-term indebtedness totaling $26.2million.

*Sources and Uses of Cash for theTwelve-Month Period Ended December 31, 2005*

As of December 31, 2005, we had a cashbalance of $6.4 million. Working capital is current assets minus currentliabilities, including the current portion of long-term debt. The workingcapital deficit was $4.6 million as of December 31, 2005 due to thecurrent portion of long-term debt from indebtedness incurred to finance theacquisition of certain vessels in our fleet.

Our net cash from operating activitiesduring 2005 was $14.4 million compared to $2.9 million during 2004. Thisincrease was primarily due to the increase in the number of operating days andchartered-in activities during the period, which more than offset the effectsof an overall weakening in the spot market and resulted in increased revenues.We incurred $2.1 million in drydocking costs related to Adventure II in 2005.

Our net cash used in investing activitieswas $27.9 million for the year ended December 31, 2005 compared with $24.9million for the year ended December 31, 2004. This increase reflects therise in costs associated with the purchase price of Discovery II, certain ofour tug and barge vessels and a majority equity interest in Svendborg ShipManagement A/S as compared with the acquisition of the vessels Explorer II,Challenger II, Adventure II, and Voyager II in 2004.

Our net cashused in financing activities was $10.5 million for the year ended December 31,2005 compared with $31.3 million during the year ended December 31, 2004. Thisdecrease is largely due to fewer borrowings to finance acquisition in 2005 ascompared with 2004. In 2005, we borrowed $19.5 million to partially finance theacquisition of the tug and barge vessels and the purchase of Discovery II,whereas we borrowed $31.3 million in 2004 to partially finance the acquisitionof the vessels Explorer II, Challenger II, Adventure II and Voyager II.Our net cash used in financing activities in 2005 was partially offset by loanrepayments of $9.3 million.

***ContractualObligations***

The following table sets forth our contractual obligations and theirmaturity dates as of December 31, 2006:

| ** **                     | ** ** | **Less then   One Year** | ** ** | **One to  Three Years** | ** ** | **Three to  Five Years** | ** ** | **More than  Five Years** | ** ** | **Total** | ** ** |
|--------------------------------|------------|-----------------------------------------|------------|-----------------------------------|------------|------------------------------------|------------|-------------------------------------|------------|-----------|------------|
| ** **                     | ** ** | **(in thousands)**                 | ** ** |
| **Long-term debt obligations** |       |                                    | $          | —                            |       |                               |       | —                              |       |      |       | $ | 185,000 |   |   |   | — |   |   | $ | 185,000 |   |
|                                |            |                                         |            |                                   |            |                                    |            |                                     |            |           |            |  |  |  |  |  |  |  |  |  |  |  |

 

***CapitalExpenditures***

We make capital expenditures from time totime in connection with our vessel acquisitions. Our current commitment forcapital expenditures relates to vessels for which we have entered into aMemorandum of Agreement for a purchase price of approximately $47.4 million, ofwhich we have paid $4.74 million in deposits. These deposits were financedwith a portion of the net proceeds from the offering of the Notes. In addition,we intend to pay the final purchase price on these vessels, as well as acquireadditional drybulk carriers, with a portion of the remaining net proceeds fromthe offering of the Notes.

 

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Inaddition to acquisitions that we may undertake in future periods, we will incuradditional capital expenditures due to special surveys and drydockings. Weestimate our drydocking costs through 2011 for the seven vessels, four tugs andfive barges currently in our fleet to be:

| **Year**   | ** ** | ** **                    | ** ** | **Estimated  Drydocking  Costs** | ** ** |
|------------|------------|-------------------------------|------------|----------------------------------|------------|
| ** ** | ** ** | **($ in millions)** | ** ** |
| 2007       |       |                          | 7.0        |                             |       |
| 2008       |       |                          | 6.5        |                             |       |
| 2009       |       |                          | 7.5        |                             |       |
| 2010       |       |                          | 8.0        |                             |       |
| 2011       |       |                          | 12.0       |                             |       |

 

The estimated capitalexpenditures set forth above include approximate costs for 2007, 2008 and subsequentyears due to delivery of new vessel acquisitions. We believe that the fundingof these costs will be met with cash we generate from operations.

***Inflation***

Inflation has only amoderate effect on our expenses given current economic conditions. In the eventthat significant global inflationary pressures appear, these pressures wouldincrease our operating, voyage, administrative and financing costs.

***Qualitativeand Quantitative Market Risk***

*InterestRates.**  *Historically,we have been subject to limited market risks relating to changes in interestrates, because we did not have significant amounts of floating rate debtoutstanding. During 2006, we paid interest on this debt based on LIBOR plusmargins ranging from 0.95% to 2% on our bank loans. Following the completion ofthe offering of Notes and subsequent repayment of all our outstanding debt, wedo not have any material exposure to interest rate changes because we do notexpect to have any significant floating rate debt outstanding.

*Foreign Exchange Rate Risk.**  *For the year ended December 31, 2006, wegenerated 99% of our revenues in U.S. dollars, and incurred 19% of ouroperating expenses in currencies other than the U.S. dollar, primarily theBritish Pound, Euro and Danish Kroner. For accounting purposes, expensesincurred in these non-U.S. dollar currencies are converted into U.S. dollars atthe exchange rate prevailing on the date of each transaction. Because asignificant portion of our expenses are incurred in currencies other than theU.S. dollar, our expenses may from time to time increase relative to ourrevenues as a result of fluctuations in exchange rates, particularly betweenthe U.S. dollar and the British Pound, Euro and Danish Kroners, which couldaffect the amount of cash flow we generate in future periods. While wehistorically have not mitigated the risk associated with exchange ratefluctuations through the use of financial derivatives, we may determine toemploy such instruments from time to time in the future in order to minimizethis risk. Our use of financial derivatives would involve certain risks,including the risk that losses on a hedged position could exceed the nominalamount invested in the instrument and the risk that the counterparty to thederivative transaction may be unable or unwilling to satisfy its contractualobligations.

***CriticalAccounting Policies***

The discussion and analysis of our financial conditionand results of operations is based upon our consolidated financial statements,which have been prepared in accordance with generally accepted accountingprinciples in the United States, or U.S. GAAP. The preparation of thosefinancial statements 

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requires us to makeestimates and judgments that affect the reported amount of assets andliabilities, revenues and expenses and related disclosure of contingent assetsand liabilities at the date of our financial statements. Actual results maydiffer from these estimates under different assumptions or conditions.

Critical accounting policies are those that reflectsignificant judgments or uncertainties, and potentially result in materiallydifferent results under different assumptions and conditions. We have describedbelow what we believe are our most critical accounting policies that involve ahigh degree of judgment and the methods of their application. For a descriptionof all of the company’s significant accounting policies, see Note 2 to theCompany’s consolidated financial statements.

*Impairmentof long-lived assets.*   We evaluate the carryingamounts of vessels to determine if events have occurred which would requiremodification to their carrying values. In evaluating carrying values ofvessels, we review certain indicators of potential impairment, such asundiscounted projected operating cash flows, vessel sales and purchases, businessplans and overall market conditions. We determine undiscounted projected netoperating cash flows for each vessel and compare it to the vessel’s carryingvalue. If our estimate of undiscounted future cash flows for any vessel islower than the vessel’s carrying value plus any unamortized drydocking costs,the carrying value is written down, by recording a charge to operations, to thevessel’s fair market value if the fair market value is lower than the vessel’scarrying value. We estimate fair market value primarily through the use ofthird party valuations performed on an individual vessel basis.

*Depreciation.*   Werecord the value of our vessels at their cost (which includes acquisition costsdirectly attributable to the vessel and expenditures made to prepare the vesselfor its initial voyage) less accumulated depreciation. We depreciate ourvessels on a straight-line basis over their estimated useful lives, estimatedto be 25 years. We believe that a 25-year depreciable life is consistentwith that of other ship owners. Depreciation is based on cost less theestimated residual scrap value. A decrease in the useful life of a dry bulkvessel or in its residual value would have the effect of increasing the annualdepreciation charge. When regulations place limitations on the ability of avessel to trade on a worldwide basis, the vessel’s useful life is adjusted at thedate such regulations are adopted.

*Deferreddrydocking costs.*   Our vessels are required to bedrydocked for major repairs and maintenance that cannot be performed while thevessel is operating approximately every 30 months. We capitalize the costsassociated with the drydocks as they occur and amortize these costs on astraight line basis over the period between drydocks. Costs capitalized as partof the drydock include actual costs incurred at the drydock yard, and the costof hiring a third party to oversee a drydock.

*Allowancefor doubtful accounts.  *Revenue is based on contractedcharter parties and Contracts of Affreightment, and although our business iswith customers who we believe to be of the highest standard, there is alwaysthe possibility of dispute over terms and payment of freight. In such circumstances,we assess the recoverability of amounts outstanding and we estimate a provisionif there is a possibility of non-recoverability. Although we believe ourprovisions to be based on fair judgment at the time of their creation, it ispossible that an amount under dispute is not recovered and the estimatedprovision for doubtful recoverability is inadequate.

***DividendPayments***

For the year ended December 31,2006, the Company did not make any dividend payments to its shareholders. Pursuantto the terms of the indenture governing our Notes, we do not intend to declareor pay dividends on our ordinary shares in the foreseeable future. Instead, weintend to invest any future earnings in our operations and servicing ouroutstanding indebtedness.

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***Off-BalanceSheet Arrangements***

As of December 31,2006, we did not have any off-balance sheet arrangements, and we currently donot have any off-balance sheet arrangements.

***Change inAccounting Principles***

For the year ended December 31,2006, we did not have any change in our accounting principles.

***RecentAccounting Pronouncements***

The Financial Accounting Standards Board (“FASB”)issued SFAS No. 157 (“SFAS 157”) on September 15, 2006. SFAS 157enhances existing guidance for measuring assets and liabilities using fairvalue. Previously, guidance for applying fair value was incorporated in severalaccounting pronouncements. The new statement provides a single definition offair value, together with a framework for measuring it, and requires additionaldisclosure about the use of fair value to measure assets and liabilities. Whilethe statement does not add any new fair value measurements, it does changecurrent practice. One such change is a requirement to adjust the value ofnon-bested stock for the effect of the restriction even if the restrictionlapses within one year. SFAS 157 is effective for financial statements issuedfor fiscal years beginning after November 15, 2007, and interim periodswithin those fiscal years. The adoption of SFAS 157 on January 1,2008, is not expected to have a material impact on the financial statements ofthe Company.

In July 2006, the FSAB issued Interpretation No. 48(“FIN 48”), “Accounting for Uncertainty in Income Taxes-an interpretation ofFASB Statement No. 109”. FIN 48 clarifies the accounting for uncertaintyin income taxes recognized by prescribing a recognition threshold andmeasurement attribute for financial statement recognition and measurement of atax position taken or expected to be taken in a tax return. FIN 48 also providesguidance on derecognition, classification, interest and penalties, accountingin interim periods, disclosure and transition. FIN 48 is effective for yearsbeginning after December 15, 2006. The Company has performed an assessmentand determined that the adoption of FIN 48 will have no material impact onthe Company’s consolidated financial statements.

In September 2006,the SEC (“SEC”) issued SAB No. 108 “Considering the Effects of Prior YearMisstatement When Quantifying Misstatements in Current Year FinancialStatements”, which provides interpretive guidance on how registrants shouldquantify financial statement misstatements. Under SAB 108 registrants arerequired to consider both a “rollover” method, which focuses primarily on theincome statement impact of misstatements. The effects of prior year uncorrectederrors include the potential accumulation of improper amounts that may resultin a material misstatement on the balance sheet or the reversal of prior perioderrors in the current period that result in a material misstatement of thecurrent period income statement amounts. Adjustments to current or prior periodfinancial statements would be required in the event that after application ofvarious approaches for assessing materiality of a misstatement in currentperiod financial statements and consideration of all relevant quantitative andqualitative factors, a misstatement is determined to be material. The Companyadopted the provisions of SAB 108 as of December 31, 2006. The adoption ofSAB 108 did not have an effect on the Company’s results of financial operationsor financial position.

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**ITEM 6.**                DIRECTORS,SENIOR MANAGEMENT AND EMPLOYEES

**A.   DIRECTORSAND SENIOR MANAGEMENT**

Set forth below are thenames, ages and positions of our directors and senior management. Our board ofdirectors is elected annually, and each director holds office for a one yearterm. Our senior management serve at the will of our board of directors. Ourdirectors and members of senior management are as follows:

| **Name**         | ** ** | ** ** | ** ** | **Age**                                                      | ** ** | **Position** |
|------------------|------------|------------|------------|--------------------------------------------------------------|------------|--------------|
| Arvid Tage       |       | 40         |       | Chairman of the Board,  Chief Executive Officer and Director |
| Fariyal Khanbabi |       | 39         |       | Chief Financial Officer  and Director                        |
| Cliff Hanson     |       | 55         |       | Chief Operating Officer,  Managing Director and Director     |
| Serguei Zoudov   |       | 39         |       | Co-President—Chartering  and Director                   |
| David Znak       |       | 40         |       | Co-President—Chartering  and Director                   |
| Rex Harrington   |       | 73         |       | Non-Executive Director                                       |

 

The business address of each of our officers anddirectors is Dexter House, 2 Royal Mint Court, London, EC3N 4QN, United Kingdom.

Biographical information with respect to each of ourdirectors and executive officers is set forth below.

**Arvid Tage** hasserved as our Chief Executive Officer and Chairman since 2003. Mr. Tage ispart of our management team that is responsible for our day-to-day management.From 1996 to 2003, Mr. Tage was a founder and served as a director atRainbow Shipping and Trading (London) Limited. Cumulatively, he has15 years of experience in the drybulk shipping industry. Mr. Tage isthe founding shareholder of Britannia Bulk, and is also a Principal Member ofthe Baltic Exchange.

**Fariyal Khanbabi**has served as a Director and our Chief Financial Officer sinceAugust 2006. Ms. Khanbabi has 17 years of experience in financeand accounting. Prior to joining us, Ms. Khanbabi served as the EuropeanOperations Director and Vice President of International Finance for themarketing agency MIVA.COM since August 2003; prior thereto, she wasFinance Director for East Ltd., a retail chain from April 2001 toJuly 2003; and Group Finance Director for KB Maritime Services Ltd.,an international shipping group from 1996 to March 2001. From her priorexperience, Ms. Khanbabi is a member of the Institute of CharteredAccountants of England and Wales.

**Cliff Hanson** hasserved as a Director since July 2006, our Chief Operating Officer and ManagingDirector since September 2006. Prior to that time, he was CharteringManager for Narvic London Ltd., a branch agency office for Narvic MaritimeS.A. since September 2005; Operator and Freight Trader for BelmontShipping Ltd., a company specializing in sea transportation of steel andbulk cargoes from October 2002 to September 2005; and Broker, Operator,Freight Trader for Curzon Maritime Ltd., a representative office for aShip Owning and Operating Company from January 2001 to July 2002 andpreviously with ED & F Man Shipping Ltd for 11 years, ofwhich eight years serving as Director/Managing Director. Mr. Hanson hasapproximately 30 years of experience in the shipping industry as well asvast industry contacts. He is a lead and Principal Member of the BalticExchange.

**Serguei Zoudov** hasserved as a Director since 2004. Mr. Zoudov currently serves as aCo-President—Chartering and a Director. Mr. Zoudov is part of ourmanagement team that is responsible for our day-to-day operations. Prior tojoining us, he served as co-director at Rainbow Shipping and Trading (London)Limited from 1996 to 2004. Mr. Zoudov has 15 years of experience inthe shipping industry. Mr. Zoudov graduated from Admiral Makarov NauticalAcademy, the leading Russian maritime academy.

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**David Znak** hasserved as a Director since 2005. Mr. Znak is part of our management teamthat is responsible for our day-to-day operations. Mr. Znak currentlyserves as a Co-President—Chartering and a Director. Prior to joining us, he wasChartering Manager at Rainbow Shipping and Trading (London) Limited from 1998to 2004. Mr. Znak has 20 years of experience in the shippingindustry. He is a member of the Institute of Chartered Shipbrokers.

**RexHarrington** has served as a director of the Company sinceOctober 2006. Mr. Harrington served as Shipping Adviser to The RoyalBank of Scotland plc (RBS) from his retirement in 1998 until 2001.Mr. Harrington served as the Director of Shipping of RBS from 1990 to 1998,Assistant General Manager, Shipping from 1980 to 1990 and Senior Manager,Shipping from 1973 to 1980. From 1969 to 1973, Mr. Harrington served as anexecutive of Baring Brothers & Co., Ltd., an international merchantbanking firm, and from 1957 to 1969 served in various capacities in the Bank ofEngland. Mr. Harrington currently serves as a director of General MaritimeCorporation, a company listed in the NYSE and Navios Maritime Holdings Inc., acompany listed on the NYSE. He is a deputy chairman of the InternationalMaritime Industries Forum., a member of the General Committee of Lloyd’sRegister of Shipping, the London Advisory Panel of InterCargo, the BalticExchange and the Steering Committee of the London Shipping Law Centre.Mr. Harrington was a director of A/S Dampskibsselskabet TORM (quoted onthe Copenhagen Stock Exchange and the NASDAQ National Market) from 2003 to2006; a director of Royal Olympia Cruise Lines, quoted on the NASDAQ, from 2000to 2003; H. Clarkson Limited (International Shipbrokers) from 1995 to 1998 anda director of Lloyd’s Register of Shipping from 1994 to 1999.Mr. Harrington has a Masters degree from the University of Oxford.

**B.   COMPENSATION**

***SeniorManagement***

Members of our senior management receive compensationfor the services they provide to us. The aggregate base salary and bonuscompensation paid to all members of senior management as a group was £904,159,for the year ended December 31, 2006.

The compensation for each member of senior managementis principally comprised of base salary, bonus and contributions to pensions ontheir behalf. The compensation that we pay to our senior management isevaluated on an annual basis considering the following primary factors:individual performance during the prior year, market rates and movements, andthe individual’s anticipated contribution to the Company and its growth. Webelieve that the compensation awarded to our senior management is consistentwith that of our peers and similarly situated companies in the industry inwhich we operate.

We also contribute fundsto a pension on behalf of, and for the benefit of, our Chief Executive Officer.Total aggregate contributions to such pension on behalf of, and for the benefitof, our Chief Executive Officer was £8,336, for the year ended December 31,2006.

***Director***s

Non-executive directors receive annual fees in theamount of £16,000 plus reimbursement for their out-of-pocket costs. These feesmay be increased from time to time at the discretion of the board of directors.In 2006, executive directors received an annual fee in the amount of £25,000for their services as a member of the Board of Directors. These executivedirectors fees were terminated effective April 1, 2007.

We have no servicecontract between us and any of our non-executive directors providing forbenefits upon termination of their employment of service.

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***IncentivePlans***

Although we do not haveany equity incentive plans or bonus sharing arrangements currently in effect,we intend to evaluate a range of employee incentive plans and may implementcertain arrangements if deemed in our best interests by the board of directors.

**C.   BOARDPRACTICES**

***Board ofDirectors***

Our board of directors is currently comprised of fiveexecutive directors and one independent non-executive director. Each of ourelected directors holds office for a one-year term until a successor is electedor until his earlier death, resignation or removal. Our directors are electedby shareholders at general meeting, subject to certain procedural requirementsset out in our Articles of Association. Further, the board of directors mayappoint new directors, either to fill a vacancy or to appoint an additionaldirector. Our Articles of Association provide that our board of directors shallconsist of  a minimum of two directorsand that there shall be no maximum number unless otherwise determined by theshareholders. Shareholders may change the minimum and maximum number ofdirectors that may sit on our board only by passing an ordinary resolution ofthe Company.

We are currentlyevaluating the composition of our board of directors and are actively seekingadditional directors to further bolster our existing director slate. Newdirector appointments are possible, should qualified and attractive candidatesbe identified.

***Committees***

We have established an audit committee which ispresently comprised of two directors. The Audit Committee is chaired by Mr. RexHarrington, with the remaining member being Arvid Tage. We do not presentlyhave an “audit committee financial expert” as such term is defined in Item 16A.of Form 20-F, but are actively seeking qualified candidates to joinour board and Audit Committee.

Our board of directors and Audit Committee has adopteda charter which sets forth such committee’s primary roles and responsibilities.These principal responsibilities include, among others: managing therelationship between the Company and its independent auditing firm; monitoringthe integrity of our financial statements; reviewing our internal financialcontrols and risk management systems; monitoring and reviewing our internalaudit functions. The Audit Committee will regularly report to the board ofdirectors.

As of the date of thisannual report, we have not established a Remuneration Committee responsible forestablishing our employees compensation and benefits.

**D.   EMPLOYEES**

We have a team of 43 shore-basedemployees, including 18 at Svendborg and its Danish affiliate. Our personnelhave substantial shipping experience and together speak over 10 languages.In addition, we currently employ approximately 200 seafaring personnel andutilize five consultants.

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**E.   SHAREOWNERSHIP**

Thetable below sets forth certain information regarding the current ownership ofour outstanding voting securities as of December 31, 2006 by all of ourdirectors and senior management, individually and as a group.

| **Name**                                                      | ** ** | ** ** | ** ** | **Number of  Shares** | ** ** | **Percentage  of Shares  Outstanding** | ** ** |
|---------------------------------------------------------------|------------|------------|------------|----------------------------|------------|---------------------------------------------|------------|
| Arvid Tage(1)(2)                                              |       | 5,349,735  |       |                       | 61.61      | %                                           |       |
| Serguei  Zoudov(2)(3)                                         |       | 2,189,589  |       |                       | 25.21      | %                                           |       |
| David Znak(2)(4)                                              |       | 657,492    |       |                       | 7.57       | %                                           |       |
| Cliff Hanson                                                  |       | —     |       |                       | —     |                                        |       |
| Fariyal Khanbabi                                              |       | —     |       |                       | —     |                                        |       |
| Rex Harrington                                                |       | —     |       |                       | —     |                                        |       |
| All directors and senior  management as a group (six persons) |       | 8,196,816  |       |                       | 94.39      | %                                           |       |

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(1)          Mr. Tage may bedeemed to beneficially own the 5,349,735 ordinary shares owned by LuscaHoldings Ltd. Mr. Tage’s address is Dexter House, 2 Royal Mint Court,London, EC3N 4QN, United Kingdom.

(2)          On April 12, 2007,we and each of our shareholders entered into a Purchase Agreement pursuant towhich, amongst other things, North Western (Neva) Limited, our smallestshareholder agreed to sell all of its shares to us and other shareholders asfollows: (i) 434,168 shares to us for total consideration of $7,500,000, (ii) 29,171shares to Lusca Holdings Ltd. for total consideration of $503,913, (iii) 11,965 sharesto Balcare Holdings Limited for total consideration of $206,689 and (iv) 3,585 sharesto Cliffgrove Limited for total consideration of $61,929. Pursuant to the termsof the purchase agreement, the shares will be sold in three tranches on April 16,2007 (159,681 shares purchased by us), April 15, 2008 (159,681 sharespurchased by us) and April 15, 2009 (114,806 shares to be purchased by usand 44,721 shares to be purchased by the remaining shareholders describedabove). The effect of this agreement will be to increase the number of sharesin the Company which are beneficially owned by Arvid Tage, Serguei Zoudov andDavid Znak.

(3)          Mr. Zoudov may bedeemed to beneficially own the 2,189,589 ordinary shares owned by BalcareHoldings Limited. Mr. Zoudov’s address is Dexter House, 2 Royal Mint Court,London, EC3N 4QN, United Kingdom.

(4)          Mr. Znakmay be deemed to beneficially own the 657,492 ordinary shares owned byCliffgrove Limited. Mr. Znak’s address is Dexter House, 2 Royal MintCourt, London, EC3N 4QN, United Kingdom.

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**ITEM 7.**                MAJORSHAREHOLDERS AND RELATED PARTY TRANSACTIONS

**A.   MAJORSHAREHOLDERS**

Thefollowing table sets forth certain information regarding the current ownershipof our outstanding voting securities as of December 31, 2006 by eachperson known to us to be the beneficial owner of more than 5% of our securitiesand all of our directors and senior management as a group. All of ourshareholders, including the shareholders included in this table, are entitledto one vote for each ordinary share held by such shareholder:

| **Name**                                                      | ** ** | ** ** | ** ** | **Number of  Shares** | ** ** | **Percentage   of Shares   Outstanding** | ** ** |
|---------------------------------------------------------------|------------|------------|------------|----------------------------|------------|---------------------------------------------------------|------------|
| Lusca Holdings  Ltd(1)(2)                                     |       | 5,349,735  |       |                       | 61.61      | %                                                       |       |
| Balcare Holdings  Limited(2)(3)                               |       | 2,189,589  |       |                       | 25.21      | %                                                       |       |
| Cliffgrove  Limited(2)(4)                                     |       | 657,492    |       |                       | 7.57       | %                                                       |       |
| North Western  (Neva) Limited(2)(5)                           |       | 479,043    |       |                       | 5.52       | %                                                       |       |
| All directors and senior  management as a group (six persons) |       | 8,196,816  |       |                       | 94.39      | %                                                       |       |

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(1)          Mr. Tage may bedeemed to beneficially own the 5,349,735 ordinary shares owned by LuscaHoldings Ltd. Mr. Tage’s address is Dexter House, 2 Royal Mint Court,London, EC3N 4QN, United Kingdom.

(2)          On April 12, 2007,we and each of our shareholders entered into a Purchase Agreement pursuant towhich, amongst other things, North Western (Neva) Limited, our smallestshareholder agreed to sell all of its shares to us and other shareholders asfollows: (i) 434,168 shares to us for total consideration of $7,500,000, (ii) 29,171shares to Lusca Holdings Ltd. for total consideration of $503,913, (iii) 11,965 sharesto Balcare Holdings Limited for total consideration of $206,689 and (iv) 3,585 sharesto Cliffgrove Limited for total consideration of $61,929. Pursuant to the termsof the purchase agreement, the shares will be sold in three tranches on April 16,2007 (159,681 shares purchased by us), April 15, 2008 (159,681 shares purchasedby us) and April 15, 2009 (114,806 shares to be purchased by us and 44,721shares to be purchased by the remaining shareholders described above). Theeffect of this agreement will be to increase the number of shares in theCompany which are beneficially owned by Arvid Tage, Serguei Zoudov and DavidZnak.

(3)          Mr. Zoudov may bedeemed to beneficially own the 2,189,589 ordinary shares owned by BalcareHoldings Limited. Mr. Zoudov’s address is Dexter House, 2 Royal MintCourt, London, EC3N 4QN, United Kingdom.

(4)          Mr. Znak may bedeemed to beneficially own the 657,492 ordinary shares owned by CliffgroveLimited. Mr. Znak’s address is Dexter House, 2 Royal Mint Court, London,EC3N 4QN, United Kingdom.

(5)          NorthWestern (Neva) Limited’s address is 14-18 St. George’s Street, Douglas,Isle of Man, IM1 1PL.

**B.   RELATEDPARTY TRANSACTIONS**

***ShareholderLoans to Company***

During the year ended December 31, 2004, theCompany issued a note to shareholders aggregating $15,018,000 in considerationfor cash received. The shareholders loans were unsecured, interest free andrepayable on demand. On June 16, 2004, the shareholders converted $190,000of the note into 99,998 ordinary shares with a par value of £1 per share. On December 29,2004, the shareholders converted $4,775,000 of the note into 2,667,519 ordinaryshares with a par value of £1 per share. As of December 31, 2004, therewas a balance of $10,053,000 remaining on the original note.

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During the year ended December 31,2005, shareholders of the Company converted the remaining balance on the noteof $10,053,000 into our ordinary shares as follows: on April 6, 2005,shareholders converted $5,121,000 of outstanding loans to us into 2,667,119ordinary shares with a par value of £1 per share, and on September 1,2005, shareholders converted the remaining outstanding balance of the loan of$4,932,000 to 2,735,523 ordinary shares with a par value of £1 per share.

***Acquisitionof Subsidiaries***

Duringthe year ended December 31, 2004, the Company acquired two subsidiaries,Flagship Maritime S.A. and Danmar Shipping S.A., from shareholders forconsideration equivalent to the net asset value of the subsidiaries (which wasestimated to be zero on the basis that the assets acquired were equal to theliabilities assumed). These subsidiaries own Challenger II andExplorer II. The following chart sets out the value assigned to the assetsacquired and liabilities assumed for the subsidiaries acquired:

| ** **                | ** ** | **Flagship  Maritime S.A.** | ** ** | **Danmar  Shipping S.A.** | ** ** |
|---------------------------|------------|----------------------------------|------------|--------------------------------|------------|
| ** **                | ** ** | **($ in thousands)**   | ** ** |
| Assets acquired:          |       |                             |       |                           |       |   |   |   |   |
| Vessels                   |       |                             | $          | 2,100                          |       |   |   | $ | 2,100 |   |   |
| Total assets acquired     |       |                             | 2,100      |                           |       |   | 2,100 |   |   |
| Liabilities assumed:      |       |                             |       |                           |       |   |   |   |   |
| Shareholder’s loans  |       |                             | 1,822      |                           |       |   | 1,767 |   |   |
| Other creditors           |       |                             | 278        |                           |       |   | 333 |   |   |
| Total liabilities assumed |       |                             | $          | 2,100                          |       |   |   | $ | 2,100 |   |   |

 

***Administrativeand Sales Support by Rainbow Shipping Group Limited***

The Company is related toRainbow Shipping Group Limited (formerly Rainbow Shipping Group plc), orRainbow, by common control. As of December 31, 2006, 2005 and 2004, the ourdirectors held a minority interest of Rainbow of 34%, 34% and 28.2%,respectively. During the years ended December 31, 2006, 2005 and 2004Rainbow provided administrative and sales support to the Company and providedoffice space for the Company’s administrative staff and incurred costs onbehalf of the Company of $0, $131,000 and $790,000, respectively. As of and forperiods ended December 31, 2006 and 2005, $0, $131,000 and $790,000,respectively were outstanding to Rainbow for such services. No further costs orexpenses will be incurred by Rainbow on behalf of the Company in the future.

***Shareholders Agreement***

Our shareholders are aparty to a shareholders’ agreement under which they have agreed (for thebenefit of each other and the Company) to subject themselves to certainrestrictive covenants, restrictions on the disposal of shares by them,obligations to promote the interests of the Company and restrictions onentering into arrangements with the Company and its subsidiaries on non-arms’length terms.

***Repurchase of Shares by Company and Other Shareholders***

On April 12, 2007, weand each of our shareholders entered into a Purchase Agreement pursuant towhich, amongst other things, North Western (Neva) Limited, our smallestshareholder agreed to sell all of its shares to us and other shareholders asfollows: (i) 434,168 shares to us for total consideration of $7,500,000,(ii) 29,171 shares to Lusca Holdings Ltd. for total consideration of$503,913, (iii) 11,965 shares to Balcare Holdings Limited for totalconsideration of $206,689 and (iv) 3,585 shares to Cliffgrove Limited fortotal consideration of $61,929. Pursuant to the terms of the purchaseagreement, the shares will be sold in three tranches on April 16, 2007(159,681 shares purchased by us), April 15, 2008 (159,681 shares purchasedby us) and April 15, 2009 (114,806 shares to be purchased by us and 44,721shares to be 

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purchasedby the remaining shareholders described above). The effect of this agreementwill be to increase the number of shares in the Company which are beneficiallyowned by Arvid Tage, Serguei Zoudov and David Znak.

**C.   INTERESTSOF EXPERTS AND COUNSEL**

Not applicable.

**ITEM 8.**                FINANCIALINFORMATION

See Item 18: FinancialStatements.

***Legal Proceedings***

We have not been involvedin any legal proceedings that we believe are likely to have, or have had asignificant effect on our business, financial position, results of operationsor liquidity, nor are we aware of any proceedings that are pending orthreatened that we believe are likely to have a significant effect on ourbusiness, financial position, results of operations or liquidity. From time totime, we may be subject to legal proceedings and claims in the ordinary courseof business, principally personal injury and property casualty claims.

***Dividend Policy***

The Company may, by ordinary resolution, declaredividends but may not declare dividends in excess of the amount recommended bythe directors. The directors may also pay interim dividends where they arejustified by the distributable profits of the Company. All dividends shall bedeclared and paid according to the amounts paid up on the shares on which thedividend is paid, unless the rights attached to the shares provide otherwise.All dividends shall be apportioned according to the length of the period forwhich the dividend is paid, unless a share is issued on different terms.

The Articles permit satisfaction of a dividend, inwhole or in part, by distribution of assets. However, such dividends must bedeclared by the shareholders at a general meeting upon the recommendation ofthe directors.

If a dividend remainsunclaimed for twelve years from the date when it became due for payment, itwill be forfeited and cease to remain owing by the Company, if the directors soresolve.

**B.   SIGNIFICANTCHANGES**

Not applicable.

**ITEM 9.**                THEOFFER AND LISTING

**A.   OFFER ANDLISTING DETAILS**

Not applicable.

**B.**   PLANOF DISTRIBUTION

Not applicable.

**C.   MARKETS**

Not applicable.

 

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**D.   SELLINGSHAREHOLDERS**

Not applicable.

**E.   DILUTION**

Not applicable.

**F.   EXPENSESOF THE ISSUE**

Not applicable.

**ITEM 10.**         ADDITIONALINFORMATION

**A.   SHARECAPITAL**

Not applicable.

**B.   MEMORANDUMAND ARTICLES OF ASSOCIATION**

***Registration, Objects and Purpose***

The Company, isa public limited company and is incorporated and registered in England andWales, under registered number 03842976. Clause 4 of the Company incorporates awide-ranging objects clause which entitles us to carry on business as a generalcommercial company and grants us power to do all such things as are incidentalor conducive to the carrying on of any trade or business by us; including, forthe avoidance of doubt, the right to borrow and raise money in any manner andthe right to sell, deal with and dispose of debentures and debenture stocks.

*Directors*

Our articles of association, or Articles,provide for a board of directors consisting, (unless otherwise determined fromtime to time by ordinary resolution of the shareholders) of no fewer than twodirectors, who shall manage the business of the Company and exercise all of thepowers of the Company (subject to the provisions of the Companies Act 1985, theMemorandum and Articles and any special resolution of the shareholders).

Two directors present shall constitute aquorum necessary for the transaction of business by the board of directors. Boththe directors, and the shareholders by ordinary resolution, have the authorityto appoint a person who is willing to act as a director.

Under the Articles, a director may vote atany meeting of the board of directors or meeting of a committee of the board ofdirectors, notwithstanding that it in any way relates to or concerns a matterin which he has, directly or indirectly, any kind of interest, including amaterial interest. Such director’s vote on the resolution shall be counted andhe shall be counted as part of the quorum present at such meeting. However, adirector with an interest, either direct or indirect, in a contract or proposedcontract with the Company must declare the nature of his interest in accordancewith section 317 of the Companies Act 1985.

Under the Articles, remuneration awarded todirectors shall be determined by ordinary resolution of the shareholders. Bypowers conferred in the Articles, the directors may exercise the powers of theCompany in relation to the payment of pensions, gratuities and other benefitsand shall be entitled to retain any benefits received by them by reason of theexercise of any such powers.

The directors are empowered to exercise allpowers of the Company to borrow money without limit and upon such terms and insuch manner as they think fit. The directors have wide powers to grant security

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such asmortgages, charges and to issue debentures and other securities whetheroutright or as security for any debt, liability or obligation of the Company orof any third party and subject to section 80 of the Companies Act 1985, theDirectors may grant security convertible into shares following an ordinaryresolution of the shareholders. The borrowing powers of the directors can bevaried provided the shareholders amend the Articles by passing a specialresolution with a majority of 75% or more of the shareholders.

The Articles do not require that thedirectors retire at a specific age or not retire before reaching a specific age.However, under section 293 of the Companies Act 1985, no one may be appointed adirector if they have attained the age of seventy and a current director shallretire at the conclusion of the next annual general meeting after he attainsthe age of seventy. However, a director may be appointed or continue to serveas a director after reaching the age of seventy if the appointment was approvedby the shareholders in general meeting. The directors are not required toretire by rotation.

Directors arenot required to hold any shares in us as a qualification to act as a director.

*DividendRights*

The Company may, by ordinary resolution,declare dividends but may not declare dividends in excess of the amountrecommended by the directors. The directors may also pay interim dividendswhere they are justified by the distributable profits of the Company. Alldividends shall be declared and paid according to the amounts paid up on theshares on which the dividend is paid, unless the rights attached to the sharesprovide otherwise. All dividends shall be apportioned according to the lengthof the period for which the dividend is paid, unless a share is issued ondifferent terms.

The Articles permit satisfaction of adividend, in whole or in part, by distribution of assets. However, suchdividends must be declared by the shareholders at a general meeting upon therecommendation of the directors.

If a dividendremains unclaimed for twelve years from the date when it became due forpayment, it will be forfeited and cease to remain owing by the Company, if thedirectors so resolve.

*VotingRights*

Votingat any general meeting of shareholders is by a show of hands, unless a poll isduly demanded. On a show of hands, every shareholder who is present in person,or being a corporation is present by a duly authorised representative, at ageneral meeting, and every proxy appointed by one or more shareholders andpresent at a general meeting, has one vote regardless of the number of sharesheld by the shareholder (or represented by the proxy, although the proxy has asmany votes as the number of members for whom he is proxy). On a poll, everyshareholder who is present in person or by proxy has one vote for every shareheld by that shareholder. A poll may be demanded by any of the following:

·       thechairman; or

·       at leasttwo shareholders having the right to vote at the meeting; or

·       ashareholder or shareholders representing not less than one-tenth of the totalvoting rights of all the shareholders having the right to vote at the meeting;or

·       ashareholder or shareholders conferring a right to vote at the meeting beingshares on which an aggregate sum has been paid up equal to not less thanone-tenth of the total sum paid up on all the shares conferring that right.

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No shareholder may vote at a generalmeeting or at a meeting of the holders of a particular class of shares (eitherin person or by proxy) in respect of any share held by him. unless all moneyspresently payable by him have been paid.

Mattersare transacted at general meetings of Britannia Bulk Plc by the proposing andpassing of three kinds of resolutions:

·       ordinaryresolutions, which include resolutions for the appointment of directors, thedeclaration of final dividends, the appointment and re-appointment of auditors,the increase of authorised share capital and the grant of authority to allotshares;

·       specialresolutions, which include resolutions to amend the Company’s Memorandum orArticles; and

·       extraordinaryresolutions, which include resolutions to divide the assets among theshareholders on the winding up of the Company.

In order to be passed, an ordinaryresolution requires the affirmative vote of a simple majority of the votes castat a meeting at which there is a quorum and special and extraordinaryresolutions require the affirmative vote of not less than three-quarters of thevotes cast at a meeting at which there is a quorum. The necessary quorum for ameeting of the Company is a minimum of two persons entitled to vote upon thebusiness to be transacted, each being a shareholder, a proxy or a dulyauthorised representative of a corporation.

Where there isan equality of votes, either by poll or on a show of hands, the chairman shallbe entitled to a casting vote, in addition to any other votes he may have.

*CapitalCalls*

To the extentthat the share premium is not paid up on issued shares, pursuant to theArticles the Company has a first and paramount lien on every share not beingfully paid up. Subject to the terms of the allotment, directors may call uponthe shareholders in respect of the unpaid moneys and each shareholder shall payto the Company the amount called up.

*LiquidationRights*

In the event ofthe liquidation of Britannia Bulk Plc, after payment of all liabilities anddeductions taking priority in accordance with English law, the balance ofassets available for distribution will be distributed among the holders ofordinary shares according to the amounts paid up on the shares held by them. Aliquidator may, with the sanction of an extraordinary resolution of theshareholders and any other sanctions required by English company law, divideamong the shareholders the whole or any part of the Company’s assets. Alternatively,upon the adoption of an extraordinary resolution of the shareholders, aliquidator may vest the assets in whole or in part in trustees upon trust forthe benefit of the shareholders, although no shareholder shall be compelled toaccept any assets upon which there is a liability.

*Pre-emptiveRights and New Issues of Shares*

While shareholders have no pre-emptiverights under the Articles, the directors’ powers to allot shares, securitiesconvertible into shares and grant rights to subscribe for shares in the Companyis restricted. Under section 80 of the Companies Act 1985, directors of acompany are generally unable to allot equity securities without expressauthorisation, such authorisation may be given in the company’s articles or byshareholders in general meeting, but in neither case may the authorisation lastlonger than five years. The Articles initially provided the directors with ageneral power to allot authorised but unissued share capital, but those initialfive years have now expired. Nevertheless, subsequent resolutions 

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increasing theCompany’s authorised share capital have also included resolutions giving thedirectors the power to allot such share capital for five years. Such power toallot may, however, be revoked or varied by ordinary resolution of theshareholders.

Therequirements of section 89 of the Companies Act 1985, that a company may notallot shares other than for cash without first making an offer to existingshareholders to allot the shares to them on the same or more favourable termsin proportion to their respective shareholdings, has been disapplied by specialresolution of the shareholders until 29 December 2009.

*Disclosureof Interest in Britannia Bulk Plc’s Shares*

TheArticles do not contain provisions whereby those acquiring or disposing of acertain percentage of the Company’s shares are required to make disclosure oftheir ownership percentage. However, sections 198-210 of the CompaniesAct 1985 do contain such requirements and impose a statutory obligation, on aperson interested in the Company’s shares to notify the Company in writing ofdetails set out in the Companies Act 1985 where:

·       a personacquires an interest or ceases to have an interest in a public company’s votingand issued share capital; and

·       either hasa “material interest” in 3% or more of the nominal value of the Company’sissued ordinary shares, or the aggregate nominal value in which he has anyinterest (material or not) is equal to or more than 10% of the nominal value ofthe Company’s issued ordinary shares

A “material interest” includes any interestof the relevant person’s spouse, civil partner, infant child or step-child, orany interest of a company accustomed to act in accordance with the relevantperson’s directions or instruction or in which the relevant person is entitledto exercise or control the exercise of one-third or more of the voting power atgeneral meeting and certain other interests set out in the Companies Act 1985. However,the definition excludes any interest arising where the person is an investmentmanager, an open-ended investment company or the operator of an authorised unittrust scheme, recognised scheme or collective investment scheme.

The Companies Act 1985, sets out particulardisclosure rules for circumstances in which two or more parties enter intoan agreement to acquire an interest in a public company’s issued and votingshares. Such rules apply where the agreement imposes obligations orrestrictions with respect to a party’s use, retention or disposal of theirinterests in the company’s shares acquired pursuant to the agreement, and aninterest is actually acquired pursuant to the agreement. Under section 212 ofthe Companies Act 1985, the Company may by notice in writing require a personwhom the Company knows or has reasonable cause to believe to be or, who at anytime during the three years preceding the issue date of the notice to havebeen, interested in the Company’s issued and voting shares to confirm orindicate whether or not that is the case and, if that person does or did holdan interest in such shares, to confirm the information as set out in section212.

The Companies Act 1985 further deals withdisclosure by persons of interests in shares or debentures in companies ofwhich they are directors and certain associated companies.

The City Codeon Takeovers and Mergers also contains strict disclosure requirements withregard to dealings in the securities of an offeror or offeree company on allparties to a takeover and also to their respective associates during the courseof an offer period.

*GeneralMeetings*

General meetings may be called by directorsor on the requisition of members, pursuant to the Companies Act 1985.

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For an annual general meeting, at leasttwenty-one clear days’ written notice is required, although such meeting can beheld on short notice if all the shareholders entitled to attend and vote at themeeting agree. For an extraordinary general meeting called for passing aspecial resolution or a resolution appointing a person as a director, at leasttwenty-one clear days’ written notice is required. All other extraordinarygeneral meetings shall be called on fourteen-clear days’ written notice. However,extraordinary general meetings can be held on short notice if a majority innumber of the shareholders entitled to attend and vote, together holding notless than ninety-five percent of the nominal value of the shares, agree. Allnotices of general meetings must contain a statement allowing a member toappoint a proxy.

The notice mustset out the time and place of the meeting, the business to be transacted and ifthe meeting is an annual general meeting, this fact must also be specified.

*Variationof Class Rights*

If, at any time, Britannia Bulk Plc’s sharecapital is divided into shares of different classes, rights attached to eachclass may be varied in accordance with the Companies Act 1985. Rights may bevaried if the holders of three-quarters of the nominal value of the issuedshares of that class consent in writing to the variation or an extraordinaryresolution passed at a separate general meeting of the holders of that classsanctions the variation.

At everysuch separate meeting, the provisions of the Articles in respect of generalmeetings apply, except that:

·       thenecessary quorum shall be two persons holding or representing by proxy at leastone-third in nominal value of the issued shares of the class, and at anadjourned meeting it shall be one person holding shares of the class or hisproxy; and

·       any holderof the shares of the class present in person or by proxy may demand a poll.

Any alterationof a provision contained in the Articles for the variation of rights attachedto a particular class of shares, or the insertion of such provision into theArticles, shall be treated as a variation of those class rights.

*Repurchaseof Shares*

Subject toauthorisation by shareholder resolution, the Company may purchase its ownshares in accordance with English company law. Any shares which have beenbought back must be cancelled immediately upon completion of the purchase thusreducing the Company’s issued share capital, unless they can be held astreasury shares. Subject to the provisions of the Companies Act 1985, sharesmay be issued which are to be redeemed or which may be redeemed at the optionof the company or the holder. The Company has no redeemable shares in issue.

**C.   MATERIALCONTRACTS**

***Acquisition Agreements***

*Discovery II*

On April 18,2005, the Company took delivery of the Discovery II pursuant to a Memorandum ofAgreement entered into on March 30, 2005. The Discovery II is a 1984 built32,813 DWT vessel and was purchased for $11.5 million.

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*Navigator II*

OnFebruary 27, 2007, the Company took delivery of the Navigator II pursuantto a Memorandum of Agreement entered into on August 30, 2006. TheNavigator II is a 1998 built 69,146 DWT Panamax type vessel and was purchasedfor $28.5 million. The Company has entered into a charter for the Navigator IIat a rate of $25,000 per day. This time charter commenced on or about January 2007and will expire on or about January 2009.

*Endurance II*

OnApril 10, 2007, the Company took delivery of the Endurance II pursuant toa Memorandum of Agreement entered into on February 9, 2007. The EnduranceII is a 1994 built 70,000 DWT Panamax type vessel and was purchased for $36.7million. Pursuant to a novation agreement, the Endurance II will continue tooperate under its existing time charter at a rate of $18,500 per day, expiringin September 2007. The Company has also entered into a charter for theEndurance II that will commence immediately following the termination of itsexisting charter at a rate of $25,000 per day. This time charter will commenceon or about September 2007 and expire in September 2009.

*Endeavour II*

The Company isparty to a Memorandum of Agreement dated January 16, 2007 pursuant towhich the Company is to acquire the Delray (to be renamed the Endeavour II), a1994 built 70,000 DWT Panamax type vessel, for a purchase price of $36.7million. The expected date of delivery of the Endeavour II is on or aboutMay 1, 2007. The Company has entered into a charter for the Endeavour IIat a rate of $25,000 per day. This time charter will commence on or aboutMay 2007 and expire on or about May 2009.

*Commander II*

The Company isparty to a Memorandum of Agreement dated March 12, 2007 pursuant to whichthe Company is to acquire the Nikopios (to be renamed the Commander II), a 1983built 31,431 DWT Panamax type vessel, for a purchase price of $10.75 million.The expected date of delivery of the Commander II is on or about May 1,2007. Pursuant to a novation agreement, the Commander II will continue tooperate under its existing time charter at a rate of $18,250 per day, expiringin June 2007. The Company has also entered into a charter for theCommander II that will commence immediately following the termination of itsexisting charter at a rate of $15,000 per day. This time charter will commenceon or about June 2007 and expire in June 2009.

*Tugs and Barges*

During 2005 and2006, the Company acquired five barges and three tugs (acquiring a fourth tugin February 2007) pursuant to separate purchase agreements. The aggregatepurchase price paid for the tugs and barges acquired during 2005 and 2006totalled $14.7 million.

***Indenture***

We are party toan Indenture dated November 16, 2006,as supplemented by the First Supplemental Indenture datedFebruary 6, 2007 and the Second Supplemental Indenture datedFebruary 9, 2007, by and among theCompany, the guarantor parties thereto and Wilmington Trust Company, as trustee,pursuant to which the Company issued $185 million aggregate principal amount of11% Senior Secured Notes with a maturity date of December 1, 2011. TheIndenture sets forth the terms, rights and obligations of the Notes, theCompany and the Noteholders.

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***Registration Rights Agreement***

The Company isparty to a Registration Rights Agreement dated as of November 16, 2006,pursuant to which the Company and its subsidiaries filed an exchange offerregistration statement on Form F-4 with the SEC with respect to anoffer to exchange the Notes for substantially identical notes that areregistered under the Securities Act. The exchange offer registration statementon Form F-4 was declared effective on March 9, 2007.

***Security Documents***

*First Preferred Ship Mortgage*

Each vesselacquired with the net proceeds of the offering of the Notes is, or shall be,subject to a first preferred ship mortgage granted in favour of WilmingtonTrust Company, as trustee for the several Noteholders, pursuant to which theCompany mortgages the vessel so acquired in order to secure the payment andperformance of its obligations under the Indenture.

*Assignment of Earnings*

Each vesselacquired with the net proceeds of the offering of the Notes is, or shall be,subject to an Assignment of Earnings in favour of Wilmington Trust Company, astrustee for the several Noteholders, pursuant to which the Company assigns anyand all earnings arising in connection with the vessel so acquired in order to securethe payment and performance of its obligations under the Indenture.

*Assignment of Insurances*

Each vesselacquired with the net proceeds of the offering of the Notes is, or shall be,subject to an Assignment of Insurances in favour of Wilmington Trust Company,as trustee for the several Noteholders, pursuant to which the Company assignsall policies and contracts of insurance in respect of the vessel so acquired inorder to secure the payment and performance of its obligations under theIndenture.

**D.**   EXCHANGE CONTROLS

**There is currently noUnited Kingdom legislation restricting the import or export of capital oraffecting the remittance of dividends or other payments to holders of ourordinary shares who are non-residents of the United Kingdom. In addition, thereare no limitations relating only to non-residents of the United Kingdom underEnglish law or Britannia’s Memorandum and Articles of Association on the rightto be a holder of, and to vote, Britannia’s ordinary shares.**

**E.   TAXATION**

**United Kingdom Tax Considerations**

**Thefollowing is a general description of certain United Kingdom tax considerationsrelating to the notes based on current law and practice in the United Kingdom.It does not purport to be a complete analysis of all United Kingdom tax considerationsrelating to the notes. It relates to the position of persons who are theabsolute beneficial owners of the notes and some aspects do not apply tocertain classes of taxpayer (such as dealers and/or investment funds and/orholders of the notes who are connected or associates with the Issuer forrelevant tax purposes). Prospective holders of the notes who may be subject totax in a jurisdiction other than the United Kingdom or who may be unsure as totheir tax position should seek their own professional advice.**

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***Intereston the Notes***

***Paymentof interest on the Notes***

The notes will constitute “quoted Eurobonds” withinthe meaning of section 882 Income Tax Act 2007 (“ITA”) as long as they are andcontinue to be listed on a “recognised stock exchange” within the meaning ofsection 1005 ITA. The Luxemburg Stock Exchange is a recognised exchange forthese purposes. Payments of interest on quoted Eurobonds may be made withoutwithholding on account of United Kingdom income tax; however, noteholders whoare individuals or residual entities (as defined in EC Council Directive2003/48/EC) are referred to the information below in the sections in respect ofthe “European Savings Directive” and “Withholding Tax—Luxembourg non-residentindividuals.”

If the notes cease to bequoted Eurobonds, interest must be paid under deduction of United Kingdomincome tax, at the lower rate (currently 20%) unless any of the followingapply: a direction by H.M. Revenue & Customs under an applicable doubletaxation treaty; or (unless H.M. Revenue & Customs directs otherwise) theIssuer reasonably believes that the noteholder in question is either a UnitedKingdom resident company or a non-United Kingdom resident company carrying on atrade in the United Kingdom through a United Kingdom permanent establishmentwithin the charge to United Kingdom corporation tax; or (unless H.M. Revenue& Customs directs otherwise) the Issuer reasonably believes that thenoteholder in question falls within a category enjoying a special tax statusunder the relevant United Kingdom legislation which would include certaincharities and pension funds or partnerships of such persons.

***UnitedKingdom source income***

Interest on the notes constitutes United Kingdomsource income for tax purposes and, as such, may be subject to United Kingdomincome tax by direct assessment even where paid without withholding.

However, interest from aUnited Kingdom source from which no United Kingdom tax has been deducted orwithheld will not be chargeable to United Kingdom tax in the hands of anoteholder who is not resident for tax purposes in the United Kingdom unlessthat noteholder carries on a trade, profession or vocation in the UnitedKingdom through a United Kingdom branch, agency or permanent establishment inconnection with which the Interest is received or to which the notes areattributable. The provisions of any applicable double taxation treaty may alsobe relevant for such holders of the notes.

***Information***

Noteholders who are individuals may wish to note thatHM Revenue & Customs has power to obtain information (including the nameand address of the beneficial owner of the interest) from any person in theUnited Kingdom who either pays interest to or receives interest for the benefitof an individual. Information so obtained may, in certain circumstances, beexchanged by H.M. Revenue & Customs with the tax authorities of otherjurisdictions.

Under EC Council Directive2003/48/BC on the taxation of savings income, Member States are required toprovide to the tax authorities of another Member State details of payments ofinterest (or other dollar income) paid by a person within its jurisdiction toor for an individual in that other Member State. However, for a transitionalperiod, Belgium, Luxembourg and Austria are permitted to operate a withholdingsystem in relation to such payments instead. A number of non-EU countries haveagreed to adopt similar measures.

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***UnitedKingdom corporation taxpayers***

In general, noteholderswithin the charge to United Kingdom corporation tax will bring into account fortax purposes as revenue items all debits and credits (including those arisingfrom exchange differences) in respect of the notes broadly in accordance with theirstatutory accounting treatment.

***OtherUnited Kingdom taxpayers***

The notes will constitute“deeply discounted securities” within the meaning of Section 430 of Income Tax(Trading and other income) Act 2005. Any profit made by an individual or trusteeresident for tax purposes in the United Kingdom on the “transfer” (includingredemption and conversion) of the notes may be taxed as income. No relief isavailable for losses. In calculating any gain or loss on disposal of a note,sterling values are compared at acquisition and transfer. Accordingly, ataxable profit may arise even where the foreign currency amount received on adisposal is less than or the same as the amount paid for the note.

***ExchangeOffer***

**For thepurposes of the taxation of chargeable gains, the exchange of notes forregistered notes pursuant to the exchange offer will not be treated as involvingany disposal of the original notes or any acquisition of registered notes butthe original notes and the registered notes will be treated as the same assetacquired as the original notes were acquired.**

***StampDuty and SDRT***

**NoUnited Kingdom stamp duty or stamp duty reserve tax should be payable on theissue or transfer of the notes.**

***CertainU.S. Federal Income Tax Considerations***

***General***

The following is a summary of the principal UnitedStates federal income tax consequences of the purchase, beneficial ownershipand disposition of the notes. For purposes of this summary, (1) the UnitedStates Internal Revenue Code of 1986, as amended, is referred to as “the Code,”and (2) the Internal Revenue Service is referred to as “the IRS.”

This summary:

·       doesnot purport to be a comprehensive description of all of the United Statesfederal income tax considerations that may be relevant to a decision topurchase notes;

·       isbased on the tax laws of the United States, including the Code, Treasuryregulations (final, temporary and proposed), administrative rulings andpractice, and judicial decisions each as in effect as of the date of thisprospectus, all of which are subject to change, possibly with retroactiveeffect;

·       dealsonly with holders who hold the notes as “capital assets” as defined inSection 1221 of the Code (generally, property held for investment);

·       doesnot address tax considerations applicable to investors that are subject tospecial tax rules, such as banks, financial institutions, insurance companies,tax-exempt organizations, regulated investment companies, real estateinvestment trusts, grantor trusts, dealers in securities or currencies, tradersin securities that elect the mark-to-market method of accounting for theirsecurities holdings, persons that will hold the notes as part of a hedgingtransaction, “straddle” or 

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“conversion transaction”for tax purposes, pass-through entities (e.g. partnerships) or investors whohold the notes through pass-through entities, persons deemed to sell the notesunder the constructive sale provisions of the Code, persons liable foralternative minimum tax or U.S. Holders (as that term is defined below) of thenotes whose “functional currency” is not the U.S. dollar; and

·       doesnot address any United States federal estate or gift tax laws or any state,local or foreign tax laws.

Except as indicated under “Tax Treatment of Non-U.S.Holders” below, this summary applies only to holders that are(1) individuals who are citizens or residents of the United States asdefined in Section 7701(b) of the Code, (2) corporations, orother entities that are taxable as corporations, created or organized in orunder the laws of the United States or any state or political subdivisionthereof (including the District of Columbia), (3) estates, the income ofwhich is subject to United States federal income taxation regardless of itssource, and (4) trusts, if a United States court can exercise primarysupervision over the administration of such trust and one or more United Statespersons has the authority to control all substantial decisions of the trust orif the trust has a valid election in effect under applicable TreasuryRegulations to be treated as a United States person (each, a “U.S. Holder”). A“Non-U.S. Holder” is a beneficial owner of the notes that is not a U.S. Holder.If a partnership (or an entity treated as a partnership for U.S. federal incometax purposes) acquires or holds the notes, the tax treatment of a partner willdepend upon the status of the partner and the activities of the partnership. Aholder that is treated as a partnership for U.S. federal income tax purposes,and partners of such partnership, should consult their own tax advisorsregarding the tax consequences of the purchase, ownership, and disposition ofthe notes.

We have not sought any ruling from the IRS withrespect to the statements made or the conclusions reached in the followingsummary, and the IRS may not agree with such statements and conclusions. Inaddition, the IRS is not precluded from adopting a contrary position. Thissummary does not consider the effect of any applicable foreign, state, local orother tax laws.

**YOU ARE ENCOURAGED TO CONSULT YOUR OWN TAX ADVISORS ASTO THE UNITED STATES FEDERAL, STATE, LOCAL AND OTHER TAX CONSEQUENCES TO YOU OFTHE PURCHASE, OWNERSHIP AND DISPOSITION OF THE NOTES.**

***Tax Treatment of U.S. Holders***

*ContingentPayments.**  *Incertain circumstances, we may be obligated to pay amounts in excess of thestated interest and principal on the notes. We intend to take the position thatthe possibility that any such payment will be made is remote so that suchpossibility will not affect the timing or amount of interest income that yourecognize unless and until any such payment is made. Our determination thatthese contingencies are remote is binding on you unless you disclose yourcontrary position to the IRS in the manner that is required by applicableTreasury regulations. Our determination is not, however, binding on the IRS. Itis possible that the IRS might take a different position from that describedabove, in which case the timing, character and amount of taxable income in respectof the notes may be different from that described herein.

*StatedInterest.**  *Thestated interest on a note generally will be includable in your income asordinary income at the time such interest is received or accrued, in accordancewith your regular method of accounting for United States federal income taxpurposes. Interest generally will be treated as foreign source income forpurposes of calculating your foreign tax credit limitation. The foreign taxcredit rules are complex and their application depends on your particularcircumstances. You should consult your own tax advisor regarding theavailability of foreign tax credits and the treatment of additional amounts.

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*OriginalIssue Discount.**  *Weissued the notes at a substantial discount from their principal amount atmaturity. For United States federal income tax purposes, the difference betweenthe issue price and the stated redemption price at maturity of each noteconstitutes original issue discount (“OID”). You will be required to includeOID in your gross income periodically over the term of the notes before receiptof the cash or other payment attributable to such income regardless of yourmethod of accounting for U.S. federal income tax purposes.

The amount of OID you must include in gross income asit accrues is the sum of the daily portions of OID with respect to the note foreach day during the taxable year or portion of a taxable year on which you holdthe note. The daily portion is determined by allocating to each day of anaccrual period a *pro rata* portionof an amount equal to the adjusted issue price of the note at the beginning ofthe accrual period multiplied by the yield to maturity of the note. The accrualperiod of a note may be of any length you choose and may vary in length overthe term of the note, provided that each accrual period is no longer than oneyear and each scheduled payment of principal or interest occurs either on thefinal day of an accrual period or on the first day of an accrual period.

The issue price of a note for OID purposes is thefirst price at which a substantial amount of notes are sold to investors(excluding sales to bond houses, brokers, or similar persons or organizationsacting in the capacity of underwriters, placement agents, or wholesalers). Theadjusted issue price of the note at the start of any accrual period is theissue price of the note increased by the accrued original issue discount foreach prior accrual period.

Under these rules, you willbe required to include in gross income increasingly greater amounts of OID ineach successive accrual period. Any amount included in income as OID willincrease your tax basis in the note.

***Market Discount***

If you purchase a note foran amount that is less than its “revised issue price,” subject to a de minimisexception you will be treated as having purchased the note at a “marketdiscount.” A note’s revised issue price at the time of purchase will equal thenote’s issue price, increased by all accruals of OID and decreased by allpayments on the note other than qualified stated interest. In such case, youwill be required to treat any payment on, or any gain realized on the sale,exchange or other disposition of, the note as ordinary income to the extent ofthe lesser of (i) the amount of such payment or realized gain or(ii) the market discount accrued on the note while held by you and notpreviously included in income. You also may be required to defer the deductionof all or a portion of any interest paid or accrued on indebtedness incurred ormaintained to purchase or carry the note. Alternatively, you may elect (withrespect to the note and all your other market discount obligations) to includemarket discount in income currently as it accrues. Market discount isconsidered to accrue ratably during the period from the date of acquisition tothe maturity date of the note, unless you elect to accrue market discount onthe basis of a constant interest rate. Amounts includible in income as marketdiscount are generally treated as ordinary interest income and will increaseyour adjusted tax basis in the note.

***Acquisition Premium***

If you purchase a note foran amount in excess of its adjusted issue price at the time of purchase, butless than its stated redemption price at maturity, you will be considered tohave purchased a note with “acquisition premium.” A note’s adjusted issue priceat the time of purchase will equal the note’s issue price, increased by allaccruals of OID and decreased by all payments on the note other than statedinterest payments. You may use acquisition premium to reduce the OID that wouldotherwise accrue during a period. The amount of the reduction is the product ofthe amount of OID accrued during the period and a fraction, the numerator ofwhich is the amount of acquisition premium and the denominator of which is 

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theamount of remaining OID at the time of purchase. Alternatively, you may makethe election described below under “Election to Treat all Interest as OriginalIssue Discount.” The effect of the election will be to reduce the amount of OIDby the amount of the acquisition premium.

***Amortizable Bond Premium***

If you purchase a note foran amount in excess of its stated redemption price at maturity, you will betreated as having purchased the note with “amortizable bond premium” equal inamount to such excess. You may elect (with respect to the note and all yourother obligations with amortizable bond premium) to amortize such premium usinga constant yield method over the remaining term of the note and may offsetinterest income otherwise required to be included in respect of the note duringany taxable year by the amortized amount of such excess for the taxable year.Your adjusted basis in the note will be reduced by the amount amortized eachyear. If you do not make the election to amortize the premium, your basis willnot be reduced and you will realize a smaller gain or a larger loss on ataxable disposition of the note than you would have realized had the electionbeen made. An election to amortize bond premium applies to all taxable debtobligations then owned and thereafter acquired by the holder and may be revokedonly with the consent of the IRS. If you do not elect to amortize bond premium,that premium will decrease the gain or increase the loss you would otherwiserecognize on the disposition of the note.

***Election to Treat All Interest as Original IssueDiscount***

In lieu of accounting for market discount andamortizable bond premium separately, you may elect to treat all interest on anote as OID and calculate the amount includible in gross income using aconstant yield method under which the note would be treated as if issued onyour purchase date for an amount equal to your adjusted basis in the noteimmediately after your purchase of the note. For purposes of this election,interest includes stated interest, acquisition discount, OID, de minimis OID,market discount, de minimis market discount, and unstated interest, as adjustedby any amortizable bond premium or acquisition premium. If you make thiselection for a note with market discount or amortizable bond premium, theelection is treated as an election under the market discount or amortizablebond premium provisions, as the case may be. The election is to be made for thetaxable year in which you acquire the note and cannot be revoked without theconsent of the IRS. **You should consult yourtax advisor about this election as well as the elections described above under“Market Discount” and “Amortizable Bond Premium.”**

*Sale,Exchange and Retirement of the notes.**  *In general, your tax basis in suchnotes will be equal to (x) the cost of such notes (y) increased bythe amount of OID or market discount accrued on the notes and included in yourincome (z) reduced by any amortizable bond premium deductions and paymentsof principal on such notes. Except as described under “Tax Treatment of U.S.Holders—Market Discount,” upon a sale, exchange, or retirement of the notes,you will generally recognize gain or loss equal to the difference between theamount realized on the sale, exchange or retirement and your tax basis in suchnotes. The amount realized will not include amounts attributable to accrued OID(which is taken into income as described above) or accrued but unpaid stated interest,which is taxed as ordinary income in accordance with your method of accountingfor U.S. federal income tax purposes. Such gain or loss will be long-termcapital gain or loss if you held the notes for more than one year at the timeof disposition. The net long-term capital gains derived by U.S. Holders thatare individuals, estates or trusts currently are entitled to a preferential taxrate; however, the ability of U.S. Holders to offset capital losses againstordinary income is limited.

Gain or loss recognized byyou on the sale, exchange or retirement of the notes generally will be treatedas U.S.-source gain or loss for foreign tax credit purposes unless it isattributable to an office or other fixed place of business outside the UnitedStates and certain other conditions are met. You should consult your taxadvisers as to the foreign tax credit implications of the sale or retirement ofnotes.

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***Tax Treatment ofNon-U.S. Holders***

Ingeneral, payments of interest on the notes to you, OID and gain realized by youon the sale, exchange or retirement of the notes will not be subject to UnitedStates federal income or withholding tax, unless:

(1)   such income is effectively connected with a trade or businessconducted by you in the United States (and, if an income tax treaty applies, isattributable to a permanent establishment maintained by you in the UnitedStates), and

(2)   in the case of gain, you are a nonresident alien individual whoboth holds the notes as a capital asset and is present in the United States formore than 182 days in the taxable year of the sale of the notes.

Except as may otherwise beprovided in an applicable income tax treaty between the United States and aforeign country, you will generally be subject to tax in the same manner as aU.S. Holder with respect to interest, including OID, if such interest iseffectively connected with your conduct of a trade or business in the UnitedStates. You will not be considered to be engaged in a trade or business withinthe United States for federal income tax purposes solely by reason of holdingthe notes.

***InformationReporting and Backup Withholding***

Under certaincircumstances, the Code requires “information reporting” annually to the IRSand to each U.S. Holder and Non-U.S. Holder (collectively, a “Holder”), and“backup withholding” with respect to certain payments made on or with respectto the notes. Certain U.S. Holders are exempt from backup withholding,including corporations, tax-exempt organizations, qualified pension and profitsharing trusts, and individual retirement accounts that provide a properlycompleted IRS Form W-9. Backup withholding will apply to anon-exempt U.S. Holder if such U.S. Holder (1) fails to furnish itsTaxpayer Identification Number, or TIN, which, for an individual would be hisor her Social Security Number, (2) furnishes an incorrect TIN, (3) isnotified by the IRS that it has failed to properly report payments of interestand dividends, or (4) under certain circumstances, fails to certify, underpenalties of perjury, that it has furnished a correct TIN and has not beennotified by the IRS that it is subject to backup withholding for failure toreport interest and dividend payments.

If a Non-U.S. Holderreceives payments made on or with respect to the notes through the UnitedStates office of a broker, such payments generally will be subject toinformation reporting and backup withholding unless the non-U.S. Holderprovides either IRS Form W-8BEN or W-8IMY, as applicable,together with all appropriate attachments, signed under penalties of perjury,identifying the Non-U.S. Holder and stating that the Non-U.S. Holder is not aUnited States person.

The payment of theproceeds of the disposition of the notes to or through the United States officeof a broker generally will be subject to information reporting and backupwithholding unless the Holder provides the certification described above orotherwise establishes an exemption from such reporting and withholdingrequirements.

Informationreporting requirements and backup withholding generally will not apply to anypayment of the proceeds of the sale of a Note effected outside the UnitedStates by a foreign office of a broker. However, unless such a broker hasdocumentary evidence in its records that a Holder is a non-U.S. holder andcertain other conditions are met, or the Holder otherwise establishes anexemption, information reporting will apply to a payment of the proceeds of thesale of a Note effected outside the United States by such a broker if thebroker:

·       is a United States person;

·       derives50% or more of its gross income for certain periods from the conduct of a tradeor business in the United States;

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·       isa controlled foreign corporation for U.S. federal income tax purposes; or

·       isa foreign partnership that, at any time during its taxable year, has more than50% of its income or capital interests owned by United States persons or isengaged in the conduct of a U.S. trade or business.

Backup withholding is not an additional tax. Rather,the federal income tax liability of persons subject to backup withholding willbe offset by the amount of tax withheld. If backup withholding results in anoverpayment of United States federal income tax, a refund or credit may beobtained from the IRS, provided that certain required information is furnished.Copies of the information returns reporting such interest and withholding maybe made available to the tax authorities in the country in which a Non-U.S.Holder is a resident under the provisions of an applicable income tax treaty oragreement.

**THE PRECEDING DISCUSSION IS ONLY A SUMMARY OF CERTAINUNITED STATES FEDERAL INCOME TAX CONSEQUENCES OF AN INVESTMENT IN THE NOTES.PROSPECTIVE INVESTORS ARE URGED TO CONSULT WITH THEIR OWN TAX ADVISORS TODETERMINE THE TAX CONSEQUENCES OF SUCH INVESTMENT IN LIGHT OF EACH SUCHINVESTOR’S PARTICULAR CIRCUMSTANCES.**

**F.   DIVIDENDSAND PAYING AGENTS**

Not applicable.

**G.   STATEMENTBY EXPERTS**

Not applicable.

**H.   DOCUMENTSON DISPLAY**

The Company is subject tothe informational requirements of the Securities Exchange Act of 1934, asamended. In  accordance with theserequirements the Company files reports and other information with theSecurities and Exchange Commission. These materials, including this annualreport and the accompanying exhibits, may be inspected and copied at the publicreference facilities maintained by the Commission at 450 Fifth Street,  N.W., Room 1024,  Washington, D.C. 20549. You may obtain  information on the operation of the publicreference room by calling 1 (800) SEC-0330,  and you may obtain copies at prescribed ratesfrom the Public  Reference  Section of the Commission at itsprincipal office in Washington,  D.C.20549. The SEC maintains a website (http://www.sec.gov.) that contains reports,  proxy  and information  statements  and other  information regarding  registrants that  file  electronically  with the SEC. In  addition, documents  referred to in this annual  report may be inspected at the Company’sprincipal place of business; 2nd Floor Dexter House, 2 Royal Mint Court, London EC3N 4XX,United Kingdom.

**I.   SUBSIDIARYINFORMATION**

*GreatBelt Shipping Company, S.A.,*a wholly owned subsidiaryof the Company, is primarily engaged in ship owning and operating. Great BeltShipping Company, S.A.’s registered office is at c/o Vives y Asociados,Edificio Banco Aliado, Octavo Piso, Calle Beatrix M. de Cabal, Guidad Panama,Panama 5, Republic of Panama.

*FlagshipMaritime, S.A. MV,*a wholly owned subsidiary of theCompany, is primarily engaged in ship owning and operating. Flagship Maritime,S.A.’s registered office is at c/o Vives y Asociados, Edificio Banco Aliado,Octavo Piso, Calle Beatrix M. de Cabal, Guidad Panama, Panama 5, Republic ofPanama.

*BalticNavigation Company, S.A.,*a wholly owned subsidiary ofthe Company, is primarily engaged in ship owning and operating. BalticNavigation Co., S.A.’s registered office is at c/o Vives y Asociados, 

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Edificio Banco Aliado,Octavo Piso, Calle Beatrix M. de Cabal, Guidad Panama, Panama 5, Republic ofPanama.

*NorthernStar Navigation, S.A.,*a wholly owned subsidiary ofthe Company, is primarily engaged in ship owning and operating. Northern StarNavigation, S.A.’s registered office is at c/o Vives y Asociados, EdificioBanco Aliado, Octavo Piso, Calle Beatrix M. de Cabal, Guidad Panama, Panama 5,Republic of Panama.

*BritanniaBulk, S.A.,*a wholly owned subsidiary of the Company,is primarily engaged in ship owning and operating. Britannia Bulk, S.A.’sregistered office is at c/o Vives y Asociados, Edificio Banco Aliado, OctavoPiso, Calle Beatrix M. de Cabal, Guidad Panama, Panama 5, Republic of Panama.

*ChannelBulk Services S.A.,* a wholly owned subsidiary of theCompany, is primarily engaged in ship owning and operating. Channel BulkServices S.A.’s registered office is at c/o Vives Y Asociados, Edificio BancoAliado, Octavo Piso, Calle Beatrix M. de Cabal, Guidad Panama, Panama 5,Republic of Panama.

*NavigatorBulk Services S.A.,* a wholly owned subsidiary of theCompany, is primarily engaged in ship owning and operating. Navigator BulkServices S.A.’s registered office is at c/o Vives Y Asociados, Edificio BancoAliado, Octavo Piso, Calle Beatrix M. de Cabal, Guidad Panama, Panama 5,Republic of Panama.

*AtlanticBulk Services S.A.,* a wholly owned subsidiary of theCompany, is primarily engaged in ship owning and operating. Atlantic BulkServices S.A.’s registered office is at c/o Vives Y Asociados, Edificio BancoAliado, Octavo Piso, Calle Beatrix M. de Cabal, Guidad Panama, Panama 5,Republic of Panama.

*WesternBulk Services S.A.,* a wholly owned subsidiary of theCompany, is primarily engaged in ship owning and operating. Western BulkServices S.A.’s registered office is at c/o Vives Y Asociados, Edificio BancoAliado, Octavo Piso, Calle Beatrix M. de Cabal, Guidad Panama, Panama 5,Republic of Panama.

*InternationalBulk Services S.A.,* a wholly owned subsidiary of theCompany, is primarily engaged in ship owning and operating. International BulkServices S.A.’s registered office is at c/o Vives Y Asociados, Edificio BancoAliado, Octavo Piso, Calle Beatrix M. de Cabal, Guidad Panama, Panama 5,Republic of Panama.

*UnityBulk Services S.A.,* a wholly owned subsidiary of theCompany, is primarily engaged in ship owning and operating. Unity Bulk ServicesS.A.’s registered office is at c/o Vives Y Asociados, Edificio Banco Aliado,Octavo Piso, Calle Beatrix M. de Cabal, Guidad Panama, Panama 5, Republic ofPanama.

*BBLDenmark Group,*a wholly owned subsidiary of theCompany, is primarily engaged in ownership of tugs and barges marine andsurveys. BBL Denmark Holding A/S’s registered office is at Jessens Mole 11,Svendborg 5700, Denmark.

*DanmarShipping, S.A.,*a wholly owned subsidiary of theCompany, is primarily engaged in ship owning and operating. Danmar Shipping, S.A.’s registered office is atc/o Vives y Asociados, Edificio Banco Aliado, Octavo Piso, Calle Beatrix M. deCabal, Guidad Panama, Panama 5, Republic of Panama.

*BritanniaBulkers plc,*a subsidiary of which the Company owns99.99% of its outstanding common stock, is primarily engaged in ship operating.Britannia Bulkers plc’s registered office is at Dukes House, 32 38 Dukes Place,London EC3A 7LP.

*SvendborgShip Management A/S,*a majority owned subsidiary ofthe Company, is primarily engaged in the technical management of our fleet.Svendborg Ship Management A/S’s registered office is at Jessens Mole 11,Svendborg 5700, Denmark.

*BritanniaBulker A/S,*a wholly owned subsidiary of the Company,is primarily engaged in operation of time charter vessels. Britannia Bulker A/Sstarted trading in February 2006. Britannia Bulker A/S’s registered officeis at Jessens Mole 11, Svendborg 5700, Denmark.

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*SvendborgMarine Surveyors A/S,*a wholly owned subsidiary of theCompany, is primarily engaged in ship inspection and surveys. Svendborg MarineSurveyors A/S’s registered office is at Jessens Mole 11, Svendborg 5700,Denmark.

*Britannia Bulk DK A/S,*awholly owned subsidiary of the Company, is primarily engaged in shippingoperations. Britannia Bulk DK A/S’s registered office is at Jessens Mole 11,Svendborg 5700, Denmark.

**ITEM 11.**         QUANTITATIVEAND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

*InterestRates.**  *Historically,we have been subject to limited market risks relating to changes in interestrates, because we did not have significant amounts of floating rate debtoutstanding. During 2006, we paid interest on this debt based on LIBOR plusmargins ranging from 0.95% to 2% on our bank loans. Following the completion ofthe offering of Notes and subsequent repayment of all our outstanding debt, wedo not have any material exposure to interest rate changes because we do notexpect to have any significant floating rate debt outstanding.

***Foreign Exchange Rate Risk.******   For the year ended December 31,2006, we generated 99% of our revenues in U.S. dollars, and incurred 19% of ouroperating expenses in currencies other than the U.S. dollar, primarily theBritish Pound, Euro and Danish Kroner. For accounting purposes, expensesincurred in these non-U.S. dollar currencies are converted into U.S. dollars atthe exchange rate prevailing on the date of each transaction. Because asignificant portion of our expenses are incurred in currencies other than theU.S. dollar, our expenses may from time to time increase relative to ourrevenues as a result of fluctuations in exchange rates, particularly betweenthe U.S. dollar and the British Pound, Euro and Danish Kroners, which couldaffect the amount of cash flow we generate in future periods. While wehistorically have not mitigated the risk associated with exchange ratefluctuations through the use of financial derivatives, we may determine toemploy such instruments from time to time in the future in order to minimizethis risk. Our use of financial derivatives would involve certain risks,including the risk that losses on a hedged position could exceed the nominalamount invested in the instrument and the risk that the counterparty to thederivative transaction may be unable or unwilling to satisfy its contractualobligations.***

**ITEM 12.**         DESCRIPTIONOF SECURITIES OTHER THAN EQUITY SECURITIES

**A.   DEBTSECURITIES**

***Principal, Maturity and Interest***

In the offering, we issued an aggregate principalamount of $185.0 million of Notes on November 16, 2006 pursuant tothe terms of an Indenture dated November 16, 2006 between us, the guarantorsthereto and Wilmington Trust Company, as trustee (the “Indenture”). The Noteswere issued in full registered form without coupons, in minimum denominationsof $100,000 and integral multiples of $1,000 and have a maturity date of  December 1, 2011. The Notes are seniorobligations of the Company and are secured by, among other things, a firstpreferred ship mortgage on all of the Company’s existing vessels and vesselsacquired in the future with the net proceeds of the offering.

The Notes accrue interest at a rate of 11% of theprincipal amount per annum. Interest on the Notes will be payable semi-annuallyin arrears on December 1 and June 1 of each year, commencing June 1,2007, to the holders of record on the immediately preceding November 15and May 15 respectively. Principal of, and premium, if any, and intereston, the Notes held in registered form will be payable, and the Notes held inregistered form will be exchangeable and transferable, at our office or agency inthe United States maintained for such purposes, which initially will be at theCorporate Trust Office or agency of the trustee in New York, New York.

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Upon completion of theOffering, $140.0 million of the proceeds was deposited in a securedcollateral account with the trustee (the “Vessel Acquisition Account”). We areentitled to withdraw funds from the Vessel Acquisition Account, if no defaultor event of default under the Indenture has occurred and is continuing, for thepurpose of acquiring one or more vessels flagged.

***Transfer and Exchange***

A noteholder may transferor exchange Notes in accordance with the Indenture. We are not required totransfer or exchange any Note selected for redemption or repurchase nor can theCompany transfer or exchange any Note for a period of 15 days before aselection of Notes to be redeemed or between a record date and the nextsucceeding interest payment date. The registered holder of a Note will betreated as the owner of it for all purposes, and only such registered holderswill have rights under the Indenture.

***Security***

The obligations under the Notes will be securedpursuant to the security documents by a first priority lien granted to thetrustee for the benefit of the holders of the Notes, in all of the followingproperty (collectively, the “*Collateral*”):(i) the mortgaged vessels and related earnings and insurance, (ii) amountson deposit in the Vessel Acquisition Account, (iii) any proceeds of theforegoing, and (iv) any assets substituted for such Collateral as providedfor in the security documents. Unless an event of default under the Indentureshall have occurred and be continuing, We will have the right to remain inpossession and retain exclusive control of the Collateral, to freely operatethe Collateral and to collect, invest and dispose of any income thereon ortherefrom. Upon an Event of Default, these rights will cease and the trusteewill be entitled to foreclose upon and sell the Collateral or any part thereofas provided in the under the Indenture.

Subject to the provisionsof the Indenture and the security documents, the trustee in its solediscretion, on behalf of the noteholders, may take all actions it deemsnecessary in order to: (i) enforce any of the terms of the security documents,and (ii) collect and receive any and all amounts payable in respect of theobligations of the Company under the Notes, the Indenture and the security documents.

***Excess Cash Flow***

Where we have excess cashflow of $5 million or more for a fiscal year (the first fiscal year beingdeemed to be November 16, 2006 to December 31, 2007), the Companyshall: (i) in respect of each fiscal year subsequent to December 31, 2008,apply 50% of such excess cash flow, and (ii) in respect of the firstfiscal year and the fiscal year ending December 31, 2008, apply 100% ofsuch excess cash flow;  to make an offerto purchase the maximum accreted value of the Notes that may be purchased outof the excess cash flow amount, at an offer price in cash in an amount equal to101% of the accreted value thereof plus accrued and unpaid interest thereon tothe date of purchase. We shall make such an offer no later than 60 daysafter the end of such relevant fiscal period and the purchase date with respectto such an offer will be no earlier than 60 days nor later than90 days following the date notice is first given to noteholders of theoffer.

***Redemption***

We may only redeem Notes prior to December 1,2009 in an aggregate principal amount not to exceed 35% of the aggregateprincipal amount of the Notes originally issued at a redemption price equal to112.75%, plus accrued and unpaid interest thereon, if any, to the redemptiondate, with the net cash proceeds from one or more equity offerings, provided that (i) at least 65%of such aggregate principal amount of the notes remains outstanding immediatelyafter the occurrence of each such redemption (other 

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than Notes held, directlyor indirectly, by us or our affiliates), and (ii) each such redemptionoccurs within 90 days after the date of the related equity offering.

On or after December 1, 2009, we may redeem theNotes provided we give not less than 30 and not more than 60 days’ prior noticeand redeem the Notes at a pre-determined redemption price. We are not required to make any mandatoryredemption or sinking fund payments with respect to the Notes. However, undercertain circumstances, We may be required to offer to purchase the Notes.

If we are redeeming lessthan all of the Notes, the trustee will select Notes by such method as thetrustee in its sole discretion shall deem to be fair and appropriate. Notesredeemed in part will be redeemed only in principal amounts of $1,000. If anyNote is to be redeemed in part only, the notice of redemption that relates tothat Note shall state the portion of the principal amount thereof to beredeemed. We will issue a new note in a principal amount equal to the unredeemedportion of the original note in the name of the noteholder thereof uponcancellation of the original note.

***Change of Control***

Upon the occurrence of a change of control, we will be requiredto offer to purchase each noteholder’s notes at a purchase price in cash equalto 101% of the accreted value thereof on the date of purchase plus accrued andunpaid interest, if any, to the date of purchase.

***Restrictive Covenants***

The Indenture contains anumber of restrictive covenants including, amongst other things, limitationson  (i) incurring any indebtedness, (ii) makingcertain restricted payments, (iii) certain subsidiaries from makingdistributions, (iv) sales of assets, (v) affiliate transactions, (vi) liens,(vii) sale and leaseback transactions, (viii) mergers orconsolidations and (ix) business activities. However, there are exemptionsto each of these limitations. For example, indebtedness can be incurredprovided that such indebtedness is in the form of a revolving credit facilityof no more than $20,000,000 or if on the date of incurring such indebtedness noevent of default has occurred or would occur and the entity incurring suchindebtedness has a an EBITDA 2.25 times greater than its equivalent interestexpense.

***Reporting Obligations***

So long as Notes areoutstanding, we will furnish to the trustee and make available to eachnoteholder: (i) within 120 days from the end of each fiscal year, anannual report containing the information required to be contained in an AnnualReport on Form 20-F; and (ii) within 60 days from the endof each of the first three quarters in each fiscal year, quarterly reports.

***Default***

The following are examples of events of default underthe Indenture: (i) a default continuing for 30 days in the payment ofinterest on the Notes when due; (ii) a default in the payment of principalof or premium, if any, on any Note; (iii) a default under any mortgage,indenture or instrument under which there may be issued or by which there maybe secured or evidenced any indebtedness by us or certain of our subsidiaries, (iv) certainevents of bankruptcy, insolvency or reorganization and (v) where aguarantee given by a subsidiary ceases to be in full force and effect or anyguarantor denies or disaffirms its obligations under its guarantee.

If an event of defaultoccurs and continues, the trustee or the noteholders of at least 25% inaccreted value amount of the outstanding Notes may declare the accreted valueof and premium, if any, and accrued but unpaid interest on all the Notes to beimmediately due and payable. If an event of default occurs, is continuing andthe trustee has received notice thereof, the trustee must mail, to eachnoteholder, notice of 

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theevent of default within the later of 90 days after it occurs or10 days after the trustee receives notice of the event of default.

***Amendments and Waivers***

The Indenture and theNotes may be amended with the consent of the noteholders of a majority inprincipal amount of the Notes then outstanding and any past default orcompliance with any provisions may also be waived with the consent of thenoteholders of a majority in principal amount of the Notes then outstanding.However, without the consent of each noteholder of an outstanding Note affectedthereby, an amendment may not, amongst other things: (i) reduce the amountof the Notes whose noteholders must consent to an amendment; (ii) reducethe rate of or extend the time for payment of interest on any Note; (iii) reducethe principal of or extend the maturity of any Note, (iv) alter theprovisions with respect to the redemption or repurchase of the Notes or changethe time at which any Note may be redeemed or repurchased and (v) make anyNote payable in money other than that stated in the Note.

***Satisfaction and Discharge***

The Indenture will bedischarged and will cease to be of further effect as to all outstanding Noteswhen we have paid all sums payable by us under the Indenture and either: (i) allthe Notes that have been authenticated and delivered have been delivered to thetrustee for cancellation; or (ii) all Notes not delivered to the trusteefor cancellation otherwise have become due and payable, or will become due andpayable within one year, and the Company has delivered irrevocable instructionsto the trustee to apply the deposited money toward the payment of the Notes atmaturity or on the date of redemption, as the case may be.

***Governing Law***

The Indenture and theNotes are governed by the laws of the State of New York.

**B.   WARRANTSAND RIGHTS**

Not applicable.

**C.   OTHERSECURITIES**

Not applicable.

**D.   AMERICANDEPOSITARY SHARES**

Not applicable.

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**PART II**

**ITEM13.**         DEFAULTS, DIVIDENDARREARAGES AND DELINQUENCIES

Not applicable.

**ITEM14.**         MATERIAL MODIFICATIONS TOTHE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS

Not applicable.

**ITEM15.**         CONTROLS AND PROCEDURES

(a)  *Disclosure Controls and Procedures.* OurChief Executive Officer and our Chief Financial Officer, after evaluating theeffectiveness of our disclosure controls and procedures as of the end of theperiod covered by this Form 20-F, have concluded that, as of such date, ourdisclosure controls and procedures were effective; and

(b) *Internal Control Over Financial Reporting.*There were no changes in our internal control over financial reporting thatoccurred during the year ended December 31, 2006 that have materially affected,or are reasonably likely to materially affect, our internal control overfinancial reporting.

This annual report doesnot include (i) an attestation report of our independent registered publicaccounting firm regarding internal control over financial reporting or (ii)management’s report on the effectiveness of internal control over our financialreporting.  Management’s report andattestation of such management report by our independent registered publicaccounting firm was not required pursuant to temporary rules of the Securitiesand Exchange Commission.

**ITEM16A. AUDIT COMMITTEE FINANCIAL EXPERT**

We have established anaudit committee which is presently comprised of two directors. The AuditCommittee is chaired by Mr. Rex Harrington, with the remaining memberbeing Arvid Tage. We do not presently have an “audit committee financial expert”as such term is defined in Item 16A. of Form 20-F, but are activelyseeking qualified candidates to potentially fulfill that role.

**ITEM16B. CODE OF ETHICS**

We have adopted a code ofethics that applies to our principal executive officer, principal financialofficer, principal accounting officer or controller or persons performingsimilar functions, as well as to all of our other employees. This code ofethics is available upon request at our principal place of business at Dexter House, 2 Royal Mint Court, London, EC3N4QN, United Kingdom.

**ITEM16C. PRINCIPAL ACCOUNTANT FEES AND SERVICES**

Thefollowing table presents fees billed for professional audit services renderedby Moore Stephens Hays LLP for the audit of our annual financial statements andfor other services for the years ended December 31, 2006 and 2005 (*in thousands*):

| **For the year ended December 31,** | ** ** | ** ** | ** ** | **2006** | ** ** | **2005** | ** ** |
|--------------------------------------------------------------|------------|------------|------------|----------|------------|----------|------------|
| Audit fees(1)                                                |       | $          | 57,365     |     | $          | 46,081   |       |
| Taxation(2)                                                  |       | 14,725     |       | 67,058   |       |
| Advisory(3)                                                  |       | 97,951     |       | —   |       |
| Total                                                        |       | $          | 170,041    |     | $          | 113,139  |       |

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(1)          Auditfees consist of assurance and related services that are reasonably related tothe performance of 

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the audit or reviewof our financial statements.  This categoryincludes fees related to the review of our SEC filings and other relatedservices.

(2)          Audit fees associatedwith tax computation, general taxation advice and related tax matters.

(3)          Audit-related feesconsist of due diligence fees associated with acquisition transactions,financial accounting and reporting consultations.

Our board of directorsreviews and approves all audit and non-audit services provided to us by MooreStephens Hays LLP. In the future, the Audit Committee will review all audit andnon-audit services to be performed for us by Moore Stephens Hays LLP.

**ITEM 16D. EXEMPTIONSFROM THE LISTING STANDARDS FOR AUDIT COMMITTEES**

**Notapplicable.**

**ITEM 16E. PURCHASES OF EQUITY SECURITIES BY THE ISSUERAND THE AFFILIATED PURCHASERS**

Neither we, nor any of our affiliates, purchased anyequity securities during the year ended December 31, 2006.

On April 12, 2007, we and each of ourshareholders entered into a Purchase Agreement pursuant to which, amongst otherthings, North Western (Neva) Limited, our smallest shareholder agreed to sellall of its shares to us and other shareholders as follows: (i) 434,168shares to us for total consideration of $7,500,000, (ii) 29,171 shares toLusca Holdings Ltd. for total consideration of $503,913, (iii) 11,965 sharesto Balcare Holdings Limited for total consideration of $206,689 and (iv) 3,585shares to Cliffgrove Limited for total consideration of $61,929. Pursuant tothe terms of the purchase agreement, the shares will be sold in three trancheson April 16, 2007 (159,681 shares purchased by us), April 15, 2008(159,681 shares purchased by us) and April 15, 2009 (114,806 shares to bepurchased by us and 44,721 shares to be purchased by the remaining shareholdersdescribed above). The effect of this agreement will be to increase the numberof shares in the Company which are beneficially owned by Arvid Tage, SergueiZoudov and David Znak.

76

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**PART III**

**ITEM 17.**         FINANCIALSTATEMENTS

See Item 18.

**ITEM 18.**         FINANCIALSTATEMENTS

The financial informationrequired by this Item is set forth on pages F-1 to F-21 and are filed aspart of this annual report.

**ITEM 19.**         EXHIBITS

The followinginstruments and documents are included as exhibits to this annual report.

| 1.1*      |   | Certificate of Incorporation on Re-Registration of a  private company as a public company of Britannia Bulk Plc dated  10th August 2004.                                                                                     |
|-----------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 1.2*      |   | Memorandum of  Association of Britannia Bulk Plc dated August 10, 2004.                                                                                                                                                           |
| 1.3*      |   | Articles of Association  of Britannia Bulk Plc dated August 10, 2004.                                                                                                                                                             |
| 2.1*      |   | Registration Rights  Agreement dated as of November 16, 2006 by and among Britannia Bulk Plc,  the Guarantors party thereto and Jefferies & Company, Inc., ABN  AMRO, Incorporated and DAVY, as Initial Purchasers. |
| 2.2*      |   | Indenture dated as of  November 16, 2006 by and among Britannia Bulk Plc, the Guarantors party  thereto and Wilmington Trust Company, as trustee.                                                                                 |
| 2.3*      |   | Form of 11% Senior  Secured Note Due 2011 (attached as Exhibit A-1 to Exhibit 4.2).                                                                                                                                     |
| 2.4*      |   | First Supplemental  Indenture dated as of February 6, 2007 by and among Britannia Bulk Plc,  the Guarantors party thereto and Wilmington Trust Company, as trustee.                                                               |
| 2.5*      |   | Second Supplemental  Indenture dated as of February 9, 2007 by and among Britannia Bulk Plc,  the Guarantors party thereto and Wilmington Trust Company, as trustee.                                                              |
| 4.1*      |   | Form of First  Preferred Ship Mortgage dated as of November 16, 2006 by the  mortgagor.**                                                                                                                                    |
| 4.2*      |   | Form of Assignment  of Insurances dated as of November 16, 2006 by and between the mortgagor  and Wilmington Trust Company, as trustee.**                                                                                    |
| 4.3*      |   | Form of Assignment  of Earnings dated as of November 16, 2006 by and between the mortgagor  and Wilmington Trust Company, as trustee.**                                                                                      |
| 4.4† |   | Memorandum of Agreement  dated as of March 30, 2005 by and between Britannia Bulk S.A., a company  fully guaranteed by Britannia Bulk Plc and Dermaga Shipping Co. Ltd.                                                           |
| 4.5† |   | Memorandum of Agreement  dated as of August 30, 2006 by and between Britannia Bulk Plc and Pan  Shipping L.P.                                                                                                                     |
| 4.6† |   | Memorandum of Agreement  dated as of February 9, 2007 by and between Britannia Bulk Plc and Human  Owning Company Limited.                                                                                                        |
| 4.7† |   | Memorandum of Agreement  dated as of January 16, 2007 by and between Britannia Bulk Plc and  Classical Owning Company Limited.                                                                                                    |
| 4.8† |   | Memorandum of Agreement  dated as of March 12, 2007 by and between Britannia Bulk Plc and Argo  Shipholding Inc.                                                                                                                  |
| 7.1† |   | Computation of Ratio of  Earnings to Fixed Charges.                                                                                                                                                                                    |
| 8.1† |   | List of subsidiaries.                                                                                                                                                                                                                  |

77

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| 12.1† |   | Certification of  Principal Executive Officer.                                                          |
|------------|--------|---------------------------------------------------------------------------------------------------------|
| 12.2† |   | Certification of  Principal Financial Officer.                                                          |
| 13.1† |   | Certification under  Section 906 of the Sarbanes-Oxley Act of 2002 of the Principal Executive Officer.  |
| 13.2† |   | Certification under  Section 906 of the Sarbanes-Oxley Act of 2002 of the Principal Financial  Officer. |

----

Notes:

†                    Filedherewith.

*                    Incorporatedby reference from Britannia’s Registration Statement on Form F-4 (File No. 333-141113).

**             One agreementrelating to each Panamanian subsidiary which includes a vessel as an asset.

78

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**SIGNATURES**

In accordance with Section 13or 15(d) of the Exchange Act, the registrant hereby certifies that itmeets all of the requirements for filing on Form 20-F and that it has dulycaused and authorised the undersigned to sign this annual report on its behalf.
| **BRITANNIA BULK PLC** | ** **                               |
|------------------------|------------------------------------------|
|  /s/ ARVID TAGE   |                                     |
| Name:                  | Arvid Tage                               |   |
| Tile:                  | *Chairman, Chief Executive Officer and*  |   |
| * *               | *Director (Principal Executive Officer)* | * * |

 

KNOW ALL MEN BY THESE PRESENTS, that each person whosesignature appears below constitutes and appoints****CliffHanson and Fariyal Khanbabi,****and each ofthem (with full power to each of them to act alone) his true and lawfulattorney-in-fact and agent, with full power of substitution and resubstitution,for him and in his name, place and stead, in any and all capacities, to sign onhis behalf individually and in each capacity stated below any and allamendments (including post-effective amendments) to this annual report, and tofile the same, with all exhibits thereto and other documents in connectiontherewith, with the Securities and Exchange Commission, granting unto saidattorney-in-fact and agents, and each of them, full power and authority to doand perform each and every act and thing requisite and necessary to be done inand about the premises, as fully to all intents and purposes as he might orcould do in person, hereby ratifying and confirming all that saidattorneys-in-fact and agents and either of them, or their substitutes, maylawfully do or cause to be done by virtue hereof. 

Pursuantto the requirements of the Securities Act of 1933, this annual report has beensigned by the following persons in the capacities and on the dates indicated. 
|                       | **Signature** | ** **                                    | ** ** | ** **          | **Capacity** | ** ** | ** ** | ** ** | **Date** | ** ** |
|-----------------------|---------------|-----------------------------------------------|------------|---------------------|--------------|------------|------------|------------|----------|------------|
| /s/ ARVID TAGE        |          | Chairman, Chief  Executive Officer and        |       | April 20, 2007 |
| Arvid  Tage           |          | Director (Principal  Executive Officer)       |       |                |
| /s/ FARIYAL  KHANBABI |          | Chief Financial Officer and Director          |       | April 20, 2007 |
| Fariyal  Khanbabi     |          | (Principal Financial and  Accounting Officer) |       |                |
| /s/ CLIFF  HANSON     |          | Chief Operating  Officer and Managing         |       | April 20, 2007 |
| Cliff  Hanson         |          | Director                                      |       |                |
| /s/ SERGUEI  ZOUDOV   |          | Co-President—Chartering  and Director    |       | April 20, 2007 |
| Serguei  Zoudov       |          |                                          |       |                |
| /s/ DAVID ZNAK        |          | Co-President—Chartering  and Director    |       | April 20, 2007 |
| David  Znak           |          |                                          |       |                |
| /s/ REX  HARRINGTON   |          | Director                                      |       | April 20, 2007 |
| Rex Harrington        |          |                                          |       |                |

 

79

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**BRITANNIA BULK PLCINDEX TOCONSOLIDATED FINANCIAL STATEMENTS**

|                                                         | ** ** | **Page** |
|---------------------------------------------------------|------------|----------|
| REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM |       | F-1      |   |
| CONSOLIDATED BALANCE SHEETS                             |       | F-2      |   |
| CONSOLIDATED STATEMENTS OF OPERATIONS                   |       | F-3      |   |
| CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY    |       | F-4      |   |
| CONSOLIDATED STATEMENTS OF CASH FLOWS                   |       | F-5      |   |
| NOTES TO CONSOLIDATED FINANCIAL STATEMENTS              |       | F-6      |   |

 

----

****

To the ShareholdersBritannia Bulk plc

**REPORT OFINDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM**

We have audited the accompanying consolidated balancesheets of Britannia Bulk plc and subsidiaries as of December 31, 2006and 2005 and the related consolidated statements of operations, shareholders’equity, and cash flows for each of the three years in the period ended December 31, 2006.These consolidated financial statements are the responsibility of the Company’smanagement. Our responsibility is to express an opinion on these consolidatedfinancial statements based on our audits.

We conducted our audits in accordance with thestandards of the Public Company Accounting Oversight Board (United States). Thosestandards require that we plan and perform the audit to obtain reasonableassurance about whether the financial statements are free of materialmisstatement. The Company is not required to have, nor were we engaged toperform, an audit of its internal control over financial reporting. Our auditincluded consideration of internal control over financial reporting as a basisfor designing audit procedures that are appropriate in the circumstances, butnot for the purpose of expressing an opinion on the effectiveness of theCompany’s internal control over financial reporting. Accordingly, we express nosuch opinion. An audit includes examining, on a test basis, evidence supportingthe amounts and disclosures in the financial statements. An audit also includesassessing the accounting principles used and significant estimates made bymanagement, as well as evaluating the overall financial statement presentation.We believe that our audits provide a reasonable basis for our opinion.

In our opinion, theconsolidated financial statements referred to above present fairly, in allmaterial respects, the financial position of Britannia Bulk plc andsubsidiaries as of December 31, 2006 and 2005 and the results oftheir operations and their cash flows for each of the three years in the periodended December 31, 2006, in conformity with accounting principlesgenerally accepted in the United States of America.

April 11, 2007New York, New York

PersonalAttention...Global ConnectionsSM A member firm ofMoore Stephens International –members in principal citiesthroughout the world

F-1

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**BRITANNIA BULK PLCCONSOLIDATED BALANCE SHEETS(Dollars in thousands, except share and per share amounts)**

| ** **                                                                                                                                                                              | ** ** | **December 31,** | ** ** |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|-----------------------|------------|
| ** **                                                                                                                                                                              | ** ** | **2006**              | ** ** | **2005** | ** ** |
| **ASSETS**                                                                                                                                                                              | ** ** | ** **            | ** ** | ** ** | ** ** |
| **Current assets**                                                                                                                                                                      |       |                  |       |   |   |
| Cash and cash  equivalents                                                                                                                                                              |       | $                     | 17,170     |   | $ | 6,401 |   |
| Vessel acquisition  account                                                                                                                                                             |       | 138,133               |       | — |   |
| Due from charters, net                                                                                                                                                                  |       | 6,717                 |       | 10,092 |   |
| Inventories                                                                                                                                                                             |       | 3,199                 |       | 1,883 |   |
| Prepaid expenses                                                                                                                                                                        |       | 3,724                 |       | 1,070 |   |
| Other current assets                                                                                                                                                                    |       | 633                   |       | 29 |   |
| **Total  current assets**                                                                                                                                                               |       | 169,576               |       | 19,475 |   |
| Vessels and other fixed  assets, net                                                                                                                                                    |       | 42,682                |       | 47,678 |   |
| Deferred drydocking  costs, net                                                                                                                                                         |       | 4,899                 |       | 3,271 |   |
|                                                                                                                                                                                    |       | 47,581                |       | 50,949 |   |
| **Other assets**                                                                                                                                                                        |       |                  |       |   |   |
| Investments                                                                                                                                                                             |       | 58                    |       | 39 |   |
| Deposit on vessel                                                                                                                                                                       |       | 2,119                 |       | — |   |
| Goodwill                                                                                                                                                                                |       | —                |       | 33 |   |
| Deferred financing  costs, net                                                                                                                                                          |       | 6,656                 |       | 356 |   |
| **Total  assets**                                                                                                                                                                       |       | $                     | 225,990    |   | $ | 70,852 |   |
| **LIABILITIES AND SHAREHOLDERS’ EQUITY**                                                                                                                                           |       |                  |       |   |   |
| **Liabilities**                                                                                                                                                                         |       |                  |       |   |   |
| **Current liabilities**                                                                                                                                                                 |       |                  |       |   |   |
| Accounts payable                                                                                                                                                                        |       | $                     | 4,571      |   | $ | 2,219 |   |
| Accrued expenses and  other liabilities                                                                                                                                                 |       | 8,702                 |       | 4,390 |   |
| Deferred revenue                                                                                                                                                                        |       | 4,230                 |       | 5,570 |   |
| Taxes payable                                                                                                                                                                           |       | 450                   |       | 280 |   |
| Amounts due to related  parties                                                                                                                                                         |       | —                |       | 131 |   |
| Current portion of  long-term debt                                                                                                                                                      |       | —                |       | 11,520 |   |
| **Total  current liabilities**                                                                                                                                                          |       | 17,953                |       | 24,110 |   |
| Long-term debt, net of  current portion                                                                                                                                                 |       | 173,496               |       | 14,680 |   |
| **Total  liabilities**                                                                                                                                                                  |       | 191,449               |       | 38,790 |   |
| Minority interest                                                                                                                                                                       |       | 107                   |       | 35 |   |
| **Commitment and contingencies**                                                                                                                                                        |       |                  |       |   |   |
| **Shareholders’ equity**                                                                                                                                                           |       |                  |       |   |   |
| Common stock (£1 par  value, stated at $1.79; 10,000,000 shares authorized; 8,683,357, 8,682,357  shares issued and outstanding at December 31, 2006 and 2005,  respectively) |       | 15,543                |       | 15,541 |   |
| Additional paid-in  capital                                                                                                                                                             |       | 648                   |       | 637 |   |
| Retained earnings                                                                                                                                                                       |       | 18,243                |       | 15,849 |   |
| **Total  shareholders’ equity**                                                                                                                                                    |       | 34,434                |       | 32,027 |   |
| **Total liabilities and shareholders’ equity**                                                                                                                                     |       | $                     | 225,990    |   | $ | 70,852 |   |

 

The accompanying notes are an integral part of these consolidated financial statements.

F-2

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**BRITANNIA BULK PLCCONSOLIDATED STATEMENTS OF OPERATIONS(Dollars in thousands, except share and per share amounts)**

| ** **                                           | ** ** | **Years ended December 31,** | ** ** |
|------------------------------------------------------|------------|---------------------------------------------|------------|
| ** **                                           | ** ** | **2006**                                    | ** ** | **2005** | ** ** | **2004** | ** ** |
| **Revenues**                                         |       |                                        |       |   |   |   |   |
| Contract of affreightment and voyage revenues        |       | $                                           | 172,242    |   | $ | 144,318 |   | $ | 39,869 |   |
| Time charter revenues                                |       | 12,909                                      |       | 33,295 |   | 654 |   |
| Demurrage and other revenues                         |       | 6,352                                       |       | 6,972 |   | 1,602 |   |
| Total revenues                                       |       | 191,503                                     |       | 184,585 |   | 42,125 |   |
| **Operating  expenses**                              |       |                                        |       |   |   |   |   |
| Voyage expenses                                      |       | 71,840                                      |       | 49,347 |   | 11,893 |   |
| Charter hire expenses                                |       | 75,723                                      |       | 95,937 |   | 16,322 |   |
| Commissions                                          |       | 4,316                                       |       | 4,265 |   | 1,083 |   |
| Vessel operating expenses                            |       | 12,870                                      |       | 12,137 |   | 2,802 |   |
| Depreciation and amortization                        |       | 10,894                                      |       | 9,341 |   | 1,114 |   |
| General and administrative                           |       | 9,410                                       |       | 3,666 |   | 148 |   |
| Expense to related parties                           |       | —                                      |       | 131 |   | 799 |   |
| Foreign currency transaction gains and losses, net   |       | (202                                        | )          | 120 |   | 88 |   |
| Total operating expenses                             |       | 184,851                                     |       | 174,944 |   | 34,249 |   |
| **Operating income**                                 |       | 6,652                                       |       | 9,641 |   | 7,876 |   |
| Minority interest expense                            |       | (72                                         | )          | (28 | ) | — |   |
| Interest income                                      |       | 1,096                                       |       | 272 |   | 23 |   |
| Interest expense                                     |       | (5,122                                      | )          | (1,353 | ) | (271 | ) |
| **Income before taxes**                              |       | 2,554                                       |       | 8,532 |   | 7,628 |   |
| Provision for taxes                                  |       | (160                                        | )          | (284 | ) | (49 | ) |
| **Net income**                                       |       | $                                           | 2,394      |   | $ | 8,248 |   | $ | 7,579 |   |
| Weighted average number of common shares outstanding |       | 8,683,289                                   |       | 5,697,612 |   | 207,720 |   |
| Basic earnings per  common share                     |       | $                                           | 0.28       |   | $ | 1.45 |   | $ | 36.49 |   |

 

The accompanying notes are an integral part of these consolidated financial statements.

F-3

----

**BRITANNIA BULK PLCCONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY(Dollars in thousands, except share and per share amounts)**

| ** **                             | ** ** | **Common stock** | ** ** | **Additional  Paid-in** | ** ** | **Retained** | ** ** | **Total  Shareholders’** | ** ** |
|----------------------------------------|------------|-----------------------|------------|-------------------------|------------|--------------|------------|-------------------------------|------------|
| ** **                             | ** ** | **Shares**            | ** ** | **Amount**              | ** ** | **Capital**  | ** ** | **Earnings**                  | ** ** | **Equity** | ** ** |
| **Balance  at December 31, 2003** |       | 2                     |       | $                       | —     |         |       | $                             | —     |   |   | $ | 22 |   |   | $ | 22 |   |   |
| Net income                             |       | —                |       | —                  |       |         | —     |                          |       | 7,579 |   |   | 7,579 |   |   |
| Issuance of  common stock              |       | 2,767,517             |       | 4,954                   |       |         | 11         |                          |       | — |   |   | 4,965 |   |   |
| **Balance  at December 31, 2004** |       | 2,767,519             |       | 4,954                   |       |         | 11         |                          |       | 7,601 |   |   | 12,566 |   |   |
| Net income                             |       | —                |       | —                  |       |         | —     |                          |       | 8,248 |   |   | 8,248 |   |   |
| Issuance of  common stock              |       | 5,914,838             |       | 10,587                  |       |         | 626        |                          |       | — |   |   | 11,213 |   |   |
| **Balance  at December 31, 2005** |       | 8,682,357             |       | 15,541                  |       |         | 637        |                          |       | 15,849 |   |   | 32,027 |   |   |
| Net income                             |       | —                |       | —                  |       |         | —     |                          |       | 2,394 |   |   | 2,394 |   |   |
| Issuance of  common stock              |       | 1,000                 |       | 2                       |       |         | 11         |                          |       | — |   |   | 13 |   |   |
| **Balance at December 31,  2006** |       | 8,683,357             |       | $                       | 15,543     |         |       | $                             | 648        |   |   | $ | 18,243 |   |   | $ | 34,434 |   |   |

 

The accompanying notes are an integral part of these consolidated financial statements.

F-4

----

**BRITANNIA BULK PLC**CONSOLIDATEDSTATEMENTS OF CASH FLOWSDollars in thousands, except share and per share amounts)

| ** **                                                                            | ** ** | **Years ended December 31,** | ** ** |
|---------------------------------------------------------------------------------------|------------|---------------------------------------------|------------|
| ** **                                                                            | ** ** | **2006**                                    | ** ** | **2005** | ** ** | **2004** | ** ** |
| **Cash flows from operating  activities**                                             | ** ** | ** **                                  | ** ** | ** ** | ** ** | ** ** | ** ** |
| Net income                                                                            |       | $                                           | 2,394      |   | $ | 8,248 |   | $ | 7,579 |   |
| **Adjustments  to reconcile net income to net cash provided by operating activities** | ** ** | ** **                                  | ** ** | ** ** | ** ** | ** ** | ** ** |
| Depreciation and amortization                                                         |       | 10,894                                      |       | 9,341 |   | 1,114 |   |
| Amortization of note discount and debt issuance  costs                                |       | 822                                         |       | — |   | — |   |
| Interest income on vessel acquisition account                                         |       | (252                                        | )          | — |   | — |   |
| Minority interest                                                                     |       | 72                                          |       | 28 |   | — |   |
| **Changes  in operating assets and liabilities**                                      | ** ** | ** **                                  | ** ** | ** ** | ** ** | ** ** | ** ** |
| Due from charters                                                                     |       | 3,375                                       |       | (5,557 | ) | (4,481 | ) |
| Inventories                                                                           |       | (1,316                                      | )          | (1,063 | ) | (599 | ) |
| Prepaid expenses                                                                      |       | (2,654                                      | )          | (749 | ) | (321 | ) |
| Other current assets                                                                  |       | (604                                        | )          | 1 |   | (9 | ) |
| Payments for drydockings                                                              |       | (5,205                                      | )          | (2,089 | ) | (6,381 | ) |
| Accounts payable, accrued expenses and other  liabilities                             |       | 6,664                                       |       | 1,307 |   | 4,742 |   |
| Deferred revenue                                                                      |       | (1,340                                      | )          | 4,504 |   | 1,066 |   |
| Taxes payable                                                                         |       | 170                                         |       | 231 |   | 49 |   |
| Other                                                                                 |       | 14                                          |       | 208 |   | 163 |   |
| Net cash provided by operating activities                                             |       | 13,034                                      |       | 14,410 |   | 2,922 |   |
| **Cash  flows from investing activities**                                             | ** ** | ** **                                  | ** ** | ** ** | ** ** | ** ** | ** ** |
| Payments and deposits for vessels and other fixed  assets                             |       | (2,321                                      | )          | (27,748 | ) | (24,888 | ) |
| Payments for acquisitions, net of cash acquired                                       |       | —                                      |       | (102 | ) | — |   |
| Funding of the vessel acquisition account                                             |       | (140,000                                    | )          | — |   | — |   |
| Net cash used in investing activities                                                 |       | (142,321                                    | )          | (27,850 | ) | (24,888 | ) |
| **Cash  flows from financing activities**                                             | ** ** | ** **                                  | ** ** | ** ** | ** ** | ** ** | ** ** |
| Amounts (paid to) received from related parties                                       |       | (131                                        | )          | (668 | ) | 15,817 |   |
| Proceeds from borrowings                                                              |       | 173,201                                     |       | 19,500 |   | 15,962 |   |
| Payments of deferred financing costs                                                  |       | (6,827                                      | )          | (216 | ) | (487 | ) |
| Repayment of borrowings                                                               |       | (26,200                                     | )          | (9,262 | ) | — |   |
| Issuance of common stock                                                              |       | 13                                          |       | 1,160 |   | — |   |
| Net cash provided by financing activities                                             |       | 140,056                                     |       | 10,514 |   | 31,292 |   |
| **Net increase (decrease) in cash**                                                   |       | 10,769                                      |       | (2,926 | ) | 9,326 |   |
| Cash and cash  equivalents at beginning of year                                       |       | 6,401                                       |       | 9,327 |   | 1 |   |
| Cash and cash  equivalents at end of year                                             |       | $                                           | 17,170     |   | $ | 6,401 |   | $ | 9,327 |   |
| **Supplementary  cash flow information**                                              | ** ** | ** **                                  | ** ** | ** ** | ** ** | ** ** | ** ** |
| Cash paid for interest                                                                |       | $                                           | 1,120      |   | $ | 1,169 |   | $ | 271 |   |
| Cash paid for  taxes                                                                  |       | $                                           | 482        |   | $ | 53 |   | $ | — |   |

 

The accompanying notes are an integral part of these consolidated financial statements.

F-5

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**BRITANNIA BULK PLC NOTES TO CONSOLIDATED FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 2006, 2005 AND 2004**

**1**   Basisof presentation and general information

The accompanying consolidated financial statementsinclude the accounts of Britannia Bulk plc (“Britannia”) and its wholly-ownedor controlled subsidiaries (collectively, the “Company”). Britannia is incorporatedunder the laws of the United Kingdom. The Company is a provider of drybulktransportation services with a focus on transporting coal exports from theBaltic region to Northern and Western Europe. The Company’s customers areprimarily power companies, coal producers and commodity trading houses,primarily in Northern and Western Europe.

Britannia was founded in 1999 and commenced operationsduring 2004. The Company’s initial fleet consisted of five vessels which werepurchased in 2004 and 2005, and in December 2005 the Company acquiredseven tug and barge vessels. As the Company’s customer awareness has grown, ithas been able to further increase its capacity by chartering-in additionaltonnage both to fulfill its contracts of affreightment and to take advantage ofprofit opportunities.

Theprincipal activities of Britannia’s subsidiaries are as follows:

| **Name**                                       | ** ** | ** ** | ** ** | **Owned**       | ** ** | **Country of Incorporation**       | ** ** | **Principal Activity** |
|------------------------------------------------|------------|------------|------------|-----------------|------------|------------------------------------|------------|------------------------|
| Britannia Bulkers Plc                          |       | 99.99%     |       | United  Kingdom |       | Ship operator                      |
| BBL Denmark Holding A/S                        |       | 100.00%    |       | Denmark         |       | Holding company                    |
| Britannia Bulk S.A.                            |       | 100.00%    |       | Panama          |       | Ship owner and operator            |
| Flagship Maritime S.A.                         |       | 100.00%    |       | Panama          |       | Ship owner and operator            |
| Baltic Navigation  Company S.A.                |       | 100.00%    |       | Panama          |       | Ship owner and operator            |
| Danmar Shipping S.A.                           |       | 100.00%    |       | Panama          |       | Ship owner and operator            |
| Northern Star Navigation  S.A.                 |       | 100.00%    |       | Panama          |       | Ship owner and operator            |
| Great Belt Shipping  Company S.A.              |       | 100.00%    |       | Panama          |       | Dormant                            |
| Britannia Bulk DK A/S                          |       | 100.00%    |       | Denmark         |       | Tugs and barges owner and operator |
| Britannia Bulker A/S                           |       | 100.00%    |       | Denmark         |       | Ship operator                      |
| Svendborg Ship  Management A/S                 |       | 68.00%     |       | Denmark         |       | Ship management                    |
| Svendborg Marine  Surveyors A/S                |       | 100.00%    |       | Denmark         |       | Marine surveyor                    |
| Inspecciones Maritimas De Costa Rica S.A. |       | 100.00%    |       | Costa Rica      |       | Marine surveyor                    |

 

F-6

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**BRITANNIA BULK PLC NOTES TO CONSOLIDATED FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 2006, 2005 AND 2004 (Continued)**

**1**   Basis of presentation and general information(Continued)

**Fleet**

As of December 31,2006, the Company owns and operates a fleet of five drybulk vessels, fivebarges and three tugs.

| **Vessel Name** | ** ** | ** ** | ** ** | **dwt** | ** ** | **Year Built** | ** ** | **Delivery Date**   | ** ** | **Price**  | ** ** |
|----------------------|------------|------------|------------|---------|------------|---------------------|------------|--------------------------|------------|------------|------------|
| **Drybulk Vessels**  | ** ** | ** ** | ** ** |    | ** ** | ** **          |       | ** **               | ** ** | ** ** | ** ** |
| Explorer II          |       | 39,814     |       |    | 1977       | ** **          |       | November 30,  2004  |       | $          | 2,100      |   |
| Challenger II        |       | 39,814     |       |    | 1977       | ** **          |       | September 30,  2004 |       | $          | 2,100      |   |
| Adventure II         |       | 38,871     |       |    | 1980       | ** **          |       | May 27,  2004       |       | $          | 7,100      |   |
| Voyager II           |       | 33,288     |       |    | 1986       | ** **          |       | November 26,  2004  |       | $          | 13,776     |   |
| Discovery II         |       | 32,813     |       |    | 1984       | ** **          |       | April 18,  2005     |       | $          | 11,500     |   |
| **Barges**           | ** ** | ** ** | ** ** |    | ** ** | ** **          |       | ** **               | ** ** | ** ** | ** ** |
| Drejoe II            |       | 15,709     |       |    | 1991       | ** **          |       | December 1,  2005   |       | $          | 2,138      |   |
| Hjortoe II           |       | 15,709     |       |    | 1992       | ** **          |       | December 1,  2005   |       | $          | 2,138      |   |
| Sioe II              |       | 15,709     |       |    | 1991       | ** **          |       | December 1,  2005   |       | $          | 2,138      |   |
| Skaroe II            |       | 15,709     |       |    | 1992       | ** **          |       | December 1,  2005   |       | $          | 2,138      |   |
| Iholm II             |       | 9,330      |       |    | 1979       | ** **          |       | October 2,  2006    |       | $          | 1,400      |   |
| **Tugs**             | ** ** | ** ** | ** ** |    | ** ** | ** **          |       | ** **               | ** ** | ** ** | ** ** |
| Bregninge II         |       | —     |       |    | 1984       | ** **          |       | December 1,  2005   |       | $          | 1,584      |   |
| Troense II           |       | —     |       |    | 1983       | ** **          |       | December 1,  2005   |       | $          | 1,584      |   |
| Vindeby II           |       | —     |       |    | 1981       | ** **          |       | December 1, 2005    |       | $          | 1,584      |   |

 

Customersindividually accounting for more than 10% of the Company’s revenues during theyears ended December 31, 2006, 2005 and 2004 are as follows:

| ** ** | ** ** | **Year ended December 31,** | ** ** |
|------------|------------|--------------------------------------------|------------|
| ** ** | ** ** | **2006**                                   | ** ** | **2005** | ** ** | **2004** | ** ** |
| Customer   |       |                                       |       |   |   |   |   |   |   |   |   |
| A          |       | 21.0                                       | %          |   | 22 | % |   |   | 15 | % |   |
| B          |       | *                                          |       |   | 15 | % |   |   | * |   |   |
| C          |       | *                                          |       |   | * |   |   |   | 10 | % |   |

 

----

*                    less than 10%

The amounts due fromcharters from customer A is $329 at December 31, 2006 and $259 at December 31,2005.

**2   Significantaccounting policies**

**(a)   Principlesof consolidation:**   The consolidated financial statementshave been prepared in accordance with accounting principles generally acceptedin the United States of America, which include 

F-7

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**BRITANNIA BULK PLC NOTES TO CONSOLIDATED FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 2006, 2005 AND 2004 (Continued)**

**2**   Significant accounting policies (Continued)

the accounts of Britanniaand its wholly-owned or controlled subsidiaries. All intercompany accounts andtransactions have been eliminated in consolidation.

**(b)   Use ofestimates:**   The preparation of consolidated financialstatements in conformity with accounting principles generally accepted in theUnited States of America requires management to make estimates and assumptionsthat affect the reported amounts of assets and liabilities and disclosure ofcontingent assets and liabilities at the date of the consolidated financialstatements and the reported amounts of revenues and expenses during thereported period. Actual results could differ from these estimates.

**(c)   Concentrations**:   Financialinstruments that potentially subject the Company to concentrations of creditrisk are amounts due from charters. With respect to amounts due fromcharterers, the Company attempts to limit its credit risk by performing ongoingcredit evaluations and, when necessary, requiring letters of credit, guaranteesor collateral.

All cash balancesare held by large financial institutions in order to minimize financial risk.

**(d)   Reporting currency:  **Thefunctional currency of the Company’s vessel operating subsidiaries is theUnited States (“US”) dollar because the Company’s vessels operate ininternational shipping markets that utilize the US dollar as the functionalcurrency. The accounting records of the Company are maintained in US dollars.Transactions involving other currencies during the year are converted into USdollars using the exchange rates in effect at the time of the transactions.Monetary assets and liabilities that are denominated in currencies other thanthe US dollar are translated into the functional currency using the exchangerate at the balance sheet date. Gains or losses resulting from foreign currencytransactions are included in the accompanying consolidated statements ofoperations as foreign currency gains and losses, net.

The par value ofthe Company’s common stock is £1 and is stated at $1.79. Foreign exchangedifferences related to common stock issuances are recorded as an adjustment toadditional paid in capital on the date the transaction is completed.

**(e)   Revenuerecognition:  **Revenues are generated from contracts ofaffreightment, time charter and voyage agreements. Revenues from time chartersare accounted for as operating leases and are thus recognized ratably over theperiods of such charters. Contracts of affreightment and voyage charterrevenues are recognized on a pro-rata basis over the duration of the voyage. Avoyage is deemed to commence upon the completion of discharge of the vessel’sprevious cargo and is deemed to end upon the completion of discharge of thecurrent cargo. Losses on voyages are provided for in full at the time suchlosses can be estimated. Demurrage income represents payments by the customerto the vessel owner when loading or discharging time exceeded the stipulatedtime in the voyage charter. Demurrage income is recognized when earned.

F-8

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**BRITANNIA BULK PLC NOTES TO CONSOLIDATED FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 2006, 2005 AND 2004 (Continued)**

**2**   Significant accounting policies (Continued)

The consolidated balance sheets reflect the deferredportion of revenues and expenses, which will be earned in subsequent periods.

**(f)    Cashand cash equivalents:  **The Company considers highlyliquid investments, such as a time deposits and certificates of deposit, withan original maturity of three months or less when purchased to be cashequivalents.

**(g)   Compensatingbalances:  **Compensating balances are required to bemaintained with certain banks under the Company’s borrowing arrangements.(Note 8)

**(h)   Duefrom charterers:  **The majority of the Company’s accountsreceivable are due from companies in the coal industry. Credit is extendedbased on evaluation of a customers’ financial condition and, generally,collateral is not required. Accounts receivable are due upon commencement ofthe voyage and are stated at amounts due from charterers net of an allowancefor doubtful accounts. Accounts outstanding longer than the contractual paymentterms are considered past due. The Company determines its allowance byconsidering a number of factors, including the length of time accountsreceivable are past due, the Company’s previous loss history, the customer’scurrent ability to pay its obligation to the Company, and the condition of thegeneral economy and the industry as a whole. The Company writes-off accountsreceivable when they become uncollectible, and payments subsequently receivedon such receivables are credited to the allowance for doubtful accounts. Anallowance for doubtful accounts has been recorded at December 31, 2006 and2005, of $324 and $0, respectively. The Company wrote off accounts receivablesof $144, $0 and $0 for the year ended December 31, 2006, 2005 and 2004,respectively.

**(i)    Inventory:  **Inventoryconsists of consumable bunkers (if any), lubricants and victualing stores,which are stated at the lower of cost or market. Cost is determined by thefirst-in, first-out method.

**(j)    Vesselacquisitions:  **When the Company enters into anacquisition transaction, it determines whether the acquisition transaction wasthe purchase of an asset or a business based on the facts and circumstances ofthe transaction. As is customary in the shipping industry the purchase of avessel is normally treated as a purchase of an asset as the historicaloperating data for the vessel is not reviewed nor is it material to the Company’sdecision to make such acquisition.

**(k)   Vesselsand other fixed assets:  **Vessels and other fixed assets,net are stated at cost less accumulated depreciation. Vessels and other fixedassets are depreciated when the asset is ready for its intended use.

Depreciation is calculated, based on cost, lessestimated residual value, using the straight-line method, over the remainingeconomic life of each asset. The costs of significant replacements, renewalsand betterments are capitalized and depreciated over the shorter of the assetsremaining estimated useful life or the estimated life of the renewal orbetterment. Expenditures for routine maintenance and repairs are expensed asincurred.

Following are theestimated useful lives of vessels and other fixed assets:

i.                   Vessels under25 years old—on a straight line basis over their remaining lives of 25 yearsfrom the date of construction.

F-9

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**BRITANNIA BULK PLC NOTES TO CONSOLIDATED FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 2006, 2005 AND 2004 (Continued)**

**2**   Significant accounting policies (Continued)

ii.               Vessels over 25years old—on a straight line basis from date of acquisition to the scheduleddate of the next special survey (including any IACS Classification Societyaccepted extension).

iii.           Tugs and barges—on astraight line basis over their estimated useful lives of 30 and 25 years,respectively, from the date of construction.

iv.             Furniture andfixtures—on a straight line basis over its estimated useful lives, ranging fromfour to 10 years.

v.                 Buildings—on astraight line basis over its estimated useful life of 50 years.

vi.             Leaseholdimprovements—on a straight line basis over the shorter of the improvementsuseful life or the length of the related lease.

**(l)    Deferredrevenue:  **Deferred revenue primarily relates to cashreceived from customers prior to it being earned. These amounts are recognizedas income when earned.

**(m)  Voyageexpenses:  **Voyage expenses are expenses unique to aparticular voyage, including bunker fuel expenses, port fees, cargo loading andunloading expenses, canal tolls, agency fees and commissions. Voyage expensesare recognized as incurred.

**(n)   Vesseloperating expenses:  **Vessel operating expenses includecrew wages and related costs, the cost of insurance, expenses relating torepairs and maintenance, the cost of spares and consumable stores, and othermiscellaneous expenses. Vessel operating expenses are recognized as incurred.

**(o)   Impairmentof long-lived assets, intangible assets and goodwill:  **TheCompany follows SFAS No. 144 “Accounting for the Impairment or Disposal ofLong-Lived Assets”, which addresses financial accounting and reporting for theimpairment or disposal of long-lived assets. The standard requires thatlong-lived assets and certain identifiable intangibles held and used by anentity be reviewed for impairment whenever events or changes in circumstancesindicate that the carrying amount of the assets may not be recoverable. Whenthe estimates of undiscounted cash flows, excluding interest charges, expectedto be generated by the use of the asset is less than its carrying amount, theasset is considered impaired. Measurement of the impairment loss is based onthe difference between the net book value of the asset and its fair value. Inthis respect, management regularly reviews the carrying value of each vessel incomparison with its fair value as provided by third parties. Goodwill is notamortized, but reviewed for impairment annually or more frequently ifimpairment indicators arise. Intangible assets with finite lives are amortizedover their estimated useful lives. For the year ended December 31, 2006goodwill of $33 was written off. For the years ended December 31, 2005 and2004 no impairment charges were recorded.

**(p)   Deferreddrydocking costs:  **The Company’s vessels are required tobe drydocked approximately every 30 to 60 months for major repairs andmaintenance that cannot be performed while the vessels are operating. TheCompany capitalizes the costs associated with the drydockings as they occur andamortizes these costs on a straight-line basis over the period betweendrydockings. Costs capitalized as part of a vessel’s drydocking include actualcosts incurred at the drydocking yard; cost of parts that are reasonably madein anticipation of reducing the duration or cost of the drydocking; cost oftravel, lodging and subsistence of personnel sent to the drydocking site tosupervise; and the cost of hiring a third party to 

F-10

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**BRITANNIA BULK PLC NOTES TO CONSOLIDATED FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 2006, 2005 AND 2004 (Continued)**

**2**   Significant accounting policies (Continued)

oversee the drydocking. Onacquisition an estimate is made of drydock costs included in the purchase priceof a vessel and allocated accordingly.

**(q)   Deferredfinancing costs:  **Deferred financing costs, included inother assets, consists of fees and legal expenses associated with the bondissue in November 2006. These costs are amortized over the life of therelated debt with amortization charges included in interest expense.

**(r)   Earningsper Common Share:**   Basic earnings per common share arecomputed by dividing net income available to common stockholders by theweighted average number of shares outstanding during the year. Diluted earningsper common share reflect the potential dilution that could occur if securitiesor other contracts to issue common stock were exercised. For the years ended December 31,2006, 2005 and 2004, the Company had no dilutive securities.

**(s)   Income**t**axes:  **The Company is not liablefor the payment of any income tax on its income, except for managementoperations in Denmark, which is insignificant. Instead, a tax is levied basedon the tonnage tax regime of the United Kingdom (“UK”). Under the UK tonnagetax regime, shipping profits, as defined under the applicable law, are subjectto corporation tax by reference to the net tonnage of qualifying vessels.Income not considered to be shipping profits under tonnage tax rules istaxable under the normal UK income tax rules. Management believes thatsubstantially all of the income attributable to the Company’s operationsconstitutes shipping profits and, accordingly, UK income tax expenses for theseoperations has been and is expected to be minimal under the current tax regime.

**(t)    Segmentreporting:  **The Company reports financial informationand evaluates its operations by charter revenues and not by the length of shipemployment for its customers, i.e. spot or time charters. The Company does nothave discrete financial information to evaluate the operating results for eachsuch type of charter. Although revenue can be identified for these types ofcharters, management cannot and does not identify expenses, profitability orother financial information for these charters. As a result, management,including the chief operating decision makers, reviews operating results solelyby revenue per day and operating results of the fleet and thus the Company hasdetermined that it operates as one reportable segment. Furthermore, when theCompany charters a vessel to a customer, the customer is free to trade thevessel worldwide and, as a result, the disclosure of geographic information isimpracticable.

**(u)   Newaccounting pronouncements:  **The Financial AccountingStandards Board (“FASB”) issued SFAS No. 157 (“SFAS 157”) on September 15,2006. SFAS 157 enhances existing guidance for measuring assets and liabilitiesusing fair value. Previously, guidance for applying fair value was incorporatedin several accounting pronouncements. The new statement provides a singledefinition of fair value, together with a framework for measuring it, andrequires additional disclosure about the use of fair value to measure assetsand liabilities. While the statement does not add any new fair value measurements,it does change current practice. One such change is a requirement to adjust thevalue of non-vested stock for the effect of the restriction even if therestriction lapses within one year. SFAS 157 is effective for financialstatements issued for fiscal years beginning after November 15, 2007, andinterim periods within those fiscal years. The adoption of SFAS 157 on January 1,2008, is not expected to have a material impact on the financial statements ofthe Company.

F-11

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**BRITANNIA BULK PLC NOTES TO CONSOLIDATED FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 2006, 2005 AND 2004 (Continued)**

**2**   Significant accounting policies (Continued)

In July 2006, the FASB issued Interpretation No. 48(“FIN 48”), “Accounting for Uncertainty in Income Taxes-an interpretation ofFASB Statement No. 109.” FIN 48 clarifies the accounting for uncertaintyin income taxes recognized by prescribing a recognition threshold andmeasurement attribute for financial statement recognition and measurement of atax position taken or expected to be taken in a tax return. FIN 48 alsoprovides guidance on derecognition, classification, interest and penalties,accounting in interim periods, disclosure and transition. FIN 48 is effectivefor years beginning after December 15, 2006. The Company has performed anassessment and determined that the adoption of FIN 48 will have no materialimpact on the Company’s consolidated financial statements.

In September 2006,the SEC (“SEC”) issued SAB No. 108 “Considering the Effects of Prior YearMisstatements When Quantifying Misstatements in Current Year FinancialStatements”, which provides interpretive guidance on how registrants shouldquantify financial statement misstatements. Under SAB 108 registrants arerequired to consider both a “rollover” method, which focuses primarily on theincome statement impact of misstatements, and the “iron curtain” method, whichfocuses primarily on the balance sheet impact of misstatements. The effects ofprior year uncorrected errors include the potential accumulation of improperamounts that may result in a material misstatement on the balance sheet or thereversal of prior period errors in the current period that result in a materialmisstatement of the current period income statement amounts. Adjustments tocurrent or prior period financial statements would be required in the eventthat after application of various approaches for assessing materiality of amisstatement in current period financial statements and consideration of allrelevant quantitative and qualitative factors, a misstatement is determined tobe material. The Company adopted the provisions of SAB 108 as of December 31,2006. The adoption of SAB 108 did not have an effect on the Company’s resultsof financial operations or financial position.

**3   Acquisitions**

On July 1, 2005, the Company completed thepurchase of Svendborg Ship Management A/S and Svendborg Marine Surveyors A/S(collectively “Svendborg”) by acquiring 68% of the outstanding capital stock ofSvendborg. Svendborg Ship Management A/S offers professional technicalmanagement of tonnage on behalf of owners; services offered include ISM &ISPS issuance, implementation of manuals and technical auditing as well asmanning, maintenance, technical upgrading, dry-docking, stores/provisions purchase,consultancy and accounting service. Svendborg Marine Surveyors A/S offers andprovides for independent marine inspections/surveys and survey of cargoincluding draft surveys as well as acting as port captains/supercargoes onbehalf of ship-owners.

The Company acquired Svendborg to expand its portfolioof shipping services offered to its customers to include ship maintenance andmanagement services. The acquisition also provides established relationships ininternational markets and provides shipping services to a wider customer base.

F-12

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**BRITANNIA BULK PLC NOTES TO CONSOLIDATED FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 2006, 2005 AND 2004 (Continued)**

**3   Acquisitions(Continued)**

The aggregate purchaseprice paid by the Company for Svendborg was $407 in cash. The purchase pricewas allocated to tangible and identifiable intangible assets acquired andliabilities assumed based on their estimated fair values at the acquisitiondate. The purchase price was allocated as follows:

| Cash                    |   | $    | 305    |   |
|-------------------------|--------|------|--------|--------|
| Accounts  Receivable    |   | 51   |   |
| Inventory               |   | 221  |   |
| Property and  Equipment |   | 298  |   |
| Investments             |   | 63   |   |
| Accounts Payable        |   | (557 | )      |
| Minority Interest       |   | (7   | )      |
|                    |   | 374  |   |
| Goodwill                |   | 33   |   |
| Net purchase  price     |   | $    | 407    |   |

 

The allocation of the purchase price was based on thefair value of identifiable intangible assets, and certain property, plant andequipment.

The results of Svendborg have been included in theconsolidated financial statements since the date of acquisition of July 1,2005.

This acquisition has notbeen presented on a pro forma basis because it is not deemed to be material.

**4   Transactions withrelated parties**

The following are relatedparty transactions not disclosed elsewhere in these consolidated financialstatements:

**Transactions withrelated companies under common control**

The Company is related toRainbow Shipping Group Limited (formerly Rainbow Shipping Group plc) (“Rainbow”)by common control. As of December 31, 2006 and 2005 the Company’sdirectors hold a minority interest of Rainbow of 34%. During the years ended December 31,2005 and 2004 Rainbow provided administrative and sales support to the Companyand provided office space for the Company’s administrative staff. Staff costsand overheads incurred by Rainbow on behalf of the Company during the yearsended December 31, 2006, 2005 and 2004 were $0, $131 and $799,respectively. As of December 31, 2006 and 2005, $0 and $131, respectively,was outstanding to Rainbow. No further staff costs and overheads will beincurred by Rainbow on behalf of the Company in the future.

**Transactions withshareholders**

During the year ended December 31, 2006 a companycontrolled by one of the shareholders provided ship brokering services to theCompany under a consultancy agreement. During this period these expenses 

F-13

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**BRITANNIA BULK PLC NOTES TO CONSOLIDATED FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 2006, 2005 AND 2004 (Continued)**

**4**   Transactions with related parties (Continued)

aggregated approximately$189. No ship brokering services were provided under this agreement in prioryears.

During the year ended December 31, 2004, theCompany issued a note to shareholders aggregating $15,018 in consideration forcash received. The shareholders loans were unsecured, interest free andrepayable on demand. On June 16, 2004 the shareholders converted $190 ofthe loans into 99,998 shares of common stock at par value. On December 29,2004, the shareholders converted $4,775 of the loans into 2,667,519 shares ofcommon stock at par value. As of December 31, 2004, there was a balance of$10,053 remaining on the original loans.

On April 6, 2005 the shareholders converted$5,121 of the loans into 2,667,119 shares of common stock at par value; on September 1,2005 the shareholders converted the remaining outstanding balance of the loansof $4,932 to 2,735,523 shares of common stock at par value.

On November 18, 2005 the Company issued 487,369shares of common stock for cash consideration of $849. On December 28,2005, the Company issued 24,827 shares of common stock for cash considerationof $311.

During the year ended December 31,2004, the Company acquired two subsidiaries, Flagship Maritime S.A. and DanmarShipping SA from the shareholders for consideration equivalent to the net assetvalue of the subsidiaries, which was estimated to be zero on the basis that theassets acquired were equal to the liabilities assumed. The fair value of thenet assets acquired approximated their book value at the date of acquisition.The following chart sets out the value assigned to the assets acquired andliabilities assumed for the subsidiaries acquired;

| ** **                          | ** ** | **Flagship  Maritime SA** | ** ** | **Danmar  Shipping SA** | ** ** |
|-------------------------------------|------------|--------------------------------|------------|------------------------------|------------|
| Vessels acquired                    |       |                           | $          | 2,100                        |       |   |   | $ | 2,100 |   |   |
| Shareholder’s  loan assumed    |       |                           | 1,822      |                         |       |   | 1,767 |   |   |
| Other creditor  liabilities assumed |       |                           | 278        |                         |       |   | 333 |   |   |
|                                |       |                           | $          | 2,100                        |       |   |   | $ | 2,100 |   |   |

 

**5   Inventories**

Inventoriesshown in the accompanying consolidated balance sheets are analyzed as follows:

| ** **  | ** ** | **December 31,** | ** ** |
|-------------|------------|-----------------------|------------|
| ** **  | ** ** | **2006**              | ** ** | **2005** | ** ** |
| Bunker fuel |       | $                     | 2,866      |   | $ | 1,579 |   |
| Ship stores |       | 333                   |       | 304 |   |
|        |       | $                     | 3,199      |   | $ | 1,883 |   |

 

F-14

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**BRITANNIA BULK PLC NOTES TO CONSOLIDATED FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 2006, 2005 AND 2004 (Continued)**

**6   Vessels and otherfixed assets and deferred drydocking costs**

Vesselsand other fixed assets and deferred drydocking costs shown in the accompanyingconsolidated balance sheets consist of the following:

| ** **                     | ** ** | **December 31,** | ** ** |
|--------------------------------|------------|-----------------------|------------|
| ** **                     | ** ** | **2006**              | ** ** | **2005** | ** ** |
| Vessels                        |       | $                     | 54,268     |   | $ | 52,531 |   |
| Furniture and  fixtures        |       | 487                   |       | 202 |   |
| Building                       |       | 229                   |       | 201 |   |
|                           |       | 54,984                |       | 52,934 |   |
| Less accumulated  depreciation |       | (12,302               | )          | (5,256 | ) |
|                           |       | $                     | 42,682     |   | $ | 47,678 |   |

 

| ** **                     | ** ** | **December 31,** | ** ** |
|--------------------------------|------------|-----------------------|------------|
| ** **                     | ** ** | **2006**              | ** ** | **2005** | ** ** |
| Deferred  drydocking costs     |       | $                     | 7,566      |   | $ | 8,470 |   |
| Less accumulated  amortization |       | (2,667                | )          | (5,199 | ) |
|                           |       | $                     | 4,899      |   | $ | 3,271 |   |

 

Depreciation andamortization expense for the years ended December 31, 2006, 2005 and 2004was $10,894, $9,341 and $1,114 respectively. For the years ended December 331,2006, 2005 and 2004, fully depreciated drydocking costs of $6,380, $0 and $0,respectively, have been written off.

**7   Accrued expensesand other liabilities**

Accruedexpenses consist of the following:

| ** **               | ** ** | **December 31,** | ** ** |
|--------------------------|------------|-----------------------|------------|
| ** **               | ** ** | **2006**              | ** ** | **2005** | ** ** |
| Bunker fuel  accruals    |       | $                     | 2,181      |   | $ | 833 |   |
| Port cost  accruals      |       | 1,285                 |       | 999 |   |
| Ship accruals            |       | 131                   |       | 1,199 |   |
| Voyage expense  accruals |       | 1,599                 |       | 1,011 |   |
| Other accruals           |       | 3,506                 |       | 348 |   |
|                     |       | $                     | 8,702      |   | $ | 4,390 |   |

 

**8   Long term debt**

On November 16, 2006 the Company raised $185,000through a private placement bond issue of 11% Senior Secured Notes (the “Notes”).The Notes are subject to an Indenture agreement between the Company andWilmington Trust Company, as trustee for the Note holders (the “Indenture”). TheNotes will mature on December 1, 2011. The Notes were issued at a discountrate of 93.622%, resulting in net 

F-15

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**BRITANNIA BULK PLC NOTES TO CONSOLIDATED FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 2006, 2005 AND 2004 (Continued)**

**8**   Long term debt (Continued)

proceeds of $173,201 tothe Company. The Notes will accrue interest at a rate of 11% of the principalamount per annum. Interest on the Notes will be payable semi-annually inarrears on December 1 and June 1 of each year, commencing June 1,2007.

The discount of $11,799 is being amortized to interestexpense over the term of the Notes. The unamortized balance at December 31,2006 was $11,504.

Fees incurred in connection with the Notes totaled$6,827 and is being amortized to interest expense over the term of the Notes. Theunamortized balance at December 31, 2006 was $6,656.

The net proceeds to the Company, after payment of feesincurred in connection with the issuance of the Notes, of $166,374 were used torepay all other then outstanding long-term debt of $20,724, fund workingcapital requirements of $5,650 and to fund the Vessel Acquisition Account.

Concurrently with the issuance of the Notes, theCompany deposited into a Vessel Acquisition Account the sum of $140,000. TheVessel Acquisition Account is a secured collateral account administered by theWilmington Trust Company, for the benefit of the Note holders. These funds willbe released for the purpose of purchasing vessels, subject to certainconditions, including that the vessels become collateral for the Notes. Amountsin the Vessel Acquisition Account may also be released to make certain interestpayments, to make certain capital expenditures and at maturity to repay theNotes or redeem the Notes. In addition, if, as of December 1, 2008, atleast $125,000 of the initial funds deposited in the Vessel Acquisition Accounthave not been used to purchase additional vessels in accordance with theIndenture, the difference between the funds that have been so expended and theinitial deposit must be used to make an offer to purchase the Notes at a priceof 101% of the accreted value, plus accrued interest. Any such offered fundsthat are not used to repurchase Notes in such offer will remain in the VesselAcquisition Account. The proceeds deposited into the Vessel Acquisition Accountwere invested in United States Treasury Bills, which generated interest incomeof $252 through December 31, 2006. The Company paid a deposit of $2,119 inDecember 2006, related to a vessel acquisition, the Foremost, funded fromthe proceeds held in the Vessel Acquisition Account.

The bonds are secured by a first priority lien for thebenefit of the holders of the Notes by (i) the Company’s existing vessels,including five drybulk vessels, five barges and three tugs, (ii) vesselsacquired with the net proceeds of the original offering and (iii) relatedcollateral including the Vessel Acquisition Account.

The Company may redeem some or all of the Notes, atits option, in whole or in part at any time after December 1, 2009 atspecified redemption prices as defined in the Indenture, with accrued andunpaid interest, if any, to the date of redemption.

Prior to December 1, 2009, the Company, at itsoption, may redeem up to 35% of the aggregate principal amount of the Noteswith the net proceeds of certain equity offerings at a redemption price of112.75% of the accreted value of the Notes, plus accrued and unpaid interest tothe date of redemption.

F-16

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**BRITANNIA BULK PLC NOTES TO CONSOLIDATED FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 2006, 2005 AND 2004 (Continued)**

**8**   Long term debt(Continued)

If a change of control occurs, subject to certainconditions, the Company must offer the Note holders an opportunity to sell tothe Company their exchange Notes at a purchase price of 101% of the accretedvalue of the Notes, plus accrued and unpaid interest to the date of thepurchase.

Within 60 days after December 31, 2007 andeach subsequent fiscal year, the Company will be required to use a specifiedpercentage of its excess cash flow, as defined in the Indenture, if such excesscash flow exceeds $5,000, to make a pro rata offer to purchase the bonds at aprice equal to 101% of the accreted value thereof plus accrued and unpaidinterest to the date of purchase. The percentage of excess cash flow requiredto be used to offer to repurchase Notes will be 100% with respect to theinitial period ending December 31, 2007 and fiscal year 2008, andthereafter will be 50% for each subsequent fiscal year. If the amount of theNotes tendered pursuant to such offer is less than the offered excess cash flowamount, such remaining amounts shall be deposited in the Vessel AcquisitionAccount.

The terms of the Notes contain certain covenants thatlimit the Company’s ability and that of certain of its subsidiaries to, amongother things:

·       incuror guarantee additional indebtedness;

·       paydividends on the Company’s capital stock or redeem, repurchase or retire theCompany’s capital stock or subordinated debt;

·       makeinvestments;

·       createrestrictions on the ability of the Company’s restricted subsidiaries to paydividends or make other payments to the Company;

·       transferor sell the Company’s assets;

·       engagein transactions with the Company’s affiliates;

·       createliens on the Company’s assets; and

·       consolidate,merge or transfer all or substantially all of the Company’s assets and theassets of the Company’s subsidiaries.

These covenants are subject to certain exceptions andqualifications as described in the Indenture. As of December 31, 2006, theCompany was in compliance with all of the covenants contained in the Indenture.

In accordance with the Indenture, on March 9,2007, the Company filed a registration statement in order to register ExchangeNotes for the purpose of offering to exchange the Notes for the Exchange Notes.The Exchange Notes will be identicalto the Notes except that the Exchange Notes will be registered under the UnitedStates Securities Act of 1933 and will not have restrictions on transfer,registration rights or provisions for special interest and will containdifferent administrative terms. The Exchange Notes will evidence the same debtas the Notes, and the same Indenture will govern the Exchange Notes and theNotes.

F-17

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**BRITANNIA BULK PLC NOTES TO CONSOLIDATED FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 2006, 2005 AND 2004 (Continued)**

**8   Long term debt(Continued)**

At December 31,2005 long-term debt consisted of the following:

| ** **                                                                                                                                                                                                                                                      | ** ** | **December 31, 2005** | ** ** |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|---------------------------------|------------|
| $11,200 note  payable to Danish bank payable in 4 quarterly installments of $840 through  February 2007 followed by 16 quarterly installments of $490, plus  interest at LIBOR plus 0.95% due in February 2011, secured by 3  tugs and 4 barges. |       |                            | $          | 11,200 |   |   |
| $15,000 note payable to Irish bank payable in  monthly installments ranging from $500 to $139, plus interest at 6.17%,  due in March 2010, secured by motor vessels.                                                                                  |       |                            | 10,500     |   |   |
| $3,000 unsecured note payable to Cowper Limited with  interest at 6% due monthly, due on demand beginning September 2007 with  balance due September 2008.                                                                                            |       |                            | 3,000      |   |   |
| $3,000 note payable to Irish bank payable in monthly  installments of $125, plus interest at 6.48%, due in December 2006,  secured by 2 motor vessels, paid in full in March 2006.                                                               |       |                            | 1,500      |   |   |
|                                                                                                                                                                                                                                                            |       |                            | 26,200     |   |   |
| Less current portion                                                                                                                                                                                                                                            |       |                            | (11,520    | ) |   |
|                                                                                                                                                                                                                                                            |       |                            | $          | 14,680 |   |   |

 

**9   Fair value offinancial instruments**

The principal financial assets of the Company consistof cash on hand and at banks, the vessel acquisition account and accountsreceivable due from charters. The principal financial liabilities of theCompany consist of long-term debt and accounts payable and accrued expenses andother liabilities.

The carrying values of cash and cash equivalents,vessel acquisition account, due from charters, accounts payable and accruedexpenses and other liabilities are reasonable estimates of their fair value dueto the short-term nature of these financial instruments.

The estimated fair valuesof the Company’s long-term debt instruments are as follows:

| ** **          | ** ** | **December 31, 2006** | ** ** | **December 31, 2005** | ** ** |
|---------------------|------------|---------------------------------|------------|---------------------------------|------------|
| ** **          | ** ** | **Carrying Value**         | ** ** | **Fair Value**             | ** ** | **Carrying Value** | ** ** | **Fair Value** | ** ** |
| Floating rate  debt |       |                            | $          | —                          |       |   | $ | — |   |   | $ | 11,200 |   |   |   | $ | 11,200 |   |   |
| Fixed rate debt     |       |                            | $          | 173,496                         |       |   | $ | 173,496 |   |   | $ | 15,000 |   |   |   | $ | 14,948 |   |   |

 

The estimated fair values of the Company’s variablerate long term debt approximates their individual carrying amounts due to theirshort-term maturity or the variable-rate nature of the respective borrowings asof December 31, 2005.

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**BRITANNIA BULK PLC NOTES TO CONSOLIDATED FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 2006, 2005 AND 2004 (Continued)**

**9**   Fair value of financial instruments (Continued)

The fair value of thefixed-rate debt is estimated based on current rates offered to the Company forsimilar debt of the same remaining maturities.

**10   Revenue from timecharters**

The Company’s vessels are available for hire. Totalrevenue earned on time charters for the years ended December 31, 2006,2005 and 2004 were $12,909, $33,295 and $654, respectively.

Future minimum timecharter revenue based on vessels committed to noncancelable time chartercontracts are as follows:

| **For the years ending December 31,** | ** ** | ** ** | ** ** | ** ** | ** ** |
|----------------------------------------------------------------|------------|------------|------------|------------|------------|
| 2007                                                           |       | $          | 16,975     |       |
| 2008                                                           |       | $          | 18,250     |       |
| 2009                                                           |       | $          | 7,400      |       |

 

**11   Commitments**

The Company leases office space in London, UnitedKingdom. Rent expense for the year ended December 31, 2006 was $96. Thelength of the lease on the new office occupied from January 2007 is 8years.

Futureminimum lease payments in respect of office space are as follows:

| **For the years ending December 31,** | ** ** | ** ** | ** ** | ** ** | ** ** |
|----------------------------------------------------------------|------------|------------|------------|------------|------------|
| 2007                                                           |       | $          | 370        |       |
| 2008                                                           |       | $          | 264        |       |
| 2009                                                           |       | $          | 264        |       |
| 2010                                                           |       | $          | 264        |       |
| 2011                                                           |       | $          | 264        |       |

 

The Company has alsoentered into time charters with various expirations dates through September 2013.Minimum charter hire payments due for the next five years, including timecharters entered into through April 10, 2007, are as follows:

| **For the years ending December 31,** | ** ** | ** ** | ** ** | ** ** | ** ** |
|----------------------------------------------------------------|------------|------------|------------|------------|------------|
| 2007                                                           |       | $          | 50,822     |       |
| 2008                                                           |       | $          | 24,449     |       |
| 2009                                                           |       | $          | 19,513     |       |
| 2010                                                           |       | $          | 16,188     |       |
| 2011                                                           |       | $          | 8,486      |       |

 

F-19

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**BRITANNIA BULK PLC NOTES TO CONSOLIDATED FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 2006, 2005 AND 2004 (Continued)**

**12   Pension schemes**

The Company maintainsindividual employee pension schemes set up for individual employees. Thecontributions made by the Company will be charged to expense as incurred. TheCompany has made no contributions nor recognized any pension scheme expense forthe years ended December 31, 2006, 2005 and 2004.

**13   Director loss ofoffice**

A compensation payment of$490 was paid to a director for loss of office. The director resigned on September 15,2006.

**14   Shareholder’srights agreement**

**Anti-dilution**

The Company shall notissue any share capital without first offering it to existing shareholders, onidentical terms, in proportion to their then shareholdings in the Companyunless the Company shall be authorized at a shareholders meeting to do so bymembers holding not less than 60% in nominal value of the shares issued by the Company.

**Share transfers**

No shareholder shallassign, transfer, exchange, pledge, mortgage, charge or otherwise encumber ordispose of any interest in any of the shares held by it except as authorized bymore than 50% of the shareholders unless the transfer is a compulsory transfer.A compulsory transfer of shares occurs if a shareholder resigns as a directoror employee; or on a corporate winding up; or fails to remedy a materialbreach, as defined in the agreement, within 30 days of notification.

**15   Contingencies**

From time to time the Company may be subject to legalproceedings and claims in the ordinary course of its business, principallypersonal injury and property casualty claims. Such claims, even if lackingmerit, could result in the expenditure of significant financial and managerialresources. The Company is not aware of any legal proceedings or claims that itbelieves will have, individually or in the aggregate, a material adverse effecton the Company, its financial condition, results of operations or cash flows.

In the normal course ofbusiness the Company enters into contracts that contain a variety ofindemnifications with its customers, suppliers and service providers. Further,the Company indemnifies its directors and officers who are, or were, serving atthe Company’s request in such capacities. The Company’s maximum exposure underthese arrangements is unknown as of December 31, 2006. The Company doesnot anticipate recognizing any significant losses relating to thesearrangements.

F-20

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**BRITANNIA BULK PLC NOTES TO CONSOLIDATED FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 2006, 2005 AND 2004 (Continued)**

**16   Subsequent events**

On January 16, 2007, the Company entered into aMemorandum of Agreement to purchase another Panamax vessel, the Delray (TBREndeavor II), dwt 70,000 for $36,735, with expected delivery in April 2007.

On February 9, 2007, the Company entered into aMemorandum of Agreement to purchase another Panamax vessel, the Estepona (TBREndurance II), dwt 70,000 for $36,735, which was delivered on April 10, 2007.

A tug, the Baus (TBR Vornaes II), was purchased on February 9,2007 for $1,009.

On February 27, 2007, the Company took deliveryof a Panamax vessel, the Foremost (TBR Navigator II), dwt 69,146. The purchaseprice was $28,500, inclusive of the deposit paid during December 2006.

On March 12, 2007, the Company entered into aMemorandum of Agreement to purchase a Handysize vessel, the Nikopios (TBRCommander II), dwt 31,431 for $10,750, with expected delivery in April or May 2007.

In April 2007, the Company entered into anagreement with North-Western Neva Limited, a shareholder, to repurchase 434,168shares of the Company’s common stock. The total consideration is $7,500 andwill be payable in three tranches. The first tranche is for 159,681 shares on April 16,2007 for consideration of $2,758. The second tranche is for 159,681 shares on April 15,2008 for a consideration of $2,758. The third and final tranche is for 114,806shares on April 15, 2009 for a consideration of $1,984.

F-21

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