United states

On March 28, 2012, Erikub and Wotho, each entered into one shipbuilding contract with China Shipbuilding Trading Company, Limited and Jiangnan Shipyard (Group) Co., Ltd for the construction of one ice class Panamax dry bulk carrier for each subsidiary for the contract price of $29,000 each. Hull H2528, named "Crystalia", was delivered on February 20, 2014 (Note 17) and hull H2529, to be named "Atalandi", is expected to be delivered in the second quarter of 2014. As at December 31, 2013, the remaining contractual obligations amounted to $17,400 for Erikub (hull H2528) and $17,400 for Wotho (hull H2529) (Note 10).

On May 17, 2013, Aster and Aerik, each entered into one shipbuilding contract with China Shipbuilding Trading Company, Limited and Jiangnan Shipyard (Group) Co., Ltd for the construction of one Newcastlemax dry bulk carrier for each subsidiary for the contract price of $48,700 each. The vessels are expected to be delivered in 2016. As at December 31, 2013, the remaining contractual obligations amounted to $41,395 for Aster (hull H2548) and $41,395 for Aerik (hull H2549) (Note 10).
6. Vessels
The amounts in the accompanying consolidated balance sheets are analyzed as follows:

		Vessel Cost				Accumulated Depreciation				Net Book Value
Balance, December 31, 2011		$	1,292,237			$	(245,518	)		$	1,046,719
- Transfer from advances for vessels under construction and acquisition and other vessel costs (Note 5)			152,314				-				152,314
- Acquisition, improvements and other vessel costs			70,819				-				70,819
- Depreciation for the year			-				(58,714	)			(58,714	)
Balance, December 31, 2012		$	1,515,370			$	(304,232	)		$	1,211,138
- Transfer from advances for vessels under construction and acquisition and other vessel costs (Note 5)			26,676				-				26,676
- Acquisition, improvements and other vessel costs			144,544				-				144,544
- Depreciation for the year			-				(61,983	)			(61,983	)
Balance, December 31, 2013		$	1,686,590			$	(366,215	)		$	1,320,375

F-20

DIANA SHIPPING INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2013

(Expressed in thousands of U.S. Dollars – except share, per share data and scrap rates, unless otherwise stated)

In December 2012, Tuvalu entered into a memorandum of agreement to purchase from an unaffiliated third party, a Kamsarmax dry bulk carrier, for the purchase price of $26,500. The vessel, was renamed "Myrto" and was delivered to the Company on January 25, 2013. Pre-delivery expenses amounted to $176.

During 2013, the Company, through subsidiaries (Note 1), entered into memoranda of agreement to purchase from unaffiliated third parties five vessels, one Panamax, two Kamsarmaxes and two Capesize vessels for an aggregate price of $141,423. Additional capitalized costs amounted to $2,627. Also, as at December 31, 2013, the Company had incurred $494 of additional capitalized costs for improvements to the existing fleet.
Effective January 1, 2013, the Company changed its estimated scrap rate of all of its vessels from $150 per lightweight ton to $250 per lightweight ton. This change was made because the historical scrap rates over the past ten years have increased and as such the $150 rate was not considered representative. For 2013, this increase in salvage values has reduced depreciation and net loss by approximately $2,946 and loss per share by approximately $0.04.
As of December 31, 2013, part of the Company's fleet (except of vessels Coronis, Melite, Artemis, Aliki, Baltimore, Myrsini and PS Palios), having an aggregate carrying value of $1,061,277 has been provided as collateral to secure the loan facilities discussed in Note 9.
7. Property and equipment, net
The amounts in the accompanying consolidated balance sheets are analyzed as follows:

		Property and Equipment				Accumulated Depreciation				Net Book Value
Balance, December 31, 2011		$	22,552			$	(893	)		$	21,659
- Additions in equipment and building improvements			1,553				-				1,553
- Depreciation for the year			-				(438	)			(438	)
Balance, December 31, 2012		$	24,105			$	(1,331	)		$	22,774
- Additions in equipment and building improvements			575				-				575
- Depreciation for the year			-				(523	)			(523	)
Balance, December 31, 2013		$	24,680			$	(1,854	)		$	22,826