Our primary objective is to maintain a stable cash flow so as to service our obligations and ensure certain levels of profit. We seek to prudently manage our risks in a number of ways. We aim to protect ourselves from spot market volatility by seeking to employ a substantial majority of our vessels on long-term fixed rate contracts.

We also monitor the freight market on a daily basis through updates from brokers and associates, as well as through contact with charterers. We receive daily, monthly, quarterly and annual reports from certain brokers which enables us to keep a close watch on market activities. We also monitor derivative markets for arbitrage activity by dry bulk operators. We are selective in the choice of our charterers and our preference is for end-users, rather than operators.

We use derivative instruments, among other things, to hedge in part the risk of adverse price fluctuations in the freight market. In particular, we use FFAs as a tool to secure both our earnings and our costs. We use FFAs to sell the future freight for the period we want to cover in order to reduce our exposure to a potential deterioration in the market. We also use FFAs to purchase time charter forward contracts to hedge the risk of insufficient vessel capacity to service certain periods in our COAs or where the future freight rate of ships similar to ours is substantially lower than the charter rate or break even cost of our vessels.

We also mitigate the risks of our bunker fuel requirements through our practice of entering into fixed-term contracts and using derivatives to hedge our bunker fuel exposure.

In order to monitor our exposure under FFAs and other derivatives, we follow internal risk management procedures, which require among other things, the approval of our Managing Director for each transaction.