ex99_1.htm

	2013			2014
Cash Flows From Operating Activities:
Net income:	$	55,291		$	47,213
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation		41,489			51,818
Amortization of prepaid lease rentals		-			1,512
Amortization and write-off of financing costs		611			3,025
Amortization of deferred dry-docking and special survey		4,029			3,796
Net settlements on interest rate swaps qualifying for cash flow hedge		(1,861	)		(489	)
Gain on derivative instruments, net		(5,460	)		(1,901	)
Loss / (Gain) on sale / disposal of vessels, net		(6,460	)		2,903
Equity loss on investments		-			2,275
Changes in operating assets and liabilities:
Accounts receivable		(10,757	)		6,813
Due from related parties		(1,566	)		2,079
Inventories		(4,987	)		(2,785	)
Insurance claims receivable		35			(126	)
Prepayments and other		(2,969	)		(2,180	)
Accounts payable		4,266			535
Due to related parties		-			96
Accrued liabilities		4,820			417
Unearned revenue		(1,142	)		(1,847	)
Other current liabilities		33			(1,023	)
Dry-dockings		(3,903	)		(2,287	)
Accrued charter revenue		6,634			5,121
Net Cash provided by Operating Activities		78,103			114,965
Cash Flows From Investing Activities:
Investment in affiliates		-			(52,647	)
Dividend from affiliate		-			1,813
Advances for vessel acquisitions		(324,466	)		(59,058	)
Vessels acquisitions / Additions to vessel cost		(47,104	)		(19,840	)
Proceeds from the sale of vessels, net		6,652			6,705
Net Cash used in Investing Activities		(364,918	)		(123,027	)
Cash Flows From Financing Activities:
Finance lease proceeds		-			256,716
Finance lease repayment		-			(3,149	)
Offering proceeds, net of related expenses		-			96,523
Proceeds from long-term debt		251,868			9,000
Repayment of long-term debt		(74,138	)		(253,812	)
Payment of financing costs		(93	)		(2,055	)
Dividends paid		(40,392	)		(45,029	)
(Increase) / Decrease in restricted cash		(5,349	)		4,289
Net Cash provided by Financing Activities		131,896			62,483
Net (decrease) / increase in cash and cash equivalents		(154,919	)		54,421
Cash and cash equivalents at beginning of the period		267,321			93,379
Cash and cash equivalents at end of the period	$	112,402		$	147,800
Supplemental Cash Information:
Cash paid during the period for interest	$	13,961		$	21,378

The accompanying notes are an integral part of these unaudited consolidated financial statements.

COSTAMARE INC.

Notes to Unaudited Consolidated Financial Statements

June 30, 2013 and 2014

(Expressed in thousands of U.S. dollars, except share and per share data)

1. Basis of Presentation and General Information:

The accompanying consolidated financial statements include the accounts of Costamare Inc. (“Costamare”) and its wholly-owned subsidiaries (collectively, the “Company”). Costamare was formed on April 21, 2008, under the laws of the Republic of the Marshall Islands.

Costamare was incorporated as part of a reorganization to acquire the ownership interest in 53 ship-owning companies owned by the Konstantakopoulos family (Vasileios Konstantakopoulos and his three sons Messrs. Konstantinos Konstantakopoulos, Achillefs Konstantakopoulos and Christos Konstantakopoulos, together the “Family”). The reorganization was completed in November 2008. On November 4, 2010, Costamare completed its initial public offering (“Initial Public Offering”) in the United States under the United States Securities Act of 1933, as amended (the “Securities Act”). On March 27, 2012 and on October 19, 2012, the Company completed two follow-on public offerings in the United States under the Securities Act and issued 7,500,000 shares and 7,000,000 shares, respectively, par value $0.0001, at a public offering price of $14.10 per share and $14.00 per share, respectively, increasing the issued share capital to 74,800,000 shares. At June 30, 2014, members of the Family owned, directly or indirectly, approximately 64.8% of the outstanding common shares, in the aggregate. Furthermore, on August 7, 2013, the Company completed a public offering of 2,000,000 shares of its 7.625% Series B Cumulative Redeemable Perpetual Preferred Stock (the “Series B Preferred Stock”), par value $0.0001, at a public offering price of $25.00 per share and on January 21, 2014, the Company completed a public offering of 4,000,000 shares of its 8.50% Series C Cumulative Redeemable Perpetual Preferred Stock (the “Series C Preferred Stock”), par value $0.0001, at a public offering price of $25.00 per share.

As of December 31, 2013 and June 30, 2014, the Company owned and/or operated a fleet of 52 and 56 container vessels, respectively, with a total carrying capacity of approximately 295,872 TEU and 324,849 TEU, respectively, through wholly-owned subsidiaries incorporated in the Republic of Liberia. The Company provides worldwide marine transportation services by chartering its container vessels to some of the world’s leading liner operators under long, medium and short-term time charters.

At June 30, 2014, Costamare had 87 wholly-owned subsidiaries, all incorporated in the Republic of Liberia, except for one incorporated in the Republic of the Marshall Islands, out of which 56 operate vessels, 29 have sold or disposed their vessels and are dormant, one was established to be used for future vessel acquisitions and one was established to participate in investments (Note 9).

Revenues for the six-month periods ended June 30, 2013 and 2014, derived from significant charterers individually accounting for 10% or more of revenues (in percentages of total revenues) were as follows:

	2013			2014
A		33	%		27	%
B		25	%		28	%
C		17	%		14	%
D		10	%		8	%
E		8	%		19	%
Total		93	%		96	%

COSTAMARE INC.

Notes to Unaudited Consolidated Financial Statements

June 30, 2013 and 2014

(Expressed in thousands of U.S. dollars, except share and per share data)

1. Basis of Presentation and General Information - continued:

The accompanying unaudited interim condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States ("U.S. GAAP") and applicable rules and regulations of the Securities and Exchange Commission ("SEC") for interim financial information. Accordingly, they do not include all the information and notes required by U.S. GAAP for annual financial statements. These statements and the accompanying notes should be read in conjunction with the Company's Annual Report on Form 20-F for the fiscal year ended December 31, 2013, filed with the SEC on February 21, 2014.

These unaudited interim condensed consolidated financial statements have been prepared on the same basis as the Company's annual consolidated financial statements and, in the opinion of management, reflect all adjustments, consisting of only normal recurring adjustments, considered necessary for a fair presentation of the Company's financial position, results of operations and cash flows for the periods presented. Operating results for the six-month period ended June 30, 2014, are not necessarily indicative of the results that might be expected for the fiscal year ending December 31, 2014.

2. Significant Accounting Policies and Recent Accounting Pronouncements:

A discussion of the Company’s significant accounting policies can be found in the Company’s Consolidated Financial Statements included in the Annual Report on Form 20-F for the year ended December 31, 2013. There have been no material changes to these policies in the six-month period ended June 30, 2014, however the Company adopted the accounting policies relating to the sale and leaseback transactions and finance leases.

Finance leases: FASB ASC 840 classifies leases as finance or operating. Finance leases are accounted for as the acquisition of an asset and the incurrence of an obligation by the lessee and as a sale or financing by the lessor. All other leases are accounted for as operating leases. The determination of whether an arrangement is (or contains) a capital lease is based on the substance of the arrangement at the inception date and is assessed in accordance with the criteria set in ASC 840-10-25-1.

Finance leases are capitalised at the commencement of the lease at the lower between the fair value of the leased asset and the present value of the minimum lease payments. Lease payments are apportioned between finance charges and reduction of the lease liability. Finance charges are recognised in finance costs in the consolidated statement of income. The lease payments are allocated between liability and finance costs to achieve a constant rate on the capital balance outstanding. If the lease agreement transfers the ownership of the leased asset to the lessee, then the asset is depreciated over its useful economic life (estimated at 30 years), else it is depreciated over the lease term.

For sale and lease back transactions, whereas the fair value of the asset sold is more than its carrying amount, any indicated loss on the sale is in substance a prepayment of rent and thus, in accordance with ASC 840-40-35-4, the Company defers this prepaid rental and amortizes it over the lease term. In case the fair value of the asset sold is less than its carrying amount, any indicated loss on the sale is recognized in the consolidated statement of income as incurred.

Operating lease payments are recognised as an operating expense in the consolidated statement of income on a straight-line basis over the lease term.

New accounting pronouncements

Revenue from Contracts with Customers: The FASB and the International Accounting Standards Board (IASB) (collectively, the Boards) jointly issued a standard that will supersede virtually all of the existing revenue recognition guidance in US GAAP and IFRS and is effective for annual periods beginning on or after January 1, 2017. The standard establishes a five-step model that will apply to revenue earned from a contract with a customer (with limited exceptions), regardless of the type of revenue transaction or the industry. The standard’s requirements will also apply to the recognition and measurement of gains and losses on the sale of some non-financial assets that are not an output of the entity’s ordinary activities (e.g., sales of property, plant and equipment or intangibles). Extensive disclosures will be required, including disaggregation of total revenue; information about performance obligations; changes in contract asset and liability account balances between periods and key judgments and estimates. Management is in the process of accessing the impact of the new standard on Company’s financial position and performance.

COSTAMARE INC.

Notes to Unaudited Consolidated Financial Statements

June 30, 2013 and 2014

(Expressed in thousands of U.S. dollars, except share and per share data)

3. Transactions with Related Parties:

(a) Costamare Shipping Company S.A. (the “Manager” or “Costamare Shipping”): Costamare Shipping is a ship management company wholly-owned by Mr. Konstantinos Konstantakopoulos, the Company’s Chief Executive Officer and, as such, is not part of the consolidated group of the Company, but is a related party. Costamare Shipping provides the Company with general administrative services, certain commercial services, director and officer related insurance services and the services of the Company’s officers. Costamare Shipping receives $1,000 annually on a prorated basis for the services of the Company’s officers in aggregate.

Costamare Shipping, itself or through Shanghai Costamare Ship Management Co., Ltd. (“Shanghai Costamare”), which is also controlled by Mr. Konstantakopoulos, or through or together with a third party sub-manager, provides technical, crewing, commercial, provisioning, bunkering, sale and purchase, chartering, accounting, insurance and administrative services in exchange for a daily fee for each containership. Up to April 2013, Costamare Shipping also provided such services through Ciel Shipmanagement S.A. (“CIEL”), another company controlled by Mr. Konstantakopoulos. We refer to Costamare Shipping and Shanghai Costamare and, up to April 2013, CIEL as our “affiliated managers”.

Pursuant to the management agreement, Costamare Shipping receives a daily fee for each containership as follows: (i) for each containership (subject to any charter other than a bareboat charter) it receives a daily fee of $0.919 since January 1, 2014 ($0.884 for 2013 and $0.850 for 2012), prorated for the calendar days the Company owns each containership and for the three-month period following the date of the sale of a vessel, (ii) for each containership subject to a bareboat charter it receives a daily fee of $0.460 since January 1, 2014 ($0.442 for 2013 and $0.425 for 2012), prorated for the calendar days the Company owns each containership and for the three-month period following the date of the sale of a vessel.

The Company also pays to Costamare Shipping (i) a flat fee of $700 for the supervision of the construction of any newbuild vessel contracted by the Company, provided that such flat fee (which is fixed at the time of the ordering of any newbuild and remains constant until its delivery) will be annually adjusted upwards by 4% for any vessels ordered after December 31, 2012, with further annual increases permitted to reflect any strengthening of the Euro against the U.S. dollar and/or material unforeseen cost increases, and (ii) a fee of 0.75% on all gross freight, demurrage, charter hire, ballast bonus or other income earned with respect to each containership in the Company’s fleet.

The initial term of the management agreement expires on December 31, 2015 and will be automatically extended in additional one-year increments until December 31, 2020, at which point it will expire. The daily management fee for each containership was fixed until December 31, 2012 and is thereafter annually adjusted upwards by 4%, with further annual increases permitted to reflect the strengthening of the Euro against the U.S. dollar and/or material unforeseen cost increases. After the initial term which expires on December 31, 2015, the Company will be able to terminate the management agreement, subject to a termination fee, by providing written notice to Costamare Shipping at least 12 months before the end of the subsequent one-year term. The termination fee is equal to (a) the lesser of (i) five and (ii) the number of full years remaining prior to December 31, 2020, times (b) the aggregate fees due and payable to Costamare Shipping during the 12-month period ending on the date of termination; provided that the termination fee will always be at least two times the aggregate fees over the 12-month period described above.

On January 7, 2013, Costamare Shipping entered into a co-operation agreement (the “Co-operation Agreement”) with third-party ship managers V.Ships Greece Ltd. (“V.Ships Greece”), pursuant to which the two companies established a ship management cell (the “Cell”) under V.Ships Greece. Since April 2013, the Cell provides technical, crewing, provisioning, bunkering, sale and purchase and accounting services, as well as certain commercial and insurance services to certain of the Company’s container vessels (including all container vessels previously managed by CIEL), pursuant to separate management agreements entered into between V.Ships Greece and the ship-owning company of the respective container vessel, for a daily management fee. Costamare Shipping remains the head manager for all vessels owned by the Company.

The Cell also offers ship management services to third-party owners. Costamare Shipping passes to the Company the net profit, if any, it receives pursuant to the Co-operation Agreement as a refund or reduction of the management fees payable by the Company to Costamare Shipping under the Group Management Agreement. As at June 30, 2014, the Cell provided technical, crewing, provisioning, bunkering, sale and purchase and accounting services, as well as certain commercial management services to 19 of Costamare’s vessels.

Management fees charged by the Manager in the six-month periods ended June 30, 2013 and 2014, amounted to $7,090 and $9,190, respectively, and are included in Management fees-related parties in the accompanying consolidated statements of income. In addition, the Manager charged (i) $1,788 for the six-month period ended June 30, 2014 ($1,449 for the six-month period ended

COSTAMARE INC.

Notes to Unaudited Consolidated Financial Statements

June 30, 2013 and 2014

(Expressed in thousands of U.S. dollars, except share and per share data)

3. Transactions with Related Parties - continued:

June 30, 2013), representing a fee of 0.75% on all gross revenues, as provided in the management agreements with each subsidiary, which is separately reflected as Voyage expenses-related parties in the accompanying consolidated statements of income for the six-month periods ended June 30, 2014 and 2013, respectively, (ii) $500 for the services of the Company’s officers in aggregate, which is included in General and administrative expenses in the accompanying consolidated statements of income for the six-month period ended June 30, 2014 ($500 for the six-month period ended June 30, 2013) and (iii) $1,050 supervision fees for three newbuild vessels, which were delivered during the six-month period ended June 30, 2014 ($2,450 for seven newbuild vessels which were delivered during the year ended December 31, 2013). Furthermore, in accordance with the management agreement with V.Ships Greece, V.Ships Greece has been provided with the amount of $1,500 as working capital security, of which $75 is included in Accounts receivable, net and $1,425 is included in Accounts receivable, non-current, respectively in the accompanying 2014 consolidated balance sheet.

During the six-month period ended June 30, 2014, the Manager charged in aggregate to the companies established pursuant to the Framework Agreement (Notes 8 and 9) the amount of $689 for services provided in accordance with the respective management agreements.

The balance due from the Manager at December 31, 2013 amounted to $2,076 and the balance due to the Manager at June 30, 2014 amounted to $96, which are included in Due from related parties in the accompanying 2013 consolidated balance sheets and Due to related parties in the accompanying 2014 consolidated balance sheets, respectively.

(b) Ciel Shipmanagement S.A.: CIEL, a company incorporated in the Republic of Liberia, is wholly-owned, effective November 30, 2012, by Mr. Konstantinos Konstantakopoulos, the Company’s Chairman and Chief Executive Officer (prior to November 30, 2012, Mr. Konstantinos Konstantakopoulos owned 50.2% and Mr. Dimitrios Lemonidis owned 49.8% of CIEL). CIEL was not part of the consolidated group of the Company but was an affiliated manager up to April 2013. CIEL, up to April 2013, provided the Company’s vessels certain ship management services such as technical support and maintenance, financial and accounting services, under separate management agreements signed between CIEL and each ship-owning company, in exchange for a daily fixed fee of $0.600 per vessel. CIEL specialized, although not exclusively, in managing containerships of up to 3,500 TEU. As of June 30, 2014, CIEL did not provide technical, crewing, provisioning, bunkering, sale and purchase and accounting services, or other commercial services, to any (nil at December 31, 2013) of the Company’s containerships. Management fees charged by CIEL in the six-month periods ended June 30, 2013 and 2014 amounted to $900 and $108, respectively, and are included in Management fees-related parties in the accompanying consolidated statements of income. The balance due from CIEL at December 31, 2013 and June 30, 2014, amounted to $603 and $600, respectively and is included in Due from related parties in the accompanying consolidated balance sheets.

(c) Shanghai Costamare Ship Management Co. Ltd.: Shanghai Costamare is owned (indirectly) 70% by the Company’s Chairman and Chief Executive Officer and 30% (indirectly) by Shanghai Costamare’s General Manager, Mr. Shen Xiao Dong. Shanghai Costamare is a company incorporated in the Peoples’ Republic of China in September 2004 and is not part of the consolidated group of the Company but is an affiliated manager. The technical, crewing, provisioning, bunkering, sale and purchase and accounting services, as well as certain commercial services of certain of the Company’s vessels have been subcontracted from the Manager to Shanghai Costamare. As of June 30, 2014, Shanghai Costamare provided such services to ten (nine as of December 31, 2013) of the Company’s containerships. There was no balance due from/to Shanghai Costamare at both December 31, 2013 and June 30, 2014.

4. Inventories:

The amounts in the accompanying consolidated balance sheets are analyzed as follows:

	December 31, 2013		June 30, 2014
Bunkers		303		659
Lubricants		9,044		11,475
Spare parts		1,658		1,656
Total		11,005		13,790

COSTAMARE INC.

Notes to Unaudited Consolidated Financial Statements

June 30, 2013 and 2014

(Expressed in thousands of U.S. dollars, except share and per share data)

5. Advances for Vessels Acquisitions:

On September 21, 2010, the Company through its three wholly-owned subsidiaries, Adele Shipping Co., Bastian Shipping Co. and Cadence Shipping Co., contracted with a shipyard for the construction and purchase of three newbuild vessels (Hulls H1068A, H1069A and H1070A), each of approximately 9,403 TEU capacity at a contract price per newbuild vessel of $95,080. The newbuilds MSC Azov (Hull H1068A), MSC Ajaccio (Hull H1069A) and MSC Amalfi (Hull H1070A) were delivered to the Company on January 14, 2014, March 14, 2014 and April 28, 2014, respectively. The Company agreed with a financial institution to refinance the then outstanding balance of the loan relating to MSC Azov, MSC Ajaccio and MSC Amalfi, under a ten-year sale and leaseback transaction. Under the sale and leaseback transaction, the vessels were chartered back to the Company on a bareboat basis and remained on time charter with its initial time charterer (Note 11). Upon their delivery the vessels commenced their ten-year charter party employment.

On January 28, 2011, the Company, through its two wholly-owned subsidiaries Jodie Shipping Co. and Kayley Shipping Co., contracted with a shipyard for the construction and purchase of two newbuild vessels (Hulls S4010 and S4011), each of approximately 8,827 TEU capacity. The Company entered into ten-year charter party agreements from their delivery from the shipyard. The newbuild vessels MSC Athens (Hull S4010) and MSC Athos (Hull S4011) were delivered to the Company on March 14, 2013 and April 8, 2013, respectively, and the amount of $196,675, in aggregate, which included the contract price, capitalized interest and financing costs and other capitalized costs, was transferred to Vessels, net. Upon their delivery, MSC Athens and MSC Athos commenced their ten-year charter party employment.

On April 20, 2011, the Company, through its five wholly-owned subsidiaries Quentin Shipping Co., Raymond Shipping Co., Sander Shipping Co., Terance Shipping Co. and Undine Shipping Co., contracted with a shipyard for the construction and purchase of five newbuild vessels (Hulls S4020, S4021, S4022, S4023 and S4024), each of approximately 8,827 TEU capacity. The newbuild vessels Valor (Hull S4020), Value (Hull S4021), Valiant (Hull S4022), Valence (Hull S4023) and Vantage (Hull S4024) were delivered to the Company on June 3, 2013, June 25, 2013, August 5, 2013, September 2, 2013 and November 8, 2013, respectively and the amount of $492,437, in aggregate, which included the contract price, capitalized interest and financing costs and other capitalized costs, was transferred to Vessels, net. Upon their delivery, Valor, Value, Valiant, Valence and Vantage commenced their long-term charter party employment.

The total aggregate price for all ten newbuild vessels is $953,873, payable in installments until their deliveries, which was fully paid through June 30, 2014 ($572,496 paid during the year ended December 31, 2013, $181,198 paid during the year ended December 31, 2012 and $143,131 paid during the year ended December 31, 2011).

During the six-month period ended June 30, 2014 the costs incurred associated with the construction of MSC Azov, MSC Ajaccio and MSC Amalfi are presented in the table below:


Balance, December 31, 2013	240,871
Pre-delivery installments	57,048
Capitalized interest and finance costs	1,306
Other capitalized costs	704
Sale and leaseback (Note 11)	(299,929	)
Balance, June 30, 2014	-

COSTAMARE INC.

Notes to Unaudited Consolidated Financial Statements

June 30, 2013 and 2014

(Expressed in thousands of U.S. dollars, except share and per share data)

6. Vessels, Net:

The amounts in the accompanying consolidated balance sheets are analyzed as follows:

	Vessel Cost			Accumulated Depreciation			Net Book Value
Balance, December 31, 2013		2,960,999			(773,611	)		2,187,388
Depreciation		-			(49,420	)		(49,420	)
Vessel acquisitions and other vessels’ costs		19,840			-			19,840
Disposals		(11,250	)		2,124			(9,126	)
Balance, June 30, 2014		2,969,589			(820,907	)		2,148,682

During the six-month period ended June 30, 2014, the Company acquired the two secondhand vessels Neapolis and Areopolis at an aggregate price of $19,540.

During the year ended December 31, 2013, the Company took delivery from the shipyard of the seven newbuild container vessels MSC Athens, MSC Athos, Valor, Value, Valiant, Valence and Vantage at an aggregate cost of $689,112 (Note 5). Furthermore, during the year ended December 31, 2013, the Company acquired the four secondhand container vessels Venetiko, Petalidi, Ensenada Express and X-Press Padma at an aggregate price of $51,853. On July 12, 2013 pursuant to the Framework Agreement (Notes 8 and 9), York (as defined below) participated with a 51% interest in the share capital of the ship-owning companies of the vessels Petalidi, Ensenada Express and X-Press Padma (Note 9).

During the six-month period ended June 30, 2014, the Company sold for scrap the container vessel Konstantina at a price of $7,546 and recognized a loss of $2,903, which is separately reflected in Gain / (Loss) on sale / disposal of vessels, net in the accompanying 2014 consolidated statement of income.

During the six-month period ended June 30, 2013, the Company sold for scrap the container vessel MSC Washington and MSC Austria at an aggregate price of $16,010 and recognized a gain of $6,460, which is separately reflected in Gain / (Loss) on sale / disposal of vessels, net in the accompanying 2013 consolidated statement of income.

As of June 30, 2014, one of the Company’s vessels, having total carrying value of $4,751 was fully depreciated.

Forty-seven of the Company’s vessels, having a total carrying value of $1,990,279 as of June 30, 2014, have been provided as collateral to secure the long-term debt discussed in Note 10.

7. Deferred Charges:

The amounts in the accompanying consolidated balance sheets are analyzed as follows:

	Financing Costs		Dry-docking and Special Survey Costs		Total
Balance, December 31, 2013		9,954		19,910		29,864
Additions		2,055		2,287		4,342
Amortization		(1,016)		(3,796)		(4,812)
Write-off		(2,009)		(482)		(2,491)
Balance, June 30, 2014		8,984		17,919		26,903

Financing costs represent fees paid to the lenders for the conclusion of the Company’s financing. The amortization and write off, of loan financing costs is included in interest and finance costs in the accompanying consolidated statements of income and the amortization of the dry-docking and special survey costs is separately reflected in the accompanying consolidated statements of income.

COSTAMARE INC.

Notes to Unaudited Consolidated Financial Statements

June 30, 2013 and 2014

(Expressed in thousands of U.S. dollars, except share and per share data)

7. Deferred Charges - continued:

During the six-month periods ended June 30, 2013 and 2014, five vessels and three vessels, respectively, underwent their special surveys. During the six-month period ended June 30, 2014, three vessels completed their works. During the six-month period ended June 30, 2013, four vessels completed their works and one vessel was in process.

8. Costamare Ventures Inc.:

On May 15, 2013, the Company, along with its wholly-owned subsidiary, Costamare Ventures Inc. (“Costamare Ventures”), entered into a Framework Deed (the “Framework Agreement”) with York Capital Management Global Advisors LLC and its affiliate Sparrow Holdings, L.P. (collectively, “York”) to invest jointly in the acquisition and construction of container vessels. Under the Framework Agreement the decisions regarding vessel acquisitions will be made jointly by Costamare Ventures and York and the Company reserves the right to acquire any vessels that York decides not to pursue.

Under the terms of the Framework Agreement, York has agreed to invest up to $250 million in mutually agreed vessel acquisitions and Costamare Ventures has agreed to invest a minimum of $75 million with an option to invest up to $240 million in these transactions. Depending on the amount Costamare Ventures elects to invest, it is expected that it will hold between 25% and 49% of the equity in the entities that will be formed under the Framework Agreement (the “affiliate ship-owning companies”) and York will hold the balance. Costamare Shipping provides shipmanagement and administrative services to the vessels acquired under the Framework Agreement, with the right to subcontract to V.Ships Greece and/or Shanghai Costamare. The Framework Agreement will terminate on its sixth anniversary or upon the occurrence of certain extraordinary events as described therein. At that time, Costamare Ventures may elect to divide the vessels owned by all such vessel-owning entities between itself and York to reflect their cumulative participation in all such entities. The Company accounts for the entities formed under the Framework Agreement as equity investments. As at June 30, 2014, the Company holds a range of 25% to 49% of the capital stock of thirteen jointly-owned companies formed pursuant to the Framework Agreement with York (Note 9).

9. Investment in Affiliates:

The affiliate ship-owning companies, all of which are incorporated in the Marshall Islands and are accounted for under the equity method, are as follows:

		Participation %		Date Established
Entity	Vessel/Hull	June 30, 2014		/Acquired
Steadman Maritime Co.	Ensenada Express		49%	July 1, 2013
Marchant Maritime Co.	X-Press Padma		49%	July 8, 2013
Horton Maritime Co.	Petalidi		49%	June 26, 2013
Kemp Maritime Co.	Hull NCP0113		49%	June 6, 2013
Hyde Maritime Co.	Hull NCP0114		49%	June 6, 2013
Ainsley Maritime Co.	Hull NCP0115		25%	June 25, 2013
Ambrose Maritime Co.	Hull NCP0116		25%	June 25, 2013
Benedict Maritime Co.	Hull HN2121		40%	October 16, 2013
Bertrand Maritime Co.	Hull HN2122		40%	October 16, 2013
Beardmore Maritime Co.	Hull HN2123		40%	December 23, 2013
Schofield Maritime Co.	Hull HN2124		40%	December 23, 2013
Fairbank Maritime Co.	Hull HN2125		40%	December 23, 2013
Connell Maritime Co.	n/a		40%	December 18, 2013

On July 12, 2013, in accordance with the Framework Agreement, York contributed $16,044, in the aggregate, in order to acquire a 51% equity interest in the affiliate ship-owning companies Steadman Maritime Co., Marchant Maritime Co. and Horton Maritime Co., and for initial working capital of such affiliate ship-owning companies. There was no difference between (a) the aggregate of the fair value of the consideration received and the fair value of the retained investment, as compared with (b) the carrying amount of the former subsidiaries assets and liabilities, in each case at the date the subsidiaries were deconsolidated.

COSTAMARE INC.

Notes to Unaudited Consolidated Financial Statements

June 30, 2013 and 2014

(Expressed in thousands of U.S. dollars, except share and per share data)

9. Investment in Affiliates - continued:

Furthermore, in July 2013, Costamare Ventures participated with 49% in the equity of Kemp Maritime Co. and Hyde Maritime Co. who entered into ship-building contracts for the construction of two 9,000 TEU container vessels, subject to upgrade, by contributing $8,707, in the aggregate up to December 31, 2013 and $8,699, in the aggregate during the six-month period ended June 30, 2014.

During the six-month period ended June 30, 2014, Costamare Ventures participated with 25% in the equity of Ainsley Maritime Co. and Ambrose Maritime Co., who entered into ship-building contracts for the construction of two 11,000 TEU container vessels, by contributing $8,670, in the aggregate. Furthermore, Costamare Ventures participated with 40% in the equity of Benedict Maritime Co., Bertrand Maritime Co., Beardmore Maritime Co., Schofield Maritime Co. and Fairbank Maritime Co., who entered into ship-building contracts for the construction of five 14,000 TEU container vessels, by contributing $28,610, in the aggregate.

During the six-month period ended June 30, 2014, pursuant to the Framework Agreement, Costamare Ventures participated with 40% in the equity of Connell Maritime Co. by contributing the amount of $6,669.

During the six-month period ended June 30, 2014, the Company recorded a net loss of $2,275, which is separately reflected as Equity loss on investments in the accompanying 2014 consolidated statement of income.

Furthermore, during the six-month period ended June 30, 2014, an affiliate ship-owning company declared a dividend to its shareholders and Costamare Ventures received the amount of $1,813, which is included in Investments in affiliates in the accompanying 2014 consolidated balance sheet.

In addition, the Company received the amount of $1,813, for services rendered, from an affiliate ship-owning company, which is included in Other, net in the 2014 consolidated statement of income.

The summarized financial information of the affiliates is as follows:

	December 31, 2013		June 30, 2014
Non-current assets		49,072		172,189
Current assets		3,184		10,501
		52,256		182,690

Current liabilities		2,196		2,498


	Six-month period ended June 30, 2014
Voyage revenue	5,894
Net loss	(3,272	)

COSTAMARE INC.

Notes to Unaudited Consolidated Financial Statements

June 30, 2013 and 2014

(Expressed in thousands of U.S. dollars, except share and per share data)

10. Long-Term Debt:

The amounts shown in the accompanying consolidated balance sheets consist of the following:

Borrower(s)				December 31, 2013			June 30, 2014
	1.	Credit Facility			675,774			630,829
	2.	Term Loans:
		1.	Costis Maritime Corporation and Christos Maritime Corporation		100,500			96,000
		2.	Mas Shipping Co.		47,000			43,000
		3.	Montes Shipping Co. and Kelsen Shipping Co.		90,000			84,000
		4.	Capetanissa Maritime Corporation		55,000			52,500
		5.	Rena Maritime Corporation		52,500			50,000
		6.	Costamare Inc.		90,100			79,423
		7.	Adele Shipping Co., Bastian Shipping Co. and Cadence Shipping Co.		146,295			-
		8.	Costamare Inc.		129,243			124,787
		9.	Undine Shipping Co., Quentin Shipping Co. and Sander Shipping Co.		224,107			216,466
		10.	Raymond Shipping Co. and Terance Shipping Co.		148,707			143,250
		11.	Costamare Inc.		108,350			102,510
					1,191,802			991,936
		Total			1,867,576			1,622,765
		Less-current portion			(206,717	)		(195,514	)
		Long-term portion			1,660,859			1,427,251

1. Credit Facility: On July 22, 2008, the Company signed a loan agreement with a consortium of banks, for a $1,000,000 Credit Facility (the “Facility”) for general corporate and working capital purposes. The Company used $631,340 of the proceeds from the Facility to repay the then existing indebtedness. The Facility bears interest at the 3, 6, 9 or 12 months (at the Company’s option) LIBOR plus margin. Following the sale of MSC Antwerp (ex. Sophia Britannia) the Company, on September 30, 2013, repaid $1,500 of the Facility.

The outstanding balance of the Facility as of June 30, 2014, is repayable in 16 equal, consecutive quarterly installments, of $22,473 each plus a balloon payment of $271,261 payable together with the last installment. The quarterly installments were calculated using a formula specified in the agreement, following the amalgamation of the Facility’s compounds on June 30, 2011, as documented in the third supplemental agreement to the Facility that the Company entered into on September 6, 2011.

On December 17, 2012, the Company entered into a fourth supplemental agreement which released two of the Company’s subsidiaries guarantors and the mortgages over their vessels and replaced them with mortgages over two other vessels. On May 28, 2013, the Company entered into a fifth supplemental agreement under which the bank agreed to the change of flags of five of the Company’s vessels and to the transfer of the technical management of two of the Company’s vessels to V.Ships Greece. On August 30, 2013, the Company entered into a sixth supplemental agreement which released one of the Company’s subsidiary guarantor and the mortgage over its vessel and replaced it with mortgages over two other vessels.

The Facility, as of June 30, 2014, was secured with, among others, first priority mortgages over 18 of the Company’s vessels, first priority assignment of vessels’ insurances and earnings, charter party assignments, first priority pledges over the operating accounts and corporate guarantees of 18 ship-owning companies.

The Facility and certain of the term loans described under Note 10.2 below include among others, financial covenants requiring (i) the ratio of Total Liabilities (after deducting cash and cash equivalents) to Market Value Adjusted Total Assets (after deducting cash and cash equivalents) not to exceed 0.75 to 1.00; (ii) minimum liquidity of the greater of $30,000 or 3% of the total debt of the Company, (iii) the ratio of EBITDA to net interest expense not to be less than 2.50 to 1.00, (iv) Market Value Adjusted Net Worth, defined as the amount by which the Market Value Adjusted Total Assets exceed the Total Liabilities, to exceed $500,000 and (v) the ratio of net funded debt to total net assets ratio not to exceed 80% on a charter inclusive valuation basis. The Company’s other term loans described under Note 10.2 below also contain financial covenants that are either equal to or less stringent than the foregoing financial covenants.

COSTAMARE INC.

Notes to Unaudited Consolidated Financial Statements

June 30, 2013 and 2014

(Expressed in thousands of U.S. dollars, except share and per share data)

10. Long-Term Debt -continued:

2. Term loans:

1. In May 2008, Costis Maritime Corporation and Christos Maritime Corporation entered into a loan agreement with a bank for an amount of up to $150,000 in the aggregate ($75,000 each) on a joint and several basis in order to partly finance the acquisition cost of the vessels Sealand New York and Sealand Washington. As at June 30, 2014, the outstanding balance of the loan of $96,000 is repayable in 8 equal semi-annual installments of $4,500, each from November 2014 to May 2018 and a balloon payment of $60,000 payable together with the last installment.

2. In January 2008, Mas Shipping Co. entered into a loan agreement with a bank for an amount of up to $75,000 in order to partly finance the acquisition cost of vessel Maersk Kokura. As at June 30, 2014, the outstanding balance of the loan of $43,000 is repayable in 8 variable semi-annual installments from August 2014 to February 2018 and a balloon payment of $10,000 payable together with the last installment.

3. In December 2007, Montes Shipping Co. and Kelsen Shipping Co. entered into a loan agreement with a bank for an amount of up to $150,000 in the aggregate ($75,000 each) on a joint and several basis in order to partly finance the acquisition cost of the vessels Maersk Kawasaki and Maersk Kure. As at June 30, 2014, the outstanding balance of the loan of $84,000 is repayable in 7 equal semi-annual installments of $6,000 each from December 2014 to December 2017 and a balloon payment of $42,000 payable together with the last installment.

4. In June 2006, Capetanissa Maritime Corporation entered into a loan agreement with a bank for an amount of up to $90,000, in order to partly finance the acquisition cost of the vessel Cosco Beijing. As at June 30, 2014, the outstanding balance of the loan of $52,500 is repayable in 9 equal semi-annual installments of $2,500 each from August 2014 to August 2018 and a balloon payment of $30,000 payable together with the last installment.

5. In February 2006, Rena Maritime Corporation entered into a loan agreement with a bank for an amount of up to $90,000 in order to partly finance the acquisition cost of the vessel Cosco Guangzhou. As at June 30, 2014, the outstanding balance of the loan of $50,000 is repayable in 8 equal semi-annual installments of $2,500 each from August 2014 to February 2018 and a balloon payment of $30,000 payable together with the last installment.

6. On November 19, 2010, Costamare entered into a term loan agreement with a consortium of banks for an amount of up to $120,000, which was available for drawing for a period up to 18 months. As of June 30, 2014, the Company has drawn the amount of $38,500 (tranche a), the amount of $42,000 (tranche b), the amount of $21,000 (tranche c), the amount of $7,470 (tranche d) and the amount of $7,470 (tranche e) under this term loan agreement in order to finance part of the acquisition cost of MSC Romanos, MSC Methoni, MSC Ulsan, MSC Koroni (ex. Koroni) and Kyparissia, respectively. As at June 30, 2014, the outstanding balance of the tranche (a) of the loan of $27,913 is repayable in 21 equal quarterly installments of $962.5 from August 2014 to August 2019 and a balloon payment of $7,700 payable together with the last installment. As at June 30, 2014, the outstanding balance of the tranche (b) of the loan of $31,500 is repayable in 22 equal quarterly installments of $1,050 from July 2014 to October 2019 and a balloon payment of $8,400 payable together with the last installment. As at June 30, 2014, the outstanding balance of the tranche (c) of the loan of $16,275 is repayable in 23 equal quarterly installments of $525 from August 2014 to February 2020 and a balloon payment of $4,200 payable together with the last installment. On May 21, 2014, the then outstanding balance of $4,202 of the tranche (d) of the loan was fully repaid. As at June 30, 2014, the outstanding balance of the tranche (e) of the loan of $3,735 is repayable in 4 equal quarterly installments of $466.9 from August 2014 to May 2015 and a balloon payment of $1,867.4 payable together with the last installment.

7. On January 14, 2011, Adele Shipping Co., Bastian Shipping Co. and Cadence Shipping Co., wholly-owned subsidiaries of Costamare, concluded a credit facility with a consortium of banks, as joint-and-several borrowers, for an amount of up to $203,343 to finance part of the acquisition and construction cost of Hulls H1068A, H1069A and H1070A (Note 5). The drawdown of the facility was made in three tranches, one for each hull. The credit facility was repayable in forty consecutive quarterly installments, the first thirty-nine (1-39) in the amount of $1,412 per tranche each, and a final (fortieth) installment of $12,713 per tranche. As of December 31, 2013, the Company had drawn the amount of $48,765 (tranche (a) - H1068A), $48,765 (tranche (b) - H1069A) and $48,765 (tranche (c) - H1070A), in order to partly finance the second installment and fully finance the third and fourth pre-delivery installment of hulls H1068A, H1069A and H1070A. MSC Azov (Hull H1068A), MSC Ajaccio (Hull H1069A) and MSC Amalfi (Hull H1070A) were delivered to the Company, on January 14, 2014, March 14, 2014 and April 28, 2014, respectively and at the same time the Company agreed the sale and leaseback of such vessels and repaid the then outstanding balance of the three tranches (Note 11).

COSTAMARE INC.

Notes to Unaudited Consolidated Financial Statements

June 30, 2013 and 2014

(Expressed in thousands of U.S. dollars, except share and per share data)

10. Long-Term Debt -continued:

8. On April 7, 2011, Costamare, as borrower, concluded a credit facility with a bank, for an amount up to the lesser of $140,000 and 70% of the contract price of the vessels, to finance part of the acquisition and construction cost of Hulls S4010 and S4011 (Note 5). In April 2011, the Company drew down the amount of $26,740 in order to partly refinance the first pre-delivery installment of Hulls S4010 and S4011. During the year ended December 31, 2012, the Company drew down the amount of $26,740, in aggregate, in order to partly finance the second and third pre-delivery installments of Hulls S4010 and S4011. Furthermore, during the year ended December 31, 2013, the Company drew down in aggregate the amount of $80,220, in order to partly finance the final installments of Hulls S4010 (MSC Athens), which was delivered to the Company on March 14, 2013 and S4011 (MSC Athos), which was delivered to the Company on April 8, 2013. As at June 30, 2014, the outstanding balance of the loan of $124,787 is repayable in 14 equal semi-annual installments of $4,456.7 from July 2014 until January 2021 and a balloon payment of $62,392.7 payable together with the last installment.

9. On August 16, 2011, Undine Shipping Co., Quentin Shipping Co. and Sander Shipping Co., wholly-owned subsidiaries of Costamare concluded a credit facility with a consortium of banks, as joint-and-several borrowers, for an amount of up to $229,200 to finance part of the acquisition and construction cost of Hulls S4020, S4022 and S4024 (Note 5). The drawdown of the facility was made in three tranches. On August 26, 2011, the Company drew down an amount of $22,920 in order to partly refinance the first pre-delivery installment of Hulls S4020, S4022 and S4024. During the year ended December 31, 2012, the Company drew down in aggregate the amount of $38,200 in order to partly finance the second and the third pre-delivery installments of Hulls S4020, S4022 and S4024. Furthermore, during the year ended December 31, 2013, the Company drew down in aggregate the amount of $168,080 in order to partly finance the third pre-delivery and the delivery final installments of Hulls S4020 (Valor), S4022 (Valiant) and S4024 (Vantage), which were delivered to the Company on June 3, 2013, August 5, 2013 and November 8, 2013, respectively. As at June 30, 2014, the outstanding balance of the tranche (a) of $71,306.4 relating to Hull S4020 (Valor), is repayable in 24 equal quarterly installments of $1,273.4 from July 2014 to April 2020 and a balloon payment of $40,744.8 payable together with the last installment. As at June 30, 2014, the outstanding balance of the tranche (b) of $71,306.4 relating to Hull S4022 (Valiant), is repayable in 24 equal quarterly installments of $1,273.4 from September 2014 to June 2020 and a balloon payment of $40,744.8 payable together with the last installment. As at June 30, 2014, the outstanding balance of the tranche (c) of $73,853.2 relating to Hull S4024 (Vantage) is repayable in 26 equal quarterly installments of $1,273.4 and a balloon payment payable together with the last installment of $40,744.8 from August 2014 to November 2020.

10. On October 12, 2011, Raymond Shipping Co. and Terance Shipping Co. wholly-owned subsidiaries of the Company concluded a credit facility with a bank, as joint and several borrowers, for an amount of up to $152,800 to finance part of the construction and acquisition cost of Hulls S4021 and S4023 (Note 5). On October 25, 2011, the Company drew down an amount of $15,280 in order to partly refinance the first pre-delivery installment of Hulls S4021 and S4023. During the year ended December 31, 2012, the Company drew down in aggregate the amount of $30,560 in order to partly finance the second and third pre-delivery installments of Hulls S4021 and S4023. Furthermore, during the year ended December 31, 2013 the Company drew down in the aggregate the amount $106,960 in order to partly finance the final installments of Hulls S4021 (Value) and S4023 (Valence), which vessels were delivered to the Company on June 25, 2013, and September 2, 2013, respectively. As at June 30, 2014, the outstanding balance of the tranche (a) of $70,942.8 relating to Hull S4021 (Value), is repayable in 24 equal quarterly installments of $1,364.3 from September 2014 to June 2020 and a balloon payment of $38,199.6 payable together with the last installment. As at June 30, 2014, the outstanding balance of tranche (b) of the loan of $72,307.1 relating to Hull S4023 (Valence) is repayable in 25 equal quarterly installments of $1,364.3 from August 2014 to August 2020 and a balloon payment of $38,199.6 payable together with the last installment.

11. On October 6, 2011, the Company concluded a loan facility with a bank for an amount of up to $120,000, in order to partly finance the aggregate market value of eleven vessels in its fleet. In March 2012, the Company drew the amount of $113,700. Furthermore, on June 29, 2012, the Company entered into a supplemental agreement for a further amount of $11,300 to finance the acquisition of the vessel Stadt Luebeck, which was drawn down in August 2012 upon the delivery of the vessel. In April 11, 2014, the Company entered into another supplemental agreement, for a further amount of $9,000 to partly finance the acquisition of the vessel Neapolis, which was drawn down in April 2014 upon the delivery of the vessel. In May 2014, the Company repaid the amount of $6,495 due to the sale of Konstantina (Note 6). As at June 30, 2014, the outstanding balance of $102,510 is repayable in 17 quarterly variable consecutive installments from September 2014 to December 2018 and a balloon payment of $48,205 payable together with the last installment.

The term loans discussed above bear interest at LIBOR plus a spread and are secured by, inter alia, (a) first priority mortgages over the financed vessels, (b) first priority assignments of all insurances and earnings of the mortgaged vessels and, (c) corporate guarantees of Costamare or its subsidiaries, as the case may be. The loan agreements contain usual ship finance covenants,

COSTAMARE INC.

Notes to Unaudited Consolidated Financial Statements

June 30, 2013 and 2014

(Expressed in thousands of U.S. dollars, except share and per share data)

10. Long-Term Debt -continued:

including restrictions as to changes in management and ownership of the vessels, additional indebtedness, mortgaging of vessels, as well as minimum requirements regarding hull Value Maintenance Clauses (“VMC”) in the range of 100% to 125% and restrictions in dividend payments if an event of default has occurred and is continuing or would occur as a result of the payment of such dividend.

The annual principal payments required to be made after June 30, 2014, are as follows:

Year ending December 31,	Amount
2014		96,823
2015		192,950
2016		185,259
2017		227,259
2018		563,946
2019 and thereafter		356,528
		1,622,765

The interest rates of Costamare’s long-term debt at December 31, 2013 and June 30, 2014, were in the range of 1.25%-6.75% and 1.03%-6.75%, respectively. The weighted average interest rate as at December 31, 2013 and June 30, 2014 was 4.3% and 4.2% respectively.

Total interest expense incurred on long-term debt (including the effect of the interest rate swaps discussed in Note 18) for the six-month periods ended June 30, 2013 and 2014, amounted to $37,535 and $41,008, respectively and is included in Interest and finance costs in the accompanying consolidated statements of income. Of the above amount incurred in 2013, $5,863 was capitalized and is included (a) in Advances for vessel acquisitions ($4,002) in the accompanying 2013 consolidated balance sheet and (b) in the statement of comprehensive income / (loss) ($1,861), representing net settlements on interest rate swaps qualifying for cash flow hedge. Of the above amount incurred in 2014, $1,795 was capitalized and is included (a) in Advances for vessel acquisitions ($1,306) (Note 5) and (b) in the statement of comprehensive income / (loss) ($489), representing net settlements on interest rate swaps qualifying for cash flow hedge.

11. Finance Leased Assets and Finance Lease Obligations:

The newbuild vessels MSC Azov, MSC Ajaccio and MSC Amalfi were delivered to the Company on January 14, 2014, March 14, 2014 and April 28, 2014, respectively (Note 5). At the same time, the Company agreed with a financial institution to refinance the then outstanding balance of the loans relating to MSC Azov, MSC Ajaccio and MSC Amalfi, by entering into a ten-year sale and leaseback transaction for each vessel upon their respective deliveries. These vessels were sold for an amount of $85,572 each and leased back for a period of ten years.

The sale and leaseback transactions were classified as finance leases. Furthermore, as the fair value of each vessel sold was in excess of its carrying amount, the difference between the sale proceeds and the carrying amount was considered as prepaid lease rentals. In this respect, an aggregate amount of $49,817 (including the net settlements on interest rate swaps qualifying for hedge accounting of $6,604) was transferred to prepaid lease rentals.

The total value of the three vessels at the inception of the Finance lease transactions amounted to $256,716. The depreciation charged during the six-month period ended June 30, 2014, amounted to $2,347 and is included in Depreciation in the accompanying 2014 consolidated statement of income. As of June 30, 2014, the net book value of the three vessels amounted to $254,369 and is separately reflected as Finance leased assets, in the accompanying 2014 consolidated balance sheet.

COSTAMARE INC.

Notes to Unaudited Consolidated Financial Statements

June 30, 2013 and 2014

(Expressed in thousands of U.S. dollars, except share and per share data)

11. Finance Leased Assets and Finance Lease Obligations - continued:

The balance of prepaid lease rentals, as of June 30, 2014, is analyzed as follows:

	June 30, 2014
Initial recognition of prepaid lease rentals		49,817
Less: Amortization of prepaid lease rentals		(1,512	)
Prepaid lease rentals		48,305
Less: current portion		(4,982	)
Non-current portion		43,323

The finance lease obligations amounting to $253,567, as at June 30, 2014 are scheduled to expire through 2024 and include a bargain purchase option to repurchase the vessels at any time during the charter period. Total interest expense incurred on finance leases for the six-month period ended June 30, 2014, amounted to $5,803 and is included in Interest and finance costs in the accompanying 2014 consolidated statement of income.

The annual lease payments in aggregate required under the finance leases after June 30, 2014, are as follows:

Year ending December 31,	Amount
2014		15,419
2015		30,699
2016		30,783
2017		30,698
2018		30,698
2019 and thereafter		238,252
Total		376,549
Less: Amount of interest		(122,982	)
Total lease payments		253,567

The total finance lease obligations are presented in the accompanying June 30, 2014 consolidated balance sheet as follows:

Finance lease obligation - current			13,039
Finance lease obligation – non current			240,528
			253,567

12. Accrued Charter Revenue, Current and Non-Current and Unearned Revenue, Current and Non-Current:

(a) Accrued charter revenue, Current and Non-Current: The amounts presented as current and non-current accrued charter revenue in the accompanying consolidated balance sheets as of December 31, 2013 and June 30, 2014, reflect revenue earned, but not collected, resulting from charter agreements providing for varying annual charter rates over their term, which were accounted for on a straight-line basis at their average rates. As at December 31, 2013, the net accrued charter revenue, reduced by the allowance for doubtful amounts of $2,208, totaling to $(16,896), comprises $409 separately reflected in Current assets, $10,264 separately reflected in Non-current assets and $27,569 (discussed in (b) below) included in Unearned revenue in current and non-current liabilities in the accompanying 2013 consolidated balance sheet. As at June 30, 2014, the net accrued charter revenue, totaling to $(22,017) comprises $408 separately reflected in Current assets, $10,063 separately reflected in Non-current assets, and $32,488 (discussed in (b) below) included in Unearned revenue in current and non-current liabilities in the accompanying 2014 consolidated balance sheet. The maturities of the net accrued charter revenue as of December 31 of each year are as follows:

COSTAMARE INC.

Notes to Unaudited Consolidated Financial Statements

June 30, 2013 and 2014

(Expressed in thousands of U.S. dollars, except share and per share data)

12. Accrued Charter Revenue, Current and Non-Current and Unearned Revenue, Current and Non-Current - continued:

Year ending December 31,	Amount
2014		(1,725	)
2015		(4,425	)
2016		(9,431	)
2017		(11,314	)
2018		(3,954	)
2019 and thereafter		8,832
		(22,017	)

(b) Unearned Revenue, Current and Non-Current: The amounts presented as current and non-current unearned revenue in the accompanying consolidated balance sheets as of December 31, 2013 and June 30, 2014, reflect (a) cash received prior to the balance sheet date for which all criteria to recognize as revenue have not been met and, (b) any unearned revenue resulting from charter agreements providing for varying annual charter rates over their term, which were accounted for on a straight-line basis at their average rate.

	2013		2014
Hires collected in advance		7,196		5,349
Charter revenue resulting from varying charter rates		27,569		32,488
Total		34,765		37,837
Less current portion		(9,601)		(9,682)
Non-current portion		25,164		28,155

13. Commitments and Contingencies:

(a) Long-term time charters: As at June 30, 2014, the Company has entered into time charter arrangements on all of its vessels in operation, with the exception of the vessels Karmen and Kyparissia, with international liner operators. These arrangements as at June 30, 2014, have remaining terms of up to 117 months. As of the same date, future minimum contractual charter revenues assuming 365 revenue days per annum per vessel and the earliest redelivery dates possible, based on vessels’ committed, non-cancelable, long-term time charter contracts, are as follows:

Year ending December 31,	Amount
2014		242,551
2015		448,716
2016		417,343
2017		371,709
2018		198,759
2019 and thereafter		433,158
		2,112,236

(b) Pursuant to the Framework Agreement the Company has a contractual commitment of approximately $312,421 representing 49% of the remaining construction cost of two vessels under construction, 40% of the remaining construction cost of five vessels under construction and 25% of the construction cost of two vessels under construction (Note 9).

(c) Other: 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, insurance and other claims with suppliers relating to the operations of the Company’s vessels. Currently, management is not aware of any such claims not covered by insurance or contingent liabilities, which should be disclosed, or for which a provision has not been established in the accompanying consolidated financial statements.

COSTAMARE INC.

Notes to Unaudited Consolidated Financial Statements

June 30, 2013 and 2014

(Expressed in thousands of U.S. dollars, except share and per share data)

13. Commitments and Contingencies - continued:

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. Currently, management is not aware of any other claims or contingent liabilities which should be disclosed or for which a provision should be established in the accompanying consolidated financial statements.

The Company is covered for liabilities associated with the individual vessels’ actions to the maximum limits as provided by Protection and Indemnity (P&I) Clubs, members of the International Group of P&I Clubs.

14. Common Stock, Preferred Stock and Additional Paid-In Capital:

(a) Common Stock: From inception through July 11, 2010, the authorized common stock of Costamare consisted of 2,000,000 shares with a par value of $0.0001 per share out of which 1,000,000 shares were issued to the Family. On July 12, 2010, the Company’s articles of incorporation were amended. Under the amended articles of incorporation, the Company’s authorized capital stock consists of 1,000,000,000 shares of common stock, par value $0.0001 per share and 100,000,000 preferred shares, par value $0.0001 per share of which no shares were issued. Of these preferred shares, 10,000,000 shares have been designated Series A Participating Preferred Stock in connection with the adoption of a stockholder rights plan. All shares of stock are in registered form.

On July 20, 2010, pursuant to a rights offering authorized by the Board of Directors on July 14, 2010, the Company issued 24,000,000 shares of common stock in exchange of $2,400, increasing the issued share capital of the Company to 25,000,000 shares of common stock.

On October 19, 2010, within the context of the Initial Public Offering completed in November 2010, the Company effected a dividend of 0.88 shares for each share of common stock outstanding on the record date of August 27, 2010 (the “Stock Split”). As a result of this dividend, the Company issued 22,000,000 additional shares in respect of its 25,000,000 shares of the then outstanding common stock.

On November 4, 2010, the Company completed its Initial Public Offering in the United States under the Securities Act. In this respect 13,300,000 common shares at par value $0.0001 were issued at a public offering price of $12.00 per share, increasing the issued share capital to 60,300,000 shares. The net proceeds of the Initial Public Offering were $145,543.

On March 27, 2012, the Company completed a follow-on public equity offering in the United States under the Securities Act. In this respect 7,500,000 shares at par value $0.0001 were issued at a public offering price of $14.10 per share, increasing the issued share capital to 67,800,000 shares. The net proceeds of the follow-on offering were $100,584.

On October 19, 2012, the Company completed a follow-on public equity offering in the United States under the Securities Act. In this respect 7,000,000 shares at par value $0.0001 were issued at a public offering price of $14.00 per share, increasing the issued share capital to 74,800,000 shares. The net proceeds of the follow-on offering were $93,547.

(b) Preferred Stock: On August 7, 2013, the Company issued 2,000,000, Series B Cumulative Redeemable Perpetual Preferred Stock (the “Series B Preferred Stock”) in the United States under the Securities Act, which pay dividends of 7.625% per annum in arrears on a quarterly basis (equal to $1.90625 per annum per share) at $25 per share. At any time after August 6, 2018, the Series B Preferred Stock may be redeemed, at Company’s election at a price of $25 of liquidation preference per share. The net proceeds from the offering were $48,042.

On January 22, 2014, the Company issued 4,000,000, Series C Cumulative Redeemable Perpetual Preferred Stock (the “Series C Preferred Stock”) in the United States under the Securities Act, which pay dividends of 8.50% per annum in arrears on a quarterly basis (equal to $2.125 per annum per share) at $25 per share. At any time after January 21, 2019, the Series C Preferred Stock may be redeemed, at Company’s election at a price of $25 of liquidation preference per share. The net proceeds from the offering were $96,523.

(c) Additional Paid-in Capital: The amounts shown in the accompanying consolidated balance sheets, as additional paid-in capital, include (i) payments made by the stockholders at various dates to finance vessel acquisitions in excess of the amounts of bank loans obtained, (ii) advances for working capital purposes and (iii) the difference between the par value of the shares issued in the Initial Public Offering in November 2010 and the offerings in March 2012, October 2012, August 2013 and January 2014 and the net proceeds obtained for those shares.

COSTAMARE INC.

Notes to Unaudited Consolidated Financial Statements

June 30, 2013 and 2014

(Expressed in thousands of U.S. dollars, except share and per share data)

14. Common Stock, Preferred Stock and Additional Paid-In Capital - continued:

(d) Dividends declared and / or paid: During the six-month period ended June 30, 2013, the Company declared and paid, to its common stockholders, (i) the amount of $20,196 or $0.27 per common share for the fourth quarter of 2012 and (ii) the amount of $20,196 or $0.27 per common share for the first quarter of 2013. During the six-month period ended June 30, 2014, the Company declared and paid to its common stockholders, (i) the amount of $20,196 or $0.27 per common share for the fourth quarter of 2013 and (ii) the amount of $20,944 or $0.28 per common share for the first quarter of 2014. During the six-month period ended June 30, 2014, the Company declared and paid to its holders of Series B Preferred Stock, (i) the amount of $953 or $0.476563 per share for the period from October 14, 2013 to January 14, 2014 and (ii) the amount of $953 or $0.476563 per share for the period from January 15, 2014 to April 14, 2014. During the six-month period ended June 30, 2014, the Company declared and paid to its holders of Series C Preferred Stock, the amount of $1,983 or $0.495833 per share for the period from January 22, 2014 to April 14, 2014.

15. Earnings / (Loss) per share (EPS)

All common shares issued are Costamare common stock and have equal rights to vote and participate in dividends. In August 2013, the Company issued Series B Preferred Stock, receiving an annual dividend of 7.625% in arrears on the 15th day of January, April, July and October of each year. Furthermore, in January 2014 the Company issued Series C Preferred Stock, receiving an annual dividend of 8.50% in arrears on the 15th day of January, April, July and October of each year. Profit or loss attributable to common equity holders is adjusted by the contractual amount of dividends on Series B Preferred Stock and Series C Preferred Stock that should be paid for the period. Dividends paid and accrued on Series B Preferred Stock and Series C Preferred Stock during the six-month periods ended June 30, 2013 and 2014, amounted to nil and $5,719, respectively.

	2013		2014
	Basic EPS		Basic EPS
Net income	$	55,291	$	47,213
Less: paid and accrued earnings allocated to Preferred Stock		-		(5,719)
Net income available to common stockholders		55,291		41,494
Weighted average number of common shares, basic		74,800,000		74,800,000
Earnings per common share	$	0.74	$	0.55

16. Interest and Finance Costs:

The amounts in the accompanying consolidated statements of income are analyzed as follows:

	2013		2014
Interest expense		14,841		22,427
Interest capitalized		(5,863)		(1,795)
Swap effect		22,694		24,384
Amortization and write-off of financing costs		611		3,025
Commitment fees		1,691		161
Bank charges and other		134		160
		34,108		48,362

17. Taxes:

Under the laws of the countries of the companies’ incorporation and/or vessels’ registration, the companies are not subject to tax on international shipping income; however, they are subject to registration and tonnage taxes, which are included in Vessel operating expenses in the accompanying consolidated statements of income.

COSTAMARE INC.

Notes to Unaudited Consolidated Financial Statements

June 30, 2013 and 2014

(Expressed in thousands of U.S. dollars, except share and per share data)

17. Taxes - continued:

The vessel owning companies with vessels that have called on the United States during the relevant year of operation are obliged to file tax returns with the Internal Revenue Service. The applicable tax is 50% of 4% of U.S. related gross transportation income unless an exemption applies. Management believes that based on current legislation the relevant vessel owning companies are entitled to an exemption because they satisfy the relevant requirements, namely that (i) the related vessel owning companies are incorporated in a jurisdiction granting an equivalent exemption to U.S. corporations and (ii) over 50% of the ultimate stockholders of the vessel owning companies are residents of a country granting an equivalent exemption to U.S. persons.

18. Derivatives:

(a) Interest rate swaps that meet the criteria for hedge accounting: The Company, according to its long-term strategic plan to maintain stability in its interest rate exposure, has decided to minimize exposure to floating interest rates by entering into interest rate swap agreements. To this effect, the Company has entered into interest rate swap transactions with varying start and maturity dates, in order to proactively and efficiently manage its floating rate exposure.

These interest rate swaps are designed to hedge the variability of interest cash flows arising from floating rate debt, attributable to movements in three-month or six-month USD LIBOR. According to the Company’s Risk Management Accounting Policy, after putting in place the formal documentation required by ASC 815 in order to designate these swaps as hedging instruments as from their inception, these interest rate swaps qualified for hedge accounting. Accordingly, since that time, only hedge ineffectiveness amounts arising from the differences in the change in fair value of the hedging instrument and the hedged item are recognized in the Company’s earnings. Assessment and measurement of prospective and retrospective effectiveness for these interest rate swaps are being performed on a quarterly basis. For qualifying cash flow hedges, the fair value gain or loss associated with the effective portion of the cash flow hedge is recognized initially in stockholders’ equity and recognized to the consolidated statement of income in the periods when the hedged item affects profit or loss. Any ineffective portion of the gain or loss on the hedging instrument is recognized in the consolidated statement of income immediately.

COSTAMARE INC.

Notes to Unaudited Consolidated Financial Statements

June 30, 2013 and 2014

(Expressed in thousands of U.S. dollars, except share and per share data)

18. Derivatives - continued:

The interest rate swap agreements designed as hedging instruments, as of December 31, 2013 and June 30, 2014, were as follows:

Effective date	Termination date	Notional amount on effective date		Fixed rate (Costamare pays)	Floating rate (Costamare receives)	Fair value Dec. 31, 2013			Fair value Jun. 30, 2014
30/6/2008	30/6/2015		425,000	4.03%p.a.	USD LIBOR 3M BBA		(8,916	)		(5,254	)
30/6/2008	30/6/2015		75,000	4.03%p.a.	USD LIBOR 3M BBA		(1,573	)		(927	)
30/9/2008	30/6/2015		100,000	4.09%p.a.	USD LIBOR 3M BBA		(2,132	)		(1,256	)
30/9/2008	30/6/2015		250,000	4.02%p.a.	USD LIBOR 3M BBA		(5,231	)		(3,080	)
16/5/2008	16/5/2014		75,000	3.88%p.a.	USD LIBOR 6M BBA		(880	)		-
16/5/2008	16/5/2014		75,000	3.88%p.a.	USD LIBOR 6M BBA		(880	)		-
17/6/2008	17/6/2013		73,000	3.57%p.a.	USD LIBOR 6M BBA		-			-
17/6/2008	17/6/2013		73,000	3.57%p.a.	USD LIBOR 6M BBA		-			-
21/2/2007	21/2/2017		85,000	Zero cost Interest rate Collar (i)			(7,771	)		(6,625	)
4/8/2008	5/8/2013		74,000	3.60%p.a.	USD LIBOR 6M BBA		-			-
30/6/2011	29/6/2018		50,000	3.45%p.a.	USD LIBOR 3M BBA		(12,933	)		(12,438	)
30/9/2011	29/6/2018		20,000	4.05%p.a.	USD LIBOR 3M BBA		(21,125	)		(22,146	)
28/9/2012	29/6/2018		40,000	3.60%p.a.	USD LIBOR 3M BBA		(3,737	)		(3,564	)
22/8/2011	22/8/2018		65,000	2.79%p.a.	USD LIBOR 6M BBA		(3,015	)		(2,884	)
31/1/2013	29/01/2021		133,700	3.51%p.a.	USD LIBOR 6M BBA		(9,981	)		(11,120	)
15/1/2014 (ii)	15/1/2021		67,781	2.94%p.a.	USD LIBOR 3M BBA		(2,603	)		-
15/2/2014 (iii)	15/2/2021		67,781	2.99%p.a.	USD LIBOR 3M BBA		(2,595	)		-
15/3/2014 (iv)	15/3/2021		67,781	3.03%p.a.	USD LIBOR 3M BBA		(2,555	)		-
5/4/2013	6/4/2020		30,000	2.39%p.a.	USD LIBOR 3M BBA		(754	)		(985	)
17/6/2013	15/6/2020		30,000	2.49%p.a.	USD LIBOR 3M BBA		(728	)		(976	)
15/8/2013	17/8/2020		30,000	2.58%p.a.	USD LIBOR 3M BBA		(878	)		(1,145	)
15/8/2013	17/8/2020		30,000	2.41%p.a.	USD LIBOR 3M BBA		(606	)		(927	)
5/4/2013	6/4/2020		30,000	2.24%p.a.	USD LIBOR 3M BBA		(522	)		(800	)
17/6/2013	15/6/2020		30,000	2.32%p.a.	USD LIBOR 3M BBA		(467	)		(769	)
15/8/2013	17/8/2020		16,400	2.46%p.a.	USD LIBOR 3M BBA		(374	)		(540	)
17/6/2013	15/6/2020		16,400	2.38%p.a.	USD LIBOR 3M BBA		(304	)		(459	)
5/4/2013	6/4/2020		16,400	2.29%p.a.	USD LIBOR 3M BBA		(325	)		(469	)
28/6/2013	23/6/2020		76,400	1.53%p.a.	USD LIBOR 3M BBA		1,587			659
28/8/2013	28/8/2020		76,400	1.60%p.a.	USD LIBOR 3M BBA		1,492			512

					Total fair value		(87,806	)		(75,193	)

(i)	Notional amount $85,000 amortizing zero-cost collar (2.23%-6.00%) with knock-in floor sold at 2.23% and struck at 6.00%, as a 10-year forward hedge, covering the period from February 2007 to February 2017. The agreement guarantees that the interest rate payable on the Company’s loans throughout the 10-year period will always remain between 2.23% and 6.00% excluding margin.
(ii)	This swap was terminated on January 14, 2014.
(iii)	This swap was terminated on March 14, 2014.
(iv)	This swap was terminated on April 28, 2014.

The interest rate swaps included in the table above are designated for the Credit Facility discussed in Note 10 and the term loans discussed in Notes 10.2.1, 10.2.4, 10.2.5, 10.2.7, 10.2.8, 10.2.9, and 10.2.10.

COSTAMARE INC.

Notes to Unaudited Consolidated Financial Statements

June 30, 2013 and 2014

(Expressed in thousands of U.S. dollars, except share and per share data)

18. Derivatives – continued:

In the six-month periods ended June 30, 2013 and 2014, the realized ineffectiveness on the interest rate swaps discussed under (a) above was nil and a loss of $121, respectively, and is included in Gain on derivative instruments, net in the accompanying 2014 consolidated statement of income.

During the six-month period ended June 30, 2014, the Company terminated three interest rate derivative instruments and paid the counterparty breakage costs of $10,192, in aggregate and is separately reflected in the Swaps breakage costs in the accompanying 2014 consolidated statement of income.

(b) Interest rate swaps that do not meet the criteria for hedge accounting: As of both December 31, 2013 and June 30, 2014, the Company had one interest rate swap agreement outstanding for the purpose of managing risks associated with the variability of changing LIBOR-related interest rates. Such agreement did not meet hedge accounting criteria and, therefore, changes in its fair value are reflected in earnings. More specifically, the swap has a notional amount of $100,000 non-amortizing zero-cost collar (1.37%-6.00%) with a knock-in floor sold at 1.37% and struck at 6.00%, as a nine-year forward hedge, covering the period from September 2008 to March 2017. At December 31, 2013 and June 30, 2014, the fair value of this swap was a liability of $15,406 and $13,384, respectively and is included in Fair value of derivatives in the accompanying consolidated balance sheets.

The total change of forward contracts fair value for the six-month period ended June 30, 2013, was a loss of $125 and is included in Gain on derivative instruments, net in the 2013 accompanying consolidated statement of income.

	The Effect of Derivative Instruments for the six-month periods ended June 30, 2013 and 2014

	Derivatives in ASC 815 Cash Flow Hedging Relationships

	Amount of Gain / (Loss) Recognized in Accumulated OCI on Derivative (Effective Portion)			Location of Gain / (Loss) Recognized in Income on	Amount of Gain / (Loss) Recognized in Income on Derivative (Ineffective Portion)
		2013	2014	Derivative (Ineffective Portion)		2013	2014
Interest rate swaps		37,326	(8,862)	Gain on derivative instruments, net		-	(121)
Reclassification to Interest and finance costs		20,030	21,596			-	-
Total		57,356	12,734			-	(121)

Derivatives Not Designated as Hedging Instruments under ASC 815
	Location of Gain / (Loss) Recognized on Derivative	Amount of Gain / (Loss) Recognized in Income on Derivative
			2013	2014
Interest rate swaps	Gain on derivative instruments, net		5,585	2,022
Realized ineffectiveness	Gain on derivative instruments, net		-	(121)
Forward contracts	Gain on derivative instruments, net		(125)	-
Total			5,460	1,901

COSTAMARE INC.

Notes to Unaudited Consolidated Financial Statements

June 30, 2013 and 2014

(Expressed in thousands of U.S. dollars, except share and per share data)

19. Financial Instruments:

(a) Interest rate risk: The Company’s interest rates and loan repayment terms are described in Note 10.

(b) Concentration of credit risk: Financial instruments consist principally of cash, trade accounts receivable, investments and derivatives. The Company places its temporary cash investments, consisting mostly of deposits, primarily with high credit rated financial institutions. The Company performs periodic evaluations of the relative credit standing of those financial institutions that are considered in the Company’s investment strategy. The Company limits its credit risk with accounts receivable by performing ongoing credit evaluations of its customers’ financial condition and generally does not require collateral for its accounts receivable and does not have any agreements to mitigate credit risk. The Company limits the exposure of non-performance by counterparties to derivative instruments by diversifying among counterparties with high credit ratings and performing periodic evaluations of the relative credit standing of the counterparties.

(c) Fair value: The carrying amounts reflected in the accompanying consolidated balance sheet of financial assets and accounts payable approximate their respective fair values due to the short maturity of these instruments. The fair value of long-term bank loans with variable interest rates approximate the recorded values, generally due to their variable interest rates. The fair value of the interest rate swap agreements discussed in Note 18 above are determined through Level 2 of the fair value hierarchy as defined in FASB guidance for Fair Value Measurements and are derived principally from or corroborated by observable market data, interest rates, yield curves and other items that allow value to be determined.

The fair value of the interest rate swap agreements discussed in Note 18(a) and (b) equates to the amount that would be paid by the Company to cancel the agreements. As at December 31, 2013 and June 30, 2014, the fair value of these interest rate swaps in aggregate amounted to a liability of $103,212 and $88,577, respectively.

The following tables summarize the hierarchy for determining and disclosing the fair value of assets and liabilities by valuation technique on a recurring basis as of the valuation date.

	December 31, 2013		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Unobservable Inputs (Level 3)
Recurring measurements:
Interest rate swaps-liability position		(103,212)		-		(103,212)		-
Total		(103,212)		-		(103,212)		-

	June 30, 2014		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Unobservable Inputs (Level 3)
Recurring measurements:
Interest rate swaps-liability position		(88,577)		-		(88,577)		-
Total		(88,577)		-		(88,577)		-

20. Comprehensive Income / (Loss):

During the six-month period ended June 30, 2013, Other comprehensive income / (loss) increased with net gains of $55,507 relating to (i) the change of the fair value of derivatives that qualify for hedge accounting (gain of $37,326), net of the settlements to net income of derivatives that qualify for hedge accounting (gain of $20,030), (ii) the Net settlements on interest rate swaps qualifying for cash flow hedge associated with vessels under construction ($1,861) and (iii) the amounts reclassified from Net settlements on interest rate swaps qualifying for hedge accounting to depreciation ($12). During the six-month period ended June 30, 2014, Other comprehensive income / (loss) increased with net gains of $18,900 relating to (i) the change of the fair value of derivatives that qualify for hedge accounting (loss of $8,862), net of the settlements to net income of derivatives that qualify for hedge accounting (gain of $21,596), (ii) the Net settlements on interest rate swaps qualifying for cash flow hedge associated with vessels under construction ($489), (iii) the amounts reclassified from Net settlements on interest rate swaps qualifying for hedge accounting to depreciation ($51) and (iv) the amounts reclassified from net settlements on interest rate swaps qualifying for hedge

COSTAMARE INC.

Notes to Unaudited Consolidated Financial Statements

June 30, 2013 and 2014

(Expressed in thousands of U.S. dollars, except share and per share data)

20. Comprehensive Income / (Loss) - continued:

accounting to Prepaid lease rentals ($6,604). As at June 30, 2013 and 2014, Comprehensive income / (loss) amounted to $110,798 and $66,113, respectively.

21. Subsequent Events:

(a) Declaration and payment of Dividends (preferred stock Series B and preferred stock Series C): On July 3, 2014, the Company declared a dividend of $953 or $0.476563 per share on its 7.625% Series B Preferred Stock and a dividend of $2,125 or $0.531250 per share on its 8.50% Series C Preferred Stock, for the period from April 15, 2014 to July 14, 2014, both paid on July 15, 2014.

(b)Vessel disposal: On July 8, 2014, the Company agreed to sell for scrap the 1981-built, 3,876 TEU containership MSC Kyoto, at a price of $9,483. The vessel was delivered to her buyers on July 17, 2014.

(c) Declaration and payment of Dividends (common stock): On July 8, 2014, the Company declared a dividend of $0.28 per share for the second quarter ended June 30, 2014, which is payable on August 6, 2014, to stockholders of record at the close of trading of the Company’s common stock on the New York Stock Exchange on July 23, 2014.

(d) Restructuring of Zim Integrated Shipping Services (“ZIM”): One of the Company’s charterers, Zim Integrated Shipping Services (“ZIM”), was engaged in ongoing discussions with its creditors, including vessel and container lenders, ship-owners, shipyards, unsecured lenders and bond holders, to restructure its debt. Costamare was participating in these discussions. On July 16, 2014, ZIM, finalized the terms of its comprehensive financial restructuring plan with its shareholders and its creditors, including vessel and container lenders, ship-owners, shipyards, unsecured lenders and bond holders. Based on this agreement, the Company has been granted charter extensions and has been issued equity securities representing 1.2% of ZIM’s equity and approximately $8.2 million in interest bearing notes maturing in 2023.

	December 31, 2013 (Audited)			June 30, 2014 (Unaudited)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	93,379		$	147,800
Restricted cash		9,067			8,786
Accounts receivable, net		16,145			9,257
Inventories (Note 4)		11,005			13,790
Due from related parties (Note 3)		2,679			600
Insurance claims receivable		1,429			1,555
Prepaid lease rentals (Notes 2 and 11)		-			4,982
Accrued charter revenue (Note 12)		409			408
Prepayments and other		2,450			4,630
Total current assets		136,563			191,808
FIXED ASSETS, NET:
Advances for vessel acquisitions (Note 5)		240,871			-
Finance leased assets (Notes 2 and 11)		-			254,369
Vessels, net (Note 6)		2,187,388			2,148,682
Total fixed assets, net		2,428,259			2,403,051
NON-CURRENT ASSETS:
Investment in affiliates (Notes 9)		23,732			72,293
Prepaid lease rentals, non-current (Notes 2 and 11)		-			43,323
Accounts receivable, non-current, net		7,334			7,409
Deferred charges, net (Note 7)		29,864			26,903
Restricted cash		49,826			45,818
Accrued charter revenue, non-current (Note 12)		10,264			10,063
Total assets	$	2,685,842		$	2,800,668
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt (Note 10)	$	206,717		$	195,514
Accounts payable		5,814			6,349
Due to related parties (Note 3)		-			96
Finance lease obligations (Notes 2 and 11)		-			13,039
Accrued liabilities		14,386			16,634
Unearned revenue (Note 12)		9,601			9,682
Fair value of derivatives (Notes 18 and 19)		55,322			46,199
Other current liabilities		3,140			2,117
Total current liabilities		294,980			289,630
NON-CURRENT LIABILITIES:
Long-term debt, net of current portion (Note 10)		1,660,859			1,427,251
Finance lease obligations, net of current portion (Notes 2 and 11)		-			240,528
Fair value of derivatives, net of current portion (Notes 18 and 19)		47,890			42,378
Unearned revenue, net of current portion (Note 12)		25,164			28,155
Total non-current liabilities		1,733,913			1,738,312
COMMITMENTS AND CONTINGENCIES (Note 13)		-			-
STOCKHOLDERS’ EQUITY:
Preferred stock (Note 14)		-			-
Common stock (Note 14)		8			8
Additional paid-in capital (Note 14)		762,142			858,665
Accumulated deficit		(20,047	)		(19,693	)
Accumulated other comprehensive loss (Notes 18 and 20)		(85,154	)		(66,254	)
Total stockholders’ equity		656,949			772,726
Total liabilities and stockholders’ equity	$	2,685,842		$	2,800,668

	2013		2014
REVENUES:
Voyage revenue	$	191,566	$	238,403
EXPENSES:
Voyage expenses		(1,877)		(1,776)
Voyage expenses-related parties (Note 3)		(1,449)		(1,788)
Vessels’ operating expenses		(56,352)		(59,905)
General and administrative expenses		(2,243)		(2,450)
Management fees-related parties (Note 3)		(7,990)		(9,298)
Amortization of dry-docking and special survey costs (Note 7)		(4,029)		(3,796)
Depreciation (Note 6, 11 and 20)		(41,489)		(51,818)
Amortization of prepaid lease rentals (Notes 2 and 11)		-		(1,512)
Gain / (loss) on sale / disposal of vessels, net (Note 6)		6,460		(2,903)
Foreign exchange gains / (losses), net		86		(110)
Operating income		82,683		103,047
OTHER INCOME / (EXPENSES):
Interest income		409		291
Interest and finance costs (Note 16)		(34,108)		(48,362)
Swaps breakage costs (Note 18)		-		(10,192)
Equity loss on investments (Note 9)		-		(2,275)
Other, net		847		2,803
Gain on derivative instruments, net (Note 18)		5,460		1,901
Total other income / (expenses)		(27,392)		(55,834)
Net Income	$	55,291	$	47,213
Earnings allocated to Preferred Stock		-		(5,719)
Net income available to Common Stockholders	$	55,291	$	41,494
Earnings per common share, basic and diluted (Note 15)	$	0.74	$	0.55
Weighted average number of shares, basic and diluted		74,800,000		74,800,000

	Preferred Stock (Series C)				Preferred Stock (Series B)				Common Stock				Additional			Accumulated Other			Retained Earnings
	# of shares		Par value		# of shares		Par value		# of shares		Par value		Paid-in Capital			Comprehensive Income/(Loss)			(Accumulated Deficit)			Total
BALANCE, January 1, 2013		-	$	-		-	$	-		74,800,000	$	8	$	714,100		$	(152,842	)	$	(40,814	)	$	520,452
-Net income		-		-		-		-		-		-		-			-			55,291			55,291
-Dividends - Common stock		-		-		-		-		-		-		-			-			(40,392	)		(40,392	)
-Other comprehensive income		-		-		-		-		-		-		-			-			-			55,507
BALANCE, June 30, 2013		-	$	-		-	$	-		74,800,000	$	8	$	714,100		$	(97,335	)	$	(25,915	)	$	590,858
BALANCE, January 1, 2014		-	$	-		2,000,000	$	-		74,800,000	$	8	$	762,142		$	(85,154	)	$	(20,047	)	$	656,949
-Net income		-		-		-		-		-		-		-			-			47,213			47,213
-Preferred stock Series C issuance		4,000,000		-		-		-		-		-		96,850			-			-			96,850
-Preferred stock Series C expenses		-		-		-		-		-		-		(327	)		-			-			(327	)
-Dividends -Common stock		-		-		-		-		-		-		-			-			(41,140	)		(41,140	)
-Dividends -Preferred stock		-		-		-		-		-		-		-			-			(5,719	)		(5,719	)
-Other comprehensive income		-		-		-		-		-		-		-			18,900			-			18,900
BALANCE, June 30, 2014		4,000,000	$	-		2,000,000	$	-		74,800,000	$	8	$	858,665		$	(66,254	)	$	(19,693	)	$	772,726

	2013		2014

Net income for the period	$	55,291	$	47,213
Other comprehensive income / (loss)
Unrealized gain / (loss) on cash flow hedges, net (Notes 18 and 20)		57,356		12,734
Net settlements on interest rate swaps qualifying for cash flow hedge (Notes 10 and 20)		(1,861)		(489)
Amounts reclassified from Net settlements on interest rate swaps qualifying for hedge accounting to Depreciation (Note 20)		12		51
Amounts reclassified from Net settlements on interest rate swaps qualifying for hedge accounting to Prepaid lease rentals (Notes 2 and 11)		-		6,604
Other comprehensive income for the period	$	55,507	$	18,900
Total comprehensive income for the period	$	110,798	$	66,113