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Fleet Employment Euroseas employs its vessels in the spot charter market, under period time charters, pool arrangements and FFA contracts. As of December 2009, 11 of Euroseas' vessels are employed under time charters and two dry bulk vessels, "IRINI" and "Monica P", are employed in the Baumarine spot pool and Bulkhandling spot pool, respectively. Euroseas has a policy of employing a minimum number of its vessels under period time charters sufficient to cover its expenses for the next 12 months. A spot charter is a contract to carry a specific cargo for a single trip. Spot charters can be spot voyage charters or spot time charters. Under spot voyage charters, Euroseas is paid on a per ton of cargo carried basis and pays voyage expenses such as port, canal and fuel costs. A time charter is a contract to charter a vessel for an agreed period of time at a set daily rate. Under time charters, the charterer pays these voyage expenses. A spot time charter is for a single voyage, while a period time charter is one under which the vessel is chartered for a period of time. A pool charter is essentially a time charter with a floating charter rate. The actual charter hire the pool vessel receives is its corresponding share of all the income generated by all vessels that participate in the pool. A short fund comprises of one or more contracts of affreightment ("COA"). These are contracts secured by the pool manager for carrying some specific types and quantities of cargo over a fixed time horizon at a fixed rate per ton of cargo carried. The combined effect of having a vessel in a spot pool and securing COA's can be equivalent to establishing a long term time charter. Under all types of charters, Euroseas will pay for vessel operating expenses, which include crew costs, provisions, deck and engine stores, lubricating oil, insurance, maintenance and repairs. Euroseas is also responsible for each vessel's intermediate drydocking and special survey costs. Vessels operating on time charter provide more predictable cash flows, but can yield lower profit margins than vessels operating in the spot market during periods characterized by favorable market conditions. Vessels operating in the spot market generate revenues that are less predictable but may enable Euroseas to increase profit margins during periods of improvements in drybulk rates. However, Euroseas would then be exposed to the risk of declining market charter rates, which may be higher or lower than the rates at which Euroseas chartered its vessels. Euroseas is constantly evaluating opportunities for time charters, but only expects to enter into additional time charters if Euroseas can obtain contract terms that satisfy its criteria. Euroseas Ltd. fleet profile is as follows:
(*) "Irini" is employed in the Baumarine spot pool that is managed by Klaveness, a major global charterer in the drybulk area. (**) "Monica P" is employed in the Bulkhandling spot pool that is managed by Klaveness, a major global charterer in the drybulk area. (***) CONTEX is a charter market index for 1,700 teu containership vessels. Euromar* fleet profile is as follows:
(*)Euromar is a joint venture between Euroseas and two private equity firms, Eton Park and Rhone Capital in which Euroseas holds 14.28% stake. |
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