-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, HVEAzIBbcc5M2GFd+IPSREOlzds51Gn9R3SnwOkZDVxtPPF0cuW8QWP/IXJ3toZL XIGjdU930y79pkeLjG+WpQ== 0000919574-07-002081.txt : 20070420 0000919574-07-002081.hdr.sgml : 20070420 20070420091719 ACCESSION NUMBER: 0000919574-07-002081 CONFORMED SUBMISSION TYPE: 20-F PUBLIC DOCUMENT COUNT: 9 CONFORMED PERIOD OF REPORT: 20061231 FILED AS OF DATE: 20070420 DATE AS OF CHANGE: 20070420 FILER: COMPANY DATA: COMPANY CONFORMED NAME: Aries Maritime Transport LTD CENTRAL INDEX KEY: 0001322587 STANDARD INDUSTRIAL CLASSIFICATION: DEEP SEA FOREIGN TRANSPORTATION OF FREIGHT [4412] IRS NUMBER: 000000000 FILING VALUES: FORM TYPE: 20-F SEC ACT: 1934 Act SEC FILE NUMBER: 001-32520 FILM NUMBER: 07777410 BUSINESS ADDRESS: STREET 1: 18 ZERVA NAP. STR. STREET 2: 166 75 GLYFADA CITY: ATHENS STATE: J3 ZIP: 00000 BUSINESS PHONE: 011-30-210-946-7400 MAIL ADDRESS: STREET 1: 18 ZERVA NAP. STR. STREET 2: 166 75 GLYFADA CITY: ATHENS STATE: J3 ZIP: 00000 20-F 1 d766101_20-f.txt UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 20-F (Mark One) [_] REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934 OR [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2006 OR [_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ____ to ____ OR [_] SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Date of event requiring this shell company report: N/A Commission file number 0001322587 ARIES MARITIME TRANSPORT LIMITED - -------------------------------------------------------------------------------- (Exact name of Registrant as specified in its charter) BERMUDA - -------------------------------------------------------------------------------- (Jurisdiction of incorporation or organization) Aries Maritime Transport Limited 18 Zerva Nap., Glyfada, Athens 166 75, Greece - -------------------------------------------------------------------------------- (Address of principal executive offices) Securities registered or to be registered pursuant to section 12(b) of the Act. Common Stock par value $0.01 per share - -------------------------------------------------------------------------------- Securities registered or to be registered pursuant to section 12(g) of the Act. NONE Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act. NONE - -------------------------------------------------------------------------------- Indicate the number of outstanding shares of each of the issuer's classes of capital or common stock as of the close of the period covered by the Annual Report. 28,416,877 shares of Common Stock, par value $0.01 per share. Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act Yes |_| No |X| If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934. Yes |_| No |X| Note- Checking the box above will not relieve any registrant required to file reports pursuant to Section 13 of 15(d) of the Securities Exchange Act of 1934 for their obligations under those Sections. Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes |X| No |_| Indicate by check mark whether registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of accelerated filer and large accelerated filer in Rule 12b-2 of the Exchange Act. (Check one): Large accelerated filer |_| Accelerated filer |X| Non-accelerated filer |_| Indicate by check mark which financial statement item the registrant has elected to follow. Item 17 |_| Item 18 |X| If this is an Annual Report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes |_| No |X| TABLE OF CONTENTS Page ITEM 1. Identity Of Directors, Senior Management And Advisers...............1 ITEM 2. Offer Statistics And Expected Timetable.............................1 ITEM 3. Key Information.....................................................1 ITEM 4. Information On The Company.........................................16 ITEM 4A. Unresolved Staff Comments..........................................30 ITEM 5. Operating And Financial Review And Prospects.......................30 ITEM 6. Directors, Senior Management And Employees.........................49 ITEM 7. Major Shareholders And Related Party Transactions..................52 ITEM 8. Financial Information..............................................55 ITEM 9. The Offer And Listing..............................................56 ITEM 10. Additional Information.............................................56 ITEM 11. Quantitative And Qualitative Disclosures About Market Risk.........66 ITEM 12. Description Of Securities Other Than Equity Securities.............66 ITEM 13. Defaults, Dividend Arrearages And Delinquencies....................67 ITEM 14. Material Modifications To The Rights Of Security Holders And Use Of Proceeds....................................................67 ITEM 15. Controls And Procedures............................................67 ITEM 16A. Audit Committee Financial Expert...................................68 ITEM 16B. Code Of Ethics....................................................68 ITEM 16C. Principal Accountant Fees And Services.............................68 ITEM 16D. Exemptions From The Listing Standards For Audit Committees.........68 ITEM 16E. Purchases Of Equity Securities By The Issuer And Affiliated Purchases..........................................................69 ITEM 17. Financial Statements...............................................69 ITEM 18. Financial Statements...............................................69 ITEM 19. Exhibits...........................................................70 CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS This report includes assumptions, expectations, projections, intentions and beliefs about future events. These statements are intended as "forward-looking statements." We caution that assumptions, expectations, projections, intentions and beliefs about future events may and often do vary from actual results and the differences can be material. All statements in this document that are not statements of historical fact are forward-looking statements. Forward-looking statements include, but are not limited to, such matters as future operating or financial results; statements about planned, pending or recent acquisitions, business strategy, future dividend payments and expected capital spending or operating expenses, including drydocking and insurance costs; statements about trends in the container vessel and products tanker shipping markets, including charter rates and factors affecting supply and demand; our ability to obtain additional financing; expectations regarding the availability of vessel acquisitions; completion of repairs, length of offhire, availability of charters and anticipated developments with respect to any pending litigation. The forward-looking statements in this press release are based upon various assumptions, many of which are based, in turn, upon further assumptions, including without limitation, management's examination of historical operating trends, data contained in our records and other data available from third parties. Although Aries Maritime Transport Limited believes that these assumptions were reasonable when made, because these assumptions are inherently subject to significant uncertainties and contingencies which are difficult or impossible to predict and are beyond our control, Aries Maritime Transport Limited cannot assure you that it will achieve or accomplish these expectations, beliefs or projections described in the forward looking statements contained in this press release. Important factors that, in our view, could cause actual results to differ materially from those discussed in the forward-looking statements include the strength of world economies and currencies, general market conditions, including changes in charter rates and vessel values, failure of a seller to deliver one or more vessels, failure of a buyer to accept delivery of a vessel, inability to procure acquisition financing, default by one or more charterers of our ships, our ability to complete documentation of agreements in principle, changes in demand for oil and oil products, the effect of changes in OPEC's petroleum production levels, worldwide oil consumption and storage, changes in demand that may affect attitudes of time charterers, scheduled and unscheduled drydocking, additional time spent in completing repairs, changes in Aries Maritime Transport Limited's voyage and operating expenses, including bunker prices, dry-docking and insurance costs, changes in governmental rules and regulations or actions taken by regulatory authorities, potential liability from pending or future litigation, domestic and international political conditions, potential disruption of shipping routes due to accidents, international hostilities and political events or acts by terrorists and other factors discussed in Aries Maritime Transport Limited's filings with the U.S. Securities and Exchange Commission from time to time. When used in this document, the words "anticipate" "estimate" "project" "forecast" "plan" "potential" "will" "may" "should" and "expect" reflect forward-looking statements. 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 Unless the context otherwise requires, as used in this report, the terms "Company" "we" "us" "the Group" and "our" refer to Aries Maritime Transport Limited and all of its subsidiaries, and "Aries Maritime Transport Limited" refers only to Aries Maritime Transport Limited and not to its subsidiaries. We use the term deadweight, or dwt, in describing the size of vessels. Dwt, expressed in metric tons each of which is equivalent to 1,000 kilograms, refers to the maximum weight of cargo and supplies that a vessel can carry. We use the term TEU, or TEUs, in describing the size of vessels carrying containers. The size of one TEU is equivalent to 20 feet by 8 feet by 8 feet 6 inches (that is, 5.9 metres by 2.35 metres by 2.39 metres). A. Selected Financial Data The following table sets forth our selected consolidated and combined financial and other data. The selected consolidated and combined financial and other data may not be indicative of the results we would have achieved had we operated as a public company for the entire period presented or of our future results. This information should be read in conjunction with "Item 5 -- Operating And Financial Review And Prospects" and our historical consolidated and predecessor combined carve-out financial statements and related notes. In accordance with standard shipping industry practice, we did not obtain from the sellers historical operating data for the vessels that we acquired, as that data was not material to our decision to purchase the vessels. Accordingly, we have not included any historical financial data relating to the results of operations of our vessels for any period before we acquired them. Please see the discussion in "Item 5 -- Operating And Financial Review And Prospects -- Lack of Historical Operating Data for Vessels Before their Acquisition." Subsequent to the year ended December 31, 2006, the Company declared dividends of $0.07 per share in respect of the fourth quarter of 2006. The dividend was paid on March 30, 2007 to stockholders on record as of March 19, 2007.
From inception, March 7, 2003, to Year ended Year ended Year ended December 31, 2003 December 31, 2004 December 31, 2005 December 31, 2006 ----------------- ----------------- ----------------- ----------------- (Dollars in thousands except per share data) Income Statement Data (for period ending) Revenue from voyages 7,316 48,269 75,905 94,199 Gain on disposal of vessels -- 14,724 -- -- Commissions (150) (1,189) (1,323) (1,403) Voyage expenses (24) (312) (224) (4,076) Vessel operating expenses (2,660) (12,460) (17,842) (27,091) General & administrative expenses (34) (75) (1,649) (4,226) Depreciation (1,721) (12,724) (19,446) (29,431) Amortization of drydocking and special survey expenses (271) (1,552) (1,958) (3,568) Management fees (199) (893) (1,511) (1,999) Net operating income 2,257 33,788 31,952 22,405 Interest expense (1,539) (8,616) (18,793) (19,135) Interest received 5 58 672 931 Other income (expenses), net 6 76 (10) (214) Change in fair value of derivatives (215) (33) 950 (1,788) Net income 514 25,273 14,771 2,199 Earnings per share (basic and diluted) 0.03 1.56 0.64 0.08 Weighted average number of shares (basic and diluted) 16,176,877 16,176,877 23,118,466 28,416,877 Balance Sheet Data (at period end) Cash and cash equivalents 667 5,334 19,248 11,612 Restricted cash 109 4,803 10 3,242 Total current assets 890 12,371 22,438 22,430 Total assets 45,534 245,725 377,898 458,040 Total current liabilities 4,177 34,666 21,356 29,622 Current portion of long-term debt 2,667 21,910 -- -- Long-term debt, net of current portion 37,743 185,050 183,820 284,800 Total liabilities 45,020 229,072 222,217 325,452 Total stockholders' equity 514 16,653 155,681 132,588 Other Financial Data (for period ending) Net cash provided by operating activities 4,426 21,899 36,974 24,215 Net cash used in investing activities (41,612) (161,773) (114,001) (101,815) Net cash provided by financing activities 37,853 144,541 90,941 69,964 Net increase (decrease) in cash and cash equivalents 667 4,667 13,914 (7,636) Fleet Data (at period end) Number of products tankers owned 2 7 8 10 Number of container vessels owned -- 3 5 5
Period from inception, March 7, (All amounts in thousands of U.S. 2003, through Year ended Year ended Year ended dollars, unless otherwise stated) December 31, December 31, December 31, December 31, 2003 2004 2005 2006 ADJUSTED EBITDA(1) NET INCOME 514 25,273 14,771 2,199 plus Net interest expense 1,534 8,558 18,121 18,204 plus Depreciation and Amortization 1,992 5,221 12,112 21,326 Plus/(minus) Change in fair value of derivatives 215 33 (950) 1,788 ADJUSTED EBITDA 4,255 39,085 44,054 43,517
ADJUSTED EBITDA (1) We consider Adjusted EBITDA to represent the aggregate of net income, net interest expense, depreciation, amortization and change in the fair value of derivatives. The Company's management uses Adjusted EBITDA as a performance measure. The Company believes that Adjusted EBITDA is useful to investors, because the shipping industry is capital intensive and may involve significant financing costs. Adjusted EBITDA is not a measure recognized by GAAP and should not be considered as an alternative to net income, operating income or any other indicator of a Company's operating performance required by GAAP. The Company's definition of Adjusted EBITDA may not be the same as that used by other companies in the shipping or other industries. B. Capitalization and Indebtedness Not Applicable. C. Reasons for the Offer and Use of Proceeds Not Applicable. D. Risk Factors The following risks relate principally to the industry in which we operate and our business in general. Other risks relate to the securities market and ownership of our common stock. If any of the circumstances or events described below actually arises or occurs, our business, results of operations, cash flows, financial condition and ability to pay dividends could be materially adversely affected. In any such case, the market price of our common shares could decline, and you may lose all or part of your investment. Industry Specific Risk Factors Charter rates for products tankers and container vessels may decrease in the future, which may adversely affect our earnings. If the shipping industry, which has been highly cyclical, is depressed in the future when our charters expire or at a time when we may want to sell a vessel, our earnings and available cash flow may be adversely affected. Two of our period charters are scheduled to expire during 2007. Our ability to re-charter our vessels on the expiration or termination of our current charters, the charter rates payable under any replacement charters and vessel values will depend upon, among other things, economic conditions in the products tanker and container vessel markets at that time, changes in the supply and demand for vessel capacity and changes in the supply and demand for oil and oil products and container transportation. We have period charters expiring on one container vessel and one products tanker during 2007. You should read the information contained in the table of vessel information under "Item 4 - Information on the Company - Business Overview - Our Fleet". The period charter expiration dates for all our vessels are detailed in that table under `Charter Expiration', except for one products tanker which is currently employed in the spot market. Factors beyond our control may adversely affect the demand for and value of our vessels. The factors affecting the supply and demand for products tankers and container vessels are outside of our control, and the nature, timing and degree of changes in industry conditions are unpredictable. The factors that influence the demand for vessel capacity include: o demand for oil and oil products; o changes in oil production and refining capacity; o the globalization of manufacturing; o global and regional economic and political conditions; o developments in international trade; o changes in seaborne and other transportation patterns, including changes in the distances over which cargoes are transported; o environmental and other regulatory developments; o currency exchange rates; and o weather. The factors that influence the supply of vessel capacity include: o the number of newbuilding deliveries; o the scrapping rate of older vessels; o the number of vessels that are out-of-service; and o port or canal congestion. If the number of new ships delivered exceeds the number of vessels being scrapped and lost, vessel capacity will increase. If the supply of vessel capacity increases but the demand for vessel capacity does not increase correspondingly, charter rates and vessel values could materially decline. The value of our vessels may fluctuate, adversely affecting our liquidity and causing us to breach the terms of our new credit facility. Vessel values can fluctuate substantially over time due to a number of different factors, including: o general economic and market conditions affecting the shipping industry; o competition from other shipping companies; o the types and sizes of available vessels; o the availability of other modes of transportation; o increases in the supply of vessel capacity; o the cost of newbuildings; o prevailing charter rates; and o the cost of retrofitting or modifying second-hand vessels, as a result of charterer requirements, technological advances in vessel design or equipment, changes in applicable environmental or other regulations or standards, or otherwise. In addition, as vessels grow older, they generally decline in value. Due to the cyclical nature of the products tanker and container vessel markets, if for any reason we sell vessels at a time when prices have fallen, we could incur a loss and our business, results of operations, cash flows, financial condition and ability to pay dividends could be adversely affected. The market value of our vessels may decline, which could lead to a default under our new credit facility and the loss of our vessels. If the market value of our fleet declines, we may not be in compliance with certain provisions of our new credit facility and we may not be able to refinance our debt or obtain additional financing. If we are unable to pledge additional collateral, our lenders could accelerate our debt and foreclose on our fleet. For instance, if the market value of our fleet declines below 140% of the aggregate outstanding principal balance of our borrowings under our new credit facility, we will not be in compliance with certain provisions of our new credit facility and, as a result, we will not be able to pay dividends and may not be able to refinance our debt or obtain additional financing. We pay interest under our new credit facility at a rate of LIBOR plus a margin which ranges from 1.125% to 1.5% to reflect the ratio of our total liabilities divided by our total assets, adjusting the book value of our fleet to its market value ranging from less than 50% to equal to or greater than 65%. If the market value of our vessels declines, we may pay a higher margin under the terms of our new credit facility. You should read "Item 5 - Operating and Financial Review and Prospects - Liquidity and Capital Resources - Indebtedness" for additional information concerning our new credit facility. We are subject to complex laws and regulations, including environmental regulations that can adversely affect the cost, manner or feasibility of doing business. Our operations are subject to numerous laws and regulations in the form of international conventions and treaties, national, state and local laws and national and international regulations in force in the jurisdictions in which our vessels operate or are registered, which can significantly affect the ownership and operation of our vessels. These requirements include, but are not limited to, the U.S. Oil Pollution Act of 1990, or OPA, the International Convention on Civil Liability for Oil Pollution Damage of 1969, the International Convention for the Prevention of Pollution from Ships, the IMO International Convention for the Prevention of Marine Pollution of 1973, the IMO International Convention for the Safety of Life at Sea of 1974, the International Convention on Load Lines of 1966 and the U.S. Marine Transportation Security Act of 2002. Compliance with such laws, regulations and standards, where applicable, may require installation of costly equipment or operational changes and may affect the resale value or useful lives of our vessels. We may also incur additional costs in order to comply with other existing and future regulatory obligations, including, but not limited to, costs relating to air emissions, the management of ballast waters, maintenance and inspection, elimination of tin-based paint, development and implementation of emergency procedures and insurance coverage or other financial assurance of our ability to address pollution incidents. These costs could have a material adverse effect on our business, results of operations, cash flows, financial condition and our ability to pay dividends. A failure to comply with applicable laws and regulations may result in administrative and civil penalties, criminal sanctions or the suspension or termination of our operations. Some environmental laws often impose strict liability for remediation of spills and releases of oil and hazardous substances, which could subject us to liability without regard to whether we were negligent or at fault. Under OPA, for example, owners, operators and bareboat charterers are jointly and severally strictly liable for the discharge of oil within the 200-mile exclusive economic zone around the United States. An oil spill could result in significant liability, including fines, penalties, criminal liability and remediation costs for natural resource damages under other federal, state and local laws, as well as third-party damages. We are required to satisfy insurance and financial responsibility requirements for potential oil (including marine fuel) spills and other pollution incidents. Although we have arranged insurance to cover certain environmental risks, there can be no assurance that such insurance will be sufficient to cover all such risks or that any claims will not have a material adverse effect on our business, results of operations, cash flows, financial condition and our ability to pay dividends. The shipping industry has inherent operational risks that could negatively impact our results of operations. Our vessels and their cargoes are at risk of being damaged or lost because of events such as marine disasters, bad weather, mechanical failures, human error, war, terrorism, piracy and other circumstances or events. All these hazards can result in death or injury to persons, loss of revenues or property, environmental damage, higher insurance rates, damage to our customer relationships, delay or rerouting. If our vessels suffer damage, they may need to be repaired at a drydocking facility. The costs of drydock repairs are unpredictable and can be substantial. We may have to pay drydocking costs that our insurance does not cover in full. The loss of earnings while these vessels are being repaired and repositioned, as well as the actual cost of these repairs, would decrease our earnings. If one of our vessels were involved in an accident with the potential risk of environmental contamination, it could have a material adverse effect on our business, results of operations, cash flows, financial condition and ability to pay dividends. Our insurance may not be adequate to cover our losses. We carry insurance to protect us against most of the accident-related risks involved in the conduct of our business, including marine hull and machinery insurance, protection and indemnity insurance, which includes pollution risks, crew insurance, war risk insurance and off-hire insurance. However, we may not be adequately insured to cover losses from our operational risks, which could have a material adverse effect on us. Additionally, our insurers may refuse to pay particular claims and our insurance may be voidable by the insurers if we take, or fail to take, certain action, such as failing to maintain certification of our vessels with applicable maritime regulatory organizations. Any significant uninsured or under-insured loss or liability could have a material adverse effect on our business, results of operations, cash flows and financial condition and our ability to pay dividends. In addition, we may not be able to obtain adequate insurance coverage at reasonable rates in the future during adverse insurance market conditions. Because we obtain some of our insurance through protection and indemnity associations, we may also be subject to calls in amounts based not only on our own claim records, but also the claim records of other members of the protection and indemnity associations. We may be subject to calls in amounts based not only on our claim records but also the claim records of other members of the protection and indemnity associations through which we receive insurance coverage for tort liability, including pollution-related liability. Our payment of these calls could result in significant expense to us, which could have a material adverse effect on our business, results of operations, cash flows, financial condition and ability to pay dividends. Labor interruptions could disrupt our business. Our vessels are manned by masters, officers and crews that are employed by third parties. If not resolved in a timely and cost-effective manner, industrial action or other labor unrest could prevent or hinder our operations from being carried out normally and could have a material adverse effect on our business, results of operations, cash flows, financial condition and ability to pay dividends. Maritime claimants could arrest our vessels, which could interrupt our cash flow. Crew members, suppliers of goods and services to a vessel, shippers of cargo and other parties may be entitled to a maritime lien against that vessel for unsatisfied debts, claims or damages. In many jurisdictions, a maritime lien holder may enforce its lien by arresting a vessel through foreclosure proceedings. The arrest or attachment of one or more of our vessels could interrupt our cash flow and require us to pay a significant amount of money to have the arrest lifted. In addition, in some jurisdictions, such as South Africa, under the " sister ship" theory of liability, a claimant may arrest both the vessel that is subject to the claimant's maritime lien and any " associated" vessel, which is any vessel owned or controlled by the same owner. Claimants could try to assert "sister ship" liability against one vessel in our fleet for claims relating to another vessel in our fleet. Increased inspection procedures, tighter import and export controls and new security regulations could increase costs and cause disruption of our container shipping business. International container shipping is subject to security and customs inspection and related procedures in countries of origin, destination and trans-shipment points. These security procedures can result in cargo seizure, delays in the loading, offloading, trans-shipment, or delivery of containers and the levying of customs duties, fines or other penalties against exporters or importers and, in some cases, carriers. Since the events of September 11, 2001, U.S. authorities have more than doubled container inspection rates to approximately 5% of all imported containers. Government investment in non-intrusive container scanning technology has grown, and there is interest in electronic monitoring technology, including so-called "e-seals" and "smart" containers that would enable remote, centralized monitoring of containers during shipment to identify tampering with or opening of the containers, along with potentially measuring other characteristics such as temperature, air pressure, motion, chemicals, biological agents and radiation. It is unclear what changes, if any, to the existing security procedures will ultimately be proposed or implemented, or how any such changes will affect the container shipping industry. These changes have the potential to impose additional financial and legal obligations on carriers and, in certain cases, to render the shipment of certain types of goods by container uneconomical or impractical. These additional costs could reduce the volume of goods shipped in containers, resulting in a decreased demand for container vessels. In addition, it is unclear what financial costs any new security procedures might create for container vessel owners, or whether carrier companies may seek to pass on certain of the costs associated with any new security procedures to vessel owners. Any additional costs or a decrease in container volumes could have an adverse impact on our business, results of operations, cash flows, financial condition and ability to pay dividends. Governments could requisition our vessels during a period of war or emergency without adequate compensation. A government could requisition or seize our vessels. Under requisition for title, a government takes control of a vessel and becomes its owner. Under requisition for hire, a government takes control of a vessel and effectively becomes its charterer at dictated charter rates. Generally, requisitions occur during periods of war or emergency. Although we would be entitled to compensation in the event of a requisition, the amount and timing of payment would be uncertain. Terrorist attacks and international hostilities can affect the shipping industry, which could adversely affect our business. Terrorist attacks like those of September 11, 2001 or war or international hostilities, including those currently underway in Iraq and the Middle East, could adversely affect the world economy, the availability of and demand for crude oil and petroleum products and the charter rates in the products tanker and container vessel markets. Terrorist attacks, such as the attack on the M/T Limburg in October 2002, could also adversely affect our operations and directly impact our vessels or our charterers. Our business, results of operations, cash flows, financial condition and ability to pay dividends may be adversely affected by changing economic, political and government conditions in the countries and regions where our vessels are employed or registered. Moreover, we operate in a sector of the economy that is likely to be adversely impacted by the effects of political instability, terrorist or other attacks, war or international hostilities. Company Specific Risk Factors We cannot assure you that we will pay dividends. We will make dividend payments to our shareholders only if our board of directors, acting in its sole discretion, determines that such payments would be in our best interest and in compliance with relevant legal and contractual requirements. The principal business factors that our board of directors expects to consider when determining the timing and amount of dividend payments will be our earnings, financial condition and cash requirements at the time. Currently, the principal contractual and legal restrictions on our ability to make dividend payments are those contained in our new credit facility agreement, which we refer to as our credit agreement, and those created by Bermuda law. Our new credit facility prohibits us from paying a dividend if an event of default under the new credit facility is continuing or would result from the payment of the dividend. Our new credit facility further requires us to maintain specified financial ratios and minimum liquidity and working capital amounts. Our obligations pursuant to these and other terms of our new credit facility could prevent us from making dividend payments under certain circumstances. Under Bermuda law, we may not declare or pay dividends if there are reasonable grounds for believing that (1) we are, or would after the payment be, unable to pay our liabilities as they become due or (2) the realizable value of our assets would thereby be less than the sum of our liabilities, our issued share capital (the total par value of all outstanding shares) and share premium accounts (the aggregate amount paid for the subscription for our shares in excess of the aggregate par value of such shares). Consequently, events beyond our control, such as a reduction in the realizable value of our assets, could cause us to be unable to make dividend payments. We may incur other expenses or liabilities that would reduce or eliminate the cash available for distribution as dividends. We may also enter into new agreements or new legal provisions may be adopted that will restrict our ability to pay dividends. As a result, we cannot assure you that dividends will be paid with the frequency set forth in this Annual Report or at all. Our historical financial and operating data may not be representative of our future results because we have a limited operating history as a stand-alone entity or as a publicly traded company. Our historical financial and operating data may not be representative of our future results because we have a limited operating history as a stand-alone entity or as a publicly traded company. Our combined financial statements included in this document have been carved out of the consolidated financial statements of Aries Energy Corporation, or Aries Energy, a private company which owned and operated two products tankers during the period from March 2003 to December 31, 2003, seven products tankers and five container vessels during the year ended December 31, 2004 and eight product tankers and five container vessels during the year ended December 31, 2005. Consistent with shipping industry practice, we have not obtained, nor do we present in this document, historical operating data for our vessels prior to their acquisition. Although our results of operations, cash flows and financial condition reflected in our combined financial statements include all expenses allocable to our business, due to factors such as the additional administrative and financial obligations associated with operating as a publicly traded company, they may not be indicative of the results of operations that we would have achieved had we operated as a public entity for all periods presented or of future results that we may achieve as a publicly traded company with our current holding company structure. We depend upon four significant charterers for the majority of our revenues. The loss of one or more of these charterers could adversely affect our financial performance. We have historically derived a significant part of our revenue from a small number of charterers. During 2006, 65% of our revenue was derived from four charterers, Trafigura Beheer B.V., Deiulemar Compagnia di Navigazione S.p.A, CMA CGM S.A. and PDVSA. If we were to lose any of these charterers, or if any of these charterers significantly reduced its use of our services or was unable to make charter payments to us, our results of operations, cash flows and financial condition would be adversely affected. Our charterers may terminate or default on their charters, which could adversely affect our results of operations and cash flow. Our charters may terminate earlier than the dates indicated in the section "Our Fleet" in "Item 4 -- Information on the Company." The terms of our charters vary as to which events or occurrences will cause a charter to terminate or give the charterer the option to terminate the charter, but these generally include a total or constructive total loss of the related vessel, the requisition for hire of the related vessel or the failure of the related vessel to meet specified performance criteria. In addition, the ability of each of our charterers to perform its obligations under a charter will depend on a number of factors that are beyond our control. These factors may include general economic conditions, the condition of a specific shipping market sector, the charter rates received for specific types of vessels and various operating expenses. The costs and delays associated with the default by a charterer of a vessel may be considerable and may adversely affect our business, results of operations, cash flows and financial condition and our ability to pay dividends. We cannot predict whether our charterers will, upon the expiration of their charters, recharter our vessels on favorable terms or at all. If our charterers decide not to re-charter our vessels, we may not be able to recharter them on terms similar to the terms of our current charters or at all. In the future, we may also employ our vessels on the spot charter market, which is subject to greater rate fluctuation than the time charter market. If we receive lower charter rates under replacement charters or are unable to recharter all of our vessels, our business, results of operations, cash flows and financial condition may be adversely affected and the amounts available, if any, to pay dividends to our shareholders may be significantly reduced or eliminated. Servicing our debt will substantially limit our funds available for other purposes, such as vessel acquisitions and the payment of dividends. We intend to finance future vessel acquisitions through borrowings under our new credit facility. A large part of our cash from operations may be required to pay principal and interest on that debt. Our debt service payments will reduce our funds available for other purposes, including those that may be in the best interests of our shareholders. We cannot assure you that our future cash flows will be adequate to fund future vessel acquisitions or to pay dividends. Our new credit facility imposes significant operating and financial restrictions. Our new credit facility requires us to adhere to certain financial covenants as of the end of each fiscal quarter, including the following: o our shareholders' equity as a percentage of our total assets, adjusting the book value of our fleet to its market value, must be no less than 35%; o free cash and cash equivalents plus the undrawn element of the $5 million portion of the new credit facility available for general corporate purposes, must be no less than 5% of interest bearing debt; o our current liabilities, excluding deferred revenue and derivative financial instruments, may not exceed our current assets, excluding derivative financial instruments; o the ratio of EBITDA (earnings before interest, taxes, depreciation and amortization) to interest expense must be no less than 3.00 to 1.00 on a trailing four quarter basis. Primarily due to vessel out-of-service time during the year ended December 31, 2006, the interest coverage ratio financial covenant contained in the new credit facility would not be met and the lender agreed to lower the ratio for this financial covenant. This ratio was lowered to 2.50 to 1.00 for the three month period ended December 31, 2006, and three month periods ending March 31, 2007 and June 30, 2007. For subsequent three month periods the lower ratio will not apply and the ratio reverts back to 3.00 to 1.00, which the Company believes it will meet. With effect from January 3, 2007 and until the lower ratio under this covenant no longer applies, the Company will pay an increased margin of 1.75%; and o the aggregate fair market value of our vessels must be no less than 140% of the aggregate outstanding loans under the credit facility. In addition, Magnus Carriers is required to maintain a credit balance in an account opened with the lender of at least $1 million. The new credit facility also requires our two principal beneficial equity holders to maintain a beneficial ownership interest in our company of no less than 10% each. Our new credit facility prevents us from declaring dividends if any event of default, as defined in the new credit facility, occurs or would result from such declaration. Each of the following will be an event of default under the new credit facility: o the failure to pay principal, interest, fees, expenses or other amounts when due; o breach of certain financial covenants, including those which require Magnus Carriers Corporation ("Magnus Carriers") to maintain a minimum cash balance; o the failure of any representation or warranty to be materially correct; o the occurrence of a material adverse change (as defined in the credit agreement); o the failure of the security documents or guarantees to be effective; o judgments against us or any of our subsidiaries in excess of certain amounts; o bankruptcy or insolvency events; and o the failure of our principal beneficial equity holders to maintain their investment in us. Events beyond our control, including changes in the economic and business conditions in the shipping markets in which we operate, may affect our ability to comply with these covenants. We cannot assure you that we will meet these ratios or satisfy these covenants or that our lenders will waive any failure to do so. A breach of any of the covenants in, or our inability to maintain the required financial ratios under, our new credit facility would prevent us from borrowing additional money under the new credit facility and could result in a default under the new credit facility. If a default occurs under our new credit facility, the lenders could elect to declare the outstanding debt, together with accrued interest and other fees, to be immediately due and payable and proceed against the collateral securing that debt, which could constitute all or substantially all of our assets. Our ability to obtain additional debt financing may depend on the performance of our then existing charters and the creditworthiness of our charterers. The actual or perceived credit quality of our charterers, and any defaults by them, may materially affect our ability to obtain the additional capital resources that we will require to purchase additional vessels or may significantly increase our costs of obtaining that capital. Our inability to obtain additional financing or our ability to obtain additional financing at higher than anticipated costs may materially and adversely affect our business, results of operations, cash flows and financial condition and our ability to pay dividends. We will depend on Magnus Carriers, a private company, or other management companies to manage and charter our fleet. We have contracted the commercial and technical management of all the vessels in our fleet (with the exception of the Chinook, Stena Compass and Stena Compassion), including crewing, maintenance and repairs to the management company, Magnus Carriers. In addition, we expect that we will need to seek approval from our lenders to change our manager. The loss of Magnus Carriers' services or its failure to perform its obligations under the management agreements could materially and adversely affect our business, results of operations, cash flows, financial condition and our ability to pay dividends. Although we may have rights against Magnus Carriers if it defaults on its obligations to us, our shareholders will not directly share that recourse. The ability of Magnus Carriers to continue providing services for our benefit will depend in part on its own financial strength. Circumstances beyond our control could impair Magnus Carriers' financial strength. Because Magnus Carriers is privately held, it is unlikely that information about its financial strength would become public prior to any default by Magnus Carriers under the management agreements. As a result, an investor in our shares might have little advance warning of problems affecting Magnus Carriers, even though those problems could have a material adverse effect on us. Magnus Carriers and its affiliates may acquire or charter vessels that compete with our fleet. Magnus Carriers, its principals or any of their controlled affiliates may acquire or charter additional products tankers and container vessels in the future, subject to a right of first refusal that Magnus Carriers and its principals have granted to us for as long as Magnus Carriers is managing our vessels. If we do not purchase or charter these vessels, they could compete with our fleet, and Magnus Carriers and its affiliates might be faced with conflicts of interest between their own interests and Magnus Carriers' obligations to us under the ship management agreements. We are a holding company, and we depend on the ability of our subsidiaries to distribute funds to us in order to satisfy our financial and other obligations and to make dividend payments. We are a holding company, and we have no significant assets other than the equity interests in our subsidiaries. Our subsidiaries own all our vessels, and payments under the charters with our charterers are made to our subsidiaries. As a result, our ability to satisfy our financial and other obligations and to pay dividends depends on the performance of our subsidiaries and their ability to distribute funds to us. If we are unable to obtain funds from our subsidiaries, we will not be able to pay dividends unless we obtain funds from other sources. We cannot assure you that we will be able to obtain the necessary funds from other sources. We may not be able to grow or effectively manage our growth. A principal focus of our strategy is to grow by expanding our business. Our future growth will depend on a number of factors, some of which we can control and some of which we cannot. These factors include our ability to: o identify vessels for acquisition; o consummate acquisitions; o integrate acquired vessels successfully with our existing operations; and o obtain required financing for our existing and new operations. A deficiency in any of these factors could adversely affect our ability to achieve anticipated growth in cash flows or realize other anticipated benefits. In addition, competition from other buyers could reduce our acquisition opportunities or cause us to pay a higher price than we might otherwise pay. The process of integrating acquired vessels into our operations may result in unforeseen operating difficulties, may absorb significant management attention and may require significant financial resources that would otherwise be available for the ongoing development and expansion of our existing operations. Future acquisitions could result in the incurrence of additional indebtedness and liabilities that could have a material adverse effect on our business, results of operations, cash flows, financial condition and ability to pay dividends. Further, if we issue additional common shares, your interest in our company will be diluted, and dividends to you, if any, may be reduced. Capital expenditures and other costs necessary to operate and maintain our vessels may increase due to changes in governmental regulations, safety or other equipment standards. Changes in governmental regulations, safety or other equipment standards, as well as compliance with standards imposed by maritime self-regulatory organizations and customer requirements or competition, may require us to make additional expenditures. In order to satisfy these requirements, we may, from time to time, be required to take our vessels out-of-service for extended periods of time, with corresponding losses of revenues. In the future, market conditions may not justify these expenditures or enable us to operate some or all of our vessels profitably during the remainder of their economic lives. If we are unable to fund our capital expenditures, we may not be able to continue to operate some of our vessels, which would have a material adverse effect on our business and our ability to pay dividends. In order to fund our capital expenditures, we may be required to incur borrowings or raise capital through the sale of debt or equity securities. Our ability to access the capital markets through future offerings may be limited by our financial condition at the time of any such offering as well as by adverse market conditions resulting from, among other things, general economic conditions and contingencies and uncertainties that are beyond our control. Our failure to obtain the funds for necessary future capital expenditures would limit our ability to continue to operate some of our vessels and could have a material adverse effect on our business, results of operations, financial condition and our ability to pay dividends. Even if we are successful in obtaining such funds through financings, the terms of such financings could further limit our ability to pay dividends. Aries Energy, an affiliate, is able to control our company, including the outcome of shareholder votes through its wholly owned indirect subsidiary, Rocket Marine Inc. Aries Energy, an affiliate, owns approximately 52% of our outstanding common shares. As a result of this share ownership and for so long as Aries Energy owns a significant percentage of our outstanding common shares, Aries Energy will be able to control or influence the outcome of any shareholder vote, including the election of directors, the adoption or amendment of provisions in our memorandum of association or bye-laws and possible mergers, amalgamations, corporate control contests and other significant corporate transactions. This concentration of ownership may have the effect of delaying, deferring or preventing a change in control, merger, amalgamation, consolidation, takeover or other business combination. This concentration of ownership could also discourage a potential acquirer from making a tender offer or otherwise attempting to obtain control of us, which could in turn have an adverse effect on the market price of our common shares. Exposure to currency exchange rate fluctuations will result in fluctuations in our cash flows and operating results. We generate all our revenues in U.S. dollars, but our manager, Magnus Carriers, incurs approximately 30% of vessel operating expenses and we incur general and administrative expenses in currencies other than the U.S. dollar. This difference could lead to fluctuations in our vessel operating expenses, which would affect our financial results. Expenses incurred in foreign currencies increase when the value of the U.S. dollar falls, which would reduce our profitability. For example, in the year ended December 31, 2006, the value of the U.S. dollar depreciated by approximately 11% against the Euro. Our incorporation under the laws of Bermuda may limit the ability of our shareholders to protect their interests. We are a Bermuda company. Our memorandum of association and bye-laws and the Companies Act 1981 of Bermuda, or the BCA, as amended, govern our corporate affairs. Investors may have more difficulty in protecting their interests in the face of actions by management, directors or controlling shareholders than would shareholders of a corporation incorporated in a United States jurisdiction. Under Bermuda law, a director generally owes a fiduciary duty only to the company, not to the company's shareholders. Our shareholders may not have a direct cause of action against our directors. In addition, Bermuda law does not provide a mechanism for our shareholders to bring a class action lawsuit under Bermuda law. Further, our bye-laws provide for the indemnification of our directors or officers against any liability arising out of any act or omission, except for an act or omission constituting fraud or dishonesty. Anti-takeover provisions in our organizational documents could have the effect of discouraging, delaying or preventing a merger, amalgamation or acquisition, which could adversely affect the market price of our common shares. Several provisions of our bye-laws could discourage, delay or prevent a merger or acquisition that shareholders may consider favorable. These include provisions: o authorizing our board of directors to issue "blank check" preference shares without shareholder approval; o establishing a classified board of directors with staggered, three-year terms; o prohibiting us from engaging in a "business combination" with an "interested shareholder" for a period of three years after the date of the transaction in which the person becomes an interested shareholder unless certain conditions are met; o not permitting cumulative voting in the election of directors; o authorizing the removal of directors only for cause and only upon the affirmative vote of the holders of at least 80% of our outstanding common shares; o limiting the persons who may call special meetings of shareholders to our board of directors, subject to certain rights guaranteed to shareholders under the BCA; and o establishing advance notice requirements for nominations for election to our board of directors and for proposing matters that can be acted on by shareholders at our shareholder meetings. These provisions could have the effect of discouraging, delaying or preventing a merger, amalgamation or acquisition, which could adversely affect the market price of our common shares. It may not be possible for investors to enforce U.S. judgments against us. We and all our subsidiaries are incorporated in jurisdictions outside the U.S., substantially all of our assets and those of our subsidiaries are located outside the U.S. In addition, most of our directors and officers are non-residents of the U.S., and all or a substantial portion of the assets of these non-residents are located outside the U.S. As a result, it may be difficult or impossible for U.S. investors to serve process within the U.S. upon us, our subsidiaries or our directors and officers or to enforce a judgment against us for civil liabilities in U.S. courts. In addition, you should not assume that courts in the countries in which we or our subsidiaries are incorporated or where our or the assets of our subsidiaries are located (1) would enforce judgments of U.S. courts obtained in actions against us or our subsidiaries based upon the civil liability provisions of applicable U.S. federal and state securities laws or (2) would enforce, in original actions, liabilities against us or our subsidiaries based on those laws. U.S. tax authorities could treat us as a "passive foreign investment company" which could have adverse U.S. federal income tax consequences to U.S. shareholders. A foreign corporation will be treated as a "passive foreign investment company", or PFIC, for U.S. federal income tax purposes if either (1) at least 75% of its gross income for any taxable year consists of certain types of "passive income" or (2) at least 50% of the average value of the corporation's assets produce or are held for the production of those types of "passive income". For purposes of these tests, "passive income" includes dividends, interest, and gains from the sale or exchange of investment property and rents and royalties other than rents and royalties which are received from unrelated parties in connection with the active conduct of a trade or business. For purposes of these tests, income derived from the performance of services does not constitute "passive income." U.S. shareholders of a PFIC are subject to a disadvantageous U.S. federal income tax regime applicable to the income derived by the PFIC, the distributions they receive from the PFIC and the gain, if any, they derive from the sale or other disposition of their shares in the PFIC. Based on our method of operation, we do not believe that we will be a PFIC. In this regard, we treat the gross income we derive or are deemed to derive from our chartering activities as services income, rather than rental income. Accordingly, we believe that our income from our chartering activities does not constitute "passive income," and the assets that we own and operate in connection with the production of that income do not constitute passive assets. There is, however, no direct legal authority under the PFIC rules addressing our method of operation. Accordingly, no assurance can be given that the U.S. Internal Revenue Service, or IRS, or a court of law will accept our position, and there is a risk that the IRS or a court of law could determine that we are a PFIC. Moreover, no assurance can be given that we would not constitute a PFIC for any future taxable year if there were to be changes in the nature and extent of our operations. If the IRS were to find that we are or have been a PFIC for any taxable year, our U.S. shareholders would face adverse and special U.S. tax consequences. Among other things, the distributions a shareholder received with respect to our shares and the gain, if any, a shareholder derived from his sale or other disposition of our shares would be taxable as ordinary income (rather than as qualified dividend income or capital gain, as the case may be), would be treated as realized ratably over his holding period in our common shares, and would be subject to an additional interest charge. However, a U.S. shareholder may be able to make certain tax elections which would ameliorate these consequences. We may have to pay tax on United States source income, which would reduce our earnings. Under the Code, 50% of the gross shipping income of a vessel owning or chartering corporation, such as our company and our subsidiaries, that is attributable to transportation that begins or ends, but that does not both begin and end, in the United States is characterized as U.S. source shipping income and is subject to a 4% United States federal income tax without allowance for deduction, unless that corporation qualifies for exemption from tax under Section 883 of the Code and the related Treasury Regulations, which the IRS has adopted and which became effective on January 1, 2005 for calendar year taxpayers such as ourselves and our subsidiaries. We expect that we and each of our subsidiaries qualify for this statutory tax exemption, and we take this position for United States federal income tax reporting purposes. However, there are factual circumstances beyond our control that could cause us to lose the benefit of this tax exemption and thereby become subject to United States federal income tax on our United States source income. For example, Aries Energy Corporation, or Aries Energy (through its wholly owned subsidiary Rocket Marine Inc., or Rocket Marine), owns approximately 52% of our outstanding common shares. We are ineligible to qualify for exemption under Section 883 for any taxable year in which Aries Energy alone or together with other shareholders with a 5% or greater interest in our common shares, or the 5% shareholder group, own 50% or more of our outstanding common shares on more than half the days during such taxable year and we are unable to establish in accordance with the Treasury Regulations that within the 5% shareholder group there are sufficient qualified shareholders for purposes of Section 883 to preclude non-qualified shareholders within such group from owning 50% or more of the value of our common stock for more than half the number of days during the taxable year. In order to establish this, qualified shareholders within the 5% shareholder group would have to provide us with certain information in order to substantiate their identity as qualified shareholders. Captain Gabriel Petridis, the 50% beneficial owner of Aries Energy, has agreed to provide us with such information. Notwithstanding this agreement, we may be unable to establish in conformity with the Treasury Regulations that there are sufficient qualified shareholders within the 5% shareholder group to allow us to qualify for exemption under Section 883. Due to the factual nature of the issues involved, we can give no assurances regarding our tax-exempt status or that of any of our subsidiaries. If we or our subsidiaries are not entitled to exemption under Section 883 of the Code for any taxable year, the imposition of a 4% U.S. federal income tax on our U.S. source shipping income and that of our subsidiaries could have a negative effect on our business and would result in decreased earnings available for distribution to our shareholders. Purchase options with respect to two of our vessels could result in our receiving less than if we were to sell these ships in the open market. The charterer for two of our vessels, the Altius and the Fortius, has an option to purchase 50% of the equity in those vessels exercisable six months before the expiration of their current charters in June and August 2009, respectively. If the option prices are lower than the prevailing market prices of these vessels at the time of exercise, we would receive less for the equity interests than we would receive if we were to sells the vessels in the open market, which could negatively impact our results of operations. Risks Relating to Our Common Stock There may not be an active market for our common shares, which may cause our common shares to trade at a discount and make it difficult to sell the common shares you purchase. We cannot assure you that an active trading market for our common shares will be sustained. We cannot assure you of the price at which our common shares will trade in the public market in the future or that the price of our shares in the public market will reflect our actual financial performance. You may not be able to resell your common shares at or above their current market price. Additionally, a lack of liquidity may result in wide bid-ask spreads, contribute to significant fluctuations in the market price of our common shares and limit the number of investors who are able to buy the common shares. The products tanker and container vessel sectors have been highly unpredictable and volatile. The market price of our common shares may be similarly volatile. Future sales of our common shares could cause the market price of our common shares to decline. The market price of our common shares could decline due to sales of a large number of shares in the market, including sales of shares by our large shareholders, or the perception that these sales could occur. These sales, or the perception that these sales could occur, could also make it more difficult or impossible for us to sell equity securities in the future at a time and price that we deem appropriate to raise funds through future offerings of common shares. Aries Energy owns approximately 52% of our common shares. Aries Energy through Rocket Marine is eligible to sell any of our common shares, directly or indirectly, in the public market following the applicable lock-up period, which expired in December 2005. We have entered into a registration rights agreement with Rocket Marine that entitles it to have all of its remaining shares registered for sale in the public market following the expiration of that restricted period. In addition, these shares could be sold into the public market after one year pursuant to Rule 144 under the Securities Act of 1933, as amended, or the Securities Act, subject to certain volume, manner of sale and notice requirements. Sales or the possibility of sales of substantial amounts of our common shares by Aries Energy in the public markets could adversely affect the market price of our common shares. ITEM 4. INFORMATION ON THE COMPANY A. History and Development of the Company We are Aries Maritime Transport Limited, or Aries Maritime, a Bermuda company incorporated in January 2005 as a wholly owned indirect subsidiary of Aries Energy Corporation, or Aries Energy. We are an international shipping company that owns products tankers and container vessels. In March 2005, subsidiaries of Aries Energy contributed to us all of the issued and outstanding stock of 10 vessel-owning companies in exchange for shares in our company. Before this contribution, each of the Aries Energy subsidiaries held 100% of the issued and outstanding stock of the respective vessel-owning company or companies owned by it. We now hold 100% of the issued and outstanding stock of each vessel-owning company. Because our ownership percentage in each vessel-owning company was identical to each contributing subsidiary's prior ownership percentage in the same vessel-owning company, the group reorganization was accounted for as an exchange of equity interests at historical cost. On June 8, 2005 Aries Maritime closed its initial public offering of 12,240,000 common shares at an offering price of $12.50 per share. Our common stock is listed on the Nasdaq Global Market under the symbol "RAMS". The address of our principal executive office is 18 Zerva Nap., Glyfada, Athens 166 75, Greece. Our primary capital expenditures are in connection with the acquisitions of vessels. Since the date of our incorporation, we have exercised an option to re-acquire two additional container vessels, CMA CGM Seine and CMA CGM Makassar, from an affiliate of Aries Energy and took delivery of the ships in June and July 2005. Also, in October 2005, contracts were entered into for the purchase of two new products tankers, Stena Compass and Stena Compassion. The Stena Compass was delivered in February 2006 and the Stena Compassion in June 2006. In November 2005, we took delivery of the 2001 built products tanker Chinook. As a result of these acquisitions, our fleet now consists of ten product tankers with an aggregate capacity of approximately 575,325 dwt and five container vessels with an aggregate capacity of approximately 12,509 TEU. The aggregate purchase price of the three vessels we acquired in 2005 was $103.2 million and the aggregate purchase price of the two vessels we acquired in 2006 was $112.2 million. See note 6 to our consolidated and predecessor combined carve-out financial statements included in this report. B. Business Overview Our Fleet Our fleet consists of ten products tankers and five container vessels. Our ten products tankers consist of five double-hulled MR tankers, one of which has a cargo-carrying capacity of 41,450 dwt, one which has a cargo-carrying capacity of 41,502 dwt and three of which have a cargo-carrying capacity of 38,701 dwt; four double-hulled Panamax tankers, two of which have a cargo-carrying capacity of 73,400 dwt and two of which have a cargo-carrying capacity of 72,750 dwt; and one double-hulled Aframax tanker, which has a cargo-carrying capacity of 83,970 dwt. Our products tankers are designed to transport several different refined petroleum products simultaneously in segregated coated cargo tanks. These cargoes typically include gasoline, jet fuel, kerosene, naphtha and heating oil, as well as edible oils. The average age of our products tankers is approximately 7.7 years. All our products tankers were employed under period charters as of March 31, 2007, with remaining terms ranging from approximately four months to 2.4 years, with the exception of Bora, now named Ostria, which was operating in the spot market. Our charterers include PDVSA, the state oil company of Venezuela, ST Shipping, Deiulemar Compagnia di Navigazione S.p.A./Enel S.p.A., Trafigura Beheer B.V. and the Stena Group. Our five container vessels range in capacity from 1,799 to 2,917 TEU and have an average age of 17.4 years. Container vessels of this size are generally utilized in the North/South trade routes that link Europe and Asia with Latin America, Africa, India, Australia and New Zealand. Our four largest container vessels are also utilized in the East/West trade routes that link Europe with the Far East and the United States. Our smaller container vessel may be employed on the same trade routes or may serve as a feeder vessel trading between hub ports, where larger vessels call, and smaller regional ports. All of our container vessels were employed under time charters as of March 31, 2007, with remaining terms ranging from approximately three months to 3.4 years. Three of our container vessels are currently chartered to China Shipping Group, Mediterranean Shipping Co. S.A. ("MSC") and Islamic Republic of Iran Shipping Line ("IRISL") with the remaining two container vessels currently chartered to CMA CGM S.A. After our period charters expire, we may employ our vessels under new period charters or in the spot voyage market between period charters, depending on the prevailing market conditions at that time. Set forth below is summary information concerning our fleet as of March 31, 2007.
- ------------------------------------------------------------------------------------------------------------------- Daily total Net Daily vessel Charter Charterhire operating Vessel Name Size Year Built Charterer Expiration Rate expenses - ------------------------------------------------------------------------------------------------------------------- Product Tankers - ------------------------------------------------------------------------------------------------------------------- Altius 73,400 dwt 2004 Deiulemar/Enel June 2009 $14,860 $4,500 - ------------------------------------------------------------------------------------------------------------------- Fortius 73,400 dwt 2004 Deiulemar/Enel August 2009 $14,860 $4,500 - ------------------------------------------------------------------------------------------------------------------- Nordanvind 38,701 dwt 2001 PDVSA November 2008 $19,988 $5,000 - ------------------------------------------------------------------------------------------------------------------- Ostria (ex Bora) 38,701 dwt 2000 Spot Spot Spot $5,000 - ------------------------------------------------------------------------------------------------------------------- High Land 41,450 dwt 1992 Trafigura April 2008 $16,575 $4,700 - ------------------------------------------------------------------------------------------------------------------- High Rider 41,502 dwt 1991 Trafigura April 2008 $16,575 $4,700 - ------------------------------------------------------------------------------------------------------------------- Arius (ex Citius) 83,970 dwt 1986 ST Shipping July 2007 $18,038(1) $4,800 - ------------------------------------------------------------------------------------------------------------------- Stena Compass 72,750 dwt 2006 Stena Group August 2008 $18,700(2) N/A - ------------------------------------------------------------------------------------------------------------------- Stena Compassion 72,750 dwt 2006 Stena Group December 2008 $18,700(2) N/A - ------------------------------------------------------------------------------------------------------------------- Chinook 38,701 dwt 2001 Stena Group August 2008 $17,062(2) $5,300 (3) - ------------------------------------------------------------------------------------------------------------------- Container Vessels - ------------------------------------------------------------------------------------------------------------------- CMA CGM Makassar 2,917 TEU 1990 CMA CGM May 2010 $20,400 $5,100 - ------------------------------------------------------------------------------------------------------------------- CMA CGM Seine 2,917 TEU 1990 CMA CGM September 2010 $20,400 $5,100 - ------------------------------------------------------------------------------------------------------------------- Energy 1 (ex ANL Energy) 2,438 TEU 1989 IRISL April 2008 $17,297 $4,800 - ------------------------------------------------------------------------------------------------------------------- MSC OSLO (ex SCI Tej) 2,438 TEU 1989 MSC March 2009 $15,000 $4,800 - ------------------------------------------------------------------------------------------------------------------- Ocean Hope 1,799 TEU 1989 China Shipping June 2007 $13,956 $4,400 Container Lines - -------------------------------------------------------------------------------------------------------------------
(1) Plus 50% of profits of over and above $18,000 per day, under the profit sharing provisions of our charter agreement with ST Shipping, plus an additional $244 per day for a third oil major approval as and when obtained. (2) Plus additional income under profit sharing provisions of our charter agreement with Stena Group. (3) This refers to the actual daily vessel operating expenses during 2006. Vessel Charters Our product tankers, except Bora, now named Ostria, which is currently operating in the spot market, and container vessels are currently committed under period employment agreements with national, regional and international companies. Pursuant to these agreements, known as charterparties, we provide these companies, or charterers, with a vessel and crew at a fixed, per-day rate for a specified term. The charterers under the time charters referenced below are generally responsible for, among other things, the cost of all fuels with respect to the vessels (with certain exceptions, including during off-hire periods), port charges, costs related to towage, pilotage, mooring expenses at loading and discharging facilities and certain operating expenses. The charterers are not obligated to pay us charterhire for off-hire days, which include days a vessel is out-of-service due to, among other things, repairs or drydockings. Under the time charters, we are generally required, among other things, to keep the related vessels seaworthy, to crew and maintain the vessels and to comply with applicable regulations. We are also required to provide protection and indemnity, hull and machinery, war risk and oil pollution insurance cover. Our shipmanagement companies perform these duties for us under the ship management agreements. Charter periods are typically, at the charterer's option, subject to (1) extension or reduction by between 15 and 60 days at the end of the final charter period and (2) extension by any amount of time during the charter period that the vessel is off-hire. A vessel is generally considered to be "off-hire" during any period that it is out-of-service due to damage to or breakdown of the vessel or its equipment or a default or deficiency of its crew. Under certain circumstances our charters may terminate prior to their scheduled termination dates. The terms of our charters vary as to which events or occurrences will cause a charter to terminate or give the charterer the option to terminate the charter, but these generally include a total or constructive total loss of the related vessel, the requisition for hire of the related vessel or the failure of the related vessel to meet specified performance criteria. Two of our vessels, Altius and Fortius, which are sister ships, are employed under time charters with Deiulemar Compagnia di Navigazione S.p.A ("Deiulemar"), an Italian shipping company, at a daily charter rate of $14,860 per vessel, net of commissions, which commenced in August and June 2004, respectively. Deiulemar has in turn sub-chartered these vessels to Enel.FTL, an Italian energy company partly owned by the Italian state. Under the Deiulemar charterparties, Deiulemar has the option to purchase 50% of each vessel's equity upon the expiration of the charter for 50% of the difference between $29.5 million and the debt balance on each vessel. If Deiulemar exercises this option, Magnus Carriers will continue to provide technical management services and Deiulemar will have a right of first refusal for the provision of commercial management services for the purchased vessel or vessels. The time charters with Deiulemar for Altius and Fortius are scheduled to expire in August and June 2009, respectively, subject to the typical adjustments discussed above. Our vessel Nordanvind is employed under a time charter with PDVSA, S.A. ("PDVSA"), the state oil company of Venezuela. Under the terms of the time charter, which commenced in November 2005, PDVSA is required to pay a daily charter rate of $19,988, net of commissions, until November 2008, subject to the typical adjustments discussed above. In May 2006, we withdrew our sister vessel Bora, now named Ostria, from its charter with PDVSA and began marketing the vessel in the spot market. Two of our vessels, High Land and High Rider, which are sister ships, have been employed since April 2006 under time charters to Trafigura Beheer B.V.("Trafigura"), a global trading group involved in the trade, transportation, storage and distribution of oil, oil products, minerals and metals. Trafigura is required to pay a daily charter rate of $16,575 per vessel, net of commissions. The charters will expire in April 2008. Our vessel Arius (ex Citius) entered into a new time charter for an initial period of 6 months with ST Shipping and Transportation Inc., ("ST Shipping"), the shipping division of Glencore International A.G., a company based in Switzerland. Glencore International A.G. supplies a range of commodities and raw materials to companies in industries such as automotive, power generation, steel production and food processing. Under the terms of the time charter, ST Shipping is required to pay us a basic hire of $17,550 per day, net of commissions plus an additional $243.75 net of commissions per day for every oil major approval as and when obtained until three are obtained. The vessel currently has two oil major approvals. The charterer is also required to pay us additional hire equalling 50% of any trading income (revenue less voyage-related expenses) in excess of $18,000 per day. The charter period to ST Shipping is scheduled to expire in July 2007. Under the terms of the charter, the charterer has the option to extend the charter period for a period of six months and subject to the typical adjustments discussed above. The vessel commenced this charter on August 1, 2006. An agreement has been made between the Company and ST Shipping to settle ST Shipping's claim of $930,000 for alleged loss of profit, on the basis of a full and final settlement in the amount of $750,000, which ST Shipping will recoup from their share of the profit sharing generated by the vessel under the new charter since August 1, 2006 and the Company has provided a guarantee that if insufficient profits are made by the end of the new charter, Aries will pay any shortfall at the end of the charter. Our vessel Chinook, sister ship to the Nordanvind and Ostria, is employed under time charter to the Stena Group for an initial period of 18 months at a daily rate of $17,062.50 net of commissions. This charter commenced on February 20, 2007. The charterer has an option to extend the time charter for a period of twelve months at the same rate subject to the typical adjustments discussed above. The time charter also includes a profit sharing component with a 50% share for the Company, based on any trading income (revenue less voyage-related expenses) in excess of the daily hire gross of commissions. Our vessels CMA CGM Makassar and CMA CGM Seine, which are sister ships, are employed under time charters to CMA CGM S.A. ("CMA CGM"), a worldwide container shipping company based in France. Under the terms of these time charters, CMA CGM is required to pay a daily charter rate of $20,400 per vessel, net of commissions. These five year time charters commenced in May 2005 and September 2005 respectively and are subject to the typical adjustments discussed above. Our vessel Energy 1 (ex ANL Energy) has been employed under time charter to IRISL since October 2006. Under the terms of the charter, IRISL is required to pay us a daily charter rate of $17,297 net of commissions. The charter will expire in April 2008, subject to a 6-month extension at the charterers' option and subject to the typical adjustments discussed above. Our vessel MSC OSLO (ex SCI Tej), sister vessel of M/V Energy 1, is employed under time charter to MSC, a privately-owned company founded in 1970 which is the second largest container shipping line in the world. Under the terms of the time charter, MSC is required to pay us a daily charter rate of $15,000 net of commissions, subject to the typical adjustments discussed above. This timecharter commenced on March 8, 2007 and is for two years. Our vessel Ocean Hope is currently employed under a time charter with China Shipping Container Lines (Asia) Co. Ltd. ("CSCL"), a company within the China Shipping Group, a state-owned Chinese shipping conglomerate. Under the terms of the time charter, CSCL is required to pay a daily charter rate of $13,956, net of commissions. The time charter to CSCL commenced in June 2004 and is scheduled to expire in June 2007, subject to the typical adjustments discussed above. Our vessels Stena Compass and Stena Compassion are currently employed under bareboat charters with two companies of the Stena Group (Panvictory Ltd. and Panvision Ltd. respectively). Under the terms of the bareboat charters, the Stena Group companies are required to pay a basic daily charter rate of $18,700, there being no commissions. In addition, the Stena Group companies are required to pay an additional hire equal to 30% of the time charter equivalent weighted average hire for each quarter in excess of $24,500 per day. The bareboat charters expire in August 2008 and December 2008 respectively. The charterers under the bareboat charters referenced above are generally responsible for the running cost of the vessels, which include, among other things, operation, maintenance, insurance (protection and indemnity, hull and machinery, war risk and oil pollution) and repairs, drydocking and crew. Also, charter hire is not subject to deductions for off-hire days under the bareboat charters. For the periods ended December 31, 2006, 2005 and 2004, our revenues from products tankers were $53 million, $42.9 million and $20.7 million respectively. For the periods ended December 31, 2006, 2005 and 2004, our revenues from container vessels were $41.2 million, $33 million and $27.6 million respectively. These revenues include Deferred Revenue (for which please refer to Item 5 - Operating and Financial Review and Prospects). Our fleet did not include any container vessels in 2003. Fleet Management Certain of our vessel-owning subsidiaries have entered into ten-year ship management agreements with Magnus Carriers, which is cancelable by us on two months' prior notice. Eleven of these twelve existing management agreements with Magnus Carriers were entered into in June 2005 with the last entered into in July 2005. Under these management agreements, Magnus Carriers is responsible for all technical management of our vessels, including crewing, maintenance, repair, capital expenditures, drydocking, payment of vessel taxes and other vessel operating activities. Magnus Carriers is also obligated under our management agreements to maintain, at our expense, insurance for each of our vessels, including marine hull and machinery insurance, protection and indemnity insurance (including pollution risks and crew insurances), war risk insurance and off-hire insurance. As compensation for these services, we pay Magnus Carriers an amount equal to the budgeted vessel operating expenses, which we have established jointly with Magnus Carriers. These initial budgeted vessel operating expenses increased by 3% during the year ended December 31, 2006. They are also subject to adjustment every three years. The initial annual management fee was set at $146,000 per vessel and during 2006 increased by 3% to $150,380 per vessel. The ship management agreements provide that, if actual total vessel operating expenses exceed the corresponding budgeted amounts, we and Magnus Carriers will bear the excess expenditures equally (except for costs relating to any improvement, structural changes or installation of new equipment required by law or regulation, which will be paid solely by us). On the other hand, if actual total vessel operating expenses are less than the corresponding budgeted amounts, we and Magnus Carriers will share the cost savings equally. Vessel operating expenses are payable by us monthly in advance. We also use Magnus Carriers and its affiliates non-exclusively for commercial management of all our vessels except Stena Compass and Stena Compassion, which includes finding employment for our vessels and identifying and developing vessel acquisition opportunities that will fit our strategy. Under the terms of the ship management agreements, Magnus Carriers provides chartering services in accordance with our instructions and we pay Magnus Carriers 1.25% of any gross charterhire and freight paid to us for new charters. In addition, Magnus Carriers will supervise the sale of our vessels and the purchase of additional vessels in accordance with our instructions. We pay Magnus Carriers 1% of the sale or purchase price in connection with a vessel sale or purchase that Magnus Carriers brokers for us. Magnus Carriers has agreed to indemnify us against the consequences of any failure by Magnus Carriers to perform its obligations under the ship management agreements up to an amount equal to ten times the annual management fee. Any indemnification by Magnus Carriers for environmental matters is limited to the insurance and indemnity coverage it is required to maintain for each vessel under its ship management agreement. In addition, as long as Magnus Carriers is managing our vessels, Magnus Carriers and its principals have granted us a right of first refusal to acquire or charter any container vessels or any products tankers ranging from 20,000 to 85,000 dwt, which Magnus Carriers, its principals or any of their controlled affiliates may consider for acquisition or charter in the future. Magnus Carriers is an established ship management company that provides ship management services for affiliated companies, such as our company, as well as third parties including commercial banks. Since its inception in 1997, Magnus Carriers has managed more than 50 vessels, including oil tankers, products tankers, LPG tankers, chemical tankers, container vessels, dry bulk carriers and reefer vessels. Magnus Carriers and its affiliates have offices in Athens, Greece and London, England and have 34 land-based administrative employees and employ more than 400 seafarers on 18 vessels. Crewing and Employees As of December 31, 2006 our wholly-owned subsidiary, AMT Management Ltd., employed 3 employees, all of whom are shore-based. Magnus Carriers ensures that all seamen have the qualifications and licenses required to comply with international regulations and shipping conventions, and that our vessels employ experienced and competent personnel. All of the employees of Magnus Carriers are subject to a general collective bargaining agreement covering employees of shipping agents. These agreements set industry-wide minimum standards. We have not had any labor interruptions with our employees under this collective bargaining agreement. Environmental and Other Regulation Government regulation significantly affects the ownership and operation of our fleet. We are subject to various international conventions and treaties, laws and regulations in force in the countries in which our vessels may operate or are registered relating to safety and health and environmental protection including the storage, handling, emission, transportation and discharge of hazardous and non-hazardous materials, and the remediation of contamination and liability for damage to natural resources. A variety of governmental and private entities subject our vessels to both scheduled and unscheduled inspections. These entities include the local port authorities, (applicable national authorities such as the U.S. Coast Guard and harbor masters), classification societies, flag state administration (country of registry) and charterers, particularly terminal operators and oil companies. Some of these entities require us to obtain permits, licenses, certificates and other authorizations for the operation of our fleet. Our failure to maintain necessary permits or approvals could require us to incur substantial costs or temporarily suspend operation of one or more of the vessels in our fleet. In recent periods, heightened levels of environmental and quality concerns among insurance underwriters, regulators and charterers have led to greater inspection and safety requirements on all ships and may accelerate the scrapping of older vessels throughout the industry. Increasing environmental concerns have created a demand for vessels that conform to the stricter environmental standards. Magnus Carriers and Ernst Jacob, the technical manager of our vessel Chinook and the Stena Group companies managing the Stena Compass and Stena Compassion, are required to maintain operating standards for all of our vessels emphasizing operational safety, quality maintenance, continuous training of our officers and crews and compliance with applicable local, national and international environmental laws and regulations. We believe that the operation of our vessels is in substantial compliance with applicable environmental laws and regulations and that our vessels have all material permits, licenses, certificates or other authorizations necessary for the conduct of our operations; however, because such laws and regulations are frequently changed and may impose increasingly stricter requirements, we cannot predict the ultimate cost of complying with these requirements, or the impact of these requirements on the resale value or useful lives of our vessels. In addition, a future serious marine incident that results in significant oil pollution or otherwise causes significant adverse environmental impact could result in additional legislation or regulation that could negatively affect our profitability. International Maritime Organization The International Maritime Organization, or IMO (the United Nations agency for maritime safety and the prevention of marine pollution by ships), has adopted the International Convention for the Prevention of Marine Pollution, 1973, as modified by the Protocol of 1978 relating thereto, which has been updated through various amendments (the "MARPOL Convention"). The MARPOL Convention relates to environmental standards including oil leakage or spilling, garbage management, as well as the handling and disposal of noxious liquids, harmful substances in packaged forms, sewage and air emissions. The IMO adopted regulations that set forth pollution prevention requirements applicable to tankers. These regulations, which have been adopted by over 150 nations, including many of the jurisdictions in which our tankers operate, provide for, among other things, phase-out of single-hulled tankers and more stringent inspection requirements; including, in part, that: o tankers between 25 and 30 years old must be of double-hulled construction or of a mid-deck design with double-sided construction, unless: (1) they have wing tanks or double-bottom spaces not used for the carriage of oil, which cover at least 30% of the length of the cargo tank section of the hull or bottom; or (2) they are capable of hydrostatically balanced loading (loading less cargo into a tanker so that in the event of a breach of the hull, water flows into the tanker, displacing oil upwards instead of into the sea); o tankers 30 years old or older must be of double-hulled construction or mid-deck design with double sided construction; and o all tankers are subject to enhanced inspections. Also, under IMO regulations, a tanker must be of double-hulled construction or a mid-deck design with double-sided construction or be of another approved design ensuring the same level of protection against oil pollution if the tanker: o is the subject of a contract for a major conversion or original construction on or after July 6, 1993; o commences a major conversion or has its keel laid on or after January 6, 1994; or o completes a major conversion or is a newbuilding delivered on or after July 6, 1996. Effective September 2002, the IMO accelerated its existing timetable for the phase-out of single hull oil tankers. At that time, these regulations required the phase-out of most single hull oil tankers by 2015 or earlier, depending on the age of the tanker and whether it has segregated ballast tanks. Under the regulations, the flag state administration may allow for some newer single hull ships registered in its country that conform to certain technical specifications to continue operating until the 25th anniversary of their delivery. Any port state, however, may deny entry of those single hull tankers that are allowed to operate until their 25th anniversary to ports or offshore terminals. However, as a result of the oil spill in November 2002 relating to the loss of the m.t. Prestige, which was owned by a company not affiliated with us, in December 2003, the Marine Environmental Protection Committee of the IMO, or MEPC, adopted an amendment to the MARPOL Convention, which became effective in April 2005. The amendment revised an existing regulation 13G accelerating the phase-out of single hull oil tankers and adopted a new regulation 13H on the prevention of oil pollution from oil tankers when carrying heavy grade oil. Under the revised regulation, single hull oil tankers must be phased out no later than April 5, 2005 or the anniversary of the date of delivery of the ship on the date or in the year specified in the following table: - -------------------------------------------------------------------------------- Category of Oil Tankers Date or Year - -------------------------------------------------------------------------------- Category 1- oil tankers of 20,000 dwt and above carrying crude oil, fuel oil, heavy diesel oil or April 5, 2005 for ships delivered lubricating oil as cargo, and of on April 5, 1982 or earlier; or 30,000 dwt and above carrying other 2005 for ships delivered after oils, which do not comply with the April 5, 1982 requirements for protectively located segregated ballast tanks - -------------------------------------------------------------------------------- Category 2 - oil tankers of 20,000 dwt and above carrying crude oil, April 5, 2005 for ships delivered fuel oil, heavy diesel oil or on April 5, 1977 or earlier lubricating oil as cargo, and of 2005 for ships delivered after 30,000 dwt and above carrying other April 5, 1977 but before January 1, oils, which do comply with the 1978 protectively located segregated 2006 for ships delivered in 1978 ballast tank requirements and 1979 2007 for ships delivered in 1980 and and 1981 2008 for ships delivered in 1982 Category 3 - oil tankers of 5,000 2009 for ships delivered in 1983 dwt and above but less than the 2010 for ships delivered in 1984 or tonnage specified for Category 1 later and 2 tankers. - -------------------------------------------------------------------------------- Under the revised regulations, the flag state administration may allow for some newer single hull oil tankers registered in its country that conform to certain technical specifications to continue operating until the earlier of the anniversary of the date of delivery of the vessel in 2015 or the 25th anniversary of their delivery. Any port state, however, may deny entry of those single hull oil tankers that are allowed to operate until the earlier of their anniversary date of delivery in 2015 or their 25th anniversary to ports or offshore terminals. The MEPC, in October 2004, adopted a unified interpretation to regulation 13G that clarified the date of delivery for tankers that have been converted. Under the interpretation, where an oil tanker has undergone a major conversion that has resulted in the replacement of the fore-body, including the entire cargo carrying section, the major conversion completion date of the oil tanker shall be deemed to be the date of delivery of the ship, provided that: o the oil tanker conversion was completed before July 6, 1996; o the conversion included the replacement of the entire cargo section and fore-body and the tanker complies with all the relevant provisions of MARPOL Convention applicable at the date of completion of the major conversion; and o the original delivery date of the oil tanker will apply when considering the 15 years of age threshold relating to the first technical specifications survey to be completed in accordance with MARPOL Convention. In December 2003, the MEPC adopted a new regulation 13H on the prevention of oil pollution from oil tankers when carrying heavy grade oil, or HGO. The new regulation bans the carriage of HGO in single hull oil tankers of 5,000 dwt and above after April 5, 2005, and in single hull oil tankers of 600 dwt and above but less than 5,000 dwt, no later than the anniversary of their delivery in 2008. Under regulation 13H, HGO means any of the following: o crude oils having a density at 15(0)C higher than 900 kg/m3; o fuel oils having either a density at 15(0)C higher than 900 kg/ m3 or a kinematic viscosity at 50(0)C higher than 180 mm2/s; o bitumen, tar and their emulsions. Under the regulation 13H, the flag state administration may allow continued operation of oil tankers of 5,000 dwt and above, carrying crude oil with a density at 15(0)C higher than 900 kg/m3 but lower than 945 kg/m3, that conform to certain technical specifications and, in the opinion of the such administration, the ship is fit to continue such operation, having regard to the size, age, operational area and structural conditions of the ship and provided that the continued operation shall not go beyond the date on which the ship reaches 25 years after the date of its delivery. The flag state administration may also allow continued operation of a single hull oil tanker of 600 dwt and above but less than 5,000 dwt, carrying HGO as cargo, if, in the opinion of the such administration, the ship is fit to continue such operation, having regard to the size, age, operational area and structural conditions of the ship, provided that the operation shall not go beyond the date on which the ship reaches 25 years after the date of its delivery. The flag state administration may also exempt an oil tanker of 600 dwt and above carrying HGO as cargo if the ship is either engaged in voyages exclusively within an area under its jurisdiction, or is engaged in voyages exclusively within an area under the jurisdiction of another party, provided the party within whose jurisdiction the ship will be operating agrees. The same applies to vessels operating as floating storage units of HGO. Any port state, however, can deny entry of single hull tankers carrying HGO which have been allowed to continue operation under the exemptions mentioned above, into the ports or offshore terminals under its jurisdiction, or deny ship-to-ship transfer of HGO in areas under its jurisdiction except when this is necessary for the purpose of securing the safety of a ship or saving life at sea. Revised Annex I to the MARPOL Convention entered into force in January 2007. Revised Annex I incorporates various amendments adopted since the MARPOL Convention entered into force in 1983, including the amendments to Regulation 13G (regulation 20 in the revised Annex) and Regulation 13H (regulation 21 in the revised Annex). Revised Annex I also imposes construction requirements for oil tankers delivered on or after January 1, 2010. A further amendment to revised Annex I includes an amendment to the definition of "heavy grade oil" that will broaden the scope of regulation 21. The IMO has also negotiated international conventions that impose liability for oil pollution in international waters and a signatory's territorial waters. In September 1997, the IMO adopted Annex VI to the MARPOL Convention to address air pollution from ships. Annex VI was ratified in May 2004, and took effect May 19, 2005. Annex VI sets limits on sulfur oxide and nitrogen oxide emissions from ship exhausts and prohibits deliberate emissions of ozone depleting substances, such as chlorofluorocarbons. Annex VI also includes a global cap on the sulfur content of fuel oil and allows for special areas to be established with more stringent controls on sulfur emissions. Annex VI regulations pertaining to nitrogen oxide emissions apply to diesel engines on vessels built on or after January 1, 2000 or diesel engines undergoing major conversion after such date. We believe that all our vessels comply with Annex VI in all material respects as of its effective date. Additional or new conventions, laws and regulations may be adopted that could adversely affect our business, cash flows, results of operations and financial condition. The IMO also has adopted the International Convention for the Safety of Life at Sea, or SOLAS Convention, which imposes a variety of standards to regulate design and operational features of ships. SOLAS standards are revised periodically. We believe that all our vessels are in substantial compliance with SOLAS standards. Under the International Safety Management Code for the Safe Operation of Ships and for Pollution Prevention, or ISM Code, promulgated by the IMO, the party with operational control of a vessel is required to develop an extensive safety management system that includes, among other things, the adoption of a safety and environmental protection policy setting forth instructions and procedures for operating its vessels safely and describing procedures for responding to emergencies. In 1994, the ISM Code became mandatory with the adoption of Chapter IX of SOLAS. We intend to rely on the safety management systems that Magnus Carriers and our other ship management companies have developed. The ISM Code requires that vessel operators obtain a safety management certificate for each vessel they operate. This certificate evidences compliance by a vessel's management with code requirements for a safety management system. No vessel can obtain a certificate unless its operator has been awarded a document of compliance, issued by each flag state, under the ISM Code. We believe that Magnus Carriers and our other ship management companies have all material requisite documents of compliance for their offices and safety management certificates for vessels in our fleet for which the certificates are required by the IMO. Magnus Carriers and our other ship management companies will be required to review these documents of compliance and safety management certificates annually. Noncompliance with the ISM Code and other IMO regulations may subject the shipowner to increased liability, may lead to decreases in available insurance coverage for affected vessels and may result in the denial of access to, or detention in, some ports. For example, the U.S. Coast Guard and European Union authorities have indicated that vessels not in compliance with the ISM Code will be prohibited from trading in U.S. and European Union ports. Although the United States is not a party to these conventions, many countries have ratified and follow the liability plan adopted by the IMO and set out in the International Convention on Civil Liability for Oil Pollution Damage of 1969. Under this convention and depending on whether the country in which the damage results is a party to the 1992 Protocol to the International Convention on Civil Liability for Oil Pollution Damage, a vessel's registered owner is strictly liable for pollution damage caused in the territorial waters of a contracting state by discharge of persistent oil, subject to certain complete defenses. Under an amendment to the 1992 Protocol that became effective on November 1, 2003, for vessels of 5,000 to 140,000 gross tons (a unit of measurement for the total enclosed spaces within a vessel), liability will be limited to approximately $6.8 million plus $955.3 for each additional gross ton over 5,000. For vessels of over 140,000 gross tons, liability will be limited to approximately $136.0 million. As the convention calculates liability in terms of a basket of currencies, these figures are based on currency exchange rates on March 22, 2006. Under the 1969 Convention, the right to limit liability is forfeited where the spill is caused by the owner's actual fault; under the 1992 Protocol, a shipowner cannot limit liability where the spill is caused by the owner's intentional or reckless conduct. Vessels trading in jurisdictions that are parties to these conventions must provide evidence of insurance covering the liability of the owner. In jurisdictions where the International Convention on Civil Liability for Oil Pollution Damage has not been adopted, various legislative schemes or common law govern, and liability is imposed either on the basis of fault or in a manner similar to that convention. We believe that our protection and indemnity insurance will cover the liability under the plan adopted by the IMO. U.S. Oil Pollution Act of 1990 and Comprehensive Environmental Response, Compensation and Liability Act The United States regulates the tanker sector with an extensive regulatory and liability regime for environmental protection and cleanup of oil spills, consisting primarily of OPA and the Comprehensive Environmental Response, Compensation and Liability Act, or CERCLA. OPA affects all owners and operators whose vessels trade with the United States or its territories or possessions, or whose vessels operate in the waters of the United States, which include the U.S. territorial sea and the 200 nautical mile exclusive economic zone around the United States. CERCLA applies to the discharge of hazardous substances other than oil, whether on land or at sea. Both OPA and CERCLA impact our operations. Under OPA, vessel owners, operators and bareboat charterers are "responsible parties" who are jointly, severally and strictly liable (unless the spill results solely from the act or omission of a third party, an act of God or an act of war and the responsible party reports the incident and reasonably cooperates with the appropriate authorities) for all containment and clean-up costs and other damages arising from oil spills from their vessels. These other damages are defined broadly to include: o natural resource damages and related assessment costs; o real and personal property damages; o net loss of taxes, royalties, rents, profits or earnings capacity; o net cost of public services necessitated by a spill response, such as protection from fire, safety or health hazards; o loss of profits or impairment of earning capacity due to injury, destruction or loss of real property, personal property and natural resources; and o loss of subsistence use of natural resources. OPA limits the liability of responsible parties to the greater of $1,200 per gross ton or $10 million per tanker that is over 3,000 gross tons per discharge (subject to possible adjustment for inflation). Amendments to OPA signed into law in July 2006 increased the OPA liability limits to the greater of $1,900 per gross ton or $16.0 million per double-hull tanker that is over 3,000 gross tons per discharge (subject to possible adjustment for inflation). The act specifically permits individual states to impose their own liability regimes with regard to oil pollution incidents occurring within their boundaries, including adjacent waters, and some states have enacted legislation providing for unlimited liability for discharge of pollutants within their waters. In some cases, states that have enacted this type of legislation have not yet issued implementing regulations defining vessel owners' responsibilities under these laws. CERCLA, which applies to owners and operators of vessels, contains a similar liability regime and provides for cleanup, removal and natural resource damages. Liability under CERCLA is limited to the greater of $300 per gross ton or $5 million. Although OPA is primarily directed at oil tankers, it also applies to non-tanker vessels, such as container vessels, with respect to the fuel carried on board. OPA limits the liability of non-tanker owners to the greater of $600 per gross ton or $500,000 per discharge, which may be adjusted periodically for inflation. These limits of liability do not apply, however, where the incident is caused by violation of applicable U.S. federal safety, construction or operating regulations, or by the gross negligence or wilful misconduct of the responsible party or the responsible party's agent or employee or any person acting in a contractual relationship with the responsible party. In addition, these limits do not apply if the responsible party or the responsible party's agent or employee or any person acting in a contractual relationship with the responsible party fails or refuses to report the incident or to cooperate and assist in connection with the substance removal activities. OPA and CERCLA each preserve the right to recover damages under other laws, including maritime tort law. OPA also requires owners and operators of vessels to establish and maintain with the U.S. Coast Guard evidence of financial responsibility sufficient to meet the limit of their potential strict liability under the act. The U.S. Coast Guard has adopted regulations requiring evidence of financial responsibility in the amount of $1,500 per gross ton for tankers, combining the OPA limitation on liability of $1,200 per gross ton with the CERLA liability limit of $300 per gross ton. The U.S. Coast Guard has indicated that it expects to adopt regulations requiring evidence of financial responsibility in the amounts that reflect the higher limits of liability imposed by the July amendments to OPA, as described above. Under the regulations, evidence of financial responsibility may be demonstrated by insurance, surety bond, self-insurance, guaranty or an alternative method subject to approval by the Director of the U.S. Coast Guard National Pollution Funds Center. Under OPA regulations, an owner or operator of more than one vessel is required to demonstrate evidence of financial responsibility for the entire fleet in an amount equal only to the financial responsibility requirement of the vessel having the greatest maximum strict liability under OPA and CERCLA. Magnus Carriers has provided the requisite guarantees and has received certificates of financial responsibility from the U.S. Coast Guard for each of our vessels required to have one. Magnus Carriers and the Stena Group companies managing Stena Compass and Stena Compassion have arranged insurance for our tankers with pollution liability insurance in the amount of $1 billion. However, a catastrophic spill could exceed the insurance coverage available, in which event there could be a material adverse effect on our business and on the ship management companies' business, which could impair their ability to manage our vessels. Under OPA, oil tankers as to which a contract for construction or major conversion was put in place after June 30, 1990 are required to have double hulls. In addition, oil tankers without double hulls will not be permitted to come to U.S. ports or trade in U.S. waters by 2015. All of the tankers in our fleet have double hulls. OPA also amended the Federal Water Pollution Control Act to require that owners or operators of tankers operating in the waters of the United States must file vessel response plans with the U.S. Coast Guard, and their tankers are required to operate in compliance with their U.S. Coast Guard approved plans. These response plans must, among other things: o address a "worst case" scenario and identify and ensure, through contract or other approved means, the availability of necessary private response resources to respond to a "worst case discharge"; o describe crew training and drills; and o identify a qualified individual with full authority to implement removal actions. Vessel response plans for our tankers operating in the waters of the United States have been approved by the U.S. Coast Guard. In addition, we conduct regular oil spill response drills in accordance with the guidelines set out in OPA. The U.S. Coast Guard has announced it intends to propose similar regulations requiring certain vessels to prepare response plans for the release of hazardous substances. Under the management agreements, Magnus Carriers and our other ship management companies are responsible for ensuring our vessels comply with any such additional regulations. As discussed above, OPA does not prevent individual states from imposing their own liability regimes with respect to oil pollution incidents occurring within their boundaries, including adjacent coastal waters. In fact, most U.S. states that border a navigable waterway have enacted environmental pollution laws that impose strict liability on a person for removal costs and damages resulting from a discharge of oil or a release of a hazardous substance. These laws may be more stringent than U.S. federal law. Additional U.S. Environmental Requirements The U.S. Clean Air Act of 1970, as amended by the Clean Air Act Amendments of 1977 and 1990 (the " CAA"), requires the U.S. Environmental Protection Agency, or EPA, to promulgate standards applicable to emissions of volatile organic compounds and other air contaminants. Our vessels are subject to vapor control and recovery requirements for certain cargoes when loading, unloading, ballasting, cleaning and conducting other operations in regulated port areas. Our vessels that operate in such port areas are equipped with vapor control systems that satisfy these requirements. The CAA also requires states to draft State Implementation Plans, or SIPs, designed to attain national health-based air quality standards in primarily major metropolitan and/or industrial areas. Several SIPs regulate emissions resulting from vessel loading and unloading operations by requiring the installation of vapor control equipment. As indicated above, our vessels operating in covered port areas are already equipped with vapor control systems that satisfy these requirements. Although a risk exists that new regulations could require significant capital expenditures and otherwise increase our costs, we believe, based on the regulations that have been proposed to date, that no material capital expenditures beyond those currently contemplated and no material increase in costs are likely to be required. The Clean Water Act ("CWA") prohibits the discharge of oil or hazardous substances into navigable waters and imposes strict liability in the form of penalties for any unauthorized discharges. The CWA also imposes substantial liability for the costs of removal, remediation and damages. State laws for the control of water pollution also provide varying civil, criminal and administrative penalties in the case of a discharge of petroleum or hazardous materials into state waters. The CWA complements the remedies available under the more recent OPA and CERCLA, discussed above. Under current regulations of the EPA, vessels are not required to obtain CWA permits for the discharge of ballast water in U.S. ports. However, on March 31, 2005, a U.S. District Court ruled that the EPA exceeded its authority in creating an exemption for ballast water. On September 18, 2006, the court issued an order invalidating the exemption in the EPA's regulations for all discharges incidental to the normal operation of a vessel as of September 30, 2008, and directing the EPA to develop a system for regulating all discharges from vessels by that date. Although the EPA has indicated that it will appeal this decision, if the exemption is repealed, we may be subject to CWA permit requirements that may include ballast water treatment obligations that could increase the cost of operating in the United States. For example, this could require the installation of equipment on our vessels to treat ballast water before it is discharged or the implementation of other port facility disposal arrangements or procedures which may restrict our vessels from entering U.S. ports. We cannot assure you that any costs associated with compliance with the CWA's permitting requirements will not be material to our results of operations. The National Invasive Species Act ("NISA") was enacted in 1996 in response to growing reports of harmful organisms being released into U.S. ports through ballast water taken on by ships in foreign ports. NISA established a ballast water management program for ships entering U.S. waters. Under NISA, mid-ocean ballast water exchange is voluntary, except for ships heading to the Great Lakes, Hudson Bay, or vessels engaged in the foreign export of Alaskan North Slope crude oil. However, NISA's exporting and record-keeping requirements are mandatory for vessels bound for any port in the United States. Although ballast water exchange is the primary means of compliance with the act's guidelines, compliance can also be achieved through the retention of ballast water onboard the ship, or the use of environmentally sound alternative ballast water management methods approved by the U.S. Coast Guard. If the mid-ocean ballast exchange is made mandatory throughout the United States, or if water treatment requirements or options are instituted, the costs of compliance could increase for ocean carriers. Our operations occasionally generate and require the transportation, treatment and disposal of both hazardous and non-hazardous wastes that are subject to the requirements of the U.S. Resource Conservation and Recovery Act, or RCRA, or comparable state, local or foreign requirements. In addition, from time to time we arrange for the disposal of hazardous waste or hazardous substances at offsite disposal facilities. If such materials are improperly disposed of by third parties, we might still be liable for clean up costs under applicable laws. European Union Tanker Restrictions In July 2003, in response to the MT Prestige oil spill in November 2002, the European Union adopted legislation that accelerates the IMO single hull tanker phase-out timetable and, by 2010 will prohibit all single-hulled tankers used for the transport of oil from entering into its ports or offshore terminals. The European Union, following the lead of certain European Union nations such as Italy and Spain, has also banned, as of October 21, 2003, all single-hulled tankers carrying heavy grades of oil, regardless of flag, from entering or leaving its ports or offshore terminals or anchoring in areas under its jurisdiction. Commencing in 2005, certain single-hulled tankers above 15 years of age will also be restricted from entering or leaving European Union ports or offshore terminals and anchoring in areas under European Union jurisdiction. The European Union has also adopted legislation that: (1) bans manifestly sub-standard vessels (defined as those over 15 years old that have been detained by port authorities at least twice in a six-month period) from European waters and creates an obligation of port states to inspect vessels posing a high risk to maritime safety or the marine environment; and (2) provides the European Union with greater authority and control over classification societies, including the ability to seek to suspend or revoke the authority of negligent societies. It is impossible to predict what legislation or additional regulations, if any, may be promulgated by the European Union or any other country or authority. All of the tankers in our fleet are double-hulled; however, because of certain age restrictions and requirements set forth in the regulations described above, High Land and High Rider and the Arius (ex Citius) are subject to certain restrictions in trading. Vessel Security Regulations Since the terrorist attacks of September 11, 2001, there have been a variety of initiatives intended to enhance vessel security. On November 25, 2002, the U.S. Maritime Transportation Security Act of 2002, or MTSA, came into effect. To implement certain portions of the MTSA, in July 2003, the U.S. Coast Guard issued regulations requiring the implementation of certain security requirements aboard vessels operating in waters subject to the jurisdiction of the United States. Similarly, in December 2002, amendments to SOLAS created a new chapter of the convention dealing specifically with maritime security. The new chapter became effective in July 2004 and imposes various detailed security obligations on vessels and port authorities, most of which are contained in the newly created International Ship and Port Facilities Security Code, or the ISPS Code. The ISPS Code is designed to protect ports and international shipping against terrorism. After July 1, 2004, to trade internationally, a vessel must attain an International Ship Security Certificate from a recognized security organization approved by the vessel's flag state. Among the various requirements are: o on-board installation of automatic identification systems to provide a means for the automatic transmission of safety-related information from among similarly equipped ships and shore stations, including information on a ship's identity, position, course, speed and navigational status; o on-board installation of ship security alert systems, which do not sound on the vessel but only alerts the authorities on shore; o the development of vessel security plans; o ship identification number to be permanently marked on a vessel's hull; o a continuous synopsis record kept onboard showing a vessel's history including, name of the ship and of the state whose flag the ship is entitled to fly, the date on which the ship was registered with that state, the ship's identification number, the port at which the ship is registered and the name of the registered owner(s) and their registered address; and o compliance with flag state security certification requirements. The U.S. Coast Guard regulations, intended to align with international maritime security standards, exempt from MTSA vessel security measures non-U.S. vessels that have on board, as of July 1, 2004, a valid ISSC attesting to the vessel's compliance with SOLAS security requirements and the ISPS Code. Magnus Carriers has implemented the various security measures addressed by MTSA, SOLAS and the ISPS Code, and our fleet is in compliance with applicable security requirements. Risk of Loss and Insurance The operation of any cargo vessel includes risks such as mechanical failure, physical damage, collision, property loss, cargo loss or damage and business interruption due to political circumstances in foreign countries, hostilities and labor strikes. In addition, there is always an inherent possibility of marine disaster, including oil spills and other environmental mishaps, and the liabilities arising from owning and operating vessels in international trade. The U.S. Oil Pollution Act of 1990, or OPA, which imposes virtually unlimited liability upon owners, operators and charterers of any vessel trading in the United States' exclusive economic zone for certain oil pollution accidents in the United States, has made liability insurance more expensive for ship owners and operators trading in the U.S. market. While we believe that our present insurance coverage is adequate, not all risks can be insured against, and there can be no guarantee that any specific claim will be paid, or that we will always be able to obtain adequate insurance coverage at reasonable rates. We have obtained marine hull and machinery and war risk insurance, which includes the risk of actual or constructive total loss, for all our vessels. The vessels are each covered up to at least fair market value. We also arranged increased value insurance for most of our vessels. Under the increased value insurance, in case of total loss of the vessel, we will be able to recover the sum insured under the policy in addition to the sum insured under our hull and machinery policy. Increased value insurance also covers excess liabilities that are not recoverable in full by the hull and machinery policies by reason of under-insurance. Protection and indemnity insurance, which covers our third party liabilities in connection with our shipping activities, is provided by mutual protection and indemnity associations, or P&I Associations. This insurance covers third-party liability and other related expenses of injury or death of crew, passengers and other third parties, loss or damage to cargo, claims arising from collisions with other vessels, damage to other third-party property, pollution arising from oil or other substances, and salvage, towing and other related costs, including wreck removal. Protection and indemnity insurance is a form of mutual indemnity insurance, extended by protection and indemnity mutual associations, or "clubs." Our coverage, except for pollution, is unlimited. Our current protection and indemnity insurance coverage for pollution is $1.0 billion per vessel per incident. The 13 P&I Associations that compose the International Group insure approximately 90% of the world's commercial tonnage and have entered into a pooling agreement to reinsure each association's liabilities. Each P&I Association has capped its exposure to this pooling agreement at $4.5 billion. As a member of a P&I Association that is a member of the International Group, we are subject to calls payable to the associations based on our claim records as well as the claim records of all other members of the individual associations, and members of the International Group. Inspection by a Classification Society Our vessels have been certified as being "in-class" by either Nippon Kaijori Kyokai Corp., Lloyds Register of Shipping, Bureau Veritas, Germanischer Lloyd or Det Norske Veritas, each of which is a member of the International Association of Classification Societies. Every commercial vessel's hull and machinery is evaluated by a classification society authorized by its country of registry. The classification society certifies that the vessel has been built and maintained in accordance with the rules of the classification society and complies with applicable rules and regulations of the vessel's country of registry and the international conventions of which that country is a member. Each vessel is inspected by a surveyor of the classification society in three surveys of varying frequency and thoroughness: every year for the annual survey, every two to three years for intermediate surveys and every four to five years for special surveys. Should any defects be found, the classification surveyor will issue a "recommendation" for appropriate repairs, which have to be made by the shipowner within the time limit prescribed. Vessels may be required, as part of the annual and intermediate survey process, to be drydocked for inspection of the underwater portions of the vessel and for necessary repair stemming from the inspection. Special surveys always require drydocking. Competition We operate in markets that are highly competitive and based primarily on supply and demand. 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 operator. We typically arrange our charters in the period market through the use of brokers, who negotiate the terms of the charters based on market conditions. We compete primarily with owners of container ships and owners of products tankers in the Aframax, Panamax and Handymax class sizes. Ownership of tankers is highly fragmented and is divided among major oil companies and independent vessel owners. Legal Proceedings Against Us From time to time in the future we may be subject to legal proceedings and claims in the ordinary course of business, principally personal injury and property casualty claims. Those claims, even if lacking merit, could result in the expenditure of significant financial and managerial resources. We have not been involved in any legal proceedings which may have, or have had a significant effect on our financial position, nor are we aware of any proceedings that are pending or threatened which may have a significant effect on our financial position. C. Organizational Structure Aries Maritime Transport Limited is the sole owner of all outstanding shares of the subsidiaries listed in note 1 of our consolidated and predecessor combined carve-out financial statements included in this report. D. Properties, Plants and Equipment We lease office space in Athens, Greece, from Domina Petridou O.E., which is owned by Mons S. Bolin, our President and Chief Executive Officer, and Domina Petridou. In November 2005 we entered into a ten-year lease agreement with the landowner. We refer you to "Our Fleet" above in this item for a discussion of our vessels. ITEM 4A UNRESOLVED STAFF COMMENTS Not applicable ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS The following discussion of our financial condition and results of operations should be read in conjunction with our consolidated and predecessor combined carve-out financial statements, which we call our consolidated and combined financial statements, and the related notes, and the other financial and other information included in this document. This discussion contains forward-looking statements, which are based on our assumptions about the future of our business. Our actual results will likely differ materially from those contained in the forward-looking statements and such differences may be material. Please read "Forward-Looking Statements" for additional information regarding forward-looking statements used in this document. Reference in the following discussion to " our" and " us" and " the company" refer to our company, our subsidiaries and the predecessor operations of Aries Maritime Transport Limited, except where the context otherwise indicates or requires. General We are Aries Maritime Transport Limited, or Aries Maritime, a Bermuda company incorporated in January 2005 as a wholly owned indirect subsidiary of Aries Energy Corporation, or Aries Energy. We are an international shipping company that owns products tankers and container vessels. In March 2005, subsidiaries of Aries Energy contributed to us all of the issued and outstanding stock of 10 vessel-owning companies in exchange for shares in our company. Before this contribution, each of the Aries Energy subsidiaries held 100% of the issued and outstanding stock of the respective vessel-owning company or companies owned by it. We now hold 100% of the issued and outstanding stock of each vessel-owning company. Because our ownership percentage in each vessel-owning company is identical to each contributing subsidiary's prior ownership percentage in the same vessel-owning company, the group reorganization was accounted for as an exchange of equity interests at historical cost. On June 8, 2005 Aries Maritime closed its initial public offering of 12,240,000 common shares at an offering price of $12.50 per share. The combined financial statements included in this document have been carved out of the consolidated financial statements of Aries Energy, which owned and operated seven products tankers and five container vessels during the year ended December 31, 2004. Results have been included from the respective dates that the vessel-owning subsidiaries came under the control of the shareholders of Aries Energy. Aries Energy's shipping interests and other assets, liabilities, revenues and expenses that do not relate to the vessel-owning subsidiaries acquired by us are not included in our combined financial statements. Our financial position, results of operations and cash flows reflected in our combined financial statements include all expenses allocable to our business, but may not be indicative of those that would have been achieved had we operated as a public entity for all periods presented or of future results. From March 17, 2005, the consolidated financial statements reflect the consolidated results of Aries Maritime. A. Operating Results Important Factors to Consider When Evaluating our Historical and Future Results of Operations We acquired our first two vessels, the High Land and the High Rider, in March 2003. These two vessels were the only vessels in our fleet to operate for the entire year ended December 31, 2004. At various times between April and December 2004, we acquired five products tankers and five container vessels. These ten vessels were placed into service shortly after their respective delivery dates. In December 2004, Aries Energy sold the Makassar and the Seine to an affiliate. As a result of these disposals, our fleet consisted of seven products tankers and three container vessels at December 31, 2004. We exercised an option to re-acquire the Makassar and the Seine shortly after the closing of the initial public offering and took delivery of these ships in June and July 2005, respectively. In October 2005, contracts were entered into for the purchase of two new products tankers; two 72,750 dwt vessels, Stena Compass and Stena Compassion. The Stena Compass was delivered in February 2006. The Stena Compassion was delivered in June 2006. In November 2005 we took delivery of the 2001 built products tanker Chinook. As a result of these acquisitions, our fleet consisted of eight products tankers and five container vessels as of December 31, 2005 and ten products tankers and five container vessels as of December 31, 2006. The products tanker and container vessel sectors have historically been highly cyclical, experiencing volatility in profitability, vessel values and charter rates. In particular, charter rates are strongly influenced by the supply of vessels and the demand for oil and oil products and container transportation services. Lack of Historical Operating Data for Vessels Before their Acquisition Consistent with shipping industry practice, other than inspection of the physical condition of the vessels and examinations of classification society records, there is no historical financial due diligence process when we acquire vessels. Accordingly, we do not obtain the historical operating data for the vessels from the sellers because that information is not material to our decision to make acquisitions, nor do we believe it would be helpful to potential investors in our common shares in assessing our business or profitability. Most vessels are sold under a standardized agreement, which, among other things, provides the buyer with the right to inspect the vessel and the vessel's classification society records. The standard agreement does not give the buyer the right to inspect, or receive copies of, the historical operating data of the vessel. Prior to the delivery of a purchased vessel, the seller typically removes from the vessel all records, including past financial records and accounts related to the vessel. In addition, the technical management agreement between the seller's technical manager and the seller is automatically terminated and the vessel's trading certificates are revoked by its flag state following a change in ownership. Consistent with shipping industry practice, we treat the acquisition of a vessel (whether acquired with or without charter) as the acquisition of an asset rather than a business. Although vessels are generally acquired free of charter, we have acquired (and may in the future acquire) some vessels with period charters. Where a vessel has been under a voyage charter, the vessel is delivered to the buyer free of charter. It is rare in the shipping industry for the last charterer of the vessel in the hands of the seller to continue as the first charterer of the vessel in the hands of the buyer. In most cases, when a vessel is under period charter and the buyer wishes to assume that charter, the vessel cannot be acquired without the charterer's consent and the buyer's entering into a separate direct agreement with the charterer to assume the charter. The purchase of a vessel itself does not transfer the charter, because it is a separate service agreement between the vessel owner and the charterer. When we purchase a vessel and assume a related period charter, we must take the following steps before the vessel will be ready to commence operations: o obtain the charterer's consent to us as the new owner; o obtain the charterer's consent to a new technical manager; o in some cases, obtain the charterer's consent to a new flag for the vessel; o arrange for a new crew for the vessel; o replace all hired equipment on board, such as gas cylinders and communication equipment; o negotiate and enter into new insurance contracts for the vessel through our own insurance brokers; o register the vessel under a flag state and perform the related inspections in order to obtain new trading certificates from the flag state; o implement a new planned maintenance program for the vessel; and o ensure that the new technical manager obtains new certificates for compliance with the safety and vessel security regulations of the flag state. The following discussion is intended to help you understand how acquisitions of vessels affect our business and results of operations. Our business is comprised of the following main elements: o employment and operation of our products tankers and container vessels; and o management of the financial, general and administrative elements involved in the conduct of our business and ownership of our products tankers and container vessels. The employment and operation of our vessels require the following main components: o vessel maintenance and repair; o crew selection and training; o vessel spares and stores supply; o contingency response planning; o onboard safety procedures auditing; o accounting; o vessel insurance arrangement; o vessel chartering; o vessel hire management; o vessel surveying; and o vessel performance monitoring. The management of financial, general and administrative elements involved in the conduct of our business and ownership of our vessels requires the following main components: o management of our financial resources, including banking relationships, i.e., administration of bank loans and bank accounts; o management of our accounting system and records and financial reporting; o administration of the legal and regulatory requirements affecting our business and assets; and o management of the relationships with our service providers and customers. Principal Factors that Affect Our Business The principal factors that affect our financial position, results of operations and cash flows include: o charter rates and periods of charterhire; o vessel operating expenses and voyage costs, which are incurred in both U.S. Dollars and other currencies, primarily Euros; o depreciation expenses, which are a function of the cost of our vessels, significant vessel improvement costs and our vessels' estimated useful lives; o financing costs related to our indebtedness, which totalled $284.8 million at December 31, 2006; and o fluctuations in foreign exchange rates. The amounts estimated below are not intended to constitute pro forma financial information within the meaning of regulations promulgated by the Securities and Exchange Commission, but in our view, have been determined on a reasonable basis, and reflect our best currently available estimates and judgements. These estimates do not represent actual results and should not be relied upon as being necessarily indicative of future results, and investors are cautioned not to place undue reliance on this information. This financial information was not prepared with a view toward compliance with published guidelines of the Securities and Exchange Commission or the guidelines established by the American Institute of Certified Public Accountants for preparation and presentation of prospective financial information. This forward-looking financial information has been prepared by us, and is our responsibility. You should read the following discussion together with the information contained in the table of vessel information under "Item 4 -- Information on the Company -- Business Overview -- Our Fleet". The net daily charterhire rates detailed in that table under "Net Daily Charterhire Rate" are fixed rates and all detailed vessels, except Bora, now named Ostria, which is currently trading in the spot market, are employed under period charters. Revenues from period charters are stable over the duration of the charter, provided there are no unexpected or periodic survey off-hire periods and no performance claims from the charterer or charterer defaults. We cannot guarantee that actual results will be as anticipated. Our strategy is to employ vessels on period charters in order to generate stable cash flow over a period of time. Fourteen of our fifteen vessels are employed, on period charters and, with the exception of the Stena Compass and Stena Compassion, are employed on time charters. The Stena Compass and Stena Compassion charters are bareboat charters. The average remaining term under our existing period charters on our fleet was 1.5 years as of December 31, 2006 with 30% of the charter parties for our products tankers containing profit sharing arrangements. The Ostria (ex Bora) and MSC Oslo (ex SCI Tej) were not employed on period charter as of December 31, 2006. Our policy is to carry loss-of-hire insurance, which will provide the equivalent of the charter rate on the vessel in the event that a vessel is off-hire for more than 14 days up to a maximum of 60 days. The daily net charterhire under our existing charter agreements is increased by any profit sharing and by the amortization of the deferred revenue associated with our assumption of charters when acquiring certain vessels. The total profit sharing earned during the year ended December 31, 2006 was $572,012. The total deferred revenue amortization in respect of the relevant vessels was $11.7 million during the year ended December 31, 2006. The recognition of deferred revenue will only continue for the duration of the charters assumed with the acquisition of the relevant vessels. Vessels typically operate for 360 days per year, which is a level commonly used as an industry average. The five days of non-operation per year are to provide for time spent in dry-dock and off-hire time. Should a vessel be operational for 355 days, instead of 360 days in any year, charterhire income from that vessel would decrease by 1.4% in that year. We earned revenues, excluding deferred revenue, of $82.5 million in the year ended December 31, 2006. An average 1.4% decrease in charterhire income for the vessels then comprising our fleet would have resulted in a decrease of revenues by $1.1 million to $81.4 million. With regard to total vessel operating expenses, defined as the sum of the vessel operating expenses, amortization of actual dry-docking and special survey expenses and management fees, the ship management agreements with Magnus Carriers for the twelve vessels under Magnus Carriers' technical management set out the initial twelve months agreed total daily vessel operating expenses. For further information on the ship management agreements with Magnus Carriers please read, "Technical and Commercial Management of Our Fleet" in "Item 5 - Operating and Financial Review and Prospects." Any variance between the agreed total vessel operating expenses and the actual total vessel operating expenses is shared equally between Magnus Carriers and us. The daily operating expenses detailed in the table under "Our Fleet" in the column headed "Daily total vessel operating expenses" represents the initial agreed vessel operating expenses under our management agreements with Magnus Carriers, with the exception of the daily operating expense detailed for Chinook, which is the actual daily vessel operating expense for 2006 as this vessel is not managed by Magnus Carriers. Chinook is subject to a ship management agreement with an unrelated company, which contains no variance sharing arrangement. Stena Compass, which was delivered in February 2006 and Stena Compassion, which was delivered in June, 2006, are both employed on bareboat charters and under such contracts the charterer is responsible for vessel operating expenses. The main factors that could increase total vessel operating expenses are crew salaries, insurance premiums, dry-docking and special survey costs, spare parts orders, repairs that are not covered under insurance policies and lubricants prices. The ship management agreements provide for a cost of inflation increase in total vessel operating expenses of 3% per annum and are subject to adjustment every three years. On the basis of total vessel operating expenses for the twelve ships subject to the management agreements with Magnus Carriers, at the initial level contained in those management agreements as set out in the table of vessel information under "Our Fleet," the aggregate of the daily total vessel operating expenses was $57,400. Following the 3% increase during the year ended December 31, 2006, in accordance with the terms of the management agreements, the aggregate of the daily total vessel operating expenses for the twelve vessels managed by Magnus Carriers was $59,122. During the year ended December 31, 2006, we incurred vessel operating expenses and management fees to Magnus Carriers for the twelve ships under its management totaling $33.4 million. Under the management agreements with Magnus Carriers, the vessel operating expenses and management fees for the same period were expected to total $19.8 million. The "Vessel operating expenses" in our consolidated and combined financial statements for the year ended December 31, 2006 have been adjusted to reflect the variance sharing contribution due from Magnus Carriers of $6.5 million under the terms of the management agreements. Revenues At December 31, 2006, all our revenues were derived from the time, bareboat and voyage charters of our ten products tankers and five container vessels. Our vessels were chartered to reputable charterers with remaining periods ranging from approximately one month to 3.7 years, with an average of approximately 1.5 years as of December 31, 2006. Our vessels have been employed with these charterers for periods ranging from 2 months to 3.2 years. We believe that the performance of the charterers to date has been in accordance with our charterparties. At the maturity of each charter, we will seek to renew these charters with the same or other reputable charterers. Our revenues for the period ended December 31, 2006 reflect the operation of eight products tankers and five container vessels for the entire year. During the year ended December 31, 2006, we took delivery of two additional products tankers, which increased our revenues for that period in relation to the year ended December 31, 2005. During the year ended December 31, 2006, the products tanker Citius, now named Arius, was out-of-service for 7 months undergoing major works and the products tanker Bora, now named Ostria, recorded 264 non-revenue days due to dry-docking for repairs and vessel upgrades. Non-revenue days are defined as the days the vessel was in our possession, but off-hire or out-of-service and not earning charterhire. In addition, certain of our vessels were out-of-service due to scheduled drydocking and special survey, upgradings and preventative maintenance works for total of 304 days. These periods of off hire and out-of-service time reduced our revenues for the year ended December 31, 2006 as compared to the year ended December 31, 2005. Our revenues include an amount for the amortization of deferred revenue arising from the purchase of vessels together with the assumption of a below market value period charter. We value the liability upon acquisition of the vessel by determining the difference between the market charter rate and assumed charter rate, discounting the result using our weighted average cost of capital and record the balance as deferred revenue, amortizing it to revenue over the remaining life of the period charter. Commissions Chartering commissions are paid to chartering brokers and are typically based on a percentage of the charterhire rate. We are currently paying chartering commissions ranging from 1.25% to 6.50%, with an average of 2.92%. We do not pay chartering commissions for vessels on bareboat charters. Voyage Expenses Voyage expenses are incurred due to a vessel's travelling from a loading port to a discharging port, to repair facilities or on a repositioning voyage, and include fuel (bunkers) cost, port expenses, agent's fees, canal dues and extra war risk insurance. Typically, under period charters, the charterer is responsible for paying voyage expenses while the vessel is on hire. General & Administrative Expenses These expenses include executive and director compensation, audit fees, liability insurance premium and company administration costs. Gain on Disposal of Vessels Gain on disposal of vessels is the difference between the net proceeds received from the sale of vessels and their net book value at the date of sale. Vessel Operating Expenses Vessel operating expenses are the costs of operating a vessel, primarily consisting of crew wages and associated costs, insurance premiums, management fees, lubricants and spare parts, and repair and maintenance costs. Vessel operating expenses exclude fuel cost, port expenses, agents' fees, canal dues and extra war risk insurance, which are included in "voyage expenses." Certain vessel operating expenses are higher during the initial period of a vessel's operation. Initial daily vessel operating expenses are usually higher than normal as newly acquired vessels are inspected and modified to conform to the requirements of our fleet. Depreciation Depreciation is the periodic cost charged to our income for the reduction in usefulness and long-term value of our vessels. We depreciate the cost of our vessels over 25 years on a straight-line basis. No charge is made for depreciation of vessels under construction until they are delivered. Amortization of Special Survey and Dry-docking Costs Special survey and dry-docking costs incurred are deferred and amortized over a period of five and two and a half years, respectively, which reflects the period between each required special survey and minimum period between each dry-docking. Interest Expenses Interest expenses include interest, commitment fees, arrangement fees, amortization of deferred financing costs, debt discount, interest incurred from discounting deferred revenue and other similar charges. Interest incurred during the construction of a newbuilding is capitalized in the cost of the newbuilding. The amount of interest expense is determined by the amount of loans and advances outstanding from time to time and interest rates. The effect of changes in interest rates may be reduced by interest rate swaps or other derivative instruments. We use interest rate swaps to hedge our interest rate exposure under our loan agreements. Change in Fair Value of Derivatives At the end of each accounting period, the fair values of our interest rate swaps are assessed by marking each swap to market. Changes in the fair value between periods are recognized in the statements of income. Foreign Exchange Rates Foreign exchange rate fluctuations, particularly between the Euro and Dollar, have had an impact on our vessel operating expenses and administrative expenses. We actively seek to manage such exposure. Currently, approximately 30% of our vessel operating cost is incurred in currencies other than the U.S. dollar. Close monitoring of foreign exchange rate trends, maintaining foreign currency accounts and buying foreign currency in anticipation of our future requirements are the main ways we manage our exposure to foreign exchange risk. Technical and Commercial Management of Our Fleet Twelve of our vessel-owning subsidiaries entered into ten-year ship management agreements with Magnus Carriers, a related party, to provide primarily for the technical management of our vessels, including crewing, maintenance, repair, capital expenditures, dry-docking, payment of vessel tonnage taxes, maintaining insurance and other vessel operating activities. These ship management agreements are cancellable by the vessel-owning subsidiaries with two months' notice, while Magnus Carriers has no such option. Under the ship management agreements, we pay Magnus Carriers an amount equal to the budgeted total vessel operating expenses, which we have established jointly with Magnus Carriers, and which ranged from $4,400 to $5,100 per vessel per day initially. The budgeted initial total vessel operating expenses, which include the management fees paid to Magnus Carriers of $146,000 per annum per vessel initially, increase by 3% annually and are subject to adjustment every three years. The ship management agreements provide that if actual total vessel operating expenses exceed the corresponding budgeted amounts, we and Magnus Carriers will bear the excess expenditures equally (except for costs relating to any improvement, structural changes or installation of new equipment required by law or regulation, which will be paid solely by us). If the actual total vessel operating expenses are less than the corresponding budgeted amounts, we and Magnus Carriers will share the cost savings equally. We also use Magnus Carriers and its affiliates non-exclusively for commercial management, which includes finding employment for our vessels and identifying and developing new business that will fit our strategy. For such services, we will pay Magnus Carriers a commercial management fee equal to 1.25% of any gross charterhire or freight we receive for new charters. In addition, Magnus Carriers will supervise the sale or purchase of vessels in accordance with our instructions. We pay Magnus Carriers 1% of the sale or purchase price in connection with a vessel sale or purchase that Magnus Carriers brokers for us. We may also use third parties for commercial management services from time to time. In the case of the Chinook, whose ship management agreement with an unrelated ship management company is for technical and operational vessel management only, we have entered into a separate commercial management agreement with Magnus Carriers for the provision of commercial and vessel accounting services for a fixed fee of $60,000 per annum. In addition, as long as Magnus Carriers is managing vessels in our fleet, Magnus Carriers and its principals have granted us a right of first refusal to acquire or charter any container vessels or any products tankers ranging from 20,000 to 85,000 dwt, which Magnus Carriers, its principals or any of their controlled affiliates may consider for acquisition or charter in the future. Critical Accounting Policies Critical accounting policies are those that reflect significant judgments of uncertainties and potentially result in materially different results under different assumptions and conditions. We have described below what we believe are our most critical accounting policies, because they generally involve a comparatively higher degree of judgment in their application. For a description of our significant accounting policies, see Note 2 to our consolidated and predecessor combined carve-out financial statements included herein. Our financial position, results of operations and cash flows include all expenses allocable to our business, but may not be indicative of the results we would have achieved had we operated as a public entity under our current chartering, management and other arrangements for the entire periods presented or for future periods. The discussion and analysis of our financial condition and results of operations is based upon our consolidated and combined financial statements, which have been prepared in accordance with U.S. GAAP. The preparation of those financial statements requires us to make estimates and judgments that affect the reported amounts of assets and liabilities, revenues and expenses and related disclosure of contingent assets and liabilities at the date of our financial statements. Actual results may differ from these estimates under different assumptions and conditions. Depreciation Our vessels represent our most significant assets. We record the value of our vessels at their cost (which includes acquisition costs directly attributable to the vessel and expenditures made to prepare the vessel for its initial voyage) less accumulated depreciation. We depreciate our vessels on a straight-line basis over their estimated useful life, which is estimated to be 25 years from date of initial delivery from the shipyard. We believe that a 25-year depreciable life is consistent with that of other shipping companies and it represents the most reasonable useful life for each of the vessels. Depreciation is based on cost less the estimated residual scrap value. We estimate the residual values of our vessels based on a scrap value of $180 or $190 per lightweight ton, which we believe are levels common in the shipping industry. An increase in the useful life of a vessel or in its residual value would have the effect of decreasing the annual depreciation charge and extending it into later periods. A decrease in the useful life of a vessel or in its residual value would have the effect of increasing the annual depreciation charge. However, when regulations place limitations over the ability of a vessel to trade, the vessel's useful life is adjusted to end at the date such regulations become effective. In the year ended December 31, 2006, a one year reduction in useful life would increase our total depreciation charge by $2.4 million. If circumstances cause us to change our assumptions in making determinations as to whether vessel improvements should be capitalized, the amounts we expense each year as repairs and maintenance costs could increase, partially offset by a decrease in depreciation expense. Impairment of Long-lived Assets We evaluate the carrying amounts and periods over which long-lived assets are depreciated to determine if events have occurred which would require modification to their carrying values or useful lives. In evaluating useful lives and carrying values of long-lived assets, we review certain indicators of potential impairment, such as undiscounted projected operating cash flows, vessel sales and purchases, business plans and overall market conditions. We determine undiscounted projected net operating cash flow for each vessel and compare it to the vessel carrying value. In the event that an impairment were to occur, we would determine the fair value of the related asset and record a charge to operations calculated by comparing the asset's carrying value to the estimated fair value. We estimate fair value primarily through the use of third-party valuations performed on an individual vessel basis. To date, we have not identified any impairment of our long-lived assets. Deferred Dry-docking and Special Survey Costs Our vessels are required to be dry-docked every 30 months for major repairs and maintenance that cannot be performed while the vessels are operating. Our vessels are required to undergo special surveys every 60 months. We capitalize the costs associated with dry-dockings and special surveys as they occur and amortize these costs on a straight-line basis over the period between dry-dockings and surveys, respectively. We believe that these criteria are consistent with U.S. GAAP guidelines and industry practice and that our policy of capitalization reflects the economics and market values of the vessels. Revenue Recognition Revenues are generated from bareboat, time and voyage charters. In recognizing revenue we are required to make certain estimates and assumptions. Historically, differences between our estimates and actual results have not been material to our financial results. Bareboat and time charter revenues are recorded over the term of the charter as service is provided. Any profit sharing additional hires generated are recorded over the term of the charter as the service is provided. Deferred income represents revenue applicable to periods after the balance sheet date. The operating results of voyages in progress at a reporting date are estimated and recognized pro-rata on a per day basis. Fair Value of Financial Instruments In determining the fair value of interest rate swaps, a number of assumptions and estimates are required to be made. These assumptions include future interest rates. These assumptions are assessed at the end of each reporting period based on available information existing at that time. Accordingly, the assumptions upon which these estimates are based are subject to change and may result in a material change in the fair value of these items. Purchase of Vessels Where we identify any intangible assets or liabilities associated with the acquisition of a vessel, we record all identified tangible and intangible assets or liabilities at fair value. Fair value is determined by reference to market data and the discounted amount of expected future cash flows. Where we have assumed an existing charter obligation at charter rates that are less than market charter rates, we record a liability, being the difference between the assumed charter rate and the market charter rate for an equivalent vessel. This deferred revenue is amortized to revenue over the remaining period of the charter. The determination of the fair value of acquired assets and assumed liabilities requires us to make significant assumptions and estimates of many variables including market charter rates, expected future charter rates, future vessel operating expenses, the level of utilization of our vessels and our weighted average cost of capital. The use of different assumptions could result in a material change in the fair value of these items, which could have a material impact on our financial position and results of operations. Results of Operations For the Year Ended December 31, 2006 Compared to the Year Ended December 31, 2005 Revenues Total revenues increased by approximately 24% to $94.2 million in the year ended December 31, 2006 compared to $75.9 million in the year ended December 31, 2005. This increase is primarily attributable to the growth of the Company's fleet (we acquired two products tankers, Stena Compass and Stena Compassion) and increase in operating days and certain vessels commencing period charters at higher rates of charterhire during the year ended December 31, 2006. Out-of-service and off-hire time for certain vessels, primarily the products tankers Citius, now named Arius, and Bora, now named Ostria, during the year ended December 31, 2006 partially offset the increase in revenue. During the year ended December 31, 2006 vessel operating days totalled 5,265, compared to total vessel operating days of 4,042 for the year ended December 31, 2005. The Company defines operating days as the total days the vessels were in the Company's possession for the relevant period. Actual revenue days during the year ended December 31, 2006 were 4,485 days compared to 3,998 days for the year ended December 31, 2005. The Company defines revenue days as the total days the vessels were not off-hire or out-of-service. Of the total revenue earned by our vessels during the year ended December 31, 2006, 56% was earned by our products tankers and 44% by our container vessels. We have recognized $11.7 million of deferred revenue during the year ended December 31, 2006 compared to $9.3 million during the year ended December 31, 2005, as a result of the assumption of charters associated with certain vessel acquisitions. These assumed charters were at set charter rates, which were less than market rates at the date of the vessels' acquisition. Commissions Chartering commissions increased by approximately 8% to $1.4 million in the year ended December 31, 2006, compared to $1.3 million in the year ended December 31, 2005. This increase is primarily due to the aggregate effect of an increase in operating days. Voyage Expenses Voyage expenses increased by approximately 1,950% to $4.1 million in the year ended December 31, 2006, compared to $0.2 million in the year ended December 31, 2005. This increase is primarily due to the costs incurred by certain vessels travelling on voyage charters and to repair facilities during the year ended December 31, 2006. During the year ended December 31, 2005, all vessels were employed on time charters, under which the charterers are responsible for voyage expenses. Vessel operating expenses Vessel operating expenses increased by approximately 52% to $27.1 million during the year ended December 31, 2006, compared to $17.8 million during the year ended December 31, 2005. This increase is mainly attributable to the greater number of operating days during the year ended December 31, 2006 and higher average fleet running costs partially offset by Magnus Carriers' contribution under the budget variance sharing arrangement within the ship management agreements between certain of our vessel-owning subsidiaries and Magnus Carriers. The Magnus Carriers managed vessel operating expenses for the year ended December 31, 2006 were budgeted at $18 million. Excluding this budget variance sharing arrangement, vessel operating expenses were $31.6 million for the year ended December 31, 2006 compared to $18.7 million for the year ended December 31, 2005. Of the total vessel operating expenses during the year ended December 31, 2006, 54% was incurred by our products tankers and 46% by our container vessels. General & Administrative Expenses General and administrative expenses increased by approximately 162% to $4.2 million in the year ended December 31, 2006 compared to $1.6 million in the year ended December 31, 2005. This increase is primarily due to the Company operating as a public company for the entire year ended December 31, 2006 and costs associated with implementing requirements of the Sarbanes-Oxley Act of 2002 incurred during 2006. Depreciation and Amortization Depreciation increased by approximately 52% to $29.4 million during the year ended December 31, 2006 compared to $19.4 million during the year ended December 31, 2005. Amortization of dry-docking and special survey costs increased by 84% to $3.5 million in the year ended December 31, 2006, compared to $1.9 million in the year ended December 31, 2005. These increases are primarily due to the growth of the Company's fleet and increase in operating days during the year ended December 31, 2006 as well as higher dry-docking and special survey expenses. The $5 million one-time accelerated payment by Magnus Carriers in respect of the capitalized costs of the Citius, now named Arius, has been recognized as a reduction in capitalized costs. This accelerated contribution by Magnus Carriers made during 2006 was in full and final settlement of its share of the costs of the works the vessel underwent during the period from December 3, 2005 to July 31, 2006. Management Fees to Related Party Management fees paid to Magnus Carriers increased by 27% to $1.8 million in the year ended December 31, 2006 compared to $1.5 million in the year ended December 31, 2005. This increase is primarily due to the increase in operating days. Interest Expense Total interest expense increased by approximately 1% to $19 million during the year ended December 31, 2006, compared to $18.8 million during the year ended December 31, 2005. Interest expense on loans increased by approximately 81% to $16.3 million, compared to $9.0 million for the year ended December 31, 2005. This increase is primarily due to the growth of the Company's fleet and associated increase in debt and financing days. Interest expense relating to amortization of deferred financing costs and debt discount decreased by approximately 83% to $1.6 million during the year ended December 31, 2006, compared to $9.2 million during the year ended December 31, 2005. During the year ended December 31, 2005, amortization of debt discount as a result of refinancing was $7.6 million. Debt discount was fully amortized during the year ended December 31, 2005. Interest expense incurred from discounting the deferred revenue expense increased by approximately 150% to $1 million during the year ended December 31, 2006, compared to $0.4 million during the year ended December 31, 2005. This increase is primarily due to the increase in deferred revenue amortization. Interest Rate Swaps The marking to market of our seven interest rate swaps in effect as of December 31, 2006 resulted in an unrealized loss of $1.8 million, compared to an unrealized gain for the year ended December 31, 2005 of $0.95 million, due to the change in fair value over the period. We had three interest rate swaps in place as of December 31, 2005. In April 2006, one of these identical swaps was cancelled with a settlement in our favor of $0.49 million. On July 5, 2006, we entered into five additional swaps for a total notional amount of $100 million. Our seven interest rate swaps comprise two sets of swaps. We entered into a set of five interest rate swaps with a termination date of April 4, 2011 for a notional amount of $20 million each, under which we pay a maximum fixed rate of 5.63%. The marking to market valuation of this set of five interest rate swaps as at December 31, 2006 resulted in an unrealized loss of $2.5million. We also entered into a set of two swaps with a termination date of March 6, 2009 for a notional amount of $46.67 million each, under which we pay a maximum fixed rate of 4.88%. The marking to market valuation of this set of two swaps as at December 31, 2006 resulted in an unrealized gain for the Company of $0.67 million. Foreign Exchange Rates During the year ended December 31, 2006 a charge of $0.4 million was recorded due to adverse movement in foreign exchange rates. Foreign exchange differences are included in General & Administrative Expenses. Net Income Net income was $2.2 million in the year ended December 31, 2006, compared to $14.8 million in the year ended December 31, 2005, a decrease of 85%. This decrease is primarily due to the greater number of out-of-service and off-hire days, higher fleet running costs, increased voyage expenses as fuel and port dues were incurred in connection with certain vessels on voyage charters and travelling to repair yards, costs associated with operating as a publicly traded company, as well as the increased depreciation and amortization charges, and the adverse change in the fair value of derivatives, which are interest rate swaps entered into to hedge the Company's exposure to US interest rates on its debt. For the Year Ended December 31, 2005 Compared to the Year Ended December 31, 2004 Revenues Total revenues increased by approximately 57% to $75.9 million in the year ended December 31, 2005 compared to $48.3 million in the year ended December 31, 2004. This increase is primarily attributable to the growth of the Company's fleet and associated increase in operating days during the year ended December 31, 2005. We have also recognized in our total revenues $1.8 million of provisions for a cargo claim, speed claims and off-hire periods based on a review of all outstanding trade receivables at the year ended December 31, 2005. At various dates between April and December 2004, we took delivery of ten vessels: five products tankers and five container vessels. Since their respective dates of delivery, each of these vessels has operated under time charters. In December 2004 Aries Energy sold the CMA CGM Seine and CMA CGM Makassar. Revenue from the employment of the ten vessels delivered during the year ended December 31, 2004 was $30.1 million and revenue from the High Land and High Rider, which were the only vessels to operate for the entire year ended December 31, 2004, was $9.1 million. The company benefited from a full year of operation of these vessels during 2005. During the year ended December 31, 2005 we acquired one product tanker, Chinook, two container vessels, CMA CGM Seine and CMA CGM Makassar and contracts were entered into for the purchase of two new products tankers, Stena Compass and Stena Compassion. Stena Compass was delivered in February 2006 and Stena Compassion was delivered in June 2006. Revenue from the three vessels delivered during the year ended December 31, 2005 was $10.8 million and revenue from the other vessels in the fleet was $65.1 million. Of the total revenue earned by our vessels during the year ended December 31, 2005, 57% was earned by our products tankers and 43% by our container vessels. We have recognized $9.3 million of deferred revenue during the year ended December 31, 2005 compared to $9.1 million during the year ended December 31, 2004, as a result of the assumption of charters associated with certain vessel acquisitions. These assumed charters were at set charter rates, which were less than market rates at the date of the vessels' acquisition. This increase was primarily due to the acquisition of the products tanker Chinook in November 2005. Commissions Chartering commissions increased by approximately 8% to $1.3 million in the year ended December 31, 2005, compared to $1.2 million in the year ended December 31, 2004. This increase is primarily due to the aggregate effect of an increase in operating days associated with growth of the Company's fleet and reduced chartering commissions paid to Magnus Carriers following implementation of new ship management agreements during the year ended December 31, 2005. Vessel operating expenses Vessel operating expenses increased by approximately 42% to $17.8 million during the year ended December 31, 2005, compared to $12.5 million during the year ended December 31, 2004. This increase is primarily due to the aggregate effect of the growth of the Company's fleet and associated increase in operating days, together with the implementation under the new ship management agreements of our arrangement with Magnus Carriers to share equally in expenses in excess of the budgeted amounts. Excluding the budget variance sharing arrangement, total vessel operating expenses were $18.7 million for the year ended December 31, 2005. Total vessel operating expenses for the vessels delivered during the year ended December 31, 2005 were $2.2 million. Of the total vessel operating expenses during the year ended December 31, 2005, 59% was incurred by our products tankers and 41% by our container vessels. General & Administrative Expenses General and administrative expenses were $1.6 million in the year ended December 31, 2005. Before the initial public offering the main elements of general and administrative expenses, such as executive and director compensation, audit fees, liability insurance premium and company administration costs, were accounted for within the administrative costs of the ship management company. Depreciation and Amortization Depreciation increased by approximately 53% to $19.4 million during the year ended December 31, 2005 compared to $12.7 million during the year ended December 31, 2004. Amortization of dry-docking and special survey costs increased by 27% to $1.9 million in the year ended December 31, 2005, compared to $1.5 million in the year ended December 31, 2004. These increases are primarily due to the growth of the Company's fleet and associated increase in operating days. Management Fees to Related Party Management fees paid to Magnus Carriers increased by 67% to $1.5 million in the year ended December 31, 2005 compared to $0.9 million of the year ended December 31, 2004. This increase is primarily due to the growth of the Company's fleet and associated increase in operating days, together with the payment of the management fees contained in the new ship management agreements. Interest Expense Total interest expense increased by approximately 119% to $18.8 million during the year ended December 31, 2005, compared to $8.6 million during the year ended December 31, 2004. Interest expense on loans increased by approximately 47% to $9.0 million, compared to $6.1 million for the year ended December 31, 2004. This increase is primarily due to the growth of the Company's fleet and associated increase in financing days. Interest expense relating to amortization of deferred financing costs increased by approximately 327% to $9.4 million during the year ended December 31, 2005, compared to $2.2 million during the year ended December 31, 2004. This increase is primarily due to the acceleration of amortization of deferred financing costs and debt discount. Interest expense incurred from discounting the deferred revenue expense increased by approximately 33% to $0.4 million during the year ended December 31, 2005, compared to $0.3 million during the year ended December 31, 2004. This increase is primarily due to the growth of the Company's fleet. Interest Rate Swaps The marking to market of our three interest rate swaps in effect as of December 31, 2005 resulted in a gain of $0.95 million, compared with a loss as of December 31, 2004 of $0.03 million, due to the change in fair value over the period. Interest rates were higher at the end of December 2005, compared with the end of December 2004. Net Income Net income was $14.8 million in the year ended December 31, 2005, compared to $25.3 million in the year ended December 31, 2004, a decrease of 41%. This decrease is primarily due to there being no disposal of vessels during the year ended December 31, 2005 compared with a gain on disposal of vessels of $14.7 million during the year ended December 31, 2004. B. Liquidity and Capital Resources Overview We operate in a capital intensive industry. Our principal sources of liquidity are cash flows from operations, equity and debt. On April 27, 2006 we refinanced all our indebtedness under our existing credit facility, which we refer to as our old credit facility, with a new fully revolving credit facility of $360 million, which we refer to as our new credit facility, and which provides for the long term financing of the fleet and which provides approximately $53 million of undrawn commitment as of April 3, 2007 to enable future growth of the Company through further vessel acquisitions. As of December 31, 2006 our future liquidity requirements relate to: (1) our operating expenses, (2) payments under our ship management agreements, (3) quarterly payments of interest and other debt-related expenses and the repayment of principal, (4) maintenance of financial covenants under our new credit facility agreement, (5) maintenance of cash reserves to provide for contingencies and (6) payment of dividends. During the year ended December 31, 2006, we paid the balance of the purchase price of $112.2 million and took delivery of the two products tankers, Stena Compass and Stena Compassion. We believe that cash flows from our charters will be sufficient to fund our interest and other debt-related expenses, any debt amortization under our new credit facility and our working capital requirements for the short and medium term. We believe that our anticipated cash flows and the availability of funds under our existing credit facility will be sufficient to permit us to pay dividends as contemplated by our dividend policy and to meet our liquidity requirements over the next 12 months. Our longer term liquidity requirements include repayment of the outstanding debt under our new credit facility. We will require new borrowings and/or issuances of equity capital or other securities to meet the repayment obligation when our new credit facility matures in April 2011. For further information on our new credit facility please read "Indebtedness" below. Cash flows As of December 31, 2006, 2005 and 2004, we had cash balances of $14.9 million, $19.2 million and $10.1 million, respectively. For the year ended December 31, 2006, our net cash provided by operating activities was $24.2 million, compared with $36.97 million during the year ended December 31, 2005, a decrease of 34.5%. This decrease was primarily due to an increase of dry-docking and special-survey costs which were $15.1 million during the year ended December 31, 2006 compared to $1.9 million during the year ended December 31, 2005. For the year ended December 31, 2006, our net cash used in investing activities was $101.8 million, compared with $114 million in the year ended December 31, 2005, a decrease of 11%. This decrease was primarily due to lower expenditure on vessel acquisitions during the year ended December 31, 2006. In the year ended December 31, 2006, our net cash provided by financing activities was $69.96 million, compared to $90.9 million in the year ended December 31, 2005, a decrease of 23%. This decrease was primarily due to lower proceeds from the issuance of long-term debt and higher dividend payments. For the year ended December 31, 2005, our net cash provided by operating activities was $36.97 million compared to $21.9 million during the year ended December 31, 2004, an increase of 69%. This increase was primarily due to an increase in the number of vessels in our fleet and associated increase in operating days during the year ended December 31, 2006. For the year ended December 31, 2005, net cash used in investing activities was $114 million compared to $161.8 million in the year ended December 31, 2004, a decrease of 29%. This decrease was primarily due to lower exependiture on vessel acquisitions during the year ended December 31, 2005. In addition, for the year ended December 31, 2004, proceeds from the disposal of vessels of $59.9 million contributed to our net cash used in investing activities. In the year ended December 31, 2005, our net cash provided by financing activities was $90.9 million, compared to $144.5 million in the year ended December 31, 2004, a decrease of 37%. This decrease was primarily due to lower proceeds from the issuance of long-term debt. In each of these years, our investing activities primarily related to funding our investments in our vessels. During the year ended December 31, 2006, we purchased two vessels compared with the year ended December 31, 2005, during which we purchased three vessels and the year ended December 31, 2004, during which we purchased eight vessels. The net cash provided by financing activities in the year ended December 31, 2006 related primarily to drawings under our new credit facility, which was used to (i) refinance our old $140 million drawn term loan, (ii) refinance our old revolving acquisition facility, which was drawn to the extent of $43.8 million at December 31, 2005 and which was further drawn in February 2006 in the amount of $50.5 million to complete the purchase of the Stena Compass and (iii) complete the purchase of the Stena Compassion. In the year ended December 31, 2005, the net cash provided by financing activities related primarily to the net proceeds of the initial public offering and drawings of debt under our old credit facility, which was used in the refinancing of existing debt and related obligations and payment of $6.5 million in settlement of the participation liability. The participation liability related to additional participation arrangements under a fee agreement related to certain of the loans outstanding with the Bank of Scotland as of December 31, 2004. In the year ended December 31, 2004, the net cash provided by financing activities related to funding our investments in our vessels. Indebtedness We had long-term debt outstanding of $284.8 million at December 31, 2006, compared to $183.8 million at December 31, 2005 and $214.6 million at December 31, 2004. Our long-term debt at December 31, 2006 represents amounts borrowed under our new credit facility. As of December 31, 2006, borrowings under our new credit facility bore an annual interest rate, including the margin of 6.55%. We use interest rate swaps to swap our floating rate interest payment obligations for fixed rate obligations. For additional information regarding our interest rate swaps, please read "--Quantitative and Qualitative Disclosures About Market Risk--Interest Rate Exposure" below. We entered into a $360 million fully revolving credit facility, which we refer to as our new credit facility in April 2006 with Bank of Scotland and Nordea Bank Finland as lead arrangers.We have used the new credit facility to (i) refinance our old $140 million drawn term loan; (ii) refinance our old revolving acquisition facility, which was drawn to the extent of $43.8 million at December 31, 2005 and which was further drawn in February 2006 in the amount of $50.5 million to complete the purchase of the Stena Compass and (iii) to complete the purchase of the Stena Compassion. The new credit facility has a five year term and is subject to fixed reductions during the five years. The other main terms and conditions of the new credit facility are as follows: Borrowings under the new credit facility can be used to fund the purchase price (and, with respect to new buildings, reasonable pre-delivery interest and inspection costs) of one or more additional vessels that meet the following requirements: o each vessel must be a double-hulled crude or products tanker or container vessel; o each vessel must be aged 8 years or less, or such other age as may be agreed by the lenders, at the time of acquisition; o each vessel's purchase price may not exceed its fair market value; o each vessel must enter into a minimum employment of 12 months with a reputable charterer within 6 months of the relevant drawdown; and each vessel must maintain a flag and class acceptable to the lead arrangers and satisfy certain other conditions. The new credit facility may also be used to the extent of $5.0 million for general corporate purposes. For the first thirty months of the new credit facility, if the total amount borrowed under the facility exceeds 65% of the fair market value of the collateral vessels, we will be unable to borrow further amounts under the facility until we either prepay some of the debt or the fair market value of the collateral vessels increases. We will be able to borrow further amounts under the facility again once the total amount borrowed under the facilities no longer exceeds 65% of the fair market value of the collateral vessels. For the second thirty months of the new credit facility, if the total amount borrowed under the facility exceeds 60% of the fair market value of the collateral vessels, we will be unable to borrow further amounts under the facility until we either prepay some of the debt or the fair market value of the collateral vessels increases. We will be able to borrow further amounts under the facility again once the total amount borrowed under the facilities no longer exceeds 60% of the fair market value of the collateral vessels. If a vessel becomes a total loss or is sold, no further amounts may be borrowed under this agreement, except for advances for additional ships already approved by the lenders, until we have applied the full sale or insurance proceeds in repayment of the facility, unless the lenders otherwise agree. Our obligations under the new credit facility are secured by a first priority security interest, subject to permitted liens, in all vessels in our fleet and any other vessels we subsequently acquire. In addition, the lenders will have a first priority security interest in all earnings from and insurances on our vessels, all existing and future charters relating to our vessels, our ship management agreements and all equity interests in our subsidiaries. Our obligations under the credit agreement are also guaranteed by all subsidiaries that have an ownership interest in any of our vessels. The $338 million remaining commitment as of April 3, 2007 contained in the credit agreement is subject to an $11 million reduction every six months from October 3, 2007, with the residual commitment, after the equal semi-annual reductions of $11 million, of $261 million to be reduced to zero or repaid in full in one instalment in April 2011. As of April 3, 2007 the amount available to draw down is $53 million. Indebtedness under the new credit facility bears interest at an annual rate equal to LIBOR plus a margin equal to: o 1.125% if our total liabilities divided by our total assets, adjusting the book value of our fleet to its market value, is less than 50%; and o 1.25% if our total liabilities divided by our total assets, adjusting the book value of our fleet to its market value, is equal to or greater than 50% but less than 60%; and o 1.375% if our total liabilities divided by our total assets, adjusting the book value of our fleet to its market value, is equal to or greater than 60% but less than 65%; and o 1.5% if our total liabilities divided by our total assets, adjusting the book value of our fleet to its market value, is equal to or greater than 65%. The interest rate on overdue sums will be equal to the applicable rate described above plus 2%. We paid a one-time arrangement fee of approximately $2.3 million at the initial draw down of the facility together with the first year's agency fee of $50,000, and pay, quarterly in arrears, a commitment fee equal to 0.5% per annum of the unused commitment of each lender under the facility. We may prepay all loans under the credit agreement without premium or penalty other than customary LIBOR breakage costs. The credit agreement will require us to adhere to certain financial covenants as of the end of each fiscal quarter, including the following: o our shareholders' equity as a percentage of our total assets, adjusting the book value of our fleet to its market value, must be no less than 35%; o free cash and cash equivalents plus the undrawn element of the $5 million portion of the new credit facility available for general corporate purposes must be no less than 5% of interest bearing debt; o the ratio of EBITDA (earnings before interest, taxes, depreciation and amortization) to interest expense must be no less than 3.00 to 1.00 on a trailing four quarter basis. Primarily due to vessel out-of-service time and off-hire days incurred during the year ended December 31, 2006 and consequent adverse effect on revenues, the interest coverage ratio financial covenant contained in the new credit facility would not be met and the lender agreed to lower the ratio for this covenant. Our lenders agreed to lower this ratio to 2.50 to 1.00 for the periods ending December 31, 2006, March 31, 2007 and June 30, 2007. For subsequent periods the lower ratio will not apply and the ratio reverts back to 3.00 to 1.00, which we believe we will meet. With effect from January 3, 2007 and until the lower ratio no longer applies, we will pay an increased margin of 1.75%; o our current liabilities, excluding deferred revenue and derivative financial instruments, may not exceed our current assets, excluding derivative financial instruments; and o the aggregate fair market value of our vessels must be no less than 140% of the aggregate outstanding loans under the credit facility. In addition, Magnus Carriers is required to maintain a credit balance in an account opened with the lender of at least $1.0 million. The credit agreement also requires our two principal beneficial equity holders to maintain a beneficial ownership interest in our company of no less than 10% each. Our credit agreement prevents us from declaring dividends if any event of default, as defined in the credit agreement, occurs or would result from such declaration. Each of the following will be an event of default under the credit agreement: o the failure to pay principal, interest, fees, expenses or other amounts when due; o breach of certain financial covenants, including those which require Magnus Carriers to maintain a minimum cash balance; o the failure of any representation or warranty to be materially correct; the occurrence of a material adverse change (as defined in the credit agreement); o the failure of the security documents or guarantees to be effective; o judgments against us or any of our subsidiaries in excess of certain amounts; and o bankruptcy or insolvency events; and the failure of our principal beneficial equity holders to maintain their investment in us. The old credit facility consisted of a $140 million drawn term loan facility and a $150 million revolving acquisition facility, which was drawn to the extent of $94.3 million when it was refinanced by our new credit facility on April 27, 2006. Our obligations under the old credit facility were secured by a first priority security interest, subject to permitted liens, in all vessels in our fleet and any other vessels we would subsequently acquire. In addition, the lenders had a first priority security interest in all earnings from and insurances on our vessels, all existing and future charters relating to our vessels, our ship management agreements and all equity interests in our subsidiaries. Our obligations under the old credit facility were also guaranteed by all subsidiaries that had an ownership interest in any of our vessels. The old term loan was payable in full in one instalment in June 2009. Borrowings under the old revolving acquisition facility were repayable in quarterly instalments commencing nine months after a vessel acquisition, unless: o at least 60% of the principal amount of a revolving loan had been repaid, in which case no payment needed be made until the earlier of (1) the date on which the vessel that the relevant borrowing was used to acquire is 15 years old and (2) June 3, 2009; or o a vessel had not been chartered for a minimum of 12 months with a reputable charterer within 6 months of the relevant drawdown, in which case at least 75% of the purchase price of that vessel needed be repaid within 9 months of its acquisition. The amortization period for each loan under the acquisition facility was equal to the difference between 15 years and the age of the vessel that the loan was used to acquire. All amounts that remain outstanding under the acquisition facility in June 2009 would be due at such time. Indebtedness under the term loan and the acquisition facility bore interest at an annual rate equal to LIBOR plus a margin equal to: o 1.25% if our total liabilities divided by our total assets, adjusting the book value of our fleet to its market value, was less than 60%; and o 1.375% if our total liabilities divided by our total assets, adjusting the book value of our fleet to its market value, was equal to or greater than 60%. The interest rate on overdue sums was equal to the applicable rate described above plus 2%. We paid a one-time arrangement fee of approximately $2.0 million at the closing of the facility in June 2005 and incurred an annual commitment fee equal to 0.5% per annum of the unused commitment of each lender under the acquisition facility. We could have prepaid all loans under the existing credit facility without premium or penalty other than customary LIBOR breakage costs. We were subject to certain financial covenants as of the end of each fiscal quarter, including the following: o our shareholders' equity as a percentage of our total assets, adjusting the book value of our fleet to its market value, should be no less than 35%; o we should maintain cash and cash equivalents of no less than the higher of (1) the amount of interest and principal scheduled to be repaid in the following two quarters and (2) $5 million, which increases by $1.25 million per year and by an additional $800,000 for every $10 million borrowed under the revolving acquisition facility; o our current at the time liabilities should not exceed our current assets; o the ratio of EBITDA (earnings before interest, taxes, depreciation and amortization) to interest expense should be no less than 3.00 to 1.00 on a trailing four quarter basis; and o the aggregate fair market value of our vessels should be no less than 145% of the aggregate outstanding loans under the facility. In addition, Magnus Carriers was required to maintain a credit balance in an account opened with the lender of at least $1 million. The existing credit facility also required our two principal beneficial equity holders to maintain a beneficial ownership interest in our company of no less than 10% each. C. Research and development, patents and licenses Not Applicable D. Trend Information Not Applicable E. Off Balance Sheet Arrangements We do not have any off-balance sheet arrangements. F. Tabular Disclosure of Contractual Obligations As of December 31, 2006 significant existing contractual obligations and contingencies consisted of our obligations as borrower under our new credit facility. In addition, we had contractual obligations under interest rate swap contracts, ship management agreements and an office rental agreement. Long-Term Financial Obligations and Other Commercial Obligations The following table sets out long-term financial and other commercial obligations, outstanding as of December 31, 2006 (all figures in thousands of U.S. Dollars): - -------------------------------------------------------------------------------- Payment due by Period - -------------------------------------------------------------------------------- More Contractual Less than 1-3 3-5 than Obligations Total 1 year years years 5 years - -------------------------------------------------------------------------------- Long-term debt 284,800 0 0 284,800 0 obligation(1) - -------------------------------------------------------------------------------- Interest payments(2) 78,102 18,652 37,274 22,176 0 - -------------------------------------------------------------------------------- Vessel operating 194,874 20,664 43,207 45,838 85,165 expenses(3) - -------------------------------------------------------------------------------- Management fees(4) 18,707 1,899 3,837 4,071 8,900 - -------------------------------------------------------------------------------- Rental agreement (5) 751 68 148 164 371 - -------------------------------------------------------------------------------- Total 577,234 41,283 84,466 357,049 94,436 - -------------------------------------------------------------------------------- Notes: (1) Refers to our obligations to repay the indebtedness outstanding as of December 31, 2006. (2) Refers to our expected interest payments over the term of the indebtedness outstanding as of December 31, 2006, assuming a weighted average interest rate of 6.549% per annum. (3) Refers to our obligations under the 10-year ship management agreements that twelve of our vessel-owning subsidiaries have entered into with Magnus Carriers. These figures represent the aggregate amount of the individual initial vessel operating expenses for 12 vessels, which increases by 3% every year under the management agreements with an assumed start date of January 1, 2006. The vessel operating expenses are subject to adjustments every three years and thus may vary. (4) Refers to the management fees payable to Magnus Carriers under the 10-year ship management agreements. These figures represent the aggregate amount of the individual initial vessel management fees for 12 vessels, which increases by 3% every year under the management agreements with an assumed start date of January 1, 2006. The commercial management fees paid to Magnus Carriers and the technical management fees paid to Ernst Jacob in respect of the Chinook are also included. (5) Refers to our obligations under a rental agreement for office space for the Company. Quantitative and Qualitative Disclosures About Market Risk Interest Rate Exposure Our debt obligations under our new credit facility bear interest at LIBOR plus a margin ranging from 1.125% to 1.5% per annum. With effect from January 3, 2007 and until the relaxation of the interest cover financial convenant no longer applies the margin will be 1.75%. Increasing interest rates could adversely affect our future profitability. We entered into three interest swap transactions with three banks during 2005. On April 7, 2006 one of the interest rate swaps was terminated and the settlement proceeds amounted to $0.49 million. Under the two swap agreements we have limited the interest rate we pay on $93.3 million of our outstanding indebtedness to a maximum of 4.885% per annum, excluding the margin, effective from January 3, 2006 and until the swap agreements mature in June 2009. On July 5, 2006 the Company entered into interest rate swaps with five banks on identical terms. These five swaps had an effective date of July 3, 2006 and a maturity date of April 3, 2011. Under the terms of the swap agreements, we pay a fixed interest rate of 5.63% per annum on a total of $100 million of the long-term debt drawn under the new credit facility. A 100 basis point increase in LIBOR would have resulted in an increase of approximately $1 million in our interest expense on the $91.5 million unhedged element of drawings under the new credit facility for the year ended December 31, 2006. Foreign Exchange Rate Exposure Our vessel-owning subsidiaries generate revenues in U.S. dollars but incur a portion of their vessel operating expenses, and we incur our general and administrative costs, in other currencies, primarily Euros. We monitor trends in foreign exchange rates closely and actively manage our exposure to foreign exchange rates. We maintain foreign currency accounts and buy foreign currency in anticipation of our future requirements in an effort to manage foreign exchange risk. As of December 31, 2006, a 1% adverse movement in U.S. dollar exchange rates would have increased our vessel operating expenses by approximately $81,273. Recent Accounting Developments In September 2006, the Financial Accounting Standard Board issued Statement of Financial Accounting Standards No. 157 (SFAS 157) "Fair Value Measurement". SFAS 157 defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles (GAAP) and expands disclosures about fair value measurements. SFAS 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007, and interim periods within those fiscal years. The provisions of SFAS 157 should be applied prospectively as of the beginning of the fiscal year in which it is initially applied. The Group does not expect the adoption of this Accounting Standard to have an effect on its financial statements. SFAS 157 will be effective for the Group for the year beginning on January 1, 2008. In February, 2007, the FASB issued SFAS No. 159 "The Fair Value Option for Financial Assets and Financial Liabilities" (SFAS No. 159). SFAS No. 159 permits entities to choose to measure many financial assets and financial liabilities at fair value. Unrealized gains and losses on items for which the fair value option has been elected are reported in earnings. SFAS No. 159 is effective for fiscal years beginning after November 15, 2007. The Group is currently assessing the impact of SFAS No. 159 on its consolidated financial position and results of operations. Subsequent Events MSC Oslo The vessel changed its name to MSC Oslo from SCI Tej and entered into a 2-year time charter to MSC on March 8, 2007 at a daily rate of $15,000 net of commissions. Chinook In February 2007, the Chinook entered into an 18-month time charter (extendable by 12 months at the charterer's option) with the Stena Group at a daily rate of $17,062.50 net of commissions, which includes a profit sharing component of 50% for the Company. Dividend On March 9, 2007 the Directors of Aries Maritime declared a dividend of $ 0.07 per share in respect of the fourth quarter of 2006. The dividend was paid on March 30, 2007 to shareholders on record as of March 19, 2007. ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES A. Directors and Senior Management Set forth below are the names, ages (as of December 31, 2006) and positions of our directors and executive officers. Our board of directors is elected annually on a staggered basis, and each director elected holds office until his successor shall have been duly elected, except in the event of his death, resignation, removal or the earlier termination of his office. The business address of each of our executive officers and directors is 18 Zerva Nap., Glyfada, Athens 166 75, Greece. Name Age Position - ---- --- -------- Mons S. Bolin 53 Class I Director, President and Chief Executive Officer Richard J.H. Coxall 50 Class I Director and Chief Financial Officer Per Olav Karlsen 53 Class II Director and Chairman Henry S. Marcus 63 Class II Director Panagiotis Skiadas 36 Class III Director and Deputy Chairman Certain biographical information about each of these individuals is set forth below. Mons S. Bolin has served as our President, Chief Executive Officer and a director since April 2005. He has over 30 years of shipping industry experience. After graduating with distinction in Law (LLB), Economics and Business Administration from the University of Lund in Sweden, Mr. Bolin completed his military service as an officer in the Swedish Royal Marines in 1975. Mr. Bolin worked as a shipbroker for Fearnleys A/S in Oslo, Norway from 1975 to 1977 and was then a director and partner in the shipbrokering firm of Alexandrakis Brandts in Greece for eight years before co-founding an oil/commodity trading and ship operating business, Westminster Oil and Gas Ltd., in London in 1985. In 1991 he co-founded with Gabriel Petridis, Southern Seas Shipping Corporation, an affiliate of Aries Energy, which he still beneficially owns with Mr Petridis. From February 1997 to April 2005, Mr. Bolin was co-managing director of Magnus Carriers. He remains a director of Sea Breeze UK Ltd., an affiliate of Aries Energy. Mr. Bolin is a citizen of Sweden and a resident of Great Britain. Richard J. H. Coxall has served as our Chief Financial Officer and a director since January 2005. Since 2000, Mr. Coxall has been the Finance Director of Magnus Carriers. Mr. Coxall studied at Havering Technical College and Polytechnic of Central London. He holds an International Banking Diploma from the Chartered Institute of Bankers. Between 1974 and 1994 Mr. Coxall worked for Barclays Bank International in various banking operations and for Barclays Bank PLC, London as a manager in ship finance. In 1995, Mr. Coxall established the representative office of the Commercial Bank of Greece in London and ran that office until 1996, developing shipping finance business for the second largest bank in Greece. In 1996, Mr. Coxall was appointed director of Barclays Bank ship finance in Greece. Between 1998 and 2000, Mr. Coxall was an independent consultant in ship finance and projects to international shipping companies. Mr. Coxall is a citizen of Great Britain and a resident of Greece. Per Olav Karlsen has served as the Chairman of our board of directors since the closing of our initial public offering in June 2005. Since 2000, Mr. Karlsen has been one of three partners and the joint managing director of Cleaves Shipbrokers Ltd. Since September 2005, he has been responsible for the formation of a new marine finance company in Oslo, Norway. From 1993 through 2000, he was President of R.S. Platou (S) Pte Ltd., a ship brokerage company. Mr. Karlsen has also worked for Fearnleys AS for 10 years in various positions and capacities. Mr. Karlsen has also served as managing director of Pacship (UK) Ltd, a company controlled by Pacific Carriers Ltd, a company in the Kuok Group. He has worked in the shipping industry for approximately 26 years. In 1993, Wind Shipping Group, a company for which Mr. Karlsen served as a director, was the subject of an insolvency proceeding. He is a citizen of Norway and a resident of England. Henry S. Marcus has served as a member of our board of directors since the closing of our offering in June 2005. Dr. Marcus has been a faculty member of the Massachusetts Institute of Technology for more than thirty years. Currently, he is a Professor of Marine Systems in the Center for Ocean Engineering. Dr. Marcus works as a consultant to various government organizations, academic institutions and corporations. He holds a bachelor's degree in Naval Architecture and Marine Engineering from the Webb Institute of Naval Architecture. He holds master's degrees in Shipping and Shipbuilding Management and Naval Architecture and Marine Engineering from Massachusetts Institute of Technology. Dr. Marcus also holds a doctorate degree in business administration, specializing in Transportation and Logistics, from Harvard University, Graduate School of Business Administration. He is a citizen and a resident of the United States. Panagiotis Skiadas has served as a member of our board of directors and our Deputy Chairman since the closing of our initial public offering in June 2005. Mr. Skiadas has been the Environmental Manager of VIOHALCO S.A., the parent company of the largest Greek metals group of companies that incorporates approximately 80 companies. Prior to joining VIOHALCO in April 2006, Mr. Skiadas performed the same role for a subsidiary of VIOHALCO, ELVAL S.A. since 2004. He has also served as the Section Manager of Environmental Operations for the Organizational Committee of Olympic Games, Athens 2004 S.A. Mr. Skiadas holds a bachelor's degree in Environmental Engineering from the University of Florida. He holds a master's degree in Environmental and Water Quality Engineering from the Massachusetts Institute of Technology. Mr. Skiadas is a citizen and a resident of Greece. B. Compensation During 2006, we paid to the members of our senior management and to our directors aggregate compensation of approximately $540,833 and $78,216 respectively and $408,362 and $45,000 respectively in 2005. We did not pay any compensation to members of our senior management or our directors in the year ended 2004. In addition, each director will be reimbursed for out-of-pocket expenses incurred while attending any meeting of the board of directors or any board committee. Officers who also serve as directors do not receive additional compensation for their service as directors. At a meeting held on August 4, 2006, the Board of Directors determined to grant 40,000 restricted shares to each director who was not also an officer of the Company. This decision was confirmed on March 28, 2007. Accordingly, the Company will issue 40,000 restricted shares to each non-executive director with the following vesting periods: o 20,000 shares will vest on July 1, 2007; o 10,000 shares will vest on July 1, 2008; and o 10,000 shares on will vest on July 1, 2009. We adopted an equity incentive plan, which enables our officers, key employees and directors to receive options to acquire common shares. We reserved a total of 500,000 common shares for issuance under the plan. Our board of directors will administer this plan once it is implemented. Under the terms of the plan, our board of directors will be able to grant new options exercisable at a price per common share to be determined by our board of directors. We expect that the exercise price for the first options granted under the plan will be equal to the higher of the offering price in our initial public offering or the price of our common shares on the date the options are granted. All options will expire no later than 10 years from the date of the grant. Other securities, including restricted and unrestricted shares, performance shares and stock appreciation rights, may also be granted under the plan. Unless terminated earlier pursuant to its terms, the plan will terminate ten years from the date it was adopted by the board of directors. C. Board Practices Committees of the Board of Directors We have established an audit committee comprised of our three independent directors responsible for reviewing our accounting controls and recommending to the board of directors the engagement of our outside auditors. The members of our audit committee are Messrs. Per Olav Karlsen, Panagiotis Skiadas and Henry S. Marcus. Corporate Governance Practices We have certified to Nasdaq that our corporate governance practices are in compliance with, and are not prohibited by, the laws of Bermuda. Therefore, we are exempt from many of Nasdaq's corporate governance practices other than the requirements regarding the disclosure of a going concern audit opinion, submission of a listing agreement, notification of material non-compliance with Nasdaq corporate governance practices and the establishment and composition of an audit committee and a formal written audit committee charter. The practices that we follow in lieu of Nasdaq's corporate governance rules are described below. o We have a board of directors with a majority of independent directors which holds at least one annual meeting at which only independent directors are present, consistent with Nasdaq corporate governance requirements. We are not required under Bermuda law to maintain a board of directors with a majority of independent directors, and we cannot guarantee that we will always in the future maintain a board of directors with a majority of independent directors. o In lieu of a compensation committee comprised of independent directors, our board of directors is responsible for establishing the executive officers' compensation and benefits. Under Bermuda law, compensation of the executive officers is not required to be determined by an independent committee. o In lieu of a nomination committee comprised of independent directors, our board of directors is responsible for identifying and recommending potential candidates to become board members and recommending directors for appointment to board committees. Shareholders may also identify and recommend potential candidates to become candidates to become board members in writing. No formal written charter has been prepared or adopted because this process is outlined in our bye-laws. o In lieu of obtaining an independent review of related party transactions for conflicts of interests, consistent with Bermuda law requirements, our bye-laws require any director who has a potential conflict of interest to identify and declare the nature of the conflict to our board of directors at the first meeting of the board of directors. Our bye-laws additionally provide that related party transactions must be approved by independent and disinterested directors. o In lieu of obtaining shareholder approval prior to the issuance of securities, we were required to obtain the consent of the Bermuda Monetary Authority as required by Bermuda law before we issued securities. We have obtained blanket consent from the Bermuda Monetary Authority. If we choose to issue additional securities, we will not be required to obtain any further consent so long as our common shares are listed. o As a foreign private issuer, we are not required to solicit proxies or provide proxy statements to Nasdaq pursuant to Nasdaq corporate governance rules or Bermuda law. Consistent with Bermuda law, we will notify our shareholders of meetings between 15 and 60 days before the meeting. This notification will contain, among other things, information regarding business to be transacted at the meeting. In addition, our bye-laws provide that shareholders must give us advance notice to properly introduce any business at a meeting of the shareholders. Our bye-laws also provide that shareholders may designate a proxy to act on their behalf (in writing or by telephonic or electronic means as approved by our board from time to time). Other than as noted above, we are in full compliance with all other applicable Nasdaq corporate governance standards. D. Employees See "Item 4 -- Information on the Company -- Business Overview --Crewing and Employees." E. Share ownership The common shares beneficially owned by our directors and officers and/or companies affiliated with these individuals are disclosed in "Item 7 -- Major Shareholders and Related Party Transactions" below. ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS Major shareholders. The following table sets forth information regarding (i) the owners of more than five percent of our common stock that we are aware of and (ii) the total number of shares of our common stock held by officers and directors as of April 18, 2007. - -------------------------------------------------------------------------------- Percent Title of Class Identity of Person or Group Amount Owned of Class - -------------------------------------------------------------------------------- Common stock, par value $0.01 per share Rocket Marine Inc. (1) 14,766,877 52% - -------------------------------------------------------------------------------- Mons Bolin (1) 14,766,877 52% - -------------------------------------------------------------------------------- Captain Gabriel Petridis (1) 14,766,877 52% - -------------------------------------------------------------------------------- Richard Coxall * * - -------------------------------------------------------------------------------- Directors and Executive 14,776,877 52% Officers as a Group - -------------------------------------------------------------------------------- Wellington Management 2,064,910 7.27% Company, LLP (2) - -------------------------------------------------------------------------------- Transamerica Investment 2,082,060 7.89% Management, LLC (3) - -------------------------------------------------------------------------------- * Less than one percent. (1) Rocket Marine Inc., a Marshall Islands corporation, is a wholly owned indirect subsidiary of Aries Energy Corporation, which is also a Marshall Islands corporation. Mons Bolin and Captain Gabriel Petridis each own 50% of the issued and outstanding capital stock of Aries Energy Corporation and Magnus Carriers. Each of Aries Energy Corporation, Mons Bolin and Captain Gabriel Petridis disclaims beneficial ownership of such shares. (2) According to Schedule 13G filed with the Securities and Exchange Commission by Wellington Management Company on February 14, 2007. (3) According to Schedule 13G filed with the Securities and Exchange Commission by Transamerica Investment Management, LLC on February 21, 2007. Related Party Transactions Aries Energy, through its wholly-owned indirect subsidiary Rocket Marine Inc., owns 52% of our outstanding common stock. Mr. Mons Bolin, our President, Chief Executive Officer and a director, owns 50% of the issued and outstanding capital stock of Aries Energy and of Magnus Carriers. We have entered into ship management agreements with Magnus Carriers. Consistent with Bermuda law requirements, our bye-laws require any director who has a potential conflict of interest to identify and declare the nature of the conflict to our board of directors at the first meeting of the board of directors. Our bye-laws additionally provide that related party transactions must be approved by independent and disinterested directors. Contributions under management agreements During the year ended December 31, 2006 the Group received $5 million in full and final settlement by Magnus Carriers of the dry-docking expenses incurred by M/T Arius. This amount has been deducted from the vessel's dry-docking expenses. During the year ended December 31, 2006 the Group received an additional $6.5 million (2005 $0.8 million) from Magnus Carriers under the ship-management cost-sharing agreements for vessel operating expenses. These amounts are reflected in the operating expenses of the vessels in the income statement. Also received during the year ended December 31, 2006 was an amount of $0.2 (2005 $NIL) for special survey and dry-docking amortization. This amount is reflected in the amortization and dry-docking expense in the income statement. Amounts due from/to related parties Amounts due from related parties were $2.5 million at December 31, 2006 and $1.2 million at December 31, 2005. These amounts represent payments less receipts made by the Group on behalf of (i) other vessel-owning companies under common control with the Group, consisting of $0.03 million (due from) at December 31, 2006 and $0.4 million (due from) at December 31, 2005 and (ii) Magnus Carriers Corporation, consisting of $2.5 million (due from) at December 31, 2006 and $0.9 million (due from) at December 31, 2005. There are no terms of settlement for these amounts, as of December 31, 2006. These amounts were collected in the month following the relevant quarter. Management fees The vessel-owning companies included in the Group receive technical and commercial management services from Magnus Carriers, a company beneficially owned by Mons Bolin, our Chief Executive Officer, and Captain Gabriel Petridis, pursuant to ship management agreements. Under these agreements, the Group paid management fees to Magnus Carriers of $1.8 million for the year ended December 31, 2006, $1.5 million for the year ended December 31, 2005 and $0.9 million for the year ended December 31, 2004 which is separately reflected in the statements of income. Commissions Magnus Carriers and Trampocean S.A., related companies under common control, provide chartering services to the vessel-owning companies included in the Group at a commission of 1.25% of hires and freights earned by the vessels. The Group paid these companies fees of $0.03 million for chartering services for the year ended December 31, 2006, $0.05 million for the year ended December 31, 2005 and $0.4 million for the year ended December 31, 2004. These commissions relate to agreements between Magnus Carriers and the vessel-owning subsidiaries. From the effective date of the new ship management agreements Magnus Carriers may only receive commissions on new charters. Under the new ship management agreements, Magnus Carriers will be paid 1% of the sale or purchase price in connection with a vessel sale or purchase that Magnus Carriers brokers for the Group. Rental agreement During 2005, the Group entered into a rental agreement with a related party, a company with common ultimate beneficial shareholders. The Group paid $0.06 million to the related party during the year ended December 31, 2006 (2005: $0.004 million and 2004: $NIL). Crewing Some crewing for the Group is undertaken by Magnus Carriers through a related entity, Poseidon Marine Agency. The Group paid manning fees of $0.3 million for the year ended December 31, 2006, $0.3 million for the year ended December 31, 2005 and $0.3 million for the year ended December 31, 2004. Vessel purchase Aries Maritime exercised its right to acquire the Chinook under the Right of First Refusal Agreement with Magnus Carriers in October 2005. The acquisition was offered to Aries Maritime by Magnus Carriers on either of two bases: (a) with retention of the five year head charter dated June 16, 2003 between the sellers and Pacific Breeze Tankers Ltd. (a joint venture company, 50% of which is ultimately owned between Mons Bolin, President and Chief Executive Officer of Aries Maritime and Gabriel Petridis equally) as charterers, at a rate of $13,000 per day, in which case the purchase consideration would be $30.6 million; or (b) without the head charter, in which case the purchase consideration would be $32.6 million. Aries Maritime exercised its right on basis (b). The total purchase consideration of $32.6 million for the Chinook, paid on November 30, 2005, comprised purchase consideration under the terms of a Memorandum of Agreement dated October 25, 2006 of $30.6 million and a $2 million additional purchase consideration to the sellers under the terms of a separate agreement relating to the termination of the head charter. Pursuant to an agreement dated December 28, 2004 Aries Maritime exercised its right to acquire CMA CGM Seine and CMA CGM Makassar in June, 2005 and took delivery of these vessels on June 24, 2005 and July 15, 2005 respectively. Both vessels were purchased from International Container Ships KS (a Norwegian limited partnership, of which Mons Bolin, our President and Chief Executive Officer and Gabriel Petridis equally together, ultimately owned 25%). The purchase price paid for the CMA CGM Seine was $35.4 million and for the CMA CGM Makassar was $35.3 million. General and administrative expenses During the year ended December 31, 2006 the Group paid directors' fees of $0.6 million (2005: $0.5 million and 2004: $NIL). Such fees are included in general and administrative expenses in the accompanying consolidated statements of income. Minimum liquidity Under the Group's new credit facility, Magnus Carriers is required to maintain at least $1 million in an account with the lender. C. Interests of experts and counsel. Not applicable. ITEM 8. FINANCIAL INFORMATION A. Consolidated Statements and Other Financial Information. See Item 18. Legal Proceedings Against Us From time to time in the future we may be subject to legal proceedings and claims in the ordinary course of business, principally personal injury and property casualty claims. Those claims, even if lacking merit, could result in the expenditure of significant financial and managerial resources. We have not been involved in any legal proceedings which may have, or have had a significant effect on our financial position, nor are we aware of any proceedings that are pending or threatened which may have a significant effect on our financial position. Dividend Policy We intend to pay quarterly dividends to the holders of our common shares in March, May, August and November of each year in amounts substantially equal to the charterhire received by us under the charters for our vessels during the preceding calendar quarter, less cash expenses for that quarter (principally vessel operating expenses and debt service and administrative expenses) and any reserves our board of directors determines we should maintain. These reserves may cover, among other things, drydocking, repairs, claims, liabilities and other obligations, interest expense and debt amortization, acquisitions of additional assets and working capital. Under Bermuda law, a company may not declare or pay dividends if there are reasonable grounds for believing either that the company is, or would after the payment be, unable to pay its liabilities as they become due, or that the realizable value of its assets would thereby be less than the sum of its liabilities, its issued share capital (the total par value of all outstanding shares) and share premium accounts (the aggregate amount paid for the subscription for its shares in excess of the aggregate par value of such shares). If the realizable value of our assets decreases, our ability to pay dividends may require our shareholders to approve resolutions reducing our share premium account by transferring an amount to our contributed surplus account. Our board of directors must approve the declaration and payment of any dividends. Under the terms of our new credit facility, we will not be able to declare or pay any dividends if we are in default under our new credit facility or if paying a dividend will result in a default under the credit facility. In addition, the requirement that we satisfy various financial covenants under the credit agreement, as well as the terms under any other loan agreements, which we may obtain in the future, could impose restrictions on our ability to pay dividends in the future. B. Significant Changes. Not Applicable. ITEM 9. THE OFFER AND LISTING A. Offer and Listing Details The trading market for our common stock is the Nasdaq Global Market, on which the shares are listed under the symbol "RAMS". The following table sets forth the high and low closing prices for our common stock since our initial public offering of common stock at $12.50 per share on June 3, 2005, as reported by the Nasdaq Global Market. The high and low closing prices for our common stock for the periods indicated were as follows: - -------------------------------------------------------------------------------- High Low - -------------------------------------------------------------------------------- For the period from June 3, 2005 to December 31, 2005 $15.99 $12.50 - -------------------------------------------------------------------------------- For the Fiscal Year Ended December 31, 2006 $14.36 $9.15 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- For the Quarter Ended - -------------------------------------------------------------------------------- June 3 to June 30, 2005 $13.60 $12.50 - -------------------------------------------------------------------------------- September 30, 2005 $15.99 $12.50 - -------------------------------------------------------------------------------- December 31, 2005 $15.63 $12.63 - -------------------------------------------------------------------------------- March 31, 2006 $14.36 $12.43 - -------------------------------------------------------------------------------- June 30, 2006 $13.97 $10.65 - -------------------------------------------------------------------------------- September 30, 2006 $12.70 $9.50 - -------------------------------------------------------------------------------- December 31, 2006 $10.81 $9.15 - -------------------------------------------------------------------------------- March 31, 2007 $9.43 $7.48 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- For the Month - -------------------------------------------------------------------------------- October 2006 $10.81 $10.30 - -------------------------------------------------------------------------------- November 2006 $10.57 $9.81 - -------------------------------------------------------------------------------- December 2006 $10.13 $9.17 - -------------------------------------------------------------------------------- January 2007 $9.07 $8.40 - -------------------------------------------------------------------------------- February 2007 $9.37 $8.37 - -------------------------------------------------------------------------------- March 2007 $8.62 $7.48 - -------------------------------------------------------------------------------- C. Markets See Item 9. A. above. ITEM 10. ADDITIONAL INFORMATION A. Share Capital Not applicable B. Memorandum and Articles of Association The following description of our capital stock summarizes the material terms of our Memorandum of Association and our bye-laws. Under our Memorandum of Association, as amended, our authorized capital consists of 30 million shares of preferred stock, par value $0.01 per share and 100 million shares of common stock, par value of $0.01 per share. Common shares Holders of common shares have no pre-emptive, subscription, redemption, conversion or sinking fund rights. Holders of common shares are entitled to one vote for each share held of record on all matters submitted to a vote of our shareholders. Holders of common shares have no cumulative voting rights. Holders of common shares are entitled to dividends if and when they are declared by our board of directors, subject to any preferred dividend right of holders of any preference shares. Directors to be elected by holders of common shares require a plurality of votes cast at a meeting at which a quorum is present. For all other matters, unless a different majority is required by law or our bye-laws, resolutions to be approved by holders of common shares require approval by a majority of votes cast at a meeting at which a quorum is present. Upon our liquidation, dissolution or winding up, our common shareholders will be entitled to receive, ratably, our net assets available after the payment of all our debts and liabilities and any preference amount owed to any preference shareholders. The rights of our common shareholders, including the right to elect directors, are subject to the rights of any series of preference shares we may issue in the future. Preference Shares Under the terms of our bye-laws, our board of directors has authority to issue up to 30 million "blank check" preference shares in one or more series and to fix the rights, preferences, privileges and restrictions of the preference shares, including voting rights, dividend rights, conversion rights, redemption terms (including sinking fund provisions) and liquidation preferences and the number of shares constituting a series or the designation of a series. The rights of holders of our common shares will be subject to, and could be adversely affected by, the rights of the holders of any preference shares that we may issue in the future. Our board of directors may designate and fix rights, preferences, privileges and restrictions of each series of preference shares which are greater than those of our common shares. Our issuance of preference shares could, among other things: o restrict dividends on our common shares; o dilute the voting power of our common shares; o impair the liquidation rights of our common shares; and o discourage, delay or prevent a change of control of our company. Our board of directors does not at present intend to seek shareholder approval prior to any issuance of currently authorized preference shares, unless otherwise required by applicable law or Nasdaq requirements. Although we currently have no plans to issue preference shares, we may issue them in the future. Dividends Under Bermuda law, a company may not declare or pay dividends if there are reasonable grounds for believing either that the company is, or would after the payment be, unable to pay its liabilities as they become due, or that the realizable value of its assets would thereby be less than the sum of its liabilities, its issued share capital (the total par value of all outstanding shares) and share premium accounts (the aggregate amount paid for the subscription for its shares in excess of the aggregate par value of such shares). If the realizable value of our assets decreases, our ability to pay dividends may require our shareholders to approve resolutions reducing our share premium account by transferring an amount to our contributed surplus account. There are no restrictions on our ability to transfer funds (other than funds denominated in Bermuda dollars) in and out of Bermuda or to pay dividends to U.S. residents who are holders of our common shares. Anti-Takeover Effects of Provisions of Our Constitutional Documents Several provisions of our bye-laws may have anti-takeover effects. These provisions are intended to avoid costly takeover battles, lessen our vulnerability to a hostile change of control and enhance the ability of our board of directors to maximize shareholder value in connection with any unsolicited offer to acquire us. However, these anti-takeover provisions, which are summarized below, could also discourage, delay or prevent (1) the merger, amalgamation or acquisition of our company by means of a tender offer, a proxy contest or otherwise, that a shareholder may consider in its best interest and (2) the removal of our incumbent directors and executive officers. Blank Check Preference Shares Under the terms of our bye-laws, subject to applicable legal or Nasdaq requirements, our board of directors has authority, without any further vote or action by our shareholders, to issue up to 30 million preference shares with such rights, preferences and privileges as our board may determine. Our board of directors may issue preference shares on terms calculated to discourage, delay or prevent a change of control of our company or the removal of our management. Classified Board of Directors Our bye-laws provide for the division of our board of directors into three classes of directors, with each class as nearly equal in number as possible, serving staggered, three year terms. One-third (or as near as possible) of our directors will be elected each year. Our bye-laws also provide that directors may only be removed for cause upon the vote of the holders of no less than 80% of our outstanding common shares. These provisions could discourage a third party from making a tender offer for our shares or attempting to obtain control of our company. It could also delay shareholders who do not agree with the policies of the board of directors from removing a majority of the board of directors for two years. Business Combinations Although the BCA does not contain specific provisions regarding "business combinations" between companies organized under the laws of Bermuda and "interested shareholders", we have included these provisions in our bye-laws. Specifically, our bye-laws contain provisions which prohibit us from engaging in a business combination with an interested shareholder for a period of three years after the date of the transaction in which the person became an interested shareholder, unless, in addition to any other approval that may be required by applicable law: o prior to the date of the transaction that resulted in the shareholder becoming an interested shareholder, our board of directors approved either the business combination or the transaction that resulted in the shareholder becoming an interested shareholder; o upon consummation of the transaction that resulted in the shareholder becoming an interested shareholder, the interested shareholder owned at least 85% of our voting shares outstanding at the time the transaction commenced; or o after the date of the transaction that resulted in the shareholder becoming an interested shareholder, the business combination is approved by the board of directors and authorized at an annual or special meeting of shareholders by the affirmative vote of at least 80% of our outstanding voting shares that are not owned by the interested shareholder. For purposes of these provisions, a "business combination" includes mergers, amalgamations, consolidations, exchanges, asset sales, leases, certain issues or transfers of shares or other securities and other transactions resulting in a financial benefit to the interested shareholder. An "interested shareholder" is any person or entity that beneficially owns 15% or more of our outstanding voting shares and any person or entity affiliated with or controlling or controlled by that person or entity, except that so long as Rocket Marine owns 15% or more of our outstanding voting shares, Rocket Marine shall not be an interested shareholder unless it acquires additional voting shares representing 8% or more of our outstanding voting shares. Election and Removal of Directors Our bye-laws do not permit cumulative voting in the election of directors. Our bye-laws require shareholders wishing to propose a person for election as a director (other than persons proposed by our board of directors) to give advance written notice of nominations for the election of directors. Our bye-laws also provide that our directors may be removed only for cause and only upon the affirmative vote of the holders of at least 80% of our outstanding common shares, voted at a duly authorized meeting of shareholders called for that purpose, provided that notice of such meeting is served on such director at least 14 days before the meeting. These provisions may discourage, delay or prevent the removal of our incumbent directors. Shareholder Meetings Under our bye-laws annual meetings of shareholders will be held at a time and place selected by our board of directors each calendar year. Special meetings of shareholders may be called by our board of directors at any time and must be called at the request of shareholders holding at least 10% of our paid-up share capital carrying the right to vote at general meetings. Under our bye-laws at least 15, but not more than 60, days' notice of an annual meeting or any special meeting must be given to each shareholder entitled to vote at that meeting. Under Bermuda law accidental failure to give notice will not invalidate proceedings at a meeting. Our board of directors may set a record date between 15 and 60 days before the date of any meeting to determine the shareholders who will be eligible to receive notice and vote at the meeting. Limited Actions by Shareholders Any action required or permitted to be taken by our shareholders must be effected at an annual or special meeting of shareholders or (except for certain actions) by unanimous written consent without a meeting. Our bye-laws provide that, subject to certain exceptions and to the rights granted to shareholders pursuant to the BCA, only our board of directors may call special meetings of our shareholders and the business transacted at a special meeting is limited to the purposes stated in the notice for that meeting. Accordingly, a shareholder may be prevented from calling a special meeting for shareholder consideration of a proposal over the opposition of our board of directors and shareholder consideration of a proposal may be delayed until the next annual meeting. Subject to certain rights set out in the BCA, our bye-laws provide that shareholders are required to give advance notice to us of any business to be introduced by a shareholder at any annual meeting. The advance notice provisions provide that, for business to be properly introduced by a shareholder when such business is not specified in the notice of meeting or brought by or at the direction of our board of directors, the shareholder must have given our secretary notice not less than 90 nor more than 120 days prior to the anniversary date of the immediately preceding annual meeting of the shareholders. In the event the annual meeting is called for a date that is not within 30 days before or after such anniversary date, the shareholder must give our secretary notice not later than 10 days following the earlier of the date on which notice of the annual meeting was mailed to the shareholders or the date on which public disclosure of the annual meeting was made. The chairman of the meeting may, if the facts warrant, determine and declare that any business was not properly brought before such meeting and such business will not be transacted. Amendments to Bye-Laws Our bye-laws require the affirmative vote of the holders of not less than 80% of our outstanding voting shares to amend, alter, change or repeal the following provisions in our bye-laws: o the classified board and director removal provisions; o the percentage of approval required for our shareholders to amend our bye-laws; o the limitations on business combinations between us and interested shareholders; o the provisions requiring the affirmative vote of the holders of not less than 80% of our outstanding voting shares to amend the foregoing provisions; and o the limitations on shareholders' ability to call special meetings, subject to certain rights guaranteed to shareholders under the BCA. These requirements make it more difficult for our shareholders to make changes to the provisions in our bye-laws that could have anti-takeover effects. C. Material Contracts As of December 31, 2006 we had long term debt obligations under our new credit facility, with a group of international lenders. On April 3, 2006 we entered into a new credit facility for $360 million with Bank of Scotland and Nordea Bank Finland as joint lead arrangers, which has been subject to subsequent amendment. For a full description of our credit facilities see "Item 5 -- Operating and Financial Review and Prospects - Indebtedness." D. Exchange controls The Company has been designated as a non-resident of Bermuda for exchange control purposes by the Bermuda Monetary Authority, whose permission for the issue of the Common Shares was obtained prior to the offering thereof. The transfer of shares between persons regarded as resident outside Bermuda for exchange control purposes and the issuance of Common Shares to or by such persons may be effected without specific consent under the Bermuda Exchange Control Act of 1972 and regulations thereunder. Issues and transfers of Common Shares involving any person regarded as resident in Bermuda for exchange control purposes require specific prior approval under the Bermuda Exchange Control Act 1972. Subject to the foregoing, there are no limitations on the rights of owners of the Common Shares to hold or vote their shares. Because the Company has been designated as non-resident for Bermuda exchange control purposes, there are no restrictions on its ability to transfer funds in and out of Bermuda or to pay dividends to United States residents who are holders of the Common Shares, other than in respect of local Bermuda currency. In accordance with Bermuda law, share certificates may be issued only in the names of corporations or individuals. In the case of an applicant acting in a special capacity (for example, as an executor or trustee), certificates may, at the request of the applicant, record the capacity in which the applicant is acting. Notwithstanding the recording of any such special capacity, the Company is not bound to investigate or incur any responsibility in respect of the proper administration of any such estate or trust. The Company will take no notice of any trust applicable to any of its shares or other securities whether or not it had notice of such trust. As an " exempted company," the Company is exempt from Bermuda laws which restrict the percentage of share capital that may be held by non-Bermudians, but as an exempted company, the Company may not participate in certain business transactions including: (i) the acquisition or holding of land in Bermuda (except that required for its business and held by way of lease or tenancy for terms of not more than 21 years) without the express authorization of the Bermuda legislature; (ii) the taking of mortgages on land in Bermuda to secure an amount in excess of $50,000 without the consent of the Minister of Finance of Bermuda; (iii) the acquisition of securities created or issued by, or any interest in, any local company or business, other than certain types of Bermuda government securities or securities of another " exempted company, exempted partnership or other corporation or partnership resident in Bermuda but incorporated abroad; or (iv) the carrying on of business of any kind in Bermuda, except in so far as may be necessary for the carrying on of its business outside Bermuda or under a license granted by the Minister of Finance of Bermuda. There is a statutory remedy under Section 111 of the Companies Act 1981 which provides that a shareholder may seek redress in the Bermuda courts as long as such shareholder can establish that the Company's affairs are being conducted, or have been conducted, in a manner oppressive or prejudicial to the interests of some part of the shareholders, including such shareholder. However, this remedy has not yet been interpreted by the Bermuda courts. The Bermuda government actively encourages foreign investment in "exempted" entities like the Company that are based in Bermuda but do not operate in competition with local business. In addition to having no restrictions on the degree of foreign ownership, the Company is subject neither to taxes on its income or dividends nor to any exchange controls in Bermuda. In addition, there is no capital gains tax in Bermuda, and profits can be accumulated by the Company, as required, without limitation. There is no income tax treaty between the United States and Bermuda pertaining to the taxation of income other than applicable to insurance enterprises. E. Taxation The following is a discussion of the material Bermuda and United States federal income tax considerations with respect to the Company and holders of common shares. This discussion does not purport to deal with the tax consequences of owning common shares to all categories of investors, some of which, such as dealers in securities, investors whose functional currency is not the United States dollar and investors that own, actually or under applicable constructive ownership rules, 10% or more of our common shares, may be subject to special rules. This discussion deals only with holders who hold the common shares as a capital asset. Holders of common shares are encouraged to consult their own tax advisors concerning the overall tax consequences arising in their own particular situation under United States federal, state, local or foreign law of the ownership of common shares. Bermuda Tax Considerations As of the date of this document, we are not subject to taxation under the laws of Bermuda, and distributions to us by our subsidiaries also are not subject to any Bermuda tax. As of the date of this document, there is no Bermuda income, corporation or profits tax, withholding tax, capital gains tax, capital transfer tax, estate duty or inheritance tax payable by non-residents of Bermuda in respect of capital gains realized on a disposition of our common shares or in respect of distributions by us with respect to our common shares. This discussion does not, however, apply to the taxation of persons ordinarily resident in Bermuda. Bermuda holders should consult their own tax advisors regarding possible Bermuda taxes with respect to dispositions of, and distributions on, our common shares. United States Federal Income Tax Considerations The following are the material United States federal income tax consequences to us of our activities and to U.S. Holders and Non-U.S. Holders, each as defined below, of our common shares. The following discussion of United States federal income tax matters is based on the United States Internal Revenue Code of 1986, or the Code, judicial decisions, administrative pronouncements, and existing and proposed regulations issued by the United States Department of the Treasury, all of which are subject to change, possibly with retroactive effect. The discussion below is based, in part, on the description of our business as described in "Item 4 -- Information on the Company" above and assumes that we conduct our business as described in that section. Except as otherwise noted, this discussion is based on the assumption that we will not maintain an office or other fixed place of business within the United States. References in the following discussion to "we" and "us" are to Aries Maritime Transport Limited and its subsidiaries on a consolidated basis. United States Federal Income Taxation of Our Company Taxation of Operating Income: In General We earn substantially all of our income from the use of vessels, from the hiring or leasing of vessels for use on a time, voyage or bareboat charter basis or from the performance of services directly related to those uses, which we refer to as "shipping income." Fifty percent of shipping income that is attributable to transportation that begins or ends, but that does not both begin and end, in the United States constitutes income from sources within the United States, which we refer to as "U.S.-source shipping income." Shipping income attributable to transportation that both begins and ends in the United States is considered to be 100% from sources within the United States. We are not permitted to engage in transportation that produces income which is considered to be 100% from sources within the United States. Shipping income attributable to transportation exclusively between non-U.S. ports is not considered to be 100% derived from sources outside the United States. Shipping income derived from sources outside the United States is not subject to any United States federal income tax. In the absence of exemption from tax under Section 883, our gross U.S. source shipping income is subject to a 4% tax imposed without allowance for deductions as described below. Exemption of Operating Income from United States Federal Income Taxation Under Section 883 of the Code, a foreign corporation will be exempt from United States federal income taxation on its U.S.-source shipping income if: (1) it is organized in a qualified foreign country, which is one that grants an "equivalent exemption" to corporations organized in the United States in respect of such category of the shipping income for which exemption is being claimed under Section 883 and which we refer to as the "Country of Organization Test" and (2) either (A) more than 50% of the value of its stock is beneficially owned, directly or indirectly, by individuals who are "residents" of a qualified foreign country, which we refer to as the "50% Ownership Test," or (B) its stock is "primarily and regularly traded on an established securities market" in its country of organization, in another qualified foreign country or in the United States, which we refer to as the "Publicly Traded Test." The Country of Organization Test is satisfied since we are incorporated in Bermuda, and each of our subsidiaries is incorporated in the British Virgin Islands, the Marshall Islands, or Malta, all of which we believe are qualified foreign countries in respect of each category of Shipping Income we currently earn and expect to earn in the future. Therefore, we and our subsidiaries are exempt from United States federal income taxation with respect to our U.S.-source shipping income as we and each of our subsidiaries meet either of the 50% Ownership Test or the Publicly Traded Test. Under a special attribution rule of Section 883, each of our Subsidiaries is deemed to have satisfied the 50% Ownership Test if we satisfy such test or the Publicly Traded Test. Due to the widely-held nature of our stock, we may have difficulty satisfying the 50% Test. The Treasury Regulations provide, in pertinent part, that stock of a foreign corporation is considered to be "primarily traded" on an established securities market if the number of shares of each class of stock that are traded during any taxable year on all established securities markets in that country exceeds the number of shares in each such class that are traded during that year on established securities markets in any other single country. Our common shares, which are our sole class of issued and outstanding stock, are "primarily traded" on the Nasdaq Global Market, which is an established securities market in the United States. Under the Treasury Regulations, our common shares are considered to be "regularly traded" on an established securities market if one or more classes of our shares representing 50% or more of our outstanding shares, by total combined voting power of all classes of shares entitled to vote and total value, is listed on an established securities market, which we refer to as the listing threshold. Since our common shares are our sole class of issued and outstanding stock and are listed on the Nasdaq Global Market, we meet the listing threshold. It is further required that with respect to each class of stock relied upon to meet the listing threshold (i) such class of the stock is traded on the market, other than in minimal quantities, on at least 60 days during the taxable year or 1/6 of the days in a short taxable year; and (ii) the aggregate number of shares of such class of stock traded on such market is at least 10% of the average number of shares of such class of stock outstanding during such year or as appropriately adjusted in the case of a short taxable year. We satisfy these trading frequency and trading volume tests. Even if this were not the case, the Treasury regulations provide that the trading frequency and trading volume tests will be deemed satisfied if, as we expect to be the case with our common shares, such class of stock is traded on an established market in the United States and such stock is regularly quoted by dealers making a market in such stock. Notwithstanding the foregoing, the Treasury Regulations provide, in pertinent part, that our shares are not be considered to be " regularly traded" on an established securities market for any taxable year in which 50% or more of the vote and value of our outstanding common shares are owned, actually or constructively under specified stock attribution rules, on more than half the days during the taxable year by persons who each own 5% or more of the vote and value of our outstanding stock, which we refer to as the "5 Percent Override Rule." To determine the persons who own 5% or more of the vote and value of our shares, or "5% Shareholders," the Treasury Regulations permit us to rely on those persons that are identified on Form 13G and Form 13D filings with the United States Securities and Exchange Commission, or the "SEC," as having a 5% or more beneficial interest in our common shares. The Treasury Regulations further provide that an investment company which is registered under the Investment Company Act of 1940, as amended, will not be treated as a 5% Shareholder for such purposes. In the event the 5 Percent Override Rule is triggered, the Treasury Regulations provide that the 5 Percent Override Rule does not apply if we can establish in conformity with the Treasury Regulations that within the group of 5% Shareholders, sufficient shares are owned by qualified shareholders for purposes of Section 883 to preclude non-qualified shareholders in such group from owning 50% or more of the value of our shares for more than half the number of days during such year. Aries Energy (through its wholly owned subsidiary Rocket Marine Inc.) owns approximately 52% of our outstanding common shares. If Aries Energy alone or together with other 5% Shareholders were to own 50% of our outstanding shares on more than half the days of any taxable year, the 5 Percent Override Rule would be triggered. In order to preclude the application of the 5 Percent Override Rule, Aries Energy, Rocket Marine Inc. and Captain Gabriel Petridis, the 50% beneficial owner of Aries Energy, have provided information to establish that Captain Petridis is a qualified shareholder. As a result, we believe we are able to preclude the application of the 5 Percent Override Rule and therefore satisfy the Publicly Traded Test. However, there can be no assurance that we are able to continue to satisfy the Publicly Traded Test if (i) Captain Petridis's status as a qualified shareholder changes, (ii) the direct or indirect beneficial ownership of the shares held by Captain Petridis changes, (iii) the ownership of shares not directly or indirectly owned by Captain Petridis comes to be concentrated in 5% Shareholders that either are not qualified shareholders or who fail to comply with applicable documentation requirements or (iv) Captain Petridis, Aries Energy or Rocket Marine fail to satisfy the applicable documentation requirements. Even though we believe that we will be able to qualify for the benefits of Section 883 under the Publicly-Traded Test, we can provide no assurance that we will be able to continue to so qualify in the future. Taxation In The Absence of Section 883 Exemption To the extent the benefits of Section 883 are unavailable, our U.S. source shipping income, to the extent not considered to be " effectively connected" with the conduct of a U.S. trade or business, as described below, would be subject to a 4% tax imposed by Section 887 of the Code on a gross basis, without the benefit of deductions. Since under the sourcing rules described above, no more than 50% of our shipping income would be treated as being derived from U.S. sources, the maximum effective rate of U.S. federal income tax on our shipping income would never exceed 2% under the 4% gross basis tax regime. To the extent the benefits of the Section 883 exemption are unavailable and our U.S. source shipping income is considered to be "effectively connected" with the conduct of a U.S. trade or business, as described below, any such "effectively connected" U.S. source shipping income, net of applicable deductions, would, in lieu of the 4% gross basis tax described above, be subject to the U.S. federal corporate income tax currently imposed at rates of up to 35%. In addition, we may be subject to the 30% " branch profits" tax on earnings effectively connected with the conduct of such trade or business, as determined after allowance for certain adjustments, and on certain interest paid or deemed paid attributable to the conduct of our U.S. trade or business. Our U.S. source shipping income would be considered "effectively connected" with the conduct of a U.S. trade or business only if: o we have, or are considered to have, a fixed place of business in the United States involved in the earning of shipping income; and o substantially all of our U.S. source shipping income is attributable to regularly scheduled transportation, such as the operation of a vessel that follows a published schedule with repeated sailings at regular intervals between the same points for voyages that begin or end in the United States. We do not have, or permit circumstances that would result in our having, a fixed place of business in the United States involved in the earning of shipping income and therefore, we believe that none of our U.S. source shipping income will be " effectively connected" with the conduct of a U.S. trade or business. United States Taxation of Gain on Sale of Vessels Regardless of whether we qualify for exemption under Section 883, we will not be subject to United States federal income taxation with respect to gain realized on a sale of a vessel, provided the sale is considered to occur outside of the United States under United States federal income tax principles. In general, a sale of a vessel will be considered to occur outside of the United States for this purpose if title to the vessel, and risk of loss with respect to the vessel, pass to the buyer outside of the United States. It is expected that any sale of a vessel by us will be considered to occur outside of the United States. United States Federal Income Taxation of U.S. Holders As used herein, the term " U.S. Holder" means a beneficial owner of common shares that is a United States citizen or resident, United States corporation or other United States entity taxable as a corporation, an estate the income of which is subject to United States federal income taxation regardless of its source, or a trust if a court within the United States is able to exercise primary jurisdiction over the administration of the trust and one or more United States persons have the authority to control all substantial decisions of the trust. If a partnership holds our common shares, the tax treatment of a partner will generally depend upon the status of the partner and upon the activities of the partnership. If you are a partner in a partnership holding our common shares, you should consult your tax advisor. Distributions Subject to the discussion of passive foreign investment companies below, any distributions made by us with respect to our common shares to a U.S. Holder will generally constitute dividends, which may be taxable as ordinary income or "qualified dividend income" as described in more detail below, to the extent of our current or accumulated earnings and profits, as determined under United States federal income tax principles. Distributions in excess of our earnings and profits will be treated first as a nontaxable return of capital to the extent of the U.S. Holder's tax basis in his common shares on a dollar-for-dollar basis and thereafter as capital gain. Because we are not a United States corporation, U.S. Holders that are corporations will not be entitled to claim a dividends received deduction with respect to any distributions they receive from us. Dividends paid with respect to our common shares will generally be treated as "passive income" (or "passive category income" for taxable years beginning after December 31, 2006) or, in the case of certain types of U.S. Holders, "financial services income," (which will be treated as "general category income" income for taxable years beginning after December 31, 2006) for purposes of computing allowable foreign tax credits for United States foreign tax credit purposes. Dividends paid on our common shares to a U.S. Holder who is an individual, trust or estate (a " U.S. Individual Holder" ) will generally be treated as " qualified dividend income" that is taxable to such U.S. Individual Holders at preferential tax rates (through 2010) provided that (1) the common shares are readily tradable on an established securities market in the United States (such as the Nasdaq Global Market, on which our common shares are traded); (2) we are not a passive foreign investment company for the taxable year during which the dividend is paid or the immediately preceding taxable year (which we do not believe we are, have been or will be); and (3) the U.S. Individual Holder has owned the common shares for more than 60 days in the 121-day period beginning 60 days before the date on which the common shares becomes ex-dividend. Therefore, there is no assurance that any dividends paid on our common shares will be eligible for these preferential rates in the hands of a U.S. Individual Holder. Any dividends paid by the Company which are not eligible for these preferential rates will be taxed as ordinary income to a U.S. Individual Holder. Special rules may apply to any "extraordinary dividend"generally, a dividend in an amount which is equal to or in excess of ten percent of a shareholder's adjusted basis (or fair market value in certain circumstances) in a common share paid by us. If we pay an "extraordinary dividend" on our common shares that is treated as "qualified dividend income," then any loss derived by a U.S. Individual Holder from the sale or exchange of such common shares will be treated as long-term capital loss to the extent of such dividend. Sale, Exchange or other Disposition of Common Shares Assuming we do not constitute a passive foreign investment company for any taxable year, a U.S. Holder generally recognizes taxable gain or loss upon a sale, exchange or other disposition of our common shares in an amount equal to the difference between the amount realized by the U.S. Holder from such sale, exchange or other disposition and the U.S. Holder's tax basis in such stock. Such gain or loss is treated as long-term capital gain or loss if the U.S. Holder's holding period is greater than one year at the time of the sale, exchange or other disposition. Such capital gain or loss is generally treated as U.S.-source income or loss, as applicable, for U.S. foreign tax credit purposes. A U.S. Holder's ability to deduct capital losses is subject to certain limitations. Passive Foreign Investment Company Status and Significant Tax Consequences Special United States federal income tax rules apply to a U.S. Holder that holds stock in a foreign corporation classified as a passive foreign investment company for United States federal income tax purposes. In general, we are treated as a passive foreign investment company with respect to a U.S. Holder if, for any taxable year in which such holder held our common shares, either o at least 75% of our gross income for such taxable year consists of passive income (e.g., dividends, interest, capital gains and rents derived other than in the active conduct of a rental business), or o at least 50% of the average value of the assets held by the corporation during such taxable year produce, or are held for the production of, passive income. For purposes of determining whether we are a passive foreign investment company, we are treated as earning and owning our proportionate share of the income and assets, respectively, of any of our subsidiary corporations in which we own at least 25 percent of the value of the subsidiary's stock. Income earned, or deemed earned, by us in connection with the performance of services would not constitute passive income. By contrast, rental income would generally constitute "passive income" unless we were treated under specific rules as deriving our rental income in the active conduct of a trade or business. Based on our current operations and future projections, we do not believe that we are, nor do we expect to become, a passive foreign investment company with respect to any taxable year. Although there is no legal authority directly on point, and we are not relying upon an opinion of counsel on this issue, our belief is based principally on the position that, for purposes of determining whether we are a passive foreign investment company, the gross income we derive or are deemed to derive from the time chartering and voyage chartering activities of our wholly owned subsidiaries should constitute services income, rather than rental income. Correspondingly, such income should not constitute passive income, and the assets that we or our wholly-owned subsidiaries own and operate in connection with the production of such income, in particular, the vessels, should not constitute passive assets for purposes of determining whether we are a passive foreign investment company. We believe there is substantial legal authority supporting our position consisting of case law and Internal Revenue Service pronouncements concerning the characterization of income derived from time charters and voyage charters as services income for other tax purposes. However, in the absence of any legal authority specifically relating to the statutory provisions governing passive foreign investment companies, the Internal Revenue Service or a court could disagree with our position. In addition, although we intend to conduct our affairs in a manner to avoid being classified as a passive foreign investment company with respect to any taxable year, we cannot assure you that the nature of our operations will not change in the future. If we were to be treated as a passive foreign investment company, special and adverse United States federal income tax rules would apply to a U.S. Holder of our shares. Among other things, the distributions a U.S. Holder received with respect to our shares and gains, if any, a U.S. Holder derived from his sale or other disposition of our shares would be taxable as ordinary income (rather than as qualified dividend income or capital gain, as the case may be), would be treated as realized ratably over his holding period in our common shares, and would be subject to an additional interest charge. However, a U.S. Holder might be able to make certain tax elections which ameliorate these consequences. United States Federal Income Taxation of "Non-U.S. Holders" A beneficial owner of common shares that is not a U.S. Holder is referred to herein as a "Non-U.S. Holder." Dividends on Common Shares Non-U.S. Holders generally are not subject to United States federal income tax or withholding tax on dividends received from us with respect to our common shares, unless that income is effectively connected with the Non-U.S. Holder's conduct of a trade or business in the United States. If the Non-U.S. Holder is entitled to the benefits of a United States income tax treaty with respect to those dividends, that income is taxable only if it is attributable to a permanent establishment maintained by the Non-U.S. Holder in the United States. Sale, Exchange or Other Disposition of Common Shares Non-U.S. Holders generally are not subject to United States federal income tax or withholding tax on any gain realized upon the sale, exchange or other disposition of our common shares, unless: o the gain is effectively connected with the Non-U.S. Holder's conduct of a trade or business in the United States. If the Non-U.S. Holder is entitled to the benefits of an income tax treaty with respect to that gain, that gain is taxable only if it is attributable to a permanent establishment maintained by the Non-U.S. Holder in the United States; or o the Non-U.S. Holder is an individual who is present in the United States for 183 days or more during the taxable year of disposition and other conditions are met. If the Non-U.S. Holder is engaged in a United States trade or business for United States federal income tax purposes, the income from the common shares, including dividends and the gain from the sale, exchange or other disposition of the stock that is effectively connected with the conduct of that trade or business is generally subject to regular United States federal income tax in the same manner as discussed in the previous section relating to the taxation of U.S. Holders. In addition, if you are a corporate Non-U.S. Holder, your earnings and profits that are attributable to the effectively connected income, which are subject to certain adjustments, may be subject to an additional branch profits tax at a rate of 30%, or at a lower rate as may be specified by an applicable income tax treaty. F. Dividends and paying agents Not applicable. G. Statement by experts Not applicable. H. Documents on display We file annual reports and other information with the SEC. You may read and copy any document we file with the SEC at its public reference room at 100 F Street, N.E., Room 1580, Washington, D.C. 20549. You may also obtain copies of this information by mail from the public reference section of the SEC, 100 F Street, N.E., Room 1580, Washington, D.C. 20549, at prescribed rates. Please call the SEC at 1-800-SEC-0330 for further information on the operation of the public reference room. Our SEC filings are also available to the public at the web site maintained by the SEC at http://www.sec.gov, as well as on our website at http://www.ariesmaritime.com. I. Subsidiary information Not applicable. ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK See " Item 5 - Operating and Financial Review and Prospects - Quantitative and Qualitative Disclosures About Market Risk." ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES Not Applicable. PART II ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES Neither we nor any of our subsidiaries have been subject to a material default in the payment of principal, interest, a sinking fund or purchase fund installment or any other material default that was not cured within 30 days. In addition, the payment of our dividends is not, and has not been in arrears or has not been subject to a material delinquency that was not cured within 30 days. ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS Not Applicable. ITEM 15. CONTROLS AND PROCEDURES (a) Disclosure Controls and Procedures. The Chief Executive Officer and Chief Financial Officer, after evaluating the effectiveness of the Company's disclosure controls and procedures (as defined by Rules 13a-15(e) and 15d-15(e) under the securities and Exchange Act of 1934) as of December 31, 2006, have concluded that, as of such date, the Company's disclosure controls and procedures were effective to provide reasonable assurance that the information required to be disclosed by the Company in reports filed under the Securities Exchange Act of 1934, is recorded, processed, summarized and reported within the time period specified in the SEC's rules and forms. The Company further believes that a system of controls, no matter how well designed and operated, cannot provide absolute assurance that the objectives of the controls are met, and no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within a company have been detected. (b) Management's annual report on internal control over financial reporting. This annual report does not include an attestation report of the Company's registered public accounting firm regarding internal control over financial reporting. Management's report was not subject to attestation by the Company's registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit the Company to provide only management's report in this annual report. Our management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rule 13a-15(f) or 15d-15(f) under the Exchange Act. Our internal control system was designed to provide reasonable assurance to our management and board of directors regarding the reliability of financial reporting and the preparation of published financial statements in accordance with Generally Accepted Accounting Principles. All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective may not prevent or detect misstatements and can provide only reasonable assurance with respect to financial statement preparation and presentation. Our management assessed the effectiveness of our internal control over financial reporting as of December 31, 2006. In making this assessment, management used the criteria for effective internal control over financial reporting set forth by the Committee of Sponsoring Organizations of the Treadway Commission ("COSO") in Internal Control-Integrated Framework. Based on this assessment, management has concluded that, as of December 31, 2006, our internal control over financial reporting was effective based on those criteria. (c) Changes in internal control over financial reporting. There have been no changes in internal controls over financial reporting (identified in connection with management's evaluation of such internal controls over financial reporting) that occurred during the year covered by this annual report that have materially affected, or are reasonably likely to materially affect, the Company's internal controls over financial reporting. ITEM 16A. AUDIT COMMITTEE FINANCIAL EXPERT We have established an audit committee comprised of three members which is responsible for reviewing our accounting controls and recommending to the board of directors the engagement of our outside auditors. Each member is an independent director under the corporate governance rules of the Nasdaq Global Market. The members of the audit committee are Messrs. Per Olav Karlsen, Henry S. Marcus and Panagiotis Skiadas. The board of directors has determined that the Chairman, Per Olav Karlsen, qualifies as an audit committee financial expert. ITEM 16B. CODE OF ETHICS As a foreign private issuer, we are exempt from the rules of the Nasdaq Global Market that require the adoption of a code of ethics. However, we have voluntarily adopted a code of ethics that applies to our principal executive officer, principal financial officer and persons performing similar functions. We will also provide any person a hard copy of our code of ethics free of charge upon written request. Shareholders may direct their requests to the Company at 18 Zerva Nap., Glyfada, Athens 166 75 Greece, Attn: Corporate Secretary. ITEM 16C. PRINCIPAL ACCOUNTANT FEES AND SERVICES Audit Fees ---------- Our principal accountants for the fiscal years ended December 31, 2006 and 2005 were PricewaterhouseCoopers S.A. Our audit fees for 2006 and 2005 were $305,000 and $268,000, respectively. Audit-Related Fees ------------------ Our audit-related fees for 2006 were $78,000. We did not incur audit-related fees for 2005. Tax Fees -------- We did not incur tax fees for 2006 or 2005. All Other Fees -------------- We incurred fees of $471,643.91 in connection with our initial public offering in June 2005. Our audit committee pre-approves all audit, audit-related and non-audit services not prohibited by law to be performed by our independent auditors and associated fees prior to the engagement of the independent auditor with respect to such services. ITEM 16D. EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES Not applicable. ITEM 16E. PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASES None. Part III ITEM 17. FINANCIAL STATEMENTS See Item 18. ITEM 18. FINANCIAL STATEMENTS The following financial statements, together with the report of PricewaterhouseCoopers S.A. thereon, are filed as part of this report: ================================================================================ ARIES MARITIME TRANSPORT LIMITED Consolidated Financial Statements and Predecessor Combined Carve-Out Financial Statements for the years ended December 31, 2006, December 31, 2005 and December 31, 2004 ================================================================================ INDEX TO THE CONSOLIDATED FINANCIAL STATEMENTS AND PREDECESSOR COMBINED CARVE-OUT FINANCIAL STATEMENTS Page ---- Report of Independent Registered Public Accounting Firm F-3 Balance Sheets F-4 Statements of Income F-5 Statements of Stockholders' Equity F-6 Statements of Cash Flows F-7 Notes to the Predecessor Combined Carve-out and Consolidated Financial Statements F-9 Report of Independent Registered Public Accounting Firm To the Board of Directors and Stockholders of Aries Maritime Transport Limited We have audited the accompanying consolidated balance sheets of Aries Maritime Transport Limited (the "Group") as of December 31, 2006 and December 31, 2005, and the related consolidated and predecessor combined carve-out statements of income, stockholders' equity and cash flows for each of the three years in the period ended December 31, 2006. These consolidated and predecessor combined carve-out financial statements are the responsibility of the Group's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated and predecessor combined carve-out financial statements referred to above present fairly, in all material respects, the financial position of Aries Maritime Transport Limited at December 31, 2006 and December 31, 2005, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2006 in conformity with accounting principles generally accepted in the United States of America. PricewaterhouseCoopers S.A. April 19, 2007 Athens, Greece ARIES MARITIME TRANSPORT LIMITED CONSOLIDATED BALANCE SHEETS (All amounts expressed in thousands of U.S. Dollars) - -------------------------------------------------------------------------------- Notes December 31, December 31, 2005 2006 ------- -------- ASSETS CURRENT ASSETS Cash and cash equivalents 19,248 11,612 Restricted cash 4 10 3,242 Trade receivables, net 176 1,960 Other receivables 60 172 Derivative financial instruments 14 401 671 Inventories 5 645 1,496 Prepaid expenses 521 338 Due from managing agent 84 444 Due from related parties 18 1,293 2,495 ------- ------- Total current assets 22,438 22,430 ------- ------- Vessels and other fixed assets, net 6 341,225 431,396 Advances for vessel acquisitions 11,363 -- Deferred charges, net 9 2,872 4,214 ------- ------- Total non-current assets 355,460 435,610 ------- ------- Total assets 377,898 458,040 ======= ======= LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities Accounts payable, trade 7 4,598 11,828 Accrued liabilities 8 2,880 7,289 Deferred income 3,163 1,947 Derivative financial instruments 14 -- 2,547 Deferred revenue 11 10,715 6,011 ------- ------- Total current liabilities 21,356 29,622 ------- ------- Long-term debt 10 183,820 284,800 Deferred revenue 11 17,041 11,030 ------- ------- Total liabilities 222,217 325,452 ------- ------- Commitments and contingencies 10,16 -- -- Stockholders' equity Preferred Stock, $0.01 par value, 30 million shares authorized, none issued. Common Stock, $0.01 par value, 100 million shares authorized, 28.4 million shares issued and outstanding at December 31, 2006 (2005: 28.4 million shares) 284 284 Additional paid-in capital 155,397 132,304 ------- ------- Total stockholders' equity 155,681 132,588 ------- ------- Total liabilities and stockholders' equity 377,898 458,040 ======= ======= The accompanying notes are an integral part of these consolidated and predecessor combined carve-out financial statements. ARIES MARITIME TRANSPORT LIMITED CONSOLIDATED AND PREDECESSOR COMBINED CARVE-OUT STATEMENTS OF INCOME (All amounts expressed in thousands of U.S. Dollars, except share and per share amounts) - ----------------------------------------------------------------------------------------------------------
Year ended Year ended Year ended Notes December 31, 2004 December 31, 2005 December 31, 2006 ----- ----------------- ----------------- ----------------- REVENUES: Revenue from voyages 11,13 48,269 75,905 94,199 Gain on disposal of vessels 14,724 - - EXPENSES: Commissions 18 (1,189) (1,323) (1,403) Voyage expenses (312) (224) (4,076) Vessel operating expenses 17,18 (12,460) (17,842) (27,091) General & administrative expenses 18 (75) (1,649) (4,226) Depreciation 6 (12,724) (19,446) (29,431) Amortization of dry-docking and special survey expense 6,18 (1,552) (1,958) (3,568) Management fees 18 (893) (1,511) (1,999) ----------------- ----------------- ----------------- (29,205) (43,953) (71,794) ----------------- ----------------- ----------------- Net operating income 33,788 31,952 22,405 OTHER INCOME/( EXPENSES), NET: Interest expense 9,10,11 (8,616) (18,793) (19,135) Interest received 58 672 931 Other income (expenses), net 76 (10) (214) Change in fair value of derivatives 14 (33) 950 (1,788) ----------------- ----------------- ----------------- Total other income/ (expenses), net (8,515) (17,181) (20,206) ----------------- ----------------- ----------------- NET INCOME 25,273 14,771 2,199 ================= ================= ================= Earnings per share: Basic and diluted $1.56 $0.64 $0.08 ================= ================= ================= Weighted average number of shares: Basic and diluted 16,176,877 23,118,466 28,416,877 ================= ================= ================= The accompanying notes are an integral part of these consolidated and predecessor combined carve-out financial statements.
ARIES MARITIME TRANSPORT LIMITED CONSOLIDATED AND PREDECESSOR COMBINED CARVE-OUT STATEMENTS OF STOCKHOLDERS' EQUITY (All amounts expressed in thousands of U.S. Dollars except as indicated)
Common Stock (Number of Additional Total Shares in Invested Share Paid-in Retained Stockholders' Notes Thousands) Equity Capital Capital Earnings Equity ----- ---------- ------ ------- ------- -------- ------ 514 514 Balance at December 31, 2003 Net income 25,273 25,273 Capital contribution 9,834 9,834 Distribution to stockholders (18,968) (18,968) --------- --------- Balance at December 31, 2004 16,653 16,653 Net income 3,807 3,807 Capital contribution 12 1,200 12 12 --------- --------- --------- Balance at March 17, 2005 1,200 20,472 20,472 Reorganization adjustment (20,472) 12 20,460 - - Distributions 12 14,977 - 150 (2,058) - (1,908) Net income - - - 10,964 10,964 Proceeds from initial public offering, net 1 12,240 - 122 140,807 - 140,929 Dividends paid 12 - - (3,812) (10,964) (14,776) --------- --------- --------- --------- --------- --------- Balance at December 31, 2005 28,417 - 284 155,397 - 155,681 Net income - - - 2,199 2,199 Dividends paid 12 - - (23,093) (2,199) (25,292) --------- --------- --------- --------- --------- --------- Balance at December 31, 2006 28,417 - 284 132,304 - 132,588 ========= ========= ========= ========= ========= ========= The accompanying notes are an integral part of these consolidated and predecessor combined carve-out financial statements.
ARIES MARITIME TRANSPORT LIMITED CONSOLIDATED AND PREDECESSOR COMBINED CARVE-OUT STATEMENTS OF CASH FLOWS (All amounts expressed in thousands of U.S. Dollars) - ----------------------------------------------------------------------------------------------------------
Year ended Year ended Year ended Notes December 31, 2004 December 31, 2005 December 31, 2006 ----- ----------------- ----------------- ----------------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income 25,273 14,771 2,199 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 12,724 19,446 29,431 Amortization of dry-docking and special survey 1,552 1,958 3,727 Amortization and write-off of deferred financing costs 587 1,598 1,639 Amortization of debt discount 1,480 7,640 - Amortization of deferred revenue (9,055) (9,275) (11,689) Unearned revenue - (16) - Interest expense of deferred revenue 294 430 974 Change in fair value of derivative financial instruments 33 (950) 1,788 Gain on disposal of vessels (14,724) - - Payments for dry-docking / special survey costs - (1,896) (15,151) Proceeds for vessel's dry-docking / special survey costs - - 5,000 Changes in working capital 15 3,735 3,268 6,297 ----------------- ----------------- ----------------- Net cash provided by operating activities 21,899 36,974 24,215 ----------------- ----------------- ----------------- Cash flows from investing activities: Vessel acquisitions (221,115) (103,355) (101,765) Other fixed asset acquisitions - (96) (50) Restricted cash for dry-docking payments (535) 813 - Proceeds from disposal of vessels 59,877 - - Advances for vessel acquisitions - (11,363) - ----------------- ----------------- ----------------- Net cash used in investing activities (161,773) (114,001) (101,815) ----------------- ----------------- ----------------- Cash flows from financing activities: Proceeds from issuance of long-term debt 246,180 183,820 100,980 Principal repayments of long-term debt (99,378) (214,600) - Proceeds from termination of derivative financial instruments - 301 489 Payment of participation liability - (6,500) - Payment of financing costs (1,959) (2,824) (2,981) Restricted cash for loan payments (4,694) 4,793 (3,232) Proceeds from issuance of capital stock 4,392 140,941 - Distribution - (214) - Dividends paid - (14,776) (25,292) ----------------- ----------------- ----------------- Net cash provided by financing activities 144,541 90,941 69,964 ----------------- ----------------- ----------------- Net increase/ (decrease) in cash and cash equivalents 4,667 13,914 (7,636) Cash and cash equivalents Beginning of year 667 5,334 19,248 ----------------- ----------------- ----------------- End of year 5,334 19,248 11,612 ================= ================= ================= The accompanying notes are an integral part of these consolidated and predecessor combined carve-out financial statements.
ARIES MARITIME TRANSPORT LIMITED CONSOLIDATED AND PREDECESSOR COMBINED CARVE-OUT STATEMENTS OF CASH FLOWS (CONTINUED) (All amounts expressed in thousands of U.S. Dollars) - ---------------------------------------------------------------------------------------------------------- Year ended Year ended Year ended December 31, 2004 December 31, 2005 December 31, 2006 ----------------- ----------------- ----------------- SUPPLEMENTAL CASH FLOW INFORMATION Interest paid 5,429 9,838 13,466 Issuance of capital stock - 150 - Vessels acquired from issuance of long-term debt 5,000 - - Vessels acquired from stockholder contributions 6,141 - - Proceeds receivable from disposal of vessels 2,000 - - Long-term debt transferred to group 19,767 - - Proceeds from disposal of vessels paid to stockholders 3,000 - - Liability assumed in connection with vessel acquisitions 22,638 28,387 - Distribution - 1,694 - The accompanying notes are an integral part of these consolidated and predecessor combined carve-out financial statements.
ARIES MARITIME TRANSPORT LIMITED (All amounts in tables expressed in thousands of U.S. Dollars) - -------------------------------------------------------------------------------- Notes to the Predecessor Combined Carve-out and Consolidated Financial Statements 1. Organization and Basis of Presentation The principal business of Aries Maritime Transport Limited (the "Company" or "Aries Maritime") is the ownership and chartering of ocean-going vessels world-wide. The Company conducts its operations through its subsidiaries. The vessel-owning subsidiaries own products tankers and container vessels that transport a variety of refined petroleum products and containers world-wide. Aries Maritime was incorporated on January 12, 2005 for the purpose of being the ultimate holding company of 100% of certain of the companies listed below (companies 1 through to 12): Company Name Country of Incorporation Vessel Name Date of Vessel Acquisition - ------------ ------------------------ ----------- -------------------------- 1. Mote Shipping Ltd. Malta ** - 2. Statesman Shipping Ltd. Malta ** - 3. Trans Continent Navigation Ltd. Malta ** - 4. Trans State Navigation Ltd. Malta ** - 5. Rivonia Marine Limited Cyprus * - 6. Robin Marine Limited Cyprus * - 7. Olympic Galaxy Shipping Ltd. Marshall Islands M/V Energy 1 ex CMA CGM Energy April 28, 2004 8. Bora Limited British Virgin Islands ** - 9. Dynamic Maritime Co. Marshall Islands M/V SCI Tej ex CMA CGM Force June 1, 2004 10. Jubilee Shipholding S.A. Marshall Islands M/V Ocean Hope July 26, 2004 11. Vintage Marine S.A. Marshall Islands M/T Arius ex Citius August 5, 2004 12. Ermina Marine Ltd. Marshall Islands M/T Nordanvind December 9, 2004 13. AMT Management Ltd. Marshall Islands - - 14. Land Marine S.A. Marshall Islands M/T High Land** March 7, 2003 15. Rider Marine S.A. Marshall Islands M/T High Rider** March 18, 2003 16. Altius Marine S.A. Marshall Islands M/T Altius** June 24, 2004 17. Seine Marine Ltd. Marshall Islands M/V CMA CGM Seine June 24, 2005 18. Makassar Marine Ltd. Marshall Islands M/V CMA CGM Makassar July 15, 2005 19. Fortius Marine S.A. Marshall Islands M/T Fortius** August 2, 2004 20. Chinook Waves Corporation Marshall Islands M/T Chinook November 30, 2005 21. Santa Ana Waves Corporation Marshall Islands *** - 22. Compassion Overseas Ltd. Bermuda M/T Stena Compassion June 16, 2006 23. Compass Overseas Ltd. Bermuda M/T Stena Compass February 14, 2006 24. Ostria Waves Ltd. Marshall Islands M/T Ostria ex Bora**/*** May 25, 2004
- ---------- * These companies were transferred out of the Aries Maritime group of companies on March 24, 2005. ** These vessels were transferred from Trans Continent Navigation Ltd, Mote Shipping Ltd, Statesman Shipping Ltd, Trans State Navigation Ltd and Bora Limited to Altius Marine S.A., Land Marine S.A., Rider Marine S.A., Fortius Marine S.A. and Ostria Waves Ltd in November, July, August, November 2005 and January 2007 respectively. The original acquisitions for these vessels were made on June 24, 2004, on March 7, 2003, on March 18, 2003, on August 2, 2004 and on May 25, 2004 respectively. *** Santa Ana Waves Corporation was incorporated on March 23, 2006. Ostria Waves Ltd was incorporated on November 27, 2006. Up to March 17, 2005, the predecessor combined carve-out financial statements of Aries Maritime had been prepared to reflect the combination of certain of the vessel-owning companies listed above. The companies reflected in the predecessor combined carve-out financial statements were not a separate legal group prior to the re-organization, therefore reserves were represented by 'Invested Equity'. In a group re-organization effective March 17, 2005 the stockholders of certain of the vessel-owning companies listed above contributed their interest in the individual vessel owning-companies in exchange for an equivalent shareholding in Aries Maritime. Aries Maritime's ownership percentages in the vessel-owning companies are identical to the ownership percentages that the previous stockholders held in each of the vessel-owning companies before the group reorganization. Accordingly the group reorganization has been accounted for as an exchange of equity interests at historical cost. After March 17, 2005, the financial statements reflect the consolidated results of Aries Maritime. On June 8, 2005 Aries Maritime closed its initial public offering of 12,240,000 common shares at an offering price of $12.50 per share. The net proceeds of the offering after expenses were $140.8 million. Hereinafter, Aries Maritime and its subsidiaries listed above will be referred to as "the Group". 2. Summary of Significant Accounting Policies Principles of Combination and Consolidation: The predecessor combined carve-out and consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States of America. All intercompany balances and transactions have been eliminated upon combination and consolidation. Use of Estimates: The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, revenues and expenses and the disclosure of contingent assets and liabilities in the financial statements and accompanying notes. Actual results could differ from those estimates. Foreign Currency Translation: The functional currency of the Group is the U.S. Dollar because the Group's vessels operate in international shipping markets, which typically utilize the U.S. Dollar as the functional currency. The accounting records of the companies comprising the Group are maintained in U.S. Dollars. Transactions involving other currencies during a period are converted into U.S. Dollars using the exchange rates in effect at the time of the transactions. At the balance sheet dates, monetary assets and liabilities, which are denominated in other currencies, are translated to reflect the period-end exchange rates. Resulting gains or losses are reflected in the accompanying consolidated statements of income. Cash and Cash Equivalents: The Group considers highly liquid investments, such as time deposits and certificates of deposit, with an original maturity of three months or less to be cash equivalents. Restricted Cash: Various restricted cash accounts held by the Group, consisting mainly of retention and debt reserve accounts, are restricted for use as general working capital unless such balances exceed the next quarter's loan payments due to the vessel-owning companies' lenders. The Group considers such accounts to be restricted cash and classifies them separately from cash and cash equivalents within current assets. Dry-docking accounts are also restricted for use by the vessel-owning companies until such time as dry-docking costs are incurred. These restricted cash accounts are classified as non-current assets. Trade Receivables: The amount shown as trade receivables includes estimated recoveries from charterers for hire, freight and demurrage billings, net of provision for doubtful accounts. An estimate is made for the provision for doubtful accounts based on a review of all outstanding trade receivables at year end. Bad debts are written off in the period in which they are identified. No provision for doubtful debts has been made for the years ended December 31, 2006, December 31, 2005 and December 31, 2004 and the Group has not written off any trade receivables during these periods. Inventories: Inventories which comprise of bunkers, lubricants, provisions and stores remaining on board the vessels at period end, are valued at the lower of cost and market value. Cost is determined by the first in, first out method. Vessels and Other Fixed Assets: Vessels are stated at cost, which consists of the contract price, delivery and acquisition expenses, interest cost while under construction, and, where applicable, initial improvements. Subsequent expenditures for conversions and major improvements are also capitalized when they appreciably extend the life, increase the earning capacity or improve the efficiency or safety of a vessel; otherwise, these amounts are charged to expenses as incurred. The component of each new vessels' initial capitalized cost that relates to dry-docking and special survey calculated by reference to the related estimated economic benefits to be derived until the next scheduled dry-docking and special survey, is treated as a separate component of the vessels' cost and is accounted for in accordance with the accounting policy for dry-docking and special survey costs. Where the Group identifies any intangible assets or liabilities associated with the acquisition of a vessel, the Group records all identified tangible and intangible assets or liabilities at fair value. Fair value is determined by reference to market data and the discounted amount of expected future cash flows. In addition, the portion of the vessels' capitalized costs that relates to dry-docking and special survey is treated as a separate component of the vessels' costs and is accounted for in accordance with the accounting policy for special survey and dry-docking costs. Fixed assets are stated at cost and are depreciated utilizing the straight-line method at rates equivalent to their estimated economic useful lives. The cost and related accumulated depreciation of fixed assets sold or retired are removed from the accounts at the time of sale or retirement and any gain or loss is included in the accompanying statement of income. Accounting for Special Survey and Dry-docking Costs: The Group follows the deferral method of accounting for special survey and dry-docking expenses whereby actual costs incurred are deferred and are amortized over a period of five and two and a half years, respectively. If a special survey and or dry-docking is performed prior to the scheduled date, the remaining unamortized balances are immediately written-off. The amortization periods for the special survey and dry-docking expenses reflect the periods between each legally required special survey and dry-docking. Debt Finance: Where a secured loan includes the right for the lender to participate in future appreciation of the underlying vessels under lien, the Group establishes a participation liability at the inception of the loan equal to the fair value of the participation feature. At the end of each reporting period, the balance of the participation liability is adjusted to be equal to the current fair value of the participation. The corresponding amount of the adjustment is reflected as an adjustment to the debt discount. As of December 31, 2006 and 2005 there is no such participation liability. Debt discount is amortized using the effective interest method over the term of the related loan. Any adjustment to the debt discount is amortized prospectively. The cost is included in interest expense. Deferred Revenue: The Group values any liability arising from the below market value bareboat and time charters assumed when a vessel is acquired. The liability, being the difference between the market charter rate and assumed charter rate is discounted using the Group's weighted average cost of capital and is recorded as deferred revenue and amortized to revenue over the remaining period of the time charter. Impairment of Long-lived Assets: Long-lived assets and certain identifiable intangibles held and used or disposed of by the Group are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable. An impairment loss for an asset held for use should be recognized when the estimate of undiscounted cash flows, excluding interest charges, expected to be generated by the use of the asset is less than its carrying amount. Measurement of the impairment loss is based on the fair value of the asset as provided by third parties as compared to its carrying amount. In this respect, management regularly reviews the carrying amount of each vessel in connection with the estimated recoverable amount for such vessel. Impairment losses on assets to be disposed of, if any, are based on the estimated proceeds to be received, less costs of disposal. The review of the carrying amount in connection with the estimated recoverable amount for each of the Group's vessels indicated that no impairment loss has occurred in any of the periods presented. Depreciation of Vessels and Other Fixed Assets: Depreciation is computed using the straight-line method over the estimated useful life of the vessels, after considering the estimated salvage value of the vessels. Each vessel's salvage value is equal to the product of its lightweight tonnage and estimated scrap value per lightweight ton. Management estimates the useful life of the Group's vessels to be 25 years from the date of its initial delivery from the shipyard. However, when regulations place limitations over the ability of a vessel to trade, its useful life is adjusted to end at the date such regulations become effective. Currently, there are no regulations which affect the vessels' useful lives. Depreciation of fixed assets is computed using the straight-line method. Annual depreciation rates, which approximate the useful life of the assets, are: Furniture, fixtures and equipment: 5 years Computer equipment and software: 5 years Financing Costs: Fees incurred for obtaining new loans or refinancing existing loans are deferred and amortized over the life of the related debt, using the effective interest rate method. Any unamortized balance of costs relating to loans repaid or refinanced is expensed in the period the repayment or refinancing is made. Fees incurred in a refinancing of existing loans continue to be amortized over the remaining term of the new loan where there is a modification of the loan. Fees incurred in a refinancing of existing loans where there is an extinguishment of the old loan are written off and included in the debt extinguishment gain or loss. Interest Expense: Interest costs are expensed as incurred and include interest on loans, financing costs and amortization. Interest costs incurred while a vessel is being constructed are capitalized. Accounting for Revenue and Expenses: Revenues are generated from bareboat, time and voyage charters. Bareboat, time and voyage charter revenues are recorded over the term of the charter as the service is provided. Any profit sharing additional hires generated are recorded over the term of the charter as the service is provided. Deferred income represents revenue applicable to periods after the balance sheet date. Vessel operating expenses are accounted for on an accrual basis. Repairs and Maintenance: Expenditure for routine repairs and maintenance of the vessels is charged against income in the period in which the expenditure is incurred. Major vessel improvements and upgrades are capitalized to the cost of vessel. Derivative Instruments: Derivative financial instruments are recognized in the balance sheets at their fair values as either assets or liabilities. Changes in the fair value of derivatives that are designated and qualify as cash flow hedges, and that are highly effective, are recognized in other comprehensive income. If derivative transactions do not meet the criteria to qualify for hedge accounting, any unrealized changes in fair value are recognized immediately in the income statement. Amounts receivable or payable arising on the termination of interest rate swap agreements qualifying as hedging instruments are deferred and amortized over the shorter of the life of the hedged debt or the hedge instrument. During 2004, 2005 and 2006, the Group entered into interest rate swap agreements that did not qualify for hedge accounting. As such, the fair value of these agreements and changes therein are recognized in the balance sheets and statements of income, respectively Segment Reporting: The Group reports financial information and evaluates its operations by charter revenues and not by the type of vessel, length of vessel employment, customer or type of charter. Management, including the chief operating decision makers, reviews operating results solely by revenue per day and operating results of the fleet and, as such, the Group has determined that it operates under one reportable segment. Earnings Per Share: The Group has presented earnings per share for all periods presented based on the common shares outstanding of Aries Maritime. The common shares issued as a result of the initial public offering have been included in the weighted average calculation prospectively from the date of such offering for purposes of disclosure of earnings per share. There are no dilutive or potentially dilutive securities; accordingly there is no difference between basic and diluted earnings per share. Cash Flow Statement: The consolidated statements of cash flows for all periods presented have been reclassified to reflect dry-docking and special survey costs as operating activities instead of investing activities to conform to the presentation adopted by the Group starting January 1, 2006. This reclassification resulted in the decrease of net cash used in investing activities in the amount of $1.9 million in the year ended December 31, 2005 (2004: $NIL). This reclassification had no impact on our Consolidated and Predecessor Combined Carve-out Balance Sheets, Statements of Income or Statements of Stockholders' Equity. Certain balances in prior fiscal years have been reclassified to conform to the presentation adopted in the current year. 3. Recent Accounting Pronouncements In September 2006, the Financial Accounting Standard Board issued Statement of Financial Accounting Standards No. 157 (SFAS 157) "Fair Value Measurement". SFAS 157 defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles (GAAP) and expands disclosures about fair value measurements. SFAS 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007, and interim periods within those fiscal years. The provisions of SFAS 157 should be applied prospectively as of the beginning of the fiscal year in which it is initially applied. The Group does not expect the adoption of this Accounting Standard to have an effect on its financial statements. SFAS 157 will be effective for the Group for the year beginning on January 1, 2008. In February, 2007, the FASB issued SFAS No. 159 "The Fair Value Option for Financial Assets and Financial Liabilities" (SFAS No. 159). SFAS No. 159 permits entities to choose to measure many financial assets and financial liabilities at fair value. Unrealized gains and losses on items for which the fair value option has been elected are reported in earnings. SFAS No. 159 is effective for fiscal years beginning after November 15, 2007. The Group is currently assessing the impact of SFAS No. 159 on its consolidated financial position and results of operations. 4. Restricted Cash December 31, 2005 December 31, 2006 ----------------- ----------------- Retention account - 3,232 Restricted account 10 10 --------- --------- 10 3,242 Cash deposited in the retention account was made available for loan interest payments within three months of being deposited. 5. Inventories December 31, 2005 December 31, 2006 ----------------- ----------------- Lubricants 581 750 Bunkers - 699 Provisions (Stores) 64 47 --------- --------- 645 1,496 6. Vessels and Other Fixed Assets Details are as follows: Other fixed Cost Special assets of vessel survey Dry-docking Total ------ --------- ------ ----------- ----- Cost Balance at December 31, 2003 - 30,572 967 700 32,239 Additions - 263,938 2,834 1,967 268,739 Disposals - (59,177) (474) (438) (60,089) ---------- ---------- ---------- ---------- ---------- Balance at December 31, 2004 - 235,333 3,327 2,229 240,889 Additions 96 131,079 1,528 1,031 133,734 ---------- ---------- ---------- ---------- ---------- Balance at December 31, 2005 96 366,412 4,855 3,260 374,623 Additions 50 112,361 1,562 14,356 128,329 Proceeds received - - - (5,000) (5,000) ---------- ---------- ---------- ---------- ---------- Balance at December 31, 2006 146 478,773 6,417 12,616 497,952 ---------- ---------- ---------- ---------- ---------- Accumulated Depreciation and Amortization Balance at December 31, 2003 - (1,721) (157) (114) (1,992) Charge for the year - (12,724) (773) (779) (14,276) Disposals - 4,127 77 70 4,274 ---------- ---------- ---------- ---------- ---------- Balance at December 31, 2004 - (10,318) (853) (823) (11,994) Charge for the year (9) (19,437) (920) (1,038) (21,404) ---------- ---------- ---------- ---------- ---------- Balance at December 31, 2005 (9) (29,755) (1,773) (1,861) (33,398) Charge for the year (26) (29,405) (1,290) (2,437) (33,158) ---------- ---------- ---------- ---------- ---------- Balance at December 31, 2006 (35) (59,160) (3,063) (4,298) (66,556) ---------- ---------- ---------- ---------- ---------- Net book value - December 31, 2004 - 225,015 2,474 1,406 228,895 ---------- ---------- ---------- ---------- ---------- Net book value - December 31, 2005 87 336,657 3,082 1,399 341,225 ---------- ---------- ---------- ---------- ---------- Net book value - December 31, 2006 111 419,613 3,354 8,318 431,396 ---------- ---------- ---------- ---------- ----------
During the year ended December 31, 2006, the Group acquired two vessels, none of which included the assumption of bareboat charters which had rates of hire below the market value at the delivery date. In 2005, three vessels were acquired and in 2004, five vessels were acquired with rates of hire below market value. The cost of these vessels in 2005 and 2004 totalled $103.2 million and $107.4 million respectively. The fair value of the liability associated with the time charters was $28.3 million in 2005 and $22.6 million in 2004. During the year ended December 31, 2006, the Group received $158,000 (2005: $NIL) from Magnus Carriers for special survey and dry-docking amortization, pursuant to the excess cost sharing arrangement contained in the management agreements (refer to note 16). The amount was received in respect of the difference between the amortization of actual dry-docking and special survey expenses and the budgeted amounts and has been recognized as a reduction in these expenses (refer to note 18). Under the ship management agreements with Magnus Carriers, the Group received $5 million during the year ended December 31, 2006, by way of a one-time accelerated payment in respect of the dry-docking costs of the M/T Arius. This $5 million has been recognized as a reduction in the capitalized costs (refer to note 18). 7. Accounts Payable December 31, 2005 December 31, 2006 ----------------- ----------------- Suppliers 2,106 8,002 Agents 626 615 Trade Creditors 1,866 3,211 --------- --------- 4,598 11,828 8. Accrued Liabilities December 31, 2005 December 31, 2006 ----------------- ----------------- Accrued interest 7 4,613 Other accrued expenses 617 1,870 Crew payroll 422 484 Claims 1,834 322 --------- --------- 2,880 7,289 9. Deferred Charges Financing Costs --------------- Net Book Value at December 31, 2003 274 Additions 1,959 Amortization (321) Deferred charges written-off (266) Net Book Value at December 31, 2004 1,646 Additions 2,824 Amortization (837) Deferred charges written-off (761) Net Book Value at December 31, 2005 2,872 Additions 2,981 Amortization (877) Deferred charges written-off (762) Net Book Value at December 31, 2006 4,214 10. Long-Term Debt Balance as of VESSEL December 31, 2006 M/T Altius 17,333 M/V CMA CGM Seine 13,565 M/T Ostria ex Bora 11,220 M/T Nordanvind 11,890 M/T High Land 9,043 M/T High Rider 8,708 M/T Arius ex Citius 7,201 M/V Ocean Hope 8,373 M/V Energy 1 ex CMA CGM Energy 10,885 M/V SCI Tej ex CMA CGM Force 10,885 M/V CMA CGM Makassar 13,565 M/T Fortius 17,332 M/T Chinook 32,600 M/T Stena Compass 56,100 M/T Stena Compassion 56,100 ---------- Total 284,800 ---------- Short term - Long term 284,800 ---------- 284,800 ---------- Senior secured credit agreement Effective April 3, 2006 the Company entered into a new $360 million revolving credit facility. The $360 million facility, which has a term of five years, was used to replace the previous $140 million term loan facility and $150 million revolving credit facility. The $360 million facility is in the name of Aries Maritime as borrower and guaranteed by the vessel-owning subsidiaries collateralised by first preferred mortgages over their vessels which have a net book value of $419.6 million at December 31, 2006 (2005: $336.7 million), excluding capitalized dry-docking and special survey costs. The $360 million commitment contained in the revolving credit facility is subject to an $11 million reduction every six months from April 3, 2006, with the remaining commitment, after the nine equal semi-annual reductions, of $261 million to be reduced to zero or repaid in full in one instalment in April, 2011. The debt agreement also contains various covenants, which the Company is required to meet quarterly, including (a) restriction as to changes in management and ownership of the vessels, (b) limitation on incurring additional indebtedness, (c) mortgaging of vessels, (d) minimum requirement regarding hull cover ratios, (e) minimum liquidity requirement, (f) maintenance of operating accounts and retention account and (g) minimum insurance values. In addition, Magnus Carriers is required to maintain a credit balance in an account with the lender of at least $1 million (See also Note 18). The debt agreement also requires the Group's two principal beneficial equity holders to maintain a beneficial ownership of no less than 10% each in the issued stock of the Company. As at December 31, 2006 repayments of the long-term debt under the new credit facility are due as follows: 2009 1,800 2010 22,000 2011 261,000 --------- Total amount 284,800 ========= Interest on the new credit facility is charged at LIBOR plus a margin equal to 1.125% if the total liabilities divided by the total assets, adjusting the book value of the fleet to its market value, is less than 50%; and 1.25% if equal to or greater than 50% but less than 60%; and 1.375% if equal to or greater than 60% but less than 65%; and 1.5% if equal to or greater than 65%. The effective interest rate at December 31, 2006 was 6.62% p.a. for the revolving credit facility. Primarily due to vessel out-of-service time during the year ended December 31, 2006, the interest coverage ratio financial covenant contained in the debt agreement would not be met and the lender granted a relaxation from 3.00 to 1.00 to 2.50 to 1.00 for the periods ending December 31, 2006, March 31, 2007 and June 30, 2007. For subsequent periods the relaxation will not apply and the ratio reverts back to 3.00 to 1.00. With effect from January 3, 2007 and until the relaxation of this covenant no longer applies, the Company will pay an increased margin of 1.75%. Settlement of fee agreement with bank Certain loans with an aggregate outstanding amount of $135.7 million at December 31, 2004 contained additional participation arrangements with the Bank of Scotland. With $6.5 million of the proceeds of the Company's initial public offering, these obligations were settled in full on June 17, 2005. 11. Deferred Revenue Deferred revenue December 31, 2003 - Additions 22,638 Amortization (9,055) Interest 293 Deferred revenue written-off on disposal of vessels (5,662) ----------- December 31, 2004 8,214 Additions 28,387 Amortization (9,275) Interest 430 ----------- December 31, 2005 27,756 Amortization (11,689) Interest 974 ----------- December 31, 2006 17,041 =========== Short term 6,011 Long term 11,030 ----------- 17,041 =========== 12. Stockholders' Equity (a) On incorporation of the Company on January 12, 2005, 12,000 shares were issued with a par value of $1 per share resulting in net proceeds of $12,000. On January 17, 2005, the Company proceeded with a stock split resulting in 1,200,000 shares of $0.01 each. (b) In April 2005, the Company paid a dividend to existing stockholders of $1.9 million. $214,000 of the dividend was paid in cash and the balance of $1.7 million was settled by the transfer of two Group companies to existing stockholders. In June 2005, the Company paid a dividend of $150,000, which the Company settled by the issuance of 14,976,877 shares. (c) On November 28, 2005, the Company paid a dividend of $14.7 million to existing stockholders. (d) During the year ended December 31, 2006, the Company paid dividends totalling $25.2 million to existing stockholders. 13. Revenue From Voyages The Group operates on a worldwide basis in one operating segment - the shipping transportation market. The geographical analysis of revenue from voyages, based on point of destination, is presented as follows: December 31, December 31, December 31, 2004 2005 2006 ---- ---- ---- North America - - 5,962 Australia - - 5,609 Europe 12,302 27,413 25,406 Asia 21,846 30,896 34,710 Africa 10,571 4,186 9,169 South America 3,550 13,410 13,343 --------- --------- --------- 48,269 75,905 94,199 During the year ended December 31, 2006, the Group received 65% of its income from four charterers (31%, 13%, 11% and 10%, respectively). During the year ended December 31, 2005, the Group received 91% of its income from five charterers (33%, 16%, 15%, 14% and 13%, respectively). During the year ended December 31, 2004, the Group received 79% of its income from three charterers (43%, 23% and 13%, respectively). 14. Financial Instruments Fair Values The carrying amounts of the following financial instruments approximate their fair values; cash and cash equivalents and restricted cash account, trade and other receivables, due from managing agent, due from related parties, derivative financial instruments and trade and other payables. The fair values of long-term loans approximate the recorded values, generally, due to their variable interest rates. Credit Risk The Group believes that no significant credit risk exists with respect to the Group's cash due to the spread of this risk among various different banks and the high credit status of these counterparties. The Group is also exposed to credit risk in the event of non-performance by counterparties to derivative instruments. However, the Group limits this exposure by entering into transactions with counterparties that have high credit ratings. Credit risk with respect to trade accounts receivable is reduced by the Group by chartering its vessels to established international charterers (refer to note 13). Interest Rate Swaps Outstanding swap agreements involve both the risk of a counterparty not performing under the terms of the contract and the risk associated with changes in market value. The Group monitors its positions, the credit ratings of counterparties and the level of contracts it enters into with any one party. The counterparties to these contracts are major financial institutions. The Group has a policy of entering into contracts with counterparties that meet stringent qualifications and, given the high level of credit quality of its derivative counter parties, the Group does not believe it is necessary to obtain collateral arrangements. The Group has entered into interest rate swap agreements detailed as follows: Notional Maximum Amount fixed rate Value Termination Dec. 31, Dec. 31, Fair value Fair value Counterparty Date Date 2006/2005 2006/2005 Floating Rate Dec. 31, 2005 Dec. 31, 2006 - ------------ ---- ---- --------- --------- ------------- ------------- ------------- SMBC Bank 03/07/06 04/04/11 20,000 5.63% 3-month LIBOR - (505) Bank of Ireland 03/07/06 04/04/11 20,000 5.63% 3-month LIBOR - (504) HSH Nordbank 03/07/06 04/04/11 20,000 5.63% 3-month LIBOR - (502) Nordea Bank 03/07/06 04/04/11 20,000 5.63% 3-month LIBOR - (506) Bank of Scotland 03/07/06 04/04/11 20,000 5.63% 3-month LIBOR - (530) --------- --------- - (2,547) --------- --------- Fortis Bank 03/01/06 03/06/09 46,667 4.885% 3-month LIBOR 127 - Nordea Bank 03/01/06 03/06/09 46,667 4.885% 3-month LIBOR 121 340 Bank of Scotland 03/01/06 03/06/09 46,667 4.885% 3-month LIBOR 153 331 --------- --------- 401 671 --------- ---------
These interest rate swaps are used to hedge the interest expense arising from the Group's long-term borrowings detailed in Note 10. The interest rate swaps allow the Group to raise long-term borrowings at floating rates and swap them into effectively fixed rates. Under the interest rate swaps, the Group agrees with the counterparty to exchange, at specified intervals, the difference between a fixed rate and floating rate interest amount calculated by reference to the agreed notional amount. The total fair value change of the interest rate swaps indicated above is shown in the income statement. These amounts were a loss of $1.8 million for the year ended December 31, 2006, a gain of $950,000 for the year ended December 31, 2005 and a loss of $33,000 for the year ended December 31, 2004. These fair values are based upon valuations received from the relevant financial institutions. The related asset or liability is shown under derivative financial instruments in the balance sheet. 15. Changes in Working Capital December 31, December 31, December 31, 2004 2005 2006 ---- ---- ---- (Increase) decrease in Trade receivables (302) 120 (1,784) Other receivables (114) 54 (112) Inventories (352) (210) (851) Prepaid expenses and other (299) (192) 183 Due from managing agent - (84) (360) Due from related parties (1,582) (152) (1,202) Increase (decrease) in Accounts payable, trade 3,518 936 7,230 Accrued liabilities 1,061 1,684 4,409 Deferred income 1,805 1,112 (1,216) -------- -------- -------- 3,735 3,268 6,297 16. Commitments and Contingent Liabilities (a) Commitments Management agreements From June 8, 2005, certain of the vessel-owning subsidiaries commenced operating under new ten-year ship management agreements with Magnus Carriers Corporation ("Magnus Carriers"), a related party with common ultimate beneficial stockholders. These ship management agreements are cancellable by the vessel-owning subsidiaries with two months notice, while Magnus Carriers has no such option. Under these agreements, Magnus Carriers provides both technical and commercial management services for the vessel-owning subsidiaries. Each of the vessel-owning subsidiaries pays vessel operating expenses to Magnus Carriers based on the jointly established budget per vessel, which will increase by 3% annually and be subject to adjustment every three years. If actual vessel operating expenses exceed or are below the budgeted amounts, the relevant subsidiary and Magnus Carriers will bear the excess expenditures or benefit from the savings equally. Expenses that relate to any improvement, structural changes or installation of new equipment required by law or regulation will be paid solely by the relevant subsidiary. Also, each of these agreements provides for the payment to Magnus Carriers of an initial management fee of $146,000 per annum for technical management services. From November 30, 2005, Chinook Waves Corporation commenced operating the vessel M/T Chinook under a ship management agreement with Ernst Jacob Shipmanagement GmbH ("Ernst Jacob"). Under this agreement, Ernst Jacob provides technical management services for the vessel-owning subsidiary and received an initial annual management fee of Euro 128,000. Rental agreement On November 21, 2005 AMT Management Ltd entered into an office rental agreement with a related party, a company with common ultimate beneficial stockholders, with effect from December 1, 2005 for ten years at a monthly rental of Euro 4,000 plus stamp duty ($5,000) (Note 18). The following table sets out long-term commercial obligations for rent and management fees, outstanding as of December 31, 2006: 2007 1,968 2008 1,963 2009 2,023 2010 2,085 2011 and thereafter 11,420 ----------- 19,459 =========== (b) Contingencies Legal proceedings There are no material legal proceedings to which the Group is a party other than routine litigation incidental to the Group's business. In the opinion of management, the disposition of these lawsuits should not have a material impact on the Group's results of operations, financial position or cash flows. 17. Taxation The Group is not subject to tax on international shipping income in its respective jurisdictions of incorporation or in the jurisdictions in which their respective vessels are registered. However, the vessel-owning companies' vessels are subject to tonnage taxes, which have been included in the vessel operating expenses in the accompanying statements of income. 18. Transactions Involving Related Parties (a) Management fees The vessel-owning companies included in the Group receive technical and commercial management services from Magnus Carriers, a company with common ultimate beneficial stockholders, pursuant to ship management agreements. Under these agreements, the Group paid management fees of $1.8 million for the year ended December 31, 2006, $1.5 million for the year ended December 31, 2005 and $0.9 million for the year ended December 31, 2004 which is separately reflected in the statements of income. (b) Commissions Magnus Carriers and Trampocean S.A., related companies with common ultimate beneficial stockholders, provide chartering services to the vessel-owning companies included in the Group at a commission of 1.25% of hires and freights earned by the vessels. The Group paid these companies fees for chartering services of $34,000 for the year ended December 31, 2006, $50,000 for the year ended December 31, 2005 and $368,000 for the year ended December 31, 2004. These commissions relate to agreements between Magnus Carriers and the vessel-owning subsidiaries. From the effective date of the new ship management agreements Magnus Carriers may only receive commissions on new charters. Under the new ship management agreements, Magnus Carriers will be paid 1% of the sale or purchase price in connection with a vessel sale or purchase that Magnus Carriers brokers for the Group. (c) Rental agreement During 2005, the Group entered into a rental agreement with a related party, a company with common ultimate beneficial stockholders (see note 16). The Group paid $62,000 to the related party during the year ended December 31, 2006 (2005 $4,000 and 2004 $NIL). (d) Amounts due from/to related parties Amounts due from related parties were $2.5 million at December 31, 2006 and $1.2 million at December 31, 2005. These amounts represent payments less receipts made by the Group on behalf of (i) other vessel-owning companies with common ultimate beneficial stockholders with the Group, consisting of $27,000 (due from) at December 31, 2006 and $392,000 (due from) at December 31, 2005 and (ii) Magnus Carriers Corporation, consisting of $2.5 million (due from) at December 31, 2006 and $901,000 (due from) at December 31, 2005. There are no terms of settlement for these amounts, as of December 31, 2006. (e) Crewing Some crewing for the Group is undertaken by Magnus Carriers through a related entity, Poseidon Marine Agency. The Group paid manning fees of $288,000 for the year ended December 31, 2006, $310,000 for the year ended December 31, 2005 and $278,000 for the year ended December 31, 2004. (f) General and administrative expenses During the year ended December 31, 2006 the Group paid directors' fees of $619,000 (2005 $467,000 and 2004 $NIL). Such fees are included in general and administrative expenses in the accompanying consolidated statements of income. (g) Contributions under management agreements During the year ended December 31, 2006 the Group received $5 million in full and final settlement by Magnus Carriers of the dry-docking expenses incurred by M/T Arius. This amount has been deducted from the vessel's dry-docking expenses (refer to note 6). During the year ended December 31, 2006 the Group received an additional $6.5 million (2005 $812,000) from Magnus Carriers under the ship-management cost-sharing agreements for vessel operating expenses. These amounts are reflected in the operating expenses of the vessels in the income statement. Also received during the year ended December 31, 2006 was an amount of $159,000 (2005 $NIL) for special survey and dry-docking amortization. This amount is reflected in the amortization and dry-docking expense in the income statement. (h) Vessel purchase Aries Maritime exercised its right to acquire the M/T Chinook under the Right of First Refusal Agreement with Magnus Carriers in October 2005. The acquisition was offered to Aries Maritime by Magnus Carriers on either of two bases; (a) with retention of the five year head charter dated June 16, 2003 between the sellers and Pacific Breeze Tankers Ltd. (a joint venture company, 50% of which is ultimately owned between Mons Bolin, President and Chief Executive Officer of Aries Maritime and Gabriel Petridis equally) as charterers, at a rate of $13,000 per day, in which case the purchase consideration would be $30.6 million or, (b) without the head charter, in which case the purchase consideration would be $32.6 million. Aries Maritime exercised its right on basis (b). The total purchase consideration of $32.6 million for the M/T Chinook, paid on November 30, 2005, comprised purchase consideration under the terms of a Memorandum of Agreement dated October 25, 2006 of $30.6 million and a $2 million additional purchase consideration to the sellers under the terms of a separate agreement relating to the termination of the head charter. Pursuant to an agreement dated December 28, 2004 Aries Maritime exercised its right to acquire CMA CGM Seine and CMA CGM Makassar in June, 2005 and took delivery of these vessels on June 24, 2005 and July 15, 2005 respectively. Both vessels were purchased from International Container Ships KS (a Norwegian limited partnership, of which Mons Bolin, President and Chief Executive Officer of Aries Maritime and Gabriel Petridis equally together, ultimately owned 25%). The purchase price paid for the CMA CGM Seine was $35.4 million and for the CMA CGM Makassar was $35.3 million. (i) Minimum liquidity Under the Group's new credit facility, Magnus Carriers is required to maintain at least $1 million in an account with the lenders (See Note 10). 19. Post Balance Sheet Events Dividend On March 9, 2007 the Directors of Aries Maritime declared a dividend of $0.07 per share in respect of the fourth quarter of 2006. The dividend was paid on March 30, 2007 to stockholders on record as of March 19, 2007. ITEM 19. EXHIBITS Number Description of Exhibits 1.1 ____ Articles of Incorporation of Aries Maritime Transport Limited (1) 1.2 ____ Bye-laws of the Company (2) 4.1 ____ Credit Agreement, dated April 3, 2006 by and among the Company and The Bank of Scotland and Nordea Bank Finland as joint lead arrangers. (3) 4.2 ____ First Supplemental Agreement, dated August 24, 2006 by and between the Company and The Bank of Scotland relating to the Credit Agreement. 4.3 ____ Second Supplemental Agreement, dated January 22, 2007 by and among the Company, certain subsidiaries, The Bank of Scotland and Magnus Carriers Corporation relating to the Credit Agreement. 4.4 ____ Third Supplemental Agreement, dated March 2, 2007 by and among the Company, certain subsidiaries, The Bank of Scotland and Magnus Carriers Corporation relating to the Credit Agreement. 8.1 ____ List of Subsidiaries 12.1 ____ Rule 13a-14(a)/15d-14(a) Certification of the Company's Chief Executive Officer. 12.2 ____ Rule 13a-14(a)/15d-14(a) Certification of the Company's Chief Financial Officer. 13.1 ____ Certification of the Company's Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. 13.2 ____ Certification of the Company's Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. - ---------- (1) Incorporated by reference to Exhibit 3.1 to the Company's registration statement on Form F-1 (Registration No. 333-124952). (2) Incorporated by reference to Exhibit 3.2 to the Company's registration statement on Form F-1 (Registration No. 333-124952). (3) Incorporated by reference to Exhibit 4.1 to the Company's Annual Report on Form 20-F/A Fiscal year ended December 31, 2005 filed on April 18, 2007. SIGNATURES The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized the undersigned to sign this registration statement on its behalf. ARIES MARITIME TRANSPORT LIMITED By: /s/ Mons S. Bolin -------------------------- Name: Mons S. Bolin Title: Chief Executive Officer April 19, 2007 SK 23248 0002 766101 EX-4.2 2 d764948_ex4-2.txt Exhibit 4.2 FIRST SUPPLEMENTAL AGREEMENT To: Aries Maritime Transport Limited 6 Poseidon Avenue Athens 17674 Greece August 24, 2006 Dear Sirs, US$360,000,000 Revolving Credit Facility We refer to the facility agreement dated 3 April 2006 (the "Facility Agreement") and made between (1) you, the Borrower, (2) the banks and financial institutions as set out in Schedule 1 to the Facility Agreement (the "Banks"), (3) The Governor and Company of the Bank of Scotland and Nordea Bank Finland plc as joint lead arrangers (the "Arrangers") (4) the banks and financial institutions set out at Schedule 1, part 3 to the Facility Agreement in their capacity as co-arrangers (the "Co-Arrangers"), (5) the banks and financial institutions set out at Schedule 1, part 2 to the Facility Agreement in their capacity as swap banks (the "Swap Banks") and (6) The Governor and Company of the Bank of Scotland (the "Agent", and together with the Banks, the Arrangers, the Co-Arrangers and the Swap Banks, the "Finance Parties" and each a "Finance Party") as agent, security agent and trustee on behalf of the Finance Parties, pursuant to which the Banks agreed to make available to you upon the terms and conditions therein the aggregate sum of up to three hundred and sixty million Dollars ($360,000,000). You, the Borrower, have now requested that we, in our capacity as security agent and trustee on behalf of the Finance Parties, agree on behalf of the Finance Parties, to the amendment of the definition of "Minimum Liquidity" set out in Clause 8.6 of the Facility Agreement so that such definition includes the undrawn portion of the Commitment which has been made available to the Borrower for general corporate purposes. We, as Agent, on behalf of the Finance Parties, hereby agree to the deletion of the definition of "Minimum Liquidity" set out in clause 8.6 of the Facility Agreement and its replacement with: ""Minimum Liquidity" means, at any time in respect of the Borrower's Group, the minimum amount of: (a) Cash; (b) Cash Equivalent Investments; and (c) the undrawn element of the $5,000,000 portion of the Commitment relative to general corporate purposes made available under Clause 2.5.7 of this Agreement (except during the six (6) months prior to the Repayment Date), which is equal to five per cent (5%) of interest bearing debt;". Please countersign and return a copy of this letter as evidence of your agreement. Words and expressions defined in the Facility Agreement shall and unless the context otherwise requires or unless defined herein have the same meanings when used in this letter. This letter shall be governed by and construed in accordance with the laws of England. Yours faithfully, ............................ For and on behalf of THE GOVERNOR AND COMPANY OF THE BANK OF SCOTLAND (as security agent and trustee for the Finance Parties) We agree to the terms of this letter. ............................ For and on behalf of ARIES MARITIME TRANSPORT LIMITED SK 23248 0002 764948 EX-4.3 3 d764950_ex4-3.txt Exhibit 4.3 SECOND SUPPLEMENTAL AGREEMENT To: Aries Maritime Transport Limited 6 Poseidon Avenue Athens 17674 Greece January 22, 2007 Dear Sirs, US$360,000,000 Revolving Credit Facility We refer to the facility agreement dated 3 April 2006 (as supplemented and amended from time to time) (the "Facility Agreement") and made between (1) you, (hereinafter referred to as the "Borrower"), (2) the banks and financial institutions as set out in Schedule 1 to the Facility Agreement (the "Banks"), (3) The Governor and Company of the Bank of Scotland and Nordea Bank Finland plc as joint lead arrangers (the "Arrangers") (4) the banks and financial institutions set out at Schedule 1, part 3 to the Facility Agreement in their capacity as co-arrangers (the "Co-Arrangers"), (5) the banks and financial institutions set out at Schedule 1, part 2 to the Facility Agreement in their capacity as swap banks (the "Swap Banks") and (6) The Governor and Company of the Bank of Scotland (the "Agent", and together with the Banks, the Arrangers, the Co-Arrangers and the Swap Banks, the "Finance Parties" and each a "Finance Party") as agent, security agent and trustee on behalf of the Finance Parties, pursuant to which the Banks agreed to make available to you upon the terms and conditions therein the aggregate sum of up to three hundred and sixty million Dollars ($360,000,000) (the "Loan"). Furthermore, we refer to the intra-group loan agreement dated 27 April 2006 (the "Bora Intra-Group Loan Agreement") and made between (1) the Borrower and (2) Bora Limited (the "Original Owner") whereby the Borrower in accordance with the provisions of the Facility Agreement on-lent to the Original Owner the sum of eleven million two hundred and twenty thousand and ninety six Dollars ($11,220,096) being part of the Loan to assist the Original Owner in refinancing the acquisition of m.v. "BORA" (tbr "OSTRIA") with official number 1878 and IMO number 9037135 (the "Ship"). You, the Borrower, have now requested that we, in our capacity as security agent and trustee on behalf of the Finance Parties, agree on behalf of the Finance Parties, to: (A) the amendment of the definition "Minimum Liquidity" set out in clause 8.6 of the Facility Agreement as amended by the first supplemental agreement dated 24 August 2006 between the Borrower and the Agent; (B) the transfer of the Ship from the Original Owner to Ostria Waves Ltd. (the "New Owner") and the registration of the Ship under the laws and flag of the Marshall Islands; (C) the assignment of the rights of the Original Owner under the Bora Intra-Group Loan Agreement to the New Owner and the assumption of the New Owner of the obligations thereunder; and (D) the change of name of the Ship from m.v. "BORA" to m.v. "OSTRIA". We, as Agent, on behalf of the Finance Parties (subject to the receipt of the conditions precedent listed in Schedule 1 hereto and the execution of the documents listed in Schedule 2 hereto in a form and substance acceptable to us in our sole discretion) hereby: 1 agree to the deletion of the definition of "Minimum Liquidity" set out in clause 8.6 of the Facility Agreement and its replacement with: ""Minimum Liquidity" means, at any time in respect of the Borrower's Group, the minimum amount of: (a) Cash; (b) Cash Equivalent Investments; and (c) the undrawn element of the $5,000,000 portion of the Commitment relative to general corporate purposes made available under Clause 2.5.7 of this Agreement (except during the six (6) months prior to the Repayment Date), which is equal to five per cent (5%) of interest bearing debt plus the undrawn element of the $5,000,000 portion of the Commitment relative to general corporate purposes;". 2 agree and consent to: (a) the transfer of the Ship from the original owner to the new Owner and the registration of the Ship under the laws and flag of the Marshall Islands; and (b) the assignment by the Original Owner of all its rights under the Bora Intra-Group Loan Agreement to the New Owner and the assumption by the New Owner of all the Original Owner's obligations thereunder; 3 agree and consent to the change of name of the Ship from m.v. "BORA" to m.v. "OSTRIA"; and 4 agree to the deletion of Schedule 2 Part 1 (Initial Ships), Schedule 2 Part 3 (Maximum amount of Advance) and Schedule 2 Part 4 (Details of Initial Owners) and their replacement with the new Schedule 2 Part 1, Schedule 2 Part 3 and Schedule 2 Part 4 attached hereto as Schedules 3, 4 and 5 respectively. Please countersign and return a copy of this letter as evidence of your agreement. Words and expressions defined in the Facility Agreement shall, unless the context otherwise requires or unless defined herein, have the same meanings when used in this letter. This letter shall be governed by and construed in accordance with the laws of England. Yours faithfully, ............................ For and on behalf of THE GOVERNOR AND COMPANY OF THE BANK OF SCOTLAND (as security agent and trustee for the Finance Parties) We agree to the terms of this letter. ............................ For and on behalf of ARIES MARITIME TRANSPORT LIMITED We agree to the terms of this letter. ............................ For and on behalf of MAGNUS CARRIERS CORPORATION We agree to the terms of this letter. ............................ For and on behalf of BORA LIMITED OSTRIA WAVES LTD. ERMINA MARINE LIMITED VINTAGE MARINE S.A. LAND MARINE S.A. RIDER MARINE S.A. ALTIUS MARINE S.A. FORTIUS MARINE S.A. JUBILEE SHIPHOLDING S.A. OLYMPIC GALAXY SHIPPING LIMITED DYNAMIC MARITIME COMPANY MAKASSAR MARINE LTD. SEINE MARINE LTD. CHINOOK WAVES CORPORATION COMPASS OVERSEAS LTD. COMPASSION OVERSEAS LTD. Schedule 1 Documents and evidence required in relation to the change of name and change of ownership of m.v. "BORA" (tbr "OSTRIA") (a) Constitutional documents copies, certified by an officer of the Original Owner, the New Owner, the Borrower or the Manager (the "Relevant Parties" and each a "Relevant Party") as true, complete and up to date copies of all documents which contain or establish or relate to the constitution of the Relevant Party; (b) Corporate authorisations copies of resolutions of the directors and, if required by such Relevant Party's law of incorporation, shareholders of the Relevant Parties approving such of the documents listed in Schedule 2 (the "Ostria Security Documents") to which such Relevant Party is, or is to be, party and authorising the signature, delivery and performance of such Relevant Party's obligations thereunder, certified (in a certificate dated at the date of this Agreement) by an officer of such Relevant Party as; (i) being true and correct; (ii) being duly passed at meetings of the directors of such Relevant Party and, if required by such Relevant Party's law of incorporation, of the shareholders of such Relevant Party, each duly convened and held or duly adopted by unanimous written consent in lieu of such meeting(s); (iii) not having been amended, modified or revoked; and (iv) being in full force and effect together with originals or certified copies of any powers of attorney issued by any Relevant Party pursuant to such resolutions; (c) Specimen signatures copies of the signatures of the persons who have been authorised on behalf of each Relevant Party to sign such of the Ostria Security Documents to which such Relevant Party is, or is to be, party and to give notices and communications under or in connection with the Ostria Security Documents, certified (in a certificate dated no earlier than five (5) Banking Days prior to the date of this Agreement) by an officer of such Relevant Party as being the true signatures of such persons; (d) Certificates of incumbency (i) a list of directors and officers of each Relevant Party (excluding the Original Owner) specifying the names and positions of such persons, certified (in a certificate dated no earlier than five (5) Banking Days prior to the date of this Agreement) by an officer of such Relevant Party to be true, complete and up to date; and (ii) in relation to the Original Owner, a Certificate of Incumbency issued by the registered agent of the Original Owner; (e) New Owner evidence that the New Owner is: (i) properly incorporated as a Marshall Islands corporation; (ii) a wholly owned subsidiary of the Borrower; (iii) a single purpose company with no other assets; and (iv) has no other Indebtedness of any nature and no Encumbrances whether registered or unregistered against it or any of its shares; (f) Bank accounts evidence that the Earnings Account for the Ship in the name of the New Owner has been opened; (g) Know your customer and money laundering compliance such documents and evidence as the Banks shall require to identify the New Owner and any other persons involved or affected by the transaction(s) contemplated by this Agreement as required by any applicable law or the Banks' own "know your customer" internal guidelines; (h) Transfer of title evidence that all documents necessary to: (i) transfer title of the Ship from the original Owner to the new Owner; and (ii) delete the registration of the Ship in the name of the original owner, have been prepared in a form and substance satisfactory to the Agent. (i) Ship conditions evidence that the Ship: (i) Registration and Encumbrances is registered in the name of the New Owner through the relevant Registry under the laws and flag of the relevant Flag State and that the Ship and its Earnings, Insurances and Requisition Compensation (as defined in the General Assignment) are free of Encumbrances; and (ii) Insurance is insured in accordance with the provisions of the Security Documents and all requirements of the Security Documents in respect of such insurance have been complied with (including without limitation, confirmation from the protection and indemnity association or other insurer with which the Ship is, or is to be, entered for insurance or insured against protection and indemnity risks (including oil pollution risks) that any necessary declarations required by the association or insurer for the removal of any oil pollution exclusion have been made and that any such exclusion does not apply to the Ship); and (j) Security documents and delivery documents the Ostria Security Documents duly executed; (k) Notices of assignment and acknowledgements (i) copies of duly executed notices of assignment required by the terms of the Ostria Security Documents and in the forms prescribed by the Ostria Security Documents; and (ii) evidence that the Borrower has given notice to the New Owner of the assignment contained in the Assignment of Intra-Group Loan Agreements and that the New Owner has executed an acknowledgement of the said assignment; (l) Management copies, certified by an officer of the New Owner of the Management Agreement for the Ship; (m) Legal opinions (i) Bermuda opinion an opinion of Conyers Dill & Pearman special legal counsel in Bermuda to the Agent; (ii) Marshall Islands opinion an opinion of Blank Rome LLP, special legal advisers of Marshall Islands law to the Agent; (iii) British Virgin Islands opinion an opinion of Conyers Dill & Pearman, special legal counsel in The British Virgin Islands to the Agent; and (iv) Further opinions any such further opinion as may be required by the Agent and/or Banks; (n) Process agent letter a copy, certified as a true copy by the Borrower's or other Security Party's solicitors or other person acceptable to the Agent of a letter from the Borrower's and other Security Party's agent for receipt of service of proceedings referred to in each of the Security Documents in which it is or is to be appointed as the Security Party's agent; (o) Certificates of financial responsibility if applicable, a copy of a certificate of financial responsibility complying with the requirements of the United States Oil Pollution Act 1990 or the United States Comprehensive Environmental Response Compensation Liability Act 1980 together with evidence of approval thereof by the relevant regulatory authorities; (p) ISM Code and ISPS Code documentation a copy, certified by an officer of the Borrower, of the SMC, DOC and ISSC Certificate for the Ship; and (q) Fees, commissions and expenses evidence that any fees and commission due from the Borrower pursuant to the terms of clause 5.1 and any other provision of the Security Documents and all expenses under clause 5.2 have been paid in full. Schedule 2 Ostria Security Documents (1) Assignment of the Intra-Group Loan Agreement to be signed by (a) the Borrower, (b) the New Owner and (c) the Original Owner; (2) Corporate Guarantee between (a) the New Owner and (b) the Agent, whereby the New Owner guarantees to pay to the Agent all moneys and to discharge all obligations and liabilities now or hereafter due or owing or incurred by the Borrower to the Finance Parties or any of them under or pursuant to the Facility Agreement, the Master Swap Agreements and the other Security Documents and all interest and all other costs and expenses; (3) First preferred Marshall Islands Mortgage in relation to the Ship between (a) the New Owner and (b) the Agent; (4) General Assignment between (a) the New Owner and (b) the Agent in relation to the Earnings and Insurances of, and any Requisition Compensation (as defined in the General Assignment) for, the Ship; (5) Account Charge between (a) the New Owner and (b) the Agent, over the New Owner's Earnings Account with the Agent; and (6) Manager's Undertaking whereby the Manager (inter alia) assigns its rights, title and interest in the insurances over the Ship.
Schedule 3 Schedule 2 of the Facility Agreement Part 1 - Initial Ships Country of Country of Incorporation of Official Underlying Ship Owner Owner Flag Number Registration "OSTRIA" Ostria Waves Limited Marshall Islands Marshall Islands 1878 N/A "NORDANVIND" Ermina Marine Limited Marshall Islands Venezuela 1879 Marshall Islands "ARIUS" Vintage Marine S.A. Marshall Islands Marshall Islands 2129 N/A "HIGH LAND" Land Marine S.A. Marshall Islands Marshall Islands 2396 N/A "HIGH RIDER" Rider Marine S.A. Marshall Islands Marshall Islands 2397 N/A "ALTIUS" Altius Marine S.A. Marshall Islands Marshall Islands 2394 N/A "FORTIUS" Fortius Marine S.A. Marshall Islands Marshall Islands 2395 N/A "OCEAN HOPE" Jubilee Shipholding S.A. Marshall Islands Marshall Islands 2128 N/A "ENERGY 1" Olympic Galaxy Shipping Limited Marshall Islands Marshall Islands 2062 N/A "SCI TEJ" Dynamic Maritime Company Marshall Islands Marshall Islands 2065 N/A "CMA CGM MAKASSAR" Makassar Marine Ltd. Marshall Islands Marshall Islands 2392 N/A "CMA CGM SEINE" Seine Marine Ltd. Marshall Islands Marshall Islands 2391 N/A "CHINOOK" Chinook Waves Corporation Marshall Islands Marshall Islands 2490 N/A "STENA COMPASS" Compass Overseas Ltd. Bermuda Bermuda 733757 N/A "STENA COMPASSION" Compassion Overseas Ltd. Bermuda Bermuda N/A IMO Ship Year Ship Number Classification Society Classification Type Built "OSTRIA" 9037135 Bureau Veritas oHULL, oMACH, FLS TANKER, ESP Tanker 2000 Unrestricted Navigation "NORDANVIND" 9037123 Germanischer Lloyd oHULL, oMACH, OIL TANKER, ESP Tanker 2001 Unrestricted Navigation "ARIUS" 8413851 Bureau Veritas oHULL, oMACH, OIL TANKER, ESP Tanker 1986 Unrestricted Navigation o AUT-UMS, IG "HIGH LAND" 9018426 NKK NS (tanker, Oils-Flashpoint below Tanker 1992 60(Degree)C) (ESP) MNS* "HIGH RIDER" 9016997 NKK NS (tanker, Oils-Flashpoint below Tanker 1991 60(Degree)C) (ESP) MNS* "ALTIUS" 9269245 Bureau Veritas I oHULL, oMACH, OIL TANKER, ESP Tanker 2004 Unrestricted Navigation o AUT-UMS, IG o AUT-PORT "FORTIUS" 9269257 Bureau Veritas I oHULL, oMACH, OIL TANKER, ESP Tanker 2004 Unrestricted Navigation o AUT-UMS, IG o AUT-PORT; VCS "OCEAN HOPE" 8717518 Germanische Lloyd oHULL, oMACH, FLS TANKER, ESP Container 1989 Unrestricted Navigation o AUT-PORT "ENERGY 1" 8618449 RINA *100-A-1.1 Nav IL; T Cont oIAP; oIAQ-1 Container 1989 "SCI TEJ" 8618451 Bureau Veritas I oHULL, oMACH, Container Ship, Container 1989 Unrestricted Navigation o AUT-PORT; VCS "CMA CGM MAKASSAR" 8814512 Lloyd's Register of Shipping 100 A1 CONTAINER SHIP LMC UMS SCM Container 1990 "CMA CGM SEINE" 8814524 Lloyd's Register of Shipping 100 A1 CONTAINER SHIP LMC UMS SCM Container 1990 "CHINOOK" 9037147 Germanische Lloyd Hull: o100 A5 ESP, ERS, NLS, T3D21, Oil Tanker 2001 Tanker with Double Hull Machinery: o MC INERT "STENA COMPASS" 9274094 Det norske veritas o1A1 Tanker for Oil ESP E0 VCS-2, TMON Tanker 2006 Nauticus (Newbuilding) "STENA COMPASSION" Tanker 2006 Deadweight/ Ship TEU Charterer "OSTRIA" 38,701 dwt N/A "NORDANVIND" 38,701 dwt PDVSA Petroleo S.A. "ARIUS" 83,970 dwt ST Shipping and Transportation Inc. "HIGH LAND" 41,450 dwt D'Amico Tankers Limited "HIGH RIDER" 41,502 dwt D'Amico Tankers Limited "ALTIUS" 73,400 dwt Deiulemar-Compagnia de Navigazione S.p.A/ENE2 "FORTIUS" 73,400 dwt Deiulemar-Compagnia de Navigazione S.p.A/ENE2 "OCEAN HOPE" 1,799 TEU China Shipping Container Lines (Asia) Co. Limited "ENERGY 1" 2,438 TEU IRISL "SCI TEJ" 2,438 TEU SCI "CMA CGM MAKASSAR" 2,917 TEU CMA CGM S.A. "CMA CGM SEINE" 2,917 TEU CMA CGM S.A. "CHINOOK" 38,701 dwt PDVSA "STENA COMPASS" 72,750 dwt Panvision Ltd (Stena Group) "STENA COMPASSION" 72,750 dwt Panvictory Ltd (Stena Group)
Schedule 4 Schedule 2 of the Facility Agreement Part 3 - Maximum amount of Advance Initial Ships Maximum Amount $ "OSTRIA" 11,220,096 "NORDANVIND" 11,889,953 "HIGH LAND" 9,043,061 "HIGH RIDER" 8,708,134 "ALTIUS" 17,332,536 "FORTIUS" 17,332,536 "ARIUS" 7,200,957 "OCEAN HOPE" 8,373,206 "ENERGY 1" 10,885,167 "SCI TEJ" 10,885,167 "CMA CGM MAKASSAR" 13,564,593 "CMA CGM SEINE" 13,564,593 "CHINOOK" 32,600,000 "STENA COMPASS" 56,100,000 "STENA COMPASSION" 5,610,000 $234,309,999
Schedule 5 Schedule 2 of the Facility Agreement Part 4 - Details of Initial Owners Country of Address Shareholder Initial Owner Incorporation Ostria Waves Limited Marshall Islands Trust Company Complex, Borrower Ajeltake Road, Ajeltake Island, Majuro MH 96960, Marshall Islands Ermina Marine Limited Marshall Islands Trust Company Complex, Borrower Ajeltake Road, Ajeltake Island, Majuro MH 96960, Marshall Islands Vintage Marine S.A. Marshall Islands Trust Company Complex, Borrower Ajeltake Road, Ajeltake Island, Majuro MH 96960, Marshall Islands Land Marine S.A. Marshall Islands Trust Company Complex, Borrower Ajeltake Road, Ajeltake Island, Majuro MH 96960, Marshall Islands Rider Marine S.A. Marshall Islands Trust Company Complex, Borrower Ajeltake Road, Ajeltake Island, Majuro MH 96960, Marshall Islands Altius Marine S.A. Marshall Islands Trust Company Complex, Borrower Ajeltake Road, Ajeltake Island, Majuro MH 96960, Marshall Islands Fortius Marine S.A. Marshall Islands Trust Company Complex, Borrower Ajeltake Road, Ajeltake Island, Majuro MH 96960, Marshall Islands Jubilee Shipholding S.A. Marshall Islands Trust Company Complex, Borrower Ajeltake Road, Ajeltake Island, Majuro MH 96960, Marshall Islands Olympic Galaxy Shipping Limited Marshall Islands Trust Company Complex, Borrower Ajeltake Road, Ajeltake Island, Majuro MH 96960, Marshall Islands Dynamic Maritime Company Marshall Islands Trust Company Complex, Borrower Ajeltake Road, Ajeltake Island, Majuro MH 96960, Marshall Islands Makassar Marine Ltd. Marshall Islands Trust Company Complex, Borrower Ajeltake Road, Ajeltake Island, Majuro MH 96960, Marshall Islands Seine Marine Ltd. Marshall Islands Trust Company Complex, Borrower Ajeltake Road, Ajeltake Island, Majuro MH 96960, Marshall Islands Chinook Waves Corporation Marshall Islands Trust Company Complex, Borrower Ajeltake Road, Ajeltake Island, Majuro MH 96960, Marshall Islands Compass Overseas Ltd. Bermuda Canon's Court, 22 Victoria Borrower Street, Hamilton HM12, Bermuda Compassion Overseas Ltd. Bermuda Canon's Court, 22 Victoria Borrower Street, Hamilton HM12, Bermuda
SK 23248 0002 764950 EX-4.4 4 d764949_ex4-4.txt Exhibit 4.4 THIRD SUPPLEMENTAL AGREEMENT To: Aries Maritime Transport Limited 6 Poseidon Avenue Athens 17674 Greece March 2, 2007 Dear Sirs, US$360,000,000 Revolving Credit Facility We refer to the facility agreement dated 3 April 2006 (as supplemented and amended from time to time) (the "Facility Agreement") and made between (1) you, (hereinafter referred to as the "Borrower"), (2) the banks and financial institutions as set out in Schedule 1 to the Facility Agreement (the "Banks"), (3) The Governor and Company of the Bank of Scotland and Nordea Bank Finland plc as joint lead arrangers (the "Arrangers") (4) the banks and financial institutions set out at Schedule 1, part 3 to the Facility Agreement in their capacity as co-arrangers (the "Co-Arrangers"), (5) the banks and financial institutions set out at Schedule 1, part 2 to the Facility Agreement in their capacity as swap banks (the "Swap Banks") and (6) The Governor and Company of the Bank of Scotland (the "Agent", and together with the Banks, the Arrangers, the Co-Arrangers and the Swap Banks, the "Finance Parties" and each a "Finance Party") as agent, security agent and trustee on behalf of the Finance Parties, pursuant to which the Banks agreed to make available to you upon the terms and conditions therein the aggregate sum of up to three hundred and sixty million Dollars ($360,000,000) (the "Loan"). You, the Borrower, have now requested that we, in our capacity as security agent and trustee on behalf of the Finance Parties, agree on behalf of the Finance Parties, to: (A) the amendment of the definitions of "Current Assets" and "Current Liabilities" as set out in clause 8.6 of the Facility Agreement so that they exclude all items currently appearing in your consolidated financial statements under the heading "Derivative Financial Instruments" which will impact upon the definition of "Working Capital" as set out in clause 8.6; (B) the temporary reduction of the interest coverage ratio as described in clause 8.7.4 of the Facility Agreement; (C) the change of charterer of m.v. "SCI TEJ" (the "Ship") from Shipping Corporation of India ("SCI") to Mediterranean Shipping Company ("MSC"); and (D) the change of name of the Ship to m.v. "MSC OSLO". We, as Agent, on behalf of the Finance Parties but subject to the receipt and satisfaction of the Conditions Precedent listed in Schedule 1 hereto, hereby: 1 agree to the deletion of the definition of "Current Assets" set out in clause 8.6 of the Facility Agreement and its replacement with: ""Current Assets" means, at any time in respect of the Borrower's Group, the amount of current assets of the Borrower's Group on a consolidated basis which would be included as current assets in a consolidated balance sheet of the Borrower's Group in accordance with GAAP drawn up at such time together with such amount of Cash and Cash Equivalent Investments forming part of the Minimum Liquidity and/or the Retention Amount (but always excluding any current assets arising from Derivative Financial Instruments) which may be disregarded from the current assets in a consolidated balance sheet of the Borrower's Group;"; 2 agree to the deletion of the definition of "Current Liabilities" set out in clause 8.6 of the Facility Agreement and its replacement with: ""Current Liabilities" means, at any time in respect of the Borrower's Group, the amount of current liabilities of the Borrower's Group on a consolidated basis which would be included as current liabilities in the consolidated balance sheet of the Borrower's Group in accordance with GAAP drawn up at such time excluding Deferred Revenue and all current liabilities arising from Derivative Financial Instruments;"; 3 agree to the insertion of the definition "Derivative Financial Instruments" in alphabetical order in clause 8.6 of the Facility Agreement as follows: ""Derivative Financial Instruments" means at any time in respect of the Borrower's Group the fair value of any Transaction entered into under the Master Swap Agreements and the fair value of any other derivative financial instruments appearing under this heading (and previously approved by the Agent) in the consolidated financial statements of the Borrower's Group provided by the Borrower to the Finance Parties in accordance with the provisions of clause 8.1.5 of the Facilities Agreement or otherwise and in the event of the Borrower changing the form or substance of the financial statements (always in accordance with GAAP) provided by the Borrower to the Finance Parties so that Derivative Financial Instruments no longer appears as a heading and/or such Derivative Financial Instruments are otherwise accounted for, the determination of what constitutes Derivative Financial Instruments shall be made by the Agent acting reasonably;" 4 subject to the proviso to this paragraph 4, agree to the temporary reduction of the interest coverage ratio as described in clause 8.7.4 of the Facility Agreement so that for the periods ending 31 December 2006, 31 March 2007 and 30 June 2007 only, the Borrower shall be required to maintain a ratio of EBITDA to Interest Payable on a trailing four (4) Financial Quarter Basis of not less than 2.50 to 1.00 but shall thereafter immediately revert back to a ratio of not less than 3.00 to 1.00 Provided That, until such time as a Compliance Certificate is received by the Agent (whether received during or after the periods set out above) advising that the ratio of EBITDA to Interest Payable on a trailing four (4) Financial Quarter Basis is not less than 3.00 to 1.00: (a) the Margin shall be increased to 1.75% (which increased Margin should (for the avoidance of doubt) be effective as from 3 January 2007); and (b) any Advance for new investments will require all Banks' consent; 5 agree and consent to the change of charterer of the Ship from SCI to MSC; 6 agree and consent to the change of name of the Ship from m.v. "SCI TEJ" to m.v. "MSC OSLO"; and 7 agree to the deletion of the words "SCI TEJ" and "SCI" wherever they appear in the Facility Agreement and their replacement with the words "MSC OSLO" and "MSC" respectively. Please countersign and return a copy of this letter as evidence of your agreement to all of its terms and conditions and procure the countersignature and return of this letter by the Owners and the Manager as evidence of their agreement to all of its terms and conditions. Words and expressions defined in the Facility Agreement shall, unless the context otherwise requires or unless defined herein, have the same meanings when used in this letter. This letter shall be governed by and construed in accordance with the laws of England. Yours faithfully, ............................ For and on behalf of THE GOVERNOR AND COMPANY OF THE BANK OF SCOTLAND (as security agent and trustee for the Finance Parties) We agree to the terms of this letter. ............................ For and on behalf of ARIES MARITIME TRANSPORT LIMITED We agree to the terms of this letter. ............................ For and on behalf of MAGNUS CARRIERS CORPORATION We agree to the terms of this letter. ............................ For and on behalf of OSTRIA WAVES LTD. ERMINA MARINE LIMITED VINTAGE MARINE S.A. LAND MARINE S.A. RIDER MARINE S.A. ALTIUS MARINE S.A. FORTIUS MARINE S.A. JUBILEE SHIPHOLDING S.A. OLYMPIC GALAXY SHIPPING LIMITED DYNAMIC MARITIME COMPANY MAKASSAR MARINE LTD. SEINE MARINE LTD. CHINOOK WAVES CORPORATION COMPASS OVERSEAS LTD. COMPASSION OVERSEAS LTD. Schedule 1 Conditions Precedent to the agreements of the Finance Parties contained in this Third Supplemental Agreement becoming effective (a) Constitutional documents copies, certified by an officer of the Borrower, each of the Owners (including without limitation Dynamic Maritime Company ("Dynamic")) and the Manager (together, the "Relevant Parties" and each a "Relevant Party") as true, complete and up to date copies of all documents which contain or establish or relate to the constitution of the Relevant Party; (b) Corporate authorisations copies of resolutions of the directors and, if required by such Relevant Party's law of incorporation, shareholders of the Relevant Parties approving this Agreement and in the case of Dynamic the charter assignment to be executed by Dynamic in favour of the Agent in relation to the charter to be made between Dynamic and MSC in relation to the Ship (the "Charter Assignment") and in each case authorising the signature, countersignature, delivery and performance of such Relevant Party's obligations as appropriate thereunder, certified (in a certificate dated no later than the date of this Agreement) by an officer of such Relevant Party as: (i) being true and correct; (ii) being duly passed at meetings of the directors of such Relevant Party and, if required by such Relevant Party's law of incorporation, of the shareholders of such Relevant Party, each duly convened and held or duly adopted by unanimous written consent in lieu of such meeting(s); (iii) not having been amended, modified or revoked; and (iv) being in full force and effect together with originals or certified copies of any powers of attorney issued by any Relevant Party pursuant to such resolutions; (c) Specimen signatures copies of the signatures of the persons who have been authorised on behalf of each Relevant Party to sign and/or countersign such of this Agreement and the Charter Assignment to which such Relevant Party is, or is to be, party and to give notices and communications under or in connection with this Agreement and the Charter Assignment, certified (in a certificate dated no earlier than five (5) Banking Days prior to the date of this Agreement) by an officer of such Relevant Party as being the true signatures of such persons; (d) Certificates of incumbency a list of directors and officers of each Relevant Party specifying the names and positions of such persons, certified (in a certificate dated no earlier than five (5) Banking Days prior to the date of this Agreement) by an officer of such Relevant Party to be true, complete and up to date; (e) Security documents and delivery documents the Charter Assignment in a form and substance acceptable to the Finance Parties duly executed by Dynamic; (f) Notices of assignment and acknowledgements copies of duly executed notices of assignment required by the terms of the Charter Assignment and in the forms prescribed by the Charter Assignment; and (g) Process agent letter a copy, certified as a true copy by Dynamic's solicitors or other person acceptable to the Agent of a letter from Dynamic's agent for receipt of service of proceedings referred to in the Charter Assignment in which it is or is to be appointed as Dynamic's agent. SK 23248 0002 764949 EX-8.1 5 d765850_ex8-1.txt EXHIBIT 8.1 The following is a list of Company's subsidiaries as of December 31, 2006 Name of Subsidiary Country of Incorporation Mote Shipping Ltd. Malta Statesman Shipping Ltd. Malta Trans Continent Navigation Ltd. Malta Trans State Navigation Ltd. Malta Olympic Galaxy Shipping Ltd. Marshall Islands Bora Limited British Virgin Islands Dynamic Maritime Co. Marshall Islands Jubilee Shipholding S.A. Marshall Islands Vintage Marine S.A. Marshall Islands Ermina Marine Ltd. Marshall Islands AMT Management Ltd. Marshall Islands Land Marine S.A. Marshall Islands Rider Marine S.A. Marshall Islands Altius Marine S.A. Marshall Islands Seine Marine Ltd. Marshall Islands Makassar Marine Ltd. Marshall Islands Fortius Marine S.A. Marshall Islands Chinook Waves Corporation Marshall Islands Santa Ana Waves Corporation Marshall Islands Compassion Overseas Ltd. Bermuda Compass Overseas Ltd. Bermuda Ostria Waves Ltd. Marshall Islands SK 23248 0002 765850 EX-12.1 6 d764097_ex12-1.txt Exhibit 12.1 CERTIFICATION OF THE PRINCIPAL EXECUTIVE OFFICER - ------------------------------------------------ I, Mons S. Bolin, certify that: 1. I have reviewed this annual report on Form 20-F of Aries Maritime Transport Limited; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Company as of, and for, the periods presented in this report; 4. The Company's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f) for the Company and have: a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; c) evaluated the effectiveness of the Company's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and d) disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the period covered by this annual report that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting. 5. The Company's other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Company's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent function): a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Company's ability to record, process, summarize and report financial information; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the Company's internal control over financial reporting. Date: April 19, 2007 /s/ Mons S. Bolin ------------------------ Mons S. Bolin Chief Executive Officer SK 23248 0002 764097 EX-12.2 7 d764099_ex12-2.txt Exhibit 12.2 CERTIFICATION OF THE CHIEF FINANCIAL OFFICER - ------------------------------------------------ I, Richard J.H. Coxall, certify that: 1. I have reviewed this annual report on Form 20-F of Aries Maritime Transport Limited; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Company as of, and for, the periods presented in this report; 4. The Company's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f) for the Company and have: a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; c) evaluated the effectiveness of the Company's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and d) disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the period covered by this annual report that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting. 5. The Company's other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Company's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent function): a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Company's ability to record, process, summarize and report financial information; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the Company's internal control over financial reporting. Date: April 19, 2007 /s/ Richard J.H. Coxall -------------------------- Richard J.H. Coxall Chief Financial Officer SK 23248 0002 683174 EX-13.1 8 d764096_ex13-1.txt Exhibit 13.1 CHIEF EXECUTIVE OFFICER CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350 In connection with this Annual Report of Aries Maritime Transport Limited (the "Company") on Form 20-F for the year ended December 31, 2006 as filed with the Securities and Exchange Commission (the "SEC") on or about the date hereof (the "Report"), I, Mons S. Bolin, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that: (1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. A signed original of this written statement has been provided to the Company and will be retained by the Company and furnished to the SEC or its staff upon request. Date: April 19, 2007 /s/Mons S. Bolin ------------------------- Mons S. Bolin Chief Executive Officer SK 23248 0002 764096 EX-13.2 9 d764098_ex13-2.txt Exhibit 13.2 CHIEF FINANCIAL OFFICER CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350 In connection with this Annual Report of Aries Maritime Transport Limited (the "Company") on Form 20-F for the year ended December 31, 2006 as filed with the Securities and Exchange Commission (the "SEC") on or about the date hereof (the "Report"), I, Richard J.H. Coxall, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that: (1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. A signed original of this written statement has been provided to the Company and will be retained by the Company and furnished to the SEC or its staff upon request. Date: April 19, 2007 /s/ Richard J.H. Coxall ------------------------- Richard J.H. Coxall Chief Financial Officer SK 23248 0002 764098 -----END PRIVACY-ENHANCED MESSAGE-----