Oslo Alternative Bond Market (ABM) Listing Document€¦ · By 2016/2017 the Group targets to have...

Navigator Holdings Ltd. (Issuer)

USD 125,000,000 9.0% Senior Unsecured Bonds due 2017

Issue Price: 100.0%

Oslo Alternative Bond Market (ABM)

“Listing Document”

25 February 2013

This document has been prepared by the Issuer with assistance from the Managers

Joint Lead Managers and Bookrunners:

Co-Manager:

ABM Listing Document

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CONTENTS

1 DEFINITIONS .......................................................................................................................................... 3

1.1 DEFINITIONS ............................................................................................................................................. 3

1.2 GLOSSARY OF TERMS .................................................................................................................................. 4

2 RESPONSIBILITY STATEMENT ................................................................................................................. 5

3 PRESENTATION OF THE COMPANY AND THE GROUP ............................................................................. 6

3.1 THE COMPANY.......................................................................................................................................... 6

3.2 LEGAL AND OPERATIONAL STRUCTURE OF NAVIGATOR ..................................................................................... 6

3.3 THE GROUP’S HISTORY AND DEVELOPMENT .................................................................................................... 7

3.4 THE GROUP’S BUSINESS .............................................................................................................................. 8

3.5 FLEET OVERVIEW ....................................................................................................................................... 8

3.6 COMPETITIVE STRENGTHS.......................................................................................................................... 12

3.7 INSURANCE ............................................................................................................................................ 12

3.8 FLEET OPERATIONS AND CHARTERING .......................................................................................................... 13

3.9 CONTRACT OVERVIEW .............................................................................................................................. 15

3.10 CERTIFICATES .......................................................................................................................................... 17

3.11 RELATED PARTY AGREEMENTS OF THE GROUP ............................................................................................... 17

3.12 AGREEMENTS WITH NON-RELATED PARTIES................................................................................................... 17

3.13 DISPUTES ............................................................................................................................................... 17

3.14 MANAGEMENT AND BOARD OF DIRECTORS OF THE COMPANY ......................................................................... 17

3.15 SHAREHOLDERS OF THE COMPANY .............................................................................................................. 19

4 THE APMM TRANSACTION ................................................................................................................... 20

4.1 THE APMM VESSELS ............................................................................................................................... 20

4.2 TRANSACTION RATIONALE ......................................................................................................................... 20

4.3 TRANSACTION FINANCING ......................................................................................................................... 21

5 FINANCIAL INFORMATION ................................................................................................................... 24

5.1 HISTORICAL FINANCIAL INFORMATION ......................................................................................................... 24

5.2 INDEBTEDNESS AND FLEET VALUATION ......................................................................................................... 27

5.3 AUDITORS .............................................................................................................................................. 29

Appendix 1: Loan Description

Appendix 2: Loan Agreement

Appendix 3: Navigator Holdings Ltd. Consolidated Interim Financial Statement Q1-Q3 2012 (Unaudited)

Appendix 4: Navigator Holdings Ltd. Consolidated Financial Statement 2011 (Audited)



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1 DEFINITIONS

1.1 Definitions

APMM ........................................ means A.P. Møller-Mærsk A/S

APMM Agreement ...................... means the framework agreement between Navigator Holdings Ltd.

and A.P. Møller-Mærsk A/S with addenda setting out the terms and

conditions of the APMM Transaction

APMM Transaction..................... means the sale and purchase of the APMM Vessels pursuant to the

APMM Agreement

APMM Vessels ........................... means the 11 LPG vessels acquired or to be acquired by the Company

pursuant to the APMM Agreement

Application Form ........................ means the form of application for Bonds in the Bond Issue

Bank Facility Agreements ........... means the (i) USD 80 million secured term loan facility dated 1 April

2011 entered into between Navigator Gas LLC, Navigator Saturn

LLC, Navigator Leo LLC and Navigator Libra LLC as borrowers and

Nordea Bank Finland PLC and Skandinaviska Enskilda Banken AB

(publ) as lenders, (ii) the USD 180 million secured term loan facility

dated 18 April 2012 entered into between Navigator Gas LLC as

borrower and initially DVB Bank SE Nordic Branch, Nordea Bank

Finland PLC and Skandinaviska Enskilda Banken AB (publ) as

lenders, (iii) the USD 270 million secured term loan facility to be

entered into based on a commitment letter dated 13 November 2012

with Navigator Gas LLC as borrower and DVB, Nordea and SEB as

lenders, (iv) the USD 120 million secured term loan facility to be

entered into based on a commitment letter dated 2 November 2012

with four SPV Group Companies (to be established) as borrowers and

Credit Agricole and the Export-Import Bank of China as arrangers.

Bond Agreement ......................... means the Bond Agreement related to the Bond Issue.

Bond Issue ................................... means the issuance of senior unsecured bonds of USD 125,000,000

Bonds .......................................... means the bonds contemplated to be issued under the Bond Issue

BSSM .......................................... means Bernhard Schulte Shipmanagement Ltd.

Company ..................................... means Navigator Holdings Ltd.

Existing Vessels .......................... means the 12 LPG vessels currently owned by relevant Group

Companies at the date of this Offering Memorandum

Finance Documents ..................... means the Bond Agreement and related documents

Group .......................................... means the Company and its subsidiaries

Group Company/ies .................... means a company in, and/or the companies constituting, the Group (as

the case may be)

Managers ..................................... means Fearnley Securities AS, Nordea Bank Norge ASA, Nordea

Markets, Pareto Securities AS, Skandinaviska Enskilda Banken AB

(publ)

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1.2 Glossary of terms

Newbuild Vessels ........................ means the four newbuild vessels to be constructed

NOK ............................................ means Norwegian Kroner, the lawful currency of the Kingdom of

Norway

Offering Memorandum ............... means this offering memorandum, including all appendices hereto

Settlement Date ........................... 18 December 2012.

Term Sheet .................................. means the term sheet relevant for the Bond Issue dated 28 November

2012.

Trustee ........................................ means Norsk Tillitsmann ASA, trustee under the Bond Agreement.

USD, US$, $ ............................... means United States Dollars, the lawful currency of the United States

of America

Vessels means the APMM Vessels, the Existing Vessels and the Newbuild

Vessels

VPS ............................................. means VPS ASA

W.L. Ross & Co .......................... means funds and/or entities controlled by W.L. Ross & Co. LLC

LPG ............................................. Liquefied Petroleum Gas

VCM ........................................... Vinyl Chloride Monomer

VLGC .......................................... Very Large Gas Carrier

LNG ............................................ Liquefied Natural Gas

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3 PRESENTATION OF THE COMPANY AND THE GROUP

3.1 The Company

Navigator Holdings Ltd., the issuer of the bonds, was registered as a private limited liability company (company

number 29140), incorporated in the Marshall Islands, on 28 March 2008 by the Register of Business

Corporations. Navigator Holdings Ltd.’s registered address is Trust Company Complex, Ajeltake Road, Ajeltake

Island, Majuro, Marshall Islands MH96960. The Company is subject to Marshall Island law.

The Company has Representative Offices in London, UK (21 Palmer Street, SW1H 0AD) and New York, USA

(399 Park Avenue, 38th

Floor), where the Company’s management run the day to day operations.

3.2 Legal and Operational Structure of Navigator

3.2.1 Legal structure Navigator

Current legal structure

All companies in the Group are registered in the Republic of the Marshall Islands unless noted otherwise in

parenthesis. All lines denote 100% ownership, unless percentage shown.

Navigator Phoenix

LLC

Navigator Mars

LLC

Navigator Neptune

LLC

Navigator Venus

LLC

Navigator Pegasus

LLC

Navigator Leo LLC

Navigator Libra

LLC

Navigator Gemini

LLC

Navigator Taurus

LLC

Navigator Saturn

LLC

Navigator Holdings Ltd

Navigator Gas LLC

Navigator Gas US, LLC

(United States of America)

Navigator Gas Invest Limited

(England)

PT Navigator Khatulistiwa

(Indonesia)

Navigator Aries

Navigator Pluto

NGT Services (UK) Limited

(England)

Falcon Funding Pte Ltd

(Singapore)

49%

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Legal structure post acquisition

All companies in the Group are registered in the Republic of the Marshall Islands unless noted otherwise in

parenthesis. All lines denote 100% ownership, unless percentage shown.

3.3 The Group’s history and development

Navigator Holdings Ltd. was formed in 1997 as an Isle of Man public limited company for the purpose of

building and operating a fleet of five semi-refrigerated, ethylene-capable gas carriers. These vessels were

delivered in 2000 and are still owned and operated by the Group. The then newbuilding program was financed

primarily through the issuance of high yield notes which, due to inability to support debt service payments,

resulted in a Chapter 11 filing on January 27, 2003. On February 6, 2003, the Office of the United States Trustee

appointed the Official Committee of Unsecured Creditors (the “Committee”), a statutory committee appointed to

oversee the reorganization process on behalf of Navigator’ creditors. The Chair of the Committee was David

Butters, current president, chief executive officer and chairman of the Company. On 17 March, 2004, the

Bankruptcy Court confirmed the Committee’s proposed Chapter 11 plan of reorganization. On 9 August, 2006,

the Committee’s plan of reorganization became effective and the Company and its subsidiaries emerged from

bankruptcy. On 28 March, 2008, the Company redomiciled and domesticated as a corporation in the Marshall

Islands. Navigator Gas L.L.C. and its vessel-owning subsidiaries had previously redomiciled from the Isle of

Man and domesticated in the Republic of The Marshall Islands in December 2007.

As part of the plan of reorganization, debt was converted into equity resulting in the bondholders receiving all of

the equity interests in the Company, and Lehman Brothers Inc. becoming the largest shareholder of the Company

with an approximate 44.1% ownership interest.

On 10 November 2011 it was agreed that W.L. Ross & Co would acquire 19.4% of the Company’s common

stock in order to provide additional capital resources for the Company’s growth program. During 2012, W.L.

Ross & Co acquired the common stock previously owned by Lehman Brothers Inc and now has an ownership

stake of 55.7% of the total common stock.

Navigator Phoenix LLC

Navigator Mars LLC

Navigator Neptune LLC

Navigator Venus LLC

Navigator Pegasus LLC

Navigator Leo LLC

Navigator Libra LLC

Navigator Gemini LLC

Navigator Taurus LLC

Navigator Saturn LLC


Navigator Gas LLC

Navigator Gas US, LLC ( United States of America )

Navigator Gas Invest Limited (England)

PT Navigator Khatulistiwa (Indonesia)

Navigator Aries Navigator Pluto

NGT Services (UK) Limited (England)

49%

Navigator Genesis LLC

Navigator Capricorn LLC

Navigator Scorpio LLC

Navigator Virgo LLC

Navigator Galaxy LLC

Navigator Global LLC

Navigator Magellan LLC

Navigator Glory LLC

Navigator Grace LLC

Navigator Gusto LLC

Navigator Mariner LLC

Falcon Funding Pte Ltd (Singapore)

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3.4 The Group’s business

3.4.1 General

Navigator Holdings Ltd. provides international seaborne transportation services to producers, traders and

consumers of LPG, petrochemical gases and ammonia. LPG consists primarily of propane and butane and is a

relatively clean alternative energy source used for heating and fuel as well as petrochemical and refinery

feedstock. Petrochemicals are primarily used to manufacture plastics and rubber while ammonia is mainly used

in the fertilizer industry. Transportation of these gases is in liquefied form to reduce volume and facilitate

handling. Seaborne transportation is the most cost effective way of transporting these gases over long distances

between the major exporting and importing regions of the world.

The Group currently owns and operates a fleet of 12 modern 20,500-22,000 cbm semi-refrigerated gas carriers,

five of which are ethylene capable. The Group will from time to time also charter in vessels to service its

customers.

According to the Company’s corporate documents, it may enter into all legal activities.

3.4.2 Strategy

The Group has grown the size of its fleet through selective acquisitions of modern, high quality existing vessels,

in addition to a limited newbuilding program. Although the Group currently operates vessels in the 15,000-

24,999 cbm size segment, opportune acquisitions of vessels in other capacity ranges will be evaluated on an on-

going basis.

The Group strives to enhance returns by maintaining a flexible chartering strategy combining a base of time

charters and contracts of affreightment (“COA”). The Group believes that a flexible chartering strategy allows

for maintaining relatively stable and predictable revenues while still being positioned to capitalize on favourable

market conditions. Furthermore, the Group seeks opportunities to increase fleet utilization by transporting

petrochemicals during vessel repositioning voyages and between time charters.

Cost-efficient technical management of the vessels is key for the Group to maximise profitability. Cost

effectiveness has historically been achieved through outsourcing of the technical management of the fleet, which

includes crewing, purchasing of stores and equipment, and servicing. For smaller shipping companies owning

less than 10 or so vessels, this is a more cost efficient way of operating. However, as the Group grows it expects

to increasingly manage its fleet “in-house” to ensure full control of the vessels. By 2016/2017 the Group targets

to have around 20 ships under own technical management and five to seven ships with a third party manager.

3.5 Fleet overview

The Group currently owns and operates a fleet of 14 vessels, 12 of which are owned with two being chartered-in.

In addition, the Company has a firm contract for four ethylene capable 21,000 cbm gas carriers and options for

two more with the Jiangnan Shipyard (“Jiangnan”) in China. Delivery of the Newbuild Vessels is scheduled for

April, June, August and October 2014.

The design is based on the previous “planet” ships (ethylene carriers) built by the Company in 2000 at the same

yard, with the design being modernised and upgraded to become more fuel efficient and more flexible in terms of

loading a wide range of petrochemical products. The Newbuild Vessels will also be prepared for a possible

future conversion to use LNG as fuel for propulsion, should this become commercially viable.

The remaining options for vessels 5 & 6 are to be declared on or before 28 February 2013. In this final option

agreement the Company may declare these as either copies of previous four vessels on order including ethylene

capacity or as straight LPG carriers with a 15% reduction to the existing contract price. If these options were to

be exercised, the Company would finance such investments by issuance of new equity amounting to a minimum

of 35% of the contract price.

Jiangnan is the No 1 shipyard for gas carriers in China with a proven track record of building such vessels

(including the Group’s five ethylene capable vessels built in 2000), as well as fabricating cryogenic tanks and

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systems. Over the past three years the yard has been relocating to the Changxing Island in the entrance to the

Yangtse river and during this time has invested in modern building technology and new machinery at the new

site.

The yard is in a solid financial condition with backing from the Chinese government through their head owner,

the China State Shipbuilding Corporation (“CSSC”). 50% of Jiangnan’s order book comes from CSSC orders of

military ship construction and 50% from the commercial shipping side. Recently the yard received orders for

2+2+2 VLGC’s from Frontline 2012, proving its strength as a well renowned ship builder in the gas shipping

segment. The plan approval and site team management has been contracted to Stena Line’s fully owned technical

and engineering company Tritec Marine. Tritec Marine has many years of experience in building ships in China

with an outstanding reputation and proven track record assisting blue chip companies securing delivery of well-

built tonnage. The Company believes that their longstanding relationship with Jiangnan in combination with

Tritec Marine as contractors, should aid a timely delivery of the vessels with a quality superseding all other yards

who are building gas carriers.

The Group’s current fleet is young with an average age of 6.7 years compared with an industry average of 11

years. Each vessel has four separate cargo tanks, segregated pumping and piping systems and two separate deck

tanks, allowing each vessel to carry up to three separate temperature controlled cargoes simultaneously. The fleet

is currently the largest in the 15,000-24,999 cbm segment of gas carriers.

Navigator Aries

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The following table provides a summary overview of the existing fleet and the newbuildings:

Owned vessels

Year

built Vessel type Size (cbm) Charter type Charterer

Charter

expiry date

Navigator Mars 2000 Semi-refrigerated /

ethylene capable 22,085 Time charter INEOS

January

2013

Navigator Venus 2000 Semi-refrigerated /

ethylene capable 22,085 Time charter

MGI Trading of

Mexico March 2013

Navigator Saturn 2000 Semi-refrigerated /

ethylene capable 22,085 Time charter Petredec

December

2012

Navigator Pluto 2000 Semi-refrigerated /

ethylene capable 22,085 Time charter Pertamina March 2015

Navigator

Neptune 2000

Semi-refrigerated /

ethylene capable 22,085 Time charter Trafigura

January

2013

Navigator Aries 2008 Semi-refrigerated 20,750 Time charter Pertamina September

2013

Navigator

Gemini 2009 Semi-refrigerated 20,750 Time charter PDVSA

September

2013

Navigator

Pegasus 2009 Semi-refrigerated 22,200

Spot / contracts

affreightment Spot n/a

Navigator

Phoenix 2009 Semi-refrigerated 22,200 Time charter PDVSA May 2013

Navigator Taurus 2009 Semi-refrigerated 20,750 Time charter Hyproc July 2013

Navigator Leo 2011 Semi-refrigerated 20,600 Time charter TOTAL December

2012

Navigator Libra 2012 Semi-refrigerated 20,600 Time charter Grupo Tomza March 20141

Chartered in

vessels

Year

built Vessel type Size (cbm) Current charter Charterer

Charter

expiry date

Maple 3 1993 Semi-refrigerated 20,600 Time charter Grupo Tomza March 20142

Arctic Gas 1993 Semi-refrigerated 20,600

Contract of

affreightment Kolmar

December

2012

Newbuilds

Expected

delivery

date Vessel type Size (cbm) Current charter Charterer

Charter

expiry date

Hull 2530 April

2014

Semi-refrigerated /

ethylene capable 21,000 n/a n/a n/a

Hull 2531 June 2014 Semi-refrigerated /


Hull 2532 August

2014

Semi-refrigerated /


Hull 2533 October

2014

Semi-refrigerated /


1 Navigator Libra will commence contract for SIBUR during Q4 2013 and a substitute vessel will then take over the Grupo Tomza contract.

The contract has a 2 x 6 month extension option 2 The chartered-in vessel Maple 3 is on a time charter contract with Grupo Tomza until March 2014 with a 2 x 6 month extension option

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Upon the completion of her current voyage charter with Ineos in January 2013, Navigator Mars is contracted to

perform eight consecutive voyages with Bayegan transporting 12,000 tons of ethylene from the Middle East to

Europe which will employ the vessel through 2013. Three vessels employed on time charters which expire

between December 2012 and January 2013, namely Navigator Saturn, Navigator Leo and Navigator Neptune, are

all currently under discussion with the respective charterers for extensions. Navigator Leo and Navigator Libra

will commence 10 year time charters with the Russian petrochemical trader SIBUR in Q4 2013.

The average monthly time charter equivalent rate for all vessels (including spot vessels) operating in the fleet is

USD 772,492 for the nine months ending 30 September 2012 and USD 788,000 for the month of September

2012. The current monthly charter rates on time charter vessels only range from the low to mid USD 700,000’s

to the low to mid USD 900,000’s. These charter rates are the gross monthly charter hire rates before payment of

address and brokerage commissions. Address and brokerage commissions typically range between 1.25% and

5% of the gross monthly charter rate. On average, the Group pays a 3.0% address and brokerage commission

with respect to the current time charter equivalent of all vessels in the fleet.

Navigator Mars, Navigator Venus, Navigator Saturn, Navigator Pluto and Navigator Neptune were all built by

Jiangnan and China Shipbuilding Trading Company, Limited and are sister ships.

Navigator Aries, Navigator Gemini and Navigator Taurus were built by Hyundai Mipo Shipyard in South Korea.

The Group took delivery of these vessels in August 2008, March 2009 and September 2009.

In 2011, the Company agreed to assume responsibility for two newbuilding contracts for the construction of two,

20,500 cbm, semi-refrigerated liquefied petroleum gas carriers, previously ordered by Latvian Shipping

Company (“LSC”). The vessels were being built at Hyundai Mipo Dockyard in South Korea. The Group took

delivery of these vessels (Navigator Leo and Navigator Libra) in September 2011 and February 2012.

In March 2012, the Company agreed to acquire two 22,200 cbm, semi-refrigerated liquefied petroleum gas

carriers from affiliates of Petredec. These vessels were originally built at Jiangnan in China in June and August

2009. The Group took delivery of the vessels (Navigator Phoenix and Navigator Pegasus) in April 2012.

The whole fleet including the Newbuild Vessels and the APMM Vessels sail (or will sail once built or acquired)

under Liberian flag, except for Navigator Pluto and Navigator Aries which sail under Indonesian flag. Each of

the vessels is or will be wholly-owned by separate Marshall Islands subsidiaries.

Navigator Venus

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3.6 Competitive strengths

The Group’s vessels are in the attractive handy-size niche of the gas carrier market. Due to vessel size they are

able to access ports that many of the larger LPG vessels are unable to serve. Most semi-refrigerated vessels

typically have capacities of up to 16,500 cbm which limits their ability to carry larger cargo. The Group’s vessels

are all above 20,000 cbm, enabling them to carry larger petrochemical cargoes with superior efficiency relative

to smaller vessels. The cooling systems of the vessels, using a combination of pressurization and refrigeration to

cool cargoes, allow for cost-efficient transportation of a wide range of liquefied gases. Five of the vessels, as

well as the four Newbuild Vessels have or will have the ability to transport ethylene (cooling gases to -104°C)

which often commands a charter rate premium.

The Group has a fleet of vessels with substantially lower average age than other industry peers. A modern fleet

reduces risk of off-hire time, ensures less frequent dry-docking, lower maintenance and operating costs and

improves safety and environmental protection. Thus, trading counterparties tend to favor modern vessels which

provide the Group with a competitive advantage in securing favorable vessel employment terms. Furthermore,

the fleet is versatile in terms of cargo range, ease and speed of loading and discharging cargoes and adaptability

for route scheduling.

In addition, the Group benefits from significant scheduling, maintenance, inventory management, repair and

crewing efficiencies due to the fact that many of the vessels are sister ships that were built to identical

specifications, a strategy continued with the four sister ships in the newbuild program. The ability to substitute

ships with identical specifications enhances the fleet’s revenue potential by providing increased flexibility to

meet charterers’ schedules.

3.7 Insurance

The entire fleet carries “hull and machinery” insurance. This insures against the risk of actual or constructive

total loss of the vessels. Furthermore, hull and machinery insurance covers loss of or damage to a vessel due to

marine perils such as collisions, grounding and weather. Each Existing Vessel is covered for up to USD 80

million, with deductibles of USD 100,000.

Furthermore, the fleet carries “protection and indemnity” insurance to protect against most of the accident-

related risks involved in the conduct of business. This insurance is provided by Mutual Protection and Indemnity

Associations (“P&I Associations”) and covers the Group’s third-party liabilities in connection with shipping

activities. This includes third-party liability and other related expenses of injury or death of crew, passengers and

other third parties, loss of 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. The Existing Vessels are entered in either the Standard Steamship Owners’ Protection

& Indemnity Association or the Britannia Steam Ship Insurance Association P&I Associations which are

members of The International Group of P&I Clubs, or The International Group.

Insurance policies covering war risks (including piracy and terrorism) are also in place for all vessels in the fleet,

with each vessel being covered for up to USD 80 million, with no deductible. The Group is required to notify

war-risk carriers as of when vessels travel into certain hostile regions. This also requires an additional payment

of approximately USD 300 to USD 1,000 per vessel per day. These additional premiums are usually paid by the

charterers pursuant to the terms of the time charter agreements.

The Group’s current protection and indemnity insurance coverage for pollution is limited to USD 1 billion per

vessel per incident, with the following per vessel per incident deductibles: USD 22,000 for fixed and floating

objects claims, USD 22,000 for collisions, USD 6,000 for cargo damage and USD 3,000 for all other incidents.

With the Company being a member of the Standard Club and the Britannia Club it is subject to calls payable to

the associations based on 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. Pooling

agreements between the International Group of Clubs operate so that each P&I Association currently bears the

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first USD 7 million of each claim with the excess of each claim over USD 7 million up to USD 50 million being

shared by the P&I Associations under the pooling agreement. Should single claims exceed USD 50 million it will

be shared by the members of The International Group under a reinsurance contract providing coverage of up to

USD 3 billion per claim. Claims exceeding USD 3.05 billion are pooled between The International Group by

way of “overspill” up to approximately USD 5.5 billion, which represents the current coverage limit per vessel

per incident.

The Company believes that the Group’s present insurance coverage is adequate, however, not all risks can be

insured against. Operating any ocean-going vessel carries an inherent risk of catastrophic marine disasters, death

or injury of persons and property losses caused by adverse weather conditions, mechanical failures, human error,

war, terrorism, piracy and other circumstances or events. The occurrence of any of these events may result in loss

of revenues or increased costs. Thus, there can be no guarantee that any specific claim will be covered or that the

Group will always be able to obtain adequate insurance coverage at reasonable rates.

3.8 Fleet operations and chartering

The Group’s chartering strategy is to combine a base, up to about 75% of the total vessel days, of coverage in the

form of time charters and contracts of affreightment, with the remaining proportion to be employed in the spot

market. This combination gives a solid platform in terms of earnings visibility as well as enabling the Group to

access market intelligence and new business opportunities through day-to-day spot activities. The Group

currently makes the majority of its revenues from time charters and expects this to continue for the foreseeable

future. Currently 10 of the 12 fully owned vessels are operating under time charters with one trading on a

consecutive voyage arrangement and one fulfilling contracts of affreightments.

A time charter is a contract for the use of a specified vessel for a fixed period of time at a specified monthly rate

called a hire rate. Under these time charters the Group is responsible for crewing and other operating expenses,

the cost of which is included in the hire rate. The customer is responsible for all of the voyage expenses,

including fuel expenses, port expenses, agent’s fees and canal dues. The hire rate is payable monthly in advance,

in US dollars, as specified in the charter. The initial term for a time charter commences upon the vessel’s

delivery to the customer. The customer may redeliver the vessel to the Group up to 15 to 30 days earlier or up to

15 to 30 days later than the respective charter expiration dates conditional that advance notice being given.

Reduction in hire payments may happen in case of the vessels not performing according to the set specifications.

Such underperformance may include but is not limited to slower speed or increased fuel consumption to power

vessel into performance levels that would normally be reasonable to expect or otherwise guaranteed.

During time charters, if the vessel is “off-hire” (or not available for service), the customer generally is not

required to pay the hire rate and all costs are passed on to the shipowner. In instances when vessels experience

prolonged off-hire, there is a risk of the vessel being substituted or termination of the time charter. Vessels may

generally be deemed off-hire if there is a loss of time due to operational deficiencies, drydocking for repairs,

maintenance or inspection, equipment breakdowns, delays due to accidents, strikes, or certain vessel detentions.

Furthermore the Group’s failure to maintain the vessel in compliance with its specifications and contractual

standards or to provide the required crew could also lead to off-hire periods.

Termination of time charters automatically happens upon a loss event of the applicable vessel. Additionally, the

Group is entitled to suspend performance under most of the time charters if the trading counterparty defaults on

its payment obligations. Furthermore, either party may also terminate the charter in the event of war in specified

countries or in locations that would significantly disrupt the free trade of the vessel.

For time charters, the Group is responsible for providing the technical management and maintenance of the

vessel, including periodic drydocking, cleaning and painting and performing work required by regulatory bodies.

Historically the Group has used third party managers to run the technical management of the vessels. Following

the acquisition of the APMM Vessels the Group can enter into shorter term technical/crew management

agreements with affiliates of APMM to smooth the roll-over phase to its existing third party managers or to

managing these vessels in-house.

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Historically the technical management has been outsourced to Bernhard Schulte Shipmanagement Ltd.

(“BSSM”). BSSM has over 700 vessels under management and several fully-owned crew recruitment agencies in

major crew recruitment countries.

During 2009 and following the delivery of Navigator Taurus in September 2009 a decision was taken to appoint

a second crew and technical management company, Northern Marine Management Ltd. (“NMM”), based in

Scotland (UK) that currently crews and technically manages approximately 120 vessels. At present NMM crews

and technically manages three of the Group’s vessels.

Over the course of the next few years the reliance the Group has with BSSM may be reduced as the Company

aims to form an in-house technical management function.

Navigator Venus

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3.9 Contract overview

3.9.1 Current and historical contract status

Vessels Historical contracts and charterers Charter type Charterer

Charter

expiry date

Navigator Mars Prior to current engagement vessel was

chartered by Grupo Tomza for 6 months.

Other former engagements include a long

term contract with PDVSA between June

2004 through to November 2009.

Voyage charter INEOS January

2013

Navigator Venus Former engagements include a long term time

charter with PDVSA for 3 years years,

between Apr 2007 and June 2010.

Time charter MGI Trading

of Mexico

March 2013

Navigator Saturn Former engagements include a time charter

with Grupo Tomza for duration of 9 months

in 2011 and a long term charter with PDVSA

for 3 years, between July 2007 and July 2010.

Time charter Petredec December

2012

Navigator Pluto Current charter was entered into in February

2010. Prior to this include longer time

charters with Chevron and SHV Gas for 5

years.

Time charter Pertamina March 2015

Navigator Neptune Former long term charters include 18 months

with PDVSA between November 2008 and

July 2010, and Geogas between January 2005

and November 2008.

Time charter Trafigura January

2013

Navigator Aries Went straight on to current time charter upon

delivery in 2008.

Time charter Pertamina September

2013

Navigator Gemini On current charter since June 2010. Other

charters include 6 months between June 2009

and January 2010 for Pertamina.

Time charter PDVSA September

2013

Navigator Pegasus Straight on to spot-work as vessel was

delivered in 2012.

Spot / contracts of

affreightment

Spot February

2013

Navigator Phoenix Straight on to current contract as vessel was

delivered in 2012.

Time charter PDVSA May 2013

Navigator Taurus Prior to its current engagement, the vessel

was on a time charter with Avance Gas from

September 2010 to November 2012.

Time charter Hyproc August

2013

Navigator Leo Entered current charter soon after delivery in

2011.

Time charter Total December

2012

Navigator Libra Entered current charter soon after delivery in

2012.

Time charter Grupo Tomza March

20143

3 Navigator Libra will commence contract for SIBUR during Q4 2013 and a substitute vessel will then take over the Grupo Tomza contract. The contract has a 2 x 6 month extension option

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Below table outlines the Company’s ability to achieve high levels of fleet utilization during the past years as well

as average daily Time Charter Equivalent rates.

Year Fleet utilization (%) Daily TCE rates ($, ‘000)

2005 97.3 24.5

2006 96.8 27.4

2007 99.4 28.6

2008 98.7 29.7

2009 97.1 28.9

2010 96.2 23.6

2011 97.4 24.0

2012 YTD 99.4 25.4

7 year average 97.8 26.5

3.9.2 Current & historical contract counterparties

Avance Gas Limited is a subsidiary of Stolt-Nielsen Gas, an LPG maritime transportation company.

Bayegan is a Turkish company that engages in the trading of chemicals, petrochemicals, steel products and other

commodities.

Chevron is an international producer and transporter of crude oil and natural gas. The company also refines,

markets, and distributes fuels as well as is involved in chemical operations, mining operations, power generation

and energy services. The company is rated Aa1 by Moody’s and AA by S&P.

Geogas is a Switzerland based global LPG trading and shipping company.

INEOS Group is a British company that manufactures, distributes, sells, and markets specialty and intermediate

chemicals. Products include ethylene oxide, acetate esters, glycol, and specialty polymers. The company is rated

Caa1 by Moody’s and B by S&P.

MGI Trading of Mexico is the trading arm of Petroleos Mexicanos, the Mexican state owned oil and gas

company. The company is rated Baa1 by Moody’s and BBB by S&P.

Petredec Ltd. is a Bermuda based global LPG trading and shipping company.

Petróleos de Venezuela S.A., the national Venezuelan state-owned producer of hydrocarbons. Created in 1975,

PDVSA is a significant exporter of oil to the U.S. The company is rated B1 by Moody’s and B+ by S&P.

PT Pertamina (Persero), the national Indonesian state-owned producer of hydrocarbons. The company is rated

Baa3 by Moody’s and BB+ by S&P.

SHV Gas retails and wholesale distributes petroleum, petroleum related products, and gas products such as

propane fuel tanks. SHV Gas serves residential and commercial consumers throughout Brazil.

SIBUR is a Russian chemicals company. The company manufactures petroleum gas, synthetic rubber, mineral

fertilization, tires, and plastics & organic synthesis. The company is rated Ba1 by Moody’s and BB+ by S&P.

Tomza Group is a Mexican LPG distribution company that distributes LPG to the Mexican and Central

American markets.

Total SA is the fifth largest publicly traded oil and gas company in the world, involved in exploration,

production, refinery and transportation of activities. The company is rated Aa1 by Moody’s and AA- by S&P.

Trafigura AG is a private, Switzerland based independent commodity trading- and logistics company.

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3.9.3 General legal description of the Contracts

The Company uses standard contracts recognized throughout the shipping industry for all its charter

engagements. Such contracts include ASBATANKVOY for voyage charters and Shell-time IV or equivalent

derivatives for time charters.

3.10 Certificates

Navigator Mars, Navigator Venus, Navigator Saturn, Navigator Pluto and Navigator Neptune all have

certifications from Germanischer Lloyd, a classification society based in Hamburg, Germany. The four Newbuild

Vessels will have the same certifications as these vessels. The remaining vessels including the two chartered in

vessels have certifications from Lloyds Registry, a maritime classification society based in London, UK.

3.11 Related party agreements of the Group

3.11.1 Management arrangements and agreements

The Group currently has no special management arrangements or agreements in place.

3.12 Agreements with non-related parties

3.12.1 Agreements in the ordinary course of business

The Company currently has no special agreements related to the ordinary course of business.

3.12.2 Shareholders' agreements related to joint ventures

The Company currently has no special agreements related to joint ventures.

3.13 Disputes

At present, neither the Company nor any of its subsidiaries are involved in any lawsuits or disputes that are

expected to have a material negative impact. The Company is not aware of any legal proceedings or claims that

will have, individually or in the aggregate, a material adverse effect on the Company or any of its subsidiaries.

3.14 Management and Board of Directors of the Company

3.14.1 Management of the Company

David Butters, (72), Chief Executive Officer, Chairman of the Board of Directors

David Butters was appointed president and chief executive officer of the Company in October 2008 and has

served as chairman of the board of directors of the Company since August 2006, and as chairman of the board of

directors since the Company was incorporated in August 2008. Prior to joining the Company, Mr. Butters served

as a managing director of Lehman Brothers Inc., a subsidiary of Lehman Brothers Holdings Inc., where he was

employed for more than 37 years. Mr. Butters is currently chairman of the board of directors of GulfMark

Offshore, Inc., vice chairman and presiding director of the board of directors of Weatherford International Ltd.,

and a director of ACOL Tankers Ltd. and Angelicoussis Shipping Group Ltd.

Niall Nolan, (49), Chief Financial Officer

Niall Nolan was appointed chief financial officer of the Company in August 2006. Prior to his appointment as

chief financial officer, Mr. Nolan worked for the Company as representative of the creditors committee during

the Company’s bankruptcy proceedings. Mr. Nolan was previously the group finance director of Simon Group

PLC, a U.K. public company.

Tommy Hjälmås (45), Chief Operating Officer

Tommy Hjälmås was appointed chief operating officer of the Company in November 2006. Prior to this,

Mr. Hjälmås was employed for five years at Dorchester Maritime Limited, now known as BSSM. Mr. Hjälmås

holds a BSc in marine engineering from the University of Chalmers.

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Oeyvind Lindeman (33), Chartering Manager

Oeyvind Lindeman was appointed Chartering Manager of the Company in November 2007. Prior to this, Mr.

Lindeman was employed for five years at A.P. Møller-Maersk A/S.

3.14.2 Board of Directors of the Company

David Butters (72), Chairman of the Board of Directors

Details provided above under 3.14.1.

Holding in the Company: Mr. Butters holds 868,316 shares in the Company.

Dr. Heiko Fischer (45), Director

Dr. Fischer has been a member of the board of directors of the Company since December 2011. Dr. Fischer has

been serving as the chairman of VTG AG since 2004, holds an MBA from State University of New York in

Albany and a doctorate in economics from the Julius-Maximilians University.

Holding in the Company: Dr. Fischer holds 5,000 shares in the Company.

David Kenwright (64), Director

David Kenwright has been a member of the board of directors of the Company since March 2007 and the board

of directors since the Company was incorporated in the Marshall Islands in August 2008. Mr. Kenwright is a

managing director of Achater Offshore Ltd. and chairman of the UK Emergency Response and Rescue Vessel

Association Ltd., and previously a managing director of Gulf Offshore N.S. Ltd. for seven years. Mr. Kenwright

is a Chartered Engineer and a Fellow of the Institute of Marine Engineering, Science and Technology.

Holding in the Company: Mr. Kenwright holds 5,000 shares in the Company.

Thomas A. McKay (65), Director

Thomas A. McKay has been a member of the board of directors of the Company since January 2010. Mr. McKay

is the principal of T.A. McKay & Co., Inc., a New York investment management firm. Funds managed by T.A.

McKay, Inc. own 11.2% of the Company’s common stock.

Holding in the Company: T.A. McKay & Co holds 1,445,156 shares in the Company for which Mr. McKay is

the principal.

Spiros Milonas (84), Director

Spiros Milonas has been a member of the board of directors of the Company since August 2006 and the board of

directors since the Company was incorporated in the Marshall Islands in August 2008. He is chairman and

president of Ionian Management Inc., which oversees the Ionian Group, with interests in shipping, oil and gas

and real estate. Mr. Milonas is a director of the New York Shipping Cooperation Committee, a member of

Leadership 100, a member of the Board of Advisors of Atlantic Bank, and a recipient of the Ellis Island Medal of

Honor Award. Mr. Milonas graduated from Athens University, School of Economics.

Holding in the Company: Mr. Milonas holds 677,419 shares in the Company.

Alexander Oetker (37), Director

Alexander Oetker has been a member of the board of directors of the Company since September 2006 and the

board of directors since the incorporation in the Marshall Islands in August 2008. Mr. Oetker is the founder and

chief executive officer of AO Schiffahrt GmbH & Co., a bulk and container shipping company, from September

2003 until January 2006. Before founding AO Schiffahrt, Mr. Oetker was employed as chartering manager of

Hamburg Sued and was employed by Hutchinson Port Holdings.

Holding in the Company: Mr. Oetker holds 0 shares in the Company.

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Wilbur Ross (74), Director

Wilbur Ross has been a member of the board of directors of the Company since April 2012. Mr. Ross is currently

the chief executive officer and chairman of W.L. Ross & Co. Prior to founding W.L. Ross & Co he spent 24

years at Rothschild Inc. serving as an executive managing director. He holds a BA from Yale College and an

MBA from Harvard Business School.

Holding in the Company: W.L. Ross & Co holds 7,185,170 shares in the Company for which Mr. Ross is the

principal.

Florian Weidinger (31), Director

Florian Weidinger has been a member of the board of directors of the Company since March 2007 and the board

of directors since the Company was incorporated in the Marshall Islands in August 2008. Mr. Weidinger

previously worked as a vice president at Lehman Brothers’ principal investment division, Global Trading

Strategies in London prior to becoming chief executive officer of Hansabay., a Singapore based fund

management business. Mr. Weidinger holds a BSc from Cass Business School, City University, London, an

MBA from the Stanford Graduate School of Business and an MS in Environment and Resources from Stanford

University.

Holding in the Company: Mr. Weidinger holds 5,000 shares in the Company.

3.15 Shareholders of the Company

W.L. Ross & Co is acknowledged as one of the world's leading turnaround groups, investing in and restructuring

financially distressed companies within niche sectors with an objective of creating new, world-class enterprises.

Mr. Ross established the company with USD 440 million in investor commitments and a staff of investment

professionals that comprise the majority of the investment committee. Currently they have approximately USD 9

billion of assets under management with investments across North America, South America, Europe, and Asia.

Since acquiring 19.4% of the Company’s common stock for a total consideration of USD 62.5 million in

November 2011 and March 2012, W.L. Ross & Co has continued to invest, becoming the largest shareholder in

the Company during the course of 2012. In conjunction with the acquisition of the APMM Vessels, W.L. Ross &

Co has committed to making an equity injection of USD 75 million, effectively acquiring 2.5 million new

common shares. The Company currently has 12.9 million shares outstanding. Current, as well as pro forma after

the equity issue, ownership structure as of November 2012 is outlined in table below:

Shareholders % Ownership % Pro forma ownership

W.L. Ross & Co 55.7% 62.9%

T.A. McKay & Co 11.2% 9.4%

David Butters 6.7% 5.6%

Spiros Milonas 5.3% 4.4%

Other Holders 21.1% 17.7%

Total 100% 100%

3.15.1 Shares

The Company currently has 12,898,216 of common stock issued and outstanding. There are currently no

preferred shares outstanding. After the planned equity injection of USD 75 million there will be another 2.5

million shares issued, bringing the total amount of shares outstanding to 15,398,216.

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4 THE APMM TRANSACTION

The Company has entered into an agreement with APMM dated 14 November 2012 to acquire its entire fleet of

eleven handy-size LPG vessels, comprising five semi-refrigerated vessels and six newly built fully-refrigerated

vessels, for USD 470 million en bloc (the “APMM Agreement”). The APMM Vessels will be delivered to the

Company on a staggered and charter-free basis, when their current time charters expire.

Delivery of the APMM Vessels will take place from 31 January 2013 and all vessels are expected to be delivered

prior to 31 December 2013.

If a vessel is not delivered by the later of (i) 31 December 2013 and (ii) 3 months after redelivery of the vessel

under its current time charter, the Company can terminate the purchase of such vessel. If the Company becomes

entitled to terminate the purchase of a vessel, the Company will be refunded the 10% deposit for that vessel

together with interest thereon, but otherwise the APMM Agreement will remain in full force and effect and the

Company will not be entitled to bring any other claim against APMM.

Under the APMM Agreement, the Company has the option of letting each vessel following delivery remain

under the technical management of Maersk Tankers A/S or any other company within the A.P. Møller-Maersk

Group as nominated by Maersk Tankers A/S. If a vessel shall remain under the technical management of Maersk

Tankers A/S, the Company shall enter into a ship management agreement with Maersk Tankers A/S for the

vessel in the form attached to the APMM Agreement. The form management agreement is based on Shipman

2009.

4.1 The APMM Vessels

The APMM Vessels have an average age of 4.0 years, comprising five semi-refrigerated vessels, three of which

are immediate sisters of the Group’s Navigator Aries, Navigator Gemini and Navigator Taurus (built in

2008/09), while the remaining two are 1998 and 2000 built vessels. The six fully-refrigerated vessels are more

recent constructions and were delivered to APMM from Hyundai Heavy Industries in South Korea in 2010/11.

The APMM Vessels will change flag to Liberian flag once delivered to the Company.

Fleet Overview Vessel Size Vessel Cooling Date Age Yard

(cbm) Type Capability Built (years) Built Flag

Maersk Humber 20,928 Semi-ref -48 C 1998 14.0 Hyundai Mipo SIN

Caribe 20,902 Semi-ref -48 C 2000 12.0 Mitsui VEN

Maersk Harmony 20,600 Semi-ref -48 C 2008 4.0 Hyundai Mipo SIN

Maersk Heritage 20,600 Semi-ref -48 C 2009 3.0 Hyundai Mipo SIN

Maersk Honour 20,600 Semi-ref -48 C 2009 3.0 Hyundai Mipo SIN

Maersk Glory 22,500 Fully-ref -48 C 2010 2.0 Hyundai HI SIN

Maersk Grace 22,500 Fully-ref -48 C 2010 2.0 Hyundai HI SIN

Maersk Gusto 22,500 Fully-ref -48 C 2011 1.0 Hyundai HI SIN

Maersk Genesis 22,500 Fully-ref -48 C 2011 1.0 Hyundai HI SIN

Maersk Galaxy 22,500 Fully-ref -48 C 2011 1.0 Hyundai HI SIN

Maersk Global 22,500 Fully-ref -48 C 2011 1.0 Hyundai HI SIN

Sum 238,630 Average age: 4.4

4.2 Transaction rationale

Consolidation within the handy-size LPG segment has been and is a key strategic goal for the Company. The

APMM Transaction is the only real alternative in the current market that can facilitate real consolidation in the

15-24,999 cbm gas carrier segment. Further, the APMM Vessels will enhance the Group’s serviceability to all

gas charterers across the complete spectrum of LPG, petrochemical and ammonia trades. Upon completion of the

transaction, the Group will own a total of 23 vessels on the water with four on order, transforming the Group to

become the market leader within the handy size segment. APMM will exit the gas carrier market and leave

Ultragas as the only focused competitor with a pure play handy-size presence. The Group will also become the

largest owner in the fully-refrigerated handy-size sub-segment (followed by Naftomar and Varun) and remain a

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market leader in the semi-refrigerated handy-size sub-segment (followed by Ultragas and Solvang/Harpain

Shipping).

Top 15,000-24,999 cbm LPG Carrier Owners

Fleet Orderbook Total

Owner No cbm No cbm No cbm Avg. age

Navigator (pre-

deal) 12 258,275 4 84,000 16 342,275 6.7

APMM 11 238,630

11 238,630 4.4

Navigator (post-

deal) 23 496,905 4 84,000 27 580,905 5.6

Naftomar 8 161,500 4 88,000 12 249,500 6.5

Ultragas 7 122,296

7 122,296 17.0

Harpain 5 90,000

5 90,000 24.4

Solvang 5 83,000

5 83,000 3.6

Schulte 4 74,000

4 74,000 27.8

Varun 3 72,104

3 72,104 2.3

PCL 3 65,452

3 65,452 5.2

Petredec 3 61,664

3 61,664 5.5

Others 29 599,910 2 41,000 31 640,910 12.2

Total 90 1,826,631 10 213,000 100 2,039,831 12.3

Source: Clarkson Research as of 12 November 2012

4.3 Transaction financing

4.3.1 Sources and uses

The proposed transaction will be financed with a USD 270 million secured bank loan facility, USD 75 million in

new equity and the proposed bond offering of USD 100-125 million.

SOURCES & USES

Sources

Secured bank debt USD 270 million

Undrawn credit facilities USD 30 million

New equity USD 75 million

Senior unsecured bond USD 125million

Cash per 30 September 2012 USD 37 million

Total Sources USD 537 million

Uses

Acquisition of the Vessels USD 470 million

Surplus for general corporate purposes USD 67 million

Total Uses USD 537 million

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The Group has four newbuildings on order from Jiangnan (the “Newbuild Vessels”) with an aggregate

construction cost of approximately USD 200 million (scheduled to be delivered during 2014), of which 10% has

already been paid in to the shipyard. The Newbuild Vessels will be part-financed with a fully committed USD

120 million senior secured bank loan facility. Per end of Q3 2012 the Company had USD 37 million in cash and

USD 30 million of undrawn credit facilities available for draw down before end of 2012, in addition to USD 83

million in estimated contracted cash flow from operations until delivery of the last newbuilding to contribute to

the financing of the Group’s total commitments.

SOURCES & USES

Sources

Secured bank debt – acquisition USD 270 million

Secured bank debt – 4 x newbuilds USD 120 million

Undrawn credit facilities USD 30 million

New equity USD 75 million

Senior unsecured bond USD 125 million

Cash per 30 September 2012 USD 37 million

Contracted EBITDA (Q4 2012 – 2014) USD 89 million

Total Sources USD 746 million

Uses

Acquisition of the Vessels USD 470 million

4 x newbuilds USD 180 million

Surplus for general corporate purposes USD 96 million

Total Uses USD 746 million

4.3.2 Sources and uses - timing

The APMM Vessels are estimated to be delivered to the Group according to the following schedule:

Vessel name Current Charterer Charter

Expiry

Est.delivery

Group Purchase Price

Maersk Humber Open - Jan 2013 29,000,000

Caribe PDVSA Aug 2013 Aug 2013 32,500,000

Maersk Harmony Petredec Jun 2013 Jun 2013 45,500,000

Maersk Heritage PDVSA Jun 2013 Jun 2013 47,500,000

Maersk Honour BPCL Sept 20134 Sept 2013 47,500,000

Maersk Glory Sonatrach Sept 2013 Sept 2013 43,000,000

Maersk Grace Statoil Apr 2013 Apr 2013 43,000,000

Maersk Gusto Open - Jan 2013 45,500,000

Maersk Genesis Open - Jan 2013 45,500,000

Maersk Galaxy Open - Jan 2013 45,500,000

Maersk Global Open - Jan 2013 45,500,000

Total 470,000,000

4 There is an option in the Maersk Honour charter to extend the duration to December 2013. If the option is exercised, the vessel will not be delivered to the Group until December 2013.

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Also after taking into effect the timing of the uses and sources of funds, the proposed bond offering fully

finances the Group’s capital commitments going forward, as illustrated in the table below.

(USD million) 2012 Q1 2013 Q2 2013 Q3 2013 Q4 2013 2014 Total

Uses of Capital

APMM Transaction 203 93 82 93 470

APMM Transaction - deposit 47 -20 -9 -8 -9

4 X Newbuildings

10 10 160 180

Total 47 183 83 83 93 160 650

Sources of Capital

Bond issue 125 125

New equity 75 75

Undrawn credit facilities 30 30

Secured bank debt - acquisition 117 53 47 53 270

Secured bank debt - newbuilds 120 120

Total financing 155 192 53 47 53 120 620

Cash per 30 September 2012 37 37

Total 192 192 53 47 53 120 657

Contracted EBITDA 20 14 13 10 10 22 89

Summary

Cumulative uses 47 230 313 397 490 650 650

Cumulative sources 192 384 437 484 537 657 657

Cumulative contracted EBITDA 20 34 47 57 67 89 89

Surplus for general corporate

purposes 165 188 170 144 114 96 96

Maersk Humber

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5 FINANCIAL INFORMATION

5.1 Historical financial information

The following section presents the historical financial information for the Company for the calendar years ended

31 December 2009, 2010 and 2011 and for the first nine months of 2012. The functional currency of the

Company is USD.

The historical financial information has been presented in accordance with US GAAP.

5.1.1 Consolidated income statement

(USD million) 2009 2010 2011 9M 2012

Operating revenues (TCE) 70 65 71 85

Total operating revenue 70 65 71 85

SG&A -5 -5 -5 -5

Opex / charter-in cost -18 -21 -23 -31

Commissions -3 -3 -3 -3

EBITDA 45 35 40 46

Depreciation -15 -18 -19 -18

EBIT 29 17 21 28

Net interest expense -2 -2 -2 -6

Pre-tax profit 27 15 19 22

Tax expense 0 0 0 0

Net earnings 27 15 19 22

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5.1.2 Consolidated balance sheet

(USD million) 31 Dec 2009 31 Dec 2010 31 Dec 2011 30 Sept 2012

Tangible fixed assets 432 419 455 593

New assets under construction 0 0 30 20

Other non-current assets 1 1 1 3

Total non-current assets 433 419 487 616

Inventory 2 4 4 4

Trade receivables 3 3 1 5

Other current assets 2 8 5 9

Cash and cash equivalents 11 16 27 37

Total current assets 17 31 38 55

Total assets 450 451 525 672

Shareholders' equity 334 347 372 439

Interest-bearing LTD (bank) 110 92 130 193

Total non-current debt 110 92 130 193

Current portion of LTD (bank) 0 6 15 27

Trade payables 3 4 4 5

Other current liabilities 3 2 4 8

Total current debt 6 12 23 40

Total liabilities & equity 450 451 525 672

For additional information on Shareholders’ equity, please see Appendix 3 (Financial Statements for the period

to 30 September 2012).

5.1.3 Consolidated statement of cash flows

(USD million) 2009 2010 2011 9M 2012

Pre-tax profit 27 15 19 22

Taxes paid 0 0 0 0

Depreciation and Amortization 15 18 19 18

Other non-cash items 2 1 1 1

Cash earnings 44 34 38 41

Change in working capital -2 -8 7 -2

Net cash from operations 43 26 45 39

Investments in fixed assets -136 0 -86 -145

Drydocking costs -2 -5 0 0

Other non-cash items 14 0 0 0

Net cash from investments -124 -5 -86 -145

Equity issued 0 0 15 47

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Dividend payments 0 -3 -10 -2

New interest-bearing debt 90 0 53 174

Repayments of debt -10 -12 -7 -101

Net cash from financials 80 -15 51 117

Net change in cash -1 6 10 10

5.1.4 Management Discussion & Analysis

Financial year 2009

Operating revenue increased substantially during 2009 to USD 72.5 million from USD 59.7 million in 2008, an

increase of 21.5%. Two new vessels delivered during the year; Navigator Gemini and Navigator Taurus, which

contributed with USD 7.5 million of this increase. Net income for the year came in at USD 26.7 million against a

USD 2.2 million profit in 2008 following a write-down of fixed assets of USD 19.2 million that year. No further

write downs were conducted in 2009. EBITDA for 2009 was USD 44.5 million compared to USD 34.2 million in

2008. The Company generated USD 42.8 million in cash from operations during the year, most of which was

utilized in part-financing the purchase of the two new-build vessels delivered during the year. The Company’s

book equity stood at USD 333.9 million at 31 December 2009, with 10.32 million ordinary shares outstanding.

Financial year 2010

Operating revenue increased to USD 82.0 million in 2010 from USD 72.5 million in 2009. However, net

revenue, that is operating revenue less voyage expenses, decreased to USD 64.6 million from USD 70.4 million a

year earlier, as charter rates fell across the LPG carrier segment. Underlying net income for the year came in at

USD 15.0 million compared to USD 26.7 million in 2009. Despite the challenging environment, the Company

continued to generate strong cash flow. EBITDA for 2010 was USD 35.3 million with the Company generating

USD 25.9 million in cash from operations. The Company maintained its solid balance sheet throughout the year,

with sound cash generation despite the reduction in net income. Net debt at 31 December 2010 was USD 81.8

million, comprising borrowings of USD 98.0 million and a cash balance of USD 16.2 million. The Group’s eight

vessel fleet performed 48 separate voyage charters during the year which accounted for 50.4% of the revenue

generated, with 49.6% arising from time charters. During 2009, only 4.3% of the revenue generated was from

voyage charters with 95.7% from time charters.

Financial year 2011

Net operating revenue (total revenues less voyage expenses) for 2011 amounted to USD 70.9 million, a 9.8%

increase from USD 64.6 million in 2010. USD 2.8 million of this increase resulted from the addition of the newly

acquired Navigator Leo and the chartered in vessel, Maple 3. Net income amounted to USD 18.7 million,

compared to USD 15.0 million for the previous year. EBITDA came in at USD 39.9 million, up from USD 35.3

million. Cash flow from operations was USD 45.0 million. The Company ended the year with a cash balance of

USD 26.7 million and interest bearing debt of USD 144.4 million. Shareholder equity increased following the

private placement of 2.5 million shares at USD 25/share to W.L. Ross & Co. The Group concluded 18 voyage

charters during 2011, six of which were to carry LPG and twelve of which were to carry petrochemicals. The

LPG voyages were primarily focused on transportation of propane to Hawaii from Korea as well as LPG mix for

inter Mediterranean trade. Crude C4 and butadiene, primarily used in the auto industry, constituted the majority

of the petrochemical voyages between Europe and the US, as well as from the Mediterranean to Asia.

Nine months ended 30 September 2012

The average daily time charter rate for the Group’s fleet during the first nine months of 2012 was USD 788,239

per calendar month compared to USD 626,683 per calendar month for the same period in 2011. As a result, and

in combination with an increasing fleet, the EBITDA for the nine months ended 30 September 2012 was USD

45.8 million compared to USD 29.3 million for the same period in 2011. Utilization came in at 99.4% vs. 97.4%

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in 2011. Cash generated from operations was USD 38.6 million, with payments of interest and taxes amounting

to USD 6.2 million and working capital increasing by USD 2.3 million, which was set-off against the effects of

expensing non cash based items of USD 1.3 million. In April 2012, the Company drew down USD 150 million

on the new USD 180 million senior secured credit facility, with the remaining USD 30 million available to be

drawn down prior to the end of this year for general corporate purposes. Shareholder equity stood at USD 438.7

million per end of the third quarter (based on 12,898,216 shares outstanding at book value of USD 34 per share).

Gearing (net debt to equity) was 41.6%.

5.2 Indebtedness and fleet valuation

5.2.1 Bank facilities, current

The Company’s current bank facilities include a six year term loan, dated 1 April 2011, in the original amount of

USD 80 million to help facilitate the purchase and construction of Navigator Leo and Navigator Libra. It was

fully drawn in February 2012 after the delivery of Navigator Libra. Current outstanding amount is USD 75.2

million. Interest is charged at US Libor plus 3.0%. Scheduled repayments are made quarterly at approximately

USD 1.4 million until maturity in April 2017. The loan is provided by both SEB and Nordea in equal

proportions. The security provided for this loan is a mortgage on the vessels; Navigator Leo, Navigator Libra and

Navigator Saturn, as well as assignment of earnings and insurances. Covenants include minimum liquidity of

USD 10 million/5% of net debt, net debt to total capitalization of maximum 60%, EBITDA to interest expense

(on a trailing four-quarter basis) to be no less than three to one, and a minimum value covenant of 130%.

In addition a five year term loan was signed on 18 April 2012 for an aggregate amount of USD 180 million, to

facilitate the purchase of two Petredec vessels, Navigator Pegasus and Navigator Phoenix, along with the

refinancing of a 2007 agreed USD 150 million revolving credit facility, which was due to expire in July 2013.

USD 180 million from that new facility has now been drawn (of which USD 30 million was drawn in November

2012 in connection with paying the 10% deposit on the APMM Transaction). The current balance stands at USD

169.4 million. Interest is charged at US Libor plus 3.375%. Scheduled repayments are approximately USD 5.3

million per quarter until maturity in April 2017. This loan is secured by all the Existing Vessels in the fleet apart

from the three mentioned above and the two vessels flagged under Indonesian flag, namely Navigator Aries and

Navigator Pluto. Covenants include minimum liquidity of USD 12.5 million / 5% of net debt, minimum book

equity ratio of 30%, EBITDA to interest expense (on a trailing four-quarter basis) to be no less than three to one,

and a minimum value covenant of 135%.

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5.2.2 Bank facilities, new

The Company has received a firm commitment from Credit Agricole and China Export Import Bank for a USD

120 million post-delivery senior secured bank loan to part-finance the Newbuild Vessels contracted at Jiangnan

for USD 200 million with 2014 delivery. The loan will be split into four identical tranches, each tranche to

mature six years after delivery of the respective vessel. The tranches are repayable on a quarterly basis by USD

625,000 each with a balloon payment due on maturity in the amount of USD 15 million. The facility will carry a

margin over US Libor of 3.5% with financial covenants similar to the ones applicable for the abovementioned

USD 180 million facility.

The Company has also received a firm commitment from Nordea and SEB for a USD 270 million senior secured

bank loan to partly finance the acquisition of the APMM Vessels. The loan will be split into tranches according

to the table below and will be available for drawdown on the respective vessel’s delivery date from APMM to

the Company.

Vessel name Est.delivery Group Purchase Price Loan Amount

Maersk Humber Jan 2013 29,000,000 18,000,000

Caribe Aug 2013 32,500,000 18,900,000

Maersk Harmony Jun 2013 45,500,000 27,900,000

Maersk Heritage Jun 2013 47,500,000 27,900,000

Maersk Honour Sept 20135 47,500,000 27,900,000

Maersk Glory Sept 2013 43,000,000 24,900,000

Maersk Grace Apr 2013 43,000,000 24,900,000

Maersk Gusto Jan 2013 45,500,000 24,900,000

Maersk Genesis Jan 2013 45,500,000 24,900,000

Maersk Galaxy Jan 2013 45,500,000 24,900,000

Maersk Global Jan 2013 45,500,000 24,900,000

Total 470,000,000 270,000,000

The facility matures five years after signing of final loan documentation or three months prior to the maturity of

the contemplated bond issue. Interest is charged at US Libor plus a margin of 3.5%. The tranches shall be repaid

linearly by quarterly amounts which would result in zero indebtnedness when the respective vessels are 15 years

old (16 years old for Maersk Humber and Caribe). Financial covenants on this facility will be similar to the ones

applicable for the abovementioned USD 180 million and USD 120 million facilities (except that minimum cash

shall at all times be higher than USD 25 million and 5% of total interest bearing debt.

5.2.3 Vessel values

In the table below the Group’s current fleet, Newbuild Vessels and soon to be acquired APMM Vessels are

listed. The estimated vessel charter-free values have been collected by the Company and been provided by

independent shipbrokers6 (except for the Newbuild Vessels contracted at Jiangnan, which are stated at cost).

5 There is an option in the Maersk Honour charter to extend the duration to December 2013. If the option is exercised, the vessel will not be

delivered to the Group until December 2013. 6 Source: E.A Gibson Shipbrokers Ltd., Inge Steensland AS, Lorentzen & Stemoco AS and Navigator Holdings Ltd.

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Fleet Overview

Vessel

Size Vessel Cooling Date Age Yard Market

(Cbm) Type Capability Built (Years) Built Flag Values7

Navigator Mars 22,000 Semi-ref/Ethylene -104 C 2000 12.0 Jiangnan 34

Navigator Venus 22,000 Semi-ref/Ethylene -104 C 2000 12.0 Jiangnan 34

Navigator Saturn 22,000 Semi-ref/Ethylene -104 C 2000 12.0 Jiangnan 34

Navigator Pluto 22,000 Semi-ref/Ethylene -104 C 2000 12.0 Jiangnan 34

Navigator Neptune 22,000 Semi-ref/Ethylene -104 C 2000 12.0 Jiangnan 34

Navigator Aries 20,600 Semi-ref -48 C 2008 4.0 Hyundai Mipo 48

Navigator Gemini 20,600 Semi-ref -48 C 2009 3.0 Hyundai Mipo 48

Navigator Taurus 20,600 Semi-ref -48 C 2009 3.0 Hyundai Mipo 48

Navigator Leo 20,600 Semi-ref -48 C 2011 1.0 Hyundai Mipo 49

Navigator Libra 20,600 Semi-ref -48 C 2012 0.0 Hyundai Mipo 49

Navigator Pegasus 22,200 Semi-ref -48 C 2009 3.0 Jiangnan 48.5

Navigator Phoenix 22,200 Semi-ref -48 C 2009 3.0 Jiangnan 48.5

Hull 2530 21,000 Semi-ref/Ethylene -104 C 2014 -2.0 Jiangnan 50




Maersk Humber 20,928 Semi-ref -48 C 1998 14.0 Hyundai Mipo SIN 30

Caribe 20,902 Semi-ref -48 C 2000 12.0 Mitsui VEN 31

Maersk Harmony 20,600 Semi-ref -48 C 2008 4.0 Hyundai Mipo SIN 48

Maersk Heritage 20,600 Semi-ref -48 C 2009 3.0 Hyundai Mipo SIN 47

Maersk Honour 20,600 Semi-ref -48 C 2009 3.0 Hyundai Mipo SIN 48

Maersk Glory 22,500 Fully-ref -48 C 2010 2.0 Hyundai HI SIN 41

Maersk Grace 22,500 Fully-ref -48 C 2010 2.0 Hyundai HI SIN 41

Maersk Gusto 22,500 Fully-ref -48 C 2011 1.0 Hyundai HI SIN 41

Maersk Genesis 22,500 Fully-ref -48 C 2011 1.0 Hyundai HI SIN 41

Maersk Galaxy 22,500 Fully-ref -48 C 2011 1.0 Hyundai HI SIN 41

Maersk Global 22,500 Fully-ref -48 C 2011 1.0 Hyundai HI SIN 41

Sum 580,030

Average

age8: 5.6 1,159

5.3 Auditors

The Company’s financial statements have been audited by MSPC, Certified Public Accountants and Advisors,

with business address 546 5th

Avenue, New York, NY 10036-5000, United States of America.

INFORMATION AND DOCUMENTATION AVAILABLE

7 Valuation of Navigator Mars, Navigator Venus, Neptune, Gemini, Taurus, Pegasus and Phoenix based on two independent valuations dated

19/07/2012 and 20/04/2012. Valuation of Navigator Libra, Leo and Saturn based on valuation dated 17/08/2012. Valuation of Navigator

Aries and Pluto based on Aries being sister vessel of Gemini and Taurus, while Pluto is sister vessel to Saturn, Mars, Neptune and Venus.

The values of acquired vessels are based on Company estimates. The valuations for Maersk Heritage, Harmony and Honour are based on the

vessels being sisters to Navigator Aries, Gemini and Taurus. The valuations for the fully refrigerated vessels are extrapolations based on

newbuild prices.

8 Excluding the Newbuild Vessels

30/30

Potential investors may by contacting the Managers obtain access to:

● The by-laws and other corporate documentation of the Company; and

● The final Bond Agreement

Potential investors may visit the website of the Company (www.navigatorgas.com) to obtain access to various

information.

APPENDICES

Appendix 1: Loan Description

Appendix 2: Loan Agreement

Appendix 3: Navigator Holdings Ltd. Consolidated Interim Financial Statement Q1-Q3 2012 (Unaudited)




http://www.navigatorgas.com/

FAST Bullet Bond Page 1 of 4

Term sheet written in connection with application of listing on Oslo ABM

Date 25 Feb 2013 Status indication – Final ISIN: NO 001 0665508

Navigator Holdings Ltd Senior Unsecured Callable Bond Issue 2012/2017

Terms:

Documentation: The Loan Agreement 1) is

described more closely in Standard Terms

Before investing in the bond, the investor is encouraged to become familiar with relevant documents such as this term sheet, the Loan Agreement and the Issuer’s financial accounts and articles of association and if relevant, listing document. The documents are available with the Issuer and in Relevant Places. In the case of any discrepancies between the Loan Agreement and this term sheet, the Loan Agreement will apply

Relevant places: www.navigatorgas.com www.osloabm.no

Issuer: Navigator Holdings Ltd

Borrowing Limit – Tap Issue:

USD 125 000 000 Limited Issue

First Tranche / Loan Amount : 2)

USD 125 000 000

Disbursement Date: 3) 18 December 2012

Maturity Date: 4) 18 December 2017

Coupon Rate: 9.0% p.a. payable semi-annually

Yield on Disbursement Date:

9.0%

Day Count Fraction– Coupon:5)

30/360

Coupon Date(s): 6) 18 June and 18 December

Interest accrual date: 18 December 2012

Date until which interest accrues:

18 December 2017

Status of the loan: 7) The Bonds shall rank as senior unsecured debt of the Issuer. The Bonds shall rank at least pari passu with other senior unsecured debt of the Issuer, except for obligations which are mandatorily preferred by law. The Bonds shall rank ahead of subordinated capital

Issue Price: 8) 100%

Denomination: The bonds will have a nominal value of USD 200,000 each

Bondholder’s put option: 9) Redemption Date(s):

N/A N/A

Price: N/A

Issuer’s call option: 10) Redemption Date(s):

18 December 2015 – 17 December 2016 18 December 2016 – 17 June 2017 18 June 2017 – 17 December 2017

Price: 104% 102% 101%

----------------------------------------------------------------------------------------------------------------------------

Issuer’s org. number: Marshall Island registration number: 29140

Usage of funds: The net proceeds from the Bond Issue shall be employed (i) to partly finance the Group’s acquisition of 11 handy-size LPG-vessels from Maersk Handy Gas Pte Ltd., A.P. Møller Singapore Pte Ltd. and Live Oak Company Limited (the “Transaction”), (ii) to finance the Group's fleet expansion, and (iii) for the Group's general corporate purposes

Approvals / Permissions: The Bonds are issued in accordance with the Issuer`s board approval dated 15 December 2012. The listing documents have been approved by Oslo Børs

http://www.navigatorgas.com/

http://www.osloabm.no/


Trustee: Norsk Tillitsmann ASA

Arranger(s): Fearnley Securities AS, Nordea Markets, Pareto Securities AS, SEB Merchant Banking

Paying Agent: Nordea Bank Norge ASA

Securities Depository: The Norwegian Central Securities Depository (VPS)

Market Making: There is no market making agreement entered into in connection with the loan

Special (distinct) conditions:

The Issuer has committed itself to certain Information Covenants as described in the Loan Agreement clause 13.2 Disposal of assets/business: The Issuer shall not, and shall ensure that no Group Company shall, sell or otherwise dispose of all or a substantial part of the Group’s assets or operations, unless the transaction is carried out at a fair market value, on terms and conditions customary for such transactions, and such transaction would not have a Material Adverse Effect. In the event that (i) a Group Company sells or disposes of one or more vessels and/or shares in a vessel owning company, (ii) the Equity Ratio is less than 35% (but more than 30%) on the Quarter Date immediately prior to such disposal, and (iii) any net proceeds realized from such sale or disposal (following repayment of any relevant Permitted Financial Indebtedness pertaining to the relevant asset) has not been re-invested in one or more second-hand vessels within 180 days from receipt of such proceeds, the Issuer undertakes to promptly apply not less than 50% of such net proceeds towards prepayment of any Permitted Financial Indebtedness. In addition to the abovementioned covenant, please see the Loan Agreement clause 13.3 for all relevant General Covenants. Financial Covenants: Asset Coverage Ratio : From and including 30 June 2013, the Issuer shall ensure that the aggregate value of:

(1) the Market Value of the Group's vessels; plus (2) any balance on the Escrow Account, is at least 120% of the Total

Interest-Bearing Debt. If the aggregate Market Value of the Group's vessels is not sufficient to meet the Asset Coverage Ratio covenant, the Issuer and/or any Group Company shall be

entitled to transfer cash to the Escrow Account in an amount sufficient to again become compliant. Any amount so transferred to the Escrow Account shall be released, in whole or in part, when the Asset Coverage Ratio is again sufficient to meet the Asset Coverage Ratio covenant. In addition to the abovementioned covenant, please see the Loan Agreement clause 13.5 for all relevant Financial Covenants. Dividends and other distributions: The Issuer shall not declare or make any dividend payment, repurchase of shares or make other distributions or payments to its shareholders (other than servicing of loans provided by shareholders, cf. Clause f) "Subordinated loans" below), whether in cash or in kind, including without limitation any total return swaps or instruments with similar effect (a "Distribution") (other than in respect of services rendered and/or transactions done in the ordinary course and on market terms for an amount of up to USD 2 million per calendar year) until after 31 December 2013. Thereafter the Issuer shall not declare or make any Distribution exceeding 50% of Issuer's consolidated net profit after taxes based on the audited annual accounts for the previous financial year, however always provided that the Group on a consolidated basis is in pro-forma compliance with an Equity Ratio of minimum 35% immediately after giving effect to such Distribution paid or declared. Negative Pledge: The Issuer shall not, and shall ensure that no other Group Company shall, create, permit to subsist or allow to exist any Encumbrance over any of its present or future respective assets (including shares in Subsidiaries) or its revenues, other than the Encumbrances grated to secure any of the following:

a) this Bond Issue b) the Permitted Financial Indebtedness c) any derivative transactions related to the Issuer’s hedging policy;


and d) any lien arising by operation of law

In addition to the abovementioned covenants, please see the Loan Agreement

clause 13.4 for all relevant Special Covenants.

Supplementary information about status of the loan: 7)

The Bonds shall constitute senior debt obligations of the Issuer. The Bonds shall rank at least pari passu with all other senior unsecured debt of the Issuer (save for such claims which are preferred by bankruptcy, insolvency, liquidation or other similar laws of general application) and shall rank ahead of subordinated debt. The Bonds are unsecured. An Escrow Account Pledge may be established after the date of the Bond Agreement should this be necessary in order to ensure compliance with the asset cover ratio requirement.

Standard terms: If any discrepancy should occur between this Loan description and the Loan Agreement, then the Loan Agreement should apply.

Loan Agreement: 1) The Loan Agreement will be entered into between the Issuer and the Trustee prior to Disbursement Date. The Loan Agreement regulates the Bondholder’s rights and obligations in relations with the Issue. The Trustee enters into this agreement on behalf

of the Bondholders and is granted authority to act on behalf of the Bondholders to the

extent provided for in the Loan Agreement. When bonds are subscribed/purchased, the Bondholder has accepted the Loan Agreement and is bound by the terms of the Loan Agreement. For tap issues, the Loan Agreement will apply for later issues made within the Borrowing Limit. The parties’ rights and obligations are also valid for subsequent issued bonds within the Borrowing Limit.

Open / Close: 3) 4) Tap Issues will be opened on Disbursement Date and closed no later than five bank days before Maturity Date.

Disbursement date: 3)

Payment of the First Tranche / Loan Amount takes place on the Disbursement Date. In case of late payment, the applicable default interest rate according to “lov 17. desember 1976 nr 100 om renter ved forsinket betaling m.m.” will accrue.

Expansions – Tap Issues: 2)

For Tap Issues the Issuer can increase the loan above the First Tranche/Loan Amount, before the initial Disbursement Date. For taps not falling on Interest Payment Dates, Accrued Interest will be calculated using standard market practice in the secondary bond market. The Issuer may apply for an increase in the Borrowing Limit.

Issue price – Tap

Issues: 8)

Any taps under the Tap Issue will be made at market prices, and will fall under the regulations set out in “emisjonsforskriften av 20. desember 1996”.

Interest Period: 6) The interest rate is paid in arrears on the Coupon Date. The first coupon is paid on the first coupon date after Disbursement Date. The subsequent period runs from this date until the next Coupon date. Last Coupon date corresponds to Maturity Date.

Standard Business Day Convention: 5)

Interest shall be calculated on the basis of a 360 day year consisting of 12 months of 30 days, with the exception of periods where

a) the last day in the period is the 31st calendar day, and the first day of the period is neither the 30th nor the 31st of the month, in which the month containing the period shall not be reduced to 30 days; or

b) the last day of the period is the last calendar day in February, in which February shall not be extended to a 30-day month.

Coupon date will not be moved even if it is on a day that is not a banking day. If Coupon Date is not a banking day, payments will be made on the following banking day.

Accrued interest: Accrued Interest rates for trades in the secondary bond market are calculated on the basis of current recommendations of Norske Finansanalytikeres Forening.

Condition – Bondholder’s put option: 9)

On Redemption Date the Bondholders have a right to redeem the bonds at the Corresponding Price. Claim of redemption must be received by the account operator investor in writing no later than 15 banking days prior to the Redemption Date in

question, as mentioned under The Bondholders Put Option.

Condition – Issuer’s call option: 10)

On Redemption Date, the Issuer has a right to redeem the bonds, completely or partly by drawing lots at Corresponding Price. If the Issuer makes use of this right to redemption, the Issuer shall notify the Trustee and Oslo ABM regarding this matter no later than 30 banking days prior to the Redemption Date in question. The notification shall also be forwarded to the Bondholders through the Securities Depository as soon as possible. Claim of Redemption must be received by the Paying Agent in writing no later than 30 banking days before relevant Date of Redemption.

Registration: The loan must prior to disbursement be registered in the Securities Depository. The bonds are being registered on each Bondholders account in the Securities Depository.


Issuer’s acquisition of bonds:

The issuer has the right to acquire and own the bonds. Such bonds may at the Issuer’s discretion be retained by the Issuer, sold or used for partial redemption. For subordinate bonds issued by financial institutions, the Issuer may not acquire bonds without prior permission by Kredittilsynet, on condition that such permission is required at that time.

Amortisation: 4) The bonds will run without instalments and be repaid in full on Maturity Date at par, provided the Issuer has not called the bonds.

Redemption: Matured interest rate and matured principal will be credit each Bondholder directly from the Securities Registry. Claims for interest and principal shall be limited in time pursuant the Norwegian Act relating to the Limitation Period Claims of May 18 1979 no 18, p.t. 3 years for interest rates and 10 years for principal.

Sale: Tranche 1/ Loan amount has been sold by the Arranger. Later taps can take place by authorized securities brokers.

Legislation: Disputes arising from or in connection with, the Loan Agreement which are not resolved amicably, shall be resolved in accordance with Norwegian law and the Norwegian courts. Legal suits shall be served at the Trustee’s competent legal venue.

Fees and expenses:

The Issuer shall pay any stamp duty and other public fees in connection with the loan. Any public fees or taxes on sales of Bonds in the secondary market shall be paid by the Bondholders, unless otherwise decided by law or regulation. The Issuer is responsible for withholding any withholding tax imposed by Norwegian law.

Oslo, 25 Feb 2013

Executuion Version

ISIN NO 001 0665508

BOND AGREEMENT

between

Navigator Holdings Ltd(Issuer)

and

Norsk Tillitsmann ASA(Bond Trustee)

on behalfof

the Bondholders

in the bond issue

9.0 per cent Navigator Holdings Ltd Senior Unsecured Callable Bond Issue2012/2017

1

Executuion Version

TABLE OF CONTENTS

INTERPRETATION 3

2 THE BONDS 9

3 LISTING 104 REGISTRATION IN THE SECURITIES DEPOSITORY 105 PURCHASE AND TRANSFER OF BONDS 106 CONDITIONS PRECEDENT 107 REPRESENTATIONS AND WARRANTIES 128 STATUS OF THE BONDS AND SECURITY 149 INTEREST 1410 MATURITY OF THE BONDS AND REDEMPTION 1411 PAYMENTS 16

12 ISSUER'S ACQUISITION OF BONDS 1713 COVENANTS 1714 FEES AND EXPENSES 2315 EVENTS OF DEFAULT 2416 BONDHOLDERS' MEETING 2717 THE BOND TRUSTEE 3018 MISCELLANEOUS 32

2

This agreement has been entered into on 14 December 2012 between:

(1) NAVIGATOR HOLDINGS LTD, (a corporation existing underthe·laws ofMarshall Islands with registration number 29140) as issuer (the "Issuer"), and

(2) NORSK TILLITSMANN ASA, (a companyexisting under the laws of Norwaywith registration number 963 342624) as bond trustee (the "Bond Trustee").

Interpretation

1.1 Definitions

In this Bond Agreement, the following terms shall have the following meanings:

"Account Manager" means a Bondholder's account manager in the SecuritiesDepository.

"Approved Shipbroker" means any of Lorentzen & Stemoco AS, Joachim Grieg &Co AS, Inge Steensland AS, Braemar Seascope Ltd, Fearnleys, EA Gibsons Ltd,Clarksons Ltd and Paten and Partners or such other independent reputable shipbroker nominated by the Issuer and approved by the Bond Trustee from time to time.

"Attachment" means the attachments to this Bond Agreement.

"Bond Agreement" means this bond agreement, including any Attachments to it,each as amended from time to time.

"Bond Issue" means the bond issue constituted by the Bonds.

"Bondholder" means a holder of Bond(s), as registered in the Securities Depository,from time to time.

"Bondholders' Meeting" means a meeting of Bondholders, as set out in Clause 16.

"Bonds" means the debt instruments issued by the Issuer pursuant to this BondAgreement.

"Business Day" means any day on which Norwegian banks are open for generalbusiness, and when Norwegian banks can settle foreign currency transactions.

"Business Day Convention" means that no adjustment will be made,notwithstanding the Payment Date occurs on a day that is not a Business Day, and ifsuch date is not a Business Day, payments of interest and/or principal (as the casemay be) will be made on the first following day that is a Business Day (NoAdjustments of Business Day).

"Call Option" shall have the meaning set out in Clause 10.2.

3

"Change of Control Event" means if and when any person or a group of persons(other than WL Ross & Co LLC, a US lARD (Investment Adviser RegistrationDepository) with a registration number of 141854, or any indirectly or directlycontrolled subsidiary, fund or other entity of WL Ross & Co LLC) acting in concert,directly or indirectly, acquires Decisive Influence over the Issuer.

"Current Assets" means the aggregate book value of the Group's assets (on aconsolidated basis) which are treated as current assets in accordance with GAAPless the aggregate book value of any restricted cash (where restricted cash meanscash which is Encumbered and/or blocked).

"Current Liabilities" means the aggregate book value of the Group's liabilities (ona consolidated basis) which are treated as current liabilities in accordance withGAAP, excluding the current portion of long term debt.

"Decisive Influence" means a person having, as a result of an agreement or throughthe ownership of shares or interests in another person:

(a) a majority of the voting rights in that other person (excluding proxies givenin connection with any shareholder meeting); or

(b) a right to elect or remove a majority of the members ofthe board ofdirectors ofthat other person.

When determining the relevant person's number ofvoting rights in the other personor the right to elect and remove members of the board of directors, rights held by theparent company of the relevant person and the parent company's Subsidiaries shallbe included.

"Defeasance Pledge" shall have the meaning given to it in Clause 18.2.

"EBITDA" means (on a consolidated basis) the Group's aggregate earnings beforeinterest, taxes, depreciation and amortization (to be calculated on a 12-month rollingbasis) determined in accordance with GAAP.

"Escrow Account" means any account opened in the name of the Issuer after thedate of this Bond Agreement should this be required for compliance with the AssetCover Ratio covenant set out in paragraph Ce)of Clause 13.5, pledged and blockedon first priority as security for the Issuer's obligations under the Finance Documents.

"Escrow Account Pledge" means a pledge over any Escrow Account opened afterthe date of this Bond Agreement, where the bank operating the account has waivedany set-off rights and for which the Bond Trustee shall act as security agent.

"Encumbrance" means any encumbrance, mortgage, charge, pledge, lien or othersecurity interest securing any obligation of any person or any other agreement orarrangement having a similar effect.

"Equity" means (on a consolidated basis) the aggregate book value of the Group'stotal equity treated as equity in accordance with GAAP.

4

"Equity Ratio" means the ratio of Equity to Total Assets.

"Event of Default" means the occurrence of an event or circumstance specified inClause 15.1.

"Exchange" means (i) a securities exchange or other reputable regulated market, or(ii) Oslo Alternative Bond Market, on which the Bonds are listed, or where the Issuerhas applied for listing of the Bonds.

"Face Value" means the denomination of each of the Bonds, as set out in Clause 2.2.

"Finance Documents" means (i) this Bond Agreement, (ii) the agreement betweenthe Bond Trustee and the Issuer referred to in Clause 14.2 and (Hi) any otherdocument (whether creating a security or not) which is executed at any time by theIssuer or any other person in relation to any amount payable under this BondAgreement.

"Financial Indebtedness" means any indebtedness for or in respect of:

(a) moneys borrowed;

(b) any amount raised by acceptance under any acceptance credit facility ordematerialized equivalent;

(c) any amount raised pursuant to any note purchase facility or the issue ofbonds, notes, debentures, loan stock or any similar instrument;

(d) the amount of any liability in respect of any lease or hire purchase contractwhich would, in accordance with GAAP, be treated as finance or capitallease;

(e) receivables sold or discounted (other than any receivables to the extent theyare sold on a non-recourse basis);

Cf) any amount raised under any other transaction (including any forward saleor purchase agreement) having the commercial effect of a borrowing;

(g) any derivative transaction entered into in connection with protection againstor benefit from fluctuation in any rate or price (and, when calculating thevalue of any derivative transaction, only the mark to market value shall betaken into account); and

(h) (without double counting) the amount of any liability in respect of anyguarantee or indemnity for any of the items referred to in paragraphs (a) to(g) above.

"Financial Statements" means the audited unconsolidated and consolidated annualfinancial statements of the Issuer for any financial year, drawn up according toGAAP, such accounts to include a profit and loss account, balance sheet, cash flowstatement and management commentary or report from the Board of Directors.

5

"GAAP" means the generally accepted accounting practice and principles in theUnited States of America, or, if applied by the Issuer, the IFRS, in force from time totime.

"Group" means the Issuer and its Subsidiaries, and a "Group Company" means theIssuer or any of its Subsidiaries.

"IFRS" means international accounting standards within the meaning of lASRegulation 1606/2002.

"Interest Coverage Ratio" means the ratio of EBITDA to Net Interest Cost.

"Interest Payment Date" means 18 June and 18 December each year and theMaturity Date. Any adjustment will be made according to the Business DayConvention.

"Interim Accounts" means the unaudited consolidated quarterly financial statementsof the Issuer for any quarter ending on a Quarter Date, drawn up according to GAAP.

"ISIN" means International Securities Identification Number - the identificationnumber of the Bond Issue.

"Issue Date" means 18 December 2012.

"Issuer's Bonds" means any Bonds owned by the Issuer, any person or persons whohas Decisive Influence over the Issuer, or any person or persons over whom theIssuer has Decisive Influence.

"Liquidity" means the aggregate book value of the Group's freely available andunrestricted cash and cash equivalents (on a consolidated basis), free of anyEncumbrance.

"Manager" means any of the managers for the Bond Issue.

"Market Value" means the aggregate fair market value of the Group's vessels. Thevaluations shall be conducted without physical inspection at the Issuer's expense bytwo Approved Shipbrokers, and shall be made on the basis of a voluntary salebetween a willing buyer and a willing seller, free of any charter or employmentcontract. The valuation shall be dated no earlier than 30 days prior to the relevantQuarter Date (being 30 June and 31 December), and shall indicate the vessels' valueper same date for all vessels, and such valuation shall be made available to the BondTrustee semi-annually on each relevant Reporting Date. The aggregate value shall bethe arithmetic mean of the two valuations.

"Material Adverse Effect" means an event or circumstance whieh has a materialadverse effect on: (a) the business, financial condition or operations of the Issuerand/or the Group taken as a whole, (b) the Issuer's ability to perform and complywith its obligations under the Finance Documents; or (c) the validity orenforceability of any of the Finance Documents.

"Maturity Date" means 18 December 2017. Any adjustment will be made accordingto the Business Day Convention.

6

"Net Interest Cost" means on a consolidated basis the aggregate gross cash interestcosts of the Group related to the Group's interest bearing debt less the aggregategross cash interest income of the Group according to GAAP (to be calculated on a12-month rolling basis).

"N ew Equity" means the issuance of new shares with net proceeds of minimumUSD 75,000,000 for the purpose of financing the Transaction in part.

"NOKlI means Norwegian kroner, being the lawful currency in Norway.

"Outstanding Bonds" means the Bonds not redeemed or otherwise discharged.

"Party" means a party to this Bond Agreement (including its successors andpermitted transferees).

"Paying Agent" means Nordea Bank Norge ASA the legal entity appointed by theIssuer to acts as its paying agent in the Securities Registry with respect to the Bonds.

"Payment Date" means a date for payment ofprincipal or interest under this BondAgreement.

"Permitted Financial Indebtedness" means the following:

(i) the USD 80 million secured term loan facility dated 1 April2011 entered intobetween Navigator Gas LLC, Navigator Saturn LLC, Navigator Leo LLC andNavigator Libra LLC as borrowers and Nordea Bank Finland PLC andSkandinaviska Enskilda Banken AB (publ) as lenders;

(ii) the USD 180 million secured term loan facility dated 18 April 2012 enteredinto between Navigator Gas LLC as borrower and DVB Bank SE NordicBranch, Nordea Bank Finland PLC and Skandinaviska Enskilda Banken AB(publ) as lenders;

(Hi) the USD 270 million secured term loan facility to be entered into based on acommitment letter dated 13 November 2012 with Navigator Gas LLC asborrower and DVB Bank SE Nordic Branch, Nordea Bank Finland Plc. andSkandinaviska Enskilda Banken AB (publ) as lenders;

(iv) the USD 120 million secured term loan facility to be entered into based on acommitment letter dated 2 November 2012 with four SPV Group Companies(to be established) and/or Navigator Gas L.L.C as borrowers and ChinaEXIM and Credit Agricole CIB as arrangers;

(v) future secured financial indebtedness provided by commercial banks or otherfinancial institutions or funds with the purpose of financing additionalvesseI(s) (including the current two Indonesian vessels ("Navigator Aries"and "Navigator Pluto"); and

(vi) any refinancing, amendments or replacements of any of (i)-(iv) aboveprovided by commercial banks or other financial institutions or funds fromtime to time, however, the refinanced amount shall (a) under the relevantfacility in (Hi) and (iv) above, not exceed the full amount outstanding,

7

available and/or committed (less any commitments made in respect ofvessels no longer forming part of such relevant financing) if such facility hasnot previously been fully drawn, and (b) otherwise not exceed the amountoutstanding under the relevant facility at the time of such refinancing, and anyrefinancing, amendments or replacements shall be subject to the originalamortization schedule of the relevant facility (except for the bullet payment).

"Quarter Date" means each 31 March, 30 June, 30 September and 31 December.

"Reporting Date" means each date on which the Issuer makes its FinancialStatements or Interim Accounts available to the Bond Trustee and on its webpagespursuant to Clause 13.2.1 (c) and (d).

"Securities Depository" means the securities depository in which the Bond Issue isregistered, being Verdipapirsentralen ASA (VPS) in Norway.

"Security Agent" means (if applicable) the Bond Trustee in its capacity as securityagent and/or security trustee pursuant to Clause 17.4.

"Security and Covenant Defeasance" shall have the meaning given to it in Clause18.2.

"Stamdata" means the web site www.stamdata.na. maintained by the Bond Trustee.

"Subsidiary" means a company over which another company has DecisiveInfluence.

"Total Assets" means (on a consolidated basis) the aggregate book value of theGroup's total assets treated as assets in accordance with GAAP.

~'Total Interest-Bearing Debt" means (on a consolidated basis) the aggregate bookvalue of the Group's total interest-bearing debt in accordance with GAAP.

"Transaction" means the Group's acquisition of 11 handy-size LPG-vesselspursuant to to a Framework Agreement dated 14 November 2012 entered intobetween Maersk Handy Gas Pte Ltd, A. P. Moller Singapore Pte Ltd, Live OakCompany Limited, Navigator Holdings LTD and Navigator Gas L. L.C.

"US Securities Act" means the U.S. Securities Act of 1933, as amended.

"USD" means US Dollars, being the legal currency of the United States of America.

"Voting Bonds" means the Outstanding Bonds less the Issuer's Bonds.

"Working Capital" means Current Assets less Current Liabilities.

1.2 Construction

In this Bond Agreement, unless the context otherwise requires:

(a) headings are for ease of reference only;

(b) words denoting the singular number shall include the plural and vice versa;

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http://www.stamdata.na.

(c) references to Clauses are references to the Clauses ofthis Bond Agreement;

(d) references to a time is a reference to Oslo time unless otherwise statedherein;

(e) references to a provision oflaw is a reference to that provision as it may beamended or re-enacted, and to any regulations made by the appropriateauthority pursuant to such law, including any determinations, rulings,judgments and other binding decisions relating to such provision orregulation;

(f) an Event of Default is "continuing" if it has not been remedied or waived;and

(g) references to a "person" shall include any individual, firm, company,corporation, government, state or agency of a state or any association, trust,joint venture, consortium or partnership (whether or not having separatelegal personality).

2 The Bonds

2.1 Binding nature of this Bond Agreement

2.1.1 By virtue of being registered as a Bondholder (directly or indirectly) with theSecurities Depository, the Bondholders are bound by the terms of this BondAgreement and any other Finance Document, without any further action required tobe taken or formalities to be complied with, see also Clause 18.1.

2.1.2 This Bond Agreement is available to anyone and may be obtained from the BondTrustee or the Issuer. The Issuer shall ensure that this Bond Agreement is available tothe general public throughout the entire term of the Bonds. This Bond Agreementmay be published on Stamdata or such other venues as decided by the Bond Trustee.

2.2 The Bonds

The Issuer has resolved to issue a series of Bonds in the maximum amount ofUSD125,000,000 (USD onehundredandtwentyfivemillion).

The Face Value is USD 200,000. The Bonds shall rank pari passu betweenthemselves.

The Bond Issue will be described as "9.0 per cent Navigator Holdings Ltd SeniorUnsecured Callable Bond Issue 2012/2017".

The ISIN of the Bond Issue will be NO 001 066550.8.

The tenor of the Bonds is from and including the Issue Date to the Maturity Date.

2.3 Purpose and utilization

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The net proceeds of the Bonds shall be applied (i) to partly finance the theTransaction, (ii) to finance the Group's further fleet expansion, and (iii) for theGroup's general corporate purposes.

3 Listing

3.1 The Issuer shall apply for listing of the Bonds on Oslo Børs or, at the discretion ofthe Issuer, on Oslo Børs ASA's Alternative Bond Market ("ABM").

3.2 If the Bonds are listed, the Issuer shall ensure that the Bonds remain listed until theyhave been discharged in full.

4 Registration in the Securities Depository

4.1 The Bond Issue and the Bonds shall prior to disbursement be registered in theSecurities Depository according to the Norwegian Securities Depository Act (Act2002/64) and the terms and conditions of the Securities Depository.

4.2 The Issuer shall ensure that correct registration in the Securities Depository is madeand shall notify the Securities Depository of any changes in the terms and conditionsof this Bond Agreement. The Bond Trustee shall receive a copy of the notification.The registration may be executed by the Paying Agent.

4.3 The Bonds have not been registered under the US Securities Act, and the Issuer isunder no obligation to arrange for registration of the Bonds under the US SecuritiesAct.

5 Purchase and transfer of Bonds

5.1 Bondholders may be subject to purchase or transfer restrictions with regard to theBonds, as applicable from time to time under local laws to which a Bondholder maybe subject (due e.g. to its nationality, its residency, its registered address, its place(s)for doing business). Each Bondholder must ensure compliance with applicable locallaws and regulations at its own cost and expense.

5.2 Notwithstanding the above, a Bondholder which has purchased the Bonds in breachof applicable mandatory restrictions may nevertheless utilize its rights (including, butnot limited to, voting rights) under this Bond Agreement,

6 Conditions Precedent

6.1 Disbursement of the net proceeds of the Bonds to the Issuer will be subject to theBond Trustee having received the documents listed below, in form and substancesatisfactory to it, at least two Business Days prior to the Issue Date:

Ca) this Bond Agreement, duly executed by all parties thereto;

(b) a certificate from the Issuer (and any further documentation in relationhereto that the Bond Trustee reasonably may require) evidencing that (i) theTransaction is agreed and that the framework agreement between Navigator

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Holdings Ltd. and A.P. Moeller Maersk NS has been signed; (H) that thefacilities described in (iii) and (iv) under Permitted Financial Indebtednesshave been fully committed and that the Commitment Letters for this purposewere signed on 2 and 13 November 2012, and (iii) that the New Equity isirrevocably and fully committed and that equity commitment letter(s) weresigned on 16 November 2012;

(c) certified copies of all necessary corporate resolutions of the Issuer to issuethe Bonds and execute the Finance Documents;

(d) a power of attorney from the Issuer to relevant individuals for theirexecution of the relevant Finance Documents, or extracts from the relevantregister or similar documentation evidencing such individuals' authorisationto execute the Finance Documents on behalf of the Issuer;

(e) certified copies of (i) the Certificate of Incorporation or other similar officialdocument for the Issuer, evidencing that it is validly registered and existingand (ii) the articles of incorporation and by-laws;

(f) the Issuer's latest Financial Statements and Interim Accounts (if any);

(g) confirmation from the Manager that the requirements set out in Chapter 7 ofthe Norwegian Securities Trading Act (implementing the EU prospectusdirective (2003171 EC) concerning prospectuses have been fulfilled;

(h) to the extent necessary, any public authorisations required for the BondIssue;

(i) a certificate confirming that no Event of Default has occurred and iscontinuing;

O) confirmation from the Paying Agent that the Bonds have been registered inthe Securities Depository;

(k) the Bond Trustee fee agreement set out in Clause 14.2, duly executed;

(1) copies of any written documentation used in the marketing of the Bonds ormade public by the Issuer or the Manager in connection with the BondIssue;

(m) documentation evidencing the Issuer's appointment of a process agent inNorway as set out in Clause 18.8; and

(n) any statements or legal opinions reasonably required by the Bond Trustee(including any capacity corporate opinions for the Issuer and opinionsrelated to the validity and enforceability of the Finance Documents).

6.2 The Bond Trustee may, in its reasonable opinion, waive the deadline or requirementsfor documentation as set out in Clause 6.1.

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6.3 Disbursement of the net proceeds from the Bonds is subject to the Bond Trustee'swritten notice to the Issuer, the Manager and the Paying Agent that the documentshave been controlled and that the required conditions precedent are fulfilled.

6.4 On the Issue Date, subject to i) that no Event of Default has occurred and iscontinuing and ii) receipt of confirmation from the Bond Trustee pursuant to Clause6.3, the Manager shall make the net proceeds from the Bond Issue available to theIssuer.

7 Representations and Warranties

7.1 The Issuer represents and warrants to the Bond Trustee that:

(a) Status

It is a limited liability company, duly domesticated and validly existing andregistered under the laws of the Marshall Islands, and has the power to own its assetsand carry on its business as it is being conducted.

(b) Power and authority

It has the power to enter into, perform and deliver, and has taken all necessary actionto authorise its entry into, performance and delivery of, this Bond Agreement andany other Finance Document to which it is a party and the transactions contemplatedby those Finance Documents.

(c) Valid, binding and enforceable obligations

This Bond Agreement and each other Finance Document to which it is a partyconstitutes (or will constitute, when executed by the respective parties thereto) itslegal, valid and binding obligations, enforceable in accordance with their respectiveterms, and (save as provided for therein) no further registration, HUng, payment oftax or fees or other formalities are necessary or desirable to render the saiddocuments enforceable against it.

(d) Non-conflict with other obligations

The entry into and performance by it of this Bond Agreement and any other FinanceDocument to which it is a party and the transactions contemplated thereby do not andwill not conflict with (i) any law or regulation or judicial or official order; (ii) itsconstitutional documents; or (Hi) any agreement or instrument which is binding uponit or any of its assets.

Ce) No Event of Default

(i) No Event of Default exists or is likely to result from the making of anydrawdown under this Bond Agreement or the entry into, the performance of,or any transaction contemplated by, any Finance Document.

CH) No other event or circumstance is outstanding which constitutes (or with theexpiry of a grace period, the giving of notice, the making of anydetermination or any combination of any of the foregoing, would constitute)a default or termination event (howsoever described) under any otheragreement or instrument which is binding on it or any of its Subsidiaries or

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to which its (or any ofits Subsidiaries') assets are subject which has or islikely to have a Material Adverse Effect.

(f) Authorizations and consents

Ali authorisations, consents, approvals, resolutions, licenses, exemptions, filings,notarizations or registrations required:

(i) to enable it to enter into, exercise its rights and comply with its obligationsunder this Bond Agreement or any other Finance Document to which it is aparty; and

(ii) to carry on its business as presently conducted and as contemplated by thisBond Agreement,

have been obtained or effected and are in full force and effect.

(g) Litigation

No litigation, arbitration or administrative proceedings or investigations of or beforeany court, arbitral body or agency which, if adversely determined, is likely to have aMaterial Adverse Effect have (to the best ofits knowledge and belief) been started orthreatened against it or any of its Subsidiaries.

(h) Financial Statements

Its most recent Financial Statements and Interim Accounts fairly and accuratelyrepresent the assets and liabilities and financial condition as at their respective dates,and have been prepared in accordance with GAAP, consistently applied.

(i) No Material Adverse Effect

Since the date of the Financial Statements, there has been no change in its business,assets or financial condition that is likely to have a Material Adverse Effect.

G) No misleading information

Any factual information provided by it to the subscribers or the Bond Trustee for thepurposes ofthis Bond Issue was true and accurate in all material respects asof thedate it was provided or as of the date (if any) at which it is stated.

(k) No withholdings

The Issuer is not required to make any deduction or withholding from any paymentwhich it may become obliged to make to the Bond Trustee or the Bondholders underthis Bond Agreement.

(1) Pari passu ranking

Its payment obligations under this Bond Agreement or any other Finance Documentto which it is a party rank at least pari passu as set out in Clause 8.1.

(m) Security

No Encumbrance exists over any of the present assets of any Group Company inconflict with this Bond Agreement.

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7.2 The representations and warranties set out in Clause 7.1 are made on the executiondate of this Bond Agreement, and shall be deemed to be repeated on the Issue Dateand on each Interest Payment Date.

8 Status of the Bonds and security

8.1 The Bonds shall constitute senior debt obligations of the Issuer. The Bonds shall rankat least pari passu with all other senior unsecured debt of the Issuer (save for suchclaims which are preferred by bankruptcy, insolvency, liquidation or other similarlaws of general application) and shall rank ahead of subordinated debt.

8.2 The Bonds are, except for the Excrow Account Pledge, unsecured.

9 Interest9.1 The Issuer shall pay interest on the par value of the Bonds from, and including, the

Issue Date at a fixed rate ofnine per cent. (9 %) per annum (the "Fixed Rate").

9.2 Interest payments shall be made semi annually in arrears on the Interest PaymentDates each year, the first Interest Payment Date being 18 June 20I3.

9.3 The relevant interest payable amount shall be calculated based on a period from, andincluding, one Interest Payment Date to, but excluding, the next following applicable

. Interest Payment Date.

9.4 The day count fraction in respect of the calculation of the payable interest amountshall be "30/360" ("Fixed Rate Day Count Fraction"), which means that thenumber of days in the calculation period in respect ofwhich payment is being madedivided by 360 (the number of days to be calculated on the basis of a year of 360days with twelve 30-days months (unless (i) the last day of the calculation period isthe 31 st day of a month but the first day of the calculation period is a day other thanthe 30th or 31 st day of a month, in which case the month that includes that last dayshall not be considered to be shortened to a 30-day month, or (ii) the last day of thecalculation period is the last day of the month ofFebruary, in which case the monthof February shall not be considered to be lengthened to a 30-day month)).

9.5 The payable interest amount per Bond for a relevant calculation period shall becalculated as follows:

InterestAmountFraction

= FaceValue

x FixedRate

x Fixed RateDay Count

10 Maturity of the Bonds and Redemption

10.1 Maturity

The Bonds shall mature in full on the Maturity Date, and shall be repaid at 100% ofpar value by the Issuer.

10.2 Call Option

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10.2.1 The Issuer may redeem the Bond Issue in whole or in part as follows (Call Option):

(a) at any time from and including the Interest Payment Day in December 2015to, but not including, the Interest Payment Day in December 2016 at a priceequal to 104.00% ofpar value (plus accrued interest on the redeemedamount),

(b) at any time from and including the Interest Payment Day in December 2016to, but not including, the Interest Payment Day in June 2017 at a price equalto 102.00% of par value (plus accrued interest on the redeemed amount);and

cc) at any time from and including the Interest Payment Day in June 2017 to,but not including, the Maturity Date at a price equal to 101.00% ofpar value(plus accrued interest on the redeemed amount)

10.2.2 Exercise ofthe Call Option shall be notified by the Issuer in writing to the BondTrustee and the Bondholders at least thirty (30) Business Days prior to the settlementdate of the Call Option.

10.2.3 Partial redemption must be carried out pro rata (in accordance with the procedures ofthe Securities Depository).

10.2.4 On the settlement date of the Call Option, the Issuer shall pay to each of theBondholders holding Bonds to be redeemed, in respect of each such Bond, theprincipal amount ofsuch Bond (including any premium as stated above) and anyunpaid interest accrued up to the settlement date.

10.2.5 Bonds redeemed by the Issuer in accordance with this Clause 10.2 shall bedischarged against the Outstanding Bonds.

10.3 Change of control

10.3.1 Upon a Change of Control Event occurring, each Bondholder shall have a right ofprepayment Ca"Put Option") ofits Bonds at a price of 101.00 % of par value (plusaccrued interest on the redeemed amount).

10.3.2 The Put Option must be exercised within 60 calendar days after the Issuer has givennotification to the Bond Trustee of a Change of Control Event. Such notificationshall be given as soon as possible after a Change ofControl Event has taken place.

10.3.3 The Put Option may be exercised by each Bondholder by giving written notice of therequest to its Account Manager. The Account Manager shall notify the Paying Agentof the redemption request. The settlement date of the Put Option shall be within 75calendar days following the notice of a Change of Control Event.

10.3.4 On the settlement date of the Put Option, the Issuer shall pay to each of theBondholders holding Bonds to be redeemed, the principal amount of each such Bond(including any premium pursuant to Clause 10.3.1) and any unpaid interest accruedup to the settlement date.

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11 Payments

11.1 Covenant to pay

11.1.1 The Issuer will on any Payment Date (or any other due date pursuant to any FinanceDocument) unconditionally pay to or to the order of the Bond Trustee all amountsdue under this Bond Agreement or any other Finance Document.

11.1.2 The covenant contained in Clause 11.1.1 shall be for the benefit of the Bond Trusteeand the Bondholders.

11.2 Payment mechanics

11.2.1 If no specific order is made by the Bond Trustee under Clause 11.1.1, the Issuer shal1pay all amounts due to the Bondholders under this Bond Agreement or any otherFinance Document by crediting the bank account nominated by each Bondholder inconnection with its securities account in the Securities Depository.

11,2.2 Payment shall be deemed to have been made once the amount has been credited tothe bank which holds the bank account nominated by the Bondholder in question, butifthe paying bank and the receiving bank are the same, payment shall be deemed tohave been made once the amount has been credited to the bank account nominatedby the Bondholder in question, see however Clause 11.3.

11.2.3 In case of irregular payments, the Bond Trustee may instruct the Issuer orBondholders of other payment mechanisms than described in Clause 11.2.1 or 11.2.2above. The Bond Trustee may also obtain payment information regardingBondholders' accounts from the Securities Depository or Account Managers.

11.2.4 Subject to Clause 11.3, payment by the Issuer in accordance with this Clause 11.2shall constitute good discharge of its obligations under Clause 11.1.1.

IlJ Currency

11.3.1 If the Bonds are denominated in other currencies than NOK, each Bondholder has toprovide the Paying Agent (either directly or through its Account Manager) withspecific payment instructions, including foreign exchange bank account details.Depending on any currency exchange settlement agreements between eachBondholder's bank and the Paying Agent, cash settlement may be delayed, andpayment shall be deemed to have been made at the date of the cash settlement,provided however, that no default interest or other penalty shall accrue for theaccount of the Issuer.

11.3.2 Except as otherwise expressly provided, aUamounts payable under this BondAgreement and any other Finance Document shall be payable in the same currencyas the Bonds are denominated in. If, however, the Bondholder has not giveninstruction as set out in Clause 11.3.1 within five Business Days prior to a PaymentDate, the cash settlement will be exchanged into NOK and credited to the NOK bankaccount registered with the Bondholder's account in the Securities Depository.

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11.3.3 Amounts payable in respect of costs, expenses, taxes and other liabilities of a similarnature shall be payable in the currency in which they are incurred.

11.4 Set-off and counterclaims

The Issuer may not apply or perform any counterclaims or set-off against anypayment obligations pursuant to this Bond Agreement or any other FinanceDocument.

11.5 Interest in the event of late payment

11.5.1 In the event that any amount due under this Bond Agreement or any FinanceDocument is not made on the relevant due date, the unpaid amount shall bear interestfrom the due date at an interest rate equivalent to the interest rate according toClause 9 plus five per cent. (5.00 %) per annum.

11.5.2 The interest charged under this Clause 11.5 shall be added to the defaulted amounton each respective Interest Payment Date relating thereto until the defaulted amounthas been repaid in full.

11.5.3 The unpaid amounts shall bear interest as stated above until payment is made,whether or not the Bonds are declared to be in default pursuant to Clause 15.1(a), cfClauses 15.2 - 15.4.

l 1.6 Partial payments

If the Bond Trustee or the Paying Agent receives a payment that is insufficient todischarge all the amounts then due and payable under the Finance Documents, thatpayment shall be applied in the following order:

(a) first, in or towards payment ofany unpaid fees, costs and expenses of theBond Trustee under the Finance Documents;

(b) secondly, in or towards payment of any accrued interest due but unpaidunder the Bond Agreement, pro rata and without any preference or priorityof any kind; and

(c) thirdly, in or towards payment of any principal due but unpaid under theBond Agreement, pro rata and without any preference or priority of anykind.

12 Issuer's acquisition of Bonds

The Issuer has the right to acquire and own Bonds (Issuer's Bonds). The Issuer'sholding of Bonds may at the Issuer's discretion be retained by the Issuer, sold ordischarged.

13 Covenants

13.1 General

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13.1.1 The Issuer undertakes from the date ofthis Bond Agreement and until such time thatno amounts are outstanding under this Bond Agreement or any other FinanceDocument, to the Bond Trustee, as further set out in this Clause 13.

13.2 Information Covenants

13.2.1 The Issuer shall:

(a) without being requested to do so, promptly inform the Bond Trustee inwriting of any Event of Default, any event or circumstance which the Issuerunderstands or ought to understand may lead to an Event of Default and anyother event which may have a Material Adverse Effect;

(b) without being requested to do so, inform the Bond Trustee in writing if theIssuer agrees to sell or dispose of all or a substantial part of its assets oroperations, or change the nature of its business;

(c) without being requested to do so, prepare Financial Statements and makethem directly available to the Bond Trustee and on its website in the Englishlanguage (alternatively byarranging for publication at Stamdata) as soon asthey become available, and not later than 120 days after the end of therelevant financial year;

(d) withoutbeing requested to do so, prepare Interim Accounts and make themdirectly available to the Bond Trustee and on its website in the Englishlanguage (alternatively by arranging for publication on Stamdata) as soon asthey become available, and not later than 60 days after the end of therelevant quarter;

Ce) at the request of the Bond Trustee, report the balance of the Issuer's Bonds;

Cf) without being requested to do so, send the Bond Trustee copies of anystatutory notifications of the Issuer, including but not limited to inconnection with mergers, de-mergers and reduction of the Issuer's sharecapital or equity;

(g) ifthe Bonds are listed on an exchange, without being requested to do so,send a copy to the Bond Trustee of its notices to the Exchange;

(h) ifthe Issuer and/or the Bonds are rated, without being requested to do so,inform the Bond Trustee of its and/or the rating of the Bond Issue, and anychanges to such rating;

(i) without being requested to do so, inform the Bond Trustee of changes in theregistration of the Bonds in the Securities Depository; and

G) within a reasonable time, provide such information about the Issuer'sbusiness, assets and financial condition as the Bond Trustee may reasonablyrequest.

13.2.2 The Issuer shall in connection with the publication ofits financial reports underClause 13.2.l(c) and (d), confirm to the Bond Trustee in writing the Issuer's

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compliance with the covenants in this Clause 13, unless the Bond Trustee explicitlywaives such requirement. Such confirmation shall be undertaken in a certificate,substantially in the form set out in Attachment 1 hereto, signed by the ChiefExecutive Officer or Chief Financial Officer of the Issuer (a "ComplianceCertifieate"), In the event of non-compliance, the Compliance Certificate shalldescribe the non-compliance, the reasons therefore as well as the steps which theIssuer has taken and will take in order to rectify the non-compliance.

13.3 General Covenants

(a) Pari passu ranking

The Issuer shall ensure that its obligations under this Bond Agreement and any otherFinance Document shall at all time rank at least pari passu as set out in Clause 8.1.

(b) Mergers

The Issuer shall not, and shall ensure that no other Group Company shall, carry outany merger or other business combination or corporate reorganization involving aconsolidation of the assets and obligations of the Issuer or any of its Subsidiarieswith any other companies or entities not being a member of the Group ifsuchtransaction would have a Material Adverse Effect.

Cc) De-mergers

The Issuer shall not, and shall ensure that no other Group Company shall, carry outany de-merger or other corporate reorganization involving a split of the Issuer or anyof its Subsidiaries into two or more separate companies or entities, if such transactionwould have a Material Adverse Effect.

(d) Cant inuation of business

The Issuer shall not, and shall ensure that no other Group Company shall, cease tocarry on its business, if such cessation would have a Material Adverse Effect. TheIssuer shall procure that no material change is made to the general nature or scope ofthe business of the Group from that carried on at the date of this Bond Agreement, oras contemplated by this Bond Agreement.

(e) Disposal of business

The Issuer shall not, and shall procure that no other Group Company shall, sell orotherwise dispose of all or a substantial pad of the Group's assets or operations,unless:

(i) the transaction is carried out at fairmarket value, on terms and conditionscustomary for such transactions; and

(H) such transaction would not have a Material Adverse Effect.

In the event that:

(i) a Group Company sells or disposes of one or more vessels and/or shares in aGroup Company owning (directly or indirectly) a vessel (or takes any other action

19

which has the similar effect as a sale or disposal of a vessel or dilution of theownership interest in a vessel), excluding any intra-Group transactions;

(H) the Equity Ratio is less than 35% (but more than 30%, cf Cl ause 13.S(d)) on theQuarter Date immediately prior to such disposal; and

(Hi) any net proceeds realized from such sale or disposal (following repayment ofany relevant Permitted Financial Indebtedness pertaining to the relevant asset) hasnot been re-invested in one or more second-hand vessels within 180 days fromreceipt of such proceeds,

the Issuer undertakes to promptly apply not less than 50% of such net proceeds (i.e.gross proceeds less ordinary cost and fees in accordance with such disposal) towardsprepayment of any Permitted Financial Indebtedness.

(f) Arm 's length transactions

The Issuer shall not, and the Issuer shall ensure that no other Group Company shall,enter into directly or indirectly any transaction with any person (without limitation,the purchase, sale or exchange of assets or the rendering of any service) except in theordinary course of business and pursuant to the reasonable requirement of theIssuer's or such Group Company's business, upon fair and reasonable terms and forfair market value that are no less favorable to the Issuer or such Group Company, asthe case may be, than those which might be obtained in an arm's length transaction atthe time.

(g) Corporate status

The Issuer shall not change its type of organization or jurisdiction of incorporationwithout the prior written consent of the Bond Trustee.

(h) Compliance with laws

The Issuer shall, and shall ensure that all other Group Companies shall, carry on itsbusiness in accordance with acknowledged, careful and sound practices in allmaterial aspects and comply in all material respects with alllaws and regulations itor they may be subject to from time to time.

13.4 Special covenants

(a) Dividends and other distributions

The Issuer shall not declare or make any dividend payment, repurchase of shares ormake other distributions or payments to its shareholders (other than servicinging ofloans provided by shareholders, cf. Clause f) "Subordinated loans" below), whetherin cash or in kind, including without limitation any total return swaps or instrumentswith similar effect (a "Distribution") (other than in respect of services renderedand/or transactions done in the ordinary course and on market terms for an amount ofup to USD 2 million per calendar year) until after 31 December 2013. Thereafter theIssuer shall 110t declare or make any Distribution exceeding 50% ofIssuer'sconsolidated net profit after taxes based on the audited annual accounts for theprevious financial year, however always provided that the Group on a consolidated

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basis is in pro-forma compliance with an Equity Ratio of minimum 35% immediatelyafter giving effect to such Distribution paid or declared.

(b) Subsidiaries' distributions

Save for obligations under the Permitted Financial Indebtedness, the Issuer shall notpermit any Group Company to create or permit to exist any contractual obligation (orencumbrance) restricting the right of any Group Company to (i) pay dividends ormake other distributions to its shareholders, (ii) service any Financial Indebtedness tothe Issuer, or (Hi)make any loans to the Issuer, if the creation of such contractualobligation is reasonably likely to prevent the Issuer from complying with its paymentobligations under this Bond Agreement.

(c) Negative pledge

The Issuer shall not, and shall ensure that no other Group Company shall, create,permit to subsist or allow to exist any Encumbrance over any of its present or futurerespective assets (including shares in Subsidiaries) or its revenues, other than theEncumbrances granted to secure any of the following:

(i) this Bond Issue;

(H) the Permitted Financial Indebtedness;

(iii) any derivative transactions related to the Issuer's hedging policy; and

(iv) any lien arising by operation of law.

(d) Financial Indebtedness restrictions

The Issuer shall not, and shall ensure that no other Group Company shall, incur,create or permit to subsist any Financial Indebtedness other than:

(i) this Bond Issue;

(H) any unsecured Financial Indebtedness with the Issuer as borrowerprovided as a subordinated loan cf. clause (f) below;

(iii) the Permitted Financial Indebtedness;

(iv) any unsecured intra-group loans granted by any member of the Group;

(v) any derivative transactions related to the Issuer's hedging policy; and

(vi) any Financial Indebtedness incurred in the ordinary course of businessfor an amount of up to USD 10 million.

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(e) Financial support restrictions

The Issuer shall not, and shall ensure that no other Group Company shall, grant anyloans, guarantees or other financial assistance (including, but not limited to grantingof security) ("Financial Support") to or for the benefit of any third party or otherGroup Companies, other than:

(i) unsecured intra-group loans granted by any Group Company toanother Group Company;

(H) Financial Support in the ordinary course of business; and

(iii) Financial Support in connection with Permitted FinancialIndebtedness.

(f) Subordinated loans

The Issuer shall ensure that any existing and future loans from a shareholder of theIssuer or any subordinated loans from a third party to the Issuer shall be subordinatedto the Bonds. For the avoidance of doubt, any such loans may be serviced as long as(i) no Event of Default is in existence, or (ii) no cure period has commenced but notexpired under the Bond Agreement.

(g) Insurances

The Issuer shall, and the Issuer shall ensure that each Group Company will, maintainwith financially sound and reputable insurance companies, funds or underwritersadequate insurance or captive arrangements with respect to its assets, equipment andbusiness against such liabilities, casualties and contingencies and of such types andin such amounts as are consistent with prudent business practice in their relevantjurisdiction including, but not limited to, insurance for all the Group's vessels inaccordance with the requirements of the Permitted Financial Indebtedness.

13.5 Financial covenants

The Issuer undertakes to comply with the following financial covenants during theterm of the Bond Issue:

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(a) Minimum Liquidity: The Issuer shall ensure that the Group maintains aLiquidity of no less than the greater of (i) USD 12.5 million and (ii) 5% ofTotal Interest-BearingDebt;

(b) Minimum Working Capital: The Issuer shall ensure that the Groupmaintains a positive Working Capital;

(c) Interest Coverage Ratio: The Issuer shall ensure that the Group maintainsan Interest Coverage Ratio not less than 3.0;

(d) Equity Ratio: The Issuer shall ensure that the Group maintains an EquityRatio of minimum 30.0%; and

(e) Asset Coverage Ratio: From and including 30 June 2013, the Issuer shallensure that the aggregate value of:

(1) the Market Value of the Group's vessels; plus

(2) any balance on the Escrow Account,

is at least 120% of the Total Interest-Bearing Dcbt.

Ifthe aggregate Market Value of the Group's vessels is not sufficient tomeet the Asset Coverage Ratio covenant, the Issuer and/or any GroupCompany shall be entitled to trensfer cash to the Escrow Account in anamount sufficient to again become compliant. Any amount so transferred tothe Escrow Account shall be released, in whole or in part, when the AssetCoverage Ratio is again sufficient to meet the Asset Coverage Ratiocovenant.

The Issuer undertakes to comply with the above Financial Covenants at al1times,such compliance to be measured on each Quarter Date and certified by the Issuerwith each annual financial statement and quarterly financial statement on therespective Reporting Date. However, (e) above shall only be measured semi-annuallyfrom and including the Quarter Date 30 June 2013. All Financial Covenants shall becalculated on a consolidated basis for the Group during the lifetime of the Bonds.

14 Fees and expenses

14.1 The Issuer shall cover all costs and expenses incurred by it or the Bond Trustee(and/or the Security Agent) in connection with this Bond Agreement and thefulfilment of its obligations under this Bond Agreement or any other FinanceDocument, including in connection with the negotiation, preparation, execution andenforcement of this Bond Agreement and the other Finance Documents and anyregistration or notifications relating thereto (including any stamp duty), the listing ofthe Bonds on an Exchange (if applicable), and the registration and administration ofthe Bonds in the Securities Depository. The Bond Trustee may withhold funds fromany escrow account (or similar arrangement) or from other funds received from theIssuer or any other person, irrespective of such funds being subject to security undera Finance Documents, to set-off and cover any such costs and expenses.

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14.2 The fees, costs and expenses payable to the Bond Trustee (and/or the Security Agent)shall be paid by the Issuer and are set out in a separate agreement between the Issuerand the Bond Trustee (andior the Security Agent).

14.3 Fees, costs and expenses payable to the Bond Trustee (or the Security Agent) which,due to the Issuer's insolvency or similar circumstances, are not reimbursed in anyother way may be covered by making an equivalent reduction in the proceeds to theBondholders hereunder ofany costs and expenses incurred by the Bond Trustee (orthe Security Agent) in connection with the restructuring or default of the Bond Issueand the enforcement of any security.

14.4 Any public fees levied on the trade of Bonds in the secondary market shall be paidby the Bondholders, unless otherwise provided by law or regulation, and the Issuer isnot responsible for reimbursing any such fees.

14.5 The Issuer is responsible for withholding any withholding tax imposed by applicablelaw on any payments to the Bondholders.

14.6 If the Issuer is required by law to withhold any withholding tax from any paymentunder any Finance Document:

(a) the amount of the payment due from the Issuer shall be increased to suchamount which is necessary to ensure that the Bondholders receive a netamount which is (after making the required withholding) equal to thepayment which would have been due if no withholding had been required;and

(b) the Issuer shall at the request of the Bond Trustee deliver to the BondTrustee evidence that the required tax reduction or withholding has beenmade.

15 Events of Default

15.1 The Bond Trustee may declare the Bonds to be in default upon occurrence of any ofthe following events:

(a) Non-payment

The Issuer fails to fulfil any payment obligation due under this Bond Agreement orany Finance Document when due, unless, in the opinion of the Bond Trustee, it islikely that such payment will be made in full within five (5) Business Days followingthe original due date.

(b) Breach of other obligations

The Issuer does not comply with any provision pursuant to this Bond Agreement orany other Finance Document, unless, in the opinion of the Bond Trustee, such failureis capable ofbeing remedied and is remedied within ten (lO) Business Days afternotice thereof is given to the Issuer by the Bond Trustee.

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(c) Cross default

If for any Group Company:

(i) any Financial Indebtedness is not paid when due nor within any originallyapplicable grace period;

(H) any Financial Indebtedness is declared to be or otherwise becomes due andpayable prior to its specified maturity as a result of an event of default(however described);

(Hi) any commitment for any Financial Indebtedness is cancelled or suspendedby a creditor as a result of an event of default (however described); or

(iv) any creditor becomes entitled to declare any Financial Indebtedness due andpayable prior to its specified maturity as a result of an event of default(however described) and such default has not been waived in writing by therelevant creditor;

always provided that the amount of the relevant Financial Indebtedness falling withinparagraphs (i), (ii) and (iv) above or the commitment for Financial Indebtednessfalling within paragraph (iii) above must exceed USD lO million, or the equivalentthereof in other currencies, for a cross-default to exist under this Bond Agreement.

(d) Misrepresentations

Any representation, warranty or statement (including statements in compliancecertificates) made under this Bond Agreement or any other Finance Document or inconnection therewith is or proves to have been incorrect, inaccurate or misleading inany material respect when made or deemed to have been made.

(e) Insolvency

(i) A Group Company, is unable or admits inability to pay its debts as they falldue, suspends making payments on any of its debts or, by reason of actualor anticipated financial difficulties, commences negotiations with one ormore of its creditors with a view to rescheduling any of its indebtedness;

(li) The value of the assets of any member of the Group is less than its liabilities(taking into account contingent and prospective liabilities); or

(Hi) A moratorium is declared in respect of any indebtedness of any member ofthe Group,

(f) Insolvency proceedings and dissolution

If for any Group Company, any corporate action, legal proceedings or otherprocedure step is taken in relation to:

(i) the suspension of payments, a moratorium of any indebtedness, winding-up,dissolution, administration or reorganisation (by way of voluntaryarrangement, scheme of arrangement or otherwise) other than solventliquidation or reorganization;

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(ii) a composition, compromise, assignment or arrangement with any creditor,having an adverse effect on the Issuer's ability to perform its paymentobligations hereunder;

(iii) the appointment of a liquidator (other than in respect of a sol ventliquidation), receiver, administrative receiver, administrator, compulsorymanager or other similar officer of any of its assets; or

(iv) its dissolution,

or any analogous procedure or step is taken in any jurisdiction.

(g) Creditors) processAny Group Company has a substantial proportion ofthe assets impounded,confiscated, attached or subject to distraint, or is subject to enforcement of anysecurity over any ofits assets.

(h) Litigation

Any litigation, arbitration, administrative, governmental, regulatory or otherinvestigations, proceedings or disputes are commenced or threatened in relation tothe Finance Documents or the transactions contemplated in the Finance Documentsor against any member of the Group or its assets which has or is reasonably likely tohave a Material Adverse Effect.

(i) Impossibility or illegality

It is or becomes impossible or unlawful for any Group Company to fulfil or performany of the terms of any Finance Document to which it is a party.

G) Material Adverse Effect

Any other event or circumstance occurs which, in the reasonable opinion of the BondTrustee, after consultations with the Issuer, would have a Material Adverse Effect.

15.2 In the event that one or more of the circumstances mentioned in Clause 15.1 occursand is continuing, the Bond Trustee can, in order to protect the interests of theBondholders, declare the Outstanding Bonds including accrued interest, costs andexpenses to be in default and due for immediate payment.

The Bond Trustee may at its discretion, take every measure necessary to recover theamounts due under the Outstanding Bonds, and all other amounts outstanding underthis Bond Agreement and any other Finance Document.

15.3 In the event that one or more of the circumstances mentioned in Clause 15.1 occursand is continuing, the Bond Trustee shall declare the Outstanding Bonds includingaccrued interest, costs and expenses to be in default and due for immediate paymentif:

(a) the Bond Trustee receives a demand in writing that a default shall bedeclared from Bondholders representing at least 115 of the Voting Bonds,and the Bondholders' Meeting has not decided on other solutions, or

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(b) the Bondholders' Meeting has with simple majority decided to declare theOutstanding Bonds in default and due for payment.

In either case the Bond Trustee shall take every measure necessary to recover theamounts due under the Outstanding Bonds.

15.4 In the event that the Bond Trustee pursuant to the terms of Clauses 15.2 or 15.3declares the Outstanding Bonds to be in default and due for payment, the BondTrustee shall immediately deliver to the Issuer a notice demanding payment ofinterest and principal due to the Bondholders under the Outstanding Bonds includingaccrued interest and interest on overdue amounts and expenses. The claim derivedfrom the Outstanding Bonds due for payment as a result of an Event of Default shallbe calculated at the prices set out in Clause 10.2.

16 Bondholders' Meeting

16.1 Authority of the Bondholders' Meeting

16.1.1 The Bondholders' Meeting represents the supreme authority of the Bondholderscommunity in all matters relating to the Bonds, and has the power to make alldecisions altering the terms and conditions of the Bonds, including, but not limitedto, any reduction ofprincipal or interest and any conversion of the Bonds into othercapital classes.

16.1.2 The Bondholders' Meeting cannot resolve that any overdue payment of anyinstalment shall be reduced unless there is a pro rata reduction ofthe principal thathas not fallen due, but may resolve that accrued interest (whether overdue or not)shall be reduced without a corresponding reduction of principal.

16.1.3 If a resolution by or an approval of the Bondholders is required, such resolution shallbe passed at a Bondholders' Meeting, see however Clause 17.1. Resolutions passedat Bondholders' Meetings shall be binding upon all Bondholders and prevail for allthe Bonds.

16.2 Procedural rules for Bondholders' meetings

16.2.1 A Bondholders' Meeting shall be held at the written request of:

Ca) the Issuer;

(b) Bondholders representing at least 1110of the Voting Bonds;

(c) the Exchange, if the Bonds are listed; or

(d) the Bond Trustee.

16.2.2 The Bondholders' Meeting shall be summoned by the Bond Trustee. A request for aBondholders' Meeting shall be made in writing to the Bond Trustee, and shall clearlystate the matters to be discussed.

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16.2.3 Ifthe Bond Trustee has not summoned a Bondholders' Meeting within ten (10)Business Days after having received a valid request, then the requesting party maysummon the Bondholders' Meeting itself.

16.2.4 The notice of a Bondholders' Meeting shall be dispatched no later than ten (10)Business Days prior to the date of the Bondholders' Meeting. The notice and aconfirmation ofeach Bondholder's holdings of Bonds shall be sent to allBondholders registered in the Securities Depository at the time of distribution. Thenotice shall also be sent to the Exchange for publication ifthe Bonds are listed.

16.2.5 The summons shall specify the agenda of the Bondholders' Meeting. The BondTrustee may in the summons also set out other matters on the agenda than thoserequested. If amendments to this Bond Agreement have been proposed, the maincontent of the proposal shall be stated in the summons.

16.2.6 The Bond Trustee may restrict the Issuer from making any changes in the number ofVoting Bonds in the period from distribution of the summons until the Bondholders'Meeting, by serving notice to it to such effect.

16.2.7 Matters that have not been repotted to the Bondholders in accordance with theprocedural rules for summoning of a Bondholders' Meeting may only be adoptedwith the approval of all Voting Bonds.

16.2.8 The Bondholders' Meeting shall be held on premises designated by the BondTrustee. The Bondholders' Meeting shall be opened and shall, unless otherwisedecided by the Bondholders' Meeting, be chaired by the Bond Trustee. Ifthe BondTrustee is not present, the Bondholders' Meeting shall be opened by a Bondholder,and be chaired by a representative elected by the Bondholders' Meeting.

16.2.9 Minutes of the Bondholders' Meeting shall be kept. The minutes shall state thenumbers of Bondholders and Bonds represented at the Bondholders' Meeting, theresolutions passed at the meeting, and the result of the voting. The minutes shall besigned by the chairman and at least one other person elected by the Bondholders'Meeting. The minutes shall be deposited with the Bond Trustee and shall beavailable to the Bondholders.

16.2.10 The Bondholders, the Bond Trustee and - provided the Bonds are listed -representatives of the Exchange, have the right to attend the Bondholders' Meeting.The chairman may grant access to the meeting to other parties, unless theBondholders' Meeting decides otherwise. Bondholders may attend by arepresentative holding proxy. Bondholders have the right to be assisted by anadvisor. In case of dispute the chairman shall decide who may attend theBondholders' Meeting and vote for the Bonds.

16.2.11 Representatives of the Issuer have the right to attend the Bondholders' Meeting. TheBondholders' Meeting may resolve that the Issuer's representatives may notparticipate in particular matters. The Issuer has the right to be present under thevoting.

16.3 Resolutions passed at Bondholders' Meetings

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16,3.1 At the Bondholders' Meeting each Bondholder may cast one vote for each VotingBond owned at close of business on the day prior to the date of the Bondholders'Meeting in accordance with the records registered in the Securities Depository, TheBond Trustee may, at its sole discretion, accept other evidence of ownership.Whoever opens the Bondholders' Meeting shall adjudicate any question concerningwhich Bonds shall count as the Issuer's Bonds. The Issuer's Bonds shall not haveany voting rights.

For this purpose, a Bondholder that has a Bond that is nominee registered shall bedeemed as the Bondholder of such Bond (instead of the nominee) provided that theBondholder presents relevant evidence stating that the relevant Bondholder is theBondholder of the Bond and the amount of Bonds held by such Bondholder.

16,3.2 In ali matters, the Issuer, the Bond Trustee and any Bondholder have the right todemand vote by ballot. In case of parity of votes, the chairman shall have thedeciding vote, regardless of the chairman being a Bondholder or not.

16.3.3 In order to form a quorum, at least half (1/2) of the Voting Bonds must berepresented at the meeting, see however Clause 16.4. Even if less than half (112) ofthe Voting Bonds are represented, the Bondholders' Meeting shall be held and votingcompleted.

16.3.4 Resolutions shall be passed by simple majority of the Voting Bonds represented atthe Bondholders' Meeting, unless otherwise set out in Clause 16.3.5.

16.3.5 A majority of at least 2/3 of the Voting Bonds represented at the Bondholders'Meeting is required for any waiver or amendment of any terms of this BondAgreement.

16.3.6 The Bondholders' Meeting may not adopt resolutions which may give certainBondholders or others an unreasonable advantage at the expense of otherBondholders.

16.3.7 The Bond Trustee shall ensure that resolutions passed at the Bondholders' Meetingare properly implemented, however, the Bond Trustee may refuse to carry outresolutions being in conflict with this Bond Agreement (or any other FinanceDocument) or any applicable law,

16.3.8 The Issuer, the Bondholders and the Exchange shall be notified of resolutions passedat the Bondholders' Meeting.

16.4 Repeated Bondholders' Meeting

16.4.1 Ifthe Bondholders' Meeting does not form a quorum pursuant to Clause 16,3,3, arepeated Bondholders' Meeting may be summoned to vote on the same matters. Theattendance and the voting result of the first Bondholders' Meeting shall be specifiedin the summons for the repeated Bondholders' Meeting.

16.4.2 A valid resolution may be passed at a repeated Bondholders' meeting even thoughless than half (1/2) of the Voting Bonds are represented,

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17 The Bond Trustee

17.1 The role and authority of the Bond Trustee

17.1.1 The Bond Trustee shall monitor the compliance by the Issuer of its obligations underthis Bond Agreement and applicable laws and regulations which are relevant to theterms ofthis Bond Agreement, including supervision oftimely and correct paymentof principal or interest, (however, this shall not restrict the Bond Trustee fromdiscussing matters of confidentiality with the Issuer), arrange Bondholders'Meetings, and make the decisions and implement the measures resolved pursuant tothis Bond Agreement. The Bond Trustee is not obligated to assess the Issuer' sfinancial situation beyond what is directly set out in this Bond Agreement.

17.1.2 The Bond Trustee may take any step it in its sole discretion considers necessary oradvisable to ensure the rights of the Bondholders in all matters pursuant to the termsof this Bond Agreement and is entitled to rely on advice from professional advisors.The Bond Trustee may in its sole discretion postpone taking action until such matterhas been put forward to the Bondholders' Meeting. The Bond Trustee is not obligedto take any steps to ascertain whether any Event of Default has occurred and until ithas actual knowledge Ol' express notice to the contrary the Bond Trustee is entitled toassume that no Event of Default has occurred.

17.1.3 The Bond Trustee may make decisions binding for all Bondholders concerning thisBond Agreement, including amendments to this Bond Agreement and waivers ormodifications of certain provisions, which in the opinion of the Bond Trustee, do notmateriallyand adversely affect the rights or interests of the Bondholders pursuant tothis Bond Agreement.

17.104 The Bond Trustee may reach decisions binding for all Bondholders in circumstancesother than those mentioned in Clause 17.1.3 provided that prior notification has beenmade to the Bondholders. Such notice shall contain a proposal of the amendment andthe Bond Trustee's evaluation. Further, such notification shall state that the BondTrustee may not reach a decision binding for all Bondholders in the event that anyBondholder submits a written protest against the proposal within a deadline set bythe Bond Trustee. Such deadline may not be less than five (5) Business Daysfollowing the dispatch of such notification.

17.1.5 The Bond Trustee may reach other decisions than set out in Clauses 17.1.3 or 17.104to amend or rectify decisions which due to spelling errors, calculation mistakes,misunderstandings or other obvious errors do not have the intended meaning.

17.1.6 The Bond Trustee may not adopt resolutions which may give certain Bondholders orothers an unreasonable advantage at the expense of other Bondholders.

I7.1.7 The Issuer, the Bondholders and the Exchange shall be notified of decisions made bythe Bond Trustee pursuant to Clause 17.1 unless such notice obviously isunnecessary.

17.1.8 The Bondholders' Meeting can decide to replace the Bond Trustee without theIssuer's approval, as provided for in Clause 16.3.5.

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17.1.9 The Bond Trustee may act as bond trustee and/or security agent for several bondissues relating to the Issuer notwithstanding potential conflicts of interest. The BondTrustee may delegate exercise of its powers to other professional parties.

17.I.l O The Bond Trustee may instruct the Paying Agent to split the Bonds to a lowerdenomination in order to facilitate partial redemptions or restructuring of the Bondsor other situations.

172 Liability and indemnity

17.2.I The Bond Trustee is liable only for direct losses incurred by Bondholders or theIssuer as a result of gross negligence or wilful misconduct by the Bond Trustee inperforming its functions and duties as set out in this Bond Agreement. Such liabilityis limited to the maximum amount set out in Clause 2.2. The Bond Trustee is notliable for the content of information provided to the Bondholders on behalf of theIssuer.

17.2.2 The Issuer is liable for, and shall indemnify the Bond Trustee fully in respect of, alllosses, expenses and liabilities incurred by the Bond Trustee as a result of negligenceby the Issuer (including its directors, management, officers, employees, agents andrepresentatives) to fulfil its obligations under the terms ofthis Bond Agreement andany other Finance Document, including losses incurred by the Bond Trustee as aresult of the Bond Trustee's actions based on misrepresentations made by the Issuerin connection with the establishment and performance ofthis Bond Agreement andany other Finance Document.

17.2.3 The Bond Trustee can as a condition for carrying out an instruction from theBondholders (including, but not limited to, instructions set out in Clause lS.3(a) or16.2.1 (b), require satisfactory security and indemnities for any possible liability andanticipated costs and expenses, from those Bondholders who requested thatinstruction and/or those who voted in favour of the decision to instruct the BondTrustee. Any instructions from the Bondholders may be put forward to theBondholders' Meeting by the Bond Trustee before the Bond Trustee takes anyaction.

17.3 Change of Bond Trustee

17.3.1 Change of Bond Trustee shall be carried out pursuant to the procedures set out inClause 16. The Bond Trustee shall continue to carry out its duties as bond trusteeuntil such time that a new Bond Trustee is elected.

17.3.2 The fees and expenses of a new bond trustee shall be covered by the Issuer pursuantto the terms set out in Clause 14, but may be recovered wholly or partially from theBond Trustee ifthe change is due to a breach by the Bond Trustee ofits dutiespursuant to the terms of this Bond Agreement or other circumstances for which theBond Trustee is liable.

17.3.3 The BondTrustee undertakes to co-operate so that the new bond trustee receiveswithout undue delay following the Bondholders' Meeting the documentation andinformation necessary to perform the functions as set out under the terms of thisBond Agreement.

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17.4 Appointment of Security Agent

17.4.1 The Bond Trustee is appointed to act as Security Agent for the Bond Issue.

The main functions of the Security Agent may include holding Security on behalf ofthe Bondholders and monitoring compliance by the Issuer and other relevant partiesof their respective obligations under this Bond Agreement and/or the SecurityDocuments with respect to the Security.

Before the appointment of a Security Agent other than the Bond Trustee, the Issuershall be given the opportunity to state its views on the proposed Security Agent, butthe final decision as to appointment shalllie exclusively with the Bond Trustee.

17.4.2 The functions, rights and obligations of the Security Agent may be determined by aSecurity Agent agreement to be entered into between the Bond Trustee and theSecurity Agent, which the Bond Trustee shall have the right to require the Issuer andany other parties to any Security Document to sign as a party, or, at the discretion ofthe Bond Trustee, to acknowledge. The Bond Trustee shall at all times retain theright to instruct the Security Agent in all matters.

Any changes to this Bond Agreement necessary or appropriate in connection with theappointment of a Security Agent shall be documented in an amendment to this BondAgreement, signed by the Bond Trustee.

17.4.3 If so desired by the Bond Trustee, any or all of the Security Documents shall beamended, assigned or re-issued, so that the Security Agent is the holder of therelevant Security (on behalf of the Bondholders). The costs incurred in connectionwith such amendment, assignment or re-issue shall be for the account of the Issuer.

18 Miscellaneous

18.1 The community of Bondholders

By virtue of holding Bonds, which are governed by this Bond Agreement (whichpursuant to Clause 2.1.1 is binding upon all Bondholders), a communityexistsbetween the Bondholders, implying, inter alia, that:

(a) the Bondholders are bound by the terms ofthis Bond Agreement;

(b) the Bond Trustee has power and authority to act on behalf of, and/orrepresent; the Bondholders, in all matters, included but not limited to takingany legal or other action, including enforcement of the Bond Issue and/orany security, opening ofbankruptcy or other insolvency proceedings;

(c) the Bond Trustee has, in order to manage the terms of this Bond Agreement,access to the Securities Depository to review ownership of Bonds registeredin the Securities Depository; and

(d) this Bond Agreement establishes a community between Bondholdersmeaning that:

(i) the Bonds rank pari passu between each other;

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(ii) the Bondholders may not, based on this Bond Agreement, actdirectly towards the Issuer and may not themselves institute legalproceedings against the Issuer, however not restricting theBondholders to exercise their individual rights derived from thisBond Agreement;

(Hi) the Issuer may not, based on this Bond Agreement, act directlytowards the Bondholders;

(iv) the Bondholders may not cancel the Bondholders' community; and(v) the individual Bondholder may not resign from the Bondholders'

community.

18.2 Defeasance

18.2.1 The Issuer may, at its option and at any time, elect to have certain obligationsdischarged (see Clause 18.2.2) upon complying with the following conditions("Security and Covenant Defeasance"):

(a) the Issuer shall have irrevocably pledged to the Bond Trustee for the benefitof the Bondholders cash or government bonds accepted by the Bond Trustee(the "Defeasance Pledge") in such amounts as will be sufficient for thepayment of principal (including if applicable premium payable uponexercise of a Call Option) and interest on the Outstanding Bonds to MaturityDate (or redemption upon a exercise of a notified Call Option) or any otheramount agreed between the Parties;

(b) no Event of Default shall have occurred and be continuing on the date ofestablishment of the Defeasance Pledge, or insofar as Events of Defaultfrom bankruptcy or insolvency events are concerned, at any time during anyhardening period applicable to the Defeasance Pledge (or the relevant periodfor non-Norwegian companies) or any other date agreed between theParties;

(c) if the Bonds are secured, the Defeasance Pledge shall be considered as areplacement of the security established prior to the Defeasance Pledge;

(d) the Issuer shall have delivered to the Bond Trustee a certificate signed by itsChief Executive Officer that the Defeasance Pledge was not made by theIssuer with the intent of preferring the Bondholders over any other creditorsof the Issuer or with the intent of defeating, hindering, delaying ordefrauding any other creditors of the Issuer or others; and

Ce) the Issuer shall have delivered to the Bond Trustee any certificate or legalopinion reasonably required by the Bond Trustee regarding the Security andCovenant Defeasance or Defeasance Pledge, including any certificate orlegal opinion on (i) the compliance of the conditions of the Security andCovenant Defeasance, (H) that the Defeasance Pledge constitutes a valid,perfected and enforceable security in favour of the Bond Trustee for thebenefit of the Bondholders which will not be subject to any rights ofcreditors of the Issuer or any bankruptcy, insolvency, reorganization orsimilar laws affecting creditors rights generally under the laws of thejurisdiction where the Defeasance Pledge was established and the corporate

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domicile of the Issuer, (iii) any relevant tax issues concerning theBondholders, (iv) any valuation of any assets or (vii) any other certificate oropinion regarding the Security and Covenant Defeasance or the DefeasancePledge.

18.2.2 Upon the exercise by the Issuer ofits option under Clause 18.2.1:

(a) the Issuer shall be released from their obligations under all provisions inClause 13, except Clauses 13.2.1(a), (e), (h), (i) and 0), or as otherwiseagreed;

(b) the Issuer shall not (and shall ensure that all Group Companies shall not)take any actions that may cause the value of the security created by thisSecurityand Covenant Defeasance to be reduced, and shall at the request ofthe Bond Trustee execute, or cause to be executed, such furtherdocumentation and perform such other acts as the Bond Trustee mayreasonably require in order for the security to remain valid, enforceable andperfected by the Bond Trustee for the account of the Bondholders;

(c) any amount standing to the credit of the Escrow Account shall be released;and

(d) all other provisions ofthis Bond Agreement (except (a) - (c) above) shallremain fully in force without any modifications, or as otherwise agreed.

18.2.3 All amounts owed by the Issuer hereunder covered by the Defeasance Pledge shall beapplied by the Bond Trustee, in accordance with the provisions ofthis BondAgreement, against payment to the Bondholders of all sums due to them under thisBond Agreement on the due date thereof.

Any excess funds not required for the payment ofprincipal, premium and interest tothe Bondholders (including any expenses, fees etc. due to the Bond Trusteehereunder) shall be returned to the Issuer.

18.3 Limitation of claims

All claims under the Bonds and this Bond Agreement for payment, including interestand principal, shall be subject to the time-bar provisions of the Norwegian LimitationAct ofMay 18, 1979 No. 18.

18.4 Access to information

18.4.1 This Bond Agreement is available to anyone and copies may be obtained from theBond Trustee or the Issuer. The Bond Trustee shall not have any obligation todistribute any other information to the Bondholders or others than explicitly stated inthis Bond Agreement. The Issuer shall ensure that a copy of this Bond Agreement isavailable to the general public until all the Bonds have been fully discharged.

18.4.2 The Bond Trustee shall, in order to carry out its functions and obligations under thisBond Agreement, have access to the Securities Depository for the purposes ofreviewing ownership of the Bonds registered in the Securities Depository.

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18.5 Amendments

All amendments of this Bond Agreement shall be made in writing, and shall unlessotherwise provided for by this Bond Agreement, only be made with the approval ofall parties hereto.

18.6 Notices, contact information

18.6.1 Written notices, warnings, summons etc to the Bondholders made by the BondTrustee shall be sent via the Securities Depository with a copy to the Issuer and theExchange. Information to the Bondholders may also be published at Stamdata only.Any such notice or communication shall be deemed to be given or made as follows:

(a) ifby letter via the Securities Depository, when sent from the SecuritiesDepository; and

(b) if by publication on Stamdata, when publicly available.

18.6.2 The Issuer's written notifications to the Bondholders shall be sent via the BondTrustee, alternatively through the Securities Depository with a copy to the BondTrustee and the Exchange.

18.6.3 Unless otherwise specifically provided, all notices or other communications under orin connection with this Bond Agreement between the Bond Trustee and the Issuershall be given or made in writing, by letter, e-mail or fax. Any such notice orcommunication shall be deemed to be given or made as follows:

(a) if by letter, when delivered at the address of the relevant Party;

(b) ifby e-mail, when received; and

(c) ifby fax, when received.

18.6.4 The Issuer and the Bond Trustee shall ensure that the other party is kept informed ofchanges in postal address, e-mail address, telephone and fax numbers and contactpersons.

18.6.5 When determining deadlines set out in this Bond Agreement, the following shallapply (unless otherwise stated):

(a) Ifthe deadline is set out in days, the first day when the deadline is in forceshall not be inclusive, however, the meeting day or the occurrence thedeadline relates to, shall be included.

(b) If the deadline is set out in weeks, months or years, the deadline shall end onthe day in the last week or the last month which, according to its name ornumber, corresponds to the first day the deadline is in force. If such day isnot a part of an actual month, the deadline shall be the last day of suchmonth.

35

(c) If a deadline ends on a day which is not a Business Day, the deadline ispostponed to the next Business Day.

18.7 Dispute resolution and legal venue

18.7.1 This Bond Agreement and all disputes arising out of, or in connection with this BondAgreement between the Bond Trustee, the Bondholders and the Issuer, shall begoverned by Norwegian law.

18.7.2 All disputes arising out of, or in connection with this Bond Agreement between theBond Trustee, the Bondholders and the Issuer, shall, subject to paragraph 18.7.3below, be exclusively resolved by the courts of Norway, with the District Court ofOslo as sole legal venue.

*****

18.7.3 Clause 18.7.2 is for the benefit of the Bond Trustee only. As a result, the BondTrustee shall not be prevented from taking proceedings relating to a dispute in anyother courts withjurisdiction. To the extent allowed by law, the Bond Trustee maytake concurrent proceedings in any number of jurisdictions.

18.8 Process Agent

The Issuer shall, prior to the Issue Date, nominate a process agent in Norway for thepurpose of serving a writ of summons and/or any other act of process in respect ofthe courts in Norway, or any notices as set out in this Bond Agreement.

s:»

This Bond Agreement has been executed in two originals, of which the Issuer and the BondTrustee retain one each.

Issuer Bon~J?~stee.. ...~ ...By:Position:

.......;j~fo..By: Niall NolanPosition: Attorney-in-fact

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Attachment 1

COMPLIANCE CERTIFICATENorsk Tillitsmann ASAP.O. Box 1470 VikaN~0116 OsloNorwayFax: +4722879410Eemail: [email protected]

[date]Dear Sirs,

9.0 per cent Navigator Holdings Ltd Bond Agreement 2012/2017 - ISIN 001 0665508

We refer to the Bond Agreement for the abovementioned Bond Issue made between NorskTillitsmann ASA as Bond Trustee on behalf of the Bondholders, and the undersigned as Issuerunder which a Compliance Certificate shall be issued. This letter constitutes the ComplianceCertificate for the period [PERIOD].

Capitalised terms used herein shall have the same meaning as in this Bond Agreement.

With reference to Clause 13.2.2 we hereby certify that:

1. al1 information contained herein is true and accurate and there has been no change whichwould have a Material Adverse Effect on the financial condition of the Issuer since thedate of the last accounts or the last Compliance Certificate submitted to you;

2. the covenants set out in Clause 13 are satisfied;

3. no Event of Default has occurred and is continuing; and

4. in accordance with Clause] 3.5 and as of [date],

Ci) the Minimum Liquidity is USD [ ] which is [ ] % of the Total Interest-Bearing Debt.

(H) the Minimum Working Capital is USD [

(iii) the Interest Coverage Ratio is [ ]

(iv) the Equity Ratio in respect of the Group is [ ]%; and

(v) [the Asset Coverage Ratio is [from and including the Quarter Date 30 June2013]].

Copies of our latest consolidated [Financial Statements] 1 [Interim Accounts] are enclosed.

Yours faithfully,Navigator Holdings Ltd.

Name of authorized personEnclosure: [copy of any written documentation]

37

mailto:[email protected]

NAVIGATOR HOLDINGS LTD FINANCIAL STATEMENTS FOR THE PERIOD TO SEPTEMBER 30, 2012


Index to Financial Statements

Page Third Quarter 2012 financial and operating results 1 Consolidated Balance Sheets as of September 30, 2012 (Unaudited) and December 31, 2011 2 Consolidated Statements of Operations for the three and nine month periods ended September 30, 2012 and 2011 (unaudited) 3 Consolidated Statements of Stockholders’ Equity for the year ended December 31, 2011 and for the nine month period ending September 30, 2012 (unaudited) 4 Consolidated Statements of Comprehensive Income for the nine month periods ended September 30, 2012 and 2011 (unaudited) 4 Consolidated Statements of Cash Flows for the nine month periods ended September 30, 2012 and 2011 (unaudited) 5 Notes to Consolidated Financial Statements 6

1

Navigator Holdings Ltd reports Third Quarter 2012 financial and operating results.

Third Quarter 2012 Results:

Operating revenue for the three months ended September 30, 2012 amounted to $39.6 million, an increase of

$18.1 million compared to operating revenue of $21.5 million for the three months ended September 30, 2011.

The average time charter equivalent rate was approximately $788,000 per calendar month ($25,915 per day)

during this third quarter, compared to $760,000 per calendar month ($24,986 per day) a year ago. Fleet utilization

for the third quarter was 99.2% compared with 98.1% for the same three month period of 2011.

Net operating revenue, which deducts voyage costs incurred during a voyage charter (bunkers, port costs and

canal fees) from operating revenue, amounted to $32.4 million for the three months ended September 30, 2012

compared to $18.0 million for the three months ended September 30, 2011, an increase of $14.4 million, most of

which is as a result of additional vessels being added to the fleet. Since the third quarter of last year the Company

has taken delivery of two new builds; Navigator Leo delivered on September 27, 2011 and Navigator Libra

delivered on February 9, 2012. The Company also acquired two additional vessels from the existing tonnage in

our sector during the second quarter of 2012; Navigator Pegasus (built June 2009) delivered on April 2, 2012 and

Navigator Phoenix (built August 2009), was delivered on April 30, 2012.

Vessel operating expenses increased by $3.5 million from $5.7 million for the three months to September 30,

2011 to $9.2 million for the same period in 2012. This increase is primarily as a result of additional vessels in the

fleet.

Net income for the three month period to September 30, 2012 was $8.4 million or $0.65 per share, increased from

$5.4 million or $0.52 per share for the same three months of 2011. EBITDA for the quarter was $17.2 million

compared with $10.5 million for the quarter ended September 30, 2011.

First Nine Months 2012 Results:

Operating revenue for the nine months ended September 30, 2012 amounted to $106.5 million, an increase of

$42.3 million compared to operating revenue of $64.2 million for the nine months ended September 30, 2011.

The average time charter equivalent rate was approximately $772,500 per calendar month ($25,397 per day)

during the first nine months, compared to $748,700 per calendar month ($24,615 per day) a year ago. Fleet

utilization for the nine months was 99.4% compared with 97.0% for the same nine month period of 2011.

Net operating revenue amounted to $85.2 million for the nine months ended September 30, 2012 compared to

$52.1 million for the nine months ended September 30, 2011. Of this $33.1 million increase in net operating

revenue $31.4 million is volume related with $1.7 million attributable to increased charter rates.

Vessel operating expenses increased by $7.7 million from $16.6 million for the nine months to September 30,

2011, to $24.3 million for the same nine month period in 2012. This increase is primarily as a result of the

additional vessels in the fleet.

Net income for the nine month period to September 30, 2012 was $21.7 million or $1.77 per share, increased

from $14.0 million or $1.35 per share for the same nine months of 2011. EBITDA for the first nine months of 2012

was $45.8 million with cash generated from operating activities of $38.6 million. EBITDA was $29.3 million for the

nine months ended September 30, 2011.

2


Consolidated Balance Sheets

(Unaudited)

September 30, December 31, 2012 2011 Assets

Current assets

Cash and cash equivalents $ 37,172,573 $ 26,734,435

Accounts receivable, net 5,213,987 1,303,445

Prepaid expenses and other current assets 8,711,126 5,427,643

Inventories 4,102,443 4,448,830

Total current assets 55,200,129 37,914,353

Vessels in operation, net 592,966,559 455,268,366

Vessels under construction 20,099,413 30,183,159

Other fixed assets, net 233,370 202,881

Deferred finance costs, net 3,147,947 1,224,375

Total assets $ 671,647,418 $ 524,793,134 Liabilities and Stockholders’ Equity

Current liabilities

Current portion of long term debt $ 26,842,508 $ 14,827,696

Accounts payable 5,086,864 4,351,463

Accrued expenses and other liabilities 4,683,610 2,087,847

Deferred income 3,193,897 1,968,225

Total current liabilities 39,806,879 23,235,231

Non - current liabilities

Long term debt, net of current portion 193,103,872 129,529,712

Stockholders’ equity

Common stock – $.01 par value;

20,000,000 shares authorized;

12,898,216 shares issued and outstanding

(2011: 10,996,450) 128,982 109,965

Additional paid-in capital 352,357,132 305,009,507

Accumulated other comprehensive loss (100,102) (146,673)

Retained earnings 86,350,655 67,055,392

Total stockholders’ equity 438,736,667 372,028,191

Total liabilities and stockholders’ equity $ 671,647,418 $ 524,793,134

See accompanying notes to consolidated financial statements.

3


Consolidated Statements of Operations

(Unaudited)

Three months ended Nine months ended September 30 September 30

2012 2011 2012 2011 Revenues

Operating revenue $ 39,571,570 $ 21,489,029 $ 106,488,310 $ 64,161,889

Expenses

Address and brokerage commissions 1,137,636 641,745 3,161,059 1,999,756

Voyage expenses 7,152,534 3,446,545 21,314,117 12,072,528

Charter in cost 3,495,331 - 7,095,331 -

Vessel operating expenses 9,165,211 5,691,679 24,269,684 16,607,513

Depreciation and amortization 6,338,986 4,557,936 17,845,075 13,672,772

General and administrative costs 1,180,946 921,817 3,716,912 3,185,816

Other corporate expenses 234,470 301,101 1,084,448 948,406

28,705,114 15,560,823 78,486,626 48,486,791

Operating income 10,866,456 5,928,206 28,001,684 15,675,098

Other income/(expense)

Interest expense (2,384,960) (536,299) (5,946,133) (1,561,674)

Interest income 26,444 2,647 35,636 6,315

Income before income taxes 8,507,940 5,394,554 22,091,187 14,119,739

Income taxes (131,094) (33,825) (376,705) (79,826)

Net income $ 8,376,846 $ 5,360,729 $ 21,714,482 $ 14,039,913

Earnings per share:

Basic and diluted $ 0.65 $ 0.52 $ 1.77 $ 1.35

Weighted average number of shares outstanding:

Basic and diluted 12,898,216 10,371,450 12,274,998 10,364,226


4


Consolidated Statements of Stockholders’ Equity (Unaudited)

Accumulated Additional Other Common Paid in Comprehensive Retained Stock Capital Income (Loss) Earnings Total

January 1, 2011 $ 103,510 $ 288,905,478 $ (138,521) $ 58,045,449 $ 346,915,916

Issuance of common stock 6,250 15,262,200 - - 15,268,450

Restricted shares issued on:

March 31, 2011 53 - - - 53

April 10, 2011 152 - - - 152

Net income - - - 18,650,279 18,650,279

Dividends paid - - - (9,640,336) (9,640,336)

Foreign currency translation - - (8,152) - (8,152)

Share based compensation plan - 841,829 - - 841,829

December 31, 2011 109,965 305,009,507 (146,673) 67,055,392 372,028,191



February 22, 2012 167 - - - 167

April 24, 2012 100 - - - 100

Net income - - - 21,714,482 21,714,482

Dividends paid - - - (2,419,219) (2,419,219)

Foreign currency translation - - 46,571 - 46,571


September 30, 2012 $ 128,982 $ 352,357,132 $ (100,102) $ 86,350,655 $ 438,736,667

Consolidated Statements of Comprehensive Income

Nine months ended Nine months ended September 30, September 30, 2012 2011

Net income $ 21,714,482 $ 14,039,913

Comprehensive Income / (loss):

Foreign currency translation gain 46,571 (9,750)

Total Comprehensive Income $ 21,761,053 $ 14,030,163


5


Consolidated Statements of Cash Flows (Unaudited)

Nine months ended Nine months ended September 30, September 30, 2012 2011 Cash flows from operating activities

Net income $ 21,714,482 $ 14,039,913

Adjustments to reconcile net income to net cash

provided by operating activities

Depreciation and amortization 17,845,075 13,672,772

Stock based compensation 514,269 632,025

Amortization of direct financing costs 776,428 194,087

Unrealized foreign exchange 41,819 (13,194)

Changes in operating assets and liabilities

Accounts receivable (3,910,542) 2,163,055

Prepaid expenses and other current assets (3,283,483) 3,798,772

Accounts payable and other liabilities 4,556,835 2,262,803

Inventories 346,386 (196,762)

Net cash provided by operating activities 38,601,269 36,553,471

Cash flows from investing activities

Payment to acquire vessels (100,538,753) (68,704,887)

Payment for vessels under construction (44,832,038) -

Payment of dry docking costs - (6,779)

Purchase of other fixed assets (114,466) (50,728)

Net cash used in investing activities (145,485,257) (68,762,394) Cash flows from financing activities

Proceeds from long term debt, net of direct financing costs 173,828,261 47,100,000

Repayment of long term debt (100,939,289) (3,740,741)

Proceeds from issuance of stock, net of issuance costs 46,852,373 -

Dividends paid (2,419,219) (6,943,759)

Net cash provided by financing activities 117,322,126 36,415,500

Net increase in cash and cash equivalents 10,438,138 4,206,577

Cash and cash equivalents at beginning of period 26,734,435 16,243,112

Cash and cash equivalents at end of period $ 37,172,573 $ 20,449,689 Supplemental Information

Total interest paid during the period excluding capitalized interest $ 3,997,792 $ 1,556,251

Total tax paid during the period $ 100,598 $ 59,247


6


Notes to the unaudited Consolidated Financial Statements

1. Basis of Presentation

In the opinion of the management of Navigator Holdings Ltd (the “Company”) the accompanying unaudited

financial statements reflect all adjustments, consisting of normal recurring accruals, necessary for a fair

presentation of the financial position of the Company and its subsidiaries as of September 30, 2012; the

results of its operations for the three and nine months ended September 30, 2012 and 2011; statement of

stockholders equity for the nine months ended September 30, 2012; and cash flows for the nine months

ended September 30, 2012 and 2011.

These condensed consolidated financial statements of the Company and its subsidiaries have been

prepared without an audit in accordance with generally accepted accounting principles in the United States

of America. Also, they do not include all of the information and footnotes required by accounting principles

generally accepted in the United States of America for complete financial statements. The results for the

period ended September 30, 2012 are not necessarily indicative of results for the full 2012 fiscal year or

any other future periods. It is recommended that these financial statements be read in conjunction with our

consolidated financial statements and notes thereto for the year ended December 31, 2011.

2. Commitments and Contingencies

The Company occupies office space in London, the lease for which was renegotiated and commenced on

March 30, 2012 for a period of ten years, with a tenant break clause after five years, and paying

approximately $515,000 (£321,850) per calendar year.

The Company also occupies property in New York with the lease being renewed during the year and

paying approximately $231,990 per year. The new lease is for a period of five years ending June 30, 2017.

The Company has chartered in a vessel for a period ending in December 2014 at a fixed monthly rate

commensurate with the market rate at the time of fixing the charter.

The Company entered into an agreement on April 25, 2012 to construct up to six 21,000 cubic meter, semi

refrigerated ethylene gas carriers from Jiangnan Shipyard (Group) Co. Ltd in China for a contract price of

approximately $300 million. At the balance sheet date the Company was committed to the purchase of four

of the new build vessels. A further option on the remaining two vessels is exercisable before the end of the

year. The first vessel is scheduled to be delivered in April 2014 followed by a vessel delivery each two

months thereafter.

NAVIGATOR HOLDINGS LTD FINANCIAL STATEMENTS FOR THE PERIOD TO JUNE 30, 2012



Page Second Quarter 2012 financial and operating results 1 Consolidated Balance Sheets as of June 30, 2012 (Unaudited) and December 31, 2011 2 Consolidated Statements of Operations for the three and six month periods ended June 30, 2012 and 2011 (unaudited) 3 Consolidated Statements of Stockholders’ Equity for the year ended December 31, 2011 and for the six month period ending June 30, 2012 (unaudited) 4 Consolidated Statements of Comprehensive Income for the six month periods ended June 30, 2012 and 2011 (unaudited) 4 Consolidated Statements of Cash Flows for the six month periods ended June 30, 2012 and 2011 (unaudited) 5 Notes to Consolidated Financial Statements 6

1

Navigator Holdings Ltd reports Second Quarter 2012 financial and operating results.

Second Quarter 2012 Results:

Operating revenue for the three months ended June 30, 2012 amounted to $37.2 million, an increase of $15.8

million compared to operating revenue of $21.4 million for the three months ended June 30, 2011. The average

time charter equivalent rate was approximately $769,000 per calendar month ($25,275 per day) during this

second quarter, compared to $789,300 per calendar month ($25,950 per day) a year ago. Fleet utilization for the

second quarter was 99.7% compared with 94.5% for the same three month period of 2011.

Net operating revenue, which deducts voyage costs incurred during a voyage charter (bunkers, port costs and

canal fees) from operating revenue, amounted to $29.0 million for the three months ended June 30, 2012

compared to $17.9 million for the three months ended June 30, 2011, an increase of $11.1 million, most of which

is as a result of additional vessels. The Company acquired two additional vessels to the fleet in the second

quarter of 2012; Navigator Pegasus (built June 2009) delivered on April 2, 2012 and Navigator Phoenix (built

August 2009), was delivered on April 30, 2012.

Vessel operating expenses increased by $2.9 million from $5.7 million for the three months to June 30, 2011 to

$8.6 million for the same period in 2012. This increase is primarily as a result of additional vessels in the fleet.

Net income for the three month period to June 30, 2012 was $7.1 million or $0.55 per share, increased from $4.6

million or $0.44 per share for the same three months of 2011. EBITDA for the quarter was $15.8 million compared

with $9.7 million for the quarter ended June 30, 2011.

First Six Months 2012 Results:

Operating revenue for the six months ended June 30, 2012 amounted to $67.0 million, an increase of $24.3

million compared to operating revenue of $42.7 million for the six months ended June 30, 2011. The average

time charter equivalent rate was approximately $763,000 per calendar month ($25,089 per day) during the first six

months, compared to $742,900 per calendar month ($24,423 per day) a year ago. Fleet utilization for the six

months was 99.5% compared with 96.3% for the same six month period of 2011.

Net operating revenue amounted to $52.8 million for the six months ended June 30, 2012 compared to $34.0

million for the six months ended June 30, 2011. Of this $18.8 million increase in net operating revenue $17.8

million is volume related with $1.0 million attributable to increased charter rates.

Vessel operating expenses increased by $4.2 million from $10.9 million for the six months to June 30, 2011, to

$15.1 million for the same six month period in 2012. This increase is primarily as a result of the additional vessels

in the fleet.

Net income for the six month period to June 30, 2012 was $13.3 million or $1.12 per share, increased from $8.7

million or $0.84 per share for the same six months of 2011. EBITDA for the first six months of 2012 was $28.6

million with cash generated from operating activities of $26.5 million. EBITDA was $18.9 million for the six months

ended June 30, 2012.

2



(Unaudited)

June 30, December 31, 2012 2011 Assets

Current assets




Inventories 4,107,679 4,448,830



Vessels under construction 10,036,845 30,183,159


Deferred finance costs, net 3,330,729 1,224,375


Current liabilities

Current portion of long term debt $ 26,842,508 $ 14,827,696



Deferred income 3,160,246 1,968,225


Non - current liabilities

Long term debt, net of current portion 199,814,499 129,529,712




12,898,216 shares issued and outstanding

(2011: 10,996,450) 128,982 109,965







3



(Unaudited)

Three months ended Six months ended June 30 June 30

2012 2011 2012 2011 Revenues


Expenses

Address and brokerage commissions 1,131,770 680,517 2,023,423 1,358,011

Voyage expenses 8,205,538 3,518,455 14,161,583 8,625,983

Charter in cost 1,800,000 - 3,600,000 -



General and administrative costs 1,194,908 1,316,407 2,535,966 2,263,998

Other corporate expenses 507,761 477,286 849,978 647,305

27,606,992 16,264,101 49,781,512 32,925,968



Interest expense (2,433,793) (518,767) (3,561,173) (1,025,375)

Interest income 7,476 1,721 9,192 3,668


Income taxes (121,350) (30,623) (245,611) (46,001)

Net income $ 7,064,789 $ 4,562,800 $ 13,337,636 $ 8,679,184

Earnings per share:





4


Consolidated Statements of Stockholders’ Equity (Unaudited)


January 1, 2011 $ 103,510 $ 288,905,478 $ (138,521) $ 58,045,449 $ 346,915,916



March 31, 2011 53 - - - 53

April 10, 2011 152 - - - 152

Net income - - - 18,650,279 18,650,279

Dividends paid - - - (9,640,336) (9,640,336)



December 31, 2011 109,965 305,009,507 (146,673) 67,055,392 372,028,191



February 22, 2012 167 - - - 167

April 24, 2012 100 - - - 100

Net income - - - 13,337,636 13,337,636

Dividends paid - - - (2,419,219) (2,419,219)

Foreign currency translation - - 23,295 - 23,295


June 30, 2012 $ 128,982 $ 352,176,704 $ (123,378) $ 77,973,809 $ 430,156,117


Six months ended Six months ended June 30, June 30, 2012 2011

Net income $ 13,337,636 $ 8,679,184

Comprehensive Income / (loss):

Foreign currency translation gain 23,295 (1,059)



5



Six months ended Six months ended June 30, June 30, 2012 2011 Cash flows from operating activities

Net income $ 13,337,636 $ 8,679,184




Stock based compensation 333,841 417,208


Unrealized foreign exchange 20,922 (7,226)


Accounts receivable (3,118,816) 2,227,307

Prepaid expenses and other current assets (440,498) 4,035,720

Accounts payable and other liabilities 3,863,374 548,892

Inventories 341,151 720,557



Payment to acquire vessels (100,522,771) -

Payment for vessels under construction (34,797,711) (35,493,675)

Payment of dry docking costs - (6,779)





Proceeds from issuance of stock, net of issuance costs 46,852,373 -

Dividends paid (2,419,219) (4,662,040)


Net increase / (decrease) in cash and cash equivalents 15,048,361 (591,353)

Cash and cash equivalents at beginning of period 26,734,435 16,243,112

Cash and cash equivalents at end of period $ 41,782,796 $ 15,651,759 Supplemental Information

Total interest paid during the period excluding capitalized interest $ 2,271,162 $ 948,803

Total tax paid during the period $ 58,745 $ 35,545


6




In the opinion of the management of Navigator Holdings Ltd (the “Company”) the accompanying unaudited

financial statements reflect all adjustments, consisting of normal recurring accruals, necessary for a fair

presentation of the financial position of the Company and its subsidiaries as of June 30, 2012; the results

of its operations for the three and six months ended June 30, 2012 and 2011; statement of stockholders

equity for the six months ended June 30, 2012; and cash flows for the six months ended June 30, 2012

and 2011.

These condensed consolidated financial statements of the Company and its subsidiaries have been

prepared without an audit in accordance with generally accepted accounting principles in the United States

of America. Also, they do not include all of the information and footnotes required by accounting principles

generally accepted in the United States of America for complete financial statements. The results for the

period ended June 30, 2012 are not necessarily indicative of results for the full 2012 fiscal year or any

other future periods. It is recommended that these financial statements be read in conjunction with our

consolidated financial statements and notes thereto for the year ended December 31, 2011.


The Company occupies office space in London, the lease for which was renegotiated and commenced on

March 30, 2012 for a period of ten years, with a tenant break clause after five years, and paying

approximately $515,000 (£321,850) per calendar year.

The Company also occupies property in New York paying approximately $133,500 per year. The lease is

for a period of three years ending August 30, 2012.

On December 14, 2011 the Company time chartered in a vessel for a period of two years at a fixed

monthly rate commensurate with the market rate at the time of fixing the charter.

The Company entered into an agreement on April 25, 2012 to construct up to six 21,000 cubic meter, semi

refrigerated ethylene gas carriers from Jiangnan Shipyard (Group) Co. Ltd in China for a contract price of

approximately $300 million. At the balance sheet date the Company was committed to the purchase of two

of the new build vessels with the commitment to purchase a further two exercised in July 2012. A further

option on the remaining two vessels is exercisable before the end of the year. The first vessel is scheduled

to be delivered in April 2014 followed by a vessel delivery each two months thereafter.

NAVIGATOR HOLDINGS LTD FINANCIAL STATEMENTS FOR THE QUARTER TO MARCH 31, 2012



Page First Quarter 2012 financial and operating results 1 Consolidated Balance Sheets as of March 31, 2012 and December 31, 2011 2 Consolidated Statements of Operations for the three month periods ended March 31, 2012 and 2011 3 Consolidated Statements of Stockholders’ Equity for the year ended December 31, 2011 and for the three month period ending March 31, 2012 4 Consolidated Statements of Comprehensive Income for the three month periods ended March 31, 2012 and 2011 4 Consolidated Statements of Cash Flows for the three month periods ended March 31, 2012 and 2011 5 Notes to Consolidated Financial Statements 6

1

Navigator Holdings Ltd reports First Quarter 2012 financial and operating results.

First Quarter 2012 Results:

Operating revenue for the three months ended March 31, 2012 amounted to $29.7 million, an increase of $8.4

million compared to operating revenue of $21.3 million for the three months ended March 31, 2011. The average

time charter equivalent rate was approximately $759,000 per calendar month ($24,950 per day) during this first

quarter, compared to $683,000 for Q4, 2011 and $697,500 per calendar month ($22,934 per day) for the

comparative quarter of 2011. Fleet utilization was 99.3% for this first quarter compared with 98.1% for the same

three month period of 2011 and 97.4% for the whole of 2011.

Net operating revenue, which is operating revenue less voyage expenses, amounted to $23.7 million for the three

months ended March 31, 2012 compared to $16.2 million for the three months ended March 31, 2011. However

$5.9 million of this increase relates to additional vessels in the fleet and $1.6 million of from improved charter

rates and a slightly increased utilization. There were three additional vessels in the fleet for the first quarter of

2012, of which two are new-build vessels delivered in September 2011 and February 2012 and one chartered-in

vessel, delivered in December 2011 for a period of two years.

Vessel operating expenses increased by $1.3 million from $5.2 million for the three months to March 31, 2011 to

$6.5 million for the same period in 2012 solely as a result of additional new vessels.

Net income rose to $6.3 million for the three month period to March 31, 2012 or $0.57 per share, from $4.1 million

or $0.40 per share for the same three months of 2011.

EBITDA for the quarter was $12.8 million compared with $9.2 million for the quarter ended March 31, 2011.

Trading in the first quarter of 2012 is in line with management expectations.

The cash position as of March 31, 2012 of approximately $70 million reflects the sale on March 30 of 1.875 million

new shares in Navigator Holdings Ltd at $25 per share ($46.87 million) to WL Ross &Co., under a previously

agreed commitment. WL Ross & Co. also purchased a further 950,000 shares from existing shareholders bringing

its position to 3.45 million shares representing a 26.8% ownership of the Company.

As of March 31, 2012 there were 12,884,516 shares outstanding.

2


Consolidated Balance Sheets March 31, December 31, 2012 2011 (Unaudited) Assets Current assets

Cash and cash equivalents $ 68,999,384 $ 26,734,435 Accounts receivable, net 1,629,914 1,303,445 Prepaid expenses and other current assets 8,232,558 5,427,643 Inventories 4,492,355 4,448,830 Total current assets 83,354,211 37,914,353 Vessels in operation, net 504,901,624 455,268,366 Vessels under construction - 30,183,159 Other fixed assets, net 176,923 202,881 Restricted cash 10,033,400 - Deferred finance costs, net 1,132,262 1,224,375

Total assets $ 599,598,420 $ 524,793,134 Liabilities and Stockholders’ Equity Current liabilities Current portion of long term debt $ 15,272,140 $ 14,827,696 Accounts payable 3,043,708 4,351,463 Accrued expenses and other liabilities 4,132,369 2,087,847 Deferred income 1,968,225 1,968,225 Total current liabilities 24,416,442 23,235,231 Non – current liabilities

Long term debt, net of current portion 152,239,938 129,529,712 Stockholders’ equity

Common stock – $.01 par value; 20,000,000 shares authorized; 12,884,516 shares issued and outstanding (2011: 10,996,450) 128,846 109,965 Additional paid-in capital 351,995,675 305,009,507 Accumulated other comprehensive loss (91,501) (146,673) Retained earnings 70,909,020 67,055,392 Total stockholders’ equity 422,942,040 372,028,191



3


Consolidated Statements of Operations (Unaudited)

Three Months ended Three months ended March 31, March 31, 2012 2011 Revenues

Operating revenue $ 29,697,292 $ 21,298,290

Expenses

Address and brokerage commissions 891,653 677,494 Voyage expenses 5,956,045 5,107,528 Charter-in cost 1,800,000 - Vessel operating expenses 6,543,590 5,202,775 Depreciation and amortization 5,299,957 4,556,459 General and administrative costs 1,341,058 947,592 Other corporate expenses 342,217 170,019 22,174,520 16,661,867

Operating income 7,522,772 4,636,423


Interest expense (1,127,380) (506,608) Interest income 1,716 1,947 Income before income taxes 6,397,108 4,131,762 Income taxes (124,261) (15,378)

Net income $ 6,272,847 $ 4,116,384

Earnings per share: Basic and diluted $ 0.57 $ 0.40 Weighted average number of shares outstanding: Basic and diluted 11,022,511 10,351,000


4


Consolidated Statements of Stockholders’ Equity


January 1, 2011 $ 103,510 $ 288,905,478 $ (138,521) $ 58,045,449 $ 346,915,916 Issuance of common stock 6,250 15,262,200 - - 15,268,450 Restricted shares issued March 31, 2011 53 - - - 53 Restricted shares issued April 10, 2011 152 - - - 152 Net income - - - 18,650,279 18,650,279 Dividends paid - - - (9,640,336) (9,640,336) Foreign currency translation - - (8,152) - (8,152) Share based compensation plan - 841,829 - - 841,829

December 31, 2011 109,965 305,009,507 (146,673) 67,055,392 372,028,191 Issuance of common stock 18,750 46,849,609 - - 46,868,359 Restricted shares issued February 22, 2012 131 - - - 131 Net income - - - 6,272,847 6,272,847 Dividends paid - - - (2,419,219) (2,419,219) Foreign currency translation - - 55,172 - 55,172 Share based compensation plan - 136,559 - - 136,559

March 31, 2012 $ 128,846 $ 351,995,675 $ 91,501 $ 70,909,020 $ 422,942,040


Three months ended Three months ended March 31, March 31, 2012 2011

Net income $ 6,272,847 $ 4,116,384 Other Comprehensive Income / (loss):

Foreign currency translation gain 55,172 (2,404) Total Comprehensive Income $ 6,328,019 $ 4,113,980


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Three months ended Three months ended March 31, March 31, 2012 2011 Cash flows from operating activities

Net income $ 6,272,847 $ 4,116,384 Adjustments to reconcile net income to net cash


Depreciation and amortization 5,299,957 4,556,459 Stock based compensation 136,690 197,328 Amortization of direct financing costs 92,113 56,250 Unrealized foreign exchange 50,758 (8,221) Changes in operating assets and liabilities

Accounts receivable (326,469) (2,916,185) Prepaid expenses and other current assets (2,804,915) 3,101,652 Accounts payable and other liabilities 736,766 1,073,403 Inventories (43,525) 870,750 Net cash provided by operating activities 9,414,222 11,047,820 Cash flows from investing activities Placement of restricted cash for vessel purchase (10,033,400) - Payment for vessels under construction (24,719,683) - Payment of dry docking costs - (6,779) Purchase of other fixed assets - (31,816) Net cash used in investing activities (34,753,083) (38,595) Cash flows from financing activities

Proceeds from long term debt, net of direct financing costs 26,528,260 - Repayment of long term debt (3,373,590) - Proceeds from issuance of stock, net of issuance costs 46,868,359 - Dividends paid (2,419,219) (2,587,750) Net cash provided by / (used in) financing activities 67,603,810 (2,587,750) Net increase in cash and cash equivalents 42,264,949 8,421,475 Cash and cash equivalents at beginning of period 26,734,435 16,243,112 Cash and cash equivalents at end of period $ 68,999,384 $ 24,664,587 Supplemental Information

Total interest paid during the period excluding capitalized interest $ 832,198 $ 450,608 Total tax paid during the period $ 43,732 $ 34,879


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In the opinion of the management of Navigator Holdings Ltd (the “Company”) the accompanying unaudited financial statements reflect all adjustments, consisting of normal recurring accruals, necessary for a fair presentation of the financial position of the Company and its subsidiaries as of March 31, 2012; the results of its operations for the three months ended March 31, 2012 and 2011; statement of stockholders equity for the three months ended March 31, 2012; and cash flows for the three months ended March 31, 2012 and 2011.

These condensed consolidated financial statements of the Company and its subsidiaries have been prepared without an audit in accordance with generally accepted accounting principles in the United States of America. Also, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements. The results for the period ended March 31, 2012 are not necessarily indicative of results for the full 2012 fiscal year or any other future periods. It is recommended that these financial statements be read in conjunction with our consolidated financial statements and notes thereto for the year ended December 31, 2011.


The Company occupies office space in London, the lease for which was renegotiated to commence on March 30, 2012 for a period of ten years, with a tenant break clause after five years, and paying approximately $515,000 (£321,850) per calendar year. The Company also occupies property in New York paying approximately $133,500 per year. The lease is for a period of three years ending August 30, 2012. The Company entered into an agreement on March 2, 2012 to purchase two 22,000 cubic meter, semi refrigerated liquefied gas carriers from Petredec. The first of these vessels, renamed Navigator Pegasus, formerly Desert Orchid, was delivered on April 2 and the Dancing Brave, to be renamed Navigator Phoenix, is scheduled to be delivered on April 30, 2012. The funding for the new acquisitions will be a mixture of equity, from the issuance of 2.5 million new common shares to WL Ross & Co and new debt finance.

NAVIGATOR HOLDINGS LTD REPORT AND FINANCIAL STATEMENTS DECEMBER 31, 2011



Page Report of Independent Auditor 1 Consolidated Balance Sheets as of December 31, 2011 and 2010 2 Consolidated Statements of Operations for the years ended December 31, 2011 and 2010 3 Consolidated Statements of Stockholders’ Equity for the years ended December 31, 2011 and 2010 4 Consolidated Statements of Comprehensive Income for the years ended December 31, 2011 and 2010 4 Consolidated Statements of Cash Flows for the years ended December 31, 2011 and 2010 5 Notes to Consolidated Financial Statements 6 - 17 Quarterly financial data reported by management 18

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Consolidated Balance Sheets December 31, December 31, 2011 2010 Assets Current Assets

Cash and cash equivalents $ 26,734,435 $ 16,243,112 Accounts receivable, net 1,303,445 3,419,274 Prepaid expenses and other current assets 5,427,643 8,188,912 Inventories 4,448,830 3,593,714 Total Current assets 37,914,353 31,445,012 Vessels in operation, net 455,268,366 418,475,000 Vessels under construction 30,183,159 - Other fixed assets, net 202,881 270,485 Deferred finance costs, net 1,224,375 600,000

Total assets $ 524,793,134 $ 450,790,497 Liabilities and Stockholders’ Equity Current liabilities Current portion of long term debt $ 14,827,696 $ 6,148,148 Accounts payable 4,351,463 3,533,501 Accrued expenses and other liabilities 2,087,847 2,341,080 Deferred income 1,968,225 - Total current liabilities 23,235,231 12,022,729 Non – current liabilities

Long-term debt, net of current portion 129,529,712 91,851,852 Stockholders’ equity

Common stock – $.01 par value; 20,000,000 shares authorized; 10,996,450 shares issued and outstanding, (2010: 10,351,000) 109,965 103,510 Additional paid-in capital 305,009,507 288,905,478 Accumulated other comprehensive loss (146,673) (138,521) Retained earnings 67,055,392 58,045,449 Total stockholders’ equity 372,028,191 346,915,916



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Year ended Year ended December 31, December 31, 2011 2010 Revenues


Expenses

Address and brokerage commissions 2,664,461 2,951,359 Voyage expenses 18,004,701 17,399,682 Vessel operating expenses 22,938,934 21,376,916 Depreciation and amortization 18,677,574 17,889,097 General and administrative costs 4,232,103 4,035,351 Other corporate expenses 1,165,838 907,818 67,683,611 64,560,223



Interest expense (2,442,182) (2,354,421) Interest income 8,978 1,483 Income before income taxes 18,757,780 15,103,369 Income taxes (107,501) (99,450)

Net income $ 18,650,279 $ 15,003,919

Earnings per share: Basic and diluted $ 1.79 $ 1.45 Weighted average number of shares outstanding: Basic and diluted 10,398,581 10,343,000


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Accumulated Common Additional Other Stock at 0.01 Paid in Comprehensive Retained par value Capital Income (Loss) Earnings Total

January 1, 2010 $ 103,200 $ 287,709,516 $ (131,042) $ 46,250,340 $ 333,932,014 Restricted shares issued March 31, 2010 260 - - - 260 Restricted shares issued April 26, 2010 50 - - - 50 Net income - - - 15,003,919 15,003,919 Dividends paid - - - (3,208,810) (3,208,810) Foreign currency translation - - (7,479) - (7,479) Share based compensation plan - 1,195,962 - - 1,195,962

December 31, 2010 103,510 288,905,478 (138,521) 58,045,449 346,915,916 Issuance of common stock 6,250 15,262,200 - - 15,268,450 Restricted shares issued March 31, 2011 53 - - - 53 Restricted shares issued April 10, 2011 152 - - - 152 Net income - - - 18,650,279 18,650,279 Dividends paid - - - (9,640,336) (9,640,336) Foreign currency translation - - (8,152) - (8,152) Share based compensation plan - 841,829 - - 841,829

December 31, 2011 $ 109,965 $ 305,009,507 $ (146,673) $ 67,055,392 $ 372,028,191


Year ended Year ended December 31, December 31, 2011 2010

Net income $ 18,650,279 $ 15,003,919 Other Comprehensive Income (Loss):

Foreign currency translation loss (8,152) (7,479) Total Comprehensive Income $ 18,642,127 $ 14,996,440


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Consolidated Statements of Cash Flows

Year ended Year ended December 31, December 31, 2011 2010 Cash flows from operating activities

Net income $ 18,650,279 $ 15,003,919 Adjustments to reconcile net income to net cash


Depreciation and amortization 18,677,574 17,889,097 Stock based compensation 842,034 1,196,272 Amortization of deferred financing costs 275,625 225,000 Unrealized foreign exchange (11,031) (1,281) Changes in operating assets and liabilities

Accounts receivable 2,115,829 (681,698) Prepaid expenses and other current assets 2,761,269 (6,036,362) Accounts payable and other liabilities 2,532,954 (49,792) Inventories (855,116) (1,674,921) Net cash provided by operating activities 44,989,417 25,870,234 Cash flows from investing activities Payment to acquire vessels - (5,058) Payment for vessels under construction (85,526,666) - Payment of dry docking costs (6,780) (4,914,129) Purchase of other fixed assets (50,170) (30,456) Net cash used in investing activities (85,583,616) (4,949,643) Cash flows from financing activities

Proceeds from long term debt, net of direct financing costs 52,571,739 - Repayment of long term debt (7,114,331) (12,000,000) Proceeds from issuance of stock, net of issuance costs 15,268,450 - Dividends paid (9,640,336) (3,208,810) Net cash provided by/(used in) financing activities 51,085,522 (15,208,810) Net increase in cash and cash equivalents 10,491,323 5,711,781 Cash and cash equivalents at beginning of year 16,243,112 10,531,331 Cash and cash equivalents at end of year $ 26,734,435 $ 16,243,112 Supplemental Information

Total interest paid during the year excluding capitalized interest $ 2,093,833 $ 2,067,545 Total tax paid during the year $ 73,361 $ 102,686


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Notes to the Consolidated Financial Statements

December 31, 2011 and 2010

1. The Company and the basis of presentation

Navigator Holdings Ltd, the ultimate parent company of the Navigator Group of companies, is registered in the Republic of the Marshall Islands. The Company has a business of owning and chartering out a fleet of gas carriers. The accompanying consolidated financial statements incorporate the accounts of Navigator Holdings Ltd and its wholly owned subsidiaries (collectively the “Company”). These subsidiaries include Navigator Gas LLC and its vessel owing subsidiaries: Navigator Aries LLC; Navigator Gemini LLC; Navigator Leo LLC; Navigator Libra LLC; Navigator Mars LLC; Navigator Neptune LLC; Navigator Pluto LLC; Navigator Saturn LLC; Navigator Taurus LLC; Navigator Venus LLC; PT Navigator Khatulistiwa; NGT Services (UK) Limited; Navigator Gas US LLC; Navigator Gas Invest Ltd and Falcon Funding Pte Ltd. NGT Services (UK) Limited is a United Kingdom company formed in August 2006 to provide certain commercial, technical and administrative services to other companies within the group. Navigator Gas US LLC is an entity formed in the State of Delaware USA in May, 2009 in order to provide certain administrative services to other companies within the group. PT Navigator Khatulistiwa is a vessel owning company incorporated in Indonesia in April 2010. Falcon Funding Pte Ltd is a company formed in Singapore in March 2010 to provide vessel services. Navigator Gas Invest Limited is a company formed in the UK in May 2010 for the purpose of receiving dividends. All other subsidiaries are formed under the laws of the Republic of the Marshall Islands. At December 31, 2011 the Company owned and operated nine gas carriers (the “Vessels”) of which five are 22,000 cubic meter, semi-refrigerated and ethylene capable and four are 20,600 cubic meter, semi-refrigerated vessels. During the year the Company took delivery of Navigator Leo, a 20,600 cubic meter semi refrigerated vessel which was built at Hyundai Mipo Dockyard in South Korea. In addition to the nine vessels owned, the Company chartered in the vessel, Maple 3, a 20,700 cubic meter, semi refrigerated gas carrier to provide additional tonnage for the fleet. This vessel was chartered in to the Company for a period of two years from December 14, 2011. All of the ten vessels provide worldwide marine transportation. The Vessels have primarily been operating to date along the following routes: from the US Gulf to Mexico and Honduras, from the Mediterranean Sea to East Asia, from the Mediterranean Sea to North West Europe, from North West Europe to USA East Coast and cabotage along the Venezuelan, Nigerian and Indonesian coasts.

2. Summary of Significant Accounting Policies

(a) Basis of Presentation

The consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America. The accompanying consolidated financial statements include the accounts of the Company and its subsidiaries. All intercompany accounts and transactions have been eliminated on consolidation.

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Notes to the Consolidated Financial Statements (Continued)


2. Summary of Significant Accounting Policies (Continued)

(b) Vessels in Operation

The cost of the vessels (excluding the estimated initial dry-docking cost) less their estimated residual value is depreciated on a straight-line basis over the vessel’s estimated economic life. Management estimates the useful life of each of the Company’s vessels to be 30 years from the date of its construction.

(c) Impairment of Vessels

In accordance with Accounting Standards Codification (“ASC”) Topic 360 “Fixed Assets”, Vessels are reviewed for impairment when market conditions indicate a significant decrease in the assets’ fair value. An impairment loss is recognized when the sum of the expected future cash flows (undiscounted and without interest) from the Vessel over its estimated remaining useful life is less than its carrying amount. An impairment loss is recorded equal to the amount by which the Vessel’s carrying amount exceeds its fair value.

(d) Dry Docking Costs

Each Vessel is required to be dry-docked every 30 to 60 months for classification society surveys and inspections of, among other things, the underwater parts of the Vessel. These works include, but are not limited to hull coatings, seawater valves, steelworks and piping works, propeller servicing, anchor chain winch calibrations, all of which cannot be performed while the vessels are operating. The Company capitalizes costs associated with the dry-dockings in accordance with ASC Topic 360 “Fixed Assets” and amortizes these costs on a straight line basis over the period to the next expected dry-docking. Amortization of dry-docking costs is included in depreciation and amortization in the Statement of Operations. Costs incurred during the dry-docking period which relate to routine repairs and maintenance are expensed.

(e) Cash and Cash Equivalents The Company considers highly liquid investments, such as time deposits and certificates of

deposit, with an original maturity of three months or less when purchased, to be cash equivalents. (f) Accounts Receivable

The Company carries its accounts receivable at cost less an allowance for doubtful accounts. On a periodic basis, the Company evaluates its accounts receivable and establishes an allowance for doubtful accounts, based on a history of past write-offs, collections and current credit conditions. The Company does not generally charge interest on past-due accounts (unless the accounts are subject to legal action), and accounts are written off as uncollectible when all reasonable collection efforts have failed. Accounts are deemed past-due based on contractual terms.

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2. Summary of Significant Accounting Policies (Continued) (g) Inventories

Inventories include bunkers (fuel), for those vessels under voyage charter, and lubricants. Under a time charter the cost of bunkers is borne by and remains the property of the charterer. Inventories are accounted for on a first in, first out basis and are valued at the lower of cost and market value.

(h) Deferred Finance Costs Costs incurred in connection with obtaining long-term debt are recorded as deferred financing costs and are amortized to interest expense over the estimated duration of the related debt on a straight line basis. Such costs include fees paid to the lenders or on the lenders’ behalf and associated legal and other professional fees.

(i) Deferred Income

Deferred income is the balance of unearned revenues received and represents that portion received under a time charter or voyage charter arrangement as of the balance sheet date for revenue applicable to a period of time subsequent to the balance sheet date.

(j) Revenue Recognition

The Company employs its vessels on time charters or voyage charters. With time charters, the Company receives a fixed charter hire per on-hire day and revenue is recognized on an accrual basis and is recorded over the term of the charter as service is provided. In the case of voyage charters, the vessel is contracted for a voyage between two or several ports and the Company is paid for the cargo transported. Voyage charter revenue is recorded based on the percentage of service completed at the balance sheet date. A voyage is deemed to commence when a vessel is available for loading at the load port and is deemed to end upon the completion of the discharge of the current cargo.

(k) Other Comprehensive Income (Loss)

The Company follows the provisions of ASC Topic 220 “Comprehensive Income”, which requires separate presentation of certain transactions, which are recorded directly as components of stockholders’ equity. Comprehensive income is comprised of net income and foreign currency translation gains and losses.

(l) Voyage Expenses and Vessel Operating Expenses

When the Company employs its vessels on time charter, it is responsible for all the operating expenses of the vessels, such as crew costs, stores, insurance, repairs and maintenance. In the case of voyage charters, the vessel is contracted only for a voyage between two or several ports and the Company pays for all voyage expenses in addition to the vessel operating expenses. Voyage expenses consist mainly of in port expenses and bunker (fuel) consumption and are recognized as incurred.

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2. Summary of Significant Accounting Policies (Continued) (m) Repairs and Maintenance

All expenditures relating to routine maintenance and repairs are expensed when incurred.

(n) Insurance

The Company maintains hull and machinery insurance, war risk insurance, protection and indemnity insurance coverage, increased value insurance, demurrage and defence insurance coverage in amounts considered prudent to cover normal risks in the ordinary course of its operations. Premiums paid in advance to insurance companies are recognized as prepaid expenses and expensed over the period covered by the insurance contract.

(o) Share Based Compensation

The Company accounts for stock-based compensation in accordance with ASC Topic 718 “Compensation-Stock Compensation”, which requires the Company to record as an expense in its financial statements the fair value of all stock-based compensation awards. The terms and vesting schedules for stock-based awards vary by type of grant. Generally, the awards vest based on time-based (immediate to five years) and/or performance-based conditions. Compensation expense is recognized ratably over the service period.

(p) Accounting Estimates

The preparation of the consolidated financial statements in conformity with accounting principles generally accepted in the United States of America (“US GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates.

(q) Foreign Currency Transactions Substantially all of the Company’s cash receipts are in U.S. Dollars. The Company’s

disbursements, however, are in the currency invoiced by the supplier. The Company remits funds in the various currencies invoiced. The non U.S. Dollar invoices received and their subsequent payments are converted into U.S. Dollars when the transactions occur. The movement in exchange rates between these two dates is transferred to an exchange difference account and is expensed each month. The exchange risk resulting from these transactions is not expected to be material.

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(r) Income Taxes

Navigator Holdings Ltd and its Marshall Islands subsidiaries are not subject to taxation in the Republic of the Marshall Islands. The Company has two subsidiaries incorporated in the United Kingdom where the base tax rate is 26%. One subsidiary earns management and other fees from fellow subsidiary companies and for the year ended December 31, 2011 the estimated tax charge is $107,501 (2010: $99,450). The second subsidiary earned no income during 2011. The Company considered the income tax disclosure requirements of ASC Topic 740 “Income Taxes”, in regards to disclosing material unrecognized tax benefits; none were identified. The Company’s policy is to recognize accrued interest and penalties for unrecognized tax benefits as a component of tax expense. As of December 31, 2011 and December 31, 2010, there were no accrued interest and penalties for unrecognized tax benefits.

(s) Earnings per share

In accordance with ASC Topic 260 “Earnings Per Share”, basic earnings per common share (“Basic EPS”) is computed by dividing the net income available to common stockholders by the weighted-average number of shares outstanding. Diluted earnings per common share (“Diluted EPS”) are computed by dividing the net income available to common stockholders by the weighted average number of common shares and dilutive common share equivalents then outstanding. ASC Topic 260 requires presentation of both Basic EPS and Diluted EPS on the face of the Company’s statement of operations. Shares granted pursuant to the 2008 Restricted Stock Plan are the only dilutive shares and these shares have been considered as outstanding since their respective grant dates for purposes of computing diluted earnings per share.

(t) Segment Reporting

Although separate vessel financial information is available, Management internally evaluates the performance of the enterprise as a whole and not on the basis of separate business units or different types of charters. As a result, the Company has determined that it operates as one reportable segment. Since the Company’s vessels regularly move between countries in international waters over many trade routes, it is impractical to assign revenues or earnings from the transportation of international LPG products by geographic area.

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(u) Recent Accounting Pronouncements The following accounting standards issued as of December 31, 2012, may affect the future

financial reporting by Navigator Holdings Ltd: ASU (“Accounting Standards Update No.”) 2011-01: Deferral of the Effective Date of Disclosures about Troubled Debt Restructurings in Update No. 2010-20 The amendments in this Update temporarily delay the effective date of the disclosures about troubled debt restructurings in Accounting Standards Update No. 2010-20, Receivables (Topic 310): Disclosures about the Credit Quality of Financing Receivables and the Allowance for Credit Losses for public entities. The delay is intended to allow the Board time to complete its deliberations on what constitutes a troubled debt restructuring. The effective date of the new disclosures about troubled debt restructurings for public entities and the guidance for determining what constitutes a troubled debt restructuring will then be coordinated. ASU 2011-02: Receivables (Topic 310) - A Creditor's Determination of Whether a Restructuring Is a Troubled Debt Restructuring The amendments in this Update would provide additional guidance to assist creditors in determining whether a restructuring of a receivable meets the criteria to be considered a troubled debt restructuring. ASU 2011-03: Transfers and Servicing (Topic 860) - Reconsideration of Effective Control for Repurchase Agreements The amendments in this Update remove from the assessment of effective control (1) the criterion requiring the transferor to have the ability to repurchase or redeem the financial assets on substantially the agreed terms, even in the event of default by the transferee, and (2) the collateral maintenance implementation guidance related to that criterion. ASU 2011-04: Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs The amendments in this Update generally represent clarifications of Topic 820, but also include some instances where a particular principle or requirement for measuring fair value or disclosing information about fair value measurements has changed. This Update results in common principles and requirements for measuring fair value and for disclosing information about fair value measurements in accordance with U.S. GAAP and IFRSs. ASU 2011-05: Presentation of Comprehensive Income Under the amendments to Topic 220, “Comprehensive Income”, in this Update, an entity has the option to present the total of comprehensive income, the components of net income, and the components of other comprehensive income either in a single continuous statement of comprehensive income or in two separate but consecutive statements. In both choices, an entity is required to present each component of net income along with total net income, each component of other comprehensive income along with a total for other comprehensive income, and a total amount for comprehensive income. This Update eliminates the option to present the components of other comprehensive income as part of the statement of changes in stockholders' equity. The amendments in this Update do not change the items that must be reported in other comprehensive income or when an item of other comprehensive income must be reclassified to net income.

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ASU 2011-08: Testing Goodwill for Impairment (Intangibles – Goodwill and Other [Topic 350]) The amendments in this Update will allow an entity to first assess qualitative factors to determine whether it is necessary to perform the two-step quantitative goodwill impairment test. Under these amendments, an entity would not be required to calculate the fair value of a reporting unit unless the entity determines, based on a qualitative assessment, that it is more likely than not that its fair value is less than its carrying amount. The amendments include a number of events and circumstances for an entity to consider in conducting the qualitative assessment.

ASU No. 2011-11: Balance Sheet (Topic 210) The objective of this Update is to provide enhanced disclosures that will enable users of its financial statements to evaluate the effect or potential effect of netting arrangements on an entity’s financial position. This includes the effect or potential effect of rights of setoff associated with an entity’s recognized assets and recognized liabilities within the scope of this Update. The amendments require enhanced disclosures by requiring improved information about financial instruments and derivative instruments that are either (1) offset in accordance with either Section 210-20-45 or Section 815-10-45 or (2) subject to an enforceable master netting arrangement or similar agreement, irrespective of whether they are offset in accordance with either Section 210-20-45 or Section 815-10-45.

ASU No.2011-12: Comprehensive Income (Topic 220) The amendments in this Update supersede certain pending paragraphs in ASU 2011-05: Comprehensive Income (Topic 220) - Presentation of Comprehensive Income, to effectively defer only those changes in Update 2011-05 that relate to the presentation of reclassification adjustments out of accumulated other comprehensive income. The amendments will be temporary to allow the Board time to re deliberate the presentation requirements for reclassifications out of accumulated other comprehensive income for annual and interim financial statements for public, private, and non-profit entities.

(v) Subsequent Events

The Company has evaluated subsequent events through March 1, 2012, the date on which the financial statements were available to be issued.

3. Fair value of Financial Instruments

The principal financial assets of the Company as of December 31, 2011 and 2010 consist of cash and cash equivalents and accounts receivable. The principal financial liabilities of the Company consist of accounts payable, accrued expenses and other liabilities and long-term debt. The carrying values of cash and cash equivalents and accrued expenses and other liabilities are reasonable estimates of their fair value due to the short-term nature of these financial instruments.

The fair value of the Company’s long-term debt approximates its carrying value due to the variable interest rate associated with the credit facility (Note 7)


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4. Accounts receivable, net

It is a condition of time charter parties that payments of hire are received monthly in advance. Voyage charter contracts require payment upon completion of each discharge, with subsequent demurrage claims payable on submission of invoices. As of December 31, 2011 management has provided a provision for doubtful accounts of $62,531 relating to outstanding demurrage claims (December 31, 2010: $186,584).

5. Vessels in Operation Vessel Dry-docking Total

Cost

December 31, 2010 468,074,849 8,899,122 476,973,971 Transfer in from vessels under construction 54,843,508 500,000 55,343,508 Additions - 6,780 6,780 December 31, 2011 $ 522,918,357 $ 9,405,902 $ 532,324,259 Accumulated Depreciation

December 31, 2010 56,715,225 1,783,746 58,498,971 Charge for the period 16,750,742 1,806,180 18,556,922 December 31, 2011 $ 73,465,967 $ 3,589,926 $ 77,055,893

Net Book Value December 31, 2011 $ 449,452,390 $ 5,815,976 $ 455,268,366

December 31, 2010 $ 411,359,624 $ 7,115,376 $ 418,475,000

Management review the values of the vessels in the fleet at each year end. At December 31, 2011 by using the average historical time charter rates over the past ten years and a cost of capital of 9% for future cash flows, the value in use calculation values each vessel in excess of its carrying value. Management do not therefore believe that there is any impairment required at December 31, 2011. The net book value of vessels that serve as collateral for the Company’s bank loans (Note 7) was $260,405,781 at December 2011.

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6. Vessels under Construction

Vessels under construction as at December 31, 2010 $ - Payments to shipyard 55,110,000 Payments to Latmar Holdings Corporation (“the seller”) 26,775,900 Other payments including initial stores, capitalised interest and site costs 3,640,767 Transfer to vessels in operation (55,343,508) _

Vessels under construction as at December 31, 2011 $ 30,183,159

During the year the Company entered into two agreements to novate ship building contracts from the seller, to the Company for the construction of two 20,600 cubic metre semi-refrigerated gas carriers at Hyundai Mipo Dockyard in South Korea. The first of the two vessels, Navigator Leo, was delivered to the Company on September 27, 2011. The second vessel was delivered to the Company subsequent to the Balance Sheet date, on February 9, 2012.

7. Long-Term Debt

December 31, December 31,

2011 2010 Due within one year $ 14,827,694 $ 6,148,148 Due in two years 87,864,730 9,629,630 Due in three years 5,642,508 82,222,222 Due in four years 4,447,587 - Due in five years or more 31,574,889 - Total Debt $ 144,357,408 $ 98,000,000

Less: current portion 14,827,696 6,148,148 Long-term debt $ 129,529,712 $ 91,851,852

The Company entered into a $150,000,000 secured revolving credit facility dated July 31, 2008 with Nordea Bank Finland Plc as Lead Arranger, for the purpose of financing the acquisition of three new build vessels and for general corporate purposes. Interest is payable under the credit facility at US LIBOR (three month LIBOR at 0.6% as at December 31, 2011) plus 1.5%, payable periodically. The Company also pays a commitment fee of 0.5% per annum based on the undrawn portion of the credit facility. At December 31, 2011, the total available under the facility amounted to $91,851,852 and the outstanding amount was $91,851,852 which is repayable by five quarterly installments of $2,407,407 and a final repayment of $79,814,817 on July 31, 2013.

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7. Long-Term Debt (Continued) This credit facility is secured by first priority mortgages on each of the vessels; Navigator Mars, Navigator Gemini and Navigator Taurus as well as assignments of earnings and insurances on these secured vessels. The financial covenants each as defined within the credit facility are: a) liquidity of $10,000,000 including undrawn available lines of credit with a maturity exceeding 12 months; b) net debt to total capitalization ratio not to exceed 60%; c) EBITDA to interest expense, on a trailing four-quarter basis, to be no less than three to one; and d) a loan to value maintenance of no less than 130%. At December 31, 2011, the Company was in compliance with all covenants contained in this credit facility During the year the Company entered into an $80,000,000 secured term loan facility with Skandinaviska Enskilda Banken AB (“SEB”) dated April 1, 2011 for the purpose of financing the acquisition of two new build vessels and general corporate purposes. Interest is payable under the credit facility at US LIBOR plus 3%, payable periodically. The Company also pays a commitment fee of 1.05% per annum based on the undrawn portion of the facility. The facility is divided into three parts; Tranche A of $16,000,000 to be used for general corporate purposes and for any consideration payable under the novation agreements to acquire the vessels; Tranche B and Tranche C at $32,000,000 each to be used for pre-delivery and delivery instalment payments for each of the two vessels. At December 31, 2011 the total amount drawn under the facility amounted to $53,471,739. Tranche A is repayable by 22 quarterly amounts of $521,739 commencing on October 1, 2011 followed by a final payment of $4,521,742. Tranche B is repayable by 21 quarterly amounts of $444,444 commencing on December 27, 2011 followed by a final payment of $22,666,676. Tranche C, when fully drawn, will be repayable by 20 quarterly amounts of $444,444 commencing on May 9, 2012 followed by a final payment of $23,111,120. This term loan facility is secured by first priority mortgages on each of the vessels; Navigator Saturn, Navigator Leo and Navigator Libra (which was delivered to the Company on February 9, 2012) as well as assignments of earnings and insurances on these secured vessels. The financial covenants each as defined within the credit facility are: a) liquidity of $10,000,000 including undrawn available lines of credit with a maturity exceeding 12 months; b) net debt to total capitalization ratio not to exceed 60%; c) EBITDA to interest expense, on a trailing four-quarter basis, to be no less than three to one; and d) a loan to value maintenance of no less than 130%. At December 31, 2011, the Company was in compliance with all covenants contained in this term loan.

8. Share-based compensation

During 2008, the Company’s Board adopted the 2008 Restricted Stock Plan (the “Plan”), which entitles officers, employees, consultants and directors of the Company to receive grants of restricted stock of the Company’s common stock. The Plan is administered by the Board or a committee of the Board. The maximum aggregate number of common shares that may be delivered pursuant to awards granted under the Plan during the ten year term of the Plan is 3,000,000 shares of common stock. A holder of restricted stock, awarded under the Plan, shall have the same voting and dividend rights as the Company’s other common stockholders in relation to those shares. The fair value of the restricted stock is calculated by multiplying the number of shares by the deemed calculated share value at the grant date.

16




8. Share-based compensation (Continued) During the year ended December 31, 2008, 320,000 shares, with a weighted average fair value of $15.24 per share, were granted. There were no awards granted by the Company during the year ended December 31, 2009 and 86,667 shares, of those previously awarded, vested. During the year ended December 31, 2010, 31,000 shares with a weighted average fair value of $12.14 were granted and 66,667 shares of those previously awarded, vested. The Company granted 5,250 shares under the Plan, with a weighted average fair value of $17.97, to the Chief Executive of the Company on March 31, 2011 and on April 10, 2011 a further 15,200 shares were granted to the officers and management of the Company with a weighted average fair value of $19.59. All of these shares vest on the third anniversary of the grant date. During the year to December 31, 2011, 66,666 shares of those awarded during 2008 vested. Using the graded vesting method of expensing the restricted stock grants, the weighted average fair value of the shares calculated thereon is recognized as compensation costs in the Statement of Operations over the vesting period. During 2011, the Company recognized $842,034 in share based compensation costs (2010: $1,196,272). As of December 31, 2011, there was a total of $853,082 unrecognized compensation costs relating to the potential future vesting of share based awards (December 31, 2010: $1,302,999) which are expected to be recognized over the next two to three years.


The Company occupies office space in London, paying approximately $303,000 (£190,000) per calendar year. The operating lease ends on March 30, 2012. The Company also occupies office space in New York paying approximately $133,500 per year. The lease is for a period of three years ending August 30, 2012. These commitments approximate $165,000 in 2012. On February 9, 2012 the Company will take delivery of Navigator Libra, the second vessel under the novated shipbuilding agreement with Latmar Holdings Corporation. A commitment exists to pay the shipyard a final instalment amount on the delivery date of $23,910,300.

On December 14, 2011 the Company time chartered in a vessel for a period of two years at a fixed monthly rate commensurate with the market rate at the time of fixing the charter.

From time to time the Company may be subject to legal proceedings and claims in the ordinary course of its business, principally personal injury and property casualty claims. Such claims, even if lacking merit, could result in the expenditure of significant financial and managerial resources. The Company is not aware of any legal proceedings or claims that it believes will have, individually or in the aggregate, a materially adverse effect on the Company, its financial condition, results of operations or cash flows.

17




10. Concentration of Credit Risks

The company’s vessels are chartered under either a time charter arrangement or voyage charter arrangement. Under a time charter arrangement, no security is provided for the payment of charter hire. However, payment is usually required monthly in advance. Under a voyage charter arrangement, a lien may sometimes be placed on the cargo to secure the payment of the accounts receivable, as permitted by the prevailing charter party agreement. At December 31, 2011, seven of the Company’s ten vessels, which includes chartered in vessels, were on time charter, five of which will expire within 12 months. The remaining two vessels on time charter are scheduled to expire between one and two years and three and four years of the balance sheet date. The committed charter income for 2012 is $48,435,000; 2013 is $17,796,000 and 2014 is $10,494,000.

During 2011 three charterers contributed 60% of the operating revenue, comprising 25%, 18% and 17% (2010: total of 57% comprising 23%, 22% and 12%). At December 31, 2011 and 2010, all of the Company’s cash was held by a large financial institution, highly rated by a recognised rating agency.

11. Subsequent Events

Since the year end the Company is in negotiations to acquire two second-hand semi-refrigerated gas carriers, similar in size to the Company’s existing vessels, at current market rates.

18



Quarterly financial data reported by management

Three months ended Year ended December 31 December 31 2011 2010 2011 2010 Revenues


Expenses

Address and brokerage commissions 664,705 747,646 2,664,461 2,951,359 Voyage expenses 5,932,173 4,936,682 18,004,701 17,399,682 Vessel operating expenses 6,331,421 5,569,820 22,938,934 21,376,916 Depreciation and amortization 5,004,802 4,566,833 18,677,574 17,889,097 General and administrative costs 1,046,287 1,278,952 4,232,103 4,035,351 Other corporate expenses 217,432 429,534 1,165,838 907,818 19,196,820 17,529,467 67,683,611 64,560,223



Interest expense (880,508) (557,957) (2,442,182) (2,354,421) Interest income 2,663 1,274 8,978 1,483 Income before income taxes 4,638,041 5,207,511 18,757,780 15,103,369 Income taxes (27,675) (13,701) (107,501) (99,450)

Net income $ 4,610,366 $5,193,810 $ 18,650,279 $ 15,003,919

Earnings per share: Basic and diluted $ 0.44 $ 0.50 $ 1.79 $ 1.45 Weighted average number of shares outstanding: Basic and diluted 10,500,526 10,351,000 10,398,581 10,343,000

NAVIGATOR HOLDINGS LTD REPORT AND FINANCIAL STATEMENTS DECEMBER 31, 2010



Page Report of Independent Auditor 1 Consolidated Balance Sheets as of December 31, 2010 and 2009 2 Consolidated Statements of Operations for the years ended December 31, 2010 and 2009 3 Consolidated Statements of Stockholders’ Equity for the years ended December 31, 2010 and 2009 4 Consolidated Statements of Comprehensive Income for the years ended December 31, 2010 and 2009 4 Consolidated Statements of Cash Flows for the years ended December 31, 2010 and 2009 5 Notes to Consolidated Financial Statements 6 - 16

Quarterly financial data reported by management 17

2



December 31, December 31, 2010 2009 Assets

Current Assets




Inventories 3,593,714 1,918,793

Total Current assets 31,445,012 17,340,250



Deferred finance costs, net 600,000 825,000


Current liabilities

Current portion of long term debt $ 6,148,145 $ -



Deferred income - 901,712


Non – current liabilities

Long-term debt, net of current portion 91,851,855 110,000,000



20,000,000 shares authorized; 10,351,000

and 10,320,000 shares issued and outstanding,

respectively 103,510 103,200







3



Year ended Year ended December 31, December 31, 2010 2009 Revenues


Expenses

Address and brokerage commissions 2,951,359 2,690,815

Voyage expenses 17,399,682 2,180,045

Vessel operating expenses 21,376,916 18,213,141


General and administrative costs 4,035,351 4,623,786

Other corporate expenses 907,818 292,764

64,560,223 43,395,998



Interest expense (2,354,421) (2,443,125)

Interest income 1,483 103,794

Income before income taxes 15,103,369 26,794,484

Income taxes (99,450) (82,031)

Net income $ 15,003,919 $ 26,712,453

Earnings per share:

Basic $ 1.45 $ 2.59

Diluted $ 1.45 $ 2.59

Weighted average number of shares outstanding: Basic 10,343,000 10,320,000

Diluted 10,343,000 10,320,000


4




January 1, 2009 $ 103,200 $ 285,567,815 $ (110,559) $ 19,537,887 $ 305,098,343

Net income - - - 26,712,453 26,712,453


Share based compensation plan - 2,141,701 - - 2,141,701

December 31, 2009 103,200 287,709,516 (131,042) 46,250,340 333,932,014

Restricted shares issued

March 31, 2010 260 - - - 260


April 26, 2010 50 - - - 50

Net income - - - 15,003,919 15,003,919

Dividends paid - - - (3,208,810) (3,208,810)


Share based compensation plan - 1,195,962 - - 1,195,962

December 31, 2010 $ 103,510 $288,905,478 $ (138,521) $ 58,045,449 $ 346,915,916


Year ended Year ended December 31, December 31, 2010 2009

Net income $ 15,003,919 $ 26,712,453

Comprehensive Income (Loss):

Foreign currency translation loss (7,479) (20,483)



5



Year ended Year ended December 31, December 31, 2010 2009 Cash flows from operating activities

Net income $ 15,003,919 $ 26,712,453




Stock based compensation 1,196,272 2,141,701


Unrealized foreign exchange (1,281) (43,086)


Accounts receivable (681,698) (1,740,364)

Prepaid expenses and other current assets (6,036,362) (180,939)

Accounts payable and other liabilities (49,792) 1,798,539

Inventories (1,674,921) (1,504,345)



Release of restricted cash for vessel purchase - 14,270,047

Payment to acquire vessels (5,058) (136,122,851)

Payment of dry docking costs (4,914,129) (2,166,216)



Proceeds from long term debt, net of direct financing costs - 90,000,000


Dividends paid (3,208,810) -

Net cash provided by financing activities (15,208,810) 80,000,000

Net decrease in cash and cash equivalents 5,711,781 (1,390,573)

Cash and cash equivalents at beginning of year 10,531,331 11,921,904

Cash and cash equivalents at end of year $ 16,243,112 $ 10,531,331 Supplemental Information

Total interest paid during the year $ 2,067,545 $ 1,659,340

Total tax paid during the year $ 102,686 $ 185,154


6


Notes to the Consolidated Financial Statements


1. The Company and the basis of presentation

Navigator Holdings Ltd, the ultimate parent company of the Navigator Group of companies, is registered

in the Republic of the Marshall Islands. The Company has a business of owning and chartering out a fleet

of gas carriers.

The accompanying consolidated financial statements incorporate the accounts of Navigator Holdings Ltd

and its wholly owned subsidiaries (collectively the “Company”). These subsidiaries include Navigator Gas

LLC and its vessel owing subsidiaries: Navigator Aries LLC; Navigator Gemini LLC; Navigator Mars LLC;

Navigator Neptune LLC; Navigator Pluto LLC; Navigator Saturn LLC; Navigator Taurus LLC; Navigator

Venus LLC; PT Navigator Khatulistiwa; NGT Services (UK) Limited; Navigator Gas US LLC; Navigator

Gas Invest Ltd and Falcon Funding Pte Ltd.

NGT Services (UK) Limited is a United Kingdom company formed in August 2006 to provide certain

commercial, technical and administrative services to other companies within the group. Navigator Gas US

LLC is an entity formed in the State of Delaware in May, 2009 in order to provide certain administrative

services to other companies within the group. PT Navigator Khatulistiwa is a vessel owning company

incorporated in Indonesia in April 2010. Falcon Funding Pte Ltd is a company formed in Singapore in

March 2010 to provide vessel services. Navigator Gas Invest Limited is a company formed in the UK in

May 2010 for the purpose of receiving dividends. All other subsidiaries are formed under the laws of the

Republic of the Marshall Islands.

At December 31, 2010 the Company owned and operated eight gas carriers (the “vessels”) of which five

are 22,000 cubic meter, semi-refrigerated and ethylene capable and three are 20,600 cubic meter, semi-

refrigerated vessels, all providing worldwide marine transportation. The Vessels have primarily been

operating to date along the following routes: from the Arabian Gulf to India, Southeast Asia, and Australia,

across the Mediterranean Sea and from the Mediterranean Sea to North West Europe, from North West

Europe to USA East Coast, between the Caribbean and West Africa, Venezuelan cabotage and

Indonesian cabotage.



The consolidated financial statements have been prepared in accordance with accounting

principles generally accepted in the United States of America. The accompanying consolidated

financial statements include the accounts of the Company and its wholly-owned subsidiaries. All

intercompany accounts and transactions have been eliminated in consolidation.


The cost of the vessels (excluding the estimated initial built-in overhaul cost) less their estimated

residual value is depreciated on a straight-line basis over the vessel’s estimated economic life.

Management estimates the useful life of each of the Company’s vessels to be 30 years from the

date of its construction.

7






In accordance with Accounting Standards Codification (“ASC”) Topic 360 “Fixed Assets”, Vessels

are reviewed for impairment when market conditions indicate a significant decrease in the assets’

fair value. An impairment loss is recognized when the sum of the expected future cash flows

(undiscounted and without interest) from the Vessel over its estimated remaining useful life is less

than its carrying amount. An impairment loss is recorded equal to the amount by which the

Vessel’s carrying amount exceeds its fair value.


Each Vessel is required to be dry-docked every 30 to 60 months for classification society surveys

and inspections of, among other things, the underwater parts of the vessel. These works include,

but are not limited to hull coatings, seawater valves, steelworks and piping works, propeller

servicing, anchor chain winch calibrations, all of which cannot be performed while the vessels are

operating. The Company capitalizes costs associated with the dry-dockings as “built in overhauls”

in accordance with ASC Topic 360 “Fixed Assets” and amortizes these costs on a straight line

basis over the period between dry-dockings. Amortization of dry-docking costs is included in

depreciation and amortization in the Statement of Operations. Costs incurred during the dry-

docking period which relate to routine repairs and maintenance are expensed.

(e) Cash and Cash Equivalents

The Company considers highly liquid investments, such as time deposits and certificates of

deposit, with an original maturity of three months or less when purchased to be cash equivalents.

(f) Accounts Receivable

The Company carries its accounts receivable at cost less an allowance for doubtful accounts. On

a periodic basis, the Company evaluates its accounts receivable and establishes an allowance for

doubtful accounts, based on a history of past write-offs, collections and current credit conditions.

The Company does not generally charge interest on past-due accounts (unless the accounts are

subject to legal action), and accounts are written off as uncollectible when all reasonable collection

efforts have failed. Accounts are deemed past-due based on contractual terms.

(g) Inventories

Inventories include bunkers (fuel), for those vessels under voyage charter, and lubricants. Under

a time charter the cost of bunkers is borne by and remains the property of the charterer.

Inventories are accounted for on a first in, first out basis and are valued at the lower of cost and

market value.

8





(h) Deferred Finance Costs

Costs incurred in connection with obtaining long-term debt are recorded as deferred financing

costs and are amortized to interest expense over the estimated duration of the related debt on a

straight line basis. Such costs include fees paid to the lenders or on the lenders’ behalf and

associated legal and other professional fees.

(i) Deferred Income

Deferred income is the balance of unearned revenues received and represents that portion

received under a time charter or voyage charter arrangement as of the balance sheet date for

revenue applicable to a period of time subsequent to the balance sheet date.

(j) Revenue Recognition

The Company employs its vessels on time charters or voyage charters. With time charters, the

Company receives a fixed charter hire per on-hire day and revenue is recognized on an accrual

basis and is recorded over the term of the charter as service is provided. In the case of voyage

charters, the vessel is contracted for a voyage between two or several ports and the Company is

paid for the cargo transported. Voyage charter revenue is recorded based on the percentage of

service completed at the balance sheet date. A voyage is deemed to commence when a vessel is

available for loading at the load port and is deemed to end upon the completion of the discharge of

the current cargo.

(k) Other Comprehensive Income (Loss)

The Company follows the provisions of ASC Topic 220 “Comprehensive Income”, which requires

separate presentation of certain transactions, which are recorded directly as components of

stockholders’ equity. Comprehensive income is comprised of net income and foreign currency

translation gains and losses.

(l) Voyage Expenses and Vessel Operating Expenses

When the Company employs its vessels on time charter, it is responsible for all the operating

expenses of the vessels, such as crew costs, stores, insurance, repairs and maintenance. In the

case of voyage charters, the vessel is contracted only for a voyage between two or several ports

and the Company pays for all voyage expenses in addition to the vessel operating expenses.

Voyage expenses consist mainly of in port expenses and bunker (fuel) consumption and are

recognized as incurred.

9




2. Summary of Significant Accounting Policies (Continued) (m) Repairs and Maintenance


(n) Insurance

The Company maintains hull and machinery insurance, war risk insurance, protection and

indemnity insurance coverage, increased value insurance, demurrage and defence insurance

coverage in amounts considered prudent to cover normal risks in the ordinary course of its

operations. Premiums paid in advance to insurance companies are recognized as prepaid

expenses and expensed over the period covered by the insurance contract.

(o) Share Based Compensation

The Company accounts for stock-based compensation in accordance with ASC Topic 718

“Compensation-Stock Compensation”, which requires the Company to record as an expense in its

financial statements the fair value of all stock-based compensation awards. The terms and vesting

schedules for stock-based awards vary by type of grant. Generally, the awards vest based on time-

based (immediate to five years) and/or performance-based conditions. Compensation expense is

recognized ratably over the service period.

(p) Accounting Estimates

The preparation of the consolidated financial statements in conformity with accounting principles

generally accepted in the United States of America (“US GAAP”) requires management to make

estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure

of contingent assets and liabilities at the date of the financial statements and the reported amounts

of revenues and expenses during the reporting period. Actual results could differ from these

estimates.

(q) Foreign Currency Transactions

Substantially all of the Company’s cash receipts are in U.S. Dollars. The Company’s

disbursements, however, are in the currency invoiced by the supplier. The Company remits funds

in the various currencies invoiced. The non U.S. Dollar invoices received and their subsequent

payments are converted into U.S. Dollars when the transactions occur. The movement in

exchange rates between these two dates is transferred to an exchange difference account and is

expensed each month. The exchange risk resulting from these transactions is not expected to be

material.

10





(r) Income Taxes

Navigator Holdings and its Marshall Islands subsidiaries are not subject to taxation in the Republic

of the Marshall Islands.

The Company has one subsidiary incorporated in the United Kingdom where the base tax rate is

28%. This subsidiary earns management and other fees from fellow subsidiary companies and for

the year ended December 31, 2010 the estimated tax charge is $99,450 (2009: $82,031).

The Company considered the income tax disclosure requirements of ASC Topic 740 “Income

Taxes”, in regards to disclosing material unrecognized tax benefits; none were identified. The

Company’s policy is to recognize accrued interest and penalties for unrecognized tax benefits as a

component of tax expense. As of December 31, 2010 and December 31, 2009, there were no

accrued interest and penalties for unrecognized tax benefits.

(s) Earnings per share

In accordance with ASC Topic 260 “Earnings Per Share”, basic earnings per common share

(“Basic EPS”) is computed by dividing the net income available to common stockholders by the

weighted-average number of shares outstanding. Diluted earnings per common share (“Diluted

EPS”) are computed by dividing the net income available to common stockholders by the weighted

average number of common shares and dilutive common share equivalents then outstanding. ASC

Topic 260 requires presentation of both Basic EPS and Diluted EPS on the face of the Company’s

statement of operations.

Shares granted pursuant to the 2008 Restricted Stock Plan are the only dilutive shares and these

shares have been considered as outstanding since their respective grant dates for purposes of

computing diluted earnings per share.

(t) Segment Reporting

Although separate vessel financial information is available, Management internally evaluates the

performance of the enterprise as a whole and not on the basis of separate business units or

different types of charters. As a result, the Company has determined it operates as one reportable

segment. Since the Company’s vessels regularly move between countries in international waters

over many trade routes, it is impractical to assign revenues or earnings from the transportation of

international LPG products by geographic area.

11





(u) Recent Accounting Pronouncements

The following accounting standards issued as of January 20, 2011, may affect the future financial

reporting by Navigator Holdings Ltd:

ASU No. 2010-06, Fair Value Measurements and Disclosures (Topic 820) – Improving Disclosures about Fair Value Measurements This ASU affects all entities that are required to make disclosures about recurring and nonrecurring

fair value measurements under FASB ASC Topic 820, originally issued as FASB Statement No.

157, Fair Value Measurements. The ASU requires certain new disclosures and clarifies two

existing disclosure requirements. The new disclosures and clarifications of existing disclosures are

effective for interim and annual reporting periods beginning after December 15, 2009, except for

the disclosures about purchases, sales, issuances, and settlements in the roll forward of activity in

Level 3 fair value measurements. Those disclosures are effective for fiscal years beginning after

December 15, 2010, and for interim periods within those fiscal years.

ASU No. 2010-08, Technical Corrections to Various Topics This ASU eliminates certain inconsistencies and outdated provisions and provides needed

clarifications. The changes are generally non substantive in nature and will not result in pervasive

changes to current practice. However, the amendments that clarify the guidance on embedded

derivatives and hedging (ASC Subtopic 815-15) may cause a change in the application of that

Subtopic. The clarifications of the guidance on embedded derivatives and hedging (Subtopic 815-

15) are effective for fiscal years beginning after December 15, 2009. The other amendments are

effective as of the first reporting period (including interim periods) beginning after February 2,

2010.

ASU 2010-13, Compensation—Stock Compensation (Topic 718) - Effect of Denominating the Exercise Price of a Share-Based Payment Award in the Currency of the Market in Which the Underlying Equity Security Trades - a consensus of the FASB Emerging Issues Task Force

This ASU clarifies that an employee share-based payment award with an exercise price

denominated in the currency of a market in which a substantial portion of the entity’s equity

securities trades should not be considered to contain a condition that is not a market, performance,

or service condition. Therefore, an entity would not classify such an award as a liability if it

otherwise qualifies as equity. This ASU is effective for fiscal years, and interim periods within

those fiscal years, beginning on or after December 15, 2010.

12





ASU 2010-20, Receivables (Topic 310) - Disclosures about the Credit Quality of Financing Receivables and the Allowance for Credit Losses This ASU requires companies to provide more information in their disclosures about the credit

quality and risk exposures of their financing receivables and the credit reserves held against them.

For public companies, the amendments that require disclosures as of the end of a reporting period

are effective for periods ending on or after December 15, 2010. The amendments that require

disclosures about activity that occurs during a reporting period are effective for periods beginning

on or after December 15, 2010. ASU 2011-01 has temporarily delayed the effective date of the

disclosures about troubled debt restructurings in ASU 2010-20 for public entities. The delay is

intended to allow the FASB to complete its deliberations on what constitutes a troubled debt

restructuring. The effective date of the new disclosures about troubled debt restructurings for

public entities and the guidance for determining what constitutes a troubled debt restructuring will

then be coordinated. Currently, that guidance is anticipated to be effective for interim and annual

periods ending after June 15, 2011. The amendments in ASU 2011-01 do not defer the effective

date for the other disclosures required of public entities by ASU 2010-20.

Management does not believe that any other recently issued, but not yet effective accounting

pronouncements, if currently adopted, would have a material impact on the consolidated financial

statements of the Company.

(v) Subsequent Events

The Company has evaluated subsequent events through March 4, 2011, the date on which the

financial statements were available to be issued.

3. Fair value of Financial Instruments

The principal financial assets of the Company as of December 31, 2010 and 2009 consist of cash and

cash equivalents and accounts receivable. The principal financial liabilities of the Company consist of

accounts payable, accrued expenses and other liabilities and long-term debt.

The carrying values of cash and cash equivalents and accrued expenses and other liabilities are

reasonable estimates of their fair value due to the short-term nature of these financial instruments.

The fair value of the Company’s long-term debt approximates its carrying value due to the variable

interest rate associated with the credit facility (Note 6)

13




4. Accounts receivable, net

It is a condition of time charter parties that payments of hire are received monthly in advance. Voyage

charter contracts require payment upon completion of each discharge, with subsequent demurrage claims

payable on submission of invoices. As of December 31, 2010 management has provided a provision for

doubtful accounts of $186,584 relating to outstanding demurrage claims (December 31, 2009: $ Nil).

5. Vessels in Operation Vessel Dry-docking Total

Cost

December 31, 2009 468,069,791 5,288,022 473,357,813

Additions 5,058 4,914,129 4,919,187

Disposals - (1,303,029) (1,303,029)

December 31, 2010 $ 468,074,849 $ 8,899,122 $ 476,973,971

Accumulated Depreciation

December 31, 2009 40,386,258 1,631,436 42,017,694

Charge for the period 16,328,967 1,455,339 17,784,306

Disposals for the period - (1,303,029) (1,303,029)

December 31, 2010 $ 56,715,225 $ 1,783,746 $ 58,498,971

Net Book Value

December 31, 2010 $ 411,359,623 $ 7,115,376 $ 418,475,000

December 31, 2009 $ 427,683,533 $ 3,656,586 $ 431,340,119

Management review the values of the vessels in the fleet at each year end. At December 31, 2010 by

using the average historical time charter rates over the past ten years and a cost of capital of 8% for

future cash flows, the value in use calculation values each vessel in excess of its carrying value.

Management do not therefore believe that there is any impairment required at December 31, 2010.

The net book value of vessels that serve as collateral for the Company’s credit facility (Note 6) was

$165,658,066 at December 2010.

14




6. Long-Term Debt

December 31, December 31,

2010 2009

Secured revolving credit facility: Due within one year $ 6,148,145 $ -

Due in two years 9,629,632 -

Due in three years 82,222,223 -

Total Debt $ 98,000,000 $ 110,000,000

Less: current portion 6,148,145 -

Long-term debt $ 91,851,855 $ 110,000,000

The Company entered into a $150,000,000 secured revolving credit facility dated July 31, 2008 with

Nordea Bank Finland Plc as Lead Arranger, for the purpose of financing the acquisition of three new build

vessels and for general corporate purposes. Interest is payable under the credit facility at LIBOR (three

month LIBOR at 0.3% as at December 31, 2010) plus 1.5%, payable periodically. The Company also

pays a commitment fee of 0.5% per annum based on the undrawn portion of the credit facility. In April

2010 the vessel Navigator Aries was released as a secured vessel pursuant to the credit facility and a

permanent reduction of the facility was enacted, reducing the facility amount available at that time from

$146,750,000 to $108,703,704. The amount available under the facility was subject to 12 revised

consecutive quarterly repayments of $2,407,408 which commenced at the end of the second quarter of

2010 with a final reduction of $79,814,815 on the maturity date, which is July 31, 2013. At December 31,

2010, the total available under the facility amounted to $101,481,482 and the outstanding amount was

$98,000,000 of which $1,333,329 is repayable on June 30, 2011 followed by seven quarterly repayments

of $2,407,408 and a final repayment of $79,814,815 on July 31, 2013.

This credit facility is secured by first priority mortgages on each of the vessels; Navigator Mars, Navigator

Gemini and Navigator Taurus as well as assignments of earnings and insurances on these secured

vessels. The financial covenants each as defined within the credit facility are: a) liquidity of $10,000,000

including undrawn available lines of credit with a maturity exceeding 12 months; b) net debt to total

capitalization ratio not to exceed 60%; c) EBITDA to interest expense, on a trailing four-quarter basis, to

be no less than three to one; and d) a loan to value maintenance of no less than 130%. At December 31,

2010, the Company was in compliance with all covenants contained in the credit facility.

15




7. Share-based compensation

During 2008, the Company’s Board adopted the 2008 Restricted Stock Plan (the “Plan”), which entitles

officers, employees, consultants and directors of the Company to receive grants of restricted stock of the

Company’s common stock.

The Plan is administered by the Board or a committee of the Board. The maximum aggregate number of

common shares that may be delivered pursuant to awards granted under the Plan during the ten year

term of the Plan is 3,000,000 shares of common stock.

A holder of restricted stock awarded under the Plan shall have the same voting and dividend rights as the

Company’s other common stockholders in relation to those shares.

The fair value of the restricted stock is calculated by multiplying the number of shares by the deemed

calculated share value at the grant date.

During the year ended December 31, 2008, 320,000 shares, with a weighted average fair value of $15.24

per share, were granted. There were no awards granted by the Company during the year ended

December 31, 2009 and 86,667 shares, of those previously awarded, vested.

The Company granted 26,000 shares under the Plan, with a weighted average fair value of $12.14, to the

officers and management of the Company on March 31, 2010 which vest on the third anniversary of the

grant date and on April 26, 2010 a further 5,000 shares, with a weighted average fair value of $12.14

were granted to a director of the Company which vest on their one year anniversary. During the year to

December 31, 2010, 66,667 shares of those awarded during 2008 vested.

Using the graded vesting method of expensing the restricted stock grants, the weighted average fair value

of the shares calculated thereon is recognized as compensation costs in the Statement of Operations

over the vesting period. During 2010, the Company recognized $1,196,272 in share based compensation

costs (2009: $2,141,701). As of December 31, 2010, there was a total of $1,302,999 unrecognized

compensation costs relating to the future vesting of share based awards (December 31, 2009:

$2,122,721). The remaining costs are expected to be recognized over the next three years.

16





The Company occupies office space in London, paying approximately $303,000 (£190,000) per calendar

year. The operating lease is for a period of 10 years, with a mutual break option in March 2012, being the

fifth anniversary of the lease commencement date.

The Company also occupies office space in New York paying approximately $133,500 per year. The

lease is for a period of three years ending August 30, 2012.

These commitments approximate $436,500 and $385,070 in 2011 and 2012, respectively.

From time to time the Company may be subject to legal proceedings and claims in the ordinary course of

its business, principally personal injury and property casualty claims. Such claims, even if lacking merit,

could result in the expenditure of significant financial and managerial resources. The Company is not

aware of any legal proceedings or claims that it believes will have, individually or in the aggregate, a

materially adverse effect on the Company, its financial condition, results of operations or cash flows.


The company’s vessels are chartered under either a time charter arrangement or voyage charter

arrangement. Under a time charter arrangement, no security is provided for the payment of the accounts

receivable. However, payment is usually received monthly in advance. Under a voyage charter

arrangement, a lien may sometimes be placed on the cargo to secure the payment of the accounts

receivable, as permitted by the prevailing charter party agreement.

At December 31, 2010, four of the Company’s eight vessels were on time charters, two of which will

expire within 12 months. The remaining two vessels on time charter are scheduled to expire between two

and three years and four and five years of the balance sheet date. The committed charter income for

2011 is $34,170,250; 2012 is $20,987,500 and 2013 is $17,825,000.

During 2010 three charterers contributed 57% of the operating revenue, comprising 23%, 22% and 12%

(2009: total of 96% comprising 60%, 21% and 15%).

At December 31, 2010 and 2009, all of the Company’s cash was held by a large financial institution. The

Company believes that credit risk related to the cash deposits is limited, since the financial institution is

highly rated by a well-known rating service.


Since the year end the Company has undertaken to acquire, for $52,000,000 each, two 20,500 cbm semi-

refrigerated gas carriers, currently being constructed at Hyundai Mipo Dockyard in South Korea. They are

scheduled to be delivered in September 2011 and February 2012.

17



Quarterly financial data reported by management Three months ended Year ended December 31 December 31

2010 2009 2010 2009 Revenues


Expenses

Address and brokerage commissions 747,646 644,617 2,951,359 2,690,815

Voyage expenses 4,936,682 1,397,402 17,399,682 2,180,045



General and administrative costs 1,278,952 1,677,522 4,035,351 4,623,786

Other corporate expenses 429,534 (237,224) 907,818 292,764

17,529,467 12,833,221 64,560,223 43,395,998



Interest expense (557,957) (614,792) (2,354,421) (2,443,125)

Interest income 1,274 226 1,483 103,794


Income taxes (13,701) (46,518) (99,450) (82,031)

Net income $ 5,193,810 $3,828,150 $ 15,003,919 $ 26,712,453

Earnings per share:


Weighted average number of shares

outstanding:


Navigator Holdings Ltd2009 Annual Report

Contents

Corporate Information 1

To our Stockholders 2

Financial Statements 7

Report of Independent Auditors 9

Consolidated Balance Sheets as of December 31, 2009 and 2008 10

Consolidated Statements of Operations for the years ended December 31, 2009 and 2008 11

Consolidated Statements of Stockholders’ Equity for the years ended December 31, 2009 and 2008 12

Consolidated Statements of Comprehensive Income for the years ended December 31, 2009 and 2008 12

Consolidated Statements of Cash Flows for the years ended December 31, 2009 and 2008 13

Notes to the Consolidated Financial Statements 14

Navigator Holdings Ltd 2009 Annual Report 1

Corporate Information

Directors

David J Butters, Chairman

David D E Kenwright

Thomas A McKay

Spiros Milonas

Alexander Oetker

Florian Weidinger

Executive Officers

David J Butters, President and Chief Executive Officer

Niall Nolan, Chief Financial Officer

Tommy Hjalmas, Chief Operating Officer

Oeyvind Lindeman, Chartering Manager

Registered Office


The Trust Company of the Marshall Islands Inc

Trust Company Complex

Ajeltake Road, Ajeltake Island

Majuro, Marshall Islands MH96960

Website: www.navigatorgas.com

Representative Offices


21 Palmer Street

London SW1H 0AD

United Kingdom

Tel: +44 (0)20 7340 4850

Email: [email protected]

Navigator Gas US, LLC

38th Floor

399 Park Avenue

New York NY 10022

United States of America

Tel: +1 (212) 355 5893

2 Navigator Holdings Ltd 2009 Annual Report

2009 was in many ways historic for Navigator Gas

recording the highest annual profitability in the

Company’s relatively short 10 year existence. This

was particularly satisfactory given the significant

downturn in shipping markets generally and the

wider global recession and credit crisis in most

countries of the world.

Navigator Gas continued its fleet expansion by taking

delivery of two new 20,500 cbm semi-refrigerated gas

carriers, resulting in the Company having a 9% share of

the 15,000 cbm to 25,000 cbm LPG size sector in which

it operates.

The gas shipping sector has not escaped the worldwide

downturn, visible by the significant lack of available

time charters and for those that have existed being

concluded at a substantial reduction to the recently

achieved charter rates. However as Navigator Gas had

over 70% charter coverage going into 2009, the effects

of the industry downturn only took effect towards the

latter part of this year.

Results

Operating revenue increased substantially during

the year from $59.7 million in 2008 to $72.5 million,

an increase of 21.5%. The two new vessels delivered

during the year; Navigator Gemini and Navigator Taurus

contributed $7.5 million of this increase. Time charter

revenue accounted for 95.7% of our 2009 operating

revenue as all vessels, except the new deliveries,

remained on time charter throughout most of the year,

with the remaining 4.3% being derived from voyage

charters. In 2008, 88% of all revenue was derived from

time charters with 12% coming from voyage charters.

However, looking forward, there is currently a significant

lack of time charters available and currently three of

our eight vessels are on the spot market, albeit fully

utilized, performing voyage charters.

Net income for the year to December 31, 2009 was

$26.7 million against a $2.2 million profit in 2008

following a write-down in asset values of $19.2 million

in that year. No further write downs were necessary at

this 2009 year end. EBITDA for 2009 was $44.5 million

compared to $34.2 million in 2008.

To our Stockholders


Liquidity and financial strength

The Company’s balance sheet remains strong, ending

the year with a cash balance of $10.5 million, and

borrowings of $110.0 million from the Company’s

$150 million revolving credit facility. Navigator Gas’

balance sheet equity at December 31, 2009 was

$333.9 million, with 10.32 million ordinary shares

in issue.

The revolving credit facility was entered into in 2008

and covers a period of five years. The loan is secured

on four of the Company’s vessels, – one ethylene carrier

and each of the three new-build vessels, leaving four

other vessels unencumbered. Interest on amounts

drawn is payable at US LIBOR plus 150 basis points per

annum and a commitment fee of 0.5% per annum of

the unused portion of the facility is payable quarterly.

The Company generated $42.8 million in cash from

operations during the year to December 31, 2009, most

of which was utilised in part financing the purchase of

the two new-build vessels delivered during the year.

Operations

The Company’s fleet principally performed time

charters throughout much of 2009, with the effect

that the fleet recorded a satisfactory utilization rate of

97.1% for the full year. This compared to a utilization

rate of 98.7% for 2008, although this slight reduction

principally represented the time taken for the two

newly delivered vessels to sail from the shipyard in

Korea to their respective initial load ports, both in the

Arabian Gulf. Excluding these two new vessels,

the fleet utilization was 99.1% for the year. During

2009 the entire Navigator Gas fleet was available for

employment for a total combined 2,544 days, out of

which it was employed for 2,471 of these days.

The average monthly time charter rate achieved across

all vessels in the fleet during 2009 was $878,667, or

$28,888 per day. The Company saw its time charter

rate reduce from an average rate of $933,000 per

calendar month at January 1, 2009 to a low of

$838,290 per calendar month, for those vessels that

were on time charter at December 31, 2009. However

many shipping brokers are reporting current time

charter rates to be in the low $600,000’s.

Daily vessel operating costs reduced by approximately

3% during the year, as the Company maintained tight

control of its costs, despite the expansion of the fleet.

The Company outsources the technical and crewing

management of its vessels to two third party managers;

Bernhard Schulte Shipmanagement and Northern

Marine Management whilst retaining the role of

managing the managers within the Company.

Each of the Navigator Gas type vessels are dry-docked

at least every five years. Navigator Mars, one of our

five 2000 built ethylene carriers went into Remontowa

dry-docks in Gdansk in December 2009 for the vessel’s

tenth year scheduled classification surveys and

inspections. The cost of this dry-docking at $1.5 million

was higher than expected due in part to the extended

time in the dock as a result of Europe having its worst

winter in many decades. However, after 29 days

in dock, the vessel departed on January 10, 2010.

Navigator Pluto was dry-docked in 2008 leaving

the remaining three ethylene carriers to be docked

during 2010.

Acquisitions and Fleet

Further to the purchase contract entered into in

May 2007, the Company took delivery during the year

of two new-build 20,500 cbm, semi-refrigerated gas

carriers, simultaneously with their delivery by Hyundai


To our Stockholders continued

Mipo Shipyard in Korea. Navigator Gemini was

delivered on March 16 and Navigator Taurus delivered

on September 24. The third vessel under this contract –

Navigator Aries was delivered in August 2008.

With these new deliveries, Navigator Gas owns and

operates a fleet of eight LPG vessels in the 15,000 cbm

– 25,000 cbm handysize category, making the Company

the second largest owner of LPG capacity, with a 9%

share, in this segment. As at December 31, 2009, the

vessels in the fleet had an average age of just 6.1 years

compared to the average age for the world gas carrier

fleet of vessels in the handy-size category of more

than twelve years. This segment comprises a total

of 76 vessels with an additional 16 on the orderbook,

ten of which are scheduled to be delivered during 2010,

five during 2011 and one in 2012. Since the beginning

of 2009, seven handysized vessels have been sold for

demolition, but a further ten vessels remain with an age

of greater than 25 years, most of which we expect will

be sold for recycling in the near future.

Chartering

As a result of the steepest decline in the world

economy in over 60 years during 2009, the LPG market

saw substantial reductions in trade volumes as the

OPEC crude oil cuts remained for longer than expected

Vessel Vessel Type Capacity cbm Year Built Charter Redelivery

Navigator Aries LPG/C Semi-ref 20,500 Aug 2008 Sep 2013

Navigator Gemini LPG/C Semi-ref 20,500 Mar 2009 Sep 2010

Navigator Mars LPG/C Semi-ref (ethylene) 22,085 Mar 2000 Spot

Navigator Neptune LPG/C Semi-ref (ethylene) 22,085 Dec 2000 May 2010

Navigator Pluto LPG/C Semi-ref (ethylene) 22,085 Nov 2000 Mar 2015

Navigator Saturn LPG/C Semi-ref (ethylene) 22,085 Oct 2000 June 2010

Navigator Taurus LPG/C Semi-ref 20,500 Sep 2009 Spot

Navigator Venus LPG/C Semi-ref (ethylene) 22,085 Sep 2000 Spot


and the new anticipated gas projects were delayed in

coming on stream. Similarly the global recession has

led to a loss in demand for domestic products, on

which the seaborne transportation of petrochemical

gases is dependent.

The handysize segment saw spot and time charter rates

slide due to an increase in the number of vessels added

to the sector without an increase in trade volumes to

absorb the extra capacity. Consequently charter rates

decreased by over 30% during 2009.

At Navigator Gas we continue to enjoy close contact

with our charterers, having provided LPG presentations

for Chevron during the year as well as LPG courses on

a number of occasions for personnel of the Venezuelan

state owned oil company, PDVSA.

Navigator Gemini and Navigator Taurus were delivered

during the year and have been successfully integrated

into our fleet. Although most of the Company’s vessels

were on time charter for much of 2009, three are

now trading in the spot market carrying cargoes on

an individual basis. However these vessels have been

fully utilized thus far, since coming off their respective

time charters. With respect to more longer term period

business, Navigator Aries and Navigator Pluto are

committed to time charters of three years and five

years respectively. These are operating under time

charters to Pertamina, the Indonesian state owned oil

company, which necessitates changing the flag of both

vessels to fly Indonesian flag. All other existing charters

are due to expire during 2010.

People

All of the vessels in the Navigator Gas fleet require a

minimum of 18 officers and crew on board. Additionally

there are usually at least two cadets on each of our

vessels as we try to provide a structured platform for

continual development among our officers as well as to

provide for officers of the future on these complex gas

vessels. We regularly also have specialists on board to

maintain specific parts of the complex cargo plant or

to provide supplementary services.

As with all shipping companies, the safety of our

crew is paramount, particularly given the special and

potentially dangerous cargoes carried on the Company’s

vessels. Across the fleet, we had one ‘lost time incident’

during 2009, with three vessels, out of a possible five

(excluding the three new-builds) achieving in excess of

1,000 days without a lost time incident. We continually

strive to operate without suffering any lost time

incidents.

The Navigator vessels operate throughout the world,

trading cabotage for both the respective Venezuelan

and Indonesian state owned oil companies, as well

as carrying cargoes from the Arabian Gulf to India,

Southeast Asia: from the Mediterranean Sea and North

West Europe to and from the USA East Coast: from the

Mediterranean Sea and North West Europe to China

and the Far East and between the Caribbean and

West Coast Africa.

The Company recognizes and is highly appreciative

of the enormous efforts made by all its employees,

particularly our seafaring staff, but also our office based

employees for their loyalty, enthusiasm and dedication

throughout the year.

We are also grateful to our charterers and suppliers

for their support during the year and to our outsourced

technical and crewing managers for their effective

management and more importantly for providing for

the safety and wellbeing of our crew as well as the safe

running of our vessels.


To our Stockholders continued

We thank and look forward to the continued support

of all those who contributed to the Company’s success

over the past year and on whose support the Company’s

future is so dependent.

Board

The Company appointed Thomas A. McKay as an

additional Non-Executive Director, effective on January 1,

2010. Mr McKay is the owner of T. A. McKay & Co., Inc, a

New York investment management firm. Funds managed

by T. A. McKay own approximately 1.25 million shares

of the Company’s common stock, representing

approximately 12% of the total shares outstanding.

Dividend

We are ever mindful of the desire of our Stockholders

to achieve liquidity for the Company’s common stock

and for the payment of dividends. Last year the Board

announced that they considered the payment of

dividends as wholly inappropriate due to the capital

investment programme undertaken – with the purchase

of the three new builds, and the global credit crisis and

worldwide recession.

However, with the completion of its capital expenditure

programme, the Board has re-evaluated the matter of

dividends and has concluded that a dividend policy

would be appropriate. Consequently the Board has

announced a dividend policy consisting of the payment

of quarterly cash dividends to common Stockholders

at a rate of 50% of the previous quarter’s net income

earned by the Company. The Board has chosen this

payout ratio so that the dividend payment will be able

to grow as the Company takes advantage of the long

term strength in the market for transporting LPG. The

Company intends to commence distributions based on

the results of the second quarter of 2010.

Outlook

We expect 2010 will be a challenging environment in

which to operate with little recovery expected prior to

mid 2011 as the worldwide economy slowly improves,

thus increasing the seaborne transportation of LPG,

ammonia and petrochemicals which will absorb the

incremental vessels added to the handysize fleet over

the recent years.

Navigator Gas remains well placed as a significant

participant in the handysized LPG sector. Our modern

tonnage, operating expertise and financial strength

will enable us respond to opportunities as they

present themselves during this economic downturn.

We will continue to seek growth to add value for our

Stockholders and strive to achieve the much needed

Stockholder liquidity. We look forward with confidence

to the future success of the Company.


Financial StatementsDecember 31, 2009


Index to the Financial Statements

Report of Independent Auditors 9

Consolidated Balance Sheets as of December 31, 2009 and 2008 10

Consolidated Statements of Operations for the years ended December 31, 2009 and 2008 11

Consolidated Statements of Stockholders’ Equity for the years ended December 31, 2009 and 2008 12

Consolidated Statements of Comprehensive Income for the years ended December 31, 2009 and 2008 12

Consolidated Statements of Cash Flows for the years ended December 31, 2009 and 2008 13

Notes to the Consolidated Financial Statements 14


Report of Independent Auditors to the Stockholders and Board of Directors of Navigator Holdings Ltd

We have audited the accompanying consolidated balance sheet of Navigator Holdings Ltd and subsidiaries as of

December 31, 2009, and the related consolidated statements of operations, stockholders’ equity, comprehensive income

and cash flows for the year then ended. These financial statements are the responsibility of the Company’s management.

Our responsibility is to express an opinion on these financial statements based on our audit. The financial statements of

Navigator Holdings Ltd and subsidiaries as of December 31, 2008, and for the year then ended were audited by the

Company’s previous auditors. Those auditors expressed an unqualified opinion on those financial statements in their

report dated March 26, 2009.

We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those

standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial

statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the

amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and

significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe

that our audit provides a reasonable basis for our opinion.

In our opinion, the 2009 financial statements referred to above present fairly, in all material respects, the consolidated

financial position of Navigator Holdings Ltd and subsidiaries as of December 31, 2009 and the consolidated results of

their operations and their cash flows for the year then ended, in conformity with accounting principles generally accepted

in the United States of America.

MSPC

Certified Public Accountants and Advisors

A Professional Corporation

New York, NY

March 12, 2010


December 31,

2009

December 31,

2008

Assets

Current assets


Accounts receivable 2,737,576 997,212


Inventories 1,918,793 414,448




Restricted cash – 14,270,047

Deferred finance costs, net 825,000 1,050,000

Total assets $ 449,856,387 $ 353,224,177

Liabilities and stockholders’ equity

Current liabilities

Accounts payable $ 2,671,700 $ 1,857,514


Provision for onerous vessel acquisition contracts – 14,000,000

Deferred income 901,712 1,134,474


Non-current liabilities

Long term debt 110,000,000 30,000,000




10,320,000 shares issued and outstanding 103,200 103,200










Year ended

December 31,

2009

Year ended

December 31,

2008

Revenues


Expenses

Address and brokerage commissions 2,690,815 1,939,019

Voyage expenses 2,180,045 3,339,790

Vessel operating expenses 18,213,141 14,307,033


Impairment loss – 5,202,017

General and administrative costs 4,623,786 2,837,927

Other corporate expenses 292,764 824,004

43,395,998 40,376,118



Interest expense (2,443,125) (999,295)

Interest income 103,794 944,703

Provision for onerous vessel acquisition contracts – (14,000,000)

Strategic review costs – (2,872,684)

Income before income taxes 26,794,484 2,377,664

Income taxes (82,031) (149,238)

Net income $ 26,712,453 $ 2,228,426

Earnings per share:

Basic $ 2.59 $ 0.22

Diluted $ 2.59 $ 0.22


Basic 10,320,000 10,080,466

Diluted 10,320,000 10,080,466



Common

Stock

Additional

Paid in

Capital

Accumulated

Other

Comprehensive

Income/(Loss)

Retained

Earnings Total

January 1, 2008 $ 100,000 $ 284,957,937 $ – $ 17,309,461 $ 302,367,398


September 16, 2008 2,500 (2,500) – – –


November 20, 2008 700 (700) – – –

Net income – – – 2,228,426 2,228,426

Foreign currency translation – – (110,559) – (110,559)

Share based compensation plan – 613,078 – – 613,078

December 31, 2008 103,200 285,567,815 (110,559) 19,537,887 305,098,343

Net income – – – 26,712,453 26,712,453

Foreign currency translation – – (20,483) – (20,483)

Share based compensation plan – 2,141,701 – – 2,141,701

December 31, 2009 $ 103,200 $ 287,709,516 $ (131,042) $ 46,250,340 $ 333,932,014

Year ended

December 31,

2009

Year ended

December 31,

2008

Net income $ 26,712,453 $ 2,228,426

Comprehensive income/(loss):

Foreign currency translation loss (20,483) (110,559)

Total comprehensive income $ 26,691,970 $ 2,117,867






Year ended December 31,

2009

Year ended December 31,

2008

Cash flows from operating activities

Net income $ 26,712,453 $ 2,228,426




Impairment loss – 5,202,017

Provision for onerous vessel acquisition contracts – 14,000,000

Stock based compensation 2,141,701 613,078


Unrealized foreign exchange (43,086) (21,368)


Accounts receivable (1,740,364) (997,212)

Prepaid expenses and other current assets (180,939) 148,857

Accounts payable and other liabilities 1,798,539 (1,635,475)

Inventories (1,504,345) (79,948)

Strategic review costs – 2,153,715



Release of restricted cash for vessel purchase 14,270,047 6,376,318

Payment to acquire vessels (136,122,851) (67,946,107)

Payment of dry docking costs (2,166,216) (1,818,777)


Net cash used in investing activities (124,194,979) (63,425,578)

Cash flows from financing activities


Repayment of long term debt (10,000,000) –


Net decrease in cash and cash equivalents (1,390,573) (937,160)

Cash and cash equivalents at beginning of year 11,921,904 12,859,064

Cash and cash equivalents at end of year $ 10,531,331 $ 11,921,904

Supplemental information

Total interest paid during the year $ 1,659,340 $ 492,319

Total tax paid during the year $ 185,154 $ 85,782



1. The Company and the Basis of Presentation

Navigator Holdings Ltd, the ultimate parent company of the Navigator Group of companies, is registered in the

Republic of the Marshall Islands. The Company has a business of owning and chartering out a fleet of gas carriers.

The accompanying consolidated financial statements incorporate the accounts of Navigator Holdings Ltd and its

wholly owned subsidiaries (collectively the “Company”). These subsidiaries include Navigator Gas LLC and its vessel

owing subsidiaries; Navigator Aries LLC; Navigator Gemini LLC; Navigator Mars LLC; Navigator Neptune LLC;

Navigator Pluto LLC; Navigator Saturn LLC; Navigator Taurus LLC; Navigator Venus LLC; and NGT Services (UK)

Limited and Navigator Gas US LLC.

NGT Services (UK) Limited is a United Kingdom company formed in August 2006 to provide certain commercial,

technical and administrative services to other companies within the group. Navigator Gas US LLC is an entity formed

in the State of Delaware on May 1, 2009 in order to provide certain administrative services to other companies within

the group. All other subsidiaries are formed under the laws of the Republic of the Marshall Islands.

At December 31, 2009 the Company owned and operated eight gas carriers (the “vessels”) of which five are 22,000

cubic meter, semi-refrigerated and ethylene capable and three are 20,600 cubic meter, semi-refrigerated vessels, all

providing worldwide marine transportation. The Vessels have primarily been operating to date along the following

routes: from the Arabian Gulf to India, Southeast Asia, and Australia, across the Mediterranean Sea and from the

Mediterranean Sea to North West Europe, from North West Europe to USA East Coast, between the Caribbean and

West Africa, Venezuelan cabotage and Indonesian cabotage.



The consolidated financial statements have been prepared in accordance with accounting principles generally

accepted in the United States of America. The accompanying consolidated financial statements include the accounts

of the Company and its wholly-owned subsidiaries. All intercompany accounts and transactions have been eliminated

in consolidation.


The cost of the vessels (excluding the estimated initial built-in overhaul cost) less their estimated residual value is

depreciated on a straight-line basis over the vessel’s estimated economic life. Management estimates the useful life

of each of the Company’s vessels to be 30 years from the date of its construction.


In accordance with Accounting Standards Codification (“ASC”) Topic 360 “Fixed Assets” Vessels, are reviewed for

impairment when market conditions indicate a significant decrease in the assets’ fair value. An impairment loss is

recognized when the sum of the expected future cash flows (undiscounted and without interest) from the Vessel over

its estimated remaining useful life is less than its carrying amount. An impairment loss is recorded equal to the

amount by which the Vessel’s carrying amount exceeds its fair value.

Notes to the Consolidated Financial Statements December 31, 2009 and 2008



Each Vessel is required to be dry-docked every 30 to 60 months for classification society surveys and inspections of,

among other things, the underwater parts of the vessel. These works include, but are not limited to hull coatings,

seawater valves, steelworks and piping works, propeller servicing, anchor chain winch calibrations, all of which cannot

be performed while the vessels are operating. The Company capitalizes costs associated with the dry-dockings as

“built in overhauls” in accordance with ASC Topic 360 “Fixed Assets” and amortizes these costs on a straight line basis

over the period between dry-dockings. Amortization of dry-docking costs is included in depreciation and amortization

in the Statement of Operations. Costs incurred during the dry-docking period which relate to routine repairs and

maintenance are expensed.

(e) Cash and Cash Equivalents

The Company considers highly liquid investments, such as time deposits and certificates of deposit, with an original

maturity of three months or less when purchased to be cash equivalents.

(f) Accounts Receivable

The Company carries its accounts receivable at cost less an allowance for doubtful accounts. On a periodic basis, the

Company evaluates its accounts receivable and establishes an allowance for doubtful accounts, based on a history of

past write-offs, collections and current credit conditions. The Company does not generally charge interest on past-

due accounts (unless the accounts are subject to legal action), and accounts are written off as uncollectible when all

reasonable collection efforts have failed. Accounts are deemed as past-due based on contractual terms.

(g) Inventories

Inventories include bunkers (fuel), for those vessels under voyage charter, and lubricants. Under a time charter the

cost of bunkers is borne by and remains the property of the charterer. Inventories are accounted for on a first in, first

out basis and are valued at the lower of cost and market value.

(h) Deferred Finance Costs

Costs incurred in connection with obtaining long-term debt are recorded as deferred financing costs and are

amortized to interest expense over the estimated duration of the related debt on a straight line basis. Such costs

include fees paid to the lenders or on the lenders’ behalf and associated legal and other professional fees.

(i) Restricted Cash

Cash and cash equivalent subject to restrictions are excluded from cash and cash equivalent in the balance sheet and

are presented as restricted cash.

(j) Deferred Income

Deferred income is the balance of unearned revenues received and represents that portion received under a time

charter or voyage charter arrangement as of the balance sheet date for revenue applicable to a period of time

subsequent to the balance sheet date.


Notes to the Consolidated Financial Statements continued

(k) Revenue Recognition

The Company employs its vessels on time charters or voyage charters. With time charters, the Company receives a

fixed charter hire per on-hire day and revenue is recognized on an accrual basis and is recorded over the term of the

charter as service is provided. In the case of voyage charters, the vessel is contracted for a voyage between two or

several ports and the Company is paid for the cargo transported. Voyage charter revenue is recorded based on the

percentage of service completed at the balance sheet date. A voyage is deemed to commence when a vessel is

available for loading at the load port and is deemed to end upon the completion of the discharge of the current cargo.

(l) Other Comprehensive Income/(Loss)

The Company follows the provisions of ASC Topic 220 “Comprehensive Income”, which requires separate presentation

of certain transactions, which are recorded directly as components of stockholders’ equity. Comprehensive income is

comprised of net income and foreign currency translation gains and losses.

(m) Voyage Expenses and Vessel Operating Expenses

When the Company employs its vessels on time charter, it is responsible for all the operating expenses of the vessels,

such as crew costs, stores, insurance, repairs and maintenance. In the case of voyage charters, the vessel is contracted

only for a voyage between two or several ports and the Company pays for all voyage expenses in addition to the

vessel operating expenses. Voyage expenses consist mainly of in port expenses and bunker (fuel) consumption and

are recognized as incurred.

(n) Repairs and Maintenance


(o) Insurance

The Company maintains hull and machinery insurance, war risk insurance, protection and indemnity insurance

coverage, increased value insurance, demurrage and defence insurance coverage in amounts considered prudent to

cover normal risks in the ordinary course of its operations. Premiums paid in advance to insurance companies are

recognized as prepaid expenses and expensed over the period covered by the insurance contract.

(p) Share-Based Compensation

The Company accounts for stock-based compensation in accordance with ASC Topic 718 “Compensation-Stock

Compensation”, which requires the Company to record as an expense in its financial statements the fair value of all

stock-based compensation awards. The terms and vesting schedules for stock-based awards vary by type of grant.

Generally, the awards vest based on time-based (immediate to five years) and/or performance-based conditions.

Compensation expense is recognized ratably over the service period.

2. Summary of Significant Accounting Policies continued


(q) Accounting Estimates

The preparation of the consolidated financial statements in conformity with accounting principles generally accepted

in the United States of America (“US GAAP”) requires management to make estimates and assumptions that affect

the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the

financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results

could differ from these estimates.

(r) Foreign Currency Transactions

Substantially all of the Company’s cash receipts are in U.S. Dollars. The Company’s disbursements, however, are in the

currency invoiced by the supplier. The Company remits funds in the various currencies invoiced. The non U.S. Dollar

invoices received and their subsequent payments are converted into U.S. Dollars when the transactions occur. The

movement in exchange rates between these two dates is transferred to an exchange difference account and is

expensed each month. The exchange risk resulting from these transactions is not expected to be material.

(s) Income Taxes

Navigator Holdings and its Marshall Islands subsidiaries are not subject to taxation in the Republic of the Marshall

Islands.

The Company has one subsidiary incorporated in the United Kingdom where the base tax rate is 28%. This subsidiary

earns management and other fees from fellow subsidiary companies and for the year ended December 31, 2009 the

estimated tax charge is $82,031 (2008: $149,238).

The Company considered the income tax disclosure requirements of ASC Topic 740 “Income Taxes”, in regards to

disclosing material unrecognized tax benefits; none were identified. The Company’s policy is to recognize accrued

interest and penalties for unrecognized tax benefits as a component of tax expense. As of December 31, 2009, there

were no accrued interest and penalties for unrecognized tax benefits. During 2009, there were no interest or penalties

included as a component of tax expense for unrecognized tax benefits.

(t) Earnings per Share

In accordance with ASC Topic 260 “Earnings Per Share”, basic earnings per common share (“Basic EPS”) is computed

by dividing the net income available to common stockholders by the weighted-average number of shares outstanding.

Diluted earnings per common share (“Diluted EPS”) are computed by dividing the net income available to common

stockholders by the weighted average number of common shares and dilutive common share equivalents then

outstanding. ASC Topic 260 requires presentation of both Basic EPS and Diluted EPS on the face of the Company’s

statement of operations.

The 320,000 shares of restricted stock granted by the Company during the year ended December 31, 2008 are the

only dilutive shares outstanding as of December 31, 2009. These shares have been considered as outstanding since

their respective grant dates for purposes of computing diluted earnings per share.



(u) Segment Reporting

Although separate vessel financial information is available, Management internally evaluates the performance of the

enterprise as a whole and not on the basis of separate business units or different types of charters. As a result, the

Company has determined it operates as one reportable segment. Since the Company’s vessels regularly move

between countries in international waters over many trade routes, it is impractical to assign revenues or earnings

from the transportation of international LPG products by geographic area.

(v) Recent Accounting Pronouncements

The following accounting standards issued as of February 2, 2010, may affect the future financial reporting by

Navigator Holdings Ltd:

ASU No. 2009-15, Accounting for Own-Share Lending Arrangements in Contemplation of Convertible Debt Issuance

or Other Financing

This ASU concludes that at the date of issuance, a share-lending arrangement entered into on an entity’s own shares

in contemplation of a convertible debt offering or other financing is required to be measured at fair value and

recognized as issuance cost in the financial statements of the entity. The ASU is effective for fiscal years beginning

on or after December 15, 2009, and interim periods within those fiscal years for arrangements outstanding as of the

beginning of those fiscal years. The ASU is effective for interim or annual periods beginning on or after June 15, 2009,

for share-lending arrangements entered into in those periods.

ASU No. 2009-16, Transfers and Servicing (Topic 860): Accounting for Transfers of Financial Assets

Among other provisions, this ASU eliminates the concept of a “qualifying special-purpose entity” from SFAS No. 140

and removes the exception from applying FIN No. 46(R) to qualifying special-purpose entities. This ASU is effective

at the beginning of a reporting entity’s first fiscal year that begins after November 15, 2009.

ASU No. 2009-17, Consolidations (Topic 810): Improvements to Financial Reporting by Enterprises Involved with

Variable Interest Entities

Among other provisions, this ASU amends FIN No. 46(R) to require an enterprise to perform an analysis to determine

whether the enterprise’s variable interest or interests give it a controlling financial interest in a variable interest entity.

This ASU is effective at the beginning of a company’s first fiscal year that begins after November 15, 2009.

ASU No. 2010-06, Fair Value Measurements and Disclosures (Topic 820) – Improving Disclosures about Fair Value

Measurements

This ASU affects all entities that are required to make disclosures about recurring and nonrecurring fair value

measurements under FASB ASC Topic 820, originally issued as FASB Statement No. 157, Fair Value Measurements.

The ASU requires certain new disclosures and clarifies two existing disclosure requirements. The new disclosures

and clarifications of existing disclosures are effective for interim and annual reporting periods beginning after

December 15, 2009, except for the disclosures about purchases, sales, issuances, and settlements in the roll

forward of activity in Level 3 fair value measurements. Those disclosures are effective for fiscal years beginning

after December 15, 2010, and for interim periods within those fiscal years.

2. Summary of Significant Accounting Policies continued


ASU No. 2010-08, Technical Corrections to Various Topics

This ASU eliminates certain inconsistencies and outdated provisions and provides needed clarifications. The changes

are generally non substantive in nature and will not result in pervasive changes to current practice. However, the

amendments that clarify the guidance on embedded derivatives and hedging (ASC Subtopic 815-15) may cause a

change in the application of that Subtopic. The clarifications of the guidance on embedded derivatives and hedging

(Subtopic 815-15) are effective for fiscal years beginning after December 15, 2009. The other amendments are

effective as of the first reporting period (including interim periods) beginning after February 2, 2010.

SFAS No. 167, Amendments to FASB Interpretation No. 46(R)

Among other provisions, this Statement amends FIN No. 46(R) to require an enterprise to perform an analysis to

determine whether the enterprise’s variable interest or interests give it a controlling financial interest in a variable

interest entity. This Statement is effective for Navigator Holdings Ltd at the beginning of the Company’s fiscal year

that began on January 1, 2010.

Management does not believe that any other recently issued, but not yet effective accounting pronouncements,

if currently adopted, would have a material impact on the consolidated financial statements of the Company.

3. Fair Value of Financial Instruments

The principal financial assets of the Company as of December 31, 2009 and 2008 consist of cash and cash equivalents,

accounts receivable and restricted cash. The principal financial liabilities of the Company consist of accounts payable,

accrued expenses and other liabilities and long-term debt.

The carrying values of cash and cash equivalents, restricted cash and accrued expenses and other liabilities are

reasonable estimates of their fair value due to the short-term nature of these financial instruments.

The fair value of the Company’s long-term debt approximates its carrying value due to the variable interest rate

associated with the credit facility (Note 7).

4. Accounts Receivable

All time charter contracts require payment monthly in advance. As of December 31, 2009, all of the accounts

receivable was owed by two charterers. At both December 31, 2009 and 2008 management considered that there

was no allowance necessary for doubtful accounts.



5. Vessels in Operation

Vessel Dry-docking Total

Cost

December 31, 2008 $ 345,946,940 $ 3,434,421 $ 349,381,361

Additions 136,122,851 2,166,216 138,289,067

Disposals – (312,615) (312,615)

Impairment charge (14,000,000) – (14,000,000)

December 31, 2009 468,069,791 5,288,022 473,357,813

Accumulated depreciation

December 31, 2008 25,960,956 1,053,962 27,014,918

Charge for the period 14,425,302 890,089 15,315,391

Disposals for the period – (312,615) (312,615)

December 31, 2009 40,386,258 1,631,436 42,017,694

Net book value

December 31, 2009 $ 427,683,533 $ 3,656,586 $ 431,340,119

December 31, 2008 $ 319,985,984 $ 2,380,459 $ 322,366,443

During 2009, the Company took delivery of two new 20,600 cbm semi-refrigerated gas carriers, at a purchase

price of $67,000,000 each, agreed in May 2007. The Company financed the acquisition with an additional

$80,000,000 draw down from its secured revolving credit facility with the balance being financed from its own

cash resources. At December 31, 2008 management estimated that the vessels had a market value of $60,000,000

each and consequently provided a provision at that time for onerous vessel acquisition contracts for a total of

$14,000,000.

Management review the values of the vessels in the fleet at each year end. At December 31, 2009 by using the

average historical time charter rates over the past ten years and a cost of capital of 8% for future cash flows,

the value in use calculation values each vessel in excess of their carrying values. Management therefore do not

believe there is any impairment required at December 31, 2009.

The net book value of vessels that serve as collateral for the Company’s credit facility (Note 7) was $232,231,400

at December 2009.


6. Accrued Expenses and Other Liabilities

The components of accrued expenses and other liabilities are as follows:

December 31, 2009

December 31, 2008


Dry docking accrual $ 878,074 $ –

$ 2,350,961 $ 1,133,846

7. Long-term debt

December 31, 2009

December 31, 2008

Secured revolving credit facility $ 110,000,000 $ 30,000,000

The Company entered into a $150,000,000 secured revolving credit facility dated July 31, 2008 with Nordea Bank

Finland Plc as Lead Arranger, for the purpose of financing the acquisition of three new build vessels and for general

corporate purposes. Interest is payable under the credit facility at LIBOR plus 1.5%, payable periodically. The Company

also pays a commitment fee of 0.5% per annum based on the undrawn portion of the credit facility. The undrawn

amount of the facility amounted to $40,000,000 at December 31, 2009. The amount available to be drawn down

under the credit facility will be reduced by 13 consecutive quarterly reductions of $3,250,000 commencing at the end

of the first quarter of 2010, with a final reduction of $107,750,000 on the maturity date, which is July 31, 2013.

Consequently the loan amount outstanding of $110,000,000 as of December 31, 2009 is repayable as $2,250,000 on

June 30, 2013 and $107,750,000 is repayable on July 31, 2013.

This credit facility is secured by first priority mortgages on each of Navigator Mars and the three new build vessels in

the security package as well as assignments of earnings and insurances on these secured vessels. The financial

covenants each as defined within the credit facility are: a) liquidity of $10,000,000 including undrawn available lines

of credit with a maturity exceeding 12 months; b) net debt to total capitalization ratio not to exceed 60%; c) EBITDA

to debt service, on a trailing four-quarter basis, to be no less than three to one; and d) a loan to value maintenance

of no less than 130%. At December 31, 2009 the Company was in compliance with all covenants contained in the

credit facility.



8. Share-Based Compensation

During 2008, the Company’s Board adopted the 2008 Restricted Stock Plan (the “Plan”), which entitles officers,

employees, consultants and directors of the Company to receive grants of restricted stock of the Company’s common

stock.

The Plan is administered by the Board or a committee of the Board. The maximum aggregate number of common

shares that may be delivered pursuant to awards granted under the Plan during the ten year term of the Plan is

3,000,000 shares of common stock.

A holder of restricted stock awarded under the Plan shall have the same voting and dividend rights as the Company’s

other common stockholders in relation to those shares.

The fair value of the restricted stock is calculated by multiplying the number of shares by the deemed calculated share

value at the grant date.

During the year ended December 31, 2008, 320,000 shares, with a weighted average fair value of $15.24 per share,

were granted. There were no awards granted by the Company during the year ended December 31, 2009 and 86,667

shares, of those previously awarded, vested.

Using the graded vesting method of expensing the restricted stock grants, the weighted average fair value of the

shares calculated thereon is recognized as compensation costs in the Statement of Operations over the vesting period.

During 2009, the Company recognized $2,141,701 in share based compensation costs (2008: $613,078). As of

December 31, 2009, there was a total of $2,122,721 unrecognized compensation costs relating to the future vesting

of share based awards (December 31, 2008: $4,264,422). The remaining costs are expected to be recognized over the

next four years.


The Company occupies office space in London, paying approximately $303,000 (£190,000) per calendar year. The

lease is for a period of 10 years, with a mutual break option in March 2012, being the fifth anniversary of the lease

commencement date.

During the year the Company took on the lease of a property in New York dated June 2009 paying approximately

$133,500 per year. The lease is for a period of three years ending August 30, 2012.

During the year ended December 31, 2008 the Company expensed costs incurred with its review of potential

alternative financing and capitalization structures and transactions. These costs have been included in the

accompanying statement of operations as strategic review costs for the year ended December 31, 2008.

From time to time the Company may be subject to legal proceedings and claims in the ordinary course of its business,

principally personal injury and property casualty claims. Such claims, even if lacking merit, could result in the

expenditure of significant financial and managerial resources. The Company is not aware of any legal proceedings or

claims that it believes will have, individually or in the aggregate, a materially adverse effect on the Company, its

financial condition, results of operations or cash flows.



The vessels are chartered under either a time charter arrangement or voyage charter arrangement. Under a time

charter arrangement, no security is provided for the payment of the accounts receivable, however, payment is usually

received monthly in advance. Under a voyage charter arrangement, a lien may sometimes be placed on the cargo to

secure the payment of the accounts receivable, as permitted by the prevailing charter party agreement.

At December 31, 2009, five of the Company’s eight vessels were on time charters, four of which will expire within

12 months. The remaining vessel has a time charter scheduled to expire between one and two years of the balance

sheet date. The committed charter income for 2010 is $26,369,861 and for 2011 is $7,600,915.

During 2009 revenue from three charterers totalled 96% of the operating revenue, comprising 60%, 21% and 15%

(2008: total of 77% comprising 50%, 17% and 10%).

At December 31, 2009 and 2008, all of the Company’s cash was held by a large financial institution. The Company

believes that credit risk related to the cash deposits is limited, since the financial institution is highly rated by a

well-known rating service.


The Company has evaluated subsequent events from the 2009 consolidated balance sheet date through

March 12, 2010.

24 Printed by Royle Print Limited, London


Representative Office


21 Palmer Street, London SW1H 0AD

United Kingdom

Tel: +44 (0)20 7340 4850

Website: www.navigatorgas.com

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