EX-99.1 2 c86349_ex99-1.htm

EXHIBIT 99.1

MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FOR THE SIX-MONTH PERIOD ENDED JUNE 30, 2016

As used herein, “we”, “us”, “our”, “the Company” and “Safe Bulkers” all refer to Safe Bulkers, Inc. and its subsidiaries. This management’s discussion and analysis of financial condition and results of operations should be read together with the discussion included in the Company’s Annual Report on Form 20-F for the fiscal year ended December 31, 2015. This discussion includes forward-looking statements which, although based on assumptions that we consider reasonable, are subject to risks and uncertainties which could cause actual events or conditions to differ materially from those currently anticipated and expressed or implied by such forward-looking statements.

A. Overview

We are an international provider of marine drybulk transportation services, transporting bulk cargoes, particularly coal, grain and iron ore, along worldwide shipping routes for some of the world’s largest consumers of marine drybulk transportation services. As of October 5, 2016, we had a fleet of 37 drybulk vessels, with an aggregate carrying capacity of 3,339,800 deadweight tons, or dwt, and an average age of 6.44 years. We have contracted to acquire two additional drybulk newbuild vessels to be delivered each in 2017 and 2018.

We employ our vessels on both period-time charters and spot charters, according to our assessment of market conditions.

We were incorporated on December 11, 2007 under the laws of the Marshall Islands to act as a holding company of drybulk vessel owning companies. We are controlled by the Hajioannou family, which has a long history of operating and investing in the international shipping industry. Our vessels are managed by our affiliated management companies, Safety Management Overseas S.A. and Safe Bulkers Management Limited.

B. Recent Developments in Our Fleet and Employment Profile

During the period from January 1, 2016, until October 5, 2016 the following developments occurred with respect to our fleet and employment profile:

In January 2016, our subsidiary Shikokuepta Shipping Inc. took delivery of the newbuild vessel Troodos Sun (ex-Hull No.1686), a 85,000 dwt, Japanese Post-Panamax class vessel, for a purchase price of $35.0 million.

In February 2016, our subsidiary Shikokuennia Shipping Corporation signed a novation agreement for newbuild Hull No. 1718, a 85,000 dwt, Japanese Post-Panamax class vessel, scheduled for delivery in 2019 and novated the newbuild to a company controlled by our Chief Executive Officer and Chairman of our Board of Directors, Polys Hajioannou. The transaction was evaluated and approved by a Special Committee of our Board of Directors, wholly comprised of independent members of the Board and advised by independent counsel. The Special Committee obtained two appraisals from independent third party brokers for the newbuild vessel and negotiated the terms of the transaction. The remaining commitment under the newbuild contract for Hull 1718 as of December 31, 2015 and as of the day of signing the novation agreement was $28.4 million, compared to $26.5 million, which represents the higher of the two appraisals obtained by the Special Committee for such newbuild. The commission of 1% of the contract price payable to the related party management company with respect to this newbuild was waived in our favor.

In March 2016, our subsidiary Staloudi Shipping Corporation disposed of the vessel Stalo, a 87,000 dwt, Japanese Post-Panamax class vessel, at a sale price of $9.0 million, and our subsidiary Gloverthree Shipping Corporation disposed of the vessel Kypros Unity, a 78,000 dwt, Japanese Panamax class vessel, at a sale price of $20.0 million, and in each case delivered the vessels to entities owned by our Chief Executive Officer and Chairman of our Board of Directors, Polys Hajioannou. Both transactions were evaluated and approved by a Special Committee of our Board of Directors, wholly comprised of independent members of the Board and advised by independent counsel. The Special Committee obtained two appraisals from independent third party brokers for each newbuild vessel, and negotiated the terms of each transaction. The sale price for both vessels represented the higher of the two appraisals obtained by the Special Committee. The commission of 1% of the sale price payable to the

related party management company with respect to these two disposals was waived in our favor. We recorded an aggregate loss of $2.75 million in connection with the sale of these two vessels in the first quarter of 2016.

In March 2016, our subsidiary Shikokuexi Shipping Corporation took delivery of the newbuild vessel Troodos Air (ex-Hull No.1685), a 85,000 dwt, Japanese Post-Panamax class vessel, for a purchase price of $32.0 million.

In July 2016, our subsidiary Gloversix Shipping Corporation took delivery of the newbuild vessel Kypros Spirit (ex-Hull No.828), a 78,000 dwt, Japanese Panamax class vessel, for a purchase price of $30.2 million.

In August 2016, our subsidiary Kyotofriendo Two Shipping Corporation signed a novation agreement for newbuild Hull No. 1552, a 81,600 dwt, Japanese Kamsarmax class vessel, scheduled for delivery in 2018 and novated the newbuild to our subsidiary Pinewood Shipping Corporation (“Pinewood”). Pinewood has agreed to issue, upon delivery of the vessel, cumulative redeemable perpetual preferred shares to an unaffiliated investor (the “Investor”) to finance $16.9 million of the cost of such vessel. The preferred shares will pay a dividend of 2.95% p.a., will not entitle the Investor to any voting rights (other than in limited circumstances in the case of certain events of default under the terms of the preferred shares) and may be redeemed at the option of Pinewood at any time or at the option of the Investor upon the third anniversary of the issuance date. Furthermore, the Investor will be entitled to nominate one director to the Issuer’s board that represents a minority of the Issuer’s board of directors.

In October 2016, our subsidiary Gloverseven Shipping Corporation signed a novation agreement for newbuild Hull No. S835, a 77,000 dwt, Japanese Panamax class vessel and our subsidiary Kyotofriendo One Shipping Corporation signed a memorandum of agreement for the sale upon delivery of newbuild Hull No. 1551, a 81,600 dwt, Japanese Kamsarmax class vessel, in each case, to entities owned by our Chief Executive Officer and Chairman of our Board of Directors, Polys Hajioannou. Each vessel is scheduled to be delivered in the first quarter of 2017. The two transactions were evaluated and approved in September 2016 by a Special Committee of the Company’s Board of Directors, wholly comprised of independent members of the Board and advised by independent counsel. The Special Committee obtained two appraisals from independent third party brokers for each newbuild vessel, and negotiated the terms of each transaction. The higher of the two appraisals obtained from the independent third party brokers was $21.5 million for Hull No. S835 and $24.5 million for Hull No. 1551; or $46.0 million in the aggregate. Our remaining capital expenditure requirements in respect of Hull No. S835 and Hull No. 1551 were $48.2 million in the aggregate. The difference of $2.2 million between the aggregate vessel valuations and the remaining aggregate capital expenditure requirements with respect to these newbuilds, as well as the commission of 1% of the contract price payable to the related party management company with respect to each of the newbuilds, have been waived in our favor. Hence an aggregate impairment loss of $17.2 million, representing installments already paid in respect of Hull No. S835 and Hull No. 1551 and capitalized cost, was recorded in the third quarter of 2016.

As of October 5, 2016, the Company’s operational fleet was comprised of 37 drybulk vessels with an average age of 6.44 years and an aggregate carrying capacity of 3,339,800 million dwt. The fleet consists of 14 Panamax class vessels, eight Kamsarmax class vessels, twelve post- Panamax class vessels and three Capesize class vessels, all built 2003 onwards.

As of October 5, 2016, the Company had contracted to acquire two additional drybulk newbuild vessels, both Kamsarmax class vessels, scheduled for delivery in 2017 and 2018, excluding Hull No. 1551 which has been contracted to be sold upon delivery.

Set out below is a table showing the Company’s existing and newbuild vessels and their contracted employment as of October 5, 2016:

Vessel Name	DWT	Year Built¹	Country of construction	Charter Rate ² USD/day	Charter Duration³
Panamax
Maria	76,000	2003	Japan	6,500	Jul 2016 – May 2017
Koulitsa	76,900	2003	Japan	5,825	Jun 2016 – Dec 2016
Paraskevi	74,300	2003	Japan	5,600	Jul 2016- Jan 2017
Vassos	76,000	2004	Japan	6,750	Jul 2016 – Oct 2016
Katerina	76,000	2004	Japan	BPI⁴+ 6%	Apr 2015 – Feb 2017
Maritsa	76,000	2005	Japan	6,750	Jul 2016 – Mar 2017
Efrossini	75,000	2012	Japan	6,000	Oct 2016 – Oct 2016
Zoe	75,000	2013	Japan	6,200	Aug 2016 – May 2017
Kypros Land	77,100	2014	Japan	5,750	Mar 2016- Nov2016
Kypros Sea	77,100	2014	Japan	7,850	Oct 2016 – Nov 2016
Kypros Bravery	78,000	2015	Japan	7,500	Jul 2016 – Jun 2017
Kypros Sky	77,100	2015	Japan	12,000	Oct2016 – Dec 2016
Kypros Loyalty	78,000	2015	Japan	6,250	Jun 2016 – Apr 2017
Kypros Spirit	78,000	2016	Japan	8,125	Sep 2016 – Oct 2016
Kamsarmax
Pedhoulas Merchant	82,300	2006	Japan	6,000	Jun 2016- Jul 2017
Pedhoulas Trader	82,300	2006	Japan	6,200	Jul 2016 - Jul 2017
Pedhoulas Leader	82,300	2007	Japan	6,250	Dec 2015- Feb 2017
Pedhoulas Commander	83,700	2008	Japan	6,250	Jan 2016 - Jan 2017
Pedhoulas Builder ⁶	81,600	2012	China	5,000	Mar 2016 - Oct 2016
Pedhoulas Fighter ⁶	81,600	2012	China	6,100	Mar 2016 - Feb 2017
Pedhoulas Farmer ⁶	81,600	2012	China	6,200	Sep 2016 - Mar 2017
Pedhoulas Cherry ⁶	82,000	2015	China	5,500 6,600	Feb 2016 - Nov 2016 Feb 2017 - Apr 2018
Post-Panamax
Marina	87,000	2006	Japan	6,200	Dec 2015 - Dec 2016
Xenia	87,000	2006	Japan	6,350	Jun 2016 - Dec 2016
Sophia	87,000	2007	Japan	7,250	Apr 2016 - Oct 2018
Eleni	87,000	2008	Japan	6,500	Sep 2016 - Oct 2016
Martine	87,000	2009	Japan	BPI⁴ + 10%	Apr 2015 - Mar 2017
Andreas K	92,000	2009	South Korea	5,650	Sep 2016 - Nov 2016
Panayiota K	92,000	2010	South Korea	5,471	Jun 2016 - Oct 2016
Venus Heritage	95,800	2010	Japan	10,200	Sep 2016 - Nov 2016
Venus History	95,800	2011	Japan	9,350	Oct 2016 - Nov 2016
Venus Horizon	95,800	2012	Japan	5,500	Jan 2016 - Feb 2017
Troodos Sun	85,000	2016	Japan	7,800	Aug 2016 - Oct 2016
Troodos Air	85,000	2016	Japan	8,050	Sep 2016 - Oct 2016
Capesize
Kanaris	178,100	2010	China	25,928	Sep 2011 - Jun 2031
Pelopidas	176,000	2011	China	38,000	Feb 2012 - Dec 2021
Lake Despina	181,400	2014	Japan	24,376 ⁵	Jan 2014 - Jan 2024
Total dwt of existing fleet	3,339,800

Hull Number	DWT	Expected delivery¹	Country of construction	Charter Rate ² USD/day	Charter Duration³
Kamsarmax
Hull 1146	82,000	H1 2017	China
Hull 1552	81,600	H1 2018	Japan
Total dwt of orderbook	163,600

	1)	For existing vessels, the year represents the year built. For newbuilds, the dates shown reflect the expected delivery date.
	2)	Charter rate is the recognized gross daily charter rate. For charter parties with variable rates among periods or consecutive charter parties with the same charterer, the recognized gross daily charter rate represents the weighted average gross daily charter rate over the duration of the applicable charter period or series of charter periods, as applicable. In case a charter agreement provides for additional payments, namely ballast bonus to compensate for vessel repositioning, the gross daily charter rate presented has been adjusted to reflect estimated vessel repositioning expenses.
	3)	The date listed represent either the actual start date or, in the case of a contracted charter that had not commenced as of October 5, 2016, the scheduled start date. The actual start date and redelivery date may differ from the scheduled start and redelivery dates depending on the terms of the charter and market conditions.
	4)	A period time charter at a gross daily charter rate linked to the Baltic Panamax Index (“BPI”) plus a premium.
	5)	A period time charter of ten years at a gross daily charter rate of $23,100 for the first two and a half years and of $24,810 for the remaining period. The charter agreement grants the charterer an option to purchase the vessel at any time beginning at the end of the seventh year of the charter, at a price of $39 million less 1.00% commission, decreasing thereafter on a pro-rated basis by $1.5 million per year. The Company holds a right of first refusal to buy back the vessel in the event that the charterer exercises its option to purchase the vessel and subsequently offers to sell such vessel to a third party. The charter agreement also grants the charterer the option to extend the period time charter for an additional twelve months at a time, at a gross daily charter rate of $26,330, less 1.25% total commissions, which option may be exercised by the charterer a maximum of two times.
	6)	Vessel sold and leased back on a net daily bareboat charter rate of $6,500, for a period of 10 years, with a purchase obligation at the end of the 10^thyear and purchase options in favor of the Company after the second year of the bareboat charter, at annual intervals and predetermined purchase prices.

Significant events subsequent to June 30, 2016 are described in Note 15 to our unaudited interim condensed consolidated financial statements included elsewhere herein.

C. Selected Unaudited Financial and Operations Information

The following tables present selected unaudited consolidated financial and operations data of Safe Bulkers, Inc. for the six-month periods ended June 30, 2015 and 2016. The unaudited financial statement data were derived from our interim unaudited consolidated condensed financial statements and notes thereto included elsewhere herein. All amounts are in thousands of U.S. Dollars, except for per share data, fleet data and average daily results.

	Six Month Period Ended June 30,
	2015			2016

STATEMENT OF OPERATIONS
Revenues	$	66,309		$	52,817
Commissions		(2,413	)		(1,877	)
Net revenues		63,896			50,940
Voyage expenses		(9,894	)		(4,971	)
Vessel operating expenses		(26,925	)		(24,583	)
Depreciation		(22,701	)		(24,126	)
General and administrative expenses		(6,605	)		(7,628	)
Loss on sale of assets		-			(2,750	)
Loss from inventory valuation		(956	)		-
Operating loss		(3,185	)		(13,118	)
Interest expense		(4,575	)		(9,685	)
Other finance costs		(763	)		(1,247	)
Interest income		37			288
Loss on derivatives		(1,358	)		(1,228	)
Foreign currency gain		241			190
Amortization and write-off of deferred finance charges		(893	)		(2,011	)
Net loss	$	(10,496	)	$	(26,811	)
Less Preferred dividend		7,100			7,027
Net loss available to common shareholders	$	(17,596	)	$	(33,838	)
Loss per share basic and diluted	$	(0.21	)	$	(0.40	)
Weighted average number of shares		83,466,487			83,557,124

	Six Month Period Ended June 30,
	2015			2016

CASH FLOW DATA
Net cash provided by/(used in) by operating activities	$	8,138		$	(1,039	)
Net cash (used in)/provided by investing activities		(70,815	)		19,252
Net cash provided by/(used in) financing activities		73,491			(65,984	)
Net increase/(decrease) in cash and cash equivalents		10,814			(47,771	)

	As of December 31,		As of June 30,
	2015		2016
BALANCE SHEET DATA
Other current assets	$	211,167	$	134,373
Assets held for sale		31,995		-
Total fixed assets		1,056,517		1,071,284
Other non-current assets		9,952		11,849
Total assets		1,309,631		1,217,506
Other current liabilities		89,002		40,911
Liability directly associated with assets held for sale		16,724		-
Long-term debt, net		569,399		576,314
Other non-current liabilities		360		959
Total shareholders’ equity		634,146		599,322
Total liabilities and shareholders’ equity	$	1,309,631	$	1,217,506

	Six-Month Period Ended June 30,
	2015			2016

FLEET DATA
Number of vessels at period’s end		35			36
Weighted average age of fleet (in years)		5.83			6.35
Ownership days (1)		6,052			6,585
Available days (2)		5,992			6,555
Operating days (3)		5,958			6,374
Fleet utilization (4)		98.4	%		96.8	%
Average number of vessels in the period (5)		33.44			36.18

AVERAGE DAILY RESULTS
Time charter equivalent rate (6)	$	9,012		$	7,013
Daily vessel operating expenses (7)	$	4,449		$	3,733
Daily general and administrative expenses (8)	$	1,091		$	1,158

(1)	Ownership days represent the aggregate number of days in a period during which each vessel in our fleet has been owned by us.
(2)	Available days represent the total number of days in a period during which each vessel in our fleet was in our possession net of off-hire days associated with scheduled maintenance, which includes major repairs, drydockings, vessel upgrades or special or intermediate surveys.
(3)	Operating days represent the number of our available days in a period less the aggregate number of days that our vessels are off-hire due to any reason, excluding scheduled maintenance.
(4)	Fleet utilization is calculated by dividing the number of our operating days during a period by the number of our ownership days during that period.
(5)	Average number of vessels in the period is calculated by dividing ownership days in the period by the number of days in that period.
(6)	Time charter equivalent rates, or TCE rates, represent our charter revenues less commissions and voyage expenses during a period divided by the number of our available days during the period.
(7)	Daily vessel operating expenses include the costs for crewing, insurance, lubricants, spare parts, provisions, stores, repairs, maintenance, statutory and classification expense, drydocking,

	intermediate and special surveys and other miscellaneous items. Daily vessel operating expenses are calculated by dividing vessel operating expenses by ownership days for the relevant period.
(8)	Daily general and administrative expenses include daily fixed and variable management fees payable to our Manager and daily costs in relation to our operation as a public company. Daily general and administrative expenses are calculated by dividing general and administrative expenses by ownership days for the relevant period.

Time Charter Equivalent Rate	Six-month Period Ended
Reconciliation	June 30,
	2015			2016

Time Charter Revenues	$	66,309		$	52,817
Less Commissions		(2,413	)		(1,877	)
Less Voyage Expenses		(9,894	)		(4,971	)
Time Charter Equivalent Revenue	$	54,002		$	45,969
Available Days		5,992			6,555
Time Charter Equivalent Rate		9,012			7,013

F. Results of Operations

Six months ended June 30, 2015 compared to six months ended June 30, 2016.

Net loss available to common shareholders was $33.8 million, or loss per share of $0.40, in the first six months of 2016, an increase of 92% from net loss of $17.6 million, or loss per share of $0.21, in the first six months of 2015. The increase in net loss of $16.2 million is attributed mainly to: (a) net revenue of $50.9 million compared to $63.9 million, (b) loss on sale of assets of $2.8 million, compared to zero, (c) depreciation of $24.1 million, compared to $22.7 million, and (d) interest expense of $9.7 million, compared to $4.6 million partially offset by (i) voyage expenses of $5.0 million, compared to $9.9 million, and (ii) operating expenses of $24.6 million, compared to $26.9 million, for the first six months of 2016 and 2015, respectively.

Net revenue from vessels

Net revenue for the first six months of 2016 decreased by 20% to $50.9 million from $63.9 million during the same period in 2015. We operated 36.2 vessels on average during the first six months of 2016, earning a TCE rate of $7,013, compared to 33.4 vessels and a TCE rate of $9,012 during the first six months of 2015. The decrease in the TCE rate resulted mainly from weak charter market conditions.

Loss on sale of assets

During the first six months of 2016, we recorded $2.8 million of loss on sale of asset relating to the disposal of our vessels Stalo and Kypros Unity, versus zero for the same period in 2015. Both vessels were delivered to their new owners in March 2016.

Voyage expenses

During the first six months of 2016, we recorded $5.0 million of voyage expenses, compared to $9.9 million for the same period in 2015 mainly due to lower vessel repositioning expenses affected by lower fuel prices.

Vessel operating expenses

Vessel operating expenses decreased by 9% to $24.6 million for the first six months of 2016, compared to $26.9 million for the same period in 2015. The decrease in operating expenses is due to a decrease in spares, store and various other operating expenses. Vessel operating expenses for the first six months of 2016 included the cost of two dry-dockings, compared to three during the first six months of 2015. On a daily basis, vessel operating expenses decreased by 16% to $3,733 per day for the first six months of 2016, compared to $4,449 per day for the first six months of 2015 as a result of reduced vessel operating expenses.

Depreciation

During the first six months of 2016, $24.1 million was recorded as depreciation expense compared to $22.7 million during the same period in 2015. The increase in depreciation is attributable to the increase of the weighted average number of vessels we operated during the first six months of 2016.

Interest expense

Interest expense increased to $9.7 million in the first six months of 2016 compared to $4.6 million for the same period in 2015, mainly as a result of the four-vessel sale and leaseback transactions concluded in September 2015, which led to the increase in the average outstanding amount of loans and credit facilities and to the increased weighted average interest rate of such loans and credit facilities.

Cash Flows

Cash and cash equivalents at June 30, 2016 amounted to $83.0 million, compared to $118.1 million at June 30, 2015.

Net cash Provided by/(Used in) Operating Activities

Net cash used in operating activities for the six months ended June 30, 2016 amounted to $1.0 million, consisting of net income after non-cash items of $2.8 million and of decreased working capital of $3.8 million. Net cash provided by operating activities for the six months ended June 30, 2015 amounted to $8.1 million, consisting of net income after non-cash items of $14.2 million and of decreased working capital of $6.1 million.

Net cash (Used In)/Provided by Investing Activities

Net cash provided by investing activities for the six months ended June 30, 2016 was $19.3 million, compared to net cash used in investing activities for the six months ended June 30, 2015 of $70.8 million. The increase of net cash provided by investing activities is mainly attributable: (a) to $29.0 million proceeds from vessel disposals for the six months ended June 30, 2016, compared to zero during the same period of 2015, (b) $38.9 million cash paid for vessel acquisitions for the six months ended June 30, 2016, compare to $78.3 million, (c) $57.9 million of restricted cash released during the first six months ended June 30, 2016, compare to $7.5 million during the same period of 2015 partially offset by (d) $27.5 million increase in bank time deposits during the first six months ended June 30, 2016, compared to zero for the same period of 2015.

Net cash Provided by/(Used in) Financing Activities

Net cash used in financing activities for the six months ended June 30, 2016 was $66.0 million, compared to net cash provided by financing activities for the six months ended June 30, 2015 of $73.5 million. The increase in net cash used in financing activities is mainly attributable to net payments of long term debt of $57.9 million for the six months ended June 30, 2016, compared to net proceeds of long term debt of $83.8 million for the six months ended June 30, 2015; partially offset by lower dividend payments of $7.0 million during the six months ended June 30, 2016, compared to $9.6 million dividend payments during the six months ended June 30, 2015.

G. Loan Facilities

For information relating to our credit facilities, please see Note 7 to our unaudited interim condensed consolidated financial statements included elsewhere herein.

H. Liquidity and Capital Resources

As of June 30, 2016, we had liquidity of $127.7 million consisting of $110.5 million in cash and bank time deposits and $17.2 million in restricted cash.

As of June 30, 2016, we had aggregate debt outstanding of $613.8 million, of which $32.5 million was the current portion of long term debt, payable within the next 12 months.

As of June 30, 2016, the existing fleet consisted of 36 vessels and we had contracted to acquire five newbuilds, one of which was scheduled to be delivered in 2016, three in 2017 and one in 2018. As of

June 30, 2016, our commitments for vessel acquisitions were $118.3 million, consisting of $25.6 million payable in 2016, $70.3 million payable in 2017 and $22.4 million payable in 2018.

As of June 30, 2016, we had an aggregate additional borrowing capacity of $56.8 million available under committed loan facilities and financing transactions for three newbuild vessels.

As of October 5, 2016, we had liquidity of $87.9 million consisting of $68.1 million in cash and bank time deposits and $19.8 million in restricted cash.

As of October 5, 2016, the existing fleet consisted of 37 vessels and we had contracted to acquire two newbuild vessels, one of which was scheduled to be delivered in 2017, and one in 2018, excluding Hull No. 1551 which has been contracted to be sold upon delivery. As of October 5, 2016, our commitments for vessel acquisitions were $50.5 million, consisting of $28.1 million payable in 2017, and $22.4 million payable in 2018.

As of October 5, 2016, we had additional borrowing capacity of $24.75 million available under a sale and lease back financing agreement for the newbuild vessel to be delivered in 2017, and had agreed the issuance of $16.9 million in preferred equity by an unaffiliated investor to finance the newbuild vessel to be delivered in 2018.

Our primary liquidity needs are to fund capital expenditures in relation to newbuild contracts, financing expenses, debt repayment, vessel operating expenses, general and administrative expenses and dividend payments to our stockholders. We anticipate that our primary sources of funds will be existing liquidity of $87.9 million, consisting of cash and cash equivalents as of October 5, 2016 of $68.1 million and restricted cash of $19.8 million, additional indebtedness available under sale and lease back agreement of $24.75 million for the vessel scheduled to be delivered in 2017, preferred equity issuance of $16.9 million for the vessel scheduled to be delivered in 2018 and possibly, equity financing.

We currently estimate that as of October 5, 2016, the contracted cash flow from operations, existing cash and cash equivalents and additional indebtedness secured by committed sale and lease back financing transaction for one newbuild vessel and committed preferred equity for the other newbuild vessel will be sufficient to fund the operations of our fleet, including our working capital requirements, and the capital expenditure requirements through the end of 2017. However, during 2017 or 2018, we may seek additional indebtedness to partially fund our capital expenditure requirements in order to maintain a strong cash position. To the extent that market conditions deteriorate, charterers may default or seek to renegotiate charter contracts, and vessel valuations may decrease, resulting in a breach of our debt covenants. In such case our contracted revenues may decrease and we may be required to make additional prepayments under existing loan facilities, resulting in additional financing needs. If we acquire additional vessels, our capital expenditure requirements will increase and we will need to rely on existing cash and time deposits, operating cash surplus and existing undrawn loan commitments. If we are unable to obtain additional indebtedness, or to find alternative financing, we will not be capable of funding our commitments for capital expenditures relating to our contracted newbuild vessels. A failure to fulfill our commitment would generally result in a forfeiture of the advances we paid to the shipyard with respect to the contracted newbuild vessels. In addition, we may also be liable for other damages for breach of contract. Examples of such liabilities could include payments to the shipyard or the third party seller for the difference between the forfeited advance and the amount that remains to be paid by us if the shipyard or the third party seller cannot locate a third-party buyer that is willing to pay an amount equal to the difference or compensatory payments by us to charter parties with whom we have entered into charters with respect to the contracted newbuilds. Such events could adversely impact the dividends we intend to pay, and could have a material adverse effect on our business, financial condition and results of operation.

We have paid dividends to our common stockholders each quarter since our initial public offering in June 2008, until the second quarter of 2015. We have also paid consecutive quarterly dividends to our preferred stockholders since the issuance of our first preferred shares in June 2013. During 2016, the Company has declared and paid three quarterly consecutive dividends of $0.50 per share for each, of the Series B Preferred Shares, totaling $2.3 million, of the Series C Preferred Shares, totaling $3.5 million, and of the Series D Preferred Shares, totaling $4.8 million. We also declared a dividend of $0.50 per all classes of preferred shares, payable to all shareholders of record as of October 24, 2016, which will be paid on October 31, 2016.

Our future liquidity needs will impact our dividend policy. We currently intend to use a portion of our free cash to pay dividends to our stockholders. The declaration and payment of dividends, if any, will

always be subject to the discretion of our board of directors. The timing and amount of any dividends declared will depend on, among other things: (i) our earnings, financial condition and cash requirements and available sources of liquidity; (ii) decisions in relation to our growth strategies; (iii) provisions of Marshall Islands and Liberian law governing the payment of dividends; (iv) restrictive covenants in our existing and future debt instruments; and (v) global financial conditions. Dividends on our common stock might continue not to be paid in the future. In addition, cash dividends on our common stock are subject to the priority of dividends on our Preferred Shares.

I. Significant Accounting Policies and Critical Accounting Policies

For a description of all of our significant accounting policies, see Note 2 to our audited financial statements included in our Annual Report on Form 20-F for the year ended December 31, 2015 and Note 2 to our unaudited interim condensed consolidated financial statements included elsewhere herein. For a discussion of our critical accounting policies please see Item 5 included in our Annual Report on Form 20-F for the year ended December 31, 2015.

J. Recent Accounting Pronouncements:

For a description of recent accounting pronouncements, see Note 2 to our unaudited interim condensed consolidated financial statements included elsewhere herein.

INDEX TO UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

		Page

Unaudited Interim Condensed Consolidated Balance Sheets as of December 31, 2015 and June 30, 2016		F-2

Unaudited Interim Condensed Consolidated Statements of Operations for the Six-Month Periods ended June 30, 2015 and June 30, 2016		F-3

Unaudited Interim Condensed Consolidated Statement of Shareholders’ Equity for the Six-Month Periods ended June 30, 2015 and June 30, 2016		F-4

Unaudited Interim Condensed Consolidated Statements of Cash Flows for the Six-Month Periods ended June 30, 2015 and June 30, 2016		F-5

Notes to the Unaudited Interim Condensed Consolidated Financial Statements		F-6

The accompanying notes are an integral part of the interim condensed consolidated financial statements.

F-1

SAFE BULKERS, INC.
UNAUDITED INTERIM CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands of U.S. Dollars)

		December 31,		June 30,
	Notes	2015		2016
ASSETS
CURRENT ASSETS:
Cash and cash equivalents			130,743		82,972
Time deposits- Short term			1,500		27,500
Accounts receivable			6,540		7,510
Asset held for sale	3,6		31,995		-
Due from Manager			946		1,467
Inventories			5,167		5,263
Accrued revenue	12		87		417
Restricted cash			64,505		6,904
Prepaid expenses and other current assets			1,679		2,340
Total current assets			243,162		134,373
FIXED ASSETS:
Vessels, net	4		988,161		1,032,894
Advances for vessel acquisition and vessels under construction	5		68,356		38,390
Total fixed assets			1,056,517		1,071,284
OTHER NON CURRENT ASSETS:
Deferred finance charges, net			1,016		557
Restricted cash			7,837		10,284
Derivative assets	11		181		-
Accrued revenue			918		1,008
Total assets			1,309,631		1,217,506
LIABILITIES AND SHAREHOLDERS’ EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt, net	7		77,467		31,306
Liability directly associated with asset held for sale, net			16,724		-
Unearned revenue			1,956		1,436
Trade accounts payable			5,277		4,935
Accrued liabilities			3,984		3,066
Derivative liabilities	11		318		168
Total current liabilities			105,726		40,911
Derivative liabilities	11		360		959
Long-term debt, net	7		569,399		576,314
Unearned revenue – Long-term			-		-
Total liabilities			675,485		618,184
COMMITMENTS AND CONTINGENCIES	8
SHAREHOLDERS’ EQUITY:
Shareholders’ equity:
Common stock, $0.001 par value; 200,000,000 authorized, 83,486,194 and 83,561,811 issued and outstanding at December 31, 2015 and June 30, 2016, respectively			83		83
Preferred stock, $0.01 par value; 20,000,000 authorized, 1,569,526 and 1,524,731 Series B Preferred Shares, 2,300,000 Series C Preferred Shares, 3,200,000 Series D Preferred Shares, issued and outstanding at December 31, 2015 and June 30, 2016, respectively			71		70
Treasury stock, $0.001 par value, none and 101,271 shares repurchased at December 31, 2015 and June 30, 2016, respectively			-		(107	)
Additional paid in capital			369,731		368,863
Retained earnings			264,261		230,413
Total shareholders’ equity			634,146		599,322
Total liabilities and shareholders’ equity			1,309,631		1,217,506

The accompanying notes are an integral part of the interim condensed consolidated financial statements.

F-2

SAFE BULKERS, INC.
UNAUDITED INTERIM CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands of U.S. Dollars, except for share and per share data)

	Six-Month Period Ended June 30,
	Notes	2015			2016
REVENUES:
Revenues	9		66,309			52,817
Commissions			(2,413	)		(1,877	)
Net revenues			63,896			50,940

EXPENSES:
Voyage expenses			(9,894	)		(4,971	)
Vessel operating expenses	10		(26,925	)		(24,583	)
Depreciation	4		(22,701	)		(24,126	)
General and administrative expenses			(6,605	)		(7,628	)
Loss on sale of assets	3		—			(2,750	)
Loss from inventory valuation			(956	)		—
Operating loss			(3,185	)		(13,118	)

OTHER (EXPENSE)/INCOME:
Interest expense			(4,575	)		(9,685	)
Other finance costs			(763	)		(1,247	)
Interest income			37			288
Loss on derivatives	11		(1,358	)		(1,228	)
Foreign currency gain			241			190
Amortization and write-off of deferred finance charges			(893	)		(2,011	)
Net loss			(10,496	)		(26,811	)
Less preferred dividend			7,100			7,027
Net loss available to common shareholders			(17,596	)		(33,838	)
Loss per share in U.S. Dollars, basic and diluted	14		(0.21	)		(0.40	)
Weighted average number of shares, basic and diluted			83,466,487			83,557,124

The accompanying notes are an integral part of the interim condensed consolidated financial statements.

F-3

SAFE BULKERS, INC.

UNAUDITED INTERIM CONDENSED CONSOLIDATED STATEMENT
OF SHAREHOLDERS’ EQUITY FOR THE SIX-MONTH PERIOD
ENDED JUNE 30, 2015 AND 2016
(In thousands of U.S. Dollars, except for per share data)

	Common Stock		Treasury Stock			Preferred Stock			Additional Paid in Capital			Retained Earnings			Total

Balance as of December 31, 2014		83		—			71			370,201			329,744			700,099

Net loss		—		—			—			—			(10,496	)		(10,496	)

Share based compensation		—		—			—			60			—			60
Preferred share dividend		—		—			—			—			(7,100	)		(7,100	)
Common share dividends		—		—			—			—			(2,502	)		(2,502	)
Balance as of June 30, 2015		83		—			71			370,261			309,646			680,061

Balance as of December 31, 2015		83		—			71			369,731			264,261			634,146

Net loss		—		—			—			—			(26,811	)		(26,811	)
Repurchase of preferred stock		—		—			(1	)		(928	)		—			(929	)
Repurchase of common stock		—		(107	)		—						—			(107	)
Share based compensation		—		—			—			60			—			60
Preferred share dividend		—		—			—			—			(7,037	)		(7,037	)
Common share dividends		—		—			—			—			—			—

Balance as of June 30, 2016		83		(107	)		70			368,863			230,413			599,322

The accompanying notes are an integral part of the interim condensed consolidated financial statements.

F-4

SAFE BULKERS, INC.
UNAUDITED INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 2015 AND 2016

(In thousands of U.S. Dollars)

	June 30,
	2015			2016
Cash Flows from Operating Activities:
Net loss		(10,496	)		(26,811	)
Adjustments to reconcile net loss to net cash provided by/(used in) operating activities:
Depreciation		22,701			24,126
Loss on sale of assets		-			2,750
Loss from inventory valuation		956			-
Amortization and write-off of deferred finance charges		893			2,011
Unrealized gain on derivatives		141			630
Share based compensation		60			60
Change in:
Accounts receivable trade		(5,674	)		(970	)
Due from Manager		(1,762	)		-
Inventories		3,939			149
Accrued revenue		(799	)		(420	)
Prepaid expenses and other current assets		(339	)		(661	)
Due to Manager		-			(521	)
Trade accounts payable		1,922			(178	)
Accrued liabilities		(1,353	)		(684	)
Unearned revenue		(2,051	)		(520	)
Net Cash Provided by/(Used in) Operating Activities		8,138			(1,039	)

Cash Flows from Investing Activities:
Vessel acquisitions including advances for vessels under construction		(78,338	)		(38,902	)
Proceeds from vessel sale		-			29,000
Restricted cash released		7,967			57,863
Increase in restricted cash		(444	)		(1,209	)
Increase in bank time deposits		-			(27,500	)
Net Cash (Used in)/ Provided by Investing Activities		(70,815	)		19,252

Cash Flows from Financing Activities:
Proceeds from long-term debt		169,229			64,500
Principal payment of long-term debt		(85,448	)		(122,372	)
Dividends paid		(9,602	)		(7,037	)
Payment of deferred financing costs		(688	)		(39	)
Repurchase of common shares		-			(107	)
Repurchase of preferred stock		-			(929	)
Net Cash Provided by/(Used in) Financing Activities		73,491			(65,984	)

Net increase/(decrease) in cash and cash equivalents		10,814			(47,771	)
Cash and cash equivalents at beginning of period		107,312			130,743
Cash and cash equivalents at end of period		118,126			82,972

The accompanying notes are an integral part of the interim condensed consolidated financial statements.

F-5

SAFE BULKERS, INC.

NOTES TO UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands of United States Dollars—except for share and per share data, unless otherwise stated)

1. Basis of Presentation and General Information:

Safe Bulkers, Inc. (“Safe Bulkers” or the “Company”) was formed on December 11, 2007, under the laws of the Republic of the Marshall Islands for the purpose of acquiring an ownership interest in 19 companies. Each of the 19 companies were under the common control of Polys Hajioannou and his family and owned or were scheduled to acquire a newbuild drybulk vessel. The shares of the 19 companies were contributed to Safe Bulkers by Vorini Holdings, Inc. (“Vorini Holdings”), a Marshall Islands corporation, controlled by Polys Hajioannou and his family. Safe Bulkers became the owner of 100% of each of the 19 companies, and Vorini Holdings became the sole shareholder of Safe Bulkers.

Safe Bulkers successfully completed its initial public offering on June 3, 2008 (the “IPO”). Safe Bulkers common stock trades on the New York Stock Exchange (“NYSE”) under the symbol “SB.” Following the IPO, Vorini Holdings became the controlling shareholder of Safe Bulkers.

On December 18, 2013, Bellapais Maritime Inc. (“Bellapais”), a Marshall Islands corporation, Kyperounta Maritime Inc. (“Kyperounta”), a British Virgin Islands corporation, Lefkoniko Maritime Inc. (“Lefkoniko”), a British Virgin Islands corporation, Akamas Maritime Inc. (“Akamas”), a Cayman Islands corporation, Chalkoessa Maritime Inc. (“Chalkoessa”), a Marshall Islands corporation, all wholly owned by Polys Hajioannou, and Kition Holdings Corp. (“Kition Holdings”), a British Virgin Islands corporation wholly owned by Nicolaos Hajioannou, Polys Hajioannou’s brother, entered into a stock transfer agreement with Vorini Holdings, through which shares of Safe Bulkers owned by Vorini Holdings were sold for no consideration to the above entities.

By virtue of shares owned indirectly through Vorini Holdings, Bellapais, Kyperounta, Lefkoniko, Akamas, Chalkoessa and Kition Holdings, Polys Hajioannou and his family continue to be the controlling shareholders of Safe Bulkers, and accordingly control the outcome of matters on which shareholders are entitled to vote, including the election of the entire board of directors and other significant corporate actions.

Since the IPO, Safe Bulkers successfully completed four additional public common stock offerings and three preferred stock offerings.

As of June 30, 2016, Safe Bulkers held 45 wholly-owned companies (which are referred to herein as “Subsidiaries”) which together owned and operated a fleet of 36 drybulk vessels and were scheduled to acquire an additional five newbuild (the “Newbuilds”) vessels.

Safe Bulkers and the Subsidiaries are collectively referred to in the notes to the consolidated financial statements as the “Company.”

The Company’s principal business is the acquisition, ownership and operation of drybulk vessels. The Company’s vessels operate worldwide, carrying drybulk cargo for the world’s largest consumers of marine drybulk transportation services. Safety Management Overseas S.A., a company incorporated under the laws of the Republic of Panama (“Safety Management”) and Safe Bulkers Management Limited a company incorporated under the laws of the Republic of Cyprus (“Safe Bulkers Management” and together with Safety Management the “Managers”, and either of them “the Manager”) related parties both controlled by Polys Hajioannou, provide technical, commercial and administrative management services to the Company.

The accompanying consolidated financial statements include the operations, assets and liabilities of the Company, and of the Subsidiaries listed below.

Subsidiary	Vessel Name	Type	Built
Maxeikosiepta Shipping Corporation (“Maxeikosiepta”)⁽¹⁾	Paraskevi	Panamax	January 2003
Marindou Shipping Corporation (“Marindou”)⁽¹⁾	Maria	Panamax	April 2003
Maxeikosiexi Shipping Corporation (“Maxeikosiexi”)⁽¹⁾	Koulitsa	Panamax	April 2003
Avstes Shipping Corporation (“Avstes”)⁽¹⁾	Vassos	Panamax	February 2004
Kerasies Shipping Corporation (“Kerasies”)⁽¹⁾	Katerina	Panamax	May 2004
Marathassa Shipping Corporation (“Marathassa”)⁽¹⁾	Maritsa	Panamax	January 2005

F-6

Maxeikositessera Shipping Corporation (“Maxeikositessera”)⁽³⁾	Efrossini	Panamax	February 2012
Glovertwo Shipping Corporation (“Glovertwo”)⁽³⁾	Zoe	Panamax	July 2013
Shikokutessera Shipping Inc. (“Shikokutessera”)⁽³⁾	Kypros Land	Panamax	January 2014
Shikokupente Shipping Inc. (“Shikokupente”)⁽³⁾	Kypros Sea	Panamax	March 2014
Gloverfour Shipping Corporation (“Gloverfour”)⁽³⁾	Kypros Bravery	Panamax	January 2015
Shikokuokto Shipping Inc. (“Shikokuokto”)⁽³⁾	Kypros Sky	Panamax	March 2015
Gloverfive Shipping Corporation (“Gloverfive”)⁽³⁾	Kypros Loyalty	Panamax	June 2015
Gloversix Shipping Corporation (“Gloversix”)⁽³⁾	Kypros Spirit	Panamax	July 2016⁽²⁾
Pemer Shipping Ltd. (“Pemer”)⁽¹⁾	Pedhoulas Merchant	Kamsarmax	March 2006
Petra Shipping Ltd. (“Petra”)⁽¹⁾	Pedhoulas Trader	Kamsarmax	May 2006
Pelea Shipping Ltd. (“Pelea”)⁽¹⁾	Pedhoulas Leader	Kamsarmax	March 2007
Vassone Shipping Corporation (“Vassone”)⁽³⁾	Pedhoulas Commander	Kamsarmax	May 2008
Maxeikosi Shipping Corporation (“Maxeikosi”)⁽¹⁾	Pedhoulas Builder	Kamsarmax	May 2012
Maxeikositria Shipping Corporation (“Maxeikositria”)⁽¹⁾	Pedhoulas Fighter	Kamsarmax	August 2012
Maxeikosiena Shipping Corporation (“Maxeikosiena”)⁽¹⁾	Pedhoulas Farmer	Kamsarmax	September 2012
Youngone Shipping Inc. (“Youngone”)⁽³⁾	Pedhoulas Cherry	Kamsarmax	July 2015
Marinouki Shipping Corporation (“Marinouki”)⁽¹⁾	Marina	Post-Panamax	January 2006
Soffive Shipping Corporation (“Soffive”)⁽¹⁾	Sophia	Post-Panamax	June 2007
Vasstwo Shipping Corporation (“Vasstwo”)⁽¹⁾	Xenia	Post-Panamax	August 2006
Eniaprohi Shipping Corporation (“Eniaprohi”)⁽¹⁾	Eleni	Post-Panamax	November 2008
Eniadefhi Shipping Corporation (“Eniadefhi”)⁽¹⁾	Martine	Post-Panamax	February 2009
Maxdodeka Shipping Corporation (“Maxdodeka”)⁽¹⁾	Andreas K	Post-Panamax	September 2009
Maxdekatria Shipping Corporation (“Maxdekatria”)⁽¹⁾	Panayiota K	Post-Panamax	April 2010
Maxdeka Shipping Corporation (“Maxdeka”)⁽³⁾	Venus Heritage	Post-Panamax	December 2010
Shikoku Friendship Shipping Company (“Shikoku”)⁽³⁾	Venus History	Post-Panamax	September 2011
Maxenteka Shipping Corporation (“Maxenteka”)⁽³⁾	Venus Horizon	Post-Panamax	February 2012
Shikokuepta Shipping Inc. (“Shikokuepta”)⁽³⁾	Troodos Sun	Post-Panamax	January 2016
Shikokuexi Shipping Inc. (“Shikokuexi”)⁽³⁾	Troodos Air	Post-Panamax	March 2016
Maxpente Shipping Corporation (“Maxpente”)⁽¹⁾	Kanaris	Capesize	March 2010
Eptaprohi Shipping Corporation (“Eptaprohi”)⁽¹⁾	Pelopidas	Capesize	November 2011
Maxtessera Shipping Corporation (“Maxtessera”)⁽³⁾	Lake Despina	Capesize	January 2014
Youngtwo Shipping Inc. (“Youngtwo”)⁽³⁾	TBN - H 1146	Kamsarmax	1H 2017⁽⁴⁾
Pinewood Shipping Corporation (“Pinewood”)⁽³⁾⁽⁷⁾	TBN - H 1552	Kamsarmax	1H 2018 ⁽⁴⁾
Maxeikosipente Shipping Corporation (“Maxeikosipente”)⁽¹⁾	—	—	—
Kyotofrendo Two Shipping Corporation (“Kyotofrendo Two”)⁽³⁾⁽⁷⁾	—	—	—
Gloverthree Shipping Corporation (“Gloverthree”)⁽³⁾⁽⁵⁾	Kypros Unity	Panamax	September 2014
Staloudi Shipping Corporation (“Staloudi”)⁽¹⁾⁽⁵⁾	Stalo	Post-Panamax	January 2006
Shikokuennia Shipping Inc. (“Shikokuennia”)⁽³⁾⁽⁶⁾	TBN - H 1718	Post-Panamax	2H 2019⁽⁴⁾
Gloverseven Shipping Corporation (“Gloverseven”)⁽³⁾⁽⁸⁾	TBN - H 835	Panamax	1H 2017⁽⁴⁾
Kyotofrendo One Shipping Corporation (“Kyotofrendo One”)⁽³⁾⁽⁹⁾	TBN - H 1551	Kamsarmax	1H 2017⁽⁴⁾

(1)	Incorporated under the laws of the Republic of Liberia
(2)	Newbuild vessel acquisition. Refer to Note 15.
(3)	Incorporated under the laws of the Republic of the Marshall Islands
(4)	Estimated completion date for newbuild vessels as of June 30, 2016.
(5)	Vessel sold in March 2016. Refer to Note 3.
(6)	Newbuild contract novated in February 2016. Refer to Note 3.
(7)	Newbuild contract novated in July 2016 to Pinewood, (Refer to Note 15). Pinewood was incorporated on July 2016. Pinewood will be operated independently and remotely from the Company, including by (i) paying its own expenses out of its own funds, (ii) keeping its assets and funds separate from the assets and funds of the Company, and (iii) refraining from holding its assets and/or creditworthiness as being available to satisfy any of the obligations of the Company.
(8)	Newbuild contract novated in October 2016. Refer to Note 15.
(9)	Newbuild contracted in October 2016 to be sold upon delivery from the shipyard. Refer to Note 15.

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. In the opinion of the management of Safe Bulkers, all adjustments (consisting of normal recurring adjustments) necessary for a fair presentation of financial position, operating results and cash flows have been included in the statements. Interim results are not necessarily indicative of results that may be expected for the year ended December 31, 2016. These financial statements should be read in conjunction with the

F-7

consolidated financial statements and footnotes for the year ended December 31, 2015 included in the Company’s Annual Report on Form 20-F.

2. Significant Accounting Policies:

A summary of the Company’s significant accounting policies is identified in Note 2 of the Company’s consolidated financial statements for the year ended December 31, 2015 included in the Company’s Annual Report on Form 20-F. The same accounting policies have been followed in these unaudited interim consolidated condensed financial statements as were applied in the preparation of the Company’s consolidated financial statements for the year end December 31, 2015.

Recent Accounting Pronouncements:

Revenue from contracts with Customers: In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standard Update (“ASU”) No 2014-09 as amended by ASU 2015-14 which was issued on August 12, 2015, Revenue From Contracts With Customers, which outlines a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance, including industry-specific guidance. This standard is effective for public entities with reporting periods beginning after December 15, 2017. Early application is permitted only as of annual reporting periods (including interim reporting periods within those periods) beginning after December 15, 2016. Subsequent to the issuance of ASU 2014-09, the FASB issued the following ASU’s which amend or provide additional guidance on topics addressed in ASU 2014-09. In March 2016, the FASB issued ASU No. 2016-08, “Revenue Recognition - Principal versus Agent” (reporting revenue gross versus net). In April 2016, the FASB issued ASU No. 2016-10, “Revenue Recognition - Identifying Performance Obligations and Licenses.” Lastly, in May 2016, the FASB issued No. ASU 2016-12, “Revenue Recognition - Narrow Scope Improvements and Practical Expedients.” The standard is effective for annual periods beginning after December 15, 2017, and interim periods therein, and shall be applied either retrospectively to each period presented or as a cumulative effect adjustment as of the date of adoption, early adoption of the standard, but not before December 15, 2016 is permitted. Management is in the process of accessing the impact of the new standards on the Company’s financial position and performance.

Going concern: In August 2014, the FASB issued ASU No. 2014-15, “Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern.” This ASU establishes specific guidance to an organization’s management on their responsibility to evaluate whether there is substantial doubt about the organization's ability to continue as a going concern. The provisions of this ASU are effective for interim and annual periods ending after December 15, 2016. Management believes that the implementation of this update will not have any material impact on its financial statements.

Financial Instruments - Credit Losses: In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses. The main objective of this Update is to provide financial statement users with more decision-useful information about the expected credit losses on financial instruments and other commitments to extend credit held by a reporting entity at each reporting date. The amendments in this Update replace the incurred loss impairment methodology in current GAAP with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. The ASU requires a financial asset (or a group of financial assets) measured at amortized cost basis to be presented at the net amount expected to be collected. The allowance for credit losses is a valuation account that is deducted from the amortized cost basis of the financial asset(s) to present the net carrying value at the amount expected to be collected on the financial asset. For public business entities that are U.S. Securities and Exchange Commission (SEC) filers, the amendments in this Update are effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. Management has not yet evaluated the impact, if any, of the adoption of this new standard.

Statement of Cash Flows: In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows: Classification of Certain Cash Receipts and Cash Payments. This Update addresses eight specific cash flow issues with the objective of reducing the existing diversity in practice. The amendments are effective for public business entities for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. Early adoption is permitted for all entities. Management has not yet evaluated the impact, if any, of the adoption of this new standard.

F-8

3. Transaction with Related Parties

Sale of Vessels and Novation of Newbuild Contracts

In December 2015, Polys Hajioannou submitted a proposal to the Company’s Board of Directors, pursuant to which companies controlled by Polys Hajioannou would (a) purchase two vessels of the Company’s operating fleet, the Stalo and the Kypros Unity and (b) novate the contracts of two of the Company’s newbuilds, Hull 1718 and Hull 1552, respectively. Upon receipt of this proposal, a special committee consisting of the Company’s three independent directors (“Special Committee”) was formed and authorized by the Board of Directors of the Company in order to evaluate the proposal. The Special Committee was advised by independent counsel. During January 2016, the Special Committee obtained two appraisals from independent third parties for each of the two vessels and for each of the two newbuildings, and negotiated the terms of the sale of the vessels and the newbuild contract novations. In February, 2016 the Special Committee of the Company determined this proposal to be in the best interest of the Company and its shareholders and approved the sale of the Stalo and the Kypros Unity and the novation of the contracts of Hull 1718 and Hull 1552 to companies controlled by Polys Hajioannou. The agreed sale price for the Stalo is $9,000 in cash, which represents the higher of the two appraisals for that vessel, and the agreed sale price for the Kypros Unity is $20,000 in cash, which likewise represents the higher of the two appraisals for that vessel that the Special Committee had obtained. The remaining commitment under the newbuild contract for Hull 1718 as of December 31, 2015 and as of the day of signing the novation agreement was $28,400, compared to $26,500, which represents the higher of the two appraisals obtained by the Special Committee for such newbuild. The Sales Fee due to the Managers pursuant to the Management Agreements arising from the above transactions has been waived.

The novation of the contract of Hull 1718 was executed in February 2016. The sales of Stalo and of the Kypros Unity were consummated in March 2016. The Company recorded an aggregate loss of $2,750 from such sales. The novation of the contract of Hull 1552 was not completed. For more information refer to Note 6.

4. Vessels, Net

Vessels, net, are comprised of the following:

	Vessel Cost			Accumulated Depreciation			Net Book Value
Balance, January 1, 2015	$	1,160,911		$	(200,488	)	$	960,423
Transfer from Advances for vessel acquisitions and vessels under construction		119,520			-			119,520
Impairment loss		(23,924	)		11,025			(12,899	)
Transfer to Asset held for sale		(31,750	)					(31,750	)
Depreciation expense		-			(47,133	)		(47,133	)
Balance, December 31, 2015	$	1,224,757		$	(236,596	)	$	988,161
Transfer from Advances for vessel acquisitions and vessels under construction		68,859			-			68,859
Depreciation expense		-			(24,126	)		(24,126	)
Balance, June 30, 2016	$	1,293,616		$	(260,722	)	$	1,032,894

Transfer from Advances for vessel acquisitions and vessels under construction represents advances paid in respect of the acquisition of newbuild vessels which were under construction and delivered to the Company. For the periods presented, the Company accepted delivery of the following vessels:

	•	During the year ended December 31, 2015: Kypros Bravery, Kypros Sky, Kypros Loyalty and Pedhoulas Cherry; and
	•	During the six months ended June 30, 2016: Troodos Sun and Troodos Air

As of June 30, 2016, 36 vessels, with a carrying value of $1,032,894 have been provided as collateral to secure the Company’s bank loans as discussed in Note 7.

5. Advances for Vessel Acquisition and Vessels under Construction

Advances for vessel acquisition and vessels under construction are comprised of the following:

Balance, January 1, 2015	$	74,243
Advances paid, including capitalized expenses and interest		123,560
Impairment loss		(9,927	)
Transferred to vessel cost		(119,520	)
Balance, December 31, 2015	$	68,356
Advances paid, including capitalized expenses and interest		38,893
Transferred to vessel cost		(68,859	)
Balance, June 30, 2016	$	38,390

F-9

Advances Paid for vessel acquisitions and vessels under construction comprise payments of installments that were due to the respective shipyard or third-party sellers, capitalized interest and certain capitalized expenses. During 2015 and the six-month period ended June 30, 2016 such payments were made for the following vessels:

	·	During the year ended December 31, 2015: Kypros Bravery, Kypros Sky, Kypros Loyalty, Pedhoulas Cherry, Troodos Air (ex-Hull 1685), Kypros Spirit (ex-Hull 828), Hull 1146, Hull 1551 and Troodos Sun (ex-Hull 1686); and
	·	During the six month period ended June 30, 2016: Troodos Air, Troodos Sun, Kypros Spirit (ex Hull 828), Hull 1146, and Hull 1551.

Transfers to vessel cost relate to the delivery to the Company from the respective shipyard or third-party seller of the following vessels:

	·	During the year ended December 31, 2015: Kypros Bravery, Kypros Sky, Kypros Loyalty and Pedhoulas Cherry; and
	·	During the six months ended June 30, 2016: Troodos Sun and Troodos Air.

6. Assets held for sale

Assets held for sale of $31,995 as of December 31, 2015 represents the fair value less cost to sell of vessels Stalo and Kypros Unity and other assets on board the vessels, including their inventories. The Company assessed that as of the day of the formation of the Special Committee, all the criteria were met in order to classify the Stalo and the Kypros Unity, including their inventories on board, as assets held for sale, and the vessels were no longer depreciated. Furthermore the loan facility relating to vessel Kypros Unity is separately presented under Liability directly associated with assets held for sale in the accompanying consolidated balance sheet (Refer to Note 3).

7. Bank Debt

Bank debt is comprised of the following secured borrowings:

December 31,

June 30,

Borrower

Commencement

Maturity

2015

2016

Maxenteka

April 2012

January 2016

25,500

Maxeikositessera

September 2012

January 2016

25,109

Glovertwo

October 2013

February 2016

13,666

Gloverthree

December 2014

February 2016

16,807

Shikokutessera

December 2014

February 2016

16,807

Maxdekatria

March 2012

February 2016

14,400

Maxpente, Maxeikositessera, Maxenteka

December 2015

December 2018

7,000

6,420

Maxtessera

July 2014

June 2021

31,500

29,090

Maxeikosiexi

September 2015

September 2021

6,750

Marathassa

September 2015

September 2021

7,232

Marinouki

September 2015

September 2021

11,089

11,080

Kerasies

September 2015

September 2021

7,714

Soffive

September 2015

September 2021

12,054

12,040

Eptaprohi

September 2015

September 2021

56,412

56,400

Maxpente, Maxeikositessera, Maxenteka

December 2015

December 2021

75,337

73,436

Shikokuokto

June 2015

June 2022

15,018

Petra

June 2015

June 2022

18,370

Pemer

June 2015

June 2022

18,368

Glovertwo

February 2016

August 2022

14,000

Maxdekatria

February 2016

August 2022

10,000

Shikokutessera

February 2016

August 2022

16,000

Safe Bulkers

November 2014

September 2022

145,527

Maxdeka

August 2011

December 2022

23,861

22,157

F-10

Shikoku	October 2011	August 2023		29,867		28,000
Shikokuepta	February 2016	February 2024		-		24,500
Maxeikosiena	September 2015	September 2025		23,008		22,600
Maxeikositria	September 2015	September 2025		23,008		22,600
Youngone	September 2015	September 2025		24,281		23,919
Maxeikosi	September 2015	September 2025		23,008		22,600
Total			$	671,693	$	613,821

Current portion			$	80,134	$	32,470
Liability directly associated with assets held for sale				16,807		-
Long-term portion			$	574,752	$	581,351
Total debt				671,693		613,821

Current portion of deferred financing costs	$	2,667	$	1,164
Deferred financing costs directly associated with assets held for sale		83		-
Deferred financing costs non-current		5,353		5,037
Total deferred financing costs	$	8,103	$	6,201
Total debt		671,693		613,821
Less: Total deferred financing costs		8,103		6,201
Total debt, net of deferred financing costs	$	663,590	$	607,620
Less: Liability directly associated with assets held for sale, net of deferred financing costs		16,724		-
Less: Current portion of long-term debt, net of current portion of deferred financing costs		77,467		31,306
Long-term debt, net of deferred financing costs, non-current	$	569,399	$	576,314

Details of the loans and credit facilities are included in Note 8 of the Company’s consolidated financial statements for the year ended December 31, 2015 included in the Company’s Annual Report on Form 20-F

The estimated minimum annual principal payments required to be made after June 30, 2016, based on the loan and credit facility agreements as amended, excluding deferred financing costs are as follows:

To June 30,
2017	$	32,470
2018		13,960
2019		49,038
2020		64,192
2021		89,000
2022 and thereafter		365,161
Total	$	613,821

The above loans and credit facilities generally bear interest at LIBOR plus a margin, except each of Maxeikosi, Maxeikosiena, Maxeikositria and Youngone and for a portion of the principal amounts of each of Maxdeka and Shikoku loan facilities. We believe that the Maxeikosi, Maxeikosiena, Maxeikositria and Youngone loan facilities approximate their fair value due to the short term period from their utilization date. Maxdeka and Shikoku loan facilities each bear interest at the Commercial Interest Reference Rate (“CIRR”) published by the Organization for Economic Co-operation and Development, as applicable on the date of the signing of the relevant loan agreements. The above loans and credit facilities are generally repayable in semi-annual installments and a balloon payment at maturity except for the Maxdeka and Shikoku loan facilities, which are repayable in semi-annual installments, and for the Maxeikosi, Maxeikosiena, Maxeikositria and Youngone transactions, where the deemed principal is repaid every 45 days out of a portion of the bareboat hire payment. The fair value of bank debt outstanding on June 30, 2016, amounted to $615,243 when valuing the respective portions of the Maxdeka and Shikoku loan facilities on the basis of the relevant CIRR, as applicable on June 30, 2016, which are considered to be Level 2 items in accordance with the fair value hierarchy.

F-11

As of December 31, 2015 and June 30, 2016 the Company was in compliance with all debt covenants with respect to its loans and credit facilities.

8. Commitments and Contingencies

(a) Commitments under Shipbuilding Contracts and Memorandums of Agreement (“MoAs”)

As of June 30, 2016 the Company had commitments under two shipbuilding contracts and three MoAs for the acquisition of five newbuild vessels. The Company expects to settle these commitments as follows:

	Due to Shipyards /		Due to
Year Ending June 30,	Sellers		Manager		Total
2017	$	87,645	$	2,069	$	89,714
2018		27,227		887		28,114
2019		460		-		460
Total	$	115,332	$	2,956	$	118,288

(b) Other contingent liabilities

The Company and its Subsidiaries have not been involved in any legal proceedings, that may have, or have had, a significant effect on their business, financial position, results of operations or liquidity, nor is the Company aware of any proceedings that are pending or threatened that may have a significant effect on its business, financial position, results of operations or liquidity. From time to time various claims, suits and complaints, including those involving government regulations and product liability, arise in the ordinary course of the shipping business. In addition, losses may arise from disputes with charterers, agents, shipyards, insurance providers and other claims relating to the operation of the Company’s vessels. Management is not aware of any material claims or contingent liabilities which should be disclosed, or for which a provision should be established in the accompanying consolidated financial statements.

The Company accrues for the cost of environmental liabilities when management becomes aware that a liability is probable and is able to reasonably estimate the probable exposure. Management is not aware of any such claims or contingent liabilities which should be disclosed, or for which a provision should be established in the accompanying consolidated financial statements. A maximum of $1,000,000 of the liabilities associated with the individual vessel actions, mainly for sea pollution, is covered by P&I Club insurance.

9. Revenues

Revenues are comprised of the following:

	Six Months Ended June 30,
	2015		2016
Time charter revenue	$	58,716	$	48,873
Ballast bonus		4,756		1,505
Other income		2,837		2,439
Total	$	66,309	$	52,817

F-12

10. Vessel Operating Expenses

Vessel operating expenses are comprised of the following:

	Six Months Ended June 30,
	2015		2016
Crew wages and related costs	$	14,235	$	14,845
Insurance		1,783		1,384
Repairs, maintenance and drydocking costs		2,723		1,366
Spares, stores and provisions		4,293		3,410
Lubricants		2,016		1,934
Taxes		728		676
Miscellaneous		1,147		968
Total	$	26,925	$	24,583

11. Fair Value of Financial Instruments and Derivatives Instruments

Cash and cash equivalents and restricted cash, over-the-counter foreign exchange forward contracts and interest rate derivatives are recorded at fair value. The carrying values of the current financial assets and current financial liabilities are reasonable estimates of their fair value due to the short-term nature of these financial instruments. Cash and cash equivalents and restricted cash are considered Level 1 items as they represent liquid assets with short-term maturities. The fair values of the variable interest long-term debt approximate the recorded values, due to their variable interest rates. The fair value of the fixed interest long-term debt is estimated using prevailing market rates as of the period end. We believe the terms of our loans are similar to those that could be procured as of June 30, 2016. The fair values of the long-term debt are disclosed in Note 7.

Derivative instruments

The Company enters into interest rate swap transactions to manage interest costs and the risk associated with changing interest rates with respect to its variable interest rate loans and credit facilities. The Company from time to time may also enter into foreign exchange forward contracts to create economic hedges for its exposure to currency exchange risk on payments relating to acquisition of vessels and on certain loan obligations or for trading purposes. Foreign exchange forward contracts are agreements entered into with a bank to exchange, at a specified future date, currencies of different countries at a specific rate. As of December 31, 2015 and June 30, 2016, the Company had no outstanding derivative instruments relating to currency exchange contracts.

The Company’s interest rate swaps did not qualify for hedge accounting. The Company marks to market the fair market value of the interest rate swaps at the end of every period and accordingly records the resulting unrealized loss/gain during the period in the consolidated statement of income. Information on the location and amounts of derivative fair values in the consolidated balance sheets and derivative gains/losses in the consolidated statements of income are shown below:

Derivatives not designated as hedging instruments

		Asset Derivatives Fair Values				Liability Derivatives Fair Values
Type of Contract	Balance sheet location	December 31, 2015		June 30, 2016		December 31, 2015		June 30, 2016
Interest rate	Derivative assets / Non-current assets	$	181	$	-		-		-
Interest Rate	Derivative liabilities / Current liabilities		-		-	$	318	$	168
Interest Rate	Derivative liabilities / Non-current liabilities		-		-		360		959
	Total Derivatives	$	181	$	-	$	678	$	1,127

F-13

	Amount of Loss Recognized on Derivatives
	Six Months Ended June 30,
	2015			2016
Interest Rate Contracts	$	(1,358	)	$	(1,228	)
Net Loss Recognized	$	(1,358	)	$	(1,228	)

The gain or loss is recognized in the consolidated statement of income and is presented in Other (Expense)/Income – Loss on Derivatives.

The Company’s interest rate derivative instruments are pay-fixed, receive-variable interest rate swaps based on the USD LIBOR swap rate. The fair value of the interest rate swaps is determined using a discounted cash flow approach based on market-based LIBOR swap yield curves. LIBOR swap rates are observable at commonly quoted intervals for the full terms of the swaps and therefore are considered Level 2 items in accordance with the fair value hierarchy. The following table summarizes the valuation of the Company’s financial instruments as of December 31, 2015 and as of June 30, 2016.

	Significant Other Observable Inputs (Level 2)
	December 31,		June 30,
	2015		2016

Derivative instruments – asset position		181		-

Derivative instruments – liability position	$	678	$	1,127

As of December 31, 2015 and as of June 30, 2016, no fair value measurements for assets or liabilities under Level 3 were recognized in the Company’s consolidated balance sheet.

12. Unearned Revenue /Accrued Revenue

Unearned Revenue represents cash received in advance of it being earned, whereas Accrued Revenue represents revenue earned prior to cash being received. Revenue is recognized as earned on a straight-line basis at their average rates where charter agreements provide for varying annual charter rates over their term. Total Unearned Revenue /Accrued Revenue during the periods presented are as follows:

	December 31,		June 30,
	2015		2016
Unearned Revenue
Revenue received in advance of service provided – Current liability	$	1,956	$	1,436
Total Unearned Revenue	$	1,956	$	1,436

Accrued Revenue
Resulting from varying charter rates – Current asset	$	87	$	417
Resulting from varying charter rates –Non Current asset		918		1,008
Total Accrued Revenue	$	1,005	$	1,425

13. Dividends

During the six months period ended June 30, 2016 the Company declared and paid two consecutive dividends of $0.50 per share for each of, Series B Preferred Shares, totaling $1,537, Series C Preferred Shares, totaling $2,300, and Series D Preferred Shares, totaling $3,200.

F-14

14. Earnings Per Share

The computation of basic earnings per share is based on the weighted average number of common shares outstanding during the period and includes the shares issuable to the audit committee chairman and the independent directors at the end of the period for services rendered. Diluted earnings per share are the same as basic earnings per share. There are no other potentially dilutive shares. The computation of basic earnings per share is calculated after deducting the preferred stock dividend from net loss.

15. Subsequent Events

(a)

Dividend declaration: In July 2016, the Board of Directors declared a dividend of $0.50 per all classes of preferred shares, totaling $3,512, payable to all shareholders of record as of July 25, 2016, which was paid on August 1, 2016.

(b)

Newbuild delivery: In July 2016, the Company took delivery of Kypros Spirit (ex-Hull No. 828), a 78,000 dwt, Japanese eco-design newbuild Panamax class vessel.

(c)

Newbuild finance: In August 2016, Kyotofriendo Two signed a novation agreement for newbuild Hull No. 1552, a 81,600 dwt, Japanese Kamsarmax class vessel, scheduled for delivery in 2018 and novated the newbuild to Pinewood. Upon delivery of the vessel, Pinewood has agreed to issue cumulative redeemable perpetual preferred equity to an unaffiliated investor to finance $16.9 million of the cost of such vessel. Preferred equity will have preference over shares of common stock of Pinewood with respect to distributions by, and liquidation of, Pinewood. The preferred shares will pay a dividend of 2.95% p.a.

(d)

Newbuild novation and newbuild sale: In October 2016, Gloverseven signed a novation agreement for newbuild Hull No. S835, a 77,000 dwt, Japanese Panamax class vessel and Kyotofriendo One signed a memorandum of agreement for the sale upon delivery of newbuild Hull No. 1551, a 81,600 dwt, Japanese Kamsarmax class vessel, in each case, to entities owned by our Chief Executive Officer and Chairman of our Board of Directors, Polys Hajioannou. Each vessel is scheduled to be delivered in the first quarter of 2017. The Company will record aggregate non-cash impairment loss of $17.2 million in the third quarter of 2016, which represents installments already paid in respect of Hull No. S835 and Hull No. 1551 and capitalized costs.

(e)

Dividend declaration: In October 2016, the Board of Directors declared a dividend of $0.50 per all classes of preferred shares, payable to all shareholders of record as of October 24, 2016, which will be paid on October 31, 2016.

F-15