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Chairman' s Statement

Preparedness

Our Chairman David Turnbull reflects on the Company’s health and preparation for the future

A TOUGHER YEAR IN DRY BULK

2016 was an extremely poor year for dry bulk shipping. Average market rates were even weaker than in 2015, dragged down in the first quarter by rates not seen for 45 years. Conditions improved over the remainder of the year, and sentiment in the industry is recovering.

Pacific Basin again outperformed the market in terms of vessel earnings and we generated positive operating cash flow. However, given the weak market, we produced a significant P&L net loss. Nevertheless, several positive achievements during the year have enhanced our position from which to navigate the challenging environment and capitalise on opportunities and improving market conditions.

EFFECTIVE PLATFORM FOR A SUSTAINABLE BUSINESS

We continue to take delivery of the last of our excellent newbuildings, which contribute to as good a fleet as we have ever had. From 12 offices close to our customers around the world, our teams develop systems of complementary trades through spot and long-term cargo contracts to achieve high utilisation and TCE earnings that outperform the market indices.

We pursued several initiatives including selling most of our remaining towage assets, completing a rights issue, issuing Pacific Basin shares to tonnage providers in return for a reduction in charter hire rates, committing to relocate to a more cost-efficient Hong Kong headquarters, and opening a new regional office in Brazil. Mats Berglund will elaborate on all of these initiatives in his Chief Executive’s Review.

Our efforts have helped to maintain a balance sheet with total cash and deposits of US$269 million at 31 December 2016, and net gearing of 34%. They have also helped to further reduced our G&A expenses, improve our efficiencies and enhance our platform for success well beyond the current market depression.

We again received several awards in 2016 recognising the quality of our customer focus and service delivery, technical management, corporate governance and investor relations. I would like to single out the Safety Award we received at the Lloyd’s List Global Awards recognising our worldclass commitment to safety at sea.

We remain committed to our Handysize and Supramax focus, our effective strategy and to always look for ways to refine and improve what we do and how we do it. Staying true to our corporate values – such as dedication and teamwork, customer attention and solutions focus, responsiveness and reliability, safety and care, and integrity and accountability – is key to the longer term sustainability of our business, irrespective of market conditions.

DIVIDEND

In view of the severe dry bulk market weakness of last year, the Board recommends not to pay out a dividend for 2016.

CHANGES TO OUR BOARD

Stanley Ryan joined our Board as an Independent Non-executive Director on 5 July 2016, bringing valuable commodities-related commercial, strategic and operational experience to our Board.

Chief Financial Officer Andrew Broomhead will leave us by the end of 2017 to return with his family to the UK, and we have started the process of identifying and recruiting a suitable successor. Our Chief Technical Officer Chanakya Kocherla will be retiring at the end of April, and our technical and ship management organisation will be led by our Fleet Director, Jay K Pillai. We are very grateful to both Andrew and Charlie for their valuable contributions to the Company over many years.

A commitment to strong corporate governance – sound internal controls, transparency and accountability to all stakeholders – continues to underpin all components of our business and seeks to enhance stakeholder confidence in Pacific Basin as a partner and a place to invest. I would like to thank our Board of Directors for their valuable contributions in all aspects of the Company’s oversight in the challenging shipping and economic environment.


David Turnbull

Chairman

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