NOVEMBER 19, 2010 CIRCULAR NO. 31/10 TO MEMBERS OF THE ASSOCIATION Dear Member: RECENT CLUB PERFORMANCE. DEVELOPMENT OF CLOSED AND OPEN POLICY YEARS. LEVYING OF THE FORECAST SUPPLEMENTARY CALL FOR 2010. PREMIUM REQUIREMENTS FOR THE 2011 POLICY YEAR. At its meeting yesterday in New York, your Board reviewed the Club’s present and prospective circumstances by reference to several important criteria, including the near and longer-term implications of the current economic climate. It also reviewed the development of closed and open policy years and, having considered the Club’s position in light of these related perspectives, made decisions in regard to the levying of the forecast supplementary call for 2010, and in regard to premium requirements for the 2011 policy year. The remainder of this Circular describes the issues which were discussed by your Board and the decisions it reached as a consequence of those discussions. Recent Club Performance Background Although less acute than they were twenty-four months ago, difficulties continue to afflict the global economy. Concerns in regard to sovereign debt, monetary and fiscal policy, asset values and trade imbalances, have conspired to produce a financial climate of “unusual uncertainty”, as recently observed by the chairman of the US Federal Reserve However, while it remains mostly anemic in the developed world, the global economy continues to expand, driven by the relentless outperformance of players such as China, India, Brazil and other developing nations. Despite misgivings about vessel supply and demand as the delivery of newbuildings gains pace over the year ahead, the steady expansion of trade, stimulated by the emerging market growth mentioned above, has kept shipping activity at a respectable level over the recent past, notwithstanding significantly lower earnings by comparison with the “super boom” years of 2003 to 2007, and persistent softness in certain trades. The recent experience of the American Club The underwriting, claims and investment experience of the American Club over the last nine months broadly reflects the trends outlined above. 1 of 6 Against a background of sustained tonnage growth during 2009 – which also saw a much greater than usual turnover of entries as older vessels were sold or scrapped and newer ships added to replace them – 2010 has experienced the further expansion of entered tonnage, although at a measured pace. As at the end of October, Class I (P&I) tonnage had grown by about 6% since the start of the policy year. Tonnage entered for coverage under Class II (FD&D) and Class III (Charterers’ insurance) had remained broadly stable over the period. On the claims front, the 2010 policy year has to date been characterized by lower levels of claims incurred for the Club’s own account than those typically experienced in earlier years at the same stage of development. While encouraging, it would be unwise to assume that this represents a trend, particularly in respect of a year which is very far from maturity. Nevertheless, there are grounds for cautious optimism as to the ultimate result for the year, particularly if International Group Pool claims continue their current trajectory. So far as the Club’s investment performance is concerned, the 2010 financial year has produced earnings of just over 6% over the ten months to the end of October by comparison with a benchmark return of 5.85%. In consequence of these favorable developments, the Club has enjoyed