Guide to Market Benchmarks Ver2.1

Guide to Market Benchmarks Version 2.1 - July 2015

Published by

Baltic Exchange Information Services Ltd

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Preface to Version 2.1, published July 2015

This Guide is the successor to the Baltic’s Manual for Panellists. The original Manual

was published in 1999. It codified the principles underpinning the Baltic’s market

benchmarks which were initially produced in 1985.

The Baltic’s market assessments have a wide range of applications. They are used

by shipowners and charterers to assess market levels, and market trends, and they

may be used to settle physical market transactions. Some are used as settlement

mechanisms in the derivatives market. They are used in dispute settlement; by

economists; by journalists; and by market analysts and others who wish to monitor

trends in the shipping markets.

The new Guide has built on the Baltic’s 30 years of experience in the field of

benchmarking. It reflects recent developments in the markets and it ensures

compliance with the recently developed Principles for Financial Benchmarks, issued

by the International Organisation of Securities Commissions (IOSCO).

The Principles seek to ensure that any market benchmarks used for the purposes of

settling financial transactions are produced in accordance with rules which ensure

their quality, integrity, continuity and reliability. The Baltic has recognised the

importance of all these aims from the inception of its activity in this field.

IOSCO has set out recommended practices in respect of methodology, transparency

and governance arrangements. These broadly reflect the Baltic’s long standing

practices, but in some respects our governance arrangements have been overhauled

to ensure full compliance with the guidelines.

Importantly, the Principles recognise that, whilst they provide a ‘framework of

standards’, these can be ‘met in different ways depending on the specificities of each

benchmark.’

From inception the Baltic and its panellists have recognised that the world of

merchant shipping is extraordinarily complex, varied, and frequently very opaque.

This Guide has been developed with due regard to this knowledge and understanding

Shipping contracts are private transactions between two parties. Contract terms are

not standardised. The full terms, and the exact time and date of transactions are only

known, with certainty, to parties involved. Rates and prices may be agreed subject to

other conditions being fulfilled. Individual transactions are often of high value but may

be very infrequent. By the standards of financial markets, shipping markets are

illiquid. There is no obligatory reporting requirement for transactions and much

remains unreported. Yet markets are highly volatile and may move significantly in

very short periods of time.

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In addition, ships exist in a very large number of different types and sizes. The value

of variances in design and performance of ships relative to a standardised benchmark

varies from trade to trade, and in relation to other key inputs such as bunker prices.

The quality of maintenance of ships and the creditworthiness and competence of

shipowners may be a factor in the value the market places on a particular ship.

The same class of ship may carry a range of cargoes on a great variety of routes.

Different ships, different trades, different cargo sizes, and a myriad of different

contract terms can all have a bearing on how individual transactions can be related to

standardised market benchmarks .Different market participants may well place

differing values on these variants.

This Guide recognises the principle that the rationale for its methodology has to be

consistent with the character of the shipping market.

It also recognises the principle that it is important to identify the potential limitations

of a benchmark. Many of these have long been recognised in our original Manual and

are also reflected in this Guide

The Guide makes it clear that a great deal of appropriate care is taken to ensure the

daily route assessments provide a fair valuation of the current market.

However the Baltic has always explained that reporting panels exist because,

ultimately, there is no independently verifiable ‘right’ or ‘wrong’ rate for index routes.

Therefore market levels at any particular time remain a matter of judgement.

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CONTENTS Page No

1 Introduction 5

2 Governance Structure 7

3 Baltic Benchmarks: Independence of the Administration 8

4 Production Method 10

5 The role of the SFR 11

6 Selection of Benchmark Parameters 13

7 Calculation of the Benchmarks 15

8 Confidentiality and Transparency 17

9 Selection, Appointment, Responsibilities and Audit of Panellists

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10 Duties of Panellists 20

11 Guidance for Panellists 22

12 Operational Risks 27

13 Changes to Benchmarks 28

14 Code of Conduct 30

15 Audits and Quality Control 31

16 Complaints and Whistle-Blowing 33

APPENDIX 1 Current Index Route Definitions 35

APPENDIX 2 Details of Index Calculations 56

APPENDIX 3 Route Notes 69

APPENDIX 4 APPENDIX 5

Time Charter Equivalents FFA Forward Curve Specifications

73

83

APPENDIX 6

APPENDIX 7

Intraday Forward Curves

Letter to Panellists Confirming Continuation of Appointment Following an Audit by BEISL

96

98

APPENDIX 8 Delegation Process 99

APPENDIX 9 Business Continuity Procedure 100

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1. Introduction

The Baltic Exchange Ltd (BEL) is a limited liability private company with over

400 shareholders. It operates as a membership organisation within the

international shipping marketplace and currently has around 600 member

companies worldwide. Its revenues derive principally from membership

subscriptions and payments by members to its subsidiary company Baltic

Exchange Information Services Ltd (BEISL) for access to its freight market

information as well as from property and investments and from its Baltex

Multilateral Trading Facility (MTF). BEISL also derives revenues from

licences for access to its information from clearing houses operating in the

freight derivatives market and from information vendors and application

providers active in the financial markets.

1.1. BEISL publishes a wide range of market reports, fixture lists and market rate

indicators on a daily and (in some cases) weekly basis. For this purpose

BEISL licences from BEL the rights to make use of its brand name in the

production and publication of the data. BEL is not directly involved in the

production, management or distribution of the data and it is BEISL which is

herein documenting its processes. Staff working in Singapore for the Baltic

Exchange (Asia) Pte Ltd are also responsible for the production of certain

Asia benchmarks which are specified within this document. Those

benchmarks follow the guidance in this document in all respects. For clarity

therefore references herein to the Baltic, or the Baltic Exchange are to Baltic

Exchange Information Services Ltd (BEISL), its staff and Board, unless

otherwise specifically stated. In some instances this will include staff and

resource from BEL which are provided under a service agreement.

References to the Chairman are to the Chairman of BEISL except where

stated otherwise.

1.2. The Baltic publishes a series of rates which provide an assessment of the

prevailing market rate for a specified shipping route in the dry or wet bulk

market as well as for forward assessments of the Forward Freight

Agreement (FFA) market and associated options market. It also publishes

rates for specified ships in the Sale and Purchase and demolition markets.

The rates are published on a daily or weekly basis. Each individual rate

represents the combined (simple arithmetical average) view of Baltic

panellists (Submitters- see 4.2).[A single exception to this is described at 7.4

below]. Most of the individual route rates are used as component parts in the

formation of specific indices such as the Baltic Exchange Capesize Index (as

is more fully set out below). The Baltic is aware that certain of its benchmark

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rates and indices are routinely used by members and non-members in the

shipping market and the wider financial community to settle freight

derivatives as well as physical market contracts (typically contracts of

affreightment and period hire contracts). However, the Baltic cannot have

any confidence it is aware of all of the uses to which its data is put.

1.3. This document is concerned with the process for the definition, production and

management of BEISL benchmark rates.

1.4. This Guide will be updated as required to reflect necessary changes to

practice.

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2. Governance Structure

2.1. The overall responsibility for the administration of the benchmarks

belongs to the Board of BEISL. This board currently comprises a number of

Directors who also serve on the Board of BEL. Since BEL is the sole

shareholder in BEISL it has the exclusive right to appoint directors to the

board of BEISL.

2.2. The BEISL Board meets at least once a quarter to review matters related

to the benchmarks and to make any necessary decisions, conduct reviews of

the accuracy and suitability of the benchmarks, and will review annually the

independent auditors' reports on compliance with the rules for index

production as set out in this Guide.

2.3. The Board receives advice from staff of BEISL and BEL and invited

representatives from the marketplace. BEISL and BEL staff, together with the

market representatives, attend in an advisory role. At this time those

representatives are the Chairmen of the Freight Market Information Users’

Group (FMIUG) (dry) and the FMIUG (wet) as well as the Chairman of the

Forward Freight Agreement Brokers’ Association (FFABA) for each of the dry

and wet markets and the Chairmen of the Panellist Working Group. These

groups are informally constituted bodies which seek to represent the views

and interests of market participants.

2.4. Board minutes are produced for each meeting which reflect the discussion

and the decisions taken. Where necessary a second part of the meeting

deals with internal matters not of interest to the market representatives.

Minutes are typically recorded by a Baltic group staff member acting as

secretary to the meeting and are retained for a minimum of five years.

2.5. The Senior Freight Market Reporter (SFR) is responsible with his staff for

the daily production activity and supervision of the benchmarks. He also

provides views and recommendations regarding the reporting of new routes,

problems with the reporting of existing routes and reviews the quality and

reliability of panellists. Throughout this document SFR is taken to include the

staff of the SFR to whom he/she delegates responsibilities when he/she is

absent.

2.6. Certain benchmarks are produced in the Singapore office of the Baltic

Exchange which is a separate legal entity known as Baltic Exchange Asia

Ltd (BEAL). For the purposes of their benchmark production role the relevant

staff of BEAL form part of the SFR team and are subject to the SFRs

guidance and instructions.

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3. Baltic Benchmarks: Independence of the Administration

3.1 The independence of the production process is more fully set out in section 4

of this document. This section is mainly concerned with the independence of

the governance and management process.

3.2 Neither BEL nor any of its operating companies invests in or trades physical

or financial shipping assets or rates. It does invest in shipping market

infrastructure that directly or indirectly benefits its members. Its income

structure is not dependent on the level of the market. Therefore the Directors

consider BEL and its operating companies are effectively free from conflicts

of interest in relation to benchmark production.

3.3 Although the majority of Directors of BEL and BEISL are market participants,

conflicts of interest are minimised by the diversity of interests represented

and by the restrictions on shareholder voting rights enshrined in the statutes

of BEL.

3.4 Staff working for BEL and any of its subsidiaries are not permitted to invest in

or trade freight derivatives. They are also not permitted to invest in private

shipping market companies or indirect investment companies such as hedge

funds and private equity firms which specifically target the shipping market.

Investments managed at arms length by a third party are not restricted by

this clause. Should they be in any doubt as to the acceptability of an

investment then they are required to raise it with the Chief Executive of BEL

Group.

3.5 Investment by staff in the shares of listed shipping companies, either directly

or via collective investment vehicles (mutual funds) is acceptable as part of a

long term investment process. Day trading or short term investment is not

appropriate nor is the use of spread betting or similar products where they

relate to the shipping market.

3.6 All staff policies are contained within the BEL Group Staff Handbook, a copy of

which is provided to personnel when they start work. Amendments are also

distributed to staff as required.

3.7 BEISL Directors are not involved in the day to day index production process,

although Directors may sometimes represent panellist companies and could

be directly involved in the reporting of rates. The panellist representative is

likely to be in a similar position. The FFABA Chairman is likely to be from a

panellist company reporting the forward curve and may be directly involved

in the reporting of rates. All data received by the Baltic prior to its

amalgamation into published results is treated in the strictest confidence.

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Access to this data by Directors is not permitted except on a historic basis for

forensic and audit purposes where in most circumstances it will be made

anonymous to protect all parties. This practice will be waived as reasonably

required to allow directors fully to investigate complaints or identified

problems with the benchmarks.

3.8 Although the Directors of BEISL will normally be shipping market

professionals, their range of backgrounds and interests should be sufficiently

diverse to protect the independence of the Baltic. This issue is considered

and documented by the Board of BEL each year.

3.9 The SFR reports to the Chief Executive of BEL and may in addition raise any

matters concerning the indices in confidence with the Chairman of BEISL or

the Chairman of BEL if he wishes.

3.10 Staff remuneration policies avoid any link between market levels and

remuneration.

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4. Production Method

4.1 The Baltic production process is based on the confidential provision of

assessments by panellists (known by the IOSCO as Submitters). The

assessments represent the professional judgement of the panellist at the

time of assessment of the prevailing open market level for the shipping route

or (in the case of the forward curve) the instrument concerned. In the case of

Sale and Purchase and Demolition assessments, the judgement is of the

current value of the defined vessel. (see Appendix 1 for assessment times

and reporting windows).

4.2 In reaching their rate assessments, panellists will take cognisance of the

totality of market information known to them at the time of reporting, making

any appropriate adjustment to accord with the Baltic's route definitions.

Where active markets exist, reports are expected to be informed by and thus

anchored in fixtures and current negotiations (transactional data). However,

the relatively limited liquidity of the shipping markets when compared to

some financial markets, together with their underlying volatility, mean that it

is essential panellists have discretion over the relative value they attribute to

transactional data, and to other data such as tonnage availability, order lists,

sentiment and news flow in reaching their assessments.

4.3 It is a characteristic of the global freight market that although a route may be

routinely fixed (traded) and therefore meet the criteria for assessment by the

Baltic when first adopted, there may subsequently be little or no activity for a

period of time. In these circumstances panellists cannot be guided by

transactions specific to the route and will therefore use their knowledge of

the wider market to provide an appropriate assessment.

4.4 The Baltic retains computer records of inputs and comments for a period of

at least five years.

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5. The role of the SFR

5.1 The Baltic considers it vital to the accuracy and reliability of its benchmarks

that it has in place an effective daily monitoring and supervision process

managed by the SFR. However, it is also essential that the role of the SFR

does not influence the outcome of the benchmark calculation.

5.2 The SFR is a senior shipbroker with a broad experience of the marketplace.

He/she will normally have experience as a principal or as a competitive

broker, usually in one of the larger shipbroking firms. The experience of the

SFR is supplemented by the SFR team as a whole which contains the

necessary mix of skills and experience. Taken together the team will have a

wide experience of the dry bulk and tanker markets, of principal activity and

of competitive shipbroking.

5.3 The Baltic production method requires that each panellist who has agreed to

provide an assessment of a specific route does so on every index reporting

day, so the primary responsibility of the SFR is to ensure that the report is

received from each panellist each day by the designated reporting time.

Panellists are exempted from reporting on local public holidays even when it

is an official reporting day for the relevant benchmark.

5.4 If for whatever reason a panellist exceptionally fails to report on a given day

for one or more routes for which they are on the panel, this must be

documented and as a minimum reported to the next Board meeting.

Persistent failure by a panellist to report will lead to suspension from the

panel. This approach ensures that the SFR can never “cherry-pick” rates to

form the averages.

5.5 It is an important part of the Baltic process that the SFR is familiar with the

activity in all relevant markets. The daily production of the dry bulk fixture list

and market reports are part of this process as are continuous discussions

with panel and non-panel brokers as well as with principals. The reporting of

fixtures to the Baltic, either for publication or on a private and confidential

basis is a considerable assistance to the SFR and helps to support the

accuracy of the benchmarks. All Baltic members are encouraged to disclose

fixture information to the Baltic.

5.6 If the SFR considers that a rate may contain an obvious error or be

significantly out of line with other inputs he contacts the panellist to consult.

5.7 The SFR is in regular contact with all panellists. It is not possible, necessary

or desirable to contact every panellist on every route every day. The SFR will

normally allocate resources according to the following priorities:

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a. Missing rates where the panellist has failed to report;

b. Rates falling outside a predetermined tolerance range and therefore

highlighted by the Baltic’s computer system. This will vary from route to

route but is intended quickly to highlight what appear to be obvious

input errors.

c. Routes which are currently relatively illiquid or for some other reason

difficult to assess and are therefore worthy of specific attention;

d. Rates where the SFR is concerned the panellist may not be sufficiently

attentive to the task;

5.8 The panellist may advise that the rate is an error and offer to correct it.

Alternatively, the panellist and the SFR may hold a discussion about the

relevance of certain transactions and other relevant data to the Baltic defined

route. However, the Baltic will never require a panellist to change a rate or

impose such a change. There are other mechanisms (see especially 9.4 and

9.6) for dealing with panellists who are not considered able to report

professionally on a routine basis.

5.9 All contacts between BEISL and panellists are noted and briefly described in

a text field available on the computer system and are retained with all other

records (including individual panellist inputs) for five years.

5.10 A panellist may ask the SFR to make the correction to an input. Where the

SFR makes such an intervention this is recorded by the computer system

and the SFR is required to note the instruction from the panellist. The

panellist is encouraged to do the same.

5.11 The publication of assessments by the Baltic is authorised by the SFR when

satisfied that sufficient review of inputs has been carried out. When available

this will normally be authorised by the SFR personally. When he is not

available there will be a documented hierarchy of authority setting out who is

authorised to publish which rates instead of the SFR. This hierarchy will

recognise that some production takes place in Singapore and the decision to

publish in that case will be routinely delegated. The delegation process

currently in force is included here at Appendix 7.

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6. Selection of Benchmark Parameters

While the criteria set out below in 5.1 and 5.2 are applied at the outset of any

new route, markets may change over time such that the route no longer

meets the criteria. (See section 13).

6.1 The criteria for selecting routes are broadly as follows:

a. Trade Volume - A steady and significant volume of trade on index routes,

or on routes related to them, is important. Trades subject to seasonal

closures (such as for example the Great Lakes) are avoided;

b. Transparency - A reasonable volume of accurately reported fixtures

should be available. Where possible, trades dominated by a sole or

limited number of interests are avoided;

c. Standard Terms - Voyage routes where business is largely concluded on

standard terms are favoured;

6.2 Baskets and geographical balance

The Baltic provides calculations of composite rates which aim to reflect

movements in the global or regional shipping market for the vessel types

concerned. Weightings of routes used to create such a composite are not

intended necessarily to reflect accurately actual underlying trade flows nor

to be perfectly geographically balanced. The composition of these rates aims

to meet the needs of market participants, who are consulted on their design.

6.3 Vessels

In defining timecharter routes, the Baltic specifies the outline details of the

vessel to be assessed. The Baltic aims to base its description on a modern

vessel design which can act as an appropriate benchmark for its category.

6.4 Forward Assessment and volatility assessments

In order to support the shipping derivatives market and a mark to market or

fair value disclosure calculation by market participants, the Baltic provides

end of day and intra-day assessments of prices and/or volatilities for the FFA

and options market.

In establishing such reporting activity the Baltic applies rules which are

generally more flexible than those for the physical market benchmarks.

In starting reporting of a new contract it is guided by the recommendations of

the FFABA, the FMIUG and the clearing houses which serve the financial

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shipping market. The key criteria in agreeing to report assessments for these

contracts will be:

- the existence of a documented market expectation that an active

forward market for the contract and period concerned will develop

- That the underlying spot physical route or basket is already being

reported on by BEISL

- That sufficient panellists confirm they are able and willing to provide a

reasonably reliable forward price curve

Liquidity and open interest are kept under review and when no open interest

develops or such open interest as exists is closed or settled, the Baltic will

aim to cease reporting for the contract.

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7. Calculation of the Benchmarks

7.1 The Baltic rate which is published is an unweighted arithmetical average of

each of the panellist contributions received. A single exception to this rule is

described in 7.4 below. No rate is excluded.

7.2 The Baltic will not normally provide a rate for a physical market route where it

is unable to create a panel of at least five brokers who are considered to

meet the criteria for appointment.

7.3 In the case of the Baltic forward assessments, which aim to provide a

forward curve to the market for risk management purposes, more flexibility is

needed as there are at times as few as two brokers engaged in transactions

for specific contracts in the FFA market. In this case the assessment may be

produced with as few as two brokers providing rates. However, where this is

the case the Baltic will take steps to ensure the less reliable nature of the

data is drawn to the attention of the market. This will specifically include

statements on the Baltic website analysing the potential shortcomings of the

data.

7.4 The forward assessments provided for the dry bulk market are an average of

the rates input by each of the brokers. In the case of the wet bulk market the

rates represent an average which is weighted according to the market share

(based on data provided by the clearing houses) of each broker in the

preceding quarter. This is intended to enhance the accuracy of the curve in a

market where there are often few brokers involved and widely varying

expertise.

7.5 In addition to the end of day forward curve production described above, the

Baltic also produces intra-day forward curves which can be made available

to assist the main clearing houses in the FFA market in determining margin

requirements during the trading day. The data may also be used by others

for intra-day risk and profit analysis. The reporting and production process for

the intra-day assessments deviates somewhat from that for the end of day

assessments. The details of the process are set out in Appendix 6.

7.6 In the event that the Baltic publishes a rate which is subsequently found for

whatever reason to be an input or calculation error, the SFR will always

advise the Chief Executive. In addition to any other action which may be

taken, the Baltic will always publish the corrected data as soon as possible

and make a public announcement of the correction in a high profile position

on its website.

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7.7 However, if, following publication of a route assessment, a panellist

submission is confirmed by a panellist to be erroneous, subject to the views

of the SFR and the Chief Executive, this will not normally give rise to a

change to the calculated rate, unless the error has been introduced by the

computer system or by Baltic staff. A different view may be taken if the error

is substantial and observed soon after initial publication has taken place. If

warranted the Chief Executive will consult with the Chairman of BEISL on the

matter.

7.8 All errors and the actions taken will be reported to the next Board meeting. If

necessary a special meeting will be convened.

7.9 The SFR will be vigilant in observing any unusual or suspicious pattern of

submissions from panellists and will report any concerns immediately to the

Chief Executive who will ensure that the matter is investigated and the

Chairman of BEISL is informed.

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8. Confidentiality and Transparency

8.1 Confidentiality is vital to the Baltic process and ensures that panellists are

free to provide their assessments without any threat of interference or

influence from the customers on whom they depend for income.

8.2 The Baltic will never disclose panellist inputs or comments except if required

by order of a court or a regulator exercising a statutory power. The Baltic

also keeps confidential the details of which panellists report on which specific

routes. The Baltic makes available general information regarding which firms

report.

8.3 Panellists may not disclose to any third party the assessments they have

provided to the Baltic except if required by order of a court or a regulator

exercising a statutory power. They should disclose to the Baltic any

inappropriate contact received from market participants which might

represent an attempt to influence rates or probe their inputs.

8.4 The Baltic publishes quantitative data on a monthly basis which are designed

to assist users of its benchmarks in understanding the current character of

each market and therefore the likely appropriateness of the benchmark as

reference for a financial instrument or contract for any given day or period.

8.5 Together these measures provide tangible and substantiated information

enabling users both to perform their own analysis and to be confident of the

benchmarks without risk of compromising the panel process.

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9. Selection, Appointment, Responsibilities and Audit of Panellists

9.1 The integrity of and respect for the Baltic indices are the result of the quality and

nature of the panel reporting companies and the reporting process itself. Above all is

the criterion that panellists must be competitive shipbrokers who do not invest in the

markets they report and are therefore free from conflicts of interest. On rare

occasions investment firms exist within the same group as panellist companies.

Where this is the case the Baltic must satisfy itself that the panellist is managing any

resulting conflict of interest appropriately.

9.2 Requirements for the number of panellists on each panel are set out in 7.2 and 7.3.

9.3 The Baltic Exchange appoints panel reporting companies in accordance with the

following criteria:

a. The main business of panellists should be shipbroking. Principals

cannot be panellists;

b. Panellists must be recognised as competent, professional firms,

actively engaged in the markets they report, with adequate personnel

to deemed qualified to perform the role of panellist;

c. Panellists must be members of the Baltic Exchange, meeting all

relevant membership criteria;

d. Panellists are bound by all of the relevant terms of this document. Each

year they are reminded in writing of the key parts;

e. The Baltic aims to maintain a geographical spread of panellists;

f. The Baltic will not appoint as panellists firms who are the exclusive

representatives of principals who are particularly influential in relevant

trades;

g. The Baltic will not appoint as a panellist a firm which is dependent for

its business on a particularly small number of clients;

h. The Baltic will generally not appoint as a panellist a firm which engages

in principal trading (as opposed to broking) in the freight derivatives

market.

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9.4 No firm shall continue to be a panellist unless the firm:

- Satisfies and, whenever required to do so, continues to satisfy the

Baltic as to the suitability and competence of the firm to report;

- Is a member of the Baltic Exchange;

- Having received notice of the responsibilities of a panellist, as

amended from time to time, performs the task of panellist diligently and

in accordance with this guide.

9.5 Panellists are appointed for an indefinite period of time. Their appointment is

formally reviewed each year, but can also be reviewed at any other time.

9.6 The appointment and removal of panellists is the responsibility of the Board,

which will be advised by the SFR. The decision to remove a panellist rests

with the Baltic alone and the Baltic is not obliged to provide reasons for the

removal or to enter into any correspondence on the matter.

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10. Duties of Panellists

10.1 On appointment to a panel the shipbroking firm commits to:

a. Accept the index rules included in this guide.

b. Continuing to satisfy the Baltic Exchange as to its competence and

suitability to report rates.

c. Carry out a process of self-assessment at regular intervals during its

appointment having regard to relevant factors, such as the number of

shipbrokers in their employment with special knowledge and

experience on each route being reported.

d. Appoint a manager and deputy to be the representative and who are

responsible to the Baltic Exchange for the performance of their firm’s

obligations as panellists. Such brokers shall have the expertise

acceptable to the Baltic Exchange and will be replaced if reasonably

required by the Baltic Exchange.

e. Accept that all information provided by the panellist to the Baltic

Exchange remains confidential between the panellist and the Baltic.

f. Hold an annual "audit" meeting with the SFR for the purpose of

reviewing submission quality and accuracy and compliance with this

guide.

g. On request confirm to the Baltic index external auditor that the meeting

set out at 15.4 has taken place.

10.3 For the purposes of assessing suitability and competence of a firm to be a

panellist or to continue to be a panellist the Baltic Exchange requires the firm

to apply a process of self-assessment prior to consideration of the firm for

appointment, at regular intervals during an appointment and prior to an

appointment being renewed, having regard to a number of factors that may

be considered relevant, such as:

a. Whether the firm has sufficient personnel who are acceptable to the

Baltic Exchange and who have adequate knowledge and shipbroking

experience to report on the agreed routes.

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b. The location of the firm and its ability to report at the times stated in

Appendix 1.

c. The ability of the relevant panel reporters to converse using the

English language.

The ability of the panellist firm to meet these requirements forms a part of

the annual "audit" visit by the SFR, but the Baltic should be notified by the

panellist without prompting if at any time it considers it may fail to meet

these basic qualifications.

10.4 Responsibility for providing data for the voyage and timecharter routes should

be allocated to individual brokers in each panel company who have special

knowledge of the specific trade.

10.5 Even if the data is input by a junior member of staff, the route assessments

are always decided upon at a level of appropriate competence, and the Baltic

is notified of the identity of the responsible staff.

10.6 The representative of the panellist listed with the Baltic Exchange is to have

a nominated deputy in his absence. The principal or his deputy or nominee

named to the Baltic Exchange should oversee the daily report for errors

before it is sent to the Baltic Exchange. A nominee from each panellist

should always be available between the reporting time and the publication

time as set out in Appendix 1 for consultation with the SFR as required.

10.7 Panellists should retain any available substantiating information for at least

five years where such records exist in a suitable form. This would include,

where practical, day books, email records, telephone records and/or

messaging traffic.

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11. Guidance for Panellists

11.1 Panellists retain discretion to decide the respective importance of the factors

they have considered in reaching their assessment. However, the following

sections provide guidance to panellists as to the approach normally expected

when they consider certain factors. Section 4 of this document provides the

essential and overarching guidance to panellists since it sets out the key

principles followed by BEISL in the production of the benchmarks.

11.2 Panellists will take note of :

a. Recently concluded fixtures, making their own judgements in respect of

the relevance of the information in the case of business fixed with

outstanding subjects, and any unusual contract terms;

b. In reporting on timecharter routes panellists are expected to relate all

relevant aspects of reported transactions and market activity to the

benchmark ship. When considering speed and consumption this will

include the likely steaming speed and consumption of the Baltic

defined vessel in the prevailing environment for freight rates and

bunker costs.

c. Current negotiations, bearing in mind they may frequently be a more

immediate reflection of the market than previously concluded business;

d. The supply of ships balanced against cargo demand;

e. Panellists will not normally be influenced or guided by:

i. Any assumption about the motivation behind a particular owner’s

or charterer’s decision to conclude a specific fixture.

ii. Movement in the derivatives markets or period market, unrelated

to the positions being assessed.

iii. How many days a ship has waited for a fixture.

f. In adjusting fixtures or negotiations which vary from route or vessel

definitions, panellists are expected to assess the relevance of any

deviation from the route definitions.

These include:

i. Specification of ships (timecharter routes). Panellists should

exercise their judgement as to the relevance or otherwise of any

deviation from the standard specification given in the route

definitions. This commonly includes deadweight, draft, cubic

24

capacity, age, LOA, speed and consumption.

ii. Laycan. Where ships are fixed either with laydays commencing

before, and/or cancelling dates later than the time specified in the

route definitions, panellists are expected to assess the extent to

which this is material.

iii. Delivery and redelivery positions (for timecharter routes).

Where delivery and/or redelivery positions fall outside the ranges

specified in the route definitions, but are nonetheless considered

relevant to the assessment, panellists should exercise their

judgement in respect of the appropriate premium or discount

which the market would apply on account of the difference. For

example, where a route definition states “delivery

Antwerp/Hamburg for a round voyage redelivery Skaw/Gib” and a

ship is fixed on these terms except with redelivery Passero,

panellists are expected to judge the market value of the

difference.

iv. Duration (for timecharter routes). Where fixtures are concluded

which, in the panellists’ judgement, fall outside the route

definition, panellists are expected to assess the significance of

any deviation. This is particularly important when ships are fixed

from strong areas to weak areas and vice versa, but may also be

relevant when business is fixed on a point to point basis, for

example trans Atlantic rounds or trans Pacific rounds, at a time

when the market structure reflects expectation of market

movement such as seasonal strength or weakness.

v. Commission. Route definitions state the commission at which

the business is expected to be quoted by usual channels to

active market participants. As such, panellists are expected to

make allowance for any variation in the rate of commission, for

example increased or reduced address commissions at which the

business is quoted in the market.

vi. Load/discharge terms (voyage charters). Where these differ

from the route descriptions, panellists should assess the value

the market places on any variation.

vii. Load/discharge ports (voyage charters). Where fixtures are

concluded from load or discharge ports which are outside the

route definitions, but deemed relevant to them, panellists must

assess the market significance of the difference. This will

normally reflect factors such as port costs, relevant drafts,

extra/reduced steaming, and the value or otherwise of

25

geographical position.

viii. Cargo size/type (voyage charters). Where cargoes are fixed for

quantities which fall outside the specified margins /specifications

of the route description, or for types of cargo which usually

command a premium or discounted rate, panellists are expected

to make an assessment of the market significance of the

variation. However, the critical criterion is always that, in the

opinion of the panellist, the fixture being considered remains of

direct relevance to the route being assessed. In assessing

voyage freight panellists should not modify reported rates to take

account of the actual quantity of cargo expected to be loaded,

provided it comes within the routes specification.

ix. Material deviation from normal charter terms. If the panellists

are aware of any charterparty term that is materially at variance

with the market norm, they are entitled to make an appropriate

adjustment.

x. Motives. Panellists are not expected to consider the motives

underlying any bona fide, properly reported market activity.

11.3 Age-related factors

a. Definitions for all timecharter routes, and some voyage routes, stipulate

a maximum age.

In noting any timecharter market activity that is transacted by ships that

are older than the specified maximum, panellists are expected to use

their discretion in adjusting these rates to the route definitions.

b. Where voyage routes stipulate a maximum age, panellists are

expected to make an allowance for any premium or discount applicable

as a result of the age of the vessel.

c. Where the voyage route does not specify the maximum age, the

panellist is expected to adjust rates to reflect the rate for modern,

tonnage.

11.4 Assessing timecharter fixtures concluded on APS terms

a. Route definitions make certain assumptions about delivery positions

which are not always reflected in the terms of fixtures concluded in the

market. For example, a route definition may call for a rate based on

delivery South Korea/Japan range for a Pacific round voyage with

26

redelivery South Korea/Japan, whereas in practice ships may be fixed

with delivery Arrival Pilot Station (APS) Australia (or North Pacific) at a

fixed rate of hire with or without a ballast bonus.

b. Panellists take due account of all such market activity, exercising their

professional judgement in assessing the relevance of such information

to their daily returns.

c. Panellists are entitled (and expected) to take a number of factors into

account including but not limited to:

i. The timecharter equivalent (see following section) of a reported

fixture. In making this assessment, panellists exercise discretion in

determining applicable bunker prices, the duration of paid leg, and

appropriate allowances (such as a bad weather allowance) to the

ballast leg;

ii. The extent to which a fixture is relevant to the route in question.

Factors to be considered include the incidence of such fixtures

relative to fixtures on such route definitions; where the ship

ballasted from and the probability of actually being able to

conclude business at the timecharter equivalent rate. Similar

principles apply when ships are fixed on APS terms with no ballast

bonuses. Typically the fixtures are concluded at apparently high

rates which need adjusting to take account of ballast time and

expenses incurred by owners.

In summary, such fixtures can be expected to form a persuasive but

not necessarily definitive element in route assessments.

Timecharter Equivalent Calculations

In assessing timecharter equivalent yields, net income less costs is divided

by total round voyage duration, where:

net income equals (net daily hire rate x days on hire) plus any ballast

bonus if any

cost is the cost of bunkers consumed plus any other relevant expenses

on ballast passage

total duration is the ballast time plus days on hire

The resulting net figure is then grossed up by the relevant commission to give the

applicable gross round voyage equivalent.

27

11.5 Extrapolation of implied timecharter rates from voyage fixtures

Occasions arise when there is a lack of underlying fixing on timecharter

terms in trades covered by timecharter route descriptions, even though

comparable trades are being fixed on voyage basis. On other occasions the

reverse will be true.

In these circumstances, panellists are encouraged to consider the

timecharter equivalent returns of the voyages being fixed, or alternatively the

implied voyage rate for a timecharter fixture, and to take this assessment into

account in deciding their returns.

Voyage calculations may also be appropriate to assist panellists in adjusting

fixtures to the equivalent of the Baltic vessel (in the case of timecharter) and

the Baltic load/discharge port, delivery, or redelivery area, and duration as

appropriate.

However, it is recognised that, just as voyage estimating varies amongst

principals, so too will it vary between panellists and, in addition, it is

recognised that such assessments will seldom be the only factors influencing

the panellists’ returns.

All physical market panellists are expected to be competent in voyage

estimating.

11.6 Forward Curve Reporting

All panellists providing data for the Baltic Forward Assessment are FFA

brokers who are members of the FFA Brokers' Association. Panellists are

asked to submit the mid price between the best bid and the best offer at the

time of the assessment.(see Appendix 1).

If at the time of assessment there is no firm two-way market, the panellist

will use his/her market expertise, being guided by market sentiment, other

vessel sizes and routes as well as last done transactions.

28

12. Operational Risks

12.1 The index production and publication process is heavily dependent on a

computer system which integrates the panellist input pages (which are

password protected), the processes managed by the SFR (which are also

password protected) and the publication mechanism via the public website.

Within the public website there are a number of levels of access, also

controlled by password.

12.2 The software which provides the index production processes is a proprietary

system developed and maintained by Infx Systems of Hastings specifically for

the Baltic Exchange Ltd and its affiliates. The systems are housed in

specialised facilities provided by InFx. First line support in response to

technical problems is provided by Baltic staff, second line by InFx operations

staff and third line support is provided by the software development staff at

Infx. First and second line support is accessible at all times via a call-out

arrangement. Third level support is limited to UK office hours.

12.3 The Baltic Exchange Ltd and its affiliates maintain a disaster recovery plan

which is summarised in Appendix 8. This sets out how BEL will react and

recover from terrorist incidents, problems which render its premises

inaccessible, and major failures of infrastructure.

12.4 There is a certain level of risk to all computer systems from malicious attack.

Such attacks can be divided into three types. They may be specific attempts

to invade a certain computer system to disrupt or manipulate services, or they

may be more general “hacking” attacks where attempts are made to

penetrate randomly selected computer systems. The third type are the very

common “denial of service” attacks which seek to disable systems by

overwhelming them with requests rather than by penetrating them. The Baltic

employs third party specialists to test its systems annually to analyse the first

two risks. The third type of attack is defended against using sophisticated

infrastructure provided by CISCO Systems.

12.5 The Baltic ensures that staff levels among the SFR and technical staff are

sufficient to minimise risks brought about by unexpected staff absences. To

reduce risks from global epidemics, staff are discouraged from attending the

office when they are ill with contagious diseases such as (for example)

influenza.

12.6 It would be a cause of major disruption to the benchmark production process if

a critical number of panellists withdrew from the provision of rates. If the

number of panellists fell below the criterion set out in Section 7, the Baltic

29

might find itself unable to publish some or all of the benchmarks. Continuous

efforts are made to reduce the likelihood of this situation arising.

13. Changes to Benchmarks

13.1 It is a characteristic of the shipping marketplace that trades change and

vessel types and sizes develop over time. This means that in order to meet

its own criterion of reporting only active trades, the Baltic must establish

mechanisms for allowing the evolution, change and cessation of its

benchmarks.

13.2 However the Baltic must also act responsibly and take account of the

outstanding open interest in the derivatives market as well as the usage

made of the route assessments and averages in the conclusion of long term

physical deals.

13.3 Minor changes which are unlikely to have an immediate material effect on

the rate reported but which are necessary to ensure clarity of reporting

arrangements, are approved by the Board and may be implemented at short

notice. There will be consultation in advance with the Users' Group, and if

considered necessary, meetings of the Users' Group may be arranged.

Meetings with the FFABA, or any other stakeholder group deemed relevant

by the Board, can be arranged. Panellists will always be included in the

consultation process.

13.4 Examples of minor changes include but are not limited to amendments to the

size of cargo lifted on a voyage route, usually because of ongoing changes

to vessel size and port maxima, as well as changes to laycan definitions

reflecting current market practice.

13.5 On occasions minor changes will be introduced in the form of guidance to

panellists which refines in some way the reporting requirement.

13.6 An emergency change may be introduced when there has been a

significant event in the market which renders the reporting of the current

route assessment impossible or meaningless. Examples which might give

rise to this situation include the outbreak of war, terrorism, civil unrest,

sanctions, and major accidents rendering ports inaccessible. However, these

examples should not in any way be taken as a prediction of the response of

the Baltic to any specific incident. An alternative to an emergency change will

always be simply to suspend the route. The Board has the final decision on

whether an emergency change is warranted, having taken such advice as it

considers necessary from the ex officio attendees and any others it

considers appropriate.

30

13.7 Scheduled changes are those which are considered necessary to ensure

benchmarks remain in line with the selection criteria set out in Section 5, and

which may have some level of impact on the absolute levels reported by

panellists, or where the impact is expected to be minor but is not certain.

This might include an adjustment to the vessel specification for a timecharter

route in response to the introduction of new regulations, or the suspension of

a route or index. The Baltic will introduce such changes with as much notice

as practical after consultation with the FFABA, FMIUG and panellists as

appropriate. However, the decision on the implementation of the change will

rest with the Baltic.

13.8 Major changes are acknowledged to have the potential to create serious

market disruption. These would include completely new vessel descriptions

or changes to routes where there is significant FFA and options open

interest.

13.9 It is the experience of the Baltic that major changes demand lengthy

consultation processes and detailed consideration of the impact on the open

interest in the derivatives market. Implementation plans are set out clearly in

advance so as to minimise market disruption. However, the Baltic will not

normally continue parallel reporting of a superseded vessel or route for a

period greater than two years. It will also restrict publication of new periods

for the forward curve beyond the two year threshold. This means that those

making use of the Baltic benchmarks in both physical and derivatives

markets must have mechanisms in place to ensure there is a smooth

transition from one benchmark to its replacement. Charter Parties covering

index-linked period business should provide for such transitions. Clearing

Houses making use of Baltic data for margining and settlement purposes

must also put in place suitable mechanisms to permit the management of

open interest at times of change to benchmarks.

31

14. Code of Conduct

14.1 The duties of panellists and the Baltic are clearly set out in this document,

which constitutes a code of conduct for the production of Baltic benchmarks.

In addition all members of the Baltic Exchange are required to comply with

The Baltic Code which makes specific reference to Baltic panellists in the

section entitled The Baltic Code of Ethics and Market Practice as follows:

Brokers who act as Baltic panellists are required to pay careful attention to

the guidance offered by the Guide to Market Benchmarks. Impeccable

standards of honesty and integrity are critical to this role.

32

15. Audits and Quality Control

15.1 The daily interaction between the SFR and the panellists is an important part

of the audit and quality control process.

15.2 In addition a major accounting firm conducts a review on a quarterly basis of

the calculation of the benchmarks by the Baltic computer system. It inputs

the raw data into a separate system and uses that to make the same

calculation. Such a review is also carried out whenever there is a change to

the index weightings or adjustment factors. This also serves to confirm that if

the Baltic’s systems were unavailable the accounting firm's computers could

be used to produce the results on an emergency basis. BEISL directors can

also request an ad hoc review when they feel such would be appropriate.

15.3 The accounting firm is required once a year to review this document to

ensure that is complies with the requirements of the IOSCO Principles for

Financial Benchmarks and to confirm that the Baltic is complying with the

processes and procedures set out in this document.

15.4 Finally each panellist is visited by the SFR each year and the following

review is conducted and documented.

a. Market position. The Baltic will from time to time establish quantitative

criteria as a qualification for serving as a panellist. The criteria will

normally relate to the number of fixtures of the vessel type or route the

panellist has concluded in a preceding period. Alternatively the Baltic

may ask a panellist simply to provide information covering relevant

routes, such as how many fixtures have been concluded or

negotiations engaged in. In some cases it will suffice for the panellist to

confirm that their level of market activity exceeds a specific threshold

set by the SFR. The Baltic will treat all such information on a strictly

confidential basis. Any information provided to the Board will be in a

form which avoids any threat to the confidentiality of this data.

b. Staff levels. Are there sufficient senior staff to ensure that the routes

agreed upon can be reported every index day?

c. Has a senior staff member who is a Principal or Representative

member of the Baltic been nominated for each category of routes (eg

cape, panamax etc) as the responsible panellist?

d. Confirm that no changes to the nature of the business have given rise

to new conflicts of interest and that the panellist company still meets all

33

the criteria for appointment.

e. Confirm that the panellist has provided inputs on the agreed routes on

each index day and to note and explain any exception.

15.5 The accounting firm reviews the Baltic records each year to confirm that this

review process has been conducted with each panellist and the panellist has

been provided with a review letter, an example of which is shown at

Appendix 5.

34

16. Complaints and Whistle-Blowing

16.1 Since the shipping market is an opaque market there are on any given day a

range of views of the value of each route assessed by the Baltic, which is

why the panel process is used. It is inevitable therefore that the process will

give rise to informal comment and, on occasions, more formal complaints.

a. Informal comment

Informal comments will normally be received via email or telephone by

the SFR or the BEL Chief Executive. They will agree together how to

respond and whether any escalation of the comment is required. If they

feel the comment should be escalated then the chairman of BEISL

should be consulted and if deemed necessary, the comment and the

response can be reviewed at the next Board meeting.

If the informal comment is not resolved to the satisfaction of the

originator then they will be provided with information setting out how to

initiate a formal complaint if they wish. This procedure is set out below.

b. Formal complaint

This should be addressed by email to [email protected].

The email will automatically be copied on to both the BEL Chief

Executive and the Chairman. The Board will consider whether the

complaint has merit and what action if any should be taken. The

Chairman will send a response to the complainant outlining the position

of the Company and any action agreed upon. The complaint will be

treated in confidence, but must contain the full name and company

details of the originator as well as all available evidence to support the

complaint.

Any formal complaints received will be reported on to the Board at its

next meeting.

c. "Whistle-Blowing"

The Baltic Exchange Ltd and its affiliates have been producing market

benchmarks since 1985 and although there has never been any

suggestion of serious irregularity, it is appropriate to ensure that

anyone with knowledge of such irregularity has the opportunity to

report it on a confidential basis at the highest possible level. The

primary recipient for any such “whistle-blowing” should be the BEL

Chief Executive. If the whistle-blower does not wish to make use of this

route then the Chairman of BEISL is an alternative. Failing him then

the Chairman of the Baltic Exchange Ltd is also able to receive such

mailto:[email protected]

35

information. For reasons of confidentiality and to ensure the approach

is not missed, the preferred way of approaching the matter is by

telephone.

All three of these individuals are aware of the need to deal promptly

and vigorously with such matters and to protect the interest and identity

of the complainant in all circumstances. They will record in writing

details of both the initial contact from the whistle-blower and any

subsequent contact. Any details of the whistle-blower and the nature of

the concern will be kept strictly confidential.

A whistle-blower may make a complaint on an anonymous basis.

However, it will always be easier to investigate the matter if the details

of the initiator are known.

36

APPENDIX 1

Assessment times and reporting windows

Data Group Assessment Time Reporting Window

Capesize 1030 1030-1045

Panamax 1230 1230-1245

Supramax 1230 1230-1245

Handysize 1230 1230-1245

Tanker routes 1530 1530-1545

BFA 1630 1630-1645

BES/BEP Asia 1230 1230-1245 (Singapore time)

BITRA Asia 1530 1530-1545 (Singapore time)

Sale and Purchase and Demolition assessments are assessed for the previous Friday and reported to the Baltic by 1530 each Monday. Current Index Route Definitions The following definitions cover the timecharter and voyage routes and vessel descriptions currently reported by the Baltic. It also sets out the basis for certain calculated results provided by the Baltic, including indices, timecharter averages and timecharter equivalents (TCE). The Baltic Dry Index

The Baltic Dry Index (BDI) is the successor to the Baltic Freight Index (BFI) and came into operation on 1 November 1999. Since 1 July 2009, the index is a composite of the Capesize, Panamax, Supramax and Handysize Timecharter Averages.

The calculation until 30 June 2009 was based on an equally weighted average of the BCI, BPI, BHSI and the BSI index. The BDI continues the established time series of the BFI, introduced in 1985. However, users of the index should note that the voyages and vessels covered by the index have changed a great deal so caution should be exercised in assuming long term consistency of the data.

For the creation of BDI we now use the following formula:

((Capesize 2014 TCavg + PanamaxTCavg + SupramaxTCavg + HandysizeTCavg)/ 4) * 0.110345333)

Where TCavg = Time charter average.

The multiplier was first applied when the BDI replaced BFI, and has changed over the years as the contributing indices and the methods of calculation have been modified. The multiplier was last updated on 6 May 2014.

37

Baltic Exchange Capesize 2014 Index (BCI)

The Baltic capesize 2014 vessel is based on the following description:

180,000mt dwt on 18.2m SSW draft

Max age 10 yrs

LOA 290m, beam 45m, TPC 121

198,000cbm grain

14 knots laden/15 knots ballast on 62mt fuel oil (380cst), no diesel at sea

When considering the prevailing timecharter market rate for the Baltic capesize vessel, panellists should assume that, if steaming at 12 knots laden or 13 knots ballast, the vessel will consume 43mt fuel oil (380cst), no diesel at sea.

Routes C2

Tubarao to Rotterdam. 160,000lt iron ore, 10% more or less in owner’s option, free in and out. Laydays/cancelling 20/35 days from index date. 6 days, Sundays + holidays included all purposes. 6 hrs turn time at loading port, 6 hrs turn time at discharge port, 0.5% in lieu of weighing. Freight based on long tons. Age max 18 yrs. 3.75% total commission.

C3

Tubarao to Qingdao. 160,000mt or 170,000mt iron ore, 10% more or less in owner’s option, free in and out. Laydays/cancelling 20/35 days from index date. Scale load/30,000mt Sundays + holidays included discharge. 6 hrs turn time at loading port, 24 hrs turn time at discharge port. Age max 18 yrs. 3.75% total commission.

C4

Richards Bay to Rotterdam. 150,000mt coal, 10% more or less in owner’s option, free in and out, trimmed. Laydays/cancelling 25/40 days from index date. Scale load/25,000mt Sundays + holidays included discharge. 18 hrs turn time at loading port, 12 hrs turn time at discharge port. Age max 15 yrs. 3.75% total commission.

C5

West Australia to Qingdao. 160,000mt or 170,000mt iron ore, 10% more or less in owner’s option, free in and out. Laydays/cancelling 10/20 days from index date. Scale load/30,000mt Sundays + holidays included discharge. 6 hrs turn time at loading port, 24 hrs turn time at discharge port. Age max 18 yrs. 3.75% total commission.

38

C7

Bolivar to Rotterdam. 150,000mt coal, 10% more or less in owner’s option, free in and out, trimmed. Laydays/cancelling 20/35 days from index date. 50,000mt Sundays + holidays included load, 25,000mt Sundays + holidays included discharge. 12 hrs turn time at loading port, 12 hrs turn time at discharge port. Age max 15 yrs. 3.75% total commission.

C8_14

Delivery Gibraltar-Hamburg range, laydays/cancelling 3/10 days from index date, transatlantic round voyage, redelivery Gibraltar-Hamburg range, duration 30-45 days. Basis the Baltic capesize 2014 vessel. 5% total commission.

C9_14

Delivery Amsterdam-Rotterdam-Antwerp range or passing Passero, laydays/cancelling 3/10 days from index date, redelivery China-Japan range, duration about 65 days. Basis the Baltic capesize 2014 vessel. 5% total commission.

C10_14

Delivery China-Japan range, laydays/cancelling 3/10 days from index date, redelivery China-Japan range, duration 30-40 days. Basis the Baltic capesize 2014 vessel. 5% total commission.

C14

Delivery Qingdao spot or retroactive up to a maximum 15 days after sailing from Qingdao, round voyage via Brazil, redelivery China-Japan range, duration 80-90 days. Basis the Baltic capesize 2014 vessel. 5% total commission.

C15

Richards Bay to Fangcheng. 160,000mt coal, 10% more or less in owner’s option, free in and out, trimmed, scale load / 30,000mt Sundays + holidays included discharge. 18 hrs turn time at loading port, 24 hrs turn time at discharge port. Laydays/cancelling 25/35 days from index date. Age max 15 yrs. 5% total commission.

C16

Delivery North China-South Japan range, 3-10 days from index date for a trip via Australia or Indonesia or US west coast or South Africa or Brazil, redelivery UK-Cont-Med within Skaw-Passero range, duration to be adjusted to 65 days. Basis the Baltic capesize 2014 vessel. 5% total commission. C17 Saldanha Bay to Qingdao. 170,000mt iron ore 10% more or less in owner’s option, free in and out trimmed. Laydays/cancelling 20/30 days from index date. 90,000 Sundays + holidays included load / 30,000 Sundays + holidays included discharge. 18 hrs turntime at loading port, 24 hrs turntime at discharge port. Max age 18 yrs. 5 % total commission. (This route does not contribute to the BCI.)

40

Applicable weightings for the calculation of the timecharter average value:

C8_14 25%

C9_14 12.5%

C10_14 25%

C14_14 25%

C16_14 12.5%

The data below shows the calculation of the superseded 4 Timecharter Average for

the 172,000 DWT Capesize ship which was the Baltic Standard until 2 May 2014.

Route definitions:

C8_03 Delivery Gibraltar-Hamburg range, laydays/cancelling 3/10 days from index date, transatlantic round voyage, redelivery Gibraltar-Hamburg range, duration 30-45 days. Basis the Baltic 172,000dwt vessel. 3.75% total commission. C9_03 Delivery Amsterdam-Rotterdam-Antwerp range or passing Passero, laydays/cancelling 3/10 days from index date, redelivery China-Japan range, duration about 65 days. Basis the Baltic 172,000dwt vessel. 3.75% total commission. C10_03 Delivery China-Japan range, laydays/cancelling 3/10 days from index date, redelivery China-Japan range, duration 30-40 days. Basis the Baltic 172,000dwt vessel. 3.75% total commission. C11_03 Delivery China-Japan range, 3-10 days from index date for a trip with redelivery Amsterdam-Rotterdam-Antwerp range or passing Passero, duration about 65 days. Basis the Baltic 172,000 dwt vessel. 3.75% total commission.

BCI 172,000 dwt timecharter average value calculation

C8_03 25%

C9_03 25%

C10_03 25%

C11_03 25%

Baltic Exchange Panamax Index (BPI)

41

The Baltic panamax vessel is based on the following description:

• 74,000mt dwt on 13.95m SSW draft

• Max age 12 yrs

• LOA 225m, beam 32.2m

• 89,000cbm grain

• 14 knots on 32mt fuel oil (380cst) laden/28mt fuel oil (380cst) ballast, no diesel at sea.

Routes P1A_03

Delivery Skaw-Gibraltar range, loading 15-20 days from index date, transatlantic round voyage, including east coast South America, redelivery Skaw-Gibraltar range, duration 45-60 days. Basis the Baltic panamax vessel. Cargo basis grain, ore, coal or similar bulk harmless cargo. 3.75% total commission.

P2A _03

Delivery Skaw-Gibraltar range, loading 15-20 days from index date, for a trip via east coast South America, US Gulf or US east coast to Asia, redelivery Taiwan-Japan range, duration 60-65 days. Basis the Baltic panamax vessel. Cargo basis grain, ore, coal or similar bulk harmless cargo. 3.75% total commission.

P3A _03

Delivery Japan-South Korea range, loading 15-20 days from index date, transpacific round voyage, either via Australia or Pacific (not including short rounds such as Vostochny to Japan), redelivery Japan-South Korea range, duration 35-50 days. Basis the Baltic panamax vessel. Cargo basis grain, ore, coal or similar bulk harmless cargo. 3.75% total commission.

P4 _03

Delivery Japan-South Korea range, loading 15-20 days from index date, for a trip via US west coast- British Columbia range or Australia, redelivery Skaw-Passero range, duration 50-60 days. Basis the Baltic panamax vessel. Cargo basis grain, petroleum coke, coal or similar bulk harmless cargo. 3.75% total commission..

Applicable weightings for the calculation of the timecharter average values:

P1A_03 25%

P2A_03 25%

P3A_03 25%

P4A_03 25%

Baltic Exchange Panamax (BEP) Asia

42

The Baltic panamax vessel is based on the following description:


• Max age 12 yrs

• LOA 225m, beam 32.2m

• 89,000cbm grain

• 14 knots on 32mt fuel oil (380cst) laden/28mt fuel oil (380cst) ballast, no diesel at sea.

Routes P5

Delivery South China (Fuzhou-Hong Kong range) or passing Taipei southbound, laydays/cancelling 5/10 days from index date, for a trip via Indonesia, redelivery South China (Fuzhou-Hong Kong range), duration 20-25 days. Basis the Baltic panamax vessel. Cargo basis coal. 5% total commission.

43

Baltic Exchange Supramax Index (BSI)

The Baltic supramax vessel is based on a standard "Tess 52" type vessel of the following description:


• Max age 15 yrs

• LOA 189.99m, beam 32.26m

• 67,756cbm grain, 65,600cbm bale

• 5 holds, 5 hatches

• 4 x 30mt cranes with 12cbm grabs

• 14 knots laden/14.5 knots ballast on 30mt fuel oil (380cst), no diesel at sea

Routes S1A

Delivery Antwerp-Skaw range, laydays/cancelling 5/10 days from index date, redelivery Singapore-Japan range (including China), duration 60-65 days. Basis the Baltic supramax vessel. 5% total commission.

S1B

Delivery passing Canakkale, laydays/cancelling 5/10 days from index date, redelivery Singapore-Japan range (including China), duration 50-55 days. Basis the Baltic supramax vessel. 5% total commission.

S2

Delivery South Korea-Japan range, laydays/cancelling 5/10 days from index date, for an Australian or transpacific round voyage, redelivery South Korea-Japan range, duration 35-40 days. Basis the Baltic supramax vessel. 5% total commission.

S3

Delivery South Korea-Japan range, laydays/cancelling 5/10 days from index date, redelivery Gibraltar-Skaw range, duration 60-65 days. Basis the Baltic supramax vessel. 5% total commission.

S4A

Delivery US Gulf, laydays/cancelling 5/10 days from index date, redelivery Skaw-Passero range, duration about 30 days. Basis the

44

Baltic supramax vessel. 5% total commission.

S4B

Delivery Skaw-Passero range, laydays/cancelling 5/10 days from index date, redelivery US Gulf, duration about 30 days. Basis the Baltic supramax vessel. 5% total commission.


S1A 12.5%

S1B 12.5%

S2 25%

S3 25%

S4A 12.5%

S4B 12.5%

S5 Delivery west Africa (Dakar-Douala range), laydays/cancelling 5/10 days from index date, trip via east coast South America, redelivery north China (Shanghai-Dalian range), duration 60-65 days. Basis the Baltic supramax vessel. 5% total commission. This route does not contribute to the BSI or TC average.

S9

Delivery west Africa (Dakar-Douala range), laydays/cancelling 5/10 days from index date, trip via east coast South America, redelivery Skaw-Passero range, duration 45-50 days. Basis the Baltic supramax vessel. 5% total commission. This route does not contribute to the BSI or TC average.

45

Baltic Exchange Supramax (BES) Asia Index

The Baltic supramax vessel is based on a standard "Tess 52" type vessel of the following description:


• Max age 15 yrs

• LOA 189.99m, beam 32.26m



• 4 x 30mt cranes with 12cbm grabs

• 14 knots laden/14.5 knots ballast on 30mt fuel oil (380cst), no diesel at sea

Routes S8

Delivery South China (Fuzhou-Fangcheng range including Taiwan), laydays/cancelling 5/10 days from index date, trip via Indonesia, redelivery east coast India (Chennai-Paradip range), duration 20-25 days. Basis the Baltic supramax vessel. Cargo basis coal. 5% total commission.

S10

Delivery South China (Fuzhou-Fangcheng range including Taiwan), laydays/cancelling 5/10 days from index date, trip via Indonesia, redelivery South China (Fangcheng-Fuzhou range), duration 20-25 days. Basis the Baltic supramax vessel. Cargo basis coal. 5% total commission.

S11

Delivery China (Changjiangkou (CJK)-Ningde range), laydays/cancelling 5/10 days from index date, for an Australian or transpacific round voyage, redelivery full China, duration 35-50 days. Basis the Baltic supramax vessel. Cargo basis coal, grain or similar bulk harmless cargo. 5% total commission.


S8 33.33%

S10 33.33%

46

S11 33.33%

47

Baltic Exchange Handysize Index (BHSI)

The Baltic Exchange handysize vessel is based on the following vessel description:


• Max age 15 yrs

• LOA 169m, beam 27m



• 4 x 30mt cranes

• 14 knots average laden/ballast on 22mt fuel oil (380cst), no diesel at sea

Routes HS1

Delivery Skaw-Passero range, laydays/cancelling 5/10 days from index date, redelivery Recalada-Rio de Janeiro range, duration 35-45 days. Basis the Baltic handysize vessel. 5% total commission.

HS2

Delivery Skaw-Passero range, laydays/cancelling 5/10 days from index date, redelivery Boston-Galveston range. Duration 35-45 days. Basis the Baltic handysize vessel. 5% total commission.

HS3

Delivery Recalada-Rio de Janeiro range, laydays/cancelling 5/10 days from index date, redelivery Skaw-Passero range, duration 35-45 days. Basis the Baltic handysize vessel. 5% total commission.

HS4

Delivery US Gulf, laydays/cancelling 5/10 days from index date, for a trip via US Gulf or north coast South America, redelivery Skaw-Passero range, duration 35-45 days. Basis the Baltic handysize vessel. 5% total commission.

HS5

Delivery South East Asia, laydays/cancelling 5/10 days from index date, trip via Australia, redelivery Singapore–Japan range including China, duration 25-30 days. Basis the Baltic handysize vessel. 5% total commission.

48

HS6

Delivery South Korea-Japan range, laydays/cancelling 5/10 days from index date, trip via North Pacific, redelivery Singapore-Japan range including China, duration 40-45 days. Basis the Baltic handysize vessel. 5% total commission.


HS1 12.5%

HS2 12.5%

HS3 12.5%

HS4 12.5%

HS5 25%

HS6 25%

49

Baltic Exchange Dirty Tanker Index (BDTI)

TD1 280,000mt. Middle East Gulf to US Gulf (Ras Tanura to Louisiana Offshore Oil Port (LOOP)). Laydays/cancelling 20/30 days from index date. Age max 20 yrs. 2.5% total commission. TD2 270,000mt. Middle East Gulf to Singapore (Ras Tanura to Singapore). Laydays/cancelling 20/30 days from index date. Age max 20 yrs. 2.5% total commission. TD3 265,000mt. Middle East Gulf to Japan (Ras Tanura to Chiba). Laydays/cancelling 15/30 days from index date. Age max 15 yrs. 2.5% total commission. TD4 260,000mt. West Africa to US Gulf. Bonny Offshore Terminal to (Louisiana Offshore Oil Port (LOOP)). Laydays/cancelling 15/25 days from index date. Age max 20 yrs. 2.5% total commission. TD6 135,000mt. Black Sea to Mediterranean (Novorossiyk to Augusta). Laydays/cancelling 10/15 days from index date. Age max 20 yrs. 2.5% total commission. TD7 80,000mt. North Sea to Continent (Sullom Voe to Wilhelmshaven). Laydays/cancelling 7/14 days from index date. Age max 20 yrs. 2.5% total commission. TD8 80,000mt crude and/or DPP, heat 135F. Kuwait to Singapore (Mena al Ahmadi to Singapore). Laydays/cancelling 20/25 days from index date. Double hull, age max 20 yrs. 2.5% total commission. TD9 70,000mt. Caribbean to US Gulf (Puerto La Cruz to Corpus Christi). Laydays/cancelling 7/14 days from index date. Age max 20 yrs. Assessment basis Oil Pollution Act premium paid. 2.5% total commission.

50

TD12 55,000mt fuel oil. Amsterdam-Rotterdam-Antwerp range to US Gulf (Antwerp to Houston). Laydays/cancelling 15/20 days from index date. Double hull, age max 15 yrs. 2.5% total commission.

TD14 80,000mt. South East Asia to east coast Australia (Seria to Sydney). Laydays/cancelling 21/25 days from index date. Double hull, age max 15 yrs. 2.5% total commission. TD15 260,000mt. West Africa to China (Serpentina FPSO and Bonny Offshore Terminal to Ningpo). Laydays/cancelling 20/30 days from index date. Double hull, age max 20 yrs. 2.5% total commission.

TD17 100,000mt. Baltic to UK-Cont (Primorsk to Wilhelmshaven), Great Belt laden/ballast. Laydays/cancelling 10/20 days from index date. Double hull, age max 15 yrs. 2.5% total commission. TD18 30,000mt fuel oil. Baltic to UK-Cont (Tallinn to Rotterdam). Laydays/cancelling 10/15 days from index date. Double hull, age max 15 yrs. 2.5% total commission. TD19 80,000mt. Cross Mediterranean (Ceyhan to Lavera). Laydays/cancelling 10/15 days from index date. Age max 20 yrs. 2.5% total commission. TD20 130,000mt. West Africa to UK-Continent (offshore terminal Bony) to Rotterdam. Laydays/cancelling 15-20 days from the index date. Age max 20 years. 82,000grt. 2.5% total commission. TD21 50,000mt fuel oil, Caribbean to US Gulf (Mamonal to Houston), laydays/cancelling 7/14 days from index date. Double hull, age max 20 yrs. 2.5% total commission.

51

Time Charter Equivalents

Time Charter Equivalent (TCE) assessments for dirty tankers are made up of average dollar pricing conversions for Very Large Crude Carriers (VLCCs), Suezmax and Aframax tankers derived from a range of routes already reported on by the Baltic Exchange and expressed in Worldscale. In addition, TCE assessments for individual routes are also reported.

VLCC

The published VLCC time charter equivalent is an average of the rates derived from TD1 and TD3.

Suezmax

The published Suezmax time charter equivalent is an average of the rates derived from TD6 and TD20.

Aframax

The published Aframax time charter equivalent is an average of the rates derived from TD7, TD8, TD9, TD14, TD17 and TD19.

Individual Routes

Time charter equivalent assessments are published for the following individual dirty tanker routes:

TD1, TD3, TD6, TD7, TD8, TD9, TD11, TD14, TD17 and TD20

The TCEs are calculated using a variable feed of bunker prices supplied by Bunkerworld. Variable exchange rates supplied under licence by XE.com are also used for adjusting port costs. Port charges used in this calculation are provided under licence by Cory Brothers.

52

Baltic Exchange Clean Tanker Index (BCTI)

TC1

75,000mt CPP/naphtha condensate. Middle East Gulf to Japan (Ras Tanura to Yokohama). Laydays/cancelling 30/35 days from index date. Age max 12 yrs. 3.75% total commission.

TC2_37

37,000mt CPP/UNL. Continent to US Atlantic coast (Rotterdam to New York). Laydays/cancelling 10/14 days from index date. Age max 15 yrs. 3.75% total commission.

TC5

55,000mt CPP/UNL naphtha condensate. Middle East Gulf to Japan (Ras Tanura to Yokohama). Laydays cancelling 30/35 days from index date. Age max 15 yrs. 3.75% total commission.

TC6

30,000mt CPP/UNL. Algeria to European Mediterranean (Skikda to Lavera). Laydays cancelling 7/14 days from index date. Age max 15 yrs. 3.75% total commission.

TC8

65,000mt CPP/UNL middle distillate. Middle East Gulf to UK-Cont (Jubail to Rotterdam). Laydays/cancelling 20/30 days from index date. Double hull, age max 15 yrs. This route to be reported as US$ per mt. 3.75% total commission.

TC9

22,000mt CPP/UNL/ULSD middle distillate. Baltic to UK-Cont (Primorsk to Le Havre). Laydays/cancelling 5/10 days from index date. Double hull, age max 15 yrs. 3.75% total commission.

TC14

38,000mt CPP/UNL/diesel. US Gulf to Continent (Houston to Amsterdam). Laydays/cancelling 6/12 days from index date. Age max 15 yrs. 3.75% total commission.

Note: All vessels reported to have major oil company approval.

53

Time Charter Equivalent Calculations (TCEs)

Time Charter Equivalent (TCE) assessments for clean tankers are made up of average dollar pricing conversions for Medium Range (MR) Product tankers derived from a range of routes already reported on by the Baltic Exchange and expressed in Worldscale. In addition, TCE assessments for individual routes are also reported.

TCE Calculations for clean tankers

MR Atlantic Triangulation

TC2_37 TCE in combination with TC14 TCE

Rotterdam to New York, ballast to Houston for voyage Houston to Amsterdam re positioning at Rotterdam

Individual Routes

TCE equivalent assessments are published for the following individual clean tanker routes:

TC1, TC2_37, , TC5 and TC14 with, TC4, TC7, TC10, TC11 (Asia reported), TC12 (Asia reported) and TC14.

The TCEs are calculated using a variable feed of bunker prices supplied by Bunkerworld. Variable exchange rates supplied under licence by XE.com are also used for adjusting port costs. Port charges used in this calculation are provided under licence by Cory Brothers.

54

Baltic Exchange International Tanker Routes – Asia

TC4

30,000mt CPP/UNL. Singapore to Japan (Singapore to Chiba). Laydays/cancelling 7/14 days from index date. Age max 15 yrs. 3.75% total commission.

TC7

30,000mt CPP. Singapore to east coast Australia (Singapore to Sydney). Laydays/cancelling 17/23 days from index date. Double hull, age max 15 yrs. 3.75% total commission.

TC10

40,000mt CPP/UNL. South Korea to west coast North Pacific (South Korea to Vancouver – Rosarito range). Laydays/cancelling 14/21 days from index date. Double hull, age max 15 yrs. 3.75% total commission.

TC11

40,000mt CPP. South Korea to Singapore. Laydays/cancelling 10/17 days from index date. Oil major approved, double hull, age max 15 yrs. 3.75% total commission.

TC12

35,000mt naphtha condensate. West coast India to Japan (Sikka (Jamnagar) to Chiba). Laydays/cancelling 7/14 days from index date. Oil major approved, double hull, age max 15 yrs. 3.75% total commission.

Note: All vessels reported to have major oil company approval.

55

Time Charter Equivalent Calculations (TCE)

Individual Routes

Time charter equivalent assessments are published for the following individual BITR-Asia tanker routes:

TC4, TC7, TC10, TC11 and TC12

MR Pacific Triangulation

TC12 TCE in combination with TC11 TCE

Sikka-Jamnagar to Chiba, ballast to Yeosu for voyage Yeosu to Singapore re-positioning in Sikka.

We utilise our standard MR as on all our MR TCEs.

47,000mt dwt, double hull 27,500 grt 14.5 knots on 30mt IFO (380 CST) ballast 14.5 knots on 36mt IFO (380 CST) laden

In port consumption:

2 days loading 5mt IFO per day 2 days discharging 12mt IFO per day 1 days waiting at anchorage 5mt IFO per day.

56

Baltic Liquefied Petroleum Gas (BLPG) 44,000mt, 5% more or less in owner’s option, 1 to 2 grades, fully refrigerated liquefied petroleum gas, Laydays/cancelling 10/40 days from index date. Middle East Gulf to Japan (Ras Tanura to Chiba). Laytime 96 hrs total. Age max 20 yrs. 1.25% total commission.

57

Baltic Exchange Sale and Purchase Assessments (BSPA)

The assessments on which the panellists report are:

1. VLCC 305,000mt dwt double hull built in “first class competitive yard”, European standard B&W main engine. LOA 332m, beam 58m, 15.5 knots service speed laden on 90mt fuel oil. Non coated. Not ice classed. 5 years old. Special survey passed. Delivery 2-3 months, charter free. 2% total commission.

2. Aframax 105,000mt dwt double hull built in “first class competitive yard”, European standard B&W main engine. LOA 248m, beam 42m, 15.5 knots service speed laden on 50mt fuel oil. Non-coated. Not ice classed. 5 years old. Special survey passed. Delivery 2-3 months, charter free. 2% total commission.

3. MR Tanker 51,000mt dwt on 13.2m draft SSW. Double hull built in “first class competitive yard”, European standard B&W main engine. LOA 183m, beam 32.2m, 13.5 knots service speed on 31/28mt fuel oil (laden/ballast). Coated, IMO 2/3, deep well. Not ice classed. 5 years old. Special survey passed. Delivery 2-3 months, charter free. 2% total commission.

4. Capesize 172,000mt dwt on 17.75m draft SSW built in “first class competitive yard”. LOA 289m, beam 45m, 190,000cbm grain. 14.5 knots laden and 15 knots ballast on 56mt fuel oil, no diesel at sea. Not ice classed. 5 years old. Special survey passed. Delivery 2-3 months, charter free. 2% total commission.

5. Panamax 74,000mt dwt on 13.95m draft SSW built in “first class competitive yard”. LOA 225m, beam 32.2m, 89,000cbm grain. 14 knots on 32/28mt fuel oil (laden/ballast) and no diesel at sea. Not ice classed. 5 years old. Special survey passed. Delivery 2-3 months, charter free. 2% total commission.

6. “Mitsui 56” type Supramax 56,052mt dwt on 12.575m draft SSW built in “first class competitive yard” - European standard B&W main engine. LOA 189.99m, beam 32.26m, 70,810cbm grain. 5 holds/hatches, 4 x 30mt cranes with 4 x 12cbm grabs. Not ice classed. 5 years old. Special survey passed. Delivery 2-3 months, charter free. 2% total commission.

58

Baltic Exchange Demolition Assessments (BDA)

The assessments on which the panellists report are:

1. Dirty tanker, China. One light displacement long ton scrap between 15,000

and 25,000 light weight, gas free for man entry. Delivery China 15-30 days from index date, as is, under own power, cash price. Total commission 2%.

2. Dirty tanker, Pakistan-Bangladesh range. One light displacement long ton

scrap between 15,000 and 25,000 lightweight, gas free for man entry. Delivery Pakistan-Bangladesh range 15-30 days from index date, as is, under own power, cash price. Total commission 3%.

3. Product tanker, China. One light displacement long ton between 6,000 and

10,000 light weight, gas free for man entry. Delivery China 15-30 days from index date, as is, under own power, cash price. Total commission 2%.

4. Product tanker, Pakistan-Bangladesh range. One light displacement long

ton scrap between 6,000 and 10,000 light weight, gas free for man entry. Delivery Pakistan-Bangladesh range 15-30 days from index date, as is, under own power, cash price. Total commission 3%.

5. Bulk carrier, China. One light displacement long ton scrap between 7,000

and 12,000 light weight. Delivery China 15-30 days from index date, as is, under own power, cash price. Total commission 2%.

6. Bulk carrier, Pakistan-Bangladesh range. One light displacement long ton

scrap between 7,000 and 12,000 light weight. Delivery Pakistan-Bangladesh range 15-30 days from index date, as is, under own power, cash price. Total commission 3%.

59

APPENDIX 2

Details of Index Calculations

1. Each route assessment (or sales & purchase and demolition assessment) is created by calculating an average of ALL of the panellist inputs provided to the Baltic.

2. From the various route assessments provided the Baltic calculates and publishes the following derived rates.

BCI 2014

The Capesize Index is calculated using a combination of the rates for each of the reported routes and multipliers as follow. Full route descriptions are in Appendix 1

Route Description Weighting (on 10 April 2014)

C2 160,000 ore Tubarao/Rotterdam 5%

C3 160-170,000 ore Tubarao/Qingdao 15%

C4 150,000 coal Richards Bay/Rotterdam 5%

C5 160-170,000 W Aussie/Qingdao 15%

C7 150,000 coal Bolivar/Rotterdam 5%

C8_14 Trans Atlantic round voyage 5%

C9_14 ARA or Passero trip China-Japan (fronthaul) 7.5%

C10_14 Pacific round voyage 15%

C14 China / Brazil round voyage 15%

C15 160,000 coal , Richards Bay/China 5%

C16 Qingdao-Beilun trip UK-Cont-Med 65 days 7.5%

60

Capesize 2014 Calculation detail

Route Multiplier Route value Index contribution

C2 10.276695630 7.572000000 77.815139310

C3 14.474995240 19.118000000 276.732958998

C4 10.178191930 7.985000000 81.272862561

C5 34.242287860 7.450000000 255.105044557

C7 10.096625310 9.140000000 92.283155333

C15 6.567770448 12.955000000 85.085466154

C8_14 0.011232800 11430 128.390904000

C9_14 0.005011588 25955 130.075766540

C10_14 0.019386696 11468 222.326629728

C14 0.020572868 11668 240.044223824

C16 0.087405223 -1814 -158.553074522

Sum 1430.579076484

Index 1430.579076484

Rounded Index 1431

Cape TC Avg 11659.125000000

Cape TC Rounded $11,659

61

Panamax (BPI)

The Baltic Exchange Panamax Index is calculated using a combination of the rates for each of the reported routes and multipliers as follow. Full descriptions of the routes are shown in Appendix 1.

Route Description Weighting

P1A_03 Trans Atlantic round voyage 25%

P2A_03 Continent-Mediterranean trip to China-Japan 25%

P3A_03 Trans Pacific round voyage 25%

P4_03 China-Japan trip to Continent-Mediterranean 25%

In addition to the Panamax Time Charter Average an index figure basis 1000 in 1998

is also published.

Route Multiplier Route Value Index Contribution

P1A_03 0.032280358 17308.000000000 558.708436264

P2A_03 0.031407559 24446.000000000 767.789187314

P3A_03 0.030123107 11303.000000000 340.481478421

P4_03 0.029755057 1923.000000000 57.218974611

1724.198076610

1724.198076610

1724

62

Panamax P3A-IV implied voyage calculation

The Baltic derives from the Panamax P3A TC route an implied voyage rate for use as required in commercial transactions. This is defined and calculated as shown below.

Route

Delivery Japan/South Korea range (specifically Pusan used) laydays cancelling 15/20 days ahead in the loading area, for a time charter round trip of 35/50 days with a cargo of coal.

Vessel

The standard "Baltic Type" panamax vessel

Implied voyage equivalent

72,000mt coal loading 1 safe berth Newcastle NSW and discharging 1 safe berth Qingdao.

25,000mt Sundays + holidays included load and 15,000mt Sundays + holidays included discharge 12 hours turn time both ends.

The calculation includes a 7% weather margin and bunkers based on Pusan.

Freight is net of commission and per metric tonne, free in and out and spout trimmed.

Implied P3A calculation process

The implied voyage equivalent is calculated as the US dollar amount per metric tonne that results from adding the net amount of hire received for the total duration of the voyage to the total voyage expenses divided by the cargo intake.

Voyage expenses

Ballast and laden days are calculated. The ballast days are derived by deducting a weather factor (7%) off the ballast speed of 14.0 knots and dividing the result into the distance Pusan to Newcastle (4,464 miles) and dividing that result by 24 hours.

The laden days are derived by deducting a weather factor (7%) off the laden speed of 14.0 knots and dividing the result into the distance Newcastle to Qingdao (4,733 miles) and dividing that result by 24 hours.

The next step is to establish the bunker costs

For the trip's IFO (Intermediate Fuel Oil) ballast consumption, the ballast days (14.29) are multiplied by the daily IFO ballast consumption (28mt per day).

For the trip's IFO (Intermediate Fuel Oil) consumption while loading, the loading port days (3.38 ) are multiplied by the daily IFO loading consumption (3mt per day) and for the MDO (Marine Diesel Oil) consumption the loading port days (3.38) are multiplied by the daily MDO consumption (0.1mt per day).

For the trip's IFO laden consumption, the laden days (15.15) are multiplied by the daily IFO laden consumption (32mt per day). For the trip's IFO

63

consumption while discharging, the discharging port days (5.3) are multiplied by the daily IFO discharging consumption (3mt per day), and for the MDO (Marine Diesel Oil) consumption the discharging port days (5.3) are multiplied by the daily MDO consumption (0.1mt per day).

Adding the results from the calculations described above generates the trip's total IFO and MDO consumption. These figures are then multiplied by the IFO and MDO market prices per mt (based on Pusan and supplied by Bunkerworld), which produces the total IFO and MDO cost for the trip.

A further allowance of US $15,000 is added for miscellaneous expenses/cleaning.

The voyage expenses are then calculated as the sum of the total IFO cost, the total MDO cost and miscellaneous charges, the load port charges (Newcastle) and the discharge port charges (Qingdao). These port figures are provided in US $. However, when received in local currencies, the foreign exchange rates are sourced from XE.com.

All port cost related information is provided by Cory Brothers Shipping. Qingdao includes tonnage dues.

Distances are provided by Netpas.

Bunker prices provided by Bunkerworld.

64

Duration

The total voyage days are the sum of ballast (14.29) + loading (3.38) + laden (15.15) + discharging (5.3).

Total 38.11 (rounded) days.

Net hire

Taking the total estimated duration of the voyage (38.11 days) and multiplying it by the time charter rate route assessment published on route P3A less 3.75% commission.

Please note that the calculation takes place using seven decimal places and is only rounded at the end.

Implied voyage rate

Dividing the product of the Net Hire and Total Voyage Expenses by the estimated cargo intake of 72,000mt

Distances used in this calculation are provided by Netpas (www.netpas.net)

Bunker prices used in this calculation are provided under licence by Bunkerworld (www.bunkerworld.com)

All port cost related information is provided by Cory Brothers Shipping (www.cory.co.uk)

To view the implied route port cost rates go to: www.balticexchange.com/market-information/indices/bpi-documents/

http://www.netpas.net/

http://www.bunkerworld.com/

http://www.cory.co.uk/

http://www.balticexchange.com/market-information/indices/bpi-documents/

http://www.balticexchange.com/market-information/indices/bpi-documents/

65

Supramax (BSI)

The Baltic Exchange Supramax Timecharter Average is calculated as a weighted average of the rates for each of the reported routes as follows. Full descriptions of the routes are shown in Appendix 4 below.


S1A Continent trip Singapore-Japan inc China 12.5%

S1B Black Sea trip Singapore-Japan inc China 12.5%

S2 Trans Pacific round voyage 25%

S3 South Korea-Japan trip Europe 25%

S4A US Gulf trip Europe 12.5%

S4B Europe trip US Gulf 12.5%

The following routes are not a component part for calculating the BSI or TC average.

S5 W Africa trip via ECSA to Singapore-Japan 0%

S9 W Africa trip via ECSA to Skaw-Passero 0%

In addition to the Supramax Time Charter Average, an index figure basis 1000 in 2005 is also published, which began at 1000 as the Baltic Handymax Index (BHI) on 7 January 1997. When the vessel size increased this was renamed the BHMI on 2 September 2000. It became the BSI on 1 July 2005. The index is calculated using a combination of the rates for the reported routes and multipliers as follow. Routes S5 and S9 do not contribute.

66

Supramax Index Multiplier

0.095637068

Route Route Multiplier Route Average Index Contribution

S1A 0.125000000 21529.000000000 2691.125000000

S1B 0.125000000 19667.000000000 2458.375000000

S2 0.250000000 7763.000000000 1940.750000000

S3 0.250000000 4458.000000000 1114.500000000

S4A 0.125000000 29688.000000000 3711.000000000

S4B 0.125000000 8306.000000000 1038.250000000

12954.000000000

1238.882578872

1239

Baltic Exchange Supramax Asia (BES Asia)

The Baltic Exchange Supramax Asia Timecharter Average is the average of the rates

for each of the reported routes as follows. Full descriptions of the routes are shown in

Appendix 1.


S8 China/Indonesia trip to EC India 33.33%

S10 N.China/Indonesia round voyage 33.33%

S11 Mid-China/Australia or transpacific round voyage 33.33%

67

Handysize (BHSI)

The Baltic Exchange Handysize Index is calculated as a weighted average of the

rates for each of the reported routes as follows, with the weightings as shown. Full

descriptions of the routes are shown in Appendix 1.


HS1 Europe trip east coast South America 12.5%

HS2 Europe trip east coast North America 12.5%

HS3 East coast South America trip Europe 12.5%

HS4 US Gulf trip Europe 12.5%

HS5 South East Asia, trip via Australia to Singapore/ 25%

Japan inc China

HS6 South Korea/Japan trip via north Pacific to 25%

Singapore/Japan inc China

Route Multiplier Route value Index Contribution

HS1 0.011479686 9825.000000000 112.787914950

HS2 0.009901618 8000.000000000 79.212944000

HS3 0.006995497 15025.000000000 105.107342425

HS4 0.009772844 19936.000000000 194.831417984

HS5 0.015174507 8378.000000000 127.132019646

HS6 0.015899136 8256.000000000 131.263266816

750.334905821

750.334905821

750

68

Baltic Exchange Dirty Tanker Index (BDTI)

The BDTI is calculated from all of the currently reported dirty tanker routes as follows:

TD1 (280,000mt, Middle East Gulf to US Gulf)

TD2 (270,000mt, Middle East Gulf to Singapore)

TD3 (265,000mt, Middle East Gulf to Japan)

TD4 (260,000mt, West Africa to US Gulf)

TD6 (135,000mt, Black Sea/Mediterranean)

TD7 (80,000mt, North Sea to Continent)

TD8 (80,000mt, Crude and/or DPP Heat 135F, Kuwait to Singapore)

TD9 (70,000mt, Caribbean to US Gulf)

TD12 (55,000mt, fuel oil, Amsterdam-Rotterdam-Antwerp range to US Gulf)

TD14 (80,000mt, no heat crude, SE Asia to EC Australia)

TD15 (260,000mt, no heat crude, West Africa to China)

TD17 (100,000mt crude. Baltic to UK-Cont)

TD18 (30,000mt fuel oil Baltic to UK-Cont)

TD19 (80,000mt, cross Mediterranean)

TD20 (130,000mt W Africa to Rotterdam)

69

BDTI

Index Multiplier 8.645389324

Route Multiplier WS

TD1 1 32.88 33

TD2 1 63.45 63

TD3 1 61.6 62

TD4 1 75.31 75

TD6 1 100.65 101

TD7 1 104.17 104

TD8 1 148.67 149

TD9 1 156.5 157

TD12 1 149.17 149

TD14 1 172.44 172

TD15 1 64.22 64

TD17 1 84.44 84

TD18 1 173.57 174

TD19 1 109.89 110

TD20 1 91.94 92

Average 105.926666667

Average x multiplier 915.777273141

Rounded Index 916

Baltic Exchange Clean Tanker Index (BCTI)

The BCTI is calculated from the following currently reported clean tanker routes:

70

TC1 (75,000mt CPP/UNL Naphtha Middle East Gulf to Japan)

TC2_37 (37,000mt CPP/UNL Rotterdam to New York)

TC5 (55,000mt CPP/UNL Naphtha Ras Tanura to Yokohama)

TC6 (30,000mt CPP/UNL Euromed - Skikda to Lavera)

TC8 (65,000mt CPP/UNL/ULSD Middle East Gulf to UKCont)

TC9 (22,000mt CPP/UNL/ULSD Baltic to UKCont)

TC14 (38,000mt CPP/UNL/Diesel USG to Cont)

The index is the rounded average of the route rates multiplied by a factor which is currently 4.667399883

BCTI

Index Multiplier 4.517980403

Route WS Value

TC1 1 110.67

TC2_37 1 226.11

TC5 1 117.5

TC6 1 215.63

TC9 1 240.36

Average 182.0519841

Average x multiplier

822.507296644

Rounded Index 823

71

The Baltic provides daily time charter equivalent (TCEs) calculations for different vessel types as follows:

VLCC

The published VLCC time-charter equivalent is an average of the rates derived from TD1 and TD3.

Suezmax

The published Suezmax time-charter equivalent is an average of the rates derived from TD6 and TD20.

Aframax

The published Aframax time-charter equivalent is an average of the rates derived from TD7, TD8, TD9, TD14, TD17 and TD19.

Revisions to index component and weightings

When a revision to an index is introduced the old and new indices are reported in full and in parallel for one reporting day in order to establish the correct revision to the multiplier needed to ensure a continuous time series of data. This is irrespective of other much more elaborate measures needed to avoid disruption to the market as a result of changes to routes and vessels, which is extensively discussed in Section 13.

72

APPENDIX 3

Route Notes

General

Panellists are reminded that the elected port or ports for load or discharge in the route description must be the ones on which they base their assessments. This is particularly important when for whatever reason freight premiums are obtained over and above other ports in the area.

In the event of port closure, the Board would have to be convened at the earliest opportunity to assess the situation.

1. Baltic Exchange Capesize Index

All routes are as “always afloat within International Navigation Limits (I.N.L)” and based on the Baltic capesize 2014 vessel description.

Route C3

Disbursements. Panellists should report on the basis of normal port disbursements at load and discharge ports. This figure is subject to periodic review by the Baltic and is usually guided by the underlying annual contracts of affreightment (COAs) contracted by the shippers/receivers.

Route C5

Disbursements. See Route C3.

Route C9_14 and C9_03

Delivery position. Panellists should note that ships fixed with delivery west of cape Passero up to, but not including, Antwerp have not delivered in accordance with the route description. These positions are often more favourable to charterers as they are closer to most load ports. Panellists are expected to take this into account in adjusting fixtures to index terms.

Route C16_14 and C11_03

Redelivery position. Panellists should note that ships fixed with redelivery west of cape Passero up to Antwerp have not redelivered in accordance with the route description. These positions are often more favourable to owners as they are closer to most subsequent load ports. Panellists are expected to take this into account in adjusting fixtures to index terms.

73

2. Baltic Exchange Panamax Index

All routes are as “always afloat except where NAABSA is customary and within I.N.L.” and based on the Baltic Panamax vessel description.

Route 1A_03

Fixtures concluded on APS terms. Panellists’ attention is drawn to the general note 11.4. (Assessing Time charter fixtures concluded on APS terms).

In assessing the relevance of these fixtures, panellists will normally consider whether the market structure assumes vessels will ballast into the US Gulf, or whether it assumes vessels have carried cargo into the area, and may make rate adjustments accordingly.

Delivery position. Panellists should note that ships fixed with delivery east of Gibraltar have not delivered in accordance with the route description. Panellists are expected to take this into account in adjusting fixtures to index terms

Redelivery position. Panellists should note that ships fixed with redelivery east of Gibraltar have not redelivered in accordance with the route description. Panellists are expected to take this into account in adjusting fixtures to index terms

Route 2A_03

Delivery position. Panellists should note that ships fixed with delivery east of Gibraltar have not delivered in accordance with the route description. Panellists are expected to take this into account in adjusting fixtures to index terms.

Route 3A_03

Delivery position. Panellists should note that ships fixed with delivery outside Japan-south Korea range have not delivered in accordance with the route description. Panellists are expected to take this into account in adjusting fixtures to index terms

Redelivery position. Panellists should note that ships fixed with redelivery outside Japan-south Korea range have not redelivered in accordance with the route description. Panellists are expected to take this into account in adjusting fixtures to index terms

Route 4A_03

Delivery position. Panellists should note that ships fixed with delivery outside Japan-south Korea range have not delivered in accordance with the route description. Panellists are expected to take this into account in adjusting fixtures to index terms

74

3. Baltic Exchange Supramax Index and Supramax Asia Index

a. All routes are as “always afloat within I.N.L.” and based on the Baltic supramax vessel description.

b. Each route is based on laydays 5 days from index date, with cancelling 10 days from index date. The routes will not be limited by specific cargo descriptions, except where stated (BES Asia S8,S10 & S11).

c. Cargo and trading exclusions. Whilst no specific cargo and trading exclusions are included in route descriptions, panellists will be aware of market norms at any time. Where fixtures have been concluded at rates which may appear to be particularly high (or low) because exceptional flexibility has been given to charterers (or exceptions restrictions imposed on them), panellists will use their judgement to make appropriate adjustments.

4. Baltic Exchange Handysize Index

a. All routes are as “always afloat within I.N.L.” and based on the Baltic handysize vessel description.

b. Each route is based on laydays 5 days from index date, with cancelling 10 days from index date. The routes will not be limited by specific cargo descriptions.

c. Cargo and trading exclusions. Whilst no specific cargo and trading exclusions are included in route descriptions, panellists will be aware of market norms at any time. Where fixtures have been concluded at rates which may appear to be particularly high (or low) because exceptional flexibility has been given to charterers (or exceptions restrictions imposed on them), panellists will use their judgement to make appropriate adjustments.

d. Route HS1/HS2 - With a delivery of Skaw-Passero this covers both Mediterranean and Continent markets. There will inevitably be fluctuations in the relative strengths between these areas and when this occurs panellists are expected to average their returns to reflect the overall value within the delivery range.

5. Baltic Exchange Dirty Tanker Index, Baltic Exchange Clean Tanker Index and Baltic International Tanker Routes – Asia.

a. Rate assessments are quoted in Worldscale rates (Copyright Worldscale Association) or dollar per day (for TCEs) or in certain

75

cases in $/mt. The Baltic Exchange does not take responsibility for the conversion of Worldscale rates into monetary values.

b. End of year Worldscale change. Panellists are required to report their assessments according to the current Worldscale rates prevailing up to the last reporting day of the year. Thereafter the next year's Worldscale rates will apply.

c. Panellists are reminded that the elected port or ports for load or discharge in the route description must be the ones on which they base their assessments. This is particularly important when for whatever reason freight premiums are obtained over and above other ports in the area.

In the event of port closure, the FIFC would have to be convened at the earliest opportunity to assess the situation.

76

APPENDIX 4

The time charter equivalent (TCE) calculation, which is always represented by a final

nett figure is calculated per the process outlined below. For this example we are

basing on BDTI route TD3 (Ras Tanura to Chiba).

TD3 TCE Calculation Process

The nett time charter equivalent (TCE) is calculated as the income received less the

total expenses and that result is then divided by the total number of days of the

voyage duration.

Expenses

Initially laden and ballast days are calculated.

The laden days are derived by adding a weather factor (5%) to the laden miles

(6,655) and dividing the result by the daily speed (13.0 knots per hour multiplied by 24

hours). The ballast days are calculated in the same manner, with the ballast miles

(6,655) basis a speed 12.5 knots being used. (often the laden mileage and ballast

mileage are the same).

The next step is establishing the bunker costs.

For the trip's IFO (Intermediate Fuel Oil) consumption while loading, the loading days

(2 days) are multiplied by the daily IFO loading consumption (20 mt per day).

For the trip's IFO laden consumption, the laden days (22.39) are multiplied by the

daily IFO laden consumption (70 mt per day).

For the trip's IFO ballast consumption, the ballast days (23.29) are multiplied by the

daily IFO ballast consumption (53 mt per day).

For the trip's IFO consumption while discharging, the discharging days (2 days) are

multiplied by the daily IFO discharging consumption (110 mt per day).

Finally for the trip's IFO consumption while waiting, the waiting days (1 day) are

multiplied by the daily IFO waiting consumption (10 mt per day).

Adding the results from the calculations described above generates the trip's total IFO

consumption. This figure is then multiplied by the IFO market price per mt (based on

Singapore 380 CST and supplied by Bunkerworld), which produces the total IFO

cost for the trip.

The trip's Total Expenses are calculated as the sum of the total IFO cost, the load

port charges (Ras Tanura) and the discharge port charges (Chiba – This figure is

divided by the USD/Yen rate as this port's charges are provided in Yen). Foreign

77

exchange rates (including SDRs) are sourced from XE.com. All port cost related

information is provided by Cory Brothers Shipping.

78

Income

The Gross Freight of the voyage is calculated by multiplying the cargo quantity

(265,000 mt) by the Worldscale flat rate and by the Baltic daily Worldscale route

assessment for TD3, divided by 100 (as market levels of freight are expressed as a

percentage of the nominal freight rate).

Please note that the Gross freight allows for the Keiyo Sea Berth Worldscale

differential.

- Discounting the gross freight by the broker commission (2.5%) produces the Nett

Freight.

Duration

The total voyage days are the sum of loading (2), laden (22.39), ballast (23.29),

discharging (2), waiting (1) days.

TD3 TCE - Deducting the total expenses from the nett freight produces the Nett Income

- Dividing the nett income by the total voyage days (50.68) gives us the Timecharter

Equivalent (TCE) rate for TD3.

79

VLCC VLCC SUEZMAX SUEZMAX

TD1 TD3 TD6 TD20

Ballast speed (knots) 12.50 12.50 12.50 12.50

Laden speed (knots) 13.00 13.00 13.00 13.00

IFO Ballast cons 53.00 53.00 44.00 44.00

IFO Laden cons 70.00 70.00 53.00 53.00

IFO cons at load 20.00 20.00 12.00 12.00

IFO cons at disch 110.00 110.00 68.00 68.00

IFO cons at Anchorage 10.00 10.00 10.00 10.00

Load Port Ras Tanura Ras Tanura Novo Off' Bonny

Disch Port Loop Chiba Augusta Rotterdam

Ballast Miles 9,631 6,655 1,269 4,475

Laden Miles 12,338 6,655 1,269 4,474

Cargo Quantity (mt) 280,000 265,000 135,000 130,000

Commission % 2.50 2.50 2.50 2.50

Port Costs Load Cory Bros Cory Bros Cory Bros Cory Bros

Port Costs Disch Cory Bros Cory Bros Cory Bros Cory Bros

Canal Dues Cory Bros n/a Cory Bros Cory Bros

WS Differential n/a n/a n/a n/a

WorldScale Flat Rate refer WS refer WS refer WS refer WS

IFO price used Spore Spore Rtdm Rtdm

Ballast IFO cons 1839.55 1234.32 283.43 689.15

Laden IFO cons 2906.55 1567.53 226.17 798.01

Loading IFO cons 40 40 24 24

Disch IFO cons 220 220 136 136

Waiting IFO cons 15 10 10 10

Total Voyage IFO cons 5006.10 3061.85 669.59 1647.16

Weather Factor 5% 5% 5% 5%

80

Days Ballast 33.71 23.29 4.44 15.66

Days Laden 41.52 22.39 4.27 15.06

Days Loading 2 2 2 2

Days Disch 2 2 2 2

Days Waiting 1.5 1 1 1

Days Canal 1 n/a 2 n/a

Total Voyage Days 81.73 50.68 15.71 35.72

81

AF

RA

MA

X

AF

RA

MA

X

AF

RA

MA

X

AF

RA

MA

X

AF

RA

MA

X

AF

RA

MA

X

TD7 TD8 TD9 TD14 TD17 TD19

Ballast speed

(knots) 12.50 12.50 12.50 12.50 12.50 12.50

Laden speed

(knots) 13.00 13.00 13.00 13.00 13.00 13.00

IFO

Ballast

cons 36.00 36.00 36.00 36.00 36.00 36.00

IFO Laden cons 43.00 43.00 43.00 43.00 43.00 43.00

IFO cons at load 10.00 10.00 10.00 10.00 10.00 10.00

IFO cons at disch 55.00 55.00 55.00 55.00 55.00 55.00

IFO cons at

Anchorage 5.00 5.00 5.00 5.00 5.00 5.00

Load Port

Sullom

Voe

Mina Al

Ahmadi P L Cruz Seria Primorsk Ceyhan

Disch Port W'haven Spore C Christi Sydney W'haven Lavera

Ballast Miles 600 3,860 2,162 4,188 1,306 1,718

Laden Miles 600 3,860 2,162 4,188 1,306 1,718

Cargo Quantity

(mt) 80,000 80,000 70,000 80,000 100,000 80,000

Commission % 2.50 2.50 2.50 2.50 2.50 2.50

Port Costs Load

Cory

Bros

Cory

Bros

Cory

Bros

Cory

Bros

Cory

Bros

Cory

Bros

Port Costs Disch

Cory

Bros

Cory

Bros

Cory

Bros

Cory

Bros

Cory

Bros

Cory

Bros

Canal Dues n/a n/a n/a n/a n/a n/a

WS Differential refer WS n/a n/a n/a refer WS n/a

Worldscale Flat

Rate refer WS refer WS refer WS refer WS refer WS refer WS

IFO price used Rtdm

S’pore Rtdm S’pore Rtdm

Rtdm

82

LSMGO LSMGO

Ballast IFO cons 75.35 486.49 272.29 528.57 164.43 216.72

Laden IFO cons 86.39 558.73 312.58 606.92 188.85 248.76

Loading IFO

cons 20 20 20 20 20 20

Disch IFO

cons 110 110 110 110 110 110

Waiting IFO

cons 2.5 2.5 2.5 2.5 2.5 2.5

Total Voyage

IFO cons 291.74 1175.22 714.86 1265.49 483.28 595.48.23

Weather Factor 5% 5% 5% 5% 5% 5%

Days Ballast 2.09 13.51 7.56 14.68 4.57 6.0218

Days Laden 2.01 12.99 7.27 14.11 4.39 5.7918

Days Loading 2 2 2 2 2 2

Days Disch 2 2 2 2 2 2

Days Waiting 0.5 0.5 0.5 0.5 0.5 0.5

Days Canal n/a n/a n/a n/a n/a n/a

Total Voyage

Days 8.60 31.00 19.33 33.29 13.46 16.317

83

LR1 MR PANAMAX MR

TC1 TC2_37 TC5 TC14

Ballast speed (knots) 12.50 12.50 12.50 12.50

Laden speed (knots) 13.00 13.00 13.00 13.00

IFO Ballast cons 36.00 22.50 28.00 22.50

IFO Laden cons 43.00 28.00 33.00 28.00

IFO cons at load 10.00 5.00 5.00 5.00

IFO cons at disch 42.50 25.00 32.00 25.00

IFO cons at Anchorage 5.00 5.00 5.00 5.00

Load Port

Ras

Tanura Rtdm

Ras

Tanura Houston

Disch Port Yokohama New York Yokohama Amsterdam

Ballast Miles 6,638 3,347 6,638 5,142

Laden Miles 6,638 3,347 6,638 5,141

Cargo Quantity (mt) 75,000 37,000 55,000 38,000

Commission % 3.75 3.75 3.75 2.5

Port Costs Load Cory Bros Cory Bros Cory Bros Cory Bros

Port Costs Disch Cory Bros Cory Bros Cory Bros Cory Bros

Canal Dues n/a n/a n/a n/a

WS Differential n/a refer WS n/a n/a

WorldScale Flat Rate refer WS refer WS refer WS refer WS

IFO price used S’pore Rtdm S’pore Rtdm

Ballast IFO cons 836.39 263.73 650.52 404.85

Laden IFO cons 960.45 315.48 737.09 484.44

Loading IFO cons 20 10 10 10

Disch IFO cons 85 50 64 50

Waiting IFO cons 2.5 5 5 5

Total Voyage IFO cons 1901.84 639.22 1461.61 949.29

84

Weather Factor 5% 5% 5% 5%

Days Ballast 23.23 11.72 23.23 17.99

Days Laden 22.34 11.27 22.34 17.30

Days Loading 2 2 2 2

Days Disch 2 2 2 2

Days Waiting 0.5 1 1 1

Days Canal n/a n/a n/a n/a

Total Voyage Days 50.07 27.99 50.57 40.29

85

HANDY HANDY MR MR MR

TC4 TC7 TC10 TC11 TC12

Ballast speed (knots) 12.50 12.50 12.50 12.50 12.50

Laden speed (knots) 13.00 13.00 13.00 13.00 13.00

IFO Ballast cons 22.50 22.50 22.50 22.50 22.50

IFO Laden cons 28.00 28.00 28.00 28.00 28.00

IFO cons at load 5.00 5.00 5.00 5.00 5.00

IFO cons at disch 25.00 25.00 25.00 25.00 25.00

IFO cons at Anchorage 5.00 5.00 5.00 5.00 5.00

Load Port Spore Spore Yeosu Yeosu Jamnagar

Disch Port Chiba Sydney

Los

Angeles S’pore Chiba

Ballast Miles 2,926 4,471 5,325 2,480 5,717

Laden Miles 2,926 4,471 5,325 2,480 5,716

Cargo Quantity (mt) 30,000 30,000 40,000 40,000 35,000

Commission % 3.75 3.75 3.75 3.75 3.75

Port Costs Load Cory Bros Cory Bros Cory Bros Cory Bros Cory Bros

Port Costs Disch Cory Bros Cory Bros Cory Bros Cory Bros Cory Bros

Canal Dues n/a n/a n/a n/a n/a

WS Differential n/a n/a n/a n/a refer WS

Worldscale Flat Rate refer WS refer WS refer WS refer WS refer WS

IFO price used Spore Spore Spore Spore Spore

Ballast IFO cons 230.34 352.09 423.28 195.30 450.21

Laden IFO cons 275.53 421.31 506.49 233.69 538.62

Loading IFO cons 10 10 10 10 10

Disch IFO cons 50 50 50 50 50

Waiting IFO cons 5 5 5 5 5

86

Total Voyage IFO cons 565.87 833.40 989.77 488.99 1048.84

Weather Factor 5% 5% 5% 5% 5%

Days Ballast 10.24 15.65 18.81 8.68 20.01

Days Laden 9.84 15.05 18.09 8.35 19.24

Days Loading 2 2 2 2 2

Days Disch 2 2 2 2 2

Days Waiting 1 1 1 1 1

Days Canal n/a n/a n/a n/a n/a

Total Voyage Days 25.08 35.70 41.90 22.03 44.25

87

APPENDIX 5

FFA Forward Curve Specifications

The following section sets out details of the data included in the Baltic Forward Assessment for the FFA market. This is also known as the forward curve. It can change rapidly as contracts trade less or for shorter periods or trade more and for more distant tenors. New contracts are added frequently in response to market demand.

Dry Bulk Settlement Periods

Routes P1A, P2A, P3A are reported based on both entire month and last seven day settlement while C3, C4, C5, C7, C9_03 and all TCs are reported on an entire month settlement basis.

Rollover

Reporting months will change on the last working day of each month.

Eg For April 2014, the rollover date is 31 March 2014.

The Cape and Panamax Time Charter Curves go out to+4M, +6Q and +7Cal.

C4, C7, C3 & C5

For the voyage routes, C4 & C7, the individual months reported will range from a minimum of current month plus five months, to a maximum of current month plus seven months. This will enable full coverage of the months not reported between the monthly and quarterly periods, whilst avoiding duplication of data.

The text below outlines how these periods operate:

In practice, a NR value will be reported when the forward month is covered by a forward quarter. For example, for routes C4 and C7 if the current month is the first month of a quarter (eg April) then monthly values will be produced for April, May, June, July, August and September (current month +5 months).

When we are in the first month of a quarter, four full quarters will be reported on all the timecharters. For example, on 12 January, the reported quarters would be Q1 (as cur. Quarter), Q2, Q3, Q4. The +4Q reporting period, will be Not Reported.

When the current month is the second month of the quarter (eg May), monthly values for the current month up to plus seven months will be reported, as the next quarterly assessment will commence in January. In this example, monthly values will be produced for May, June, July, August, September, October, November and December (current month +7).

88

When the current month is the third month of the quarter (eg June), monthly values for the current month up to plus six months will be reported, but the current month plus seven months will be a NR value. For example, if the current month is June, then monthly values will be produced for June, July, August, September, October, November and December.

The same concept applies to the individual months reported for the voyage routes C3 & C5, except that for these routes the range will be from current month plus two months, to current month plus five months. As such current month plus three months and current month plus four months will be reported as a NR when the current month is the first month of the quarter (eg April).

When the current month is the second month of the quarter (eg May), values will be reported for the current month up to plus five months and there will be no NR values. Finally, when the current month is the third month of the quarter (eg June), a NR value will be reported for current month plus five months.

90

Route C3

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BCI T/C average(5TC)

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Q

+1

Q

+2

Q

+3

Q

+1

CalY

+2

CalY

+3

CalY

BPI T/C average

Cu

r m

th

+1

mth

+2

mth

+3

mth

+4

mth

Cur

Q

+1

Q

+2

Q

+3

Q

+4

Q

+5

Q

+6

Q

+1

Ca

lY

+2

Ca

lY

+3

Ca

lY

+4

Ca

lY

+5

Ca

lY

+6

CalY

+7

Ca

lY

BSI T/C average

Cu

r m

th

+1

mth

+2

mth

+3

mth

+4

mth

Cur

Q

+1

Q

+2

Q

+3

Q

+4

Q

+1

Ca

lY

+2

Ca

lY

+3

Ca

lY

+4

Ca

lY

+5

Ca

lY

+6

Ca

lY

+7

Ca

lY

BHSI T/C average

Cu

r m

th

+1

mth

+2

mth

+3

mth

+4

mth

Cur

Q

+1

Q

+2

Q

+3

Q

+4

Q

+1

CalY

+2

CalY

+3

CalY

+4

CalY

+5

CalY

+6

CalY

+7

CalY

91

Tankers

Tanker Settlement Periods

All Tankers are reported on an entire month settlement basis.

Dirty routes :

TD3 – 265000mt Middle East Gulf to Japan. Ras Tanura to Chiba with laydays/cancelling 30/40 days in advance. Maximum age 15 years. 2.5% total commission.

TD7 – 80000mt North Sea to Continent. Sullom Voe to Wilhelmshaven, with laydays/cancelling 7/14 days in advance. Maximum age 20 years. 2.5% total commission.

TD8 – 80000mt Kuwait to Singapore. Mena al Ahmadi to Singapore with laydays/cancelling 20/25 days in advance. Maximum age 20 years. 2.5% total commission.

TD9 – 70000mt Caribbean to US Gulf. Puerto La Cruz (Jose Platform TAECJ) to Corpus Christi with laydays/cancelling 7/14 days in adavnce. Maximum 20 years. 2.5% total commission.

TD17 – 100000mt Baltic to UK-Cont. Primorsk to Wilhelmshaven (belt/belt) with laydays/cancelling 10/20 days in advance. Maximum 15 years of age. 2.5% total commission.

TD19 – 80000mt Cross Mediterranean. Ceyhan to Lavera with laydays/cancelling 10/15 days in advance. Maximum age 20 years. 2.5% total commission.

TD20 - 130,000mt. West Africa to UK-Continent (offshore terminal Bony) to Rotterdam. Laydays/cancelling 15-20 days from the index date. Age max 20 years. 82,000grt. 2.5% total commission.

Clean routes :

TC2_37 – 37000mt CPP/UNL Continent to USAC. Rotterdam to New York with laydays/cancelling 10/14 days in advance. Maximum age 15 years. 3.75% total commission.

TC5 – 55,000mt, CPP/UNL naphtha condensate, Middle East/Japan. Ras Tanura to Yokohama with laydays cancelling 30/35 days in advance. Maximum age 15 years. 3.75% total commission.

TC6 – 30000mt CPP/UNL Algeria/Euromed Skikda/Lavera with laydays cancelling 7/14 days in advance. Maximum age 15 years3.75% total commission.

92

TC12 – 35000mt Naptha (WCI) to Japan. Sikka (Jamnagar) to Chiba with laydays/cancelling 7/14 days in advance. Maximum age 15 years. 3.75% total commission.

TC14 – 38000mt CPP/UNL U.S.Gulf to Continent. Houston to Amsterdam with laydays cancelling 6/12 days in advance. Maximum age 15 years. 3.75% total commission.

Reporting periods for US$/tonne curves:

TD3 Cur mth +1m +2m +3m +4m +5m Cur Quarter

+1Q

+2Q

+3Q

+4Q

+5Q

+1 CalY +2 CalY


+1Q

+2Q

+3Q

+4Q

+5Q

+1 CalY +2 CalY


+1Q

+2Q

+3Q

+4Q

+5Q

+1 CalY +2 CalY


+1Q

+2Q

+3Q

+4Q

+5Q

+1 CalY +2 CalY

TD17

Cur mth +1m +2m +3m +4m +5m Cur Quarter

+1Q

+2Q

+3Q

+4Q

+5Q

+1 CalY +2 CalY

TD19


+1Q

+2Q

+3Q

+4Q

+5Q

+1 CalY +2 CalY

TD20


+1Q

+2Q

+3Q

+4Q

+5Q

+1 CalY +2 CalY

TC2 Cur mth +1m +2m +3m +4m +5m Cur Quarter

+1Q

+2Q

+3Q

+4Q

+5Q

+1 CalY +2 CalY


+1Q

+2Q

+3Q

+4Q

+5Q

+1 CalY +2 CalY


+1Q

+2Q

+3Q

+4Q

+5Q

+1 CalY +2 CalY


+1Q

+2Q

+3Q

+4Q

+5Q

+1 CalY +2 CalY


+1Q

+2Q

+3Q

+4Q

+5Q

+1 CalY +2 CalY


+1Q

+2Q

+3Q

+4Q

+5Q

+1 CalY +2 CalY

**PLEASE NOTE THAT WORLDSCALE CURVES WILL ONLY DISPLAY

CURRENT YEAR PERIODS

Rollover

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Reporting months will change on the last working day of each month.

Eg For April 2014, the rollover date is 31 March 2014.

When we are in the first month of a quarter, there five full quarters reported on all the tanker routes.

For example, on 12 January (12), the reported quarters would be Q1 (12) (as cur. Quarter), Q2 (12), Q3 (12), Q4 (12) & Q1 (13).

The +5Q reporting period, will be Not Reported. When we are in the second or the third month of the quarter, current quarter will be the remaining of that quarter, and four full quarters ahead will also be reported on all tanker routes.

For example, on 17 February 12, current quarter would be Feb/Mar, and then we would be reporting on Q2, Q3, Q4, Q1 & Q2 (10).

Mathematically Derived Periods

1. Dry Timecharter – quarterly reporting When current month is the third month of a quarter, (eg CURMON = March), current quarter is the same (March). Therefore, for the third month of the quarter the system automatically copies the CURMON value to CUR Q and reporting to CUR Q is blocked from panellists.

2. Dry Timecharter and Tanker yearly reporting When Q1, Q2, Q3 and Q4 of the same year are reported, (this only happens when current month is November or December) the entry for calendar year +1 is automatically calculated as the average of Q1+Q2+Q3+Q4 and reporting is blocked from panellists.

3. Tankers – quarterly reporting All formula examples are based using TC4 TC5 but the principle holds for all tanker routes. a. When the current month is the first month of a quarter [eg April]

The reported months are April (TC4CURMONTC5CURMON), May (TC5+1_M), June (TC5+2_M), July (TC5+3_M), August (TC5+4_M) and September (TC5+5_M)

The Current Quarter (TC5CURQ which is Q2) and Current Quarter +1 (TC5+1Q which is Q3) is derived mathematically using the monthly reported data in the following manner. The current quarter is calculated as

TC5CURQ = (TC5CURMON + TC5+1_M + TC5+2_M) / 3

94

And TC5CURQ is blocked from reporting panellists.

Current Quarter +1 is calculated as

TC5+1Q = (TC5+3_M + TC5+4_M + TC5+5_M) / 3

And TC5+1Q is blocked from reporting panellists.

b. When the current month is the second month of a quarter [eg May]

The reported months are May (TC5CURMON), June (TC5+1_M), July (TC5+2_M), August (TC5+3_M), September (TC5+4_M) and October (TC5+5_M)

The Current Quarter (TC5CURQ which is May/June) and Current Quarter +1 (TC5+1Q which is Q3) is derived mathematically using the monthly reported data in the following manner.

The current quarter is calculated as

TC5CURQ = (TC5CURMON + TC5+1_M) / 2

And TC5CURQ is blocked from reporting panellists.


TC5+1Q = (TC5+2_M + TC5+3_M + TC5+4_M) / 3


c. When the current month is the third month of a quarter [eg June]

The reported months are June (TC5CURMON), July (TC5+1_M), August (TC5+2_M), September (TC5+3_M), October (TC5+4_M) and November (TC5+5_M)

The Current Quarter (TC5CURQ which is June) and Current Quarter +1 (TC5+1Q which is Q3) is derived mathematically using the monthly reported data in the following manner.

The current quarter is calculated as

TC5CURQ = (TC5CURMON)

And TC5CURQ is blocked from reporting panellists online.


TC5+1Q = (TC5+1_M + TC5+2_M + TC5+3_M) / 3


95

The remaining forward quarters are reported by the FFA broker panel.

96

APPENDIX 6

INTRADAY CURVE PRODUCTION

1. Background

The Baltic Exchange is to provide intraday curves for dry FFAs each day in order to allow clearing

houses to carry out variation margining of open positions or market participants to mark their

books to market. Three factors which apply to the production of the intraday curves are:

a) Time constraints: the intraday curves need to be provided in a timely manner by 12:30 each

day but the process of creating them cannot begin until a reasonable interval after the

publication of the Cape index at 11:00.

b) Consistency: the intraday curves need to be consistent with the previous day’s closing prices

taking into account actual market movements but avoiding excessive variance caused by

factors such as numbers being provided by different or fewer panellists and panellist errors,

unless a large intraday market move genuinely occurs.

c) Discretionary power for SFR Team: whereas the Baltic’s normal process for calculation of the

Baltic forward assessments (the “closing prices”) requires that they are simply “an average of

rates input by each of the panellists”, the calculation of the intraday curves, by virtue of being

able to draw on real time trade data on Baltex and because of the need for consistency with

the closing prices, may require discretionary intervention by the SFR Team as set out below.

2. Timings

a) 10:45 - 11:00 send out reminder email to intraday contributors at contributing panellists with

follow up telephone calls where needed.

b) 11:20 - 11:40 panellists submit their numbers and relevant trades processed through Baltex

are captured.

c) 11:20 - 12:00 intraday team prepares spreadsheet from template.

d) 12:00 - 12:30 intraday team creates intraday curves and saves file

e) 12:30 intraday team places CSV file on FTP server (ftp2014.balticexchange.org) for

collection

3. Preparation of spreadsheet

a) Enter previous day’s (or most recent) Baltic closing prices for reference.

b) Enter panellists’ intraday numbers.

c) Enter recent (after 10:00) Baltex trade prices taking care to distinguish combo and spread

prices.

d) Spreadsheet calculates averages of panellists’ numbers.

e) Where applicable, spreadsheet derives Quarters from constituent months and Calendars from

constituent Quarters.

f) Spreadsheet calculates difference (percentage and absolute) between average of panellists’

numbers and previous closing prices.

4. Methodology for creating intraday curves

ftp://ftp2014.balticexchange.org/

97

a) Each instrument (e.g. Capesize 5T/C) is reviewed in turn, firstly by looking for any anomalous

large differences (percentage or absolute) in a particular period between the average of the

panellists’ numbers and the previous session’s closing prices.

b) The numbers provided by the panellists for each period of the instrument are compared with

each other to look for any anomalies (say, 5% or more from the others). Such anomalies could

arise either from input errors by the panellists or due to differing views of the market,

particularly in illiquid periods or instruments.

c) Where there is an anomaly, the average number produced is (i) compared with any Baltex

trade prices in the period and (ii) the change between the average and the previous day’s

close is compared with the equivalent changes in adjacent periods. Where the average is

significantly out of line with a Baltex trade price or the change from the close in the period is

significantly different (say 5% or more) from the equivalent changes in adjacent periods a

decision whether to ignore the anomalous panellist number shall be made and documented

by the SFR team.

d) If it is determined that, in the circumstances, the perceived anomalous panellist number

should be disregarded, the average of the remaining broker numbers is recalculated and this

new average is used for the intraday curve, except that where the perceived anomalous

panellist number which is to be disregarded was the only panellist number provided for a

given period, then the intraday curve will use the previous closing price for that period unless

the adjacent periods in that instrument have moved significantly (more than 5%) in which

case the previous day’s closing price will be adjusted by a percentage amount which is the

average of the changes in the adjacent periods (one on each side) and this number is then

used for the intraday curve price.

e) For instruments where there is little or no open interest or trading activity the intraday

curves, with the exception of the current month, are taken directly from the previous closing

prices except where there is a large move in the market as demonstrated by panellist returns

or trades logged through Baltex.

f) Any panellist number which is considered to be anomalous is checked with the panellist that

provided the number. Due to time constraints this will normally take place after the

production of the intraday curve except where it is considered absolutely necessary to have

this information beforehand.

g) The data produced in the spreadsheet used to perform the above calculations feeds

automatically into a second spreadsheet in the format needed for publication. A copy of the

second spreadsheet is then saved as a CSV file and is made available to the clearing house via

the FTP server.

5. Review

Before publication the rates are reviewed by the SFR or his delegate to confirm that the process

has been correctly followed and the rates may be published.

6. Record keeping

Electronic records of all spreadsheets used to generate the intraday curves and any relevant

email correspondence with panellists and clearing houses will be retained as per the stipulations

of this Guide to Market Benchmarks.

98

APPENDIX 7

DRAFT: Letter to panellists confirming continuation of appointment following an audit by BEISL

Dear

Thank you for allowing the time for my/our visit to your office on xxxxxxx. It was a pleasure to see you. This letter follows the successful completion of the annual review process we went through together and confirms the continuation of your appointment as a Baltic panellist. The appointment is always subject to your continued willingness to serve and our conviction that you continue to meet the necessary criteria.

You are currently reporting on the following routes. [insert routes].

During the audit process we confirmed together that you have sufficient business in the routes you are reporting to justify your position as a panellist. We also reviewed your staffing levels to ensure that you are able to report even when staff are on vacation or otherwise out of the office. We discussed the importance of providing reports on each route on every reporting day within the time windows permitted. We also discussed the record of your performance on this point in the last year.

Your attention is drawn to the important information contained in the Baltic's Guide to Market Benchmarks which sets out the responsibilities of panellists. It is particularly important that you and your staff are familiar with sections 4, 9, 10, 11 and 14 as well as with the relevant route specification contained in the various appendices.

I look forward to continuing to work with you and to our next review in 12 months.

99

APPENDIX 8

Delegation Process

Staff members to whom authority to compile and transmit the route averages and indices is delegated are currently as follow.

Capesize 1. Patricia Jones 2. Patrick Swayne

Panamax 1. Patricia Jones 2. Barrie Wooderson

Supramax 1. Patrick Swayne 2. Barrie Wooderson

Handysize 1. Barrie Wooderson 2. Patrick Swayne

Tankers 1. David Williams 2. Patrick Swayne

LPG 1. David Williams 2. Patrick Swayne

S&P 1. Patrick Swayne 2. David Williams

Demo 1. Patrick Swayne 2. David Williams

BFA 1. Michael Ackerman

Options 1. Michael Ackerman

Singapore generated routes

1. Chris Jones 2. Shi Yanjie

100

APPENDIX 9

Baltic Exchange Information Services Ltd

Summary of backup and business continuity plans

Office systems

The Baltic Exchange primary office systems run on MS Server 2007 and are housed

in a computer room locally. Data is mirrored in real time to a back up system running

at a remote data centres in Maidenhead which is run by C4L Ltd and provided to the

Baltic by Ridgewall Ltd.

There is no automatic switching to the remote centre, and in the event of a

catastrophic failure of the main site or a disaster rendering the location inaccessible,

uninhabitable or devoid of power for any significant period, company systems (email,

file systems etc) can be accessed using Terminal Services to the remote site.

In addition to the real-time mirroring of data to the remote centre, data is continuously

backup up on site to a Network Attached Storage (NAS) device. Data from the NAS is

also backed up daily to "cloud" storage, providing off-site storage of the backups. In

the worst case the fallback data will be 24 hours old.

Assuming the main Baltic location is inaccessible it is expected that staff will work

from home until an alternative location can be established. All critical staff have

access to fast broadband connections at home.

Index production system

The index data is collected from panellists, reviewed, managed and indices calculated

and distributed using a world wide web based system. The system is developed and

maintained by a third party (InFx Solutions Ltd).

The main website is hosted for InFx by hosting provider M247 using three machines

in a cluster, 2 in London and one in Manchester. Each machine is a mirror of the

other so the loss of a machine or an entire data centre will not bring the system down.

Daily system backups are also transferred to separate storage at the InFx premises in

Hastings.

Access to this system would be unaffected by any local failure at the Baltic offices

and staff would be able to access it from home or new premises without interruption.

To cover for the possibility of catastrophic and unrecoverable failure of the system

software, the Baltic maintains Excel spreadsheets which are available on its in-house

101

systems and which can be used to record contributions provided by panellists on the

telephone. The SFR maintains the master spreadsheets and ensures that they are up

to date in relation to contributing panellists, routes, multipliers and calculations.

These spreadsheets are backed up and recoverable via the processes set out above.

Process

In the event of the web based system becoming unavailable the members of the

Baltic freight office will contact the contributing panellists directly by phone or email as

appropriate and record their contributing returns on the master sheets.

These sheets automatically update as the information is entered. Once the freight

market team are content with the returns, the results of the calculations can be

approved.

The information will be distributed to the market participants using stored emails

distribution lists. This data will be sent as a report to members and also as a comma

delimited file (CSV) to our quote vendor network to allow its importation into their

systems.

Security

All in house and web systems are protected using firewall technology and penetration

testing of in-house systems is carried out once per annum with any significant

deficiencies being remedied.

For the exchange systems live scanning for viruses and trojans is carried out using

Sophos technology which is updated on a 15 minute cycle.

The web servers as all Linux based and also run active anti-virus software with

signature updates twice a day.

All exchange systems, internal DR and web systems are also protected by Intrusion

Prevention Systems which scan inbound requests for known malicious signatures.

Any such requests matched will result in the sender being added to the real time

blacklist blocking tables.

In addition the web hosting has robust precautions in place to withstand denial of

service attacks

Physical security of in-house systems is protected by their location in a locked room

inside the Baltic Exchange building which has 24 hour security arrangements

including video surveillance.

The physical web servers are hosts in secured hosted data centres with 24 hour

access controls limited to the employees of the hosting company. Any visit to the

hosting centre would be security cleared in advance and visitor would be

accompanied at all times.

102

Guide to Market Benchmarks Version 2.0.3 – May 2015

Copyright Baltic Exchange Information Services Ltd

Guide to Market Benchmarks Ver2.1

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