1. Letter to Shareholders

Dear Shareholders,

Business Environment

Post-COVID recovery of consumption and production in the shipping market pushed the BDI to the highest in October 2021 since 2008. The market as a whole was positive throughout the first half of 2022, except for the usual low season during the Chinese New Year. However, market activities slowed down in the second half of 2022. The slowdown continued into the first half of 2023, and the market remained stagnant after China lifted COVID restrictions. Nevertheless, at the end of 2023, the BDI climbed back to where it was in the first half of 2022. As of the Chinese New Year 2024, the BDI is not showing any significant downward trend.

The macroeconomic outlook on the global market still faces many uncertainties despite post-COVID recovery in the dry bulk shipping market. Tightening monetary policies in the U.S. and European countries, intended to counter inflation, might have cooled trade to a certain degree. Meanwhile, China's economic activities fell short of market expectations. Unfavorable factors such as news of defaulting real estate developers and a stagnant stock market also had a negative impact on dry bulk shipping. All of these adverse conditions might have contributed to the shipping market downturn in the second half of 2022.

The ongoing Russia-Ukraine war and the Israeli-Palestinian conflict, while causing geopolitical havoc, do not necessarily have a negative impact on dry bulk ships by forcing rerouting. In addition, slowed traffic at the Panama Canal due to drought and reroutes at the Suez Canal forced by military attacks may provide some support for the shipping market as a result of longer shipping routes.

The EU ETS on maritime shipping has come into effect in 2024. Although the economic impact was not significant at the beginning, the carbon tax is having an effect on shipping companies in their increased awareness of environmentally friendly operations and investment strategies. As various international, regional, and national carbon reduction initiatives come into effect, their political and social impacts are as important as their direct economic costs. In particular, international trade companies' and shipping companies' attention to ESG is urging many shipping companies to take action to reduce carbon emissions or make an investment.

Looking forward to the business environment in 2024, the market appeared to be relatively positive from the end of 2023 to early 2024. The global supply chain, while facing challenges caused by geopolitics, is undergoing restructuring in certain areas. These are positive forces acting on dry bulk shipping. However, in a fast moving time when political and economic factors are intertwined, monetary policy changes around the world and volatility in the Chinese economy are still uncertainties to be watched closely.

2023 Business Results

In 2023, we had added 7 newbuild ships and sold 14 ships. The number of ships in our fleet underwent a net decrease of 7, and the total number of ships in our fleet was 133 at the end of the year. The 7 newbuild ships included 2 kamsarmax and 5 handysize. The ships sold included 1 capesize, 5 handysize, 6 small handysize, and 1 LPG carrier.

In 2023, the total revenue was US$545.5 million, down by 34.73% compared to 2022, amid unfavorable market conditions and revenue from ship sales. The operating profit was US$111.6 million, and the operating profit margin fell to 20.45% and was lower than in the first and third quarters. However, the monthly operating profit margin bounced back 38.43% in December as the economy recovered.

A total of US$55.1 million were recognized in non-operating loss and profit for the sale of 14 ships in 2023. USD interest rates kept rising since 2022. The interest expense reached US$68.8 million. Meanwhile, the recognized exchange rate gain reached US$3.9 million as a result of a falling Japanese yen. The total net profit before tax was US$105 million, and the EPS was NT$4.42.

2024 Business Plan

We expect to receive another 4 newbuild ships in 2024. They include 1 kamsarmax, 2 supramax, and 1 handysize, all of which are made by Japanese builders including NSY and Tsuneishi. All of them are eco-ships that comply with the Tier III NOx emission standards. All of these newbuild ships are expected to be delivered in the first half of the year and able to contribute to revenue.

A relatively large percentage of our current charters are index-linked hire. The plan is that our ships' better energy saving performance can lead to higher charter premium than the market average and we will not have to negotiate for fixed hire at a discount in uncertain political or economic times.

Given the overall inflation trends, dry bulk shipping prices have not fallen despite slowdown in shipping rates. Our ships still reply on traditional diesel fuels, which has a more steady supply, at the present. Ships on traditional fuels also provide a stronger operating advantage so far. There is not yet any plan to order hybrid or new fuel ships at present. Nevertheless, we strive to become more energy efficient with traditional fuels in order to achieve operational stability and energy saving and carbon reduction at the same time.