Navios Maritime Containers L.P. (Form: 20-F, Received: 03/18/2020 17:23:39)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 20-F

(Mark One)

☐	REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934

☒	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2019

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

☐	SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Date of event requiring this shell company report

For the transition period from to

Commission file number 001-38651

Navios Maritime Containers L.P.

(Exact name of Registrant as specified in its charter)

Not Applicable

(Translation of Registrant’s Name into English)

Republic of Marshall Islands

(Jurisdiction of incorporation or organization)

7 Avenue de Grande Bretagne, Office 11B2

Monte Carlo, MC 98000 Monaco

(Address of Principal Executive Offices)

Todd E. Mason

Thompson Hine LLP

335 Madison Ave.

New York, NY 10017

todd.mason@thompsonhine.com

(212) 908-3946

(Name, Telephone, E-mail and/or Facsimile number and Address of Company Contact Person)

Securities registered or to be registered pursuant to Section 12(b) of the Act.

Title of each class

Trading

Symbol

Name of each exchange

on which registered

Common Units

NMCI

Nasdaq Global Select Market

Securities registered or to be registered pursuant to Section 12(g) of the Act. None

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act. None

Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report: 34,603,100 Common Units

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒

If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or (15)(d) of the Securities Exchange Act of 1934. Yes ☐ No ☒

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter periods that the registrant was required to file such reports), and (2) has been subject to such reporting requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or emerging growth company. See the definition of “large accelerated filer,” “accelerated filer,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):

Large Accelerated Filer

☐

Accelerated Filer

☐

Non-Accelerated Filer

☒

Emerging Growth Company

☒

If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards† provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:


U.S. GAAP ☒	International Financial Reporting Standards as issued	Other ☐
	by the International Accounting Standards Board ☐

If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow.

☐ Item 17 ☐ Item 18

If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

TABLE OF CONTENTS


*FORWARD-LOOKING STATEMENTS*			1

*PART I*			3

Item 1. Identity of Directors, Senior Management and Advisers			3

Item 2. Offer Statistics and Expected Timetable			3

Item 3. Key Information			3

Item 4. Information on the Company			37

Item 4A. Unresolved Staff Comments			61

Item 5. Operating and Financial Review and Prospects			61

Item 6. Directors, Senior Management and Employees			81

Item 7. Major Unitholders and Related Party Transactions			87

Item 8. Financial Information			93

Item 9. The Offer and Listing			94

Item 10. Additional Information			94

*MATERIAL U.S. FEDERAL INCOME TAX CONSIDERATIONS*			96

*NON-UNITED STATES TAX CONSIDERATIONS*			103

Item 11. Quantitative and Qualitative Disclosures about Market Risks			104

Item 12. Description of Securities Other than Equity Securities			104

*PART II*			105

Item 13. Defaults, Dividend Arrearages and Delinquencies			105

Item 14. Material Modifications to the Rights of Unitholders and Use of Proceeds			105

Item 15. Controls and Procedures			105

Item 16A. Audit Committee Financial Expert			105

Item 16B. Code of Ethics			106

Item 16C. Principal Accountant Fees and Services			106

Item 16D. Exemptions from the Listing Standards for Audit Committees			106

Item 16E. Purchases of Units by the Issuer and Affiliated Purchasers			106

Item 16F. Change in Registrant’s Certifying Accountant			107

Item 16G. Corporate Governance			107

Item 16H. Mine Safety Disclosures			107

Item 17. Financial Statements			107

Item 18. Financial Statements			107

Item 19. Exhibits			108

*SIGNATURES*			111

*INDEX*			F-1

FORWARD-LOOKING STATEMENTS

This Annual Report should be read in conjunction with the consolidated financial statements and accompanying notes included in this report.

Statements included in this annual report which are not historical facts (including our statements concerning plans and objectives of management for future operations or economic performance, or assumptions related thereto) are forward-looking statements. In addition, we and our representatives may from time to time make other oral or written statements which are also forward-looking statements. Such statements include, in particular, statements about our plans, strategies, business prospects, changes and trends in our business, the markets in which we operate, and our ability to make cash distributions or make common unit repurchases in the future as described in this annual report. In some cases, you can identify the forward-looking statements by the use of words such as “may,” “could,” “should,” “would,” “expect,” “plan,” “anticipate,” “intend,” “forecast,” “believe,” “estimate,” “predict,” “propose,” “potential,” “continue” or the negative of these terms or other comparable terminology.

Forward-looking statements appear in a number of places and include statements with respect to, among other things:

•

the favorable timing for acquisitions and chartering opportunities in the container shipping sector and our ability to take advantage of such opportunities;

•

the value of container shipping vessels;

•

our ability to identify container shipping vessels for acquisition at attractive prices, if at all, including the availability of distressed acquisition opportunities in the container shipping industry;

•

our ability to execute on a low-cost operating structure;

•

our ability to achieve a return on investment for and to pay cash distributions to our unit holders or make common unit repurchases from our unit holders;

•

the level of trade growth and recovery of charter rates and asset values in the container shipping industry;

•

general market conditions and shipping industry trends, including charter rates, vessel values and the future supply of, and demand for, ocean-going containership shipping services;

•

any advantages resulting from our strategic focus on intermediate-size containerships;

•

our ability to leverage the scale, experience, reputation and relationships of Navios Maritime Holdings Inc. (“Navios Holdings”) and our manager Navios Shipmanagement Inc. (the “Manager”);

•

our ability to maintain or develop new and existing customer relationships with existing charterers and new customers, including liner companies;

•

our ability to successfully grow our business and our capacity to manage our expanding business;

•

future levels of distributions, as well as our distribution policy;

•

our current and future competitive strengths and business strategies and other plans and objectives for future operations;

•

our future operating and financial results, our ability to identify and consummate desirable fleet acquisitions, business strategy, areas of possible expansion and expected capital expenditure or operating expenses;

•

container shipping industry trends, including charter rates and vessel values and factors affecting vessel supply and demand as well as trends and conditions in the newbuilding markets and scrapping of vessels;

•

our future financial condition or results of operations and our future revenues and expenses, including our estimated cash flow;

•

the loss of any customer or charter or vessel;

•

the aging of our vessels and resultant increases in operation and drydocking costs;

•

the ability of our vessels to pass classification, security and customs inspections;

•

significant changes in vessel performance, including increased equipment breakdowns;

•

the creditworthiness of our charterers and the ability of our contract counterparties to fulfill their obligations to us;

•

our ability to maintain long-term relationships with major liner companies;

•

our ability to retain key executive officers and our Manager’s ability to attract and retain skilled employees;

•

our ability to access debt, credit and equity markets;

•

changes in the availability and costs of funding due to conditions in the bank market, capital markets and other factors;

•

our ability to repay outstanding indebtedness, to obtain additional financing and to obtain replacement charters for our vessels, in each case, at commercially acceptable rates or at all;

•

estimated future acquisition, maintenance and replacement expenditures;

•

future sales of our common units in the public market;

•

potential liability from litigation and our vessel operations, including discharge of pollutants;

•

our performance in safety, environmental and regulatory matters;

•

global economic outlook and growth and changes in general economic and business conditions;

•

general domestic and international political conditions, including wars, acts of piracy and terrorism;

•

changes in production of or demand for container shipments, either globally or in particular regions;

•

changes in the standard of service or the ability of our Manager to be approved as required;

•

increases in costs and expenses, including but not limited to, crew wages, insurance, technical maintenance costs, spares, stores and supplies, charter brokerage commissions on gross voyage revenues and general and administrative expenses;

•

the adequacy of our insurance arrangements and our ability to obtain insurance and required certifications;

•

the expected cost of, and our ability to comply with, governmental regulations and maritime self-regulatory organization standards, as well as standard regulations imposed by our charterers applicable to our business;

•

the changes to the regulatory requirements applicable to the shipping and container transportation industry, including, without limitation, stricter requirements adopted by international organizations, such as the International Maritime Organization and the European Union, or by individual countries or charterers and actions taken by regulatory authorities and governing such areas as safety and environmental compliance;

•

the anticipated taxation of our partnership and our unit holders;

•

potential liability and costs due to environmental, safety and other incidents involving our vessels; and

•

the effects of increasing emphasis on environmental and safety concerns by customers, governments and others, as well as changes in maritime regulations and standards.

These and other forward-looking statements are made based upon management’s current plans, expectations, estimates, assumptions and beliefs concerning future events impacting us and therefore involve a number of risks and uncertainties, including those risks discussed in “Risk Factors”.

The forward-looking statements, contained in this annual report, are based on our current expectations and beliefs concerning future developments and their potential effects on us. There can be no assurance that future developments affecting us will be those that we have anticipated.

The risks, uncertainties and assumptions involve known and unknown risks and are inherently subject to significant uncertainties and contingencies, many of which are beyond our control. We caution that forward-looking statements are not guarantees and that actual results could differ materially from those expressed or implied in the forward-looking statements.

We undertake no obligation to update any forward-looking statement or statements to reflect events or circumstances after the date on which such statement is made or to reflect the occurrence of unanticipated events. New factors emerge from time to time, and it is not possible for us to predict all of these factors. Further, we cannot assess the impact of each such factor on our business or the extent to which any such factor, or combination of such factors, may cause actual results to be materially different from those contained in any forward-looking statement.

PART I

Item 1. Identity of Directors, Senior Management and Advisers

Not Applicable.

Item 2. Offer Statistics and Expected Timetable

Not Applicable.

Item 3. Key Information

A. Selected Financial Data

The following table presents selected historical consolidated financial data giving retroactive effect to our conversion from a corporation to a limited partnership described in Note 1 to our consolidated financial statements included herein. The selected historical financial data as of December 31, 2019, 2018 and 2017, for the years ended December 31, 2019, 2018 and for the period from April 28, 2017 (date of inception) to December 31, 2017 have been derived from the audited consolidated financial statements of Navios Maritime Containers L.P. (sometimes referred to as “Navios Containers”, the “Company”, “we” or “us”) included elsewhere in this report. This information is qualified by reference to, and should be read in conjunction with, “Item 5. Operating and Financial Review and Prospects” and our consolidated financial statements and notes thereto included elsewhere in this report.

Because we were formed in April 2017, we compare the operating results of the year ended December 31, 2019 with the year ended December 31, 2018 and the period from April 28, 2017 (date of inception) to December 31, 2017. We do not have financial results for any historical period that is comparable to the results of our operations for the period from April 28, 2017 (date of inception) to December 31, 2017.

All references to our common units and per unit data included in the selected historical financial data below have been retrospectively adjusted to reflect the conversion ratio of one common share of Navios Maritime Containers Inc. (“Navios Containers Inc.”) for each common unit of Navios Containers in connection with the conversion of Navios Containers Inc. into Navios Containers.


*(in thousands of U.S. dollars, except for unit and per unit data)*	Year Ended December 31, 2019			Year Ended December 31, 2018			Period from April 28, 2017 (date of inception) to December 31, 2017
Statement of Income Data:
Revenue	$	141,532		$	133,921		$	39,188
Time charter and voyage expenses		(5,754	)		(4,178	)		(1,257	)
Direct vessel expenses		(4,077	)		(1,314	)		(672	)
Management fees (entirely through related parties transactions)		(65,638	)		(53,772	)		(16,488	)
General and administrative expenses		(10,223	)		(7,413	)		(2,262	)
Listing transaction-related expenses		—			(4,990	)		—
Depreciation and amortization		(28,647	)		(38,552	)		(13,578	)
Interest expense and finance cost		(16,846	)		(11,785	)		(2,293	)
Interest income		—			90			25
Other income		603			1,017			7
Other expense		(3,443	)		(324	)		(32	)

Net income	$	7,507		$	12,700		$	2,638

Net earnings per common unit, basic and diluted	$	0.22		$	0.38		$	0.14
Weighted average number of common units, basic and diluted		34,603,100			33,527,135			18,371,855


*(in thousands of U.S. dollars)*	December 31, 2019		December 31, 2018		December 31, 2017
Balance Sheet Data (at period end):
Total current assets	$	29,450	$	25,137	$	21,371
Vessels, net		395,621		342,693		177,597
Total assets		460,302		413,527		266,811
Total current liabilities		71,397		47,384		49,559
Long-term financial liability, net of current portion and net of deferred finance costs		69,863		78,100		—
Long-term debt, net of current portion and net of deferred finance costs		129,062		105,570		76,534
Total Partners’ capital	$	189,980	$	182,473	$	140,718


*(in thousands of U.S. dollars)*	Year Ended December 31, 2019			Year Ended December 31, 2018			Period from April 28, 2017 (date of inception) to December 31, 2017
Cash Flow Data:
Net cash provided by operating activities	$	36,976		$	47,509		$	2,623
Net cash used in investing activities		(62,513	)		(170,503	)		(249,227	)
Net cash provided by financing activities		24,754			127,385			261,105
(Decrease)/increase in cash and cash equivalents and restricted cash ⁽¹⁾	$	(783	)	$	4,391		$	14,501

Other Financial and Operating Data:


(*in thousands of U.S dollars except days and per day TCE)*	Year Ended December 31, 2019		Year Ended December 31, 2018		Period from April 28, 2017 (date of inception) to December 31, 2017
EBITDA ⁽²⁾	$	56,639	$	64,262	$	18,709
Available days ⁽³⁾		10,261		8,442		2,411
Time Charter Equivalent (TCE) per day ⁽⁴⁾		13,232		15,369		15,730

(1)	From January 1, 2018, reflects the adoption of ASU 2016-18.

(2)

EBITDA is a non-GAAP financial measure. For a reconciliation of EBITDA from net cash provided by operating activities, the most comparable U.S. GAAP liquidity measure, refer also to “Item 5. Operating and Financial Review and Prospects — Reconciliation of EBITDA from Net Cash Provided by Operating Activities”.

(3)

Available days for the fleet are total calendar days the vessels were in our possession for the relevant period after subtracting off-hire days associated with scheduled repairs or repairs under guarantee, vessel upgrades, drydocking or special surveys. The shipping industry uses available days to measure the number of days in a relevant period during which vessels should be capable of generating revenues.

(4)	TCE is defined as revenues less time charter and voyage expenses during a relevant period divided by the number of available days during the period.

B. Capitalization and indebtedness.

Not applicable.

C. Reasons for the offer and use of proceeds.

Not applicable.

D. Risk factors

Although many of our business risks are comparable to those a corporation engaged in a similar business would face, limited partner interests are inherently different from the capital stock of a corporation. You should carefully consider the following risk factors together with all of the other information included in this Annual Report and in documents incorporated by reference in this Annual Report when evaluating an investment in our securities.

If any of the following risks actually occur, our business, financial condition, cash flows or operating results could be materially adversely affected. In that case, we might not be able to pay distributions on our common units, the trading price of our common units could decline, and you could lose all or part of your investment.

Risks Relating to the Shipping Industry and the Operation of our Vessels

Our profitability and growth depends upon world and regional demand for chartering containerships, and weakness in the global economy may impede our ability to generate cash flows, maintain liquidity and continue to grow our business.

The ocean-going container shipping industry is both cyclical and volatile in terms of charter rates, profitability and, consequently, vessel values. According to industry data, containership charter rates peaked in 2005, with the Clarksons Containership Timecharter Rate Index (a $/day per TEU weighted average of 6-12 month time charter rates of Panamax and smaller vessels (1993=100)) reaching 172 points in March and April 2005, and generally stayed above 100 points until the middle of 2008, when the effects of the economic crisis began to affect global container trade, driving the Containership Timecharter Rate Index to a 10-year low of 32 points in the period from November 2009 to January 2010. As of the end of January 2019, the Containership Timecharter Rate Index stood at 50 points, peaked at 63 in September 2019 and then fell to 55 at the beginning of March 2020.

Demand for container shipments declined significantly from 2008 to 2009 in the aftermath of the global financial crisis but has increased each year from 2009 to 2018 and is estimated to have increased in 2019. From 2009 to 2011, there was improvement on the Far East-to-Europe and Trans-Pacific Eastbound container trade lanes, alongside improvements also witnessed on other, non-main lane, trade routes including certain intra-Asia and North-South trade routes. More recently, since the second half of 2015, a slowdown in demand in certain key container trade routes, including the Asia to Europe route at a time of increased vessel supply, has resulted in the highest annual scrapping on record. The oversupply in our market continued to prevent any significant rise in time charter rates for both short-term and long-term periods. Additional orders for large and very large containerships have been placed since 2014, both increasing the expected future supply of larger vessels and having a spillover effect on the market segment for smaller vessels. Ordering of containerships slowed significantly in 2016 and 2017. Since the middle of 2016, as economic growth returned to world markets and in combination with continued scrapping, time charter rates rose and have remained above their 2016 lows.

The continuation of this containership oversupply or any declines in container freight rates could negatively affect the liner companies to which we seek to charter our containerships. The decline in the containership market has affected the major liner companies and the value of container vessels, which follow the trends of freight rates and containership charter rates, and can affect the earnings on our charters, and similarly, our cash flows and liquidity. The decline in the containership charter market has had, and may continue to have, additional adverse consequences for the container industry, including a less active secondhand market for the sale of vessels and charterers not performing under, or requesting modifications of, existing time charters. Weak or volatile conditions in the containership sector may affect our ability to generate cash flows and maintain liquidity, as well as adversely affect our ability to obtain financing.

The factors affecting the supply and demand for containerships are outside of our control, and the nature, timing and degree of changes in industry conditions are unpredictable. The factors that influence demand for containership capacity include:

•

global and regional economic conditions;

•

developments in international trade, including the effects of currency exchange rate changes;

•

changes in seaborne and other transportation patterns, such as port congestion and canal closures or expansions;

•

supply and demand for products shipped in containers;

•

changes in global production of raw materials, semi-finished goods or products transported by containerships;

•

the distance containers are to be moved by sea;

•

fuel prices for the bunker fuel used aboard ships;

•

whether the containership is equipped with scrubbers or not;

•

natural or man-made disasters;

•

the globalization of manufacturing;

•

carrier alliances, vessel sharing or container slot sharing that seek to allocate containership capacity on routes;

•

armed conflicts and terrorist activities, including piracy;

•

political, environmental and other regulatory developments, including but not limited to, governmental macroeconomic policy changes, import and export restrictions, trade wars, central bank policies and pollution conventions or protocols;

•

embargoes and strikes; and

•

technical advances in ship design and construction.

The factors that influence the supply of containership capacity include:

•

the number of vessels that are in or out of service;

•

the scrapping rate of older vessels;

•

the availability of finance or lack thereof for ordering newbuildings or for facilitating ship sale and purchase transactions;

•

port and canal traffic and congestion, including canal improvements that can affect employment of ships designed for older canals;

•

the number of newbuilding deliveries;

•

vessel casualties;

•

changes in environmental and other regulations and standards (including IMO rules requiring a reduction in the use of high sulphur fuels and the fitting of additional ballast water treatment systems) that limit the profitability, operations or useful lives of vessels;

•

the availability of shipyard capacity;

•

the price of steel, fuel and other raw materials; and

•

the economics of slow steaming.

Our ability to re-charter our containerships upon the expiration or termination of their current time charters and the charter rates payable under any replacement or new time charters will depend upon, among other things, the prevailing state of the containership charter market, which can be affected by the abovementioned factors. If the charter market is depressed when our containerships’ time charters expire or when we are otherwise seeking new charters, we may be forced to charter our containerships at reduced or even unprofitable rates, or we may not be able to charter them at all and/or we may be forced to scrap them, which may reduce or eliminate our earnings or any future distribution or make our earnings volatile.

An oversupply of containership capacity may depress charter rates, as has happened in the past, or prolong the period of depressed charter rates, and adversely affect our ability to charter our containerships at profitable rates or at all.

From 2005 through 2010, the containership orderbook was at historically high levels as a percentage of the in-water fleet reaching a high of 61.3% in November 2007, according to industry data. Since that time, deliveries of previously ordered containerships increased substantially and ordering momentum slowed somewhat with the total orderbook declining as a percentage of the existing fleet from 20.8% in August 2015 to an all-time low of 9.6% in October 2019 and stood at 9.8% in March 2020. The orderbook remains significantly skewed towards vessels over 8,000 TEU. An oversupply of large newbuilding vessel and/or re-chartered containership capacity entering the market, combined with any decline in the demand for containerships, may prolong or further depress the current low charter rates and may decrease our ability to charter our containerships when we are seeking new or replacement charters other than for unprofitable or reduced rates, or we may not be able to charter our containerships at all.

The market value of our vessels may fluctuate significantly. If vessel values are low at a time when we are attempting to dispose of a vessel, we could incur a loss.

Containership vessel values remain below historical averages and may continue to remain at low, or lower, levels for a prolonged period of time and can fluctuate significantly over time due to a number of different factors. The factors that influence vessel values include:

•

the number of newbuilding deliveries;

•

prevailing economic conditions in the markets in which containerships operate;

•

reduced demand for containerships, including as a result of a substantial or extended decline in world trade;

•

the number of vessels scrapped or otherwise removed from the total fleet;

•

changes in environmental and other regulations that may limit the useful life of vessels;

•

types and sizes of vessels;

•

the development of an increase in use of other modes of transportation;

•

where the ship was built and as-built specification;

•

lifetime maintenance record;

•

the cost of vessel acquisitions;

•

governmental or other regulations;

•

prevailing level of charter rates;

•

the availability of financing, or lack thereof, for ordering newbuildings or for facilitating ship sale and purchase transactions;

•

general economic and market conditions affecting the shipping industry; and

•

the cost of retrofitting or modifying existing ships to respond to technological advances in vessel design or equipment, changes in applicable environmental or other regulations or standards, or otherwise.

If the book value of a vessel is impaired due to unfavorable market conditions, or a vessel is sold at a price below its book value, we would incur a loss. If a charter expires or is terminated, we may be unable to re-charter the vessel at an acceptable rate and, rather than continue to incur costs to maintain the vessel, may seek to dispose of it. Our inability to dispose of a vessel at a reasonable price could result in a loss on its sale and could materially and adversely affect our business, results of operations and financial condition, as well as our cash flows, including cash available for distributions to our unit holders and repurchases of common units.

Weak economic conditions throughout the world, particularly the Asia Pacific region, renewed terrorist activity, the growing refugee crises, trade wars and protectionist policies, could have a material adverse effect on our business, financial condition and results of operations.

The global economy remains relatively weak, especially when compared to the period prior to the 2008-2009 financial crisis. The current global recovery is proceeding at varying speeds across regions and is still subject to downside economic risks stemming from factors like fiscal fragility in advanced economies, high sovereign and private debt levels, highly accommodative macroeconomic policies, the significant fall in the price of crude oil and other commodities and persistent difficulties in access to credit and equity financing as well as political risks such as the continuing war in Syria, renewed terrorist attacks around the world and the emergence of populist and protectionist political movements in advanced economies.

Concerns regarding terrorist threats from groups in Europe and the refugee crisis may advance protectionist policies and may negatively impact globalization and global economic growth, which could disrupt financial markets, and may lead to weaker consumer demand in the European Union, the United States, and other parts of the world which could have a material adverse effect on our business. The deterioration in the global economy has caused, and may continue to cause, a decrease in worldwide demand for certain goods shipped in containerized form.

In recent years, China has been one of the world’s fastest growing economies in terms of gross domestic product, which has had a significant impact on shipping demand. However, if China’s growth in gross domestic product declines and other countries in the Asia Pacific region experience slower or negative economic growth in the future, this may negatively affect the fragile recovery of the economies of the United States and the European Union, and thus, may negatively impact container shipping demand. For example, the possibility of the introduction of impediments to trade within the European Union member countries in response to increasing terrorist activities, and the possibility of market reforms to float the Chinese renminbi, either of which development could weaken the euro against the Chinese renminbi, could adversely affect consumer demand in the European Union. Moreover, the revaluation of the renminbi may negatively impact the United States’ demand for imported goods, many of which are shipped from China in containerized form. Political events such as a global trade war between the U.S. and China, or any moves by either China, the United States or the European Union to levy additional tariffs on imported goods carried in containers as part of protectionist measures or otherwise could decrease container shipping demand. Such weak economic conditions or protectionist measures could have a material adverse effect on our business, results of operations and financial condition, as well as our cash flows, including cash available for distributions to our unit holders and repurchases of common units.

Disruptions in global financial markets from terrorist attacks, regional armed conflicts, general political unrest, the emergence of a pandemic or epidemic crisis and the resulting governmental action could have a material adverse impact on our results of operations, financial condition and cash flows.

Terrorist attacks in certain parts of the world and the continuing response of the United States and other countries to these attacks, as well as the threat of future terrorist attacks, continue to cause uncertainty and volatility in the world financial markets and may affect our business, results of operations and financial condition. The continuing refugee crisis in the European Union, the continuing war in Syria and the presence of terrorist organizations in the Middle East, conflicts and turmoil in Yemen, Iraq, Afghanistan and Iran, general political unrest in Ukraine, political tension, continuing concerns relating to Brexit (as defined herein), concerns regarding the recent emergence of the COVID19, and its spread throughout Asia and other parts of the world, and other viral outbreaks or conflicts in the Asia Pacific Region such as in the South China Sea, mainland China and North Korea have led to increased volatility in global credit and equity markets. Further, as a result of the ongoing political, social and economic turmoil in Greece resulting from the sovereign debt crisis and the influx of refugees from Syria and other areas, the operations of our Manager located in Greece may be subjected to new regulations and potential shift in government policies that may require us to incur new or additional compliance or other administrative costs and may require the payment of new taxes or other fees. We also face the risk that strikes, work stoppages, civil unrest and violence within Greece may disrupt the shoreside operations of our Manager located in Greece.

In addition, global financial markets and economic conditions have been severely disrupted and volatile in recent years and remain subject to significant vulnerabilities, such as the deterioration of fiscal balances and the rapid accumulation of public debt, continued deleveraging in the banking sector and a limited supply of credit. Credit markets as well as the debt and equity capital markets were exceedingly distressed during 2008 and 2009 and have been volatile since that time. The resulting uncertainty and volatility in the global financial markets may accordingly affect our business, results of operations and financial condition. These uncertainties, as well as future hostilities or other political instability in regions where our vessels trade, could also affect trade volumes and patterns and adversely affect our operations, and otherwise have a material adverse effect on our business, results of operations and financial condition, as well as our cash flows and cash available for distributions to our unit holders and repurchases of common units.

Specifically, these issues, along with the re-pricing of credit risk and the difficulties currently experienced by financial institutions, have made, and will likely continue to make, it difficult to obtain financing. As a result of the disruptions in the credit markets and higher capital requirements, many lenders have increased margins on lending rates, enacted tighter lending standards, required more restrictive terms (including higher collateral ratios for advances, shorter maturities and smaller loan amounts), or have refused to refinance existing debt at all. Furthermore, certain banks that have historically been significant lenders to the shipping industry have reduced or ceased lending activities in the shipping industry. Additional tightening of capital requirements and the resulting policies adopted by lenders, could further reduce lending activities. We may experience difficulties obtaining financing commitments or be unable to fully draw on the capacity under our committed term loans in the future if our lenders are unwilling to extend financing to us or unable to meet their funding obligations due to their own liquidity, capital or solvency issues. We cannot be certain that financing will be available on acceptable terms or at all. If financing is not available when needed, or is available only on unfavorable terms, we may be unable to meet our future obligations as they come due. Our failure to obtain such funds could have a material adverse effect on our business, results of operations and financial condition, as well as our cash flows, including cash available for distributions to our unit holders and repurchases of common units. In the absence of available financing, we also may be unable to take advantage of business opportunities or respond to competitive pressures.

Our financial and operating performance may be adversely affected by the recent novel coronavirus outbreak.

Our business could be materially and adversely affected by the outbreak of the recent COVID19. The coronavirus or other epidemics or pandemics could potentially disrupt our operations and significantly affect global markets, affecting the demand for our services, global demand for goods shipped in containers as well as the price of international freights and hires. If the effect of the coronavirus is ongoing, we may be unable to charter our vessels at the rates or for the length of time we currently expect. The effects of the coronavirus remain uncertain, and should our liner company customers be under financial pressure this could negatively affect our charterers’ willingness to perform their obligations under our time charters. The loss or termination of any of our time charters, or a decline in payments under our time charters, could have a material adverse effect on our business, results of operations and financial condition, as well as our cash flows, including cash available for distributions to our unit holders and repurchases of common units.

In addition, certain countries have introduced travel restrictions and adopted certain hygiene measures, including quarantining. European countries have recently adopted more stringent measures to contain the spread of the virus. Any prolonged measure may affect our normal operations and those of our Manager. All these measures have further affected the process of construction and repair of vessels, as well as the presence of workers in shipyards, of administrative personnel in their offices, and of seafarers. Any prolonged restrictive measures in order to control the novel coronavirus or other adverse global public health developments may have a material and adverse effect on our business operations and demand for our vessels generally.

We are dependent on our charterers and other counterparties fulfilling their obligations under agreements with us, and their inability or unwillingness to honor these obligations could significantly reduce our revenues and cash flow.

Payments to us by our charterers under time charters are and will be our sole source of operating cash flow. Weaknesses in demand for container shipping services, increased operating costs due to changes in environmental or other regulations and the oversupply of large containerships as well as the oversupply of smaller size vessels due to a cascading effect would place our liner company customers under financial pressure. Any declines in demand could result in worsening financial challenges to our liner company customers and may increase the likelihood of one or more of our customers being unable or unwilling to pay us contracted charter rates or going bankrupt.

If we lose a time charter because the charterer is unable to pay us or for any other reason, we may be unable to re-deploy the related vessel on similarly favorable terms or at all. Also, we will not receive any revenues from such a vessel while it is un-chartered, but we will be required to pay expenses necessary to maintain and insure the vessel and service any indebtedness on it. The combination of any surplus of containership capacity, the expected entry into service of new technologically advanced containerships, and the expected increase in the size of the world containership fleet over the next few years may make it difficult to secure substitute employment for any of our containerships if our counterparties fail to perform their obligations under the currently arranged time charters, and any new charter arrangements we are able to secure may be at lower rates. Furthermore, the surplus of containerships available at lower charter rates and lack of demand for our customers’ liner services could negatively affect our charterers’ willingness to perform their obligations under our time charters, particularly if the charter rates in such time charters are significantly above the prevailing market rates. Accordingly we may have to grant concessions to our charterers in the form of lower charter rates for the remaining duration of the relevant charter or part thereof, or to agree to re-charter vessels coming off charter at reduced rates compared to the charter then ended. Because we enter into short-term and medium-term time charters from time-to-time, we may need to re-charter vessels coming off charter more frequently than some of our competitors, which may have a material adverse effect on business, results of operations and financial condition, as well as our cash flows, including cash available for distributions to our unit holders and repurchases of common units.

The loss of any of our charterers, time charters or vessels, or a decline in payments under our time charters, could have a material adverse effect on our business, results of operations and financial condition, as well as our cash flows, including cash available for distributions to our unit holders and repurchases of common units.

In addition to charter parties, we may, among other things, enter into contracts for the sale or purchase of secondhand containerships or, in the future, shipbuilding contracts for newbuildings, provide performance guarantees relating to shipbuilding contracts to sale and purchase contracts or to charters, enter into credit facilities or other financing arrangements, accept commitment letters from banks, or enter into insurance contracts and interest or exchange rate swaps or enter into joint ventures. Such agreements expose us to counterparty credit risk. The ability and willingness of each of our counterparties to perform its obligations under a contract with us will depend upon a number of factors that are beyond our control and may include, among other things, general economic conditions, the state of the capital markets, the condition of the ocean-going container shipping industry and charter hire rates. Should a counterparty fail to honor its obligations under agreements with us, we could sustain significant losses, which in turn could have a material adverse effect on our business, results of operations and financial condition, as well as our cash flows, including cash available for distributions to our unit holders and repurchases of common units.

A limited number of customers operating in a consolidating industry comprise a large part of our revenues. The loss of these customers could adversely affect our results of operations, cash flows and competitive position and further consolidation among our customers will reduce our bargaining power.

Our customers in the containership sector consist of a limited number of liner companies. For the year ended December 31, 2019 two customers, NOL Liner PTE Ltd and Hapag-Lloyd AG, represented 30.8% and 17.9% of our total revenues, respectively. For the year ended December 31, 2018, two customers, NOL Liner PTE Ltd and Mitsui O.S.K. Lines represented 30.5% and 25.7% of our total revenues, respectively. For the period from April 28, 2017 (date of inception) to December 31, 2017, one customer, Mitsui O.S.K. Lines represented 71.0% of our total revenues. The tough economic conditions faced by liner companies and the intense competition among them has caused, and may in the future cause, certain liner companies to default and are also resulting in consolidation among liner companies. The number of leading liner companies which are our client base may continue to shrink and we may depend on an even more limited number of customers to generate a substantial portion of our revenues. The cessation of business with these liner companies or their failure to fulfill their obligations under the time charters for our containerships could have a material adverse effect on our business, financial condition and results of operations, as well as our cash flows, including cash available for distributions to our unit holders and repurchases of common units. In addition to consolidations, alliances involving our customers could further increase the concentration of our business and reduce our bargaining power.

We could lose a customer or the benefits of our time charter arrangements for many different reasons, including if the customer is unable or unwilling to make charter hire or other payments to us because of a deterioration in its financial condition, disagreements with us or if the charterer exercises certain termination rights or otherwise. If any of these customers terminate its charters, chooses not to re-charter our ships after charters expire or is unable to perform under its charters and we are not able to find replacement charters on similar terms or are unable to re-charter our ships at all, we will suffer a loss of revenues that could have a material adverse effect on our business, results of operations and financial condition and our ability to make distributions to our unit holders and repurchases of common units.

Refer also to “Item 4. Information on the Company — Business Overview — Our Customers”.

Our growth depends on our ability to expand relationships with existing charterers, establish relationships with new customers and obtain new time charters, for which we will face substantial competition from new entrants and established companies with significant resources.

One of our principal objectives is to acquire additional containerships in conjunction with entering into long-term, fixed-rate charters for these vessels. The process of obtaining new fixed-rate charters is highly competitive and generally involves an intensive screening process and competitive bids, and often extends for several months. Generally, we compete for charters based upon charter rate, customer relationships, operating expertise, professional reputation and containership specifications, including size, age and condition.

In addition, as vessels age, it can be more difficult to employ them on profitable time charters, particularly during periods of decreased demand in the charter market. Accordingly, we may find it difficult to continue to find profitable employment for our vessels as they age.

We face substantial competition from a number of experienced companies, including state-sponsored entities and financial organizations. Some of these competitors have significantly greater financial resources than we do, and can therefore operate larger fleets and may be able to offer better charter rates. In the future, we may also face competition from reputable, experienced and well-capitalized marine transportation companies, including state-sponsored entities, that do not currently own containerships, but may choose to do so. Any increased competition may cause greater price competition for time charters, as well as for the acquisition of high-quality secondhand vessels and newbuilding vessels. Further, since the charter rate is generally considered to be one of the principal factors in a charterer’s decision to charter a vessel, the rates offered by our competitors can place downward pressure on rates throughout the charter market. On the other hand, consolidation among liner companies and the creation of alliances among liner companies have increased their negotiation power. As a result of these factors, we may be unable to charter our containerships, expand our relationships with existing customers or to obtain new customers on a profitable basis, if at all, which could have a material adverse effect on our business, results of operations and financial condition, as well as our cash flows, including cash available for distributions to our unit holders and repurchases of common units.

Due to our lack of diversification, adverse developments in the container shipping industry could reduce our ability to service our debt obligations and make distributions to our unit holders and repurchases of common units.

We rely exclusively on the cash flow generated from charters for our containerships and our fleet is focused on a limited size and type of vessel. Our fleet of 29 containerships 25 are between 3,450 TEU and 4,730 TEU. The number of vessels with 10,000 or more TEU capacity has increased substantially since 2006, and as of March 12, 2020, vessels over 10,000 TEU account for 35% of the world containership fleet in terms of fleet capacity, while vessels above 13,000 TEU represent 28% of fleet capacity. Based on containership order data, we expect the increase in containership vessel capacity will continue. Due to the current evolution to larger vessels there can be adjustments to trade patterns, particularly on the main trade lanes, as smaller replaced ships may cascade down to secondary trade lanes, as long as there is sufficient demand and the physical infrastructure is in place to accommodate them. Therefore, the development of large ships not only impacts the trade lanes in which these ships are used, but the entire maritime containerized transport chain as well. As a result, we cannot assure you that we will be able to successfully renew the charters for our size vessels at favorable rates, if at all, which may have an adverse effect on our revenues, profitability, cash flows and our ability to comply with the financial covenants in our loan agreements.

In addition, under the Omnibus Agreement, we have agreed that we will own and operate only containerships. Due to our lack of diversification, an adverse development in the container shipping industry would have a significantly greater impact on our financial condition and results of operations than if we maintained more diverse assets or lines of business. An adverse development could also impair our ability to service debt or make distributions to our unit holders and repurchases of common units.

We currently have a majority of our vessels on short-term and medium-term charters and we expect to continue to charter a portion of our fleet on short-term to medium-term charters in the future. As a result, the charter rates we obtain are less predictable than rates we would capture under longer-term charters, which may have an adverse impact on our growth. The current time charters for 24 of our 29 containerships, will expire before the end of 2020. While we generally expect to be able to obtain time charters for our vessels within a reasonable period prior to their time charter expiry or delivery, as applicable, we cannot be assured that this will occur in any particular case, or at all. The current economic conditions have reduced the demand for long-term time charters while the supply of containerships has increased due to newbuilding deliveries and the ongoing consolidation among liner companies. In addition, even if a short-term time charter is secured it may be at unprofitable rates and may not be continuous, leaving the vessels idle for some days in between charters. If there is a downward trend in the market, we expect to have difficulty entering into multi-year, fixed-rate time charters for our containerships due to the increased supply of containerships and the possibility of lower rates in the spot market. We would then have to charter more of our containerships for shorter periods upon expiration or early termination of the current charters. As a result, our revenues, cash flows and profitability would then reflect fluctuations in the short-term charter market and become more volatile. It may also become more difficult or expensive to finance or re-finance vessels that do not have long-term employment at fixed rates. In addition, we may have to enter into charters based on changing market prices, as opposed to contracts based on fixed rates, which would increase the volatility of our revenues, cash-flows and profitability and, during a prolonged period of depressed charter rates, could also result in a decrease in our revenues, cash flows and profitability. If we are unable to re-charter these containerships or obtain new time charters at favorable rates or at all, it could have a material adverse effect on our business, results of operations and financial condition, as well as our cash flows, including cash available for distributions to our unit holders and repurchases of common units.

An increase in trade protectionism and the unraveling of multilateral trade agreements could have a material adverse impact on our charterers’ business and, in turn, could cause a material adverse impact on our results of operations, financial condition and cash flows.

Our operations expose us to the risk that increased trade protectionism will adversely affect our business. Recently, government leaders have declared that their countries may turn to trade barriers to protect or revive their domestic industries in the face of foreign imports, thereby depressing the demand for shipping. On January 31, 2020, the United Kingdom withdrew from the European Union (“Brexit”), opening a standstill transition period that is currently set to last until December 31, 2020. The ongoing negotiations surrounding Brexit have yet to provide clarity on what the outcome will be for the United Kingdom or Europe, which could significantly disrupt the free movement of goods, services, and people between the United Kingdom and the European Union. In the United States, the current administration has created significant uncertainty about the future relationship between the United States and other exporting countries, including with respect to trade policies, treaties, government regulations and tariffs. The U.S. presidential administration has stated that it rejects multilateral trade agreements in favor of bilateral relations and purports to seek more favorable terms in its dealings with its trade partners. The U.S. administration has indicated that it may resort to aggressive tactics, such as the imposition of punitive tariffs, in order to secure achieve these goals in addition to those already implemented.

Restrictions on imports, including in the form of tariffs, could have a major impact on global trade and demand for shipping. Specifically, increasing trade protectionism in the markets that our charterers serve may cause an increase in (i) the cost of goods exported from exporting countries such as China and Mexico, (ii) the length of time required to deliver goods from exporting countries, (iii) the costs of such delivery and (iv) the risks associated with exporting goods. These factors may result in a decrease in the quantity of goods to be shipped and the distances those goods travel. Protectionist developments, or the perception they may occur, may have a material adverse effect on global economic conditions, and may significantly reduce global trade, including trade between the United States and China. These developments would have an adverse impact on our charterers’ business, operating results and financial condition. This could, in turn, affect our charterers’ ability to make timely charter hire payments to us and impair our ability to renew charters and grow our business. This could have a material adverse effect on our business, results of operations and financial condition, as well as our cash flows, including cash available for distributions to our unit holders and repurchases of common units.

A decrease in the level of China’s export of goods or an increase in trade protectionism could have a material adverse impact on our charterers’ business and, in turn, could cause a material adverse impact on our results of operations, financial condition and cash flows.

China exports considerably more goods than it imports. Our containerships are deployed on routes involving containerized trade in and out of emerging markets, and our charterers’ container shipping and business revenue may be derived from the shipment of goods from the Asia Pacific region, including China, to various overseas export markets including the United States and Europe. The ongoing global trade war between the U.S. and China may contribute to an economic slowdown in China. Any reduction in or hindrance to the output of China-based exporters could have a material adverse effect on the growth rate of China’s exports and on our charterers’ business. For instance, the government of China has implemented economic policies aimed at increasing domestic consumption of Chinese-made goods. This may have the effect of reducing the supply of goods available for export and may, in turn, result in a decrease of demand for container shipping. Additionally, while there is an increasing level of autonomy and a gradual shift in emphasis to a “market economy” and enterprise reform in China, many of the reforms, particularly some limited price reforms that result in the prices for certain commodities being principally determined by market forces, are unprecedented or experimental and may be subject to revision, change or abolition. The level of imports to and exports from China could be adversely affected by changes to these economic reforms by the Chinese government, as well as by changes in political, economic and social conditions or other relevant policies of the Chinese government.

In China, trade protectionism may cause (i) a decrease in cargoes available to our charterers in favor of Chinese charterers and Chinese owned ships and (ii) an increase in the risks associated with importing goods to China. Any increased trade barriers or restrictions on trade, especially trade with China, would have an adverse impact on our charterers’ business, operating results and financial condition and could thereby affect their ability to make timely charter hire payments to us and to renew and increase the number of their time charters with us.

In addition, China has enacted a new tax for non-resident international transportation enterprises engaged in the provision of services of passengers or cargo, among other items, in and out of China using their own, chartered or leased vessels, including any stevedore, warehousing and other services connected with the transportation. The new regulation broadens the range of international transportation companies which may find themselves liable for Chinese enterprise income tax on profits generated from international transportation services passing through Chinese ports. This tax or similar regulations by China may reduce our operating results and may also result in an increase in the cost of goods exported from China and the risks associated with exporting goods from China, as well as a decrease in the quantity of goods to be shipped from or through China, which would have an adverse impact on our charterers’ business, operating results and financial condition and could thereby affect their ability to make timely charter hire payments to us and to renew and increase the number of their time charters with us.

We conduct a substantial amount of business in China. The legal system in China has inherent uncertainties that could limit the legal protections available to us and could have a material adverse impact on our business, results of operations, financial condition and cash flows.

Many of our vessels regularly call to ports in China and we have entered into sale and leaseback transactions with Chinese financial institutions. Although our charters and sale and leaseback agreements are governed by English law, we may have difficulties enforcing a judgment rendered by an English court (or other non-Chinese court) in China. Such charters and any additional agreements that we enter into with Chinese counterparties, may be subject to new regulations in China that may require us to incur new or additional compliance or other administrative costs and pay new taxes or other fees to the Chinese government. Changes in laws and regulations, including with regards to tax matters, and their implementation by local authorities could affect our vessels chartered to Chinese customers as well as our vessels calling to Chinese ports and could have a material adverse effect on our business, results of operations and financial condition, as well as our cash flows, including cash available for distributions to our unit holders and repurchases of common units.

We may have difficulty properly managing our growth through acquisitions of secondhand, or potentially new vessels, and we may not realize expected benefits from these acquisitions, which may negatively impact our cash flows, liquidity and our ability to make distributions to our unit holders and repurchases of common units.

We intend to grow our business through selective acquisitions of quality secondhand vessels to the extent that they are available and may order newbuilding vessels in the future. Our future growth will primarily depend on:

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the availability of employment for our vessels;

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locating and identifying suitable quality secondhand vessels;

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obtaining required financing on acceptable terms;

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consummating vessel acquisitions;

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enlarging our customer base;

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continuing to meet technical and safety performance standards;

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managing significant acquisitions and integrating newly acquired vessels into our fleet;

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the potential to identify and enter into shipbuilding contracts at acceptable prices; and

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the operations of the shipyards that build any newbuilding vessels that we may order in the future and any delays in delivery that may arise as a result.

Vessel values are correlated with charter rates. During periods in which charter rates are high, vessel values are generally high as well, and it may be difficult to consummate ship acquisitions or potentially enter into shipbuilding contracts in the future at favorable prices. During periods in which charter rates are low and employment is scarce, vessel values are low and any vessel acquired without time charter attached will automatically incur additional expenses to operate, insure, maintain and finance the vessel thereby significantly increasing the acquisition cost. In addition, any vessel acquisition may not be profitable at or after the time of acquisition and may not generate cash flows sufficient to justify the investment. We may not be successful in executing any future growth plans and we cannot give any assurance that we will not incur significant expenses and losses in connection with such growth efforts. Other risks associated with vessel acquisitions that may harm our business, financial condition and operating results include the risks that we may:

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fail to realize anticipated benefits, such as new customer relationships, cost-savings or cash flow enhancements;

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decrease our liquidity by using a significant portion of available cash or borrowing capacity to finance acquisitions;

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significantly increase our interest expense or financial leverage if we incur additional debt to finance acquisitions;

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incur or assume unanticipated liabilities, losses or costs associated with any vessels or businesses acquired; or

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incur other significant charges, such as impairment of goodwill or other intangible assets, asset devaluation or restructuring charges.

Unlike newbuilding vessels, secondhand vessels typically do not carry warranties as to their condition. While we generally inspect existing vessels prior to purchase, such an inspection would normally not provide us with as much knowledge of a vessel’s condition as we would possess if it had been built for us and operated by us during its life. Repairs and maintenance costs for secondhand vessels are difficult to predict and may be substantially higher than for vessels we have operated since they were built. These costs could decrease our cash flows, liquidity and our ability to make distributions to our unit holders and repurchases of common units.

Additionally, if the delivery of any vessel is materially delayed or cancelled, especially if we have committed the vessel to a charter for which we become responsible for substantial liquidated damages to the customer as a result of the delay or cancellation, our business, financial condition and results of operations, which would materially and adversely affect our business, results of operations, financial condition and cash flows, including cash available for distributions to our unit holders and repurchases of common units.

Unless we set aside reserves or are able to borrow funds for vessel replacement, at the end of the useful lives of our vessels our revenue will decline, which would adversely affect our business, results of operations and financial condition.

Our fleet of 29 containerships, has an average age of 11.7 years. Refer also to “Item 4. Information on the Company — Business Overview — Our Fleet”. Unless we maintain reserves or are able to borrow or raise funds for vessel replacement, we will be unable to replace the older vessels in our fleet. Our cash flows and income are dependent on the revenues earned by the chartering of our containerships. The inability to replace the vessels in our fleet upon the expiration of their useful lives could have a material adverse effect on our business, results of operations and financial condition, as well as our cash flows, including cash available for distributions to our unit holders and repurchases of common units.

The aging of our fleet may result in increased operating costs in the future, which could adversely affect our earnings.

As noted above, our fleet of 29 containerships, has an average age of 11.7 years. In general, the cost of maintaining a vessel in good operating condition increases with the age of the vessel. As our fleet ages, we will incur increased costs. Older vessels may require longer and more expensive dry-dockings, resulting in more off-hire days and reduced revenue. Older vessels are typically less fuel efficient and more costly to maintain than more recently constructed vessels due to improvements in engine technology. In addition, older vessels are often less desirable to charterers. Governmental regulations and safety or other equipment standards related to the age of a vessel may also require expenditures for alterations or the addition of new equipment to our vessels and may restrict the type of activities in which our containerships may engage. Refer also to “Item 4. Information on the Company — Business Overview — Our Fleet”. We cannot assure you that, as our vessels age, market conditions will justify such expenditures or will enable us to profitably operate our older vessels.

Fuel price fluctuations may have an adverse effect on our profits.

The cost of fuel is a significant factor in negotiating charter rates and can affect us in both direct and indirect ways. This cost will be borne by us when our containerships are not employed or are employed on voyage charters or contracts of affreightment. We currently have no voyage charters or contracts of affreightment, but we may enter into such arrangements in the future, and to the extent we do so, an increase in the price of fuel beyond our expectations may adversely affect our profitability. Even where the cost of fuel is borne by the charterer, which is the case with all of our existing time charters that cost may affect the level of charter rates that charterers are prepared to pay. Rising costs of fuel will make our older and less fuel efficient vessels less competitive compared to the more fuel efficient newer vessels or compared with vessels which can utilize less expensive fuel and may reduce their charter hire, limit their employment opportunities and force us to employ them at a discount compared to the charter rates commanded by more fuel efficient vessels or not at all.

Falling costs of fuel may lead our charterers to abandon slow steaming, thereby releasing additional capacity into the market and exerting downward pressure on charter rates or may lead our charterers to employ older, less fuel efficient vessels which may drive down charter rates and make it more difficult for us to secure employment for our newer vessels.

The price and supply of fuel is unpredictable and fluctuates based on events outside our control, including geo-political developments, supply and demand for oil, actions by members of the OPEC and other oil and gas producers, economic or other sanctions levied against oil and gas producing countries, war and unrest in oil producing countries and regions, regional production patterns and environmental concerns and regulations.

Our vessels may be subject to unbudgeted periods of off-hire, which could materially adversely affect our business, financial condition and results of operations.

Under the terms of the charter agreements under which our vessels operate, when a vessel is “off-hire,” or not available for service or otherwise deficient in its condition or performance, the charterer generally is not required to pay the hire rate, and we will be responsible for all costs (including the cost of bunker fuel) unless the charterer is responsible for the circumstances giving rise to the lack of availability. A vessel generally will be deemed to be off-hire if there is an occurrence preventing the full working of the vessel due to, among other things:

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operational deficiencies;

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the removal of a vessel from the water for repairs, maintenance or inspection, which is referred to as drydocking;

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equipment breakdowns;

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delays due to accidents or deviations from course;

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occurrence of hostilities in the vessel’s flag state or in the event of piracy;

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a natural or man-made event of force majeure;

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crewing strikes, labor boycotts, certain vessel detentions or similar problems; or

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our failure to maintain the vessel in compliance with its specifications, contractual standards and applicable country of registry and international regulations or to provide the required crew.

Under some of our charters, the charterer is permitted to terminate the time charter if the vessel is off-hire for an extended period, which is generally defined as a period of 90 or more consecutive off-hire days. Under some circumstances, an event of force majeure may also permit the charterer to terminate the time charter or suspend payment of charter hire.

As we do not maintain off-hire insurance except in cases of loss of hire up to a limited number of days due to war or piracy events any extended off-hire period could have a material adverse effect on our results of operations, cash flows and financial condition.

We must make substantial capital expenditures to maintain the operating capacity of our fleet and acquire vessels, which may reduce the amount of cash for distributions to our unit holders and repurchases of common units.

We must make substantial capital expenditures to maintain the operating capacity of our fleet and replace, over the long-term, the operating capacity of our fleet and we generally expect to finance these maintenance capital expenditures with cash balances or credit facilities. In addition, we will need to make substantial capital expenditures to acquire vessels in accordance with our growth strategy. These expenditures could increase as a result of, among other things: the cost of labor and materials; customer requirements; the size of our fleet; the cost of replacement vessels; the length of charters; governmental regulations and maritime self-regulatory organization standards relating to safety, security or the environment; competitive standards; and the age of our ships. Significant capital expenditures, including to maintain and replace, over the long-term, the operating capacity of our fleet, as well as to comply with environmental and safety regulations, may reduce or eliminate the amount of cash available for distribution to our unit holders and repurchases of common units.

Increased competition in technology and innovation could reduce our charter hire income and the value of our vessels.

The charter hire rates and the value and operational life of a vessel are determined by a number of factors including the vessel’s efficiency, operational flexibility and physical life. Efficiency includes vessel speed, fuel economy, loading and discharging speed and personnel required to operate. The potential introduction of remote controlled or autonomous vessels, which would significantly reduce or eliminate the costs of crew and victuals, could put our vessels at an efficiency disadvantage. Flexibility includes the ability to enter harbors, utilize related docking facilities and pass through canals and straits. The length of a vessel’s physical life is related to its original design and construction, its maintenance and the impact of the stress of operations. If new vessels are built that are more efficient or more flexible or have longer physical lives than our vessels, competition from these more technologically advanced vessels could adversely affect the amount of charter hire payments we receive for our vessels upon expiration of their current charters and the resale value of our vessels could significantly decrease. This could adversely affect our revenues and cash flows, and our ability to service our debt or make distributions to our unit holders and repurchases of common units.

The smuggling of drugs or other contraband onto our vessels may lead to governmental claims against us.

We expect that our vessels will call in ports where smugglers may attempt to hide drugs and other contraband on vessels, with or without the knowledge of crew members. To the extent our vessels are found with contraband, whether inside or attached to the hull of our vessel and whether with or without the knowledge of any of our crew, we may face governmental or other regulatory claims or penalties which could have an adverse effect on our business, results of operations, cash flows, financial condition, as well as our cash flows, including cash available for distributions to our unit holders and repurchases of common units. Under some jurisdictions, vessels used for the conveyance of illegal drugs could result in forfeiture of the vessel to the government of such jurisdiction.

Increased inspection procedures and tighter import and export controls could increase costs and disrupt our business.

International shipping is subject to various security and customs inspections and related procedures in countries of origin and destination. Inspection procedures can result in the seizure of contents of vessels, delays in the loading, offloading or delivery and the levying of customs, duties, fines and other penalties.

It is possible that changes to inspection procedures could impose additional financial and legal obligations on us. Furthermore, changes to inspection procedures could also impose additional costs and obligations on our future customers and may, in certain cases, render the shipment of certain types of cargo impractical. Any such changes or developments may have a material adverse effect on our business, financial condition, and results of operations.

Security breaches and disruptions to our information technology infrastructure could interfere with our operations and expose us to liability which could have a material adverse effect on our business, financial condition, cash flows and results of operations.

In the ordinary course of business, we rely heavily on information technology networks and systems to process, transmit, and store electronic information, and to manage or support a variety of business processes and activities. Additionally, we collect and store certain data, including proprietary business information and customer and employee data, and may have access to other confidential information in the ordinary course of our business. Despite our cybersecurity measures, which includes active monitoring, training, reporting and other activities designed to protect and secure our data, our information technology networks and infrastructure may be vulnerable to damage, disruptions, or shutdowns due to attack by hackers or breaches, employee error or malfeasance, data leakage, power outages, computer viruses and malware, telecommunication or utility failures, systems failures, natural disasters, or other catastrophic events. Any such events could result in legal claims or proceedings, liability or penalties under privacy or other laws, disruption in operations, and damage to our reputation, which could have a material adverse effect on our business, financial condition, cash flows and results of operations.

In addition, some of our technology networks and systems are managed by third-party service providers (including cloud-service providers) for a variety of reasons, and such providers also may have access to proprietary business information and customer and employee data, and may have access to confidential information on the conduct of our business. Like us, these third-party providers are subject to risks imposed by data breaches and disruptions to their technology infrastructure. A cyber-attack could defeat one or more of our third-party service providers’ security measures, allowing an attacker access to proprietary information from our company including our employees’, customers’ and suppliers’ data. Any such security breach or disruption to our third-party service providers could result in a disruption in operations and damage to our reputation and liability claims, which could have a material adverse effect on our business, financial condition, cash flows and results of operations.

Governments could requisition our vessels during a period of war or emergency, resulting in loss of earnings.

A government of the jurisdiction where one or more of our containerships are registered could requisition for title or seize our containerships. Requisition for title occurs when a government takes control of a vessel and becomes its owner. Also, a government could requisition our containerships for hire. Requisition for hire occurs when a government takes control of a ship and effectively becomes the charterer at dictated charter rates. Generally, requisitions occur during a period of war or emergency, although governments may elect to requisition vessels in other circumstances. Although we would expect to be entitled to compensation in the event of a requisition of one or more of our vessels, the amount and timing of payment, if any, would be uncertain. Government requisition of one or more of our containerships may cause us to breach covenants in certain of our credit facilities, and could have a material adverse effect on our business, results of operations and financial condition, as well as our cash flows, including cash available for distributions to our unit holders and repurchases of common units.

Acts of piracy on ocean-going vessels have recently increased in frequency, which could adversely affect our business.

Acts of piracy have historically affected ocean-going vessels trading in certain regions of the world, such as the South China Sea and the Gulf of Aden off the coast of Somalia. Piracy continues to occur in the Gulf of Aden off the coast of Somalia and increasingly in the Gulf of Guinea. Other areas where piracy has affected shipping include the Indian Ocean, the Strait of Malacca, the Arabian Sea, the Mozambique Channel and the Gulf of Guinea. Acts of piracy are a material risk to the international container shipping industry. Our vessels regularly travel through regions where pirates are active. Piracy not only increases our risk of loss of property and the cost of delay or detention, but it may also increase our risk of liability for death or personal injury.We may incur increased insurance premiums for “war risk” coverage or, if such insurance is unavailable, we may not be adequately insured to cover losses from these incidents, which could have a material adverse effect on our results of operations, financial condition and ability to make distributions and repurchases of common units. While we believe the charterer remains liable for charter payments when a vessel is seized by pirates, the charterer may dispute this and withhold charter hire until the vessel is released. Crew and security costs could also increase in such circumstances. A charterer may also claim that a vessel seized by pirates was not “on-hire” for a certain number of days and it is therefore entitled to cancel the charter party, a claim that we would dispute. We may not be adequately insured to cover losses from acts of terrorism, piracy, regional conflicts and other armed actions.

Risks inherent in the operation of ocean-going vessels could affect our business and reputation, which could adversely affect our expenses, net income, cash flow and the price of our common units.

The operation of ocean-going vessels carries inherent risks. These risks include the possibility of:

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marine disaster;

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piracy;

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environmental accidents;

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grounding, fire, explosions and collisions;

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cargo and property loss or damage;

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unexpected closure of a particular port where our vessels conduct cargo operations or closure of a particular waterway through which our vessels routinely transit;

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business interruptions caused by mechanical failure, human error, war, terrorism, disease and quarantine, political action in various countries, or adverse weather conditions; and

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work stoppages or other labor problems with crew members serving on our containerships, some of whom are unionized and covered by collective bargaining agreements.

Such occurrences could result in death or injury to persons, loss of property or environmental damage, delays in the delivery of cargo, loss of revenues from or termination of charter contracts, governmental fines, penalties or restrictions on conducting business, litigation with our employees, customers or third parties, higher insurance rates, and damage to our reputation and customer relationships generally. Although we maintain hull and machinery and war risks insurance, as well as protection and indemnity insurance, which may cover certain risks of loss resulting from such occurrences, our insurance coverage may be subject to caps or not cover such losses, and any of these circumstances or events could increase our costs or lower our revenues. The involvement of our vessels in an environmental disaster may harm our reputation as a safe and reliable vessel owner and operator. Any of these results could have a material adverse effect on business, results of operations and financial condition, as well as our cash flows, including cash available for distributions to our unit holders and repurchases of common units.

Our insurance may be insufficient to cover losses that may occur to our property or result from our operations.

The operation of any vessel includes risks such as mechanical failure, collision, fire, contact with floating objects, property loss, cargo loss or damage and business interruption due to political circumstances in foreign countries, hostilities and labor strikes. In addition, there is always an inherent possibility of a marine disaster, including oil spills and other environmental mishaps. There are also liabilities arising from owning and operating vessels in international trade. We procure insurance for our fleet of containerships in relation to risks commonly insured against by vessel owners and operators. Our current insurance includes (i) hull and machinery and war risk insurance covering damage to our vessels’ hulls and machinery from, among other things, collisions and contact with fixed and floating objects, (ii) war risks insurance covering losses associated with the outbreak or escalation of hostilities and (iii) protection and indemnity insurance (which includes environmental damage) covering, among other things, third-party and crew liabilities such as expenses resulting from the injury or death of crew members, passengers and other third parties, the loss or damage to cargo, third-party claims arising from collisions with other vessels, damage to other third-party property and pollution arising from oil or other substances, and salvage, towing and other related costs, including wreck removal.

We can give no assurance that we are adequately insured against all risks or that our insurers will pay a particular claim. Even if our insurance coverage is adequate to cover our losses, we may not be able to obtain a timely replacement containership in the event of a loss of a containership. Under the terms of our credit facilities, we are subject to restrictions on the use of any proceeds we may receive from claims under our insurance policies. Furthermore, in the future, we may not be able to obtain adequate insurance coverage at reasonable rates for our fleet. For example, more stringent environmental regulations have led to increased costs for, and in the future may result in the lack of availability of, insurance against risks of environmental damage or pollution. We may also be subject to calls, or premiums, in amounts based not only on our own claim records but also the claim records of all other members of the protection and indemnity associations through which we receive indemnity insurance coverage. There is no cap on our liability exposure for such calls or premiums payable to our protection and indemnity association. Our insurance policies also contain deductibles, limitations and exclusions which, although we believe are standard in the shipping industry, may nevertheless increase our costs. A catastrophic oil spill or marine disaster could exceed our insurance coverage, which could have a material adverse effect on our business, results of operations and financial condition and our ability to make distributions to our unit holders and repurchases of common units. Any uninsured or underinsured loss could harm our business and financial condition. In addition, the insurance may be voidable by the insurers as a result of certain actions, such as vessels failing to maintain required certification.

Our charterers may in the future engage in legally permitted trading in locations which may still be subject to sanctions or boycott. However, no vessels in our fleet have called on ports in sanctioned countries or countries designated as state sponsors of terrorism by the U.S. State Department, including Iran, Syria, or Sudan. Our insurers may be contractually or by operation of law prohibited from honoring our insurance contract for such trading, which could result in reduced insurance coverage for losses incurred by the related vessels. Furthermore, our insurers and we may be prohibited from posting or otherwise be unable to post security in respect of any incident in such locations, resulting in the loss of use of the relevant vessel and negative publicity for our Company which could negatively impact our business, results of operations, cash flows and share price.

Maritime claimants could arrest our vessels, which could interrupt our cash flows.

Crew members, suppliers of goods and services to a vessel, shippers or receivers of cargo and other parties may be entitled to a maritime lien against a vessel for unsatisfied debts, claims or damages, including, in some jurisdictions, for debts incurred by previous owners. In many jurisdictions, a maritime lien-holder may enforce its lien by arresting a vessel. The arrest or attachment of one or more of our vessels, if such arrest or attachment is not timely discharged, could cause us to default on a charter or breach covenants in certain of our credit facilities, could interrupt our cash flows and could require us to pay large sums of money to have the arrest or attachment lifted. Any of these occurrences could have a material adverse effect on our business, results of operations and financial condition, as well as our cash flows, including cash available for distributions to our unit holders and repurchases of common units.

In addition, in some jurisdictions, such as South Africa, under the “sister ship” theory of liability, a claimant may arrest both the vessel that is subject to the claimant’s maritime lien and any “associated” vessel, which is any vessel owned or controlled by the same owner. Claimants could try to assert “sister ship” liability against one containership in our fleet for claims relating to another of our containerships.

Compliance with safety and other requirements imposed by classification societies may be very costly and may adversely affect our business.

The hull and machinery of every commercial vessel must be inspected and approved by a classification society. The classification society certifies that the vessel has been built and maintained in accordance with the applicable rules and regulations of the classification society. Moreover, every vessel must comply with all applicable international conventions and the regulations of the vessel’s flag state as verified by a classification society. Finally, each vessel must successfully undergo periodic surveys, including annual, intermediate and special surveys.

If any vessel does not maintain its class, it will lose its insurance coverage and be unable to trade, and the vessel’s owner will be in breach of relevant covenants under its financing arrangements. Failure to maintain the class of one or more of our containerships could have a material adverse effect on our financial condition and results of operations, as well as our cash flows, including cash available to make distributions to our unit holders and repurchases of common units.

Our international activities increase the compliance risks associated with economic and trade sanctions imposed by the U.S., the EU and other jurisdictions/authorities.

Our international operations and activities could expose us to risks associated with trade and economic sanctions prohibitions or other restrictions imposed by the U.S. or other governments or organizations, including the United Nations, the EU and its member countries, as such sanctions and compliance are described in this report. Under economic and trade sanctions laws, governments may seek to impose modifications to, prohibitions/restrictions on business practices and activities, and modifications to compliance programs, which may increase compliance costs, and, in the event of a violation, may subject us to fines and other penalties. To reduce the risk of violating economic sanctions, we have a policy of compliance with applicable economic sanctions laws and have implemented and continue to implement and diligently follow compliance procedures to avoid economic sanctions violations.

Considering U.S. as well as EU sanctions and the nature of our business, there is a constant sanction-related risk for us, due to the worldwide trade of our vessels, which we seek to minimize by the implementation of our corporate Economic Sanctions Compliance Policy and Procedures and our compliance with all applicable sanctions and embargo laws and regulations. Although we intend to maintain such Economic Sanctions Compliance Policy and Procedures, there can be no assurance that we will be in compliance in the future, particularly as the scope of certain laws may be unclear and may be subject to changing interpretations, and the law may change. Moreover, despite, for example, relevant provisions in charter parties forbidding the use of our vessels in trade that would violate economic sanctions, our charterers may nevertheless violate applicable sanctions and embargo laws and regulations and those violations could in turn negatively affect our reputation and be imputed to us.

We constantly monitor developments in the U.S., the EU and other jurisdictions that maintain economic sanctions against Iran, Russian entities, Venezuela, other countries, and other sanctions targets, including developments in implementation and enforcement of such sanctions programs. Expansion of sanctions programs, embargoes and other restrictions in the future (including additional designations of countries and persons subject to sanctions), or modifications in how existing sanctions are interpreted or enforced, could prevent our vessels from calling in ports in sanctioned countries or could limit their cargoes.

Given our relationship with Navios Partners, and Navios Holdings, we cannot give any assurance that an adverse finding against Navios Holdings (and/or its affiliates) by a governmental or legal authority or others, with respect to sanction matters or any future matter related to regulatory compliance by Navios Holdings (and/or its affiliates) will not have a material adverse impact on our business, reputation or the market price or trading of our common units.

If any of the risks described herein materializes, it could have a material adverse impact on our business and results of operations.

For a description of the economic and trade sanctions and other compliance requirements under which we operate please see “Item 4. Information on the Company. B. Business Overview—Sanction and Compliance”

We are subject to various laws, regulations, and international conventions, particularly environmental and safety requirements, that could require significant expenditures both to maintain compliance with such requirements and to pay for any uninsured environmental liabilities, including any resulting from a spill or other environmental incident, which could affect our cash flows and vessel operation net income

Vessel owners and operators are subject to government regulation in the form of international conventions and national, state, and local laws and regulations in the jurisdictions in which their vessels operate, in international waters, as well as in the country or countries where their vessels are registered. Such laws and regulations include those governing the management and disposal of hazardous substances and wastes, the cleanup of oil spills and other contamination, air emissions, discharges of operational and other wastes into the water, and ballast water management. Port State regulation significantly affects the operation of vessels, as it commonly is more stringent than international rules and standards. This is the case particularly in the United States and, increasingly, in Europe. Non-compliances with such laws and regulations can give rise to civil or criminal liability, and/or vessel delays and detentions in the jurisdictions in which we operate.

Our vessels are subject to scheduled and unscheduled inspections by regulatory and enforcement authorities, as well as private maritime industry entities. This includes inspections by Port State Control authorities, including the U.S. Coast Guard, harbor masters or equivalent entities, classification societies, flag Administrations (country in which the vessel is registered), charterers, and terminal operators. Certain of these entities require vessel owners to obtain permits, licenses, and certificates for the operation of their vessels. Failure to maintain necessary permits or approvals could require a vessel owner to incur substantial costs or temporarily suspend operation of one or more of its vessels.

Heightened levels of environmental and quality concerns among insurance underwriters, regulators, and charterers continue to lead to greater inspection and safety requirements on all vessels and may accelerate the scrapping of older vessels throughout the industry. Increasing environmental concerns have created a demand for vessels that conform to stricter environmental standards. Vessel owners are required to maintain operating standards for all vessels that will emphasize operational safety, quality maintenance, continuous training of officers and crews, and compliance with U.S. and international regulations.

The legal requirements and maritime industry standards to which we and our vessels are subject are set forth below, along with the risks associated with such requirements and standards. We may be required to make substantial capital and other expenditures to ensure that we remain in compliance with these requirements and standards, as well as with standards imposed by our customers, including costs for ship modifications and changes in operating procedures. We also maintain insurance coverage against pollution liability risks for all of our vessels in the amount of $1.0 billion in the aggregate for any one event. The insured risks include penalties and fines, as well as civil liabilities and expenses resulting from accidental pollution. However, this insurance coverage is subject to exclusions, deductibles, and other terms and conditions. And, claims relating to pollution incidents for knowing violations of U.S. environmental laws or the International Convention for the Prevention of Pollution from Ships may be considered by our protection and indemnity associations on a discretionary basis only. If any liabilities or expenses fall within an exclusion from coverage, or if damages from a catastrophic incident exceed the aggregate liability of $1.0 billion for any one event, our cash flow, profitability and financial position would be adversely impacted.

Because international conventions, laws, regulations, and other requirements are often revised, we cannot predict the ultimate cost of compliance or the impact on the fair market price or useful life of our vessels. Nor can we assure that our vessels will be able to attain and maintain certifications of compliance with various regulatory requirements.

Comparably, governmental regulation of the shipping industry, particularly in the areas of safety and environmental requirements, can be expected to become stricter in the future. We believe that the heightened environmental, quality, and security concerns of insurance underwriters, regulators, and charterers will lead to additional requirements, including enhanced risk assessment and security requirements, greater inspection and safety requirements, and heightened due diligence obligations. We also may be required to take certain of our vessels out of service for extended periods of time to address changing legal requirements, which would result in losses of revenues. In the future, market conditions may not justify these expenditures or enable us to operate our vessels, particularly older vessels, profitably during the remainder of their economic lives. This could lead to significant asset write downs.

Specific examples of expected changes that could have a significant, and potentially material, impact on our business include:

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Limitations on sulfur oxide and nitrogen oxide emissions from ships could cause increased demand and higher prices for low sulfur fuel due to supply constraints, as well as significant cost increases due to the implementations of measures such as fuel switching, vessel modifications such as adding distillate fuel storage capacity, or installation of exhaust gas cleaning systems or scrubbers;

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Environmental requirements can affect the resale value or useful lives of our vessels, require a reduction in cargo capacity, vessel modifications or operational changes or restrictions, lead to decreased availability of, or more costly insurance coverage for, environmental matters or result in the denial of access to certain jurisdictional waters or ports.

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Under local and national laws, as well as international treaties and conventions, we could incur material liabilities, including cleanup obligations and claims for natural resource damages, personal injury and/or property damages in the event that there is a release of petroleum or other hazardous materials from our vessels or otherwise in connection with our operations.

Climate change and government laws and regulations related to climate change could negatively impact our financial condition.

We are and will be, directly and indirectly, subject to the effects of climate change and may, directly or indirectly, be affected by local and national laws, as well as international treaties and conventions, and implementing regulations related to climate change. Any passage of climate control treaties, legislation, or other regulatory initiatives by the IMO, the European Union, the United States or other countries where we operate that restricts emissions of greenhouse gases (“GHGs”) could require us to make significant financial expenditures that we cannot predict with certainty at this time. This could include, for example, the adoption of regulatory frameworks to reduce GHG emissions, such as carbon dioxide, methane and nitrogen oxides. The climate change efforts undertaken to date are detailed below.

We cannot predict with any degree of certainty what effect, if any, possible climate change and legal requirements relating to climate change will have on our operations. However, we believe that climate change, including the possible increases in severe weather events, and legal requirements relating to climate change may affect, directly or indirectly, (i) the cost of the vessels we may acquire in the future, (ii) our ability to continue to operate as we have in the past, (iii) the cost of operating our vessels, and (iv) insurance premiums and deductibles, and the availability of insurance coverage. As a result, our financial condition could be materially impacted by climate change and related legal requirements.

We are subject to vessel security regulations and we incur costs to comply with adopted regulations. We may be subject to costs to comply with similar regulations that may be adopted in the future in response to terrorism.

We are subject to local and national laws, including in the United States, as well as international treaties and conventions, intended to enhance and ensure vessel security. These laws are detailed below. Navios has and will continue to implement the various security measures addressed by all applicable laws and will take measures for our vessels or vessels that we charter to attain compliance with all applicable security requirements within the prescribed time periods. Although management does not believe these additional requirements will have a material financial impact on our operations, there can be no assurance that there will not be an interruption in operations to bring vessels into compliance with the applicable requirements and any such interruption could cause a decrease in charter revenues. Furthermore, additional security measures could be required in the future that could have significant financial impact on us.

Changing laws and evolving reporting requirements could have an adverse effect on our business.

Changing laws, regulations and standards relating to reporting requirements, including the European Union General Data Protection Regulation (“GDPR”), may create additional compliance requirements for us. To maintain high standards of corporate governance and public disclosure, we have invested in, and intend to continue to invest in, reasonably necessary resources to comply with evolving standards.

GDPR broadens the scope of personal privacy laws to protect the rights of European Union citizens and requires organizations to report on data breaches within 72 hours and be bound by more stringent rules for obtaining the consent of individuals on how their data can be used. GDPR has become enforceable on May 25, 2018 and non-compliance may expose entities to significant fines or other regulatory claims, which could have an adverse effect on our business, financial conditions, results of operations and cash flows. Our Company is compliant with applicable GDPR Regulations.

We could be materially adversely affected by violations of the U.S. Foreign Corrupt Practices Act, the U.K. Bribery Act and anti-corruption laws in other applicable jurisdictions.

As an international shipping company, we may operate in countries known to have a reputation for corruption. The U.S. Foreign Corrupt Practices Act of 1977 (the “FCPA”) and other anti-corruption laws and regulations in applicable jurisdictions generally prohibit companies registered with the SEC and their intermediaries from making improper payments to government officials for the purpose of obtaining or retaining business. Under the FCPA, U.S. companies may be held liable for some actions taken by strategic or local partners or representatives. Legislation in other countries includes the U.K. Bribery Act 2010 (the “U.K. Bribery Act”) which is broader in scope than the FCPA because it does not contain an exception for facilitation payments. We and our customers may be subject to these and similar anti-corruption laws in other applicable jurisdictions. Failure to comply with legal requirements could expose us to civil and/or criminal penalties, including fines, prosecution and significant reputational damage, all of which could materially and adversely affect our business and the results of operations, including our relationships with our customers, and our financial results. Compliance with the FCPA, the U.K. Bribery Act and other applicable anti-corruption laws and related regulations and policies imposes potentially significant costs and operational burdens on us. Moreover, the compliance and monitoring mechanisms that we have in place including our Code of Ethics and our anti-bribery and anti-corruption policy, may not adequately prevent or detect all possible violations under applicable anti-bribery and anti-corruption legislation. However, we believe that the procedures we have in place to prevent bribery are adequate and that they should provide a defense in most circumstances to a violation or a mitigation of applicable penalties, at least under the U.K.’s Bribery Act.

Risks Related to Our Indebtedness

The market value of our vessels may fluctuate significantly, which could cause us to breach covenants in our credit facilities and result in the foreclosure on our mortgaged vessels.

If the market value of our owned vessels decreases, we may be required to record an impairment charge in our consolidated financial statements that, among other things, could cause us to breach covenants contained in our credit facilities, which could adversely affect our results of operations. If we breach the covenants in our credit facilities and are unable to remedy any relevant breach, our lenders could accelerate our debt and foreclose on the collateral, including our vessels. Any loss of vessels would significantly decrease our ability to generate positive cash flow from operations and therefore service our debt.

We may be unable to obtain additional debt financing for future acquisitions of vessels and to fund payments in respect of any newbuilding orders that we may place in the future.

Our ability to borrow against the ships in our existing fleet and any ships we may acquire in the future largely depends on the existence of time charter employment of the ship and on the value of the ships, which in turn depends in part on charter hire rates and the creditworthiness of our charterers. The actual or perceived credit quality of our charterers, any defaults by them, any decline in the market value of our fleet and the lack of long-term employment of our ships may materially affect our ability to obtain the additional capital resources that we will require to purchase additional vessels or may significantly increase our costs of obtaining such capital. Our inability to obtain additional financing or committing to financing on unattractive terms could have a material adverse effect on our business, results of operations and financial condition, as well as our cash flows, including cash available for distributions to our unit holders and repurchases of common units.

Our credit facilities or other financing arrangements contain payment obligations and restrictive covenants that may limit our liquidity and our ability to expand our fleet. A failure by us to meet our obligations under our credit facilities could result in an event of default under such credit facilities and foreclosure on our vessels.

Our credit facilities and other financing arrangements impose certain operating and financial restrictions on us. These restrictions in our existing credit facilities and other financing arrangements generally limit our and our subsidiaries’ ability to, among other things:

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incurring or guaranteeing indebtedness;

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entering into affiliate transactions other than on arm’s length terms;

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charging, pledging or encumbering our vessels;

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changing the flag, class, management or ownership of our vessels;

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acquiring any vessel or permitting any guarantor to acquire any further assets or make investments;

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purchasing or otherwise acquiring for value any units of our capital;

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declaring or paying any distributions; or

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permitting any guarantor to form or acquire any subsidiaries.

Our credit facilities and other financing arrangements also require that our vessels comply with the ISM Code and ISPS Code and maintain safety management certificates and documents of compliance at all times. Additionally, our credit facilities and other financing arrangements require compliance with certain financial covenants, including maintenance covenants, such as loan-to-value ratio, minimum liquidity, net worth and ratio of liabilities-to-assets, as defined in the agreements governing our credit facilities. In addition, it is a requirement under our credit facilities that Navios Holdings, Navios Maritime Partners L.P. (“Navios Partners”), Angeliki Frangou and their respective affiliates collectively own at least 20% of us. As of December 31, 2019, Navios Holdings, Navios Partners, Angeliki Frangou and their respective affiliates collectively own approximately 37.2% of us.

A failure to meet our payment and other obligations could lead to defaults under our credit facilities and other financing arrangements. Our lenders could then accelerate our indebtedness and foreclose on the vessels in our fleet securing those credit facilities, which could result in the acceleration of other indebtedness that we may have at such time and the commencement of similar foreclosure proceedings by other lenders. If any of these events occur, we cannot guarantee that our assets will be sufficient to repay in full all of our outstanding indebtedness and we may be unable to find alternative financing. Even if we could obtain alternative financing, such financing may not be on terms that are favorable or acceptable. The loss of these vessels would have a material adverse effect on our operating results and financial condition. For additional information, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Cash Sources and Uses”.

Substantial debt levels may limit our ability to obtain additional financing and pursue other business opportunities.

As of December 31, 2019, we had outstanding indebtedness of approximately $249.2 million. For additional information, see “Item 5. Operating and Financial Review and Prospects — Liquidity and Capital Resources”. We also expect to incur additional indebtedness as we grow our fleet or in order to cover its operational needs. This level of debt could have important consequences to us, including the following:

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our ability to obtain additional financing, if necessary, for working capital, capital expenditures, acquisitions or other purposes may be impaired or such financing may not be available on favorable terms;

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we may need to use a substantial portion of our cash from operations to make principal and interest payments on our debt, thereby reducing the funds that would otherwise be available for operations, future business opportunities, distributions to our unit holders and repurchases of common units;

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our debt level could make us more vulnerable than our competitors with less debt to competitive pressures or a downturn in our business or the economy generally; and

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our debt level may limit our flexibility in responding to changing business and economic conditions.

Our ability to service our debt depends upon, among other things, our future financial and operating performance, which will be affected by prevailing economic conditions and financial, business, regulatory and other factors, some of which are beyond our control. We may not be able to refinance all or part of our maturing debt on favorable terms, or at all. If our operating income is not sufficient to service our current or future indebtedness, we will be forced to take actions such as reducing or discontinuing distributions and repurchases of common units, reducing or delaying our business activities, acquisitions, investments or capital expenditures, selling assets, restructuring or refinancing our debt, or seeking additional equity capital or bankruptcy protection. We may not be able to effect any of these remedies on satisfactory terms, or at all.

In the future, we may change our operational and financial model by replacing amortizing debt in favor of non-amortizing debt with a higher fixed or floating rate without unit holder approval, which may increase our risk of defaulting on our indebtedness if market conditions become unfavorable.

Changes in the method of determining LIBOR, or the replacement of LIBOR with an alternative reference rate, may adversely affect interest expense related to outstanding debt.

Our outstanding debt bears interest rates in relation to LIBOR. On July 27, 2017, the United Kingdom’s Financial Conduct Authority, which regulates LIBOR, announced that it intends to phase out LIBOR by the end of 2021. It is unclear if at that time whether or not LIBOR will cease to exist or if new methods of calculating LIBOR will be established such that it continues to exist after 2021. The U.S. Federal Reserve, in conjunction with the Alternative Reference Rates Committee, a steering committee comprised of large U.S. financial institutions, is considering replacing U.S. dollar LIBOR with a new index calculated by short-term repurchase agreements, backed by Treasury securities (“SOFR”). SOFR is observed and backward looking, which stands in contrast with LIBOR under the current methodology, which is an estimated forward-looking rate and relies, to some degree, on the expert judgment of submitting panel members. Whether or not SOFR attains market traction as a LIBOR replacement tool remains in question. As such, the future of LIBOR at this time is uncertain. If LIBOR ceases to exist, we may need to renegotiate our credit agreements that utilize LIBOR as a factor in determining the interest rate. In addition, lenders have recently insisted on provisions that entitle the lenders, in their discretion, to replace published LIBOR as the base for the interest calculation with their cost-of-funds rate. Such provisions could significantly increase our lending costs, which would have an adverse effect on our profitability, earnings and cash flow.

Risks Inherent in an Investment in Us

We are a holding company and we depend on the ability of our subsidiaries to distribute funds to us in order to satisfy our financial obligations and to make distributions and repurchases of common units.

We are a holding company and our subsidiaries conduct all of our operations and own all of our operating assets, including our ships. We have no significant assets other than the equity interests in our subsidiaries. As a result, our ability to pay our obligations and to make distributions and repurchases of common units depends entirely on our subsidiaries and their ability to distribute funds to us. The ability of a subsidiary to make these distributions could be affected by a claim or other action by a third party, including a creditor, or by the law of their respective jurisdiction of incorporation which regulates the payment of distributions. If we are unable to obtain funds from our subsidiaries, our board of directors may exercise its discretion not to declare or make distributions and repurchases of common units.

Navios Maritime Acquisition Inc. (“Navios Acquisition”), Navios Holdings and Navios Partners and their respective affiliates may compete with us.

Pursuant to the Omnibus Agreement that we entered into with Navios Acquisition, Navios Holdings and Navios Partners, Navios Acquisition, Navios Holdings, Navios Partners and their controlled affiliates (other than us, our general partner and our subsidiaries) generally have agreed not to acquire or own any containerships. The Omnibus Agreement also provides us with rights of first offer on containerships. The Omnibus Agreement, however, contains significant exceptions that will allow Navios Acquisition, Navios Holdings, Navios Partners or any of their controlled affiliates to compete with us under specified circumstances which could materially harm our business.

Unit holders have limited voting rights and our partnership agreement restricts the voting rights of unit holders owning more than 4.9% of our common units.

Holders of common units have only limited voting rights on matters affecting our business. We will hold a meeting of the limited partners every year to elect one or more members of our board of directors and to vote on any other matters that are properly brought before the meeting. Common unit holders may only elect four of the seven members of our board of directors. The elected directors will be elected on a staggered basis and will serve for three-year terms. Our general partner in its sole discretion has the right to appoint the remaining three directors and to set the terms for which those directors will serve. The partnership agreement also contains provisions limiting the ability of unit holders to call meetings or to acquire information about our operations, as well as other provisions limiting the unit holders’ ability to influence the manner or direction of management.

Unit holders will have no right to elect our general partner and our general partner may not be removed except by a vote of the holders of at least 75% of the outstanding units, including any units owned by our general partner and its affiliates, voting together as a single class. Our partnership agreement further restricts unit holders’ voting rights by providing that if any person or group owns beneficially more than 4.9% of any class of units then outstanding, any such units owned by that person or group in excess of 4.9% may not be voted on any matter and will not be considered to be outstanding when sending notices of a meeting of unit holders or calculating required votes (except for purposes of nominating a person for election to our board), determining the presence of a quorum or for other similar purposes, unless required by law. The voting rights of any such unit holders in excess of 4.9% will effectively be redistributed pro rata among the other unit holders of the same class that are not subject to this voting limitation. Our general partner, its affiliates and persons who acquired units with the prior approval of our board of directors will not be subject to this 4.9% limitation except with respect to voting their common units in the election of the elected directors.

Our general partner may have conflicts of interest and limited duties, which may permit them to favor their own interests to your detriment.

In August 2019, Navios Holdings announced that it sold certain assets, including its ship management division and the general partnership interests in Navios Containers to N Shipmanagement Acquisition Corp. and related entities, an entity affiliated with the Company’s Chairman and Chief Executive Officer, Angeliki Frangou. The general partner unit, however, does not have the same economic rights as a common unit. The general partner unit will not entitle our general partner to participate in our distributions, profits or losses. The interests of the General Partner may be different from your interests.

As a result of these conflicts, our general partner and its affiliates may favor their own interests over the interests of our unit holders. These conflicts include, among others, the following situations:

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neither our partnership agreement nor any other agreement requires our general partner to pursue a business strategy that favors us;

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our general partner and our directors have limited liabilities and duties under the laws of the Marshall Islands, while the remedies available to our unit holders are also restricted, and, as a result of purchasing common units, unit holders are treated as having agreed to the limited duties and to certain actions that may be taken by our general partner and our directors, all as set forth in the partnership agreement;

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either or both of our general partner and our board of directors are involved in determining the amount and timing of our asset purchases and sales, capital expenditures, borrowings, issuances of additional partnership securities and reserves, each of which can affect the amount of cash that is available for distributions to our unit holders and repurchases of common units;

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our general partner is authorized to cause us to borrow funds in order to permit the payment of cash distributions and repurchases of common units;

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our general partner is entitled to reimbursement of all reasonable costs incurred by it and its affiliates for our benefit;

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our partnership agreement does not restrict us from paying our general partner or its affiliates for any services rendered to us on terms that are fair and reasonable or entering into additional contractual arrangements with any of these entities on our behalf; and

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our general partner may exercise its right to call and purchase our common units if it and its affiliates own more than 80% of our common units.

Our partnership agreement limits our general partner’s and our directors’ duties to our unit holders and restricts the remedies available to unit holders for actions taken by our general partner or our directors.

Our partnership agreement contains provisions that reduce the standards to which our general partner and directors would otherwise be held by Marshall Islands law. For example, our partnership agreement:

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permits our general partner to make a number of decisions in its individual capacity, as opposed to in its capacity as our general partner. Where our partnership agreement permits, our general partner may consider only the interests and factors that it desires, and in such cases it has no duty or obligation to give any consideration to any interest of, or factors affecting us, our affiliates or our unit holders. Decisions made by our general partner in its individual capacity will be made by its board of directors or members of its management. Specifically, pursuant to our partnership agreement, our general partner will be considered to be acting in its individual capacity if it exercises its call right, pre-emptive rights, consents or withholds consent to any merger or consolidation of the partnership, appoints any directors or votes for the election of any director, votes or refrains from voting on amendments to our partnership agreement that require a vote of the outstanding units, voluntarily withdraws from the partnership, transfers (to the extent permitted under our partnership agreement) or refrains from transferring its units, general partner interest or votes upon the dissolution of the partnership;

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provides that our general partner and our directors are entitled to make other decisions in “good faith” if they reasonably believe that the decision is in our best interests;

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generally provides that affiliated transactions and resolutions of conflicts of interest not approved by the conflicts committee of our board of directors and not involving a vote of unit holders must be on terms no less favorable to us than those generally being provided to or available from unrelated third parties or be “fair and reasonable” to us and that, in determining whether a transaction or resolution is “fair and reasonable,” our board of directors may consider the totality of the relationships between the parties involved, including other transactions that may be particularly advantageous or beneficial to us; and

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provides that neither our general partner nor our officers or our directors are liable for monetary damages to us, our limited partners or assignees for any acts or omissions unless there has been a final and non-appealable judgment entered by a court of competent jurisdiction determining that our general partner or directors or our officers or directors or those other persons engaged in actual fraud or willful misconduct.

Our partnership agreement contains provisions that may have the effect of discouraging a person or group from attempting to remove our current management or our general partner, and even if public unit holders are dissatisfied, they will need a qualified majority of 75% to remove our general partner.

Our partnership agreement contains provisions that may have the effect of discouraging a person or group from attempting to remove our current management or our general partner.

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The vote of the holders of at least 75% of all outstanding common units voting is required to remove the general partner. As of December 31, 2019, Navios Holdings and Navios Partners own approximately 37.2% of the total number of common units.

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Common unit holders elect only four of the seven members of our board of directors. Our general partner in its sole discretion has the right to appoint the remaining three directors.

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Elections of the four directors elected by unit holders in subsequent annual meetings of unit holders will be staggered, meaning that the members of only one of three classes of our elected directors will be selected each year. In addition, the directors appointed by our general partner will serve for terms determined by our general partner.

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A director appointed by our general partner may be removed from our board of directors at any time without cause only by our general partner and with cause by either our general partner, the vote of holders of a majority of all classes of equity interests in us voting as a single class or the majority vote of the other members of our board. A director elected by our common unit holders may be removed from our board of directors at any time without cause only by the majority vote of the other members of our board and with cause by the vote of holders of a majority of our outstanding common units or the majority vote of the other members of our board. “Cause” is narrowly defined to mean that a court of competent jurisdiction has entered a final, non-appealable judgment finding a member of the board of directors has engaged in actual fraud or willful misconduct in his or her capacity as a member of the board of directors. Cause does not include most cases of charges of poor business decisions such as charges of poor management of our business by the directors appointed by our general partner.

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Our partnership agreement contains provisions limiting the ability of unit holders to call meetings of unit holders, to nominate directors and to acquire information about our operations as well as other provisions limiting the unit holders’ ability to influence the manner or direction of management.

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Unit holders’ voting rights are further restricted by the partnership agreement provision providing that if any person or group owns beneficially more than 4.9% of any class of units then outstanding, any such units owned by that person or group in excess of 4.9% may not be voted on any matter and will not be considered to be outstanding when sending notices of a meeting of unit holders or calculating required votes (except for purposes of nominating a person for election to our board), determining the presence of a quorum or for other similar purposes, unless required by law. The voting rights of any such unit holders in excess of 4.9% will be effectively redistributed pro rata among the other unit holders of the same class that are not subject to this voting limitation. Our general partner, its affiliates and persons who acquired units with the prior approval of our board of directors will not be subject to this 4.9% limitation except with respect to voting their common units in the election of the elected directors.

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We have substantial latitude in issuing equity securities without unit holder approval.

Our general partner may transfer its general partner interest to, and the control of our general partner may be transferred to, a third party without unit holder consent.

Our general partner may transfer its general partner interest to a third party without the consent of the unit holders. In addition, our partnership agreement does not restrict the ability of a member of our general partner from transferring its membership interests in our general partner to a third party. A different general partner may make decisions or operate our business in a manner that is different, and significantly less skilled and beneficial to the Company and that could have a material adverse effect on our business, results of operations and financial condition, as well as our cash flows.

Our relationship with Navios Holdings and Navios Partners

Navios Partners and Navios Holdings are our main unitholders, and their interests may be different from your interests. This concentration of ownership may delay, deter or prevent acts that would be favored by our other unit holders or deprive unit holders of an opportunity to receive a premium for their common units as part of a sale of our business, and it is possible that the interests of the controlling unit holders may in some cases conflict with our interests and the interests of our other unit holders.

Further, certain of our executive officers and/or directors also serve as executive officers and/or directors of Navios Holdings and its affiliates and as such they may have duties to make decisions in their best interests of the unitholders of Navios Partners and stockholders of Navios Holdings and Navios Acquisition that may cause them to pursue business strategies that disproportionately benefit Navios Acquisition, Navios Partners, or Navios Holdings or which otherwise are not in the best interests of us or our unit holders, or may be contrary to our interests. Neither our partnership agreement nor any other agreement requires Navios Partners or Navios Holdings or their affiliates to pursue a business strategy that favors us. Conflicts of interest may arise between Navios Acquisition, Navios Partners, Navios Holdings, or our general partner on the one hand, and us and our unit holders, on the other hand.

Our officers face conflicts in the allocation of their time to our business.

Certain of our executive officers and/or directors also serve as executive officers and/or directors of Navios Partners, Navios Holdings and Navios Acquisition and their affiliates. Navios Partners, Navios Holdings and Navios Acquisition conduct substantial businesses and activities of their own in which we have no economic interest. If these separate activities are significantly greater than our activities, there will be material competition for the time and effort of our officers, who also provide services to affiliates of Navios Partners, Navios Holdings and Navios Acquisition. Our officers are not required to work full-time on our affairs and, in the future, we may have additional officers that also provide services to Navios Partners, Navios Holdings and Navios Acquisition and their affiliates. Based solely on the anticipated relative sizes of our fleet and the fleet owned by Navios Partners, Navios Holdings and Navios Acquisition and their affiliates over the next twelve months, we estimate that our officers may spend a substantial portion of their monthly business time dedicated to the business activities of Navios Partners, Navios Holdings and Navios Acquisition and their affiliates. However, the actual allocation of time could vary significantly from time to time depending on various circumstances and needs of the businesses, such as the relative levels of strategic activities of the businesses.

We depend on the Manager to assist us in operating and expanding our business.

Pursuant to the management agreement (the “Management Agreement”) between us and the Manager, the Manager provides to us significant commercial and technical management services (including the commercial and technical management of our vessels, vessel maintenance and crewing, purchasing and insurance and shipyard supervision). In addition, pursuant to the Administrative Services Agreement (the “Administrative Agreement”) between us and the Manager, the Manager provides to us significant administrative, financial and other support services. Our operational success and ability to execute our growth strategy will depend significantly upon the Manager’s satisfactory performance of these services. Our business will be harmed if the Manager fails to perform these services satisfactorily, if the Manager cancels either of these agreements, or if the Manager stops providing these services to us.

Our ability to enter into new charters and expand our customer relationships will depend largely on the Manager and its reputation and relationships in the shipping industry. If the Manager suffers material damage to its reputation or relationships, it may harm our ability to:

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renew existing charters upon their expiration;

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obtain new charters;

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successfully interact with shipyards during periods of shipyard construction constraints;

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obtain financing on commercially acceptable terms; or

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maintain satisfactory relationships with suppliers and other third parties.

If our ability to do any of the things described above is impaired, it could have a material adverse effect on our business, results of operations and financial condition and our ability to make cash distributions and repurchases of common units.

The loss of key members of our senior management team could disrupt the management of our business.

We believe that our success depends on the continued contributions of the members of our senior management team, including Angeliki Frangou, our Chairman and Chief Executive Officer. The loss of the services of Ms. Frangou or one of our other executive officers or senior management members could impair our ability to identify and secure new charter contracts, to maintain good customer relations and to otherwise manage our business, which could have a material adverse effect on our financial performance and our ability to compete.

The Manager may be unable to attract and retain qualified, skilled employees or crew necessary to operate our vessels and business or may have to pay increased crew and other vessel operating costs.

Acquiring and renewing time charters with leading liner companies depends on a number of factors, including our ability to man our containerships with suitably experienced, high-quality masters, officers and crews. Our success will depend in part on the Manager’s ability to attract, hire, train and retain highly skilled and qualified personnel. In crewing our vessels, we require technically skilled employees with specialized training who can perform physically demanding work. Competition to attract, hire, train and retain qualified crew members is intense, and crew manning costs continue to increase. If we are not able to increase our hire rates to compensate for any crew cost increases, our business, financial condition, results of operations and ability to make cash distributions to our unit holders and repurchases of common units may be adversely affected. Any inability we experience in the future to attract, hire, train and retain a sufficient number of qualified employees could impair our ability to manage, maintain and grow our business.

Fees and cost reimbursements, which the Manager determines for services provided to us, represent a significant percentage of our revenues, are payable regardless of profitability and reduce our cash available for distributions and repurchases of common units.

A large portion of the management, staffing and administrative services that we require to operate our business are provided to us by the Manager. We pay the Manager, a commercial and technical management fee under the management agreement, as well as an administrative services fee under the Administrative Agreement. For the years ended December 31, 2019, 2018 and for the period from April 28, 2017 (date of inception) to December 31, 2017 these fees amounted to $73.6 million, or 52.0%, $60.4 million, or 45.1%, and $18.4 million, or 46.9%, of our revenue for such period, respectively.

Pursuant to a management agreement, dated June 7, 2017, as amended on November 23, 2017, April 23, 2018, June 1, 2018 and August 28, 2019, the Manager provides commercial and technical management services to our vessels. The term of the Management Agreement as amended in August 2019, expires in January 1, 2025. During the remaining years of the term of the management agreement, we will reimburse the Manager for all of the actual operating costs and expenses it incurs in connection with the management of our fleet.

In addition, the Manager will provide us with administrative services, pursuant to the Administrative Agreement as amended in August 2019, expiring in January 1, 2025, and we will reimburse the Manager for all costs and expenses reasonably incurred by it in connection with the provision of those services. The exact amount of these future costs and expenses are unquantifiable at this time and they are payable regardless of our profitability.

If we desire to terminate either of these agreements before its scheduled expiration, we must pay a termination fee to the Manager as per management agreement. As a result, our ability to make short-term adjustments to manage our costs by terminating one or both these agreements may be limited which could cause our results of operations and ability to pay cash distributions and repurchases of common units to be materially and adversely affected.

Refer also to “Item 5. Operating and Financial Review and Prospects — Vessel Operations” and “Item 7. Major Unitholders and Related Party Transaction — Related Party Transactions”.

The price of our common units may be volatile.

The price of our common units may be volatile and may fluctuate due to various factors including:

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actual or anticipated fluctuations in quarterly and annual results;

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fluctuations in the seaborne transportation industry, including fluctuations in the containership market;

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our making of distributions and repurchases of common units;

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mergers and strategic alliances in the shipping industry;

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changes in governmental regulations or maritime self-regulatory organization standards;

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shortfalls in our operating results from levels forecasted by securities analysts;

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announcements concerning us or our competitors;

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general economic conditions;

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terrorist acts;

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future sales of our common units or other securities;

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investors’ perceptions of us and the international container shipping industry;

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the general state of the securities markets; and

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other developments affecting us, our industry or our competitors.

The containership sector of the shipping industry has been highly unpredictable and volatile. Securities markets worldwide are experiencing significant price and volume fluctuations. The market price for our securities may also be volatile. This market volatility, as well as general economic, market or political conditions, could reduce the market price of our securities in spite of our operating performance. Consequently, you may not be able to sell our securities at prices equal to or greater than those at which you pay or paid.

Substantial future sales of our common units in the public market could cause the price of our common units to fall.

Under the partnership agreement, we have agreed to register for resale under the Securities Act and applicable state securities laws any common units or other partnership securities proposed to be sold by our general partner, our Chairman and CEO, Angeliki Frangou, or any of their current or future affiliates if an exemption from the registration requirements is not otherwise available or advisable. These registrations may be solely for sales of partnership securities by our general partner, Angeliki Frangou or any of their current or future affiliates, or may also register sales of partnership securities by us or, if we grant registration rights to any unitholder other than our general partner, Angeliki Frangou or any of their current or future affiliates, a third party. Following the conversion from a corporation to a limited partnership, Navios Holdings owns 1,263,276 of our outstanding common units and Navios Partners owns 11,592,276 of our outstanding common units. Following their registration and sale under an applicable registration statement, those securities will become freely tradable. By exercising their registration rights and selling a large number of common units or other securities, these unit holders could cause the price of our common units to decline. Further, the issuance from time to time of new common units in any equity offering, or the perception that such sales may occur, could have the effect of depressing the market price of our common units.

You may experience future dilution as a result of future equity offerings and other issuances of our common units or other securities, which could also cause the price of our common units to fall.

In order to raise additional capital, we may in the future offer additional common units or other securities convertible into or exchangeable for our common units, including convertible debt. We cannot predict the size of future issuances or sales of our common units, including those made in connection with future acquisitions or capital activities, or the effect, if any, that such issuances or sales may have on the market price of our common units. The issuance and sale of substantial amounts of common units, or announcement that such issuance and sales may occur, could adversely affect the market price of our common units. In addition, we cannot assure you that we will be able to make future sales of our common units or other securities in any other offering at a price per unit that is equal to or greater than the price per unit paid by investors, and investors purchasing units or other securities in the future could have rights that are superior to existing unit holders. The issuance of additional common units could adversely impact the trading price of our common units.

We may issue additional equity securities and may do so without unit holder approval, which would dilute your ownership interests.

We may, without the approval of our unit holders, issue an unlimited number of additional units or other equity securities. The issuance by us of additional common units or other equity securities of equal or senior rank will have the following effects:

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our unit holders’ proportionate ownership interest in us will decrease;

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the amount of cash available for distribution on each common unit and repurchases of common units may decrease;

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the relative voting strength of each previously outstanding unit may be diminished; and

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the market price of the common units may decline.

If we expand the size of our fleet in the future, we generally will be required to make significant installment payments for acquisitions of vessels prior to their delivery and generation of revenue. Depending on whether we finance our expenditures through cash from operations or by issuing debt or equity securities, our ability to make cash distributions and repurchases of common units may be diminished or our financial leverage could increase or our unit holders could be diluted.

We cannot assure you that our board of directors will declare cash distributions or unit repurchases in the foreseeable future.

While we expect to make annual cash distribution and/or unit repurchases, our board of directors may not declare cash distributions or unit repurchases in the future. The declaration and payment of cash distributions or unit repurchases, if any, will always be subject to the discretion of our board of directors, restrictions contained in our credit facilities and the requirements of Marshall Islands law. The timing and amount of any cash distributions and unit repurchases declared will depend on, among other things, our earnings, financial condition and cash requirements and availability, our ability to obtain debt and equity financing on acceptable terms as contemplated by our growth strategy, the terms of our outstanding indebtedness and the ability of our subsidiaries to distribute funds to us. The containership sector of the shipping industry is highly volatile, and we cannot predict with certainty the amount of cash, if any, that will be available for distribution as cash distributions in any period. Also, there may be a high degree of variability from period to period in the amount of cash that is available for the payment of cash distributions and repurchases of common units. We may incur expenses or liabilities or be subject to other circumstances in the future that reduce or eliminate the amount of cash that we have available for distribution as cash distributions and repurchases of common units, including as a result of the risks described herein. Our growth strategy contemplates that we will finance our acquisitions of additional vessels primarily through debt financings and/or the net proceeds of future equity issuances on terms acceptable to us. If financing is not available to us on acceptable terms, our board of directors may determine to finance or refinance acquisitions with cash from operations, which would reduce the amount of any cash available for distributions and repurchases of common units.

Our general partner has a limited call right that may require our unit holders to sell their common units at an undesirable time or price.

If at any time our general partner and its affiliates, including Navios Partners and Navios Holdings, own more than 80% of the common units, our general partner will have the right, which it may assign to any of its affiliates or to us, but not the obligation, to acquire all, but not less than all, of the common units held by unaffiliated persons at a price not less than their then-current market price. As a result, unit holders may be required to sell their common units at an undesirable time or price and may not receive any return on their investment. Unit holders may also incur a tax liability upon a sale of their units. Navios Holdings and Navios Partners, own approximately 37.2% of our common units.

We can borrow money to make distributions and repurchases of common units, which would reduce the amount of credit available to operate our business.

Our partnership agreement will allow us to make borrowings to make distributions and repurchases of common units. Accordingly, we can make distributions on all our units and repurchases of common units even though cash generated by our operations may not be sufficient to pay such distributions and repurchases. Any borrowings by us to make distributions and unit repurchases will reduce the amount of borrowings we can make for operating our business.

Increases in interest rates may cause the market price of our common units to decline.

An increase in interest rates may cause a corresponding decline in demand for equity investments in general, and in particular for yield-based equity investments such as our common units. Any such increase in interest rates or reduction in demand for our common units resulting from other relatively more attractive investment opportunities may cause the trading price of our common units to decline. In addition, our interest expense will increase, since initially our debt will bear interest at a floating rate, subject to any interest rate swaps we may enter into the future.

Unit holders may have liability to repay distributions.

Under some circumstances, unit holders may have to repay amounts wrongfully returned or distributed to them. Under the Marshall Islands Act, we may not make a distribution to you if the distribution would cause our liabilities to exceed the fair value of our assets. Marshall Islands law provides that for a period of three years from the date of the impermissible distribution, limited partners who received the distribution and who knew at the time of the distribution that it violated Marshall Islands law will be liable to the limited partnership for the distribution amount. Assignees who become substituted limited partners are liable for the obligations of the assignor to make contributions to the partnership that are known to the assignee at the time it became a limited partner and for unknown obligations if the liabilities could be determined from the partnership agreement. Liabilities to partners on account of their partnership interest and liabilities that are non-recourse to the partnership are not counted for purposes of determining whether a distribution is permitted.

We have been organized as a limited partnership under the laws of the Republic of the Marshall Islands, which does not have a well-developed body of partnership law; as a result, unit holders may have more difficulty in protecting their interests than would unit holders of a similarly organized limited partnership in the United States.

Our partnership affairs are governed by our partnership agreement and by the Marshall Islands Act. The provisions of the Marshall Islands Act resemble provisions of the limited partnership laws of a number of states in the United States, most notably Delaware. The Marshall Islands Act also provides that it is to be applied and construed to make it uniform with Delaware law and, so long as it does not conflict with the Marshall Islands Act or decisions of the Marshall Islands courts, interpreted according to the non-statutory law (or case law) of the State of Delaware. There have been, however, few, if any, court cases in the Marshall Islands interpreting the Marshall Islands Act, in contrast to Delaware, which has a fairly well-developed body of case law interpreting its limited partnership statute. Accordingly, we cannot predict whether Marshall Islands courts would reach the same conclusions as the courts in Delaware. For example, the rights of our unit holders and the responsibilities of our general partner under Marshall Islands law are not as clearly established as under judicial precedent in existence in Delaware. As a result, unit holders may have more difficulty in protecting their interests in the face of actions by our officers or directors than would unit holders of a similarly organized limited partnership in the United States.

Because we are organized under the laws of the Marshall Islands and our business is operated primarily from our office in Monaco, it may be difficult to serve us with legal process or enforce judgments against us, our directors or our management.

We are organized under the laws of the Marshall Islands, and all of our assets are located outside of the United States. Our business is operated primarily from our office in Monaco. In addition, our general partner is a Marshall Islands limited liability company, and our directors and officers generally are or will be non-residents of the United States, and all or a substantial portion of the assets of these non-residents are located outside the United States. As a result, it may be difficult or impossible for unit holders to bring an action against us or against these individuals in the United States if unit holders believe that their rights have been infringed under securities laws or otherwise. Even if you are successful in bringing an action of this kind, the laws of the Marshall Islands, Monaco and of other jurisdictions may prevent or restrict unit holders from enforcing a judgment against our assets or the assets of our general partner or our directors or officers.

Unit holders may not have limited liability if a court finds that unit holder action constitutes control of our business.

As a limited partner in a partnership organized under the laws of the Marshall Islands, unit holders could be held liable for our obligations to the same extent as a general partner if you participate in the “control” of our business. Our general partner generally has unlimited liability for the obligations of the partnership, such as its debts and environmental liabilities, except for those contractual obligations of the partnership that are expressly made without recourse to our general partner.

We are an “emerging growth company” and we cannot be certain if the reduced disclosure requirements applicable to emerging growth companies will make our common units less attractive to investors.

We are an “emerging growth company”, as defined in the JOBS Act, and we may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not “emerging growth companies”. We cannot predict if investors will find our common units less attractive because we may rely on these exemptions. If some investors find our common units less attractive as a result, there may be a less active trading market for our common units and our unit price may be more volatile.

In addition, under the JOBS Act, our independent registered public accounting firm will not be required to attest to the effectiveness of our internal control over financial reporting pursuant to Section 404 of the Sarbanes- Oxley Act for so long as we are an emerging growth company. For as long as we take advantage of the reduced reporting obligations, the information that we provide unit holders may be different than information provided by other public companies.

We have limited operating history as a U.S. publicly-traded company, and our historical financial information is not necessarily representative of the results we would have achieved as a publicly-traded company and may not be a reliable indicator of our future results.

Prior to December 10, 2018, the date on which our common units began trading on the Nasdaq Global Select Market, we were not responsible for the additional costs associated with being a U.S. publicly-traded company, including costs related to corporate governance, investor and public relations and public reporting. Therefore, our historical consolidated financial statements may not be indicative of our future performance as a publicly-traded company. We cannot assure you that our operating results will continue at a similar level when we are a publicly-traded company. For additional information about our past financial performance and the basis of presentation of our consolidated financial statements, see “Item 3. Key Information — Selected Financial Data”, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our historical consolidated financial statements and notes thereto included elsewhere in this annual report.

Tax Risks

In addition to the following risk factors, you should read “Business—Taxation of the Company,” “Material U.S. Federal Income Tax Considerations” and “Marshall Islands Tax Considerations” for a more complete discussion of the expected material U.S. federal income tax and Marshall Islands tax considerations relating to us and the ownership and disposition of our common units.

We may be subject to taxes, which may reduce our cash available for distribution to our unit holders.

We and our subsidiaries may be subject to tax in the jurisdictions in which we are organized or operate, reducing the amount of cash available for distribution. In computing our tax obligation in these jurisdictions, we may be required to take various tax accounting and reporting positions on matters that are not entirely free from doubt and for which we have not received rulings from the governing authorities. We cannot assure you that upon review of these positions the applicable authorities will agree with our positions. A successful challenge by a tax authority could result in additional tax imposed on us or our subsidiaries, further reducing the cash available for distribution. In addition, changes in our operations or ownership could result in additional tax being imposed on us or our subsidiaries in jurisdictions in which operations are conducted.

In accordance with the currently applicable Greek law, foreign flagged vessels that are managed by Greek or foreign ship management companies having established an office in Greece are subject to duties towards the Greek state which are calculated on the basis of the relevant vessels’ tonnage. The payment of said duties exhausts the tax liability of the foreign ship owning company and the relevant manager against any tax, duty, charge or contribution payable on income from the exploitation of the foreign flagged vessel. In case that tonnage tax and/or similar taxes/duties are paid to the vessel’s flag state, these are deducted from the amount of the duty to be paid in Greece.

U.S. tax authorities could treat us as a “passive foreign investment company,” which could have adverse U.S. federal income tax consequences to U.S. unit holders.

A non-U.S. entity treated as a corporation for U.S. federal income tax purposes will be treated as a “passive foreign investment company” (“PFIC”) for U.S. federal income tax purposes if either (1) at least 75.0% of its gross income for any taxable year consists of certain types of “passive income,” or (2) at least 50.0% of the average value of the entity’s assets produce or are held for the production of those types of “passive income”. For purposes of these tests, “passive income” generally includes dividends, interest, gains from the sale or exchange of investment property, and rents and royalties other than rents and royalties that are received from unrelated parties in connection with the active conduct of a trade or business. For purposes of these tests, income derived from the performance of services does not constitute “passive income”. Furthermore, the U.S. Department of Treasury issued proposed regulations in July 2019 that impact these tests, and the proposed regulations may be finalized in 2020. U.S. unit holders of a PFIC are subject to a disadvantageous U.S. federal income tax regime with respect to the income derived by the PFIC, the distributions they receive from the PFIC, and the gain, if any, they derive from the sale or other disposition of their units in the PFIC, as well as additional U.S. federal income tax filing obligations.

Based on our current and projected method of operation, and an opinion of counsel, we believe that we will not be a PFIC for our current taxable year, and we expect that we will not become a PFIC with respect to any future taxable year. In this regard, we expect that all of the vessels in our fleet will be engaged in time chartering activities, and we intend to treat our income from those activities as non-passive income, and the vessels engaged in those activities as non-passive assets, for PFIC purposes. However, we cannot assure you that the method of our operations, or the nature or composition of our income or assets, will not change in the future and that we will not become a PFIC. Moreover, although there is legal authority for our position, there is also contrary authority and no assurance can be given that the Internal Revenue Service (the “IRS”), will accept our position. We express no belief regarding our PFIC status with respect to any U.S. Holder that acquired common units prior to the listing of the common units on the Nasdaq Global Select Market or any U.S. person that acquired common shares of Navios Containers Inc.

We may have to pay tax on U.S. source income, which would reduce our earnings.

Under the Internal Revenue Code (the “Code”), 50.0% of the gross transportation income of a vessel-owning or chartering corporation that is attributable to transportation that either begins or ends, but that does not both begin and end, in the United States is characterized as U.S. source international transportation income. U.S. source international transportation income generally is subject to a 4.0% U.S. federal income tax without allowance for deduction or, if such U.S. source international transportation income is effectively connected with the conduct of a trade or business in the United States, U.S. federal corporate income tax (presently imposed at a 21.0% rate) as well as a branch profits tax (presently imposed at a 30.0% rate on effectively connected earnings), unless the non-U.S. corporation qualifies for exemption from tax under Section 883 of the Code.

Based on certain assumptions, we intend to take the position that our common units will represent more than 50.0% of the total combined voting power of all classes of our equity interests entitled to vote and, therefore, that we will qualify for the statutory tax exemption under Section 883 of the Code, provided that our common units (i) represent more than 50.0% of the total value of all of our outstanding equity interests, (ii) satisfy certain listing and trading volume requirements, and (iii) are not subject to certain exceptions based on our common units being closely held. However, our position is based on certain assumptions regarding us, our units and the holders thereof, and there are factual circumstances, including some that may be beyond our control, which could cause us to fail to qualify for the benefit of this tax exemption. Furthermore, our board of directors or general partner could determine that it is in our best interests to take an action or actions that would result in this tax exemption not applying to us. In addition, our position that we qualify for this exemption is based upon legal authorities that do not expressly contemplate an organizational structure such as ours; specifically, although we have elected to be treated as a corporation for U.S. federal income tax purposes, we are organized as a limited partnership under Marshall Islands law. We cannot give any assurance that we will qualify for this tax exemption for any taxable year or that the IRS will not take a different position regarding our qualification for this tax exemption.

If we were not entitled to the Section 883 exemption for any taxable year, we generally would be subject to a 4.0% U.S. federal income tax with respect to our gross U.S. source international transportation income or, if such U.S. source international transportation income were effectively connected with the conduct of a trade or business in the United States, U.S. federal corporate income tax as well as a branch profits tax for any such taxable year or years. Our failure to qualify for the Section 883 exemption could have a negative effect on our business and would result in decreased earnings available for distribution to our unit holders.

Refer also to “Business—Taxation of the Company”.

We could be or become a “controlled foreign corporation,” which could have adverse U.S. federal income tax consequences to certain U.S. holders.

We believe that tax rules recently enacted by the Tax Cuts and Jobs Act, including the imposition of so-called “downward attribution” for purposes of determining whether a non-U.S. corporation is a controlled foreign corporation (“CFC”) could cause Navios Containers to be (or to become in the future) a CFC for U.S. federal income tax purposes. Through downward attribution, U.S. subsidiaries of Navios Holdings and Navios Partners are treated as constructive owners of the equity interests of Navios Containers for purposes of determining whether Navios Containers is a CFC. If U.S. holders (including U.S. subsidiaries of Navios Holdings and Navios Partners, as discussed above) that each own 10.0% or more (by vote or value) of the equity of Navios Containers, own in the aggregate more than 50% of the equity of Navios Containers (by vote or value), in each case, directly, indirectly, or constructively, Navios Containers could be (or could become) a CFC.

U.S. holders who at all times own less than 10% of our equity should not be affected. However, if we are (or in the future were to become) a CFC, any U.S. holder owning 10% or more (by vote or value), directly, indirectly, or constructively (but not through downward attribution) of our equity could be subject to U.S. federal income tax in respect of a portion of our earnings. Any U.S. holder of Navios Containers that owns 10% or more (by vote or value), directly, indirectly, or constructively, of the equity of Navios Containers should consult its own tax advisor regarding U.S. federal tax consequences that may result from Navios Containers being treated as a CFC. (see U.S. Federal Income Taxation of U.S. Holders – Controlled Foreign Corporation).

You may be subject to income tax in one or more non-U.S. countries, including Greece, as a result of owning our common units if, under the laws of any such country, we are considered to be carrying on business there. Such laws may require you to file a tax return with and pay taxes to those countries.

We intend that our affairs and the business of each of our subsidiaries will be conducted and operated in a manner that minimizes income taxes imposed upon us and our subsidiaries or which may be imposed upon you as a result of owning our common units. However, because we are organized as a partnership, there is a risk in some jurisdictions that our activities and the activities of our subsidiaries may be attributed to our unit holders for tax purposes and, thus, that you will be subject to tax in one or more non-U.S. countries, including Greece, as a result of owning our common units if, under the laws of any such country, we are considered to be carrying on business there. If you are subject to tax in any such country, you may be required to file a tax return with and to pay tax in that country based on your allocable share of our income. We may be required to reduce distributions to you on account of any withholding obligations imposed upon us by that country in respect of such allocation to you. The United States may not allow a tax credit for any foreign income taxes that you directly or indirectly incur.

We believe we can conduct our activities in such a manner that our unit holders should not be considered to be carrying on business in Greece solely as a consequence of the acquisition, holding, disposition or redemption of our common units. However, the question of whether either we or any of our subsidiaries will be treated as carrying on business in any particular country, including Greece, will be largely a question of fact to be determined based upon an analysis of contractual arrangements, including the Management Agreement and the Administrative Agreement we entered into with the Manager, and the way we conduct business or operations, all of which may change over time. Furthermore, the laws of Greece or any other country may change in a manner that causes that country’s taxing authorities to determine that we are carrying on business in such country and are subject to its taxation laws. Any foreign taxes imposed on us or any subsidiaries will reduce our cash available for distribution.

Item 4. Information on the Company

A. History and Development of the Company

Navios Containers Inc. was incorporated on April 28, 2017 under the laws of the Republic of the Marshall Islands and has its principal offices located at 7 Avenue de Grande Bretagne, Office 11B2, Monte Carlo, MC 98000 Monaco, and its telephone number is (011) + (377) 9798-2140. Our agent for service is Trust Company of the Marshall Islands, Inc., located at Trust Company Complex, Ajeltake Island, P.O. Box 1405, Majuro, Marshall Islands MH96960.

On November 30, 2018, Navios Containers Inc. was converted into a limited partnership named Navios Maritime Containers L.P. under the laws of the Republic of the Marshall Islands. Navios Containers is a growth vehicle dedicated to the container sector of the maritime industry.

The issued common shares of Navios Containers Inc. were converted to common units at the conversion ratio of one common share of Navios Containers Inc. for one common unit of Navios Containers.

As of December 31, 2019, Navios Containers had a total of 34,603,100 common units outstanding. Navios Partners held 11,592,276 common units representing 33.5% of the outstanding common units and Navios Holdings held 1,263,276 common units representing 3.7% of the outstanding common units of Navios Containers.

The common units of Navios Containers commenced trading on the Nasdaq Global Select Market on December 10, 2018 under the ticker symbol “NMCI”.

The operations of Navios Containers are managed by the Manager, from its offices in Greece, Singapore and Monaco.

Equity Offerings and Issuances

On March 13, 2018, Navios Containers Inc. closed a follow-on private placement and issued 5,454,546 common shares at a subscription price of $5.50 per share, resulting in gross proceeds of $30.0 million. Navios Partners invested $14.5 million and received 2,629,095 shares and Navios Holdings invested $0.5 million and received 90,909 common shares. Navios Partners and Navios Holdings also received warrants, with a five-year term, for 6.8% and 1.7% of the newly issued equity, respectively, at an exercise price of $5.50 per share.

On November 9, 2017, Navios Containers Inc. closed a follow-on private placement of 9,090,909 common shares at a subscription price of $5.50 per share, resulting in gross proceeds of $50.0 million. Navios Partners invested $10.0 million and received 1,818,182 common shares. Navios Partners and Navios Holdings also received warrants, with a five-year term, for 6.8% and 1.7% of the newly issued equity, respectively.

On August 29, 2017, Navios Containers Inc. closed a follow-on private placement of 10,000,000 common shares at a subscription price of $5.00 per share, resulting in gross proceeds of $50.0 million. Navios Partners invested $10.0 million and received 2,000,000 common shares. Navios Partners and Navios Holdings also received warrants, with a five-year term, for 6.8% and 1.7% of the newly issued equity, respectively.

On June 8, 2017, Navios Containers Inc. closed the initial private placement of 10,057,645 common shares at a subscription price of $5.00 per share, resulting in gross proceeds of $50.3 million. Navios Partners invested $30.0 million and received 59.7% of the equity, and Navios Holdings invested $5.0 million and received 9.9% of our equity. Each of Navios Partners and Navios Holdings also received warrants, with a five-year term, for 6.8% and 1.7% of the equity, respectively.

Upon the conversion of Navios Containers Inc. to a limited partnership, all of the warrants described above issued to Navios Partners and Navios Holdings expired.

Refer also to “Item 16E. Purchases of Units by the Issuer and Affiliated Purchasers”.

Acquisition of Vessels

On April 23, 2019, the Company purchased from an unrelated third party the Navios Constellation, a 2011-built 10,000 TEU containership, for an acquisition cost of $53.4 million (including $0.9 million capitalized expenses), pursuant to the exercise of its purchase option in January 2019, based on the memorandum of agreement entered into in November 2018.

Refer also to “Item 5. Operating and Financial Review and Prospects”.

B. Business Overview

Introduction

We are a growth-oriented international owner and operator of containerships. We were formed in April 2017 by Navios Holdings, which owns or operates one of the largest shipping fleets by capacity, to take advantage of acquisition and chartering opportunities in the container shipping sector. We generate our revenues by chartering our vessels to leading liner companies pursuant to fixed-rate time charters. Under the terms of our charters, we provide crewing and technical management (via a separate Management Agreement with the Manager), while the charterer is generally responsible for securing cargoes, fuel costs and voyage expenses.

Our Fleet

As of March 12, 2020, Navios Containers owned a fleet of 29 vessels totaling 142,821 TEU and an average age of 11.7 years, which is below the current industry average of about 12.8 years as of the beginning of March 2020, according to industry data. Our fleet includes three 3,450 TEU containerships, 22 containerships between 4,250 TEU and 4,730 TEU and four containerships between 8,200 TEU and 10,000 TEU. As of March 12, 2020, we had contracts covering 49.7% and 8.2% of available days for 2020 and for 2021, respectively.

The following table provides summary information about our fleet as of March 12, 2020:


Owned Vessels	TEU		Built		Charter Expiration Date⁽¹⁾	Charter-Out Rate⁽²⁾
Navios Summer ⁽³⁾		3,450		2006	November 2020	$	10,517
Navios Verano ⁽³⁾		3,450		2006			Spot
Navios Spring ⁽³⁾		3,450		2007	April 2020	$	8,888
Navios Vermilion ⁽³⁾		4,250		2007	May 2020	$	12,588
Navios Indigo ⁽³⁾		4,250		2007	March 2020	$	12,898
Navios Amaranth ⁽³⁾		4,250		2007	March 2020	$	13,427
Navios Amarillo ⁽³⁾		4,250		2007	June 2020	$	12,113
Navios Verde ⁽³⁾		4,250		2007	September 2020	$	11,850
Navios Azure ⁽³⁾		4,250		2007	March 2020	$	11,850
Navios Domino ⁽³⁾		4,250		2008	April 2020	$	13,253
					May 2020	$	11,400
Navios Dedication ⁽³⁾		4,250		2008	September 2020	$	12,063
Navios Delight ⁽³⁾		4,250		2008	July 2020	$	9,134
Navios Destiny ⁽³⁾		4,250		2009			Spot
Navios Devotion⁽³⁾		4,250		2009	April 2020	$	8,203
Navios Lapis		4,250		2009	December 2020		Index	⁽⁵⁾
Navios Tempo		4,250		2009	July 2021		Index	⁽⁵⁾
Navios Dorado		4,250		2010	January 2021	$	13,776
Navios Felicitas		4,360		2010			Spot
Bahamas		4,360		2010	April 2020	$	10,213
Bermuda		4,360		2010	March 2020	$	10,001
					September 2020	$	12,359
Navios Miami		4,563		2009	June 2020	$	12,541
APL Oakland		4,730		2008	March 2020⁽⁴⁾	$	27,156
APL Los Angeles		4,730		2008	April 2020⁽⁴⁾	$	27,156
APL Denver		4,730		2008	May 2020⁽⁴⁾	$	27,156
APL Atlanta		4,730		2008	June 2020⁽⁴⁾	$	27,156
YM Utmost ⁽⁶⁾		8,204		2006	April 2020	$	21,231
Navios Unite ⁽⁶⁾		8,204		2006	April 2021	$	23,160
Navios Unison ⁽⁷⁾		10,000		2010	May 2019	$	26,663
					May 2021	$	26,325
					May 2024	$	27,300
Navios Constellation ⁽⁷⁾		10,000		2011	November 2020	$	26,325
					May 2024	$	27,300

(1)	Charter expiration dates shown reflect expected redelivery date based on the midpoint of the full redelivery period in the charter agreement, unless otherwise noted.

(2)	Daily charter-out rate, net of commissions where applicable.

(3)	The vessel is subject to a sale and leaseback transaction with Minsheng Financial Leasing Co. Ltd. for a period of up to five years, at which time we have an obligation to purchase the vessel.

(4)	Charter expiration dates shown reflect earliest redelivery date of the full redelivery period in the charter agreement.

(5)	The market rate will be calculated according to the Container Ship Time Charter Assessment Index (ConTex) as published for a 4,250 TEU vessel for a 12 month period.

(6)	The vessel is subject to a sale and leaseback transaction with a Chinese financial institution for a period of up to five years, at which time we have an obligation to purchase the vessel.

(7)	The vessel is subject to a sale and leaseback transaction with a Chinese financial institution for a period of up to seven years, at which time we have an obligation to purchase the vessel.

Our Competitive Strengths

We believe that we possess a number of competitive strengths that will allow us to capitalize on growth opportunities in the containership sector, including:

•

Strategically Focused Fleet of Intermediate-Size Containerships. We are one of the largest independent owners of quality intermediate-size containerships that are between 3,000 and 10,000 TEU in capacity. We believe this sector size currently demonstrates the best relative fundamental outlook based on current market dynamics and is where we see significant demand from our customers. We believe our fleet of intermediate-size containerships provides us a competitive advantage when chartering these vessels with liner companies because we believe these vessels are well positioned to withstand recent disruptions in the containership trade, such as the recent expansion of the Panama Canal, and to capitalize on the redeployment of containerships across trade lanes as recent deliveries of containership newbuildings have been dominated by the largest-size containerships. Trade volumes continue to grow more rapidly on North-South and intra-regional trade lanes which traditionally have been served by intermediate-size and smaller containerships at the same time that net fleet growth, deliveries and the orderbook for intermediate-size containerships remain low. All of our 25 Baby Panamaxes are of a shorter length and have a shallower draft, which we believe allows them to be more versatile and capable to be deployed in these trade lanes post-Panama Canal expansion. For example, vessels between 4,000 and 5,100 TEU have seen the highest increase in their share of the deployment capacity in intra-Asia, growing from 13% of the capacity in 2012 to approximately 24% of the capacity as of February 2020, according to Alphaliner. During the same period, the share of capacity in intra-Asia by vessels between 100 and 999 TEU and 1,000 and 1,999 TEU has declined considerably.

•

Relationships with Leading Charterers. We expect to benefit from the long-standing relationships of our Manager with leading liner companies such as Maersk Line A/S, Mediterranean Shipping CO. S.A., CMA CGM, Cosco Shipping Co Ltd, Hapag-Lloyd AG, Evergreen Marine Corp., Mitsui O.S.K. Lines, Ltd. and others. We believe that the experience of our management team, coupled with our Manager’s reputation for excellence, will assist us in securing employment for our vessels and will provide us with an established customer base to facilitate our future growth.

•

Well-Positioned to Pursue Acquisitions. We believe that our liquidity, low leverage and access to bank financing and the capital markets through our relationships with Navios Holdings and our Manager positions us with ship brokers, financial institutions and shipyards as a favored purchaser of quality containerships and will allow us to make additional near-term accretive acquisitions as quality secondhand vessel values remain below their historical 15-year averages. We intend to monitor vessel values and charter rates and expect to continue to pursue acquisitions that are consistent with our investment criteria. We will also have a right of first refusal as to all containerships owned or acquired by Navios Holdings, Navios Partners or Navios Acquisition which provides us with a preferred position for acquisition opportunities as to a large fleet of containers.

•

Experience Across Sectors and Growing Through Cycles. Executives of Navios Holdings and our Manager have substantial experience with investing in and operating fleets in the drybulk, tanker and containership sectors. We believe that the strong reputations and relationships they have developed in these industries and with major financial institutions will continue to provide us with access to distressed situation transactions, vessel acquisition and employment opportunities, as well the ability to access financing to grow our business.

•

Scale and Cost-Efficient Operations of our Manager. We believe that the Manager provides us with operational scale, geographical flexibility and market-specific experience and relationships, which will allow us to manage our vessels in an efficient and cost-effective manner. By leveraging the Manager’s established operating platform, we are able to take advantage of a disciplined management team that has been tested through multiple shipping cycles.

Business Strategies

Our primary objectives are to continue to profitably grow our business, increase distributable cash flow per unit and maximize value to our unit holders by pursuing the following strategies:

•

Continue to Capitalize on Low Vessel Prices to Pursue Accretive Acquisitions. We are focused on continuing to purchase containerships at favorable prices. We intend to grow our fleet using Navios Holdings’ and our Manager’s global network of relationships and long experience in the maritime industry to make selective acquisitions of quality, second-hand containerships. We believe that the recent developments in the container shipping industry have created significant opportunities to acquire vessels at near historically low prices on an inflation adjusted basis and we will analyze acquisitions based on whether they meet targeted return thresholds and are accretive to cash flow in addition to meeting our strategy of targeting intermediate-size containerships. As a recently formed company without a legacy fleet of highly leveraged vessels, we believe we are well-positioned to take advantage of the significant opportunities created by the developments in the container shipping sector.

•

Continue to Actively Manage our Charter Portfolio. We intend to deploy our vessels on a mix of short-term, medium-term and long-term time charters, to leading liner companies according to our continuing assessment of market conditions. We believe that our chartering strategy will afford us opportunities to capture increased profits during strong charter markets while benefiting from the relatively stable cash flows and high utilization rates associated with longer-term time charters. We believe our strategy will give us the flexibility to take advantage of rising charter rates if the charter markets improve as the global economy strengthens.

•

Maintain a Strong Balance Sheet and Flexible Capital Structure. We intend to manage our balance sheet conservatively, targeting a modest amount of leverage, managing our maturity profile and maintaining an adequate level of liquidity. We believe that managing our balance sheet in a conservative manner will minimize our financial risk while providing a solid foundation for our future expansion and enhancing our ability to make distributions to our unit holders and repurchases of common units.

•

Provide Superior Customer Service with High Standards of Performance, Reliability and Safety. Our customers seek transportation partners that have a reputation for high standards of performance, reliability and safety. We intend to use Navios Holdings’ and our Manager’s excellent vessel safety record, compliance with rigorous health, safety and environmental protection standards, operational expertise and customer relationships to further expand a sustainable competitive advantage and consistent delivery of superior customer service.

Our Customers

We provide or we will provide seaborne shipping services under short-term and medium-term time charters, as well as some long-term time charters, with customers that we believe are creditworthy. For the year ended December 31, 2019 two customers, NOL Liner PTE Ltd and Hapag-Lloyd AG, represented 30.8% and 17.9% of our total revenues, respectively. For the year ended December 31, 2018, two customers, NOL Liner PTE Ltd and Mitsui O.S.K. Lines represented 30.5% and 25.7% of our total revenues, respectively. For the period from April 28, 2017 (date of inception) to December 31, 2017, one customer Mitsui O.S.K. Lines represented 71.0% of our total revenues. No other customer accounted for 10% or more of total revenues for the periods presented.

Although we believe that if any one of our charters were terminated, we could recharter the related vessel at the prevailing market rate relatively quickly, the permanent loss of a significant customer or a substantial decline in the amount of services requested by a significant customer could harm our business, financial condition and results of operations if we were unable to recharter our vessel on a favorable basis due to then-current market conditions, or otherwise.

Competition

The global container shipping market is extensive, diversified, competitive and fragmented, divided among approximately 655 liner operators and independent owners. The world’s active containership fleet consists of approximately 5,374 vessels, aggregating approximately 23.0 million TEU as of March 12, 2020. As a general principle, the smaller the cargo carrying capacity of a containership, the more fragmented is its market, both with regard to charterers and vessel owner/operators. Even among the larger liner companies and independent containership owners and operators, whose vessels are mainly in the larger sizes, only ten companies are known to control, through vessel ownership and/or time charters, fleets of 92 vessels or more: AP Moller, China COSCO Shipping, Mediterranean Shipping Co. (MSC), CMA CGM, Evergreen, Pacific International Lines, Seaspan, Hapag Lloyd, Imabari Shipbuilding and Wan Hai Lines. There are about 40 owners known to control, through vessel ownership and/or time charters, fleets of between 27 and 82 vessels. Liner companies, who control the movement of containers on land and at sea, own vessels directly and also charter-in vessels on short- and long-term charters. Many owners/managers of containerships charter their vessels out for extended periods but unlike the liner companies, do not control the movement of any containers. These owners/managers are often called tonnage providers. Liner companies may, at any given time, control a fleet many times the size of their owned tonnage. AP Moller and MSC are such liner operators; whereas Seaspan, Costamare and others, including us, are tonnage providers.

It is likely that we will face substantial competition for long-term charter business from a number of experienced companies. Many of these competitors will have significantly greater financial resources than we do. It is also likely that we will face increased numbers of competitors entering into the container transportation sector. Many of these competitors have strong reputations and extensive resources and experience. Increased competition may cause greater price competition, especially for long-term charters.

We believe that the containership sector of the international shipping industry is characterized by the significant time required to develop the operating expertise and professional reputation necessary to obtain and retain customers. We believe that our development of an intermediate-size containerships fleet has enhanced our relationship with our principal charterers by enabling them to serve the East-West, North-South and Intra-regional trade routes efficiently, while enabling us to operate in the different rate environments prevailing for those routes. We also believe that our focus on customer service and reliability enhances our relationships with our charterers.

Time Charters

Overview

We provide or we will provide seaborne shipping services under short-term and medium-term time charters, as well as some long-term time charters, with customers that we believe are creditworthy. A time charter is a contract under which a charterer pays a fixed daily hire rate on a semi-monthly or monthly basis for a fixed period of time for use of the vessel. Subject to any restrictions in the charter, the charterer decides the type and quantity of cargo to be carried and the ports of loading and unloading. Under a time charter the charterer pays substantially or all of the voyage expenses, including any bunker fuel expenses, port fees, cargo loading and unloading expenses, canal tolls, garbage fees, agency fees, but excluding charter brokerage commissions. The vessel owner pays the vessel operating expenses, which include crew wages, insurance, technical maintenance costs, spares, stores and supplies and charter brokerage commissions on gross voyage revenues. Time charter rates are usually fixed during the term of the charter. Vessels operating on time charters for a certain period of time provide more predictable cash flows over that period of time, but can yield lower profit margins than vessels operating under short-term charters under market rates during periods characterized by favorable market conditions. Prevailing time charter rates fluctuate on a seasonal and year-to-year basis reflecting changes in spot charter rates, expectations about future charter rates and other factors. The degree of volatility in time charter rates is lower for longer term time charters as opposed to shorter term time charters.

Base Hire Rate

“Base hire rate” refers to the basic payment from the customer for the use of the vessel. The hire rate is generally payable monthly, in advance on the first day of each month, in U.S. Dollars as specified in the charter.

Expenses

The charterer generally pays the voyage expenses, which include all expenses relating to particular voyages, including any bunker fuel expenses, port fees, cargo loading and unloading expenses, canal tolls and agency fees.

Off-hire

Under a time charter, when the vessel is “off-hire,” or not available for service, the charterer generally is not required to pay the charter hire rate, and we will be responsible for all costs, including the cost of fuel bunkers unless the charterer is responsible for the circumstances giving rise to the lack of availability. A vessel generally will be deemed to be off-hire if there is an occurrence preventing the full working of the vessel due to, among other things:

•

operational deficiencies;

•

dry-docking for repairs, maintenance or inspection;

•

equipment breakdowns;

•

delays due to accidents;

•

crewing strikes, labor boycotts, certain vessel detentions or similar problems; or

•

our failure to maintain the vessel in compliance with its specifications and contractual standards or to man a vessel with the required crew.

Under time charters if a vessel is delayed, detained or arrested for over a specified number of consecutive days due to engine or essential gear breakdown, strikes, labor stoppages, boycotts or blockades, or is requisitioned, or other causes affecting the vessel’s schedule, other than grounding, collision or similar causes, we must charter a substitute vessel and we must pay any difference in hire cost of the charter for the duration of the substitution. The charterer may also have the right under these circumstances to terminate the charter.

Termination

We are generally entitled to suspend performance under the time charters covering our vessels if the customer defaults in its payment obligations. Under some of our time charters, either party may terminate the charter in the event of war in specified countries or in locations that would significantly disrupt the free trade of the vessel. Some of our time charters covering our vessels require us to return to the charterer, upon the loss of the vessel, all advances paid by the charterer but not earned by us.

Crewing

The Manager crews its vessels primarily with Ukrainian, Polish, Filipino, Russian, Indian, Georgian, Romanian, Myanmar, Korean and Sri Lanka Officers and Filipino, Georgian, Romanian, Ethiopian, Indian, Ukrainian and Myanmar seamen. The crewing agencies handle each seaman’s training while the Manager handles their travel and payroll. The Manager requires that all of its officers and seamen have the qualifications and licenses required to comply with international regulations and shipping conventions.

Inspections

Our Manager carries out ship audits and inspections on a regular basis. The results of these audits and inspections, which are conducted both in port and underway, result in reports containing recommendations for improvements to the overall condition of the vessel, maintenance, safety and crew welfare. Our manager is in frequent contact with our vessels and updates compliance programs as needed based on changes to applicable regulations or their interpretation. Based in part on these evaluations, our Manager creates and implements a program of continuous maintenance for our vessels and their systems.

Inspection by Classification Societies

Every sea going vessel must be inspected and approved by a classification society in order to be flagged in a specific country, obtain liability insurance, and legally operate. The classification society certifies that the vessel is “in class,” signifying that the vessel has been built and maintained in accordance with the rules of the classification society and complies with applicable rules and regulations of the vessel’s country of registry and the international conventions of which that country is a party. In addition, where surveys are required by international conventions and corresponding laws and ordinances of a flag State, the classification society will often undertake them on application or by official order, acting on behalf of the authorities concerned.

The classification society also undertakes, on request, other surveys and checks that are required by regulations and requirements of the flag State or port authority. These surveys are subject to agreements made in each individual case or to the regulations and requirements of the flag State or port authority. These surveys are subject to agreements made in each individual case or to the regulations of the country concerned. For maintenance of the class, regular and extraordinary surveys of hull, machinery (including the electrical plant) and any special equipment classed are required to be performed subject to statutory requirements mandated by SOLAS as follows:

• Annual Surveys. For ocean-going ships, annual surveys are conducted for the hull and the machinery (including the electrical plant) and, where applicable, for special equipment classed, at intervals of 12 months from the date of commencement of the class period indicated in the certificate.

• Intermediate Surveys. Extended annual surveys are referred to as intermediate surveys and typically are conducted two and a half years after commissioning and each class renewal. Intermediate surveys may be carried out on the occasion of the second or third annual survey.

• Class Renewal Surveys. Class renewal surveys, also known as special surveys, are carried out for the ship’s hull, machinery (including the electrical plant), and for any special equipment classed, at the intervals indicated by the character of classification for the hull. At the special survey, the vessel is thoroughly examined, including audio-gauging, to determine the thickness of its steel structure. Should the thickness be found to be less than class requirements, the classification society would prescribe steel renewals. The classification society may grant a one-year grace period for completion of the special survey under certain conditions. Substantial funds may have to be spent for steel renewals to pass a special survey if the vessel experiences excessive wear and tear. In lieu of the special survey every four or five years, depending on whether a grace period was granted, a ship owner has the option of arranging with the classification society for the vessel’s integrated hull or machinery to be on a continuous survey cycle, in which every part of the vessel would be surveyed within a five-year cycle.

Risk of Loss and Liability Insurance

The operation of any cargo vessel includes risks such as mechanical failure, physical damage, collision, fire, contact with floating objects, property loss, cargo loss or damage, business interruption due to political circumstances in foreign countries, hostilities, and labor strikes. In addition, there is always an inherent possibility of marine disaster, including oil spills and other environmental mishaps, and the liabilities arising from owning and operating vessels in international trade. OPA 90, which imposes virtually unlimited liability upon owners, operators and demise charterers of any vessel trading in the U.S. exclusive economic zone for certain oil pollution accidents in the United States, has made liability insurance more expensive for ship owners and operators trading in the U.S. market. While we believe that our present insurance coverage is adequate, not all risks can be insured, and there can be no guarantee that any specific claim will be paid, or that we will always be able to obtain adequate insurance coverage at reasonable rates. Our current insurance includes the following:

Hull and Machinery and War Risk Insurance

We have marine hull and machinery and war risk insurance, which include coverage of the risk of actual or constructive total loss, for all of our owned vessels. Each of the owned vessels is covered up to at least fair market value, with a deductible of $0.1 million per containership for the hull and machinery insurance. We have also extended our war risk insurance to include war loss of hire for any loss of time to the vessel, including for physical repairs, caused by a warlike incident and piracy seizure for up to 270 days of detention/loss of time. There are no deductibles for the war risk insurance or the war loss of hire cover.

We have arranged, as necessary, increased value insurance for our vessels. With the increased value insurance, in case of total loss of the vessel, we will be able to recover the sum insured under the increased value policy in addition to the sum insured under the hull and machinery policy. Increased value insurance also covers excess liabilities that are not recoverable in full by the hull and machinery policies by reason of underinsurance. We do not expect to maintain loss of hire insurance for our vessels. Loss of hire insurance covers business interruptions that result in the loss of use of a vessel.

Protection and Indemnity Insurance

Protection and indemnity insurance is expected to be provided by mutual protection and indemnity associations (“P&I Associations”), who indemnify members in respect of discharging their tortious, contractual or statutory third-party legal liabilities arising from the operation of an entered ship. Such liabilities include but are not limited to third-party liability and other related expenses from injury or death of crew, passengers and other third parties, loss or damage to cargo, claims arising from collisions with other vessels, damage to other third-party property, pollution arising from oil or other substances, and salvage, towing and other related costs, including wreck removal. Protection and indemnity insurance is a form of mutual indemnity insurance, extended by protection and indemnity mutual associations and always provided in accordance with the applicable associations’ rules and members’ agreed terms and conditions.

Our fleet is currently entered for protection and indemnity insurance with International Group associations where, in line with all International Group Clubs, coverage for oil pollution is limited to $1.0 billion per event. The 13 P&I Associations that comprise the International Group insure approximately 95% of the world’s commercial tonnage and have entered into a pooling agreement to collectively reinsure each association’s liabilities. Each vessel that we acquire will be entered with P&I Associations of the International Group. Under the International Group reinsurance program for the current policy year, each P&I club in the International Group is responsible for the first $10.0 million of every claim. In every claim the amount in excess of $10.0 million and up to $100.0 million is shared by the clubs under the pooling agreement. Any claim in excess of $100.0 million is reinsured by the International Group in the international reinsurance market under the General Excess of Loss Reinsurance Contract. This policy currently provides an additional $2.0 billion of coverage for non-oil pollution claims. Further to this, an additional reinsurance layer has been placed by the International Group for claims up to $1.0 billion in excess of $2.10 billion, i.e. $3.10 billion in total. For passengers and crew claims, the overall limit is $3.0 billion for any one event on any one vessel with a sub-limit of $2.0 billion for passengers. With the exception of pollution, passenger or crew claims, should any other P&I claim exceed Group reinsurance limits, the provisions of all International Group Club’s overspill claim rules will operate and members of any International Group Club will be liable for additional contributions in accordance with such rules. To date, there has never been an overspill claim, or one even nearing this level.

As a member of the P&I Associations that are members of the International Group, we will be subject to calls payable to the associations based on our individual fleet record, the associations’ overall its claim records as well as the claim records of all other members of the individual associations, and members of the pool of P&I Associations comprising the International Group. The P&I Associations’ policy year commences on February 20th. Calls are levied by means of Estimated Total Premiums (“ETP”) and the amount of the final installment of the ETP varies according to the actual total premium ultimately required by the club for a particular policy year. Members have a liability to pay supplementary calls which might be levied by the board of directors of the club if the ETP is insufficient to cover amounts paid out by the club. Should a member leave or entry cease with any of the associations, at the club’s manager’s discretion, they may be also be liable to pay release calls or provide adequate security for the same amount. Such calls are levied in respect of potential outstanding Club/Member liabilities on open policy years and include but are not limited to liabilities for deferred calls and supplementary calls.

Uninsured Risks

Not all risks are insured and not all risks are insurable. The principal insurable risks that nonetheless remain uninsured across our businesses are “loss of hire” (except in cases of loss of hire due to war or a piracy event or due to presence or suspected presence of contraband on board), “strikes,” “defense,” and “credit risk. Specifically, we do not insure these risks because the costs are regarded as disproportionate. These insurances provide, subject to a deductible, a limited indemnity for hire that would not be receivable by the ship owner for reasons set forth in the policy. Should a vessel on time charter, where the vessel is paid a fixed hire day by day, suffer a serious mechanical breakdown, the daily hire will no longer be payable by the charterer. The purpose of the loss of hire insurance is to secure the loss of hire during such periods. In the case of strikes insurance, if a vessel is being paid a fixed sum to perform a voyage and the ship becomes strike bound at a loading or discharging port, the insurance covers the loss of earnings during such periods. However, in some cases when a vessel is transiting high risk war and/or piracy areas, we arrange war loss of hire insurance to cover up to 270 days of detention/loss of time. When our charterers engage in legally permitted trading in locations which may still be subject to sanctions or boycott, such as Iran, Syria and Sudan, our insurers may be contractually or by operation of law prohibited from honoring our insurance contract for such trading, which could result in reduced insurance coverage for losses incurred by the related vessels. However, no vessels in our fleet have called on ports in sanctioned countries or countries designated as state sponsors of terrorism by the U.S. State Department, including Iran, Syria, or Sudan. Furthermore, our insurers and we may be prohibited from posting or otherwise be unable to post security in respect of any incident in such locations, resulting in the loss of use of the relevant vessel and negative publicity for our Company which could negatively impact our business, results of operations, cash flows and share price.

There are no deductibles for the war loss of hire cover and contraband cover.

Even if our insurance coverage is adequate to cover our losses, if we suffer a loss of a containership, we may not be able to obtain a timely replacement for any lost containership. Furthermore, in the future, we may not be able to obtain adequate insurance coverage at reasonable rates for our fleet. For example, more stringent environmental regulations have led to increased costs for, and in the future may result in the lack of availability of, insurance against risks of environmental damage or pollution. We may also be subject to calls, or premiums, in amounts based not only on our own claim records but also the claim records of all other members of the protection and indemnity associations through which we receive indemnity insurance coverage. A catastrophic oil spill or marine disaster could exceed our insurance coverage, which could have a material adverse effect on our business, results of operations and financial condition and our ability to make distributions to our unit holders and repurchases of common units. Any uninsured or underinsured loss could harm our business and financial condition. In addition, the insurance may be voidable by the insurers as a result of certain actions, such as vessels failing to maintain required certification.

Permits and Authorizations

We are required by various governmental and quasi-governmental agencies to obtain certain permits, licenses, financial assurances and certificates with respect to our containerships. The kinds of permits, licenses, financial assurances and certificates required will depend upon several factors, including the commodity transported, the waters in which the vessel operates, the nationality of the vessel’s crew and the type and age of the vessel. We have obtained all permits, licenses, financial assurances and certificates currently required to operate our vessels. Additional laws and regulations, environmental or otherwise, may be adopted which could limit our ability to do business or increase the cost of doing business.

Environmental and Other Regulations

Sources of Applicable Maritime Laws and Standards

Shipping is one of the world’s most heavily regulated industries, as it is subject to both Governmental regulation and industry standards. The Governmental regulation to which we are subject include local and national laws, as well as international treaties and conventions, and regulations in force in jurisdictions where our vessels operate and are registered. We also are subject to regulation by ship classification societies and industry associations, which often have independent standards. In the United States and, increasingly, in Europe, the national, state, and local laws and regulations are more stringent than international conventions, as well as industry standards. Violations of these laws, regulations, treaties and other requirements could result in sanctions by regulators, possibly fines, penalties, delays, and detention.

The primary areas maritime laws and standards to which we are subject include environment, safety, and security, as provided in detail below.

International Conventions and Standards

The IMO has adopted a number of international conventions concerned with preventing, reducing, or managing pollution from ships; and ship safety and security.

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MARPOL

The International Convention for the Prevention of Pollution from Ships or “MARPOL” is the primary international convention governing vessel pollution prevention and response. MARPOL includes six annexes concerning operational pollution by oil, noxious liquid substances, harmful substances, sewage, garbage and air emissions. More specifically, these annexes contain regulations for the prevention of pollution by oil (Annex I), by noxious liquid substances in bulk (Annex II), by harmful substances in packaged forms within the scope of the International Maritime Dangerous Goods Code (Annex III), by sewage (Annex IV), by garbage (Annex V), and by air emissions, including sulfur oxides (“SOx”), nitrogen oxides (“NOx”), and particulate matter (Annex VI). The annexes also contain recordkeeping and inspection requirements.

Under MARPOL, all of our ships may be required to have an International Oil Pollution Prevention Certificate, an International Sewage Pollution Prevention Certificate, and an International Air Pollution Prevention Certificate issued by their flag States, as well as a Shipboard Oil Pollution Emergency Plan and a Garbage Management Plan, among others, some of which must be approved by their flag States. Certain jurisdictions have not adopted all of the MARPOL annexes, but have established various national, regional, or local laws and regulations that apply to these areas.

Annex VI has been amended and also was designed to phase in increasingly stringent limits on sulfur emissions. On January 1, 2020, the emissions standard under MARPOL Annex VI for the reduction of sulfur oxides was lowered to 0.5% worldwide. Current regulations also allow for special emissions control areas (“ECAs”) to be established with more stringent controls on emissions of 0.1% sulfur. As of January 1, 2020, ships must operate on lower sulfur fuel oil with 0.5% sulfur content worldwide (down from previous levels of 3.5%) outside the ECAs. Using low sulfur fuel as a means of compliance may require fuel system modification and tank cleaning. Another means of compliance is the installation of pollution control equipment (exhaust gas cleaning systems or scrubbers), allowing the vessel to use the existing, less expensive, high sulfur content fuel.

As previously noted, Annex VI allows for designation, in response to proposals from member parties, of ECAs that impose more stringent requirements for control of sulfur oxide, particulate matter, and nitrogen oxide emissions. Thus far, ECAs have been formally adopted for the Baltic Sea area (limits SOx emissions only); the North Sea area including the English Channel (limiting SOx emissions only); the North American ECA (limiting SOx, NOx and particulate matter emissions); and the U.S. Caribbean ECA (limiting SOx, NOx and particulates). The IMO approved, then adopted in 2017, the designation of the North Sea and Baltic Sea as ECAs for NOx under Annex VI as well, which will take effect in January 2021 for new vessels constructed on or after January 1, 2021 or existing vessels which replace an engine with “non-identical” engines, or install an “additional” engine. Fuel sulfur limits in ECAs are 0.1%.

Despite Annex VI’s extensive regulations, other jurisdictions have taken unilateral approaches to air emissions regulation. For example, the state of California adopted more stringent low sulfur fuel requirements within California-regulated waters, requiring marine gas oil and prohibiting exhaust gas cleaning systems. China has also established local emissions control areas. While the Chinese areas are currently consistent with international standards, certain Chinese local emissions control areas may become more stringent than international requirements in the future. Similarly, South Korea has established Port Air Quality Control Zones which will cap the sulfur content of fuel at 0.1% beginning September 1, 2020.

Annex III contains general requirements for the prevention of pollution by harmful substances carried by sea in packaged form. This Annex contains requirements for safe handling of packaged substances that represent a serious risk to the environment, as well as guidelines for identification of harmful substances. For example, any relevant documents, such as the ship’s manifest, identify the substances carried, if any, aboard our vessels. Violations of this Annex may also lead to applicable fines and penalties, as with all MARPOL annexes.

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Ballast Water

The IMO, the United States, and certain U.S. states have implemented requirements relating to the management of ballast water to prevent the harmful effects of foreign invasive species. The IMO’s International Convention for the Control and Management of Ships’ Ballast Water and Sediments (the “BWM Convention”) entered into force on September 8, 2017. The BWM Convention requires ships to manage ballast water in a manner that removes, renders harmless, or avoids the uptake or discharge of aquatic organisms and pathogens within ballast water and sediment. As of February 12, 2020, the BWM Convention had 81 contracting states, representing 81.83% of world gross tonnage. The United States is not party to the BWM Convention.

As amended, the BWM Convention requires, among other things, ballast water exchange, the maintenance of certain records, and the implementation of a Ballast Water and Sediments Management Plan. It also requires the installation of ballast water management systems for existing ships by certain deadlines, as described below.

Ships constructed prior to September 8, 2017 must install ballast water management systems by the first renewal survey following September 8, 2017 and must comply with IMO discharge standards by the due date for their International Oil Pollution Prevention Certificate renewal survey under MARPOL Annex 1. Ships constructed after September 8, 2017 are required to comply with the BWM Convention upon delivery. All ships must meet the IMO ballast water discharge standard by September 8, 2024, regardless of construction date. And, recently updated guidance for Ballast Water and Sediments Management Plan includes more robust testing and performance specifications.

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International Convention for Bunker Oil Pollution Damage and Other Pollution Liability Regimes

Several international conventions impose and limit pollution liability from vessels. For example, the International Convention on Civil Liability for Bunker Oil Pollution Damage (the “Bunker Convention”) in addition to local and national environmental laws. The Bunker Convention entered into force in 2008 and imposes strict liability on ship owners for pollution damage and response costs incurred in contracting States caused by discharges, or threatened discharges, of bunker oil from all classes of ships not covered by the CLC. The Bunker Convention also requires registered owners of ships over a certain tonnage to maintain insurance to cover their liability for pollution damage in an amount equal to the limits of liability under the applicable national or international limitation regime, including liability limits calculated in accordance with the Convention on Limitation of Liability for Maritime Claims 1976, as amended (the “1976 Convention”). As of February 12, 2020, the Bunker Convention had 95 contracting states, representing 92.91% of the gross tonnage of the world’s merchant fleet. In non-contracting States, such as the United States, liability for such bunker oil pollution typically is determined by the national or other domestic laws in the jurisdiction where the spillage occurs.

The 1976 Convention is the most widely applicable international regime limiting maritime pollution liability. Rights to limit liability under the 1976 Convention are forfeited where a spill is caused by a ship owner’s intentional or reckless conduct. Certain jurisdictions have ratified the IMO’s Protocol of 1996 to the 1976 Convention, referred to herein as the “Protocol of 1996.” The Protocol of 1996 provides for substantially higher liability limits in those jurisdictions than the limits set forth in the 1976 Convention. Finally, some jurisdictions, such as the United States, are not a party to either the 1976 Convention or the Protocol of 1996, and, therefore, a ship owner’s rights to limit liability for maritime pollution in such jurisdictions may be uncertain or subject to national and local law.

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International Convention for the Safety of Life at Sea and the International Safety Management Code

Our vessels also must operate in compliance with the requirements set forth in the International Convention for the Safety of Life at Sea, as amended, (“SOLAS”), including the International Safety Management Code (the “ISM Code”), which is contained in Chapter IX of SOLAS.

SOLAS was enacted primarily to promote the safety of life and preservation of property. SOLAS, and the regulations and codes of practice thereunder, is regularly amended to introduce heightened shipboard safety requirements into the industry. The ISM Code requires ship operators to develop and maintain an extensive Safety Management System (“SMS”) that includes the adoption of a safety and environmental protection policy setting forth instructions and procedures for safe vessel operation and describing procedures for dealing with emergencies. The ISM Code also requires vessel operators to obtain a Document of Compliance (“DOC”) demonstrating that the company complies with the SMS and a Safety Management Certificate (“SMC”) for each vessel verifying compliance with the approved SMS from the government of each vessel’s flag State. No vessel can obtain an SMC unless its manager has been awarded a Document of Compliance, issued by the flag State for the vessel, under the ISM Code.

Noncompliance with the ISM Code and regulations contained in other IMO Conventions may subject a ship owner to increased liability, lead to decreases in available insurance coverage for affected vessels, or result in the denial of access to, or detention in, certain ports. For example, the United States Coast Guard and European Union authorities have indicated that vessels not in compliance with the ISM Code may be prohibited from trading in ports in the United States and European Union. Non-compliances identified in port, may lead to delays and detention. Each company’s DOC and each vessel’s SMC must be periodically renewed, and compliance must be periodically verified. The failure of a ship operator to comply with the ISM Code and IMO measures could subject such party to increased liability, decrease available insurance coverage for the affected vessels, or result in a denial of access to, or detention in, certain ports.

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Energy Efficiency and Greenhouse Gas Reduction

The IMO now has mandatory measures for an international greenhouse gas (“GHG”) reduction regime for a global industry sector. These energy efficiency measures took effect on January 1, 2013 and apply to all ships of 400 gross tonnage and above. A major component of this GHG regime is the development of a ship energy efficiency management plan (“SEEMP”), with which vessels across the industry must comply. Vessel SEEMPs were required to be updated by December 31, 2018 to include data collection processes and vessels were required to begin collecting data on fuel oil consumption on January 1, 2019.

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ISPS Code

In 2002, following the September 11 terrorist attacks, SOLAS was amended to impose detailed security obligations on vessels and port authorities, most of which are contained in the International Ship and Port Facility Security Code (“ISPS Code”), which is Chapter XI-2 of SOLAS. Vessels demonstrate compliance with the ISPS Code by having an International Ship Security Certificate issued by their flag State.

Among the various requirements are:

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On-board installation of automatic information systems to enhance vessel-to-vessel and vessel-to-shore communications;

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On-board installation of ship security alert systems;

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Development of Vessel Security Plans;

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Appointment of a Ship Security Officer and a Company Security Officer; and

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Compliance with Flag States security certification requirements.

Applicable U.S. Laws

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The Act to Prevention Pollution from Ships

The Act to Prevent Pollution from Ships (“APPS”) and corresponding U.S. Coast Guard regulations implement several MARPOL annexes in the United States. Violations of MARPOL, APPS, or the implementing regulations can result in liability for civil and/or criminal penalties. Numerous vessel owners and operators, as well as individual ship officers and shoreside technical personnel have been prosecuted for APPS violations. APPS violations also carry significant fines.

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Clean Water Act, National Invasive Species Act, Vessel General Permit, and Vessel Incidental Discharge Act.

The Clean Water Act (“CWA”) prohibits the discharge of oil or hazardous substances in U.S. navigable waters and imposes penalties for unauthorized discharges. The CWA also imposes substantial liability for the costs of removal, remediation and damages.

The United States is not a party to the BWM Convention discussed above. Instead, ballast water operations are governed by the National Invasive Species Act (“NISA”) and U.S. Coast Guard regulations mandating ballast water management practices for all vessels equipped with ballast water tanks entering U.S. waters, as well as the Vessel General Permit issued by the U.S. Environmental Protection Agency (“EPA”) under the CWA. In addition, through the CWA certification provisions that allow U.S. states to place additional conditions in EPA’s Vessel General Permit, a number of states have proposed or implemented a variety of stricter ballast water requirements including, in some states, specific treatment standards.

Depending on a vessel’s compliance date for installation of a U.S. Coast Guard type-approved ballast water management system, these requirements may be met by performing mid-ocean ballast exchange, by retaining ballast water onboard the vessel, or by using another ballast water management system authorized or approved by the U.S. Coast Guard. In the near future, ballast exchange will no longer be permissible. These U.S. Coast Guard regulations and EPA’s Vessel General Permit, however, will ultimately be replaced with the new regulatory regime being developed under Vessel Incidental Discharge Act (“VIDA”) signed into law on December 4, 2018, which is expected to contain similar requirements.

VIDA establishes a new framework for regulation of discharges incidental to the normal operation of commercial vessels into navigable waters of the United States, including management of ballast water. VIDA requires EPA to implement a final rule setting forth standards for incidental discharges, including ballast water, by December 4, 2022 and the U.S. Coast Guard to issue a final rule implementing EPA’s standards by December 4, 2024. Implementation of VIDA is expected to create more uniformity in state and federal regulation of incidental vessel discharges and thus is expected to result in a simplification of the current patch-work of state ballast water regulations in the United States. However, the relevant standards and regulations implementing those standards are expected to take at least until the end of 2024, and it is ultimately unclear what discharge limits may apply to discharges under VIDA, as well as how certain permissible state-specific standards may be implemented.

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Oil Pollution Act of 1990 and State Law Regarding Oil Pollution Liability

The United States has a comprehensive regulatory and liability regime for the protection and cleanup of the environment from oil spills from all vessels, including cargo or bunker oil spills from tankers. This regime is set forth in the Oil Pollution Act of 1990, or “OPA.”

OPA applies to owners and operators whose vessels trade in the United States, its territories and possessions or whose vessels operate in United States waters. Under OPA, vessel owners, operators and bareboat charterers are “responsible parties” and are jointly, severally and strictly liable for all containment and clean-up costs, as well as damages, arising from discharges or substantial threats of discharges, of oil from their vessels unless the spill results solely from the act or omission of a third party, an act of God or an act of war, which is determined after-the-fact. As such, responsible parties must respond to a spill immediately irrespective of fault.

OPA liability limits are periodically adjusted for inflation, and the U.S. Coast Guard issued a final rule on August 13, 2019 to reflect increases in the Consumer Price Index, which resulted in higher liability limits. With this adjustment, OPA currently limits liability of the responsible party for non-tank vessels to $1,200 per gross ton or $997,100, whichever is greater. Under OPA, these liability limits do not apply if an incident was directly caused by violation of applicable U.S. federal safety, construction or operating regulations or by a responsible party’s gross negligence or willful misconduct, or if the responsible party fails or refuses to report the incident or to cooperate and assist in connection with oil removal activities.

Under OPA, an owner or operator of a fleet of vessels is required only to demonstrate evidence of financial responsibility in an amount sufficient to cover the vessel in the fleet having the greatest maximum liability under OPA. The Certificate of Financial Responsibility (“COFR”) program has been created by the U.S. Coast Guard to ensure that vessels carrying oil as cargo or fuel in the U.S. waters have the financial ability to pay for removal costs and damages resulting from an oil spill or threat of a spill up to their liability limits, which are based on the gross tonnage of our vessels. These limits are subject to annual increases. It is possible for our liability limits to be broken as discussed above, which could expose us to unlimited liability.

A COFR is issued in the name of the company/person financially responsible in the event of a spill or threat of a spill and this is usually the owning company or operator of the vessel. Once they have shown the can pay cleanup and damage costs up to the liability limits required by the OPA, and there is a guaranty issued to back it up provided to the U.S. Coast Guard, the U.S. Coast Guard will issue a COFR. With a few limited exceptions (not applicable to Navios vessels), vessels greater than 300 gross tons and vessels of any size that are transferring oil or cargoes between vessels or shipping oil in the Exclusive Economic Zone (EEZ) are required to comply with the COFR regulations in order to operate in U.S. waters.

The guarantor used throughout the Navios fleet is SIGCO / The Shipowners Insurance and Guaranty Company. SIGCO issues the guaranty noted above and confirms that if the responsible party does not respond to an oil spill or threat of a spill, the guarantor will be called upon to provide the funds to do so. This would be a rare occurrence because any guaranty issued by SIGCO is contingent on protection and indemnity cover.

The COFR is renewed on a three year basis whereas the COFR guaranty is renewed annually. The U.S. Coast Guard checks that a vessel has a valid COFR prior to or upon entering the U.S. waters. Some states have COFR requirements in addition to the federal requirement under OPA, which may be more stringent than the requirement under OPA.

Trading in the United States without a valid COFR may result in the vessel being detained and/or fined USD 47,357.00 per day or prevented from entering US ports or US protectorates, until the COFR is in place. We have provided satisfactory evidence of financial responsibility to the U.S. Coast Guard for all of our vessels and all have valid COFRs.

In addition to potential liability under OPA, individual states may impose their own and more stringent liability regimes with regard to oil pollution incidents occurring within their boundaries. Some states’ environmental laws impose unlimited liability for oil spills and contain more stringent financial responsibility and contingency planning requirements.

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Comprehensive Environmental Response, Compensation and Liability Act

CERCLA contains a liability regime and provides for cleanup, removal and natural resource damages for the release of hazardous substances (other than oil) whether on land or at sea. In some cases, CERCLA could be applicable to potential cargo spills from our vessels rather than OPA.

Under CERCLA, the owner or operator of a vessel from which there is a release or threatened release of a hazardous substance is liable for certain removal costs, other remedial action, damages due to injury of natural resources, and the costs of any required health assessment for releases that expose individuals to hazardous substances. Liability for any vessel that carries any hazardous substance as cargo or residue is limited to the greater of $300 per gross ton or $5 million. For any other vessel, the limitation is the greater of $300 per gross ton or $500,000.

These liability limits do not apply if the release resulted from willful misconduct or willful negligence within the privity or knowledge of the responsible person, or from a violation of applicable safety, construction, or operating standards or regulations within the privity or knowledge of the responsible person. In addition, the liability limits also do not apply if the responsible person fails to provide all reasonable cooperation and assistance requested by a responsible public official in connection with response activities conducted under the National Contingency Plan.

Further, any person who is liable for a release or threat of release, and who fails to provide removal or remedial action ordered by the EPA is subject to punitive damages in an amount equal to three times the costs incurred by the federal Superfund trust fund as a result of such failure to act.

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Clean Air Act and Emissions Regulations

The Federal Clean Air Act (“CAA”) requires the EPA to develop standards applicable to emissions of volatile organic compounds and other air contaminants. Our vessels are subject to CAA vapor control and recovery standards (“VCS”) for cleaning fuel tanks and conducting other operations in regulated port areas.

Also, under the CAA, since 1990 the U.S. Coast Guard has regulated the safety of VCSs that are required under EPA and state rules. Our vessels operating in regulated port areas have installed VCSs that are compliant with EPA, state and U.S. Coast Guard requirements. The U.S. Coast Guard has adopted regulations that made its VCS requirements more compatible with new EPA and State regulations, reflected changes in VCS technology, and codified existing U.S. Coast Guard guidelines.

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State Laws

In the United States, there is always a possibility that state law could be more stringent than federal law. Such is the case with certain state laws concerning marine environmental protection. A few examples include:

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California adopted more stringent low sulfur fuel requirements within California-regulated waters, requiring marine gas oil and prohibiting exhaust gas cleaning systems.

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California also requires the use of shore power or equivalent emissions reductions strategies for vessels at all California ports.

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Vessel owners may in some instances incur liability on an even more stringent basis under state law in the particular state where the spillage occurred. For example, many U.S. states have unlimited liability and more stringent requirements for financial responsibility and contingency planning.

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Most states do not have comprehensive laws relating specifically to the discharge of hazardous substances into state waters as they do for oil discharges, but many states have general water pollution prevention laws that apply to hazardous substances and other materials and others have broadly written hazardous substance cleanup laws based on CERCLA that would provide a cause of action for discharges of hazardous substances from vessels.

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Ship Safety and Security Laws

With respect to ship safety, the requirements contained in SOLAS and the ISM Code generally have been implemented into U.S. law and are largely captured within U.S. Coast Guard regulations.

Ship security in the United States is governed primarily by the Marine Transportation Security Act of 2002 (“MTSA”). MTSA was implemented by U.S. Coast Guard regulations that imposed certain security requirements aboard vessels operating in waters subject to the jurisdiction of the United States.

Because the MTSA regulations were intended to be aligned with international maritime security standards contained in the ISPS Code, the regulations exempt non-U.S.-flag vessels from MTSA vessel security measures, provided such vessels have on board a valid International Ship Security Certificate (“ISSC”) that attests to the vessel’s compliance with SOLAS security requirements and the ISPS Code.

Applicable EU Laws

European regulations in the maritime sector are in general based on international law. However, since the Erika incident in 1999 and subsequent court decisions, the European Community has become increasingly active in the field of regulation of maritime safety and protection of the environment. It has been the driving force behind a number of amendments to MARPOL (including, for example, changes to accelerate the time-table for the phase-out of single hull tankers, and to prohibit the carriage in such tankers of heavy grades of oil), and if dissatisfied either with the extent of such amendments or with the time-table for their introduction it has been prepared to legislate on a unilateral basis.

In some instances, EU regulations may impose burdens and costs on shipowners and operators beyond the requirements under international rules and standards.

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Liability for Pollution and Interaction between MARPOL and EU Law

The EU has implemented certain EU-specific pollution laws, most notably a 2005 directive on ship-source pollution. This directive imposes imposing criminal sanctions for pollution caused by intent or recklessness (which would be an offense under MARPOL), as well as by “serious negligence.” The directive could therefore result in criminal liability being incurred in a European port state in circumstances where it may not be incurred in other jurisdictions.

There is skepticism that the notion of “serious negligence” is likely to prove any narrower in practice than ordinary negligence. Either way, however, criminal liability for a pollution incident could result in the imposition of substantial penalties or fines and also facilitate civil liability claims for greater compensation than would otherwise have been payable.

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Regulation of Emissions and Emissions Trading System

The EU has a ship emissions regime. This regime primarily mirrors the IMO regime, but is more stringent than IMO regulations in some respects.

In December 2016, the EU signed into law the National Emissions Ceiling (“NEC”) Directive, which entered into force on December 31, 2016. The NEC required implementation by individual members States through particular laws in each State by June 30, 2018. The NEC aims to set stricter emissions limits on SO2, ammonia, non-methane volatile organic compounds, NOx and fine particulate (PM2.5) by setting new upper limits for emissions of these pollutants, starting in 2020. While the NEC is not specifically directed toward the shipping industry, the EU specifically mentions the shipping industry in its announcement of the NEC as a contributor to emissions of PM2.5, SO2 and NOx.

In February 2017, EU member states met to consider independently regulating the shipping industry under the Emissions Trading System (“ETS”), which requires certain businesses to report on carbon emissions and provides for a credit trading system for carbon allowances. On February 15, 2017, European Parliament voted in favor of a bill to include maritime shipping in the ETS by 2023 if the IMO has not promulgated a comparable system by 2021. In November 2017, the Council of Ministers, EU’s main decision-making body, agreed that Europe should act on shipping emissions from 2023 if the IMO fails to deliver effective global measures.

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Ship Recycling and Waste Shipment Regulations

On December 31, 2018, EU-flagged vessels became subject to Regulation (EU) No. 1257/2013 of the European Parliament and of the Council of 20 November 2013 on ship recycling (the “EU Ship Recycling Regulation” or “ESRR”) and exempt from the Regulation (EC) No. 1013/2006 of the European Parliament and of the Council of 14 June 2006 on shipments of waste (the “European Waste Shipment Regulation” or “EWSR”), which had previously governed their disposal and recycling. The EWSR continues to be applicable to Non-European Union Member State-flagged (“non-EU-flagged”) vessels.

Under the ESRR, commercial EU-flagged vessels of 500 gross tonnage and above may be recycled only at shipyards included on the European List of Authorised Ship Recycling Facilities (the “European List”). As of December 31, 2019, 33 of our EU-flagged vessels met this tonnage specification. The European List presently includes six facilities in Turkey, but no facilities in the major ship recycling countries in Asia. The combined capacity of the European List facilities may prove insufficient to absorb the total recycling volume of EU-flagged vessels. This circumstance, taken in tandem with the possible decrease in cash sales, may result in longer wait times for divestment of recyclable vessels as well as downward pressure on the purchase prices offered by European List shipyards. Furthermore, facilities located in the major ship recycling countries generally offer significantly higher vessel purchase prices, and as such, the requirement that we utilize only European List shipyards may negatively impact revenue from the residual values of our vessels.

In addition, the EWSR requires that non-EU-flagged ships departing from European Union ports be recycled only in Organisation for Economic Cooperation and Development (OECD) member countries. In March 2018, the Rotterdam District Court ruled that the sale of four recyclable vessels by third-party Dutch ship owner Seatrade to cash buyers, who then reflagged and resold the vessels to non-OECD country recycling yards, were effectively indirect sales to non-OECD country yards, in violation of the EWSR. If European Union Member State courts widely adopt this analysis, it may negatively impact revenue from the residual values of our vessels and we may be subject to a heightened risk of non-compliance, due diligence obligations and costs in instances where we sell older ships to cash buyers.

Laws and International Standards to Stem Climate Change and Reduce Greenhouse Gas Emissions

In February 2005, the Kyoto Protocol to the United Nations Framework Convention on Climate Change (the “UNFCCC”) entered into force. Pursuant to the Kyoto Protocol, adopting countries are required to implement national programs to reduce emissions of certain gases, generally referred to as GHGs, which are suspected of contributing to global warming. Currently, the GHG emissions from international shipping do not come under the Kyoto Protocol.

Some attention has been paid to GHGs in Europe. On June 28, 2013, the European Commission (“EC”) adopted a communication setting out a strategy for progressively including GHG emissions from maritime transport in the EU’s policy for reducing its overall GHG emissions. The first step proposed by the EC was an EU Regulation to an EU-wide system for the monitoring, reporting and verification of carbon dioxide emissions from large ships starting in 2018. The Regulation was adopted on April 29, 2015 and took effect on July 1, 2015, with monitoring, reporting and verification requirements beginning on January 1, 2018. This Regulation appears to be indicative of an intent to maintain pressure on the international negotiating process. The EC also adopted an Implementing Regulation, which entered into force November 2016, setting templates for monitoring plans, emissions reports and compliance documents pursuant to Regulation 2015/757.

There are varying approaches on whether or not to add additional regulations on GHG emissions in the United States. The United States has withdrawn from international commitments relating to GHG regulation. However, the Transportation Committee of the U.S. House of Representatives recently held a hearing on “Decarbonizing the Maritime Industry,” which highlighted alleged health impacts of GHG, the IMO’s goal of decarbonization, and what next steps can be taken in reducing emissions from vessels. Further, legislation has been introduced to the U.S. Congress which would require emissions reductions of 80% below the 2005 emissions level. The bill would also require each U.S. state to develop its own Strategic Action Plan for reducing greenhouse gas emissions. Although this bill is not likely to become law, the bill targets the transportation sector and indicates interest in certain sectors of the U.S. government to regulate GHG.

In addition, the IMO has developed and intends to continue developing limits on emissions before 2023. The IMO is also considering its position on market-based measures through an expert working group. Among the numerous proposals being considered by the working group are the following: a port state levy based on the amount of fuel consumed by the vessel on its voyage to the port in question; and a global emissions trading scheme which would allocate emissions allowances and set an emissions cap, among others. The IMO’s current strategy encompasses a reduction in total GHG emissions from international shipping. The IMO’s goal is to reduce the total annual GHG emissions by at least 50% by 2050 compared to 2008, while, at the same time, pursuing efforts towards phasing them out entirely.

In 2018, IMO’s call to action on GHGs was met with industry push-back in many countries. Despite this, work on GHG continues at the IMO. Specifically, there will be an intersessional meeting on Reduction of GHG Emissions from Ships in March 2020. Among other agenda items, this meeting will consider further consider concrete proposals to improve the operational energy efficiency of existing ships, with a view to developing draft amendments to Chapter 4 of MARPOL Annex VI.

Sanction and Compliance

Iran Sanctions

Prior to January 2016, the scope of sanctions imposed against Iran, the government of Iran and persons engaging in certain activities or doing certain business with and relating to Iran was expanded by a number of jurisdictions, including the U.S., the EU and Canada. In 2010, the U.S. enacted the Comprehensive Iran Sanctions Accountability and Divestment Act (“CISADA”), which expanded the scope of the former Iran Sanctions Act. The scope of U.S. sanctions against Iran were expanded subsequent to CISADA by, among other U.S. laws, the National Defense Authorization Act of 2012 (the “2012 NDAA”), the Iran Threat Reduction and Syria Human Rights Act of 2012 (“ITRA”), and the Iran Freedom and Counter-Proliferation Act of 2012 (“IFCA”). The foregoing laws, among other things, expanded the application of prohibitions to non-U.S. companies such as our company and to transactions with no U.S. nexus, and introduced limits on the ability of non-U.S. companies and other non-U.S. persons to do business or trade with Iran when such activities relate to specific activities such as investment in Iran, the supply or export of refined petroleum or refined petroleum products to Iran, the supply and delivery of goods to Iran which could enhance Iran’s petroleum or energy sectors, and the transportation of crude oil from Iran to countries which do not enjoy Iran crude oil sanctions waivers (our tankers called in Iran but did not engage in the prohibited activities specifically identified by these sanctions).

U.S. economic sanctions on Iran fall into two general categories: “Primary” sanctions, which prohibit U.S. persons or U.S. companies and their foreign branches, U.S. citizens, foreign owned or controlled subsidiaries, U.S. permanent residents, persons within the territory of the U.S. from engaging in all direct and indirect trade and other transactions with Iran without U.S. government authorization, and “secondary” sanctions, which are mainly nuclear-related sanctions. While most of the U.S. nuclear-related sanctions with respect to Iran (including, inter alia, CISADA, ITRA, and IFCA) and the EU sanctions on Iran were initially lifted on January 16, 2016 through the implementation of the Joint Comprehensive Plan of Action (the “JCPOA”) entered into between the permanent members of the United Nations Security Council (China, France, Russia, the U.K. and the U.S.) and Germany, there are still certain limitations under that sanctions framework in place with which we need to comply. The primary sanctions with which U.S. persons or transactions with a U.S. nexus must comply are still in force and have not been lifted or relaxed. However, the following sanctions which were lifted under the JCPOA were reimposed (“snapped back”) on May 8, 2018 as a result of the U.S. withdrawal from the JCPOA:

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Sanctions on the purchase or acquisition of U.S. dollar banknotes by the Government of Iran;

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Sanctions on Iran’s trade in gold or precious metals;

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Sanctions on the direct or indirect sale, supply, or transfer to or from Iran of graphite, raw, or semi-finished metals such as aluminum and steel, coal, and software for integrating industrial processes;

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Sanctions on significant transactions related to the purchase or sale of Iranian rials, or the maintenance of significant funds or accounts outside the territory of Iran denominated in the Iranian rial;

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Sanctions on the purchase, subscription to, or facilitation of the issuance of Iranian sovereign debt; and

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Sanctions on Iran’s automotive sector.

Following a 180-day wind-down period ending on November 4, 2018, the U.S. government re-imposed the following sanctions that were lifted pursuant to the JCPOA, including sanctions on associated services related to the activities below:

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Sanctions on Iran’s port operators, and shipping and shipbuilding sectors, including on the Islamic Republic of Iran Shipping Lines (IRISL), South Shipping Line Iran, or their affiliates;

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Sanctions on petroleum-related transactions with, among others, the National Iranian Oil Company (NIOC), Naftiran Intertrade Company (NICO), and National Iranian Tanker Company (NITC), including the purchase of petroleum, petroleum products, or petrochemical products from Iran;

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Sanctions on transactions by foreign financial institutions with the Central Bank of Iran and designated Iranian financial institutions under Section 1245 of the National Defense Authorization Act for Fiscal Year 2012 (NDAA);

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Sanctions on the provision of specialized financial messaging services to the Central Bank of Iran and Iranian financial institutions described in Section 104(c)(2)(E)(ii) of the Comprehensive Iran Sanctions and Divestment Act of 2010 (CISADA);

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Sanctions on the provision of underwriting services, insurance, or reinsurance; and

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Sanctions on Iran’s energy sector.

In two Executive Orders issued in 2019, U.S. secondary sanctions against Iran were expanded to include the Iron, Steel, Aluminum, and Copper Sectors of Iran. The new, additional sanctions, which are pursuant to an Executive Order issued on January 10, 2020, may be imposed against any individual owning, operating, trading with, or assisting sectors of the Iranian economy including construction, manufacturing, textiles, and mining. As a result, trade with Iran in almost all industry sectors is now off limits for U.S. as well as non-U.S. persons, except for trade in medicine/medical items and food and agricultural commodities.

The new sanctions imposed in 2020 also authorize the imposition of sanctions on a foreign financial institution upon a determination that the foreign financial institution has, on or after January 10, 2020, knowingly conducted or facilitated any significant financial transaction: i) for the sale, supply, or transfer to or from Iran of significant goods or services used in connection with a prohibited sector of the Iranian economy, or (ii) for or on behalf of any person whose property and interests in property are blocked.

U.S. Iran sanctions also prohibit U.S. as well as non-U.S. persons from engaging in significant transactions with any individual or entity that the U.S. Government has designated as an Iran sanctions target.

EU sanctions remain in place in relation to the export of arms and military goods listed in the EU common military list, missiles-related goods and items that might be used for internal repression. The main nuclear-related EU sanctions which remain in place include restrictions on:

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Graphite and certain raw or semi-finished metals such as corrosion-resistant high-grade steel, iron, aluminum and alloys, titanium and alloys and nickel and alloys (as listed in Annex VIIB to EU Regulation 267/2012 as updated by EU Regulation 2015/1861 (the “EU Regulation”);

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Goods listed in the Nuclear Suppliers Group list (listed in Annex I to the EU Regulation);

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Goods that could contribute to nuclear-related or other activities inconsistent with the JCPOA (as listed in Annex II to the EU Regulation); and

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Software designed for use in nuclear/military industries (as listed in Annex VIIA to the EU Regulation).

The above EU sanctions activities can only be engaged if prior authorization (granted on a case-by-case basis) is obtained. The remaining restrictions apply to the sale, supply, transfer or export, directly or indirectly to any Iranian person/for use in Iran, as well as the provision of technical assistance, financing or financial assistance in relation to the restricted activity. Certain individuals and entities remain sanctioned and the prohibition to make available, directly or indirectly, economic resources or assets to or for the benefit of sanctioned parties remains. “Economic resources” is widely defined and it remains prohibited to provide vessels for a fixture from which a sanctioned party (or parties related to a sanctioned party) directly or indirectly benefits. It is therefore still necessary to carry out due diligence on the parties and cargoes involved in fixtures involving Iran.

Russia/Ukraine Sanctions

As a result of the crisis in Ukraine and the annexation of Crimea by Russia in 2014, both the U.S. and the EU have implemented sanctions against certain Russian individuals and entities.

The EU has imposed travel bans and asset freezes on certain Russian persons and entities pursuant to which it is prohibited to make available, directly or indirectly, economic resources or assets to or for the benefit of the sanctioned parties. Certain Russian ports including Kerch Commercial Seaport; Sevastopol Commercial Seaport and Port Feodosia are subject to the above restrictions. Other entities are subject to sectoral sanctions which limit the provision of equity financing and loans to the listed entities. In addition, various restrictions on trade have been implemented which, amongst others, include a prohibition on the import into the EU of goods originating in Crimea or Sevastopol as well as restrictions on trade in certain dual-use and military items and restrictions in relation to various items of technology associated with the oil industry for use in deep water exploration and production, Arctic oil exploration and production or shale oil projects in Russia. As such, it is important to carry out due diligence on the parties and cargoes involved in fixtures relating to Russia.

The U.S. has imposed sanctions against certain designated Russian entities and individuals (“U.S. Russian Sanctions Targets”). These sanctions block the property and all interests in property of the U.S. Russian Sanctions Targets. This effectively prohibits U.S. persons from engaging in any economic or commercial transactions with the U.S. Russian Sanctions Targets unless the same are authorized by the U.S. Treasury Department. Similar to EU sanctions, U.S. sanctions also entail restrictions on certain exports from the U.S. to Russia and the imposition of Sectoral Sanctions which restrict the provision of equity and debt financing to designated Russian entities. While the prohibitions of these sanctions are not directly applicable to us, we have compliance measures in place to guard against transactions with U.S. Russian Sanctions Targets which may involve the U.S. or U.S. persons and thus implicate prohibitions. The U.S. also maintains prohibitions on trade with Crimea.

With respect to Russia, the U.S. has also taken a number of steps toward implementing aspects of the Countering America’s Adversaries Through Sanctions Act (“CAATSA”), a major piece of sanctions legislation.

Under CAATSA, the U.S. may impose secondary sanctions relating to Russia’s energy export pipelines, and investments in special Russian crude oil projects. CAATSA has a provision that requires the U.S. President to sanction persons who knowingly engage in significant transactions with parties affiliated with Russia’s defense and intelligence sectors.

Venezuela-Related Sanctions

The U.S. sanctions with respect to Venezuela prohibit various financial and other transactions and activities, dealings with designated Venezuelan government officials and entities, curtail the provision of financing to Petroleos de Venezuela, S.A. (“PdVSA”) and other government entities, and they also prohibit U.S. persons from purchasing oil rom PdVSA. Additionally, U.S. (blocking) sanctions may be imposed on any (non-U.S.) person that has materially assisted, sponsored, or provided financial, material, or technological support for, or goods or services to or in support of, or any blocked entity such as PdVSA.

EU sanctions against Venezuela are primarily governed by EU Council Regulation 2017/2063 of 13 November 2017 concerning restrictive measures in view of the situation in Venezuela. This includes financial sanctions and restrictions on listed persons and an, arms embargo, and related prohibitions and restrictions including restrictions related to internal repression.

U.S. Executive Orders

The following Executive Orders govern the U.S. sanctions with respect to Venezuela:

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13884 - Blocking Property of the Government of Venezuela—(August 5, 2019)

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13857 - Taking Additional Steps to Address the National Emergency With Respect to Venezuela (January 25, 2019)

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13850 - Blocking Property of Additional Persons Contributing to the Situation in Venezuela (November 1, 2018)

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13835 - Prohibiting Certain Additional Transactions with Respect to Venezuela (May 21, 2018)

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13827 - Taking Additional Steps to Address the Situation in Venezuela (March 19, 2018) – prohibits all transactions related to, provision of financing for, and other dealings in, by a U.S. person or within the U.S., in any digital currency, digital coin, or digital token, (the Petro) that was issued by, for, or on behalf of the Government of Venezuela on or after January 9, 2018.

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13808 - Imposing Additional Sanctions with Respect to the Situation in Venezuela (August 24, 2017) – This executive Order prohibits transactions involving, dealings in, and the provision of financing for (by (US persons) of:

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New debt with a maturity of greater than 90 days of PdVSA;

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New debt with a maturity of greater than 30 days or new equity of the Government of Venezuela, other than debt of PdVSA;

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Bonds issued by the Government of Venezuela prior to August 25, 2017, the EO’s effective date;

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Dividend payments or other distributions of profits to the Government of Venezuela from any entity directly or indirectly owned or controlled by the Government of Venezuela; or

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Direct or indirect purchase by U.S. persons or persons within the U.S. of securities from the Government of Venezuela, other than securities qualifying as new debt with a maturity of less than or equal to 90 or 30 days as covered by the EO (Section 1).

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13692-Blocking Property and Suspending Entry of Certain Persons Contributing to the Situation in Venezuela (March 8, 2015) – blocks designated Venezuelan government officials.

Other U.S. Economic Sanctions Targets

In addition to Iran and certain Russian entities and individuals, as indicated above, the U.S. maintains comprehensive economic sanctions against Syria, Cuba, North Korea, and sanctions against entities and individuals (such as entities and individuals in the foregoing targeted countries, designated terrorists, narcotics traffickers) whose names appear on the List of SDNs and Blocked Persons maintained by the U.S. Treasury Department (collectively, the “Sanctions Targets”). We are subject to the prohibitions of these sanctions to the extent that any transaction or activity we engage in involves Sanctions Targets and a U.S. person or otherwise has a nexus to the U.S.

Other EU Economic Sanctions Targets

The EU also maintains sanctions against Syria, North Korea and certain other countries and against individuals listed by the EU. These restrictions apply to our operations and as such, to the extent that these countries may be involved in any business it is important to carry out checks to ensure compliance with all relevant restrictions and to carry out due diligence checks on counterparties and cargoes.

Exchange Controls

Under Marshall Islands law, there are currently no restrictions on the export or import of capital, including foreign exchange controls or restrictions that affect the remittance of dividends, interest or other payments to non-resident holders of our common units.

Taxation of the Company

Marshall Islands

Because we and our subsidiaries are non-resident entities and do not and will not conduct business or operations in the Republic of the Marshall Islands, neither we nor our subsidiaries will be subject to income, capital gains, profits or other taxation under current Marshall Islands law, and we do not expect this to change in the future. As a result, distributions we receive from the operating subsidiaries are not expected to be subject to Marshall Islands taxation.

United States Taxation

The following is a discussion of the material U.S. federal income tax considerations applicable to us. This discussion is based upon provisions of the Code, Treasury Regulations thereunder, and administrative rulings and court decisions, all as in effect currently and during our year ended December 31, 2019 and all of which are subject to change or differing interpretation, possibly with retroactive effect. Changes in these authorities may cause the tax consequences to vary substantially from the consequences described below. The following discussion is for general information purposes only and does not address any U.S. state or local tax considerations and does not purport to be a comprehensive description of all of the U.S. federal income tax considerations applicable to us.

Conversion to a Limited Partnership; Election to be Treated as a Corporation. We were previously a private corporation incorporated under the laws of the Marshall Islands, Navios Containers Inc., and we converted into a limited partnership organized under the laws of the Marshall Islands, Navios Containers. Navios Containers filed an election to be treated as a corporation for U.S. federal income tax purposes, which specified the effective date November 30, 2018 that is the date of the conversion. As a result, we are subject to U.S. federal income tax on our income to the extent it is from U.S. sources or is effectively connected with the conduct of a trade or business in the United States as discussed below.

Taxation of Operating Income. Under the Code, income derived from, or in connection with, the use (or hiring or leasing for use) of a vessel, or the performance of services directly related to the use of a vessel, is treated as “Transportation Income”. Transportation Income that is attributable to transportation that either begins or ends, but that does not both begin and end, in the United States is considered to be 50.0% derived from sources within the United States (“U.S. Source International Transportation Income”). Transportation Income attributable to transportation that both begins and ends in the United States is considered to be 100.0% derived from sources within the United States (“U.S. Source Domestic Transportation Income”). Transportation Income that is attributable to transportation exclusively between non-U.S. destinations is considered to be 100.0% derived from sources outside the United States. Transportation Income derived from sources outside the United States generally is not subject to U.S. federal income tax.

We expect that substantially all of our gross income will be attributable to the ownership and operation of containerships and, accordingly, that substantially all of our gross income will constitute Transportation Income. Based on our current plans and expectations regarding our organization and operations, we do not expect to earn U.S. Source Domestic Transportation Income. However, certain of our activities could give rise to U.S. Source International Transportation Income, and future expansion of our operations could result in an increase in the amount thereof, which generally would be subject to U.S. federal income taxation, unless the exemption from U.S. federal income taxation under Section 883 of the Code (the “Section 883 Exemption”) applied.

The Section 883 Exemption. In general, the Section 883 Exemption provides that if a non-U.S. corporation satisfies the requirements of Section 883 of the Code and the Treasury Regulations thereunder (the “Section 883 Regulations”), it will not be subject to the net basis and branch profit taxes or the 4.0% gross basis tax described below on its U.S. Source International Transportation Income. The Section 883 Exemption applies only to U.S. Source International Transportation Income and does not apply to U.S. Source Domestic Transportation Income.

We qualify for the Section 883 Exemption if, among other matters, we meet the following three requirements:

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We are organized in a jurisdiction outside the United States that grants an equivalent exemption from tax to corporations organized in the United States with respect to the types of U.S. Source International Transportation Income that we earn (an “Equivalent Exemption”);

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We satisfy the Publicly Traded Test (as described below) or the Qualified Shareholder Stock Ownership Test (as described below); and

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We meet certain substantiation, reporting and other requirements.

We are organized under the laws of the Republic of the Marshall Islands. The U.S. Treasury Department has recognized the Republic of the Marshall Islands as a jurisdiction that grants an Equivalent Exemption with respect to the type of income that we have earned and are expected to earn. Consequently, our U.S. Source International Transportation Income (including for this purpose, any such income earned by our subsidiaries, that have elected to be disregarded as entities separate from us for U.S. federal income tax purposes) will be exempt from U.S. federal income taxation provided we meet the Publicly Traded Test or the Qualified Shareholder Stock Ownership Test and we satisfy certain substantiation, reporting and other requirements.

In order to meet the Publicly Traded Test, the equity interests in the non-U.S. corporation at issue must be “primarily traded” and “regularly traded” on an established securities market either in the United States or in a jurisdiction outside the United States that grants an Equivalent Exemption. The Section 883 Regulations generally provide, in pertinent part, that equity of a non-U.S. corporation will be considered to be “primarily traded” on one or more established securities markets in a given country if, with respect to the class or classes of equity relied upon to meet the “regularly traded” requirement described below, the number of units of each such class that are traded during any taxable year on all established securities markets in that country exceeds the number of units in each such class that are traded during that year on established securities markets in any other single country. Since December 10, 2018 (the Nasdaq listing date for our common units), our common units have been traded and continue to be traded only on the Nasdaq Global Select Market, which is considered to be an established securities market for purposes of these rules. Because our common units have been and continue to be traded only on the Nasdaq Global Select Market, our common units will be “primarily traded” on an established securities market for purposes of the Publicly Traded Test.

Equity interests in a non-U.S. corporation will be considered to be “regularly traded” on an established securities market under the Section 883 Regulations provided one or more classes of such equity interests representing more than 50.0% of the aggregate vote and value of all of the outstanding equity interests in the non-U.S. corporation satisfy certain listing and trading volume requirements. These requirements are satisfied with respect to a class of equity interests listed on an established securities market, provided that trades in such class are effected, other than in de minimis quantities, on such market on at least 60 days during the taxable year and the aggregate number of units in such class that are traded on such market or markets during the taxable year are at least 10.0% of the average number of units outstanding in that class during the taxable year (with special rules for short taxable years). In addition, a class of equity interests traded on an established securities market in the United States will be considered to satisfy the listing and trading volume requirements if the equity interests in such class are “regularly quoted by dealers making a market” in such class (within the meaning of the Section 883 Regulations). We intend to take the position that our common units will represent more than 50.0% of the total combined voting power of all classes of our equity interests entitled to vote, although there is no legal authority that specifically contemplates an organizational structure such as ours and, consequently, this conclusion is not free from doubt. Accordingly, provided that our common units (i) represent more than 50.0% of the total value of all of our outstanding equity interests, (ii) satisfy the listing and trading volume requirements described above and (iii) are not subject to the Closely Held Block Exception described below, we intend to take the position that our common units will be considered to be “regularly traded” on an established securities market.

Notwithstanding these rules, a class of equity that would otherwise be treated as “regularly traded” on an established securities market will not be so treated if, for more than half of the number of days during the taxable year, one or more “5.0% unit holders” (i.e., unit holders owning, actually or constructively, at least 5.0% of the vote and value of that class) own in the aggregate 50.0% or more of the vote and value of that class (the “Closely Held Block Exception”), unless the corporation can establish that a sufficient proportion of such 5.0% unit holders are Qualified Shareholders (as defined below) so as to preclude other persons who are 5.0% unit holders from owning 50.0% or more of the value of that class for more than half the days during the taxable year.

We expect that our common units will not lose eligibility for the Section 883 Exemption as a result of the Closely Held Block Exception. In this regard, our partnership agreement provides that any person or group that beneficially owns more than 4.9% of any class of our units then outstanding (other than our general partner, its affiliates and persons who acquired units with the prior approval of our board of directors) generally will be treated as owning only 4.9% of such units for purposes of voting for directors, although there can be no assurance that this limitation will be effective to eliminate the possibility that we will have any 5.0% unit holders for purposes of the Closely Held Block Exception.

The expectations and beliefs described above are based upon legal authorities that do not expressly contemplate an organizational structure such as ours. In particular, although we have elected to be treated as a corporation for U.S. federal income tax purposes, we will be organized as a limited partnership under Marshall Islands law. Accordingly, while we expect that, assuming satisfaction of the factual requirements described above, our common units will be considered to be “regularly traded” on an established securities market and we will satisfy the requirements for the Section 883 Exemption, it is possible that the IRS would assert that our common units do not meet the “regularly traded” test. In addition, as described previously, our ability to satisfy the Publicly Traded Test depends upon factual matters that are subject to change. Should any of the factual requirements described above fail to be satisfied, we may not be able to satisfy the Publicly Traded Test. Furthermore, our board of directors could determine that it is in our best interests to take an action that would result in our not being able to satisfy the Publicly Traded Test in the future.

As an alternative to satisfying the Publicly Traded Test, we will be able to qualify for the Section 883 Exemption if we are able to satisfy the Qualified Shareholder Stock Ownership Test. The Qualified Shareholder Stock Ownership Test generally is satisfied if more than 50.0% of the value of the outstanding equity interests in the non-U.S. corporation is owned, or treated as owned after applying certain attribution rules, for at least half of the number of days in the taxable year by:

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individual residents of jurisdictions that grant an Equivalent Exemption;

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non-U.S. corporations organized in jurisdictions that grant an Equivalent Exemption and that meet the Publicly Traded Test; or

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certain other qualified persons described in the Section 883 Regulations (collectively, “Qualified Shareholders”).

We currently do not expect to be able to satisfy the Qualified Shareholder Stock Ownership Test for any taxable year, because we do not expect that Qualified Shareholders will own more than 50.0% of the value of our outstanding equity interests for at least half of the number of days in such year and provide us with certain information that we need in order to claim the benefits of the Qualified Shareholder Stock Ownership Test.

Eligibility for the Section 883 Exemption is required to be determined separately with respect to any subsidiary that has not elected to be disregarded as separate from us for U.S. federal income tax purposes. However, because stock owned by a non-U.S. corporation meeting the Publicly Traded Test is treated as owned by a Qualified Shareholder for purposes of the Qualified Shareholder Stock Ownership Test, in the event that we are able to satisfy the Publicly Traded Test described above for a taxable year, we expect that any non-disregarded subsidiary that is included in our consolidated financial statements would satisfy the Qualified Shareholder Stock Ownership Test for such taxable year.

We cannot give any assurance that we will qualify for the Section 883 Exemption for any taxable year or that the IRS will not take a different position regarding our qualification for this exemption.

The Net Basis Tax and Branch Profits Tax. If we earn U.S. Source International Transportation Income and the Section 883 Exemption does not apply, the U.S. source portion of such income may be treated as effectively connected with the conduct of a trade or business in the United States (“Effectively Connected Income”) if we have a fixed place of business in the United States and substantially all of our U.S. Source International Transportation Income is attributable to regularly scheduled transportation or, in the case of bareboat charter income (if any), is attributable to a fixed place of business in the United States. Based on our current operations, none of our potential U.S. Source International Transportation Income is attributable to regularly scheduled transportation or is received pursuant to bareboat charters. As a result, we do not anticipate that any of our U.S. Source International Transportation Income will be treated as Effectively Connected Income even in the event we do not qualify for the Section 883 Exemption. However, there is no assurance that we will not earn income pursuant to regularly scheduled transportation or bareboat charters attributable to a fixed place of business in the United States in the future, which would result in such income being treated as Effectively Connected Income. In addition, any U.S. Source Domestic Transportation Income generally will be treated as Effectively Connected Income.

Any income we earn that is treated as Effectively Connected Income would be subject to U.S. federal corporate income tax (currently imposed at a rate of 21.0%) as well as 30.0% branch profits tax imposed under Section 884 of the Code. In addition, a 30.0% branch interest tax could be imposed on certain interest paid or deemed paid by us.

On the sale of a vessel that has produced Effectively Connected Income, we could be subject to the net basis U.S. federal corporate income tax as well as branch profits tax with respect to the gain recognized up to the amount of certain prior deductions for depreciation that reduced Effectively Connected Income. Otherwise, we would not be subject to U.S. federal income tax with respect to gain realized on the sale of a vessel, provided the sale is considered to occur outside of the United States (as determined under U.S. tax principles) and the gain is not attributable to an office or other fixed place of business maintained by us in the United States under U.S. federal income tax principles.

The 4.0% Gross Basis Tax. If the Section 883 Exemption does not apply and the net basis tax does not apply, we would be subject to a 4.0% U.S. federal income tax on our U.S. Source International Transportation Income, without benefit of deductions.

Other Tax Jurisdictions

In accordance with the currently applicable Greek law, foreign flagged vessels that are managed by Greek or foreign ship management companies having established an office in Greece are subject to duties towards the Greek state which are calculated on the basis of the relevant vessel’s tonnage. The payment of said duties exhausts the tax liability of the foreign ship owning company and the relevant manager against any tax, duty, charge or contribution payable on income from the exploitation of the foreign flagged vessel. In case that tonnage tax and/or similar taxes/duties are paid to the vessel’s flag state, these are deducted from the amount of the duty to be paid in Greece.

C. Organizational Structure

Please read exhibit 8.1 to this Annual Report for a list of our significant subsidiaries as of December 31, 2019.

D. Property, Plants and Equipment

Other than our vessels, we do not have any material property, plants or equipment.

Item 4A. Unresolved Staff Comments

Not applicable.

Item 5. Operating and Financial Review and Prospects

Overview

Refer also to “Item 4. Information on the Company” and “Item 16E. Purchases of Units by the Issuer and Affiliated Purchasers”.

Fleet Development

On December 17, 2018, the Company purchased from an unrelated third party the Bermuda, a 2010-built 4,360 TEU containership, for an acquisition cost of approximately $11.1 million (including $0.4 million capitalized expenses).

On December 7, 2018, the Company purchased from an unrelated third party the Bahamas, a 2010-built 4,360 TEU containership, for an acquisition cost of approximately $13.4 million (including $0.5 million capitalized expenses).

In November 2018, Navios Containers Inc. agreed to acquire a 2011-built 10,000 TEU containership from an unrelated third party for a purchase price of $52.5 million, upon the exercise of the Company’s purchase option prior to February 2019. See Note 11 to our consolidated financial statements included herein.

On September 12, 2018, Navios Containers Inc. purchased from an unrelated third party the Navios Miami, a 2009-built 4,563 TEU containership, for an acquisition cost of approximately $14.1 million (including $0.2 million capitalized expenses).

On July 2, 2018, Navios Containers Inc. purchased from Navios Partners the YM Utmost and the Navios Unite (ex YM Unity), two 2006-built 8,204 TEU containerships, for an acquisition cost of approximately $67.5 million (including $0.5 million capitalized expenses).

On May 30, 2018, Navios Containers Inc. purchased from an unrelated third party the Navios Unison, a 2010-built 10,000 TEU containership, for an acquisition cost of approximately $50.3 million (including $0.1 million capitalized expenses).

On March 14, 2018, Navios Containers Inc. purchased from an unrelated third party the Navios Dorado, a 2010-built 4,250 TEU containership, for an acquisition cost of approximately $11.9 million (including $0.2 million capitalized expenses).

On December 28, 2017, Navios Containers Inc. purchased from an unrelated third party the Navios Felicitas, a 2010-built 4,360 TEU containership, for an acquisition cost of approximately $11.5 million (including $0.02 million capitalized expenses).

In November and December 2017, Navios Containers Inc. purchased from an unrelated third party the APL Denver, APL Los Angeles, APL Oakland and APL Atlanta, 2008-built 4,730 TEU containerships and their charter out contracts, for an acquisition cost of approximately $97.2 million (including $0.4 million capitalized expenses). Any favorable lease terms associated with these vessels were recorded as an intangible asset at the time of acquisition.

On November 9, 2017, Navios Containers Inc. purchased from an unrelated third party the Navios Tempo, a 2009-built 4,250 TEU containership, for an acquisition cost of approximately $10.3 million (including $0.1 million capitalized expenses).

On November 7, 2017, Navios Containers Inc. purchased from an unrelated third party the Navios Lapis, a 2009-built 4,250 TEU containership, for an acquisition cost of approximately $9.6 million (including $0.04 capitalized expenses).

On June 8, 2017, Navios Containers Inc. purchased from Navios Partners five containerships and the charter out contracts for a purchase price of $64.0 million, of which $40.0 million was financed through a private placement and the remaining consideration of $24.0 million was in the form of a seller’s credit. The acquisition of these five containerships was effected through the acquisition of all of the capital stock of the respective vessel-owning companies, which held the ownership and other contractual rights and obligations related to each of the acquired vessels, including the respective charter-out contracts. Any favorable lease terms associated with these vessels were recorded as an intangible asset at the time of acquisition. The vessel acquisitions were treated as a transaction between entities under common control, and as such, the transaction was recorded at historical cost. The historical cost of the vessels was $32.4 million and of the time charters was $26.7 million. The excess cash over the historical cost of the net assets acquired is a deemed distribution to controlling stockholder and is recorded in stockholders’ equity. These vessels were previously acquired by Navios Partners from Rickmers Maritime Trust Pte. (“Rickmers Trust”) and were employed on charters with a net daily charter rate of $26,850 which expired in 2018 and early 2019. The working capital acquired for the five vessels was $0.6. Management accounted for this acquisition as an asset acquisition under ASC 805 “Business Combinations”.

During the third quarter of 2017, Navios Containers Inc. completed the acquisition of the nine additional containerships from Rickmers Trust for a purchase price of $54.0 million, of which $26.7 million was financed through the net proceeds under the bank loans and the remaining consideration of $27.3 million through available cash. Initial capitalized costs of $8.1 million were also incurred in connection with that acquisition.

The historical results discussed below, and the historical consolidated financial statements and related notes included elsewhere in this annual report, present operating results of the fleet for the periods beginning from April 28, 2017 (date of inception) to December 31, 2019.

Statements of Operations

Company name

Nature Name

Effective
Ownership

Country of

incorporation

2019

2018

2017

Navios Maritime Containers L.P.

Holding Company

—

Marshall Is.

01/01—12/31

04/28—12/31

Navios Partners Containers Finance Inc.

Sub—Holding Company

100

Marshall Is.

01/01—12/31

06/07—12/31

Navios Partners Containers Inc.

Sub—Holding Company

100

Marshall Is.

01/01—12/31

06/07—12/31

Olympia II Navigation Limited

Vessel Owning Company⁽¹⁾

100

Marshall Is.

01/01—12/31

06/07—12/31

Pingel Navigation Limited

Vessel Owning Company⁽¹⁾

100

Marshall Is.

01/01—12/31

06/07—12/31

Ebba Navigation Limited

Vessel Owning Company⁽¹⁾

100

Marshall Is.

01/01—12/31

06/07—12/31

Clan Navigation Limited

Vessel Owning Company⁽¹⁾

100

Marshall Is.

01/01—12/31

06/07—12/31

Statements of Operations

Company name

Nature Name

Effective
Ownership

Country of

incorporation

2019

2018

2017

Sui An Navigation Limited

Vessel Owning Company⁽¹⁾

100

Marshall Is.

01/01—12/31

06/07—12/31

Bertyl Ventures Co.

Vessel Owning Company⁽¹⁾

100

Marshall Is.

01/01—12/31

07/12—12/31

Silvanus Marine Company

Vessel Owning Company⁽¹⁾

100

Marshall Is.

01/01—12/31

07/12—12/31

Anthimar Marine Inc.

Vessel Owning Company⁽¹⁾

100

Marshall Is.

01/01—12/31

07/17—12/31

Enplo Shipping Limited

Vessel Owning Company⁽¹⁾

100

Marshall Is.

01/01—12/31

07/17—12/31

Morven Chartering Inc.

Vessel Owning Company⁽¹⁾

100

Marshall Is.

01/01—12/31

07/25—12/31

Rodman Maritime Corp.

Vessel Owning Company⁽¹⁾

100

Marshall Is.

01/01—12/31

08/03—12/31

Isolde Shipping Inc.

Vessel Owning Company⁽¹⁾

100

Marshall Is.

01/01—12/31

08/03—12/31

Velour Management Corp.

Vessel Owning Company⁽¹⁾

100

Marshall Is.

01/01—12/31

08/03—12/31

Evian Shiptrade Ltd.

Vessel Owning Company⁽¹⁾

100

Marshall Is.

01/01—12/31

08/03—12/31

Boheme Navigation Company

Sub—Holding Company

100

Marshall Is.

01/01—12/31

09/27—12/31

Theros Ventures Limited

Vessel Owning Company

100

Marshall Is.

01/01—12/31

11/07—12/31

Legato Shipholding Inc.

Vessel Owning Company

100

Marshall Is.

01/01—12/31

11/09—12/31

Inastros Maritime Corp.

Vessel Owning Company

100

Marshall Is.

01/01—12/31

11/23—12/31

Zoner Shiptrade S.A.

Vessel Owning Company

100

Marshall Is.

01/01—12/31

11/24—12/31

Jasmer Shipholding Ltd.

Vessel Owning Company

100

Marshall Is.

01/01—12/31

12/05—12/31

Thetida Marine Co.

Vessel Owning Company

100

Marshall Is.

01/01—12/31

12/08—12/31

Jaspero Shiptrade S.A.

Vessel Owning Company

100

Marshall Is.

01/01—12/31

12/12—12/31

Peran Maritime Inc.

Vessel Owning Company

100

Marshall Is.

01/01—12/31

12/28—12/31

Nefeli Navigation S.A.

Vessel Owning Company

100

Marshall Is.

01/01—12/31

03/13—12/31

—

Fairy Shipping Corporation

Vessel Owning Company

100

Marshall Is.

01/01—12/31

07/02—12/31

—

Limestone Shipping Corporation

Vessel Owning Company

100

Marshall Is.

01/01—12/31

07/02—12/31

—

Crayon Shipping Ltd

Vessel Owning Company

100

Marshall Is.

01/01—12/31

05/31—12/31

—

Chernava Marine Corp.

Vessel Owning Company

100

Marshall Is.

01/01—12/31

05/14—12/31

—

Proteus Shiptrade S.A

Vessel Owning Company

100

Marshall Is.

01/01—12/31

05/14—12/31

—

Vythos Marine Corp.

Vessel Owning Company

100

Marshall Is.

01/01—12/31

05/31—12/31

—

Iliada Shipping S.A.

Operating Company

100

Marshall Is.

01/01—12/31

05/31—12/31

—

Vinetree Marine Company

Operating Company

100

Marshall Is.

01/01—12/31

04/04—12/31

—

Afros Maritime Inc.

Operating Company

100

Marshall Is.

01/01—12/31

05/31—12/31

—

(1) Currently, vessel-operating company under the sale and leaseback transaction.

Our Charters

Our revenues are driven by the number of vessels in the fleet, the number of days during which the vessels operate and our charter hire rates, which, in turn, are affected by a number of factors, including:

•

the duration of the charters;

•

the level of spot and long-term market rates at the time of charter;

•

decisions relating to vessel acquisitions and disposals;

•

the amount of time spent positioning vessels;

•

the amount of time that vessels spend undergoing repairs and upgrades in drydock;

•

the age, condition and specifications of the vessels; and

•

the aggregate level of supply and demand in the dry cargo shipping industry.

Time charters are available for varying periods, ranging from a single trip (spot charter) to long-term which may be many years. In general, a long-term time charter assures the vessel owner of a consistent stream of revenue. Operating the vessel in the spot market affords the owner greater spot market opportunity, which may result in high rates when vessels are in high demand or low rates when vessel availability exceeds demand. We intend to employ our vessels in the short-term and medium-term charter market. Vessel charter rates are affected by world economics, international events, weather conditions, strikes, governmental policies, supply and demand and many other factors that might be beyond our control.

We could lose a customer or the benefits of a charter if:

•

the customer fails to make charter payments because of its financial inability, disagreements with us or otherwise;

•

the customer exercises certain rights to terminate the charter of the vessel;

•

the customer terminates the charter because we fail to deliver the vessel within a fixed period of time, the vessel is lost or damaged beyond repair, there are serious deficiencies in the vessel or prolonged periods of off-hire, or we default under the charter; or

•

a prolonged force majeure event affecting the customer, including damage to or destruction of relevant production facilities, war or political unrest prevents us from performing services for that customer.

Under some of our time charters, either party may terminate the charter contract in the event of war in specified countries or in locations that would significantly disrupt the free trade of the vessel. Some of the time charters covering our vessels require us to return to the charterer, upon the loss of the vessel, all advances paid by the charterer but not earned by us.

Refer also to “Item 4. Information on the Company — Business Overview — Our Customers”.

Vessel Operations

Under our charters, our vessel manager is generally responsible for commercial, technical, health and safety and other management services related to the vessels’ operation, and the charterer is responsible for bunkering and substantially or all of the vessel voyage costs, including canal tolls and port charges.

Management fees

Pursuant to the terms of the Management Agreement, the Manager bears all of our vessel operating expenses other than extraordinary costs and expenses in exchange for the payment of fees as described elsewhere in this report. Under this agreement, the Manager is responsible for commercial, technical, health and safety and other management services related to the vessels’ operation, including chartering, technical support and maintenance, insurance but costs associated with special surveys and related drydockings will be reimbursed by Navios Containers at cost at occurrence.

In addition to the fixed daily fees payable under the management agreement, the Management Agreement provides that the Manager will not be responsible for paying any extraordinary fees and costs resulting from:

•

repairs, refurbishment or modifications, including those not covered by the guarantee of the shipbuilder or by the insurance covering the vessels, resulting from maritime accidents, collisions, other accidental damage or unforeseen events (except to the extent that such accidents, collisions, damage or events are due to the fraud, gross negligence or willful misconduct of the Manager, its employees, agents or subcontractors, unless and to the extent otherwise covered by insurance);

•

any improvement, upgrade or modification to, or structural changes with respect to the installation of new equipment aboard any vessel that results from a change in, an introduction of new, or a change in the interpretation of, applicable laws, at the recommendation of the classification society for that vessel or otherwise; and

•

any increase in administrative costs and expenses or crew employment expenses resulting from an introduction of new, or a change in the interpretation of, applicable laws or resulting from the early termination of the charter of any vessel.

Additionally, the Manager is entitled to receive additional remuneration for:

•

time spent on insurance and salvage claims (at a rate of $1,000 per man per day of eight hours) in respect of the preparation and prosecution of claims, the supervision of repairs and the provision of documentation relating to adjustments; and

•

time spent vetting and pre-vetting the vessels by any charterers in excess of 10 days per vessel per year (at a rate of $750 per man per day of eight hours).

We are also required to pay:

•

the deductible of any insurance claims relating to the vessels or for any claims that are within such deductible range;

•

any significant increase in insurance premiums which are due to factors outside the control of the Manager such as “acts of God”;

•

any taxes, dues or fines imposed on the vessels or the Manager due to the operation of the vessels;

•

any expenses incurred in connection with the sale or acquisition of a vessel such as inspections and technical assistance;

•

any costs, liabilities and expenses similar to those for which the Manager is entitled to remuneration or that we are required to pay that were not reasonably contemplated by us and the Manager as being encompassed by or a component of the fixed daily fees at the time the fixed daily fees were determined; and

•

any hire expense adjustment incurred in connection with any time charter of our containerships to the Navios Maritime Entities or their affiliates and/or subsidiaries, including but not limited to any off-hire adjustment, owners’ items to be deducted from hire etc., in accordance with the terms of the relevant time charter.

Payment of any extraordinary fees or expenses to the Manager could significantly increase our vessel operating expenses and impact our results of operations.

During the remaining years of the term of the management agreement, we expect that we will reimburse the Manager for all of the actual operating costs and expenses it incurs in connection with the management of our fleet.

Refer also to “Item 7. Major Unitholders and Related Party Transaction — Related Party Transactions — Management Agreement”.

Administrative Services

Under the Administrative Agreement we entered into with the Manager, we reimburse the Manager for reasonable costs and expenses incurred in connection with the provision of the services under this agreement within 15 days after the Manager submits to us an invoice for such costs and expenses, together with any supporting detail that may be reasonably required. Under this agreement, which was extended on August 2019, until January 1, 2025, the Manager provides significant administrative, financial and other support services to us.

Refer also to “Item 7. Major Unitholders and Related Party Transaction — Related Party Transactions — Administrative Services Agreement”.

Trends and Factors Affecting Our Future Results of Operations

We believe the principal factors that will affect our future results of operations are the economic, regulatory, political and governmental conditions that affect the shipping industry generally and that affect conditions in countries and markets in which our vessels engage in business. Other key factors that will be fundamental to our business, future financial condition and results of operations include:

•

the demand for seaborne transportation services;

•

the ability of our Manager’s commercial and chartering operations to successfully employ our vessels at economically attractive rates, particularly as our fleet expands and our charters expire;

•

the effective and efficient technical management of our vessels by our Manager;

•

our and our Manager’s ability to comply with governmental regulations, maritime organization regulations, as well as standard environmental, health and safety standards imposed by our charterers applicable to our business; and

•

the strength of and growth in the number of our customer relationships, especially with liner companies.

In addition to the factors discussed above, we believe certain specific factors will impact our consolidated results of operations. These factors include:

•

the fixed rates earned by our vessels under our charters;

•

the length of time of the charters we are able to enter into;

•

our access to capital required to acquire additional vessels and/or to implement our business strategy;

•

our ability to acquire and sell vessels at prices we deem satisfactory;

•

our level of debt and the related interest expense and amortization of principal; and

•

the level of any distributions on and repurchases of our common units, if any.

Recent Developments

On March 11, 2020, the Company completed a $119.1 million sale and leaseback transaction with an unrelated third party to refinance the existing credit facilities of the Navios Unison, the Navios Constellation, the Navios Unite and the YM Utmost. The Company drew the entire amount on March 13, 2020. The Company has the option to buy: (i) the Navios Unison and the Navios Constellation with purchase option price starting at the end of year three de-escalating up to a $12.0 million and $13.5 million purchase obligation at maturity, respectively; and (ii) the Navios Unite and the YM Utmost with purchase option price starting at the end of year two de-escalating up to a $9.0 million and $9.0 million purchase obligation at maturity, respectively. The sale and leaseback agreement: (i) will be repayable in 28 quarterly installments of $1.0 million each, matures in March 2027 and bears interest at LIBOR plus 310 bps per annum for the Navios Unison and the Navios Constellation; (ii) will be repayable in 20 quarterly installments of: (a) $8,000 per day for the first eight installments; and (b) $3,375 per day for the remaining 12 installments, matures in March 2025 and bears interest at LIBOR plus 335 bps per annum for the Navios Unite; and (iii) will be repayable in 20 quarterly installments of: (a) $8,000 per day for the first eight installments; and (b) $3,532 per day for the remaining 12 installments, matures in March 2025 and bears interest at LIBOR plus 335 bps per annum for the YM Utmost.

A. Operating results

Year Ended December 31, 2019 compared to Year Ended December 31, 2018

The following table presents consolidated revenue and expense information for the years ended December 31, 2019 and December 31, 2018. This information was derived from our audited consolidated statements of income for the respective periods.


*(in thousands of U.S. dollars)*	Year Ended December 31, 2019			Year Ended December 31, 2018
Revenue	$	141,532		$	133,921
Time charter and voyage expenses		(5,754	)		(4,178	)
Direct vessel expenses		(4,077	)		(1,314	)
Management fees (entirely through related parties transactions)		(65,638	)		(53,772	)
General and administrative expenses		(10,223	)		(7,413	)
Listing transaction-related expenses		—			(4,990	)
Depreciation and amortization		(28,647	)		(38,552	)
Interest expense and finance cost		(16,846	)		(11,785	)
Interest income		—			90
Other income		603			1,017
Other expense		(3,443	)		(324	)

Net Income	$	7,507		$	12,700

Revenue: Revenue for the year ended December 31, 2019 amounted to $141.5 million, as compared to $133.9 million for the same period during 2018. The increase of $7.6 million was mainly due to the increase in the number of vessels operating during the year ended December 31, 2019 and the resulting increase in the number of available days from 8,442 for year ended December 31, 2018, to 10,261 for the year ended December 31, 2019, partially offset by the decrease in time charter rates reflecting primarily the expiration of certain legacy time charter contracts. TCE per day declined from $15,369 for the year ended December 31, 2018 to $13,232 for the same period during 2019, primarily as a result of the expiration of these contracts between the two periods.

Time charter and voyage expenses: Time charter and voyage expenses for the year ended December 31, 2019 increased by $1.6 million, to $5.8 million, as compared to $4.2 million for the same period in 2018, mainly relating to fuel expenses and brokers’ commissions. The increase in time charter and voyage expenses was due to the increase in the number of vessels in our fleet as described above.

Direct vessel expenses: Direct vessel expenses for the years ended December 31, 2019 and 2018 amounted to $4.1 million and $1.3 million, respectively. The increase of $2.8 million was attributable to a: (i) $2.3 million increase in amortization of dry dock and special survey costs of our fleet; and (ii) $0.5 million increase in other expenses, as per Management Agreement.

Management fees (entirely through related parties transactions): Management fees for the years ended December 31, 2019 and 2018 amounted to $65.6 million and $53.8 million, respectively. The $11.8 million increase was mainly due to the increase of the available days from 8,442 days for the year ended December 31, 2018, to 10,261 days for the year ended December 31, 2019.

General and administrative expenses: General and administrative expenses increased by $2.8 million, to $10.2 million for the year ended December 31, 2019 from $7.4 million for the year ended to December 31, 2018. The $2.8 million increase in general and administrative expenses was attributable to a: (i) $1.4 million increase in expense charged by the Manager mainly due to the growth in our fleet; and (ii) $1.4 million increase in legal and professional fees, as well as audit fees and directors’ fees.

Listing transaction-related expenses: Listing transaction-related expenses incurred in connection with our listing on the Nasdaq Global Select Market for the year ended December 31, 2018 were $5.0 million. There were no listing transaction-related expenses for the year ended December 31, 2019.

Depreciation and amortization: Depreciation and amortization was $28.6 million and $38.6 million for the years ended December 31, 2019 and 2018, respectively. The decrease of $10.0 million was due to a $14.0 million decrease in the amortization of the intangible assets resulting from the expiration of five charter-out contracts between the two periods, partially offset by a $4.0 million increase in vessel depreciation due to the increased number of vessels in Navios Containers’ fleet.

Interest expense and finance cost: Interest expense and finance cost for the years ended December 31, 2019 and 2018 was $16.8 million and $11.8 million, respectively. The increase of $5.0 million was mainly attributable to a: (i) $4.7 million increase in the interest expense, which resulted from an increase in the weighted average outstanding debt from $162.8 million for the year ended December 31, 2018, to $250.0 million for the year ended December 31, 2019; and (ii) $0.3 million increase in the amortization of the deferred finance fees.

Interest income: Interest income for the years ended December 31, 2019 and 2018 was zero and below $0.1 million, respectively, and was related to the interest earned on the Company’s cash deposits.

Other income: Other income for the years ended December 31, 2019 and 2018 was $0.6 million and $1.0 million and related primarily to settlement of outstanding claims.

Other expense: Other expense increased by $3.1 million to $3.4 million for the year ended December 31, 2019, as compared to $0.3 million for the year ended December 31, 2018. The $3.1 million increase was attributable to a: (i) $3.0 million expense related to a vessel purchase option that was not exercised; and (ii) $0.1 million increase in other expense.

Net income: Net income for the year ended December 31, 2019 was $7.5 million, as compared to $12.7 million for the year ended December 31, 2018. The $5.2 million decrease in net income was due to the factors discussed above.

Year Ended December 31, 2018 compared to the period from April 28, 2017 (date of inception) to December 31, 2017

The following table presents consolidated revenue and expense information for the year ended December 31, 2018 and for the period from April 28, 2017 (date of inception) to December 31, 2017. This information was derived from our audited consolidated income statement for the respective periods.


*(in thousands of U.S. dollars)*	Year Ended December 31, 2018			Period from April 28, 2017 (date of inception) to December 31, 2017
Revenue	$	133,921		$	39,188
Time charter and voyage expenses		(4,178	)		(1,257	)
Direct vessel expenses		(1,314	)		(672	)
Management fees (entirely through related parties transactions)		(53,772	)		(16,488	)
General and administrative expenses		(7,413	)		(2,262	)
Listing transaction-related expenses		(4,990	)		—
Depreciation and amortization		(38,552	)		(13,578	)
Interest expense and finance cost		(11,785	)		(2,293	)
Interest income		90			25
Other income		1,017			7
Other expense		(324	)		(32	)

Net Income	$	12,700		$	2,638

Revenue: Revenue for the year ended December 31, 2018 was $133.9 million, as compared to $39.2 million for the period from April 28, 2017 (date of inception) to December 31, 2017. The $94.7 million increase was mainly due to the increase in the number of vessels operating during the year ended December 31, 2018 and the resulting increase in the number of available days from 2,411 for the period from April 28, 2017 (date of inception) to December 31, 2017, to 8,442 for the year ended December 31, 2018.

Time charter and voyage expenses: Time charter and voyage expenses for the year ended December 31, 2018 increased by $2.9 million, to $4.2 million, as compared to $1.3 million for the period from April 28, 2017 (date of inception) to December 31, 2017, mainly relating to fuel expenses and brokers’ commissions. The increase in time charter and voyage expenses was due to the increase in the number of vessels in our fleet as described above.

Direct vessel expenses: Direct vessel expenses for the year ended December 31, 2018 amounted to $1.3 million and were related to the amortization of drydock and special survey costs of certain vessels in our fleet. Direct vessel expenses for the period from April 28, 2017 (date of inception) to December 31, 2017, amounted to $0.7 million, out of which $0.4 million was related to the reactivation costs of four laid-up vessels and $0.3 million was related to the amortization of drydock and special survey costs of certain vessels in our fleet.

Management fees (entirely through related parties transactions): Management fees for the year ended December 31, 2018 and for the period from April 28, 2017 (date of inception) to December 31, 2017 were $53.8 million and $16.5 million, respectively. The $37.3 million increase was attributable to the increase in the number of operating vessels from 21 as of December 31, 2017 to 28 as of December 31, 2018 and to the increase of the available days from 2,411 for the period from April 28, 2017 (date of inception) to December 31, 2017 to 8,442 for the year ended December 31, 2018. Pursuant to the management agreement, the Manager provides commercial and technical management services to our vessels for a daily fixed fee of $6,100 for containerships from 3,000 TEU up to 5,500 TEU and $7,400 for containerships from 8,000 TEU up to 10,000 TEU, payable on the last day of each month, covering all of our vessels’ operating expenses, other than certain extraordinary fees and costs.

General and administrative expenses: General and administrative expenses increased by $5.1 million to $7.4 million for the year ended December 31, 2018 from $2.3 million for the period from April 28, 2017 (date of inception) to December 31, 2017. The Manager is reimbursed for reasonable costs and expenses incurred in connection with the provision of these services. The $5.1 million increase was attributable to a: (i) $4.7 million increase in expense charged by the Manager mainly due to the growth in our fleet; and (ii) $0.4 million increase in legal and professional fees, as well as audit fees and directors’ fees.

Depreciation and amortization: Depreciation and amortization was $38.6 million and $13.6 million for the year ended December 31, 2018 and for the period from April 28, 2017 (date of inception) to December 31, 2017, respectively. The increase was due to a: (i) $4.9 million increase in vessel depreciation due to the increase number of vessels in Navios Containers’ fleet; and (ii) $20.1 million increase in the amortization of favorable lease terms that were recognized in relation to the acquisition of the rights on the time charter-out contracts of nine containerships.

Interest expense and finance cost: Interest expense and finance cost for the year ended December 31, 2018 and for the period from April 28, 2017 (date of inception) to December 31, 2017 was $11.8 million and $2.3 million, respectively. The increase of $9.5 million was mainly attributable to: (i) an $8.3 million increase in the interest expense, which resulted from an increase in the weighted average outstanding debt from $51.5 million for the period from April 28, 2017 (date of inception) to December 31, 2017, to $162.8 million for the year ended December 31, 2018; and (ii) a $1.2 million increase in the amortization of the deferred finance fees.

Interest income: Interest income for the year ended December 31, 2018 and for the period from April 28, 2017 (date of inception) to December 31, 2017 was below $0.1 million and was related to the interest earned on the Company’s cash deposits.

Other income: Other income for the year ended December 31, 2018 was $1.0 million and related primarily to settlement of outstanding claims. Other income for the period from April 28, 2017 (date of inception) to December 31, 2017 was below $0.1 million.

Other expense: Other expense increased by $0.2 million to $0.3 million for the year ended December 31, 2018, as compared to below $0.1 million for the period from April 28, 2017 (date of inception) to December 31, 2017.

Net income: Net income for the year ended December 31, 2018 was $12.7 million, as compared to $2.6 million for the period from April 28, 2017 (date of inception) to December 31, 2017. The $10.1 million increase in net income was due to the factors discussed above.

B. Liquidity and Capital Resources

Borrowings

Our long-term borrowings are reflected in our balance sheet as “Long-term debt, net of current portion and net of deferred finance costs,” “Long-term financial liability, net of current portion and net of deferred finance costs”, “Current portion of long-term debt, net of deferred finance costs” and “Financial liability short term, net of deferred finance costs”. As of December 31, 2019 and December 31, 2018, total borrowings, net amounted to $245.7 million and $219.0 million, respectively.

The current portion of long-term debt, net of deferred finance costs amounted to $38.5 million and $27.6 million as of December 31, 2019 and December 31, 2018, respectively. Long-term financial liability, net of current portion and deferred finance costs amounted to $69.9 million and $78.1 million as of December 31, 2019 and December 31, 2018, respectively, and the short-term portion, net as of the same dates was $8.2 million and $7.7 million, respectively.

ABN AMRO BANK N.V Facilities: On June 29, 2017, we entered into a facility agreement with ABN AMRO BANK N.V. (“ABN AMRO”) for an amount of up to $40.0 million (divided in three tranches of up to $34.3 million, $3.2 million and $2.5 million, respectively) to finance part of the purchase price of seven containerships. Pursuant to the supplemental agreement dated June 29, 2018, the loan bore interest at a rate of LIBOR plus 400 bps. The facility was repaid in full on November 9, 2018. As of December 31, 2019, there was no outstanding amount under this facility.

On July 27, 2017, the Company entered into a facility agreement with ABN AMRO for an amount of up to $21.0 million to finance part of the purchase price of seven containerships. This loan bears interest at a rate of LIBOR plus 400 bps. The entire amount was drawn under this loan in the third quarter of 2017, net of the loan’s discount of $0.3 million. On December 1, 2017, the facility was extended for an additional amount of $50.0 million to finance part of the purchase price of four containerships. Pursuant to the supplemental agreement dated June 29, 2018, the additional loan bears interest at a rate of LIBOR plus 400 bps. The entire amount under the additional loan was drawn, in the fourth quarter of 2017, net of the loan’s discount of $0.6 million. On December 6, 2018, the Company fully repaid the July 27, 2017 credit facility. As of December 31, 2019, there was no outstanding amount under this facility.

On December 3, 2018, the Company entered into a facility agreement with ABN AMRO for an amount of up to $50.0 million divided in two tranches: (i) the first tranche is for an amount of up to $41.2 million in order to refinance the outstanding debt of four containerships and to partially finance the acquisition of one containership; and (ii) the second tranche is for an amount of $8.8 million in order to partially finance the acquisition of one containership. This loan bears interest at a rate of LIBOR plus 350 bps. The Company drew the entire amount under this facility, net of the loan’s discount of $0.5 million in the fourth quarter of 2018. On June 28, 2019, the Company entered into a supplemental agreement with ABN AMRO, under which the Company made a partial prepayment of the loan in the aggregate amount of $9.4 million and two containerships were released from the facility. The outstanding loan amount as of December 31, 2019 was $25.8 million and is repayable in 12 quarterly installments, the first in the amount of $3.4 million each and the subsequent 11 in the amount of $1.1 million each, along with a final balloon payment of $10.9 million payable together with the last installment due in December 2022.

BNP Paribas Facilities: On December 20, 2017, the Company entered into a facility agreement with BNP Paribas for an amount of up to $24.0 million (divided into four tranches of up to $6.0 million each) to finance part of the purchase price of four containerships. The Company had drawn $24.0 million under this facility, during the fourth quarter of 2017 and the first quarter of 2018, net of the loan discount of $0.3 million. In September 2018, the Company entered into a facility agreement with BNP Paribas to extend the facility dated December 20, 2017, for an additional amount of $9.0 million to partially finance the purchase price of one containership. The Company drew the entire amount, net of the loan’s discount of $0.1 million, on September 7, 2018. These loans bore interest at a rate of LIBOR plus 300 bps. On June 28, 2019, Navios Containers refinanced the facilities dated in December 2017 and September 2018. As of December 31, 2019, there were no outstanding amounts under these facilities.

On May 25, 2018, the Company entered into a facility agreement with BNP Paribas, for an amount of up to $25.0 million, to finance part of the purchase price of one containership. This loan bore interest at a rate of LIBOR plus 300 bps. On May 29, 2018, the Company drew $25.0 million under this facility, net of the loan’s discount of $0.3 million. On March 14, 2019, the facility was repaid in full. There was no outstanding loan amount under the facility as of December 31, 2019.

On June 26, 2019, the Company entered into a facility agreement with BNP Paribas for an amount of up to $54.0 million to refinance the existing facilities of seven containerships. On June 27, 2019, the Company drew $48.8 million net of loan’s discount of $0.4 million. This loan bears interest at a rate of LIBOR plus 300 bps. As of December 31, 2019, the facility is repayable in 18 quarterly installments the first two in the amount of $2.0 million each and the subsequent 16 in the amount of $1.7 million each, along with a final balloon payment of $13.5 million payable together with the last installment, falling due on June 2024. As of December 31, 2019, the outstanding loan amount under this facility was $44.7 million and no amount remains to be drawn.

Hamburg Commercial Bank AG and Alpha Bank A.E.: On June 28, 2018, the Company entered into a facility agreement with Hamburg Commercial Bank AG and Alpha Bank A.E. for an amount of up to $36.0 million to finance part of the purchase price of two containerships. This loan bears interest at a rate of LIBOR plus 325 bps. As of December 31, 2019, the Company had drawn $36.0 million under this facility, net of the loan’s discount of $0.3 million. As of December 31, 2019, the outstanding loan amount under this facility was $27.2 million and is repayable in 10 consecutive quarterly installments in an amount of $1.2 million each together with a final balloon payment of $15.2 million payable together with the last installment falling due in June 2022.

On November 9, 2018, the Company entered into a facility agreement with Hamburg Commercial Bank AG divided into four tranches of up to $31.8 million each to finance part of the purchase price of up to four 10,000 TEU containerships. This loan bears interest at a rate of LIBOR plus 325 bps and commitment fee of 0.75% per annum on the undrawn loan amount. On March 12, 2019 and October 16, 2019, Navios Containers cancelled two of the tranches of the facility at no cost. On March 13, 2019, the Company drew $30.2 million of the second tranche, net of the loan’s discount of $0.2 million, to refinance the outstanding debt of one containership. As of December 31, 2019, the second tranche of the facility is repayable in 15 consecutive quarterly installments in an amount of $0.7 million each together with a final balloon payment of $17.5 million payable together with the last installment falling due in July 2023. On April 18, 2019, the Company drew $31.1 million of the fourth tranche, net of the loan’s discount of $0.2 million, to finance part of the purchase price of one containership. As of December 31, 2019, the fourth tranche of the facility is repayable in 15 consecutive quarterly installments in an amount of $0.7 million each together with a final balloon payment of $18.9 million payable together with the last installment falling due in July 2023. As of December 31, 2019, the outstanding loan amount under the facility was $57.1 million, and no amount remains to be drawn.

Sellers’ Credit: In January 2019, the Company entered into a sellers’ credit agreement (the “Sellers’ Credit”) in connection with the acquisition of two 10,000 TEU containerships, for an amount of up to $20.0 million at a rate of 5% per annum, divided in two tranches of $15.0 million and $5.0 million. On April 23, 2019, following the acquisition of one 2011-built 10,000 TEU containership, the Company drew $15.0 million, net of discount of $0.2 million. In July 2019, following the conversion of the purchase obligation of the second 2011-built 10,000 TEU containership into an option, the second tranche expired. As of December 31, 2019, the outstanding amount under the Sellers’ Credit was $15.0 million and it matured and was repaid in January 2020.

Financial liability: On May 25, 2018, the Company entered into a $119.0 million sale and leaseback transaction with Minsheng Financial Leasing Co. Ltd. in order to refinance the outstanding balance of the existing facilities of 18 containerships. The Company has a purchase obligation to acquire the vessels at the end of the lease term and, under ASC 842-40, the transfer of the vessels was determined to be a failed sale. In accordance with ASC 842-40, the Company did not derecognize the respective vessels from its balance sheet and accounted for the amounts received under the sale and leaseback transaction as a financial liability. On June 29, 2018, the Company completed the sale and leaseback of the first six vessels for $37.5 million. On July 27, 2018 and on August 29, 2018, the Company completed the sale and leaseback of four additional vessels for $26.0 million. On November 9, 2018 the Company completed the sale and leaseback of four additional vessels for $26.7 million. The Company did not proceed with the sale and leaseback transaction of the four remaining vessels. The Company is obligated to make 60 monthly payments in respect of all 14 vessels of approximately $1.1 million each. The Company also has an obligation to purchase the vessels at the end of the fifth year for $45.1 million. As of December 31, 2019, the outstanding balance under the sale and leaseback transaction was $79.4 million.

Amounts drawn under the facilities are secured by first priority mortgages on the Company’s vessels. The credit facilities and sale and leaseback transaction contain a number of restrictive covenants that limit Navios Containers and/or its subsidiaries from, among other things: incurring or guaranteeing indebtedness; entering into affiliate transactions other than on arm’s length terms; charging, pledging or encumbering the vessels; changing the flag, class, management or ownership of the Company’s vessels; acquiring any vessel or permitting any guarantor to acquire any further assets or make investments; purchasing or otherwise acquiring for value any units of its capital or declaring or paying any distributions; permitting any guarantor to form or acquire any subsidiaries. The majority of credit facilities and sale and leaseback transaction also require the vessels to comply with the ISM Code and ISPS Code and to maintain safety management certificates and documents of compliance at all times.

The Company’s credit facilities and sale and leaseback transaction also require compliance with a number of financial covenants, including: (i) maintain a value to loan ratio ranging from 120% to 125%; (ii) minimum free consolidated liquidity of $14.5 million as of December 31, 2019 and equal to at least the product of $0.5 million and the total number of vessels as defined in the Company’s credit facilities; (iii) maintain a ratio of liabilities-to-assets (as defined in the Company’s credit facilities) of less than 0.80 : 1.00; and (iv) maintain a minimum net worth of at least $75.0 million. Among other events, it will be an event of default under the Company’s credit facilities and sale and leaseback transaction if the financial covenants are not complied with.

In addition, it is a requirement under the credit facilities that Navios Holdings, Navios Partners, Angeliki Frangou and their respective affiliates collectively own at least 20% of the Company.

As of December 31, 2019, the Company was in compliance with all of the covenants under all of its credit facilities and sale and leaseback transaction.

The annualized weighted average interest rates of the Company’s total borrowings were 5.72%, 5.76% and 5.20% for the years ended December 31, 2019 and 2018 and for the period from April 28, 2017 (date of inception) to December 31, 2017, respectively.

The maturity table below reflects the principal payments for the next five years of all of borrowings of Navios Containers outstanding as of December 31, 2019, based on the repayment schedules of the respective loan facilities, financial liability and Sellers’ Credit (as describe above).


Payment due by 12 month period ending	Amount in millions of U.S. dollars
December 31, 2020	$	48.0
December 31, 2021		30.5
December 31, 2022		54.7
December 31, 2023		99.2
December 31, 2024		16.8

Total	$	249.2

Liquidity and Cash Sources and Uses

Navios Containers primary short-term liquidity needs are to fund general working capital requirements, cash reserve requirements including those under its credit facilities and debt service, while its long-term liquidity needs primarily relate to capital expenditures, relating to vessel acquisitions, maintenance capital expenditures (relating primarily to drydocking expenditures) and debt repayment.

Navios Containers anticipates that its primary sources of funds for its short-term liquidity needs will be cash flows from operations and borrowings. On December 31, 2019, Navios Containers’ current assets totaled $29.5 million, while current liabilities totaled $71.4 million, resulting in a negative working capital position of $41.9 million. As of December 31, 2019, Navios Containers’ current liabilities included $46.7 million related to installments due under its credit facilities and the financial liability under the sale and leaseback transactions. Navios Containers’ cash forecast indicates that it will generate sufficient cash to make the required principal and interest payments on its indebtedness, provide for the normal working capital requirements of the business through twelve months from March 18, 2020. Navios Containers expects to be in a position to meet its loan obligations in part through its contracted revenue of $151.0 million as of March 12, 2020. Generally, Navios Containers’ long-term sources of funds derive from cash from operations, long-term bank borrowings and other debt or equity financings to fund acquisitions and expansion and investment capital expenditures, including opportunities Navios Containers may pursue under the Omnibus Agreement. Navios Containers cannot assure you that it will be able obtain additional funds on favorable terms.

Cash deposits and cash equivalents in excess of amounts covered by government provided insurance are exposed to loss in the event of non-performance by financial institutions. Navios Containers maintain cash deposits and equivalents in excess of government provided insurance limits. Navios Containers also minimize exposure to credit risk by dealing with a diversified group of major financial institutions.

Cash flows for the year ended December 31, 2019 compared to the year ended December 31, 2018:

The following table presents cash flow information for the years ended December 31, 2019 and 2018. This information was derived from our audited consolidated statement of cash flows for the respective period.


*(in thousands of U.S. dollars)*	Year Ended December 31, 2019			Year Ended December 31, 2018
Net cash provided by operating activities	$	36,976		$	47,509
Net cash used in investing activities		(62,513	)		(170,503	)
Net cash provided by financing activities		24,754			127,385

(Decrease)/increase in cash and cash equivalents and restricted cash	$	(783	)	$	4,391

Cash provided by operating activities for the year ended December 31, 2019 as compared to the cash provided by operating activities for year ended December 31, 2018:

Net cash provided by operating activities decreased by $10.5 million, to $37.0 million for the year ended December 31, 2019, as compared to $47.5 million for the year ended December 31, 2018.

Net income decreased by $5.2 million, to $7.5 million for the year ended December 31, 2019, from $12.7 million for the year ended December 31, 2018. In determining net cash provided by operating activities for the year ended December 31, 2019, net income was adjusted for the effects of certain non-cash items, including $28.6 million depreciation and amortization, $1.9 million amortization of deferred financing costs and discount and $3.6 million amortization of deferred drydock and special survey costs. For the year ended December 31, 2018, net income was adjusted for the effects of certain non-cash items, including $38.6 million depreciation and amortization, $1.6 million amortization of deferred financing costs and $1.3 million amortization of deferred drydock and special survey costs.

Accounts receivable, net, decreased by $0.3 million, from $2.6 million as of December 31, 2018 to $2.3 million as of December 31, 2019. The decrease was mainly attributable to $0.5 million increase in accrued voyage expenses; partially mitigated by $0.2 million increase in accounts receivables from charterers and other receivables.

Inventories increased by $3.9 million, to $4.5 million as of December 31, 2019 from $0.6 million as of December 31, 2018. The increase in inventories was attributable to $4.2 million increase in lubricants and stock provisions on board of the vessels; partially mitigated by $0.3 million decrease in bunkers on board our containerships.

Other current assets increased by $1.6 million, to $4.5 million as of December 31, 2019 from $2.9 million as of December 31, 2018. Other current assets mainly related to Company’s claims receivable. Claims receivable mainly represents claims against vessels’ insurance underwriters in respect of damages arising from accidents or other insured risks, as well as claims under charter contracts.

Prepaid expenses remained stable at $0.1 million for the years ended December 31, 2019 and December 31, 2018.

Amounts due from related parties, non-current, increased by $0.3 million, from $7.9 million as of December 31, 2018 to $8.2 million as of December 31, 2019. Amounts due from related parties, non-current consisted of management fees, in accordance with the management agreement. Please refer to the relevant discussion below, under “Related Party Transactions”.

Other long-term assets increased by $0.1 million, to $1.2 million as of December 31, 2019 from $1.1 million as of December 31, 2018. The increase was attributable to the asset recognized for two of the Company’s vessels, which according to the terms of their effective charter party agreements had escalating rates.

Accounts payable decreased by $1.3 million, from $3.6 million as of December 31, 2018 to $2.3 million as of December 31, 2019. The decrease was attributable to a $1.7 million decrease in accounts payables relating to legal and professional fees, partially mitigated by a: (i) $0.3 million increase in accounts payables to brokers; and (ii) $0.1 million increase in accounts payables to bunkers.

Accrued expenses increased by $2.6 million, from $2.3 million as of December 31, 2018 to $4.9 million as of December 31, 2019. The increase was attributable to a: (i) $3.0 million accrued expenses related to a vessel purchase option that was not exercised; (ii) $0.2 million increase in accrued interest; and (iii) $0.1 million increase in other accrued expenses; partially mitigated by $0.7 million decrease in accrued expenses relating to legal and professional fees.

Amounts due to related parties increased by $12.5 million to $16.6 million as of December 31, 2019 compared to $4.1 million as of December 31, 2018. Amounts due to related parties consisted of special survey and drydocking expenses for certain vessels of our fleet, as well as management fees and other expenses, in accordance with the management agreement. Please refer to the relevant discussion below, under “Related Party Transactions”.

Payments for drydock and special survey costs incurred for the year ended December 31, 2019 was $11.8 million and related to drydock and special survey costs incurred for certain vessels of the fleet. Payments for drydock and special survey costs incurred for the year ended December 31, 2018 amounted to $9.1 million.

Deferred income and cash received in advance decreased by $1.3 million, from $2.1 million as of December 31, 2018 to $0.8 million as of December 31, 2019. Deferred income primarily reflects charter-out amounts collected on voyages that have not been completed.

Cash used in investing activities for the year ended December 31, 2019 as compared to the cash used in investing activities for the year ended December 31, 2018:

Net cash used in investing activities decreased by $108.0 million, to $62.5 million outflow for the year ended December 31, 2019 as compared to $170.5 million outflow for the year ended December 31, 2018. Cash used in investing activities for the year ended December 31, 2019 was the result of: (i) $53.4 million in payments relating to the acquisition of one containership, which we took delivery of during the year ended December 31, 2019 and (ii) $9.1 million in payments relating to certain extraordinary fees and costs related to regulatory requirements, under the Company’s management agreement.

Cash used in investing activities for the year ended December 31, 2018 was the result of $170.5 million in payments relating to the acquisition of seven containerships, which we took delivery of during the year ended December 31, 2018.

Cash provided by financing activities for the year ended December 31, 2019 as compared to the cash provided by financing activities for the year ended December 31, 2018:

Cash provided by financing activities decreased by $102.7 million, from $127.4 million for the year ended December 31, 2018 to $24.7 million for the year ended December 31, 2019.

Cash provided by financing activities for the year ended December 31, 2019 was the result of: (i) $125.0 million of new loan proceeds to refinance certain existing credit facilities originally maturing in 2022 and 2023 and to finance the acquisition of one containership; partially mitigated by: (i) $98.4 million of payments performed in connection with our outstanding indebtedness; and (ii) $1.9 million of debt issuance costs.

Cash provided by financing activities for the year ended December 31, 2018 was the result of: (i) $126.0 million of loan proceeds to partially finance the acquisition of seven containerships and to refinance the facility maturing in the fourth quarter of 2019; (ii) $90.2 million from the completion of the sale and leaseback of 14 vessels; and (iii) $29.1 million proceeds from the issuance of 5,454,546 common shares, net of offering costs, related to the follow-on private placement in March 2018. This overall increase was partially offset by: (i) $114.3 million of payments performed in connection with our outstanding indebtedness; and (ii) $3.6 million of debt issuance costs.

Cash flows for the year ended December 31, 2018 compared to the period from April 28, 2017 (date of inception) to December 31, 2017

The following table presents cash flow information for the year ended December 31, 2018 and for the period from April 28, 2017 (date of inception) to December 31, 2017. This information was derived from our audited consolidated statement of cash flows for the respective period.


*(in thousands of U.S. dollars)*	Year Ended December 31, 2018			Period from April 28, 2017 (date of inception) to December 31, 2017
Net cash provided by operating activities	$	47,509		$	2,623
Net cash used in investing activities		(170,503	)		(249,227	)
Net cash provided by financing activities		127,385			261,105

Increase in cash and cash equivalents and restricted cash	$	4,391		$	14,501

Cash provided by operating activities for the year ended December 31, 2018 as compared to the cash provided by operating activities for the period from April 28, 2017 (date of inception) to December 31, 2017:

Net cash provided by operating activities increased by $44.9 million, to $47.5 million for the year ended December 31, 2018, as compared to $2.6 million for the period from April 28, 2017 (date of inception) to December 31, 2017.

Net income increased by $10.1 million to $12.7 million for the year ended December 31, 2018, from $2.6 million for the period from April 28, 2017 (date of inception) to December 31, 2017. In determining net cash provided by operating activities for the year ended December 31, 2018, net income was adjusted for the effects of certain non-cash items, including $38.6 million depreciation and amortization, $1.6 million amortization of deferred financing costs and discount and $1.3 million amortization of deferred drydock and special survey costs. For the period from April 28, 2017 (date of inception) to December 31, 2017, net income was adjusted for the effects of certain non-cash items, including $13.6 million depreciation and amortization, $0.4 million amortization of deferred financing costs and $0.2 million amortization of deferred drydock and special survey costs.

Accounts receivable, net, increased by $2.0 million, from $0.6 million as of December 31, 2017 to $2.6 million as of December 31, 2018. The increase was attributable to the increase of amounts due from charterers.

Amounts due from related parties, short-term, decreased by $5.6 million, from $5.6 million as of December 31, 2017, to $0 as of December 31, 2018. The balance as at December 31, 2017 mainly consisted of special survey and drydocking expenses for certain vessels of our fleet, as well as management fees, in accordance with the management agreement. Please refer to the relevant discussion below, under “Related Party Transactions”.

Inventories increased by $0.1 million, to $0.6 million as of December 31, 2018 from $0.5 million as of December 31, 2017. The balance consisted of bunkers on board our containerships.

Other current assets increased by $2.9 million, to $2.9 million as of December 31, 2018. Other current assets mainly related to Company’s claims receivable. Claims receivable mainly represents claims against vessels’ insurance underwriters in respect of damages arising from accidents or other insured risks, as well as claims under charter contracts.

Prepaid expenses increased by $0.1 million, to $0.1 million as of December 31, 2018 from $0 as of December 31, 2017.

Amounts due from related parties, long-term, increased by $2.1 million, from $5.8 million as of December 31, 2017 to $7.9 million as of December 31, 2018 and consist of management fees, in accordance with the management agreement. Please refer to the relevant discussion below, under “Related Party Transactions”.

Other long-term assets increased by $1.1 million, to $1.1 million as of December 31, 2018 and were related to cash deposits relating to the sale and leaseback of 14 vessels.

Accounts payable increased by $3.0 million from $0.6 million as of December 31, 2017 to $3.6 million as of December 31, 2018. The increase was attributable to a: (i) $1.8 million increase in legal and professional fees payables; (ii) $0.7 million increase in port-agent payables; and (iii) $0.6 million increase in payables to other suppliers. The increase was partially offset by a $0.1 million decrease in broker payables.

Accrued expenses decreased by $1.6 million, from $3.9 million as of December 31, 2017 to $2.3 million as of December 31, 2018. The decrease was attributable to a: (i) $0.4 million decrease in accrued in legal and professional fees; and (ii) $1.7 million decrease in other accrued expenses. The decrease was partially offset by a $0.5 million increase in accrued interest.

Amounts due to related parties increased by $4.1 million, to $4.1 million as of December 31, 2018 that consisted of special survey and drydocking expenses for certain vessels of our fleet, as well as management fees, in accordance with the management agreement. Please refer to the relevant discussion below, under “Related Party Transactions”. There were no amounts due to related parties as of December 31, 2017.

Payments for drydock and special survey costs incurred for the year ended December 31, 2018 was $9.1 million and related to drydock and special survey costs incurred for certain vessels of the fleet. Payments for drydock and special survey costs incurred for the period from April 28, 2017 (date of inception) to December 31, 2017 amounted to $3.8 million.

Deferred income and cash received in advance decreased by $0.4 million, from $2.5 million as of December 31, 2017 to $2.1 million as of December 31, 2018. Deferred income primarily reflects charter-out amounts collected on voyages that have not been completed.

Cash used in investing activities for the year ended December 31, 2018 as compared to the cash used in investing activities for the period from April 28, 2017 (date of inception) to December 31, 2017:

Net cash used in investing activities decreased by $78.7 million, to $170.5 million outflow for the year ended December 31, 2018 as compared to $249.2 million outflow for the period from April 28, 2017 (date of inception) to December 31, 2017. Cash used in investing activities for the year ended December 31, 2018 was the result of $170.5 million in payments relating to the acquisition of seven containerships which we took delivery of during the year ended December 31, 2018.

Cash used in investing activities for the period from April 28, 2017 (date of inception) to December 31, 2017 was the result of $254.7 million in payments relating to the acquisition of 21 containerships partially offset by the $5.5 million of cash acquired through an asset acquisition.

Cash provided by financing activities for the year ended December 31, 2018 as compared to the cash provided by financing activities for the period from April 28, 2017 (date of inception) to December 31, 2017:

Cash provided by financing activities decreased by $133.7 million, from $261.1 million for the period from April 28, 2017 (date of inception) to December 31, 2017 to $127.4 million for the year ended December 31, 2018.

Cash provided by financing activities for the period from April 28, 2017 (date of inception) to December 31, 2017 was the result of: (i) $126.9 million of loan proceeds (net of $2.1 million loan discounts and debt issuance costs) to partially finance the acquisition of 21 containerships; and (ii) $142.5 million proceeds from the issuance of 29,148,554 common shares, net of offering costs, related to the private placements in June, August and November 2017. Cash provided by financing activities was partially offset by $8.3 million of payments performed in connection with our outstanding indebtedness.

Reconciliation of EBITDA from Net Cash Provided by Operating Activities


(in thousands of U.S. dollars)	Year Ended December 31, 2019			Year Ended December 31, 2018			Period from April 28, 2017 (date of inception) to December 31, 2017
	(unaudited)			(unaudited)			(unaudited)
Net cash provided by operating activities	$	36,976		$	47,509		$	2,623
Net increase in operating assets		5,556			2,572			12,142
Net increase in operating liabilities		(12,572	)		(5,034	)		(1,701	)
Net interest expense and finance cost		16,846			11,695			2,268
Amortization of deferred financing costs		(1,943	)		(1,598	)		(430	)
Payments for drydock and special survey costs		11,776			9,118			3,807

EBITDA⁽¹⁾	$	56,639		$	64,262		$	18,709


(in thousands of U.S. dollars)	Year Ended December 31, 2019			Year Ended December 31, 2018			Period from April 28, 2017 (date of inception) to December 31, 2017
	(unaudited)			(unaudited)			(unaudited)
Net cash provided by operating activities	$	36,976		$	47,509		$	2,623
Net cash used in investing activities		(62,513	)		(170,503	)		(249,227	)
Net cash provided by financing activities	$	24,754		$	127,385		$	261,105

(1)

EBITDA: EBITDA represents net income before interest and finance costs, before depreciation and amortization and before income taxes. We use EBITDA as liquidity measure and reconcile EBITDA to net cash provided by operating activities, the most comparable U.S. GAAP liquidity measure. EBITDA is calculated as follows: net cash provided by operating activities adding back, when applicable and as the case may be, the effect of: (i) net increase in operating assets; (ii) net (increase) in operating liabilities; (iii) net interest cost; (iv) amortization of deferred financing costs; and (v) payments for drydock and special survey costs. We believe that EBITDA is a basis upon which liquidity can be assessed and represents useful information to investors regarding our ability to service and/or incur indebtedness, pay capital expenditures, meet working capital requirements and pay dividends. We also believe that EBITDA is used: (i) by prospective and current lessors as well as potential lenders to evaluate potential transactions; (ii) to evaluate and price potential acquisition candidates; and (iii) by securities analysts, investors and other interested parties in the evaluation of companies in our industry.

EBITDA has limitations as an analytical tool, and therefore, should not be considered in isolation or as a substitute for the analysis of our results as reported under U.S. GAAP. Some of these limitations are: (i) EBITDA does not reflect changes in, or cash requirements for, working capital needs; (ii) EBITDA does not reflect the amounts necessary to service interest or principal payments on our debt and other financing arrangements; and (iii) although depreciation and amortization are non-cash charges, the assets being depreciated and amortized may have to be replaced in the future. EBITDA does not reflect any cash requirements for such capital expenditures. Because of these limitations, among others, EBITDA should not be considered as a principal indicator of our performance. Furthermore, our calculation of EBITDA may not be comparable to that reported by other companies due to differences in methods of calculation.

EBITDA for the year ended December 31, 2019 decreased by $7.7 million, to $56.6 million, as compared to $64.3 million for the year ended to December 31, 2018. The decrease in EBITDA was primarily due to: i) a $11.8 million increase in management fees mainly due to the increase of the available days from 8,442 for the year ended December 31, 2018, to 10,261 for the year ended December 31, 2019; (ii) a $3.1 million increase in other expense mainly related to a vessel purchase option that was not exercised; (iii) a $2.8 million increase in general and administrative expenses also mainly due to the growth in our fleet; (iv) a $1.6 million increase in time charter and voyage expenses; (v) a $0.5 million increase in other expenses, as per Management Agreement; and (vi) a $0.5 million decrease in other income. These overall decrease of $20.3 million was mitigated by a: (i) $7.6 million increase in revenue reflecting the growth in the number of vessels operating in the fleet during the period and the resulting increase in the number of available days; and (ii) $5.0 million decrease in transaction-related expenses incurred in connection with our listing on a U.S. exchange.

EBITDA for the year ended December 31, 2018 increased by $45.6 million to $64.3 million, as compared to $18.7 million for the period from April 28, 2017 (date of inception) to December 31, 2017. The increase in EBITDA was primarily due to a: (i) $94.7 million increase in revenue reflecting the growth in the number of vessels operating in the fleet during the period; (ii) $1.0 million increase in other income mainly attributable to the settlement of outstanding claims; and (iii) $0.5 million decrease in direct vessel expenses related to the reactivation costs of four laid-up vessels. This overall increase of $96.2 million was partially offset by a: (i) $37.3 million increase in management fees mainly due to the increase of the available days from 2,411 for the period from April 28, 2017 (date of inception) to December 31, 2017, to 8,442 for the year ended December 31, 2018; (ii) $5.1 million increase in general and administrative expenses also mainly due to the growth in our fleet; (iii) $5.0 million increase in transaction-related expenses incurred in connection with our listing on a U.S. exchange; (iv) $2.9 million increase in time charter and voyage expenses; and (v) $0.3 million increase in other expense.

Capital Expenditures

Navios Containers finances its capital expenditures with cash flow from operations, equity raisings, long term bank borrowings and other debt raisings. Capital expenditures for the years ended December 31, 2019 and 2018 amounted to $62.5 million and $170.5 million, respectively. For the year ended December 31, 2019, expansion capital expenditures of $62.5 million related to the acquisition of one containership, which we took delivery of during the year ended December 31, 2019 and payments relating to certain extraordinary fees and costs related to regulatory requirements, under the Company’s management agreement. For the year ended December 31, 2018, expansion capital expenditures of $170.5 million related to the acquisition of seven containerships, which we took delivery of during the year. For the period from April 28, 2017 (date of inception) to December 31, 2017, expansion capital expenditures of $254.7 million related to the acquisition of 21 containerships.

Maintenance for our vessels and expenses related to drydocking expenses are reimbursed at cost by us to our Manager under the management agreement. Pursuant to a management agreement, dated June 7, 2017, as amended on November 23, 2017, April 23, 2018, June 1, 2018 and August 28, 2019, the Manager provides commercial and technical management services to our vessels.

Refer also to “Item 7. Major Unitholders and Related Party Transaction — Related Party Transactions — Management Agreement”.

C. Research and development, patents and licenses, etc.

Not applicable.

D. Trend information

Our results of operations depend primarily on the charter hire rates that we are able to realize for our vessels, which depend on the demand and supply dynamics characterizing the containership market at any given time. For other trends affecting our business please see other discussions in “Item 5 — Operating and Financial Review Prospects”.

E. Off-Balance Sheet Arrangements

We have no off-balance sheet arrangements that have or are reasonably likely to have, a current or future material effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.

F. Contractual Obligations and Contingencies

The following table summarizes our long-term contractual obligations as of December 31, 2019:


	Payments due by period (unaudited)
	Less than 1 year		1-3 years		3-5 years		More than 5 years		Total
	(in thousands of U.S. dollars)
Loan obligations ⁽¹⁾	$	39.4	$	66.3	$	64.1	$	—	$	169.8
Financial liability ⁽²⁾	$	8.6	$	18.9	$	51.9	$	—	$	79.4
Purchase option not exercised ⁽³⁾	$	3.0	$	—	$	—	$	—	$	3.0

Total contractual obligations	$	51.0	$	85.2	$	116.0	$	—	$	252.2

(1)

Represents principal payments on amounts drawn on: (i) our four credit facilities that bear interest at applicable fixed interest rates ranging from 3.00% to 3.50% plus LIBOR per annum, and (ii) Sellers’ Credit that bears interest at fixed interest rate of 5.00% per annum. The amounts in the table exclude expected interest payments of $7.4 million (less than 1 year), $11.0 million (1-3 years) and $2.6 million (3-5 years). Expected interest payments are based on outstanding principal amounts, applicable currently effective interest rates and margins as of December 31, 2019, timing of scheduled payments and the term of the debt obligations.

(2)	Represents principal payments on amounts drawn under the financial liability and excludes interest payments of $4.6 million (less than 1 year), $7.4 million (1-3 years) and $1.9 million (3-5 years).

(3)

In February 2019, the Company announced the exercise of an option to acquire a 2011-built 10,000 TEU containership from an unrelated third party for a purchase price of $52,500. In July 2019, the Company converted the obligation to purchase a 2011-built 10,000 TEU containership, into an option, expiring on March 31, 2020. The agreement granted the Company the option and the right of first refusal to acquire the vessel at terms mutually agreed with the seller. During the fourth quarter of 2019, the Company received notice from the sellers to acquire the vessel. Navios Containers did not exercise the option and the containership was sold to a third party. As a result, Navios Containers will have to make a payment of $3,000 to the sellers by the end of the first quarter of 2020.

Critical Accounting Policies

Our consolidated financial statements have been prepared in accordance with U.S. GAAP. The preparation of these financial statements requires us to make estimates in the application of our accounting policies based on the best assumptions, judgments and opinions of management. Following is a discussion of the accounting policies that involve a higher degree of judgment and the methods of their application that affect the reported amounts of assets and liabilities, revenues and expenses and related disclosure of contingent assets and liabilities at the date of our consolidated financial statements. Actual results may differ from these estimates under different assumptions or conditions.

Critical accounting policies are those that reflect significant judgments or uncertainties, and potentially result in materially different results under different assumptions and conditions. We have described below what we believe is our most critical accounting policies that involve a high degree of judgment and the methods of their application. For a description of all of our significant accounting policies, see Note 2 to the Notes to the consolidated financial statements, included herein.

Use of Estimates: The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the dates of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting periods. On an on-going basis, management evaluates the estimates and judgments, including those related to uncompleted voyages, future drydock dates, the selection of useful lives for tangible assets, expected future cash flows from long-lived assets to support impairment tests, provisions necessary for accounts receivables, provisions for legal disputes and contingencies. Management bases its estimates and judgments on historical experience and on various other factors that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results could differ from those estimates under different assumptions and/or conditions.

Vessels, net: Vessels acquired in an asset acquisition or in a business combination are recorded at fair value. Vessels acquired from entities under common control are recorded at historical cost. Subsequent expenditures for ballast water treatment system, major improvements and upgrades are capitalized, provided they appreciably extend the life, increase the earnings capacity or improve the efficiency or safety of the vessels. Expenditures for routine maintenance and repairs are expensed as incurred.

Depreciation is computed using the straight line method over the useful life of the vessels, after considering the estimated residual value. Management estimates the residual values of the Company’s containerships based on a scrap value of $340 per lightweight ton, as management believes these levels are common in the shipping industry. Residual values are periodically reviewed and revised to recognize changes in conditions, new regulations or other reasons. Revisions of residual values affect the depreciable amount of the vessels and the depreciation expense in the period of the revision and future periods.

Management estimates the useful life of the Company’s vessels to be 30 years from the vessel’s original construction. However, when regulations place limitations over the ability of a vessel to trade on a worldwide basis, its useful life is re-estimated to end at the date such regulations become effective.

Impairment of Long Lived Assets: Vessels, other fixed assets and other long-lived assets held and used by the Company are reviewed periodically for potential impairment whenever events or changes in circumstances indicate that the carrying amount of a particular asset may not be fully recoverable. The Company’s management evaluates the carrying amounts and periods over which long-lived assets are depreciated to determine if events or changes in circumstances have occurred that would require modification to their carrying values or useful lives. In evaluating useful lives and carrying values of long-lived assets, certain indicators of potential impairment are reviewed, such as undiscounted projected operating cash flows, vessel sales and purchases, business plans and overall market conditions.

Undiscounted projected net operating cash flows are determined for each asset group and compared to the carrying value of the vessel, the unamortized portion of deferred drydock and special survey costs related to the vessel and the related carrying value of the intangible assets with respect to the time charter agreement attached to that vessel. Within the shipping industry, vessels are customarily bought and sold with a charter attached. The value of the charter may be favorable or unfavorable when comparing the charter rate to then-current market rates. The loss recognized either on impairment (or on disposition) will reflect the excess of carrying value over fair value (selling price) for the vessel asset group.

For the year ended December 31, 2019, the management of Navios Containers after considering various indicators, including but not limited to the market price of its long-lived assets, its contracted revenues and cash flows and the economic outlook identified impairment indications for 12 of its vessels. In this respect, the Company performed an impairment analysis (step one) to estimate the future undiscounted cash flows for each of these vessels.

The Company determined the undiscounted projected net operating cash flows for each vessel and compared them to the vessel’s carrying value together with the carrying value of deferred drydock and special survey costs related to the vessel and the carrying value of the related intangible assets, if applicable. The significant factors and assumptions used in the undiscounted projected net operating cash flow analysis included: determining the projected net operating cash flows by considering the charter revenues from existing time charters for the fixed fleet days (the Company’s remaining charter agreement rates) and an estimated daily time charter equivalent for the unfixed days (based on a combination of one-year average historical time charter rates and 10-year average historical time charter rates, adjusted for outliers) over the remaining economic life of each vessel, net of brokerage and address commissions, excluding days of scheduled off-hires, management fees fixed until December 2021 and thereafter assuming an increase of 3.0% every second year and a utilization rate of 99.6% based on the fleet’s actual performance for the year ended December 31, 2019.

The assessments concluded that step two of the impairment analysis was not required and that no impairment of vessels existed for the years ended December 31, 2019 and 2018 and for the period from April 28, 2017 (date of inception) to December 31, 2017, as the undiscounted projected net operating cash flows exceeded the carrying values.

As of December 31, 2019, the 10-year historical average rates for the Company’s vessels (which naturally varies by type of vessel) used in determining future cash flows for purposes of its impairment analysis were 2.5% higher than the daily time charter equivalent rate of the owned fleet achieved in the fiscal year 2019 of $13,232 per day.

In addition, the Company compared the 10-year historical average (of the one-year charter rate for similar vessels) with the five-year, three-year and one-year historical averages (of the one-year charter rate for similar vessels). A comparison of the 10-year historical average (of the one-year charter rate for similar vessels) and the five-year, three-year and one-year historical averages (of the one-year charter rate for similar vessels) is as follows (as of December 31, 2019):


	Historical Average of One-year Charter Rates (over Various Periods) vs. the 10-year Historical Average (of the One-Year Charter Rate)
	Five-Year Average			Three-Year Average			One-Year Average
	(% above (below) the 10-year average)
Container 4,250 – 4,730 TEU		(13.3	%)		(7.5	%)		3.5	%
Container 8,204 – 10,000 TEU*		(6.3	%)		(4.2	%)		8.6	%

*	For the vessels with capacity of 8,204 -10,000 TEU, the average daily rates were only available for the years 2012 through 2019.

If testing for impairment using the five-year, three-year and one-year historical averages (of the one-year charter rate for similar vessels) in lieu of the 10-year historical average (of the one-year charter rate for similar vessels), the Company estimates that four, none and none of its vessels, respectively, would have carrying values in excess of their projected undiscounted future cash flows.

As of December 31, 2019 and 2018, the Company owned and operated a fleet of 29 and 28 vessels, respectively, with an aggregate carrying value of $421.4 million as of December 31, 2019, including the carrying value of existing time charters on its fleet of vessels. On a vessel-by-vessel basis, as of December 31, 2019 and 2018, the carrying value of 12 and five of the Company’s vessels (including the unamortized portion of deferred drydock and special survey costs related to the vessel) exceeded the estimated fair value of those same vessels by approximately $32.4 million and $10.8 million, respectively, in the aggregate (the unrealized loss).

A vessel-by-vessel summary as of December 31, 2019 and 2018 follows (with an * indicating those individual vessels whose carrying value exceeded its estimated fair value, including the related time charter, the unamortized portion of deferred drydock and special survey costs, if any):


Vessel	Year Built		Purchase Price (in millions)		Carrying Value (as of December 31, 2019) (in millions) ⁽¹⁾			Carrying Value (as of December 31, 2018) (in millions)⁽¹⁾
Navios Tempo		2009		13.1		12.7	*		10.0
Navios Lapis		2009		10.7		10.2	*		10.0
Navios Felicitas		2010		12.0		11.5			11.3
Navios Dorado		2010		12.7		12.2	*		11.7
Navios Miami		2009		14.4		13.8	*		14.0	*
Navios Unison		2010		50.5		47.8			49.3
Navios Spring		2007		9.5		9.1			6.7
Navios Summer		2006		8.7		8.2			8.1
Navios Verano		2006		8.1		7.6			7.7
Navios Indigo		2007		9.1		8.9			6.6
Navios Vermilion		2007		12.3		11.8	*		9.1
Navios Azure		2007		8.5		8.2			8.1
Navios Verde		2007		7.3		6.6			6.7
Navios Domino		2008		13.4		8.1			8.1
Navios Dedication		2008		14.0		7.9			7.9
Navios Delight		2008		15.0		8.1			6.6
Navios Amaranth		2007		7.5		6.9			6.9
Navios Amarillo		2007		6.9		6.4			6.4
Navios Destiny		2009		16.3		8.7			8.0
Navios Devotion		2009		14.9		6.9			7.1
YM Utmost		2006		34.0		32.2	*		33.2	*
Navios Unite		2006		33.9		32.1	*		33.1	*


Vessel	Year Built		Purchase Price (in millions)		Carrying Value (as of December 31, 2019) (in millions) ⁽¹⁾			Carrying Value (as of December 31, 2018) (in millions)⁽¹⁾
Bahamas		2010		13.7		13.3	*		13.4
APL Atlanta		2008		24.7		14.5	*		19.2
APL Denver		2008		24.7		14.3	*		19.1
APL Los Angeles		2008		26.1		15.4	*		20.4	*
APL Oakland		2008		25.2		14.6	*		19.6	*
Bermuda		2010		11.4		11.1			11.1
Navios Constellation		2011		53.6		52.3			—

				512.2		421.4			379.4

(1)	All amounts include related time charter, the unamortized portion of deferred drydock and special survey costs, if any.

Deferred Drydock and Special Survey Costs: The Company’s vessels are subject to regularly scheduled drydocking and special surveys which are carried out every 30 or 60 months to coincide with the renewal of the related certificates issued by the classification societies, unless a further extension is obtained and under certain conditions. The costs of drydocking and special surveys are deferred and amortized over the above periods or to the next drydocking or special survey date if such date has been determined. Unamortized drydocking or special survey costs of vessels sold are written-off to the consolidated statements of income in the year the vessel is sold.

Time Charters at Favorable Terms: When intangible assets or liabilities associated with the acquisition of a vessel are identified, they are recorded at fair value. Fair value is determined by reference to market data and the discounted amount of expected future cash flows. Where charter rates are higher than market charter rates, an asset is recorded, being the difference between the acquired charter rate and the market charter rate for an equivalent vessel. Where charter rates are less than market charter rates, a liability is recorded, being the difference between the assumed charter rate and the market charter rate for an equivalent vessel. The determination of the fair value of acquired assets and assumed liabilities requires the Company to make significant assumptions and estimates of many variables including market charter rates, expected future charter rates, the level of utilization of the Company’s vessels and the Company’s weighted average cost of capital. The use of different assumptions could result in a material change in the fair value of these items, which could have a material impact on the Company’s financial position and results of operations.

The amortizable value of favorable and unfavorable leases is amortized over the remaining life of the lease term and the amortization expense is presented in the consolidated statements of income under the caption “Depreciation and amortization”.

Recent Accounting Pronouncements

For a description of Navios Containers’ recent accounting pronouncements, see Note 2 to the consolidated financial statements, included herein.

G. Safe Harbor

Refer also to the section entitled “Forward-Looking Statements” immediately preceding Part I of this report.

Item 6. Directors, Senior Management and Employees

Set forth below are the names, ages and positions of our directors and executive officers. The business address of each of our directors and executive officers is 7 Avenue de Grande Bretagne, Office 11B2, Monte Carlo, Monaco.


Name	Age	Position
Angeliki Frangou	55	Chairman of the Board of Directors and Chief Executive Officer
Erifili Tsironi	46	Chief Financial Officer
George Achniotis	55	Executive Vice President—Business Development
Vasiliki Papaefthymiou	51	Secretary
Efstratios Desypris	47	Director
Konstantinos Maratos	48	Director
Ted C. Petrone	65	Director
Ifigeneia Tzavela	58	Director
Stefan Kuch	66	Director
Vasilios Mouyis	57	Director

Angeliki Frangou has been our Chairman of the Board of Directors and Chief Executive Officer since our inception. Ms. Frangou has also been Chairman and Chief Executive Officer of Navios Holdings (NYSE: NM) since August 2005. In addition, Ms. Frangou has been the Chairman and Chief Executive Officer of Navios Partners (NYSE: NMM), an affiliated limited partnership, since August 2007, Chairman and Chief Executive Officer of Navios Acquisition (NYSE: NNA), an affiliated corporation, since March 2008. Ms. Frangou has been the Chairman of the Board of Directors of Navios South American Logistics Inc. (“Navios Logistics”) since its inception in December 2007. Ms. Frangou is the Chairman of IRF European Finance Investments Ltd., listed on the SFM of the London Stock Exchange, and is also a Member of the Board of the United Kingdom Mutual Steam Ship Assurance Association (Bermuda) Limited. Since 2015, she has also been a Board Member of the Union of Greek Ship owners, as well as on the Board of Trustees of Fairleigh Dickinson University. Since 2013, Ms. Frangou has been a Member of the Board of Visitors of the Columbia University School of Engineering and Applied Science. Ms. Frangou also acts as Vice Chairman of the China Classification Society Mediterranean Committee, and is a member of the International General Committee and of the Hellenic and Black Sea Committee of Bureau Veritas, and is also a member of the Greek Committee of Nippon Kaiji Kyokai. Ms. Frangou received a bachelor’s degree in Mechanical Engineering, summa cum laude, from Fairleigh Dickinson University and a master’s degree in Mechanical Engineering from Columbia University.

Erifili Tsironi has been our Chief Financial Officer since July 12, 2019. Ms. Tsironi is also Senior Vice President – Credit Management of Navios Holdings since October 2014. Furthermore, she served as Chief Financial Officer of Navios Maritime Midstream Partners L.P (“Navios Midstream”) since its inception in 2014 until completion of the merger with Navios Acquisition. Ms. Tsironi has over 23 years experience in shipping focusing on ship finance. Before joining us, she was Global Dry Bulk Sector Coordinator and Senior Vice President at DVB Bank SE. Ms. Tsironi joined the Bank in 2000 serving as Assistant Local Manager and Senior Relationship Manager. Previously, she served as account manager in ANZ Investment Bank/ANZ Grindlays Bank Ltd from May 1997 until December 1999. Ms. Tsironi holds a BSc. in Economics, awarded with Honours, from the London School of Economics and Political Science and a MSc in Shipping, Trade and Finance, awarded with Distinction, from Cass Business School of City University in London.

George Achniotis has been our Executive Vice President—Business Development since our inception. Mr. Achniotis is currently Chief Financial Officer of Navios Holdings and previously served as Senior Vice President—Business Development of Navios Holdings from August 2006 to April 2007. Before joining Navios Holdings, Mr. Achniotis was a partner at PricewaterhouseCoopers (“PwC”) in Greece, heading the Piraeus office and the firm’s shipping practice. He became a partner at PwC in 1999 when he set up and headed the firm’s internal audit services department from which all SOX implementation and consultation projects were performed. Mr. Achniotis is currently a Director and Executive Vice President—Business Development of Navios Partners, a New York Stock Exchange traded limited partnership, which is an affiliate of Navios Containers. He has more than 20 years’ experience in the accounting profession with work experience in England, Cyprus and Greece. Mr. Achniotis qualified as a Chartered Accountant in England and Wales in 1991, and holds a Bachelor’s degree in Civil Engineering from the University of Manchester.

Vasiliki Papaefthymiou has been our Secretary since our inception. She has been Executive Vice President—Legal and a member of Navios Holdings’ board of directors since its inception, and prior to that was a member of the board of directors of ISE. Ms. Papaefthymiou has also held various officer and director positions at Navios Acquisition, Navios Partners, Navios Midstream and Navios Logistics. Ms. Papaefthymiou has also served as General Counsel for Maritime Enterprises Management S.A. since October 2001, where she has advised the company on shipping, corporate and finance legal matters. Ms. Papaefthymiou provided similar services as General Counsel to Franser Shipping from October 1991 to September 2001. Ms. Papaefthymiou received her undergraduate degree from the Law School of the University of Athens and a master’s degree in maritime law from Southampton University in the United Kingdom. Ms. Papaefthymiou is admitted to practice law before the Bar in Piraeus, Greece.

Efstratios Desypris was appointed a member of our board of directors by our general partner effective upon our conversion into a limited partnership. Mr. Desypris is the Chief Financial Officer of Navios Partners since January 2010, and Chief Financial Controller of Navios Holdings, the Company’s sponsor, since May 2006. He also serves as a Director and the SVP—Strategic Planning of Navios Logistics. Before joining the Navios Group, Mr. Desypris worked in the accounting profession, most recently as manager of the audit department at Ernst & Young in Greece. Mr. Desypris started his career as an auditor with Arthur Andersen & Co. in 1997. He holds a Bachelor of Science degree in Economics from the University of Piraeus.

Konstantinos Maratos has been a member of our board of directors since our inception in April 2017. Mr. Maratos has 23 years of financial markets experience and he is currently a Managing Director with a lending Swiss bank based in Zurich, Switzerland. In the past, he has worked for Eurobank EFG, Bank of American and Barclays Bank in Athens, London and Geneva. Mr. Maratos is a CFA Charterholder and for the last 7 years teaches as a Visiting Professor/Visiting Lecturer Master’s Level courses in Finance at the University of London (King’s College and Queen Mary in London). Mr. Maratos holds a B.Sc. in Economics and Politics and a M.Sc. in Financial Management from the University of London and has completed the FT Non-Executive Director programme. In the past, he has served as an independent director in OPAP S.A., one of the largest market cap companies listed on the Athens Stock Exchange. Mr. Maratos is an independent director of the Company, member and chairman of our Audit committee and a member and chairman of our Conflicts committee.

Ted C. Petrone has been a member of our board of directors since our inception. Mr. Petrone has been a member of the Board of Directors of Navios Acquisition since its inception and was also President from its inception until December 2014. He has also been a director of Navios Holdings since May 2007, and served as President of Navios Corporation from September 2006 until December 2014. He currently also serves as Navios Corporation’s Vice Chairman, a position he has held since December 2014. Mr. Petrone has served in the maritime industry for 43 years, 39 of which he has spent with Navios Holdings. After joining Navios Holdings as an assistant vessel operator, Mr. Petrone worked there in various operational and commercial positions. Mr. Petrone was previously responsible for all the aspects of daily commercial activity, encompassing the trading of tonnage, derivative hedge positions and cargoes. Mr. Petrone graduated from New York Maritime College at Fort Schuyler with a bachelor in science degree in maritime transportation. He has also served aboard U.S. Navy (Military Sealift Command) tankers.

Ifigeneia Tzavela has been a member of our board of directors since our inception. Upon receiving her M.B.A., Ms. Tzavela joined INTEC S.A., a company specializing in the Petroleum Refining and Marine Industries in Greece. Beginning as a Sales Manager with the firm, Ms. Tzavela rose to Managing Director and co-owner of the Company, a title she has held since 1998. Ms. Tzavela received her B.Sc. in Chemistry from the National Kapodistrian University of Athens and her M.B.A. from Stern School of Business at New York University in 1988. Ms. Tzavela is a member of our Conflicts committee and is an independent director.

Stefan Kuch has over 33 years of experience in finance and ship finance, having served in senior leadership positions in the shipping division of Commerzbank AG, one of Germany’s leading financial institutions. He also served as Managing Director of Hanseatic Ship Asset Management GmbH, a vessel-owning company within the Commerzbank Group. Mr Kuch is a member of our Audit committee and is an independent director.

Vasilios Mouyis has over 30 years of experience in chartering and ship brokerage. He is the co-founder and managing director of Doric Shipbrokers S.A., a ship brokering firm. Previously, Mr. Mouyis served as a chartering broker at Clarkson’s Plc South African office, formerly known as Afromar Pty Ltd. He is also a panelist for the Handysize index of the Baltic Exchange, London. Mr Mouyis is a member of our Conflicts and Audit committees and is an independent director.

B. Compensation

Reimbursement of Expenses of Our General Partner

Our General Partner does not receive any management fee or other compensation for services from us, although it will be entitled to reimbursement for expenses incurred on our behalf. For the years ended December 31, 2019, 2018 and for the period from April 28, 2017 (date of inception) to December 31, 2017, no amounts were paid to the General Partner.

Reimbursement of Expenses of the Manager

We reimburse the Manager for expenses incurred pursuant to the Management and Administrative Agreement. These expenses include all expenses necessary or appropriate for the conduct of our business.

Refer also to “Item 7. Major Unitholders and Related Party Transaction - B. Related Party Transactions - Management Agreement” and B. Related Party Transactions – Administrative Agreement”.

Officers’ Compensation

We were formed in April 2017. Because our officers, are employees of the Manager, their compensation is set and paid by the Manager, and we reimburse the Manager for time they spend on Company matters pursuant to the Administrative Agreement. Under the terms of the Administrative Agreement, we reimburse the Manager for the actual costs and expenses it incurs in providing administrative support services to us. The amount of our reimbursements to the Manager for the time of our officers depends on an estimate of the percentage of time our officers spent on our business and is based on a percentage of the salary and benefits that the Manager pays to such officers. Our directors and certain employees of the Manager, may participate in employee benefit plans and arrangements sponsored by the General Partner, including plans that may be established in the future. Our board of directors may establish such plans without the approval of our limited partners.

For the years ended December 31, 2019 and 2018, and for the period from April 28, 2017 (date to inception) to December 31, 2017, the fees charged by the Manager for administrative services were $8.0 million, $6.6 million and $1.9 million, respectively.

Compensation of Directors

Our officers who also serve as our directors will not receive additional compensation for their service as directors. Non-management directors receive a director fee of $0.04 million per year. Ms. Frangou receives a fee of $0.15 million (following our listing on the Nasdaq Global Select Market on December 10, 2018) per year for acting as a director and as our Chairman of the Board. The Chairman of our audit committee receives an additional fee of $0.02 million per year and the Chairman of our conflicts committee receives an additional fee of $0.02 million (following our listing on the Nasdaq Global Select Market on December 10, 2018) per year. In addition, each director is reimbursed for out-of-pocket expenses in connection with attending meetings of the board of directors or committees. Each director is fully indemnified by us for actions associated with being a director to the extent permitted under Marshall Islands law.

For the year ended December 31, 2019 and 2018 and for the period from April 28, 2017 (date of inception) to December 31, 2017, the aggregate compensation paid to our directors was approximately $0.4 million, $0.1 million and $0.1 million, respectively.

C. Board Practices

Our partnership agreement exclusively vests management power over our business and affairs in our General Partner, other than certain powers delegated to, or shared with, our board of directors. Our General Partner, Navios Maritime Containers GP LLC, is a Marshall Islands limited liability company. Our executive officers manage our day-to-day activities consistent with the policies and procedures adopted by general partner. Certain of our executive officers and/or directors also are executive officers and/or directors of Navios Holdings and our Chief Executive Officer is also the Chairman and Chief Executive Officer of Navios Acquisition, Navios Partners and Navios Holdings.

Our board of directors consists of seven members three of whom are appointed by our General Partner in its sole discretion and four of whom are elected by our common unitholders. All of our current directors elected by our common unitholders were elected at our 2019 annual meeting. In accordance with our partnership agreement, these directors were divided into three classes serving staggered three-year terms: Class I, comprised of two elected directors, Class II, comprised of one elected director, and Class III, comprised of one elected director. Each of the three directors appointed by our General Partner holds office until his or her successor is duly appointed by the General Partner and qualified or until his or her earlier death, resignation or removal. Our Class I elected directors serves for a one-year term expiring on the date of the 2020 annual meeting, our Class II elected director serves for a two-year term expiring at our 2021 annual meeting and the Class III elected directors serves for a three-year term expiring on the date of the 2022 annual meeting. At each annual meeting, directors of the class then standing for election or re-election will be elected a plurality of the votes of the outstanding common units present in person or represented by proxy, with each outstanding common unit having one vote.

With respect to our corporate governance, there are several significant differences between us and a domestic issuer in that the Nasdaq Global Select Market does not require a listed limited partnership like us to have a majority of independent directors on our board of directors, although we do have a majority independent board of directors, or to establish a compensation committee or a nominating/corporate governance committee.

Three independent members of our board of directors serve on a conflicts committee to review specific matters that the board believes may involve conflicts of interest. The members of our conflicts committee are Vasilios Mouyis, Ifigeneia Tzavela and Konstantinos Maratos, who acts as Chairman. The conflicts committee will determine if the resolution of the conflict of interest is fair and reasonable to us. The members of the conflicts committee may not be officers or employees of our General Partner or directors, officers or employees of its affiliates, and must meet the independence standards established by the Nasdaq Global Select Market to serve on an audit committee of a board of directors and certain other requirements. Any matters approved by the conflicts committee will be deemed to be fair and reasonable to us, approved by all of our partners, and not a breach by our directors, our General Partner or its affiliates of any duties any of them may owe us or our unit holders.

In addition, we have an audit committee of at least three directors who meet the independence criteria for audit committee members applicable to foreign private issuers, comprised of Stefan Kuch, Vasilios Mouyis and Konstantinos Maratos, who acts as Chairman. Konstantinos Maratos qualifies as an “audit committee financial expert” for purposes of SEC rules and regulations. The audit committee, among other things, reviews our external financial reporting, engages our external auditors and oversees our internal audit activities and procedures and the adequacy of our internal accounting controls.

Employees of the Manager provide assistance to us and our operating subsidiaries pursuant to the Management Agreement and the Administrative Agreement.

Our Chief Executive Officer, Ms. Angeliki Frangou, and our Chief Financial Officer, Ms. Erifili Tsironi, allocate their time between managing our business and affairs and the business and affairs of Navios Holdings, and our Chief Executive Officer is also the Chief Executive Officer of Navios Acquisition, Navios Holdings and Navios Partners. While the amount of time each of them allocate between our business and the business of Navios Holdings, Navios Partners and Navios Acquisition varies from time to time depending on various circumstances and the respective needs of the business, such as their relative levels of strategic activities, we anticipate that each of them will allocate approximately one quarter of their time to our business.

Our officers and other individuals providing services to us or our subsidiaries may face a conflict regarding the allocation of their time between our business and the other business interests of Navios Holdings, Navios Partners and Navios Acquisition. We intend to cause our officers to devote as much time to the management of our business and affairs as is necessary for the proper conduct of our business and affairs.

Whenever our General Partner makes a determination or takes or declines to take an action in its capacity as our General Partner, it is generally entitled to make such determination or to take or decline to take such other action in good faith and is not subject to any other or different standard or fiduciary duty. Similarly, whenever our board of directors makes a determination or takes or declines to take an action, it is generally entitled to make such determination or to take or decline to take such other action in good faith and is not subject to any other or different standard or fiduciary duty.

Whenever our General Partner makes a determination or takes or declines to take an action in its individual capacity rather than in its capacity as our General Partner, it is entitled to make such determination or to take or decline to take such other action free of any fiduciary duty or obligation whatsoever to us or any limited partner, and is not required to act in good faith or pursuant to any other standard imposed by our partnership agreement or under the Marshall Islands Act or any other law. Specifically, our General Partner will be considered to be acting in its individual capacity if it exercises its call right, pre-emptive rights or registration rights, consents or withholds consent to any merger or consolidation of the partnership, appoints any directors or votes for the appointment of any director, votes or refrains from voting on amendments to our partnership agreement that require a vote of the outstanding units, voluntarily withdraws from the partnership, transfers (to the extent permitted under our partnership agreement) or refrains from transferring its units, general partner interest or incentive distribution rights or votes upon the dissolution of the partnership. Actions of our General Partner, which are made in its individual capacity, are made by Alegria Shiptrade Co. (“Alegria”) as sole member of our General Partner.

D. Employees

Employees of the Manager provide assistance to us and our operating subsidiaries pursuant to the Management Agreement and the Administrative Agreement; therefore Navios Containers does not employ additional staff. The Manager crews its vessels primarily with Ukrainian, Polish, Filipino, Russian, Indian, Georgian, Romanian, Myanmar, Korean and Sri Lanka Officers and Filipino, Georgian, Romanian, Ethiopian, Indian, Ukrainian and Myanmar seamen/ratings. For these nationalities, officers and seamen are referred to the Manager by local crewing agencies. The crewing agencies handle each seaman’s training while the Manager handles their travel and payroll. The Manager requires that all of its seamen have the qualifications and licenses required to comply with international regulations and shipping conventions.

The Manager also provides on-shore advisory, operational and administrative support to us pursuant to service agreements. Refer also to “Item 7. Major Unitholders and Related Party Transaction — Related Party Transactions”.

E. Unit Ownership

The following table sets forth certain information regarding beneficial ownership, as of March 12, 2020, of our units by each of our officers and directors and by all of our directors and officers as a group. The information is not necessarily indicative of beneficial ownership for any other purposes. Under SEC rules, a person or entity beneficially owns any units that the person or entity has the right to acquire as of May 11, 2020 (60 days after March 12, 2020) through the exercise of any unit option or other right. The percentage disclosed under “Common Units Owned” is based on all outstanding common units (34,603,100). Unless otherwise indicated, each person or entity has sole voting and investment power (or shares such powers with his or her spouse) with respect to the units set forth in the following table. Information for certain holders is based on information delivered to us.

Identity of Person or Group


	Common Units Owned			Percentage of Common Units Owned
Angeliki Frangou ^{(1) (2)}			*			*
Erifili Tsironi		—			—
George Achniotis ^{(1) (2)}			*			*
Vasiliki Papaefthymiou ^{(1) (2)}		—			—
Efstratios Desypris ⁽¹⁾		—			—
Konstantinos Maratos		—			—
Ted C. Petrone			*			*
Ifigeneia Tzavela		—			—
Stefan Kuch		—			—
Vasilios Mouyis		—			—
All directors and executive officers as a group (ten (10) persons)⁽³⁾			*			*

*	Less than 1%

(1)

Excludes units owned by Navios Partners, on the board of which our Chief Executive Officer, Angeliki Frangou serves. In addition, Ms. Frangou is Navios Partners’ Chief Executive Officer, our Executive Vice President – Business Development, George Achniotis, is Navios Partners’ Executive Vice President – Business Development and Director, our Secretary, Vasiliki Papaefthymiou, is Navios Partners’ Secretary and our director, Efstratios Desypris, is Navios Partners’ Chief Financial Officer.

(2)

Excludes units owned by Navios Holdings, on the board of which our Chief Executive Officer, Angeliki Frangou, our Secretary, Vasiliki Papaefthymiou and our Executive Vice President—Business Development, George Achniotis, all serve. In addition, Ms. Frangou is Navios Holdings’ Chairman of the Board and Chief Executive Officer, Ms. Papaefthymiou is Navios Holdings’ Executive Vice President, Legal and Director and Mr. Achniotis is Navios Holdings’ Chief Financial Officer.

(3)	Each director, executive officer and key employee, beneficially owns less than one percent of the outstanding common units.

Item 7. Major Unitholders and Related Party Transaction

A. Major Unitholders

The following table sets forth the beneficial ownership as of March 12, 2020, of our common units by each person we know to beneficially own more than 5% of the common units. The number of units beneficially owned by each person is determined under SEC rules and the information is not necessarily indicative of beneficial ownership for any other purpose. Under SEC rules, a person beneficially owns any units as to which the person has or shares voting or investment power. In addition, a person beneficially owns any units that the person or entity has the right to acquire as of May 11, 2020 (60 days after March 12, 2020) through the exercise of any unit option or other right. The percentage disclosed under “Common Units Beneficially Owned” is based on all outstanding common units (34,603,100).


	Common Units Beneficially Owned
	Number		Percentage
Name of Beneficial Owner
Navios Partners⁽¹⁾		11,592,276		33.5	%
Evermore Global Advisors, LLC ⁽²⁾		5,048,651		14.6	%
Mangrove Partners Master Fund, Ltd ⁽³⁾		3,307,850		9.6	%
683 Capital Management, LLC ⁽⁴⁾		2,235,000		6.5	%

(1)	The business address of the reporting person is 7 Avenue de Grande Bretagne, Office 11B2, Monte Carlo, MC 98000 Monaco. The foregoing information was derived from a Schedule 13D filed with the SEC on December 11, 2018.

(2)	The business address of the reporting person is 89 Summit Avenue, Summit NJ 07901. The foregoing information was derived from a Schedule 13G/A filed with the SEC on January 30, 2020.

(3)	The business address of the reporting person is Corporate Services, Ltd., PO Box 309 Ugland House, S. Church, Street George Town Grand Cayman, Cayman Islands, E9 KY1-1104. The foregoing information was derived from a Schedule 13G/A filed with the SEC on February 7, 2020.

(4)	The business address of the reporting person is 3 Columbus Circle, Suite 2205 New York NY 10019. The foregoing information was derived from a Schedule 13G/A filed with the SEC on February 13, 2020.

B. Related Party Transactions

Following our conversion from a corporation into a limited partnership our general partner had exclusive management authority over our operations, controlled the appointment of all of our directors (until the election of four of our directors at our 2019 annual meeting) and had veto rights over certain significant actions we may take.

Navios Maritime Containers GP LLC, a Marshall Islands limited liability company, is our general partner and holds a non-economic interest that does not provide the holder with any rights to profits or losses of, or distributions by, Navios Containers. In August 2019, Navios Holdings announced that it sold certain assets, including its ship management division and the general partnership interests in Navios Containers to an entity affiliated with the Company’s Chairman and Chief Executive Officer, Angeliki Frangou.

In addition, Navios Holdings owns 1,263,276 common units, representing an approximately 3.7% limited partner interest in us. Navios Partners, an affiliate of Navios Holdings, owns 11,592,276 common units, representing an approximately 33.5% limited partner interest in us.

Registration Rights Agreements

Under the limited partnership agreement, we have granted registration rights to our general partner, our Chairman and CEO, Angeliki Frangou, and any of their current or future affiliates.

Stock Purchase Agreement

On June 7, 2017, we entered into a stock purchase agreement with Navios Partners and Navios Partners Containers Inc., a wholly-owned subsidiary of Navios Partners. Pursuant to the stock purchase agreement, we purchased all of the shares of common stock of Navios Partners Containers Finance Inc. (“Navios Containers Finance”), a wholly-owned subsidiary of Navios Partners, which had acquired five vessels from Rickmers Trust and had the right to acquire nine additional vessels from Rickmers Trust. Under the Stock Purchase Agreement we paid an aggregate consideration of $118.0 million, of which $24.0 million was in the form of a seller’s credit from Navios Partners for a period of up to 90 days at LIBOR plus 375 bps.

Pursuant to the Stock Purchase Agreement, Navios Partners agreed to indemnify us with respect to the initial five vessels that it owned prior to the sale of those vessels to us, up to $5.0 million for certain environmental losses; losses relating to our ability to own our operate the vessels; and certain tax liabilities.

Omnibus Agreement

On June 7, 2017, we entered into an Omnibus Agreement with Navios Acquisition, Navios Holdings, Navios Partners and Navios Containers Finance The following discussion describes certain provisions of the Omnibus Agreement.

•

Noncompetition

Under the Omnibus Agreement, Navios Holdings and the controlled affiliates (other than us, our general partner, Navios Containers Finance and our subsidiaries) of Navios Holdings, Navios Acquisition and Navios Partners (together the “Navios Maritime Entities”), agreed not to acquire any containerships. However, this restriction will not prevent such entities from:

(1)

owning a containership that was already owned by such Navios Maritime Entity at the time of the agreement;

(2)

acquiring a containership if such Navios Maritime Entity offers to sell it to us for fair market value in accordance with the procedures established in the agreement;

(3)

acquiring a non-controlling interest in any company, business or pool of assets;

(4)

acquiring or owning a containership if we do not fulfill our obligations under any written agreement with Navios Partners that requires us to purchase such containership;

(5)

acquiring or owning a containership that is subject to an offer to sell such containership to us, as described in paragraph (2), pending our determination whether to accept such offers and pending the closing of any offers we accept;

(6)

providing ship management services relating to any vessel whatsoever; or

(7)

acquiring or owning a containership if we have previously advised such Navios Maritime Entity that we consent to such acquisition or ownership.

In addition, under the Omnibus Agreement, we and our subsidiaries agreed to acquire, own, operate or charter only containerships (any vessels that are not containerships will in the following be referred to as the “Non-Restricted Vessels”). This restriction will not prevent us or any of our subsidiaries from:

(1)

acquiring a Non-Restricted Vessel as part of the acquisition of a controlling interest in a business or package of assets and owning and operating or chartering those vessels, provided, however, that:

(a)

if less than a majority of the value of the total assets or business acquired is attributable to a Non-Restricted Vessel, as determined in good faith by us, we must offer to sell such Non-Restricted Vessel to the Navios Maritime Entities for their fair market value plus any additional tax or other similar costs to us that would be required to transfer the Non-Restricted Vessel to the Navios Maritime Entities separately from the acquired business; and

(b)

if a majority or more of the value of the total assets or business acquired is attributable to a Non-Restricted Vessel, as determined in good faith by us, we shall notify the Navios Maritime Entities in writing of the acquisition. The Navios Maritime Entities shall, not later than the 15th calendar day following receipt of such notice, notify us if they wish to acquire the Non-Restricted Vessel forming part of the business or package. If no Navios Maritime Entity notifies us of its intent to pursue the acquisition within 15 calendar days, then the Navios Maritime Entities shall be deemed to have waived the right to acquire such Non-Restricted Vessel pursuant to this paragraph (b).

(2)

owning, operating or chartering a Non-Restricted Vessel subject to the offer to the Navios Maritime Entities described in paragraph (2) above, pending its determination whether to accept such offer and pending the closing of any offer it accepts; or

(3)

acquiring, operating or chartering a Non-Restricted Vessel if the Navios Maritime Entities have previously advised us that they consent to such acquisition, operation or charter; or

(4)

acquiring, operating or chartering a Non-Restricted Vessel already owned by us.

Upon a change of control (as defined in the Omnibus Agreement) of us or our general partner, the noncompetition provisions of the Omnibus Agreement will terminate immediately. Upon a change of control of Navios Holdings (as defined in the Omnibus Agreement), the noncompetition provisions of the Omnibus Agreement will terminate one year following the date of the change of control of Navios Holdings.

•

Rights of First Offer

Under the Omnibus Agreement, the Navios Maritime Entities granted to us a right of first offer on any proposed sale, transfer or other disposition by the Navios Maritime Entities of any containership owned or acquired by any of the Navios Maritime Entities.

Prior to engaging in any negotiation regarding any vessel disposition with respect to a containership with a non-affiliated third-party, the applicable Navios Maritime Entity will deliver a written notice to us setting forth the material terms and conditions of the proposed transaction. During the 15-day period after the delivery of such notice, we and the applicable Navios Maritime Entity will negotiate in good faith to reach an agreement on the transaction. If we do not reach an agreement within such 15-day period, the applicable Navios Maritime Entity will be able within the next 180 calendar days to sell, transfer, dispose or re-charter the vessel to a third party (or to agree in writing to undertake such transaction with a third party) on terms generally no less favorable to the applicable Navios Maritime Entity than those offered pursuant to the written notice.

Upon a change of control (as defined in the Omnibus Agreement) of us or our general partner, the right of first offer provisions of the Omnibus Agreement will terminate immediately. Upon a change of control of Navios Holdings (as defined in the Omnibus Agreement), the right of first offer provisions of the Omnibus Agreement will terminate one year following the date of the change of control of Navios Holdings.

•

Amendments

The Omnibus Agreement may not be amended without the prior approval of the conflicts committee of our board of directors if the proposed amendment will, in the reasonable discretion of our board of directors, adversely affect holders of our common units.

Management Agreement

On June 7, 2017, we entered into a Management Agreement with the Manager, pursuant to which the Manager provides certain commercial and technical management services to us, with respect to each vessel in our initial fleet and all vessels of a similar size and type that we acquire and entrust to the Manager. These services are to be provided in a commercially reasonable manner in accordance with customary ship management practice and under our direction. The Manager provides these services to us directly but may subcontract for certain of these services with other entities, including other Navios Holdings subsidiaries

The commercial and technical management services include:

•

Commercial and technical management of the vessels: managing day-to-day vessel operations including negotiating charters and other employment contracts with respect to the vessels and monitoring payments thereunder, ensuring regulatory compliance, arranging for the vetting of vessels, procuring and arranging for port entrance and clearance, appointing counsel and negotiating the settlement of all claims in connection with the operation of each vessel, appointing adjusters and surveyors and technical consultants as necessary, and providing technical support;

•

Vessel maintenance and crewing: including supervising the maintenance and general efficiency of vessels, ensuring the vessels are in seaworthy and good operating condition, arranging our hire of qualified officers and crew, arranging for all transportation, board and lodging of the crew, and negotiating the settlement and payment of all wages; and

•

Purchasing and insurance: purchasing stores, supplies and parts for vessels, arranging insurance for vessels (including marine hull and machinery insurance, protection and indemnity insurance and war risk and oil pollution insurance).

In August 2019, the Company extended the duration of its existing Management Agreement with Manager until January 1, 2025, with an automatic renewal for an additional five years, unless earlier terminated by either party, and provides for payment of a termination fee equal to the fees charged for the full calendar year preceding the termination date by Navios Containers, in the event the Management Agreement is terminated on or before December 31, 2024. The Company’s fixed rates are renewed for a two-year period commencing January 1, 2020 at: (a) $6,215 daily rate per Container vessel of 3,000 TEU up to 4,999 TEU; (b) $7,780 daily rate per Container vessel of 8,000 TEU up to 9,999 TEU; and (c) $8,270 daily rate per Container vessel of 10,000 TEU up to 11,999 TEU. The agreement also provides for a technical and commercial management daily fee of $50 per vessel and an annual increase of 3%, unless otherwise agreed, commencing January 1, 2022. This fixed daily fees cover all of our vessel operating expenses, other than certain extraordinary fees and costs. Drydocking and special survey are paid to the Manager at cost. During the remaining three years of the term of the management agreement, we will reimburse the Manager for all of the actual operating costs and expenses it incurs in connection with the management of our fleet. Actual operating costs and expenses will be determined in a manner consistent with how the fixed fees were determined.

Management fees under the Management Agreement for the year ended December 31, 2019, 2018, and for the period from April 28, 2017 (date of inception) to December 31, 2017 amounted to $65.6 million, $53.8 million and $16.5 million, respectively.

The Management Agreement may be terminated prior to the end of its initial term by us upon 120 days’ notice if there is a change of control of the Manager or by the Manager upon 120 days’ notice if there is a change of control of us or our general partner. In addition, the Management Agreement may be terminated by us or by the Manager upon 120 days’ notice if:

•

the other party breaches the agreement in any material respect which remains unremedied;

•

a receiver is appointed for all or substantially all of the property of the other party;

•

an order is made to wind up the other party;

•

a final judgment, order or decree that materially and adversely affects the other party’s ability to perform the agreement is obtained or entered and not vacated, discharged or stayed; or

•

the other party makes a general assignment for the benefit of its creditors, files a petition in bankruptcy or liquidation, is adjudged insolvent or bankrupt or commences any reorganization proceedings.

Furthermore, at any time after the first anniversary of the Management Agreement, the Management Agreement may be terminated prior to the end of its initial term by us or by the Manager upon 365 days’ notice for any reason other than those described above.

•

Additionally, the Manager is entitled to receive additional remuneration for:

•

time spent vetting and pre-vetting the vessels by any charterers in excess of 10 days per vessel per year (at a rate of $750 per man per day of eight hours).

We are also required to pay:

•

the deductible of any insurance claims relating to the vessels or for any claims that are within such deductible range;

•

any significant increase in insurance premiums which are due to factors outside the control of the Manager such as “acts of God”;

•

any taxes, dues or fines imposed on the vessels or the Manager due to the operation of the vessels;

•

any expenses incurred in connection with the sale or acquisition of a vessel such as inspections and technical assistance;

•

Under the management agreement, neither we nor the Manager will be liable for failure to perform any of our or its obligations, respectively, under the Management Agreement by reason of any cause beyond our or its reasonable control.

In addition, the Manager will have no liability to us for any loss arising in the course of the performance of the commercial and technical management services under the Management Agreement unless and to the extent that such loss is proved to have resulted solely from the fraud, gross negligence or willful misconduct of the Manager or its employees, in which case (except where such loss has resulted from the Manager’s intentional personal act or omission and with knowledge that such loss would probably result) the Manager’s liability will be limited to $3.0 million for each incident or series of related incidents.

Further, under our management agreement, we have agreed to indemnify the Manager and its employees and agents against all actions which may be brought against them under the Management Agreement including, without limitation, all actions brought under the environmental laws of any jurisdiction, or otherwise relating to pollution or the environment, and against and in respect of all costs and expenses they may suffer or incur due to defending or settling such action, provided however that such indemnity excludes any or all losses which may be caused by or due to the fraud, gross negligence or willful misconduct of the Manager or its employees or agents, or any breach of the Management Agreement by the Manager.

Administrative Services Agreement

On June 7, 2017, we entered into an Administrative Agreement with the Manager, pursuant to which the Manager provides certain administrative management services to us. The agreement had an initial term of five years from June 7, 2017. In August 2019, the Company extended the duration of its existing Administrative Agreement with the Manager until January 1, 2025, which provide for allocable general and administrative costs.

The Administrative Agreement may be terminated prior to the end of its term by us upon 120 days’ notice if there is a change of control of the Manager or by the Manager upon 120 days’ notice if there is a change of control of us or our general partner. In addition, the Administrative Agreement may be terminated by us or by the Manager upon 120 days’ notice if:

•

the other party breaches the agreement in any material respect which remains unremedied;

•

a receiver is appointed for all or substantially all of the property of the other party;

•

an order is made to wind up the other party;

•

a final judgment, order or decree that materially and adversely affects the other party’s ability to perform the Management Agreement is obtained or entered and not vacated, discharged or stayed; or

•

the other party makes a general assignment for the benefit of its creditors, files a petition in bankruptcy or for liquidation, is adjudged insolvent or bankrupt or commences any reorganization proceedings.

Furthermore, at any time after the first anniversary of the Administrative Agreement, the Administrative Agreement may be terminated by us or by the Manager upon 365 days’ notice for any reason other than those described above.

The administrative services include:

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bookkeeping, audit and accounting services: assistance with the maintenance of our corporate books and records, assistance with the preparation of our tax returns and arranging for the provision of audit and accounting services;

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legal and insurance services: arranging for the provision of legal, insurance and other professional services and maintaining our existence and good standing in necessary jurisdictions;

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administrative and clerical services: assistance with office space, arranging meetings for our common unit holders pursuant to the partnership agreement, arranging the provision of IT services, providing all administrative services required for subsequent debt and equity financings and attending to all other administrative matters necessary to ensure the professional management of our business;

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banking and financial services: providing cash management including assistance with preparation of budgets, overseeing banking services and bank accounts, arranging for the deposit of funds, negotiating loan and credit terms with lenders and monitoring and maintaining compliance therewith;

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advisory services: assistance in complying with United States and other relevant securities laws;

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client and investor relations: arranging for the provision of advisory, clerical and investor relations services to assist and support us in our communications with our common unit holders; and

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integration of any acquired businesses.

We reimburse the Manager for reasonable costs and expenses reasonably incurred in connection with the provision of these services within 15 days after the Manager submits to us an invoice for such costs and expenses, together with any supporting detail that may be reasonably required. Total general and administrative expenses under the Administrative Agreement for the year ended December 31, 2019, 2018, and for the period from April 28, 2017 (date of inception) to December 31, 2017 amounted to $8.0 million, $6.6 million and $1.9 million, respectively.

Under the Administrative Agreement, we have agreed to indemnify the Manager, its employees and agents against all actions which may be brought against them under the Administrative Agreement including, without limitation, all actions brought under the environmental laws of any jurisdiction, and against and in respect of all costs and expenses they may suffer or incur due to defending or settling such actions; provided, however that such indemnity excludes any or all losses which may be caused by or due to the fraud, gross negligence or willful misconduct of the Manager or its employees or agents.

Item 8. Financial Information

A. Consolidated Statements and Other Financial Information

Consolidated Financial Statements: See Item 18.

Legal Proceedings

We have not been involved in any legal proceedings that we believe may have a significant effect on our business, financial position, results of operations or liquidity, and we are not aware of any proceedings that are pending or threatened that may have a material effect on our business, financial position, results of operations or liquidity. From time to time, we may be subject to legal proceedings and claims in the ordinary course of business, principally property damage and personal injury claims. We expect that these claims would be covered by insurance, subject to customary deductibles. However, those claims, even if lacking merit, could result in the expenditure of significant financial and managerial resources.

On March 13, 2020, two purported holders of the Company’s common units commenced a lawsuit in the United States District Court for the Southern District of New York. The suit is captioned The Mangrove Partners Master Fund, Ltd. et al v. Navios Maritime Containers L.P. and is listed in the court’s system as Case No. 1:20-cv-02290-LJL. In the suit, the plaintiffs allege that the Company breached the Company’s Limited Partnership Agreement and the Marshall Islands Limited Partnership Act, in each case based on an alleged refusal by the Company to provide to the plaintiffs certain non-public books and records of the Company. In the suit, the plaintiffs seek, among other things, an order from the court requiring the Company to furnish the requested books and records to the plaintiffs. The Company believes the plaintiffs’ position to be without merit and will vigorously defend itself.

Distribution Policy

Subject to the applicable provisions of the Marshall Islands Act, the Board of Directors may, in its sole discretion, at any time and from time to time, declare, make and pay distributions of cash or other assets of the Company to the partners pro rata and repurchase common units. Any change to our return of capital policy will be subject to a number of factors, including the discretion of our board of directors, Marshall Islands law, our results of operation, financial condition and cash requirements and availability, our ability to obtain debt and equity financing on acceptable terms, contractual restriction, the ability of our subsidiaries to distribute funds to us and other factors deemed relevant by our board of directors. Subject to the terms of any additional Partnership Securities, distributions shall be paid to the Partners in accordance with their respective Partnership Interests as of the Record Date selected by the Board of Directors. Notwithstanding anything otherwise to the contrary herein, the Company shall not make or pay any distributions of cash or other assets with respect to the General Partner Interest (represented by the General Partner Unit).

Refer also to “Item 16E. Purchases of Units by the Issuer and Affiliated Purchasers”.

Limitations on Cash Distributions and Our Ability to Change Our Cash Distribution Policy

There is no guarantee that unitholders will receive quarterly distributions from us or that we will make common unit repurchases. Our distribution policy may be changed at any time and is subject to certain risks and restrictions, including:

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Under Section 51 of the Marshall Islands Limited Partnership Act, we may not make a distribution to our unitholders if the distribution would cause our liabilities to exceed the fair value of our assets.

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We may lack sufficient cash to pay distributions to our unitholders or make common unit repurchases due to decreases in net revenues or increases in operating expenses, principal and interest payments on outstanding debt, tax expenses, working capital requirements, capital expenditures or anticipated cash needs.

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Our distribution policy is affected by restrictions on distributions under our credit facilities. Specifically, our credit facilities contain material financial tests that must be satisfied and we will not pay any distributions or make common unit repurchases that will cause us to violate our credit facilities or other debt instruments. Should we be unable to satisfy these restrictions included in our credit facilities or if we are otherwise in default under our credit facilities, our ability to make cash distributions to unitholders or make common unit repurchases, notwithstanding our distribution policy, would be materially adversely affected.

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Our ability to make distributions to our unit holders or make common unit repurchases depends on the performance of our subsidiaries and their ability to distribute funds to us. The ability of our subsidiaries to make distributions to us may be restricted by, among other things, the provisions of existing and future indebtedness, applicable partnership and limited liability company laws and other laws and regulations.

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We have a limited operating history upon which to rely with respect to whether we will have sufficient cash available for cash distributions or common unit repurchases.

Item 9. The Offer and Listing

Prior to our conversion from a corporation to a limited partnership, common shares of Navios Containers Inc. were traded on the Norwegian OTC List, an over-the-counter market that is administered and operated by a subsidiary of the Norwegian Securities Dealers Association. On November 26, 2018, trading of the common shares of Navios Containers Inc. on the Norwegian OTC List was halted and, effective on the conversion, ceased to be outstanding.

Our common units commenced trading on the Nasdaq Global Select Market (or “NASDAQ”) on December 10, 2018 under the ticker symbol “NMCI”.

Item 10. Additional Information

A. Share Capital

Not applicable.

B. Memorandum and Articles of Association

The information required to be disclosed under Item 10.B is incorporated by reference to the following sections of the prospectus included in our Registration Statement on Form F-1, as amended, filed with the SEC on November 30, 2018: “The Partnership Agreement,” “Description of the Common Units — The Units”, “Conflicts of Interest and Fiduciary Duties” and “Our Distribution Policy”.

C. Material Contracts

The following is a summary of each material contract, other than material contracts entered into in the ordinary course of business, to which we or any of our subsidiaries is a party, for the two years immediately preceding the date of this Annual Report, each of which is included in the list of exhibits in Item 19. Please read “Item 5. Operating and Financial Review and Prospects — Trends and Factors Affecting Our Future Results of Operations — Liquidity and Capital Resources — credit facilities” for a summary of certain contract terms.

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Supplemental Agreement, dated June 30, 2017, to Facility Agreement, dated May 30, 2008, giving effect to Amended and Restated Facility Agreement, dated June 30, 2017, among Olympia II Navigation Limited, Sui An Navigation Limited, Pingel Navigation Limited, Ebba Navigation Limited, Clan Navigation Limited and ABN AMRO BANK N.V.

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Supplemental Agreement, dated July 27, 2017, to the Amended and Restated Facility Agreement, dated June 30, 2017, among Olympia II Navigation Limited, Sui An Navigation Limited, Pingel Navigation Limited, Ebba Navigation Limited, Clan Navigation Limited and ABN AMRO BANK N.V.

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Supplemental Agreement, dated December 1, 2017, to the Amended and Restated Facility Agreement, dated June 30, 2017, among Olympia II Navigation Limited, Sui An Navigation Limited, Pingel Navigation Limited, Ebba Navigation Limited, Clan Navigation Limited and ABN AMRO BANK N.V.

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Supplemental Agreement, dated June 29, 2018, to the Amended and Restated Facility Agreement, dated June 30, 2017, among Olympia II Navigation Limited, Sui An Navigation Limited, Pingel Navigation Limited, Ebba Navigation Limited, Clan Navigation Limited and ABN AMRO BANK N.V.

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Facility Agreement, dated July 27, 2017, between Navios Containers and ABN AMRO BANK N.V.

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Supplemental Agreement, dated December 1, 2017, to the Facility Agreement, dated July 27, 2017, between Navios Containers and ABN AMRO BANK N.V.

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Supplemental Agreement, dated June 29, 2018, to the Facility Agreement, dated July 27, 2017, between Navios Containers and ABN AMRO BANK N.V.

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Loan Agreement, dated December 20, 2017, among Theros Ventures Limited, Legato Shipholding Inc., Peran Maritime Inc., Zoner Shiptrade S.A. and BNP Paribas.

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Deed of Accession, Amendment and Restatement, dated September 5, 2018, among Theros Ventures Limited, Legato Shipholding Inc., Peran Maritime Inc., Zoner Shiptrade S.A., Crayon Shipping Ltd., Navios Containers, Boheme Navigation Company, Nefeli Navigation S.A. and BNP Paribas.

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Loan Agreement, dated May 25, 2018, among Nefeli Navigation S.A., the banks and financial institutions listed therein and BNP Paribas.

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Loan Agreement, dated June 28, 2018, among Fairy Shipping Corporation, Limestone Shipping Corporation, the banks and financial institutions listed therein and HSH Nordbank AG.

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Omnibus Agreement, dated June 7, 2017, among Navios Acquisition, Navios Holdings, Navios Partners, Navios Midstream, Navios Containers, and Navios Partners Containers Finance Inc.

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Management agreement, dated June 7, 2017, between Navios Containers and Navios Shipmanagement Inc.

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Amendment No. 1 to Management Agreement, dated November 23, 2017, between Navios Containers and Navios Shipmanagement Inc.

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Amendment No. 2 to Management Agreement, dated April 23, 2018, between Navios Containers and Navios Shipmanagement Inc.

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Amendment No. 3 to Management Agreement, dated June 1, 2018, between Navios Containers and Navios Shipmanagement Inc.

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Amendment No. 4 to Management Agreement, dated August 28, 2019, between Navios Containers and Navios Shipmanagement Inc.

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Administrative Services Agreement, dated June 7, 2017, between Navios Containers and Navios Shipmanagement Inc.

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Amendment No. 1 to Administrative Services Agreement, dated August 28, 2019, between Navios Containers and Navios Shipmanagement Inc.

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Loan Agreement, dated November 9, 2018, among Afros Maritime Inc., Iliada Shipping S.A., Vinetree Marine Company, Vythos Marine Corp., the banks and financial institutions listed therein and HSH Nordbank AG.

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Bareboat Charters and Memoranda of Agreement by and between Ocean Dazzle Shipping Limited, wholly owned subsidiary of Minsheng Financial Leasing Co. Ltd., and Jasmer Shipholding Ltd, Inastros Maritime Corp., Jaspero Shiptrade S.A., Thetida Marine Co., Evian Shiptrade Ltd and Anthimar Marine Inc., dated May 25, 2018, providing for the sale and leaseback of the APL Atlanta, APL Denver, APL Los Angeles, APL Oakland, Navios Amaranth and Navios Amarillo, respectively.

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Bareboat Charters and Memoranda of Agreement by and between Ocean Dawn Shipping Limited, wholly owned subsidiary of Minsheng Financial Leasing Co. Ltd., and Sui An Navigation Limited, Pingel Navigation Limited, Ebba Navigation Limited, Clan Navigation Limited, Olympia II Navigation Limited and Enplo Shipping Limited, dated May 25, 2018, providing for the sale and leaseback of the MOL Dedication, MOL Delight, MOL Destiny, MOL Devotion, Navios Domino (ex MOL Dominance) and Navios Verde, respectively.

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Bareboat Charters and Memoranda of Agreement by and between Ocean Wood Tang Shipping Limited, wholly owned subsidiary of Minsheng Financial Leasing Co. Ltd., and Bertyl Ventures Co., Isolde Shipping Inc., Rodman Maritime Corp., Silvanus Marine Company, Morven Chartering Inc. and Velour Management Corp., dated May 25, 2018, providing for the sale and leaseback of the Navios Azure, Navios Indigo, Navios Spring, Navios Summer, Navios Verano and Navios Vermillion, respectively.

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Bareboat Charters and Memoranda of Agreement by and between Xiang L44 Hk International Ship Lease Co., Limited, Xiang L45 Hk International Ship Lease Co., Limited,, Xiang L46 Hk International Ship Lease Co., Limited and Xiang L47 Hk International Ship Lease Co., Limited wholly owned subsidiaries of Bank of Communications Financial Leasing Company and Vythos Marine Corp., Nefeli Navigation S.A., Fairy Shipping Corporation and Limestone Shipping Corporation dated March 11, 2020, providing for the sale and leaseback of the Navios Constellation, the Navios Unison, the Ym Utmost and the Navios Unite.

D. Exchange Controls

E. Taxation of Holders

MATERIAL U.S. FEDERAL INCOME TAX CONSIDERATIONS

The following is a discussion of the material U.S. federal income tax considerations that may be relevant to beneficial owners of our common units.

This discussion is based upon provisions of the Code, U.S. Treasury Regulations, and administrative rulings and court decisions, all as in effect or in existence on the date of this filing and all of which are subject to change or differing interpretations by the Internal Revenue Service (the “IRS”) or a court, possibly with retroactive effect. Changes in these authorities may cause the tax consequences of ownership of our common units to vary substantially from the consequences described below. Unless the context otherwise requires, references in this section to “we,” “our” or “us” are references to Navios Maritime Containers L.P.

The following discussion applies only to beneficial owners of common units that own the common units as “capital assets” (generally, property held for investment purposes). The following discussion does not address all aspects of U.S. federal income taxation which may be important to particular beneficial owners of common units in light of their individual circumstances, such as (i) beneficial owners of common units subject to special tax rules (e.g., banks or other financial institutions, real estate investment trusts, regulated investment companies, insurance companies, broker-dealers, traders that elect to mark-to-market for U.S. federal income tax purposes, tax-exempt organizations and retirement plans, individual retirement accounts and tax-deferred accounts, persons that acquire the common units as compensation or former citizens or long-term residents of the United States) or to persons that will hold the common units as part of a straddle, hedge, conversion, constructive sale, or other integrated transaction for U.S. federal income tax purposes, (ii) S corporations, partnerships or other entities classified as partnerships for U.S. federal income tax purposes or their shareholders or partners, (iii) U.S. Holders (as defined below) that have a functional currency other than the U.S. dollar, or (iv) beneficial owners of common units that actually or constructively own 2.0% or more (by vote or value) of our common units or are otherwise entitled to claim a “participation exemption” with respect to our common units, all of whom may be subject to tax rules that differ significantly from those summarized below. If a partnership or other entity classified as a partnership for U.S. federal income tax purposes holds our common units, the tax treatment of its partners generally will depend upon the status of the partner, the activities of the partnership and certain determinations made at the partner level. If you are a partner in a partnership holding our common units, you should consult your own tax advisor regarding the tax consequences to you of the partnership’s ownership of our common units.

No ruling has been obtained or will be requested from the IRS, regarding any matter affecting us or holders of our common units. The opinions and statements made herein may be challenged by the IRS and, if so challenged, may not be sustained upon review in a court.

This discussion does not contain information regarding any state or local, estate, gift or alternative minimum tax considerations concerning the ownership or disposition of common units.

Each prospective beneficial owner of our common units should consult its own tax advisor regarding the U.S. federal, state, local, and other tax consequences of the ownership or disposition of common units.

Conversion to a Limited Partnership; Election to be Treated as a Corporation

We were a private corporation incorporated under the laws of the Marshall Islands, Navios Containers Inc., and we converted into a limited partnership organized under the laws of the Marshall Islands, Navios Containers. Navios Containers filed an election to be treated as a corporation for U.S. federal income tax purposes, which specified the effective date, November 30, 2018 that is the date of the conversion. Since we expect Navios Containers will be treated as a corporation for U.S. federal income tax purposes, among other things, U.S. Holders will not directly be subject to U.S. federal income tax on their shares of our income, but rather will be subject to U.S. federal income tax on distributions received from us and dispositions of common units as described below.

U.S. Federal Income Taxation of U.S. Holders

As used herein, the term “U.S. Holder” means a beneficial owner of our common units that:

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is an individual U.S. citizen or resident (as determined for U.S. federal income tax purposes),

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a corporation (or other entity that is classified as a corporation for U.S. federal income tax purposes) organized under the laws of the United States or any of its political subdivisions,

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an estate the income of which is subject to U.S. federal income taxation regardless of its source, or

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a trust if (i) a court within the United States is able to exercise primary jurisdiction over the administration of the trust and one or more “United States persons” (as defined in the Code) have the authority to control all substantial decisions of the trust or (ii) the trust has a valid election in effect under current U.S. Treasury Regulations to be treated as a “United States person”.

Distributions

Subject to the discussion below of the rules applicable to a passive foreign investment company (a “PFIC”), any distributions to a U.S. Holder made by us with respect to our common units generally will constitute dividends, which will be taxable as ordinary income or “qualified dividend income” as described in more detail below, to the extent of our current and accumulated earnings and profits, as determined under U.S. federal income tax principles. Distributions in excess of our current and accumulated earnings and profits will be treated first as a non-taxable return of capital to the extent of the U.S. Holder’s tax basis in its common units on a dollar-for-dollar basis, and thereafter as capital gain, which will be either long-term or short-term capital gain depending upon whether the U.S. Holder held the common units for more than one year. U.S. Holders that are corporations generally will not be entitled to claim a dividend received deduction with respect to distributions they receive from us. Dividends received with respect to the common units will be treated as foreign source income and generally will be treated as “passive category income” for U.S. foreign tax credit purposes.

Dividends received with respect to our common units by a U.S. Holder who is an individual, trust or estate (a “non-corporate U.S. Holder”) generally will be treated as “qualified dividend income” that is taxable to such non-corporate U.S. Holder at preferential capital gain tax rates, provided that: (i) subject to the possibility that our common units may be delisted by a qualifying exchange, our common units are traded on an “established securities market” in the United States (such as the Nasdaq Global Select Market where our common units are traded) and are “readily tradeable” on such an exchange; (ii) we are not a PFIC for the taxable year during which the dividend is paid or the immediately preceding taxable year (which we do not believe we are, have been or will be, as discussed below); (iii) the non-corporate U.S. Holder has owned the common units for more than 60 days during the 121-day period beginning 60 days before the date on which the common units become ex-dividend (and has not entered into certain risk limiting transactions with respect to such common units); and (iv) the non-corporate U.S. Holder is not under an obligation to make related payments with respect to positions in substantially similar or related property. Any dividends paid on our common units that are not eligible for these preferential rates will be taxed as ordinary income to a non-corporate U.S. Holder. In addition, a 3.8% tax may apply to certain investment income. See “Medicare Tax” below.

Special rules may apply to any amounts received in respect of our common units that are treated as “extraordinary dividends”. In general, an extraordinary dividend is a dividend with respect to a common unit that is equal to or in excess of 10.0% of a U.S. Holder’s adjusted tax basis (or fair market value upon the U.S. Holder’s election) in such common unit. In addition, extraordinary dividends include dividends received within a one-year period that, in the aggregate, equal or exceed 20.0% of a U.S. Holder’s adjusted tax basis (or fair market value) in a common unit. If we pay an “extraordinary dividend” on our common units that is treated as “qualified dividend income,” then any loss recognized by a U.S. Individual Holder from the sale or exchange of such common units will be treated as long-term capital loss to the extent of the amount of such dividend.

Sale, Exchange or Other Disposition of Common Units

Subject to the discussion of PFICs below, a U.S. Holder generally will recognize capital gain or loss upon a sale, exchange or other disposition of our common units in an amount equal to the difference between the amount realized by the U.S. Holder from such sale, exchange or other disposition and the U.S. Holder’s adjusted tax basis in such units. The U.S. Holder’s initial tax basis in the common units generally will be the U.S. Holder’s purchase price for the common units and that tax basis will be reduced (but not below zero) by the amount of any distributions on the common units that are treated as non-taxable returns of capital (as discussed under “Distributions” above). Such gain or loss will be treated as long-term capital gain or loss if the U.S. Holder’s holding period is greater than one year at the time of the sale, exchange or other disposition. If Navios Containers were to be considered a CFC, such gain, if any, recognized by a U.S. Holder would be recharacterized as a dividend to the extent of the earnings and profits attributable to such units.

A corporate U.S. Holder’s capital gains, long-term and short-term, are taxed at ordinary income tax rates. If a corporate U.S. Holder recognizes a loss upon the disposition of our common units, such U.S. Holder is limited to using the loss to offset other capital gain. If a corporate U.S. Holder has no other capital gain in the tax year of the loss, it may carry the capital loss back three years and forward five years.

Long-term capital gains of non-corporate U.S. Holders are subject to the favorable tax rate of a maximum of 20%. In addition, a 3.8% tax may apply to certain investment income. Refer also to “Medicare Tax” below. A non-corporate U.S. Holder may deduct a capital loss resulting from a disposition of our common units to the extent of capital gains plus up to $3,000 ($1,500 for married individuals filing separate tax returns) annually and may carry forward a capital loss indefinitely.

PFIC Status and Significant Tax Consequences

In general, we will be treated as a PFIC with respect to a U.S. Holder if, for any taxable year in which the holder held our common units, either:

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at least 75.0% of our gross income (including the gross income of our vessel-owning subsidiaries) for such taxable year consists of passive income (e.g., dividends, interest, capital gains and rents derived other than in the active conduct of a rental business), or

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at least 50.0% of the average value of the assets held by us (including the assets of our vessel-owning subsidiaries) during such taxable year produce, or are held for the production of, passive income.

Income earned, or deemed earned, by us in connection with the performance of services would not constitute passive income. By contrast, rental income generally would constitute “passive income” unless we were treated as deriving our rental income in the active conduct of a trade or business under the applicable rules. The PFIC provisions contain a look-through rule under which we will be treated as earning directly our proportionate share of any income, and owning directly our proportionate share of any assets, of another corporation if we own at least 25% of the value of the stock of such other corporation.

Based on our current and projected methods of operations, and an opinion of counsel, we believe that we will not be a PFIC for 2019, and we expect that we will not become a PFIC with respect to any future taxable year. For post-2018 taxable years, our counsel, Thompson Hine LLP, is of the opinion that, although there is no authority directly on point and, accordingly, the matter is not free from doubt, (1) the income we receive from the time chartering activities and assets engaged in generating such income should not be treated as passive income or assets, respectively, and (2) so long as our income from time charters exceeds 25.0% of our gross income for each taxable year after our initial taxable year and the value of our vessels contracted under time charters exceeds 50.0% of the average value of our assets for each taxable year after our initial taxable year, we should not be a PFIC. This opinion is based on representations and projections provided to our counsel by us regarding our structure, assets, income and charters and its validity is conditioned on the accuracy of such representations and projections. Thompson Hine LLP expresses no opinion regarding our PFIC status for pre-2019 taxable years. We express no belief, and our counsel expresses no opinion, regarding our PFIC status with respect to any U.S. Holder that acquired common units prior to the listing of the common units on the Nasdaq Global Select Market or any U.S. person that acquired common shares of Navios Containers Inc.

Our counsel’s opinion is based principally on the conclusion that, for purposes of determining whether we are a PFIC, the gross income we derive or are deemed to derive from the time chartering activities of our wholly-owned subsidiaries should constitute services income, rather than rental income. Correspondingly, such income should not constitute passive income, and the assets that we or our subsidiaries own and operate in connection with the production of such income, in particular, the vessels we or our subsidiaries own that are subject to time charters, should not constitute passive assets for purposes of determining whether we are or have been a PFIC.

We expect that all of the vessels in our fleet will be engaged in time chartering activities and intend to treat our income from those activities as non-passive income, and the vessels engaged in those activities as non-passive assets, for PFIC purposes. Our counsel has advised us that there is a significant amount of legal authority consisting of the Code, legislative history, IRS pronouncements and rulings supporting our position that the income from our time chartering activities constitutes services income (rather than rental income). There is, however, no direct legal authority under the PFIC rules addressing whether income from time chartering activities is services income or rental income. Moreover, in a case not interpreting the PFIC rules, Tidewater Inc. v. United States, 565 F.3d 299 (5th Cir. 2009), the Fifth Circuit held that the vessel time charters at issue generated predominantly rental income rather than services income. However, the IRS stated in an Action on Decision (AOD 2010-001) that it disagrees with, and will not acquiesce to, the way that the rental versus services framework was applied to the facts in the Tidewater decision, and in its discussion stated that the time charters at issue in Tidewater would be treated as producing services income for PFIC purposes. The IRS’s AOD, however, is an administrative action that cannot be relied upon or otherwise cited as precedent by taxpayers.

The opinion of our counsel is not binding on the IRS or any court. Thus, while we have received an opinion of our counsel in support of our position, there is a possibility that the IRS or a court could disagree with this position. In addition, the determination of whether we are a PFIC in any taxable year is fact specific and will depend upon the portion of our assets (including goodwill) and income that are characterized as passive under the PFIC rules and other factors, some of which may be beyond our control. In particular, because the total value of our assets for purposes of the asset test described above will generally be calculated using the market price of our common units, our PFIC status may depend in large part on the market price of our common units. Accordingly, fluctuations in the market price of the common units may cause us to become a PFIC. In addition, the composition of our income and assets will be affected by how, and how quickly, we use the cash generated by our business operations and any net proceeds that we receive from any future financing or capital transactions. The PFIC determination also depends on the application of complex U.S. federal income tax rules concerning the classification of our assets and income for this purpose, and these rules are uncertain in some respects. Further, the PFIC determination is made annually and, although we intend to conduct our affairs in a manner to avoid being classified as a PFIC with respect to any taxable year, we cannot assure you that the method of our operations, or the nature or composition of our income or assets, will not change in the future and that we will not become a PFIC.

As discussed more fully below, if we were to be treated as a PFIC for any taxable year in which a U.S. Holder owned our common units, the U.S. Holder would be subject to different taxation rules depending on whether the U.S. Holder makes an election to treat us as a “Qualified Electing Fund,” which we refer to as a “QEF election”. As an alternative to making a QEF election, the U.S. Holder should be able to make a “mark-to-market” election with respect to our common units, as discussed below. In addition, if we were treated as a PFIC for any taxable year in which a U.S. Holder owned our common units, the U.S. Holder generally would be required to file IRS Form 8621 with the U.S. Holder’s U.S. federal income tax return for each year to report the U.S. Holder’s ownership of such common units. In the event a U.S. Holder does not file IRS Form 8621, the statute of limitations on the assessment and collection of U.S. federal income taxes of such U.S. Holder for the related tax year will not close before the date which is three years after the date on which such report is filed.

It should also be noted that, if we were treated as a PFIC for any taxable year in which a U.S. Holder owned our common units and any of our non-U.S. subsidiaries were also a PFIC, the U.S. Holder would be treated as owning a proportionate amount (by value) of the shares of the lower-tier PFIC for purposes of the application of these rules.

Taxation of U.S. Holders Making a Timely QEF Election

If we were to be treated as a PFIC for any taxable year, and a U.S. Holder makes a timely QEF election (any such U.S. Holder, an “Electing Holder”), the Electing Holder must report for U.S. federal income tax purposes its pro rata share of our ordinary earnings and net capital gain, if any, for our taxable year that ends with or within the Electing Holder’s taxable year, regardless of whether or not the Electing Holder received any distributions from us in that year. Such income inclusions would not be eligible for the preferential tax rates applicable to “qualified dividend income”. The Electing Holder’s adjusted tax basis in our common units will be increased to reflect taxed but undistributed earnings and profits. Distributions to the Electing Holder of our earnings and profits that were previously taxed will result in a corresponding reduction in the Electing Holder’s adjusted tax basis in our common units and will not be taxed again once distributed. The Electing Holder would not, however, be entitled to a deduction for its pro rata share of any losses that we incur with respect to any year. An Electing Holder generally will recognize capital gain or loss on the sale, exchange or other disposition of our common units.

Even if a U.S. Holder makes a QEF election for one of our taxable years, if we were a PFIC for a prior taxable year during which the U.S. Holder owned our common units and for which the U.S. Holder did not make a timely QEF election, the U.S. Holder would also be subject to the more adverse rules described below under “Taxation of U.S. Holders Not Making a Timely QEF or Mark-to-Market Election”. However, under certain circumstances, a U.S. Holder may be permitted to make a retroactive QEF election with respect to us for any open taxable years in the U.S. Holder’s holding period for our common units in which we are treated as a PFIC. Additionally, to the extent that any of our subsidiaries is a PFIC, a U.S. Holder’s QEF election with respect to us would not be effective with respect to the U.S. Holder’s deemed ownership of the stock of such subsidiary and a separate QEF election with respect to such subsidiary would be required.

A U.S. Holder makes a QEF election with respect to any year that we are a PFIC by filing IRS Form 8621 with the U.S. Holder’s U.S. federal income tax return. If, contrary to our expectations, we were to determine that we are treated as a PFIC for any taxable year, we would notify all U.S. Holders and would provide all necessary information to any U.S. Holder that requests such information in order to make the QEF election described above with respect to us and the relevant subsidiaries. A QEF election would not apply to any taxable year for which we are not a PFIC, but would remain in effect with respect to any subsequent taxable year for which we are a PFIC, unless the IRS consents to the revocation of the election.

Taxation of U.S. Holders Making a “Mark-to-Market” Election

If we were to be treated as a PFIC for any taxable year and, subject to the possibility that our common units may be delisted by a qualifying exchange, our common units were treated as “marketable stock,” then, as an alternative to making a QEF election, a U.S. Holder would be allowed to make a “mark-to-market” election with respect to our common units, provided the U.S. Holder completes and files IRS Form 8621 in accordance with the relevant instructions and related Treasury Regulations. If that election is made, the U.S. Holder generally would include as ordinary income in each taxable year the excess, if any, of the fair market value of the U.S. Holder’s common units at the end of the taxable year over the holder’s adjusted tax basis in the common units. The U.S. Holder also would be permitted an ordinary loss in respect of the excess, if any, of the U.S. Holder’s adjusted tax basis in the common units over the fair market value thereof at the end of the taxable year, but only to the extent of the net amount previously included in income as a result of the mark-to-market election. A U.S. Holder’s tax basis in the U.S. Holder’s common units would be adjusted to reflect any such income or loss recognized. Gain recognized on the sale, exchange or other disposition of our common units would be treated as ordinary income, and any loss recognized on the sale, exchange or other disposition of the common units would be treated as ordinary loss to the extent that such loss does not exceed the net mark-to-market gains previously included in income by the U.S. Holder. A mark-to-market election would not apply to our common units owned by a U.S. Holder in any taxable year during which we are not a PFIC, but would remain in effect with respect to any subsequent taxable year for which we are a PFIC, unless our common units are no longer treated as “marketable stock” or the IRS consents to the revocation of the election.

Even if a U.S. Holder makes a “mark-to-market” election for one of our taxable years, if we were a PFIC for a prior taxable during which the U.S. Holder owned our common units and for which the U.S. Holder did not make a timely mark-to-market election, the U.S. Holder would also be subject to the more adverse rules described below under “Taxation of U.S. Holders Not Making a Timely QEF or Mark-to-Market Election”. Additionally, to the extent that any of our subsidiaries is a PFIC, a “mark-to-market” election with respect to our common units would not apply to the U.S. Holder’s deemed ownership of the stock of such subsidiary.

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Taxation of U.S. Holders Not Making a Timely QEF or Mark-to-Market Election

If we were to be treated as a PFIC for any taxable year, a U.S. Holder who does not make either a timely QEF election or a timely “mark-to-market” election for that year (i.e., the taxable year in which the U.S. Holder’s holding period commences), whom we refer to as a “Non-Electing Holder,” would be subject to special rules resulting in increased tax liability with respect to (1) any excess distribution (i.e., the portion of any distributions received by the Non-Electing Holder on our common units in a taxable year in excess of 125.0% of the average annual distributions received by the Non-Electing Holder in the three preceding taxable years, or, if shorter, the Non-Electing Holder’s holding period for the common units), and (2) any gain realized on the sale, exchange or other disposition of our common units. Under these special rules:

•

the excess distribution and any gain would be allocated ratably over the Non-Electing Holder’s aggregate holding period for the common units;

•

the amount allocated to the current taxable year and any year prior to the year we were first treated as a PFIC with respect to the Non-Electing Holder would be taxed as ordinary income; and

•

the amount allocated to each of the other taxable years would be subject to tax at the highest rate of tax in effect for the applicable class of taxpayer for that year, and an interest charge for the deemed deferral benefit would be imposed with respect to the resulting tax attributable to each such other taxable year.

If we were treated as a PFIC for any taxable year, a U.S. Holder would be treated as owning a proportionate amount of any shares that we own, directly or indirectly by application of certain attribution rules, in other PFICs (including any of our subsidiaries, if they are PFICs) and would be subject to the PFIC rules on a separate basis with respect to its indirect interests in any such PFICs. A mark-to-market election would not be available with respect to the shares of any such lower-tier PFICs. In addition, if we were treated as a PFIC for any taxable year and a Non-Electing Holder who is an individual dies while owning our common units, such holder’s successor generally would not receive a step-up in tax basis with respect to such common units.

Controlled Foreign Corporation

Currently, Navios Holdings owns 3.7% of our common units and Navios Partners owns 33.5% of our outstanding common units. Through so-called downward attribution, U.S. subsidiaries of Navios Holdings and Navios Partners are treated as the constructive owners of these equity interests for purposes of determining whether we are a controlled foreign corporation (a “CFC”). We should be a CFC (or become a CFC in the future) if U.S. Holders (including U.S. subsidiaries of Navios Holdings and Navios Partners), that each own 10% or more of our equity (by vote or value), would own in the aggregate more than 50% of our equity (by vote or value), in each case, directly, indirectly, or constructively.

The U.S. federal income tax consequences of U.S. holders who at all times own less than 10% of our equity, directly, indirectly, and constructively, should not be affected if we are or were to become a CFC. However, if we are or were to become a CFC, any U.S. Holder who owns 10% or more of our equity (by vote or value), directly, indirectly, or constructively (but not through downward attribution) should be subject to U.S. federal income tax on its pro rata share of our so-called “subpart F” income and should be subject to U.S. federal income tax reporting requirements. Income from our time chartering activities could constitute subpart F income if it were derived from passive rental activities. But, we believe that the income we earn from our time chartering activities should constitute services income, rather than rental income (see U.S. Federal Income Taxation of U.S. Holders – PFIC Status and Significant Tax Consequences). So, we believe that the income we earn from our time chartering activities should not be treated as subpart F income and thus no such U.S. Holder should be subject to U.S. federal income tax on such income, regardless of whether IRS’s position that the Section 883 exemption does not apply to subpart F income is correct. If, contrary, to our belief discussed above, the income we earn from our time chartering activities were treated as subpart F income, it is unclear whether such income would nonetheless be exempted from U.S. federal income tax for so long as we qualify for the Section 883 exemption (see Taxation of the Partnership – The Section 338 Exemption). In this regard, the IRS has taken the position in Revenue Ruling 87-15 that the Section 883 exemption does not cause subpart F income to be exempted from U.S. federal income tax. Any U.S. Holder of Navios Containers that owns 10% or more (by vote or value), directly, indirectly, or constructively, of the equity of Navios Containers, should consult its own tax advisor regarding U.S. federal tax consequences that may result from Navios Containers being treated as a CFC.

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Medicare Tax

A U.S. Holder that is an individual or estate, or a trust that does not fall into a special class of trusts that is exempt from such tax, will generally be subject to a 3.8% tax on the lesser of (i) the U.S. Holder’s “net investment income” for a taxable year and (ii) the excess of the U.S. Holder’s modified adjusted gross income for such taxable year over $200,000 ($250,000 in the case of joint filers and $125,000 for married persons filing separately). For these purposes, “net investment income” will generally include dividends paid with respect to our common units and net gain attributable to the disposition of our common units not held in connection with certain trades or businesses, but will be reduced by any deductions properly allocable to such income or net gain.

If we were to be treated as a PFIC for any taxable year, solely for purposes of this additional tax, a U.S. Holder who has made a QEF election will generally be required to include in net investment income the amount of dividends (including distributions of previously taxed income), rather than the amount the U.S. Holder is required to include in its gross income under the QEF rules. Additionally, to determine the amount of any net gain attributable to the sale, exchange or other disposition of our common units, solely for purposes of this additional tax, a U.S. Holder who has made a QEF election will generally be required to recalculate its adjusted tax basis in its common units excluding QEF election basis adjustments.

Alternatively, if we were to be treated as a PFIC for any taxable year, a U.S. Holder who made a QEF election may generally make an election to cause the rules applicable to inclusions of income and gain, receipt of distributions and adjustments to tax basis with respect to a QEF to apply for purposes of this additional 3.8% tax. This election is generally required to be made for the first taxable year for which the U.S. Holder is required to include an amount in gross income under the QEF rules with respect to an interest in us and is subject to the additional tax on net investment income (or would be subject to such tax absent this election). Once made, this election is effective with respect to all interests in us held by the U.S. Holder in that year or acquired by the U.S. Holder in future taxable years. U.S. Holders should consult their own tax advisors regarding the applicability of this tax to any of their income or gains in respect of our common units.

U.S. Federal Income Taxation of Non-U.S. Holders

A beneficial owner of our common units (other than a partnership or an entity or arrangement treated as a partnership for U.S. federal income tax purposes) that is not a U.S. Holder is a “Non-U.S. Holder”.

Distributions

Distributions we pay to a Non-U.S. Holder will not be subject to U.S. federal income tax or withholding tax if the Non-U.S. Holder is not engaged in a U.S. trade or business. If the Non-U.S. Holder is engaged in a U.S. trade or business, our distributions will be subject to U.S. federal income tax to the extent they constitute income effectively connected with the Non-U.S. Holder’s U.S. trade or business (and a corporate Non-U.S. Holder may also be subject to U.S. federal branch profits tax). However, distributions paid to a Non-U.S. Holder who is engaged in a trade or business may be exempt from taxation under an income tax treaty if the income arising from the distribution is not attributable to a U.S. permanent establishment maintained by the Non-U.S. Holder.

Disposition of Units

In general, a Non-U.S. Holder will not be subject to U.S. federal income tax or withholding tax on any gain resulting from the disposition of our common units provided the Non-U.S. Holder is not engaged in a U.S. trade or business. A Non-U.S. Holder that is engaged in a U.S. trade or business will be subject to U.S. federal income tax in the event the gain from the disposition of units is effectively connected with the conduct of such U.S. trade or business (provided, in the case of a Non-U.S. Holder entitled to the benefits of an income tax treaty with the United States, such gain also is attributable to a U.S. permanent establishment). However, even if not engaged in a U.S. trade or business, individual Non-U.S. Holders may be subject to tax on gain resulting from the disposition of our common units if they are present in the United States for 183 days or more during the taxable year in which those units are disposed and meet certain other requirements.

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Backup Withholding and Information Reporting

In general, payments to a non-corporate U.S. Holder of distributions or the proceeds of a disposition of common units may be subject to information reporting. These payments to a non-corporate U.S. Holder also may be subject to backup withholding (currently at a rate of 24%), if the non-corporate U.S. Holder:

•

fails to provide an accurate taxpayer identification number;

•

is notified by the IRS that he has failed to report all interest or corporate distributions required to be reported on his U.S. federal income tax returns; or

•

in certain circumstances, fails to comply with applicable certification requirements.

A U.S. Holder generally is required to certify its compliance with the backup withholding rules on IRS Form W-9.

Non-U.S. Holders may be required to establish their exemption from information reporting and backup withholding by certifying their status on IRS Form W-8BEN, W-8BEN-E, W-8ECI or W-8IMY, as applicable.

Backup withholding is not an additional tax. Rather, a unitholder generally may obtain a credit for any amount withheld against his liability for U.S. federal income tax (and obtain a refund of any amounts withheld in excess of such liability) by filing a U.S. federal income tax return with the IRS.

Individual U.S. Holders (and to the extent specified in applicable U.S. Treasury Regulations, certain individual Non-U.S. Holders and certain U.S. Holders that are entities) that hold “specified foreign financial assets,” including our common units, whose aggregate value exceeds $75,000 at any time during the taxable year or $50,000 on the last day of the taxable year (or such higher amounts as prescribed by applicable Treasury Regulations) are required to file a report on IRS Form 8938 with information relating to the assets for each such taxable year. Specified foreign financial assets would include, among other things, our common units, unless such common units are held in an account maintained by a U.S. “financial institution” (as defined). Substantial penalties apply to any failure to timely file IRS Form 8938, unless the failure is shown to be due to reasonable cause and not due to willful neglect. Additionally, in the event an individual U.S. Holder (and to the extent specified in applicable Treasury Regulations, an individual Non-U.S. Holder or a U.S. entity) that is required to file IRS Form 8938 does not file such form, the statute of limitations on the assessment and collection of U.S. federal income taxes of such holder for the related tax year may not close until three years after the date that the required information is filed. U.S. Holders (including U.S. entities) and Non-U.S. Holders should consult their own tax advisors regarding their reporting obligations.

NON-UNITED STATES TAX CONSIDERATIONS

Marshall Islands Tax Consequences

The following discussion is based upon the opinion of Reeder & Simpson P.C., our counsel as to matters of the laws of the Republic of the Marshall Islands, and the current laws of the Republic of the Marshall Islands applicable to persons who do not reside in, maintain offices in or engage in business in the Republic of the Marshall Islands.

Because we and our subsidiaries do not and do not expect to conduct business or operations in the Republic of the Marshall Islands, under current Marshall Islands law you will not be subject to Marshall Islands taxation or withholding on distributions, including upon distribution treated as a return of capital, we make to you as a unitholder. In addition, you will not be subject to Marshall Islands stamp, capital gains or other taxes on the purchase, ownership or disposition of common units, and you will not be required by the Republic of the Marshall Islands to file a tax return relating to your ownership of common units.

EACH UNITHOLDER IS URGED TO CONSULT HIS OWN TAX, LEGAL AND OTHER ADVISORS REGARDING THE CONSEQUENCES OF OWNERSHIP OF COMMON UNITS UNDER THE UNITHOLDER’S PARTICULAR CIRCUMSTANCES.

F. Dividends and Paying Agents

Not applicable.

G. Statements by Experts

Not applicable.

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H. Documents on Display

We file reports and other information with the SEC. These materials, including this annual report and the accompanying exhibits, may be inspected and copied at the public facilities maintained by the Commission at 100 F Street, N.E., Washington, D.C. 20549, or from the SEC’s website http://www.sec.gov. You may obtain information on the operation of the public reference room by calling 1 (800) SEC-300 and you may obtain copies at prescribed rates.

I. Subsidiary Information

Not applicable.

Item 11. Quantitative and Qualitative Disclosures about Market Risks

Foreign Exchange Risk

Our functional and reporting currency is the U.S. dollar. We engage in worldwide commerce with a variety of entities. Although our operations may expose us to certain levels of foreign currency risk, our transactions are predominantly U.S. dollar denominated. Transactions in currencies other than U.S. dollar are translated at the exchange rate in effect at the date of each transaction. Differences in exchange rates during the period between the date a transaction denominated in a foreign currency is consummated and the date on which it is either settled or translated are recognized. Expenses incurred in foreign currencies against which the U.S. Dollar falls in value can increase such expenses thereby decreasing our income, or vice versa if the U.S. dollar increases in value. For example, as of December 31, 2019, the value of the U.S. dollar as compared to the Euro decreased by approximately 2.0% compared with the respective value as of December 31, 2018.

Interest Rate Risk

All of the Company’s credit facilities bear interest at a rate based on a premium over U.S. LIBOR (“Floating-Rate Credit Facilities”) except for the Sellers’ Credit and the financial liability. Therefore, we are exposed to the risk that our interest expense may increase if interest rates rise. As of December 31, 2019, the outstanding amount of the Company’s Floating-Rate Credit Facilities was $154.8 million. A 1% increase in LIBOR would have increased our interest expense for the year ended December 31, 2019 by $1.6 million.

Refer also to “Item 5. Operating and Financial Review and Prospects — Liquidity and Capital Resources — Borrowings”.

Concentration of Credit Risk

Financial instruments, which potentially subject us to significant concentrations of credit risk, consist principally of trade accounts receivable. We closely monitor our exposure to customers for credit risk. We have policies in place to ensure that we trade with customers with an appropriate credit history.

Refer also to “Item 4. Information on the Company — Business Overview — Our Customers”.

Inflation

Inflation has had a minimal impact on vessel operating expenses, drydocking expenses and general and administrative expenses. Our management does not consider inflation to be a significant risk to direct expenses in the current and foreseeable economic environment.

Item 12. Description of Securities Other than Equity Securities

Not applicable.

104

PART II

Item 13. Defaults, Dividend Arrearages and Delinquencies

None.

Item 14. Material Modifications to the Rights of Unitholders and Use of Proceeds

None.

Item 15. Controls and Procedures

Disclosure Controls and Procedures

The management of Navios Containers, with the participation of the Chief Executive Officer and Chief Financial Officer, conducted an evaluation, pursuant to Rule 13a-15 promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), of the effectiveness of our disclosure controls and procedures as of December 31, 2019. Based on this evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the disclosure controls and procedures were effective as of December 31, 2019.

Disclosure controls and procedures means controls and other procedures that are designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms and that such information required to be disclosed by us in the reports that we file or submit under the Exchange Act is accumulated and communicated to our management, including our principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosures.

Management’s Annual Report on Internal Control over Financial Reporting

The management of Navios Containers is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rule 13a-15(f) and 15d-15(f) of the Exchange Act. Navios Containers’ internal control system was designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles in the U.S.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Navios Containers’ management assessed the effectiveness of Navios Containers’ internal control over financial reporting as of December 31, 2019. In making this assessment, it used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control — Integrated Framework (2013). Based on its assessment, management concluded that, as of December 31, 2019, Navios Containers’ internal control over financial reporting is effective based on those criteria.

Changes in Internal Control over Financial Reporting

There were no changes in our internal controls over financial reporting that occurred during the period covered by this Annual Report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Item 16A. Audit Committee Financial Expert

Navios Containers’ Audit Committee consists of three independent directors, Konstantinos Maratos, Vasilios Mouyis and Stefan Kuch. The Board of Directors has determined that Konstantinos Maratos qualifies as “an audit committee financial expert” as defined in the instructions of Item 16A of Form 20-F. Mr. Konstantinos Maratos is independent under applicable NASDAQ and SEC standards.

105

Item 16B. Code of Ethics

Navios Containers has adopted a code of ethics applicable to officers, directors and employees that complies with applicable guidelines issued by the SEC. The Navios Containers Code of Corporate Conduct and Ethics is available for review on Navios Containers’ website at ww.navios-containers.com.

Item 16C. Principal Accountant Fees and Services

Audit Fees

Our principal Accountants for fiscal years 2019 and 2018 were Ernst & Young (Hellas) Certified Auditors Accountants S.A. The audit fees for the audit of the years ended December 31, 2019, and 2018 were $0.2 million and $0.3 million, respectively.

Audit-Related Fees

There were no audit-related fees billed in 2019 and 2018.

Tax Fees

There were no tax fees billed in 2019 and 2018.

Other Fees

There were no other fees billed in 2019 and 2018.

Audit Committee

The Audit Committee is responsible for the appointment, replacement, compensation, evaluation and oversight of the work of the independent auditors. As part of this responsibility, the audit committee pre-approves the audit and non-audit services performed by the independent auditors in order to assure that they do not impair the auditors’ independence from Navios Containers. The Audit Committee has adopted a policy which sets forth the procedures and the conditions pursuant to which services proposed to be performed by the independent auditors may be pre-approved.

The Audit Committee separately pre-approved all engagements and fees paid to our principal accountant in 2019.

Item 16D. Exemptions from the Listing Standards for Audit Committees

Not applicable.

Item 16E. Purchases of Units by the Issuer and Affiliated Purchasers

On March 4, 2019, we announced that our Board of Directors authorized a unit repurchase program for up to $10.0 million of the Company’s common units over a one-year period. The repurchase program has expired under its terms. Common Unit repurchases could have been made from time to time for cash in open market transactions at prevailing market prices or in privately negotiated transactions. The timing and amount of repurchases under the program would have been determined by our management based upon market conditions and other factors. Repurchases would have been made pursuant to a program adopted under Rule 10b5-1 under the Securities Exchange Act of 1934, as amended. The program did not require any minimum repurchase or any specific number of units of common equity and could have been suspended or reinstated at any time in the Company’s discretion and without notice. As of its expiration, no common units were purchased under this program. The Board of Directors may consider another Common Unit repurchase program or Common Unit repurchases, in its discretion, depending upon the Company’s cash position, the market price of the Common Units and other relevant factors.

Refer also to “Item 7. Major Unitholders and Related Party Transactions”.

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Item 16F. Change in Registrant’s Certifying Accountant

Not applicable.

Item 16G. Corporate Governance

Pursuant to an exception for foreign private issuers, we are not required to comply with the corporate governance practices followed by U.S. companies under the NASDAQ listing standards. However, we have voluntarily adopted all of the NASDAQ required practices, except we do not have a compensation committee or a nominating/governance committee consisting of independent directors or a compensation committee charter or a nominating/governance committee charter specifying the purpose and responsibilities of the compensation committee and the nominating/governance committee. Instead, all compensation committee and nomination/governance decisions, other than those compensation and nominating decisions dictated by our Partnership Agreement, are currently made by a majority of our independent board members.

Item 16H. Mine Safety Disclosures

Not applicable.

Item 17. Financial Statements

Not applicable.

Item 18. Financial Statements

The financial information required by this Item together with the related report of Ernst & Young (Hellas) Certified Auditors Accountants S.A., Independent Registered Public Accounting Firm, thereon is filed as part of this annual report on Pages F-1 through F-25.

107

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS


		Page

Navios Maritime Containers L.P.

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM		F-2

CONSOLIDATED BALANCE SHEETS AT DECEMBER 31, 2019 AND 2018		F-3

CONSOLIDATED STATEMENTS OF INCOME FOR EACH OF THE YEARS ENDED DECEMBER 31, 2019, 2018 AND FOR THE PERIOD FROM APRIL 28, 2017 (DATE OF INCEPTION) TO DECEMBER 31, 2017		F-4

CONSOLIDATED STATEMENTS OF CASH FLOWS FOR EACH OF THE YEARS ENDED DECEMBER 31, 2019, 2018 AND FOR THE PERIOD FROM APRIL 28, 2017 (DATE OF INCEPTION) TO DECEMBER 31, 2017		F-5

CONSOLIDATED STATEMENTS OF CHANGES IN PARTNERS’ CAPITAL FOR EACH OF THE YEARS ENDED DECEMBER 31, 2019, 2018 AND FOR THE PERIOD FROM APRIL 28, 2017 (DATE OF INCEPTION) TO DECEMBER 31, 2017		F-6

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS		F-7

F-1

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Partners and the Board of Directors of Navios Maritime Containers L.P.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Navios Maritime Containers L.P. (the “Company”) as of December 31, 2019 and 2018, the related consolidated statements of income, partners’ capital and cash flows for each of the two years in the period ended December 31, 2019, and for the period from inception (April 28, 2017) through December 31, 2017, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2019 and 2018, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2019, and for the period from inception (April 28, 2017) through December 31, 2017, in conformity with U.S. generally accepted accounting principles.

Basis for opinion

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

/s/ Ernst & Young (Hellas) Certified Auditors Accountants S.A.

We have served as Company’s auditor since 2018.

Athens, Greece

March 18, 2020

F-2

NAVIOS MARITIME CONTAINERS L.P.

CONSOLIDATED BALANCE SHEETS

(Expressed in thousands of U.S. dollars—except for unit data)


	Notes		December 31, 2019		December 31, 2018
ASSETS
Current assets
Cash and cash equivalents		3,9	$	16,685	$	16,958
Restricted cash		3,9		1,424		1,934
Accounts receivable, net		4		2,287		2,643
Inventories				4,457		599
Other current assets		5		4,525		2,903
Prepaid expenses				72		100

Total current assets				29,450		25,137

Non-current assets
Vessels, net		6		395,621		342,693
Intangible assets		7		6,288		25,350
Deferred drydock and special survey costs, net				19,522		11,386
Balance due from related parties, non-current		9,12		8,195		7,862
Other long-term assets				1,226		1,099

Total non-current assets				430,852		388,390

Total assets			$	460,302	$	413,527

LIABILITIES AND PARTNERS’ CAPITAL
Current liabilities
Accounts payable			$	2,343	$	3,574
Accrued expenses		11		4,928		2,302
Deferred income and cash received in advance				807		2,152
Balance due to related parties, current		12		16,586		4,065
Financial liability short term, net of deferred finance costs		8,9		8,237		7,665
Current portion of long-term debt, net of deferred finance costs		8,9		38,496		27,626

Total current liabilities				71,397		47,384

Non-current liabilities
Long-term financial liability, net of current portion and net of deferred finance costs		8,9		69,863		78,100
Long-term debt, net of current portion and net of deferred finance costs		8,9		129,062		105,570

Total non-current liabilities				198,925		183,670

Total liabilities				270,322		231,054

Commitment and contingencies		11		—		—
Partners’ capital
Common unit holders — 34,603,100 common units issued and outstanding at December 31, 2019 and December 31, 2018		16		189,980		182,473

Total Partners’ capital				189,980		182,473

Total liabilities and Partners’ capital			$	460,302	$	413,527

See notes to consolidated financial statements.

F-3

NAVIOS MARITIME CONTAINERS L.P.

CONSOLIDATED STATEMENTS OF INCOME

(Expressed in thousands of U.S. dollars—except for unit and per unit data)


	Notes		Year Ended December 31, 2019			Year Ended December 31, 2018			Period from April 28, 2017 (date of inception) to December 31, 2017
Revenue		13	$	141,532		$	133,921		$	39,188
Time charter and voyage expenses				(5,754	)		(4,178	)		(1,257	)
Direct vessel expenses				(4,077	)		(1,314	)		(672	)
Management fees (entirely through related parties transactions)		12		(65,638	)		(53,772	)		(16,488	)
General and administrative expenses		12		(10,223	)		(7,413	)		(2,262	)
Listing transaction-related expenses		14		—			(4,990	)		—
Depreciation and amortization		6,7		(28,647	)		(38,552	)		(13,578	)
Interest expense and finance cost		8,12		(16,846	)		(11,785	)		(2,293	)
Interest income				—			90			25
Other income				603			1,017			7
Other expense		11		(3,443	)		(324	)		(32	)

Net income			$	7,507		$	12,700		$	2,638

Net earnings per common unit, basic and diluted		15	$	0.22		$	0.38		$	0.14
Weighted average number of common units, basic and diluted		15		34,603,100			33,527,135			18,371,855

See notes to consolidated financial statements.

F-4

NAVIOS MARITIME CONTAINERS L.P.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Expressed in thousands of U.S. dollars—except for unit data)


	Note		Year Ended December 31, 2019			Year Ended December 31, 2018			Period from April 28, 2017 (date of inception) to December 31, 2017
OPERATING ACTIVITIES:
Net income			$	7,507		$	12,700		$	2,638
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		6,7		28,647			38,552			13,578
Amortization of deferred financing costs				1,943			1,598			430
Amortization of deferred drydock and special survey costs				3,639			1,314			225
Changes in operating assets and liabilities:
Decrease/(increase) in accounts receivable				356			(2,001	)		(642	)
Decrease/(increase) in balance due from related companies, current				—			5,643			(5,195	)
Increase in inventories				(3,858	)		(63	)		(536	)
Increase in other current assets				(1,622	)		(2,854	)		(4	)
Decrease/(increase) in prepaid expenses				28			(100	)		—
Increase in balance due from related parties, non-current				(333	)		(2,097	)		(5,765	)
Increase in other long term assets				(127	)		(1,099	)		—
(Decrease)/increase in accounts payable				(1,230	)		2,992			536
(Decrease)/increase in accrued expenses				2,626			( 1,631	)		2,541
Increase/(decrease) in due to related companies				12,521			4,065			(1,674	)
(Decrease)/increase in deferred income and cash received in advance				(1,345	)		(392	)		298
Payments for drydock and special survey costs				(11,776	)		(9,118	)		(3,807	)

Net cash provided by operating activities			$	36,976		$	47,509		$	2,623

INVESTING ACTIVITIES:
Cash acquired through asset acquisition				—			—			5,433
Acquisition of/additions to vessels and time charters at favorable terms		6,7,12		(62,513	)		(170,503	)		(254,660	)

Net cash used in investing activities			$	(62,513	)	$	(170,503	)	$	(249,227	)

FINANCING ACTIVITIES:
Proceeds from long-term debt and financial liability, net		8		125,022			216,200			127,760
Repayment of long-term debt and financial liability				(98,417	)		(114,255	)		(8,340	)
Debt issuance costs				(1,851	)		(3,615	)		(815	)
Proceeds from issuance of common units, net of offering costs		16		—			29,055			142,500

Net cash provided by financing activities			$	24,754		$	127,385		$	261,105
Net (decrease)/increase in cash and cash equivalents and restricted cash				(783	)		4,391			14,501

Cash and cash equivalents and restricted cash, beginning of period				18,892			14,501			—

Cash and cash equivalents and restricted cash, end of period			$	18,109		$	18,892		$	14,501

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid for interest, net			$	14,296		$	9,028		$	1,599

See notes to consolidated financial statements.

F-5

NAVIOS MARITIME CONTAINERS L.P.

CONSOLIDATED STATEMENTS OF CHANGES IN PARTNERS’ CAPITAL

(Expressed in thousands of U.S. dollars—except for unit data)


			Common unit holders					Total Partners’
	Note		Units		Amount			Capital
Balance April 28, 2017 (date of inception)
Proceeds from private placements, net of offering costs				29,148,554	$	142,503		$	142,503
Deemed distribution				—		(4,423	)		(4,423	)
Net income				—		2,638			2,638

Balance, December 31, 2017				29,148,554	$	140,718		$	140,718
Proceeds from private placements, net of offering costs		16		5,454,546		29,055			29,055
Net income				—		12,700			12,700

Balance, December 31, 2018				34,603,100	$	182,473		$	182,473
Net income				—		7,507			7,507

Balance, December 31, 2019				34,603,100		189,980			189,980

See notes to the consolidated financial statements.

F-6

NAVIOS MARITIME CONTAINERS L.P.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

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

NOTE 1: DESCRIPTION OF BUSINESS

Navios Maritime Containers Inc. (“Navios Containers Inc.”) was incorporated on April 28, 2017 under the laws of the Republic of the Marshall Islands.

Conversion into Limited Partnership

On November 30, 2018, Navios Containers Inc. was converted into a limited partnership, Navios Maritime Containers L.P. (“Navios Containers” or the “Company”). The Company is a growth vehicle dedicated to the container sector of the maritime industry.

The Company converted the issued common shares to common units at the conversion ratio of one common share of Navios Containers Inc. for each common unit of Navios Containers. In connection with the conversion, Navios Maritime Containers GP LLC, a Marshall Islands limited liability company, is the Company’s general partner and holds a non-economic interest that does not provide the holder with any rights to profits or losses of, or distributions by, the partnership. The consolidated financial statements of the Company have been presented giving retroactive effect to the conversion described above, which was treated as a reorganization made within the context of the Company’s above-mentioned transactions. In August 2019, Navios Maritime Holdings Inc. (“Navios Holdings”) announced that it sold certain assets, including its ship management division and the general partnership interests in Navios Containers to N Shipmanagement Acquisition Corp. and related entities, an entity affiliated with the Company’s Chairman and Chief Executive Officer, Angeliki Frangou.

As of December 31, 2019, Navios Containers had a total of 34,603,100 common units outstanding. Navios Maritime Partners L.P. (“Navios Partners”) held 11,592,276 common units representing 33.5% of the outstanding common units and Navios Holdings held 1,263,276 common units representing 3.7% of the outstanding common units of Navios Containers.

The common units of the Company commenced trading on the Nasdaq Global Select Market on December 10, 2018 under the ticker symbol “NMCI”.

The operations of the Company are managed by Navios Shipmanagement Inc. (the “Manager”), from its offices in Piraeus, Greece, Singapore and Monaco.

NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

(a)

Basis of Presentation: The accompanying consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States of America (U.S. GAAP). The Company had no items of other comprehensive income for the years ended December 31, 2019 and 2018 and for the period from April 28, 2017 (date of inception) to December 31, 2017.

Based on internal forecasts and projections that take into account reasonably possible changes in our trading performance, management believes that the Company has adequate financial resources to continue in operation and meet its financial commitments, including but not limited to capital expenditures and debt service obligations, for a period of at least twelve months from the date of issuance of these consolidated financial statements. Accordingly, the Company continues to adopt the going concern basis in preparing its consolidated financial statements.

(b)

Recent Accounting Pronouncements: In October 2018, the Financial Accounting Standards Board (“FASB”) issued ASU 2018-17, Consolidation (Topic 810): “Targeted Improvements to Related Party Guidance for Variable Interest Entities” (“ASU 2018-17”). ASU 2018-17 provides that indirect interests held through related parties in common control arrangements should be considered on a proportional basis for determining whether fees paid to decision makers and service providers are variable interests. This is consistent with how indirect interests held through related parties under common control are considered for determining whether a reporting entity must consolidate a VIE. For Public business entities the amendments are effective for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. Early adoption is permitted. Since there are no entities included in the Company’s consolidation under the VIE model or required to be assessed for consolidation under the VIE model, the Company believes that this ASU will not have a material impact on its consolidated financial statements.

F-7

NAVIOS MARITIME CONTAINERS L.P.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

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

In August 2018, the Financial Accounting Standards Board (“FASB”) issued ASU 2018-13, “Fair Value Measurement (Topic 820): Disclosure Framework-Changes to the Disclosure Requirements for Fair Value Measurement”. This update modifies the disclosure requirements on fair value measurements. ASU 2018-13 is effective for fiscal years beginning after December 15, 2019, and earlier adoption is permitted. The Company believes that this ASU will not have a material impact on its consolidated financial statements.

In June 2016, FASB issued ASU No. 2016-13, “Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments”. This standard requires entities to measure all expected credit losses of financial assets held at a reporting date based on historical experience, current conditions and reasonable and supportable forecasts in order to record credit losses in a more timely manner. ASU 2016-13 also amends the accounting for credit losses on available-for-sale debt securities and purchased financial assets with credit deterioration. In November 2018, FASB issued ASU 2018-19 “Codification Improvements to topic 326, Financial Instruments-Credit Losses”. The amendments in this update clarify that operating lease receivables are not within the scope of ASC 326-20 and should instead be accounted for under the new leasing standard, ASC 842. In April 2019, FASB issued ASU 2019-04 “Codification Improvements to topic 326, Financial Instruments-Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments”. In May 2019, FASB issued ASU 2019-05, “Financial Instruments-Credit Losses (Topic 326): Targeted Transition Relief”. The amendments in this update provide entities that have certain instruments within the scope of Subtopic 326-20, Financial Instruments-Credit Losses-Measured at Amortized Cost, with an option to irrevocably elect the fair value option in Subtopic 825-10, Financial Instruments-Overall, applied on an instrument-by-instrument basis for eligible instruments, upon adoption of Topic 326. The fair value option election does not apply to held-to-maturity debt securities. An entity that elects the fair value option should subsequently apply the guidance in Subtopics 820-10, Fair Value Measurement-Overall, and 825-10. In December 2019, FASB issued ASU No. 2019-11, Codification Improvements to Topic 326, Financial Instruments—Credit Losses. This update introduced an expected credit loss model for the impairment of financial assets measured at amortized cost basis. That model replaces the probable, incurred loss model for those assets. The standard is effective for interim and annual reporting periods beginning after December 15, 2019, although early adoption is permitted for interim and annual periods beginning after December 15, 2018. The Company believes that this ASU will not have a material impact on its consolidated financial statements.

(c)

Principles of Consolidation: The accompanying consolidated financial statements include the accounts of Navios Containers, a Marshall Islands limited partnership, and its subsidiaries that are all 100% owned. All significant intercompany balances and transactions have been eliminated in the consolidated financial statements.

Subsidiaries: Subsidiaries are those entities in which the Company has an interest of more than one half of the voting rights or otherwise has power to govern the financial and operating policies. The acquisition method of accounting is used to account for the acquisition of subsidiaries. The cost of an acquisition is measured as the fair value of the assets given up, shares issued or liabilities undertaken at the date of acquisition. The excess of the cost of acquisition over the fair value of the net assets acquired and liabilities assumed is recorded as goodwill.

Subsidiaries included in the consolidation:

Statements of Operations

Company name

Nature Name

Effective
Ownership

Country of
incorporation

2019

2018

2017

Navios Maritime Containers L.P.

Holding Company

—

Marshall Is.

01/01—12/31

04/28—12/31

Navios Partners Containers Finance Inc.

Sub—Holding Company

100

Marshall Is.

01/01—12/31

06/07—12/31

Navios Partners Containers Inc.

Sub—Holding Company

100

Marshall Is.

01/01—12/31

06/07—12/31

Olympia II Navigation Limited

Vessel Owning Company⁽¹⁾

100

Marshall Is.

01/01—12/31

06/07—12/31

Pingel Navigation Limited

Vessel Owning Company⁽¹⁾

100

Marshall Is.

01/01—12/31

06/07—12/31

Ebba Navigation Limited

Vessel Owning Company⁽¹⁾

100

Marshall Is.

01/01—12/31

06/07—12/31

Clan Navigation Limited

Vessel Owning Company⁽¹⁾

100

Marshall Is.

01/01—12/31

06/07—12/31

Sui An Navigation Limited

Vessel Owning Company⁽¹⁾

100

Marshall Is.

01/01—12/31

06/07—12/31

Bertyl Ventures Co.

Vessel Owning Company⁽¹⁾

100

Marshall Is.

01/01—12/31

07/12—12/31

F-8

NAVIOS MARITIME CONTAINERS L.P.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

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

Statements of Operations

Company name

Nature Name

Effective
Ownership

Country of
incorporation

2019

2018

2017

Silvanus Marine Company

Vessel Owning Company⁽¹⁾

100

Marshall Is.

01/01—12/31

07/12—12/31

Anthimar Marine Inc.

Vessel Owning Company⁽¹⁾

100

Marshall Is.

01/01—12/31

07/17—12/31

Enplo Shipping Limited

Vessel Owning Company⁽¹⁾

100

Marshall Is.

01/01—12/31

07/17—12/31

Morven Chartering Inc.

Vessel Owning Company⁽¹⁾

100

Marshall Is.

01/01—12/31

07/25—12/31

Rodman Maritime Corp.

Vessel Owning Company⁽¹⁾

100

Marshall Is.

01/01—12/31

08/03—12/31

Isolde Shipping Inc.

Vessel Owning Company⁽¹⁾

100

Marshall Is.

01/01—12/31

08/03—12/31

Velour Management Corp.

Vessel Owning Company⁽¹⁾

100

Marshall Is.

01/01—12/31

08/03—12/31

Evian Shiptrade Ltd.

Vessel Owning Company⁽¹⁾

100

Marshall Is.

01/01—12/31

08/03—12/31

Boheme Navigation Company

Sub—Holding Company

100

Marshall Is.

01/01—12/31

09/27—12/31

Theros Ventures Limited

Vessel Owning Company

100

Marshall Is.

01/01—12/31

11/07—12/31

Legato Shipholding Inc.

Vessel Owning Company

100

Marshall Is.

01/01—12/31

11/09—12/31

Inastros Maritime Corp.

Vessel Owning Company

100

Marshall Is.

01/01—12/31

11/23—12/31

Zoner Shiptrade S.A.

Vessel Owning Company

100

Marshall Is.

01/01—12/31

11/24—12/31

Jasmer Shipholding Ltd.

Vessel Owning Company

100

Marshall Is.

01/01—12/31

12/05—12/31

Thetida Marine Co.

Vessel Owning Company

100

Marshall Is.

01/01—12/31

12/08—12/31

Jaspero Shiptrade S.A.

Vessel Owning Company

100

Marshall Is.

01/01—12/31

12/12—12/31

Peran Maritime Inc.

Vessel Owning Company

100

Marshall Is.

01/01—12/31

12/28—12/31

Nefeli Navigation S.A.

Vessel Owning Company

100

Marshall Is.

01/01—12/31

03/13—12/31

—

Fairy Shipping Corporation

Vessel Owning Company

100

Marshall Is.

01/01—12/31

07/02—12/31

—

Limestone Shipping Corporation

Vessel Owning Company

100

Marshall Is.

01/01—12/31

07/02—12/31

—

Crayon Shipping Ltd

Vessel Owning Company

100

Marshall Is.

01/01—12/31

05/31—12/31

—

Chernava Marine Corp.

Vessel Owning Company

100

Marshall Is.

01/01—12/31

05/14—12/31

—

Proteus Shiptrade S.A

Vessel Owning Company

100

Marshall Is.

01/01—12/31

05/14—12/31

—

Vythos Marine Corp.

Vessel Owning Company

100

Marshall Is.

01/01—12/31

05/31—12/31

—

Iliada Shipping S.A.

Operating Company

100

Marshall Is.

01/01—12/31

05/31—12/31

—

Vinetree Marine Company

Operating Company

100

Marshall Is.

01/01—12/31

04/04—12/31

—

Afros Maritime Inc.

Operating Company

100

Marshall Is.

01/01—12/31

05/31—12/31

—

(1)	Currently, vessel-operating company under the sale and leaseback transaction.

(d)

(e)

Cash and Cash Equivalents: Cash and cash equivalents consist from time to time of cash on hand, deposits held on call with banks, and other short-term liquid investments with original maturities of three months or less.

(f)

Restricted Cash: As of December 31, 2019 and 2018, restricted cash consisted of $1,424 and $1,934, respectively, which related to amounts held in retention accounts in order to service debt and interest payments, as required by certain credit facilities of Navios Containers.

(g)

Insurance Claims: Insurance claims at each balance sheet date consist of claims submitted and/or claims in the process of compilation or submission (claims pending). They are recorded on an accrual basis and represent the claimable expenses, net of applicable deductibles, incurred through December 31 of each reported period, which are probable to be recovered from insurance companies. Any remaining costs to complete the claims are included in accrued liabilities. The classification of insurance claims into current and non-current assets is based on management’s expectations as to their collection dates.

F-9

NAVIOS MARITIME CONTAINERS L.P.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

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

(h)

Inventories: Inventories, which are comprised of: (i) bunkers (when applicable) on board of the vessels, are valued at cost as determined on the first-in, first-out basis and (ii) lubricants and stock provisions on board of the vessels as of the balance sheet date, are valued at cost as determined on the first-in, first-out basis.

(j)

Impairment of Long-Lived Assets: Vessels, other fixed assets and other long-lived assets held and used by the Company are reviewed periodically for potential impairment whenever events or changes in circumstances indicate that the carrying amount of a particular asset may not be fully recoverable. The Company’s management evaluates the carrying amounts and periods over which long-lived assets are depreciated to determine if events or changes in circumstances have occurred that would require modification to their carrying values or useful lives. In evaluating useful lives and carrying values of long-lived assets, certain indicators of potential impairment are reviewed, such as undiscounted projected operating cash flows, vessel sales and purchases, business plans and overall market conditions.

The assessments concluded that step two of the impairment analysis was not required and that no impairment of vessels existed for the years ended December 31, 2019, 2018 and for the period from April 28, 2017 (date of inception) to December 31, 2017, as the undiscounted projected net operating cash flows exceeded the carrying values.

F-10

NAVIOS MARITIME CONTAINERS L.P.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

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

In the event that impairment would occur, the fair value of the related asset would be determined and a charge would be recognized in the consolidated statements of income calculated by comparing the asset’s carrying value to its fair value. Fair value is estimated primarily through the use of third-party valuations performed on an individual vessel basis.

(k)

Costs capitalized as part of the drydocking or special survey consist principally of the actual costs incurred at the yard, expenses relating to spare parts, paints, lubricants and services incurred solely during the drydocking or special survey period. The amortization expense for the years ended December 31, 2019, 2018 and for the period from April 28, 2017 (date of inception) to December 31, 2017 was $3,639, $1,314 and $225 respectively. Accumulated amortization as of December 31, 2019 and 2018 amounted to $5,039 and $1,539, respectively.

(l)

Deferred Financing Costs: Deferred financing costs include fees, commissions and legal expenses associated with obtaining or modifying loan facilities. Deferred financing costs are presented as a deduction from the corresponding liability. These costs are amortized over the life of the related debt using the effective interest rate method, and are presented under the caption “Interest expense and finance cost” in the consolidated statements of income. The total deferred unamortized financing costs, net were $3,552 and $3,644 as of December 31, 2019 and 2018, respectively and were presented net under the caption “Current portion of long-term debt, net of deferred finance costs”, “Financial liability short term, net of deferred finance costs”, “Long-term financial liability, net of current portion and net of deferred finance costs” and “Long-term debt, net of current portion and net of deferred finance costs” in the consolidated balance sheets. Amortization costs for the years ended December 31, 2019, 2018 and for the period from April 28, 2017 (date of inception) to December 31, 2017 were $1,943, $1,598 and $430, respectively.

(m)

Foreign Currency Translation: The Company’s functional and reporting currency is the U.S. dollar. The Company engages in worldwide commerce with a variety of entities. Although, its operations may expose it to certain levels of foreign currency risk, its transactions are predominantly U.S. dollar denominated. Transactions in currencies other than the functional currency are translated at the exchange rate in effect at the date of each transaction. Differences in exchange rates during the period between the date a transaction denominated in a foreign currency is consummated and the date on which it is either settled or translated, are recognized in the statements of income. The foreign currency gain/(losses) recognized under the caption “Other income” or “Other expense” in the consolidated statements of income for the years ended December 31, 2019, 2018 and for the period from April 28, 2017 (date of inception) to December 31, 2017 was $1, $(15) and $(3), respectively.

(n)

Provisions: The Company, in the ordinary course of business, is subject to various claims, suits and complaints. Management, in consultation with internal and external advisers, will provide for a contingent loss in the consolidated financial statements if the contingency had occurred at the date of the consolidated financial statements, the likelihood of loss was probable and the amount can be reasonably estimated. If the Company has determined that the reasonable estimate of the loss is a range and there is no best estimate within the range, the Company will provide for the lower amount within the range. See also Note 11, “Commitments and Contingencies”. As of December 31, 2019 and 2018, the amount of $610 and $1,002 relating to settlement of outstanding claims was presented under the caption “Other income” of the consolidated statements of income.

F-11

NAVIOS MARITIME CONTAINERS L.P.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

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

(o)

Revenue and Expense Recognition: On January 1, 2018, the Company adopted the provisions of ASU No. 2014-09, “Revenue from Contracts with Customers” and the related amendments (“ASC 606” or “the new revenue standard”) using the modified retrospective approach. The guidance provides a unified model to determine how revenue is recognized. In doing so, the Company makes judgments including identifying performance obligations in the contract, estimating the amount of variable consideration to include in the transaction price, and allocating the transaction price to each performance obligation. Revenue is recognized when (or as) the Company transfers promised goods or services to its customers in amounts that reflect the consideration to which the company expects to be entitled to in exchange for those goods or services, which occurs when (or as) the Company satisfies its contractual obligations and transfers control of the promised goods or services to its customers. Revenues are recognized to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. In determining the appropriate amount of revenue to be recognized as it fulfills its obligations under its agreements, the Company performs the following steps: (i) identification of the promised goods or services in the contract; (ii) determination of whether the promised goods or services are performance obligations, including whether they are distinct in the context of the contract; (iii) measurement of the transaction price, including the constraint on variable consideration; (iv) allocation of the transaction price to the performance obligations based on estimated selling prices; and (v) recognition of revenue when (or as) the Company satisfies each performance obligation.

The Company generates revenue from time charter of vessels. Revenues from time chartering of vessels are accounted for as operating leases and are thus recognized on a straight line basis as the average revenue over the rental periods of such charter agreements as service is performed, except for loss generating time charters, in which case the loss is recognized in the period when such loss is determined. A time charter involves placing a vessel at the charterer’s disposal for a period of time during which the charterer uses the vessel in return for the payment of a specified daily hire rate. Short period charters for less than three months are referred to as spot-charters. Charters extending three months to a year are generally referred to as medium term charters. All other charters are considered long-term. Under time charter agreements, operating costs such as for crews, maintenance and insurance are typically paid by the owner of the vessel whereas voyage expenses primarily consisting of port, canal and bunkers expenses that are unique to a particular charter are paid for by the charterer, except for commissions, which are always paid for by the Company, regardless of charter type.

The Company’s contract revenues from time chartering are governed by ASC 842 “Leases”. Upon adoption of the ASC 606 and ASC 842, the timing and recognition of earnings from time charter contracts to which the Company is party did not change from previous practice. The Company has determined to recognize lease revenue as a combined single lease component for all time charters (operating leases) as the related lease component and non-lease component will have the same timing and pattern of the revenue recognition of the combined single lease component. The performance obligations in a time charter contract are satisfied over the term of the contract beginning when the vessel is delivered to the charterer until it is redelivered back to the Company. As a result of the adoption of these standards, there was no cumulative impact to the Company’s retained earnings at January 1, 2018. The comparative information has not been restated and continues to be reported under the accounting standards in effect for those periods (ASC840), including disclosure requirements.

Revenue is recorded when services are rendered, the Company has a signed charter agreement or other evidence of an arrangement, the price is fixed or determinable, and collection is reasonably assured.

Revenues are recorded net of address commissions. Address commissions represent a discount provided directly to the charterers based on a fixed percentage of the agreed upon charter rate. Since address commissions represent a discount on services rendered by the Company and no identifiable benefit is received in exchange for the consideration provided to the charterer, these commissions are presented as a reduction of revenue.

Expenses related to the revenue-generating contracts are recognized as incurred.

(p)

Deferred Income and Cash Received In Advance: Deferred revenue primarily relates to cash received from charterers prior to it being earned. These amounts are recognized as revenue over the charter period.

(q)

Time Charter and Voyage Expenses: Time charter and voyage expenses comprise all expenses related to each particular voyage, bunkers, port charges, canal tolls, cargo handling, agency fees and brokerage commissions. Also included in time charter and voyage expenses are charterers’ liability insurances, provisions for losses on time charters in progress at year-end and other miscellaneous expenses.

F-12

NAVIOS MARITIME CONTAINERS L.P.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

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

(r)

Direct Vessel Expenses: Direct vessel expenses comprise the amortization related to drydock and special survey costs of certain vessels of Navios Containers’ fleet as well as the reactivation cost of laid-up vessels and other expenses as per management agreement.

(s)

Financial Instruments: Financial instruments carried on the balance sheet include cash and cash equivalents, restricted cash, trade receivables and payables, other receivables and other liabilities, long-term debt and financial liability. The particular recognition methods applicable to each class of financial instrument are disclosed in the applicable significant policy description of each item, or included below as applicable.

Financial Risk Management: The Company’s activities expose it to a variety of financial risks including fluctuations in future time charter hire rates, fuel prices and credit and interest rates risk. Risk management is carried out under policies approved by executive management. Guidelines are established for overall risk management, as well as specific areas of operations.

Credit Risk: Financial instruments, which potentially subject the Company to significant concentrations of credit risk, consist principally of cash and cash equivalents and trade receivables. The Company places its cash and cash equivalents, consisting mostly of deposits, with high credit qualified financial institutions. The Company limits its credit risk with accounts receivable by performing ongoing credit evaluations of its customers’ financial condition. Due to these factors, management believes that no additional credit risk beyond amounts provided for collection losses is inherent in the Company’s trade receivables.

For the year ended December 31, 2019 two customers, NOL Liner PTE Ltd and Hapag-Lloyd AG, represented 30.8% and 17.9% of the total revenues, respectively. For the year ended December 31, 2018, two customers, NOL Liner PTE Ltd and Mitsui O.S.K. Lines represented 30.5% and 25.7% of the total revenues, respectively. For the period from April 28, 2017 (date of inception) to December 31, 2017, one customer Mitsui O.S.K. Lines represented 71.0% of the total revenues.

Liquidity Risk: Prudent liquidity risk management implies maintaining sufficient cash, the availability of funding through an adequate amount of committed credit facilities and the ability to close out market positions. The Company monitors cash balances adequately to meet working capital needs.

Foreign Exchange Risk: Foreign currency transactions are translated into the measurement currency at rates prevailing on the dates of the relevant transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation of monetary assets and liabilities denominated in foreign currencies are recognized in the consolidated statements of income.

Fair Value Risk: See Note 2(x).

(t)

Income Taxes: The Company is a Marshall Islands limited partnership. Pursuant to various treaties and the United States Internal Revenue Code, the Company believes that substantially all its operations are exempt from income taxes in the Marshall Islands and the United States of America.

In accordance with the currently applicable Greek law, foreign flagged vessels that are managed by Greek or foreign ship management companies having established an office in Greece are subject to duties towards the Greek state which are calculated on the basis of the relevant vessel’s tonnage. The payment of said duties exhausts the tax liability of the foreign ship owning company and the relevant manager against any tax, duty, charge or contribution payable on income from the exploitation of the foreign flagged vessel. In case that tonnage tax and/or similar taxes/duties are paid to the vessel’s flag state, these are deducted from the amount of the duty to be paid in Greece.

Marshall Islands do not impose a tax on international shipping income. Under the laws of Marshall Islands, the country of the companies’ incorporation and formation and vessels’ registration in addition to Panama and Liberia, the companies are subject to registration and tonnage taxes which have been included in daily management fee.

(u)

Leases: Leases where the Company acts as the lessor are classified as either operating or sales-type / direct financing leases. In cases of lease agreements where the Company acts as the lessor under an operating lease, the Company keeps the underlying asset on the consolidated balance sheet and continues to depreciate the assets over its useful life (see Note 2(o) “Revenue and Expense Recognition”). In cases of lease agreements where the Company acts as the lessor under a sales-type / direct financing lease, the Company derecognizes the underlying asset and records a net investment in the lease. The Company acts as a lessor under operating leases in connection with all of its revenue arrangements.

F-13

NAVIOS MARITIME CONTAINERS L.P.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

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

In cases of sale and leaseback transactions, if the transfer of the asset to the lessor does not qualify as a sale, then the transaction constitutes a failed sale and leaseback and is accounted for as a financing transaction. For a sale to have occurred, the control of the asset would need to be transferred to the lessor, and the lessor would need to obtain substantially all the benefits from the use of the asset. The Company has entered into a sale and leaseback transaction which qualify as failed sale and leaseback transaction as the Company has a purchase obligation to acquire the vessels at the end of the lease term.

(v)

Accounts Receivable, net: The amount shown as accounts receivable, net, at each balance sheet date, includes trade receivables from charterers for hire. At each balance sheet date, all potentially uncollectible accounts are assessed individually for purposes of determining the appropriate provision for doubtful accounts. No provision for doubtful accounts has been made for the years presented.

(w)

Financial Instruments and Fair Value: Guidance on Fair Value Measurements provides a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level I measurements) and the lowest priority to unobservable inputs (Level III measurements).

A financial instrument’s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. In determining the appropriate levels, the Company performs a detailed analysis of the assets and liabilities that are subject to guidance on Fair Value Measurements.

(x)

The amortizable value of favorable and unfavorable leases is amortized over the remaining lease term and the amortization expense is presented in the consolidated statements of income under the caption “Depreciation and amortization”. For the years ended December 31, 2019, 2018 and for the period from April 28, 2017 (date of inception) to December 31, 2017 the amortization expense amounted to $19,062, $33,146 and $13,039, respectively.

NOTE 3: CASH AND CASH EQUIVALENTS AND RESTRICTED CASH

Cash and cash equivalents and restricted cash consisted of the following:


	December 31, 2019		December 31, 2018
Reconciliation of cash and cash equivalents and restricted cash:
Current assets:
Cash and cash equivalents	$	16,685	$	16,958
Restricted cash		1,424		1,934

Total cash and cash equivalents and restricted cash	$	18,109	$	18,892

Cash deposits and cash equivalents in excess of amounts covered by government-provided insurance are exposed to loss in the event of non-performance by financial institutions. The Company does maintain cash deposits and equivalents in excess of government-provided insurance limits. The Company also minimizes exposure to credit risk by dealing with a diversified group of major financial institutions.

As of December 31, 2019 and 2018, restricted cash amounted to $1,424 and $1,934, respectively and related to amounts held in retention accounts in order to service debt and interest payments, as required by certain of Navios Containers’ credit facilities.

F-14

NAVIOS MARITIME CONTAINERS L.P.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

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

NOTE 4: ACCOUNTS RECEIVABLE, NET

Accounts receivable consisted of the following:


	December 31, 2019		December 31, 2018
Accounts receivable	$	2,287	$	2,643
Less: Provision for doubtful accounts		—		—

Accounts receivable, net	$	2,287	$	2,643

Financial instruments that potentially subject Navios Containers to concentrations of credit risk are accounts receivable. Navios Containers does not believe its exposure to credit risk is likely to have a material adverse effect on its financial position, results of operations or cash flows.

NOTE 5: OTHER CURRENT ASSETS

As of December 31, 2019 and 2018, other current assets amounted to $4,525 and $2,903, respectively, which mainly related to Company’s claims receivable. Claims receivable mainly represent claims against vessels’ insurance underwriters in respect of damages arising from accidents or other insured risks, as well as claims under charter contracts.

NOTE 6: VESSELS, NET

Vessels consist of the following:


Vessels	Vessels’ Cost		Accumulated Depreciation			Net Book Value
Vessel acquisition	$	178,136		—			178,136
Depreciation		—		(539	)		(539	)

Balance December 31, 2017	$	178,136	$	(539	)	$	177,597
Additions		170,503		—			170,503
Depreciation		—		(5,407	)		(5,407	)

Balance December 31, 2018	$	348,639	$	(5,946	)	$	342,693
Additions		62,513		—			62,513
Depreciation		—		(9,585	)		(9,585	)

Balance December 31, 2019	$	411,152	$	(15,531	)	$	395,621

Acquisition of Vessels

2019

On April 23, 2019, the Company purchased from an unrelated third party the Navios Constellation, a 2011-built 10,000 TEU containership, for an acquisition cost of $53,360 (including $860 capitalized expenses), pursuant to the exercise of its purchase option in January 2019, based on the memorandum of agreement entered into in November 2018.

2018

On December 17, 2018, the Company purchased from an unrelated third party the Bermuda, a 2010-built 4,360 TEU containership, for an acquisition cost of approximately $11,098 (including $398 capitalized expenses).

On December 7, 2018, the Company purchased from an unrelated third party the Bahamas, a 2010-built 4,360 TEU containership, for an acquisition cost of approximately $13,422 (including $522 capitalized expenses).

In November 2018, Navios Containers Inc. agreed to acquire a 2011-built 10,000 TEU containership from an unrelated third party for a purchase price of $52,500, upon the exercise of the Company’s purchase option prior to February 2019. See Note 11.

F-15

NAVIOS MARITIME CONTAINERS L.P.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

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

On July 2, 2018, Navios Containers Inc. purchased from Navios Partners the YM Utmost and the Navios Unite (ex YM Unity), two 2006-built 8,204 TEU containerships, for an aggregate acquisition cost of approximately $67,496 (including $496 capitalized expenses).

On March 14, 2018, Navios Containers Inc. purchased from an unrelated third party the Niledutch Okapi (ex Navios Dorado), a 2010-built 4,250 TEU containership, for an acquisition cost of approximately $11,931 (including $151 capitalized expenses).

2017

In November and December 2017, Navios Containers Inc. purchased from an unrelated third party the APL Denver, APL Los Angeles, APL Oakland and APL Atlanta, 2008-built 4,730 TEU containerships and their charter out contracts, for an acquisition cost of approximately $97,175 (including $375 capitalized expenses). Any favorable lease terms associated with these vessels were recorded as an intangible asset at the time of acquisition.

On June 8, 2017, Navios Containers Inc. purchased from Navios Partners five containerships and the charter out contracts for a purchase price of $64,000, of which $40,000 was financed through a private placement and the remaining consideration of $24,000 was in the form of a seller’s credit. The acquisition of these five containerships was effected through the acquisition of all of the capital stock of the respective vessel-owning companies, which held the ownership and other contractual rights and obligations related to each of the acquired vessels, including the respective charter-out contracts. Any favorable lease terms associated with these vessels were recorded as an intangible asset at the time of acquisition. The vessel acquisitions were treated as a transaction between entities under common control, and as such, the transaction was recorded at historical cost. The historical cost of the vessels was $32,350 and of the time charters was $26,662. The excess cash over the historical cost of the net assets acquired is a deemed distribution to controlling stockholder and is recorded in stockholders’ equity. These vessels were previously acquired by Navios Partners from Rickmers Maritime Trust Pte. (“Rickmers Trust”) and were employed on charters with a net daily charter rate of $26,850 which expired in 2018 and early 2019. The working capital acquired for the five vessels was $566. Management accounted for this acquisition as an asset acquisition under ASC 805 “Business Combinations”.

In addition, Navios Containers Inc. acquired all the rights under the acquisition agreements entered into between Navios Partners and Rickmers Trust to purchase nine additional containerships for a purchase price of $54,000 plus certain delivery and other operating costs.

During the third quarter of 2017, Navios Containers Inc. completed the acquisition of the nine additional containerships from Rickmers Trust for a purchase price of $54,000, of which $26,680 was financed through the net proceeds under the bank loans and the remaining consideration of $27,320 through available cash. Initial capitalized costs of $8,105 were also incurred in connection with that acquisition.

F-16

NAVIOS MARITIME CONTAINERS L.P.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

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

NOTE 7: INTANGIBLE ASSETS

Time charters with favorable terms consist of the charter out contracts acquired in relation to containerships purchased and are analyzed as following:


Time charters with favorable terms	December 31, 2019			December 31, 2018
Acquisition cost	$	71,535		$	71,535
Accumulated amortization		(65,247	)		(46,185	)

Time charters with favorable terms net book value	$	6,288		$	25,350

Amortization expense for the years ended December 31, 2019 and 2018 and for the period from April 28, 2017 (date of inception) to December 31, 2017 amounted to $19,062, $33,146 and $13,039, respectively, and is presented under the caption “Depreciation and amortization” in the consolidated statements of income.

The remaining aggregate amortization of acquired intangibles as of December 31, 2019 was as follows:


Description	Within one year		Year Two		Total
Time charters with favorable terms	$	6,288	$	—	$	6,288

Total amortization	$	6,288	$	—	$	6,288

Intangible assets subject to amortization are amortized using straight line method over their estimated useful lives to their estimated residual value of zero. The weighted average remaining useful lives for time charters with favorable terms are 0.4 years.

NOTE 8: BORROWINGS

Borrowings consist of the following:


*Navios Containers credit facilities*	December 31, 2019		December 31, 2018
ABN AMRO Bank N.V. $50 million facility	$	25,800	$	50,000
BNP Paribas $24 million facility		—		29,464
BNP Paribas $25 million facility		—		23,611
BNP Paribas $54 million facility		44,688		—
HCOB $36 million facility		27,200		32,000
HCOB $127.2 million facility		57,131		—
Sellers’ Credit		15,000		—

Total loans	$	169,819	$	135,075
Financial liability		79,391		87,530

Total borrowings	$	249,210	$	222,605


*Total borrowings*	December 31, 2019			December 31, 2018
Total borrowings	$	249,210		$	222,605
Less: current portion of long-term debt		(38,496	)		(27,626	)
Less: current portion financial liability		(8,237	)		(7,665	)
Less: Deferred financing costs		(3,552	)		(3,644	)

Total long-term borrowings, net	$	198,925		$	183,670

F-17

NAVIOS MARITIME CONTAINERS L.P.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

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

ABN AMRO BANK N.V Facilities: On December 3, 2018, the Company entered into a facility agreement with ABN AMRO for an amount of up to $50,000 divided into two tranches: (i) the first tranche is for an amount of up to $41,200 in order to refinance the outstanding debt of four containerships and to partially finance the acquisition of one containership; and (ii) the second tranche is for an amount of up to $8,800 in order to partially finance the acquisition of one containership. This loan bears interest at a rate of LIBOR plus 350 bps. The Company drew the entire amount under this facility, net of the loan’s discount of $500 in the fourth quarter of 2018. On June 28, 2019, the Company entered into a supplemental agreement with ABN AMRO, under which the Company made a partial prepayment of the loan in the aggregate amount of $9,400 and two containerships were released from the facility. The outstanding loan amount as of December 31, 2019 was $25,800 and is repayable in 12 quarterly installments, the first in the amount of $3,400 each and the subsequent 11 in the amount of $1,050 each, along with a final balloon payment of $10,850 payable together with the last installment due in December 2022.

BNP Paribas Facilities: On December 20, 2017, the Company entered into a facility agreement with BNP Paribas for an amount of up to $24,000 (divided into four tranches of up to $6,000 each) to finance part of the purchase price of four containerships. The Company had drawn $24,000 under this facility, during the fourth quarter of 2017 and the first quarter of 2018, net of the loan discount of $300. In September 2018, the Company entered into a facility agreement with BNP Paribas to extend the facility dated December 20, 2017, for an additional amount of $9,000 to partially finance the purchase price of one containership. The Company drew the entire amount, net of the loan’s discount of $103.5, on September 7, 2018. These loans bore interest at a rate of LIBOR plus 300 bps. On June 28, 2019, Navios Containers refinanced the facilities dated in December 2017 and September 2018. As of December 31, 2019, there were no outstanding amounts under these facilities.

On May 25, 2018, the Company entered into a facility agreement with BNP Paribas, for an amount of up to $25,000, to finance part of the purchase price of one containership. This loan bore interest at a rate of LIBOR plus 300 bps. On May 29, 2018, the Company drew $25,000 under this facility, net of the loan’s discount of $300. On March 14, 2019, the facility was repaid in full. There was no outstanding loan amount under the facility as of December 31, 2019.

On June 26, 2019, the Company entered into a facility agreement with BNP Paribas for an amount of up to $54,000 to refinance the existing facilities of seven containerships. On June 27, 2019, the Company drew $48,750 net of loan’s discount of $405. This loan bears interest at a rate of LIBOR plus 300 bps. As of December 31, 2019, the facility is repayable in 18 quarterly installments the first two in the amount of $2,031 each and the subsequent 16 in the amount of $1,693 each, along with a final balloon payment of $13,542 payable together with the last installment, falling due on June 2024. As of December 31, 2019, the outstanding loan amount under this facility was $44,688 and no amount remains to be drawn.

Hamburg Commercial Bank AG and Alpha Bank A.E.: On June 28, 2018, the Company entered into a facility agreement with Hamburg Commercial Bank AG and Alpha Bank A.E. for an amount of up to $36,000 to finance part of the purchase price of two containerships. This loan bears interest at a rate of LIBOR plus 325 bps. As of December 31, 2019, the Company had drawn $36,000 under this facility, net of the loan’s discount of $270. As of December 31, 2019, the outstanding loan amount under this facility was $27,200 and is repayable in ten consecutive quarterly installments in an amount of $1,200 each together with a final balloon payment of $15,200 payable together with the last installment falling due in June 2022.

On November 9, 2018, the Company entered into a facility agreement with Hamburg Commercial Bank AG divided into four tranches of up to $31,800 each to finance part of the purchase price of up to four 10,000 TEU containerships. This loan bears interest at a rate of LIBOR plus 325 bps and commitment fee of 0.75% per annum on the undrawn loan amount. On March 12, 2019 and October 16, 2019, Navios Containers cancelled two of the tranches of the facility at no cost. On March 13, 2019, the Company drew $30,150 of the second tranche, net of the loan’s discount of $166, to refinance the outstanding debt of one containership. As of December 31, 2019, the second tranche of the facility is repayable in 15 consecutive quarterly installments in an amount of $702.4 each together with a final balloon payment of $17,506 payable together with the last installment falling due in July 2023. On April 18, 2019, the Company drew $31,122 of the fourth tranche, net of the loan’s discount of $233, to finance part of the purchase price of one containership. As of December 31, 2019, the fourth tranche of the facility is repayable in 15 consecutive quarterly installments in an amount of $678 each together with a final balloon payment of $18,918 payable together with the last installment falling due in July 2023. As of December 31, 2019, the outstanding loan amount under the facility was $57,131, and no amount remains to be drawn.

F-18

NAVIOS MARITIME CONTAINERS L.P.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

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

Sellers’ Credit: In January 2019, the Company entered into a sellers’ credit agreement (the “Sellers’ Credit”) in connection with the acquisition of two 10,000 TEU containerships, for an amount of up to $20,000 at a rate of 5% per annum, divided in two tranches of $15,000 and $5,000. On April 23, 2019, following the acquisition of one 2011-built 10,000 TEU containership, the Company drew $15,000, net of discount of $150. In July 2019, following the conversion of the purchase obligation of the second 2011-built 10,000 TEU containership into an option, the second tranche expired. As of December 31, 2019, the outstanding amount under the Sellers’ Credit was $15,000 and it matured and was repaid in January 2020.

Financial liability: On May 25, 2018, the Company entered into a $119,000 sale and leaseback transaction with Minsheng Financial Leasing Co. Ltd to refinance the outstanding balance of the existing facilities of 18 containerships. The Company has a purchase obligation to acquire the vessels at the end of the lease term and under ASC 842-40, the transfer of the vessels was determined to be a failed sale. In accordance with ASC 842-40, the Company did not derecognize the respective vessels from its balance sheet and accounted for the amounts received under the sale and leaseback transaction as a financial liability. On June 29, 2018, the Company completed the sale and leaseback of the first six vessels for $37,500. On July 27, 2018 and on August 29, 2018, the Company completed the sale and leaseback of four additional vessels for $26,000. On November 9, 2018, the Company completed the sale and leaseback of four additional vessels for $26,700. The Company did not proceed with the sale and leaseback transaction of the four remaining vessels. The Company is obligated to make 60 monthly payments in respect of all 14 vessels of approximately $1,097 each. The Company also has an obligation to purchase the vessels at the end of the fifth year for $45,100. As of December 31, 2019, the outstanding balance under the sale and leaseback transaction was $79,391.

The Company’s credit facilities and sale and leaseback transaction also require compliance with a number of financial covenants, including: (i) maintain a value to loan ratio ranging from 120% to 125%; (ii) minimum free consolidated liquidity of $14,500 as at December 31, 2019 and equal to at least the product of $500 and the total number of vessels as defined in the Company’s credit facilities; (iii) maintain a ratio of liabilities-to-assets (as defined in the Company’s credit facilities) of less than 0.80 : 1.00; and (iv) maintain a minimum net worth of at least $75,000. Among other events, it will be an event of default under the Company’s credit facilities and sale and leaseback transaction if the financial covenants are not complied with.

In addition, it is a requirement under the credit facilities that Navios Holdings, Navios Partners, Angeliki Frangou and their respective affiliates collectively own at least 20% of the Company.

As of December 31, 2019, the Company was in compliance with all of the covenants under all of its credit facilities and sale and leaseback transaction.

For the years ended December 31, 2019, 2018 and for the period from April 28, 2017 to December 31, 2017, interest expense amounted to $14,903, $10,187 and $1,863, respectively and is presented under the caption “Interest expense and finance cost” in the consolidated statements of income.

The maturity table below reflects the principal payments for the next five years of all borrowings of Navios Containers outstanding as of December 31, 2019 based on the repayment schedules of the respective loan facilities, financial liability and Sellers’ Credit (as described above).

F-19

NAVIOS MARITIME CONTAINERS L.P.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

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


Payment due by 12 month period ending
December 31, 2020	$	47,960
December 31, 2021		30,466
December 31, 2022		54,682
December 31, 2023		99,175
December 31, 2024		16,927

Total	$	249,210

NOTE 9: FAIR VALUE OF FINANCIAL INSTRUMENTS

Fair Value of Financial Instruments

The following methods and assumptions were used to estimate the fair value of each class of financial instrument:

Cash and cash equivalents: The carrying amounts reported in the consolidated balance sheets for interest bearing deposits approximate their fair value because of the short maturity of these investments.

Restricted cash: The carrying amounts reported in the consolidated balance sheets for interest bearing deposits approximate their fair value because of the short maturity of these investments.

Balance due from related parties, non-current: The carrying amount of due from related parties non-current reported in the consolidated balance sheet approximates its fair value.

Long-term debt: The book value has been adjusted to reflect the net presentation of deferred finance costs. The outstanding balance of the floating rate loans continues to approximate its fair value, excluding the effect of any deferred finance costs. Sellers’ Credit is a fixed rate borrowing and its outstanding balance approximates its fair value due to its short maturity.

Financial liability: The book value has been adjusted to reflect the net presentation of deferred finance costs. The outstanding balance of the financial liability continues to approximate its fair value, excluding the effect of any deferred finance costs.

The estimated fair values of the Company’s financial instruments are as follows:


	December 31, 2019						December 31, 2018
	Book Value			Fair Value			Book Value			Fair Value
Cash and cash equivalents	$	16,685		$	16,685		$	16,958		$	16,958
Restricted cash	$	1,424		$	1,424		$	1,934		$	1,934
Balance due from related parties, non-current	$	8,195		$	8,195		$	7,862		$	7,862
Long-term debt, including current portion, net	$	(167,558	)	$	(169,819	)	$	(133,196	)	$	(135,075	)
Financial liability, including current portion, net	$	(78,100	)	$	(79,391	)	$	(85,765	)	$	(87,530	)

Fair Value Measurements

The estimated fair value of our financial instruments that are not measured at fair value on a recurring basis, categorized based upon the fair value hierarchy, are as follows:

Level I: Inputs are unadjusted, quoted prices for identical assets or liabilities in active markets that the Company has the ability to access. Valuation of these items does not entail a significant amount of judgment.

Level II: Inputs other than quoted prices included in Level I that are observable for the asset or liability through corroboration with market data at the measurement date.

Level III: Inputs that are unobservable.

F-20

NAVIOS MARITIME CONTAINERS L.P.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

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


	Fair Value Measurements at December 31, 2019
	Total			(Level I)		(Level II)			(Level III)
Cash and cash equivalents	$	16,685		$	16,685	$	—		$	—
Restricted cash	$	1,424		$	1,424	$	—		$	—
Balance due from related parties, non-current⁽¹⁾	$	8,195		$	—	$	8,195		$	—
Long-term debt, including current portion, net⁽²⁾	$	(169,819	)	$	—	$	(169,819	)	$	—
Financial liability, including current portion, net⁽³⁾	$	(79,391	)	$	—	$	(79,391	)	$	—


	Fair Value Measurements at December 31, 2018
	Total			(Level I)		(Level II)			(Level III)
Cash and cash equivalents	$	16,958		$	16,958	$	—		$	—
Restricted cash	$	1,934		$	1,934	$	—		$	—
Balance due from related parties, non-current⁽¹⁾	$	7,862		$	—	$	7,862		$	—
Long-term debt, including current portion, net⁽²⁾	$	(135,075	)	$	—	$	(135,075	)	$	—
Financial liability, including current portion, net⁽³⁾	$	(87,530	)	$	—	$	(87,530	)	$	—

⁽¹⁾	The fair value of the Company’s receivable from related companies is estimated based on currently available debt with similar contract terms, interest rate and remaining maturities as well as taking into account the counterparty’s creditworthiness.

⁽²⁾	The fair value of the Company’s long-term debt is estimated based on currently available debt with similar contract terms, interest rate and remaining maturities as well as taking into account the Company’s creditworthiness.

⁽³⁾	The fair value of the Company’s financial liability is estimated based on currently available debt with similar contract terms, interest rate and remaining maturities as well as taking into account the Company’s creditworthiness.

NOTE 10: LEASES

The future minimum contractual lease income (charter-out rates are presented net of commissions), for which a charter party has been concluded as of December 31, 2019, is as follows:


	Amount in thousands of U.S. dollars
2020		65,625
2021		22,266
2022		19,929
2023		19,929
2024		6,661
Thereafter		—

Total minimum lease revenue, net of commissions	$	134,410

Revenues from time charters are generally not received when a vessel is off-hire, which includes time required for scheduled maintenance of the vessel.

NOTE 11: COMMITMENTS AND CONTINGENCIES

The Company is involved in various disputes and arbitration proceedings arising in the ordinary course of business. Provisions are recognized in the consolidated financial statements for all such proceedings where the Company believes that a liability may be probable, and for which the amounts are reasonably estimable, based upon facts known at the date the consolidated financial statements were prepared. While the ultimate disposition of these actions cannot be predicted with certainty, management does not believe the outcome, individually or in aggregate, of such actions will have a material effect on the Company’s financial position, results of operations or cash flows.

F-21

NAVIOS MARITIME CONTAINERS L.P.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

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

NOTE 12: TRANSACTIONS WITH RELATED PARTIES

Management fees: Pursuant to a management agreement dated June 7, 2017, as amended on November 23, 2017, April 23, 2018, June 1, 2018 and August 28, 2019 (the “Management Agreement”), the Manager provides commercial and technical management services to the Company’s vessels. The term of this agreement is for an initial period of five years with an automatic extension for five years periods thereafter unless a notice for termination is received by either party. In August 2019, the Company extended the duration of the Management Agreement until January 1, 2025, with an automatic renewal for an additional five years, unless earlier terminated by either party, and provides for payment of a termination fee, equal to the fees charged for the full calendar year preceding the termination date, by Navios Containers in the event the Management Agreement is terminated on or before December 31, 2024. The fee for the ship management services provided by the Manager for the period through December 31, 2019 and the two-year period commencing January 1, 2020 is: (a) $6.1 and $6.2, respectively, daily rate per Container vessel of 3,000 TEU up to 4,999 TEU; (b) $7.4 and $7.8, respectively, daily rate per Container vessel of 8,000 TEU up to 9,999 TEU; (c) $7.4 and $8.3, respectively, daily rate per Container vessel of 10,000 TEU up to 11,999 TEU; and (d) commencing January 1, 2020, $0.1 per vessel daily rate for technical and commercial management services. Commencing January 1, 2022, the fees described in subsections (a) through (c) are subject to an annual increase of 3%, unless otherwise agreed. This fixed daily fee covers all of the vessels operating expenses, other than certain extraordinary fees and costs, as defined in management agreement. For the year ended December 31, 2019 certain extraordinary fees and costs related to regulatory requirements, under Company’s Management Agreement amounted to $9,164, and are presented under the caption “Acquisition of/additions to vessels and time charters at favorable terms” in the consolidated statements of cash flows. Drydocking and special survey are paid to the Manager at cost. Total management fees for the years ended December 31, 2019, 2018 and for the period from April 28, 2017 (date of inception) to December 31, 2017, under the respective agreement amounted to $65,638, $53,772 and $16,488, respectively, and are presented under the caption “Management fees (entirely through related parties transactions)” in the consolidated statements of income.

General & administrative expenses: Pursuant to the administrative services agreement, dated June 7, 2017, as amended on August 28, 2019 (the “Administrative Agreement”), the Manager also provides administrative services to Navios Containers, which include bookkeeping, audit and accounting services, legal and insurance services, administrative and clerical services, banking and financial services, advisory services, client and investor relations and other. The Manager is reimbursed for reasonable costs and expenses incurred in connection with the provision of these services. The term of this agreement is for an initial period of five years with an automatic extension for five years periods thereafter unless a notice for termination is received by either party. On August 2019, the Company extended the duration of the Administrative Agreement until January 1, 2025, with an automatic renewal for an additional five years, unless earlier terminated by either party. The amendment dated August 28, 2019 also provides for payment of a termination fee, equal to the fees charged for the full calendar year preceding the termination date, by the Company in the event the Administrative Agreement is terminated on or before December 31, 2024. Total general and administrative fees charged by the Manager for the years ended December 31, 2019, 2018 and for the period from April 28, 2017 (date of inception) to December 31, 2017 amounted to $8,034, $6,638 and $1,868, respectively, and are presented under the caption “General and administrative expenses” in the consolidated statements of income.

Balance due from/to related parties: Balance due to related parties as of December 31, 2019 amounted to $16,586 (December 31, 2018: $4,065), and the long-term receivable amounted to $8,195 (December 31, 2018: $7,862). The balances mainly consisted of administrative fees, drydocking, extraordinary fees and costs related to regulatory requirements including ballast water treatment system, other expenses, as well as management fees, in accordance with the management agreement.

F-22

NAVIOS MARITIME CONTAINERS L.P.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

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

Consideration payable to Navios Partners: The Company used the proceeds of the private placement on June 8, 2017, to acquire five 4,250 TEU vessels from Navios Partners for a total purchase price of $64,000. The payment terms included a $24,000 sellers’ credit by Navios Partners for a period of up to 90 days at LIBOR plus 375 bps. On June 30, 2017 and August 29, 2017, the Company paid to Navios Partners $10,000 and $14,000, respectively, in relation to this agreement. As of December 31, 2019 and 2018, the amount due and the interest payable to Navios Partners related to this agreement was $0. Interest expense for the years ended December 31, 2019, 2018 and for the period from April 28, 2017 (date of inception) to December 31, 2017 amounted to $0, $0 and $189, respectively and is presented under the caption “Interest expense and finance cost” in the consolidated statements of income.

Omnibus Agreement: On June 7, 2017, the Company entered into an omnibus agreement with Navios Maritime Acquisition Corporation (“Navios Acquisition”), Navios Holdings and Navios Partners pursuant to which Navios Acquisition, Navios Holdings, Navios Partners and their controlled affiliates generally have granted a right of first refusal over any containerships to be sold or acquired in the future. The omnibus agreement contains significant exceptions that will allow Navios Acquisition, Navios Holdings and Navios Partners or any of their controlled affiliates to compete with the Company under specified circumstances.

NOTE 13: SEGMENT INFORMATION

The Company reports financial information and evaluates its operations by charter revenues. The Company does not use discrete financial information to evaluate operating results for each type of charter or by sector. As a result, management reviews operating results solely by revenue per day and operating results of the fleet and thus the Company has determined that it operates under one reportable segment.

Revenue by Geographic Region

Vessels operate on a worldwide basis and are not restricted to specific locations. Accordingly, it is not possible to allocate the assets of these operations to specific countries.

The following table sets out operating revenue by geographic region for the Company’s reportable segment. Revenue is allocated on the basis of the geographic region in which the customer is located. Revenues from specific geographic regions which contribute over 10% of total revenue are disclosed separately.


	Year Ended December 31, 2019		Year Ended December 31, 2018		Period from April 28, 2017 (date of inception) to December 31, 2017
Asia	$	89,271	$	108,508	$	34,233
Europe		52,261		25,413		4,955

Total Revenue	$	141,532	$	133,921	$	39,188

NOTE 14: LISTING TRANSACTION-RELATED EXPENSES

Listing transaction-related expenses for the year ended December 31, 2018 amounted to $4,990 and related to expenses incurred in connection with the Company’s listing on the Nasdaq Global Select Market.

NOTE 15: EARNINGS PER UNIT

The unit and per unit data included in the accompanying consolidated financial statements have been restated for the periods presented to reflect the Company’s conversion to a limited partnership, as discussed in Note 1.

Earnings per unit is calculated by dividing net income available to common unit holders by the weighted average number of common units of Navios Containers outstanding during the period.

F-23

NAVIOS MARITIME CONTAINERS L.P.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

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

The general partner interest is a non-economic interest, meaning the Company’s general partner, Navios Maritime Containers GP LLC, does not participate in the Company’s distributions, profits or losses by reason of owning its general partner interest.

The calculations of the basic and diluted earnings per unit are presented below.


	Year Ended December 31, 2019		Year Ended December 31, 2018		Period from April 28, 2017 (date of inception) to December 31, 2017
Numerator
Net income	$	7,507	$	12,700	$	2,638
Denominator:
Denominator for basic and diluted earnings per common unit—weighted average number of common units		34,603,100		33,527,135		18,371,855
Basic and diluted net earnings per common unit	$	0.22	$	0.38	$	0.14

NOTE 16: PARTNERS’ CAPITAL

Navios Containers

Common units represent limited partnership interests in the Company. The holders of common units are entitled to participate pro rata in distributions from the Company and to exercise the rights or privileges that are available to common unit holders under the Company’s partnership agreement. The common unit holders have limited voting rights. The vote of the holders of at least 75% of all outstanding common units is required to remove the general partner.

Navios Containers Inc.

On June 8, 2017, Navios Containers Inc. closed its private placement and issued 10,057,645 common shares for $50,288 of gross proceeds at a subscription price of $5.00 per share. Navios Partners invested $30,000 and received 6,000,000 common shares and Navios Holdings invested $5,000 and received 1,000,000 common shares. Navios Partners and Navios Holdings also received warrants, with a five-year term, for 6.8% and 1.7% of the newly issued equity, respectively, at an exercise price of $5.00 per share.

On August 29, 2017, Navios Containers Inc. closed a follow-on private placement and issued 10,000,000 common shares at a subscription price of $5.00 per share resulting in gross proceeds of $50,000. Navios Partners invested $10,000 and received 2,000,000 common shares. Navios Partners and Navios Holdings also received warrants, with a five year term, for 6.8% and 1.7% of the newly issued equity, respectively, at an exercise price of $5.00 per share.

On November 9, 2017, Navios Containers Inc. closed a follow-on private placement and issued 9,090,909 common shares at a subscription price of $5.50 per share, resulting in gross proceeds of $50,000. Navios Partners invested $10,000 and received 1,818,182 common shares. Navios Partners and Navios Holdings also received warrants, with a five-year term, for 6.8% and 1.7% of the newly issued equity, respectively, at an exercise price of $5.50 per share.

On March 13, 2018, Navios Containers Inc. closed a follow-on private placement and issued 5,454,546 common shares at a subscription price of $5.50 per share, resulting in gross proceeds of $30,000. Navios Partners invested $14,460 and received 2,629,095 common shares and Navios Holdings invested $500 and received 90,909 common shares. Navios Partners and Navios Holdings also received warrants, with a five-year term, for 6.8% and 1.7% of the newly issued equity, respectively, at an exercise price of $5.50 per share.

On November 30, 2018, Navios Containers Inc. converted the issued shares of common stock to common units (see Note 1).

F-24

NAVIOS MARITIME CONTAINERS L.P.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

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

In March 2019, the Board of Directors authorized a unit repurchase program for up to $10,000 of the Company’s common units over a one-year period. The repurchase program has expired under its terms. Common unit repurchases could have been made from time to time for cash in open market transactions at prevailing market prices or in privately negotiated transactions. The timing and amount of repurchases under the program would have been determined by Company’s management based upon market conditions and other factors. Repurchases would have been made pursuant to a program adopted under Rule 10b5-1 under the Securities Exchange Act of 1934, as amended. The program did not require any minimum repurchase or any specific number of units of common equity and could have been suspended or reinstated at any time in the Company’s discretion and without notice. As of its expiration, no common units were purchased under this program. The Board of Directors may consider another Common Unit repurchase program or Common Unit repurchases, in its discretion, depending upon the Company’s cash position, the market price of the Common Units and other relevant factors.

Following the private placement and the conversion described above, the Company had a total of 34,603,100 common units outstanding as of December 31, 2019. Upon the conversion of Navios Containers Inc. to a limited partnership all of the warrants described above issued to Navios Partners and Navios Holdings expired.

NOTE 17: SUBSEQUENT EVENTS

On March 11, 2020, the Company completed a $119,060 sale and leaseback transaction with an unrelated third party to refinance the existing credit facilities of the Navios Unison, the Navios Constellation, the Navios Unite and the YM Utmost. The Company drew the entire amount on March 13, 2020. The Company has the option to buy: (i) the Navios Unison and the Navios Constellation with purchase option price starting at the end of year three de-escalating up to a $12,000 and $13,500 purchase obligation at maturity, respectively; and (ii) the Navios Unite and the YM Utmost with purchase option price starting at the end of year two de-escalating up to a $9,000 and $9,000 purchase obligation at maturity, respectively. The sale and leaseback agreement: (i) will be repayable in 28 quarterly installments of $991 and $1,020 each, matures in March 2027 and bears interest at LIBOR plus 310 bps per annum for the Navios Unison and the Navios Constellation, respectively; (ii) will be repayable in 20 quarterly installments of: (a) $8.0 per day for the first eight installments; and (b) $3.4 per day for the remaining 12 installments, matures in March 2025 and bears interest at LIBOR plus 335 bps per annum for the Navios Unite; and (iii) will be repayable in 20 quarterly installments of: (a) $8.0 per day for the first eight installments; and (b) $3.5 per day for the remaining 12 installments, matures in March 2025 and bears interest at LIBOR plus 335 bps per annum for the YM Utmost.

F-25

Item 19. Exhibits


Exhibit Number		Description

1.1		Amended and Restated Plan of Conversion of Navios Maritime Containers Inc.⁽¹⁾

1.2		Certificate of Conversion of Navios Maritime Containers Inc.⁽¹⁾

1.3		Certificate of Limited Partnership of Navios Maritime Containers L.P.⁽¹⁾

1.4		Agreement of Limited Partnership of Navios Maritime Containers L.P.⁽¹⁾

1.5		Certificate of Formation of Navios Maritime Containers Inc.⁽¹⁾

1.6		Limited Liability Company Agreement of Navios Maritime Containers GP LLC.⁽¹⁾

4.1		Supplemental Agreement, dated June 30, 2017, to Facility Agreement, dated May 30, 2008, giving effect to Amended and Restated Facility Agreement, dated June 30, 2017, among Olympia II Navigation Limited, Sui An Navigation Limited, Pingel Navigation Limited, Ebba Navigation Limited, Clan Navigation Limited and ABN AMRO BANK N.V.⁽¹⁾

4.1.1		Supplemental Agreement, dated July 27, 2017, to the Amended and Restated Facility Agreement, dated June 30, 2017, among Olympia II Navigation Limited, Sui An Navigation Limited, Pingel Navigation Limited, Ebba Navigation Limited, Clan Navigation Limited and ABN AMRO BANK N.V.⁽¹⁾

4.1.2		Supplemental Agreement, dated December 1, 2017, to the Amended and Restated Facility Agreement, dated June 30, 2017, among Olympia II Navigation Limited, Sui An Navigation Limited, Pingel Navigation Limited, Ebba Navigation Limited, Clan Navigation Limited and ABN AMRO BANK N.V.⁽¹⁾

4.1.3		Supplemental Agreement, dated June 29, 2018, to the Amended and Restated Facility Agreement, dated June 30, 2017, among Olympia II Navigation Limited, Sui An Navigation Limited, Pingel Navigation Limited, Ebba Navigation Limited, Clan Navigation Limited and ABN AMRO BANK N.V.⁽¹⁾

4.2		Facility Agreement, dated July 27, 2017, between Navios Maritime Containers Inc. and ABN AMRO BANK N.V.⁽¹⁾

4.2.1		Supplemental Agreement, dated December 1, 2017, to the Facility Agreement, dated July 27, 2017, between Navios Maritime Containers Inc. and ABN AMRO BANK N.V. ⁽¹⁾

4.2.2		Supplemental Agreement, dated June 29, 2018, to the Facility Agreement, dated July 27, 2017, between Navios Maritime Containers Inc. and ABN AMRO BANK N.V. ⁽¹⁾

4.3		Loan Agreement, dated December 20, 2017, among Theros Ventures Limited, Legato Shipholding Inc., Peran Maritime Inc., Zoner Shiptrade S.A. and BNP Paribas. ⁽¹⁾

4.3.1		Deed of Accession, Amendment and Restatement, dated September 5, 2018, among Theros Ventures Limited, Legato Shipholding Inc., Peran Maritime Inc., Zoner Shiptrade S.A., Crayon Shipping Ltd., Navios Maritime Containers Inc., Boheme Navigation Company, Nefeli Navigation S.A. and BNP Paribas. ⁽¹⁾

4.4		Loan Agreement, dated May 25, 2018, among Nefeli Navigation S.A., the banks and financial institutions listed therein and BNP Paribas. ⁽¹⁾

4.5		Loan Agreement, dated June 28, 2018, among Fairy Shipping Corporation, Limestone Shipping Corporation, the banks and financial institutions listed therein and HSH Nordbank AG. ⁽¹⁾



4.6		Omnibus Agreement, dated June 7, 2017, among Navios Acquisition, Navios Holdings, Navios Partners, Navios Midstream, Navios Maritime Containers Inc., and Navios Partners Containers Finance Inc. ⁽¹⁾

4.7		Management Agreement, dated June 7, 2017, between Navios Maritime Containers Inc. and Navios Shipmanagement Inc.⁽¹⁾

4.7.1		Amendment No. 1 to Management Agreement, dated November 23, 2017, between Navios Maritime Containers Inc. and Navios Shipmanagement Inc. ⁽¹⁾

4.7.2		Amendment No. 2 to Management Agreement, dated April 23, 2018, between Navios Maritime Containers Inc. and Navios Shipmanagement Inc. ⁽¹⁾

4.7.3		Amendment No. 3 to Management Agreement, dated June 1, 2018, between Navios Maritime Containers Inc. and Navios Shipmanagement Inc. ⁽¹⁾

4.7.4		Amendment No. 4 to Management Agreement, dated August 28, 2019, between Navios Containers and Navios Shipmanagement Inc.⁽²⁾

4.8		Administrative Services Agreement, dated June 7, 2017, between Navios Maritime Containers Inc. and Navios Shipmanagement Inc. ⁽¹⁾

4.8.1		Amendment No. 1 to Administrative Services Agreement, dated August 28, 2019, between Navios Containers and Navios Shipmanagement Inc. ⁽³⁾

4.9		Loan Agreement, dated November 9, 2018, among Afros Maritime Inc., Iliada Shipping S.A., Vinetree Marine Company, Vythos Marine Corp., the banks and financial institutions listed therein and HSH Nordbank AG. ⁽¹⁾

4.10.1		Bareboat Charters and Memoranda of Agreement by and between Ocean Dazzle Shipping Limited, wholly owned subsidiary of Minsheng Financial Leasing Co. Ltd., and Jasmer Shipholding Ltd, Inastros Maritime Corp., Jaspero Shiptrade S.A., Thetida Marine Co., Evian Shiptrade Ltd and Anthimar Marine Inc., dated May 25, 2018, providing for the sale and leaseback of the APL Atlanta, APL Denver, APL Los Angeles, APL Oakland, Navios Amaranth and Navios Amarillo, respectively. ⁽¹⁾

4.10.2		Bareboat Charters and Memoranda of Agreement by and between Ocean Dawn Shipping Limited, wholly owned subsidiary of Minsheng Financial Leasing Co. Ltd., and Sui An Navigation Limited, Pingel Navigation Limited, Ebba Navigation Limited, Clan Navigation Limited, Olympia II Navigation Limited and Enplo Shipping Limited, dated May 25, 2018, providing for the sale and leaseback of the MOL Dedication, MOL Delight, MOL Destiny, MOL Devotion, Navios Domino (ex MOL Dominance) and Navios Verde, respectively. ⁽¹⁾

4.10.3		Bareboat Charters and Memoranda of Agreement by and between Ocean Wood Tang Shipping Limited, wholly owned subsidiary of Minsheng Financial Leasing Co. Ltd., and Bertyl Ventures Co., Isolde Shipping Inc., Rodman Maritime Corp., Silvanus Marine Company, Morven Chartering Inc. and Velour Management Corp., dated May 25, 2018, providing for the sale and leaseback of the Navios Azure, Navios Indigo, Navios Spring, Navios Summer, Navios Verano and Navios Vermillion, respectively. ⁽¹⁾

4.10.4		Bareboat Charters and Memoranda of Agreement (Form of) by and between Xiang L44 Hk International Ship Lease Co., Limited, Xiang L45 Hk International Ship Lease Co., Limited,, Xiang L46 Hk International Ship Lease Co., Limited and Xiang L47 Hk International Ship Lease Co., Limited wholly owned subsidiaries of Bank of Communications Financial Leasing Company and Vythos Marine Corp., Nefeli Navigation S.A., Fairy Shipping Corporation and Limestone Shipping Corporation dated March 11, 2020, providing for the sale and leaseback of the Navios Constellation, the Navios Unison, the Ym Utmost and the Navios Unite.*

8.1		List of Subsidiaries of Navios Maritime Containers L.P.*



12.1		Section 302 Certification of Chief Executive Officer*

12.2		Section 302 Certification of Chief Financial Officer*

13.1		Section 906 Certification of Chief Executive Officer and Chief Financial Officer*

101		The following materials from the Company’s Annual Report on Form 20-F for the fiscal year ended December 31, 2019, formatted in eXtensible Business Reporting Language (XBRL): (i) Consolidated Balance Sheets at December 31, 2019, 2018 and 2017; (ii) Consolidated Statements of Income for each of the years ended December 31, 2019, 2018 and 2017; (iii) Consolidated Statements of Cash Flows for each of the years ended December 31, 2019, 2018 and 2017; (iv) Consolidated Statements of Changes in Partners’ Capital for each of the years ended December 31, 2019, 2018 and 2017; and (v) the Notes to the Consolidated Financial Statements as blocks of text.

(1)	Previously filed as an exhibit to the Company’s Registration Statement on Form F-1, as amended (File No. 333-225677), as filed with the SEC and hereby incorporated by reference to the Annual Report.

(2)	Previously filed as an exhibit to the Company’s current report on Form 6-K/A filed with the SEC on September 19, 2019 and hereby incorporated by reference to the Annual Report.

(3)	Previously filed as an exhibit to the Company’s current report on Form 6-K filed with the SEC on September 11, 2019 and hereby incorporated by reference to the Annual Report.

*	Filed herewith

SIGNATURES

Navios Maritime Containers L.P. hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized the undersigned to sign this Annual Report on its behalf.

Navios Maritime Containers L.P.

/s/ Angeliki Frangou

By: Angeliki Frangou

Its: Chairman and Chief Executive Officer

Date: March 18, 2020

Exhibit 4.10.4

LOGO

1. Shipbroker 2. Place and date N/A 3. Owners/Place of business (Cl. 1) 4. Bareboat Charterers/Place of business (Cl. 1) XIANG L46 HK INTERNATIONAL SHIP LEASE CO., LIMITED, a FAIRY SHIPPING CORPORATION, a corporation company incorporated under the laws of Hong Kong with incorporated and existing under the laws of the registration number 2913116 whose registered office is at 1/F Republic of the Marshall Islands with registration Far East Consortium Bldg 121 Des Voeux Rd Central, Hong Kong number 61718 whose registered address at Trust Company Complex, Ajeltake Road, Ajeltake Island, Majuro, Marshall Islands MH 96960 5. Vessel’s name, call sign and flag (Cl. 1 and 3) YM Utmost / A8HZ5 / Liberia 6. Type of Vessel 7. GT/NT Container Carrier 90,389 / 55,275 8. When/Where built 9. Total DWT (abt.) in metric tons on summer freeboard 2006 101,597 HYUNDAI HEAVY INDUSTRIES CO., LTD. 10. Classification Society (Cl. 3) 11. Date of last special survey by the Vessel’s classification American Bureau of Shipping or any other Classification Society society TBA 12 Further particulars of Vessel (also indicate minimum number of months’ validity of class certificates agreed acc. to Cl. 3) IMO No.: 9302621 Length: 319M Breadth: 42.8M Depth: 24.5M 13. Port or Place of delivery (Cl. 3) 14. Time for delivery (Cl. 4) 15. Cancelling date (Cl. 5) The place of delivery specified under Clause 5(a) of the MOA See Clause 34 (Delivery of See Clause 33 Vessel) (Cancellation) 16. Port or Place of redelivery (Cl. 15) 17. No. of months’ validity of trading and class certificates See Clause 40 (Termination, Redelivery and Total Loss) upon redelivery (Cl. 15) See Clause 40 (Termination, Redelivery and Total Loss) 18. Running days’ notice if other than stated in Cl. 4 19. Frequency of dry-docking (Cl. 10(g)) N/A In accordance with Classification Society or Flag State requirements 20. Trading limits (Cl. 6) Worldwide within International Navigating Limits 21. Charter period (Cl. 2) 22. Charter hire (Cl. 11) See Clause 32 (Charter Period) See Clause 36 (Charterhire and Advance Charterhire) 23. New class and other safety requirements (state percentage of Vessel’s insurance value acc. to Box 29)(Cl. 10(a)(ii)) N/A 24. Rate of interest payable acc. to Cl. 11 (f) and, if applicable, acc. 25. Currency and method of payment (Cl. 11) to PART IV Dollars/bank transfer See Clause 36 (Charterhire and Advance Charterhire)—neither Clause 11 (f) nor Part IV applies 26. Place of payment; also state beneficiary and bank account (Cl. 27. Bank guarantee/bond (sum and place) (Cl. 24) (optional) 11) See Clause 24 (Corporate Guarantee) The following account: Beneficiary: FAIRY SHIPPING CORPORATION Account No.: 1200049745 Beneficiary bank: Hamburg Commercial Bank AG SWIFT Code: HSHNDEHH or such other account as may be notified by the Owners to the Charterers from time to time Copyright © 2001 BIMCO. All rights reserved. Any unauthorised copying, duplication, reproduction or distribution of this BIMCO SmartCon document will constitute an infringement of BIMCO’s copyright. Explanatory notes are available from BIMCO at www.bimco.org. First published in 1974 as BARECON A and B. Amalgamated and revised in 1989. Revised 2001.

LOGO

28. Mortgage(s), if any (state whether 12(a) or (b) applies; if 12(b) 29. Insurance (hull and machinery and war risks) (state applies state date of Financial Instrument and name of value acc. to Cl. 13(f) or, if applicable, acc. to Cl. 14(k)) Mortgagee(s)/Place of business) (Cl. 12) (also state if Cl. 14 applies) See Clause 35 (Quiet Enjoyment) See Clause 38 (Insurance)—Clause 14 does not apply 30. Additional insurance cover, if any, for Owners’ account limited to 31. Additional insurance cover, if any, for Charterers’ (Cl. 13(b) or, if applicable, Cl. 14(g)) account limited to (Cl. 13(b) or, if applicable, Cl. 14(g)) See Clause 38 (Insurance) See Clause 38 (Insurance) 32. Latent defects (only to be filled in if period other than stated in 33. Brokerage commission and to whom payable (Cl. 27) Cl. 3) N/A N/A 34. Grace period (state number of clear banking days) (Cl. 28) 35. Dispute Resolution (state 30(a), 30(b) or 30(c); if 30(c) See Clause 44 agreed Place of Arbitration must be stated (Cl. 30) (c) See Clause 30 (Dispute Resolution) 36. War cancellation (indicate countries agreed) (Cl. 26(f)) N/A 37. Newbuilding Vessel (indicate with “yes” or “no” whether PART III 38. Name and place of Builders (only to be filled in if PART applies) (optional) III applies) N/A No, Part III does not apply 39. Vessel’s Yard Building No. (only to be filled in if PART III applies) 40. Date of Building Contract (only to be filled in if PART III N/A applies) N/A 41. Liquidated damages and costs shall accrue to (state party acc. to Cl. 1) a) N/A b) N/A c) N/A 42. Hire/Purchase agreement (indicate with “yes” or “no” whether 43. Bareboat Charter Registry (indicate with “yes” or “no” PART IV applies) (optional) whether PART V applies) (optional) No, Part IV does not apply No, Part V does not apply 44. Flag and Country of the Bareboat Charter Registry (only to be 45. Country of the Underlying Registry (only to be filled in if filled in if PART V applies) PART V applies) N/A N/A 46. Number of additional clauses covering special provisions, if agreed Clause 32 (Charter Period) to Clause 60 (Definitions) PREAMBLE—It is mutually agreed that this Contract shall be performed subject to the conditions contained in this Charter which shall include PART I and PART II. In the event of a conflict of conditions, the provisions of PART I shall prevail over those of PART II to the extent of such conflict but no further. It is further mutually agreed that PART III and/or PART IV and/or PART V shall only apply and only form part of this Charter if expressly agreed and stated in Boxes 37, 42 and 43. If PART III and/or PART IV and/or PART V apply, it is further agreed that in the event of a conflict of conditions, the provisions of PART I and PART II shall prevail over those of PART III and/or PART IV and/or PART V to the extent of such conflict but no further. Signature (Owners) Signature (Charterers) For and on behalf of the Owners For and on behalf of the Charterers Name: Name: Title: Title: Copyright © 2001 BIMCO. All rights reserved. Any unauthorised copying, duplication, reproduction or distribution of this BIMCO SmartCon document will constitute an infringement of BIMCO’s copyright. Explanatory notes are available from BIMCO at www.bimco.org. First published in 1974 as BARECON A and B. Amalgamated and revised in 1989. Revised 2001.

LOGO

PART II BARECON 2001 Standard Bareboat Charter 1 1. Definitions See also Clause 60 (Definitions) 2 In this Charter, the following terms shall have the 3 meanings hereby assigned to them: 4 “The Owners” shall mean the party identified in Box 3; 5 “The Charterers” shall mean the party identified in Box 4; 6 “The Vessel” shall mean the vessel named in Box 5 and 7 with particulars as stated in Boxes 6 to 12. 8 “Financial Instrument” means the mortgage, deed of 9 covenant or other such financial security instrument as 10 annexed to this Charter and stated in Box 28. 11 2 Charter Period 12 In consideration of the hire detailed in Box 22, 13 the Owners have agreed to let and the Charterers have 14 agreed to hire the Vessel for the period stated in Box 21. 15 (“The Charter Period”). See also Clause 32 (Charter Period) and Clause 36 (Charterhire and Advance Charterhire). 16 3. Delivery 17 (not applicable when Part III applies, as indicated in Box 37) 18 (a) The Owners shall before and at the time of delivery 19 exercise due diligence to make the Vessel seaworthy 20 And in every respect ready in hull, machinery and 21 equipment for service under this Charter. 22 The Vessel shall be delivered by the Owners and taken 23 over by the Charterers at the port or place indicated in 24 Box 13. in such ready safe berth as the Charterers may 25 direct. 26 (b) The Vessel is shall be properly documented on 27 delivery in accordance with the laws of the flag State 28 indicated in Box 5 and the requirements of the 29 cClassification sSociety stated in Box 10. The Vessel upon 30 delivery shall have her survey cycles up to date and 31 trading and class certificates valid for at least the number 32 of months agreed in Box 12. 33 (c) The delivery of the Vessel by the Owners and the 34 taking over of the Vessel by the Charterers shall 35 constitute a full performance by the Owners of all the 36 Owners’ obligations under this Clause 3, and thereafter 37 the Charterers shall not be entitled to make or assert 38 any claim against the Owners on account of any 39 conditions, representations or warranties expressed or 40 implied with respect to the Vessel. but the Owners shall 41 be liable for the cost of but not the time for repairs or 42 renewals occasioned by latent defects in the Vessel, 43 her machinery or appurtenances, existing at the time of 44 delivery under this Charter, provided such defects have 45 manifested themselves within twelve (12) months after 46 delivery unless otherwise provided in Box 32. 47 4. Time for Delivery See Clauses 32 (Charter Period) and 34 (Delivery of Vessel) 48 (not applicable when Part III applies, as indicated in Box 37) 49 The Vessel shall not be delivered before the date 50 indicated in Box 14 without the Charterers’ consent and 51 the Owners shall exercise due diligence to deliver the 52 Vessel not later than the date indicated in Box 15. 53 Unless otherwise agreed in Box 18, the Owners shall 54 give the Charterers not less than thirty (30) running days’ 55 preliminary and not less than fourteen (14) running days’ 56 definite notice of the date on which the Vessel is 57 expected to be ready for delivery. 58 The Owners shall keep the Charterers closely advised 59 of possible changes in the Vessel’s position. 60 5. Cancelling See Clause 33 (Cancellation) 61 (not applicable when Part III applies, as indicated in Box 37) 62 (a) Should the Vessel not be delivered latest by the 63 cancelling date indicated in Box 15, the Charterers shall 64 have the option of cancelling this Charter by giving the 65 Owners notice of cancellation within thirty-six (36) 66 running hours after the cancelling date stated in Box 67 15, failing which this Charter shall remain in full force 68 and effect. 69 (b) If it appears that the Vessel will be delayed beyond 70 the cancelling date, the Owners may, as soon as they 71 are in a position to state with reasonable certainty the 72 day on which the Vessel should be ready, give notice 73 thereof to the Charterers asking whether they will 74 exercise their option of cancelling, and the option must 75 then be declared within one hundred and sixty-eight 76 (168) running hours of the receipt by the Charterers of 77 such notice or within thirty-six (36) running hours after 78 the cancelling date, whichever is the earlier. If the 79 Charterers do not then exercise their option of cancelling, 80 the seventh day after the readiness date stated in the 81 Owners’ notice shall be substituted for the cancelling 82 date indicated in Box 15 for the purpose of this Clause 5. 83 (c) Cancellation under this Clause 5 shall be without 84 prejudice to any claim the Charterers may otherwise 85 have on the Owners under this Charter. 86 6. Trading Restrictions See also Clauses 46.1 (n) and 46.1(o) 87 The Vessel shall be employed in lawful trades for the 88 carriage of suitable lawful merchandise within the trading 89 limits indicated in Box 20. 90 The Charterers undertake not to employ the Vessel or 91 suffer the Vessel to be employed otherwise than in 92 conformity with the terms of the contracts of insurance 93 (including any warranties expressed or implied therein) 94 without first obtaining the consent of the insurers to such 95 employment and complying with such requirements as 96 to extra premium or otherwise as the insurers may 97 prescribe. 98 The Charterers also undertake not to employ the Vessel 99 or suffer her employment in any trade or business which 100 is forbidden by the law of any country to which the Vessel 101 may sail or is otherwise illicit or in carrying illicit or 102 prohibited goods or in any manner whatsoever which 103 may render her liable to condemnation, destruction, 104 seizure or confiscation. 105 Notwithstanding any other provisions contained in this 106 Charter it is agreed that nuclear fuels or radioactive 107 products or waste are specifically excluded from the 108 cargo permitted to be loaded or carried under this 109 Charter. This exclusion does not apply to radio-isotopes 110 used or intended to be used for any industrial, 111 commercial, agricultural, medical or scientific purposes 112 provided the Owners’ prior approval has been obtained 113 to loading thereof. 114 7. Surveys on Delivery and Redelivery 115 (not applicable when Part III applies, as indicated in Box 37) 116 The Owners and Charterers shall each appoint 117 surveyors for the purpose of determining and agreeing 118 in writing the condition of the Vessel at the time of 119 delivery and redelivery pursuant to Clause 40 (Termination, Redelivery and Total Loss) (with the Copyright © 2001 BIMCO. All rights reserved. Any unauthorised copying, duplication, reproduction or distribution of this BIMCO SmartCon document will constitute an infringement of BIMCO’s copyright. Explanatory notes are available from BIMCO at www.bimco.org. First published in 1974 as BARECON A and B. Amalgamated and revised in 1989. Revised 2001.

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PART II BARECON 2001 Standard Bareboat Charter relevant costs paid by the Charterers) hereunder. The Owners shall 120 bear all expenses of the On-hire Survey including loss 121 of time, if any, and the Charterers shall bear all expenses 122 of the Off-hire Survey including loss of time, if any, at 123 the daily equivalent to the rate of hire or pro rata thereof. 124 8. Inspection 125 The Owners shall have the right at any time either (i) once every calendar year provided no Potential Termination Event or Termination Event has occurred (after giving reasonable notice to the Charterers and provided that the Owners do not unduly interfere with or cause delay to the commercial operation of the Vessel) or (ii) at any time following the occurrence of a Potential Termination Event or Termination event), after giving 126 reasonable notice to the Charterers to inspect or survey 127 the Vessel or instruct a duly authorised surveyor to carry 128 out such survey on their behalf:-129 (a) to ascertain the condition of the Vessel and satisfy 130 themselves that the Vessel is being properly repaired 131 and maintained. The costs and fees for such inspection 132 or survey shall be paid by the Charterers; Owners unless the Vessel 133 is found to require repairs or maintenance in order to 134 achieve the condition so provided; 135 (b) in dry-dock if the Charterers have not dry-docked 136 Her in accordance with Clause 10(g). The costs and fees 137 for such inspection or survey shall be paid by the 138 Charterers; and 139 (c) for any other commercial reason they consider 140 necessary (provided it does not unduly interfere with 141 the commercial operation of the Vessel). The costs and 142 fees for such inspection and survey shall be paid by the 143 Owners. 144 All time used in respect of inspection, survey or repairs 145 shall be for the Charterers’ account and form part of the 146 Charter Period. 147 The Charterers shall also permit the Owners to inspect 148 the Vessel’s log books whenever requested and shall 149 whenever required by the Owners furnish them with full 150 information regarding any casualties or other accidents 151 or damage to the Vessel. The Charterers shall provide all necessary assistance to the Owners, their representatives or agents in respect of any inspection and/or survey referred to hereunder. 152 9. Inventories, Oil and Stores See Clause 34.7 153 A complete inventory of the Vessel’s entire equipment, 154 outfit including spare parts, appliances and of all 155 consumable stores on board the Vessel shall be made 156 by the Charterers in conjunction with the Owners on 157 delivery and again on redelivery of the Vessel. The 158 Charterers and the Owners, respectively, shall at the 159 time of delivery and redelivery take over and pay for all 160 bunkers, lubricating oil, unbroached provisions, paints, 161 ropes and other consumable stores (excluding spare 162 parts) in the said Vessel at the then current market prices 163 at the ports of delivery and redelivery, respectively. The 164 Charterers shall ensure that all spare parts listed in the 165 inventory and used during the Charter Period are 166 replaced at their expense prior to redelivery of the 167 Vessel. 168 10. Maintenance and Operation 169 (a)(i)Maintenance and Repairs—During the Charter 170 Period the Vessel shall be in the full possession 171 and at the absolute disposal for all purposes of the 172 Charterers and under their complete control in 173 every respect. The Charterers shall maintain the 174 Vessel, her machinery, boilers, appurtenances and 175 spare parts in a good state of repair, in efficient 176 operating condition and in accordance with good 177 commercial maintenance practice and, except as 178 provided for in Clause 14(l), if applicable, at their 179 own expense they shall at all times keep the 180 Vessel’s classification Class fully up to date with the Classification 181 Society indicated in Box 10 and maintain all other 182 necessary certificates in force at all times. 183 (ii) New Class and Other Safety Requirements—In the 184 event of any improvement, structural changes or 185 new equipment becoming necessary for the 186 continued operation of the Vessel by reason of new 187 class requirements or by compulsory legislation . the Charterers shall ensure that the same are complied with and the time and costs of compliance shall be for the Charterers’ account. 188 costing (excluding the Charterers’ loss of time) 189 more than the percentage stated in Box 23, or if 190 Box 23 is left blank, 5 per cent. of the Vessel’s 191 insurance value as stated in Box 29, then the 192 extent, if any, to which the rate of hire shall be varied 193 and the ratio in which the cost of compliance shall 194 be shared between the parties concerned in order 195 to achieve a reasonable distribution thereof as 196 between the Owners and the Charterers having 197 regard, inter alia, to the length of the period 198 remaining under this Charter shall, in the absence 199 of agreement, be referred to the dispute resolution 200 method agreed in Clause 30. 201 (iii) Financial Security—The Charterers shall maintain 202 financial security or responsibility in respect of third 203 party liabilities as required by any government, 204 including federal, state or municipal or other division 205 or authority thereof, to enable the Vessel, without 206 penalty or charge, lawfully to enter, remain at, or 207 leave any port, place, territorial or contiguous 208 waters of any country, state or municipality in 209 performance of this Charter without any delay. This 210 obligation shall apply whether or not such 211 requirements have been lawfully imposed by such 212 government or division or authority thereof. 213 The Charterers shall make and maintain all arrange-214 ments by bond or otherwise as may be necessary to 215 satisfy such requirements at the Charterers’ sole 216 expense and the Charterers shall indemnify the Owners 217 against all consequences whatsoever (including loss of 218 time) for any failure or inability to do so. 219 (b) Operation of the Vessel—The Charterers shall at 220 their own expense and by their own procurement man, 221 victual, navigate, operate, supply, fuel and, whenever 222 required, repair the Vessel during the Charter Period 223 and they shall pay all charges and expenses of every 224 kind and nature whatsoever incidental to their use and 225 operation of the Vessel under this Charter, including 226 annual fFlag State fees and any foreign general 227 municipality and/or state taxes. The Master, officers 228 and crew of the Vessel shall be the servants of the Charterers Copyright © 2001 BIMCO. All rights reserved. Any unauthorised copying, duplication, reproduction or distribution of this BIMCO SmartCon document will constitute an infringement of BIMCO’s copyright. Explanatory notes are available from BIMCO at www.bimco.org. First published in 1974 as BARECON A and B. Amalgamated and revised in 1989. Revised 2001.

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PART II BARECON 2001 Standard Bareboat Charter 229 for all purposes whatsoever, even if for any reason 230 appointed by the Owners. 231 Charterers shall comply with the regulations regarding 232 officers and crew in force in the country of the Vessel’s 233 flag or any other applicable law. 234 (c) The Charterers shall keep the Owners and the 235 mortgagee(s) advised of the intended employment, 236 planned dry-docking (other than the periodical dry-docking referred to under paragraph (g) below) and major repairs of the Vessel, 237 as reasonably required. 238 (d) Flag and Name of Vessel – During the Charter 239 Period, the Charterers shall have the liberty to paint the 240 Vessel in their own colours, install and display their 241 funnel insignia and fly their own house flag (with all fees, costs and expenses arising in relation thereto for the Charterers’ account). The 242 Charterers shall also have the liberty, with the Owners’ 243 consent, which shall not be unreasonably withheld, to 244 change the flag of the Vesseel to that of another Flag State (with all fees, costs and expenses arising in relation thereto for the Charterers’ account) and/or with the Owners’ consent, the name of the Vessel (with all fees, costs and expenses arising in relation thereto for the Charterers’ account) during 245 the Charter Period. Any Ppainting and re-painting, instalment 246 and re-instalment, registration (including maintenance and renewal therefore) and re-registration, if 247 required by the Owners, shall be at the Charterers’ 248 expense and time. If the Flag State requires the Owners to register itself for establish a physical presence or office in the jurisdiction of such Flag State, all fees, costs and expenses payable by the Owners to register itself, establish and maintain such physical presence or office shall be for the account of the Charterers. 249 (e) Changes to the Vessel – Subject to Clause 10(a)(ii) and Clause 10(b), 250 the Charterers shall make no structural changes in the 251 Vessel or changes which materially adversely affect the Vessel’s classification or value in the machinery, boilers, or appurten-252 ances or spare parts thereof without in each instance 253 first securing the Owners’ approval thereof. If the Owners 254 so agree, the Charterers shall, if the Owners so require, 255 restore the Vessel to its former condition. before the 256 termination of this Charter. 257 (f) Use of the Vessel’s Outfit, Equipment and 258 Appliances—The Charterers shall have the use of all 259 outfit, equipment, and appliances on board the Vessel 260 at the time of delivery, provided the same or their 261 substantial equivalent shall be returned to the Owners 262 on redelivery (without prejudice to Clauses 40.6 and 40.7 and if redelivery is required pursuant to this Charter) in the same good order and condition as 263 when received, ordinary wear and tear excepted. The 264 Charterers shall from time to time during the Charter 265 Period replace such items of equipment as shall be so 266 damaged or worn as to be unfit for use. The Charterers 267 are to procure that all repairs to or replacement of any 268 damaged, worn or lost parts or equipment be effected 269 in such manner (both as regards workmanship and 270 quality of materials) as not to diminish the value of the 271 Vessel. Title of any equipment so replaced shall vest in and remain with the Owners. The Charterers have the right to fit additional 272 equipment at their expense and risk (provided that no permanent structural damage is caused to the Vessel by reason of such installation) andbut the Charterers 273 shall, at their expense, remove such equipment and make good any damage caused by the fitting or removal of such additional equipment before the Vessel is redelivered to the Owners pursuant to Clause 40.3 and without prejudice to Clauses 40.6 and 40.7, at the end of the period if 274 requested by the Owners. Any equipment including radio 275 equipment on hire on the Vessel at time of delivery shall 276 be kept and maintained by the Charterers and the 277 Charterers shall assume the obligations and liabilities 278 of the Owners under any lease contracts in connection 279 therewith and shall reimburse the Owners for all 280 expenses incurred in connection therewith, also for any 281 new equipment required in order to comply with radio 282 regulations. 283 (g) Periodical Dry-Docking—The Charterers shall dry-284 dock the Vessel and clean and paint her underwater 285 parts whenever the same may be necessary, but not 286 less than once during the period stated in Box 19 or, if 287 Box 19 has been left blank, every sixty (60) calendar 288 months after delivery or such other period as may be 289 required by the Classification Society or Fflag State. 290 11. Hire See Clause 36 (Charterhire and Advance Charterhire) 291 (a) The Charterers shall pay hire due to the Owners 292 punctually in accordance with the terms of this Charter 293 in respect of which time shall be of the essence. 294 (b) The Charterers shall pay to the Owners for the hire 295 of the Vessel a lump sum in the amount indicated in 296 Box 22 which shall be payable not later than every thirty 297 (30) running days in advance, the first lump sum being 298 payable on the date and hour of the Vessel’s delivery to 299 the Charterers. Hire shall be paid continuously 300 throughout the Charter Period. 301 (c) Payment of hire shall be made in cash without 302 discount in the currency and in the manner indicated in 303 Box 25 and at the place mentioned in Box 26. 304 (d) Final payment of hire, if for a period of less than 305 thirty (30) running days, shall be calculated proportionally 306 according to the number of days and hours remaining 307 before redelivery and advance payment to be effected 308 accordingly. 309 (e) Should the Vessel be lost or missing, hire shall 310 cease from the date and time when she was lost or last 311 heard of. The date upon which the Vessel is to be treated 312 as lost or missing shall be ten (10) days after the Vessel 313 was last reported or when the Vessel is posted as 314 missing by Lloyd’s, whichever occurs first. Any hire paid 315 in advance to be adjusted accordingly. 316 (f) Any delay in payment of hire shall entitle the 317 Owners to interest at the rate per annum as agreed 318 in Box 24. If Box 24 has not been filled in, the three months 319 Interbank offered rate in London (LIBOR or its successor) 320 for the currency stated in Box 25, as quoted by the British 321 Bankers’ Association (BBA) on the date when the hire 322 fell due, increased by 2 per cent., shall apply. 323 (g) Payment of interest due under sub-clause 11(f) Copyright © 2001 BIMCO. All rights reserved. Any unauthorised copying, duplication, reproduction or distribution of this BIMCO SmartCon document will constitute an infringement of BIMCO’s copyright. Explanatory notes are available from BIMCO at www.bimco.org. First published in 1974 as BARECON A and B. Amalgamated and revised in 1989. Revised 2001.

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PART II BARECON 2001 Standard Bareboat Charter 324 shall be made within seven (7) running days of the date 325 of the Owners’ invoice specifying the amount payable 326 or, in the absence of an invoice, at the time of the next 327 hire payment date. 328 12. Mortgage See Clause 35 (Quiet Enjoyment) 329 (only to apply if Box 28 has been appropriately filled in) 330 *) (a) The Owners warrant that they have not effected 331 any mortgage(s) of the Vessel and that they shall not 332 effect any mortgage(s) without the prior consent of the 333 Charterers, which shall not be unreasonably withheld. 334 *) (b) The Vessel chartered under this Charter is financed 335 by a mortgage according to the Financial Instrument. 336 The Charterers undertake to comply, and provide such 337 information and documents to enable the Owners to 338 comply, with all such instructions or directions in regard 339 to the employment, insurances, operation, repairs and 340 maintenance of the Vessel as laid down in the Financial 341 Instrument or as may be directed from time to time during 342 the currency of the Charter by the mortgagee(s) in 343 conformity with the Financial Instrument. The Charterers 344 confirm that, for this purpose, they have acquainted 345 themselves with all relevant terms, conditions and 346 provisions of the Financial Instrument and agree to 347 acknowledge this in writing in any form that may be 348 required by the mortgagee(s). The Owners warrant that 349 they have not effected any mortgage(s) other than stated 350 in Box 28 and that they shall not agree to any 351 amendment of the mortgage(s) referred to in Box 28 or 352 effect any other mortgage(s) without the prior consent 353 of the Charterers, which shall not be unreasonably 354 withheld. 355 *) (Optional, Clauses 12(a) and 12(b) are alternatives; 356 indicate alternative agreed in Box 28). 357 13. Insurance and Repairs See also Clause 38 (Insurance) 358 (a) Subject and without prejudice to Clause 38 (Insurance) Dduring the Charter Period the Vessel shall be kept 359 insured by the Charterers at their expense against hull 360 and machinery,marine and war (including blocking and trapping) and Protection and Indemnity risks and freight, demurrage and defence risks 361 (and any risks against which it is compulsory to insure 362 for the operation of the Vessel, including but not limited to maintaining 363 financial security in accordance with sub-clause 364 10(a)(iii)) in such form as the Owners shall in writing 365 approve, which approval shall not be un-reasonably 366 withheld. Such insurances as specified in this Clause 13 shall be arranged by the 367 Charterers to protect the interests of both the Owners 368 and the Charterers and the mMortgagee(s) (if any), and 369 The Charterers shall be at liberty to protect under such 370 insurances the interests of any managers they may 371 appoint. Insurance policies shall cover the Owners and 372 the Charterers and the Mortgagees (if any) according to their respective interests. 373 Subject to the provisions of the Financial Instruments, (if 374 any), and the agreed loss payable clauses, and the approval of the Owners and the insurers, 375 the Charterers shall effect all insured repairs and shall 376 undertake settlement and reimbursement from the 377 insurers of all costs in connection with such repairs as 378 well as insured charges, expenses and liabilities to the 379 extent of coverage under the insurances herein provided 380 for. 381 The Charterers also to remain responsible for and to 382 effect repairs and settlement of costs and expenses 383 incurred thereby in respect of all other repairs not 384 covered by the insurances and/or not exceeding any 385 possible franchise(s) or deductibles provided for in the 386 insurances. 387 All time used for repairs under the provisions of sub-388 clause 13(a) and for repairs of latent defects according 389 to Clause 3(c) above, including any deviation, shall be 390 for the Charterers’ account. 391 (b) If the conditions of the above insurances permit 392 additional insurance to be placed by the parties, such 393 cover shall be limited to the amount for each party set 394 out in Box 30 and Box 31, respectively. The Owners or 395 the Charterers as the case may be shall immediately 396 furnish the Owners other party with particulars of any additional 397 insurance effected, including copies of any cover notes 398 or policies and the written consent of the insurers of 399 any such required insurance in any case where the 400 consent of such insurers is necessary. 401 (c) The Charterers shall upon the request of the 402 Owners, provide information and promptly execute such 403 documents as may be required to enable the Owners to 404 comply with the insurance provisions of the each Financial 405 Instrument (if any). 406 (d) Subject to the provisions of the Financial Instru-407 ments, if any, and Clause 38 (Insurance) and Clause 40 (Termination, Redelivery and Total Loss), should the Vessel become an actual, 408 constructive, compromised or agreed a tTotal lLoss under 409 the insurances required under sub-clause 13(a), all 410 insurance payments for such loss shall be paid to the 411 Owners (if applicable, their financiers) in accordance with the agreed loss payable clauses who shall distribute the moneys between the 412 Owners and the Charterers according to their respective 413 interests. The Charterers undertake to notify the Owners 414 and the mMortgagee(s), if any, of any occurrences in 415 consequence of which the Vessel is likely to become a 416 tTotal lLoss. as defined in this Clause. 417 (e) The Owners shall upon the request of the 418 Charterers and subject to the Owners’ approval of such request, promptly execute such documents as may 419 be required to enable the Charterers to abandon the 420 Vessel to insurers and claim a constructive total loss. 421 (f) For the purpose of insurance coverage against hull 422 and machinery and war risks under the provisions of 423 sub-clause 13(a), the value of the Vessel is the sum 424 indicated in Box 29 Clause 38 (Insurance). 425 14. Insurance, Repairs and Classification - intentionally omitted 426 (Optional, only to apply if expressly agreed and stated 427 in Box 29, in which event Clause 13 shall be considered 428 deleted). 429 (a) During the Charter Period the Vessel shall be kept 430 insured by the Owners at their expense against hull and 431 machinery and war risks under the form of policy or 432 policies attached hereto. The Owners and/or insurers 433 shall not have any right of recovery or subrogation 434 against the Charterers on account of loss of or any 435 damage to the Vessel or her machinery or appurt-436 enances covered by such insurance, or on account of Copyright © 2001 BIMCO. All rights reserved. Any unauthorised copying, duplication, reproduction or distribution of this BIMCO SmartCon document will constitute an infringement of BIMCO’s copyright. Explanatory notes are available from BIMCO at www.bimco.org. First published in 1974 as BARECON A and B. Amalgamated and revised in 1989. Revised 2001.

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PART II BARECON 2001 Standard Bareboat Charter 437 payments made to discharge claims against or liabilities 438 of the Vessel or the Owners covered by such insurance. 439 Insurance policies shall cover the Owners and the 440 Charterers according to their respective interests. 441 (b) During the Charter Period the Vessel shall be kept 442 insured by the Charterers at their expense against 443 Protection and Indemnity risks (and any risks against 444 which it is compulsory to insure for the operation of the 445 Vessel, including maintaining financial security in 446 accordance with sub-clause 10(a)(iii)) in such form as 447 the Owners shall in writing approve which approval shall 448 not be unreasonably withheld. 449 (c) In the event that any act or negligence of the 450 Charterers shall vitiate any of the insurance herein 451 provided, the Charterers shall pay to the Owners all 452 losses and indemnify the Owners against all claims and 453 demands which would otherwise have been covered by 454 such insurance. 455 (d) The Charterers shall, subject to the approval of the 456 Owners or Owners’ Underwriters, effect all insured 457 repairs, and the Charterers shall undertake settlement 458 of all miscellaneous expenses in connection with such 459 repairs as well as all insured charges, expenses and 460 liabilities, to the extent of coverage under the insurances 461 provided for under the provisions of sub-clause 14(a). 462 The Charterers to be secured reimbursement through 463 the Owners’ Underwriters for such expenditures upon 464 presentation of accounts. 465 (e) The Charterers to remain responsible for and to 466 effect repairs and settlement of costs and expenses 467 incurred thereby in respect of all other repairs not 468 covered by the insurances and/or not exceeding any 469 possible franchise(s) or deductibles provided for in the 470 insurances. 471 (f) All time used for repairs under the provisions of 472 sub-clauses 14(d) and 14(e) and for repairs of latent 473 defects according to Clause 3 above, including any 474 deviation, shall be for the Charterers’ account and shall 475 form part of the Charter Period. 476 The Owners shall not be responsible for any expenses 477 as are incident to the use and operation of the Vessel 478 for such time as may be required to make such repairs. 479 (g) If the conditions of the above insurances permit 480 additional insurance to be placed by the parties such 481 cover shall be limited to the amount for each party set 482 out in Box 30 and Box 31, respectively. The Owners or 483 the Charterers as the case may be shall immediately 484 furnish the other party with particulars of any additional 485 insurance effected, including copies of any cover notes 486 or policies and the written consent of the insurers of 487 any such required insurance in any case where the 488 consent of such insurers is necessary. 489 (h) Should the Vessel become an actual, constructive, 490 compromised or agreed total loss under the insurances 491 required under sub-clause 14(a), all insurance payments 492 for such loss shall be paid to the Owners, who shall 493 distribute the moneys between themselves and the 494 Charterers according to their respective interests. 495 (i) If the Vessel becomes an actual, constructive, 496 compromised or agreed total loss under the insurances 497 arranged by the Owners in accordance with sub-clause 498 14(a), this Charter shall terminate as of the date of such 499 loss. 500 (j) The Charterers shall upon the request of the 501 Owners, promptly execute such documents as may be 502 required to enable the Owners to abandon the Vessel 503 to the insurers and claim a constructive total loss. 504 (k) For the purpose of insurance coverage against hull 505 and machinery and war risks under the provisions of 506 sub-clause 14(a), the value of the Vessel is the sum 507 indicated in Box 29. 508 (l) Notwithstanding anything contained in sub-clause 509 10(a), it is agreed that under the provisions of Clause 510 14, if applicable, the Owners shall keep the Vessel’s 511 Class fully up to date with the Classification Society 512 indicated in Box 10 and maintain all other necessary 513 certificates in force at all times. 514 15. Redelivery See Clause 40 (Termination, Redelivery and Total Loss) 515 At the expiration of the Charter Period the Vessel shall 516 be redelivered by the Charterers to the Owners at a 517 safe and ice-free port or place as indicated in Box 16, in 518 such ready safe berth as the Owners may direct. The 519 Charterers shall give the Owners not less than thirty 520 (30) running days’ preliminary notice of expected date, 521 range of ports of redelivery or port or place of redelivery 522 and not less than fourteen (14) running days’ definite 523 notice of expected date and port or place of redelivery. 524 Any changes thereafter in the Vessel’s position shall be 525 notified immediately to the Owners. 526 The Charterers warrant that they will not permit the 527 Vessel to commence a voyage (including any preceding 528 ballast voyage) which cannot reasonably be expected 529 to be completed in time to allow redelivery of the Vessel 530 within the Charter Period. Notwithstanding the above, 531 should the Charterers fail to redeliver the Vessel within 532 The Charter Period, the Charterers shall pay the daily 533 equivalent to the rate of hire stated in Box 22 plus 10 534 per cent. or to the market rate, whichever is the higher, 535 for the number of days by which the Charter Period is 536 exceeded. All other terms, conditions and provisions of 537 this Charter shall continue to apply. 538 Subject to the provisions of Clause 10, the Vessel shall 539 be redelivered to the Owners in the same or as good 540 structure, state, condition and class as that in which she 541 was delivered, fair wear and tear not affecting class 542 excepted. 543 The Vessel upon redelivery shall have her survey cycles 544 up to date and trading and class certificates valid for at 545 least the number of months agreed in Box 17. 546 16. Non-Lien 547 Other than Permitted Security Interests, Tthe Charterers will not suffer, nor permit to be continued, 548 any lien or encumbrance incurred by them or their 549 agents, which might have priority over the title and 550 interest of the Owners in the Vessel. The Charterers 551 further agree to fasten to the Vessel in a conspicuous 552 place and to keep so fastened during the Charter Period 553 a notice reading as follows: 554 “This Vessel is the property of (name of Owners). It is 555 under charter to (name of Charterers) and by the terms 556 of the Charter Party neither the Charterers nor the 557 Master have any right, power or authority to create, incur 558 or permit to be imposed on the Vessel any lien 559 whatsoever.” Copyright © 2001 BIMCO. All rights reserved. Any unauthorised copying, duplication, reproduction or distribution of this BIMCO SmartCon document will constitute an infringement of BIMCO’s copyright. Explanatory notes are available from BIMCO at www.bimco.org. First published in 1974 as BARECON A and B. Amalgamated and revised in 1989. Revised 2001.

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PART II BARECON 2001 Standard Bareboat Charter Or a notice in such form as required by any Mortgagee(s) 560 17. Indemnity See Clauses 37.4, 38.15, 38.16, 40.5, 41.3 and 51 561 (a) The Charterers shall indemnify the Owners against 562 any loss, damage or expense incurred by the Owners 563 arising out of or in relation to the operation of the Vessel 564 by the Charterers, and against any lien of whatsoever 565 nature arising out of an event occurring during the 566 Charter Period. If the Vessel be arrested or otherwise 567 detained by reason of claims or liens arising out of her 568 operation hereunder by the Charterers, the Charterers 569 shall at their own expense take all reasonable steps to 570 secure that within a reasonable time the Vessel is 571 released, including the provision of bail. 572 Without prejudice to the generality of the foregoing, the 573 Charterers agree to indemnify the Owners against all 574 consequences or liabilities arising from the Master, 575 officers or agents signing Bills of Lading or other 576 documents. 577 (b) If the Vessel be arrested or otherwise detained by 578 reason of a claim or claims against the Owners, the 579 Owners shall at their own expense take all reasonable 580 steps to secure that within a reasonable time the Vessel 581 is released, including the provision of bail. 582 In such circumstances the Owners shall indemnify the 583 Charterers against any loss, damage or expense 584 incurred by the Charterers (including hire paid under 585 this Charter) as a direct consequence of such arrest or 586 detention. 587 18. Lien 588 The Owners to have a lien upon all cargoes, sub-hires 589 and sub-freights belonging or due to the Charterers or 590 any sub-charterers and any Bill of Lading freight for all 591 claims under this Charter., and the Charterers to have a 592 lien on the Vessel for all moneys paid in advance and 593 not earned. 594 19. Salvage 595 All salvage and towage performed by the Vessel shall 596 be for the Charterers’ benefit and the cost of repairing 597 damage occasioned thereby shall be borne by the 598 Charterers. 599 20. Wreck Removal 600 In the event of the Vessel becoming a wreck or 601 obstruction to navigation the Charterers shall indemnify 602 the Owners against any sums whatsoever which the 603 Owners shall become liable to pay and shall pay in 604 consequence of the Vessel becoming a wreck or 605 obstruction to navigation. 606 21. General Average 607 The Owners shall not contribute to General Average. 608 22. Assignment, Sub-Charter and Sale 609 (a) The Charterers shall not assign this Charter nor 610 sub-charter the Vessel on a bareboat basis except with 611 the prior consent in writing of the Owners, which shall 612 not be unreasonably withheld, and subject to such terms 613 and conditions as the Owners shall approve. 614 (b) The Owners shall not sell the Vessel during the 615 currency of this Charter except with the prior written 616 consent of the Charterers, which shall not be unreason-617 ably withheld, and subject to the buyer accepting an 618 assignment of this Charter. 619 23. Contracts of Carriage 620 *) (a) The Charterers are to procure that all documents 621 issued during the Charter Period evidencing the terms 622 and conditions agreed in respect of carriage of goods 623 shall contain a paramount clause incorporating any 624 legislation relating to carrier’s liability for cargo 625 compulsorily applicable in the trade; if no such legislation 626 exists, the documents shall incorporate the Hague-Visby 627 Rules. The documents shall also contain the New Jason 628 Clause and the Both-to-Blame Collision Clause. 629 *) (b) The Charterers are to procure that all passenger 630 tickets issued during the Charter Period for the carriage 631 of passengers and their luggage under this Charter shall 632 contain a paramount clause incorporating any legislation 633 relating to carrier’s liability for passengers and their 634 luggage compulsorily applicable in the trade; if no such 635 legislation exists, the passenger tickets shall incorporate 636 the Athens Convention Relating to the Carriage of 637 Passengers and their Luggage by Sea, 1974, and any 638 protocol thereto. 639 *) Delete as applicable. 640 24. Bank Corporate Guarantee 641 (Optional, only to apply if Box 27 filled in) 642 The Charterers undertake to furnish on or about the date of this Charter, before delivery of 643 the Vessel, a first class bank a corporate guarantee from the Guarantor or bond in the 644 sum and at the place as indicated in Box 27 as guarantee and on or about the date of this Charter the other Security Documents (as the case may be) as security, in each case 645 for full performance of their obligations under this 646 Charter. 647 25. Requisition/Acquisition 648 (a) Subject to the provisions of the Financial Instruments (if any) and the General Assignment, Iin the event of the Requisition for Hire of the Vessel 649 by any governmental or other competent authority 650 (hereinafter referred to as “Requisition for Hire”) 651 irrespective of the date during the Charter Period when 652 “Requisition for Hire” may occur and irrespective of the 653 length thereof and whether or not it be for an indefinite 654 or a limited period of time, and irrespective of whether it 655 may or will remain in force for the remainder of the 656 Charter Period, this Charter shall not be deemed thereby 657 or thereupon to be frustrated or otherwise terminated 658 and the Charterers shall continue to pay the stipulated 659 hire in the manner provided by this Charter until the time 660 when the Charter would have terminated pursuant to 661 any of the provisions hereof always. provided however 662 that in the event of “Requisition for Hire” any Requisition 663 Hire or compensation received or receivable by the 664 Owners shall be payable to the Charterers during the 665 remainder of the Charter Period or the period of the 666 “Requisition for Hire” whichever be the shorter. 667 (b) In the event of the Owners being deprived of their 668 ownership in the Vessel by any Compulsory Acquisition 669 of the Vessel or requisition for title by any governmental 670 or other competent authority (hereinafter referred to as 671 “Compulsory Acquisition”), then, irrespective of the date 672 during the Charter Period when “Compulsory Acqui-673 sition” may occur, this Charter shall be deemed 674 terminated as of the date of such “Compulsory 675 Acquisition”. In such event Charter Hire to be considered 676 as earned and to be paid up to the date and time of 677 such “Compulsory Acquisition”. Copyright © 2001 BIMCO. All rights reserved. Any unauthorised copying, duplication, reproduction or distribution of this BIMCO SmartCon document will constitute an infringement of BIMCO’s copyright. Explanatory notes are available from BIMCO at www.bimco.org. First published in 1974 as BARECON A and B. Amalgamated and revised in 1989. Revised 2001.

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PART II BARECON 2001 Standard Bareboat Charter 678 26. War 679 (a) Subject to the provisions of the Financial Instruments (if any), Ffor the purpose of this Clause, the words “War 680 Risks” shall include any war (whether actual or 681 threatened), act of war, civil war, hostilities, revolution, 682 rebellion, civil commotion, warlike operations, the laying 683 of mines (whether actual or reported), acts of piracy, 684 acts of terrorists, acts of hostility or malicious damage, 685 blockades (whether imposed against all vessels or 686 imposed selectively against vessels of certain flags or 687 ownership, or against certain cargoes or crews or 688 otherwise howsoever), by any person, body, terrorist or 689 political group, or the Government of any state 690 whatsoever, which may be dangerous or are likely to be 691 or to become dangerous to the Vessel, her cargo, crew 692 or other persons on board the Vessel. 693 (b) Without first obtaining (i) the written consent of the Owners and (ii) the consent of the insurers to such employment and complying with the terms of Clause 38 and such other requirements as to extra insurance premiums or any other requirements as may be prescribed by the insurers, Tthe Vessel, unless the written consent of the 694 Owners be first obtained, shall not continue to or go 695 through any port, place, area or zone (whether of land 696 or sea), or any waterway or canal, where it reasonably 697 appears that the Vessel, her cargo, crew or other 698 persons on board the Vessel, in the reasonable 699 judgement of the Owners, may be, or are likely to be, 700 exposed to War Risks. Should the Vessel be within any 701 such place as aforesaid, which only becomes danger-702 ous, or is likely to be or to become dangerous, after her 703 entry into it, the Owners shall have the right to require 704 the Vessel to leave such area. 705 (c) The Vessel shall not load contraband cargo, or to 706 pass through any blockade, whether such blockade be 707 imposed on all vessels, or is imposed selectively in any 708 way whatsoever against vessels of certain flags or 709 ownership, or against certain cargoes or crews or 710 otherwise howsoever, or to proceed to an area where 711 she shall be subject, or is likely to be subject to 712 a belligerent’s right of search and/or confiscation. 713 (d) If the insurers of the war risks insurance, when 714 Clause 14 is applicable, should require payment of 715 premiums and/or calls because, pursuant to the 716 Charterers’ orders, the Vessel is within, or is due to enter 717 and remain within, any area or areas which are specified 718 by such insurers as being subject to additional premiums 719 because of War Risks, then such premiums and/or calls 720 shall be reimbursed by the Charterers to the Owners at 721 the same time as the next payment of hire is due. 722 (e) The Charterers shall have the liberty: 723 (i) to comply with all orders, directions, recommend-724 ations or advice as to departure, arrival, routes, 725 sailing in convoy, ports of call, stoppages, 726 destinations, discharge of cargo, delivery, or in any 727 other way whatsoever, which are given by the 728 Government of the Nation under whose flag the 729 Vessel sails, or any other Government, body or 730 group whatsoever acting with the power to compel 731 compliance with their orders or directions; 732 (ii) to comply with the orders, directions or recom-733 mendations of any war risks underwriters who have 734 the authority to give the same under the terms of the war risks insurance; (iii) to comply with the terms of any resolution of the Security Council of the United Nations, any directives of the European Community, the effective orders of any other Supranational body which has the right to issue and give the same, and with national laws aimed at enforcing the same to which the Owners are subject, and to obey the orders and directions of those who are charged with their enforcement. (f) In the event of outbreak of war (whether there be a declaration of war or not) (i) between any two or more of the following countries: the United States of America; Russia; the United Kingdom; France; and the People’s Republic of China, (ii) between any two or more of the countries stated in Box 36, both the Owners and the Charterers shall have the right to cancel this Charter, whereupon the Charterers shall redeliver the Vessel to the Owners in accordance with Clause 15, if the Vessel has cargo on board after discharge thereof at destination, or if debarred under this Clause from reaching or entering it at a near, open and safe port as directed by the Owners, or if the Vessel has no cargo on board, at the port at which the Vessel then is or if at sea at a near, open and safe port as directed by the Owners. In all cases hire shall continue to be paid in accordance with Clause 11 and except as aforesaid all other provisions of this Charter shall apply until redelivery the end of the Charter Period. 27. Commission—intentionally omitted The Owners to pay a commission at the rate indicated in Box 33 to the Brokers named in Box 33 on any hire paid under the Charter. If no rate is indicated in Box 33, the commission to be paid by the Owners shall cover the actual expenses of the Brokers and a reasonable fee for their work. If the full hire is not paid owing to breach of the Charter by either of the parties the party liable therefor shall indemnify the Brokers against their loss of commission. Should the parties agree to cancel the Charter, the Owners shall indemnify the Brokers against any loss of commission but in such case the commission shall not exceed the brokerage on one year’s hire. 28. Termination See Clauses 40 (Termination, Redelivery and Total Loss) and 44 (Termination Events) (a) Charterers’ Default The Owners shall be entitled to withdraw the Vessel from the service of the Charterers and terminate the Charter with immediate effect by written notice to the Charterers if: (i) the Charterers fail to pay hire in accordance with Clause 11. However, where there is a failure to make punctual payment of hire due to oversight, negligence, errors or omissions on the part of the Charterers or their bankers, the Owners shall give the Charterers written notice of the number of clear banking days stated in Box 34 (as recognised at the agreed place of payment) in which to rectify the failure, and when so rectified within such number of days following the Owners’ notice, the payment shall stand as regular and punctual. Failure by the Charterers to pay hire within the number of days stated in Box 34 of their receiving the Owners’ notice as provided herein, shall entitle Copyright © 2001 BIMCO. All rights reserved. Any unauthorised copying, duplication, reproduction or distribution of this BIMCO SmartCon document will constitute an infringement of BIMCO’s copyright. Explanatory notes are available from BIMCO at www.bimco.org. First published in 1974 as BARECON A and B. Amalgamated and revised in 1989. Revised 2001.

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PART II BARECON 2001 Standard Bareboat Charter 797 the Owners to withdraw the Vessel from the service 798 of the Charterers and terminate the Charter without 799 further notice; 800 (ii) the Charterers fail to comply with the requirements of: 801 (1) Clause 6 (Trading Restrictions) 802 (2) Clause 13(a) (Insurance and Repairs) 803 provided that the Owners shall have the option, by 804 written notice to the Charterers, to give the 805 Charterers a specified number of days grace within 806 which to rectify the failure without prejudice to the 807 Owners’ right to withdraw and terminate under this 808 Clause if the Charterers fail to comply with such 809 notice; 810 (iii) the Charterers fail to rectify any failure to comply 811 with the requirements of sub-clause 10(a)(i) 812 (Maintenance and Repairs) as soon as practically 813 possible after the Owners have requested them in 814 writing so to do and in any event so that the Vessel’s 815 insurance cover is not prejudiced. 816 (b) Owners’ Default 817 If the Owners shall by any act or omission be in breach 818 of their obligations under this Charter to the extent that 819 the Charterers are deprived of the use of the Vessel 820 and such breach continues for a period of fourteen (14) 821 running days after written notice thereof has been given 822 by the Charterers to the Owners, the Charterers shall 823 be entitled to terminate this Charter with immediate effect 824 by written notice to the Owners. 825 (c) Loss of Vessel 826 This Charter shall be deemed to be terminated if the 827 Vessel becomes a total loss or is declared as a 828 constructive or compromised or arranged total loss. For 829 the purpose of this sub-clause, the Vessel shall not be 830 deemed to be lost unless she has either become an 831 actual total loss or agreement has been reached with 832 her underwriters in respect of her constructive, 833 compromised or arranged total loss or if such agreement 834 with her underwriters is not reached it is adjudged by a 835 competent tribunal that a constructive loss of the Vessel 836 has occurred. 837 (d) Either party shall be entitled to terminate this 838 Charter with immediate effect by written notice to the 839 other party in the event of an order being made or 840 resolution passed for the winding up, dissolution, 841 liquidation or bankruptcy of the other party (otherwise 842 than for the purpose of reconstruction or amalgamation) 843 or if a receiver is appointed, or if it suspends payment, 844 ceases to carry on business or makes any special 845 arrangement or composition with its creditors. 846 (e) The termination of this Charter shall be without 847 prejudice to all rights accrued due between the parties 848 prior to the date of termination and to any claim that 849 either party might have. 850 29. Repossession 851 In the event of the Owners have made a request for redelivery of the Vessel termination of this Charter in 852 accordance with the applicable provisions of Clause 28 40.3, 853 the Owners shall in addition have the right to repossess the Vessel 854 from the Charterers at her current or next port of call, or 855 at a port or place convenient to them without hindrance 856 or interference by the Charterers, courts or local 857 authorities. Pending physical repossession of the Vessel 858 in accordance with this Clause 29 and/or Clause 40, the Charterers shall 859 hold the Vessel as gratuitous bailee only to the Owners and the Charterers shall procure that the master and crew follow the orders and directions of the Owners. 860 The Owners shall arrange for an authorised represent-861 ative to board the Vessel as soon as reasonably 862 practicable following the termination of the Charter. The 863 Vessel shall be deemed to be repossessed by the 864 Owners from the Charterers upon the boarding of the 865 Vessel by the Owners’ representative. All arrangements 866 and expenses relating to the settling of wages, 867 disembarkation and repatriation of the Charterers’ 868 Master, officers and crew shall be the sole responsibility 869 of the Charterers. 870 30. Dispute Resolution 871 *) (a) This Contract Charter and any non-contractual obligations arising out of or in connection with it shall be governed by and construed 872 in accordance with English law and any dispute arising 873 out of or in connection with this Contract Charter shall be referred 874 to arbitration in London in accordance with the Arbitration 875 Act 1996 or any statutory modification or re-enactment 876 thereof save to the extent necessary to give effect to 877 the provisions of this Clause. 878 The arbitration shall be conducted in accordance with 879 the London Maritime Arbitrators Association (LMAA) 880 Terms current at the time when the arbitration proceed-881 ings are commenced. 882 The reference shall be to three arbitrators. A party 883 wishing to refer a dispute to arbitration shall appoint its 884 arbitrator and send notice of such appointment in writing 885 to the other party requiring the other party to appoint its 886 own arbitrator within 14 calendar days of that notice and 887 stating that it will appoint its arbitrator as sole arbitrator 888 unless the other party appoints its own arbitrator and 889 gives notice that it has done so within the 14 days 890 specified. If the other party does not appoint its own 891 arbitrator and give notice that it has done so within the 892 14 days specified, the party referring a dispute to 893 arbitration may, without the requirement of any further 894 prior notice to the other party, appoint its arbitrator as 895 sole arbitrator and shall advise the other party 896 accordingly. The award of a sole arbitrator shall be 897 binding on both parties as if he had been appointed by 898 agreement. 899 Nothing herein shall prevent the parties agreeing in 900 writing to vary these provisions to provide for the 901 appointment of a sole arbitrator. 902 In cases where neither the claim nor any counterclaim 903 exceeds the sum of US$50,000 (or such other sum as 904 the parties may agree) the arbitration shall be conducted 905 in accordance with the LMAA Small Claims Procedure 906 current at the time when the arbitration proceedings are 907 commenced. The language or any arbitration proceedings shall be English. 908 *) (b) This Contract shall be governed by and construed 909 in accordance with Title 9 of the United States Code 910 and the Maritime Law of the United States and any 911 dispute arising out of or in connection with this Contract 912 shall be referred to three persons at New York, one to 913 be appointed by each of the parties hereto, and the third Copyright © 2001 BIMCO. All rights reserved. Any unauthorised copying, duplication, reproduction or distribution of this BIMCO SmartCon document will constitute an infringement of BIMCO’s copyright. Explanatory notes are available from BIMCO at www.bimco.org. First published in 1974 as BARECON A and B. Amalgamated and revised in 1989. Revised 2001.

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PART II BARECON 2001 Standard Bareboat Charter 914 by the two so chosen; their decision or that of any two 915 of them shall be final, and for the purposes of enforcing 916 any award, judgement may be entered on an award by 917 any court of competent jurisdiction. The proceedings 918 shall be conducted in accordance with the rules of the 919 Society of Maritime Arbitrators, Inc. 920 In cases where neither the claim nor any counterclaim 921 exceeds the sum of US$50,000 (or such other sum as 922 the parties may agree) the arbitration shall be conducted 923 in accordance with the Shortened Arbitration Procedure 924 of the Society of Maritime Arbitrators, Inc. current at 925 the time when the arbitration proceedings are commenced. 926 *) (c) This Contract shall be governed by and construed 927 in accordance with the laws of the place mutually agreed 928 by the parties and any dispute arising out of or in 929 connection with this Contract shall be referred to 930 arbitration at a mutually agreed place, subject to the 931 procedures applicable there. 932 (d) Notwithstanding (a), (b) or (c) above, the parties 933 may agree at any time to refer to mediation any 934 difference and/or dispute arising out of or in connection 935 with this Contract. 936 In the case of a dispute in respect of which arbitration 937 has been commenced under (a), (b) or (c) above, the 938 following shall apply:-939 (i) Either party may at any time and from time to time 940 elect to refer the dispute or part of the dispute to 941 mediation by service on the other party of a written 942 notice (the “Mediation Notice”) calling on the other 943 party to agree to mediation. 944 (ii) The other party shall thereupon within 14 calendar 945 days of receipt of the Mediation Notice confirm that 946 they agree to mediation, in which case the parties 947 shall thereafter agree a mediator within a further 948 14 calendar days, failing which on the application 949 of either party a mediator will be appointed promptly 950 by the Arbitration Tribunal (“the Tribunal”) or such 951 person as the Tribunal may designate for that 952 purpose. The mediation shall be conducted in such 953 place and in accordance with such procedure and 954 on such terms as the parties may agree or, in the 955 event of disagreement, as may be set by the 956 mediator. 957 (iii) If the other party does not agree to mediate, that 958 fact may be brought to the attention of the Tribunal 959 and may be taken into account by the Tribunal when 960 allocating the costs of the arbitration as between 961 the parties. 962 (iv) The mediation shall not affect the right of either 963 party to seek such relief or take such steps as it 964 considers necessary to protect its interest. 965 (v) Either party may advise the Tribunal that they have 966 agreed to mediation. The arbitration procedure shall 967 continue during the conduct of the mediation but 968 the Tribunal may take the mediation timetable into 969 account when setting the timetable for steps in the 970 arbitration. 971 (vi) Unless otherwise agreed or specified in the 972 mediation terms, each party shall bear its own costs 973 incurred in the mediation and the parties shall share 974 equally the mediator’s costs and expenses. 975 (vii) The mediation process shall be without prejudice 976 and confidential and no information or documents 977 disclosed during it shall be revealed to the Tribunal 978 except to the extent that they are disclosable under 979 the law and procedure governing the arbitration. 980 (Note: The parties should be aware that the mediation 981 process may not necessarily interrupt time limits.) 982 (e) If Box 35 in Part I is not appropriately filled in, subclause 983 30(a) of this Clause shall apply. Sub-clause 30(d) shall 984 apply in all cases. 985 *) Sub-clauses 30(a), 30(b) and 30(c) are alternatives; 986 indicate alternative agreed in Box 35. 987 31. Notices See Clause 43 (Notices) 988 (a) Any notice to be given by either party to the other 989 party shall be in writing and may be sent by fax, telex, 990 registered or recorded mail or by personal service. 991 (b) The address of the Parties for service of such 992 communication shall be as stated in Boxes 3 and 4 993 respectively. Copyright © 2001 BIMCO. All rights reserved. Any unauthorised copying, duplication, reproduction or distribution of this BIMCO SmartCon document will constitute an infringement of BIMCO’s copyright. Explanatory notes are available from BIMCO at www.bimco.org. First published in 1974 as BARECON A and B. Amalgamated and revised in 1989. Revised 2001.

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PART III PROVISIONS TO APPLY FOR NEWBUILDING VESSELS ONLY (Optional, only to apply if expressly agreed and stated in Box 37) 1. Specifications and Building Contract 2 (a) The Vessel shall be constructed in accordance with 3 the Building Contract (hereafter called “the Building 4 Contract”) as annexed to this Charter, made between the 5 Builders and the Owners and in accordance with the 6 specifications and plans annexed thereto, such Building 7 Contract, specifications and plans having been counter-8 signed as approved by the Charterers. 9 (b) No change shall be made in the Building Contract or 10 in the specifications or plans of the Vessel as approved by 11 the Charterers as aforesaid, without the Charterers’ 12 consent. 13 (c) The Charterers shall have the right to send their 14 representative to the Builders’ Yard to inspect the Vessel 15 during the course of her construction to satisfy themselves 16 that construction is in accordance with such approved 17 specifications and plans as referred to under sub-clause 18 (a) of this Clause. 19 (d) The Vessel shall be built in accordance with the 20 Building Contract and shall be of the description set out 21 therein. Subject to the provisions of sub-clause 2(c)(ii) 22 hereunder, the Charterers shall be bound to accept the 23 Vessel from the Owners, completed and constructed in 24 accordance with the Building Contract, on the date of 25 delivery by the Builders. The Charterers undertake that 26 having accepted the Vessel they will not thereafter raise 27 any claims against the Owners in respect of the Vessel’s 28 performance or specification or defects, if any. 29 Nevertheless, in respect of any repairs, replacements or 30 defects which appear within the first 12 months from 31 delivery by the Builders, the Owners shall endeavour to 32 compel the Builders to repair, replace or remedy any defects 33 or to recover from the Builders any expenditure incurred in 34 carrying out such repairs, replacements or remedies. 35 However, the Owners’ liability to the Charterers shall be 36 limited to the extent the Owners have a valid claim against 37 the Builders under the guarantee clause of the Building 38 Contract (a copy whereof has been supplied to the 39 Charterers). The Charterers shall be bound to accept such 40 sums as the Owners are reasonably able to recover under 41 this Clause and shall make no further claim on the Owners 42 for the difference between the amount(s) so recovered and 43 the actual expenditure on repairs, replacement or 44 remedying defects or for any loss of time incurred. 45 Any liquidated damages for physical defects or deficiencies 46 shall accrue to the account of the party stated in Box 41(a) 47 or if not filled in shall be shared equally between the parties. 48 The costs of pursuing a claim or claims against the Builders 49 under this Clause (including any liability to the Builders) 50 shall be borne by the party stated in Box 41(b) or if not 51 filled in shall be shared equally between the parties. 52 2. Time and Place of Delivery 53 (a) Subject to the Vessel having completed her 54 acceptance trials including trials of cargo equipment in 55 accordance with the Building Contract and specifications 56 to the satisfaction of the Charterers, the Owners shall give 57 and the Charterers shall take delivery of the Vessel afloat 58 when ready for delivery and properly documented at the 59 Builders’ Yard or some other safe and readily accessible 60 dock, wharf or place as may be agreed between the parties 61 hereto and the Builders. Under the Building Contract the 62 Builders have estimated that the Vessel will be ready for 63 delivery to the Owners as therein provided but the delivery 64 date for the purpose of this Charter shall be the date when 65 the Vessel is in fact ready for delivery by the Builders after 66 completion of trials whether that be before or after as 67 indicated in the Building Contract. The Charterers shall not 68 be entitled to refuse acceptance of delivery of the Vessel 69 and upon and after such acceptance, subject to Clause 70 1(d), the Charterers shall not be entitled to make any claim 71 against the Owners in respect of any conditions, 72 representations or warranties, whether express or implied, 73 as to the seaworthiness of the Vessel or in respect of delay 74 in delivery. 75 (b) If for any reason other than a default by the Owners 76 under the Building Contract, the Builders become entitled 77 under that Contract not to deliver the Vessel to the Owners, 78 the Owners shall upon giving to the Charterers written 79 notice of Builders becoming so entitled, be excused from 80 giving delivery of the Vessel to the Charterers and upon 81 receipt of such notice by the Charterers this Charter shall 82 cease to have effect. 83 (c) If for any reason the Owners become entitled under 84 the Building Contract to reject the Vessel the Owners shall, 85 before exercising such right of rejection, consult the 86 Charterers and thereupon 87 (i) if the Charterers do not wish to take delivery of the Vessel 88 they shall inform the Owners within seven (7) running days 89 by notice in writing and upon receipt by the Owners of such 90 notice this Charter shall cease to have effect; or 91 (ii) if the Charterers wish to take delivery of the Vessel 92 they may by notice in writing within seven (7) running days 93 require the Owners to negotiate with the Builders as to the 94 terms on which delivery should be taken and/or refrain from 95 exercising their right to rejection and upon receipt of such 96 notice the Owners shall commence such negotiations and/ 97 or take delivery of the Vessel from the Builders and deliver 98 her to the Charterers; 99 (iii) in no circumstances shall the Charterers be entitled to 100 reject the Vessel unless the Owners are able to reject the 101 Vessel from the Builders; 102 (iv) if this Charter terminates under sub-clause (b) or (c) of 103 this Clause, the Owners shall thereafter not be liable to the 104 Charterers for any claim under or arising out of this Charter 105 or its termination. 106 (d) Any liquidated damages for delay in delivery under the 107 Building Contract and any costs incurred in pursuing a claim 108 therefor shall accrue to the account of the party stated in 109 Box 41(c) or if not filled in shall be shared equally between 110 the parties. 111 3. Guarantee Works 112 If not otherwise agreed, the Owners authorise the 113 Charterers to arrange for the guarantee works to be 114 performed in accordance with the building contract terms, 115 and hire to continue during the period of guarantee works. 116 The Charterers have to advise the Owners about the 117 performance to the extent the Owners may request. 118 4. Name of Vessel 119 The name of the Vessel shall be mutually agreed between 120 the Owners and the Charterers and the Vessel shall be Copyright © 2001 BIMCO. All rights reserved. Any unauthorised copying, duplication, reproduction or distribution of this BIMCO SmartCon document will constitute an infringement of BIMCO’s copyright. Explanatory notes are available from BIMCO at www.bimco.org. First published in 1974 as BARECON A and B. Amalgamated and revised in 1989. Revised 2001.

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PART III PROVISIONS TO APPLY FOR NEWBUILDING VESSELS ONLY (Optional, only to apply if expressly agreed and stated in Box 37) 121 painted in the colours, display the funnel insignia and fly 122 the house flag as required by the Charterers. 123 5. Survey on Redelivery 124 The Owners and the Charterers shall appoint surveyors 125 for the purpose of determining and agreeing in writing the 126 condition of the Vessel at the time of re-delivery. 127 Without prejudice to Clause 15 (Part II), the Charterers 128 shall bear all survey expenses and all other costs, if any, 129 including the cost of docking and undocking, if required, 130 as well as all repair costs incurred. The Charterers shall 131 also bear all loss of time spent in connection with any 132 docking and undocking as well as repairs, which shall be 133 paid at the rate of hire per day or pro rata. Copyright © 2001 BIMCO. All rights reserved. Any unauthorised copying, duplication, reproduction or distribution of this BIMCO SmartCon document will constitute an infringement of BIMCO’s copyright. Explanatory notes are available from BIMCO at www.bimco.org. First published in 1974 as BARECON A and B. Amalgamated and revised in 1989. Revised 2001.

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PART IV HIRE/PURCHASE AGREEMENT (Optional, only to apply if expressly agreed and stated in Box 42) 1 On expiration of this Charter and provided the Charterers 2 have fulfilled their obligations according to Part I and II 3 as well as Part III, if applicable, it is agreed, that on 4 payment of the final payment of hire as per Clause 11 5 the Charterers have purchased the Vessel with 6 everything belonging to her and the Vessel is fully paid 7 for. 8 In the following paragraphs the Owners are referred to 9 as the Sellers and the Charterers as the Buyers. 10 The Vessel shall be delivered by the Sellers and taken 11 over by the Buyers on expiration of the Charter. 12 The Sellers guarantee that the Vessel, at the time of 13 delivery, is free from all encumbrances and maritime 14 liens or any debts whatsoever other than those arising 15 from anything done or not done by the Buyers or any 16 existing mortgage agreed not to be paid off by the time 17 of delivery. Should any claims, which have been incurred 18 prior to the time of delivery be made against the Vessel, 19 the Sellers hereby undertake to indemnify the Buyers 20 against all consequences of such claims to the extent it 21 can be proved that the Sellers are responsible for such 22 claims. Any taxes, notarial, consular and other charges 23 and expenses connected with the purchase and 24 registration under Buyers’ flag, shall be for Buyers’ 25 account. Any taxes, consular and other charges and 26 expenses connected with closing of the Sellers’ register, 27 shall be for Sellers’ account. 28 In exchange for payment of the last month’s hire 29 instalment the Sellers shall furnish the Buyers with a 30 Bill of Sale duly attested and legalized, together with a 31 certificate setting out the registered encumbrances, if 32 any. On delivery of the Vessel the Sellers shall provide 33 for deletion of the Vessel from the Ship’s Register and 34 deliver a certificate of deletion to the Buyers. 35 The Sellers shall, at the time of delivery, hand to the 36 Buyers all classification certificates (for hull, engines, 37 anchors, chains, etc.), as well as all plans which may 38 be in Sellers’ possession. 39 The Wireless Installation and Nautical Instruments, 40 unless on hire, shall be included in the sale without any 41 extra payment. 42 The Vessel with everything belonging to her shall be at 43 Sellers’ risk and expense until she is delivered to the 44 Buyers, subject to the conditions of this Contract and 45 the Vessel with everything belonging to her shall be 46 delivered and taken over as she is at the time of delivery, 47 after which the Sellers shall have no responsibility for 48 possible faults or deficiencies of any description. 49 The Buyers undertake to pay for the repatriation of the 50 Master, officers and other personnel if appointed by the 51 Sellers to the port where the Vessel entered the Bareboat 52 Charter as per Clause 3 (Part II) or to pay the equivalent 53 cost for their journey to any other place. Copyright © 2001 BIMCO. All rights reserved. Any unauthorised copying, duplication, reproduction or distribution of this BIMCO SmartCon document will constitute an infringement of BIMCO’s copyright. Explanatory notes are available from BIMCO at www.bimco.org. First published in 1974 as BARECON A and B. Amalgamated and revised in 1989. Revised 2001.

LOGO

PART V PROVISIONS TO APPLY FOR VESSELS REGISTERED IN A BAREBOAT CHARTER REGISTRY (Optional, only to apply if expressly agreed and stated in Box 43) 1. Definitions For the purpose of this PART V, the following terms shall have the meanings hereby assigned to them: “The Bareboat Charter Registry” shall mean the registry of the State whose flag the Vessel will fly and in which the Charterers are registered as the bareboat charterers during the period of the Bareboat Charter. “The Underlying Registry” shall mean the registry of the state in which the Owners of the Vessel are registered as Owners and to which jurisdiction and control of the Vessel will revert upon termination of the Bareboat Charter Registration. 2. Mortgage The Vessel chartered under this Charter is financed by a mortgage and the provisions of Clause 12(b) (Part II) shall apply. 3. Termination of Charter by Default If the Vessel chartered under this Charter is registered in a Bareboat Charter Registry as stated in Box 44, and if the Owners shall default in the payment of any amounts due under the mortgage(s) specified in Box 28, the Charterers shall, if so required by the mortgagee, direct the Owners to re-register the Vessel in the Underlying Registry as shown in Box 45. In the event of the Vessel being deleted from the Bareboat Charter Registry as stated in Box 44, due to a default by the Owners in the payment of any amounts due under the mortgage(s), the Charterers shall have the right to terminate this Charter forthwith and without prejudice to any other claim they may have against the Owners under this Charter. Copyright © 2001 BIMCO. All rights reserved. Any unauthorised copying, duplication, reproduction or distribution of this BIMCO SmartCon document will constitute an infringement of BIMCO’s copyright. Explanatory notes are available from BIMCO at www.bimco.org. First published in 1974 as BARECON A and B. Amalgamated and revised in 1989. Revised 2001.

EXECUTION VERSION (FORM OF)

ADDITIONAL CLAUSES TO BARECON 2001

DATED __________________ 2020

Clause 32 – CHARTER PERIOD

32.1	For the avoidance of doubt, notwithstanding the fact that the Charter Period shall commence on the Delivery Date, this Charter shall be:

(a)	in full force and effect; and

(b)	valid, binding and enforceable against the parties hereto,

with effect from the date of this Charter until the end of the Charter Period (subject to the terms of this Charter).

32.2	The charter period shall, subject to the terms of this Charter, continue for a period of sixty (60) months from the Delivery Date.

Clause 33 – CANCELLATION

33.1

If:

(a)	a Termination Event which is continuing occurs prior to the delivery of the Vessel by the Charterers as sellers to the Owners as buyers under the MOA;

(b)	it becomes unlawful for the Owners (as buyers) to perform or comply with any or all of their obligations under the MOA or any of the obligations of the Owners under the MOA are not or cease to be legal, valid, binding and enforceable; and/or

(c)	the MOA expires, is cancelled, terminated, rescinded or suspended or otherwise ceases to remain in full force and effect for any reason,

then this Charter shall immediately terminate and be cancelled (provided that any provision hereof expressed to survive such termination or cancellation shall so do in accordance with its terms) without the need for either of the Owners or the Charterers to take any action whatsoever, provided that the Owners shall be entitled to retain all fees or amounts paid by the Charterers pursuant to Clause 41.1 (and without prejudice to Clause 41.1, if such fees or amounts have not been paid but are due and payable, the Charterers shall forthwith pay such fees or amounts to the Owners in accordance with Clause 41.1) and such payment and the payment of:

(i)

all other amounts payable under this Charter which have fallen due on or prior to the date on which this Charter may be terminated pursuant to this Clause 33 (Cancellation) (but which remain unpaid together with any default interest thereon); and

(ii)

any costs and expenses incurred by the Owners in collecting any payments due under this Charter or in obtaining the due performance of the obligations of the Charterers under this Charter or the other Leasing Documents and any default interest in relation thereto, is acknowledged by the Charterers to be proportionate as to amount, having regard to the legitimate interest of the Owners, in protecting against the Owners’ risk of the Charterers failing to perform their obligations under this Charter.

Clause 34 – DELIVERY OF VESSEL

34.1

(a)	This Charter is part of a transaction involving the sale, purchase and charter back of the Vessel and constitutes one of the Leasing Documents.

(b)	The obligation of the Owners to charter the Vessel to the Charterers hereunder is subject to and conditional upon:

(i)

the delivery of the Vessel by the Charterers as sellers to the Owners as buyers in accordance with the terms of the MOA with such Delivery occurring on or before the Cancelling Date (and, for the purposes of this Charter, the Vessel shall be deemed delivered to the Charterers simultaneously with delivery of the Vessel to the Owners pursuant to the MOA);

(ii)

no Potential Termination Event or Termination Event has occurred and is continuing at the relevant time;

(iii)

the representations and warranties contained in Clause 45 (Representations and warranties) being true and correct on the date of this Charter and each day thereafter until and including the last day of the Charter Period; and

(iv)

the Owners having received from the Charterers:

(A)

on or prior to Delivery, the documents or evidence set out in Part A, Part B and Part C of Schedule II in form and substance satisfactory to them; and

(B)

after Delivery, the documents or evidence set out in Part D of Schedule II in form and substance satisfactory to them within the time periods set out thereunder;

and if any of the documents listed in sub-paragraph (iv) above are not in the English language then they shall be accompanied by a certified English translation.

34.2	The conditions precedent and conditions subsequent specified in Clause 34.1(b) are for the sole benefit of the Owners.

34.3

On delivery to and acceptance by the Owners (in their capacity as buyers) of the Vessel under the MOA from the Charterers (in their capacity as sellers) and subject to the provisions of this Clause 34 (Delivery of Vessel), the Vessel shall be deemed to have been delivered to, and accepted without reservation by, the Charterers under this Charter and the Charterers shall become and be entitled to the possession and use of the Vessel on and subject to the terms and conditions of this Charter.

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34.4

On Delivery, as evidence of the commencement of the Charter Period, the Charterers shall sign and deliver to the Owners the Acceptance Certificate. Without prejudice to this Clause 34.4, the Charterers shall be deemed to have accepted the Vessel under this Charter and the commencement of the Charter Period having started, on Delivery even if for whatever reason, the Acceptance Certificate is not signed and/or the Charterers do not take actual possession of the Vessel at that time.

34.5

The Charterers shall not be entitled for any reason whatsoever to refuse to accept delivery of the Vessel under this Charter once the Vessel has been delivered to and accepted by the Owners as buyers under the MOA from the Charterers as sellers, and the Owners shall not be liable for any losses, costs or expenses whatsoever or howsoever arising including, without limitation, any loss of profit or any loss or otherwise:

(a)	resulting directly or indirectly from any defect or alleged defect in the Vessel or any failure of the Vessel; or

(b)	arising from any delay in the commencement of the Charter Period or any failure of the Charter Period to commence.

34.6

The Owners will not and shall not be obliged to deliver the Vessel to the Charterers with any bunkers and unused lubricating oils and greases (whether in storage tanks and unopened drums or otherwise) except such items (including bunkers, lubricating oils, unbroached provisions, paints, ropes and other consumable stores) as are on the Vessel on Delivery.

34.7	The Charterers shall, following the Owners’ delivery of items on board the Vessel on Delivery pursuant to Clause 34.6, keep all such items on board the Vessel for the Charterers’ own use.

Clause 35 – QUIET ENJOYMENT

35.1

Provided that no Potential Termination Event or Termination Event has occurred and is continuing, the Owners hereby agree not to disturb or interfere (or instruct another party to disturb or interfere) with the Charterers’ lawful use, possession and quiet enjoyment of the Vessel during the Charter Period.

35.2	Subject to Clause 35.1 above, the Charterers acknowledge that, at any time during the Charter Period:

(a)	the Owners are entitled to enter into certain funding arrangements with their financier(s), (the “Mortgagee”), in order to finance in part or in full of the Purchase Price, which funding arrangements may be secured, inter alia, by the relevant Financial Instruments;

(b)	the Owners may do any of the following as security for the funding arrangements referred to in paragraph (a) above, in each case, without the prior consent of the Charterers:

(i)

execute a ship mortgage over the Vessel or any other Financial Instrument in favour of a Mortgagee;

(ii)

assign their rights and interests to, in or in connection with this Charter and any other Leasing Document in favour of that Mortgagee;

(iii)

assign their rights and interests to, in or in connection with the Insurances, the Earnings and the Requisition Compensation of the Vessel in favour of that Mortgagee; and

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(iv)

enter into any other document or arrangement which is necessary to give effect to such financing arrangements; and

(c)

the Charterers undertake to comply, and provide such information and documents reasonably required to enable the Owners to comply, with all such instructions or directions in regard to the employment, insurances, operation, repairs and maintenance of the Vessel as laid down in any Financial Instrument or as may be directed from to time during the currency of this Charter by the Mortgagee in conformity with any Financial Instrument. The Charterers further agree and acknowledge all relevant terms, conditions and provisions of each Financial Instrument (if any) and agree to acknowledge this in writing in any form that may be reasonably required by the Mortgagee.

35.3	The Owners shall use best endeavours to procure that their financier(s) enter into a quiet enjoyment agreement with the Charterers on such terms as may be agreed between the Owners, the Mortgagee and the Charterers.

Clause 36 – CHARTERHIRE AND UPFRONT CHARTERHIRE

36.1

In consideration of the Owners agreeing to charter the Vessel to the Charterers under this Charter at the request of the Charterers, the Charterers hereby irrevocably and unconditionally agree to pay to the Owners the Charterhire, the Upfront Charterhire and the Expiry Purchase Price in accordance with the terms of this Charter.

36.2	The Charterers shall pay to the Owners on the Delivery Date, the Upfront Charterhire.

36.3

The Charterers shall be deemed to have paid the Upfront Charterhire to the Owners on the Delivery Date (as defined under the MOA) upon the Owners setting off an amount equal to the Upfront Charterhire from the Purchase Price payable by the Owners under the MOA against the Charterers’ obligation to pay the Upfront Charterhire under this Charter.

36.4	The Upfront Charterhire shall not bear interest and shall be non-refundable.

36.5	Subject to the terms of this Clause 36 (Charterhire and Upfront Charterhire) the Charterers shall pay to the Owners, the Charterhire quarterly in arrears in twenty (20) consecutive instalments to the Owners under this Charter, provided that:

(a)	the first instalment of the Charterhire shall be payable on the date falling three (3) months after the Delivery Date;

(b)	each subsequent instalment (other than the final instalment) of the Charterhire shall be payable on the date falling three (3) months after the previous instalment payment of the Charterhire; and

(c)	the final instalment of the Charterhire shall be payable on the date falling sixty (60) months after the Delivery Date.

36.6

The Vessel shall not at any time be deemed off-hire and the Charterers’ obligation to pay all Charterhire, the Upfront Charterhire and other amounts payable under the Leasing Documents shall be absolute and unconditional under any and all circumstances and shall not be affected by any circumstances of any nature whatsoever including but not limited to:

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(a)

any set-off (other than the Upfront Charterhire which shall be set-off pursuant to Clause 36.3), counterclaim, recoupment, defence, claim or other right which the Charterers may at any time have against the Owners or any other person for any reason whatsoever including, without limitation, any act, omission or breach on the part of the Owners under this Charter or any other agreement at any time existing between the Owners and the Charterers;

(b)	any change, extension, indulgence or other act or omission in respect of any indebtedness or obligation of the Charterers, or any sale, exchange, release or surrender of, or other dealing in, any security for any such indebtedness or obligation;

(c)	any title defect or encumbrance or any dispossession of the Vessel by title paramount or otherwise;

(d)	any defect in the seaworthiness, condition, value, design, merchantability, operation or fitness for use of the Vessel or the ineligibility of the Vessel for any particular trade;

(e)	the Total Loss or any damage to or forfeiture or court marshall or other sale of the Vessel;

(f)	any libel, attachment, levy, detention, sequestration or taking into custody of the Vessel or any restriction or prevention of or interference with or interruption or cessation in, the use or possession thereof by the Charterers;

(g)	any insolvency, bankruptcy, reorganization, arrangement, readjustment, dissolution, striking-off, liquidation or similar proceedings by or against the Charterers;

(h)	any invalidity, unenforceability, lack of due authorization or other defects, or any failure or delay in performing or complying with any of the terms and provisions of this Charter or the other Leasing Documents by any party to this Charter or any other person;

(i)	any enforcement or attempted enforcement by the Owners of their rights under this Charter or any of the Leasing Documents executed or to be executed pursuant to this Charter; or

(j)

any loss of use of the Vessel due to deficiency or default or strike of officers or crew, fire, breakdown, damage, accident, defective cargo or any other cause which would or might but for this provision have the effect of terminating or in any way affecting any obligation of the Charterers under this Charter.

36.7	Time of payment of the Charterhire, the Upfront Charterhire and other payments by the Charterers shall be of the essence of this Charter and the other Leasing Documents.

36.8	All payments of the Charterhire, the Upfront Charterhire and any other amounts payable under the Leasing Documents shall be made in Dollars and shall be received by the Owners in same day available funds and by not later than 5.00p.m. (Shanghai time) on the due date thereof.

36.9	All Charterhire and any moneys payable hereunder shall be payable by the Charterers to the Owners to such account as the Owners may notify the Charterers in writing.

36.10

Payment of the Charterhire, the Upfront Charterhire and any other amounts payable to the Owners under the Leasing Documents shall be at the Charterers’ risk until receipt by the Owners.

36.11

All stamp duty, value added tax, withholding or other taxes (excluding taxes levied on the overall income of the Owners) and import and export duties and all other similar types of charges which may be levied or assessed on or in connection with:

(a)	the operation of this Charter in respect of the hire and all other payments to be made pursuant to this Charter and the remittance thereof to the Owners; and

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(b)	the import, export, purchase, delivery and re-delivery of the Vessel,

shall be borne by the Charterers. The Charterers shall pay, if applicable, value added tax and other similar tax levied on any Charterhire, the Upfront Charterhire and any other payments payable under this Charter by addition to, and at the time of payment of, such amounts.

36.12

If the Charterers fail to make any payment due under this Charter on the due date, they shall pay interest on such late payment at the default rate of two per cent. (2%) plus the Interest Rate per annum from the date on which such payment became due until the date of payment thereof.

36.13

All default interest and any other payments under this Charter which are of an annual or periodic nature shall accrue from day to day and shall be calculated on the basis of the actual number of days elapsed and a 360 day year.

36.14

Any payment which is due to be made on a day which is not a Business Day, shall be made on the preceding Business Day.

Clause 37 – POSSESSION OF VESSEL

37.1

The Charterers shall not, without the prior written consent of the Owners, assign, mortgage or pledge the Vessel or any interest therein, its Earnings, Insurances and Requisition Compensation and/or any of its rights and interests under any Approved Sub-charter, and shall not permit the creation of any Security Interest thereon other than the Permitted Security Interests.

37.2

The Charterers shall promptly notify each Approved Sub-charterer or such other party as the Owners may request, in writing that the Vessel is the property of the Owners and the Charterers shall provide the Owners with a copy of such written acknowledgement in such form and substance satisfactory to the Owners evidencing that such party has received such written notification.

37.3

If the Vessel is arrested, seized, impounded, forfeited, detained or taken out of their possession or control (whether or not pursuant to any distress, execution or other legal process), the Charterers shall procure the immediate release of the Vessel (whether by providing bail or procuring the provision of security or otherwise do such lawful things as the circumstances may require) and shall immediately notify the Owners of such event and shall indemnify the Owners against all documented losses, costs or charges incurred by the Owners by reason thereof in re-taking possession or otherwise in re-acquiring the Vessel. Without prejudice to the generality of the foregoing, the Charterers agree to indemnify the Owners against all consequences or liabilities arising from the master, officers or agents signing bills of lading or other documents.

37.4

The Charterers shall pay and discharge or cause that any sub-charterer of the Vessel shall promptly pay and discharge all obligations and liabilities whatsoever which have given or may give rise to liens on or claims enforceable against the Vessel and take all steps to prevent an arrest (threatened or otherwise) of the Vessel.

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Clause 38 – INSURANCE

38.1	The Charterers shall procure that insurances are effected in form and substance satisfactory to the Owners and their financiers (if any):

(a)	in Dollars;

(b)	in the case of fire and usual hull and machinery, marine risks and war risks (including blocking and trapping), on an agreed value basis in an amount no less than the higher from time to time of (i) 120% of the then Outstanding Principal Balance and (ii) the prevailing Market Value;

(c)	in the case of oil pollution liability risks for the Vessel, for an aggregate amount equal to the highest level of cover from time to time available under protection and indemnity club entry and in the international marine insurance market and for an amount of not less than US$1,000,000,000;

(d)	in relation to protection and indemnity risks in respect of the full tonnage of the Vessel;

(e)

through approved brokers and with first class international insurers and/or underwriters acceptable to the Owners (acting reasonably) and their financiers (if any) (including having a Standard & Poor’s rating of BBB+ or above, a Moody’s rating of A or above or an AM Best rating of A- or above) or, in the case of war risks and protection and indemnity risks, in a war risks and protection and indemnity risks association acceptable to the Owners (acting reasonably) and their financiers (if any) (including being a member of the International Group of Protection and Indemnity Clubs);

(f)	on no less favourable terms which the Charterers may be under an obligation (if any) to maintain under the terms of any Approved Sub-charter; and

(g)	otherwise on such terms as may be acceptable to the Owners and their financiers (if any).

38.2	In addition to the terms set out in Clause 13(a), the Charterers shall procure that the obligatory insurances shall:

(a)	subject always to paragraph (b), name the Charterers, the Approved Managers and the Owners (if so required by the Owners) as the only named assureds unless the interest of every other named assured or co-assured is limited:

(i)

in respect of any obligatory insurances for hull and machinery and war risks;

(A)

to any provable out-of-pocket expenses that they have incurred and which form part of any recoverable claim on underwriters; and

(B)

to any third party liability claims where cover for such claims is provided by the policy (and then only in respect of discharge of any claims made against them); and

(ii)

in respect of any obligatory insurances for protection and indemnity risks, to any recoveries they are entitled to make by way of reimbursement following discharge of any third party liability claims made specifically against them,

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and every other named assured or co-assured has undertaken in writing to the Owners or their financiers in such form as they may require, that any deductible shall be apportioned between the Charterers and every other named assured or co-assured in proportion to the gross claims made by or paid to each of them and that they shall do all things necessary and provide all documents, evidence and information to enable the Owners and their financiers (if any) in accordance with the terms of the loss payable clause, to collect or recover any moneys which at any time become payable in respect of the obligatory insurances;

(b)	whenever the Owners or a financier of the Owners requires:

(i)

in respect of fire and other usual marine risks and war risks, name (or be amended to name) the same as additional named assured for their rights and interests, warranted no operational interest and with full waiver of rights of subrogation against such financiers, but without such financiers thereby being liable to pay (but having the right to pay) premiums, calls or other assessments in respect of such insurance;

(ii)

in relation to protection and indemnity risks, name (or be amended to name) the same as additional insured or co-assured for their rights and interests to the extent permissible under the relevant protection and indemnity club rules; and

(iii)

name the Owners’ financiers (as applicable) and the Owners (as applicable) as the first ranking loss payee and the second ranking loss payee respectively (and in the absence of any financiers, the Owners as first ranking loss payee) in accordance with the terms of the relevant loss payable clauses approved by the Owners’ financiers and the Owners (such approval not to be unreasonably withheld) with such directions for payment in accordance with the terms of such relevant loss payable clause, as the Owners and their financiers (if any) may specify;

(c)	provide that all payments by or on behalf of the insurers under the obligatory insurances to the Owners and/or their financiers (as applicable) shall be made without set-off, counterclaim or deductions or condition whatsoever;

(d)	provide that such obligatory insurances shall be primary without right of contribution from other insurances which may be carried by the Owners or their financiers (if any);

(e)	provide that the Owners and/or their financiers (if any) may make proof of loss if the Charterers fail to do so; and

(f)

provide that if any obligatory insurance is cancelled, or if any substantial change is made in the coverage which adversely affects the interest of the Owners, or if any obligatory insurance is allowed to lapse for non-payment of premium, such cancellation, change or lapse shall not be effective with respect to the Owners and/or their financiers (if any) for fourteen (14) days (or seven (7) days in the case of war risks), or such other period as may be agreed by the Owners and/or their financiers (if any), after receipt by the Owners and/or their financiers (if any) of prior written notice from the insurers of such cancellation, change or lapse.

38.3	The Charterers shall:

(a)	at least fourteen (14) days prior to Delivery (or such shorter period agreed by the parties), notify in writing the Owners (copied to their financiers (if any)) of the terms and conditions of all Insurances;

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(b)

at least fourteen (14) days before the expiry of any obligatory insurance, notify the Owners (copied to their financiers (if any)) of the brokers (or other insurers) and any protection and indemnity or war risks association through or with whom the Charterers propose to renew that obligatory insurance and of the proposed terms of renewal and obtain the Owners’ approval (such approval not to be unreasonably withheld and in any event, having regard to the requirements on insurance cover referred to under this Charter);

(c)	at least seven (7) days before the expiry of any obligatory insurance, procure that such obligatory insurance is renewed or to be renewed on its expiry date in accordance with the provisions of this Charter;

(d)

procure that the approved brokers and/or the war risks and protection and indemnity associations with which such a renewal is effected shall promptly after the renewal or the effective date of the new insurance and protection and indemnity cover notify the Owners (copied to their financiers (if any)) in writing of the terms and conditions of the renewal; and

(e)

as soon as practicable after the expiry of any obligatory insurance, deliver to the Owners a letter of undertaking as required by this Charter in respect of such Insurances for the Vessel as renewed pursuant to this Clause 38.3 together with copies of the relevant policies or cover notes or entry certificates duly endorsed with the interest of the Owners and/or their financiers (if any).

38.4

The Charterers shall ensure that all insurance companies and/or underwriters, and/or (if any) insurance brokers provide the Owners with all copies of policies, cover notes and certificates of entry (or originals where so requested by the Owners following the occurrence of a Termination Event or Potential Termination Event) relating to the obligatory insurances which they are to effect or renew and of a letter or letters or undertaking in a form required by the Owners and/or their financiers (if any) (which the Charterers shall procure the relevant insurance companies, underwriters and/or insurance brokers to provide upon renewal or receipt of the insurance companies, underwriters and/or insurance brokers or an executed notice of assignment), and such letter or letters of undertaking shall include undertakings by the insurance companies and/or underwriters that:

(a)	they will have endorsed on each policy, immediately upon issue, a loss payable clause and a notice of assignment complying with the provisions of this Charter and the Financial Instruments;

(b)	they will hold the benefit of such policies and such insurances, to the order of the Owners and/or their financiers (if any) and/or such other party in accordance with the said loss payable clause;

(c)	they will advise the Owners and their financiers (if any) promptly of any material change to the terms of the obligatory insurances of which they are aware;

(d)

(i) they will indicate in the letters of undertaking that they will immediately notify the Owners and their financiers (if any) when any cancellation, charge or lapse of the relevant obligatory insurance occurs and (ii) following a written application from the Owners and/or their financiers (if any) not later than one (1) month before the expiry of the obligatory insurances they will notify the Owners and their financiers (if any) not less than fourteen (14) days before the expiry of the obligatory insurances, in the event of their not having received notice of renewal instructions from the Charterers and, in the event of their receiving instructions to renew, they will promptly notify the Owners and their financiers (if any) of the terms of the instructions; and

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(e)

if any of the obligatory insurances form part of any fleet cover, the Charterers shall procure that the insurance broker(s), or leading insurer, as the case may be, undertakes to the Owners and their financiers (if any) that such insurance broker or insurer will not set off against any sum recoverable in respect of a claim relating to the Vessel under such obligatory insurances any premiums due in respect of any other vessel under any fleet cover of which the Vessel forms a part or any premium due for other insurances, they waive any lien on the policies, or any sums received under them, which they might have in respect of such premiums, and they will not cancel such obligatory insurances by reason of non-payment of such premiums or other amounts, and will arrange for a separate policy to be issued in respect of the Vessel forthwith upon being so requested by the Owners and/or their financiers (if any) and where practicable.

38.5	The Charterers shall ensure that any protection and indemnity and/or war risks associations in which the Vessel is entered provides the Owners and their financiers (if any) with:

(a)	a copy of the certificate of entry for the Vessel as soon as such certificate of entry is issued;

(b)	a letter or letters of undertaking in such form as may be required by the Owners and their financiers (if any) or in such association’s standard form; and

(c)	a copy of each certificate of financial responsibility for pollution by oil or other Environmentally Sensitive Material issued by the relevant certifying authority in relation to the Vessel.

38.6	The Charterers shall ensure that all policies relating to obligatory insurances are deposited with the approved brokers through which the insurances are effected or renewed.

38.7	The Charterers shall procure that all premiums or other sums payable in respect of the obligatory insurances are punctually paid and produce all relevant receipts when so required by the Owners.

38.8	The Charterers shall ensure that any guarantees required by a protection and indemnity or war risks association are promptly issued and remain in full force and effect.

38.9

The Charterers shall neither do nor omit to do (nor permit to be done or not to be done) any act or thing which would or might render any obligatory insurance invalid, void, voidable or unenforceable or render any sum payable under an obligatory insurance repayable in whole or in part; and, in particular:

(a)

the Charterers shall procure that all necessary action is taken and all requirements are complied with which may from time to time be applicable to the obligatory insurances, and (without limiting the obligations contained in this Clause 38 (Insurance)) ensure that the obligatory insurances are not made subject to any exclusions or qualifications to which the Owners have not given their prior approval (unless such exclusions or qualifications are made in accordance with the rules of a protection and indemnity association which is a member of the International Group of protection and indemnity associations) (such approval not to be unreasonably withheld);

(b)

the Charterers shall not make or permit any changes relating to the classification or classification society or manager or operator of the Vessel unless such changes have first been approved by the underwriters of the obligatory insurances or the Owners (such approval not to be unreasonably withheld, and subject always to the Owners receiving credit approval on such changes);

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(c)

the Charterers shall procure that all quarterly or other voyage declarations which may be required by the protection and indemnity risks association in which the Vessel is entered to maintain cover for trading to the United States of America and Exclusive Economic Zone (as defined in the United States Oil Pollution Act 1990 or any other applicable legislation) are made and the Charterers shall promptly provide the Owners with copies of such declarations and a copy of the certificate of financial responsibility; and

(d)

the Charterers shall not employ the Vessel, nor allow it to be employed, otherwise than in conformity with the terms and conditions of the obligatory insurances, without first obtaining the consent of the insurers and complying with any requirements (as to extra premium or otherwise) which the insurers specify.

38.10

The Charterers shall not make or agree to any material alteration to the terms of any obligatory insurance nor waive any right relating to any obligatory insurance which would or would potentially have an adverse effect on the rights of the Owners under the Leasing Documents, in each case without the prior written consent (such consent not to be unreasonably withheld) of the Owners and their financiers (if any), and for the purposes of this Clause 38.10, “material” alterations shall include, without limitation, any change to the identity of the beneficiaries under such insurances or scope of cover, reduction to the insured amount, limitation on the scope of the cover and any other amendment which would cause a breach under the terms of this Charter, any Approved Sub-charter or any other Leasing Document.

38.11

The Charterers shall not settle, compromise or abandon any claim under any obligatory insurance for a Total Loss or for a Major Casualty, and shall do all things necessary and provide all documents, evidence and information to enable the Owners to collect or recover any moneys which at any time become payable in respect of the obligatory insurances.

38.12

The Charterers shall provide the Owners, promptly upon the Owners’ written request, copies of:

(a)	all communications between the Charterers and:

(i)

the approved brokers; and

(ii)

the approved protection and indemnity and/or war risks associations; and

(iii)

the approved international insurers and/or underwriters, which relate directly or indirectly to:

(A)

the Charterers’ obligations relating to the obligatory insurances including, without limitation, all requisite declarations and payments of additional premiums or calls; and

(B)

any credit arrangements made between the Charterers and any of the persons referred to in paragraphs (i) or (ii) relating wholly or partly to the effecting or maintenance of the obligatory insurances; and

(b)	any communication with all parties involved in case of a claim under any of the Vessel’s insurances.

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38.13

The Charterers shall promptly provide the Owners (or any persons which they may designate) with any information which the Owners or their financiers (if any) may request for the purpose of:

(a)	obtaining or preparing any report from an independent marine insurance broker as to the adequacy of the obligatory insurances effected or proposed to be effected; and/or

(b)	effecting, maintaining or renewing any such insurances as are referred to in Clause 13(a) or this Clause 38 (Insurance) or dealing with or considering any matters relating to any such insurances.

38.14

If one or more of the obligatory insurances are not effected and maintained with first class international insurers or are effected with an insurance or captive subsidiary of the Owners or the Charterers, then the Charterers shall procure, at their own expense, that the relevant insurers maintain in full force and effect facultative reinsurances with reinsurers and through brokers, in each case, of recognised standing and acceptable in all respects to the Owners and their financiers (if any). Any reinsurance policy shall include, if and when permitted by law, a cut-through clause in a form acceptable to the Owners. The Charterers shall procure that underwriters of the primary insurances assign each reinsurance to the relevant financiers in full, if required.

38.15

The Charterers shall upon demand fully indemnify the Owners in respect of all premiums and other expenses which are incurred by (i) the Owners (in their absolute discretion) in connection with or with a view to effecting, maintaining or renewing any innocent owners’ interest insurance, mortgagee’s interest insurance and a lessor’s/ mortgagee’s additional perils (pollution) insurance that may be taken out in respect of the Vessel and/or (ii) the financier(s) of the Owners (if any) (in their absolute discretion) in connection with or with a view to effecting, maintaining or renewing a mortgagee’s interest insurance and a mortgagee’s additional perils (pollution) insurance that may be taken out in respect of the Vessel, in each case, on such terms, through such insurers and generally in such manner as the Owners may from time to time consider appropriate, and the amount of the cover under the insurances referred to this Clause 38.15 shall be equal to at least equal to the higher of (i) 120% of the then prevailing Outstanding Principal Balance and (ii) the prevailing Market Value.

38.16

The Charterers shall be solely responsible for and indemnify the Owners in respect of all loss or damage to the Vessel (insofar as the Owners shall not be reimbursed by the proceeds of any insurance in respect thereof) however caused occurring at any time or times before physical possession thereof is retaken by the Owners, reasonable wear and tear to the Vessel only excepted.

38.17

The Charterers shall:

(a)	reimburse the Owners any expenses incurred by the Owners in obtaining the reports described in Clause 38.13; and

(b)	procure that there is delivered to the brokers, insurers, underwriters, associations described in Clause 38.1(e) such information in relation to the Insurances as they may require.

38.18

The Charterers shall keep the Vessel insured at their expense against such other risks which the Owners consider reasonable for a prudent shipowner or operator to insure against at the relevant time (as notified by the Owners) and which are, at that time, generally insured against by owners or operators of vessels similar to the Vessel.

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38.19

The Charterers shall, in the event that an Approved Manager makes a claim under any obligatory insurances taken out in connection with this Clause 38 (Insurance) but is unable to or otherwise fails to pay in full any deductible in connection with such claim (in an amount as apportioned between the Charterers and every other assured in proportion to the gross claims made by or paid to each of them), pay such shortfall in deductible payable on behalf of that Approved Manager.

Clause 39 – WARRANTIES RELATING TO VESSEL

39.1

It is expressly agreed and acknowledged that the Owners are not the manufacturer or original supplier of the Vessel which has been purchased by the Owners from the Charterers as sellers pursuant to the MOA for the purpose of then chartering the Vessel to the Charterers hereunder and that no condition, term, warranty or representation of any kind is or has been given to the Charterers by or on behalf of the Owners in respect of the Vessel (or any part thereof).

39.2	All conditions, terms or warranties express or implied by the law relating to the specifications, quality, description, merchantability or fitness for any purpose of the Vessel (or any part thereof) or otherwise are hereby expressly excluded.

39.3

The Charterers agree and acknowledge that the Owners shall not be liable for any claim, loss, damage, expense or other liability of any kind or nature caused directly or indirectly by the Vessel or by any inadequacy thereof or the use or performance thereof or any repairs thereto or servicing thereof and the Charterers shall not by reason thereof be released from any liability to pay any Charterhire, the Upfront Charterhire or other payment due under this Charter or the other Leasing Documents.

Clause 40 – TERMINATION, REDELIVERY AND TOTAL LOSS

40.1

If the Termination Purchase Price becomes payable in accordance with Clause 44.2, the same shall be payable in consideration of the purchase and transfer of the legal and beneficial title of the Vessel pursuant to Clause 40.4 and it is hereby agreed by the parties hereto that payment of the Termination Purchase Price is proportionate as to amount, having regard to the legitimate interest of the Owners, in protecting against the Owners’ risk of the Charterers failing to perform their obligations under this Charter.

40.2	Upon the full and irrevocable receipt by the Owners of the Termination Purchase Price pursuant to Clause 40.1 in full on the Termination Date, this Charter shall terminate and the title in the Vessel shall be transferred to the Charterers on the Termination Date pursuant to Clause 40.4.

40.3

(a)	If the Charterers fail to make full payment of the Termination Purchase Price on the Termination Date:

(i)

Clauses 36.12 and 36.13 shall apply;

(ii)

the Charterers’ right to possess and operate the Vessel shall cease on a date that the Owners advise the Charterers of and (without in any way affecting the Charterers’ obligation to pay the Termination Purchase Price and Charterhire hereunder and any other moneys under this Charter) the Charterers shall, upon the Owners’ request (at Owners’ sole discretion), be obliged to immediately (and at the Charterers’ own cost) redeliver the Vessel to the Owners on such date as the Owners may require at such ready and safe port as the Owners may require.

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(b)

Without prejudice to any rights which the Owners may have in the capacity as owner of the Vessel, the Owners shall concurrently with their right to require redelivery of the Vessel pursuant to Clause 40.3(a)(ii) or Clause 44.2(b), be entitled (but not obliged) to sell the Vessel on terms they deem fit and/or to otherwise operate the Vessel on such terms as they may require and may create whatsoever interests thereon, including without limitation, charterparties or any other form of employment contracts and shall apply all such proceeds and earnings (after deducting all fees, taxes, disbursements and any other costs and expenses incurred by the Owners) towards satisfying the Termination Purchase Price.

(c)

Following any sale of the Vessel by the Owners to a third party following the Charterers’ failure to pay the Termination Purchase Price, the Net Sale Proceeds shall be applied towards satisfying amounts owing under the Charter and the Other Charters in accordance with the provisions of the Trust Deed and any excess shall thereafter be paid to the Charterers but if there is a shortfall, the Charterers shall be obliged to pay such shortfall within ten (10) days of the Owners’ demand. The Owners and the Charterers hereby agree that unless the Owners shall not have exercised reasonable care to obtain the best price reasonably obtainable for the Vessel at the time it is sold in the relevant jurisdiction, the Charterers shall not have any claim or recourse against the Owners in relation to its power of sale.

40.4

Immediately upon receipt by the Owners of irrevocable payment of the Termination Purchase Price in full pursuant to the terms of this Charter, the Owners shall (save in the event of Total Loss or where ownership has already been or agreed to be transferred pursuant to Clause 40.3) transfer the legal and beneficial ownership of the Vessel on an “as is where is” basis (and, for the avoidance of doubt but without prejudice to Clause 50.1(b)), and otherwise in accordance with the terms and conditions set out at Clause 50.1(a) and (b)), to the Charterers (or their nominee) and shall (at the cost of the Charterers) execute a bill of sale and a protocol of delivery and acceptance evidencing the same and the Vessel shall be deemed to have been delivered to the Charterers (or their nominee) on the date and time set out in such protocol of delivery and acceptance (and to the extent required for such purposes, the Vessel shall be deemed first to have been redelivered to the Owners).

40.5

The Charterers hereby undertake to indemnify the Owners against any claims incurred in relation to the Vessel as a result of the Charterers’ action or performance prior to such transfer of ownership. Any taxes, notarial, consular and other costs, charges and expenses connected with closing of the Owners’ register shall be for the Charterers’ account.

40.6

If the Charterers are required to redeliver the Vessel to the Owners pursuant to Clause 40.3(a)(ii) or following a direction of the Owners under Clause 44.2(b) or the Vessel is not purchased by the Charterers at the end of the Charter Period pursuant to Clause 49 (Expiry Purchase Obligation), the Charterers shall ensure that the Vessel shall, at the time of redelivery to the Owners (at the Charterers’ cost and expense including any dry-docking expenses):

(a)	be in compliance with its Insurances;

(b)

be in an equivalent classification as she was as at the Delivery Date without any recommendation or condition, and with valid, unextended certificates for not less than six (6) months and free of average damage affecting the Vessel’s classification and in the same or as good structure, state, condition and classification as that in which she was deemed on the Delivery Date, fair wear and tear not affecting the Vessel’s classification excepted;

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(c)

have passed her 5-year and, if applicable, 10-year special surveys, and any subsequent intermediate surveys without any condition or outstanding issue and to the satisfaction of the Classification Society and with all the Vessel’s classification, trading, national and international certificates that the Vessel had when she was delivered under this Charter and the log book and whatsoever necessary relating to the operation of the Vessel, valid and un-extended without conditions or recommendation falling due;

(d)	have her survey cycles up to date and trading and classification certificate valid for at least six (6) months;

(e)

be redelivered to the Owners together with all spare parts and spare equipment as were on board at the time of Delivery (but only to the extent they have not already been used in the operation of the Vessel), and any such spare parts and spare equipment on board at the time of re-delivery shall be taken over by the Owners free of charge;

(f)	be free of any Security Interest (save for the Security Interests granted pursuant to the Financial Instruments) and free of any cargo;

(g)

be redelivered to the Owners together with all material information generated during the Charter Period in respect of the use, possession, operation, navigation, utilization of lubricating oil and the physical condition of the Vessel, whether or not such information is contained in the Charterers’ equipment, computer or property;

(h)	be free of any charter (unless the Owners wish to retain the continuance of any then existing charter);

(i)	be free of officers and crew (unless otherwise agreed by the Owners); and

(j)	shall have had her underwater parts treated with ample anti-fouling to last for the ensuing period up to the next scheduled dry docking of the Vessel.

40.7	The Owners shall, at the time of the redelivery of the Vessel, take over all bunkers, lubricating oil, unbroached provisions, paints, ropes and other consumable stores in the Vessel at no cost to the Owners.

40.8

At the expiration of the Charter Period the Vessel shall be redelivered by the Charterers to the Owners at a safe and ice free port in China or Europe (or other port or place (including without limitation, at sea) the parties may agree in writing). The Charterers shall give the Owners not less than thirty (30) running days’ preliminary notice of expected date and port of redelivery and not less than fourteen (14) running days’ definite notice of expected date and port of redelivery.

40.9	If the Vessel, for any reason, becomes a Total Loss after Delivery, the Charterers shall pay the Termination Purchase Price to the Owners on the earlier of:

(a)	the date falling one hundred and twenty (120) days after such Total Loss has occurred; and

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(b)

the date of receipt by the Owners and/or their financiers (if any), in accordance with the terms of the relevant loss payable clause, of the proceeds of insurance relating to such Total Loss, provided that it is hereby agreed that any insurance proceeds in respect of the Vessel received by the Owners and/or their financiers (if any) shall be applied in or towards discharging the Charterers’ obligation to pay the Termination Purchase Price and any interest accrued thereon (and such application shall be deemed satisfaction of the Charterers’ obligation to pay the Termination Purchase Price to the extent so satisfied) and in the event that the insurance proceeds received from the insurers exceed the Termination Purchase Price due (and any interest accrued thereon), the excess shall be firstly paid towards satisfying any amounts outstanding and owing by the Charterers or any of their Affiliates under any Other Charter and thereafter paid to the Charterers.

For the avoidance of doubt, in the event that the Vessel becomes a Total Loss:

(i)

payment of the Charterhire and all other sums payable under the Leasing Documents during such period shall continue to be made by the Charterers in accordance with the terms thereof unless and until the Owners receive in full the Termination Purchase Price;

(ii)

should insurance proceeds be received by the Owners from the insurers, the Charterers’ obligations to pay the Termination Purchase Price shall be accordingly reduced by an amount corresponding to such insurance proceeds but in the event that such insurance proceeds are less than the amount of the Termination Purchase Price together with any interest accrued thereon, the Charterers remain obliged to pay to the Owners the balance so that the full amount of the Termination Purchase Price due together with any interest accrued thereon is received by the Owners; and

(iii)

the obligation of the Charterers to pay the Termination Purchase Price shall remain unaffected and exist regardless of whether any of the insurers have agreed or refused to meet or have disputed in good faith, the claim for Total Loss.

40.10

The Owners shall have no obligation to supply to the Charterers with a replacement vessel following the occurrence of a Total Loss.

Clause 41 – FEES AND EXPENSES

41.1

In consideration of the Owners entering into this Charter, the Charterers shall pay to the Owners or their nominee a non-refundable upfront fee equal to one (1) per cent. of the difference between the Purchase Price and the Upfront Charterhire (the “Upfront Fee”) without set-off, deduction or counterclaim which shall be payable (subject to Clause 41.2) on or before the earlier of:

(a)	the Delivery Date (as defined in the MOA); and

(b)	if this Charter is terminated pursuant to Clause 33.1, immediately upon the Owners’ demand.

41.2	The Owners shall set-off the Upfront Fee from the payment of the Purchase Price payable by the Owners to the Charterers.

41.3	Without prejudice to any other rights of the Owners under this Charter, the Charterers shall promptly pay to the Owners on written demand on a full indemnity basis:

(a)

all costs, charges and expenses incurred by the Owners in collecting any Charterhire, the Upfront Charterhire or other payments not paid on the due date under this Charter, in remedying any other failure of the Charterers to observe the terms and conditions of this Charter and in enforcing the Owners’ rights under any Leasing Document; and

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(b)

all costs and expenses (including, but not limited to, legal costs) reasonably incurred by the Owners in the negotiation and execution of all documentation in relation to this Charter and the other Leasing Documents including, but not limited to, all costs incurred by the Owners and all legal costs, expenses and other disbursements incurred by the Owners’ legal counsels in connection with the same.

Clause 42 – NO WAIVER OF RIGHTS

42.1

No neglect, delay, act, omission or indulgence on the part of either party in enforcing the terms and conditions of this Charter shall prejudice the strict rights of that party or be construed as a waiver thereof nor shall any single or partial exercise of any right of either party preclude any other or further exercise thereof.

42.2	No right or remedy conferred upon either party by this Charter shall be exclusive of any other right or remedy provided for herein or by law and all such rights and remedies shall be cumulative.

Clause 43 – NOTICES

43.1

Any notice, certificate, demand or other communication to be served, given made or sent under or in relation to this Charter shall be in English and in writing and (without prejudice to any other valid method or giving making or sending the same) shall be deemed sufficiently given or made or sent if sent by registered post, fax or by email to the following respective addresses:


to the Owners:	c/o BANK OF COMMUNICATIONS FINANCIAL LEASING CO., LTD. 28/F, 333 Lujiazui Ring Road, Pudong New Area, Shanghai 200120, The People’s Republic of China

	Attention:	FANG Xiuzhi / WANG Changzhen
	Email:	fang_xz@bocommleasing.com / wang.changzhen@bocommleasing.com
	Fax:	+8621 6278 8317

to the Charterers:	c/o NAVIOS SHIPMANAGEMENT INC. 85 Akti Miaouli, 18535, Piraeus, Greece
	Attention:	Vasiliki Papaefthymiou
	Email:	vpapaefthymiou@navios.com / legal@navios.com
	Fax:	+30 210 41 72 070

or, if a party hereto changes its address or fax number, to such other address or fax number as that party may notify to the other.

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Clause 44 – TERMINATION EVENTS

44.1	The Owners and the Charterers hereby agree that any of the following events shall constitute a Termination Event:

(a)	any of the Relevant Persons fail to make any payment:

(i)

on its due date, in respect of any Charterhire; or

(ii)

within five (5) days of its due date, in respect of any other amount payable,

in each case, under this Charter or any other Leasing Document to which they are a party; or

(b)	the Charterers breach or omit to observe or perform any of their undertakings in Clauses 46.1 (m), (n), (o), (p), (q), (r) or (v) or the Guarantor breaches or omits to observe or perform its financial covenants contained in clause 12.21 (financial covenants) of the Guarantee; or

(c)	the Charterers fail to obtain and/or maintain the Insurances required under Clause 38 (Insurance) in accordance with the provisions thereof or any insurer in respect of such Insurances cancels the Insurances or disclaims liability with respect thereto; or

(d)

any of the Relevant Persons commits any other breach of, or omits to observe or perform, any of their other obligations or undertakings in this Charter or any Leasing Document (other than a breach referred to in paragraph (a) or (b) above) unless such breach or omission is, in the reasonable opinion of the Owners, remediable and such Relevant Person remedies such breach or omission to the satisfaction of the Owners within fourteen (14) Business Days (or in the case of Clause 46.1(l), ten (10) Business Days) of the earlier of (i) notice thereof from the Owner or (ii) upon such Relevant Person becoming aware of the same; or

(e)	any representation or warranty made by any Relevant Person in or pursuant to any Leasing Document proves to be untrue or misleading in any material way when made; or

(f)

at any time after any representation or warranty in connection with a Non-subsidiary Manager or made by a Non-subsidiary Manager in or pursuant to any Leasing Document proves to be untrue or misleading in any material way when made and the Charterers fail to comply with the request of the Owners to change or appoint a new manager for the Vessel within the prescribed timeline; or

(g)	any of the following occurs in relation to any Financial Indebtedness of a Relevant Person:

(i)

any Financial Indebtedness of such Relevant Person is not paid when due or, if so payable, on demand after any applicable grace period has expired; or

(ii)

any Financial Indebtedness of such Relevant Person becomes due and payable, or capable of being declared due and payable, prior to its stated maturity date as a consequence of any event of default and not as a consequence of the exercise of any voluntary right of prepayment; or

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(iii)

a lease, hire purchase agreement or charter creating any Financial Indebtedness of such Relevant Person is terminated by the lessor or owner as a consequence of any termination event or event of default (howsoever defined); or

(iv)

any overdraft, loan, note issuance, acceptance credit, letter of credit, guarantee, foreign exchange or other facility, or any swap or other derivative contract or transaction, relating to any Financial Indebtedness of such Relevant Person ceases to be available or becomes capable of being terminated or declared due and payable or cash cover is required or becomes capable of being required, as a result of any termination event or event of default (howsoever defined),

provided that no Termination Event will occur under this Clause 44.1(g) in respect of such Relevant Person if (1) the aggregate amount of Financial Indebtedness or commitment for Financial Indebtedness falling within paragraphs (i) to (iv) above is less than (A) in the case of such Relevant Person (other than the Charterers or the Guarantor), US$1,000,000 (or its equivalent in any other currency) in aggregate and (B) in the case of the Guarantor, less than US$10,000,000 (or its equivalent in any other currency) in aggregate and (2) such event has, in the opinion of the Owners, arisen solely and directly from a claim which is frivolous or vexatious and such claim is discharged, stayed or dismissed within fourteen (14) days of commencement; or

(h)	any of the following occurs in relation to a Relevant Person:

(i)

such Relevant Person becomes, in the reasonable opinion of the Owners, unable to pay their debts as they fall due; or

(ii)

the value of the assets of such Relevant Person is less than their liabilities; or

(iii)

any assets of the Charterers or any assets of the Guarantor exceeding the value of US$10,000,000 (or its equivalent in any other currency) in aggregate or any assets of such other Relevant Person exceeding US$1,000,000 (or its equivalent in any other currency) are subject to any form of execution, attachment, arrest, sequestration or distress which is not discharged within thirty (30) days (or such longer period agreed by the Owners); or

(iv)

any administrative or other receiver is appointed over all or a substantial part of the assets of such Relevant Person unless as part of a solvent reorganisation which has been approved by the Owners; or

(v)

such Relevant Person makes any formal declaration of bankruptcy or any formal statement to the effect that they are insolvent or likely to become insolvent, or a winding up or administration order is made in relation to such Relevant Person, or the members, partners or directors of such Relevant Person pass a resolution to the effect that they should be wound up, placed in administration or cease to carry on business; or

(vi)

a petition is presented or any other step is taken in any Relevant Jurisdiction for the dissolution, winding up or administration, or the appointment of a provisional liquidator, of such Relevant Person unless the petition is being contested in good faith and on substantial grounds and is dismissed or withdrawn within twenty-one (21) days of the presentation of the petition; or

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(vii)

such Relevant Person petitions a court, or presents any proposal for, any form of judicial or non-judicial suspension or deferral of payments, reorganisation of their debt (or certain of their debt) or arrangement with all or a substantial proportion (by number or value) of their creditors or of any class of them or any such suspension or deferral of payments, reorganisation or arrangement is effected by court order, contract or otherwise; or

(viii)

any meeting of the partners, members or directors of such Relevant Person is summoned for the purpose of considering a resolution or proposal or resolving or proposing to authorise or take any action of a type described in paragraphs (iv) to (vii); or

(ix)

in a country or a territory other than England and Wales, any event occurs or any procedure is commenced which, in the opinion of the Owners, is similar to any of the foregoing referred to in (ii) to (vii) above inclusive; or

(x)

any expropriation, attachment, sequestration, distress or execution (or any analogous process in any jurisdiction) affects any asset or assets of such Relevant Person; or

(i)	a Relevant Person suspends or ceases (or threatens to suspend or cease) carrying on all or a material part of its business; or

(j)

any consent, approval, authorisation, license or permit necessary to enable any Relevant Person to operate or charter the Vessel to enable them to comply with any provision of any Leasing Document or to ensure that the obligations of such Relevant Person are legal, valid, binding or enforceable is not granted, expires without being renewed, is revoked or becomes liable to revocation or any condition of such a consent, approval, authorisation, license or permit is not fulfilled; or

(k)	any event or circumstance occurs which has or is likely to have a Material Adverse Effect; or

(l)	the Vessel is subject to any form of execution, attachment, arrest, sequestration or distress which is not discharged within thirty (30) days (or such longer period as the Owners may agree); or

(m)

this Charter or any Leasing Document or any Security Interest created by a Leasing Document is cancelled, terminated, rescinded or suspended or otherwise ceases to remain in full force and effect for any reason or no longer constitutes valid, binding and enforceable obligations of any party to that document for any reason whatsoever; or

(n)	any Relevant Person rescinds or purports to rescind or repudiates or purports to repudiate a Leasing Document; or

(o)	it is or has become:

(i)

unlawful or prohibited, whether as a result of the introduction of a new law, an amendment to an existing law or a change in the manner in which an existing law is or will be interpreted or applied; or

(ii)

contrary to, or inconsistent with, any regulation,

for any Relevant Person to maintain or give effect to any of its obligations under this Charter or any of the other Leasing Documents to which it is a party in the manner it is contemplated under such Leasing Document or any of the obligations of such Relevant Person under any Leasing Document to which it is a party are not or cease to be legal, valid, binding and enforceable; or

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(p)	the Security Interest constituted by any Security Document is in any way imperilled or in jeopardy; or

(q)	the Vessel is not delivered latest by the Cancelling Date; or

(r)

there is a merger, amalgamation, demerger, consolidation or corporation reconstruction of a Relevant Person (other than where, in the case of the Guarantor, the Guarantor remains the surviving legal entity following the occurrence of such event) or a change of control or legal or beneficial ownership of the Charterers from that set out in Clause 45.1(a) and (b) without the Owners’ prior written consent; or

(s)	there is a change in control of the Guarantor from that set out in Clause 45.1(c) without the Owners’ prior written consent; or

(t)	save with the prior written consent of the Owners, the Guarantor is de-listed from the NASDAQ or the trading of its units on the NASDAQ is suspended for any reason for a period of exceeding twenty (20) consecutive days; or

(u)	any Termination Event (as defined in any Other Charter) occurs under such Other Charter.

44.2

At any time after the occurrence of a Termination Event which is continuing, the Owners may in their absolute discretion issue a written notice to the Charterers advising the Charterers of the Owners’ intention to terminate this Charter on the date specified in such notice (the “Termination Date”) and requiring the Charterers to pay to the Owners the Termination Purchase Price on the Termination Date, whereupon the Charterers shall be obliged to pay the Termination Purchase Price on such date; and it is hereby agreed that:

(a)

the Charterers shall be obliged to continue to pay Charterhire up to and including the date that the Termination Purchase Price is fully and irrevocably paid to the Owners (which shall be the Termination Date if the Termination Purchase Price is punctually paid in accordance with this Clause) or, as the case may be, (without prejudice to the Owners’ right to continue to request for the payment of the Termination Purchase Price) the date that the Vessel is re-delivered by the Charterers to the Owners under this Clause; and

(b)	if the Charterers fail to pay the Termination Purchase Price on the Termination Date, then sub-paragraphs (a)(i), (a)(ii) and (b) of Clauses 40.3 shall apply,

and further the Owners (or their agents and representatives) may, to the extent permitted by applicable law and without prejudice to any of the obligations of the Charterers hereunder, take possession of the Vessel and for this purpose, the Owners (or their agents and representatives) may enter any premises belonging to or in the occupation or under the control of the Charterers, the Guarantor or any of its Affiliates, to board the Vessel and cause the Vessel to be redelivered to the Owners by any lawful means.

44.3	For the avoidance of doubt, notwithstanding any action taken by the Owners following a Termination Event, the Charterers shall remain liable for the outstanding obligations on their part to be performed under this Charter.

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44.4

Without limiting the generality of the foregoing or any other rights of the Owners, upon the occurrence of a Termination Event which is continuing, the Owners shall have the sole and exclusive right and power to (i) settle, compromise, compound, adjust or defend any actions, suits or proceedings relating to or pertaining to the Vessel and this Charter, (ii) make proof of loss, appear in and prosecute any action arising from any policy or policies of insurance maintained pursuant to this Charter, and settle, adjust or compromise any claims for loss, damage or destruction under, or take any other action in respect of, any such policy or policies and (iii) change or appoint a new manager for the Vessel other than an Approved Manager and the appointment of that Approved Manager may be terminated immediately without any recourse to the Owners.

44.5

Each Termination Event shall be either a breach of condition by the Charterers where it involves a breach of this Charter by the Charterers or shall otherwise be an agreed terminating event, the occurrence and continuation of which gives rise to a right of the Owners to terminate the leasing of the Vessel under this Charter in accordance with this Clause and to exercise their rights under this Charter.

Clause 45 – REPRESENTATIONS AND WARRANTIES

45.1	The Charterers represent and warrant to the Owners as of the date of this Charter and on each day thereafter until the last day of the Charter Period, as follows:

(a)	the Charterers are wholly legally owned by the Shareholder and the Shareholder is wholly legally owned by the Guarantor;

(b)	the Charterers are wholly beneficially owned by the Guarantor;

(c)

(i)

Mrs Angeliki Frangou either directly or indirectly (through entities owned and controlled by her or trusts or foundations of which she is the beneficiary) and/or Navios Maritime Partners L.P. and/or Navios Maritime Holdings Inc. and/or its Affiliates is the ultimate beneficial owner of, or has ultimate control of the voting rights attaching to, at least 20 per cent. of all the issued units in the Guarantor;

(ii)

Mrs Angeliki Frangou, either directly or indirectly (through entities owned and controlled by her or trusts or foundations of which she is the beneficiary), is the ultimate beneficial owner of Navios Maritime Containers GP L.L.C.; and

(iii)

Navios Maritime Containers GP L.L.C. is the only general partner of the Guarantor;

(d)	each of the Relevant Persons is duly incorporated or formed, validly existing and (where relevant) good standing under the laws of its jurisdiction of its incorporation or formation;

(e)	each of the Relevant Persons has the corporate or limited partnership capacity, and has taken all corporate or limited partnership actions, and each of the Relevant Persons has obtained all consents, approvals, authorisations, licenses or permits necessary, in each case for it:

(i)

to execute each of the Leasing Documents to which it is a party; and

(ii)

to comply with and perform its obligations under each of the Leasing Documents to which it is a party;

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(f)

all consents, approvals, authorisations, licenses or permits referred to in Clause 45.1(e) required or desirable to (i) enable each Relevant Person lawfully to enter into, exercise their rights and comply with its obligations in the Leasing Documents to which such Relevant Person is a party to and (ii) to make the Leasing Documents to which such Relevant Person is a party admissible in evidence in such Relevant Person’s Relevant Jurisdictions, have been obtained or effected and are in full force and effect;

(g)	all the consents, approvals, authorisations, licenses or permits referred to in Clause 45.1(e) remain in force and nothing has occurred which makes any of them liable to revocation;

(h)	each of the Leasing Documents to which a Relevant Person is a party constitutes such Relevant Person’s legal, valid and binding obligations enforceable against such party in accordance with its respective terms and any relevant insolvency laws affecting creditors’ rights generally;

(i)

save for the Existing Mortgage (which shall be discharged prior to Delivery), no third party has any Security Interest, other than the Permitted Security Interests, or any other interest, right or claim over, in or in relation to the Vessel, this Charter or any moneys payable hereunder and/or any of the other Leasing Documents;

(j)	all payments which a Relevant Person is liable to make under any Leasing Document to which such Relevant Person is a party may be made by such party without deduction or withholding for or on account of any tax payable under the laws of its jurisdiction of incorporation or formation;

(k)	no legal or administrative action involving a Relevant Person (including without limitation, in relation to any Environmental Claim) has been commenced or taken, which if adversely determined, would have or which is likely to have a Material Adverse Effect;

(l)	each of the Relevant Persons has paid all taxes applicable to, or imposed on or in relation to it, its business or if applicable, the Vessel, except for those being contested in good faith and for which adequate reserves have been made;

(m)	the choice of governing law as stated in each Leasing Document to which a Relevant Person is a party and the agreement by such party to refer disputes to the relevant courts or tribunals as stated in such Leasing Document are valid and binding against such Relevant Person;

(n)	no Relevant Person nor any of their assets are entitled to immunity on the grounds of sovereignty or otherwise from any legal action or proceeding (which shall include, without limitation, suit, attachment prior to judgment, execution or other enforcement);

(o)

the obligations of each Relevant Person under each Leasing Document to which it is a party, are the direct, general and unconditional obligations of such Relevant Person and, rank at least pari passu with all other present and future unsecured and unsubordinated creditors of such Relevant Person save for any obligation which is mandatorily preferred by law and not by virtue of any contract;

(p)	each Leasing Document creates (or, once entered into, will create) the Security Interest which it is expressed to create with the ranking and priority it is expressed to have;

(q)	no Relevant Person is a US Tax Obligor, and no Relevant Person has established a place of business in the United Kingdom or the United States of America;

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(r)

no Relevant Person nor any of their respective directors, officers, employees or agents is a Restricted Person and to the best of the Charterers’ knowledge and belief (having made all due and careful enquiry), none of the Approved Sub-charterer, any Non-subsidiary Manager or any of their respective directors, officers, employees or agents is a Restricted Person;

(s)

(t)

each Relevant Person, a Non-subsidiary Manager and their respective directors, officers, employees and agents, and to the best of the Charterers’ knowledge and belief (having made all due and careful enquiry), the Approved Sub-charterer and its directors, officers, employees and agents have not (i) been or are currently being investigated on compliance with Sanctions, (ii) received notice or are aware of any claim, action, suit or proceeding against any of them with respect to Sanctions and (iii) taken any action to evade the application of Sanctions;

(u)

the Vessel is not employed, operated or managed in any manner which (i) is contrary to any Sanctions and in particular, the Vessel is not used by or to benefit any party which is a target of Sanctions or trade to any area or country where trading the Vessel to such area or country would constitute a breach of any Sanctions or published boycotts imposed by any of the United Nations, the European Union, the United States of America, the United Kingdom or the People’s Republic of China; or (ii) would trigger the operation of any sanctions limitation or exclusion clause in any insurance documentation;

(v)

each Relevant Person and to the best of the Charterers’ knowledge and belief (having made all due and careful enquiry) the Approved Sub-charterer, is not in breach of any laws or regulations relating to the Vessel and its ownership, employment, operation, management and registration, including the ISM Code, the ISPS Code, all Environmental Laws, the laws of the Vessel’s registry and in particular, all Anti-Money Laundering Laws, Anti-Terrorism Financing Laws and/or Business Ethics Laws and each of the Relevant Persons has instituted and maintained systems, controls, policies and procedures designed to:

(i)

prevent and detect incidences of bribery and corruption, money laundering and terrorism financing; and

(ii)

promote and achieve compliance with Anti-Money Laundering Laws, Anti-Terrorism Financing Laws and Business Ethics Laws;

(w)	no Relevant Person nor any of their assets, in each case, has any right to immunity from set off, legal proceedings, attachment prior to judgment or other attachment or execution of judgment on the grounds of sovereign immunity or otherwise;

(x)

no Relevant Persons or Non-subsidiary Manager is insolvent or in liquidation or administration or subject to any other formal or informal insolvency procedure, and no receiver, administrative receiver, administrator, liquidator, trustee or analogous officer has been appointed in respect of the Relevant Persons, a Non-Subsidiary Manager or all or material part of their assets;

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(y)	that in respect of any Approved Sub-charter:

(i)

the copy of such Approved Sub-charter provided to the Owners is a true and complete copy; and

(ii)

in the case of an Approved Sub-charter being a bareboat charter, the relevant Approved Sub-charterer is fully aware of the content of and the transactions contemplated under this Charter and consents to the same;

(z)	no Termination Event or Potential Termination Event has occurred or might reasonably be expected to result from the entry into and performance of this Charter or any other Leasing Document;

(aa)

as at the date of this Charter, the Charterers have not entered into any other investments, any sale or leaseback agreements, any off-balance sheet transaction or incur any other liability or obligation (including without limitation, any Financial Indebtedness of any obligations under a guarantee) except:

(i)

liabilities and obligations under the Leasing Documents to which they are or, as the case may be, will be a party; or

(ii)

liabilities or obligations reasonably incurred in the normal course of its business of trading, operating and chartering, maintaining and repairing the Vessel;

(bb)	apart from the listing of the units of the Guarantor on the NASDAQ, none of the shares of a Relevant Person are listed on any stock exchange for listed shares/units;

(cc)	any factual information provided by the Charterers (or on their behalf) to the Owners was true and accurate in all material respects as at the date it was provided or as the date at which such information was stated; and

(dd)	the entry by each Relevant Person into any Leasing Document does not in any way cause any breach, and is in all respects permitted, under the terms of any document which it is entered into.

Clause 46 – CHARTERERS’ UNDERTAKINGS

46.1	The Charterers undertake that they shall comply or procure compliance with the following undertakings commencing from the date of this Charter and up to the last day of the Charter Period:

(a)	there shall be sent to the Owners:

(i)

as soon as possible, but in no event later than ninety (90) days after the end of each financial half-year, the consolidated unaudited semi-annual accounts of the Guarantor certified as to their correctness by the chief financial officer or a duly authorised officer of the Guarantor; and

(ii)

as soon as possible, but in no event later than one hundred and eighty (180) days after the end of each financial year of the Guarantor, the audited consolidated annual financial reports of the Guarantor;

(b)

they will provide to the Owners, promptly at the Owners’ request, copies of all notices and minutes relating to any of their shareholders’ meetings and copies of their shareholders’ written resolutions which are despatched to the Charterers’ or the Guarantor’s respective shareholders or partners or any class of them save that publicly disclosed notices, minutes and written resolutions not concerning the Vessel or the Leasing Documents need not be provided to the Owners under this Clause;

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(c)	they will provide to the Owners, promptly at the Owners’ requests, copies of all notices, notices of meetings and written resolutions which are despatched to the Charterers’ or Guarantor’s other creditors (if any);

(d)

they will provide or will procure that each other Relevant Person provides the Owners with details of any legal, arbitral or administrative action involving such Relevant Person (provided that in the case where such Relevant Person is the Guarantor, such claim under such legal, arbitral or administrative action either (1) exceeds the sum of US$10,000,000 (or its equivalent in any other currency) or (2) which if adversely determined against the Guarantor, would or is likely to have a Material Adverse Effect) or the Vessel as soon as such action is instituted or it becomes apparent to such Relevant Person that it is likely to be instituted and is likely to have a material adverse effect on the ability of a Relevant Person to perform their obligations under each Leasing Document to which it is a party;

(e)

they will, and will procure that each other Relevant Person obtains and promptly renews or procure the obtainment or renewal of and provide copies of, from time to time, any necessary consents, approvals, authorisations, licenses or permits of any regulatory body or authority for the transactions contemplated under each Leasing Document to which it is a party (including without limitation to sell, charter and operate the Vessel);

(f)

they will not, and will procure that each other Relevant Person will not, create, assume or permit to exist any Security Interest of any kind upon any Leasing Document to which such Relevant Person is a party, and if applicable, the Vessel (save for the Existing Mortgage (which shall be discharged prior to Delivery), in each case other than the Permitted Security Interests;

(g)	they will at their own cost, and will procure that each other Relevant Person will:

(i)

do all that such Relevant Person reasonably can to ensure that any Leasing Document to which such Relevant Person is a party validly creates the obligations and the Security Interests which such Relevant Person purports to create; and

(ii)

without limiting the generality of paragraph (i), promptly register, file, record or enrol any Leasing Document to which such Relevant Person is a party with any court or authority in all Relevant Jurisdictions, pay any stamp duty, registration or similar tax or fee in all Relevant Jurisdictions in respect of any Leasing Document to which such Relevant Person is a party, give any notice or take any other step which, is or has become necessary or desirable for any such Leasing Document to be valid, enforceable or admissible in evidence or to ensure or protect the priority of any Security Interest which such Relevant Person creates;

(h)	they will, and will procure that each other Relevant Person, notify the Owners immediately of the occurrence of:

(i)

any damage and/or alteration caused to the Vessel by any reason whatsoever which results, or may be expected to result, in repairs on the Vessel which exceed US$1,000,000 (or its equivalent in any other currency);

(ii)

any material safety incidents taking place on board the Vessel;

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(iii)

any casualty or occurrence as a result of which the Vessel has become or is, by the passing of time or otherwise, likely to become, a Major Casualty;

(iv)

any Environmental Claim which is made against the Charterers, an Approved Sub-charterer or an Approved Manager in connection with the Vessel or any Environmental Incident;

(v)

any arrest or detention of the Vessel, any exercise or purported exercise of any lien on that Vessel or its Earnings or any requisition of that Vessel for hire; and

(vi)

any Potential Termination Event or Termination Event,

and will keep the Owners fully up-to-date with all developments and the Charterers will, if so requested by the Owners, provide any such certificate signed by an officer of the Charterers, confirming that there exists no Potential Termination Event or Termination Event;

(i)	they will, and will procure that each other Relevant Person and Non-subsidiary Manager will, as soon as practicable after receiving the request, provide the Owners with any additional financial or other information relating:

(i)

to themselves and/or the Vessel (including, but not limited to the condition and location of the Vessel); or

(ii)

to any other matter relevant to, or to any provision of any Leasing Document to which it is a party,

which may be reasonably requested by the Owners (or their financiers (if any)) at any time;

(j)

without prejudice to Clause 46.1(l)(i)(A), comply, or procure compliance, and will procure that each other Relevant Person will comply or procure compliance, with all laws or regulations relating to the Vessel and its ownership, employment, operation, management and registration, including the ISM Code, the ISPS Code, all Environmental Laws and the laws of the Vessel’s registry;

(k)	the Vessel shall be classed with the Classification Society and shall be free of all overdue recommendations and conditions;

(l)	they will ensure and procure that:

(i)

the Market Value of the Vessel shall be ascertained from time to time in the following circumstances:

(A)

upon the occurrence of a Termination Event which is continuing, at any time at the request of the Owners; and

(B)

in the absence of a Termination Event which is continuing, at least once every calendar year, with such report to be dated no more than thirty (30) calendar days prior to every anniversary of the Delivery Date occurring within the Charter Period or on such other date as the Owners may request; and

(ii)

the Charterers shall pay the amount of the fees and expenses incurred by the Owners in connection with any matter arising out of this paragraph (l);

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(m)

if at any time during the Charter Period, the Outstanding Principal Balance is of an amount which is more than ninety per cent. (90%) of the Vessel’s Market Value (the “LTV Breach”, and the said difference between ninety per cent. (90%) of the Market Value and one hundred per cent. (100%) of the Outstanding Principal Balance shall be referred to as the “shortfall” for the purposes of this paragraph), they shall at the Owners’ option (promptly and in any event no later than the date falling thirty (30) days from the date on which the Owners’ notify the Charterers of such LTV Breach) either,

(i)

prepay such part of the Outstanding Principal Balance in an amount equal to such shortfall, whereupon such prepayment shall be applied towards (A) payment and satisfaction on a pro-rata basis to the remaining outstanding instalment(s) of the Fixed Charterhire (or part thereof) of the Charterhire, or (B) in the event of the valid exercise by the Charterers of a Purchase Option (and always without prejudice to Clause 47) , the relevant portion of the applicable Early Purchase Option Price; or

(ii)

provide, or ensure that a third party shall provide cash collateral (or such other additional Security Interests which, is acceptable to the Owners and in the opinion of the Owners, has a net realisable value (and the Owners may engage the services of an Approved Valuer at the cost of the Charterers in order to reach such opinion)) at least equal to the shortfall, and is documented with such terms and conditions as the Owners may require;

(n)

they shall comply, shall procure that each other Relevant Person and a Non-subsidiary Manager complies with all laws and regulations in respect of Sanctions, and in particular, they shall effect and maintain a sanctions compliance policy to ensure compliance with all such laws and regulations implemented from time to time;

(o)

the Vessel shall not be employed, operated or managed in any manner which (i) is contrary to any Sanctions and in particular, the Vessel shall not be used by or to benefit any party which is a target of Sanctions and/or is a Restricted Person or trade to any area or country or territory where trading the Vessel to such area or country or territory would constitute or reasonably be expected to constitute a breach of any Sanctions or published boycotts imposed by any of the United Nations, the European Union, the United States of America, the United Kingdom or the People’s Republic of China, (ii) would result or reasonably be expected to result in any Relevant Person, a Non-subsidiary Manager or the Owners becoming a Restricted Person or (iii) would trigger the operation of any sanctions limitation or exclusion clause in any insurance documentation;

(p)

they shall, and shall procure that each other Relevant Person and a Non-subsidiary Manager shall, and shall use all reasonable endeavours to procure that the Approved Sub-charterer shall, promptly notify the Owners of any non-compliance, by any Relevant Person, the Approved Sub-charterer, any Non-subsidiary Manager or their respective officers, directors, employees, consultants, agents or intermediaries, with all laws and regulations relating to Sanctions, Anti-Money Laundering Laws, Anti-Terrorism Financing Laws and/or Business Ethics Laws (including but not limited to notifying the Owners in writing immediately upon being aware that any Relevant Person, the Approved Sub-charterer, any Non-Subsidiary Manager or their respective shareholders, directors, officers or employees is a Restricted Person or has otherwise become a target of Sanctions) as well as provide all information (once available) in relation to its business and operations which may be relevant for the purposes of ascertaining whether any of the aforesaid parties are in compliance with such laws;

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(q)

they shall, and shall procure that each other Relevant Person shall, and shall use all reasonable endeavours to procure that the Approved Sub-charterer shall, (in each case above, including procuring or as the case may be, using all reasonable endeavours to procure the respective officers, directors, employees, consultants, agents and/or intermediaries of the relevant entity to do the same) shall:

(i)

comply with all Anti-Money Laundering Laws, Anti-Terrorism Financing Laws and Business Ethics Laws;

(ii)

maintain systems, controls, policies and procedures designed to promote and achieve ongoing compliance with Anti-Money Laundering Laws, Anti-Terrorism Financing Laws and Business Ethics Laws; and

(iii)

in respect of the Charterers, not use, or permit or authorize any person to directly or indirectly use, the Purchase Price for any purpose that would breach any Anti-Money Laundering Laws, Anti-Terrorism Financing Laws or Business Ethics Laws;

(r)	in respect of the Charterers, not lend, invest, contribute or otherwise make available the Purchase Price to or for any other person in a manner which would result in a violation of Anti-Money Laundering Laws, Anti-Terrorism Financing Laws or Business Ethics Laws;

(s)	they shall not appoint or permit to be appointed any manager of the Vessel unless it is an Approved Manager appointed on terms acceptable to the Owners and their financiers (if any) and such Approved Manager has (prior to accepting its appointment) entered into a Manager’s Undertaking;

(t)	they shall ensure that all Earnings and any other amounts received by them in connection with the Vessel are paid into the Earnings Account;

(u)	they shall maintain a credit balance of at least $500,000 in the Earnings Account;

(v)	upon request, they will provide or they will procure to be provided to the Owners the report(s) of the survey(s) conducted pursuant to Clause 7 (Surveys on Delivery and Redelivery) of this Charter in form and substance satisfactory to the Owners;

(w)	save with the prior written consent of the Owners, they shall not permit the sub-chartering of the Vessel:

(i)

on a bareboat charter basis; or

(ii)

on a time charter basis for a period exceeding thirteen (13) months (taking into account any optional extension period);

(x)

as a condition precedent to the execution of any Approved Sub-charter entered into by the Charterers after the date of this Charter, the Charterers shall assign all their rights and interests under such Approved Sub-charter in favour of the Owners (and their financiers (if any)) and shall use their best endeavours to procure such Approved Sub-charterer gives a written acknowledgment of such assignment, in each case, in form and substance acceptable to the Owners and provide such documents as the Owners may reasonably require regarding the due execution of such Approved Sub-charter (and in the case where the Approved Sub-charter is a bareboat charter, such Approved Sub-charterer shall additionally assign all their rights and interests under the Insurances and Requisition Compensation in favour of the Owners (and their financiers (if any)) in form and substance acceptable to the Owners (and their financiers (if any));

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(y)

in respect of an Approved Sub-charter which contains an option to extend the charter period, they shall notify the Owners as soon as they become aware that the relevant Approved Sub-charterer does not intend to, or has not by the date falling 20 days prior to the date on which such Approved Sub-charter will expire, exercise the relevant option to extend the same;

(z)	they shall not make or pay any dividend or other distribution (in cash or in kind) in respect of its share capital following the occurrence of a Potential Termination Event or Termination Event or which would result in a Potential Termination Event or Termination Event;

(aa)	the Vessel shall be registered under the Flag State at all times;

(bb)	they shall not enter into any other investments, any sale or leaseback agreements, any off-balance sheet transaction or incur any other liability or obligation (including without limitation, any Financial Indebtedness of any obligations under a guarantee) except:

(i)

liabilities and obligations under the Leasing Documents to which it is or, as the case may be, will be a party; or

(ii)

liabilities or obligations reasonably incurred in the normal course of its business of trading, operating and chartering, maintaining and repairing the Vessel; and

(iii)

any transaction entered into with their Affiliates shall be on arm’s length basis and in good faith.

Clause 47 – EARLY PURCHASE OPTION

47.1

The Charterers shall have the option, at any time on or after the second anniversary of the Delivery Date to purchase (either directly or with the Guarantor as its nominee) the Vessel on any Payment Date (the “Early Purchase Option Date”) specified in a notice (the “Early Purchase Option Notice”) at the applicable Early Purchase Option Price, subject always to giving the Owners no less than ninety (90) days’ prior written notice.

47.2	The Early Purchase Option shall only be exercisable by the Charterers on an Early Purchase Option Date, provided that no Total Loss, Termination Event or Potential Termination Event has occurred and is continuing.

47.3	An Early Purchase Option Notice shall be signed by a duly authorised officer or a director or an attorney of the Charterers and, once delivered to the Owners, is irrevocable and the Charterers shall be bound to pay to the Owners the Early Purchase Option Price on the Early Purchase Option Date.

47.4	Only one Early Purchase Option Notice may be served throughout the duration of the Charter Period.

47.5	Upon the Owners’ receipt in full of the Early Purchase Option Price, the Owners shall transfer the legal and beneficial ownership of the Vessel in accordance with the terms and conditions set out at Clauses 50.1(a) and 50.1(b) to the Charterers or their nominees.

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Clause 48 – EXPIRY PURCHASE OBLIGATION

48.1

The Charterers shall be obliged to purchase the Vessel on the last day of the natural expiration of the Charter Period (the “Expiry Purchase Obligation Date”) at the Expiry Purchase Price but they are permitted to notify the Owners if they do not intend to purchase the Vessel by giving the Owners no less than three hundred and sixty five (365) days’ prior irrevocable written notice (the “Expiry Purchase Obligation Notice”) of their intention to not purchase the Vessel.

48.2

If the Charterers fail to serve an Expiry Purchase Obligation Notice on or before the day falling three hundred and sixty five (365) days’ prior to the last day of the Charter Period the Charterers shall be required to purchase the Vessel in accordance with Clause 50 (Sale of the Vessel by Purchase Option or Expiry Purchase Obligation).

48.3	An Expiry Purchase Obligation Notice shall be signed by a director or attorney of the Charterers and, once delivered to the Owners, is irrevocable.

48.4	Only one Expiry Purchase Obligation Notice may be served throughout the duration of the Charter Period.

Clause 49 – INTENTIONALLY DELETED

Clause 50 – SALE OF THE VESSEL BY PURCHASE OPTION OR EXPIRY PURCHASE OBLIGATION

50.1

On the Purchase Option Date or the Expiry Purchase Obligation Date, all legal and beneficial interest and title in the Vessel shall be transferred to the Charterers by the Owners upon receipt by the Owners of the Early Purchase Option Price or the Expiry Purchase Price (as the case may be) on an “as is where is” basis and on the following terms and conditions:

(a)

the Charterers expressly agree and acknowledge that no condition, warranty or representation of any kind is or has been given by or on behalf of the Owners in respect of the Vessel or any part thereof, and accordingly the Charterers confirm that they have not, in entering into this Charter, relied on any condition, warranty or representation by the Owners or any person on the Owners’ behalf, express or implied, whether arising by law or otherwise in relation to the Vessel or any part thereof, including, without limitation, warranties or representations as to the description, suitability, quality, merchantability, fitness for any purpose, value, state, condition, appearance, safety, durability, design or operation of any kind or nature of the Vessel or any part thereof, and the benefit of any such condition, warranty or representation by the Owners is hereby irrevocably and unconditionally waived by the Charterers to the extent permissible under applicable law, the Charterers hereby also waive any rights which they may have in tort in respect of any of the matters referred to under this Clause and irrevocably agree that:

(i)

the Owners shall have no greater liability in tort in respect of any such matter than they would have in contract after taking account of all of the foregoing exclusions;

(ii)

no third party making any representation or warranty relating to the Vessel or any part thereof is the agent of the Owners nor has any such third party authority to bind the Owners thereby; and

(iii)

notwithstanding anything contained above, nothing contained herein is intended to obviate, remove or waive any rights or warranties or other claims relating thereto which the Charterers (or their nominee) or the Owners may have against the manufacturer or supplier of the Vessel or any third party;

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(b)	the Vessel shall be free from any registered mortgages or any other liens, encumbrances or debts created or permitted to exist by the Owners (save for those mortgages, liens, encumbrances or debts created under the Leasing Documents);

(c)

the Early Purchase Option Price or the Expiry Purchase Price (as the case may be) shall be paid by (or on behalf of) the Charterers to the Owners on the relevant Purchase Option Date (in the case of the Early Purchase Option Price and the Expiry Purchase Price) or the Expiry Purchase Obligation Date (in the case of the Expiry Purchase Price), together with unpaid amounts of Charterhire and other moneys owing by or accrued or due from the Charterers under this Charter on or prior to the Purchase Option Date or Expiry Purchase Obligation Date (as the case may be) which remain unpaid; and

(d)

upon the Early Purchase Option Price or the Expiry Purchase Price and all other moneys payable under this Charter being fully and irrevocably paid to the Owners on, and in accordance with, the terms set forth in this Charter (except in the case of Total Loss) the Owners agree (at the cost of the Charterers) to enter into:

(i)

a bill of sale; and

(ii)

a protocol of delivery and acceptance,

and the Vessel shall accordingly be deemed delivered to the Charterers on the date and time set out in such protocol of delivery and acceptance (and to the extent required for such purposes the Vessel shall be deemed first to have been redelivered to the Owners).

Clause 51 – INDEMNITIES

51.1

The Charterers shall pay such amounts to the Owners, on the Owners’ demand, in respect of all documented claims, expenses, liabilities, losses, fees (including, but not limited to, any legal fees or vessel registration and tonnage fees) suffered or incurred by or imposed on the Owners arising directly or indirectly from this Charter and any Leasing Document or in connection with delivery, possession, performance, control, registration, payment of tonnage tax or other registration fees or fees associated with maintaining the relevant registry of the Vessel, repair, survey, insurance, maintenance, manufacture, purchase, ownership and operation of the Vessel by the Owners and the costs related to the prevention or release of liens or detention of or requisition, use, operation or redelivery, repossession, sale or disposal of the Vessel or any part of it, enforcement of the Owners’ rights under any Leasing Document or in connection with, following or resulting from the occurrence of a Termination Event or a Potential Termination Event and whether or not the Vessel is in the possession or the control of the Charterers or otherwise (including without limitation by reason thereof in re-taking possession or otherwise in re-acquiring the Vessel pursuant to Clause 37.3), and whether prior to, during or after termination of the leasing of this Charter and whether or not the Vessel is in the possession or the control of the Charterers or otherwise.

51.2

Without prejudice to its generality, Clause 51.1 covers any documented claims, expenses, liabilities and losses which arise, or are asserted, under or in connection with any law relating to safety at sea, the ISM Code, the ISPS Code, the MARPOL Protocol, any Environmental Law, any Sanctions, Anti-Money Laundering Laws, Anti-Terrorism Financing Laws or Business Ethics Laws.

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51.3	Without prejudice to any right to damages or other claim which the Owners may have at any time against the Charterers, it is hereby agreed that the indemnities of the Owners contained in this Charter shall continue in full force and effect until the expiry of the Charter Period.

51.4

Without prejudice to the above Clause 51.1, if any sum (a “Sum”) due from a Relevant Person under the Leasing Documents, or any order, judgment or award given or made in relation to a Sum, has to be converted from the currency (the “First Currency”) in which that Sum is payable into another currency (the “Second Currency”) for the purpose of:

(a)	making or filing a claim or proof against that Relevant Person; or

(b)	obtaining or enforcing an order, judgment or award in relation to any litigation or arbitration proceedings,

the Charterers shall, as an independent obligation, on demand, indemnify the Owners against any cost, loss or liability arising out of or as a result of the conversion including any discrepancy between:

(i)

the rate of exchange used to convert that Sum from the First Currency into the Second Currency; and

(ii)

the rate or rates of exchange available to that person at the time of its receipt of that Sum.

51.5

The obligations of the Charterers under Clause 51 (Indemnities) and in respect of any Security Interest created pursuant to the Security Documents will not be affected or discharged by an act, omission, matter or thing which would reduce, release or prejudice any of its obligations under Clause 51 (Indemnities) or in respect of any Security Interest created pursuant to the Security Documents (without limitation and whether or not known to it or any Relevant Person) including:

(a)	any time, waiver or consent granted to, or composition with, any Relevant Person or other person;

(b)	the release of any other Relevant Person or any other person under the terms of any composition or arrangement with any creditor of the Guarantor or any of its affiliates;

(c)

the taking, variation, compromise, exchange, renewal or release of, or refusal or neglect to perfect or delay in perfecting, or refusal or neglect to take up or enforce, or delay in taking or enforcing any rights against, or security over assets of, any Relevant Person or other person or any non-presentation or non-observance of any formality or other requirement in respect of any instrument or any failure to realise the full value of any security;

(d)	any incapacity or lack of power, authority or legal personality of or dissolution or change in the members or status of a Relevant Person or any other person;

(e)	any amendment, novation, supplement, extension, restatement (however fundamental and whether or not more onerous) or replacement of any Leasing Document or any other document or security;

(f)	any unenforceability, illegality or invalidity of any obligation of any person under any Security Document or any other document or security; or

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(g)	any insolvency or similar proceedings.

51.6

Notwithstanding anything to the contrary under the Leasing Documents (but subject and without prejudice to Clause 33 (Cancellation)) and without prejudice to any right to damages or other claim which the Charterers may have at any time against the Owners under this Charter, the indemnities provided by the Charterers in favour of the Owners shall continue in full force and effect notwithstanding any breach of the terms of this Charter or such Leasing Document or termination or cancellation of this Charter or such Leasing Document pursuant to the terms hereof or thereof or termination of this Charter or such Leasing Document by the Owners.

51.7

In consideration of the Charterers requesting the Other Owners to charter the Other Vessels to the Other Charterers under the Other Charters, the Charterers hereby irrevocably and unconditionally undertake to pay immediately on demand (as primary obligor) from the Other Owners (or of them, as the case may be) such amounts in respect of all claims, expenses, liabilities, losses, fees of every kind and nature and all other moneys due, owing and/or payable to the Other Owners under or in connection with the Other Charters, and to indemnify and hold the Other Owners harmless against all such moneys, costs, fees and expenses incurred or suffered or outstanding under the Other Charters.

51.8

All rights which the Charterers have at any time (whether in respect of this Charter or any other transaction) against the Other Charterers or the Guarantor or any of them shall be fully subordinated to the rights of the Owners under the Leasing Documents and until the end of this Charter and unless the Owners otherwise direct, the Charterers shall not exercise any rights which it may have (whether in respect of this Charter or any other transaction) by reason of performance by it of its obligations under the Leasing Documents or by reason of any amount becoming payable, or liability arising, under this Clause:

(a)	to be indemnified by the Other Charterers or the Guarantor or any of them;

(b)	to claim any contribution from any third party providing security for, or any other guarantor of, the Other Charterers’ or the Guarantor’s obligations under the Leasing Documents;

(c)

to take any benefit (in whole or in part and whether by way of subrogation or otherwise) of any rights of the Other Charterers or the Guarantor or any of them under the Leasing Documents or of any other guarantee or security taken pursuant to, or in connection with, the Leasing Documents by any of the aforesaid parties;

(d)	to bring legal or other proceedings for an order requiring any of the Other Charterers or the Guarantor or any of them to make any payment, or perform any obligation, in respect of any Leasing Document;

(e)	to exercise any right of set-off against any of the Other Charterers or the Guarantor or any of them; and/or

(f)	to claim or prove as a creditor of any of the Other Charterers or the Guarantor or any of them,

and if the Charterers receive any benefit, payment or distribution in relation to such rights it shall hold that benefit, payment or distribution to the extent necessary to enable all amounts which may be or become payable to the Owners or the Other Owners by the Other Charterers or the Guarantor or any of them under or in connection with the Leasing Documents to be repaid in full on trust for the Owners or the Other Owners and shall promptly pay or transfer the same to the Owners or the Other Owners as may be directed by the Owners.

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51.9

The Charterers hereby irrevocably agree to indemnify and hold harmless the Owners against any claim, expense, liability or loss reasonably incurred by the Owners (and which is notified to the Charterers) in liquidating or employing deposits from their financiers or third parties to fund the acquisition of the Vessel pursuant to the MOA, on or prior to the Delivery Date.

51.10

Notwithstanding anything to the contrary herein (but subject and without prejudice to Clause 33 (Cancellation)) and without prejudice to any right to damages or other claim which the Charterers may have at any time against the Owners under this Charter, the indemnities provided by the Charterers in favour of the Owners shall continue in full force and effect notwithstanding any breach of the terms of this Charter or termination of this Charter pursuant to the terms hereof or termination of this Charter by the Owners.

Clause 52 – NO SET-OFF OR TAX DEDUCTION

52.1	All payments of Charterhire, the Upfront Charterhire or the Early Purchase Option Price or Expiry Purchase Price and any other payment made by the Charterers under a Leasing Document shall be paid punctually:

(a)	without any form of set-off (other than the Upfront Charterhire which shall be set-off pursuant to Clause 36.3), cross-claim or condition and in the case of Charterhire or the Upfront Charterhire, without previous demand unless otherwise agreed with the Owners; and

(b)	free and clear of any tax deduction or withholding unless required by law.

52.2	Without prejudice to Clause 52.1, if the Charterers are required by law to make a tax deduction from any payment:

(a)	the Owners shall notify the Charterers as soon as they become aware of the requirement; and

(b)	the amount due in respect of the payment shall be increased by the amount necessary to ensure that the Owners receive and retain (free from any liability relating to the tax deduction) a net amount which, after the tax deduction, is equal to the full amount which they would otherwise have received.

52.3	In this Clause “tax deduction” means any deduction or withholding for or on account of any present or future tax, other than a FATCA Deduction.

Clause 53 – INCREASED COSTS

53.1	This Clause 53 (Increased Costs) applies if the Owners notify the Charterers that they consider that as a result of:

(a)

the introduction or alteration after the date of this Charter of a law or an alteration after the date of this Charter in the manner in which a law is interpreted or applied (disregarding any effect which relates to the application to payments under this Charter of a tax on the Owners’ overall net income); or

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(b)

complying with any regulation (including any which relates to capital adequacy or liquidity controls or which affects the manner in which the Owners allocates capital resources to their obligations under this Charter) which is introduced, or altered, or the interpretation or application of which is altered, after the date of this Charter,

the Owners (or a parent company of them) has incurred or will incur an increased cost.

53.2	In this Clause 53 (Increased Costs), “increased cost” means, in relation to the Owners:

(a)	an additional or increased cost incurred as a result of, or in connection with, the Owners having entered into, or being a party to, this Charter, of funding the acquisition of the Vessel pursuant to the MOA or performing their obligations under this Charter;

(b)	a reduction in the amount of any payment to the Owners under this Charter or in the effective return which such a payment represents to the Owners on their capital;

(c)	an additional or increased cost of funding the acquisition of the Vessel pursuant to the MOA; or

(d)	a liability to make a payment, or a return foregone, which is calculated by reference to any amounts received or receivable by the Owners under this Charter.

53.3	For the purposes of Clause 53.2 the Owners may in good faith allocate or spread costs and/or losses among their assets and liabilities (or any class of their assets and liabilities) on such basis as they consider appropriate.

53.4	Subject to the terms of Clause 53.1, the Charterers shall pay to the Owners, on the Owners’ demand, the amounts which the Owners from time to time notify the Charterers to be necessary to compensate the Owners for the increased cost.

Clause 54 – CONFIDENTIALITY

54.1	The Parties agree to keep the terms and conditions of this Charter and any other Leasing Documents (the “Confidential Information”) strictly confidential, provided that a Party may disclose Confidential Information in the following cases:

(a)	it is already known to the public or becomes available to the public other than through the act or omission of the disclosing Party;

(b)

it is required to be disclosed under the applicable laws of any Relevant Jurisdiction, by a governmental order, decree, regulation or rule, by an order of a court, tribunal or listing exchange of the Relevant Jurisdiction (including but not limited to an order by the US Securities and Exchange Commission or the NASDAQ), provided that the disclosing Party shall give written notice of such required disclosure to the other Party prior to the disclosure;

(c)	in filings with a court or arbitral body in proceedings in which the Confidential Information is relevant and in discovery arising out of such proceedings;

(d)

to (or through) whom a Party assigns or transfers (or may potentially assign or transfer) all or any of its rights and/or obligations under one or more Leasing Document (as permitted by the terms thereof), provided that such person receiving Confidential Information shall undertake that it would not disclose Confidential Information to any other party save for circumstances arising which are similar to those described under this Clause or such other circumstances as may be permitted by all Parties;

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(e)	to any of the following persons on a need to know basis:

(i)

a shareholder or an Affiliate of either Party (including the employees, officers and directors thereof);

(ii)

professional advisers retained by a disclosing party; or

(iii)

persons advising on, providing or considering the provision of financing to the disclosing party or an Affiliate,

provided that the disclosing party shall exercise due diligence to ensure that no such person shall disclose Confidential Information to any other party save for circumstances arising which are similar to those described under this Clause or such other circumstances as may be permitted by all Parties; or

(f)	with the prior written consent of all Parties.

Clause 55 – PARTIAL INVALIDITY

If, at any time, any provision of a Leasing Document is or becomes illegal, invalid or unenforceable in any respect under any law of any jurisdiction, neither the legality, validity or enforceability of the remaining provisions under the law of that jurisdiction nor the legality, validity or enforceability of such provision under the law of any other jurisdiction will in any way be affected or impaired.

Clause 56 – SETTLEMENT OR DISCHARGE CONDITIONAL

56.1

Any settlement or discharge under any Leasing Document between the Owners and any Relevant Person or any other person shall be conditional upon no security or payment to the Owners by any Relevant Person or any other person being set aside, adjusted or ordered to be repaid, whether under any insolvency law or otherwise.

56.2

If the Owners consider that an amount paid or discharged by, or on behalf of, a Relevant Person in purported payment or discharge of an obligation of that Relevant Person to the Owners under the Leasing Documents is capable of being avoided or otherwise set aside on the liquidation or administration of that Relevant Person or otherwise, then that amount shall not be considered to have been unconditionally and irrevocably paid or discharged for the purposes of the Leasing Documents.

Clause 57 – CHANGES TO THE PARTIES

57.1	Assignment or transfer by the Charterers

The Charterers shall not assign their rights or transfer by novation any of their rights and obligations under the Leasing Documents except with the prior consent in writing of the Owners (such consent not to be unreasonably withheld if such assignment or transfer is to an Affiliate of the Charterers).

57.2	Transfer by the Owners

(a)

The Owners may transfer by novation (or otherwise) any of their rights and obligations under the Leasing Documents at any time to an Affiliate of the Owners, another lessor or financial institution or trust, fund, leasing company or other entity which is regularly engaged in or established for the purpose of making, purchasing or investing in loans, securities or other financial assets or to any other party at any time.

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(b)

During the Charter Period, any change in the registered ownership of the Vessel (other than pursuant to paragraph (a)) above shall not require the Charterers’ prior approval and notwithstanding such change, this Charter would continue on identical terms (save for logical, consequential or mutually agreed amendments), and the Charterers hereby agree that they shall be liable to the aforesaid new owner of the Vessel for its performance of all obligations pursuant to this Charter after change of the registered ownership of the Vessel from the Owners to such new owner and shall procure that the Guarantor shall execute a guarantee in favour of the new owners for inter alia, the obligations of the Charterers under this Charter, in substantially in the same form as the Guarantee (or such other form as the Guarantor and the new owners may agree).

57.3	The Charterers agree and undertake to enter into any such usual documents as the Owners shall require to complete or perfect the transfer of the Vessel (with the benefit and burden of this Charter) pursuant to Clause 57.2, at no cost to the Charterers.

Clause 58 – MISCELLANEOUS

58.1	The Charterers waive any rights of sovereign immunity which they or any of their assets may enjoy in any jurisdiction and subjects itself to civil and commercial law with respect to their obligations under this Charter.

58.2	No term of this Charter is enforceable under the Contracts (Rights of Third Parties) Act 1999 by a person who is not party to this Charter, save that the Other Owners may rely on the rights conferred on them under Clause 51.7.

58.3	This Charter and each Leasing Document may be executed in any number of counterparts, and this has the same effect as if the signatures on the counterparts were on a single copy of this Charter or that Leasing Document, as the case may be.

58.4	These additional clauses shall be read together with the BARECON 2001, and shall constitute a single instrument. In the case of any conflict between the provisions of these additional terms and the BARECON 2001, these additional terms shall prevail.

Clause 59 – FATCA

59.1	Defined terms

For the purposes of this Clause 59 (FACTA), the following terms shall have the following meanings:

“Code” means the United States Internal Revenue Code of 1986, as amended.

“FATCA” means:

(a)

sections 1471 to 1474 of the Code or any associated regulations or other official guidance;

(b)

any treaty, law, regulation or other official guidance enacted in any other jurisdiction, or relating to an intergovernmental agreement between the US and any other jurisdiction, which (in either case) facilitates the implementation of paragraph (a) above; or

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(c)

any agreement pursuant to the implementation of paragraphs (a) or (b) above with the IRS, the US government or any governmental or taxation authority in any other jurisdiction.

“FATCA Deduction” means a deduction or withholding from a payment under this Charter or the Leasing Documents required by or under FATCA.

“FATCA Exempt Party” means a Relevant Party that is entitled under FATCA to receive payments free from any FATCA Deduction.

“FATCA FFI” means a foreign financial institution as defined in section 1471(d)(4) of the Code which, if a Relevant Party is not a FATCA Exempt Party, could be required to make a FATCA Deduction.

“FATCA Non-Exempt Party” means any Relevant Party who is not a FATCA Exempt Party.

“IRS” means the United States Internal Revenue Service or any successor taxing authority or agency of the United States government.

“Relevant Party” means any party to a Leasing Document.

59.2	FATCA Information

(a)	Subject to paragraph (c) below, each Relevant Party shall, on the date of this Charter, and thereafter within ten (10) Business Days of a reasonable request by another Relevant Party:

(i)

confirm to that other party whether it is a FATCA Exempt Party or is not a FATCA Exempt Party; and

(ii)

supply to the requesting party (with a copy to all other Relevant Parties) such other form or forms (including IRS Form W-8 or Form W-9 or any successor or substitute form, as applicable) and any other documentation and other information relating to its status under FATCA (including its applicable “pass thru percentage” or other information required under FATCA or other official guidance including intergovernmental agreements) as the requesting party reasonably requests for the purpose of the requesting party’s compliance with FATCA.

(b)

If a Relevant Party confirms to any other Relevant Party that it is a FATCA Exempt Party or provides an IRS Form W-8 or W-9 showing that it is a FATCA Exempt Party and it subsequently becomes aware that it is not, or has ceased to be a FATCA Exempt Party, that party shall so notify all other Relevant Parties reasonably promptly.

(c)

Nothing in this clause shall oblige any Relevant Party to do anything which would or, in its reasonable opinion, might constitute a breach of any law or regulation, any policy of that party, any fiduciary duty or any duty of confidentiality, or to disclose any confidential information (including, without limitation, its tax returns and calculations); provided, however, that nothing in this paragraph shall excuse any Relevant Party from providing a true, complete and correct IRS Form W-8 or W-9 (or any successor or substitute form where applicable). Any information provided on such IRS Form W-8 or W-9 (or any successor or substitute forms) shall not be treated as confidential information of such party for purposes of this paragraph.

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(d)	If a Relevant Party fails to confirm its status or to supply forms, documentation or other information requested in accordance with the provisions of this Charter or the provided information is insufficient under FATCA, then:

(i)

if that party failed to confirm whether it is (and/or remains) a FATCA Exempt Party then such party shall be treated for the purposes of this Charter and the Leasing Documents as if it is a FATCA Non-Exempt Party; and

(ii)

if that party failed to confirm its applicable passthru percentage then such party shall be treated for the purposes of this Charter and the Leasing Documents (and payments made thereunder) as if its applicable passthru percentage is 100%,

until (in each case) such time as the party in question provides sufficient confirmation, forms, documentation or other information to establish the relevant facts.

59.3	FATCA Deduction and gross-up by Relevant Party

(a)

If the representation made by the Charterers under Clause 45.1(q) proves to be untrue or misleading such that the Charterers are required to make a FATCA Deduction, the Charterers shall make the FATCA Deduction and any payment required in connection with that FATCA Deduction within the time allowed and in the minimum amount required by FATCA.

(b)	If the Charterers are required to make a FATCA Deduction then the Charterers shall increase the payment due from them to the Owners to an amount which (after making any FATCA Deduction) leaves an amount equal to the payment which would have been due if no FATCA Deduction had been required.

(c)

The Charterers shall promptly upon becoming aware that they must make a FATCA Deduction (or that there is any change in the rate or basis of a FATCA Deduction) notify the Owners accordingly. Within thirty (30) days of the Charterers making either a FATCA Deduction or any payment required in connection with that FATCA Deduction, the Charterers shall deliver to the Owners evidence reasonably satisfactory to the Owners that the FATCA Deduction has been made or (as applicable) any appropriate payment paid to the relevant governmental or taxation authority.

59.4	FATCA Deduction by Owners

The Owners may make any FATCA Deduction they are required by FATCA to make, and any payment required in connection with that FATCA Deduction, and the Owners shall not be required to increase any payment in respect of which they make such a FATCA Deduction or otherwise compensate the recipient for that FATCA Deduction.

59.5	FATCA Mitigation

Notwithstanding any other provision to this Charter, if a FATCA Deduction is or will be required to be made by any party under Clause 59.3 in respect of a payment to the Owners as a result of the Owners not being a FATCA Exempt Party, the Owners shall have the right to transfer their interest in the Vessel (and this Charter) to any person nominated by the Owners and all costs in relation to such transfer shall be for the account of the Charterers.

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Clause 60 – DEFINITIONS

60.1	In this Charter the following terms shall have the meanings ascribed to them below:

“Acceptance Certificate” means a certificate substantially in the form set out in Schedule I (Acceptance Certificate) to be signed by the Charterers at Delivery.

“Account Bank” means Hamburg Commercial Bank AG acting through its office at Hamburg or such bank as the Owners may approve in advance in writing.

“Account Security” means the document creating security over the Earnings Account executed by the Charterers in favour of the Owners, in the agreed form.

“Upfront Charterhire” means an amount equal to thirty per cent. (30%) of the Purchase Price.

“Affiliate” means in relation to any person, a subsidiary of that person or a Holding Company of that person or any other subsidiary of that Holding Company.

“Anti-Money Laundering Laws” means all applicable financial record-keeping and reporting requirements, anti-money laundering statutes (including all applicable rules and regulations thereunder) and all applicable related or similar laws, rules, regulations or guidelines, of all jurisdictions including and without limitation, the United States of America, the European Union and the People’s Republic of China and which in each case are (a) issued, administered or enforced by any governmental agency having jurisdiction over any Relevant Person or the Owners; (b) of any jurisdiction in which any Relevant Person or the Owners conduct business; or (c) to which any Relevant Person or the Owners is subjected or subject to.

“Anti-Terrorism Financing Laws” means all applicable anti-terrorism laws, rules, regulations or guidelines of any jurisdiction, including and not limited to the United States of America or the People’s Republic of China which are: (a) issued, administered or enforced by any governmental agency, having jurisdiction over any Relevant Person or the Owners; (b) of any jurisdiction in which any Relevant Person or the Owners conduct business; or (c) to which any Relevant Person or the Owners are subjected or subject to.

“Approved External Sub-Manager” means Synergy Marine Pte. Ltd., a corporation incorporated and existing under the laws of Singapore with registration number 200918639D and having its registered address at 1, Kim Seng Promenade, #10-11/12k, Great World City,Singapore – 237994, or G-Marine Service Co., Ltd., a company incorporated in the Republic of Korea and having its address at 15th floor, 331, Jungang-daero, Dong-gu, 48792, Korea.

“Approved Manager” means the Approved Main Manager, the Approved Sub-Manager or the Approved External Sub-Manager.

“Approved Main Manager” means Navios Shipmanagement Inc., a corporation incorporated under the laws of the Marshall Islands having its registered address at Trust Company Complex, Ajeltake Road, Ajeltake Island, Majuro, MH96960, the Republic of the Marshall Islands, any other Affiliate of the Guarantor or any other ship management company approved in writing in advance by the Owners.

“Approved Sub-charter” means any other charter or employment of the Vessel which has been approved in writing by the Owners pursuant to Clause 46.1(w).

“Approved Sub-charterer” means and any other sub-charterer (approved by the Owners in writing) to any Approved Sub-charter.

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“Approved Sub-Manager” means Navios Containers Management Inc, a corporation incorporated under the laws of the Marshall Islands having its registered address at Trust Company Complex, Ajeltake Road, Ajeltake Island, Majuro, MH96960, the Republic of the Marshall Islands, any other Affiliate of the Guarantor, a ship management company which is wholly owned by Angeliki Frangou, a ship management company which is a subsidiary of Navios Maritime Holdings Inc. or any other ship management company approved in writing in advance by the Owners.

“Approved Valuer” means Arrow, Fearnleys, Clarksons, Platou, Maersk Brokers, Simpson Spence Young, Howe Robinson, Braemar or any other independent and reputable shipbroker nominated by the Charterers and approved by the Owners.

“Breakfunding Costs” means all breakfunding costs and expenses incurred or payable by the Owners when a repayment or prepayment under the relevant funding arrangement entered into by the Owners for the purpose of financing the Purchase Price does not fall on a Payment Date as a result of or due to the payments made under this Charter by the Charterers.

“Business Day” means a day on which banks are open for business in the principal business centres of Athens, Hamburg, Shanghai, Hong Kong and in respect of a day on which a payment is required to be made or other dealing is due to take place under a Leasing Document in Dollars, also a day on which commercial banks are open in New York City.

“Business Ethics Law” means any laws, regulations and/or other legally binding requirements or determinations in relation to corruption, fraud, collusion, bid-rigging or anti-trust, human rights violations (including forced labour and human trafficking) which are applicable to any Relevant Person or the Owners or to any jurisdiction where activities are performed and which shall include but not be limited to (i) the United Kingdom Bribery Act 2010 and (ii) the United States Foreign Corrupt Practices Act 1977 and all rules and regulations under each of (i) and (ii).

“Cancelling Date” has the meaning given to that term in the MOA.

“Charterhire” means each of, as the context may require, all of the quarterly instalments of hire payable hereunder comprising in each case:

(a)

a component of Fixed Charterhire; and

(b)

a component of Variable Charterhire.

“Variable Charterhire” means, in relation to a Payment Date, the interest component of Charterhire calculated in accordance with Schedule III (Interest Rate) at the applicable Interest Rate for the Term ending on that Payment Date on the Outstanding Principal Balance (as at Delivery Date, in the case of the first Payment Date, and as at the preceding Payment Date, in the case of all other Payment Dates).

“Fixed Charterhire” means an aggregate amount of US$9,711,072.00 payable in instalments over each of the twenty (20) Payment Dates as follows:

(a)

in respect of the 1^st Payment Date, an amount equivalent to the aggregate of $8,000 per day multiplied by the number of days elapsed from and including the Delivery Date up to but excluding the 1^st Payment Date;

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(b)

in respect of each of the 2^nd Payment Date to the 8^th Payment Date, an amount equivalent to the aggregate of $8,000 per day multiplied by the number of days elapsed from and including the preceding Payment Date up to but excluding the next Payment Date;

(c)

in respect of each of the 9^th Payment Date to the 19^th Payment Date, an amount equivalent to the aggregate of $3,532 per day multiplied by the number of days elapsed from and including the preceding Payment Date up to but excluding the next Payment Date; and

(d)

in respect of the last Payment Date, an amount equivalent to an amount equivalent to the aggregate of $3,532 per day multiplied by the number of days elapsed from and including the preceding Payment Date up to and including the date falling sixty (60) months after the Delivery Date.

“CISADA” means the United States Comprehensive Iran Sanctions, Accountability and Divestment Act of 2010 as it applies to non-US persons.

“Charter Period” means the period commencing on the Delivery Date and described in Clause 32.2 unless it is either terminated earlier pursuant to the terms of this Charter.

“Classification Society” means American Bureau of Shipping or any classification society being a member of the International Association of Classification Societies which is approved by the Owners.

“Delivery” means the delivery of the legal and beneficial interest in the Vessel from the Owners to the Charterers pursuant to the terms of the MOA.

“Delivery Date” means the date on which Delivery occurs.

“Document of Compliance” has the meaning given to it in the ISM Code.

“Dollars” or “US$” or “$” means the lawful currency for the time being of the United States of America.

“Early Purchase Option” means the early purchase option which the Charterers are entitled to exercise pursuant to Clause 47 (Early Purchase Option).

“Early Purchase Option Date” has the meaning given to that term in Clause 47.1.

“Early Purchase Option Fee” means an amount equal to the Outstanding Principal Balance multiplied by the following percentages pursuant to the table below determined in accordance with the Early Purchase Option Date:

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Early Purchase Option Date		Percentage (%)

From (and including) the day immediately following the third anniversary of the Delivery Date up to (and including) the fourth anniversary of the Delivery Date		1.0

From (and including) the day immediately following the fourth anniversary of the Delivery Date up to (and including) the fifth anniversary of the Delivery Date		0.75

From (and including) the day immediately following the fifth anniversary of the Delivery Date up to (and including) the sixth anniversary of the Delivery Date		0.25

From (and including) the day immediately following the sixth anniversary of the Delivery Date up to (and including) the last day of the natural expiration of the Charter Period		0


Early Purchase Option Date¹		Percentage (%)

From (and including) the day immediately following the second anniversary of the Delivery Date up to (and including) the third anniversary of the Delivery Date		1.0

From (and including) the day immediately following the third anniversary of the Delivery Date up to (and including) the fourth anniversary of the Delivery Date		0.5

From (and including) the day immediately following the fourth anniversary of the Delivery Date up to (and including) the last date of the natural expiration of the Charter Period		0

“Early Purchase Option Notice” has the meaning given to that term in Clause 47.1.

“Early Purchase Option Price” means, in relation to the Early Purchase Option Date, the aggregate, as at that date, of:

(a)

the Outstanding Principal Balance;

(b)

the Early Purchase Option Fee;

(c)

any accrued but unpaid Variable Charterhire;

(d)

any Breakfunding Costs;

(e)

any legal costs incurred by the Owners in connection with the exercise of the Early Purchase Option under Clause 47 (Early Purchase Option); and

(f)

all other amounts payable under this Charter and the other Leasing Documents together with any applicable interest thereon.

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“Earnings” means all moneys whatsoever which are now, or later become, payable (actually or contingently) and which arise out of the use or operation of the Vessel, including (but not limited to):

(a)

all freight, hire and passage moneys, compensation payable in the event of requisition of the Vessel for hire, all moneys which are at any time payable under any Insurances in respect of loss of hire, remuneration for salvage and towage services, demurrage and detention moneys and damages for breach (or payments for variation or termination) of any charterparty or other contract for the employment of the Vessel; and

(b)

if and whenever the Vessel is employed on terms whereby any moneys falling within paragraph (a) are pooled or shared with any other person, that proportion of the net receipts of the relevant pooling or sharing arrangement which is attributable to the Vessel.

“Earnings Account” means, an account in the name of the Charterers with the Account Bank into which the Earnings are paid.

“Environmental Claim” means:

(a)

any claim by any governmental, judicial or regulatory authority which arises out of an Environmental Incident or which relates to any Environmental Law; or

(b)

any claim by any other person which relates to an Environmental Incident,

and for this purpose, “claim” means a claim for damages, compensation, contribution, injury, fines, losses and penalties or any other payment of any kind, including in relation to clean-up and removal, whether or not similar to the foregoing; an order or direction to take, or not to take, certain action or to desist from or suspend certain action; and any form of enforcement or regulatory action, including the arrest or attachment of any asset.

“Environmental Incident” means:

(a)

any release, emission, spill or discharge of Environmentally Sensitive Material whether within the Vessel or from the Vessel into any other vessel or into or upon the air, water, land or soils (including the seabed) or surface water; or

(b)

any incident in which Environmentally Sensitive Material is released, emitted, spilled or discharged into or upon the air, water, land or soils (including the seabed) or surface water from a vessel other than the Vessel and which involves a collision between the Vessel and such other vessel or some other incident of navigation or operation, in either case, in connection with which the Vessel is actually or reasonably expected to be potentially liable to be arrested, attached, detained or injuncted and/or the Vessel and/or any Relevant Person and/or any operator or manager of the Vessel is at fault or allegedly at fault or otherwise liable to any legal or administrative action; or

(c)

any other incident in which Environmentally Sensitive Material is released, emitted, spilled or discharged into or upon the air, water, land or soils (including the seabed) or surface water otherwise than from the Vessel and in connection with which the Vessel is actually or reasonably expected to be potentially liable to be arrested and/or where any Relevant Person and/or any operator or manager of the Vessel is at fault or allegedly at fault or otherwise liable to any legal or administrative action.

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“Environmental Law” means any present or future law relating to pollution or protection of human health or the environment, to conditions in the workplace, to the carriage, generation, handling, storage, use, release or spillage of Environmentally Sensitive Material or to actual or threatened releases of Environmentally Sensitive Material.

“Environmentally Sensitive Material” means and includes all contaminants, oil, oil products, toxic substances and any other substance (including any chemical, gas or other hazardous or noxious substance) which is (or is capable of being or becoming) polluting, toxic or hazardous.

“Existing Mortgage” means the mortgage over the Vessel dated 2 July 2018 executed by the Charterers in favour of Hamburg Commercial Bank AG.

“Expiry Purchase Obligation” means the option not to acquire the Vessel the Charterers are entitled to exercise pursuant to Clause 48 (Expiry Purchase Obligation).

“Expiry Purchase Obligation Date” has the meaning given to that term in Clause 48.1.

“Expiry Purchase Obligation Notice” has the meaning given to that term in Clause 48.1.

“Expiry Purchase Price” means US$US$9,000,000.

“Financial Indebtedness” means, in relation to a person (the “debtor”), a liability of the debtor:

(a)

for principal, interest or any other sum payable in respect of any moneys borrowed or raised by the debtor;

(b)

under any loan stock, bond, note or other security issued by the debtor;

(c)

under any acceptance credit, guarantee or letter of credit facility made available to the debtor;

(d)

under a lease, a deferred purchase consideration arrangement (other than deferred payments for assets or services obtained on normal commercial terms in the ordinary course of business) or any other agreement having the commercial effect of a borrowing or raising of money by the debtor;

(e)

under any foreign exchange transaction, any interest or currency swap or any other kind of derivative transaction entered into by the debtor or, if the agreement under which any such transaction is entered into requires netting of mutual liabilities, the liability of the debtor for the net amount; or

(f)

under a guarantee, indemnity or similar obligation entered into by the debtor in respect of a liability of another person which would fall within paragraphs (a) to (e) if the references to the debtor referred to the other person.

“Financial Instruments” means a mortgage, a deed of covenant, a general assignment or such other financial security instruments granted to the Owners’ financiers as security for the obligations of the Owners in relation to the financing of the acquisition of the Vessel.

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“Flag State” means the Republic of Liberia or any other flag state approved by the Owners in writing.

“General Assignment” means the general assignment executed or to be executed between the Charterers and the Owners in respect of the Vessel, pursuant to which the Charterers shall, inter alia, assign their rights under the Insurances, Earnings and Requisition Compensation and each Approved Sub-charter in favour of the Owners and in the agreed form.

“Group” means the Guarantor and each of its direct or indirect subsidiaries from time to time.

“Guarantor” means Navios Maritime Containers L.P., a limited partnership converted from a corporation under the laws of the Republic of Marshall Islands, having its registered address at Trust Company Complex, Ajeltake Road, Ajeltake Island, Majuro, MH96960, the Republic of the Marshall Islands.

“Guarantee” means a guarantee executed by the Guarantor in favour of the Owners dated on or around the date of this Charter.

“Holding Company” means, in relation to a person, any other person in relation to which it is a subsidiary.

“Initial Market Value” means, in relation to the Vessel, US$28,500,000.

“Insurances” means:

(a)

all policies and contracts of insurance, including entries of the Vessel in any protection and indemnity or war risks association, which are effected in respect of the Vessel or otherwise in relation to it whether before, on or after the date of this Charter; and

(b)

all rights and other assets relating to, or derived from, any of the foregoing, including any rights to a return of a premium and any rights in respect of any claim whether or not the relevant policy, contract of insurance or entry has expired on or before the date of this Charter.

“Interest Rate” means, in relation to Variable Charterhire, the rate of interest determined in accordance with Schedule III (Interest Rate) plus the Margin.

“ISM Code” means the International Safety Management Code (including the guidelines on its implementation), adopted by the International Maritime Organization Assembly as Resolutions A.741 (18) and A.788 (19), as the same may be amended or supplemented from time to time (and the terms “safety management system”, “Safety Management Certificate” and “Document of Compliance” have the same meanings as are given to them in the ISM Code).

“ISPS Code” means the International Ship and Port Security Code as adopted by the Conference of Contracting Governments to the Safety of Life at Sea Convention 1974 on 13 December 2002 and incorporated as Chapter XI-2 of the Safety of Life at Sea Convention 1974, as the same may be supplemented or amended from time to time.

“Leasing Documents” means this Charter, the MOA, the Security Documents and the Trust Deed.

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“LIBOR” means, in relation to a Term, the London Interbank offered rate administered by ICE Benchmark Administration Limited (or any other person which takes over the administration of that rate) for Dollars commencing on the first day of that Term displayed on page LIBOR 01 of the Thomson Reuters screen (or any replacement Thomson Reuters page which displays that rate) or on the appropriate page of such other information service which publishes that rate from time to time in place of Thomson Reuters, and if such page or service ceases to be available the Owners may specify another page or service displaying the relevant rate on the Quotation Day (if the rate as determined above is less than zero, LIBOR shall be deemed to be zero).

“Major Casualty” means any casualty to the Vessel in respect of which the claim or the aggregate of the claims against all insurers, before adjustment for any relevant franchise or deductible, exceeds US$1,000,000 (or its equivalent in any other currency).

“Manager’s Undertaking” means, in relation to an Approved Manager, the letter of undertaking from such Approved Manager, inter alia, subordinating the rights of such Approved Manager against the Vessel and the Charterers to the rights of the Owners and their financiers (if any) in an agreed form.

“Margin” means 3.35% per annum.

“Market Value” means, in relation to the Vessel at any relevant time, the arithmetic mean of two (2) valuations, each prepared by an Approved Valuer (one selected by the Owners and one selected by the Charterers (but both at the cost of the Charterers)):

(a)

on a date no earlier than thirty (30) days previously;

(b)

without physical inspection of the Vessel; and

(c)

on the basis of a sale for prompt delivery for cash on normal arm’s length commercial terms as between a willing and a willing buyer, free of any existing charter or other contract of employment.

“MARPOL Protocol” means Annex VI (Regulations for the Prevention of Air Pollution from Ships) to the International Convention for the Prevention of Pollution from Ships 1973 (as amended in 1978 and 1997).

“Material Adverse Effect” means, in the opinion of the Owners, a material adverse effect on:

(a)

the business, operations, property, condition (financial or otherwise) or prospects of the Charterers, the Shareholder, the Guarantor or the Group taken as a whole; or

(b)

the ability of any Relevant Person to perform its obligations under any Leasing Document to which it is a party; or

(c)

the validity or enforceability of, or the effectiveness or ranking of any Security Interests granted pursuant to any of the Leasing Documents or the rights or remedies of the Owners under any of the Leasing Documents.

“MOA” means the memorandum of agreement entered into by the Charterers as sellers and the Owners as buyers dated on the date of this Charter in relation to the sale and purchase of the Vessel.

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“Mortgagee” has the meaning given to that term in Clause 35.2.

“NASDAQ” means the National Association of Securities Dealers Automated Quotations of the United States of America.

“Net Sale Proceeds” means, in relation to a sale of the Vessel by the Owners to a third party following the Charterers’ failure to pay the Termination Purchase Price, the amount of the consideration actually and unconditionally received by the Owners from a purchaser of the Vessel and any non-refundable deposit paid to or for the account of the Owners by a person acquiring or proposing to acquire the Vessel under a contract or offer to purchase the Vessel or other agreement to acquire the Vessel which has been withdrawn, terminated or cancelled or has lapsed, after deducting in each case: (a) any tax for which the Owners are required to account in respect of such sale, and (b) the Owners’ costs and out of pocket expenses properly incurred in connection with such sale (including but not limited to brokers’ commissions, legal fees, registration fees and stamp duties) or properly incurred in recovering possession of or in moving, insuring, maintaining, or dry-docking the Vessel and in carrying out any works or modifications required to restore the Vessel to the condition required by this Charter.

“Non-subsidiary Manager” means an Approved Manager which is not an entity within the Group.

“OFAC” means the U.S. Department of Treasury’s Office of Foreign Assets Control.

“Original Jurisdiction” means, in relation to any Relevant Person, the jurisdiction under whose laws they are respectively incorporated, converted or formed as at the date of this Charter.

“Other Charter” means, in relation to each Other Charterer, the bareboat charterparty entered into between the relevant Other Owner and such Other Charterer in respect of the relevant Other Vessels.

“Other Charterer” means each or, as the context may require, any of Nefeli Navigation S.A., Vythos Marine Corp. and Limestone Shipping Corporation (and “Other Charterers” mean all of them).

“Other Owner” means each or, as the context may require, any of Xiang L44 HK International Ship Lease Co., Limited, Xiang L45 HK International Ship Lease Co., Limited, and Xiang L47 HK International Ship Lease Co., Limited (and “Other Owners” means all of them).

“Other Vessel” means each or, as the context may require, any of m.v.s Navios Unison, Navios Constellation and Navios Unite (and “Other Vessels” means all of them).

“Outstanding Principal Balance” means, on any relevant date, the Purchase Price minus the aggregate of (i) the Upfront Charterhire and (ii) the aggregate Fixed Charterhire which has been paid by the Charterers and received by the Owners as at such date.

“Party” means either party to this Charter.

“Payment Date” means each of the twenty (20) dates upon which Charterhire is to be paid by the Charterers to the Owners pursuant to Clause 36 (Charterhire and Upfront Charterhire).

“Permitted Security Interests” means:

(a)

Security Interests created by a Leasing Document or a Financial Instrument;

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(b)

liens for unpaid master’s and crew’s wages in accordance with the ordinary course of operation of the Vessel or in accordance with usual reputable maritime practice;

(c)

liens for salvage;

(d)

liens for master’s disbursements incurred in the ordinary course of trading;

(e)

any other liens arising by operation of law or otherwise in the ordinary course of the operation, repair or maintenance of the Vessel provided such liens do not secure amounts more than 30 days overdue;

(f)

any Security Interest created in favour of a plaintiff or defendant in any action of the court or tribunal before whom such action is brought as security for costs and expenses where the Owners are prosecuting or defending such action in good faith by appropriate steps; and

(g)

Security Interests arising by operation of law in respect of taxes which are not overdue or for payment of taxes which are overdue for payment but which are being contested by the Owners or the Charterers in good faith by appropriate steps and in respect of which adequate reserves have been made.

“Potential Termination Event” means, an event or circumstance which, with the giving of any notice, the lapse of time, a determination of the Owners and/or the satisfaction of any other condition, would constitute a Termination Event.

“Purchase Option Date” means:

(a)

the Early Purchase Option Date; or

(b)

the Expiry Purchase Date.

“Purchase Price” has the meaning ascribed thereto in the MOA.

“Quiet Enjoyment Letter” means the quiet enjoyment letter entered or to be entered into between the Owners, the Charterers and the Approved Sub-charterer in relation to the Vessel.

“Quotation Day” means in relation to any period for which an Interest Rate is to be determined, 2 Business Days before the first day of that period unless market practice differs in the Relevant Interbank Market in which case the Quotation Day will be determined by the Owners in accordance with market practice in the Relevant Interbank Market (and if quotations would normally be given by leading banks in the Relevant Interbank Market on more than one day, the Quotation Day will be the last of those days).

“Relevant Interbank Market” means the London interbank market.

“Relevant Person” means:

(a)

the Charterers,

(b)

the Other Charterers,

(c)

the Guarantor,

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(d)

the Shareholder;

(e)

any Approved Manager other than a Non-subsidiary Manager; and

(f)

such other party providing security to the Owners for the Charterers’ obligations under this Charter pursuant to a Security Document or otherwise.

“Relevant Jurisdiction” means, in relation to any Relevant Person:

(a)

its Original Jurisdiction;

(b)

any jurisdiction where any property owned by it and charged under a Leasing Document is situated;

(c)

any jurisdiction where it conducts its business; and

(d)

any jurisdiction whose laws govern the perfection of any of the Leasing Documents entered into by it creating a Security Interest.

“Requisition Compensation” includes all compensation or other moneys payable by reason of any act or event such as is referred to in paragraph (b) of the definition of “Total Loss”.

“Restricted Countries” means those countries subject to country-wide or territory-wide Sanctions and/or trade embargoes, in particular but not limited to those of OFAC, including at the date of this Charter, but without limitation, Cuba, Crimea, Iran, North Korea, Sudan, Syria and any additional countries based on respective country-wide or territory-wide Sanctions being imposed by OFAC or any of the regulative bodies referred to in the definition of Restricted Persons.

“Restricted Person” means a person, entity or any other parties (i) located, domiciled, resident or incorporated in Restricted Countries, and/or (ii) subject to any sanction administrated by the United Nations, the European Union, Switzerland, the United States, OFAC, the United Nations, the United Kingdom, Her Majesty’s Treasury and the Foreign and Commonwealth Office of the United Kingdom, the People’s Republic of China and/or (iii) owned or controlled by or affiliated with persons, entities or any other parties as referred to in (i) and (ii).

“Sanctions” means any sanctions, embargoes, freezing provisions, prohibitions or other restrictions relating to trading, doing business, investment, exporting, financing or making assets available (or other activities similar to or connected with any of the foregoing) imposed by law or regulation of the United Kingdom, the United States of America (including, without limitation, CISADA and OFAC), the People’s Republic of China or the Council of the European Union.

“Security Documents” means the Guarantee, the Account Security, the General Assignment, the Shares Security, the Manager’s Undertaking, the Quiet Enjoyment Letter and any other security documents granted as security for the obligations of the Charterers under or in connection with this Charter.

“Security Interest” means:

(a)

a mortgage, charge (whether fixed or floating), pledge or assignment, any maritime or other lien or any other security interest of any kind;

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(b)

the security rights of a plaintiff under an action in rem; or

(c)

any other right which confers on a creditor or potential creditor a right or privilege to receive the amount actually or contingently due to it ahead of the general unsecured creditors of the debtor concerned; however this paragraph (c) does not apply to a right of set off or combination of accounts conferred by the standard terms of business of a bank or financial institution.

“Shareholder” means Boheme Navigation Company, a corporation incorporated and existing under the laws of the Republic of the Marshall Islands having its registered address at Trust Company Complex, Ajeltake Road, Ajeltake Island, Majuro, MH96960, the Republic of Marshall Islands.

“Shares Security” means the shares security over the units/shares in the Charterers to be executed by the Shareholder in favour of the Owners on or around the date of this Charter.

“Term” means, in relation to the definitions of “Fixed Charterhire” and “Variable Charterhire”, a period of three (3) month’s duration, provided that:

(a)

the first period shall commence on the Delivery Date;

(b)

each subsequent period shall commence on the last day of the preceding period;

(c)

if any period commences on the last day of a calendar month or on a day for which there is no numerically corresponding day in the calendar month falling three (3) months thereafter, as the case may be, that period shall, subject to paragraph (d), end on the last day of such later calendar month; and

(d)

any period which would otherwise extend beyond the Charter Period shall instead end on the last day of the Charter Period.

“Termination Date” has the meaning given to that term in Clause 44.2.

“Termination Event” means any event described in Clause 44 (Termination Events).

“Termination Purchase Price” means, in respect of any date, the aggregate, as at such date, of:

(a)

the Outstanding Principal Balance;

(b)

any Early Purchase Option Fee;

(c)

any accrued but unpaid Variable Charterhire;

(d)

any Breakfunding Costs;

(e)

any costs incurred and expenses incurred by the Owners (and their financiers (if any)) in locating, repossessing or recovering the Vessel or collecting any payments due under this Charter or in obtaining the due performance of the obligations of the Charterers under this Charter or the other Leasing Documents and any default interest in relation thereto;

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(f)

any legal costs incurred by the Owners in connection with the termination of this Charter under Clause 44 (Termination Events); and

(g)

all other outstanding amounts payable under this Charter together with any applicable interest thereon.

“Total Loss” means:

(a)

actual, constructive, compromised, agreed or arranged total loss of the Vessel;

(b)

any expropriation, confiscation, requisition or acquisition of the Vessel, whether for full consideration, a consideration less than its proper value, a nominal consideration or without any consideration, which is effected by any government or official authority or by any person or persons claiming to be or to represent a government or official authority; or

(c)

any arrest, capture, seizure or detention of the Vessel (including any hijacking or theft but excluding any event specified in paragraph (b) of this definition) unless it is redelivered within thirty (30) days to the full control of the Owners or the Charterers.

“Trust Deed” means a trust deed dated on or around the date of this Charter entered into between amongst others the Owners, the Other Owners, the Charterers, the Other Charterers, the Shareholder and the Guarantor which, inter alia, sets out the obligations of the Owners in respect of holding on trust all moneys or other assets received or recovered by or on behalf of the Owners and the Other Owners by virtue of any Security Interest or other rights granted to the Owners under or by virtue of the Security Documents.

“Upfront Fee” shall have the meaning given to such term in Clause 41.1.

“US Tax Obligor” means (a) a person which is resident for tax purposes in the United States of America or (b) a person some or all of whose payments under the Leasing Documents are from sources within the United States for United States federal income tax purposes.

“Vessel” means the 9,954 TEU container vessel named m.v. “YM UTMOST” with IMO No. 9302621 and which is to be registered under the name of the Owners under the flag of the Republic of Liberia upon Delivery.

60.2	In this Charter:

“Approved Manager”, “Approved Sub-charterer”, “Charterers”, “Other Charterers”, “Other Owners”, “Owners”, “Relevant Person”, “Shareholder” or any other person shall be construed so as to include its successors in title, permitted assigns and permitted transferees to, or of, its rights and/or obligations under the Leasing Documents;

“agreed form” means, in relation to a document, such document in a form agreed in writing by the Owners;

“asset” includes every kind of property, asset, interest or right, including any present, future or contingent right to any revenues or other payment;

“company” includes any partnership, joint venture and unincorporated association;

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“consent” includes an authorisation, consent, approval, resolution, licence, exemption, filing, registration, notarisation and legalisation;

“contingent liability” means a liability which is not certain to arise and/or the amount of which remains unascertained;

“continuing” or, as the case may be, “continuation of” means, in relation to any Termination Event, a Termination Event which has not been waived by the Owners in writing and in relation to any Potential Termination Event, a Potential Termination Event which has not been waived by the Owners in writing;

“control” over a particular company means the power (whether by way of ownership of units/shares, proxy, contract, agency or otherwise) to:

(a)

cast, or control the casting of, more than 51 per cent, of the maximum number of votes that might be cast at a general meeting of such company; or

(b)

appoint or remove all, or the majority, of the directors or other equivalent officers of such company; or

(c)

give directions with respect to the operating and financial policies of such company with which the directors or other equivalent officers of such company are obliged to comply;

“document” includes a deed; also a letter, fax or telex;

“expense” means any kind of cost, charge or expense (including all legal costs, charges and expenses) and any applicable value added or other tax;

“law” includes any order or decree, any form of delegated legislation, any treaty or international convention and any regulation or resolution of the Council of the European Union, the European Commission, the United Nations or its Security Council;

“legal or administrative action” means any legal proceeding or arbitration and any administrative or regulatory action or investigation;

“liability” includes every kind of debt or liability (present or future, certain or contingent), whether incurred as principal or surety or otherwise;

“months” shall be construed in accordance with Clause 60.3;

“person” includes any company; any state, political sub-division of a state and local or municipal authority; and any international organisation;

“policy”, in relation to any insurance, includes a slip, cover note, certificate of entry or other document evidencing the contract of insurance or its terms;

“protection and indemnity risks” means the usual risks covered by a protection and indemnity association which is a member of the International Group of P&I Clubs including pollution risks, freight, demurrage and defence cover, extended passenger cover and the proportion (if any) of any sums payable to any other person or persons in case of collision which are not recoverable under the hull and machinery policies by reason of the incorporation in them of clause 6 of the International Hull Clauses (1/11/02 or 1/11/03), clause 8 of the Institute Time Clauses (Hulls)(1/10/83) or clause 8 of the Institute Time Clauses (Hulls) (1/11/1995) or the Institute Amended Running Down Clause (1/10/71) or any equivalent provision;

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“regulation” includes any regulation, rule, official directive, request or guideline whether or not having the force of law of any governmental, intergovernmental or supranational body, agency, department or regulatory, self-regulatory or other authority or organisation;

“subsidiary” has the meaning given in Clause 60.4; and

“tax” includes any present or future tax, duty, impost, levy or charge of any kind which is imposed by any state, any political sub-division of a state or any local or municipal authority (including any such imposed in connection with exchange controls), and any connected penalty, interest or fine.

60.3	Meaning of “month”

A period of one or more “months” ends on the day in the relevant calendar month numerically corresponding to the day of the calendar month on which the period started (“the numerically corresponding day”), but:

(a)

on the Business Day following the numerically corresponding day if the numerically corresponding day is not a Business Day or, if there is no later Business Day in the same calendar month, on the Business Day preceding the numerically corresponding day; or

(b)

on the last Business Day in the relevant calendar month, if the period started on the last Business Day in a calendar month or if the last calendar month of the period has no numerically corresponding day;

and “month” and “monthly” shall be construed accordingly.

60.4	Meaning of “subsidiary”.

A company (S) is a subsidiary of another company (P) if a majority of the issued units/shares in S (or a majority of the issued units/shares in S which carry unlimited rights to capital and income distributions) are directly owned by P or are indirectly attributable to P.

A company (S) is a subsidiary of another company (U) if S is a subsidiary of P and P is in turn a subsidiary of U.

60.5	In this Charter:

(a)

references to a Leasing Document or any other document being in the form of a particular appendix or to any document referred to in the recitals include references to that form with any modifications to that form which the Owners approve;

(b)

references to, or to a provision of, a Leasing Document or any other document are references to it as amended or supplemented, whether before the date of this Charter or otherwise;

(c)

references to, or to a provision of, any law include any amendment, extension, re-enactment or replacement, whether made before the date of this Charter or otherwise; and

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(d)

words denoting the singular number shall include the plural and vice versa.

60.6

Headings

In interpreting a Leasing Document or any provision of a Leasing Document, all clauses, sub-clauses and other headings in that and any other Leasing Document shall be entirely disregarded.

BoComm Leasing | Navios

Additional Terms to BBC | YM Utmost

EXECUTION PAGE


OWNERS

SIGNED		)
by		)
as an attorney-in-fact		)
for and on behalf of		)
XIANG L46 HK INTERNATIONAL SHIP LEASE CO., LIMITED		)
in the presence of:		)

Witness’ signature:		)
Witness’ name:		)
Witness’ address:		)

CHARTERERS

SIGNED		)
by		)
as an attorney-in-fact		)
for and on behalf of		)
FAIRY SHIPPING CORPORATION		)
in the presence of:		)

Witness’ signature:		)
Witness’ name:		)
Witness’ address:		)

BoComm Leasing | Navios

Additional Terms to BBC | YM Utmost

Exhibit 8.1

SUBSIDIARIES OF NAVIOS MARITIME CONTAINERS L.P.


Company Name	Effective Ownership Interest			Country of Incorporation
Navios Partners Containers Finance Inc.		100	%		Marshall Is.
Navios Partners Containers Inc.		100	%		Marshall Is.
Olympia II Navigation Limited		100	%		Marshall Is.
Pingel Navigation Limited		100	%		Marshall Is.
Ebba Navigation Limited		100	%		Marshall Is.
Clan Navigation Limited		100	%		Marshall Is.
Sui An Navigation Limited		100	%		Marshall Is.
Bertyl Ventures Co.		100	%		Marshall Is.
Silvanus Marine Company		100	%		Marshall Is.
Anthimar Marine Inc.		100	%		Marshall Is.
Enplo Shipping Limited		100	%		Marshall Is.
Morven Chartering Inc.		100	%		Marshall Is.
Rodman Maritime Corp.		100	%		Marshall Is.
Isolde Shipping Inc.		100	%		Marshall Is.
Velour Management Corp.		100	%		Marshall Is.
Evian Shiptrade Ltd.		100	%		Marshall Is.
Boheme Navigation Company		100	%		Marshall Is.
Theros Ventures Limited		100	%		Marshall Is.
Legato Shipholding Inc.		100	%		Marshall Is.
Inastros Maritime Corp.		100	%		Marshall Is.
Zoner Shiptrade S.A.		100	%		Marshall Is.
Jasmer Shipholding Ltd.		100	%		Marshall Is.
Thetida Marine Co.		100	%		Marshall Is.
Jaspero Shiptrade S.A.		100	%		Marshall Is.
Peran Maritime Inc.		100	%		Marshall Is.
Nefeli Navigation S.A.		100	%		Marshall Is.
Fairy Shipping Corporation		100	%		Marshall Is.
Limestone Shipping Corporation		100	%		Marshall Is.
Crayon Shipping Ltd		100	%		Marshall Is.
Chernava Marine Corp.		100	%		Marshall Is.
Proteus Shiptrade S.A		100	%		Marshall Is.
Vythos Marine Corp.		100	%		Marshall Is.
Iliada Shipping S.A.		100	%		Marshall Is.
Vinetree Marine Company		100	%		Marshall Is.
Afros Maritime Inc.		100	%		Marshall Is.

Exhibit 12.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Angeliki Frangou, certify that:

1.	I have reviewed this annual report on Form 20-F for the year ended December 31, 2019 of Navios Maritime Containers L.P.;

2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the company as of, and for, the periods presented in this report;

The company’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the company and have:

(a)

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)

Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)

Evaluated the effectiveness of the company’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)

Disclosed in this report any change in the company’s internal control over financial reporting that occurred during the period covered by the annual report that has materially affected, or is reasonably likely to materially affect, the company’s internal control over financial reporting: and

5.	The company’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the company’s auditors and the Audit Committee of the company’s board of directors (or persons performing the equivalent functions):

(a)

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the company’s ability to record, process, summarize and report financial information; and

(b)

Any fraud, whether or not material, that involves management or other employees who have a significant role in the company’s internal control over financial reporting.

Date: March 18, 2020

/s/ Angeliki Frangou

Angeliki Frangou

Chief Executive Officer

(Principal Executive Officer)

Exhibit 12.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER

PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Erifili Tsironi, certify that:

1.	I have reviewed this annual report on Form 20-F for the year ended December 31, 2019 of Navios Maritime Containers L.P.;

2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the company as of, and for, the periods presented in this report;

(a)

(b)

(c)

(d)

5.	The company’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the company’s auditors and the Audit Committee of the company’s board of directors (or persons performing the equivalent functions):

(a)

(b)

Any fraud, whether or not material, that involves management or other employees who have a significant role in the company’s internal control over financial reporting.

Date: March 18, 2020

/s/ Erifili Tsironi

Erifili Tsironi

Chief Financial Officer

(Principal Financial Officer)

Exhibit 13.1

Certification

Pursuant To Section 906 of the Sarbanes-Oxley Act Of

2002

(Subsections (A) And (B) Of Section 1350,

Chapter 63 of Title 18, United States Code)

Pursuant to section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of section 1350, chapter 63 of title 18, United States Code), each of the undersigned officers of Navios Maritime Partners L.P., (the “Company”), does hereby certify, to such officer’s knowledge, that:

(i) the Annual Report on Form 20-F for the fiscal year ended December 31, 2019 (the “Form 20-F”) of the Company fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934;

(ii) and the information contained in the Form 20-F fairly presents, in all material respects, the financial condition and results of operations of the Company.


Dated: March 18, 2020						/s/ Angeliki Frangou
						Angeliki Frangou
						Chief Executive Officer

Dated: March 18, 2020						/s/ Erifili Tsironi
						Erifili Tsironi
						Chief Financial Officer