---

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|                                  
|----------------------------------
|UNITED STATES                     
|SECURITIES AND EXCHANGE COMMISSION
|Washington, D.C. 20549            
|                                  
|FORM 20-F                         

(Mark One)

|                                                                       |                                                                                                
|---------------------------------------------------------------------- | -----------------------------------------------------------------------------------------------
|o                                                                      | REGISTRATION STATEMENT PURSUANT TO
 SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934
|OR                                                                    
|x                                                                      | ANNUAL REPORT PURSUANT TO SECTION
 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934          
|For the fiscal year ended December 31, 2012                           
|OR                                                                    
|o                                                                      | TRANSITION REPORT PURSUANT TO
 SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934      
|For the
 transition period from _________________ to _________________
|OR                                                                    
|o                                                                      | SHELL COMPANY REPORT PURSUANT TO
 SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934   
|Date of
 event requiring this shell company report _________________  

|                                                              
|--------------------------------------------------------------
|Commission
 file number                                       
|SCORPIO TANKERS INC.                                          
|(Exact name of Registrant as specified in its charter)        
|                                                              
|                                                              
|(Translation of Registrants name into English)               
|                                                              
|Republic of The Marshall Islands                              
|(Jurisdiction of incorporation or organization)               
|                                                              
|9, Boulevard Charles III Monaco 98000                         
|(Address of principal executive offices)                      
|                                                              
|Mr. Emanuele Lauro,                                           
|+377-9898-5716                                                
|9, Boulevard Charles III Monaco 98000                         
|(Name, Telephone Number and Address of Company Contact Person)

|                                                                                             |                                          
|-------------------------------------------------------------------------------------------- | -----------------------------------------
|Securities
 registered or to be registered pursuant to section 12(b) of the Act.            
|                                                                                             |                                          
|Title of each class                                                                          | Name of each exchange on which registered
|Common Stock, par value of $0.01 per share                                                   | New York Stock Exchange                  
|                                                                                            
|                                                                                            
|Securities
 registered or to be registered pursuant to section 12(g) of the Act.            
|NONE                                                                                        
|(Title of class)                                                                            
|                                                                                             |                                          
|Securities
 for which there is a reporting obligation pursuant to Section 15(d) of the
 Act.

---



|                
|----------------
|NONE            
|(Title of class)

Indicate the number of
outstanding shares of each of the issuers classes of capital or common stock
as of the close of the period covered by the annual report.


|                                                                                                                                                                                                                                                                                                                                                                                           
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|As
 of December 31, 2012, there were 63,827,846 outstanding common shares with a
 par value $0.01 per share.                                                                                                                                                                                                                                                                               
|                                                                                                                                                                                                                                                                                                                                                                                           
|Indicate by
 check mark if the registrant is a well-known seasoned issuer, as defined by
 Rule 405 of the Securities Act.                                                                                                                                                                                                                                                                  
|Yes x No o                                                                                                                                                                                                                                                                                                                                                                                 
|                                                                                                                                                                                                                                                                                                                                                                                           
|If this report
 is an annual or transitional report, indicate by check mark if the registrant
 is not required to file reports pursuant to section 13 or 15(d) of the
 Securities Exchange Act of 1934.                                                                                                                                                                                    
|                                                                                                                                                                                                                                                                                                                                                                                           
|Yes o No x                                                                                                                                                                                                                                                                                                                                                                                 
|                                                                                                                                                                                                                                                                                                                                                                                           
|Indicate by
 check mark whether the registrant (1) has filed all reports required to be
 filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
 the preceding 12 months (or for such shorter period that the registrant was
 required to file such reports), and (2) has been subject to such filing
 requirements for the past 90 days.                              
|                                                                                                                                                                                                                                                                                                                                                                                           
|Yes x No o                                                                                                                                                                                                                                                                                                                                                                                 
|                                                                                                                                                                                                                                                                                                                                                                                           
|Indicate by
 check mark whether the registrant has submitted electronically and posted on
 its corporate Web site, if any, every Interactive Data File required to be
 submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this
 chapter) during the preceding 12 months (or for such shorter period that the
 registrant was required to submit and post such files).
|                                                                                                                                                                                                                                                                                                                                                                                           
|Yes o No o                                                                                                                                                                                                                                                                                                                                                                                 
|                                                                                                                                                                                                                                                                                                                                                                                           
|Indicate by
 check mark whether the registrant is a large accelerated filer, an
 accelerated filer, or a non-accelerated filer. See definition of accelerated
 filer in Rule 12b-2 of the Exchange Act. (Check one):                                                                                                                                                                     
|                                                                                                                                                                                                                                                                                                                                                                                           
|Large
 accelerated filer o                                                                                                                                                                                                                                                                                                                                                                 
|Accelerated
 filer x                                                                                                                                                                                                                                                                                                                                                                       
|Non-accelerated
 filer o                                                                                                                                                                                                                                                                                                                                                                   

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

U.S. GAAP o

International
Financial Reporting Standards as issued by the International Accounting
Standards Board x

Other o

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

Item 17 o 18 o

If this is an
annual report, indicate by check mark whether the registrant is a shell company
(as defined in Rule 12b-2 of the Exchange Act).

Yes o No x

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Cautionary Statement Regarding
Forward-Looking Statements

Matters discussed in this report may constitute forward-looking
statements. The Private Securities Litigation Reform Act of 1995 provides safe
harbor protections for forward-looking statements in order to encourage
companies to provide prospective information about their business.
Forward-looking statements include statements concerning plans, objectives,
goals, strategies, future events or performance, and underlying assumptions and
other statements, which are other than statements of historical facts. We
desire to take advantage of the safe harbor provisions of the Private
Securities Litigation Reform Act of 1995 and is including this cautionary
statement in connection with this safe harbor legislation. The words believe,
anticipate, intends, estimate, forecast, project, plan,
potential, may, should, expect, pending and similar expressions
identify forward-looking statements.

The forward-looking statements in this report are based upon various
assumptions, many of which are based, in turn, upon further assumptions,
including without limitation, our managements examination of historical
operating trends, data contained in our records and other data available from
third parties. Although we believe that these assumptions were reasonable when
made, because these assumptions are inherently subject to significant
uncertainties and contingencies which are difficult or impossible to predict
and are beyond our control, we cannot assure you that we will achieve or
accomplish these expectations, beliefs or projections.

In addition to these important factors, other important factors that,
in our view, could cause actual results to differ materially from those
discussed in the forward-looking statements include the failure of
counterparties to fully perform their contracts with us, the strength of world
economies and currencies, general market conditions, including fluctuations in
charter rates and vessel values, changes in demand for tanker vessel capacity,
changes in our operating expenses, including bunker prices, drydocking and
insurance costs, the market for our vessels, availability of financing and
refinancing, charter counterparty performance, ability to obtain financing and comply
with covenants in such financing arrangements, changes in governmental rules
and regulations or actions taken by regulatory authorities, potential liability
from pending or future litigation, general domestic and international political
conditions, potential disruption of shipping routes due to accidents or
political events, vessels breakdowns and instances of off-hires and other
factors described from time to time in the reports we file with the SEC. We
caution readers of this report not to place undue reliance on these
forward-looking statements, which speak only as of their dates. We undertake no
obligation to update or revise any forward-looking statements. These forward
looking statements are not guarantees of our future performance, and actual results
and future developments may vary materially from those projected in the forward
looking statements. Please see our Risk Factors in Item 3.D of this annual
report for a more complete discussion of these and other risks and
uncertainties.

(i)

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|         |           |                                                                               |     
|-------- | --------- | ----------------------------------------------------------------------------- | ----
|         |           | TABLE OF CONTENTS                                                             |     
|         |           |                                                                               |     
|         |           |                                                                               | Page
|         |           |                                                                               |     
|PART I   | 1        
|         |           |                                                                               |     
|         | ITEM 1.   | IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS                         | 1   
|         | ITEM 2.   | OFFER STATISTICS AND EXPECTED TIMETABLE                                       | 1   
|         | ITEM 3.   | KEY INFORMATION                                                               | 1   
|         | ITEM 4.   | INFORMATION ON THE COMPANY                                                    | 20  
|         | ITEM 4A.  | UNRESOLVED STAFF COMMENTS                                                     | 40  
|         | ITEM 5.   | OPERATING AND FINANCIAL REVIEW AND PROSPECTS                                  | 41  
|         | ITEM 6.   | DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES                                    | 77  
|         | ITEM 7.   | MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS                             | 83  
|         | ITEM 8.   | FINANCIAL INFORMATION                                                         | 87  
|         | ITEM 9.   | THE OFFER AND LISTING                                                         | 88  
|         | ITEM 10.  | ADDITIONAL INFORMATION                                                        | 89  
|         | ITEM 11.  | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS                   | 98  
|         | ITEM 12.  | DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES                        | 99  
|         |           |                                                                               |     
|PART II  | 99       
|         |           |                                                                               |     
|         | ITEM 13.  | DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES                               | 99  
|         | ITEM 14.  | MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF
 PROCEEDS | 99  
|         | ITEM 15.  | CONTROLS AND PROCEDURES                                                       | 99  
|         | ITEM 16A. | AUDIT COMMITTEE FINANCIAL EXPERT                                              | 101 
|         | ITEM 16B. | CODE OF ETHICS                                                                | 101 
|         | ITEM 16C. | PRINCIPAL ACCOUNTANT FEES AND SERVICES                                        | 101 
|         | ITEM 16D. | EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES                    | 102 
|         | ITEM 16E. | PURCHASE OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS         | 102 
|         | ITEM 16F. | CHANGE IN REGISTRANTS CERTIFYING ACCOUNTANT                                  | 102 
|         | ITEM 16G. | CORPORATE GOVERNANCE                                                          | 102 
|         | ITEM 16H. | MINE SAFETY DISCLOSURE                                                        | 103 
|         |           |                                                                               |     
|PART III | 103      
|         |           |                                                                               |     
|         | ITEM 17.  | FINANCIAL STATEMENTS                                                          | 103 
|         | ITEM 18.  | FINANCIAL STATEMENTS                                                          | 103 
|         | ITEM 19.  | EXHIBITS                                                                      | 103 

(ii)

---



PART I.

|        |                                                      
|------- | -----------------------------------------------------
|ITEM 1. | IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS

Not
applicable.

|        |                                        
|------- | ---------------------------------------
|ITEM 2. | OFFER STATISTICS AND EXPECTED TIMETABLE

Not
applicable.

|        |                
|------- | ---------------
|ITEM 3. | KEY INFORMATION

Unless
the context otherwise requires, when used in this annual report, the terms Scorpio
Tankers, the Company, we, our and us refer to Scorpio Tankers Inc. and
its subsidiaries. Scorpio Tankers Inc. refers only to Scorpio Tankers Inc.
and not its subsidiaries. Unless otherwise indicated, all references to
dollars, US dollars and $ in this annual report are to the lawful
currency of the United States. We use the term deadweight tons, or dwt,
expressed in metric tons, each of which is equivalent to 1,000 kilograms, in
describing the size of tankers.

|   |                        
|-- | -----------------------
|A. | Selected Financial Data

The
following tables set forth our selected consolidated financial data and other
operating data as of and for the years ended December 31, 2012, 2011, 2010,
2009 and 2008. The selected data is derived from our audited consolidated
financial statements, which have been prepared in accordance with International
Financial Reporting Standards (IFRS) as issued by the International Accounting
Standards Board (IASB). Our audited consolidated financial statements for the
years ended December 31, 2012, 2011 and 2010 and our consolidated balance
sheets as of December 31, 2012 and 2011, together with the notes thereto, are
presented herein. Our audited consolidated financial statements
for the years ended December 31, 2009 and 2008 and our consolidated balance
sheets as of December 31, 2010, 2009 and 2008, and the notes thereto, are not
included herein.

We began
our operations in October 2009, when Liberty Holding Company Ltd., or Liberty,
a wholly-owned subsidiary of Simon Financial Limited, or Simon, a company owned
and controlled by the Lolli-Ghetti family, of which our founder, Chairman and
Chief Executive Officer, Mr. Emanuele Lauro, is a member, transferred to us
three vessel owning and operating subsidiary companies. Prior to October 1,
2009, our historical consolidated financial statements were prepared on a
carve-out basis from the financial statements of Liberty. These carve-out
financial statements include all assets, liabilities and results of operations
of the three vessel-owning subsidiaries owned by us, formerly subsidiaries of
Liberty, for the periods presented. For the periods presented, certain of the
expenses incurred by these subsidiaries for commercial, technical and
administrative management services were under management agreements with other
entities owned and controlled by the Lolli-Ghetti family, which we refer to
collectively as the Scorpio Group, consisting of: (i) Scorpio Ship Management
S.A.M., or SSM; and Scorpio Commercial Management S.A.M., or SCM; which provide
us and third parties with technical and commercial management services,
respectively; (ii) Liberty, which provided us with administrative services
until March 13, 2012 when the administrative services agreement was assigned to
Scorpio Services Holding Limited, or SSH, a company owned by the Lolli-Ghetti
family; and (iii) other affiliated entities. Since agreements with related
parties are by definition not at arms length, the expenses incurred under these
agreements may have been different than the historical costs incurred if the
subsidiaries had operated as unaffiliated entities during prior periods. Our
estimates of any differences between historical expenses and the expenses that
may have been incurred had the subsidiaries been stand-alone entities have been
disclosed in the notes to our historical consolidated financial statements for
those relevant years which are not presented herein.

1

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|                                                             |  |                                 |            |      |   |            |   |      |            |      |   |           |   |   |           |  
|------------------------------------------------------------ |  | ------------------------------- | ---------- | ---- | - | ---------- | - | ---- | ---------- | ---- | - | --------- | - | - | --------- | -
|                                                             |  | For the year ended December 31, |           
|In
thousands of US dollars except per share and share data   |  | 2012                            |            | 2011 |   | 2010       |   | 2009 |            | 2008 |  
|Consolidated income statement data                           |  |                                 |            |      |   |            |   |      |            |      |   |           |   |   |           |  
|Revenue:                                                     |  |                                 |            |      |   |            |   |      |            |      |   |           |   |   |           |  
|Vessel revenue                                               |  | $                               | 115,381    |      | $ | 82,110     |   | $    | 38,798     |      | $ | 27,619    |   | $ | 39,274    |  
|Operating expenses:                                          |  |                                 |            |      |   |            |   |      |            |      |   |           |   |   |           |  
|Vessel operating costs                                       |  |                                 | (30,353    | )    |   | (31,370    | ) |      | (18,440    | )    |   | (8,562    | ) |   | (8,623    | )
|Voyage expenses                                              |  |                                 | (21,744    | )    |   | (6,881     | ) |      | (2,542     | )    |   |          |   |   |          |  
|Charterhire                                                  |  |                                 | (43,701    | )    |   | (22,750    | ) |      | (276       | )    |   | (3,073    | ) |   | (6,722    | )
|Impairment (1)                                               |  |                                 |           |      |   | (66,611    | ) |      |           |      |   | (4,512    | ) |   |          |  
|Depreciation                                                 |  |                                 | (14,818    | )    |   | (18,460    | ) |      | (10,179    | )    |   | (6,835    | ) |   | (6,984    | )
|Loss from sale of vessels                                    |  |                                 | (10,404    | )    |   |           |   |      |           |      |   |          |   |   |          |  
|General and administrative expenses                          |  |                                 | (11,536    | )    |   | (11,637    | ) |      | (6,200     | )    |   | (417      | ) |   | (600      | )
|Total operating expenses                                     |  |                                 | (132,556   | )    |   | (157,708   | ) |      | (37,637    | )    |   | (23,399   | ) |   | (22,930   | )
|Operating (loss) / income                                    |  |                                 | (17,175    | )    |   | (75,599    | ) |      | 1,161      |      |   | 4,220     |   |   | 16,344    |  
|Other income and expense:                                    |  |                                 |            |      |   |            |   |      |            |      |   |           |   |   |           |  
|Financial expenses                                           |  |                                 | (8,512     | )    |   | (7,060     | ) |      | (3,231     | )    |   | (699      | ) |   | (1,711    | )
|Earnings from profit or loss sharing agreements              |  |                                 | 443        |      |   |           |   |      |           |      |   |          |   |   |          |  
|Realized loss on derivative financial instruments            |  |                                 |           |      |   |           |   |      | (280       | )    |   | (808      | ) |   | (406      | )
|Unrealized (loss) / gain on derivative financial instruments |  |                                 | (1,231     | )    |   |           |   |      |           |      |   | 956       |   |   | (2,058    | )
|Financial income                                             |  |                                 | 35         |      |   | 51         |   |      | 37         |      |   | 5         |   |   | 35        |  
|Other expense, net                                           |  |                                 | (97        | )    |   | (119       | ) |      | (509       | )    |   | (256      | ) |   | (19       | )
|Total other income and expense                               |  |                                 | (9,362     | )    |   | (7,128     | ) |      | (3,983     | )    |   | (802      | ) |   | (4,158    | )
|Net (loss)/income                                            |  | $                               | (26,537    | )    | $ | (82,727    | ) | $    | (2,822     | )    | $ | 3,418     |   | $ | 12,186    |  
|(Loss)/earnings per common share (2):                        |  |                                 |            |      |   |            |   |      |            |      |   |           |   |   |           |  
|Basic and diluted (loss)/earnings per share                  |  | $                               | (0.64      | )    | $ | (2.88      | ) | $    | (0.18      | )    | $ | 0.61      |   | $ | 2.18      |  
|Basic and diluted weighted average shares outstanding        |  |                                 | 41,413,339 |      |   | 28,704,876 |   |      | 15,600,813 |      |   | 5,589,147 |   |   | 5,589,147 |  

|                                   |  |                    |         |      |   |         |  |      |         |      |   |         |  |   |         | 
|---------------------------------- |  | ------------------ | ------- | ---- | - | ------- |  | ---- | ------- | ---- | - | ------- |  | - | ------- | 
|                                   |  | As of December 31, |        
|In thousands of US dollars         |  | 2012               |         | 2011 |   | 2010    |  | 2009 |         | 2008 |  
|Balance sheet data                 |  |                    |         |      |   |         |  |      |         |      |   |         |  |   |         | 
|Cash and cash equivalents          |  | $                  | 87,165  |      | $ | 36,833  |  | $    | 68,187  |      | $ | 444     |  | $ | 3,608   | 
|Vessels and drydock                |  |                    | 395,412 |      |   | 322,458 |  |      | 333,425 |      |   | 99,594  |  |   | 109,260 | 
|Vessels under construction         |  |                    | 50,251  |      |   | 60,333  |  |      |        |      |   |        |  |   |        | 
|Total assets                       |  |                    | 573,280 |      |   | 448,230 |  |      | 412,268 |      |   | 104,423 |  |   | 117,112 | 
|Current and non-current bank loans |  |                    | 142,459 |      |   | 145,568 |  |      | 143,188 |      |   | 36,200  |  |   | 43,400  | 
|Shareholder payable(3)             |  |                    |        |      |   |        |  |      |        |      |   |        |  |   | 22,028  | 
|Related party payable (3)          |  |                    |        |      |   |        |  |      |        |      |   |        |  |   | 27,406  | 
|Shareholders equity               |  |                    | 414,790 |      |   | 286,853 |  |      | 264,783 |      |   | 61,329  |  |   | 20,299  | 

2

---



|                           |  |                                 |         |      |   |          |   |      |          |      |   |         |   |   |         |  
|-------------------------- |  | ------------------------------- | ------- | ---- | - | -------- | - | ---- | -------- | ---- | - | ------- | - | - | ------- | -
|                           |  | For the year ended December 31, |        
|In thousands of US dollars |  | 2012                            |         | 2011 |   | 2010     |   | 2009 |          | 2008 |  
|Cash flow data             |  |                                 |         |      |   |          |   |      |          |      |   |         |   |   |         |  
|Net cash inflow/(outflow)  |  |                                 |         |      |   |          |   |      |          |      |   |         |   |   |         |  
|Operating activities       |  | $                               | (1,928  | )    | $ | (12,452  | ) | $    | 4,907    |      | $ | 9,306   |   | $ | 24,838  |  
|Investing activities       |  |                                 | (90,155 | )    |   | (122,573 | ) |      | (245,595 | )    |   |        |   |   |        |  
|Financing activities       |  |                                 | 142,415 |      |   | 103,671  |   |      | 308,431  |      |   | (12,469 | ) |   | (22,384 | )

| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (1) | In the years ended December 31, 2011 and December 31, 2009, we
 recorded an impairment charge of $66.6 million for our 12 owned vessels and
 $4.5 million for two of our owned vessels, respectively. See Item 5.
 Operating and Financial Review and Prospects.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|
| | (2) | Basic earnings per share is calculated by dividing the net
 (loss)/income attributable to equity holders of the parent by the weighted
 average number of common shares outstanding assuming, for the period prior to
 October 1, 2009, when our historical consolidated financial statements were
 prepared on a carve-out basis, that the reorganization described above was
 effective during the period. Diluted earnings per share are calculated by
 adjusting the net (loss)/income attributable to equity holders of the parent
 and the weighted average number of common shares used for calculating basic
 earnings per share for the effects of all potentially dilutive shares. Such
 potentially dilutive common shares are excluded when the effect would be to
 increase earnings per share or reduce a loss per share.
|
| | (3) | On November 18, 2009, the shareholder payable and the related party
 payable balances, as of that date, were converted to equity as a capital
 contribution.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           

The
following table sets forth our other operating data. This data should be read
in conjunction with Item 5. Operating and Financial Review and Prospects.

|                                                      |  |                                 |        |      |   |        |  |      |        |      |   |        |  |   |        | 
|----------------------------------------------------- |  | ------------------------------- | ------ | ---- | - | ------ |  | ---- | ------ | ---- | - | ------ |  | - | ------ | 
|                                                      |  | For the year ended December 31, |       
|                                                      |  | 2012                            |        | 2011 |   | 2010   |  | 2009 |        | 2008 |  
|Average Daily Results                                 |  |                                 |        |      |   |        |  |      |        |      |   |        |  |   |        | 
|Time charter equivalent (TCE) per day(1)              |  | $                               | 12,960 |      | $ | 12,898 |  | $    | 16,213 |      | $ | 23,423 |  | $ | 29,889 | 
|Vessel operating costs per day(2)                     |  |                                 | 7,605  |      |   | 7,581  |  |      | 8,166  |      | $ | 7,819  |  | $ | 7,875  | 
|                                                      |  |                                 |        |      |   |        |  |      |        |      |   |        |  |   |        | 
|Aframax/LR2                                           |  |                                 |        |      |   |        |  |      |        |      |   |        |  |   |        | 
|TCE per revenue day - pool                            |  | $                               | 10,201 |      | $ | 14,849 |  | $    | 12,460 |      | $ |       |  | $ |       | 
|TCE per revenue day - time charters                   |  |                                 |       |      |   | 15,457 |  |      |       |      |   |       |  |   |       | 
|Vessel operating costs per day(2)                     |  |                                 | 8,436  |      |   | 6,960  |  |      | 8,293  |      |   |       |  |   |       | 
|                                                      |  |                                 |        |      |   |        |  |      |        |      |   |        |  |   |        | 
|Panamax/LR1                                           |  |                                 |        |      |   |        |  |      |        |      |   |        |  |   |        | 
|TCE per revenue day - pool                            |  | $                               | 14,242 |      | $ | 12,876 |  | $    | 15,213 |      | $ | 21,425 |  | $ | 36,049 | 
|TCE per revenue day - spot                            |  |                                 | 15,147 |      |   |       |  |      | 2,839  |      |   |       |  |   |       | 
|TCE per revenue day - time charters                   |  |                                 |       |      |   | 23,962 |  |      | 22,729 |      | $ | 24,825 |  | $ | 24,992 | 
|Vessel operating costs per day(2)                     |  |                                 | 7,714  |      |   | 7,891  |  |      | 8,189  |      |   | 7,819  |  |   | 7,875  | 
|                                                      |  |                                 |        |      |   |        |  |      |        |      |   |        |  |   |        | 
|MR                                                    |  |                                 |        |      |   |        |  |      |        |      |   |        |  |   |        | 
|TCE per revenue day - pool                            |  | $                               | 11,811 |      | $ |       |  | $    |       |      | $ |       |  | $ |       | 
|TCE per revenue day - spot                            |  |                                 | 12,541 |      |   | 12,092 |  |      |       |      |   |       |  |   |       | 
|Vessel operating costs per day(2)                     |  |                                 | 6,770  |      |   | 6,748  |  |      |       |      |   |       |  |   |       | 
|                                                      |  |                                 |        |      |   |        |  |      |        |      |   |        |  |   |        | 
|Handymax                                              |  |                                 |        |      |   |        |  |      |        |      |   |        |  |   |        | 
|TCE per revenue day - pool                            |  | $                               | 13,166 |      | $ | 11,343 |  | $    | 9,965  |      | $ |       |  | $ |       | 
|TCE per revenue day - spot                            |  |                                 | 11,201 |      |   |       |  |      | 8,077  |      |   |       |  |   |       | 
|Vessel operating costs per day(2)                     |  |                                 | 7,594  |      |   | 7,619  |  |      | 8,107  |      |   |       |  |   |       | 
|                                                      |  |                                 |        |      |   |        |  |      |        |      |   |        |  |   |        | 
|Fleet data                                            |  |                                 |        |      |   |        |  |      |        |      |   |        |  |   |        | 
|Average number of owned vessels                       |  |                                 | 10.81  |      |   | 11.29  |  |      | 6.19   |      |   | 3.00   |  |   | 3.00   | 
|Average number of time chartered-in vessels           |  |                                 | 9.18   |      |   | 4.95   |  |      | 0.06   |      |   | 0.33   |  |   | 0.59   | 
|                                                      |  |                                 |        |      |   |        |  |      |        |      |   |        |  |   |        | 
|Drydock                                               |  |                                 |        |      |   |        |  |      |        |      |   |        |  |   |        | 
|Expenditures for drydock (in thousands of US dollars) |  | $                               | 2,869  |      | $ | 2,624  |  | $    | 974    |      | $ | 1,681  |  | $ |       | 

3

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|   |                                           |                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|-- | ----------------------------------------- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   | (1)                                       | Freight rates are commonly measured in the shipping industry in terms
 of time charter equivalent per revenue day. Vessels in the pool and on time
 charter do not have voyage expenses; therefore, the revenue for pool vessels
 and time charter vessels is the same as their TCE revenue. Please see
 Important financial and operational terms and concepts section below for a
 discussion of TCE revenue, revenue days and voyage expenses.
|   | (2)                                       | Vessel operating costs per day represent vessel operating costs, as
 such term is defined in the Important financial and operational terms and
 concepts section below, divided by the number of days the vessel is owned
 during the period.                                                                                                                                                                                                    
|   | (3)                                       | For a definition of items listed under Fleet Data, please see the
 section of this annual report entitled Item 5. Operating and Financial
 Review and Prospects.                                                                                                                                                                                                                                                                               
|   |                                           |                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|B. | Capitalization and indebtedness          
|   |                                          
|   | Not
 applicable.                         
|   |                                          
|C. | Reasons for the offer and use of proceeds
|   |                                          
|   | Not
 applicable.                         
|   |                                          
|D. | Risk Factors                             

The following
risks relate principally to the industry in which we operate and our business
in general. Other risks relate principally to the securities market and
ownership of our common stock. The occurrence of any of the events described in
this section could significantly and negatively affect our business, financial
condition, operating results or cash available for dividends or the trading
price of our common stock.

RISKS RELATED TO OUR INDUSTRY

If the tanker industry, which historically
has been cyclical, continues to be depressed in the future, our earnings and
available cash flow may be adversely affected.

The tanker industry is both cyclical and
volatile in terms of charter rates and profitability. A worsening of the
current global economic conditions may adversely affect our ability to charter
or recharter our vessels or to sell them on the expiration or termination of
their charters and the rates payable in respect of our vessels currently
operating in tanker pools, or any renewal or replacement charters that we enter
into may not be sufficient to allow us to operate our vessels profitably.
Fluctuations in charter rates and vessel values result from changes in the
supply and demand for tanker capacity and changes in the supply and demand for
oil and oil products. The factors affecting the supply and demand for tankers
are outside of our control, and the nature, timing and degree of changes in
industry conditions are unpredictable.

The factors that influence demand for
tanker capacity include:

| |   |                                                                                                                      
| | - | ---------------------------------------------------------------------------------------------------------------------
| |  | supply and demand for energy resources and oil and petroleum
 products;                                              
| |   |                                                                                                                      
| |  | regional availability of refining capacity and inventories;                                                          
| |   |                                                                                                                      
| |  | global and regional economic and political conditions, including
 armed conflicts, terrorist activities, and strikes;

4

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| |   |                                                                                                
| | - | -----------------------------------------------------------------------------------------------
| |  | the distance oil and oil products are to be moved by sea;                                      
| |   |                                                                                                
| |  | changes in seaborne and other transportation patterns;                                         
| |   |                                                                                                
| |  | environmental and other legal and regulatory developments;                                     
| |   |                                                                                                
| |  | weather and natural disasters;                                                                 
| |   |                                                                                                
| |  | competition from alternative sources of energy; and                                            
| |   |                                                                                                
| |  | international sanctions, embargoes, import and export restrictions,
 nationalizations and wars.

The factors
that influence the supply of tanker capacity include:

| |   |                                                                        
| | - | -----------------------------------------------------------------------
| |  | supply and demand for energy resources and oil and petroleum
 products;
| |   |                                                                        
| |  | the number of newbuilding deliveries;                                  
| |   |                                                                        
| |  | the scrapping rate of older vessels;                                   
| |   |                                                                        
| |  | conversion of tankers to other uses;                                   
| |   |                                                                        
| |  | the number of vessels that are out of service;                         
| |   |                                                                        
| |  | environmental concerns and regulations; and                            
| |   |                                                                        
| |  | port or canal congestion.                                              

We are dependent on spot-oriented pools and
spot charters and any decrease in spot charter rates in the future may
adversely affect our earnings.

As of the date of this annual report, all
of our vessels are employed in either the spot market or in spot
market-oriented tanker pools, such as the Scorpio LR2 Pool, Scorpio Panamax
Tanker Pool the Scorpio MR Pool, or the Scorpio Handymax Tanker Pool, which we
refer to collectively as the Scorpio Group Pools, exposing us to fluctuations
in spot market charter rates. The spot charter market may fluctuate
significantly based upon tanker and oil supply and demand. The successful
operation of our vessels in the competitive spot charter market, including
within the Scorpio Group Pools, depends on, among other things, obtaining
profitable spot charters and minimizing, to the extent possible, time spent
waiting for charters and time spent traveling unladen to pick up cargo. The
spot market is very volatile, and, in the past, there have been periods when
spot charter rates have declined below the operating cost of vessels. If future
spot charter rates decline, then we may be unable to operate our vessels
trading in the spot market profitably, meet our obligations, including payments
on indebtedness, or pay dividends in the future. Furthermore, as charter rates
for spot charters are fixed for a single voyage which may last up to several
weeks, during periods in which spot charter rates are rising, we will generally
experience delays in realizing the benefits from such increases.

Our ability
to renew expiring charters or obtain new charters will depend on the prevailing
market conditions at the time. If we are not able to obtain new charters in
direct continuation with existing charters, or if new charters are entered into
at charter rates substantially below the existing charter rates or on terms
otherwise less favorable compared to existing charter terms, our revenues and
profitability could be adversely affected.

An over-supply of tanker capacity may lead to
a reduction in charter rates, vessel values, and profitability.

The market supply of tankers is affected
by a number of factors, such as supply and demand for energy resources,
including oil and petroleum products, supply and demand for seaborne
transportation of such energy resources, and the current and expected purchase orders for newbuildings. If the capacity
of new tankers delivered exceeds the capacity of tankers being scrapped and
converted to non-trading tankers, tanker capacity will increase. According to
Drewry Shipping Consultants Ltd., or Drewry, as of the end of January 2013, the
newbuilding order book, which extends to 2016, equaled approximately 12.4% of
the existing world tanker fleet and the order book may increase further in
proportion to the existing fleet. If the supply of tanker capacity increases
and if the demand for tanker capacity decreases or does not increase
correspondingly, charter rates could materially decline. A reduction in charter
rates and the value of our vessels may have a material adverse effect on our
results of operations and available cash.

5

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Acts of
piracy on ocean-going vessels could adversely affect our business.

Acts of
piracy have historically affected ocean-going vessels trading in regions of the
world such as the South China Sea, the Indian Ocean and in the Gulf of Aden.
Although the frequency of sea piracy worldwide decreased during 2012 to its
lowest level since 2009, sea piracy incidents continue to occur, particularly
in the Gulf of Aden off the coast of Somalia and increasingly in the Gulf of
Guinea, with drybulk vessels and tankers particularly vulnerable to such
attacks. If these piracy attacks result in regions in which our vessels are
deployed being characterized by insurers as war risk zones by insurers or
Joint War Committee war and strikes listed areas, premiums payable for such
coverage could increase significantly and such insurance coverage may be more
difficult to obtain. In addition, crew costs, including costs which may be
incurred to the extent we employ onboard security guards, could increase in
such circumstances. We may not be adequately insured to cover losses from these
incidents, which could have a material adverse effect on us. In addition,
detention hijacking as a result of an act of piracy against our vessels, or an
increase in cost, or unavailability of insurance for our vessels, could have a
material adverse impact on our business, results of operations, cash flows and
financial condition and may result in loss of revenues, increased costs and
decreased cash flows to our customers, which could impair their ability to make
payments to us under our charters.

The current
state of the global financial markets and current economic conditions may
adversely impact our ability to obtain additional financing on acceptable terms
and otherwise negatively impact our business.

Global
financial markets and economic conditions have been, and continue to be,
volatile. In recent years, operating businesses in the global economy have
faced tightening credit, weakening demand for goods and services, deteriorating
international liquidity conditions, and declining markets. There has been a
general decline in the willingness of banks and other financial institutions to
extend credit, particularly in the shipping industry, due to the historically
volatile asset values of vessels. As the shipping industry is highly dependent
on the availability of credit to finance and expand operations, it has been
negatively affected by this decline.

Also, as a
result of concerns about the stability of financial markets generally and the
solvency of counterparties specifically, the cost of obtaining money from the
credit markets has increased as many lenders have increased interest rates,
enacted tighter lending standards, refused to refinance existing debt at all or
on terms similar to current debt and reduced, and in some cases ceased, to
provide funding to borrowers. . We will need to secure additional
debt or equity financing or both in addition to our 2013 Credit Facility
(defined later) to fully fund the remaining balance of our obligations under
our Newbuilding Program (defined later). Due to these factors, additional
financing may not be available if needed and to the extent required, on
acceptable terms or at all. If additional financing is not available when
needed, or is available only on unfavorable terms, we may be unable to expand
or meet our obligations as they come due or we may be unable to enhance our
existing business, complete additional vessel acquisitions or otherwise take
advantage of business opportunities as they arise.

If economic
conditions throughout the world do not improve, it will impede our operations.

Negative
trends in the global economy that emerged in 2008 continue to adversely affect
global economic conditions. In addition, the world economy continues to face a
number of new challenges, including uncertainty related to the continuing
discussions in the United States regarding the U.S. federal debt ceiling,
mandatory reductions in federal spending, along with widespread skepticism
about the implementation of any resulting agreements, continuing turmoil and
hostilities in the Middle East, North Africa and other geographic areas and
countries and continuing economic weakness in the European Union. There has
historically been a strong link between the development of the world economy
and demand for energy, including oil and gas. An extended period of
deterioration in the outlook for the world economy could reduce the overall demand for oil and gas and for our
services. Such changes could adversely affect our results of operations and
cash flows.

6

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The
economies of the United States, the European Union and other parts of the world
continue to experience relatively slow growth or remain in recession and
exhibit weak economic trends. The credit markets in the United States and
Europe have experienced significant contraction, de-leveraging and reduced
liquidity, and the U.S. federal government and state governments and European
authorities continue to implement a broad variety of governmental action and/or
new regulation of the financial markets. Global financial markets and economic
conditions have been, and continue to be, severely disrupted and volatile.
Since 2008, lending by financial institutions worldwide remain at very low
levels compared to the period preceding 2008.

We face
risks attendant to changes in economic environments, changes in interest rates,
and instability in the banking and securities markets around the world, among
other factors. We cannot predict how long the current market conditions will
last. However, these recent and developing economic and governmental factors,
together with the concurrent decline in charter rates and vessel values, may
have a material adverse effect on our results of operations and may cause the
price of our common stock to decline.

Changes in fuel, or bunkers, prices may
adversely affect profits.

Fuel, or
bunkers, is typically the largest expense in our shipping operations for our
vessels and changes in the price of fuel may adversely affect our
profitability. The price and supply of fuel is unpredictable and fluctuates
based on events outside our control, including geopolitical developments,
supply and demand for oil and gas, actions by the Organization of the Petroleum
Exporting Countries, or OPEC, and other oil and gas producers, war and unrest
in oil producing countries and regions, regional production patterns and
environmental concerns. Further, fuel may become much more expensive in the
future, which may reduce the profitability.

We are subject to complex laws and regulations, including
environmental laws and regulations that can adversely affect our business,
results of operations, cash flows and financial condition, and our available
cash.

Our
operations are subject to numerous laws and regulations in the form of
international conventions and treaties, national, state and local laws and
national and international regulations in force in the jurisdictions in which
our vessels operate or are registered, which can significantly affect the
ownership and operation of our vessels. These requirements include, but are not
limited to, the U.S. Oil Pollution Act of 1990, or OPA, the U.S. Comprehensive
Environmental Response, Compensation and Liability Act of 1980, or CERCLA, the
U.S. Clean Air Act, U.S. Clean Water Act and the U.S. Marine Transportation
Security Act of 2002, European Union Regulation, and regulations of the
International Maritime Organization, or the IMO, including the International
Convention for the Prevention of Pollution from Ships of 1975, the
International Convention for the Prevention of Marine Pollution of 1973, the
IMO International Convention for the Safety of Life at Sea of 1974, the
International Convention on Load Lines of 1966, and the International Ship and
Port Facility Security Code. Compliance with such laws and regulations, where
applicable, may require installation of costly equipment or operational changes
and may affect the resale value or useful lives of our vessels. We may also
incur additional costs in order to comply with other existing and future
regulatory obligations, including, but not limited to, costs relating to air
emissions including greenhouse gases, the management of ballast waters,
maintenance and inspection, development and implementation of emergency
procedures and insurance coverage or other financial assurance of our ability
to address pollution incidents. The 2010 Deepwater Horizon oil spill in the Gulf of
Mexico may also result in additional regulatory initiatives or statutes or
changes to existing laws that may affect our operations or require us to incur
additional expenses to comply with such regulatory initiatives, statutes or
laws.

These
costs could have a material adverse effect on our business, results of
operations, cash flows and financial condition and our available cash. A
failure to comply with applicable laws and regulations may result in
administrative and civil penalties, criminal sanctions or the suspension or
termination of our operations. Environmental laws often impose strict liability
for remediation of spills and releases of oil and hazardous substances, which
could subject us to liability without regard to whether we were negligent or at
fault. Under OPA, for example, owners, operators and bareboat charterers are
jointly and severally strictly liable for the discharge of oil within the
200-nautical mile exclusive economic zone around the United States (unless the
spill results solely from the act or omission of a third party, an act of God
or an act of war). An oil spill could result in significant liability,
including fines, penalties, criminal liability and remediation costs
for natural resource damages under other international and U.S. federal, state
and local laws, as well as third-party damages, including punitive damages, and
could harm our reputation with current or potential charterers of our tankers.
We are required to satisfy insurance and financial responsibility requirements
for potential oil (including marine fuel) spills and other pollution incidents.
Although we have arranged insurance to cover certain environmental risks, there
can be no assurance that such insurance will be sufficient to cover all such
risks or that any claims will not have a material adverse effect on our
business, results of operations, cash flows and financial condition and
available cash.

7

---



If we fail to comply with international safety regulations,
we may be subject to increased liability, which may adversely affect our
insurance coverage and may result in a denial of access to, or detention in,
certain ports.

The
operation of our vessels is affected by the requirements set forth in the IMOs
International Management Code for the Safe Operation of Ships and Pollution
Prevention, or the ISM Code, promulgated by the IMO under the International
Convention for the Safety of Life at Sea of 1974, or SOLAS. The ISM Code
requires the party with operational control of a vessel to develop and maintain
an extensive Safety Management System that includes, among other things, the
adoption of a safety and environmental protection policy setting forth
instructions and procedures for safe operation and describing procedures for
dealing with emergencies. If we fail to comply with the ISM Code, we may be
subject to increased liability, may invalidate existing insurance or decrease
available insurance coverage for our affected vessels and such failure may
result in a denial of access to, or detention in, certain ports.

Adverse market conditions could cause us to
breach covenants in our credit facilities and adversely affect our operating
results.

The market
values of tankers have generally experienced high volatility. The market prices
for tankers declined significantly from historically high levels reached in
early 2008 and remain at relatively low levels. You should expect the market
value of our vessels to fluctuate depending on general economic and market
conditions affecting the shipping industry and prevailing charterhire rates,
competition from other tanker companies and other modes of transportation,
types, sizes and ages of vessels, applicable governmental regulations and the
cost of newbuildings. We believe that the current aggregate market value of our
vessels will be in excess of loan to value amounts required under our credit
facilities. Our 2010 Revolving Credit Facility (defined later) and 2011 Credit
Facility (defined later) each require that the fair market value of the vessels
pledged as collateral never be less than 150% of the aggregate principal amount
outstanding. Our Newbuilding Credit Facility (defined later) requires 140%
(120% if the vessel is subject to acceptable long term employment) of the
aggregate principal amount outstanding plus a pro rata amount of any allocable
swap exposure. Our STI Spirit Credit Facility (defined later) requires that the
charter-free market value of the STI Spirit be no less than 140% of the
then outstanding loan balance and we made prepayments of $0.8 million in
June 2012, and $1.3 million in December 2012 in order to stay in compliance
with this covenant which will be applied to our next four quarterly payments.

In
addition, each of our 2010 Revolving Credit Facility, 2011 Credit Facility and
STI Spirit Credit Facility required us to maintain a ratio of EBITDA to
interest expense of no less than 1.25 to 1.00 commencing with the fourth fiscal
quarter of 2011 through the fourth quarter of 2012, at which time it increased
to 1.50 to 1.00 for the first quarter of 2013, 1.75 to 1.00 for the second
quarter of 2013, and 2.00 to 1.00 at all times thereafter. Our Newbuilding
Credit Facility required us to maintain a ratio of EBITDA to interest expense
of not less than 2.00 to 1.00 through the fourth quarter of 2012 and 2.50 to
1.00 at all times thereafter. Such ratio in all our credit facilities shall be
calculated quarterly on a trailing four quarter basis. We expect to be subject
to similar financial covenants under our 2013 Credit Facility.

A decrease
in vessel values or a failure to meet these ratios could cause us to breach
certain covenants in our existing credit facilities and future financing
agreements that we may enter into from time to time. If we breach such
covenants and are unable to remedy the relevant breach or obtain a waiver, our
lenders could accelerate our debt and foreclose on our owned vessels.
Additionally, if we sell one or more of our vessels at a time when vessel
prices have fallen, the sale price may be less than the vessels carrying value
on our consolidated financial statements, resulting in a loss on sale or an
impairment loss being recognized, ultimately leading to a reduction in
earnings. For the year ended December 31, 2011, we evaluated the recoverable
amount of our vessels, and we recognized a total impairment loss of $66.6
million for all of our owned vessels. For the year ended December 31, 2012, we
did not recognize an impairment loss, however we did record a $4.5 million
total loss from disposal on the sales of the STI Conqueror, STI
Gladiator and STI Matador and a $5.9 million total loss
from disposal on the sales of the STI Diamond and STI Coral. See Risks
related to our indebtedness and Item 5.B. Liquidity and Capital
Resources - Long-Term Debt Obligations and Credit Arrangements for a more
comprehensive discussion of our current credit facilities and the related
risks.

8

---



If our vessels suffer damage due to the
inherent operational risks of the tanker industry, we may experience unexpected
drydocking costs and delays or total loss of our vessels, which may adversely
affect our business and financial condition.

The
operation of an ocean-going vessel carries inherent risks. Our vessels and
their cargoes will be at risk of being damaged or lost because of events such
as marine disasters, bad weather, and other acts of God, business interruptions
caused by mechanical failures, grounding, fire, explosions and collisions,
human error, war, terrorism, piracy and other circumstances or events. Changing
economic, regulatory and political conditions in some countries, including
political and military conflicts, have from time to time resulted in attacks on
vessels, mining of waterways, piracy, terrorism, labor strikes and boycotts.
These hazards may result in death or injury to persons, loss of revenues or
property, the payment of ransoms, environmental damage, higher insurance rates,
damage to our customer relationships, and market disruptions, delay or
rerouting, which may also subject us to litigation. In addition, the operation
of tankers has unique operational risks associated with the transportation of
oil. An oil spill may cause significant environmental damage, and the
associated costs could exceed the insurance coverage available to us. Compared
to other types of vessels, tankers are exposed to a higher risk of damage and
loss by fire, whether ignited by a terrorist attack, collision, or other cause,
due to the high flammability and high volume of the oil transported in tankers.

If our
vessels suffer damage, they may need to be repaired at a drydocking facility.
The costs of drydock repairs are unpredictable and may be substantial. We may
have to pay drydocking costs that our insurance does not cover in full. The
loss of revenues while these vessels are being repaired and repositioned, as
well as the actual cost of these repairs, may adversely affect our business and
financial condition. In addition, space at drydocking facilities is sometimes
limited and not all drydocking facilities are conveniently located. We may be
unable to find space at a suitable drydocking facility or our vessels may be
forced to travel to a drydocking facility that is not conveniently located to
our vessels positions. The loss of earnings while these vessels are forced to
wait for space or to travel to more distant drydocking facilities may adversely
affect our business and financial condition. Further, the total loss of any of
our vessels could harm our reputation as a safe and reliable vessel owner and operator.
If we are unable to adequately maintain or safeguard our vessels, we may be
unable to prevent any such damage, costs, or loss which could negatively impact
our business, financial condition, results of operations and available cash.

We operate our vessels worldwide and as a
result, our vessels are exposed to international risks which may reduce revenue
or increase expenses.

The
international shipping industry is an inherently risky business involving
global operations. Our vessels and their cargoes will be at risk of being
damaged or lost because of events such as marine disasters, bad weather, and
other acts of God, business interruptions caused by mechanical failures,
grounding, fire, explosions and collisions, human error, war, terrorism, piracy
and other circumstances or events. In addition, changing economic, regulatory
and political conditions in some countries, including political and military
conflicts, have from time to time resulted in attacks on vessels, mining of
waterways, piracy, terrorism, labor strikes and boycotts. These sorts of events
could interfere with shipping routes and result in market disruptions which may
reduce our revenue or increase our expenses.

International
shipping is subject to various security and customs inspection and related
procedures in countries of origin and destination and trans-shipment points.
Inspection procedures can result in the seizure of the cargo and/or our
vessels, delays in the loading, offloading or delivery and the levying of
customs duties, fines or other penalties against us. It is possible that
changes to inspection procedures could impose additional financial and legal
obligations on us. Furthermore, changes to inspection procedures could also
impose additional costs and obligations on our customers and may, in certain
cases, render the shipment of certain types of cargo uneconomical or
impractical. Any such changes or developments may have a material adverse
effect on our business, results of operations, cash flows, financial condition
and available cash.

Political instability, terrorist or other
attacks, war or international hostilities can affect the tanker industry, which
may adversely affect our business.

We conduct
most of our operations outside of the United States, and our business, results
of operations, cash flows, financial condition and available cash may be adversely affected by the
effects of political instability, terrorist or other attacks, war or
international hostilities. Continuing conflicts and recent developments in the
Middle East, including Egypt, and North Africa, including Libya, and the
presence of the United States and other armed forces in Iraq and Afghanistan
may lead to additional acts of terrorism and armed conflict around the world,
which may contribute to further world economic instability and uncertainty in
global financial markets. As a result of the above, insurers have increased
premiums and reduced or restricted coverage for losses caused by terrorist acts
generally. Future terrorist attacks could result in increased volatility of the
financial markets and negatively impact the U.S. and global economy. These
uncertainties could also adversely affect our ability to obtain additional
financing on terms acceptable to us or at all.

9

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In the
past, political instability has also resulted in attacks on vessels, such as
the attack on the M/T Limburg,a very large crude carrier not related to
us, in October 2002, mining of waterways and other efforts to disrupt
international shipping, particularly in the Arabian Gulf region. Acts of
terrorism and piracy have also affected vessels trading in regions such as the
South China Sea and the Gulf of Aden off the coast of Somalia. Any of these
occurrences could have a material adverse impact on our business, financial
condition, results of operations and available cash.

If our vessels call on ports located in
countries that are subject to sanctions and embargos imposed by the U.S. or
other governments that could adversely affect our reputation and the market for
our common stock.

Although no
vessels owned or operated by us have called on ports located in countries
subject to sanctions and embargoes imposed by the U.S. government and other
authorities or countries identified by the U.S. government or other authorities
as state sponsors of terrorism, such as Cuba, Iran, Sudan, and Syria, in the
future, our vessels may call on ports in these countries from time to time on
charterers instructions. Sanctions and embargo laws and regulations vary in
their application, as they do not all apply to the same covered persons or
proscribe the same activities, and such sanctions and embargo laws and
regulations may be amended or strengthened over time. In 2010, the U.S. enacted
the Comprehensive Iran Sanctions Accountability and Divestment Act, or
CISADA, which expanded the scope of the Iran Sanctions Act. Among other
things, CISADA expands the application of the prohibitions of companies, such
as ours, and introduces limits on the ability of companies and persons to do
business or trade with Iran when such activities relate to the investment,
supply or export of refined petroleum or petroleum products.

In 2012,
President Obama signed Executive Order 13608 which prohibits foreign persons
from violating or attempting to violate, or causing a violation of any
sanctions in effect against Iran or facilitating any deceptive transactions for
or on behalf of any person subject to U.S. sanctions. Any persons found to be
in violation of Executive Order 13608 will be deemed a foreign sanctions evader
and will be banned from all contacts with the United States, including
conducting business in US dollars. Also in 2012, President Obama signed into
law the Iran Threat Reduction and Syria Human Rights Act of 2012, or the Iran
Threat Reduction Act, which created new sanctions and strengthened existing
sanctions. Among other things, the Iran Threat Reduction Act intensifies
existing sanctions regarding the provision of goods, services, infrastructure
or technology to Irans petroleum or petrochemical sector. The Iran Threat
Reduction Act also includes a provision requiring the President of the United
States to impose five or more sanctions from Section 6(a) of the Iran Sanctions
Act, as amended, on a person the President determines is a controlling
beneficial owner of, or otherwise owns, operates, or controls or insures a
vessel that was used to transport crude oil from Iran to another country and
(1) if the person is a controlling beneficial owner of the vessel, the person
had actual knowledge the vessel was so used or (2) if the person otherwise
owns, operates, or controls, or insures the vessel, the person knew or should
have known the vessel was so used. Such a person could be subject to a variety
of sanctions, including exclusion from U.S. capital markets, exclusion from
financial transactions subject to U.S. jurisdiction, and exclusion of that
persons vessels from U.S. ports for up to two years.

Although we
believe that we have been in compliance with all applicable sanctions and
embargo laws and regulations, and intend to maintain such compliance, there can
be no assurance that we will be in compliance in the future, particularly as
the scope of certain laws may be unclear and may be subject to changing
interpretations. Any such violation could result in fines, penalties or other
sanctions that could severely impact our ability to access U.S. capital markets
and conduct our business, and could result in some investors deciding, or being
required, to divest their interest, or not to invest, in us. In addition,
certain institutional investors may have investment policies or restrictions
that prevent them from holding securities of companies that have contracts with
countries identified by the U.S. government as state sponsors of terrorism. The
determination by these investors not to invest in, or to divest from, our
common stock may adversely affect the price at which our common stock trades.
Additionally, some investors may decide to divest their interest, or not to invest, in our company simply because we do
business with companies that do business in sanctioned countries. Moreover, our
charterers may violate applicable sanctions and embargo laws and regulations as
a result of actions that do not involve us or our vessels, and those violations
could in turn negatively affect our reputation. In addition, our reputation and
the market for our securities may be adversely affected if we engage in certain
other activities, such as entering into charters with individuals or entities
in countries subject to U.S. sanctions and embargo laws that are not controlled
by the governments of those countries, or engaging in operations associated
with those countries pursuant to contracts with third parties that are
unrelated to those countries or entities controlled by their governments.
Investor perception of the value of our common stock may also be
adversely affected by the consequences of war, the effects of terrorism, civil
unrest and governmental actions in these and surrounding countries.

10

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

We expect
that our vessels will call in ports where smugglers attempt to hide drugs and
other contraband on vessels, with or without the knowledge of crew members. To
the extent our vessels are found with contraband, whether inside or attached to
the hull of our vessel and whether with or without the knowledge of any of our
crew, we may face governmental or other regulatory claims which could have an
adverse effect on our business, results of operations, cash flows, financial
condition and ability to pay dividends.

Maritime claimants could arrest our vessels,
which would have a negative effect on our cash flows.

Crew
members, suppliers of goods and services to a vessel, shippers of cargo and
other parties may be entitled to a maritime lien against a vessel for
unsatisfied debts, claims or damages. In many jurisdictions, a maritime lien
holder may enforce its lien by arresting or attaching a vessel through
foreclosure proceedings. The arrest or attachment of one or more of our vessels
could interrupt our business or require us to pay large sums of money to have
the arrest lifted, which would have a negative effect on our cash flows.

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

Governments could requisition our vessels
during a period of war or emergency, which may negatively impact our business,
financial condition, results of operations and available cash.

A
government could requisition one or more of our vessels for title or hire.
Requisition for title occurs when a government takes control of a vessel and
becomes the owner. Also, a government could requisition our vessels for hire.
Requisition for hire occurs when a government takes control of a vessel and
effectively becomes the charterer at dictated charter rates. Generally,
requisitions occur during a period of war or emergency. Government requisition
of one or more of our vessels may negatively impact our business, financial
condition, results of operations and available cash.

Technological innovation could reduce our
charterhire income and the value of our vessels.

The
charterhire rates and the value and operational life of a vessel are determined
by a number of factors including the vessels efficiency, operational
flexibility and physical life. Efficiency includes speed, fuel economy and the
ability to load and discharge cargo quickly. Flexibility includes the ability
to enter harbors, utilize related docking facilities and pass through canals
and straits. The length of a vessels physical life is related to its original
design and construction, its maintenance and the impact of the stress of
operations. If new tankers are built that are more efficient or more flexible
or have longer physical lives than our vessels, competition from these more technologically
advanced vessels could adversely affect the amount of charterhire payments we
receive for our vessels and the resale value of our vessels could significantly
decrease. As a result, our available cash could be adversely affected.

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If labor interruptions are not resolved in a
timely manner, they could have a material adverse effect on our business,
results of operations, cash flows, financial condition and available cash.

We,
indirectly through SSM, employ masters, officers and crews to man our vessels.
If not resolved in a timely and cost-effective manner, industrial action or
other labor unrest could prevent or hinder our operations from being carried
out as we expect and could have a material adverse effect on our business, results
of operations, cash flows, financial condition and available cash.

RISKS RELATED TO OUR BUSINESS

Newbuilding projects are subject to risks
that could cause delays, cost overruns or cancellation of our newbuilding
contracts.

We have
entered into contracts with Hyundai Mipo Dockyard Co. Ltd., or HMD, SPP
Shipbuilding Co., Ltd., or SPP, Hyundai Samho Heavy Industries Co. Ltd., or
HSHI and Daewoo Shipbuilding & Marine Engineering Co., Ltd., or DSME for
the construction of 33 newbuilding vessels with expected delivery between April
2013 and December 2014. As of the date of this annual report, we have made
total yard payments in the amount of $124.7 million and we have remaining
yard installments in the amount of $1,101.5 million before we take possession
of all of these vessels.

The
delivery of such vessels or vessels that we may acquire in the future could be
delayed, not completed or cancelled, which would delay or eliminate our
expected receipt of revenues from the employment of such vessels. In addition,
the yards or a seller could fail to deliver vessels to us as agreed, or we
could cancel a purchase contract because such yard or seller has not met its
obligations.

If the
delivery of any vessel is materially delayed or cancelled, especially if we
have committed the vessel to a charter for which we become responsible for
substantial liquidated damages to the customer as a result of the delay or
cancellation, our business, financial condition and results of operations could
be adversely affected.

In
addition, in the event HMD, SPP, HSHI and DSME do not perform under their
contracts and we are unable to enforce certain refund guarantees with third
party banks for any reason, we may lose all or part of our investment, which
would have a material adverse effect on our results of operations, financial
condition and cash flows.

Obligations associated with being a public
company require significant company resources and management attention.

In April
2010, we became subject to the reporting requirements of the Securities
Exchange Act of 1934, as amended, or the Exchange Act, and the other rules and
regulations of the SEC, including the Sarbanes-Oxley Act of 2002, or
Sarbanes-Oxley. Section 404 of Sarbanes-Oxley requires that we evaluate
and determine the effectiveness of our internal controls over financial
reporting. If we have a material weakness in our internal control over
financial reporting, we may not detect errors on a timely basis and our
financial statements may be materially misstated. We will need to dedicate a
significant amount of time and resources to ensure compliance with these
regulatory requirements.

We will
continue to evaluate areas such as corporate governance, corporate control,
internal audit, disclosure controls and procedures and financial reporting and
accounting systems. We will make changes in any of these and other areas,
including our internal control over financial reporting, which we believe are
necessary. However, these and other measures we may take may not be sufficient
to allow us to satisfy our obligations as a public company on a timely and
reliable basis. In addition, compliance with reporting and other requirements
applicable to public companies will create additional costs for us and will
require the time and attention of management. Our limited management resources
may exacerbate the difficulties in complying with these reporting and other
requirements while focusing on executing our business strategy. Our incremental
general and administrative expenses as a publicly traded corporation will
include costs associated with annual reports to shareholders, tax returns,
investor relations, registrar and transfer agents fees, incremental director
and officer liability insurance costs and director compensation. We cannot
predict or estimate the amount of the additional costs we may incur, the timing
of such costs or the degree of impact that our managements attention to these
matters will have on our business.

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We may have difficulty managing our planned
growth properly.

One of our
principal strategies is to continue to grow by expanding our operations and
adding to our fleet. Our future growth will primarily depend upon a number of
factors, some of which may not be within our control. These factors include our
ability to:

| |   |                                                                                                                                                                                             
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | identify suitable tankers and/or shipping companies for acquisitions
 at attractive prices;                                                                                                 
| |   |                                                                                                                                                                                             
| |  | obtain required financing for our existing and new operations;                                                                                                                              
| |   |                                                                                                                                                                                             
| |  | identify businesses engaged in managing, operating or owning tankers
 for acquisitions or joint ventures;                                                                                   
| |   |                                                                                                                                                                                             
| |  | integrate any acquired tankers or businesses successfully with our
 existing operations, including obtaining any approvals and qualifications
 necessary to operate vessels that we acquire;
| |   |                                                                                                                                                                                             
| |  | hire, train and retain qualified personnel and crew to manage and
 operate our growing business and fleet;                                                                                  
| |   |                                                                                                                                                                                             
| |  | identify additional new markets;                                                                                                                                                            
| |   |                                                                                                                                                                                             
| |  | enhance our customer base; and                                                                                                                                                              
| |   |                                                                                                                                                                                             
| |  | improve our operating, financial and accounting systems and controls.                                                                                                                       

Our failure
to effectively identify, purchase, develop and integrate any tankers or
businesses could adversely affect our business, financial condition and results
of operations. The number of employees that perform services for us and our
current operating and financial systems may not be adequate as we implement our
plan to expand the size of our fleet, and we may not be able to effectively
hire more employees or adequately improve those systems. Finally, acquisitions
may require additional equity issuances or debt issuances (with amortization
payments), both of which could lower our available cash. If any such events
occur, our financial condition may be adversely affected.

Growing any
business by acquisition presents numerous risks such as undisclosed liabilities
and obligations, difficulty in obtaining additional qualified personnel and
managing relationships with customers and suppliers and integrating newly
acquired operations into existing infrastructures. The expansion of our fleet
may impose significant additional responsibilities on our management and staff,
and the management and staff of our commercial and technical managers, and may
necessitate that we, and they, increase the number of personnel. We cannot give
any assurance that we will be successful in executing our growth plans or that
we will not incur significant expenses and losses in connection with our future
growth.

If we purchase and operate secondhand
vessels, we will be exposed to increased operating costs which could adversely
affect our earnings and, as our fleet ages, the risks associated with older
vessels could adversely affect our ability to obtain profitable charters.

Our current
business strategy includes additional growth through the acquisition of new and
secondhand vessels. While we typically inspect secondhand vessels prior to
purchase, this does not provide us with the same knowledge about their
condition that we would have had if these vessels had been built for and
operated exclusively by us. Generally, we do not receive the benefit of
warranties from the builders for the secondhand vessels that we acquire.

In general,
the costs to maintain a vessel in good operating condition increase with the
age of the vessel. Older vessels are typically less fuel-efficient than more
recently constructed vessels due to improvements in engine technology. Cargo
insurance rates increase with the age of a vessel, making older vessels less
desirable to charterers.

Governmental
regulations, safety or other equipment standards related to the age of vessels
may require expenditures for alterations, or the addition of new equipment, to
our vessels and may restrict the type of activities in which the vessels may
engage. As our vessels age, market conditions may not justify those
expenditures or enable us to operate our vessels profitably during the
remainder of their useful lives.

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An increase in operating costs would decrease
earnings and available cash.

Under time charter-out
agreements, the charterer is responsible for voyage costs and the owner is responsible for the vessel operating costs. The same
applies to time-charter-in agreements. With the exception of certain vessels on short-term time charter-out agreements, we currently
have no vessels on long-term time charter-out agreements (greater than one year) and 21 vessels on time-charter-in agreements.
When our owned vessels are employed under one of the Scorpio Group Pools, the pool is responsible for voyage expenses and we are
responsible for vessel costs. As of the date of this annual report, we have 12 of our owned vessels and 15 of our time-chartered-in
vessels employed through the Scorpio Group Pools. When our vessels operate in the spot market, we are responsible for both voyage
expenses and vessel operating costs. As of the date of this annual report, four of the vessels in our Operating Fleet (defined
later) operate in the spot market. Our vessel operating costs include the costs
of crew, fuel (for spot chartered vessels), provisions, deck and engine stores, insurance and maintenance and repairs, which depend
on a variety of factors, many of which are beyond our control. Further, if our vessels suffer damage, they may need to be repaired
at a drydocking facility. The costs of drydocking repairs are unpredictable and can be substantial. Increases in any of these
expenses would decrease earnings and available cash.

Declines in charter rates and other market
deterioration could cause us to incur impairment charges.

We evaluate
the carrying amounts of our vessels to determine if events have occurred that
would require an impairment of their carrying amounts. The recoverable amount
of vessels is reviewed based on events and changes in circumstances that would
indicate that the carrying amount of the assets might not be recovered. The
review for potential impairment indicators and projection of future cash flows
related to the vessels is complex and requires us to make various estimates
including future freight rates, earnings from the vessels and discount rates.
All of these items have been historically volatile.

We evaluate
the recoverable amount as the higher of fair value less costs to sell and value
in use. If the recoverable amount is less than the carrying amount of the
vessel, the vessel is deemed impaired. The carrying values of our vessels may
not represent their fair market value at any point in time because the new
market prices of secondhand vessels tend to fluctuate with changes in charter
rates and the cost of newbuildings. For the year ended December 31, 2011,
charter rates in the oil and petroleum products charter market declined along
with second hand vessel values. Due to these indicators of potential impairment,
in the year ended December 31, 2011, we evaluated the recoverable amount
of our vessels, and we recognized a total impairment loss of $66.6 million for
all of our owned vessels. For the year ended December 31, 2012, we did not
recognize an impairment loss, however, we cannot assure you that there will be
not be further impairments in future years. Any additional impairment charges
incurred as a result of further declines in charter rates could negatively
affect our business, financial condition, operating results or the trading
price of our common shares.

If we are unable to operate our vessels
profitably, we may be unsuccessful in competing in the highly competitive
international tanker market, which would negatively affect our financial
condition and our ability to expand our business.

The
operation of tanker vessels and transportation of crude and petroleum products
is extremely competitive, in an industry that is capital intensive and highly
fragmented. The recent global financial crisis may reduce the demand for
transportation of oil and oil products which could lead to increased
competition. Competition arises primarily from other tanker owners, including
major oil companies as well as independent tanker companies, some of whom have substantially
greater resources than we do. Competition for the transportation of oil and oil
products can be intense and depends on price, location, size, age, condition
and the acceptability of the tanker and its operators to the charterers. We
will have to compete with other tanker owners, including major oil companies as
well as independent tanker companies.

Our market
share may decrease in the future. We may not be able to compete profitably as
we expand our business into new geographic regions or provide new services. New
markets may require different skills, knowledge or strategies than we use in
our current markets, and the competitors in those new markets may have greater
financial strength and capital resources than we do.

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If we do not set aside funds and are unable
to borrow or raise funds for vessel replacement, at the end of a vessels
useful life our revenue will decline, which would adversely affect our
business, results of operations, financial condition, and available cash.

If we do
not set aside funds and are unable to borrow or raise funds for vessel
replacement, we will be unable to replace the vessels in our fleet upon the
expiration of their remaining useful lives, which we expect to occur between
2026 to 2038, depending on the vessel. Our cash flows and income are dependent
on the revenues earned by the chartering of our vessels. If we are unable to
replace the vessels in our fleet upon the expiration of their useful lives, our
business, results of operations, financial condition, and available cash per
share would be adversely affected. Any funds set aside for vessel replacement
will reduce available cash.

Our ability to obtain additional financing
may be dependent on the performance of our then existing charters and the
creditworthiness of our charterers.

The actual
or perceived credit quality of our charterers, and any defaults by them, may
materially affect our ability to obtain the additional capital resources that
we will require to purchase additional vessels or may significantly increase
our costs of obtaining such capital. Our inability to obtain additional
financing at all or at a higher than anticipated cost may materially affect our
results of operation and our ability to implement our business strategy.

United States tax authorities could treat us
as a passive foreign investment company, which could have adverse United
States federal income tax consequences to United States shareholders.

A foreign
corporation will be treated as a passive foreign investment company, or PFIC,
for United States federal income tax purposes if either (1) at least 75%
of its gross income for any taxable year consists of certain types of passive
income or (2) at least 50% of the average value of the corporations
assets produce or are held for the production of those types of passive
income. For purposes of these tests, passive income includes dividends,
interest, and gains from the sale or exchange of investment property and rents
and royalties other than rents and royalties which are received from unrelated
parties in connection with the active conduct of a trade or business. For
purposes of these tests, income derived from the performance of services does
not constitute passive income. United States shareholders of a PFIC are
subject to a disadvantageous United States federal income tax regime with
respect to the income derived by the PFIC, the distributions they receive from
the PFIC and the gain, if any, they derive from the sale or other disposition
of their shares in the PFIC.

Based on
our current and proposed method of operation, we do not believe that we will be
a PFIC with respect to any taxable year. In this regard, we intend to treat the
gross income we derive or are deemed to derive from our time chartering
activities as services income, rather than rental income. Accordingly, our
income from our time and voyage chartering activities should not constitute
passive income, and the assets that we own and operate in connection with the
production of that income should not constitute assets that produce or are held
for the production of passive income.

There is
substantial legal authority supporting this position, consisting of case law
and United States Internal Revenue Service, or IRS, pronouncements concerning
the characterization of income derived from time charters and voyage charters
as services income for other tax purposes. However, it should be noted
that there is also authority that characterizes time charter income as rental
income rather than services income for other tax purposes. Accordingly, no
assurance can be given that the IRS or a court of law will accept this
position, and there is a risk that the IRS or a court of law could determine
that we are a PFIC. Moreover, no assurance can be given that we would not
constitute a PFIC for any future taxable year if the nature and extent of our
operations change.

If the IRS
were to find that we are or have been a PFIC for any taxable year, our United
States shareholders would face adverse United States federal income tax
consequences and incur certain information reporting obligations. Under
the PFIC rules, unless those shareholders make an election available under the
United States Internal Revenue Code of 1986, as amended, or the Code (which
election could itself have adverse consequences for such shareholders), such
shareholders would be subject to United States federal income tax at the then
prevailing rates on ordinary income plus interest, in respect of excess
distributions and upon any gain from the disposition of their common shares, as
if the excess distribution or gain had been recognized ratably over the
shareholders holding period of the common shares. See TaxationPassive
Foreign Investment Company Status and Significant Tax Consequences for
a more comprehensive discussion of the United States federal income tax
consequences to United States shareholders if we are treated as a PFIC.

15

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We may have to pay tax on United States source
shipping income, which would reduce our earnings.

Under the
Code, 50% of the gross shipping income of a corporation that owns or charters
vessels, as we and our subsidiaries do, that is attributable to transportation
that begins or ends, but that does not both begin and end, in the United States
may be subject to a 4% United States federal income tax without allowance for
deductions, unless that corporation qualifies for exemption from tax under
Section 883 of the Code and the regulations promulgated thereunder by the
United States Department of the Treasury.

We and our
subsidiaries intend to take the position that we qualify for this statutory tax
exemption for United States federal income tax return reporting purposes.
However, there are factual circumstances beyond our control that could cause us
to lose the benefit of this tax exemption and thereby become subject to United
States federal income tax on our United States source shipping income. For
example, we may no longer qualify for exemption under Section 883 of the Code
for a particular taxable year if shareholders with a five percent or greater
interest in our common shares, or 5% Shareholders, owned, in the aggregate,
50% or more of our outstanding common shares for more than half the days during
the taxable year, and there does not exist sufficient 5% Shareholders that are
qualified shareholders for purposes of Section 883 of the Code to preclude
nonqualified 5% Shareholders from owning 50% or more of our common shares for
more than half the number of days during such taxable year or we are unable to
satisfy certain substantiation requirements with regard to our 5% Shareholders.
Due to the factual nature of the issues involved, there can be no assurances on
the tax-exempt status of us or any of our subsidiaries.

If we or
our subsidiaries were not entitled to exemption under Section 883 of the
Code for any taxable year, we or our subsidiaries could be subject for such
year to an effective 2% United States federal income tax on the shipping income
we or they derive during such year which is attributable to the transport of
cargoes to or from the United States. The imposition of this taxation
would have a negative effect on our business and would decrease our earnings
available for distribution to our shareholders.

We will be required to make additional
capital expenditures to expand the number of vessels in our fleet and to
maintain all our vessels, which will be dependent on additional financing.

Our business
strategy is based in part upon the expansion of our fleet through the purchase
of additional vessels. If we are unable to fulfill our obligations under any
memorandum of agreement for future vessel acquisitions, the sellers of such
vessels may be permitted to terminate such contracts and we may forfeit all or
a portion of the down payments we already made under such contracts, and we may
be sued for any outstanding balance.

In
addition, we will incur significant maintenance costs for our existing and any
newly-acquired vessels. A newbuilding vessel must be drydocked within five
years of its delivery from a shipyard, and vessels are typically drydocked
every 30 months thereafter, not including any unexpected repairs. We estimate
the cost to drydock a vessel to be between $500,000 and $1,000,000, depending
on the size and condition of the vessel and the location of drydocking.

We are incorporated in the Republic of the
Marshall Islands, which does not have a well-developed body of corporate law
and, as a result, shareholders may have fewer rights and protections under
Marshall Islands law than under a typical jurisdiction in the United States.

Our
corporate affairs are governed by our articles of incorporation and bylaws and
by the Marshall Islands Business Corporations Act, or BCA. The provisions of
the BCA resemble provisions of the corporation laws of a number of states in
the United States. However, there have been few judicial cases in the Republic
of The Marshall Islands interpreting the BCA. The rights and fiduciary
responsibilities of directors under the law of the Republic of The Marshall
Islands are not as clearly established as the rights and fiduciary
responsibilities of directors under statutes or judicial precedent in existence
in certain United States jurisdictions. Shareholder rights may differ as well.
While the BCA does specifically incorporate the non-statutory law, or judicial
case law, of the State of Delaware and other states with substantially similar
legislative provisions, our public shareholders may have more difficulty in
protecting their interests in the face of actions by management, directors or controlling shareholders than would
shareholders of a corporation incorporated in a United States jurisdiction.

16

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It may be difficult to serve process on or
enforce a United States judgment against us, our officers and our directors
because we are a foreign corporation.

We are a
corporation formed in the Republic of The Marshall Islands, and some of our
directors and officers and certain of the experts named in this offering are
located outside the United States. In addition, a substantial portion of our
assets and the assets of our directors, officers and experts are located
outside of the United States. As a result, you may have difficulty serving
legal process within the United States upon us or any of these persons. You may
also have difficulty enforcing, both in and outside the United States,
judgments you may obtain in U.S. courts against us or any of these persons
in any action, including actions based upon the civil liability provisions of
U.S. federal or state securities laws. Furthermore, there is substantial
doubt that the courts of the Republic of The Marshall Islands or of the
non-U.S. jurisdictions in which our offices are located would enter
judgments in original actions brought in those courts predicated on
U.S. federal or state securities laws.

RISKS RELATED TO OUR RELATIONSHIP WITH
SCORPIO GROUP AND ITS AFFILIATES

We are dependent on our managers and their
ability to hire and retain key personnel, and there may be conflicts of
interest between us and our managers that may not be resolved in our favor.

Our success
depends to a significant extent upon the abilities and efforts of our technical
manager, SSM, our commercial manager, SCM, and our management team. Our success
will depend upon our and our managers ability to hire and retain key members
of our management team. The loss of any of these individuals could adversely
affect our business prospects and financial condition.

Difficulty
in hiring and retaining personnel could adversely affect our results of
operations. We do not maintain key man life insurance on any of our officers.

Our
technical and commercial managers are affiliates of Scorpio Group, which is
owned and controlled by the Lolli-Ghetti family, of which our founder, Chairman
and Chief Executive Officer, Mr. Emanuele Lauro, is a member. Conflicts of
interest may arise between us, on the one hand, and our commercial and
technical managers, on the other hand. As a result of these conflicts, our
commercial and technical managers, who have limited contractual duties, may
favor their own or their owners interests over our interests. These conflicts
may have unfavorable results for us.

Our founder, Chairman and Chief Executive
Officer has affiliations with our commercial and technical managers which may
create conflicts of interest.

Emanuele
Lauro, our founder, Chairman and Chief Executive Officer, is a member of the
Lolli-Ghetti family which owns and controls our commercial and technical
managers. These responsibilities and relationships could create conflicts of
interest between us, on the one hand, and our commercial and technical managers,
on the other hand. These conflicts may arise in connection with the chartering,
purchase, sale and operations of the vessels in our fleet versus vessels
managed by other companies affiliated with our commercial or technical
managers. Our commercial and technical managers may give preferential treatment
to vessels that are time chartered-in by related parties because our founder,
Chairman and Chief Executive Officer and members of his family may receive
greater economic benefits. In particular, as of the date of this annual report,
our commercial and technical managers provide commercial and technical
management services to approximately 59 and 8 vessels respectively, other than
the vessels in our fleet, that are owned or operated by entities affiliated with
Mr. Lauro, and such entities may acquire additional vessels that will
compete with our vessels in the future. Such conflicts may have an adverse
effect on our results of operations.

Our Chief Executive Officer and President do
not devote all of their time to our business, which may hinder our ability to
operate successfully.

Messrs.
Lauro and Bugbee, our Chief Executive Officer and President, respectively,
participate in business activities not associated with us. As a result, Messrs.
Lauro and Bugbee may devote less time to us than if they were not engaged in
other business activities and may owe fiduciary duties to the
shareholders of both us as well as shareholders of other companies which they
may be affiliated, including other Scorpio Group companies. This may create
conflicts of interest in matters involving or affecting us and our customers
and it is not certain that any of these conflicts of interest will be resolved
in our favor. This could have a material adverse effect on our business,
financial condition, results of operations and cash flows.

17

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Our commercial and technical managers are
each privately held companies and there is little or no publicly available
information about them.

SCM is our
commercial manager and SSM is our technical manager. SCMs and SSMs ability to
render management services will depend in part on their own financial strength.
Circumstances beyond our control could impair our commercial managers or
technical managers financial strength, and because each is a privately held
company, information about the financial strength of our commercial manager and
technical manager is not available. As a result, we and our shareholders might
have little advance warning of financial or other problems affecting our
commercial manager or technical manager even though their financial or other
problems could have a material adverse effect on us.

We are subject to certain risks with respect
to our counterparties on contracts, and failure of such counterparties to meet
their obligations could cause us to suffer losses or negatively impact our
results of operations and cash flows.

We have
entered into, and may enter in the future, various contracts, including,
charter agreements and credit facilities. Such agreements subject us to
counterparty risks. The ability of each of our counterparties to perform its
obligations under a contract with us will depend on a number of factors that
are beyond our control and may include, among other things, general economic
conditions, the condition of the maritime and offshore industries, the overall
financial condition of the counterparty, charter rates received for specific
types of vessels, and various expenses. For example, the combination of a
reduction of cash flow resulting from declines in world trade, a reduction in
borrowing bases under reserve-based credit facilities and the lack of
availability of debt or equity financing may result in a significant reduction
in the ability of our charterers to make charter payments to us. In addition,
in depressed market conditions, our charterers and customers may no longer need
a vessel that is currently under charter or contract or may be able to obtain a
comparable vessel at lower rates. As a result, charterers and customers may
seek to renegotiate the terms of their existing charter agreements or avoid
their obligations under those contracts. Should a counterparty fail to honor
its obligations under agreements with us, we could sustain significant losses
which could have a material adverse effect on our business, financial
condition, results of operations and cash flows.

The failure of our charterers to meet their
obligations under our charter agreements, on which we depend for our revenues,
could cause us to suffer losses or otherwise adversely affect our business.

As of the
date of this annual report, we do not employ any vessels under a long-term time
charter agreement but we may enter into such agreements in the future. The
ability and willingness of each of our counterparties to perform their
obligations under a time charter, spot voyage or other agreement with us will
depend on a number of factors that are beyond our control and may include,
among other things, general economic conditions, the condition of the tanker
shipping industry and the overall financial condition of the counterparties.
Charterers are sensitive to the commodity markets and may be impacted by market
forces affecting commodities such oil. In addition, in depressed market
conditions, there have been reports of charterers renegotiating their charters
or defaulting on their obligations under charters. Our customers may fail to
pay charterhire or attempt to renegotiate charter rates. Should a counterparty
fail to honor its obligations under agreements with us, it may be difficult to
secure substitute employment for such vessel, and any new charter arrangements
we secure in the spot market or on time charters may be at lower rates given
currently decreased tanker charter rate levels. When we employ a vessel in the
spot charter market, we generally place such vessel in a tanker pool managed by
our commercial manager that pertains to that vessels size class. If our
charterers fail to meet their obligations to us or attempt to renegotiate our
charter agreements, we could sustain significant losses which could have a
material adverse effect on our business, financial condition, results of
operations and cash flows, as well as our ability to pay dividends, if any, in
the future, and compliance with covenants in our credit facilities.

18

---



Our insurance may not be adequate to cover
our losses that may result from our operations due to the inherent operational
risks of the tanker industry.

We carry
insurance to protect us against most of the accident-related risks involved in
the conduct of our business, including marine hull and machinery insurance,
protection and indemnity insurance, which include pollution risks, crew
insurance and war risk insurance. However, we may not be adequately insured to
cover losses from our operational risks, which could have a material adverse
effect on us. Additionally, our insurers may refuse to pay particular claims
and our insurance may be voidable by the insurers if we take, or fail to take,
certain action, such as failing to maintain certification of our vessels with
applicable maritime regulatory organizations. Any significant uninsured or
under-insured loss or liability could have a material adverse effect on our
business, results of operations, cash flows and financial condition and our
available cash. In addition, we may not be able to obtain adequate insurance
coverage at reasonable rates in the future during adverse insurance market
conditions.

Changes in
the insurance markets attributable to terrorist attacks may also make certain
types of insurance more difficult for us to obtain due to increased premiums or
reduced or restricted coverage for losses caused by terrorist acts generally.

Because we obtain some of our insurance
through protection and indemnity associations, which result in significant
expenses to us, we may be required to make additional premium payments.

We may be
subject to increased premium payments, or calls, in amounts based on our claim
records, the claim records of our managers, as well as the claim records of
other members of the protection and indemnity associations through which we
receive insurance coverage for tort liability, including pollution-related
liability. In addition, our protection and indemnity associations may not have
enough resources to cover claims made against them. Our payment of these calls
could result in significant expense to us, which could have a material adverse
effect on our business, results of operations, cash flows, financial condition
and available cash.

RISKS RELATED TO OUR INDEBTEDNESS

Servicing our current or future indebtedness
limits funds available for other purposes and if we cannot service our debt, we
may lose our vessels.

Borrowing
under our credit facilities requires us to dedicate a part of our cash flow
from operations to paying interest on our indebtedness. These payments limit
funds available for working capital, capital expenditures and other purposes,
including further equity or debt financing in the future. Amounts borrowed
under our credit facilities bear interest at variable rates. Increases in
prevailing rates could increase the amounts that we would have to pay to our
lenders, even though the outstanding principal amount remains the same, and our
net income and cash flows would decrease. We expect our earnings and cash flow
to vary from year to year due to the cyclical nature of the tanker industry. If
we do not generate or reserve enough cash flow from operations to satisfy our
debt obligations, we may have to undertake alternative financing plans, such
as:

| |   |                                          
| | - | -----------------------------------------
| |  | seeking to raise additional capital;     
| |   |                                          
| |  | refinancing or restructuring our debt;   
| |   |                                          
| |  | selling tankers; or                      
| |   |                                          
| |  | reducing or delaying capital investments.

However,
these alternative financing plans, if necessary, may not be sufficient to allow
us to meet our debt obligations. If we are unable to meet our debt obligations
or if some other default occurs under our credit facilities, our lenders could
elect to declare that debt, together with accrued interest and fees, to be
immediately due and payable and proceed against the collateral vessels securing
that debt even though the majority of the proceeds used to purchase the
collateral vessels did not come from our credit facilities.

19

---



Our credit facilities contain restrictive
covenants which limit the amount of cash that we may use for other corporate
activities, which could negatively affect our growth and cause our financial
performance to suffer.

Our credit facilities
impose operating and financial restrictions on us. These restrictions limit our
ability, or the ability of our subsidiaries party thereto to:

| |   |                                                                                                                                                                       
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | pay dividends and make capital expenditures if we do not repay
 amounts drawn under our credit facilities or if there is another default
 under our credit facilities;
| |   |                                                                                                                                                                       
| |  | incur additional indebtedness, including the issuance of guarantees;                                                                                                  
| |   |                                                                                                                                                                       
| |  | create liens on our assets;                                                                                                                                           
| |   |                                                                                                                                                                       
| |  | change the flag, class or management of our vessels or terminate or
 materially amend the management agreement relating to each vessel;                               
| |   |                                                                                                                                                                       
| |  | sell our vessels;                                                                                                                                                     
| |   |                                                                                                                                                                       
| |  | merge or consolidate with, or transfer all or substantially all our
 assets to, another person; or                                                                    
| |   |                                                                                                                                                                       
| |  | enter into a new line of business.                                                                                                                                    

Therefore,
we will need to seek permission from our lenders in order to engage in some
corporate actions. Our lenders interests may be different from ours and we may
not be able to obtain our lenders permission when needed. This may limit our
ability to pay dividends to you if we determine to do so in the future, finance
our future operations or capital requirements, make acquisitions or pursue
business opportunities.

If the recent volatility in LIBOR rates
continues, it will affect the interest rate under our existing credit
facilities or future credit facilities which could affect our profitability,
earnings and cash flow.

Amounts
borrowed under our credit facilities are tied to LIBOR rates. LIBOR rates have
recently been volatile, with the spread between those rates and prime lending
rates widening significantly at times. These conditions are the result of the
recent disruptions in the international credit markets. Because the interest
rates borne by amounts that we may drawdown under our existing credit
facilities or future credit facilities fluctuate with changes in the LIBOR
rates, if this volatility were to continue, it would affect the amount of
interest payable on amounts that we were to draw down from our existing credit
facilities or future credit facilities, which in turn, would have an adverse
effect on our profitability, earnings and cash flow.

|        |                                        | 
|------- | -------------------------------------- | 
|ITEM 4. | INFORMATION ON THE COMPANY            
|        |                                        | 
|A.      | History and Development of the Company

Scorpio
Tankers Inc. was incorporated in the Republic of the Marshall Islands pursuant
to the Marshall Islands Business Corporations Act on July 1, 2009. Our
principal executive offices are located at 9, Boulevard Charles III, Monaco
98000 and our telephone number at that location is +377-9798-5716.We provide
seaborne transportation of refined petroleum products and crude oil worldwide.
We began our operations in October 2009 with three vessel owning and operating
subsidiary companies. In April 2010, we completed our initial public offering of
12,500,000 shares of common stock at a public offering price of $13.00 per
share and commenced trading on the New York Stock Exchange, or NYSE, under the
symbol STNG. We have since expanded our fleet and as of the date of this
annual report, our fleet consists of 14 wholly owned tankers (one LR2 tanker,
four LR1 tankers, one Handymax tanker, seven MR tankers, and one post-Panamax
tanker) with a weighted average age of approximately 4.4 years compared to a
weighted average age of approximately 9.1 years for the global fleet (according to Drewry) and time charter-in and operate 21 tankers (six Handymax
tankers, seven MR tankers, three LR1 tankers and five LR2 tankers, including
four vessels we expect to be delivered to us by April 2013), which we refer to
collectively as our Operating Fleet. Additionally, we currently have contracts for the construction of 33 newbuilding vessels (19 MR
tankers, six Handymax ice class 1-A tankers and eight LR2 tankers), of which,
one is expected to be delivered to us in April 2013 and the remaining 32 within
2014.

20

---



Fleet development

Newbuilding vessels

Since June
2011, we have entered into contracts for the construction of 40 fuel efficient
newbuilding product tankers with shipyards, including HMD, HSHI, SPP and DSME,
which we refer to as our Newbuilding Program. As of the date of this annual
report, seven of the vessels in our Newbuilding Program have been delivered to
us. We currently have contracts for the construction of 33 vessels, consisting
of 11 MR tankers with HMD for an aggregate purchase price of $368.6 million,
eight MR product tankers with SPP for an aggregate purchase price of $267.0
million, six Handymax ice class-1A tankers with HMD for an aggregate purchase
price of $187.5 million, six LR2 product tankers with HSHI for an aggregate
purchase price of $303.0 million and two LR2 product tankers with DSME for an
aggregate purchase price of $100.0 million. One vessel in our Newbuilding
Program is expected to be delivered to us by April 2013 and the remaining 32
within 2014. We also have fixed-price options to construct additional
newbuilding product tankers at these yards.

As
of March 28, 2013, we have paid $124.7 million of installment payments
related to these newbuilding product tankers, and are committed to make
additional installment payments of $1,101.5 million. We will need to secure additional debt or
equity financing or both in addition to our 2013 Credit Facility to fully fund
the remaining balance of our obligations under our newbuilding program.

Owned vessels

We
currently have 14 wholly-owned vessels and contracts for the construction of 33
additional vessels.

We sold
three Handymax vessels in 2012, STI
Conqueror for $21.0 million in March 2012,STI Matador for $16.2 million in April
2012, andSTI Gladiator for $16.2
million in May 2012 and recorded a $4.5 million loss from disposal in
connection with the sales of these vessels. We also completed the sales of two
MR product tankers, STI Diamond
andSTI Coral in August 2012 and
September 2012, respectively, for $25.25 million each and recorded a $5.9
million loss from disposal in connection with the sales of these vessels.

In
2012, we took delivery of the first five vessels in our Newbuilding Program, STI Amber,
STI Topaz
STI Ruby,
STI Garnet and STI Onyx, and in January 2013 and March
2013, we took delivery of the sixth and seventh vessels in our Newbuilding
Program, STI
Sapphireand STI Emerald, respectively.

Time
chartered-in vessels

During
2012, we time chartered-in 21 vessels (six Handymax tankers, eight MR tankers,
three LR1 tankers and four LR2 tankers), compared to 11 vessels in 2011. We
currently have 21 vessels on time charter-in agreements as of the date of this
annual report (six Handymax tankers, seven MR tankers, three LR1 tankers and five LR2
tankers, including four vessels we expect to be delivered to us by April
2013).

Please
see our fleet list under Item 4.B. Business Overview for further information
regarding our time chartered-in vessels.

Recent Developments

In
January 2013, we reached an agreement with HMD for the construction of two
additional MR product tankers for approximately $32.5 million each. These
vessels will be delivered in May and June 2014.

In
January 2013, we took delivery of the sixth vessel under our newbuilding
program, STI Sapphire. Upon delivery, the vessel began a time charter
for up to 80 days at $20,750 per day. The vessel was partially financed under
our 2011 Credit Facility.

In
February 2013, we closed on the sale 30,672,000 shares of common stock in a
registered direct placement of common shares at an offering price of $7.50 per
share. We received net proceeds of $222.1 million, after deducting placement
agents discounts and offering expenses.

21

---



In
February 2013, we reached an agreement with SPP for the construction of four MR
product tankers for approximately $32.5 million each, two of which are the
exercise of options from a previous contract. The vessels are expected to
be delivered in the third and fourth quarters of 2014, respectively.

In
February 2013, we exercised options with HMD for the construction of four MR
product tankers for $33.0 million each and six Handymax ice class-1A tankers for
approximately $31.3 million each. Two of the MR product tankers are expected to
be delivered in the second quarter of 2014, with the third and fourth MR
product tankers expected to be delivered in the third and fourth quarter of
2014, respectively. The six Handymax vessels are expected to be delivered
in the third quarter of 2014.

In
February 2013, we signed a commitment letter for a $267.0 million credit
facility, or the 2013 Credit Facility, with Nordea Bank Finland plc, acting
through its New York branch, ABN AMRO Bank N.V, and Skandinaviska Enskilda
Banken AB.

In
March 2013, we closed on the sale of 29,012,000 shares of common stock in a
registered direct placement of common shares at an offering price of $8.10 per
share. We received net proceeds of $226.7 million, after deducting placement
agents discounts and offering expenses.

In
March 2013, we reached an agreement with HSHI for the construction of six
114,000 dwt LR2 product tankers for approximately $50.5 million each. These
vessels are expected to be delivered to us within 2014.

In
March 2013, we reached an agreement with DSME for the construction of two
114,000 dwt LR2 product tankers for approximately $50.0 million each. These
vessels are expected to be delivered to us within 2014.

In
March 2013, we took delivery of the seventh vessel under our newbuilding
program, STI Emerald. Upon delivery, the vessel began a time charter for up to 80 days at $19,500 per day. The
vessel was partially financed under our 2011 Credit Facility.

In
March 2013, we agreed to time charter-in two LR2 product tankers (one 115,756
dwt, 2011 built, and one  115,592 dwt, 2010 built) each for one year at $16,125
per day with expected deliveries by the middle of April 2013. We also agreed to
time charter-in a Handymax product tanker, ice-class 1B, (37,217 dwt, 2004
built) for one year at approximately $12,700 per day. We have an option to
extend the charter for an additional year at $14,000 per day. This vessel is
expected to be delivered by the middle of April 2013.

|   |                  
|-- | -----------------
|B. | Business Overview

We provide
seaborne transportation of refined petroleum products and crude oil worldwide.
We began our operations in October 2009 with three vessel-owning and operating
subsidiary companies. In April 2010, we completed our initial public offering
of 12,500,000 shares of common stock at a public offering price of $13.00 per
share and commenced trading on the NYSE under the symbol STNG. We have since
expanded our fleet, and as of the date of this annual report, our fleet
consists of 14 wholly owned tankers (one LR2 tanker, four LR1 tankers, one
Handymax tanker, seven MR tankers, and one post-Panamax tanker) with a weighted
average age of approximately 4.4 years and 21 time chartered-in tankers (five LR2 tankers,
three LR1 tankers, seven MR tankers and six Handymax tankers), which we refer
to collectively as our Operating Fleet. Additionally, we currently have
contracts for 33 newbuilding vessels (six Handymax ice class 1-A tankers, 19 MR
tankers and eight LR2 tankers), of which one MR is expected to be delivered by
April 2013 and the remaining 32 within 2014.

22

---



The
following table sets forth certain information regarding our fleet as of the
date of this annual report:

|   |  |                 |  |           |  |     |         |          |    |            |            |              |              |  |  |  |  |  |  | 
|-- |  | --------------- |  | --------- |  | --- | ------- | -------- | -- | ---------- | ---------- | ------------ | ------------ |  |  |  |  |  |  | 
|   |  | Vessel
 Name    |  | YearBuilt |  | DWT |         | IceClass |    | Employment |            | Vessel
 type |              |  |  |  |  |  | 
|   |  | Owned
 vessels  |  |           |  |     |         |          |    |            |            |              |              |  |  |  |  |  |  | 
|   |  |                 |  |           |  |     |         |          |    |            |            |              |              |  |  |  |  |  |  | 
|1  |  | STI Highlander  |  | 2007      |  |     | 37,145  |          | 1A |            | SHTP
 (1)  |              | Handymax     |  |  |  |  |  |  | 
|   |  |                 |  |           |  |     |         |          |    |            |            |              |              |  |  |  |  |  |  | 
|2  |  | STI Amber       |  | 2012      |  |     | 52,000  |          |   |            | SMRP(4)    |              | MR           |  |  |  |  |  |  | 
|   |  |                 |  |           |  |     |         |          |    |            |            |              |              |  |  |  |  |  |  | 
|3  |  | STI Topaz       |  | 2012      |  |     | 52,000  |          |   |            | SMRP(4)    |              | MR           |  |  |  |  |  |  | 
|   |  |                 |  |           |  |     |         |          |    |            |            |              |              |  |  |  |  |  |  | 
|4  |  | STI Ruby        |  | 2012      |  |     | 52,000  |          |   |            | SMRP(4)    |              | MR           |  |  |  |  |  |  | 
|   |  |                 |  |           |  |     |         |          |    |            |            |              |              |  |  |  |  |  |  | 
|5  |  | STI Garnet      |  | 2012      |  |     | 52,000  |          |   |            | SMRP(4)    |              | MR           |  |  |  |  |  |  | 
|   |  |                 |  |           |  |     |         |          |    |            |            |              |              |  |  |  |  |  |  | 
|6  |  | STI Onyx        |  | 2012      |  |     | 52,000  |          |   |            | SMRP(4)    |              | MR           |  |  |  |  |  |  | 
|   |  |                 |  |           |  |     |         |          |    |            |            |              |              |  |  |  |  |  |  | 
|7  |  | STI Sapphire    |  | 2013      |  |     | 52,000  |          |   |            | Spot       |              | MR           |  |  |  |  |  |  | 
|   |  |                 |  |           |  |     |         |          |    |            |            |              |              |  |  |  |  |  |  | 
|8  |  | STI Emerald     |  | 2013      |  |     | 52,000  |          |   |            | Spot       |              | MR           |  |  |  |  |  |  | 
|   |  |                 |  |           |  |     |         |          |    |            |            |              |              |  |  |  |  |  |  | 
|9  |  | Noemi           |  | 2004      |  |     | 72,515  |          |   |            | SPTP
 (2)  |              | LR1          |  |  |  |  |  |  | 
|   |  |                 |  |           |  |     |         |          |    |            |            |              |              |  |  |  |  |  |  | 
|10 |  | Senatore        |  | 2004      |  |     | 72,514  |          |   |            | SPTP
 (2)  |              | LR1          |  |  |  |  |  |  | 
|   |  |                 |  |           |  |     |         |          |    |            |            |              |              |  |  |  |  |  |  | 
|11 |  | STI Harmony     |  | 2007      |  |     | 73,919  |          | 1A |            | SPTP
 (2)  |              | LR1          |  |  |  |  |  |  | 
|   |  |                 |  |           |  |     |         |          |    |            |            |              |              |  |  |  |  |  |  | 
|12 |  | STI Heritage    |  | 2008      |  |     | 73,919  |          | 1A |            | SPTP
 (2)  |              | LR1          |  |  |  |  |  |  | 
|   |  |                 |  |           |  |     |         |          |    |            |            |              |              |  |  |  |  |  |  | 
|13 |  | Venice          |  | 2001      |  |     | 81,408  |          | 1C |            | SPTP
 (2)  |              | Post-Panamax |  |  |  |  |  |  | 
|   |  |                 |  |           |  |     |         |          |    |            |            |              |              |  |  |  |  |  |  | 
|14 |  | STI Spirit      |  | 2008      |  |     | 113,100 |          |   |            | SLR2P
 (3) |              | LR2          |  |  |  |  |  |  | 
|   |  |                 |  |           |  |     |         |          |    |            |            |              |              |  |  |  |  |  |  | 
|   |  | Total owned DWT |  |           |  |     | 888,520 |          |    |            |            |              |              |  |  |  |  |  |  | 

|   |  |                             |  |             |           |     |         |          |    |            |            |              |          |           |                    |             |  |           |  |     
|-- |  | --------------------------- |  | ----------- | --------- | --- | ------- | -------- | -- | ---------- | ---------- | ------------ | -------- | --------- | ------------------ | ----------- |  | --------- |  | ----
|   |  |                             |  |             |           |     |         |          |    |            |            |              |          |           | Time
 Charter Info |             | 
|   |  | Time Chartered-In
 vessels  |  |             |           |     |         |          |    |            |            |              | Daily    |           |                    |             | 
|   |  | Vessel Name                 |  | Year
 Built |           | DWT |         | IceClass |    | Employment |            | Vessel
 type |          | Base Rate |                    | Expiry
 (5) |  |          
|15 |  | Freja Polaris               |  | 2004        |           |     | 37,217  |          | 1B |            | SHTP
 (1)  |              | Handymax |           | $                  | 12,700      |  | 10-Apr-14 |  | (6) 
|   |  |                             |  |             |           |     |         |          |    |            |            |              |          |           |                    |             |  |           |  |     
|16 |  | Kraslava                    |  | 2007        |           |     | 37,258  |          | 1B |            | SHTP
 (1)  |              | Handymax |           | $                  | 12,070      |  | 18-Jul-13 |  | (7) 
|   |  |                             |  |             |           |     |         |          |    |            |            |              |          |           |                    |             |  |           |  |     
|17 |  | Krisjanis Valdemars         |  | 2007        |           |     | 37,266  |          | 1B |            | SHTP
 (1)  |              | Handymax |           | $                  | 12,000      |  | 14-Jun-13 |  | (8) 
|   |  |                             |  |             |           |     |         |          |    |            |            |              |          |           |                    |             |  |           |  |     
|18 |  | Histria Azure               |  | 2007        |           |     | 40,394  |          |   |            | SHTP
 (1)  |              | Handymax |           | $                  | 12,000      |  | 04-Apr-14 |  | (9) 
|   |  |                             |  |             |           |     |         |          |    |            |            |              |          |           |                    |             |  |           |  |     
|19 |  | Histria Coral               |  | 2006        |           |     | 40,426  |          |   |            | SHTP
 (1)  |              | Handymax |           | $                  | 13,000      |  | 17-Jul-13 |  | (10)
|   |  |                             |  |             |           |     |         |          |    |            |            |              |          |           |                    |             |  |           |  |     
|20 |  | Histria Perla               |  | 2005        |           |     | 40,471  |          |   |            | SHTP
 (1)  |              | Handymax |           | $                  | 13,000      |  | 15-Jul-13 |  | (10)
|   |  |                             |  |             |           |     |         |          |    |            |            |              |          |           |                    |             |  |           |  |     
|21 |  | STX Ace 6                   |  | 2007        |           |     | 46,161  |          |   |            | SMRP(4)    |              | MR       |           | $                  | 14,150      |  | 17-May-14 |  | (11)
|   |  |                             |  |             |           |     |         |          |    |            |            |              |          |           |                    |             |  |           |  |     
|22 |  | Targale                     |  | 2007        |           |     | 49,999  |          |   |            | SMRP(4)    |              | MR       |           | $                  | 14,500      |  | 17-May-14 |  | (12)
|   |  |                             |  |             |           |     |         |          |    |            |            |              |          |           |                    |             |  |           |  |     
|23 |  | Ugale                       |  | 2007        |           |     | 49,999  |          | 1B |            | SMRP(4)    |              | MR       |           | $                  | 14,000      |  | 15-Jan-14 |  | (13)
|   |  |                             |  |             |           |     |         |          |    |            |            |              |          |           |                    |             |  |           |  |     
|24 |  | Nave Orion                  |  | 2013        |           |     | 49,999  |          |   |            | Spot       |              | MR       |           | $                  | 14,300      |  | 25-Mar-15 |  | (14)
|   |  |                             |  |             |           |     |         |          |    |            |            |              |          |           |                    |             |  |           |  |     
|25 |  | Freja Lupus                 |  | 2012        |           |     | 50,385  |          |   |            | SMRP(4)    |              | MR       |           | $                  | 14,760      |  | 26-Apr-14 |  | (15)
|   |  |                             |  |             |           |     |         |          |    |            |            |              |          |           |                    |             |  |           |  |     
|26 |  | Gan-Trust                   |  | 2013        |           |     | 51,561  |          |   |            | SMRP(4)    |              | MR       |           | $                  | 16,250      |  | 06-Jan-16 |  | (16)
|   |  |                             |  |             |           |     |         |          |    |            |            |              |          |           |                    |             |  |           |  |     
|27 |  | Usma                        |  | 2007        |           |     | 52,684  |          | 1B |            | SMRP(4)    |              | MR       |           | $                  | 13,500      |  | 03-Jan-14 |  | (17)
|   |  |                             |  |             |           |     |         |          |    |            |            |              |          |           |                    |             |  |           |  |     
|28 |  | SN Federica                 |  | 2003        |           |     | 72,344  |          |   |            | Spot       |              | LR1      |           | $                  | 11,250      |  | 28-Feb-15 |  | (18)
|   |  |                             |  |             |           |     |         |          |    |            |            |              |          |           |                    |             |  |           |  |     
|29 |  | Hellespont Promise          |  | 2007        |           |     | 73,669  |          |   |            | SPTP
 (2)  |              | LR1      |           | $                  | 12,500      |  | 16-Dec-13 |  | (19)
|   |  |                             |  |             |           |     |         |          |    |            |            |              |          |           |                    |             |  |           |  |     
|30 |  | FPMC P Eagle                |  | 2009        |           |     | 73,800  |          |   |            | SPTP
 (2)  |              | LR1      |           | $                  | 12,800      |  | 09-Sep-13 |  | (20)
|   |  |                             |  |             |           |     |         |          |    |            |            |              |          |           |                    |             |  |           |  |     
|31 |  | FPMC P Hero                 |  | 2011        |           |     | 99,995  |          |   |            | SLR2P
 (3) |              | LR2      |           | $                  | 14,750      |  | 19-Oct-13 |  | (21)
|   |  |                             |  |             |           |     |         |          |    |            |            |              |          |           |                    |             |  |           |  |     
|32 |  | FPMC P Ideal                |  | 2012        |           |     | 99,993  |          |   |            | SLR2P
 (3) |              | LR2      |           | $                  | 14,750      |  | 09-Jul-13 |  | (21)
|   |  |                             |  |             |           |     |         |          |    |            |            |              |          |           |                    |             |  |           |  |     
|33 |  | Fair Seas                   |  | 2008        |           |     | 115,406 |          |   |            | SLR2P
 (3) |              | LR2      |           | $                  | 16,000      |  | 27-Jul-13 |  | (22)
|   |  |                             |  |             |           |     |         |          |    |            |            |              |          |           |                    |             |  |           |  |     
|34 |  | Pink Stars                  |  | 2010        |           |     | 115,592 |          |   |            | SLR2P
 (3) |              | LR2      |           | $                  | 16,125      |  | 01-Apr-14 |  | (23)
|   |  |                             |  |             |           |     |         |          |    |            |            |              |          |           |                    |             |  |           |  |     
|35 |  | Orange Stars                |  | 2011        |           |     | 115,756 |          |   |            | SLR2P
 (3) |              | LR2      |           | $                  | 16,125      |  | 01-Apr-14 |  | (23)
|   |  |                             |  |             |           |     |         |          |    |            |            |              |          |           |                    |             |  |           |  |     
|   |  | Total time chartered-in DWT |  |             | 1,350,375 |     |         |          |    |            |            |              |          |           |                    |             |  |          

23

---



|   |  |                                           |  |  |           |     |           |          |    |  |  |              |          |  |  |  |  |  |  |     
|-- |  | ----------------------------------------- |  |  | --------- | --- | --------- | -------- | -- |  |  | ------------ | -------- |  |  |  |  |  |  | ----
|   |  | Newbuildings currently under construction |  |  |           |     |           |          |    |  |  |              |          |  | 
|   |  | Vessel Name                               |  |  |           | DWT |           | IceClass |    |  |  | Vessel
 type |          |  |  |  |  |  | 
|36 |  | Hull 2451                                 |  |  |           |     | 38,000    |          | 1A |  |  |              | Handymax |  |  |  |  |  |  | (24)
|37 |  | Hull 2452                                 |  |  |           |     | 38,000    |          | 1A |  |  |              | Handymax |  |  |  |  |  |  | (24)
|38 |  | Hull 2453                                 |  |  |           |     | 38,000    |          | 1A |  |  |              | Handymax |  |  |  |  |  |  | (24)
|39 |  | Hull 2454                                 |  |  |           |     | 38,000    |          | 1A |  |  |              | Handymax |  |  |  |  |  |  | (24)
|40 |  | Hull 2462                                 |  |  |           |     | 38,000    |          | 1A |  |  |              | Handymax |  |  |  |  |  |  | (24)
|41 |  | Hull 2463                                 |  |  |           |     | 38,000    |          | 1A |  |  |              | Handymax |  |  |  |  |  |  | (24)
|42 |  | Hull 2369                                 |  |  |           |     | 52,000    |          |    |  |  |              | MR       |  |  |  |  |  |  | (24)
|43 |  | Hull 2389                                 |  |  |           |     | 52,000    |          |    |  |  |              | MR       |  |  |  |  |  |  | (24)
|44 |  | Hull 2390                                 |  |  |           |     | 52,000    |          |    |  |  |              | MR       |  |  |  |  |  |  | (24)
|45 |  | Hull 2391                                 |  |  |           |     | 52,000    |          |    |  |  |              | MR       |  |  |  |  |  |  | (24)
|46 |  | Hull 2392                                 |  |  |           |     | 52,000    |          |    |  |  |              | MR       |  |  |  |  |  |  | (24)
|47 |  | Hull 2449                                 |  |  |           |     | 52,000    |          |    |  |  |              | MR       |  |  |  |  |  |  | (24)
|48 |  | Hull 2450                                 |  |  |           |     | 52,000    |          |    |  |  |              | MR       |  |  |  |  |  |  | (24)
|49 |  | Hull 2458                                 |  |  |           |     | 52,000    |          |    |  |  |              | MR       |  |  |  |  |  |  | (24)
|50 |  | Hull 2459                                 |  |  |           |     | 52,000    |          |    |  |  |              | MR       |  |  |  |  |  |  | (24)
|51 |  | Hull 2460                                 |  |  |           |     | 52,000    |          |    |  |  |              | MR       |  |  |  |  |  |  | (24)
|52 |  | Hull 2461                                 |  |  |           |     | 52,000    |          |    |  |  |              | MR       |  |  |  |  |  |  | (24)
|53 |  | Hull S1138                                |  |  |           |     | 52,000    |          |    |  |  |              | MR       |  |  |  |  |  |  | (25)
|54 |  | Hull S1139                                |  |  |           |     | 52,000    |          |    |  |  |              | MR       |  |  |  |  |  |  | (25)
|55 |  | Hull S1140                                |  |  |           |     | 52,000    |          |    |  |  |              | MR       |  |  |  |  |  |  | (25)
|56 |  | Hull S1141                                |  |  |           |     | 52,000    |          |    |  |  |              | MR       |  |  |  |  |  |  | (25)
|57 |  | Hull S1142                                |  |  |           |     | 52,000    |          |    |  |  |              | MR       |  |  |  |  |  |  | (25)
|58 |  | Hull S1143                                |  |  |           |     | 52,000    |          |    |  |  |              | MR       |  |  |  |  |  |  | (25)
|59 |  | Hull S1144                                |  |  |           |     | 52,000    |          |    |  |  |              | MR       |  |  |  |  |  |  | (25)
|60 |  | Hull S1145                                |  |  |           |     | 52,000    |          |    |  |  |              | MR       |  |  |  |  |  |  | (25)
|61 |  | Hull S703                                 |  |  |           |     | 114,000   |          |    |  |  |              | LR2      |  |  |  |  |  |  | (26)
|62 |  | Hull S704                                 |  |  |           |     | 114,000   |          |    |  |  |              | LR2      |  |  |  |  |  |  | (26)
|63 |  | Hull S705                                 |  |  |           |     | 114,000   |          |    |  |  |              | LR2      |  |  |  |  |  |  | (26)
|64 |  | Hull S706                                 |  |  |           |     | 114,000   |          |    |  |  |              | LR2      |  |  |  |  |  |  | (26)
|65 |  | Hull S709                                 |  |  |           |     | 114,000   |          |    |  |  |              | LR2      |  |  |  |  |  |  | (26)
|66 |  | Hull S710                                 |  |  |           |     | 114,000   |          |    |  |  |              | LR2      |  |  |  |  |  |  | (26)
|67 |  | LR2 #1                                    |  |  |           |     | 114,000   |          |    |  |  |              | LR2      |  |  |  |  |  |  | (27)
|68 |  | LR2 #2                                    |  |  |           |     | 114,000   |          |    |  |  |              | LR2      |  |  |  |  |  |  | (27)
|   |  |                                           |  |  |           |     |           |          |    |  |  |              |          |  |  |  |  |  |  |     
|   |  | Total newbuilding DWT                     |  |  | 2,128,000 |     |           |          |    |  |  |              |          |  |  |  |  | 
|   |  |                                           |  |  |           |     |           |          |    |  |  |              |          |  |  |  |  |  |  |     
|   |  |                                           |  |  |           |     |           |          |    |  |  |              |          |  |  |  |  |  |  |     
|   |  | Total DWT                                 |  |  |           |     | 4,366,895 |          |    |  |  |              |          |  |  |  |  |  |  |     

|    |                                                                                                                                                                                                                                                                               
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | This vessel operates in or
 is expected to operate in the Scorpio Handymax Tanker Pool (SHTP). SHTP is
 operated by Scorpio Commercial Management (SCM). SHTP and SCM are related
 parties to the Company.                                                                    
|    |                                                                                                                                                                                                                                                                               
|(2) | This vessel operates in or
 is expected to operate in the Scorpio Panamax Tanker Pool (SPTP). SPTP is
 operated by SCM. SPTP is a related party to the Company.                                                                                                               
|    |                                                                                                                                                                                                                                                                               
|(3) | This vessel operates in or
 is expected to operate in the Scorpio LR2 Pool (SLR2P). SLR2P is operated by
 SCM. SLR2P is a related party to the Company.                                                                                                                       
|    |                                                                                                                                                                                                                                                                               
|(4) | This vessel operates in or
 is expected to operate in the Scorpio MR Pool (SMRP). SMRP is operated by
 SCM. SMRP is a related party to the Company.                                                                                                                           
|    |                                                                                                                                                                                                                                                                               
|(5) | Redelivery from the
 charterer is plus or minus 30 days from the expiry date.                                                                                                                                                                                                 
|    |                                                                                                                                                                                                                                                                               
|(6) | We have an option to extend
 the charter for an additional year at $14,000 per day. This vessel is
 expected to be delivered in April 2013.                                                                                                                                   
|    |                                                                                                                                                                                                                                                                               
|(7) | We have an option to extend
 the charter for an additional year at $13,070 per day.                                                                                                                                                                                           
|    |                                                                                                                                                                                                                                                                               
|(8) | We have an option to extend
 the charter for an additional year at $13,000 per day. The agreement also
 contains a 50% profit and loss sharing provision whereby we split all of the
 vessels profits and losses above or below the daily base rate with the vessels
 owner.

24

---



|     |                                                                                                                                                                                                                                                                                                                                                                                               
|---- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(9)  | In April 2013, the daily
 base rate will increase to $12,600 per day for one year thereafter. We have
 an option to extend the term of the charter for an additional year at $13,550
 per day.                                                                                                                                                                                                
|     |                                                                                                                                                                                                                                                                                                                                                                                               
|(10) | Represents the average rate
 for the two year duration of the agreement. The rate for the first year is
 $12,750 per day and the rate for the second year is $13,250 per day. We have
 an option to extend the charter for an additional year at $14,500 per day.                                                                                                                             
|     |                                                                                                                                                                                                                                                                                                                                                                                               
|(11) | We have an option to extend
 the charter for an additional year at $15,150 per day.                                                                                                                                                                                                                                                                                                           
|     |                                                                                                                                                                                                                                                                                                                                                                                               
|(12) | We have options to extend
 the charter for up to three consecutive one year periods at $14,850 per day,
 $15,200 per day and $16,200 per day, respectively.                                                                                                                                                                                                                                   
|     |                                                                                                                                                                                                                                                                                                                                                                                               
|(13) | We have an option to extend
 the charter for an additional year at $15,000 per day.                                                                                                                                                                                                                                                                                                           
|     |                                                                                                                                                                                                                                                                                                                                                                                               
|(14) | We have an option to extend
 the charter for an additional year at $15,700 per day.                                                                                                                                                                                                                                                                                                           
|     |                                                                                                                                                                                                                                                                                                                                                                                               
|(15) | We have an option to extend
 the charter for an additional year at $16,000 per day.                                                                                                                                                                                                                                                                                                           
|     |                                                                                                                                                                                                                                                                                                                                                                                               
|(16) | The daily base rate
 represents the average rate for the three year duration of the agreement. The
 rate for the first year is $15,750 per day, the rate for the second year is
 $16,250 per day, and the rate for the third year is $16,750 per day. We have
 options to extend the charter for up to two consecutive one year periods at
 $17,500 per day and $18,000 per day, respectively.
|     |                                                                                                                                                                                                                                                                                                                                                                                               
|(17) | We have an option to extend
 the charter for an additional year at $14,500 per day.                                                                                                                                                                                                                                                                                                           
|     |                                                                                                                                                                                                                                                                                                                                                                                               
|(18) | We have an option to extend
 the charter for an additional year at $12,500 per day. We have also entered
 into an agreement with the owner whereby we split all of the vessels profits
 above the daily base rate.                                                                                                                                                                           
|     |                                                                                                                                                                                                                                                                                                                                                                                               
|(19) | We have an option to extend
 the charter for an additional six months at $14,250 per day.                                                                                                                                                                                                                                                                                                     
|     |                                                                                                                                                                                                                                                                                                                                                                                               
|(20) | We have options to extend
 the charter for up to two consecutive one year periods at $13,400 per day and
 $14,400 per day, respectively. We have also entered into an agreement with a
 third party whereby we split all of the vessels profits and losses above or
 below the daily base rate.                                                                                              
|     |                                                                                                                                                                                                                                                                                                                                                                                               
|(21) | We have options to extend
 the charters for three consecutive six month periods at $15,000 per day,
 $15,250 per day, and $15,500 per day respectively. FPMC P Hero is expected to be delivered in April 2013 and FPMC P Ideal was delivered in January
 2013.                                                                                                                                
|     |                                                                                                                                                                                                                                                                                                                                                                                               
|(22) | We have options to extend
 the charter for three consecutive six month periods at $16,250 per day,
 $16,500 per day, and $16,750 per day respectively.                                                                                                                                                                                                                                        
|     |                                                                                                                                                                                                                                                                                                                                                                                               
|(23) | These vessels are expected
 to be delivered in April 2013.                                                                                                                                                                                                                                                                                                                                    
|     |                                                                                                                                                                                                                                                                                                                                                                                               
|(24) | These Newbuilding vessels
 are being constructed at HMD (Hyundai Mipo Dockyard Co., Ltd. of South Korea).
 One vessel is expected to be delivered in April 2013, and the remaining 16
 vessels are expected to be delivered by the end of 2014.                                                                                                                                               
|     |                                                                                                                                                                                                                                                                                                                                                                                               
|(25) | These Newbuilding vessels
 are being constructed at SPP (SPP Shipbuilding Co., Ltd. of South Korea).
 These eight vessels are expected to be delivered during the second, third and
 fourth quarters of 2014.                                                                                                                                                                                 
|     |                                                                                                                                                                                                                                                                                                                                                                                               
|(26) | These Newbuilding vessels
 are being constructed at HSHI (Hyundai Samho Heavy Industries Co., Ltd.).
 These six vessels are expected to be delivered in the third and fourth
 quarters of 2014.                                                                                                                                                                                               
|     |                                                                                                                                                                                                                                                                                                                                                                                               
|(27) | These Newbuilding vessels
 are being constructed at DSME (Daewoo Shipbuilding and Marine Engineering Co., Ltd.).
 These two vessels are expected to be delivered in the fourth quarter of 2014.                                                                                                                                                                                               

Chartering
strategy

Generally,
we operate our vessels in commercial pools on time charters or in the spot
market.

Commercial
Pools

To increase
vessel utilization and thereby revenues, we participate in commercial pools
with other shipowners of similar modern, well-maintained vessels. As of the
date of this annual report, 27 of the vessels in our Operating Fleet operate in
one of the Scorpio Group Pools. By operating a large number of vessels as an
integrated transportation system, commercial pools offer customers greater
flexibility and a higher level of service while achieving scheduling
efficiencies. Pools employ experienced commercial managers and operators who
have close working relationships with customers and brokers, while technical
management is performed by each shipowner. Pools negotiate charters with
customers primarily in the spot market. The size and scope of these pools
enable them to enhance utilization rates for pool vessels by securing backhaul
voyages and contracts of affreightment, or COAs, thus generating higher
effective TCE revenues than otherwise might be obtainable in the spot market.

Time Charters

Time charters give us a fixed and stable cash flow
for a known period of time. Time charters also mitigate in part the seasonality
of the spot market business, which is generally weaker in the second and third
quarters of the year. In the future, we may opportunistically look to enter our
vessels into time charter contracts. We may also enter into time charter
contracts with profit sharing agreements, which enable us to benefit if the
spot market increases. As of the date of this annual report, none of the
vessels in our Operating Fleet operate under long-term time charters (greater
than one year).

25

---



Spot Market

A spot market
voyage charter is generally a contract to carry a specific cargo from a load port to a discharge port for an agreed freight per
ton of cargo or a specified total amount. Under spot market voyage charters, we pay voyage expenses such as port, canal and bunker
costs. Spot charter rates are volatile and fluctuate on a seasonal and year-to-year basis. Fluctuations derive from imbalances
in the availability of cargoes for shipment and the number of vessels available at any given time to transport these cargoes.
Vessels operating in the spot market generate revenue that is less predictable, but may enable us to capture increased profit
margins during periods of improvements in tanker rates. As of the date of this annual report, four of the vessels in our Operating
Fleet, STI Sapphire, STI Emerald, Nave Orion, and SN Federica, operate in the spot market.

Management of our
fleet

Commercial and Technical Management

Our
vessels are commercially managed by Scorpio Commercial Management S.A.M., or
SCM and technically managed by Scorpio Ship Management S.A.M., or SSM, pursuant
to a Master Agreement (which may be terminated upon a two year notice). SCM and
SSM are related parties of ours. We expect that additional vessels that we may
acquire in the future will also be managed under the Master Agreement or on
substantially similar terms.

SCMs
services include securing employment, in the spot market and on time charters,
for our vessels. SCM also manages the Scorpio Group Pools. For commercial
management of our vessels that do not operate in any of the Scorpio Group
Pools, we pay SCM a fee of $250 per vessel per day for each Panamax, LR1 and
LR2 vessel and $300 per vessel per day for each Handymax and MR vessels, plus 1.25%
commission on gross revenues per charter fixture. Effective January 1, 2013,
all participants in the Scorpio Group Pools collectively pay SCM a pool
management fee of $250 per vessel per day with respect to our LR2 vessels, $300
per vessel per day with respect to each of our Panamax vessels and $325
per vessel per day with respect to each of our Handymax and MR vessels, plus
1.50% commission on gross revenues per charter fixture. These are the same fees
that SCM charges other vessels in these pools, including third party owned
vessels.

SSMs
services include day-to-day vessel operation, performing general maintenance,
monitoring regulatory and classification society compliance, customer vetting
procedures, supervising the maintenance and general efficiency of vessels,
arranging the hiring of qualified officers and crew, arranging and supervising
drydocking and repairs, purchasing supplies, spare parts and new equipment for
vessels, appointing supervisors and technical consultants and providing technical
support. We currently pay SSM $548 per vessel per day to provide technical
management services for each of our vessels. This fee is lower than that charged to
third parties by SSM.

Administrative
Services Agreement

We
have an Administrative Services Agreement with Scorpio Services Holding
Limited, or SSH, or our Administrator, for the provision of administrative
staff and office space, and administrative services, including accounting,
legal compliance, financial and information technology services. SSH is a
related party of ours. Liberty, a company affiliated with us, acted as our
Administrator until March 13, 2012 when the Administrative Services Agreement
was novated to SSH. The effective date of the novation was November 9, 2009,
the date that we first entered into the agreement with Liberty. We reimburse
our current Administrator for the reasonable direct or indirect expenses it
incurs in providing us with the administrative services described above. Our
Administrator also arranges vessel sales and purchases for us. The services
provided to us by our Administrator may be sub-contracted to other entities
within the Scorpio Group.

We
pay our Administrator a fee for arranging vessel purchases and sales for us,
equal to 1% of the gross purchase or sale price, payable upon the consummation
of any such purchase or sale. For the years ended December 31, 2012 and 2011,
we paid our Administrator $2.4 million and $0.7 million in fees, respectively,
relating to vessel acquisitions and sales. We believe this 1% fee on purchases
and sales is customary in the tanker industry.

Further,
pursuant to our administrative services agreement, our Administrator, on behalf
of itself and other members of the Scorpio Group, has agreed that it will not
directly own product or crude tankers ranging in size from 35,000 dwt to 200,000 dwt.

26

---



Our
administrative services agreement, whose effective commencement began in
December 2009, was automatically renewed on December 31, 2012 for an additional
term of two years.

The International Oil Tanker Shipping Industry

All
the information and data presented in this section, including the analysis of
the oil tanker shipping industry, has been provided by Drewry Shipping
Consultants Ltd., or Drewry. The statistical and graphical information
contained herein is drawn from Drewrys database and other sources. According
to Drewry: (i) certain information in Drewrys database is derived from
estimates or subjective judgments; (ii) the information in the databases of
other maritime data collection agencies may differ from the information in
Drewrys database; and (iii) while Drewry has taken reasonable care in the compilation
of the statistical and graphical information and believes it to be accurate and
correct, data compilation is subject to limited audit and validation
procedures.

Oil Tanker Demand

Demand
for crude oil and refined petroleum products is affected by a number of factors
including general economic conditions (such as increases and decreases in
industrial production), oil prices, environmental concerns, weather conditions,
and competition from alternative energy sources.

The
world economy grew continuously from 2000 to 2008, but growth came to a halt in
2009 when the world went into a global economic recession. Since 2009, the
world economy has returned to a state of growth, with a 3.1% increase in global
GDP in 2012, generated largely by China and India.

World
oil consumption has followed a similar pattern. From 2000 to 2007, world oil
consumption grew considerably, but receded in 2008 and 2009 due to global
economic downturn. World oil consumption has since recovered, with consumption
rising to 89.7 million bpd in 2012. Since 2000, world oil consumption has grown
at a compound annual growth rate, or CAGR, of approximately 1.4%.

World Oil Consumption: 1990  2012(1)(Million Barrels Per
Day)

(LINE GRAPH)

(1) Provisional 
Source: Drewry Maritime Research

Oil consumption is either
static or declining in most of the developed world, but is increasing in most
of the developing world. In recent years, Asia, particularly China, has been
the main generator of additional demand for oil.

27

---



Traditional sources, such as
oil from the Middle East, have largely fulfilled this demand. From 2000 to
2012, Chinese oil consumption grew by a CAGR of 5.9%, reaching 9.54 million
barrels per day. Notably, oil consumption on a per capita basis is still low in
countries such as China and India as compared to the United States and Western
Europe.

Seasonal
trends also affect world oil consumption and, consequently, oil tanker demand.
While trends in consumption do vary with season, peaks in tanker demand frequently
precede seasonal consumption peaks due to anticipated consumer demand by
refiners and suppliers. Seasonal peaks in oil demand can be broadly classified
into two categories: increased demand prior to winter in the Northern
Hemisphere, during which heating oil consumption increases, and increased
demand for gasoline prior to the summer driving season in the United States.

Production
trends have generally followed oil consumption patterns, though changes in oil
inventories also play a part in determining production levels.

Production
and exports from the Middle East, particularly countries that are members of
the Organization of the Petroleum Exporting Countries, or OPEC, have
historically had a significant impact on the demand for tanker capacity, and,
consequently, on tanker charter hire rates, due to the relatively long
distances between the Middle East and typical destination ports. Oil exports
from short-haul regions, such as Latin America and the North Sea, are
significantly closer to ports used by the primary consumers of such exports,
which results in shorter average voyage length as compared to oil exports from
the Middle East. Therefore, production in short-haul regions has historically
increased the demand for vessels in the Handy, Panamax and Aframax market
segments, but has had less of an impact on the demand for larger vessels.

Oil Refinery Capacity

Oil
refineries also vary greatly in the quantity, variety and specification of
products that they produce, and it is common for tankers to take products into
and out of the same refinery. This global multi-directional trade pattern
enables owners and operators of product tankers to engage in charters of
triangulation, thereby maximizing revenue.

Changes
in refinery throughput are somewhat driven by changes in the location of
refinery capacity. Capacity increases are taking place mostly in the developing
world, especially in Asia, and this is leading to changes in voyage patterns
and longer voyages.

In
response to growing domestic demand, Chinese refinery throughput has grown at
the fastest rate of any global region in the last decade, ahead of the Middle
East and other emerging economies. By contrast, refinery throughput in North America
has actually declined in the last decade.

The
shift in global refinery capacity from the developed to the developing world is
likely to continue as refinery development plans are heavily focused on areas
such as Asia and the Middle East, with relatively little capacity additions
planned for North America and Europe.

World Oil Trades

World
oil trades are naturally the result of geographical imbalances between areas of
oil consumption and production, although in some sectors, such as refined petroleum
products, arbitrage can have an impact on trade flows.

The
volume of crude oil moved by sea each year also reflects underlying changes in
world oil consumption and production. Seaborne trade in crude oil in 2012 is
provisionally estimated at 2.1 billion tons, while refined petroleum products
movement is provisionally estimated at 910 million tons.

Demand
for oil tankers is primarily determined by the volume of crude oil and refined
petroleum products transported and the distances over which they are
transported. Tanker demand is generally expressed in ton miles, which are
calculated as the number of metric tons of oil carried multiplied by the miles
over which the oil is carried.

The
transportation of crude oil is typically unidirectional as most oil is
transported from a few areas of production to many regions of consumption,
where it is refined into petroleum products. Conversely, the transportation of
refined petroleum products and
associated cargoes is multidirectional as there are several areas of both
production and consumption.

28

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In
terms of ton miles, geographical changes in the pattern of trade have had a
positive impact on tanker demand despite only modest growth in the volume of
oil moved by sea since 2000. From 2000 to 2012, ton mile demand in the tanker
sector grew at a CAGR of 2.6%, whereas the overall increase in trade over the
same period was equivalent to a CAGR of 2.2%.

As
a result of changes in patterns of trade, the average loaded voyage haul length
of refined product trades has risen from a recent market low of 2,283 miles in
2000 to 2,800 miles in 2012, equivalent to a CAGR of 1.7%.

Oil Tanker Supply

The
world oil tanker fleet is generally divided into five major types of vessel
classifications based on vessel carrying capacity. Additionally, the tanker
fleet is divided between crude tankers that carry dirty products, such as crude
oil or residual fuel oil, and product tankers that carry clean products, such
as refined petroleum products, including gasoline, jet fuel, kerosene, naphtha
and gas oil.

While
product tankers can carry dirty products, they generally do not switch between
clean and dirty cargoes because a vessels tank must be cleaned prior to loading
a different cargo type. Product tankers do not form a distinct vessel
classification, but are identified on the basis of various factors, including
technical and trading histories.

A
number of tankers also have the capability to carry chemicals as well as
refined petroleum products. These ships are sometimes referred to as
product/chemical tankers and may switch between the carriage of chemicals or
refined petroleum products depending on market conditions and employment
opportunities.

The
supply of tankers is measured in deadweight tons, or dwt. The supply of tanker
capacity is determined by the age and size of the existing global fleet, the
number of vessels on order and the number of ships removed from the fleet by
scrapping and international regulations. Other factors which can affect the
short-term supply of tankers include the number of combined carriers (which are
vessels capable of trading wet and dry cargoes) trading in the oil market and
the number of tankers in storage, dry-docked, awaiting repairs or otherwise out
of commission.

There
are eight main fleet categories within the oil tanker fleet: Small, Handy,
Handymax (which include MR product tankers), Panamax (which include LR1 product
tankers), Aframax (which include LR2 product tankers), Suezmax, Very Large
Crude Carrier, or VLCC, and Ultra Large Crude Carrier, or ULCC.

The
oil tanker fleet at the end of January 2013 consisted of 3,166 vessels with a
combined capacity of 413.4 million dwt.

29

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Oil Tanker Fleet  January 31, 2013

|         |  |                        |  |                    |       |            |  |                         |  |            |       |  |  |       |  | 
|-------- |  | ---------------------- |  | ------------------ | ----- | ---------- |  | ----------------------- |  | ---------- | ----- |  |  | ----- |  | 
|Sector   |  | Deadweight Tons
 (dwt) |  | Number of
 Vessels |       | % of Fleet |  | Capacity
 (million dwt) |  | % of Fleet |      
|         |  |                        |  |                    |       |            |  |                         |  |            |       |  |  |       | 
|Small    |  | 10-29,999              |  |                    | 228   |            |  | 7.2                     |  |            | 4.1   |  |  | 1.0   | 
|Handy    |  | 30-41,999              |  |                    | 152   |            |  | 4.8                     |  |            | 5.6   |  |  | 1.4   | 
|Handymax |  | 42-54,999              |  |                    | 407   |            |  | 12.9                    |  |            | 19.2  |  |  | 4.6   | 
|Panamax  |  | 55-79,999              |  |                    | 397   |            |  | 12.5                    |  |            | 28.5  |  |  | 6.9   | 
|Aframax  |  | 80-119,999             |  |                    | 902   |            |  | 28.5                    |  |            | 96.6  |  |  | 23.4  | 
|Suezmax  |  | 120-199,999            |  |                    | 470   |            |  | 14.8                    |  |            | 72.7  |  |  | 17.6  | 
|VLCC     |  | 200-320,000            |  |                    | 574   |            |  | 18.1                    |  |            | 174.9 |  |  | 42.3  | 
|ULCC     |  | 320,000+               |  |                    | 36    |            |  | 1.1                     |  |            | 11.8  |  |  | 2.9   | 
|         |  |                        |  |                    | 3,166 |            |  | 100.0                   |  |            | 413.4 |  |  | 100.0 | 

Source: Drewry Maritime Research

Between
the end of 2000 and January 2013 the size of the total tanker fleet grew by
54%, with increases in fleet size taking place across all sectors.

The Product Tanker Fleet

The
product tanker fleet as of January 31, 2013 comprises 1,239 ships of 70.9
million dwt.

World Product(1) Tanker Fleet January 31, 2013

|                |  |                        |           |                    |  |            |  |                          |       |            |  |      |  |  |       | 
|--------------- |  | ---------------------- | --------- | ------------------ |  | ---------- |  | ------------------------ | ----- | ---------- |  | ---- |  |  | ----- | 
|Sector          |  | Deadweight Tons
 (dwt) |           | Number of
 Vessels |  | % of Fleet |  | Capacity
 (million dwt ) |       | % of Fleet | 
|Small           |  |                        | 10-29,999 |                    |  | 209        |  |                          | 16.9  |            |  | 3.7  |  |  | 5.2   | 
|Handy (MR1)     |  |                        | 30-41,999 |                    |  | 135        |  |                          | 10.9  |            |  | 5    |  |  | 7.1   | 
|Handymax
 (MR2) |  |                        | 42-54,999 |                    |  | 403        |  |                          | 32.5  |            |  | 18.9 |  |  | 26.7  | 
|Panamax
 (LR1)  |  |                        | 55-79,999 |                    |  | 293        |  |                          | 23.6  |            |  | 21.3 |  |  | 30.0  | 
|Aframax
 (LR2)  |  |                        | 80,000+   |                    |  | 199        |  |                          | 16.1  |            |  | 22   |  |  | 31.0  | 
|                |  |                        |           |                    |  | 1,239      |  |                          | 100.0 |            |  | 70.9 |  |  | 100.0 | 

(1) Excludes chemical tankers

Source: Drewry Maritime Research

The
supply of the smallest product tanker category fleet (tankers with
10,000-29,999 dwt) has declined in favor of larger ships that are more suited
to long-haul routes.

World Product Tanker Fleet: Age Profile, January 31, 2013

(LINE GRAPH)

Left Hand Scale = Million Dwt; Right Hand
Scale = No of Ships

Source: Drewry Maritime Research

30

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Oil Tanker Orderbook

As
of January 31, 2013, the oil tanker orderbook amounted to 362 tankers of 51.3
million dwt, equivalent to 12.4% of the current fleet. At its peak in 2008, the
orderbook to existing fleet ratio was just over 40%. The decrease to its
current level is due to deliveries from the orderbook outpacing new orders
being placed. The current total tanker orderbook, including crude tankers and product
tankers, and the schedule of deliveries are shown below.

The Total Tanker Fleet & Orderbook: January 31, 2013

|                |  |                |  |       |  |     |  |      |  |     |  |      |  |     |  |       |  |     |  |       |  |     |  |                  |  |        |  |       
|--------------- |  | -------------- |  | ----- |  | --- |  | ---- |  | --- |  | ---- |  | --- |  | ----- |  | --- |  | ----- |  | --- |  | ---------------- |  | ------ |  | ------
|Size            |  | Existing Fleet |  | 2013  |  |     |  | 2014 |  |     |  | 2015 |  |     |  | 2016+ |  |     |  | Total |  |     |  | % Existing Fleet
|                |  | No.            |  | Dwt   |  | No. |  | Dwt  |  | No. |  | Dwt  |  | No. |  | Dwt   |  | No. |  | Dwt   |  | No. |  | Dwt              |  | No     |  | Dwt   
|                |  |                |  |       |  |     |  |      |  |     |  |      |  |     |  |       |  |     |  |       |  |     |  |                  |  |        |  |       
|10-29,999       |  | 228            |  | 4.1   |  | 7   |  | 0.1  |  | 0   |  | 0.0  |  | 0   |  | 0.0   |  | 0   |  | 0.0   |  | 7   |  | 0.1              |  | 3.1%   |  | 2.4%  
|30-41,999       |  | 152            |  | 5.6   |  | 7   |  | 0.2  |  | 2   |  | 0.1  |  | 0   |  | 0.0   |  | 0   |  | 0.0   |  | 9   |  | 0.3              |  | 5.9%   |  | 5.4%  
|42-54,999       |  | 407            |  | 19.2  |  | 58  |  | 2.9  |  | 28  |  | 1.4  |  | 8   |  | 0.4   |  | 5   |  | 0.2   |  | 99  |  | 4.9              |  | 24.3%  |  | 25.5% 
|55-79,999       |  | 397            |  | 28.5  |  | 18  |  | 1.3  |  | 6   |  | 0.4  |  | 0   |  | 0.0   |  | 4   |  | 0.3   |  | 28  |  | 2.0              |  | 7.1%   |  | 7.0%  
|80-119,999      |  | 902            |  | 96.6  |  | 29  |  | 3.2  |  | 21  |  | 2.3  |  | 7   |  | 0.8   |  | 0   |  | 0.0   |  | 57  |  | 6.3              |  | 6.3%   |  | 6.5%  
|120-199,999     |  | 470            |  | 72.7  |  | 67  |  | 10.4 |  | 10  |  | 1.5  |  | 6   |  | 1.0   |  | 1   |  | 0.2   |  | 84  |  | 13.1             |  | 17.9%  |  | 18.0% 
|200,000-319,999 |  | 574            |  | 174.9 |  | 23  |  | 7.2  |  | 13  |  | 4.0  |  | 2   |  | 0.6   |  | 0   |  | 0.0   |  | 38  |  | 11.8             |  | 6.6%   |  | 6.7%  
|320,000+        |  | 36             |  | 11.8  |  | 33  |  | 10.6 |  | 7   |  | 2.2  |  | 0   |  | 0.0   |  | 0   |  | 0.0   |  | 40  |  | 12.8             |  | 111.1% |  | 108.5%
|Total           |  | 3,166          |  | 413.4 |  | 242 |  | 35.9 |  | 87  |  | 11.9 |  | 23  |  | 2.8   |  | 10  |  | 0.7   |  | 362 |  | 51.3             |  | 11.4%  |  | 12.4% 

Source: Drewry Maritime Research

Product Tanker Orderbook

As
of January 31, 2013, the product tanker orderbook amounted to 145 ships of 8.3
million dwt, equivalent to 11.7% of the current fleet.

World
Product Tanker Orderbook, January 31, 2013

|                |  |                      |  |      |  |      |  |      |  |       |  |                 |  |            |  |     |  |     |  |     |  |     |  |     |  |      |  |     
|--------------- |  | -------------------- |  | ---- |  | ---- |  | ---- |  | ----- |  | --------------- |  | ---------- |  | --- |  | --- |  | --- |  | --- |  | --- |  | ---- |  | ----
|                |  | Scheduled Deliveries
|Size (000 dwt) |  | Existing Fleet*      |  | 2013 |  | 2014 |  | 2015 |  | 2016+ |  | Total Orderbook |  | % of Fleet
|                |  | No.                  |  | Dwt  |  | No.  |  | Dwt  |  | No.   |  | Dwt             |  | No.        |  | Dwt |  | No. |  | Dwt |  | No. |  | Dwt |  | No   |  | Dwt 
|10-29,999       |  | 209                  |  | 3.7  |  | 6    |  | 0.1  |  | 0     |  | 0.0             |  | 0          |  | 0.0 |  | 0   |  | 0.0 |  | 6   |  | 0.1 |  | 2.9  |  | 2.7 
|30-41,999       |  | 135                  |  | 5.0  |  | 6    |  | 0.2  |  | 2     |  | 0.1             |  | 0          |  | 0.0 |  | 0   |  | 0.0 |  | 8   |  | 0.3 |  | 5.9  |  | 6.0 
|42-54,999       |  | 403                  |  | 18.9 |  | 54   |  | 2.7  |  | 28    |  | 1.4             |  | 8          |  | 0.4 |  | 5   |  | 0.2 |  | 95  |  | 4.7 |  | 23.6 |  | 24.9
|55-79,999       |  | 293                  |  | 21.3 |  | 13   |  | 0.9  |  | 5     |  | 0.4             |  | 0          |  | 0.0 |  | 4   |  | 0.3 |  | 22  |  | 1.6 |  | 7.5  |  | 7.5 
|80,000+         |  | 199                  |  | 22.0 |  | 8    |  | 0.9  |  | 6     |  | 0.7             |  | 0          |  | 0.0 |  | 0   |  | 0.0 |  | 14  |  | 1.6 |  | 7.0  |  | 7.3 
|Total           |  | 1,239                |  | 70.9 |  | 87   |  | 4.8  |  | 41    |  | 2.6             |  | 8          |  | 0.4 |  | 9   |  | 0.5 |  | 145 |  | 8.3 |  | 11.7 |  | 11.7

Source: Drewry Maritime
Research

The Product Tanker Freight Market

Tanker charter hire rates
and vessel values for all tankers are influenced by supply and demand for
tanker capacity. However, the product tanker segment is generally less volatile
than other crude market segments because these vessels mainly transport refined
petroleum products that are not subject to the same degree of volatility as the
crude oil market. Time charter rates are also less volatile than spot rates
because chartered vessels are fixed for a longer period of time. In the spot
market, rates will reflect the immediate underlying conditions in vessel supply
and demand and are thus prone to more volatility. Recent trends in rates in the
time charter equivalent of spot rates and time charter rates are shown in the
tables below.

Tanker charter hire rates
and vessel values for all tankers are strongly influenced by supply and demand
for tanker capacity. Small changes in tanker utilization have historically led
to relatively large fluctuations in tanker charter rates for VLCCs, more moderate price
volatility in the Suezmax, Aframax and Panamax markets and less volatility in
the Handy market compared to the tanker market as a whole.

From
2005 to 2008, time charter rates for all sizes of oil tankers rose steeply,
reflecting additional demand for tanker capacity generated by increased demand
for oil and seaborne movements. This led to a much tighter balance between vessel
demand and supply, and freight rates consequently rose. However, as the world
economy weakened in the second half of 2008, demand for oil also fell,
negatively impacting tanker demand and freight rates. Rates resultantly
declined in 2009, recovered briefly in 2010, but remained weak for all of 2011
and 2012, especially for larger sized oil tankers.

31

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Oil Tanker One Year Time Charter Rates:
2000-2013(US$/Day Period Averages)

|           |  |            |  |               |  |            |  |                |  |             |  |            
|---------- |  | ---------- |  | ------------- |  | ---------- |  | -------------- |  | ----------- |  | -----------
|Size Range |  | 30,000 Dwt |  | 40-45,000 Dwt |  | 60,000 Dwt |  | 95-105,000 Dwt |  | 150,000 Dwt |  | 280,000 Dwt
|Age        |  | 5 Yr       |  | 5 Yr          |  | 10 Yr      |  | 5 Yr           |  | 5 Yr        |  | 5 Yr       
|2000       |  | 12,454     |  | 13,958        |  | 14,854     |  | 18,854         |  | 27,042      |  | 35,250     
|2001       |  | 15,583     |  | 17,563        |  | 19,708     |  | 23,125         |  | 30,500      |  | 37,958     
|2002       |  | 11,417     |  | 13,288        |  | 15,292     |  | 16,896         |  | 17,750      |  | 23,458     
|2003       |  | 13,267     |  | 14,846        |  | 14,163     |  | 19,146         |  | 26,104      |  | 33,604     
|2004       |  | 15,629     |  | 19,029        |  | 18,813     |  | 29,500         |  | 37,875      |  | 53,875     
|2005       |  | 18,854     |  | 25,271        |  | 21,833     |  | 34,771         |  | 42,292      |  | 60,125     
|2006       |  | 21,417     |  | 26,792        |  | 23,225     |  | 35,150         |  | 42,667      |  | 55,992     
|2007       |  | 22,200     |  | 25,250        |  | 22,292     |  | 33,413         |  | 43,042      |  | 53,333     
|2008       |  | 21,438     |  | 23,092        |  | 19,704     |  | 34,708         |  | 46,917      |  | 74,663     
|2009       |  | 13,675     |  | 14,850        |  | 13,675     |  | 19,663         |  | 27,825      |  | 38,533     
|2010       |  | 11,038     |  | 12,388        |  | 11,738     |  | 18,571         |  | 25,967      |  | 36,083     
|2011       |  | 12,300     |  | 13,633        |  | 10,275     |  | 15,208         |  | 19,700      |  | 24,642     
|2012       |  | 12,013     |  | 13,325        |  | 9,808      |  | 13,588         |  | 17,504      |  | 20,996     
|Jan 2013   |  | 12,500     |  | 13,750        |  | 10,750     |  | 13,500         |  | 16,750      |  | 21,500     

Source: Drewry Maritime Research

Environmental and Other Regulations

Government
laws and regulations significantly affect the ownership and operation of our
vessels. We are subject to various international conventions, laws and
regulations in force in the countries in which our vessels may operate or are
registered. Compliance with such laws, regulations and other requirements
entails significant expense, including vessel modification and implementation
costs.

A
variety of government, quasi-governmental and private organizations subject our
vessels to both scheduled and unscheduled inspections. These organizations
include the local port authorities, national authorities, harbor masters or
equivalent entities, classification societies, relevant flag state (country of
registry) and charterers, particularly terminal operators and oil companies.
Some of these entities require us to obtain permits, licenses, certificates and
approvals for the operation of our vessels. Our failure to maintain necessary
permits, licenses, certificates or approvals could require us to incur
substantial costs or temporarily suspend operation of one or more of the
vessels in our fleet, or lead to the invalidation or reduction of our insurance
coverage.

We
believe that the heightened levels of environmental and quality concerns among
insurance underwriters, regulators and charterers have led to greater
inspection and safety requirements on all vessels and may accelerate the
scrapping of older vessels throughout the industry. Increasing environmental
concerns have created a demand for tankers that conform to stricter
environmental standards. We are required to maintain operating standards for
all of our vessels that emphasize operational safety, quality maintenance,
continuous training of our officers and crews and compliance with applicable
local, national and international environmental laws and regulations. We
believe that the operation of our vessels is in substantial compliance with
applicable environmental laws and regulations and that our vessels have all
material permits, licenses, certificates or other authorizations necessary for
the conduct of our operations; however, because such laws and regulations are
frequently changed and may impose increasingly strict requirements, we cannot
predict the ultimate cost of complying with these requirements, or the impact
of these requirements on the resale value or useful lives of our vessels. In
addition, a future serious marine incident that results in significant oil
pollution or otherwise causes significant adverse environmental impact, such as
the 2010 Deepwater
Horizon oil spill in the Gulf of Mexico, could result in additional
legislation or regulation that could negatively affect our profitability.

International Maritime Organization

The
International Maritime Organization, or the IMO, is the United Nations agency
for maritime safety and the prevention
of pollution by ships. The IMO has adopted several international conventions
that regulate the international shipping industry, including but not limited to
the International Convention on Civil Liability for Oil Pollution Damage of
1969, generally referred to as CLC, the International Convention on Civil
Liability for Bunker Oil Pollution Damage, and the International Convention for
the Prevention of Pollution from Ships of 1973, or the MARPOL Convention. The
MARPOL Convention is broken into six Annexes, each of which establishes
environmental standards relating to different sources of pollution: Annex I
relates to oil leakage or spilling; Annexes II and III relate to harmful
substances carried, in bulk, in liquid or packaged form, respectively; Annexes
IV and V relate to sewage and garbage management, respectively; and Annex VI,
adopted by the IMO in September of 1997, relates to air emissions.

32

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Air
Emissions

In
September of 1997, the IMO adopted Annex VI to MARPOL to address air pollution.
Effective May 2005, Annex VI sets limits on nitrogen oxide emissions from ships
whose diesel engines were constructed (or underwent major conversions) on or
after January 1, 2000. It also prohibits deliberate emissions of ozone
depleting substances, defined to include certain halons and
chlorofluorocarbons. Deliberate emissions are not limited to times when the
ship is at sea; they can for example include discharges occurring in the course
of the ships repair and maintenance. Emissions of volatile organic compounds
from certain tankers, and the shipboard incineration (from incinerators
installed after January 1, 2000) of certain substances (such as polychlorinated
biphenyls (PCBs)) are also prohibited. Annex VI also includes a global cap on
the sulfur content of fuel oil (see below).

The
amended Annex VI seeks to further reduce air pollution by, among other things,
implementing a progressive reduction of the amount of sulfur contained in any
fuel oil used on board ships. As of January 1, 2012, the amended Annex VI
requires that fuel oil contain no more than 3.50% sulfur. By January 1, 2020,
sulfur content must not exceed 0.50%, subject to a feasibility review to be
completed no later than 2018.

Sulfur
content standards are even stricter within certain Emission Control Areas ( or
ECAs). As of July 1, 2010, ships operating within an ECA were not permitted to
use fuel with sulfur content in excess of 1.0% (from 1.50%), which will be
further reduced to 0.10% on January 1, 2015. Amended Annex VI establishes
procedures for designating new ECAs. Currently, the Baltic Sea and the North
Sea have been so designated. On August 1, 2012, certain coastal areas of North
America were designated ECAs as will, the United States Caribbean Sea,
effective January 1, 2014. If other ECAs are approved by the IMO or other new
or more stringent requirements relating to emissions from marine diesel engines
or port operations by vessels are adopted by the EPA or the states where we
operate, compliance with these regulations could entail significant capital
expenditures or otherwise increase the costs of our operations.

As
of January 1, 2013, MARPOL made mandatory certain measures relating to energy
efficiency for new ships. It makes the Energy Efficiency Design Index (EEDI)
apply to all new ships, and the Ship Energy Efficiency Management Plan (SEEMP)
apply to all ships.

Amended
Annex VI also establishes new tiers of stringent nitrogen oxide emissions
standards for new marine engines, depending on their date of installation. The
U.S. Environmental Protection Agency promulgated equivalent (and in some senses
stricter) emissions standards in late 2009. As a result of these
designations or similar future designations, we may be required to incur
additional operating or other costs.

Safety
Management System Requirements

The
IMO also adopted the International Convention for the Safety of Life at Sea, or
SOLAS, and the International Convention on Load Lines, or LL, which impose a
variety of standards that regulate the design and operational features of
ships. The IMO periodically revises the SOLAS and LL standards. The Convention
on Limitation for Maritime Claims (LLMC) was recently amended and the
amendments are expected to go into effect on June 8, 2015. The amendments alter
the limits of liability for a loss of life or personal injury claim and a property
claim against ship owners.

Our
operations are also subject to environmental standards and requirements
contained in the International Safety Management Code for the Safe Operation of
Ships and for Pollution Prevention, or ISM Code, promulgated by the IMO under
Chapter IX of SOLAS. The ISM Code requires the owner of a vessel, or any person
who has taken responsibility for operation of a vessel, to develop an extensive
safety management system that includes, among other things, the adoption of a
safety and environmental protection policy setting forth instructions and
procedures for operating its vessels safely and describing procedures for
responding to emergencies. We rely upon the safety management system that has
been developed for our vessels for compliance with the ISM Code.

33

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The
ISM Code requires that vessel operators also obtain a safety management
certificate for each vessel they operate. This certificate evidences compliance
by a vessels management with code requirements for a safety management system.
No vessel can obtain a certificate unless its manager has been awarded a
document of compliance, issued by each flag state, under the ISM Code. We have
obtained documents of compliance for its offices and safety management
certificates for all of our vessels for which the certificates are required by
the ISM Code. These documents of compliance and safety management certificates
are renewed as required.

Noncompliance
with the ISM Code and other IMO regulations may subject the shipowner or
bareboat charterer to increased liability, may lead to decreases in, or
invalidation of, available insurance coverage for affected vessels and may
result in the denial of access to, or detention in, some ports.

Pollution
Control and Liability Requirements

IMO
has negotiated international conventions that impose liability for pollution in
international waters and the territorial waters of the signatory nations to
such conventions. For example, many countries have ratified and follow the
liability plan adopted by the IMO and set out in the International Convention
on Civil Liability for Oil Pollution Damage of 1969, as amended by different
Protocol in 1976, 1984, and 1992, and amended in 2000, or the CLC. Under the
CLC and depending on whether the country in which the damage results is a party
to the 1992 Protocol to the CLC, a vessels registered owner is strictly liable
for pollution damage caused in the territorial waters of a contracting state by
discharge of persistent oil, subject to certain exceptions. The 1992 Protocol
changed certain limits on liability, expressed using the International Monetary
Fund currency unit of Special Drawing Rights. The limits on liability have
since been amended so that compensation limits on liability were raised. The
right to limit liability is forfeited under the CLC where the spill is caused
by the shipowners actual fault and under the 1992 Protocol where the spill is
caused by the shipowners intentional or reckless act or omission where the
shipowner knew pollution damage would probably result. The CLC requires ships
covered by it to maintain insurance covering the liability of the owner in a
sum equivalent to an owners liability for a single incident. We believe that
our protection and indemnity insurance will cover the liability under the plan
adopted by the IMO.

The
IMO adopted the International Convention on Civil Liability for Bunker Oil
Pollution Damage, or the Bunker Convention, to impose strict liability on
shipowners for pollution damage in jurisdictional waters of ratifying states
caused by discharges of bunker fuel. The Bunker Convention requires registered
owners of ships over 1,000 gross tons to maintain insurance for pollution
damage in an amount equal to the limits of liability under the applicable
national or international limitation regime (but not exceeding the amount
calculated in accordance with the Convention on Limitation of Liability for
Maritime Claims of 1976, as amended). With respect to non-ratifying states,
liability for spills or releases of oil carried as fuel in ships bunkers
typically is determined by the national or other domestic laws in the
jurisdiction where the events or damages occur.

In
addition, the IMO adopted an International Convention for the Control and
Management of Ships Ballast Water and Sediments, or the BWM Convention, in
February 2004. The BWM Conventions implementing regulations call for a phased
introduction of mandatory ballast water exchange requirements to be replaced in
time with mandatory concentration limits. The BWM Convention will not become
effective until 12 months after it has been adopted by 30 states, the combined
merchant fleets of which represent not less than 35% of the gross tonnage of the
worlds merchant shipping. To date, there has not been sufficient adoption of
this standard for it to take force. However, Panama may adopt this standard in
the relatively near future, which would be sufficient for it to take force.
Upon entry into force of the BWM Convention, mid-ocean ballast exchange would
be mandatory. Vessels would be required to be equipped with a ballast water
treatment system that meets mandatory concentration limits not later than the
first intermediate or renewal survey, whichever occurs first, after the
anniversary date of delivery of the vessel in 2014, for vessels with ballast
water capacity of 1500-5000 cubic meters, or after such date in 2016, for
vessels with ballast water capacity of greater than 5000 cubic meters. If mid-ocean
ballast exchange or ballast water treatment requirements become mandatory, the
cost of compliance
could increase for ocean carriers. Although we do not believe that the costs of
compliance with a mandatory mid-ocean ballast exchange would be material, it is
difficult to predict the overall impact of such a requirement on our
operations.

The
IMO continues to review and introduce new regulations. It is impossible to
predict what additional regulations, if any, may be passed by the IMO and what
effect, if any, such regulations might have on our operations.

34

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U.S. Regulations

The
U.S. Oil Pollution Act of 1990, or OPA, established an extensive regulatory and
liability regime for the protection and cleanup of the environment from oil
spills. OPA affects all owners and operators whose vessels trade in the
United States, its territories and possessions or whose vessels operate in U.S.
waters, which includes the U.S. territorial sea and its 200 nautical mile
exclusive economic zone. The United States has also enacted the Comprehensive
Environmental Response, Compensation and Liability Act, or CERCLA, which
applies to the discharge of hazardous substances other than oil, whether on
land or at sea. OPA and CERCLA both define owner and operator in the case of
a vessel as any person owning, operating or chartering by demise, the vessel.
Accordingly, both OPA and CERCLA impact our operations.

Under
OPA, vessel owners and operators are responsible parties and are jointly,
severally and strictly liable (unless the spill results solely from the act or
omission of a third party, an act of God or an act of war) for all containment
and clean-up costs and other damages arising from discharges or threatened
discharges of oil from their vessels. OPA defines these other damages broadly
to include:

| |   |                                                                                                                                                                                                                                  
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | injury
 to, destruction or loss of, or loss of use of, natural resources and related
 assessment costs;                                                                                                                          
| |   |                                                                                                                                                                                                                                  
| |  | injury
 to, or economic losses resulting from, the destruction of real and personal
 property;                                                                                                                                   
| |   |                                                                                                                                                                                                                                  
| |  | net
 loss of taxes, royalties, rents, fees or net profit revenues resulting from
 injury, destruction or loss of real or personal property, or natural
 resources;                                                               
| |   |                                                                                                                                                                                                                                  
| |  | loss
 of subsistence use of natural resources that are injured, destroyed or lost;                                                                                                                                               
| |   |                                                                                                                                                                                                                                  
| |  | lost
 profits or impairment of earning capacity due to injury, destruction or loss
 of real or personal property or natural resources; and                                                                                       
| |   |                                                                                                                                                                                                                                  
| |  | net
 cost of increased or additional public services necessitated by removal
 activities following a discharge of oil, such as protection from fire, safety
 or health hazards, and loss of subsistence use of natural resources.

OPA
contains statutory caps on liability and damages; such caps do not apply to
direct cleanup costs. Effective July 31, 2009, the U.S. Coast Guard adjusted
the limits of OPA liability to the greater of $2,000 per gross ton or $17.088
million for any double-hull tanker that is over 3,000 gross tons (subject to
periodic adjustment for inflation), and our fleet is entirely composed of
vessels of this size class. These limits of liability do not apply if an
incident was proximately caused by the violation of an applicable U.S. federal
safety, construction or operating regulation by a responsible party (or its agent,
employee or a person acting pursuant to a contractual relationship), or a
responsible partys gross negligence or willful misconduct. The limitation on
liability similarly does not apply if the responsible party fails or refuses to
(i) report the incident where the responsibility party knows or has reason to
know of the incident; (ii) reasonably cooperate and assist as requested in
connection with oil removal activities; or (iii) without sufficient cause,
comply with an order issued under the Federal Water Pollution Act (Section 311
(c), (e)) or the Intervention on the High Seas Act.

CERCLA
contains a similar liability regime whereby owners and operators of vessels are
liable for cleanup, removal and remedial costs, as well as damage for injury to,
or destruction or loss of, natural resources, including the reasonable costs
associated with assessing same, and health assessments or health effects
studies. There is no liability if the discharge of a hazardous substance
results solely from the act or omission of a third party, an act of God or an
act of war. Liability under CERCLA is limited to the greater of $300 per gross
ton or $5 million for vessels carrying a hazardous
substance as cargo and the greater of $300 per gross ton or $500,000 for any
other vessel. These limits do not apply (rendering the responsible person
liable for the total cost of response and damages) if the release or threat of
release of a hazardous substance resulted from willful misconduct or
negligence, or the primary cause of the release was a violation of applicable
safety, construction or operating standards or regulations. The limitation on
liability also does not apply if the responsible person fails or refused to
provide all reasonable cooperation and assistance as requested in connection
with response activities where the vessel is subject to OPA.

35

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OPA
and CERCLA both require owners and operators of vessels to establish and
maintain with the U.S. Coast Guard evidence of financial responsibility
sufficient to meet the maximum amount of liability to which the particular
responsible person may be subject. Vessel owners and operators may satisfy
their financial responsibility obligations by providing a proof of insurance, a
surety bond, qualification as a self-insurer or a guarantee. We have provided
such evidence and received certificates of financial responsibility from the
U.S. Coast Guards for each of our vessels as required to have one.

OPA
permits individual states to impose their own liability regimes with regard to
oil pollution incidents occurring within their boundaries, provided they
accept, at a minimum, the levels of liability established under OPA. Some
states have enacted legislation providing for unlimited liability for discharge
of pollutants within their waters, however, in some cases, states which have
enacted this type of legislation have not yet issued implementing regulations
defining tanker owners responsibilities under these laws.

The
2010 Deepwater Horizon oil spill in the Gulf of Mexico may also result in
additional regulatory initiatives or statutes, including the raising of
liability caps under OPA. For example, on August 15, 2012, the U.S. Bureau of
Safety and Environmental Enforcement (BSEE) issued a final drilling safety rule
for offshore oil and gas operations that strengthens the requirements for
safety equipment, well control systems, and blowout prevention practices.
Compliance with any new
requirements of OPA may substantially impact our cost of operations or require
us to incur additional expenses to comply with any new regulatory initiatives
or statutes.

Through
our P&I Club membership, we expect to maintain pollution liability coverage
insurance in the amount of $1 billion per incident for each of our
vessels. If the damages from a catastrophic spill were to exceed our
insurance coverage, it could have a material adverse effect on our business,
financial condition, results of operations and cash flows.

The
U.S. Clean Water Act, or CWA, prohibits the discharge of oil, hazardous
substances and ballast water in U.S. navigable waters unless authorized by a
duly-issued permit or exemption, and imposes strict liability in the form of
penalties for any unauthorized discharges. The CWA also imposes substantial
liability for the costs of removal, remediation and damages and complements the
remedies available under OPA and CERCLA. Furthermore, many U.S. states that
border a navigable waterway have enacted environmental pollution laws that
impose strict liability on a person for removal costs and damages resulting
from a discharge of oil or a release of a hazardous substance. These laws may
be more stringent than U.S. federal law.

The
United States Environmental Protection Agency, or EPA, has enacted rules
requiring a permit regulating ballast water discharges and other discharges
incidental to the normal operation of certain vessels within United States
waters under the Vessel General Permit for Discharges Incidental to the Normal
Operation of Vessels, or VGP. For a new vessel delivered to an owner or
operator after September 19, 2009 to be covered by the VGP, the owner must
submit a Notice of Intent, or NOI, at least 30 days before the vessel operates
in United States waters. The EPA has proposed a draft 2013 VGP to replace the
current VGP upon its expiration on December 19, 2013. The VGP focuses on
authorizing discharges incidental to operations of commercial vessels and the
new VGP is expected to contain numeric ballast water discharge limits for most
vessels to reduce the risk of invasive species in US waters, more stringent
requirements for exhaust gas scrubbers and the use of environmentally
acceptable lubricants.

U.S.
Coast Guard regulations adopted and proposed for adoption under the U.S.
National Invasive Species Act, or NISA, impose mandatory ballast water
management practices for all vessels equipped with ballast water tanks entering
U.S. waters, which could require the installation of equipment on our vessels
to treat ballast water before it is discharged or the implementation of other
port facility disposal arrangements or procedures, and/or otherwise restrict
our vessels from entering U.S. waters. In 2009, the Coast Guard proposed new
ballast water management standards and practices, including limits regarding
ballast water releases. As of June 21, 2012, the U.S. Coast Guard implemented
revised regulations
on ballast water management by establishing standards on the allowable
concentration of living organisms in ballast water discharged from ships into
U.S. waters. The revised ballast water standards are consistent with those
adopted by the IMO in 2004.

36

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Compliance
with the EPA and the U.S. Coast Guard regulations could require the
installation of equipment on our vessels to treat ballast water before it is
discharged or the implementation of other port facility disposal arrangements
or procedures at potentially substantial cost, and/or otherwise restrict our
vessels from entering U.S. waters.

European Union Regulations

In
October 2009, the European Union amended a directive to impose criminal
sanctions for illicit ship-source discharges of polluting substances, including
minor discharges, if committed with intent, recklessly or with serious negligence
and the discharges individually or in the aggregate result in deterioration of
the quality of water. Aiding and abetting the discharge of a polluting
substance may also lead to criminal penalties. Member States were required to
enact laws or regulations to comply with the directive by the end of 2010.
Criminal liability for pollution may result in substantial penalties or fines
and increased civil liability claims.

Greenhouse Gas Regulation

Currently,
the emissions of greenhouse gases from international shipping are not subject
to the Kyoto Protocol to the United Nations Framework Convention on Climate
Change, which entered into force in 2005 and pursuant to which adopting
countries have been required to implement national programs to reduce greenhouse
gas emissions. On January 1, 2013, two new sets of mandatory requirements to
address greenhouse gas emissions from ships which were adopted by MEPC in July
2011, entered into force. Currently operating ships will be required to develop
Ship Energy Efficiency Management Plans, and minimum energy efficiency levels
per capacity mile will apply to new ships. These requirements could cause us to
incur additional compliance costs. The IMO is also planning to implement
market-based mechanisms to reduce greenhouse gas emissions from ships at an
upcoming MEPC session. The European Union has indicated that it intends to
propose an expansion of the existing European Union emissions trading scheme to
include emissions of greenhouse gases from marine vessels, and in January 2012
the European Commission launched a public consultation on possible measures to
reduce greenhouse gas emissions from ships. In the United States, the EPA has
issued a finding that greenhouse gases endanger the public health and safety and
has adopted regulations to limit greenhouse gas emissions from certain mobile
sources and large stationary sources. Although the mobile source emissions
regulations do not apply to greenhouse gas emissions from vessels, such
regulation of vessels is foreseeable, and the EPA has in recent years received
petitions from the California Attorney General and various environmental groups
seeking such regulation. Any passage of climate control legislation or other
regulatory initiatives by the IMO, European Union, the U.S. or other countries
where we operate, or any treaty adopted at the international level to succeed
the Kyoto Protocol, that restrict emissions of greenhouse gases could require
us to make significant financial expenditures which we cannot predict with
certainty at this time.

International Labour Organization

The
International Labour Organization (ILO) is a specialized agency of the UN with
headquarters in Geneva, Switzerland. The ILO has adopted the Maritime Labor
Convention 2006 (MLC 2006). A Maritime Labor Certificate and a Declaration of
Maritime Labor Compliance will be required to ensure compliance with the MLC
2006 for all ships above 500 gross tons in international trade. The MLC 2006
will enter into force one year after 30 countries with a minimum of 33% of the
worlds tonnage have ratified it. On August 20, 2012, the required number of
countries was met and MLC 2006 is expected to come into force on August 20,
2013. MLC 2006 will require us to develop new procedures to ensure full compliance
with its requirements.

Vessel Security Regulations

Since
the terrorist attacks of September 11, 2001, there have been a variety of
initiatives intended to enhance vessel security. On November 25, 2002, the U.S.
Maritime Transportation Security Act of 2002, or the MTSA, came into effect.
To implement certain portions of the MTSA, in July 2003, the U.S. Coast Guard
issued regulations requiring the implementation of certain security
requirements aboard vessels operating in waters subject to the jurisdiction of
the United States. The regulations also impose requirements on certain ports
and facilities, some of which are regulated by the U.S. Environmental
Protection Agency (EPA).

37

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Similarly,
in December 2002, amendments to SOLAS created a new chapter of the convention
dealing specifically with maritime security. The new Chapter V became effective
in July 2004 and imposes various detailed security obligations on vessels and
port authorities, and mandates compliance with the ISPS Code. The ISPS Code is
designed to enhance the security of ports and ships against terrorism.
Amendments to SOLAS Chapter VII, made mandatory in 2004, apply to vessels
transporting dangerous goods and require those vessels be in compliance with
the International Maritime Dangerous Goods Code (IMDG Code).

To
trade internationally, a vessel must attain an International Ship Security
Certificate, or ISSC, from a recognized security organization approved by the
vessels flag state. Among the various requirements are:

| |   |                                                                                                                                                                                                                                                                                                                                                                             
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | on-board
 installation of automatic identification systems to provide a means for the
 automatic transmission of safety-related information from among similarly
 equipped ships and shore stations, including information on a ships
 identity, position, course, speed and navigational status;                                                                          
| |   |                                                                                                                                                                                                                                                                                                                                                                             
| |  | on-board
 installation of ship security alert systems, which do not sound on the vessel
 but only alert the authorities on shore;                                                                                                                                                                                                                                           
| |   |                                                                                                                                                                                                                                                                                                                                                                             
| |  | the
 development of vessel security plans;                                                                                                                                                                                                                                                                                                                                  
| |   |                                                                                                                                                                                                                                                                                                                                                                             
| |  | ship
 identification number to be permanently marked on a vessels hull;                                                                                                                                                                                                                                                                                                    
| |   |                                                                                                                                                                                                                                                                                                                                                                             
| |  | a
 continuous synopsis record kept onboard showing a vessels history, including
 the name of the ship, the state whose flag the ship is entitled to fly, the
 date on which the ship was registered with that state, the ships
 identification number, the port at which the ship is registered and the name
 of the registered owner(s) and their registered address; and
| |   |                                                                                                                                                                                                                                                                                                                                                                             
| |  | compliance
 with flag state security certification requirements.                                                                                                                                                                                                                                                                                                            

Ships
operating without a valid certificate, may be detained at port until it obtains
an ISSC, or it may be expelled from port, or refused entry at port.

The
U.S. Coast Guard regulations, intended to align with international maritime security
standards, exempt from MTSA vessel security measures non-U.S. vessels provided
that such vessels have on board a valid ISSC that attests to the vessels
compliance with SOLAS security requirements and the ISPS Code. We have
implemented the various security measures addressed by MTSA, SOLAS and the ISPS
Code, and our fleet is in compliance with applicable security requirements.

Inspection by classification societies

Every
seagoing vessel must be classed by a classification society. The classification
society certifies that the vessel is in class, signifying that the vessel
has been built and maintained in accordance with the rules of the
classification society and complies with applicable rules and regulations of
the vessels country of registry and the international conventions of which
that country is a member. In addition, where surveys are required by
international conventions and corresponding laws and ordinances of a flag
state, the classification society will undertake them on application or by
official order, acting on behalf of the authorities concerned.

The
classification society also undertakes on request other surveys and checks that
are required by regulations and requirements of the flag state. These surveys
are subject to agreements made in each individual case and/or to the
regulations of the country concerned.

38

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For
maintenance of the class, regular and extraordinary surveys of hull, machinery,
including the electrical plant, and any special equipment classed are required
to be performed as follows:

| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Annual Surveys.For seagoing ships, annual surveys are
 conducted for the hull and the machinery, including the electrical plant, and
 where applicable for special equipment classed, within three months before or
 after each anniversary date of the date of commencement of the class period
 indicated in the certificate.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| |  | Intermediate Surveys.Extended annual surveys are referred to as
 intermediate surveys and typically are conducted two and one-half years after
 commissioning and each class renewal. Intermediate surveys are to be carried
 out at or between the occasion of the second or third annual survey.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| |  | Class Renewal Surveys.Class renewal surveys, also known as
 special surveys, are carried out for the ships hull, machinery, including
 the electrical plant, and for any special equipment classed, at the intervals
 indicated by the character of classification for the hull. At the special
 survey, the vessel is thoroughly examined, including audio-gauging to
 determine the thickness of the steel structures. Should the thickness be
 found to be less than class requirements, the classification society would
 prescribe steel renewals. The classification society may grant a one-year
 grace period for completion of the special survey. Substantial amounts of
 money may have to be spent for steel renewals to pass a special survey if the
 vessel experiences excessive wear and tear. In lieu of the special survey
 every four or five years, depending on whether a grace period was granted, a
 vessel owner has the option of arranging with the classification society for
 the vessels hull or machinery to be on a continuous survey cycle, in which
 every part of the vessel would be surveyed within a five-year cycle.

At
an owners application, the surveys required for class renewal may be split
according to an agreed schedule to extend over the entire period of class. This
process is referred to as continuous class renewal.

All
areas subject to survey as defined by the classification society are required
to be surveyed at least once per class period, unless shorter intervals between
surveys are prescribed elsewhere. The period between two subsequent surveys of
each area must not exceed five years.

Most
vessels are also dry-docked every 30 to 36 months for inspection of the
underwater parts and for repairs related to inspections. If any defects are
found, the classification surveyor will issue a recommendation which must
be rectified by the ship owner within prescribed time limits.

Most
insurance underwriters make it a condition for insurance coverage that a vessel
be certified as in-class by a classification society which is a member of the
International Association of Classification Societies (IACS). The IACS issued
draft harmonized Common Structure Rules that align with IMO goal standards, for
industry review in 2012 and it expects them to be adopted in Winter 2013.
All our vessels are certified as
being in-class by American Bureau of Shipping. All new and secondhand vessels
that we purchase must be certified prior to their delivery under our standard
purchase contracts and memoranda of agreement. If the vessel is not certified
on the scheduled date of closing, we have no obligation to take delivery of the
vessel.

In
addition to the classification inspections, many of our customers regularly
inspect our vessels as a precondition to chartering them for voyages. We
believe that our well-maintained, high-quality vessels provide us with a
competitive advantage in the current environment of increasing regulation and
customer emphasis on quality.

Risk of Loss and Liability Insurance

General

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

39

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Marine and
War Risks Insurance

We
have in force marine and war risks insurance for all of our
vessels. Our marine hull and machinery insurance covers risks
of particular average and actual or constructive total loss from
collision, fire, grounding, engine breakdown and other insured named
perils up to an agreed amount per vessel. Our war risks insurance covers
the risks of particular average and actual or constructive total loss
from confiscation, seizure, capture, vandalism, sabotage, and other war-related named
perils. We have also arranged coverage for increased value for each
vessel. Under this increased value coverage, in the event of total loss of a
vessel, we will be able to recover amounts in excess of those recoverable under
the hull and machinery policy in order to compensate for additional costs
associated with replacement of the loss
of the vessel. Each vessel is covered up to at
least its fair market value at the time of the insurance attachment
and subject to a fixed deductible per each single accident or occurrence,
but excluding actual or constructive total loss.

Protection
and Indemnity Insurance

Protection
and indemnity insurance is provided by mutual protection and indemnity
associations, or P&I Associations, and covers our third party liabilities
in connection with our shipping activities. This includes third-party liability
and other related expenses resulting from injury or death of crew, passengers
and other third parties, loss or damage to cargo, claims arising from
collisions with other vessels, damage to other third-party property, pollution
arising from oil or other substances, and salvage, towing and other related
costs, including wreck removal. Protection and indemnity insurance is a form of
mutual indemnity insurance, extended by mutual protection and indemnity
associations, or clubs. Subject to the capping discussed below, our
coverage, except for pollution, is unlimited.

As
a member of a P&I Club that is a member of the International Group of
P&I Clubs, or the International Group, we carry protection and indemnity
insurance coverage for pollution of $1 billion per vessel per incident.
The P&I Clubs that comprise the International Group insure approximately
90% of the worlds commercial tonnage and have entered into a pooling agreement
to reinsure each associations liabilities. Although the P&I Clubs compete
with each other for business, they have found it beneficial to pool their
larger risks under the auspices of the International Group. This pooling is
regulated by a contractual agreement which defines the risks that are to be
pooled and exactly how these risks are to be shared by the participating
P&I Clubs. We are 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 Clubs comprising the
International Group.

|   |                         
|-- | ------------------------
|C. | Organizational Structure

Please
see Exhibit 8.1 to this annual report for a list of our current subsidiaries.

|   |                              
|-- | -----------------------------
|D. | Property, Plant and Equipment

For a
description of our fleet, see Item 4.A.  History and Development of the
Company and Item 4.B. Business Overview  Our Fleet.

|         |                          
|-------- | -------------------------
|ITEM 4A. | UNRESOLVED STAFF COMMENTS

None.

40

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|        |                                             
|------- | --------------------------------------------
|ITEM 5. | OPERATING AND FINANCIAL REVIEW AND PROSPECTS

|   |                  
|-- | -----------------
|A. | Operating Results

The
following presentation of managements discussion and analysis of results of
operations and financial condition should be read in conjunction with our
consolidated financial statements, accompanying notes thereto and other
financial information appearing in Item 18. Financial Statements. You should
also carefully read the following discussion with the sections of this annual
report entitled Risk Factors, The International Tanker Industry, and
Cautionary Statement Regarding Forward-Looking Statements. Our consolidated
financial statements as of December 31, 2012 and 2011 and for the years ended
December 31, 2012, 2011 and 2010 have been prepared in accordance with
IFRS as issued by the IASB. The consolidated financial statements are presented
in US dollars ($) unless otherwise indicated. Any amounts converted from
another non-U.S. currency to US dollars in this annual report are at the rate
applicable at the relevant date, or the average rate during the applicable
period.

We
anticipate additional opportunities to expand our fleet through acquisitions of
tankers, and we believe that recent downward pressure on tanker values will present
attractive investment opportunities to ship operators that have the necessary
capital resources. We may purchase secondhand vessels that meet our
specifications or newbuilding vessels, either directly from shipyards or from
the current owners with shipyard contracts. The timing of these acquisitions
will depend on our ability to identify suitable vessels on attractive purchase
terms. Since our initial public offering in April 2010, we have expanded our
fleet from three tankers to 14 wholly-owned tankers and 21 time chartered-in
tankers, and we have contracts for the construction of 33 additional
newbuilding vessels.

We
generate revenues by charging customers for the transportation of their refined
oil and other petroleum products using our vessels. Historically, these
services generally have been provided under the following basic types of
contractual relationships:

|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Voyage charters, which are charters for short intervals that are priced on current,
 or spot, market rates.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| | Time charters, which are chartered to customers for a fixed period of time at
 rates that are generally fixed, but may contain a variable component based on
 inflation, interest rates, or current market rates.                                                                                                                                                                                                                                                                                                                                                                                                                       
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| | Commercial Pools, whereby we participate with other shipowners to operate a large
 number of vessels as an integrated transportation system, which offers
 customers greater flexibility and a higher level of service while achieving
 scheduling efficiencies. Pools negotiate charters primarily in the spot market.
 The size and scope of these pools enable them to enhance utilization rates
 for pool vessels by securing backhaul voyages and contracts of affreightment
 (described below), thus generating higher effective time charter equivalent,
 or TCE, revenues than otherwise might be obtainable in the spot market.
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| | For
 all types of vessels in contractual relationships, we are responsible for
 crewing and other vessel operating costs for our owned vessels and the
 charterhire expense for vessels that we time charter-in.                                                                                                                                                                                                                                                                                                                                                                                                                        

The
table below illustrates the primary distinctions among these different
employment arrangements:

|                                                 |  |                        |  |                        |  |                   
|------------------------------------------------ |  | ---------------------- |  | ---------------------- |  | ------------------
|                                                 |  | Voyage Charter         |  | Time Charter           |  | Commercial Pool   
|Typical contract length                          |  | Single
 voyage         |  | One
 year or more      |  | Varies            
|Hire rate basis(1)                               |  | Varies                 |  | Daily                  |  | Varies            
|Voyage expenses(2)                               |  | We
 pay                |  | Customer
 pays         |  | Pool
 pays        
|Vessel operating costs for
 owned vessels(3)     |  | We
 pay                |  | We
 pay                |  | We
 pay           
|Charterhire expense for
 vessels chartered-in(3) |  | We
 pay                |  | We
 pay                |  | We
 pay           
|Off-hire (4)                                     |  | Customer
 does not pay |  | Customer
 does not pay |  | Pool
 does not pay

41

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| |     |                                                                                                                                                                                                                                                  
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (1) | Hire
 raterefers to the
 basic payment from the charterer for the use of the vessel.                                                                                                                                                           
| |     |                                                                                                                                                                                                                                                  
| | (2) | Voyage
 expensesrefers to
 expenses incurred due to a vessels traveling from a loading port to a
 discharging port, such as fuel (bunker) cost, port expenses, agents
 fees, canal dues and extra war risk insurance, as well as commissions.
| |     |                                                                                                                                                                                                                                                  
| | (3) | Defined below under
 Important Financial and Operational Terms and Concepts.                                                                                                                                                                  
| |     |                                                                                                                                                                                                                                                  
| | (4) | Off-hirerefers to the time
 a vessel is not available for service due primarily to scheduled and
 unscheduled repairs or drydockings. For time chartered-in vessels, we do not
 pay the charterhire expense when the vessel is off-hire.       

As
of the date of this annual report, all of our owned and time chartered-in
vessels were operating in the Scorpio Group Pools except STI Sapphire, Gan-Trust
and SN
Federica, which were operating in the spot market.

IMPORTANT FINANCIAL AND OPERATIONAL TERMS AND
CONCEPTS

We
use a variety of financial and operational terms and concepts. These include
the following:

Vessel revenues. Vessel revenues primarily include revenues
from time charters, pool revenues and voyage charters (in the spot market).
Vessel revenues are affected by hire rates and the number of days a vessel
operates. Vessel revenues are also affected by the mix of business between
vessels on time charter, vessels in pools and vessels operating on voyage
charter. Revenues from vessels in pools and on voyage charter are more
volatile, as they are typically tied to prevailing market rates.

Voyage charters. Voyage charters or spot voyages are charters
under which the customer pays a transportation charge for the movement of a
specific cargo between two or more specified ports. We pay all of the voyage
expenses.

Voyage expenses. Voyage expenses primarily include bunkers,
port charges, canal tolls, cargo handling operations and brokerage commissions
paid by us under voyage charters. These expenses are subtracted from voyage
charter revenues to calculate time charter equivalent revenues.

Vessel operating costs. For our owned vessels, we are responsible
for vessel operating costs, which include crewing, repairs and maintenance,
insurance, stores, lube oils, communication expenses, and technical management
fees. The two largest components of our vessel operating costs are crews, and
repairs and maintenance. Expenses for repairs and maintenance tend to fluctuate
from period to period because most repairs and maintenance typically occur
during periodic drydocking. Please read Drydocking below. We expect these
expenses to increase as our fleet matures and to the extent that it expands.

Additionally,
these costs include technical management fees that we paid to SSM, which is
controlled by the Lolli-Ghetti family. Pursuant to our Master Agreement, SSM
provides us with technical services, and we provide them with the ability to
subcontract technical management of our vessels with our approval.

Charterhire. Charterhire is the amount we pay the owner
for time chartered-in vessels. The amount is usually for a fixed period of time
at rates that are generally fixed, but may contain a variable component based
on inflation, interest rates, or current market rates. The vessels owner is
responsible for crewing and other vessel operating costs.

Drydocking. We periodically drydock each of our owned
vessels for inspection, repairs and maintenance and any modifications to comply
with industry certification or governmental requirements. Generally, each
vessel is drydocked every 30 months to 60 months. We capitalize a substantial
portion of the costs incurred during drydocking and amortize those costs on a
straight-line basis from the completion of a drydocking to the estimated completion
of the next drydocking. We immediately expense costs for routine repairs and
maintenance performed during drydocking that do not improve or extend the
useful lives of the assets. The number of drydockings undertaken in a given
period and the nature of the work performed determine the level of drydocking
expenditures.

42

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Depreciation. Depreciation expense typically consists of:

| |   |                                                                                                                                                                         
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | charges related to the
 depreciation of the historical cost of our owned vessels (less an estimated
 residual value) over the estimated useful lives of the vessels; and
| |   |                                                                                                                                                                         
| |  | charges related to the
 amortization of drydocking expenditures over the estimated number of years to
 the next scheduled drydocking.                                   

Time charter equivalent (TCE) revenue or rates. We report time charter equivalent, or TCE
revenues, a non-IFRS measure, because (i) we believe it provides
additional meaningful information in conjunction with voyage revenues and
voyage expenses, the most directly comparable IFRS measure, (ii) it assists
our management in making decisions regarding the deployment and use of our
vessels and in evaluating their financial performance, (iii) it is a
standard shipping industry performance measure used primarily to compare
period-to-period changes in a shipping companys performance irrespective of
changes in the mix of charter types (i.e., spot charters, time charters and
bareboat charters) under which the vessels may be employed between the periods,
and (iv) we believe that it presents useful information to investors. TCE
revenue is vessel revenue less voyage expenses, including bunkers and port
charges. The TCE rate achieved on a given voyage is expressed in US dollars/day
and is generally calculated by taking TCE revenue and dividing that figure by the
number of revenue days in the period. For a reconciliation of TCE revenue,
deduct voyage expenses from revenue on our Statement of Profit or Loss.

Revenue days.Revenue days are the total number of calendar
days our vessels were in our possession during a period, less the total number
of off-hire days during the period associated with major repairs or
drydockings. Consequently, revenue days represent the total number of days
available for the vessel to earn revenue. Idle days, which are days when a
vessel is available to earn revenue, yet is not employed, are included in
revenue days. We use revenue days to show changes in net vessel revenues
between periods.

Average number of vessels. Historical average number of owned
vessels consists of the average number of vessels that were in our possession
during a period. We use average number of vessels primarily to highlight
changes in vessel operating costs and depreciation and amortization.

Contract of affreightment.A contract of affreightment, or COA, relates
to the carriage of specific quantities of cargo with multiple voyages over the
same route and over a specific period of time which usually spans a number of
years. A COA does not designate the specific vessels or voyage schedules that
will transport the cargo, thereby providing both the charterer and shipowner
greater operating flexibility than with voyage charters alone. The charterer
has the flexibility to determine the individual voyage scheduling at a future
date while the shipowner may use different vessels to perform these individual
voyages. As a result, COAs are mostly entered into by large fleet operators,
such as pools or shipowners with large fleets of the same vessel type. We pay
the voyage expenses while the freight rate normally is agreed on a per cargo
ton basis.

Commercial pools.To increase vessel utilization and revenues,
we participate in commercial pools with other shipowners and operators of
similar modern, well-maintained vessels. By operating a large number of vessels
as an integrated transportation system, commercial pools offer customers
greater flexibility and a higher level of service while achieving scheduling
efficiencies. Pools employ experienced commercial charterers and operators who
have close working relationships with customers and brokers, while technical
management is performed by each shipowner. Pools negotiate charters with
customers primarily in the spot market. The size and scope of these pools
enable them to enhance utilization rates for pool vessels by securing backhaul
voyages and COAs, thus generating higher effective TCE revenues than otherwise
might be obtainable in the spot market while providing a higher level of
service offerings to customers.

Operating days. Operating days are the total number of
available days in a period with respect to the owned vessels, before deducting
available days due to off-hire days and days in drydock. Operating days is a
measurement that is only applicable to our owned vessels, not our chartered-in
vessels.

ITEMS YOU SHOULD CONSIDER WHEN EVALUATING OUR
RESULTS

You
should consider the following factors when evaluating our historical financial
performance and assessing our future prospects:

43

---



Our vesselrevenues are affected by cyclicality in the
tanker markets. The
cyclical nature of the tanker industry causes significant increases or
decreases in the revenue we earn from our vessels, particularly those vessels
we trade in the spot market. We employ a chartering strategy to capture upside
opportunities in the spot market while using fixed-rate time charters to reduce
downside risks, depending on SCMs outlook for freight rates, oil tanker market
conditions and global economic conditions. Historically, the tanker industry
has been cyclical, experiencing volatility in profitability due to changes in
the supply of, and demand for, tanker capacity. The supply of tanker capacity
is influenced by the number and size of new vessels built, vessels scrapped,
converted and lost, the number of vessels that are out of service, and
regulations that may effectively cause early obsolescence of tonnage. The
demand for tanker capacity is influenced by, among other factors:

|  |                                                                                                 
|- | ------------------------------------------------------------------------------------------------
| | global
 and regional economic and political conditions;                                         
|  |                                                                                                 
| | increases
 and decreases in production of and demand for crude oil and petroleum
 products;     
|  |                                                                                                 
| | increases
 and decreases in OPEC oil production quotas;                                         
|  |                                                                                                 
| | the
 distance crude oil and petroleum products need to be transported by sea; and               
|  |                                                                                                 
| | developments
 in international trade and changes in seaborne and other transportation
 patterns.

Tanker rates also fluctuate based on seasonal
variations in demand.Tanker markets are typically stronger in the winter months as a result
of increased oil consumption in the northern hemisphere but weaker in the
summer months as a result of lower oil consumption in the northern hemisphere
and refinery maintenance that is typically conducted in the summer months. In
addition, unpredictable weather patterns during the winter months in the
northern hemisphere tend to disrupt vessel routing and scheduling. The oil
price volatility resulting from these factors has historically led to increased
oil trading activities in the winter months. As a result, revenues generated by
our vessels have historically been weaker during the quarters ended
June 30 and September 30, and stronger in the quarters ended
March 31 and December 31.

Our general and administrative expenses were affected
by the fees we pay SCM and SSH for commercial management and administrative
services respectively, and costs incurred from being a public company.SCM and SSH,
companies controlled by the Lolli-Ghetti family of which our founder, Chairman
and Chief Executive Officer is a member, provide commercial and administrative
management services to us, respectively. We pay fees under our Master Agreement
with SCM, which are identical to what SCM charges to its pool participants,
including third-party owned vessels. We reimburse our Administrator for the
reasonable direct or indirect expenses it incurs in providing us with the
administrative services described above. We also pay our Administrator a fee
for arranging vessel purchases and sales for us equal to 1% of the gross
purchase or sale price, payable upon the consummation of any such purchase or
sale. We believe this 1% fee on purchases and sales is customary in the tanker
industry. In addition, we continue to incur general and administrative expenses
related to our being a publicly traded company, including, among other things,
costs associated with reports to shareholders, filings with the U.S. Securities
Exchange Commission, investor relations, New York Stock Exchange fees and tax
compliance expenses.

RESULTS OF OPERATIONS

The following
tables separately present our operating results for the years ended December
31, 2012, 2011 and 2010.

Results of Operations for the Year ended
December 31, 2012 Compared to the Year Ended December 31, 2011

|                                                    |  |                                 |         |        |   |                     |   |   |         |   |  |      |   
|--------------------------------------------------- |  | ------------------------------- | ------- | ------ | - | ------------------- | - | - | ------- | - |  | ---- | --
|                                                    |  | For the year ended December 31, |         | Change |   | Percentage 
 Change |  
|In
thousands of US dollars                          |  | 2012                            |         | 2011   |   |                     |  
|Vessel revenue                                      |  | $                               | 115,381 |        | $ | 82,110              |   | $ | 33,271  |   |  | 41   | % 
|Vessel operating costs                              |  |                                 | (30,353 | )      |   | (31,370             | ) |   | 1,017   |   |  | 3    | % 
|Voyage expenses                                     |  |                                 | (21,744 | )      |   | (6,881              | ) |   | (14,863 | ) |  | (216 | %)
|Charterhire                                         |  |                                 | (43,701 | )      |   | (22,750             | ) |   | (20,951 | ) |  | (92  | %)
|Impairment                                          |  |                                 |        |        |   | (66,611             | ) |   | 66,611  |   |  | 100  | % 
|Depreciation                                        |  |                                 | (14,818 | )      |   | (18,460             | ) |   | 3,642   |   |  | 20   | % 
|Loss from sale of vessels                           |  |                                 | (10,404 | )      |   |                    |   |   | (10,404 | ) |  | N/A  |   
|General and administrative expenses                 |  |                                 | (11,536 | )      |   | (11,637             | ) |   | 101     |   |  | 1    | % 
|Financial expenses                                  |  |                                 | (8,512  | )      |   | (7,060              | ) |   | (1,452  | ) |  | (21  | %)
|Earnings from profit or loss sharing agreements     |  |                                 | 443     |        |   |                    |   |   | 443     |   |  | N/A  |   
|Unrealized loss on derivative financial instruments |  |                                 | (1,231  | )      |   |                    |   |   | (1,231  | ) |  | N/A  |   
|Financial income                                    |  |                                 | 35      |        |   | 51                  |   |   | (16     | ) |  | (31  | %)
|Other expenses, net                                 |  |                                 | (97     | )      |   | (119                | ) |   | 22      |   |  | 18   | % 
|Net loss                                            |  | $                               | (26,537 | )      | $ | (82,727             | ) | $ | 56,190  |   |  | 68   | % 

44

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Net
Loss.Net loss
for the year ended December 31, 2012 was $26.5 million, compared to a net
loss of $82.7 million for the year ended December 31, 2011. The
differences between the two periods are discussed below.

Vessel
revenue. Revenue
for the year ended December 31, 2012 was $115.4 million, an increase of $33.3
million, or 41% from revenue of $82.1 million for the year ended December 31,
2011. The following table summarizes our revenue:

|                           |  |                                 |         |      |   |                     |  |   |        |   |  |      |   
|-------------------------- |  | ------------------------------- | ------- | ---- | - | ------------------- |  | - | ------ | - |  | ---- | --
|                           |  | For the year ended December 31, |         |      |   | Percentage 
 Change | 
|In
thousands of US dollars |  | 2012                            |         | 2011 |   | Change              |  |  
|                           |  |                                 |         |      |   |                     |  |   |       
|Owned vessels              |  |                                 |         |      |   |                     |  |   |        |   |  |      |   
|Time charter revenue       |  |                                 |        |      | $ | 9,626               |  | $ | (9,626 | ) |  | (100 | %)
|Pool revenue               |  |                                 | 38,522  |      |   | 39,522              |  |   | (1,000 | ) |  | (3   | %)
|Voyage revenue             |  |                                 | 26,668  |      |   | 12,287              |  |   | 14,381 |   |  | 117  | % 
|Time chartered-in vessels  |  |                                 |         |      |   |                     |  |   |        |   |  |      |   
|Pool revenue               |  |                                 | 33,740  |      |   | 20,675              |  |   | 13,065 |   |  | 63   | % 
|Voyage revenue             |  |                                 | 16,451  |      |   |                    |  |   | 16,451 |   |  | N/A  |   
|                           |  | $                               | 115,381 |      | $ | 82,110              |  | $ | 33,271 |   |  | 41   | % 

Owned
vessels  Time charter revenue. We did not time charter-out any owned vessels for the year ended
December 31, 2012. For the year ended December 31, 2011, Noemi andSTI Spirit
were employed on time charters for a total of 427 days.

Owned
vessels  Pool revenue. Pool revenue for owned
vessels for the year ended December 31, 2012 was $38.5 million, a decrease of
$1.0 million or 3% from $39.5 million for the year ended December 31, 2011. We
had 2,851 revenue days of owned vessels in the pools during the year ended
December 31, 2012 compared to 3,149 during the year ended December 31, 2011.
This decrease in revenue days was primarily driven by the sales of STI
Conqueror, STI Matador,andSTI Gladiator during March, April and May
2012 resulting in 911 less pool days partially offset by (i) the entrance in
the Scorpio MR Pool by our first five newbuilding vessels during the fourth
quarter of 2012 for a total of 176 additional days, (ii) Noemi, which was on time charter for the
majority of 2011 and operated in the pool during the year ended December 31,
2012 (net increase of 355 days), and (iii) an increase in TCE earnings from our
owned vessels operating in the pools to $13,510 per day for the year ended
December 31, 2012 from $12,550 per day for the year ended December 31, 2011.

45

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Owned
vessels  Voyage revenue. Voyage revenue for owned
vessels for the year ended December 31, 2012 was $26.7 million, an increase of
$14.4 million, or 117% from $12.3 million during the year ended December 31,
2011. The increase was primarily the result of an increase in the number of
days that our vessels operated in the spot market for the year ended December
31, 2012 and 2011 to 1,015 days from 450 days, respectively. Additionally, TCE
earnings from our owned vessels operating in the spot market increased to
$13,220 per day in 2012 from $12,092 per day in 2011. Our first five
newbuilding vessels operated in the spot market immediately after delivery from
the yards for a total of 414 days. Furthermore, STI Conqueror, STI Matador, STI
Gladiator, STI Coral and STI Diamond all operated in the spot
market during 2012 prior to their sales. While STI Coral and STI Diamond
were the only vessels operating in the spot market during 2011.

Time
chartered-in vessels  Pool revenue. Pool revenue for
time chartered-in vessels for the year ended December 31, 2012 was $33.7
million, an increase of $13.1 million, or 63% from $20.7 million during the
year ended December 31, 2011. The increase was primarily the result of an
increase in the number of days that our time chartered-in vessels operated in
the pools for the years ended December 31, 2012 and 2011 to 2,662 days from
1,806 days, respectively. Additionally, TCE earnings from our time chartered-in
vessels operating in the pools increased to $12,656 per day for the year ended
December 31, 2012 from $11,448 per day for the year ended December 31, 2011.

Time
chartered-in vessels  Voyage revenue. Voyage
revenue for our time chartered-in vessels for the year ended December 31, 2012
was $16.5 million. During the year ended December 31, 2012, time chartered-in
vessels operated 698 days in the spot market. There were no time chartered-in
vessels operating in the spot market during the year ended December 31, 2011.

Vessel
operating costs. Vessel operating costs for the
year ended December 31, 2012 were $30.4 million, a decrease of $1.0
million or 3%, from $31.4 million during the year ended December 31, 2011. We
had 3,957 operating days during 2012 compared to 4,121 operating days during
2011. The decrease was primarily the result of the sales ofSTI Conqueror, STI Gladiator andSTI Matador in 2012 which resulted in a
decrease of 789 operating days for these vessels during the year ended December
31, 2012 versus the same period of the prior year. This decrease was partially
offset by an increase of 612 operating days resulting from the delivery of our
first five newbuilding vessels during the third quarter of 2012. Overall
operating costs per day were consistent at $7,605 per day for the year ended
December 31, 2012 compared to $7,581 per day for the year ended December 31,
2011.

Voyage
expenses. Voyage expenses for the year ended
December 31, 2012 were $21.7 million, an increase of $14.9 million, or 216%,
from $6.9 million during the year ended December 31, 2011. The increase was
primarily due to an increase in the number of days vessels operated in the spot
market. There were 1,712 spot voyage days (owned and time chartered-in) during
the year ended December 31, 2012 as compared to 450 days during year ended
December 31, 2011.

Charterhire.
Charterhire expense for the year ended December 31, 2012 was $43.7 million, an
increase of $21.0 million, or 92%, from $22.8 million during the year ended
December 31, 2011. The increase was the result of additional time chartered-in
vessels in 2012 compared with 2011; the average number of chartered-in vessels
increased to 9.18 from 4.95 during the years ended December 31, 2012 and 2011,
respectively.

Impairment.In the year ended December 31, 2011, we recognized
an impairment loss of $66.6 million for our 12 owned vessels. This impairment
loss was triggered by reductions in vessel values, and represented the
difference between the carrying value and recoverable amount, being fair
value less cost to sell. No impairment was recognized in the year ended
December 31, 2012.

Impairment
methodology

The
carrying values of our vessels may not represent their fair market value at any
point in time since the market prices of second-hand vessels fluctuate with
changes in charter rates and the cost of constructing new vessels. At each
reporting period end date, we review the carrying amounts of our vessels to
determine whether there is any indication that those vessels may have suffered
an impairment loss. In this regard, fluctuations in market values below
carrying values are considered to represent an impairment triggering event that
necessitates performance of a full impairment review.

Impairment
losses are calculated as the excess of a vessels carrying amount over its
recoverable amount. Under IFRS, the recoverable amount is the higher of an
assets (i) fair value less costs to sell and (ii) value in use. Fair value
less costs to sell is defined by IFRS as the amount obtainable from the
sale of an asset or cash-generating unit in an arms length transaction between
knowledgeable, willing parties, less the costs of disposal. When we calculate
value in use, we discount the expected future cash flows to be generated by our
vessels to their net present value.

46

---



Our
impairment evaluation is performed on an individual vessel basis when there are
indications of impairments. First, we assess the fair value less the cost to
sell our vessels taking into consideration vessel valuations from leading,
independent and internationally recognized ship brokers. We then compare that
estimate of market values (less an estimate of selling costs) to each vessels
carrying value and, if the carrying value exceeds the vessels market value, an
indicator of impairment exists. The indicator of impairment prompts us to
perform a calculation of the potentially impaired vessels value in use, in
order to appropriately determine the higher of the two values.

In
assessing value in use, the estimated future cash flows are discounted to their
present value using a pre-tax discount rate that reflects current market
assessments of the time value of money and the risks specific to the asset for
which the estimates of future cash flows have not been adjusted. In developing estimates of future
cash flows, we make assumptions about future charter rates, vessel operating
expenses, the estimated remaining useful lives of the vessels and the discount
rate. These assumptions are based on historical trends as well as future
expectations. Although management believes that the assumptions used to
evaluate potential impairment are reasonable and appropriate, such assumptions
are highly subjective. Reasonable changes in the assumptions for the discount
rate or future charter rates could lead to a value in use for some of our
vessels that is equal to or less than the carrying amount for such vessels. All
of the aforementioned assumptions have been highly volatile in both the current
market and historically. Given the current and historical volatility in
market prices for similar vessels and recent downward pressure on charter
rates, the fair value less estimated costs to sell in the current year
reflected potential indicators of impairment for all of our owned vessels.

For the
year ended December 31, 2012, we performed an assessment as described above. At
that date, the carrying amounts of our vessels were greater than the basic,
meaning charter free, market value for all of our owned vessels. In line with
our policy we performed a value in use calculation where we estimated each
vessels future cash flows based on a combination of the latest forecast
time charter rates for the next three years (obtained from a third party service
provider), a growth rate of 3.0% in freight rates for each period thereafter,
and our best estimate of vessel operating expenses and drydock costs, which
also assume a growth rate of 3.0% in each succeeding year. These cash
flows were then discounted to their present value, using a discount rate of
7.9%, based on our current borrowing rates adjusted for certain credit risks. The value in use calculations were
greater than the fair value less estimated costs to sell in all instances. As a
result of this testing, no impairment charge was recorded.

For the
year ended December 31, 2011, the value in use calculations for all vessels
were less than both the fair value less estimated costs to sell and carrying
amounts of the vessels. As a result of this testing, we recorded an impairment
loss of $66.6 million to adjust the carrying amounts of our vessels to reflect
fair value less estimated costs to sell.

Illustrative
comparison of excess of carrying amounts over estimated charter-free market
value of certain vessels

During the
past few years, the market values of vessels have experienced particular
volatility, with substantial declines in many vessel classes. As a result, the
charter-free market value, or basic market value, of certain of our vessels may
have declined below the carrying amounts of those vessels. After undergoing the
impairment analysis using value in use to determine the recoverable amount as
discussed above, we have concluded that at December 31, 2012, the value in use
for our vessels was higher than their carrying values and consequently, no
impairment is required.

The table
set forth below indicates the carrying amount of each of our vessels as of
December 31, 2012 and December 31, 2011 and the aggregate difference between
the carrying amount and the market value represented by such vessels (see
footnote 1 to the table set forth below). This aggregate difference represents
the approximate analysis of the amount by which we believe we would record a loss
if we sold those vessels, in the current environment, on industry standard
terms, in cash transactions and to a willing buyer where we are not under any
compulsion to sell, and where the buyer is not under any compulsion to buy. For
purposes of this calculation, we have assumed that the vessels would be sold at
a price that reflects our estimate of their basic market values. However, we
are not holding our vessels for sale.

47

---



Our
estimate of basic market value assumes that our vessels are all in good and
seaworthy condition without need for repair and if inspected would be certified
in class without notations of any kind. Our estimates are based on information
available from various industry sources, including:

| |   |                                                                                                                                                                                                                      
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | reports by industry analysts and data providers that focus on our
 industry and related dynamics affecting vessel values;                                                                                            
| |   |                                                                                                                                                                                                                      
| |  | news and industry reports of similar vessel sales;                                                                                                                                                                   
| |   |                                                                                                                                                                                                                      
| |  | news and industry reports of sales of vessels that are not similar to
 our vessels where we have made certain adjustments in an attempt to derive
 information that can be used as part of our estimates;            
| |   |                                                                                                                                                                                                                      
| |  | approximate market values for our vessels or similar vessels that we
 have received from shipbrokers, whether solicited or unsolicited, or that
 shipbrokers have generally disseminated;                            
| |   |                                                                                                                                                                                                                      
| |  | offers that we may have received from potential purchasers of our
 vessels; and                                                                                                                                      
| |   |                                                                                                                                                                                                                      
| |  | vessel sale prices and values of which we are aware through both
 formal and informal communications with shipowners, shipbrokers, industry
 analysts and various other shipping industry participants and observers.

As we obtain information from various industry and other sources, our
estimates of basic market value are inherently uncertain. In addition, vessel
values and revenues are highly volatile; as such, our estimates may not be
indicative of the current or future basic market value of our vessels or prices
that we could achieve if we were to sell them.

|   |  |                           |  |            |      |                       |   |                       |     |   |       |    
|-- |  | ------------------------- |  | ---------- | ---- | --------------------- | - | --------------------- | --- | - | ----- | ---
|   |  | In
millions of US dollars |  |            |      | Carrying value as at, |  
|   |  | Vessel Name               |  | Year Built |      | December 31, 2012 (1) |   | December 31, 2011 (2) |    
|1  |  | STI
 Highlander           |  |            | 2007 |                       | $ | 23.1                  |     | $ | 24.4  |    
|2  |  | STI
 Gladiator            |  |            | 2003 |                       |   | N/A                   | (3) |   | 17.8  |    
|3  |  | STI Matador               |  |            | 2003 |                       |   | N/A                   | (3) |   | 18.3  |    
|4  |  | STI
 Conqueror            |  |            | 2005 |                       |   | N/A                   | (3) |   | 20.5  |    
|5  |  | STI Coral                 |  |            | 2008 |                       |   | N/A                   | (3) |   | 28.3  |    
|6  |  | STI Diamond               |  |            | 2008 |                       |   | N/A                   | (3) |   | 28.3  |    
|7  |  | Noemi                     |  |            | 2004 |                       |   | 27.0                  |     |   | 28.4  |    
|8  |  | Senatore                  |  |            | 2004 |                       |   | 27.1                  |     |   | 28.4  |    
|9  |  | STI Harmony               |  |            | 2007 |                       |   | 33.6                  |     |   | 35.3  |    
|10 |  | STI Heritage              |  |            | 2008 |                       |   | 35.9                  |     |   | 35.9  |    
|11 |  | Venice                    |  |            | 2001 |                       |   | 17.7                  |     |   | 19.7  |    
|12 |  | STI Spirit                |  |            | 2008 |                       |   | 37.4                  |     |   | 37.7  |    
|13 |  | STI Amber                 |  |            | 2012 |                       |   | 38.6                  |     |   | N/A   | (4)
|14 |  | STI Topaz                 |  |            | 2012 |                       |   | 38.7                  |     |   | N/A   | (4)
|15 |  | STI Ruby                  |  |            | 2012 |                       |   | 38.7                  |     |   | N/A   | (4)
|16 |  | STI Garnet                |  |            | 2012 |                       |   | 38.8                  |     |   | N/A   | (4)
|17 |  | STI Onyx                  |  |            | 2012 |                       |   | 38.8                  |     |   | N/A   | (4)
|   |  |                           |  |            |      |                       |   |                       |     |   |       |    
|   |  | Total                     |  |            |      |                       | $ | 395.4                 |     | $ | 322.5 |    

48

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|    |                                                                                                                                                                                                                                                                   
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | As of December 31, 2012,
 the basic charter-free market value is lower than each vessels carrying
 value. We believe that the aggregate carrying value of these vessels exceeds
 their aggregate basic charter-free market value by approximately $64.2
 million.
|    |                                                                                                                                                                                                                                                                   
|(2) | Given that each of our
 vessels was impaired at December 31, 2011 based on fair value less costs to
 sell, the carrying amounts noted above are representative of fair value less
 estimated costs to sell as of December 31, 2011.                               
|    |                                                                                                                                                                                                                                                                   
|(3) | These vessels were sold
 during the year ended December 31, 2012.                                                                                                                                                                                                 
|    |                                                                                                                                                                                                                                                                   
|(4) | These vessels were acquired
 during the year ended December 31, 2012.                                                                                                                                                                                             

The
impairment test that we conduct is most sensitive to variances in the discount
rate and future time charter rates. Based on the sensitivity analysis performed
for December 31, 2012, a 1.0% increase in the discount rate would result in an
aggregate impairment of $6.4 million. Alternatively, a 5% decrease in forecasted
time charter rates would result in an aggregate impairment of $8.0 million.

We refer you to the
discussion herein under Item 3.D. “Risk Factors — Risks Related to our Industry,” including the risk factor
entitled “Adverse market conditions could cause us to breach covenants in our credit facilities and adversely affect
our operating results.”

Depreciation.
Depreciation expense for the year ended December 31, 2012 was $14.8 million, a
decrease of $3.6 million or 20%, from $18.5 million during the year ended
December 31, 2011. The decrease was a result of (i) a $66.6 million
impairment charge recorded at December 31, 2011 which decreased the
depreciable basis of our vessels and (ii) a decrease in the number of
owned vessels to 10.81 from 11.29 which was driven by the sales ofSTI Conqueror in March 2012, STI Matador in April 2012,STI Gladiator in May 2012, STI Diamond in August 2012 andSTI Coral in September 2012, partially
offset by the delivery of our first five newbuilding vessels between July 2012
and September 2012.

Loss
from sale of vessels. Loss from sale of vessels
for the year ended December 31, 2012 was $10.4 million. This loss is related to
the sales ofSTI Conqueror, STI Matador, STI
Gladiator, STI Coral, andSTI
Diamond during the year ended December 31, 2012 and includes $0.2
million in relating to a loss on the interest rate swaps used to hedge
the interest payments on the borrowings on these vessels.

General
and administrative expenses. General and
administrative expenses for the year ended December 31, 2012 were $11.5
million, a decrease of $0.1 million, or 1%, from the year ended December 31,
2011. These costs remained relatively stable as there were no significant
changes in our overhead structure on a period over period basis.

Financial
expenses. Financial expenses for the year ended
December 31, 2012 were $8.5 million, an increase of $1.5 million, or 21%, from
$7.1 million during the year ended December 31, 2011. The increase for the year
ended December 31, 2012 was primarily driven by a $3.0 million write-off of
deferred financing fees relating to our 2011 Credit Facility offset by a
decrease in interest expense of $1.7 million which was driven by an increase in
capitalized interest expense of $2.6 million for the year ended December 31,
2012 related to our vessels under construction.

Financial
expenses for the year ended December 31, 2012 consisted of interest expense of
$3.3 million, commitment fees of $1.0 million on the undrawn portions of the
2010 Revolving Credit Facility and 2011 Credit Facility, deferred financing fee
amortization of $1.1 million, write-off of deferred financing fees of $3.0
million and other costs of $0.1 million.

Financial
expenses for the year ended December 31, 2011 consisted of interest expense of
$5.0 million, commitment fees of $1.1 million on the undrawn portion of the
2010 Revolving Credit Facility and 2011 Credit Facility and deferred financing
fee amortization of $1.0 million.

Earnings
from profit or loss sharing agreements. Earnings
from profit or loss sharing agreements consist of realized earnings from profit
and loss sharing agreements with third parties relating to a time chartered-in
vessel. There were no similar agreements for the comparative period.

Unrealized
loss on derivative financial instruments.Unrealized loss on
derivative financial instruments consists of (i) the impact of the
reclassification of $1.0 million from other comprehensive income to the
statement of profit or loss relating to the de-designation of the hedge
relationship on our interest rate swaps relating to the 2010 Revolving Credit
Facility (See Note 12 to the consolidated financial statements) and (ii) the
change in the fair value of profit and loss sharing agreements on time
chartered-in vessels with third parties of $0.2 million.

49

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The following is a
discussion of our operating results by operating segment:

Aframax/LR2 segment

The
following table summarizes vessel operations for our Aframax/LR2 segment.

|                                                         |  |                                  |        |      |   |         |            |        |         |   |  |      |   
|-------------------------------------------------------- |  | -------------------------------- | ------ | ---- | - | ------- | ---------- | ------ | ------- | - |  | ---- | --
|Aframax/LR2
segment                                      |  | For the year ended
 December 31, |        |      |   |         | Percentage |       
|In
thousands of US dollars except per day and fleet data |  | 2012                             |        | 2011 |   | Change  |            | Change |        
|Vessel revenue                                           |  | $                                | 4,541  |      | $ | 6,484   |            | $      | (1,943  | ) |  | (30  | %)
|Vessel operating costs                                   |  |                                  | (3,304 | )    |   | (2,547  | )          |        | (757    | ) |  | (30  | %)
|Voyage expenses                                          |  |                                  | (25    | )    |   |        |            |        | (25     | ) |  | N/A  |   
|Charterhire                                              |  |                                  | (1,287 | )    |   | (839    | )          |        | (448    | ) |  | (53  | %)
|Impairment                                               |  |                                  |       |      |   | (12,459 | )          |        | 12,459  |   |  | 100  | % 
|Depreciation                                             |  |                                  | (1,735 | )    |   | (2,074  | )          |        | 339     |   |  | 16   | % 
|General and administrative
 expenses                     |  |                                  | (100   | )    |   | (136    | )          |        | 36      |   |  | 26   | % 
|Financial expenses                                       |  |                                  | (1,086 | )    |   | (841    | )          |        | (245    | ) |  | (29  | %)
|Other expenses, net                                      |  |                                  | (11    | )    |   | (134    | )          |        | 123     |   |  | 92   | % 
|Segment loss                                             |  | $                                | (3,007 | )    | $ | (12,546 | )          | $      | 9,539   |   |  | 76   | % 
|                                                         |  |                                  |        |      |   |         |            |        |         |   |  |      |   
|Time charter revenue per
 day                            |  | $                                |       |      | $ | 15,457  |            | $      | (15,457 | ) |  | (100 | %)
|Pool revenue per day                                     |  |                                  | 10,201 |      |   | 14,849  |            |        | (4,648  | ) |  | (31  | %)
|Operating costs per day                                  |  |                                  | 8,436  |      |   | 6,960   |            |        | (1,476  | ) |  | (21  | %)
|                                                         |  |                                  |        |      |   |         |            |        |         |   |  |      |   
|Time charter revenue days                                |  |                                  |       |      |   | 72      |            |        | (72     | ) |  | (100 | %)
|Pool revenue days                                        |  |                                  | 443    |      |   | 361     |            |        | 82      |   |  | 23   | % 
|Operating days                                           |  |                                  | 366    |      |   | 365     |            |        | 1       |   |  | 0    | % 
|                                                         |  |                                  |        |      |   |         |            |        |         |   |  |      |   
|Average number of owned
 vessels                         |  |                                  | 1.00   |      |   | 1.00    |            |        |        |   |  | 0    | % 
|Average number of time
 chartered-in vessels             |  |                                  | 0.29   |      |   | 0.19    |            |        | 0.10    |   |  | 53   | % 

Vessel
Revenue. Vessel revenue for the year ended
December 31, 2012 was $4.5 million, a decrease of $1.9 million or 30% from the
year ended December 31, 2011. There were two vessels operating in this segment
during both periods, STI Spirit and Khawr Aladid. The decrease
in revenue is due to a decrease in pool revenue per day to $10,201 per day from
$14,849 per day. This was primarily driven by STI
Spirit, which in June 2012 needed repairs and a subsequent
positioning voyage which negatively affected the vessels earnings.

Vessel
operating costs. Vessel operating costs for the
year ended December 31, 2012 were $3.3 million, an increase of $0.8 million, or
30%, from the year ended December 31, 2011. On a daily basis, vessel operating
costs for the year ended December 31, 2012 increased $1,476 per day, or 21%
from the year ended December 31, 2011. This was a result of unplanned repairs
onSTI Spirit during the year
ended December 31, 2012.

Charterhire.
Charterhire expense for the year ended December 31, 2012 was $1.3 million, an
increase of $0.5 million, or 53%, from the year ended December 31, 2011. This
increase was driven by the time chartered-in vessel,Khawr Aladid, which was delivered on October 24, 2011,
on a six month arrangement that expired in April 2012.

Depreciation.
Depreciation expense for the year ended December 31, 2012 was $1.7 million, a
decrease of $0.3 million, or 16%, from the year ended December 31, 2011. This
was a result of an impairment charge that was recorded in December 2011 which
reduced the depreciable basis ofSTI Spiritin 2012.

Financial
expense. Financial expense for the year ended
December 31, 2012 was $1.1 million, an increase of $0.2 million or 29% from the
year ended December 31, 2011. Financial expense for the Aframax/LR1 segment
represents interest for the STI Spirit Credit Facility, which was signed and
drawn in March 2011; therefore, the year ended December 31,
2012 represents a full year of interest expense as opposed to approximately
nine months of interest expense during year ended December 31, 2011.

50

---



Other
expenses, net. Other expenses, net for the year
ended December 31, 2012 decreased $0.1 million or 92% from the year ended
December 31, 2011. This decrease was driven by the write-off of the fair value
of vessel purchase options that were acquired withSTI Spirit in September 2011.

Panamax/LR1 segment

The
following table summarizes vessel operations for our Panamax/LR1 segment.

|                                                         |  |                                  |         |      |   |            |   |        |         |   |  |       |   
|-------------------------------------------------------- |  | -------------------------------- | ------- | ---- | - | ---------- | - | ------ | ------- | - |  | ----- | --
|Panamax/LR1
segment                                      |  | For the year ended
 December 31, |         |      |   | Percentage |  
|In
thousands of US dollars except per day and fleet data |  | 2012                             |         | 2011 |   | Change     |   | Change |        
|Vessel revenue                                           |  | $                                | 28,602  |      | $ | 31,101     |   | $      | (2,499  | ) |  | (8    | %)
|Vessel operating costs                                   |  |                                  | (14,137 | )    |   | (14,428    | ) |        | 291     |   |  | 2     | % 
|Voyage expenses                                          |  |                                  | (999    | )    |   | (13        | ) |        | (986    | ) |  | (7585 | %)
|Charterhire                                              |  |                                  | (1,629  | )    |   | (4,554     | ) |        | 2,925   |   |  | 64    | % 
|Impairment                                               |  |                                  |        |      |   | (28,616    | ) |        | 28,616  |   |  | 100   | % 
|Depreciation                                             |  |                                  | (7,352  | )    |   | (9,279     | ) |        | 1,927   |   |  | 21    | % 
|General and administrative
 expenses                     |  |                                  | (495    | )    |   | (692       | ) |        | 197     |   |  | 28    | % 
|Earnings from profit or
 loss sharing agreements         |  |                                  | 443     |      |   |           |   |        | 443     |   |  | N/A   |   
|Unrealized loss on
 derivative financial instruments     |  |                                  | (184    | )    |   |           |   |        | (184    | ) |  | N/A   |   
|Other expenses, net                                      |  |                                  |        |      |   | 23         |   |        | (23     | ) |  | 100   | % 
|Segment profit / (loss)                                  |  | $                                | 4,249   |      | $ | (26,458    | ) | $      | 30,707  |   |  | 116   | % 
|                                                         |  |                                  |         |      |   |            |   |        |         |   |  |       |   
|Time charter revenue per
 day                            |  | $                                |        |      | $ | 23,962     |   | $      | (23,962 | ) |  | (100  | %)
|Pool revenue per day                                     |  |                                  | 14,242  |      |   | 12,876     |   |        | 1,366   |   |  | 11    | % 
|Voyage revenue per day                                   |  |                                  | 15,147  |      |   |           |   |        | 15,147  |   |  | N/A   |   
|Operating costs per day                                  |  |                                  | 7,714   |      |   | 7,891      |   |        | 177     |   |  | 2     | % 
|                                                         |  |                                  |         |      |   |            |   |        |         |   |  |       |   
|Time charter revenue days                                |  |                                  |        |      |   | 355        |   |        | (355    | ) |  | (100  | %)
|Pool revenue days                                        |  |                                  | 1,888   |      |   | 1,754      |   |        | 134     |   |  | 8     | % 
|Voyage revenue days                                      |  |                                  | 48      |      |   |           |   |        | 48      |   |  | N/A   |   
|Operating days                                           |  |                                  | 1,830   |      |   | 1,825      |   |        | (5      | ) |  | 0     | % 
|                                                         |  |                                  |         |      |   |            |   |        |         |   |  |       |   
|Average number of owned
 vessels                         |  |                                  | 5.00    |      |   | 5.00       |   |        |        |   |  | 0     | % 
|Average number of time
 chartered-in vessels             |  |                                  | 0.35    |      |   | 0.91       |   |        | (0.56   | ) |  | (62   | %)

Vessel
Revenue. Vessel revenue for the year ended
December 31, 2012 was $28.6 million, a decrease of $2.5 million or 8% from the
year ended December 31, 2011. The decrease in revenue was the result of (i) a
decrease in the number of revenue days to 1,936 for the year ended December 31,
2012 compared to 2,109 days during the year ended December 31, 2011 and (ii) a
decrease in overall revenue per day to $14,264 for the year ended December 31,
2012 from $14,743 for the year ended December 31, 2011. This was driven by a
reduction in the average number of time chartered-in vessels to 0.35 from 0.91
for the years ended December 31, 2012 and 2011, respectively. This reduction is
due to the redelivery of the time chartered-in vessel,BW Zambesi in November 2011 following its
10 month time charter-in agreement offset partially by the delivery of the time
chartered-in vessels, FPMC P Eagleand
Hellespont
Promise in September and December 2012, respectively.

Noemi
was time chartered-out during the year ended December 31, 2011 at a rate of
$24,500 per day and was redelivered in December 2011. The effect of the
decrease on overall pool revenue resulting from the expiration of this charter was
offset by an increase of pool revenue per day to $14,242 per day during the
year ended December 31, 2012 from $12,876 per day during the year ended
December 31, 2011.

51

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Vessel
operating costs. Vessel operating costs for the
year ended December 31, 2012 were $14.1 million, a decrease of $0.3 million, or
2%, from the year ended December 31, 2011. Vessel operating costs per day for
the year ended December 31, 2012 decreased $177 per day, or 2% from the year
December 31, 2011. These costs remained relatively stable as there were no
changes in our owned Panamax/LR1 fleet on a period over period basis.

Voyage expenses.
Voyage expenses for the year ended December 31, 2012 were $1.0 million, an
increase of $1.0 million from the year ended December 31, 2011. This increase
was the result of time chartered-in vessel,FPMC P Eagle, which operated in the spot market for 48 days during
the year ended December 31, 2012. No vessels operated in the spot market for
the year ended December 31, 2011.

Charterhire.
Charterhire expense for the year ended December 31, 2012 was $1.6 million, a
decrease of $2.9 million or 64% from the year ended December 31, 2011. This
decrease was the result of the redelivery of time chartered-in vessel,BW Zambesi in November 2011 from its 10
month time charter-in agreement. This was partially offset by the delivery of
the time chartered-in vessels,FPMC P Eagleand
Hellespont
Promise in September and December 2012, respectively.

Depreciation.
Depreciation expense for the year ended December 31, 2012 was $7.4 million, a
decrease of $1.9 million, or 21%, from the year ended December 31, 2011. This
was a result of an impairment charge recorded in December 2011, which reduced
the depreciable basis of all owned vessels in the Panamax / LR1 Segment.

General
and administrative expenses. General and
administrative expenses for the year ended December 31, 2012 were $0.5 million,
a decrease of $0.2 million or 28%, from the year ended December 31, 2011.
General and administrative expenses for the Panamax / LR1 segment primarily
consist of administrative fees.

Earnings
from profit or loss sharing agreementsEarnings
from profit or loss sharing agreements consist of realized earnings from profit
and loss sharing agreements with third parties relating to time chartered-in
vessels. We had two such agreements in place during the year ended December 31,
2012, one with our time chartered-in vessel, FPMC
P Eagle and the other relating to a vessel for which the Company
neither owns nor time charters-in (i.e. the vessel is chartered-in by an
unrelated third party.) There were no similar agreements for the comparative
period.

Unrealized
loss on derivative financial instruments. Unrealized loss on
derivative financial instruments consists of a $0.2 million change in
the fair value of our profit and loss sharing agreements with third parties.
For a description of these agreements, please see Item 5.B. Liquidity and
Capital Resources  Profit or loss sharing agreements. There were no similar
agreements for the comparative period.

MR segment

The
following table summarizes vessel operations for our MR segment.

|                                                         |  |                                  |         |      |   |            |   |        |         |   |  |      |   
|-------------------------------------------------------- |  | -------------------------------- | ------- | ---- | - | ---------- | - | ------ | ------- | - |  | ---- | --
|MR
segment                                               |  | For the year ended
 December 31, |         |      |   | Percentage |  
|In
thousands of US dollars except per day and fleet data |  | 2012                             |         | 2011 |   | Change     |   | Change |        
|Vessel revenue                                           |  | $                                | 46,857  |      | $ | 12,287     |   | $      | 34,570  |   |  | 281  | % 
|Vessel operating costs                                   |  |                                  | (7,484  | )    |   | (3,178     | ) |        | (4,306  | ) |  | (135 | %)
|Voyage expenses                                          |  |                                  | (17,979 | )    |   | (6,842     | ) |        | (11,137 | ) |  | (163 | %)
|Charterhire                                              |  |                                  | (17,593 | )    |   |           |   |        | (17,593 | ) |  | N/A  |   
|Impairment                                               |  |                                  |        |      |   | (12,573    | ) |        | 12,573  |   |  | 100  | % 
|Depreciation                                             |  |                                  | (4,015  | )    |   | (2,038     | ) |        | (1,977  | ) |  | (97  | %)
|Loss from sale of vessels                                |  |                                  | (5,879  | )    |   |           |   |        | (5,879  | ) |  | N/A  |   
|General and administrative
 expenses                     |  |                                  | (398    | )    |   | (314       | ) |        | (84     | ) |  | (27  | %)
|Financial income                                         |  |                                  | 6       |      |   |           |   |        | 6       |   |  | N/A  |   
|Other expenses, net                                      |  |                                  | (51     | )    |   |           |   |        | (51     | ) |  | N/A  |   
|Segment loss                                             |  | $                                | (6,536  | )    | $ | (12,658    | ) | $      | 6,122   |   |  | 48   | % 
|                                                         |  |                                  |         |      |   |            |   |        |         |   |  |      |   
|Pool revenue per day                                     |  | $                                | 11,811  |      | $ |           |   | $      | 11,811  |   |  | N/A  |   
|Voyage revenue per day                                   |  |                                  | 12,541  |      |   | 12,092     |   |        | 449     |   |  | 4    | % 
|Operating costs per day                                  |  |                                  | 6,770   |      |   | 6,748      |   |        | (22     | ) |  | 0    | % 
|                                                         |  |                                  |         |      |   |            |   |        |         |   |  |      |   
|Pool revenue days                                        |  |                                  | 809     |      |   |           |   |        | 809     |   |  | N/A  |   
|Voyage revenue days                                      |  |                                  | 1,541   |      |   | 450        |   |        | 1,091   |   |  | 242  | % 
|Operating days                                           |  |                                  | 1,089   |      |   | 471        |   |        | 618     |   |  | 131  | % 
|                                                         |  |                                  |         |      |   |            |   |        |         |   |  |      |   
|Average number of owned
 vessels                         |  |                                  | 2.97    |      |   | 1.29       |   |        | 1.68    |   |  | 130  | % 
|Average number of time
 chartered-in vessels             |  |                                  | 3.51    |      |   |           |   |        | 3.51    |   |  | N/A  |   

52

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Vessel
Revenue. Vessel revenue for the year ended
December 31, 2012 was $46.9 million, an increase of $34.6 million or 281% from
the year ended December 31, 2011. Vessel revenue less voyage expenses, or TCE
revenue, was $28.9 million, an increase of $23.4 million, or 430% from $5.4
million for the year ended December 31, 2011. The change in revenue was the
result of an increase in revenue days to 2,350 for the year ended December 31,
2012 from 450 during the year ended December 31, 2011. During the year ended
December 31, 2011, only STI Diamond and STI Coral were operating in
this segment as these vessels were acquired in May 2011. Revenue days increased
during the year ended December 31, 2012 as a result of the delivery of the
first five Newbuilding vessels in the third quarter of 2012 (STI Amber, STI Topaz, STI Ruby, STI Garnet,
andSTI Onyx) and the delivery of
six time chartered-in vessels (Pacific
Duchess, Freja Lupus, STX Ace 6,Targale, Endeavour, andValle
Bianca). The increase in revenue was also driven by an increase in
voyage revenue per day to $12,541 during the year ended December 31, 2012 from
$12,092 during the year ended December 31, 2011.

Vessel
operating costs. Vessel operating costs for the
year ended December 31, 2012 were $7.5 million, an increase of $4.3 million, or
135%, from the year ended December 31, 2011. The increase was driven by an
increase in the number of operating days to 1,089 from 471 days during the year
ended December 31, 2012. This increase was the result of the delivery of our
first five newbuilding vessels during the third quarter of 2012.

Voyage
expenses. Voyage expenses for the year ended
December 31, 2012 were $18.0 million, an increase of $11.1 million or 163% from
the year ended December 31, 2011. The increase was primarily driven bySTI Coral, STI Diamond, Pacific Duchess, Freja
Lupus, STX Ace 6,Targale,
Endeavour, Valle Bianca and the first five newbuilding vessels
operating in the spot market for a total of 1,541 days during the year ended
December 31, 2012 compared to onlySTI Coral
andSTI Diamond operating in the
spot market for 450 days during the year ended December 31, 2011.

Charterhire.
Charterhire expense for the year ended December 31, 2012 was $17.6 million,
which was the result of time chartering-inPacific Duchess, Freja Lupus, STX Ace 6, Targale, Endeavour andValle Bianca during the year ended December 31, 2012. There were no vessels chartered-in during the year
ended December 31, 2011.

Depreciation.
Depreciation expense for the year ended December 31, 2012 was $4.0 million, an
increase of $2.0 million, or 97%, from the year ended December 31, 2011. The
increase was driven by an increase in the average number of owned MR vessels to
2.97 for the year ended December 31, 2012 from 1.29 for the year ended December
31, 2011, which was the result of the delivery of the first five newbuilding
vessels during the third quarter of 2012. The increase was partially offset by
a decrease of depreciation expense which was driven by an impairment charge
recorded in December 2011 that reduced the depreciable basis ofSTI Diamond andSTI Coral.

Loss
from sale of vessels. Loss from sale of vessels
for the year ended December 31, 2012 was $5.9 million. This was a result of the
sales ofSTI Diamond andSTI Coral for $25.25 million each in
August and September 2012, respectively.

53

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General
and administrative expenses. General and
administrative expenses for the year ended December 31, 2012 were $0.4 million,
an increase of $0.1 million, or 27%, from the year ended December 31, 2011.
General and administrative expenses for the MR segment primarily consist of
administrative fees. The increase was the result of an increase in the average
number of owned vessels to 2.97 during the year ended December 31, 2012 from
1.29 during the year ended December 31, 2011.

Handymax segment

The
following table summarizes vessel operations for our Handymax segment:

|                                                         |  |                                  |         |      |   |            |   |        |        |   |  |        |   
|-------------------------------------------------------- |  | -------------------------------- | ------- | ---- | - | ---------- | - | ------ | ------ | - |  | ------ | --
|Handymax
segment                                         |  | For the year ended
 December 31, |         |      |   | Percentage |  
|In
thousands of US dollars except per day and fleet data |  | 2012                             |         | 2011 |   | Change     |   | Change |       
|Vessel revenue                                           |  | $                                | 35,381  |      | $ | 32,238     |   | $      | 3,143  |   |  | 10     | % 
|Vessel operating costs                                   |  |                                  | (5,428  | )    |   | (11,217    | ) |        | 5,789  |   |  | 52     | % 
|Voyage expenses                                          |  |                                  | (2,741  | )    |   | (26        | ) |        | (2,715 | ) |  | (10442 | %)
|Charterhire                                              |  |                                  | (23,192 | )    |   | (17,357    | ) |        | (5,835 | ) |  | (34    | %)
|Impairment                                               |  |                                  |        |      |   | (12,962    | ) |        | 12,962 |   |  | 100    | % 
|Depreciation                                             |  |                                  | (1,716  | )    |   | (5,069     | ) |        | 3,353  |   |  | 66     | % 
|Loss from sale of vessels                                |  |                                  | (4,525  | )    |   |           |   |        | (4,525 | ) |  | N/A    |   
|General and administrative
 expenses                     |  |                                  | (195    | )    |   | (762       | ) |        | 567    |   |  | 74     | % 
|Segment loss                                             |  | $                                | (2,416  | )    | $ | (15,155    | ) | $      | 12,739 |   |  | 84     | % 
|                                                         |  |                                  |         |      |   |            |   |        |        |   |  |        |   
|Pool revenue per day                                     |  | $                                | 13,166  |      | $ | 11,343     |   | $      | 1,823  |   |  | 16     | % 
|Voyage revenue per day                                   |  |                                  | 11,201  |      |   |           |   |        | 11,201 |   |  | N/A    |   
|Operating costs per day                                  |  |                                  | 7,594   |      |   | 7,619      |   |        | 25     |   |  | 0      | % 
|                                                         |  |                                  |         |      |   |            |   |        |        |   |  |        |   
|Pool revenue days                                        |  |                                  | 2,374   |      |   | 2,840      |   |        | (466   | ) |  | (16    | %)
|Voyage revenue days                                      |  |                                  | 124     |      |   |           |   |        | 124    |   |  | N/A    |   
|Operating days                                           |  |                                  | 673     |      |   | 1,460      |   |        | 787    |   |  | 54     | % 
|                                                         |  |                                  |         |      |   |            |   |        |        |   |  |        |   
|Average number of owned
 vessels                         |  |                                  | 1.84    |      |   | 4.00       |   |        | (2.16  | ) |  | (54    | %)
|Average number of time
 chartered-in vessels             |  |                                  | 5.03    |      |   | 3.85       |   |        | 1.18   |   |  | 31     | % 

Vessel
Revenue. Vessel revenue for the year ended
December 31, 2012 was $35.4 million, an increase of $3.1 million or 10% from
the year ended December 31, 2011. The increase is driven by 124 voyage revenue
days in 2012 compared to no voyage revenue days in 2011 (though certain nominal
voyage expenses were incurred).

Vessel
revenue less voyage expenses, or TCE revenue, was $32.6 million for the year
ended December 31, 2012, an increase of $0.4 million, or 1.3% from $32.2
million for the year ended December 31, 2011. The Handymax segment had 2,498
revenue days for the year ended December 31, 2012 and 2,840 revenue days for
the year ended December 31, 2011. This decrease was driven by the sales ofSTI Conqueror, STI Matador andSTI Gladiator in March, April and May of
2012, respectively, and was partially offset by an increase in the number of
vessels time chartered-in for the year ended December 31, 2012. The average
number of vessels (owned and time chartered-in) was 6.87 for the year ended
December 31, 2012 and 7.85 for the year ended December 31, 2011.

The
decrease in revenue days was offset by an increase in pool revenue per day to
$13,166 for the year ended December 31, 2012 from $11,343 per day for the year
ended December 31, 2011.

Vessel
operating costs. Vessel operating costs for the
year ended December 31, 2012 were $5.4 million, a decrease of $5.8 million, or
52%, from the year ended December 31, 2011. The decrease was driven by a
decrease in the number of
operating days to 673 during the year ended December 31, 2012 from 1,460 during
the year ended December 31, 2011 which was due to the sales ofSTI Conqueror, STI Matador, andSTI Gladiator in March, April and May of
2012, respectively.

54

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Voyage
expenses. Voyage expenses for the year ended
December 31, 2012 were $2.7 million, increasing $2.7 million from the year
ended December 31, 2011. This was a result ofSTI Conqueror, STI Matador, andSTI Gladiator operating in the spot market for 124 days during the
year ended December 31, 2012 prior to their sales. There were nominal voyage
expenses incurred for the year ended December 31, 2011.

Charterhire.
Charterhire expense for the year ended December 31, 2012 was $23.2 million, an
increase of $5.8 million or 34% from the year ended December 31, 2011. This was
the result of an increase in the number of days of chartered-in vessels to
1,840 during the year ended December 31, 2012 from 1,404 days during the year
ended December 31, 2011. The increase was primarily driven byHistria Perla andHistria Coral;their time charters began in July 2011. These vessels therefore
operated for partial periods during the year ended December 31, 2011 as
compared to the full year during the year ended December 31, 2012. The average
number of time chartered-in vessels increased to 5.03 for the year ended
December 31, 2012 as compared to 3.85 for the year ended December 31, 2011.

Depreciation.
Depreciation expense for the year ended December 31, 2012 was $1.7 million, a
decrease of $3.4 million, or 66%, from the year ended December 31, 2011. This
was due to the sales ofSTI Conqueror, STI
Matador, andSTI Gladiator
which ceased being depreciated and were written down to their disposal values
in February 2012, the date which they were considered held for sale. In
addition, we recorded an impairment charge in December 2011 which decreased the
depreciable basis of the owned vessels in this segment.

Loss
from sales of vessels. Loss from sales of vessels
for the year ended December 31, 2012 was $4.5 million which was the result of
the sales ofSTI Conqueror, STI Matador,
andSTI Gladiator in March,
April, and May 2012, respectively.

General
and administrative expenses. General and
administrative expenses for the year ended December 31, 2012 were $0.2 million,
a decrease of $0.6 million, or 74% from the year ended December 31, 2011.
General and administrative expenses for the Handymax segment primarily consist
of administrative fees. The decrease in administrative fees was driven by
decrease in the average number of owned vessels to 1.84 for the year ended
December 31, 2012 from 4.00 for the year ended December 31, 2011 resulting from
the sales of STI Conqueror, STI Matadorand STI Gladiatorduring the
year ended December 31, 2012.

Results of Operations for the Year Ended
December 31, 2011 Compared to the Year Ended December 31, 2010

Net
Loss.For the year ended December 31, 2011, we
incurred a net loss of $82.7 million, compared to a net loss of $2.8 million
for the year ended December 31, 2010. The differences between the two periods
are discussed below.

|                                                   |  |                                   |         |      |   |            |   |        |         |   |  |       |   
|-------------------------------------------------- |  | --------------------------------- | ------- | ---- | - | ---------- | - | ------ | ------- | - |  | ----- | --
|                                                   |  | For the year ended 
 December 31, |         |      |   | Percentage |  
|In
thousands of US dollars                         |  | 2011                              |         | 2010 |   | Change     |   | Change |        
|Vessel revenue                                     |  | $                                 | 82,110  |      | $ | 38,798     |   | $      | 43,312  |   |  | 112   | % 
|Vessel operating costs                             |  |                                   | (31,370 | )    |   | (18,440    | ) |        | (12,929 | ) |  | (70   | %)
|Voyage expenses                                    |  |                                   | (6,881  | )    |   | (2,542     | ) |        | (4,339  | ) |  | (171  | %)
|Charterhire                                        |  |                                   | (22,750 | )    |   | (276       | ) |        | (22,475 | ) |  | (8157 | %)
|Impairment                                         |  |                                   | (66,611 | )    |   |           |   |        | (66,611 | ) |  | N/A   |   
|Depreciation                                       |  |                                   | (18,460 | )    |   | (10,179    | ) |        | (8,281  | ) |  | (81   | %)
|General and administrative
 expenses               |  |                                   | (11,637 | )    |   | (6,200     | ) |        | (5,437  | ) |  | (88   | %)
|Financial expenses                                 |  |                                   | (7,060  | )    |   | (3,231     | ) |        | (3,829  | ) |  | (119  | %)
|Realized loss on
 derivative financial instruments |  |                                   |        |      |   | (280       | ) |        | 280     |   |  | N/A   |   
|Financial income                                   |  |                                   | 51      |      |   | 37         |   |        | 14      |   |  | 40    | % 
|Other expense, net                                 |  |                                   | (119    | )    |   | (509       | ) |        | 390     |   |  | 77    | % 
|Net loss                                           |  | $                                 | (82,727 | )    | $ | (2,822     | ) | $      | (79,904 | ) |  | 2831  | % 

55

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Vessel
revenue.Vessel revenue was $82.1 million for the
year ended December 31, 2011, an increase of $43.3 million, or 112%, from
vessel revenue of $38.8 million for the year ended December 31, 2010. The
following table summarizes our revenue:

|                           |  |                                   |        |      |   |            |  |        |        |   |  |      |   
|-------------------------- |  | --------------------------------- | ------ | ---- | - | ---------- |  | ------ | ------ | - |  | ---- | --
|                           |  | For the year ended 
 December 31, |        |      |   | Percentage | 
|In
thousands of US dollars |  | 2011                              |        | 2010 |   | Change     |  | Change |       
|Owned vessels              |  |                                   |        |      |   |            |  |        |        |   |  |      |   
|Time charter revenue       |  | $                                 | 9,626  |      | $ | 19,417     |  | $      | (9,791 | ) |  | (50  | %)
|Pool revenue               |  |                                   | 39,522 |      |   | 15,180     |  |        | 24,342 |   |  | 160  | % 
|Voyage revenue             |  |                                   | 12,287 |      |   | 3,916      |  |        | 8,371  |   |  | 214  | % 
|Time chartered-in vessels  |  |                                   |        |      |   |            |  |        |        |   |  |      |   
|Pool revenue               |  |                                   | 20,675 |      |   | 285        |  |        | 20,390 |   |  | 7163 | % 
|                           |  |                                   |        |      |   |            |  |        |        |   |  |      |   
|Total                      |  | $                                 | 82,110 |      | $ | 38,798     |  | $      | 43,312 |   |  | 112  | % 

The
decrease in time charter revenue of $9.8 million, or 50%, was the result of a
decrease in the overall number of days of vessels on time charter to 427 in
2011 compared to 854 in 2010. This decrease was the result of the expiration of
time charter contracts on the Senatore (expired August 2010), STI Harmony (expired September 2010), and STI Heritage (expired November 2010). Noemi was employed on a time charter for
both periods that began in 2007 and expired in December 2011, and STI Spiritwas
employed on a short term time charter for 72 days during 2011.

The
increase in pool revenue for owned vessels of $24.3 million, or 160%, was
primarily the result of an increase in the number of pool revenue days to 3,149
in 2011 from 1,185 in 2010. This increase was attributable to growth of the
fleet as our average number of owned vessels was 11.29 for the year ended
December 31, 2011, compared to 6.19 for the year ended December 31, 2010.

The
increase in voyage revenue of $8.4 million, or 214%, is a result of an increase
in the number of days that our vessels operated in the spot market to 450 days
in 2011 compared to 177 in 2010, in addition to an increase in TCE to $12,092
per day in 2011 from $7,774 per day in 2010. During 2011, STI Coral and STI Diamond
operated in the spot market for 450 days combined. During 2010, our newly
purchased vessels, STI Conqueror, STI Gladiator, STI Matador
and STI
Highlander operated in the spot market prior to their entry in the
Scorpio Handymax Tanker Pool for 167 days. Additionally, Senatore operated in the
spot market for 10 days subsequent to the termination of its time charter
agreement and prior to its entry in the Scorpio Panamax Tanker Pool.

The
increase of pool revenue for time chartered-in vessels of $20.3 million, or
7,163%, in 2011 compared to 2010 was due to an increase in the number of pool
revenue days for time chartered-in vessels. In 2011, BW Zambesi, Krisjanis Valdemars,
Kraslava, Kazdanga, Histria Azure, Histria Perla, Histria CoralandKhawr
Aladidwere time chartered-in for 1,806 days, while in 2010, BW Zambesi
was time chartered-in for 20 days. All vessels operated in the Scorpio Group
Pools.

Vessel
operating costs.Vessel operating costs for owned
vessels of $31.4 million for the year ended December 31, 2011, increased $12.9
million, or 70% from $18.4 million for the year ended December 31, 2010. The
increase is the result of an additional 1,863 operating days in 2011 which was
driven by the purchase of two vessels in 2011 and seven vessels throughout
2010, which operated for a full year in 2011 as opposed to partial years in 2010.

Voyage
expenses. The increase in voyage expenses is a
result of an increase in the number of days that our vessels operated in the
spot market to 450 in 2011 from 177 in 2010. During 2011, STI Coral and STI Diamond
operated in the spot market for 450 days combined. During 2010, our newly
purchased vessels, STI Conqueror, STI Gladiator, STI Matador and STI Highlander operated in
the spot market for 167 days prior to their entry in the Scorpio Handymax
Tanker Pool. Additionally, Senatore operated in the spot market for
10 days subsequent to the termination of its time charter agreement and prior
to its entry in the Scorpio Panamax Tanker Pool.

56

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Charterhire.Charterhire expense of $22.8 million for the year
ended December 31, 2011 increased $22.5 million, or 8,157%, from $0.3 million
for the year ended December 31, 2010. The increase was due to an increase of
the number of time chartered-in days in 2011. In 2011, BW Zambesi, Krisjanis Valdemars,
Kraslava, Kazdanga, Histria Azure, Histria Perla, Histria Coraland Khawr Aladidwere time chartered-in for 1,806 days, while in 2010, BW Zambesi
was time chartered-in for 20 days.

Impairment.In the
year ended December 31, 2011, we recognized an impairment loss of $66.6 million
for our 12 owned vessels. This impairment loss was triggered by reductions in
vessel values, and represented the difference between the carrying value and recoverable
amount, being fair value less cost to sell. In determining the fair value less
cost to sell, we took into consideration the estimated valuations provided by
independent ship brokers. No impairments were recognized in the year ended
December 31, 2010.

Depreciation.Depreciation of $18.5 million for the year ended
December 31, 2011 increased $8.3 million, or 81%, from $10.2 million for the
year ended December 31, 2010. The increase in depreciation expense was
primarily due to an increase in our average number of owned vessels to 11.29 in
2011 from 6.19 in 2010. This increase was offset by a change in the depreciable
life of our owned vessels from 20 to 25 years in the second quarter 2010. The
estimated useful life of 25 years is managements best estimate and is also
consistent with industry practice for similar vessels. This change in estimate
was applied prospectively and the impact on the income statement for the year
ended December 31, 2010 resulted in a decrease in depreciation expense and
increase in net income of $1.2 million.

General
and administrative expense.General and administrative
expense, which includes commercial management and administrative fees, of $11.6
million for the year ended December 31, 2011, increased $5.4 million, or 88%,
from $6.2 million for the year ended December 31, 2010. The increase is a
result of incremental costs incurred to operate as a public company and
additional compensation arrangements that were entered into as part of the
initial public offering in April 2010. This was specifically driven by an
increase in the amortization of restricted stock issued in June 2010 and
January 2011, a full year of salary costs, directors and officers insurance and
fees, legal fees, audit fees and other related expenses.

Financial
expenses.Financial expenses of $7.1 million for
the year ended December 31, 2011, increased $3.8 million, or 119%, from $3.2
million for the year ended December 31, 2010. Financial expenses for the year
ended December 31, 2011 consisted of interest on bank loans ($5.0 million),
commitment fees on undrawn portions of the our 2010 and 2011 Credit Facilities
($1.1 million ) and amortization of deferred financing fees ($1.0 million).
Financial expenses for the year ended December 31, 2010 consisted of interest
on bank loan ($2.4 million), which at the time only consisted of the 2010
Revolving Credit Facility, commitment fees on undrawn portions of our 2010
Revolving Credit Facility ($0.6 million) and amortization of deferred financing
fees ($0.2 million).

Realized
loss on derivative financial instruments.Realized
loss on derivatives from our interest rate swap, was $0.3 million for the year
ended December 31, 2010. The realized loss is the result of the settlement
difference between contracted interest rates and the actual market interest
rates (LIBOR). The interest rate swap, which was related to the 2005 Credit
Facility and did not qualify for hedge accounting, was terminated on April 9,
2010.

Financial
income.Interest income was $51,008 for the year
ended December 31, 2011, an increase of $14,474 or 40% from the $36,534 for the
year ended December 31, 2010. The increase was primarily due to an increase in
our average cash balance during the period.

Other
expenses, net. Other expense, net was a loss of
$0.1 million for the year ended December 31, 2011, and a loss of $0.5 million
for the year ended December 31, 2010. The decrease was primarily driven by
expenses incurred for the initial public offering in April 2010.

57

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Results of operations  segment analysis

Aframax/LR2 segment

The
following table summarizes vessel operations for our Aframax segment.

|                                                         |  |                                   |         |      |   |            |   |        |         |   |  |        |   
|-------------------------------------------------------- |  | --------------------------------- | ------- | ---- | - | ---------- | - | ------ | ------- | - |  | ------ | --
|Aframax/LR2
segment                                      |  | For the year ended 
 December 31, |         |      |   | Percentage |  
|In
thousands of US dollars except per day and fleet data |  | 2011                              |         | 2010 |   | Change     |   | Change |        
|Vessel revenue                                           |  | $                                 | 6,484   |      | $ | 641        |   | $      | 5,843   |   |  | 911    | % 
|Vessel operating costs                                   |  |                                   | (2,547  | )    |   | (427       | ) |        | (2,121  | ) |  | (497   | %)
|Charterhire                                              |  |                                   | (839    | )    |   |           |   |        | (839    | ) |  | N/A    |   
|Impairment                                               |  |                                   | (12,459 | )    |   |           |   |        | (12,459 | ) |  | N/A    |   
|Depreciation                                             |  |                                   | (2,074  | )    |   | (293       | ) |        | (1,781  | ) |  | (607   | %)
|General and administrative
 expenses                     |  |                                   | (136    | )    |   | (15        | ) |        | (121    | ) |  | (819   | %)
|Financial expenses                                       |  |                                   | (841    | )    |   | 1          |   |        | (842    | ) |  | 108206 | % 
|Other expense, net                                       |  |                                   | (134    | )    |   |           |   |        | (134    | ) |  | N/A    |   
|Segment loss                                             |  | $                                 | (12,546 | )    | $ | (93        | ) |        | (12,453 | ) |  | (13434 | %)
|                                                         |  |                                   |         |      |   |            |   |        |         |   |  |        |   
|Time charter revenue per
 day                            |  |                                   | 15,457  |      |   |           |   |        | 15,457  |   |  | N/A    |   
|Pool revenue per day                                     |  |                                   | 14,849  |      |   | 12,460     |   |        | 2,389   |   |  | 19     | % 
|Operating costs per day                                  |  |                                   | 6,960   |      |   | 8,293      |   |        | (1,333  | ) |  | (16    | %)
|                                                         |  |                                   |         |      |   |            |   |        |         |   |  |        |   
|Time charter revenue days                                |  |                                   | 72      |      |   |           |   |        | 72      |   |  | N/A    |   
|Pool revenue days                                        |  |                                   | 361     |      |   | 51         |   |        | 310     |   |  | 602    | % 
|Operating days                                           |  |                                   | 365     |      |   | 51         |   |        | 314     |   |  | 609    | % 
|                                                         |  |                                   |         |      |   |            |   |        |         |   |  |        |   
|Average number of owned
 vessels                         |  |                                   | 1.00    |      |   | 0.14       |   |        | 0.86    |   |  | 609    | % 
|Average number of time
 chartered-in vessels             |  |                                   | 0.19    |      |   |           |   |        | 0.19    |   |  | N/A    |   

58

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On
November 2010, we took delivery of STI
Spirit, a 113,091 dwt Aframax/LR2 product tanker. From
delivery on November 10, 2010 through January 11, 2011, STI Spirit operated in the
Scorpio Aframax Tanker Pool, which traded a mix of crude and product tankers.
As of March 25, 2011, this vessel joined the Scorpio LR2 Pool, which focuses
solely on product tankers.

Vessel
Revenue.Vessel revenue of $6.5 million for the
year ended December 31, 2011, increased $5.8 million, or 911%, as the result of
an increase in the overall number of total revenue days to 434 days in 2011
from 51 days in 2010. This was driven by the acquisition of STI Spirit. Additionally, we took delivery of the Khawr Aladid,
a 2006 built LR2 product tanker (106,003 DWT), on October 24, 2011,
on a six month time charter-in agreement.

Vessel
operating costs.Vessel operating costs of $2.5
million for the year ended December 31, 2011, increased $2.1 million or 497% as
a result of an increase in the number of operating days to 365 in 2011 from 51
2010 which was driven by the purchase of STI Spirit in November 2010.

Charterhire.Charterhire expense of $0.9 million for the year
ended December 31, 2011 was driven by the delivery of Khawr Aladid, a 2006 built
LR2 product tanker (106,003 DWT), on October 24, 2011, on a six month
time charter-in agreement. There were no time chartered-in vessels in the
Aframax/LR2 segment in 2010.

Impairment.In the
year ended December 31, 2011, we recognized an impairment loss of $12.5 million
for the Aframax/LR2 segment. No impairment was recognized in 2010.

Depreciation.Depreciation
expense of $2.1 million for the year ended December 31, 2011 increased $1.8
million, or 607%, from $0.3 million for the year ended December 31, 2010. The
increase is due to an increase in the number of operating days to 365 in 2011 from
51 in 2010 which was driven by the purchase of STI Spirit in November 2010.

General
and administrative expense.General and
administrative expense of $0.1 million for the year ended December 31, 2011,
increased $0.1 million or 819% from $14,747 for the year ended December 31,
2010. General and administrative expenses for the Aframax/LR2 segment primarily
consist of commercial management fees and administrative fees to SCM. The
increase is due to an increase in the number of revenue days to 434 in 2011
from 51 2010 which was driven by the purchase of STI Spirit in November 2010
and delivery of Khawr Aladid in October 2011.

Financial
expenses. Financial expenses was $0.8 million for
the year ended December 31, 2011, an increase of approximately $0.8 million or
108,206% from $778 for year ended December 31, 2010. Financial expenses for the
Aframax/LR2 segment represents interest for the STI Spirit Credit Facility
which was signed and drawn in March 2011.

Other
expense, net. Other expense, net was a loss of
$0.1 million for the year ended December 31, 2011. There were no other expenses
for the year ended December 31, 2010. This increase is primarily due to the
write-off of vessel purchase options that were acquired as part of the purchase
of STI
Spirit in November 2010 and expired unexercised in September 2011.

59

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Panamax/LR1 segment

The
following table summarizes vessel operations for our Panamax segment

|                                                         |  |                                   |         |      |   |            |   |        |         |   |  |       |   
|-------------------------------------------------------- |  | --------------------------------- | ------- | ---- | - | ---------- | - | ------ | ------- | - |  | ----- | --
|Panamax/LR1
segment                                      |  | For the year ended 
 December 31, |         |      |   | Percentage |  
|In
thousands of US dollars except per day and fleet data |  | 2011                              |         | 2010 |   | Change     |   | Change |        
|Vessel revenue                                           |  | $                                 | 31,101  |      | $ | 29,345     |   | $      | 1,756   |   |  | 6     | % 
|Vessel operating costs                                   |  |                                   | (14,428 | )    |   | (12,364    | ) |        | (2,064  | ) |  | (17   | %)
|Voyage expenses                                          |  |                                   | (13     | )    |   | (253       | ) |        | 240     |   |  | 95    | % 
|Charterhire                                              |  |                                   | (4,554  | )    |   | (276       | ) |        | (4,278  | ) |  | (1553 | %)
|Impairment                                               |  |                                   | (28,616 | )    |   |           |   |        | (28,616 | ) |  | N/A   |   
|Depreciation                                             |  |                                   | (9,279  | )    |   | (7,494     | ) |        | (1,786  | ) |  | (24   | %)
|General and administrative
 expenses                     |  |                                   | (692    | )    |   | (600       | ) |        | (91     | ) |  | (15   | %)
|Financial expenses                                       |  |                                   | 0       |      |   | (134       | ) |        | 134     |   |  | 100   | % 
|Realized loss on
 derivative financial instruments       |  |                                   |        |      |   | (280       | ) |        | 280     |   |  | N/A   |   
|Other expense, net                                       |  |                                   | 23      |      |   | (4         | ) |        | 27      |   |  | 616   | % 
|Segment (loss)/profit                                    |  | $                                 | (26,458 | )    | $ | 7,940      |   |        | (34,398 | ) |  | 433   | % 
|                                                         |  |                                   |         |      |   |            |   |        |         |   |  |       |   
|Time charter revenue per
 day                            |  |                                   | 23,962  |      |   | 22,729     |   |        | 1,233   |   |  | 5     | % 
|Pool revenue per day                                     |  |                                   | 12,876  |      |   | 15,213     |   |        | (2,337  | ) |  | (15   | %)
|Voyage revenue per day                                   |  |                                   |        |      |   | 2,839      |   |        | (2,839  | ) |  | N/A   |   
|Operating costs per day                                  |  |                                   | 7,891   |      |   | 8,189      |   |        | (298    | ) |  | (4    | %)
|                                                         |  |                                   |         |      |   |            |   |        |         |   |  |       |   
|Time charter revenue days                                |  |                                   | 355     |      |   | 854        |   |        | (499    | ) |  | (58   | %)
|Pool revenue days                                        |  |                                   | 1,754   |      |   | 634        |   |        | 1,120   |   |  | 177   | % 
|Voyage revenue days                                      |  |                                   |        |      |   | 10         |   |        | (10     | ) |  | N/A   |   
|Operating days                                           |  |                                   | 1,825   |      |   | 1,510      |   |        | 315     |   |  | 21    | % 
|                                                         |  |                                   |         |      |   |            |   |        |         |   |  |       |   
|Average number of owned
 vessels                         |  |                                   | 5.00    |      |   | 4.14       |   |        | 0.86    |   |  | 21    | % 
|Average number of time
 chartered-in vessels             |  |                                   | 0.91    |      |   | 0.05       |   |        | 0.86    |   |  | 1565  | % 

Vessel
Revenue.Vessel revenue for the year ended
December 31, 2011 was $31.1 million, an increase of $1.8 million, or 6% from
$29.3 million for the year ended December 31, 2010. The increase in revenue was
the result of an increase in the overall number of total revenue days to 2,109
days in 2011 from 1,498 days in 2010. This was driven by an increase in pool
days of 1,120 offset by a decrease in time charter days of 499. STI Harmony
and STI
Heritage were acquired in June 2010 with existing time charter
contracts that expired in September and December 2010, respectively. These,
along with the time charter contracts with Noemi and Senatore comprised the time
charter revenue for 2010. The time charter contract for Senatore expired in August
2010. The time charter arrangement for Noemiexpired in December 2011 and was the
only vessel in this segment on time charter during 2011. All of these vessels
entered the Scorpio Panamax Tanker Pool subsequent to the expiration of the
time charters.

As such, in
2011, five of our owned vessels and one of our time chartered-in vessels
operated in the Scorpio Panamax Tanker Pool. In 2010, four of our owned vessels
and one of our time chartered-in vessels operated in the Scorpio Panamax Tanker
Pool. The increase was offset by an overall decrease in daily TCE rates to
$12,876 per day in 2011, from $15,213 per day in 2010.

Vessel
operating costs.Vessel operating costs of $14.4
million increased $2.1 million or 17%, as a result of an increase in the number
of operating days to 1,825 in 2011 from 1,510 in 2010, which was driven by the
purchase of STI
Harmony and STI Heritage in June 2010 and therefore a
full year of operation in 2011.

60

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Voyage
expenses.Voyage expenses of $13,383 decreased
$0.2 million or 95% as a result of Senatore operating in the spot market for
10 days subsequent to the termination of its time charter agreement and prior
to its entry in the Scorpio Panamax Tanker Pool.

Charterhire.Charterhire expense of $4.5 million for the year
ended December 31, 2011 decreased $4.2 million or 1,553% from $0.3 million for
the year ended December 31, 2010. The increase was due to BW Zambesiwhich was
chartered-in for a total of 333 days in 2011 and 20 days in 2010 at a
charterhire rate of $13,850 per day.

Impairment.In the
year ended December 31, 2011, we recognized an impairment loss of $28.6 million
for our owned Panamax/LR1 vessels. No impairment was recognized in 2010.

Depreciation.Depreciation
expense of $9.3 million for the year ended December 31, 2011, increased by $1.8
million, or 24% from $7.5 million for the year ended December 31, 2010. The
increase in depreciation expense was primarily due to an increase in our
average number of owned vessels to 5.00 in 2011 from 4.14 in 2010. This
increase was offset by the effect from a change in the depreciable life of our
owned vessels from 20 to 25 years, which occurred in the second quarter of
2010, together with the effect of an increase in estimated residual values of
our vessels.

General
and administrative expense.General and
administrative expense of $0.7 million for the year ended December 31, 2011,
increased $0.1 million, or 15% from $0.6 million for the year ended December
31, 2010. General and administrative expenses for the Panamax/LR1 segment
primarily consist of commercial management fees and administrative fees to SCM.
The increase is the result of an increase in the average number of owned
vessels to 5.00 in 2011 to 4.14 in 2010.

Financial
expenses.Financial expenses were $0.1 million for
the year ended December 31, 2010. Financial expenses for the Panamax/LR1
segment represent interest for the 2005 Credit Facility which was repaid in
April 2010.

Realized
loss on derivative financial instruments.Realized
loss on derivative financial instruments was $0.3 million for the year ended
December 31, 2010. The realized loss is the result of the settlement difference
between contracted interest rates and the actual market interest rates (LIBOR)
on an interest rate swap that was related to the 2005 Credit Facility, and was
terminated on April 9, 2010.

MR Segment

The
following table summarizes vessel operations for our MR segment. On May 10,
2011, we took delivery of STI Coral and STI Diamond and we did not
have vessels operating in this segment in prior periods. As such, no further
commentary has been provided in respect of this segment as a year-on-year
comparison is not applicable.

|                                                         |  |                                  |         |  
|-------------------------------------------------------- |  | -------------------------------- | ------- | -
|MR
segment                                               |  | For the year ended
 December 31, |        
|In
thousands of US dollars except per day and fleet data |  | 2011                             |        
|Vessel revenue                                           |  | $                                | 12,287  |  
|Vessel operating costs                                   |  |                                  | (3,178  | )
|Voyage expenses                                          |  |                                  | (6,842  | )
|Impairment                                               |  |                                  | (12,573 | )
|Depreciation                                             |  |                                  | (2,038  | )
|General and administrative
 expenses                     |  |                                  | (314    | )
|Segment loss                                             |  | $                                | (12,658 | )
|                                                         |  |                                  |         |  
|Voyage revenue per day                                   |  |                                  | 12,092  |  
|Operating costs per day                                  |  |                                  | 6,748   |  
|                                                         |  |                                  |         |  
|Voyage revenue days                                      |  |                                  | 450     |  
|Operating days                                           |  |                                  | 471     |  
|                                                         |  |                                  |         |  
|Average number of owned
 vessels                         |  |                                  | 1.29    |  

61

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Handymax segment

The
following table summarizes vessel operations for our Handymax segment.

|                                                         |  |                                   |         |   |      |        |        |   |                    |   |  |      |   
|-------------------------------------------------------- |  | --------------------------------- | ------- | - | ---- | ------ | ------ | - | ------------------ | - |  | ---- | --
|Handymax
segment                                         |  | For the year ended 
 December 31, |         |   |      |        |        |   |                   
|In
thousands of US dollars except per day and fleet data |  | 2011                              |         |   | 2010 |        | Change |   | Percentage
 Change |  
|                                                        
|Vessel revenue                                           |  | $                                 | 32,238  |   | $    | 8,812  |        | $ | 23,426             |   |  | 266  | % 
|Vessel operating costs                                   |  |                                   | (11,217 | ) |      | (5,650 | )      |   | (5,567             | ) |  | (99  | %)
|Voyage expenses                                          |  |                                   | (26     | ) |      | (2,289 | )      |   | 2,263              |   |  | 99   | % 
|Charterhire                                              |  |                                   | (17,357 | ) |      |       |        |   | (17,357            | ) |  | N/A  |   
|Impairment                                               |  |                                   | (12,962 | ) |      |       |        |   | (12,962            | ) |  | N/A  |   
|Depreciation                                             |  |                                   | (5,068  | ) |      | (2,390 | )      |   | (2,678             | ) |  | (112 | %)
|General and administrative
 expenses                     |  |                                   | (762    | ) |      | (267   | )      |   | (496               | ) |  | (186 | %)
|Financial expenses                                       |  |                                   |        |   |      | 1      |        |   | (1                 | ) |  | N/A  |   
|Segment loss                                             |  | $                                 | (15,155 | ) | $    | (1,782 | )      |   | (13,373            | ) |  | (751 | %)
|                                                         |  |                                   |         |   |      |        |        |   |                    |   |  |      |   
|Pool revenue per day                                     |  |                                   | 11,343  |   |      | 9,965  |        |   | 1,379              |   |  | 14   | % 
|Voyage revenue per day                                   |  |                                   |        |   |      | 8,077  |        |   | (8,077             | ) |  | N/A  |   
|Operating costs per day                                  |  |                                   | 7,619   |   |      | 8,107  |        |   | (489               | ) |  | (6   | %)
|                                                         |  |                                   |         |   |      |        |        |   |                    |   |  |      |   
|Pool revenue days                                        |  |                                   | 2,840   |   |      | 520    |        |   | 2,320              |   |  | 446  | % 
|Voyage revenue days                                      |  |                                   |        |   |      | 167    |        |   | (167               | ) |  | N/A  |   
|Operating days                                           |  |                                   | 1,460   |   |      | 697    |        |   | 763                |   |  | 109  | % 
|                                                         |  |                                   |         |   |      |        |        |   |                    |   |  |      |   
|Average number of owned
 vessels                         |  |                                   | 4.00    |   |      | 1.91   |        |   | 2.09               |   |  | 109  | % 
|Average number of time
 chartered-in vessels             |  |                                   | 3.85    |   |      |       |        |   | 3.85               |   |  | N/A  |   

Vessel
Revenue.Vessel
revenue for the year ended December 31, 2011 was $32.2 million, an increase of
$23.4 million, or 266% from $8.8 million for the year ended December 31, 2010.
This increase was the result of an increase in the overall number of total
revenue days to 2,840 days in 2011 from 687 days in 2010. STI Conqueror was delivered
in June 2010, STI Matador and STI Gladiator were delivered in July 2010
and STI
Highlander was delivered in August 2010. These were the only vessels
in the Handymax segment during the year ended December 31, 2010. We time
chartered-in Krisjanis Valdemars, Kraslava, Histria Azure, Kazdanga,
Histria
Perla and Histria Coral during the year ended
December 31, 2011. In addition, pool revenue per day increased 14% for the year
ended December 31, 2011 when compared to the year ended December 31, 2010.

Vessel
operating costs.Vessel
operating costs for the year ended December 31, 2011 were $11.2 million, an increase of
$5.6 million, or 99%from the year ended December 31, 2010. This was the result of an increase
in the number of
operating days to 1,460 from 697 for the years ended December 31, 2011 and
2010, respectively which was driven by the purchase of STI Conqueror in June 2010, STI
Gladiator and STI Matadorin July 2010 and STI
Highlanderin August 2010, all of which operated for a full year
during 2011.

62

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Voyage
expenses.Voyage
expenses for the year ended December 31, 2011 were $25,760, a decrease of $2.3
million, or 99% as a result of STI Conqueror, STI Gladiator, STI Matador
and STI
Highlanderoperating in the spot market for 167 days in during the year ended
December 31, 2010. No vessels operated in the spot market during the
year ended December 31, 2011 though certain nominal voyage charges were
incurred.

Charterhire.Charterhire for the year ended December 31,
2011 was $17.4 million, an increase of $17.4 million from the year ended
December 31, 2010. The increase was
the result of the chartering-in of Krisjanis Valdemars, Kraslava, Histria Azure,
Kazdanga,
Histria Perla and Histria Coral during the year ended December 31,
2011. There were no vessels chartered-in during the year ended December 31, 2010.

Impairment.In the
year ended December 31, 2011, we recognized an impairment loss of $13.0 million
for our owned Handymax. No impairment was recognized in 2010.

Depreciation.Depreciation
expense for the year ended December
31, 2011 was $5.0 million, an increase of $2.7 million, or 112% from the year ended December 31, 2010.
This increase was a result of an increase in our average number of owned
Handymax vessels to 4.00 from 1.91 for the years ended December 31, 2011and 2010, respectively.

General
and administrative expense.General and administrative expense for the year ended December 31, 2011 was $0.8 million, an increase of
$0.5 million, or 186%, from the year
ended December 31, 2010. General and administrative expenses for the
Handymax segment primarily consists of commercial management fees and
administrative fees to SCM. The increase is the result of an increase in the
average number of owned and time chartered-in vessels to 7.85 from 1.91 for the
years ended December 31, 2011
and 2010, respectively.

|   |                                 
|-- | --------------------------------
|B. | Liquidity
 and Capital Resources

Our
primary source of funds for our short-term and long-term liquidity needs will
be the cash flows generated from our vessels, which are currently operating in
Scorpio Group Pools or in the spot market, in addition to availability under
our 2010 Revolving Credit Facility, 2011 Credit Facility, 2013 Credit Facility
(as defined later), which will be used for the partial financing of
newbuildings to be delivered after the first quarter of 2014, and cash on hand.
The Scorpio Group Pools reduce volatility because (i) they aggregate the
revenues and expenses of all pool participants and distribute net earnings to
the participants based on an agreed upon formula and (ii) some of the
vessels in the pool are on time charter. Furthermore, spot charters provide
flexibility and allow us to fix vessels at prevailing rates. We believe these
cash flows from operations, amounts available under our various credit
facilities and our cash balance will be sufficient to meet our existing
liquidity needs for the next 12 months from the date of this annual report.

As
of December 31, 2012, our cash balance was $87.2 million, which is an increase
from our cash balance of $36.8 million as of December 31, 2011.
Additionally, at December 31, 2012 we had $67.4 million in availability under
our 2010 Revolving Credit Facility. The increase in cash balance was primarily
due to net proceeds from the sales of STI Conqueror, STI Matador, STI Gladiator,
STI Coral
and STI
Diamond, drawdowns on various credit facilities, and proceeds from
registered direct placements of common shares in April 2012 and December 2012.
These increases were offset by bank loan repayments and payments related to our
newbuilding vessels.

For
the year ended December 31, 2012, our net cash outflow from operating
activities was $1.9 million, our net cash outflow from investing activities was
$90.2 million and the net cash inflow from financing activities was $142.4 million.
For the year ended December 31, 2011, our net cash outflow from operating
activities was $12.5 million, our net cash outflow from investing activities
was $122.6 million, and the net cash inflow from financing activities was
$103.7 million.

As
of December 31, 2012, our long-term liquidity needs were comprised of our debt
repayment obligations for our credit facilities, our obligations for our
vessels under construction, and obligations under our charter-in arrangements.

63

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Our
credit facilities require us to comply with a number of covenants, including
financial covenants related to liquidity, consolidated net worth, minimum
interest coverage, maximum leverage ratios, loan to value ratios and collateral
maintenance; delivery of quarterly and annual financial statements and annual
projections; maintaining adequate insurances; compliance with laws (including
environmental); compliance with the Employee Retirement Income and Security
Act, or ERISA; maintenance of flag and class of the initial vessels;
restrictions on consolidations, mergers or sales of assets; approvals on
changes in the manager of the vessels; limitations on liens; limitations on
additional indebtedness; prohibitions on paying dividends if a covenant breach
or an event of default has occurred or would occur as a result of payment of a
dividend; prohibitions on transactions with affiliates; and other customary
covenants.

No
vessels are scheduled to be drydocked within the next 12 months.

Cash Flows

The table
below summarizes our sources and uses of cash for the periods presented:

|                           |  |                                   |         |      |   |          |   |   |          |  
|-------------------------- |  | --------------------------------- | ------- | ---- | - | -------- | - | - | -------- | -
|                           |  | For the year 
 ended December 31, |        
|In
thousands of US dollars |  | 2012                              |         | 2011 |   | 2010     |  
|Condensed
 Cash Flows      |  |                                   |         |      |   |          |   |   |          |  
|Net cash inflow/(outflow)  |  |                                   |         |      |   |          |   |   |          |  
|Operating activities       |  | $                                 | (1,928  | )    | $ | (12,452  | ) | $ | 4,907    |  
|Investing activities       |  |                                   | (90,155 | )    |   | (122,573 | ) |   | (245,595 | )
|Financing activities       |  |                                   | 142,415 |      |   | 103,671  |   |   | 308,431  |  

For the Year Ended December 31, 2012 Compared to the Year
Ended December 31, 2011

Net cash outflow from operating
activities

Net
cash outflow from operating activities was $1.9 million for the year ended
December 31, 2012, which was an increase of $10.5 million from a cash outflow
of $12.5 million the year ended December 31, 2011. The increase was primarily
attributable to (i) an increase in vessel revenue of $33.3 million
(ii) a decrease in vessel operating costs of $1.0 million
(iii) earnings from profit or loss arrangements of $0.4 million
(iv) a decrease in drydock payments of $0.8 million (v) changes in working
capital movements of $9.1 million and (vi) a decrease in financial expenses of
$1.7 million (excluding non-cash items such as deferred financing fee
amortization). These changes were offset by (i) an increase in voyage
expenses of $14.9 million and (ii) an increase in charterhire expense of
$21.0 million.

Net cash outflow from investing
activities

Cash
outflow from investing activities was $90.2 million for the year ended
December 31, 2012 compared to net cash outflows of $122.6 million for the
year ended December 31, 2011. Investment activity during the year ended
December 31, 2012 was driven by payments on our newbuilding vessels of $191.5
million (including capitalized costs). This was offset by the sales of STI Conqueror, STI Matador, STI
Gladiator, STI CoralandSTI
Diamondfor aggregate net proceeds of $101.3 million.

Cash
outflow from investing activities was $122.6 million for the year ended
December 31, 2011. Investment activity during the year ended December 31, 2011
was driven by the purchase of STI Coral and STI Diamond for an aggregate
purchase price of $71.0 million (including a 1% commission paid to Liberty, our
related party Administrator at that time, along with other capitalized costs).
Additionally, as of December 31, 2011, we had made payments of $51.0 million relating to our newbuilding vessels under construction at
HMD.

64

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Net cash inflow from financing
activities

Cash
provided by financing activities was $142.4 million for the year ended December
31, 2012 compared to cash provided by financing activities of $103.7 million
for the year ended December 31, 2011. Financing activities during the year
ended December 31, 2012 were driven by the receipt of net proceeds of $153.1
million from two registered direct placements of common shares in April and
December 2012, borrowings of $32.2 million under our 2010 Revolving Credit
Facility, and borrowings of $92.0 million under our Newbuilding Credit
Facility. These inflows were offset by repayments of $106.0 million into the
2010 Revolving Credit Facility, principal payments of $2.8 million into the STI
Spirit Credit Facility, $18.2 million into the 2011 Credit Facility (of which
$16.1 million was the repayment made as a result of the sale ofSTI Coral) and $2.1 million into the
Newbuilding Credit Facility. Cash outflows from financing activities also
include the acquisition of treasury shares of $2.4 million and debt issuance
costs of $3.3 million.

Financing
activities during the year ended December 31, 2011 were driven by net proceeds
of $68.5 million from an underwritten public offering of common shares in May
2011, net proceeds of $36.5 million from an underwritten public offering of
common shares in November 2011, borrowings of $35.0 million under the 2011
Credit Facility, borrowings of $27.3 million under the STI Spirit Credit
Facility, and borrowings of $53.0 million under the 2010 Revolving Credit
Facility. These inflows were offset by payments of $99.0 million into the 2010
Revolving Credit Facility, principal payments on all of our credit facilities
of $10.6 million, payment of debt issuance cost of $4.1 million under the 2011
Credit Facility, STI Spirit Credit Facility and the 2010 Revolving Credit
Facility along with $2.9 million of costs related to the repurchase of our
common shares.

For the Year Ended December 31, 2011 Compared to the Year
Ended December 31, 2010

Cash inflow/(outflow) from operating
activities

Net
cash outflow operating activities was $12.5 million for the year ended December
31, 2011, which was a decrease of $17.4 million from the year ended December
31, 2010. The decrease was primarily attributable to (i) an increase in
vessel operating costs of $12.9 million, (ii) an increase in voyage expenses of
$4.3 million, (iii) an increase in charterhire expense of $22.5 million, (iv)
an increase in general and administrative expenses of $4.4 million (excluding
non-cash items), (v) a net increase in interest expense of $3.8 million,
(vi) a net increase in working capital movements of $11.5 million, (vii) a
decrease in receipts from shareholders of $1.9 million, and (viii) an increase
in drydock payments of $1.5 million. These decreases were partially offset by
(i) an increase in vessel revenue of $43.3 million, (ii) a decrease in other
expenses of $0.4 million and (iii) a decrease in interest rate swap termination
payments of $1.9 million.

Cash outflow from investing activities

Cash
outflow from investing activities was $122.6 million for the year ended December
31, 2011 compared to $245.6 million for the year ended December 31, 2010.
Investment activity during the year ended December 31, 2011 was driven by the
purchase of STI
Coral and STI Diamond for an aggregate purchase
price of $71.0 million (including a 1% commission paid to Liberty, our related
party Administrator (at that time), along with other capitalized costs).
Additionally, we entered into agreements with HMD for the construction of a total
of six newbuilding vessels as of December 31, 2011 for an aggregate purchase price
of $223.4 million of which, $51.0 million was paid as of that date. The first
five newbuilding vessels were delivered to us in third quarter of 2012 and the
sixth newbuilding vessel was delivered in January 2013.

Investment
activity during the year ended December 31, 2010 was driven by the purchase of
seven product tankers during the period. Two of the tankers, STI Harmony and STI Heritage, are LR1 ice class 1A sister ships and were
acquired for an aggregate purchase price of $92.9 million (including a 1%
commission paid to Liberty, a related party), which included $2.3 million
related to the value of the existing time charter contracts. Four of the other
vessels, STI Conqueror, STI Matador, STI Gladiator and STI
Highlanderare Handymax vessels that were acquired for $100.0
million in aggregate (including a 1% commission paid to Liberty, our related
party Administrator). The last vessel, STI Spirit was acquired for $52.7 million
which included $0.1 million related to the value of purchase options on two
additional vessels which expired unexercised in September 2011.

65

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Cash inflow from financing activities

Cash
inflow from financing activities was $103.7 million for the year ended December
31, 2011 compared to $308.4 million for the year ended December 31, 2010.
Financing activity during the year ended December 31, 2011 was driven by net
proceeds of $68.5 million from an underwritten public offering in May 2011, net
proceeds of $36.5 million from
an underwritten public offering in November 2011, borrowings of $35.0 million
under the 2011 Credit Facility, borrowings of $27.3 million under the STI
Spirit Credit Facility, and borrowings of $53.0 million under the 2010
Revolving Credit Facility offset by payments of $99.0 million into the 2010
Revolving Credit Facility, principal payments on all of our credit facilities
of $10.6 million, payment of deferred financing fees of $4.1 million under the
2011 Credit Facility, STI Spirit Credit Facility and the 2010 Revolving Credit
Facility along with $2.9 million of costs related to the repurchase of our
common shares. Financing activity during the year ended December 31, 2010 was
driven from our initial public offering of $154.8 million and $150.0 million of
borrowings under the 2010 Revolving Credit Facility, which were offset by
principal payments of $4.8 million under the 2010 Revolving Credit Facility,
the repayment of $39.8 million under the 2005 Credit Facility, $2.6 million of
costs related to the repurchase of our common shares and the payment of
deferred financing fees of $2.2 million under the 2010 Revolving Credit
Facility.

Long-Term Debt Obligations and Credit Arrangements

2005 Credit Facility

Two
of our wholly-owned subsidiaries, Senatore Shipping Company Limited and Noemi
Shipping Company Limited, were joint and several borrowers under a loan
agreement dated May 17, 2005, or the 2005 Credit Facility, entered into
with The Royal Bank of Scotland plc, as lender, which was secured by, among
other things, a first preferred mortgage over each of Senatore and Noemi. The initial amount of the 2005 Credit Facility was
$56.0 million and consisted of two tranches, one for each vessel-owning
subsidiary. On April 9, 2010, we repaid the outstanding balance of $38.9 million
with a portion of the proceeds from our initial public offering.

2010 Revolving Credit Facility

On
June 2, 2010, we executed a credit facility with Nordea Bank Finland plc,
acting through its New York branch, DNB Bank ASA, acting through its New York
branch, and ABN AMRO Bank N.V, for a
senior secured term loan facility of up to $150 million. On July 12, 2011,
we amended and restated the credit facility to convert it from a term loan to a
reducing revolving credit facility. This gave us the ability to pay down and
re-borrow from the total available commitments under the loan.

In March, April and May 2012, we sold three of our Handymax vessels, STI
Conqueror for $21.0 million, STI Gladiator for $16.2
million, and STI Matador for $16.2 million. The availability of
the 2010 Revolving Credit Facility permanently decreased by $31.0 million as a
result of these vessel sales. Commitments
are now reduced by $3.1 million each quarter, with a lump sum reduction of
$39.9 million at the maturity on June 2, 2015. Our subsidiaries that own the
vessels that are collateralized by the 2010 Revolving Credit Facility act as
guarantors under the amended and restated credit facility. All terms
mentioned are defined in the agreement.

Drawdowns
under the credit facility bear interest as follows: (1) through December 29,
2011, at LIBOR plus an applicable margin of 3.00% per annum when our debt
to capitalization (total debt plus equity) ratio is equal to or less than 50%
and 3.50% per annum when our debt to capitalization ratio is greater than
50%; (2) from December 30, 2011 through September 30, 2013, at LIBOR plus an
applicable margin of 3.50% per annum; and (3) from October 1, 2013 and at
all times thereafter, at LIBOR plus an applicable margin of 3.25% per
annum when our debt to capitalization (total debt plus equity) ratio is equal
to or less than 50% and 3.50% per annum when our debt to capitalization
ratio is greater than 50%. A commitment fee equal to 40% of the applicable
margin is payable on the unused daily portion of the credit facility. The
credit facility matures on June 2, 2015 and can only be used to refinance
amounts outstanding from the original loan agreement and for general corporate
purposes.

The
credit facility requires that we comply with a number of covenants, including
financial covenants; delivery of quarterly and annual financial statements and
annual projections; maintaining adequate insurances; compliance with laws
(including environmental); compliance with ERISA; maintenance of flag and
class of the initial vessels; restrictions on consolidations, mergers or sales
of assets; approval on changes in the Manager of our initial vessels;
limitations on liens; limitations on additional indebtedness; prohibitions on paying
dividends if a covenant breach or an event of default has occurred or would
occur as a result of payment of a dividend; prohibitions on transactions with
affiliates; and other customary covenants.

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The
financial covenants require us to maintain:

|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | The
 ratio of net debt to capitalization no greater than 0.60 to 1.00.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | Consolidated
 tangible net worth no less than $150 million plus 25% of cumulative positive
 net income (on a consolidated basis) for each fiscal quarter beginning on
 July 1, 2010 and 50% of the value of any new equity issues from July 1, 2010
 going forward.                                                                                                                                                                                                                                                                                                                                                                             
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | The
 ratio of EBITDA to interest expense no less than 1.25 to 1.00 commencing with
 the fourth fiscal quarter of 2011 until the fourth quarter of 2012, at which
 point the ratio will increase to: (i) 1.50 to 1.00 for the first quarter of
 2013, (ii) 1.75 to 1.00 for the second quarter of 2013 and (iii) 2.00 at all
 times thereafter. Such ratio shall be calculated quarterly on a trailing four
 quarter basis. In addition, we are restricted from paying dividends until our
 EBITDA to interest expense ratio is 2.00 to 1.00 or greater. EBITDA, as
 defined in the loan agreement, excludes non-cash charges such as impairment.
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | Consolidated
 liquidity (cash, cash equivalents, and availability under the 2010 Revolving
 Credit Facility) not less than $25 million, of which unrestricted cash and
 cash equivalents shall be not less than $15.0 million, until we owns,
 directly or indirectly, more than 15 vessels, at which time the amount
 increases by $750,000 per each additional vessel.                                                                                                                                                                                                                                                                        
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | The
 aggregate fair market value of the collateral vessels shall at all times be
 no less than 150% of the then aggregate outstanding principal amount of loans
 under the credit facility.                                                                                                                                                                                                                                                                                                                                                                                                                                                     

In
December 2012, we raised net proceeds of $127.2 million from a registered
direct placement of common shares and as part of the use of proceeds of this
offering, we voluntarily repaid $50.0 million into our 2010 Revolving Credit
Facility.

As
of December 31, 2012 and
December 31, 2011 the outstanding balance was $17.2 million and $91.0 million,
respectively, and the amount available to be drawn was $67.4 million and $37.9
million, respectively. We were in compliance with the financial covenants
relating to this facility as of December 31, 2012.

STI Spirit Credit Facility

On
March 9, 2011, we executed a credit facility with DVB Bank SE for a senior
secured term loan facility of $27.3 million for STI Spirit, which was
acquired on November 10, 2010. The credit facility was drawn down on March 17,
2011 and matures on March 17, 2018. On September 28, 2011 and on December 30,
2011, we amended certain financial covenants contained in the credit facility.
The loan bears interest at LIBOR plus a margin of 2.75% per annum. The loan is
repayable over 28 equal quarterly installments and a lump sum payment at
maturity. The quarterly installments commenced three months after the drawdown
and were calculated using an 18 year amortization profile. Our subsidiary, STI
Spirit Shipping Company Limited, which owns the vessel, is the borrower and
Scorpio Tankers Inc. is the guarantor. The credit facility requires us to
comply with a number of covenants, including financial covenants; delivery of
quarterly and annual financial statements and annual projections; maintaining
adequate insurances; compliance with laws (including environmental); compliance
with ERISA; maintenance of flag and class of the vessel; restrictions on
consolidations, mergers or sales of assets; approval of changes in the Manager
of our vessels; limitations on liens; limitations on additional indebtedness;
prohibitions on paying dividends if a covenant breach or an event of default
has occurred or would occur as a result of payment of a dividend; prohibitions
on transactions with affiliates; and other customary covenants.

The
financial covenants of the credit facility are described below. On September
28, 2011, we executed an amendment modifying the EBITDA to interest expense financial
covenant. On December 30, 2011, we entered into a first amendatory agreement
modifying certain other financial covenants.

The
financial covenants require us to maintain:

|  |                                                                                                                                                          
|- | ---------------------------------------------------------------------------------------------------------------------------------------------------------
| | The
 ratio of debt to capitalization no greater than 0.60 to 1.00.                                                                                       
|  |                                                                                                                                                          
| | Consolidated tangible net worth no less than $150 million plus 25% of
 cumulative positive net income (on a consolidated basis) for each fiscal
 quarter.

67

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|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | The ratio of EBITDA to interest expense shall be no less than 1.25 to
 1.00 for the period commencing with the fourth quarter of 2011 through the
 fourth quarter of 2012, at which time it will increase to: (i) 1.50 to 1.00
 for the first quarter of 2013, (ii) 1.75 to 1.00 for the second quarter of
 2013 and (iii) 2.00 to 1.00 at all times thereafter. Such ratio shall be
 calculated quarterly on a trailing four quarter basis. In addition, we are
 restricted from paying dividends until our EBITDA to interest expense ratio
 is 2.00 to 1.00 or greater. EBITDA, as defined in the loan agreement,
 excludes non-cash charges such as impairment.
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| | Consolidated liquidity (cash, cash equivalents, and availability
 under the 2010 Revolving Credit Facility) not less than $25 million, of which
 unrestricted cash and cash equivalents shall be not less than $15.0 million,
 until we own, directly or indirectly, more than 15 vessels, at which time the
 amount increases by $750,000 per each additional vessel.                                                                                                                                                                                                                                                                                             
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| | The aggregate fair market value of STI
 Spirit not less than (i) 140% of the then outstanding loan balance
 if the vessel is operating in a pool or in the spot market or (ii) 130% of
 the then outstanding loan if the vessel is on time charter with a duration of
 at least one year.                                                                                                                                                                                                                                                                                                                                                                          

As
described above, our STI Spirit Credit Facility requires that the charter-free
market value of the STI Spirit
shall be no less than 140% of the then outstanding loan balance. In order to
stay in compliance with this covenant, we made prepayments of $0.8 million
in June, 2012, and $1.3 million in December 2012 which will be applied to the
next four quarterly payments.

As of
December 31, 2012 the outstanding balance on this facility was $23.4 million,
which includes a reduction for the prepayments discussed above. We were in
compliance with the financial covenants relating to this facility as of
December 31, 2012

2011 Credit Facility

On May 3,
2011, we executed a credit facility with Nordea Bank Finland plc, acting through
its New York branch, DNB NOR Bank ASA, acting through its New York branch, and
ABN AMRO Bank N.V., for a senior secured term loan facility of up to
$150 million. On September 22, 2011 and December 22, 2011 we amended the
loan agreement to extend the availability period and we amended the margin and
certain financial covenants. On July 20, 2012, we extended the availability
period of the 2011 Credit Facility until January 31, 2014 which was previously
scheduled to expire in May 2013. As a result of this amendment, we wrote-off
$3.0 million in deferred financing fees within Financial Expenses in our
consolidated financial statements attached hereto.

Borrowings
under this credit facility are available until January 31, 2014. Drawdowns
under the credit facility bear interest as follows: (1) until December 29,
2011, at LIBOR plus an applicable margin of (i) 2.75% per annum when our
debt to capitalization (total debt plus equity) ratio is less than 45%, (ii)
3.00% per annum when our debt to capitalization ratio is greater than or
equal to 45% but less than or equal to 50% and (iii) 3.25% when our debt to
capitalization ratio is greater than 50%; (2) from December 30, 2011 through
September 30, 2013, at LIBOR plus an applicable margin of 3.50% per annum and
(3) from October 1, 2013 and at all times thereafter, at LIBOR plus an
applicable margin of (i) 3.25% per annum when our debt to capitalization
(total debt plus equity) ratio is equal to or less than 50% and (ii)
3.50% per annum when our debt to capitalization ratio is greater than 50%.
A commitment fee equal to 40% of the applicable margin is payable on the unused
daily portion of the credit facility. The credit facility matures on May 3,
2017 and can only be used to finance up to 50% of the cost of future vessel
acquisitions, which vessels would be the collateral for the credit facility.

Borrowings
for each vessel financed under this facility represent a separate tranche, with
repayment terms dependent on the age of the vessel at acquisition. Each tranche
under the new credit facility is repayable in equal quarterly installments,
with a lump sum payment at maturity, based on a full repayment of such tranche
when the vessel to which it relates is sixteen years of age. Our subsidiaries,
which may at any time, own one or more of our vessels, will act as guarantors
under the credit facility.

The credit
facility requires us to comply with a number of covenants, including financial
covenants; delivery of quarterly and annual financial statements and annual
projections; maintaining adequate insurances; compliance with laws (including
environmental); compliance with ERISA; maintenance of flag and class of the
initial vessels; restrictions on

68

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consolidations, mergers or sales of assets; approvals on changes in the
Manager of our initial vessels; limitations on liens; limitations on additional
indebtedness; prohibitions on paying dividends if a covenant breach or an event
of default has occurred or would occur as a result of payment of a dividend;
prohibitions on transactions with affiliates; and other customary covenants.

|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  | The financial covenants require us to maintain:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | The ratio of net debt to capitalization no greater than 0.60 to 1.00.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | Consolidated tangible net worth not less than $150 million plus 25%
 of cumulative positive net income (on a consolidated basis) for each fiscal
 quarter from July 1, 2010 going forward and 50% of the value of any new
 equity issues from July 1, 2010 going forward.                                                                                                                                                                                                                                                                                                                                                                         
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | The ratio of EBITDA to interest expense not less than 1.25 to 1.00
 commencing with the fourth fiscal quarter of 2011 until the fourth quarter of
 2012, at which point it will increase to: (i) 1.50 to 1.00 for the first
 quarter of 2013, (ii) 1.75 to 1.00 for the second quarter of 2013 and (iii)
 2.00 to 1.00 at all times thereafter. Such ratio shall be calculated
 quarterly on a trailing four quarter basis. In addition, we are restricted
 from paying dividends until our EBITDA to interest expense ratio is 2.00 to
 1.00 or greater. EBITDA, as defined in the loan agreement, excludes non-cash
 charges such as impairment.
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | Consolidated liquidity (cash, cash equivalents, and availability
 under the 2010 Revolving Credit Facility) not less than $25 million, of which
 unrestricted cash and cash equivalents shall be not less than $15.0 million,
 until we own, directly or indirectly, more than 15 vessels, at which time the
 amount increases by $750,000 per each additional vessel.                                                                                                                                                                                                                                                                            
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | The aggregate fair market value of the collateral vessels shall at
 all times be no less than 150% of the then aggregate outstanding principal
 amount of loans under the credit facility.                                                                                                                                                                                                                                                                                                                                                                                                                                                        

In August
2012, we sold STI Diamond and in
September 2012, STI Coral for an
aggregate amount of $50.5 million. A portion of the proceeds from the sale of STI Coral was used to repay $16.1 million
of debt outstanding on the 2011 Credit Facility. STI Onyx, a newbuilding vessel which was delivered to us in
September 2012, was substituted as collateral under the 2011 Credit Facility on
the outstanding borrowings related to STI
Diamond.

The
outstanding balance on this facility at December 31, 2012 and December 31, 2011
was $15.5 million and $33.6 million, respectively. At December 31, 2012, there
was $115.0 million available for borrowing which may be used to finance up to
50% of future vessel acquisitions.

In January
2013, we drew down $17.0 million in connection with the delivery of the sixth
vessel in our Newbuilding Program, STI
Sapphire. In March 2013, we drew down $17.4 million in connection
with the delivery of the seventh vessel in our Newbuilding Program, STI Emerald. As of the date of this annual
report, there was $49.9 million outstanding under this facility and $80.6
million available for borrowing which can be used to finance up to 50% of
future vessel acquisitions.

We were in
compliance with the financial covenants relating to this facility as of
December 31, 2012.

Newbuilding Credit
Facility

On December
21, 2011, we executed a credit facility agreement with Credit Agricole
Corporate and Investment Bank and Skandinaviska Enskilda Banken AB for a senior
secured term loan facility of up to $92.0 million. During the year ended
December 31, 2012, we drew down an aggregate of $92.0 million from this
facility to partially finance the deliveries of STI Amber, STI Topaz, STI Ruby and STI Garnet ($23.0 million per vessel).
These vessels are owned individually by certain of our subsidiaries, who
together are the borrowers under this credit facility, and Scorpio Tankers Inc.
is the guarantor. Borrowings under the credit facility bear interest at LIBOR
plus an applicable margin of 2.70% per annum. A commitment fee equal to 1.10%
per annum is payable on the unused daily portion of the credit facility.

The
facility is separated into four tranches (one tranche per vessel) and the four
vessels are collateral for the credit facility. The repayment of the tranche
relating to the respective vessel commenced after delivery of that vessel in
quarterly installments of $375,000, which equates to a repayment
profile of 15.33 years. Each tranche is scheduled to mature approximately seven
years after delivery of the relevant vessel from the shipyard.

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The credit
facility requires us to comply with a number of covenants, including financial
covenants; delivery of quarterly and annual financial statements and annual
projections; maintaining adequate insurances; compliance with laws (including
environmental); compliance with ERISA; maintenance of flag and class of the
initial vessels; restrictions on consolidations, mergers or sales of assets;
approvals on changes in the Manager of our initial vessels; limitations on
liens; limitations on additional indebtedness; prohibitions on paying dividends
if a covenant breach or an event of default has occurred or would occur as a
result of payment of a dividend; prohibitions on transactions with affiliates;
and other customary covenants.

|  |                                                                                                                                                                                                                                                                                                                                                                        
|- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  | The financial covenants require us to maintain:                                                                                                                                                                                                                                                                                                                        
|  |                                                                                                                                                                                                                                                                                                                                                                        
| | The ratio of debt to capitalization no greater than 0.60 to 1.00.                                                                                                                                                                                                                                                                                                      
|  |                                                                                                                                                                                                                                                                                                                                                                        
| | Consolidated tangible net worth not less than $150 million plus 25%
 of cumulative positive net income (on a consolidated basis) for each fiscal
 quarter from July 1, 2010 going forward and 50% of the value of any new
 equity issues from July 2, 2010 going forward.                                                                                              
|  |                                                                                                                                                                                                                                                                                                                                                                        
| | The ratio of EBITDA to interest expense not less than 2.00 to 1.00
 commencing with the third fiscal quarter of 2011 until the fourth quarter of
 2012, and 2.50 to 1.00 for all times thereafter. Such ratio shall be
 calculated quarterly on a trailing four quarter basis. EBITDA, as defined in
 the loan agreement, excludes non-cash charges such as impairment.
|  |                                                                                                                                                                                                                                                                                                                                                                        
| | Unrestricted cash and cash equivalents not less than $15.0 million,
 until we owns, directly or indirectly, more than 15 vessels, at which time
 the amount increases by $750,000 per each additional vessel.                                                                                                                                                          
|  |                                                                                                                                                                                                                                                                                                                                                                        
| | The aggregate fair market value of the collateral vessels shall at
 all times not less than 140% (120% if the vessel is subject to acceptable
 long term employment) of the aggregate principal amount outstanding plus a
 pro rata amount of any allocable swap exposure for the credit facility.                                                                     

As of
December 31, 2012, the outstanding balance on this facility was $89.8 million
and the facility was fully drawn.

We
had no borrowings outstanding under this facility at December 31, 2011. We
were in compliance with the financial covenants relating to this facility as of
December 31, 2012.

2013 Credit Facility

In
February 2013, we signed a commitment letter for a $267.0 million credit
facility, or the 2013 Credit Facility, with Nordea Bank Finland plc, acting
through its New York branch, ABN AMRO Bank N.V, and Skandinaviska Enskilda
Banken AB.

The
2013 Credit Facility is expected to consist of a $114.0 million delayed draw
term loan facility and a $153.0 million revolving credit facility. The 2013
Credit Facility is expected to be secured by, among other things, a
first-priority cross-collateralized mortgage on certain vessels for which we
have entered into newbuilding contracts, or the Firm Vessels, and certain
vessels for which we may exercise construction options, or the Option Vessels,
and together with the Firm Vessels, the Collateral Vessels. Our subsidiaries
that own the Collateral Vessels are expected to act as joint and several
guarantors under the 2013 Credit Facility.

A single
drawdown of the term loan may occur in connection with the delivery of each
Firm Vessel in an amount equal to the lesser of 60% of (i) the loan amount
allocated for such vessel or (ii) its fair market value. The initial drawdown
of each revolving loan may occur in connection with the delivery of an Option
Vessel and is similarly capped at the lesser of 60% of the loan amount or fair
market value, with such amount, once drawn, available on a revolving basis.
Drawdowns under the term loan are expected to be available until January 31,
2015 and drawdowns under the revolving loan are expected to be available until July 31, 2015
and each will bear interest at LIBOR plus an applicable margin of 3.50%.

70

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Under the
terms outlined in the commitment letter, the term loan shall be repaid and the
revolving loans reduced, in each case, in an amount equal to 1/60th of such loan on a consecutive
quarterly basis until final maturity on the sixth anniversary of the facility.

In addition
to restrictions imposed upon the owners of the Collateral Vessels (such as,
limitations on liens and limitations on the incurrence of additional
indebtedness), the 2013 Credit Facility is expected to include financial
covenants that require us to maintain:

| |   |                                                                                                                                                                                                                                                                              
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | minimum liquidity of at least the greater of $25 million or 5% of
 total indebtedness;                                                                                                                                                                                       
| |   |                                                                                                                                                                                                                                                                              
| |  | a consolidated tangible net worth no less than (i) $150 million
 plus 25% of cumulative positive net income (on a consolidated basis) for each
 fiscal quarter beginning on July 1, 2010 and (ii) 50% of the value of
 any new equity issues from July 1, 2010 going forward.
| |   |                                                                                                                                                                                                                                                                              
| |  | a ratio of net debt to total capitalization no greater than 0.60 to
 1.00.                                                                                                                                                                                                   
| |   |                                                                                                                                                                                                                                                                              
| |  | a ratio of EBITDA to net interest expense greater than 2.00 to 1.00
 through September 30, 2013 and 2.50 to 1.00 thereafter.                                                                                                                                                 
| |   |                                                                                                                                                                                                                                                                              
| |  | the aggregate fair market value of the Collateral Vessels shall at
 all times be no less than 140% of the then aggregate outstanding principal
 amount of loans under the credit facility.                                                                                   

Our ability
to close the 2013 Credit Facility and our ability to draw down on the facility
are each subject to usual and customary conditions precedent, including the
negotiation and execution of final documentation.

Derivative Contracts

Interest Rate Swaps

In August
2011, we entered into six interest rate swap agreements with three different
banks to manage the interest costs and the risk associated with changing
interest rates on our 2010 Revolving Credit Facility and 2011 Revolving Credit
Facility. The notional amount of the swaps relating to the 2010 Revolving
Credit Facility is $51.0 million with an average fixed rate of 1.27%
starting on July 2, 2012 and expiring on June 2, 2015. The notional amount of
the swaps relating to the 2011 Credit Facility was $24.0 million with an
average fixed rate of 1.30% starting on July 2, 2012 and expiring on
June 30, 2015.

In August
and September 2012, we completed the sales of STI
Coral and STI Diamond,
respectively and as a result, we reduced the notional amount on the interest
rate swaps relating to the 2011 Credit Facility to $15.0 million from $24.0
million in aggregate. As a result of the reduction, we recognized a
loss of $0.2 million which was reclassified out of other comprehensive loss
into the statement of profit or loss and recorded as a component of loss on
sale of vessels.

In December
2012, we raised net proceeds of $127.2 million from a registered direct
placement of common shares and as part of the use of proceeds of this offering,
we voluntarily repaid $50.0 million into our 2010 Revolving Credit Facility. After
the payment, we had $17.2 million of debt outstanding under the 2010 Revolving
Credit Facility, which is less than the total notional amount of $51.0 million
for the three interest rate swaps related to the facility. As such, the swaps
related to the 2010 Revolving Credit Facility no longer met the criteria for
hedge accounting and we therefore de-designated the hedge relationship
prospectively and reclassified all amounts accumulated in other comprehensive
income ($1.0 million) to the statement of profit or loss for the year ended
December 31, 2012 as a component of Financial Expenses.

The
interest rate swaps relating to the 2011 Credit Facility continue to qualify
for hedge accounting. Hedge effectiveness is measured quarterly. Accordingly,
changes in their fair value, which the hedge is deemed to be effective, are
recognized directly in other comprehensive income and classified as hedging
reserves. Changes in their fair value for
any portion deemed to be ineffective are recognized in the consolidated
statement of profit or loss. The fair market value of the interest rate swaps
relating to both the 2010 Revolving Credit Facility and 2011 Credit Facility at
December 31, 2012 and December 31, 2011 was a liability of $1.4 million and $0.7
million, respectively.

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Profit or loss
sharing agreements

In
July 2012, we entered into a profit or loss sharing arrangement on the earnings
of an LR1 vessel that is not owned or operated by us. Under the agreement, 50%
of the profits and losses will be shared with the counterparty. The
counterparty to this agreement was time chartering-in this vessel for a period
of six months at $12,750 per day and this agreement expired in January 2013.

In
September 2012, we took delivery of an LR1, FPMC
P Eagle, on a time charter-in arrangement for one year at $12,800
per day. We also entered into a profit and loss sharing arrangement whereby 50%
of the profits and losses relating to this vessel above or below the
charterhire rate will be shared with a third party that neither owns nor
operates this vessel.

These
agreements are being treated as derivatives, recorded at fair value with any
resultant gain or loss recognized in the statement of profit or loss. Changes
in fair value are recorded as unrealized gains and losses on derivative
financial instruments and actual earnings are recorded as earnings from profit
or loss agreements, within the consolidated statement of profit or loss. The
fair value of instrument is determined by comparing published time charter
rates to the charterhire rate and discounting those cash flows to their
estimated present value.

For the
year ended December 31, 2012, we recognized earnings of $0.4 million and an
unrealized loss of $0.2 million. There were no similar arrangements in 2011.

Equity

On April 6,
2010, we closed the issuance of 12,500,000 shares of common stock at $13.00 per
share in our initial public offering and received net proceeds of $149.6
million, after deducting underwriters discounts and offering expenses.

On May 4,
2010, pursuant to the underwriters exercise of their over-allotment option
that we granted in connection with our initial public offering, we closed the
issuance of 450,000 shares of common stock at $13.00 and received $5.2 million,
after deducting underwriters discounts.

On November
22, 2010, we closed on a follow-on public offering of 4,575,000 shares of
common stock at $9.80 per share. After deducting underwriters discounts and
paying offering expenses, the net proceeds were $41.8 million, and 510,204
shares were issued in a concurrent private placement to a member of the
Lolli-Ghetti family for total proceeds of $5.0 million. On December 2, 2010, we
closed the issuance of 686,250 shares of common stock at $9.80 and received
$6.4 million, after deducting underwriters discounts, when the underwriters in
our follow-on public offering fully exercised their over-allotment option.

On May 18,
2011, we closed on a follow-on public offering of 6,000,000 shares of common
stock and also closed on the underwriters over-allotment option to purchase
900,000 additional common shares at an offering price of $10.50 per share. We
received net proceeds of $68.5 million, after deducting underwriters discounts
and offering expenses.

On December
6, 2011, we closed on a follow-on public offering of 7,000,000 shares of common
stock at an offering price of $5.50 per share. We received net proceeds of
$36.5 million, after deducting underwriters discounts and estimated offering
expenses.

In April
2012, we closed on the sale of 4,000,000 shares of common stock in a registered
direct placement of common shares at an offering price of $6.75 per share. We
received net proceeds of $25.9 million, after deducting the placement agents
discount and offering expenses.

In December
2012, we closed on the sale of 21,639,774 shares of common stock in a
registered direct placement of common shares at an offering price of $6.10 per
share. We received net proceeds of $127.2 million, after deducting the
placement agents discount and offering expenses.

72

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In February
2013, we closed on the sale 30,672,000 shares of common stock in a registered
direct placement of common shares at an offering price of $7.50 per share. We
received net proceeds of $222.1 million, after deducting placement agents discounts
and offering expenses.

In March 2013, we closed on the sale 29,012,000 shares of common stock in a registered
direct placement of common shares at an offering price of $8.10 per share. We
received net proceeds of $226.7 million, after deducting placement agents
discounts and offering expenses.

CAPITAL EXPENDITURES

Vessel acquisitions

Since June
2011, we have entered into agreements to construct 40 fuel efficient newbuilding
product tankers with shipyards including HMD, SPP, HSHI and DSME,
which we refer to as our Newbuilding Program. As of the date of this annual
report, seven of the vessels in our Newbuilding Program have been delivered to
us. We currently have contracts for the construction of 33 vessels, consisting
of 11 MR product tankers with HMD for an aggregate purchase price of $368.6
million, eight MR product tankers with SPP for an aggregate purchase price of
$267.0 million, six Handymax ice class-1A tankers with HMD for an aggregate
purchase price of $187.5 million, six LR2 product tankers with HSHI for an
aggregate purchase price of $303.0 million and two LR2 product tankers with
DSME for an aggregate purchase price of $100.0 million.

One
of the vessels in our Newbuilding Program is expected to be delivered to us by
April 2013 and the remaining 32 within 2014.

We
made $152.5 million of instalment payments during the first quarter of 2013,
which includes $44.2 million in aggregate for the delivery
instalment payments on STI Sapphire in January 2013 and STI Emerald
in March 2013. Our remaining commitments under all
newbuilding vessel agreements as of the date of this report, including the
above mentioned vessels are as follows*:

|         |  |   |         |  |  |         | 
|-------- |  | - | ------- |  |  | ------- | 
|Q2
 2013 |  | $ | 41.6    |  |  | million | 
|Q3
 2013 |  |   | 114.3   |  |  | million | 
|Q4
 2013 |  |   | 74.1    |  |  | million | 
|Q1
 2014 |  |   | 77.6    |  |  | million | 
|Q2
 2014 |  |   | 302.0   |  |  | million | 
|Q3
 2014 |  |   | 241.0   |  |  | million | 
|Q4
 2014 |  |   | 250.9   |  |  | million | 
|Total    |  | $ | 1,101.5 |  |  | million | 

*These
are estimates only and are subject to change as construction progresses.

As
of the date of this annual report, we have paid $124.7 million of installment
payments related to the newbuilding product tankers that we have contracted to
purchase, and are committed to make additional installment payments of $1,101.5
million. We will
need to secure additional debt or equity financing or both in addition to our
2013 Credit Facility to fully fund the remaining balance of our newbuilding
obligations.

Vessel disposals

We sold
three Handymax vessels in 2012, STI Conqueror for $21.0 million in March
2012, STI
Matador for $16.2 million in April 2012, and STI Gladiator for $16.2
million in May 2012, and recorded a $4.5 million loss in connection with the
sales of these vessels and the availability of the 2010 Revolving Credit
Facility decreased by $31.0 million.

We also
completed the sales of two MR product tankers, STI Diamond and STI Coral,
in August 2012 and September 2012, respectively, for $25.25 million each, and
recorded a $5.9 million loss in connection with the sales of these vessels. A
portion of the proceeds from the sale of STI
Coral was used to repay $16.1 million under our 2011 Credit
Facility. STI Onyx, a newbuilding vessel which was delivered to us in
September 2012, was substituted as collateral under our 2011 Credit Facility on our outstanding borrowings related to
the STI
Diamond. Please see  Liquidity and Capital Resources  Long Term
Debt Obligations and Credit Arrangements  2011 Credit Facility.

73

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Drydock

During
2012, we drydocked two of our owned vessels, STI HeritageandSTI Spirit
for an aggregated drydock cost of $2.9 million and a total of 38 off-hire days.

As our
fleet matures and expands, our drydock expenses will likely increase. Ongoing
costs for compliance with environmental regulations and society classification
survey costs are a component of our vessel operating costs. We are not
currently aware of any regulatory changes or environmental liabilities that we
anticipate will have a material impact on our results of operations or
financial condition.

Dividends

We do not
have immediate plans to pay dividends, but we will continue to assess our
dividend policy. In the future, our board of directors may determine to pay
dividends.

Share Buy-Back

On July 9,
2010, the board of directors authorized a share buyback program of up to $20
million. As of December 31, 2012, we have purchased $7.9 million of shares in
the open market at an average price of $6.78. See Item 16E for further
information.

|   |                                                      
|-- | -----------------------------------------------------
|C. | Research and Development, Patents and
 Licenses, Etc.
|   |                                                      
|   | Not applicable.                                      
|   |                                                      
|D. | Trend Information                                    
|   |                                                      
|   | See Item 4.B. The International Tanker Industry.   
|   |                                                      
|E. | Off-Balance Sheet Arrangements                       

As of
December 31, 2012, we were committed to make charter-hire payments to third
parties for certain chartered-in vessels. These arrangements are accounted for
as operating leases. Additionally, we are committed to make payments on our
newbuilding vessel orders. See Item 5.B.  Liquidity and Capital Resources
for further information.

|   |                                               
|-- | ----------------------------------------------
|F. | Tabular Disclosure of Contractual
 Obligations

The
following table sets forth our total contractual obligations at December 31,
2012:

|                                            |  |                   |         |               |   |               |  |                    |        |  |   |        | 
|------------------------------------------- |  | ----------------- | ------- | ------------- | - | ------------- |  | ------------------ | ------ |  | - | ------ | 
|Amounts
in thousands of US dollars          |  | Less than
 1 year |         | 1 to 3
 years |   | 3 to 5
 years |  | More than
 5 years |       
|                                            |  |                   |         |               |   |               |  |                    |        |  |   |        | 
|Bank
 loan(1)                               |  | $                 | 7,608   |               | $ | 34,974        |  | $                  | 26,446 |  | $ | 76,913 | 
|Estimated
 interest payments(2)             |  |                   | 5,662   |               |   | 10,010        |  |                    | 7,374  |  |   | 3,491  | 
|Interest
 rate swap derivative contracts(3) |  |                   | 635     |               |   | 748           |  |                    |       |  |   |       | 
|Bank
 loan - commitment fees(4)             |  |                   | 2,516   |               |   | 1,094         |  |                    |       |  |   |       | 
|Time
 charter-in commitments(5)             |  |                   | 62,612  |               |   | 23,771        |  |                    |       |  |   |       | 
|Technical
 management fees(6)               |  |                   | 1,156   |               |   | 263           |  |                    |       |  |   |       | 
|Commercial
 management fees(7)              |  |                   |        |               |   |              |  |                    |       |  |   |       | 
|Newbuilding
 installments (8)               |  |                   | 157,149 |               |   | 173,575       |  |                    |       |  |   |       | 
|Total                                       |  | $                 | 237,338 |               | $ | 244,435       |  | $                  | 33,820 |  | $ | 80,404 | 

74

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| |     |                                                                                                                                                                                                                         
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (1) | Represents principal payments due on our 2010 Revolving Credit
 Facility, 2011 Credit Facility, STI Spirit Credit Facility and Newbuilding
 Credit Facility based on our outstanding borrowings as of December 31, 2012.
|
| | (2) | Represents estimated interest payments on the variable portion of our
 credit facilities:                                                                                                                               

| |  |   |                                                                                                                                                                                                                                                                                                                                                                                                                          
| |  | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  |  | For the 2010 Revolving Credit Facility, we used a weighted average of
 the 2 year and 3 year interest swap rates of 0.43% (as published by the US
 Federal Reserve as of December 31, 2012) plus a margin of 3.50%, which is the
 margin for the 2010 Revolving Credit Facility. We used a weighted average of
 the 2-year and 3-year interest swap rates to reflect the maturity date of
 this facility of June 2, 2015.
|
| |  |  | For the 2011 Credit Facility, we used a weighted average of the 4-year
 and 5-year interest swap rates of 0.73% (as published by the US Federal
 Reserve as of December 31, 2012) plus a margin of 3.50%, which is the margin
 for the 2011 Credit Facility. We used the weighted average of the 4-year and
 5-year interest swap rates to reflect the maturity date of this facility of
 May 3, 2017.                   
|
| |  |  | For the STI Spirit Credit Facility, we used a weighted average of the
 5-year and 7-year interest swap rates of 0.88% (as published by the US
 Federal Reserve as of December 31, 2012) plus a margin of 2.75%, which is the
 margin for the STI Spirit Credit Facility. We used the weighted average of
 the 5-year and 7-year interest swap rates to reflect the maturity date of
 this facility of March 17, 2018.    
|
| |  |  | For the Newbuilding Credit Facility, we used a weighted average of
 the 5-year and 7-year interest swap rates of 1.208% (as published by the US
 Federal Reserve as of December 31, 2012) plus a margin of 2.70%, which is the
 margin for our Newbuilding Credit Facility. We used the weighted average of
 the 5-year and 7-year interest swap rates to reflect the maturity date of
 this facility of June 30, 2019.  

| |     |                                                                 
| | --- | ----------------------------------------------------------------
| | (3) | Represents estimated payments due under our interest rate swaps:

| |  |   |                                                                                                                                                                                                                                                                                                                                                                                                                                
| |  | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  |  | The three swaps relating to the 2010 Credit Facility with a total
 notional amount of $51.0 million carry an average fixed interest rate of
 1.27% during the time period the swap is outstanding (January 1, 2013 through
 June 2, 2015). The payments due were estimated by offsetting the fixed
 payments against the estimated interest received using the forward swap curve
 at December 31, 2012 for each of the swaps. 
|
| |  |  | The three swaps relating to the 2011 Credit Facility with a total
 notional amount of $15.0 million carry an average fixed interest rate of
 1.30% during the time period the swap is outstanding (January 1, 2013 through
 June 30, 2015). The payments due were estimated by offsetting the fixed
 payments against the estimated interest received using the forward swap curve
 at December 31, 2012 for each of the swaps.

| |     |                                                                                                                                                                                                                                                                                                                                                                                           
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (4) | A commitment fee equal to 40% of the applicable margin is payable on
 the unused daily portion of our 2010 Revolving Credit Facility and 2011
 Credit Facility. The STI Spirit Credit Facility and Newbuilding Credit
 Facility were fully drawn as of December 31, 2012.                                                                                                                 
|
| | (5) | Represents amounts due under our time charter-in arrangements as of
 December 31, 2012.                                                                                                                                                                                                                                                                                                   
|
| | (6) | We pay our technical manager, SSM, $548 per day per owned vessel.                                                                                                                                                                                                                                                                                                                         
|
| | (7) | We pay our commercial manager, SCM, $250 per day for owned Aframax/LR2
 and LR1 vessels and $300 per day for owned MR and Handymax vessels plus 1.25%
 of gross revenue for vessels that are not in a pool. As of December 31, 2012,
 all our owned vessels were operating in the pools. See Item 7.B., Related
 Party Transactions for changes to these fees effective January 1, 2013.
|
| | (8) | Represents obligations under our agreements with HMD and SPP for the
 construction of eleven newbuilding vessels, as of December 31, 2012.                                                                                                                                                                                                                                                

|   |                                                                                                         
|-- | --------------------------------------------------------------------------------------------------------
|G. | Safe Harbor                                                                                             
|   |                                                                                                         
|   | See Cautionary Statement Regarding Forward-Looking Statements at
 the beginning of this annual report.

CRITICAL JUDGEMENTS AND KEY SOURCES OF
ESTIMATION UNCERTAINTY

In the
application of the accounting policies, we are required to make judgments,
estimates and assumptions about the carrying amounts of assets and liabilities
that are not readily apparent from other sources. The estimates and associated
assumptions are based on historical experience and other factors that are
considered to be relevant. Actual results may differ from these estimates.

75

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The
estimates and underlying assumptions are reviewed on an ongoing basis.
Revisions to accounting estimates are recognized in the period in which the
estimate is revised if the revision affects only that period, or in the period
of the revision and future periods if the revision affects both current and
future periods.

The
significant judgments and estimates are as follows:

Revenue recognition

We
currently generate all revenue from vessels operating in pools or in the spot
market. From time to time we also employ our vessels on time charters. Revenue
recognition for time charters and pools is generally not as complex or as
subjective as voyage charters (spot voyages). Time charters are for a specific
period of time at a specific rate per day. For long-term time charters, revenue
is recognized on a straight-line basis over the term of the charter. Pool
revenues are determined by the pool managers from the total revenues and
expenses of the pool and allocated to pool participants using a mechanism set
out in the pool agreement.

We
generated revenue from spot voyages during the year ended December 31, 2012.
Within the shipping industry, there are two methods used to account for spot voyage
revenue: (1) ratably over the estimated length of each voyage or (2) completed
voyage. The recognition of voyage revenues ratably over the estimated length of
each voyage is the most prevalent method of accounting for voyage revenues and
the method used by us. Under each method, voyages may be calculated on either a
load-to-load or discharge-to-discharge basis. In applying our revenue
recognition method, we believe that the discharge-to-discharge basis of
calculating voyages more accurately estimates voyage results than the
load-to-load basis. In the application of this policy, we do not begin
recognizing revenue until (i) the amount of revenue can be measured reliably,
(ii) it is probable that the economic benefits associated with the transaction
will flow to the entity, (iii) the transactions stage of completion at the
balance sheet date can be measured reliably and (iv) the costs incurred and the
costs to complete the transaction can be measured reliably.

Vessel impairment

We evaluate
the carrying amounts of our vessels to determine whether there is any
indication that those vessels have suffered an impairment loss. If any such
indication exists, the recoverable amount of vessels is estimated in order to
determine the extent of the impairment loss (if any).

Recoverable
amount is the higher of fair value less costs to sell and value in use. In
assessing value in use, the estimated future cash flows are discounted to their
present value using a pre-tax discount rate that reflects current market
assessments of the time value of money and the risks specific to the asset for
which the estimates of future cash flows have not been adjusted. The projection
of cash flows related to vessels is complex and requires us to make various
estimates including future freight rates, earnings from the vessels and
discount rates. All of these items have been historically volatile. As part of
our process of assessing the fair value less cost to sell of the vessel, we
obtain vessel valuations from leading, independent and internationally
recognized ship brokers on an annual basis or when there is an indication that
an asset or assets may be impaired. If an indication of impairment is
identified, the need for recognising an impairment loss is assessed by comparing
the carrying amount of the vessels to the higher of the fair value less cost to
sell and the value in use. Likewise, if there is an indication that an
impairment loss recognized in prior periods no longer exists or may have
decreased, the need for recognizing an impairment reversal is assessed by
comparing the carrying amount of the vessels to the latest estimate of
recoverable amount.

At December
31, 2012, the carrying amounts of all our vessels were greater than their fair
values less costs to sell (determined by taking into consideration two
independent broker valuations) which served as indicators of impairment. In
line with our policy, for each vessel we performed a value in use calculation
where we estimated the vessels future cash flows based on a combination of the
latest, published, forecast time charter rates for the next three years, a
steady growth rate in freight rates in each period thereafter which is based on
managements long-term view of the market, and our best estimate of vessel
operating expenses and drydock costs. These cash flows were then discounted to
their present value, using a pre-tax discount rate based on our current
borrowing rates adjusted for certain credit risks. The value in use
calculations were greater than the carry amounts of the vessels in all
instances, which resulted in no impairment being recognized in 2012.

76

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Vessel lives and residual value

The
carrying value of each of our vessels represents its original cost at the time
it was delivered or purchased less depreciation and impairment. We depreciate
our vessels to their residual value on a straight-line basis over their
estimated useful lives. Effective April 1, 2010, we revised the estimated
useful life of our vessels from 20 years to 25 years from the date of initial
delivery from the shipyard. The estimated useful life of 25 years is
managements best estimate and is also consistent with industry practice for
similar vessels. The residual value is estimated as the lightweight tonnage of
each vessel multiplied by a forecast scrap value per ton. The scrap value per
ton is estimated taking into consideration the historical four year scrap
market rate average at the balance sheet date.

An
increase in the estimated useful life of a vessel or in its scrap value would
have the effect of decreasing the annual depreciation charge and extending it
into later periods. A decrease in the useful life of a vessel or scrap value
would have the effect of increasing the annual depreciation charge.

When
regulations place significant limitations over the ability of a vessel to trade
on a worldwide basis, the vessels useful life is adjusted to end at the date
such regulations become effective. The estimated salvage value of the vessels may
not represent the fair market value at any one time since market prices of
scrap values tend to fluctuate.

Deferred drydock cost

We
recognize drydock costs as a separate component of the vessels carrying
amounts and amortize the drydock cost on a straight-line basis over the
estimated period until the next drydock. We use judgment when estimating the
period between drydocks performed, which can result in adjustments to the
estimated amortization of the drydock expense. If the vessel is disposed of
before the next drydock, the remaining balance of the deferred drydock is
written-off and forms part of the gain or loss recognized upon disposal of
vessels in the period when contracted. We expect that our vessels will be
required to be drydocked approximately every 30 to 60 months for major
repairs and maintenance that cannot be performed while the vessels are
operating. Costs capitalized as part of the drydock include actual costs
incurred at the drydock yard and parts and supplies used in making such
repairs. We only include in deferred drydocking costs those direct costs that
are incurred as part of the drydocking to meet regulatory requirements, or are
expenditures that add economic life to the vessel, increase the vessels
earnings capacity or improve the vessels efficiency. Direct costs include
shipyard costs as well as the costs of placing the vessel in the shipyard.
Expenditures for normal maintenance and repairs, whether incurred as part of
the drydocking or not, are expensed as incurred.

|        |                                           
|------- | ------------------------------------------
|ITEM 6. | DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES

|   |                                
|-- | -------------------------------
|A. | Directors and Senior Management

Set forth below are the names, ages and positions of our directors and
executive officers. Our board of directors is elected annually, and each
director elected holds office for a three-year term or until his successor
shall have been duly elected and qualified, except in the event of his death,
resignation, removal or the earlier termination of his term of office. The term
of office of each director is as follows: One will serve for a term expiring at
the 2013 annual meeting of shareholders, two will serve for a term expiring at
the 2014 annual meeting of the shareholders and two will serve for a term
expiring at the 2015 annual meeting of shareholders. Officers are elected from
time to time by vote of our board of directors and hold office until a
successor is elected. The business address for each director and executive
officer is the address of our principal executive office which is Scorpio
Tankers Inc., 9, Boulevard Charles III, Monaco 98000.

Messrs. Lauro and Bugbee, our Chief Executive Officer and President,
respectively, participate in business activities not associated with us. As a
result, Messrs. Lauro and Bugbee may devote less time to us than if they were
not engaged in other business activities and may owe fiduciary duties to the
shareholders of both us as well as shareholders of other companies which they
may be affiliated, including other Scorpio Group companies. This may create
conflicts of interest in matters involving or affecting us and our customers
and it is not certain that any of these conflicts of interest will be resolved
in our favor. While there will be no formal requirements or guidelines for the
allocation of Messrs. Lauros and Bugbees time between our business and the
business of members of the Scorpio Group, Messrs. Lauros and Bugbees
performance of their duties will be subject to the ongoing oversight of our
board of directors.

77

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|                    |  |     |  |                                                         
|------------------- |  | --- |  | --------------------------------------------------------
|Name                |  | Age |  | Position                                                
|Emanuele A. Lauro   |  | 34  |  | Chairman, Class I
 Director, and Chief Executive Officer
|Robert Bugbee       |  | 52  |  | President and Class II
 Director                        
|Brian Lee           |  | 46  |  | Chief Financial Officer                                 
|Cameron Mackey      |  | 44  |  | Chief Operating Officer                                 
|Luca Forgione       |  | 36  |  | General Counsel                                         
|Sergio Gianfranchi  |  | 68  |  | Vice President, Vessel
 Operations                      
|Alexandre Albertini |  | 36  |  | Class III Director                                      
|Ademaro Lanzara     |  | 69  |  | Class I Director                                        
|Donald C. Trauscht  |  | 78  |  | Class II Director                                       

Biographical
information with respect to each of our directors and executive officers is set
forth below.

Emanuele
A. Lauro, Chairman & Chief Executive
Officer

Emanuele A. Lauro, our founder,
has served as Chairman and Chief Executive Officer since our initial public offering in April 2010. He joined Scorpio Group
in 2003 and has continued to serve there in a senior management position since 2004. Under Mr. Lauros leadership,
Scorpio Group has grown from an owner of three vessels in 2003 to become a leading operator and manager of over 100 vessels
in 2013. Over the course of the last years, Mr. Lauro has founded and developed all of the Scorpio Group Tanker Pools in
addition to several other ventures such as Scorpio Logistics in 2007, which owns and operates specialized assets engaged in
the transshipment of coal and invests in coastal transportation and port infrastructure developments and Scorship Navigation
in 2005, which engages in the identification, placement, and management of certain international shipping investments on
behalf of retail investors in Europe. Mr. Lauro has a degree in international business from the European Business School,
London. He currently serves as non-executive director in various international companies and trade organizations.

Robert
Bugbee, President and Director

Robert
Bugbee, has more than 25 years of experience in the shipping industry and has
served as President since our initial public offering in April 2010. He joined
Scorpio Group in February 2009 and has continued to serve there in senior
management. Prior to joining Scorpio Group, Mr. Bugbee was a partner at Ospraie
Management LLP between 2007 and 2008, a company which advises and invests in
commodities and basic industry. From 1995 to 2007, Mr. Bugbee was employed at
OMI Corporation, or OMI, a NYSE-listed tanker company sold in 2007. While at
OMI, Mr. Bugbee most recently served as President from January 2002 until the
sale of the company, and he previously served as Executive Vice President since
January 2001, Chief Operating Officer since March 2000 and Senior Vice
President of OMI from August 1995 to June 1998. Mr. Bugbee joined OMI in
February 1993. Prior to this, he was employed by Gotaas-Larsen Shipping
Corporation since 1984. During this time he took a two year sabbatical from
1987 for the M.I.B. Programme at the Norwegian School for Economics and Business
administration in Bergen. He has a Fellowship from the International
Shipbrokers Association and a B.A. (Honors) from London University.

Brian
Lee, Chief Financial Officer

Brian
Lee has served as Chief Financial Officer since our initial public offering in
April 2010. He joined Scorpio Group in April 2009 where he continues to serve
in a senior management position. He has been employed in the shipping industry
since 1998. Prior to joining Scorpio Group, he was the Controller of OMI Corporation
from 2001 until the sale of the company in 2007. Mr. Lee has a M.B.A. from the
University of Connecticut and has B.S. in Business Administration from the
University at Buffalo, State University of New York.

Cameron
Mackey, Chief Operating Officer

Cameron
Mackey, has served as Chief Operating Officer since our initial public offering
in April 2010. He joined Scorpio Group in March 2009, where he continues to
serve in a senior management position. Prior to joining Scorpio Group, he was
an equity and commodity analyst at Ospraie Management LLC from 2007-2008. Prior
to that, he was Senior Vice President of OMI Marine Services LLC from 2004-2007
and in Business Development at OMI Corporation from 2002-2004. He has been
employed in the shipping industry since 1994 and, earlier in his career, was
employed in unlicensed and licensed positions in the merchant navy, primarily
on tankers in the international fleet of Mobil Oil Corporation,
where he held the qualification of Master Mariner. He has an M.B.A. from the
Sloan School of Management at the Massachusetts Institute of Technology, a B.S.
from the Massachusetts Maritime Academy and a B.A. from Princeton University.

78

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Luca
Forgione, General Counsel

Luca
Forgione, has served as General Counsel since our initial public offering in
April 2010. He joined Scorpio Group in August 2009 where he continues to serve
as General Counsel. He is licensed as a lawyer in his native Italy and as a
Solicitor of the Supreme Court of England & Wales. Mr. Forgione has eight
years of shipping industry experience and has worked in the fields of shipping,
offshore logistics, commodity trading and energy since the beginning of his
in-house career, most recently with Constellation Energy Commodities Group Ltd.
in London, which is part of Constellation Energy Group Inc. listed on the NYSE
under CEG, from 2007 to 2009, and previously with Coeclerici S.p.a. in Milan
from 2004 to 2007. He has experience with all aspects of the supply chain of
drybulk and energy commodities (upstream and downstream), and has developed
considerable understanding of the regulatory and compliance regimes surrounding
the trading of physical and financial commodities as well as the owning,
managing and chartering of vessels. Mr. Forgione was a Tutor in International
Trade Law and Admiralty Law at University College London (U.K.) and more
recently a Visiting Lecturer in International Trade Law at Kings College
(U.K.). He has a Masters Degree in Maritime Law from the University of
Southampton (U.K.) and a Law Degree from the University of Genoa (Italy).

Sergio
Gianfranchi, Vice President, Vessel
Operations

Sergio
Gianfranchi, has served as Vice President of Vessel Operations since our
initial public offering in April 2010. He served as Operations Manager of our
technical manager, SSM, at its headquarters in Monaco from 2002 to 2004. He has
been instrumental in launching and operating the Scorpio Group Pools during the
last five years, and was employed as the Fleet Manager of SCM, the Scorpio
Group affiliate that manages the commercial operations of approximately 50
vessels grouped in the three Scorpio Group Pools, from 2007 to 2009. Mr.
Gianfranchi is currently employed as the Pool Fleet Manager of SCM. From 1999
to 2001, Mr. Gianfranchi served as the on-site owners representative of the
Scorpio Group affiliates named Doria Shipping, Tristan Shipping, Milan Shipping
and Roma Shipping, to survey the construction of their Panamax and Post-Panamax
newbuilding tankers being built at the 3Maj Shipyard in Rijeka, Croatia. When
Mr. Gianfranchi joined SSM in 1989, he began as vessel master of its OBOs
(multipurpose vessels that carry ore, heavy drybulk and oil). Upon obtaining
his Master Mariner License in 1972, he served until 1989 as a vessel master
with prominent Italian shipping companies, including NAI, which is the largest
private Italian shipping company and owned by the Lolli-Ghetti family, and
Almare, initially a subsidiary of NAI but later controlled by Finmare, the
Italian state shipping financial holding company. In this position he served
mostly on OBOs, tankers and drybulk carriers. He graduated from La Spezia
Nautical Institute in Italy in 1963.

Alexandre
Albertini, Director

Alexandre
Albertini has more than 10 years of experience in the shipping industry. He has
been employed by Marfin Management SAM, a drybulk ship management company,
since 1997 and has served as Managing Director there since 2009, working in
fields related to crew and human resources, insurance, legal, financial,
technical, commercial, and information technology. He is a director of eight
drybulk ship owning companies and serves as President of Ant. Topic srl, a
vessel and crewing agent based in Italy. The aggregate valuation of the drybulk
shipping companies for which Mr. Albertini serves as a Secretary or director is
approximately $300 million. In 2008, Mr. Albertini was elected as a member of
the Executive Committee of InterManager. He is a founding member of the Chamber
of Shipping of Monaco and has served as its Secretary General since 2006. Mr.
Albertini also holds various board positions in several other local business
and associations.

Ademaro
Lanzara, Director

Ademaro
Lanzara has served as the Chairman of BPV Finance (International) Plc Dublin, a
subsidiary of Banca Popolare di Vicenza, Italy, since 2008. He has also served
as the deputy Chairman and Chairman of the Audit Committee of Cattolica Life
Inc. Dublin since 2011 and Chairman of BPVI Fondi Sgr SpA, Milano since April
2012. From 1963 to 2006, Mr. Lanzara held a number of positions with BNL spa
Rome, a leading Italian banking group, including acting as the Chairman of the
Credit Committee, Chairman of the Finance Committee and Deputy CEO. He was also
a director of Istituto
dellEnciclopedia Italiana fondata da Giovanni Treccani Spa, Rome. He also
served as Chairman and/or director of a number of BNL controlled banks or
financial companies in Europe, the United States and South America. He formerly
served as a director of each of the Institute of International Finance Inc. in
Washington DC, Compagnie Financiere Edmond de Rothschild Banque, in Paris,
France, ABIItalian Banking Association in Rome, Italy, FITDInterbank deposit
Protection Fund, in Rome, Italy, ICC International Chamber of Commerce Italian
section, Rome, Italy Co-Chairman Round Table of Bankers and Small and Medium
Enterprises, European Commission, in Brussels, Belgium. Mr. Lanzara has an
economics degree (graduated magna cum laude)
from the University of Naples, a law degree from the University of Naples and
completed the Program for Management Development (PMD) at Harvard Business
School.

79

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Donald
C. Trauscht, Director

Donald
C. Trauscht has served as the Chairman of BW Capital Corporation, a private
investment company, since 1996. From 1967 to 1995, Mr. Trauscht held a number
of positions at Borg-Warner Corporation, including Chairman and Chief Executive
Officer. While at Borg Warner, Mr. Trauscht supervised an annual capital budget
of $250 million and was responsible for risk assessment decisions involving the
companys investments. He has participated in acquisitions, divestments,
financings, public offerings and other transactions whose combined value is
over $30 billion. Mr. Trauscht is a director of Esco Technologies Inc., Hydac
International Corporation, Bourns Inc., and Eyes For Learning LLC. He formerly
served as a director of Baker Hughes Inc., Cordant Technologies Inc., Blue Bird
Corporation, Imo Industries Inc., Mannesmann Capital Corporation, Wynn
International Inc., Recon Optical Inc., Global Motorsport Group Inc., OMI
Corporation, IES Corporation, and NSK-Warner Ltd. He has served as the
Chairman, Lead Director, and Audit Committee, Compensation Committee, and
Governance Committee Chairman at numerous public and private companies.

|   |             
|-- | ------------
|B. | Compensation

We
did not pay any compensation to members of our senior executive officers in
2009. We paid an aggregate compensation of $6.3 million and $6.1 million to our
senior executive officers in 2012 and 2011, respectively. We paid an aggregate
compensation of $3.0 million to our senior executive officers in 2010 for the
period April 6, 2010 to December 31, 2010. Executive management remuneration
was as follows during these periods:

|                                         |  |                                   |       |      |   |       |  |   |       | 
|---------------------------------------- |  | --------------------------------- | ----- | ---- | - | ----- |  | - | ----- | 
|                                         |  | For the period ended December 31, |      
|In
thousands of US dollars               |  | 2012                              |       | 2011 |   | 2010  | 
|Short-term employee
 benefits (salaries) |  | $                                 | 2,896 |      | $ | 2,875 |  | $ | 2,060 | 
|Share-based compensation
 (1)            |  |                                   | 3,368 |      |   | 3,189 |  |   | 922   | 
|                                         |  |                                   |       |      |   |       |  |   |       | 
|Total                                    |  | $                                 | 6,264 |      | $ | 6,064 |  | $ | 2,982 | 

|    |                                                                                                                                                                                                                      
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Represents
 the amortization of restricted stock issued under our equity incentive plans
 in June 2010, January 2011 and January 2012. See Note 14 in the consolidated
 financial statements for further description.

Each
of our non-employee directors receive cash compensation in the aggregate amount
of $45,000 annually, plus an additional fee of $5,000 for each committee on
which a director serves plus an additional fee of $15,000 for each committee
for which a director serves as Chairman, per year, plus an additional fee of
$20,000 to the lead independent director, plus reimbursements for actual
expenses incurred while acting in their capacity as a director. During the year
ended December 31, 2012 and 2011, we paid an aggregate compensation of $0.4
million and $0.4 million to our directors, respectively. Our officers and
directors are eligible to receive awards under our equity incentive plan which
is described below under 2010 Equity Incentive Plan.

We
believe that it is important to align the interests of our directors and
management with that of our shareholders. In this regard, we have determined
that it will generally be beneficial to us and to our shareholders for our
directors and management to have a stake in our long-term performance. We
expect to have a meaningful component of our compensation package for our
directors and management consisted of equity interests in us in order to
provide them on an on-going basis with a meaningful percentage of ownership in
us.

We
do not have a retirement plan for our officers or directors.

80

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2010 Equity Incentive Plan

We
have adopted an equity incentive plan, which we refer to as the plan, under
which directors, officers, employees, consultants and service providers of us
and our subsidiaries and affiliates are eligible to receive incentive stock
options and non-qualified stock options, stock appreciation rights, restricted
stock, restricted stock units and unrestricted common stock. We have reserved a
total of 1,148,916 common shares for issuance under the plan, subject to
adjustment for changes in capitalization as provided in the plan and it is not
expected that any additional common shares will be reserved for issuance under
our equity incentive plan prior to the third anniversary of the closing of our
initial public offering. The plan is administered by our compensation
committee. We issued a total of 559,458 restricted shares under the plan to our
executive officers in the second quarter of 2010 which will vest in three equal
installments on the third, fourth and fifth anniversaries, respectively, of the
closing date of the initial public offering, which was April 6, 2010. In the
second quarter of 2010, we also issued 9,000 restricted shares to our
independent directors, which vested on April 6, 2011. We issued a total of
281,000 restricted shares under the plan to our executive officers in the first
quarter of 2011 which will vest ratably in three equal installments on the
first, second and third anniversaries, respectively, of the grant date, which
was January 31, 2011. In the first quarter of 2011, we also issued 9,000
restricted shares to our independent directors, which vest on January 31, 2012.
In the first quarter of 2012, we issued a total of 281,000 restricted shares
under the plan to our executive officers, which will vest ratably in three
equal installments on the first, second and third anniversaries of the grant
date, which was January 31, 2012. In the first quarter of 2012, we also issued
9,000 restricted shares to our independent directors, which vest on January 31,
2013.

Under
the terms of the plan, stock options and stock appreciation rights granted
under the plan will have an exercise price equal to the fair market value of a
common share on the date of grant, unless otherwise determined by the plan
administrator, but in no event will the exercise price be less than the fair
market value of a common share on the date of grant. Options and stock
appreciation rights will be exercisable at times and under conditions as
determined by the plan administrator, but in no event will they be exercisable
later than ten years from the date of grant.

The
plan administrator may grant shares of restricted stock and awards of
restricted stock units subject to vesting, forfeiture and other terms and
conditions as determined by the plan administrator. Following the vesting of a
restricted stock unit, the award recipient will be paid an amount equal to the
number of vested restricted stock units multiplied by the fair market value of
a common share on the date of vesting, which payment may be paid in the form of
cash or common shares or a combination of both, as determined by the plan
administrator. The plan administrator may grant dividend equivalents with
respect to grants of restricted stock units.

Adjustments
may be made to outstanding awards in the event of a corporate transaction or
change in capitalization or other extraordinary event. In the event of a
change in control (as defined in the plan), unless otherwise provided by the
plan administrator in an award agreement, awards then outstanding will become
fully vested and exercisable in full.

Our
board of directors may amend or terminate the plan and may amend outstanding
awards, provided that no such amendment or termination may be made that would
materially impair any rights, or materially increase any obligations, of a
grantee under an outstanding award. Shareholder approval of plan amendments
will be required under certain circumstances. Unless terminated earlier by our
board of directors, the plan will expire ten years from the date the plan is
adopted.

Employment Agreements

In
April 2010, we entered into employment agreements with each of our executives.
These employment agreements are in effect for a period of up to two years, and
will automatically renew for the same successive employment periods unless
terminated in accordance with the terms of such agreements. Pursuant to the
terms of their respective employment agreements, our executives are prohibited
from disclosing or unlawfully using any of our material confidential
information.

81

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Upon
a change in control of us, the annual bonus provided under the employment
agreement becomes a fixed bonus of up to 150% of the executives base salary.
If an executives employment is terminated within two years of a change in
control due to either disability or a reason other than for cause, he will be
entitled to receive upon termination an assurance bonus equal to such fixed
bonus and an immediate lump-sum payment in an amount equal to three times the
sum of the executives then current base salary and the assurance bonus, and he
will continue to receive all salary, compensation payment and benefits,
including additional bonus payments, otherwise due to him, to the extent
permitted by applicable law, for the remaining balance of his then-existing
employment period. If an executives employment is terminated for cause or
voluntarily by the employee, he shall not be entitled to any salary, benefits
or reimbursements beyond those accrued through the date of his termination,
unless he voluntarily terminated his employment in connection with certain
conditions. Those conditions include a change in control combined with a
significant geographic relocation of his office, a material diminution of his
duties and responsibilities, and other conditions identified in the employment
agreement.

|   |                 
|-- | ----------------
|C. | Board
 Practices

Our
board of directors currently consists of five directors, three of whom have
been determined by our board of directors to be independent under the rules of
the New York Stock Exchange and the rules and regulations of the SEC. Our board
has an Audit Committee, a Nominating Committee and a Compensation Committee,
each of which is comprised of our three independent directors, who are Messrs.
Alexandre Albertini, Ademaro Lanzara and Donald Trauscht. The Audit Committee,
among other things, reviews our external financial reporting, engage our
external auditors and oversee our internal audit activities, procedures and the
adequacy of our internal controls. In addition, provided that no member of the
Audit Committee has a material interest in such transaction, the Audit
Committee is responsible for reviewing transactions that we may enter into in
the future with other members of the Scorpio Group that our board believes may
present potential conflicts of interests between us and the Scorpio Group. The Nominating
and Corporate Governance Committee is responsible for recommending to the board
of directors nominees for director and directors for appointment to board
committees and advising the board with regard to corporate governance
practices. The Compensation Committee oversees our equity incentive plan and
recommends director and senior employee compensation. Our shareholders may also
nominate directors in accordance with procedures set forth in our bylaws.

|   |          
|-- | ---------
|D. | Employees

As
of December 31, 2012, we had ten employees. SSM and SCM were responsible for
our commercial and technical management.

|   |                 
|-- | ----------------
|E. | Share
 Ownership

The
following table sets forth information regarding the share ownership of the our
common stock as of the date of this annual report by our directors and
officers, including the restricted shares issued to our executive officers and
to our independent directors as well as shares purchased in the open market.

|                                               |  |               |         |         |  |      |  
|---------------------------------------------- |  | ------------- | ------- | ------- |  | ---- | -
|Name                                           |  | No. of Shares |         | % Owned | 
|Emanuele A. Lauro (1)                          |  |               | 704,145 |         |  | 0.57 | %
|Robert Bugbee (2)                              |  |               | 611,958 |         |  | 0.50 | %
|All other officers and
 directors individually |  |               |         | *       |  |      | *

|    |                                                                                                                     
|--- | --------------------------------------------------------------------------------------------------------------------
|(1) | Includes
 262,418 shares of restricted stock from the 2010 Equity Incentive Plan.                                   
|    |                                                                                                                     
|(2) | Includes
 262,418 shares of restricted stock from the 2010 Equity Incentive Plan.                                   
|    |                                                                                                                     
|*   | The
 remaining officers and directors individually each own less than 1% of our
 outstanding shares of common stock.

82

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|        |                                                    | 
|------- | -------------------------------------------------- | 
|ITEM 7. | MAJOR
 SHAREHOLDERS AND RELATED PARTY TRANSACTIONS
|        |                                                    | 
|A.      | Major
 Shareholders                               

The
following table sets
forth information regarding beneficial ownership of our common stock for owners
of more than five percent of our common stock, of which we are aware as of the
date of this annual report.

|                                                                                                                                                                                                 |  |               |            |         |  |      |  
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ |  | ------------- | ---------- | ------- |  | ---- | -
|Name                                                                                                                                                                                             |  | No. of Shares |            | % Owned | 
|Galahad Securities Limited (1)                                                                                                                                                                   |  |               | 12,396,721 |         |  | 13.1 | %
|Claren Road Asset Management LLC (2)                                                                                                                                                             |  |               | 9,260,000  |         |  | 7.5  | %
|Wellington Management Company, LLP (3)                                                                                                                                                           |  |               | 7,814,974  |         |  | 12.2 | %
|Kensico Capital Management Corporation, Michael Lowenstein and Thomas
 J. Coleman (4)                                                                                                            |  |               | 5,930,049  |         |  | 9.3  | %
|Oceanic Hedge Fund, Oceanic Opportunities Master Fund, L.P., Oceanic
 Investment Management Limited, Oceanic Opportunities GP Limited, Tufton
 Oceanic (Isle of Man) Limited and Cato Brahde (5) |  |               | 4,900,040  |         |  | 5.2  | %
|Wellington Trust Company, NA (6)                                                                                                                                                                 |  |               | 3,497,676  |         |  | 5.5  | %

|   |                             |                                                                                            
|-- | --------------------------- | -------------------------------------------------------------------------------------------
|   | (1)                         | This information is
 derived from Schedule 13G/A filed with the SEC on February 11, 2013.  
|   |                             |                                                                                            
|   | (2)                         | This information is
 derived from Schedule 13G filed with the SEC on March 25, 2013        
|   |                             |                                                                                            
|   | (3)                         | This Information is
 derived from a Schedule 13G/A filed with the SEC on February 14, 2013.
|   |                             |                                                                                            
|   | (4)                         | This Information is
 derived from a Schedule 13G/A filed with the SEC on February 13, 2013.
|   |                             |                                                                                            
|   | (5)                         | This Information is
 derived from a Schedule 13G/A filed with the SEC on February 14, 2013.
|   |                             |                                                                                            
|   | (6)                         | This Information is
 derived from a Schedule 13G/A filed with the SEC on February 14, 2013.
|   |                             |                                                                                            
|B. | Related
 Party Transactions

Management of Our Fleet

Commercial and Technical Management

Our
vessels are commercially managed by SCM and technically managed by SSM,
pursuant to a Master Agreement, which may be terminated upon a two year notice.
SCM and SSM are related parties of ours. We expect that additional vessels that
we may acquire in the future will also be managed under the Master Agreement.

SCMs
services include securing employment, in the spot market and on time charters,
for our vessels. SCM also manages the Scorpio Group Pools. For commercial
management of our vessels that do not operate in any of the Scorpio Group
Pools, we pay SCM a fee of $250 per vessel per day for each Panamax, LR1, LR2
vessel and $300 per vessel per day for each of our Handymax and MR vessels,
plus 1.25% commission on gross revenues per charter fixture. Effective January 1, 2013, the Scorpio Group
pool participants collectively pay SCM a pool management fee of $250 per vessel
per day with respect to our LR2 vessels, $300 per vessel per day with respect
to each of our Panamax vessels and $325 per vessel per day with respect to each
of our Handymax and MR vessels, plus 1.50% commission on gross revenues per
charter fixture. These are the same fees that SCM charges other vessels in
these pools, including third party owned vessels.

83

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SSMs
services include day-to-day vessel operation, performing general maintenance,
monitoring regulatory and classification society compliance, customer vetting
procedures, supervising the maintenance and general efficiency of vessels,
arranging the hiring of qualified officers and crew, arranging and supervising
drydocking and repairs, purchasing supplies, spare parts and new equipment for
vessels, appointing supervisors and technical consultants and providing
technical support. We currently pay SSM $548 per vessel per day to provide
technical management services for each of our vessels. This fee is lower
than that charged to third parties by SSM.

Administrative Services Agreement

Liberty
Holding Company Ltd., or Liberty, is a Scorpio Group affiliate which provided
us with administrative services pursuant to an administrative services agreement
until March 13, 2012 when the administrative services agreement was assigned to
SSH, a company controlled by the Lolli-Ghetti, family pursuant to a novation
agreement to which we were a party. The effective date of the novation was
November 9, 2009, the date that we first entered into the agreement with
Liberty. The administrative services provided under the agreement primarily
include accounting, legal compliance, financial, information technology
services, and the provision of administrative staff and office space. SSH also
arranges vessel sales and purchases for us. Further, pursuant to our
administrative services agreement, SSH, on behalf of itself and other members
of the Scorpio Group, has agreed that it will not directly own product or crude
tankers ranging in size from 35,000 dwt to 200,000 dwt. We expect that SSH will
sub-contract many of its responsibilities to other entities within the Scorpio
Group.

We
reimburse SSH for the reasonable direct or indirect expenses it incurs in
providing us with the administrative services described above. We also pay SSH
a fee for arranging vessel purchases and sales for us equal to 1% of the gross
purchase or sale price, payable upon the consummation of any such purchase or
sale. We believe this 1% fee on purchases and sales is customary in the tanker
industry.

Tanker pools

To
increase vessel utilization and thereby revenues, we participate in commercial
pools with other shipowners of similar modern, well-maintained vessels. By
operating a large number of vessels as an integrated transportation system,
commercial pools offer customers greater flexibility and a higher level of
service while achieving scheduling efficiencies. Pools employ experienced
commercial charterers and operators who have close working relationships with
customers and brokers, while technical management is performed by each
shipowner. The managers of the pools negotiate charters with customers
primarily in the spot market. The size and scope of these pools enable them to enhance
utilization rates for pool vessels by securing backhaul voyages and COAs, thus
generating higher effective TCE revenues than otherwise might be obtainable in
the spot market while providing a higher level of service offerings to
customers. When we employ a vessel in the spot charter market, we generally
place such vessel in a tanker pool managed by our commercial manager that
pertains to that vessels size class. The earnings allocated to vessels
(charterhire expense for the pool) are aggregated and divided on the basis of a
weighted scale, or Pool Points, which reflect comparative voyage results on
hypothetical benchmark routes. The Pool Point system generally favors those
vessels with greater cargo-carrying capacity and those with better fuel consumption.
Pool Points are also awarded to vessels capable of carrying clean products and
to vessels capable of trading in certain ice conditions. We currently
participate in four pools: the Scorpio LR2 Tanker Pool, the Scorpio Panamax
Tanker Pool, Scorpio MR Tanker Pool and the Scorpio Handymax Tanker Pool.

SCM
is responsible for the commercial management of participating vessels in the
pools, including the marketing, chartering, operating and bunker (fuel oil)
purchases of the vessels. The Scorpio LR2 Pool is administered by Scorpio LR2
Pool Ltd., the Scorpio Panamax Tanker Pool is administered by Scorpio Panamax
Tanker Pool Ltd., or SPTP, the Scorpio MR Tanker Pool is administered by
Scorpio MR Tanker Pool Ltd, or SMRP and the Scorpio Handymax Tanker Pool is
administered by Scorpio Handymax Tanker Pool Ltd., or SHTP. Our founder,
Chairman and Chief Executive Officer is a member of the Lolli-Ghetti family
which owns all issued and outstanding stock of SLR2P, SPTP, SMRP and SHTP.
Taking into account the recommendations of a pool committee and a technical
committee, each of which is comprised of representatives of each pool
participant, SLR2P, SPTP, SMRP and SHTP set the respective pool policies and
issues directives to the pool participants and SCM. The pool participants
remain responsible for all other costs including the financing, insurance,
manning and technical management of their vessels. The earnings of all of the
vessels are
aggregated and divided according to the relative performance capabilities of
the vessel and the actual earning days each vessel is available.

84

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Our Relationship with Scorpio Group and its Affiliates

We
were incorporated in the Republic of The Marshall Islands on July 1, 2009 by
Simon Financial Limited, or Simon, which is owned by the Lolli-Ghetti family
and manages their shipping interests. On October 1, 2009, (i) Simon, through
its wholly-owned subsidiary, Liberty Holding Company Ltd., or Liberty,
transferred three operating subsidiary companies to us that owned the vessels
in our initial fleet consisting of the Venice,
Senatore and Noemi; (ii) Liberty became a wholly-owned
subsidiary and operating vehicle of Simon; (iii) Scorpio Owning Holding Ltd.
became a wholly-owned subsidiary of Liberty; and (iv) we became a wholly-owned
subsidiary of Scorpio Owning Holding Ltd. Libertys operations include
chartered-in vessels, and interests in joint ventures and investments. Scorpio
Group does not have an ownership interest in any tanker vessels other than our
tanker vessels, and will preclude itself from directly owning product or crude
tankers ranging in size from 35,000 dwt to 200,000 dwt.

Our
board of directors consists of five individuals, three of whom are independent
directors. The three independent directors form the boards Audit Committee
and, pursuant to the Audit Committee charter, are required to review all
potential conflicts of interest between us and Scorpio Group. The two
non-independent directors, Emanuele Lauro and Robert Bugbee, serve in senior
management positions within the Scorpio Group which is also our Administrator,
and is an affiliate of the Scorpio Group.

The
Scorpio Group is owned and controlled by the Lolli-Ghetti family, of which Mr.
Lauro is a member. Mr. Lauro is considered to be the acting Chief Executive
Officer and Mr. Bugbee is considered to be the acting President of the Scorpio
Group. Mr. Lauro is employed by Scorpio Commercial Management and Mr. Bugbee is
employed by Scorpio USA LLC, and both entities are affiliates within the
Scorpio Group. Mr. Lauro, Mr. Bugbee and other senior management have a
minority equity interest in Scorpio Services Holding Limited. We are not
affiliated with any other entities in the shipping industry other than those
that are members of the Scorpio Group.

In January 2011, Scorpio Owning
Holding Ltd. distributed its shares in Scorpio Tankers Inc. (via a dividend) to the shareholders of Liberty, which is owned
by the Lolli-Ghetti family, of which our CEO and Chairman is a member.

SCM,
SSM and SSH our commercial manager, technical manager and administrator,
respectively, are affiliates of the Scorpio Group. For information regarding
the details regarding our relationship with SCM, SSM and SSH, please see  
Related Party Transactions  Management of our Fleet.

Transactions with Related Parties

Transactions
with entities controlled by the Lolli-Ghetti family (herein referred to as
related party affiliates) in the consolidated statements of profit or loss and
balance sheet are as follows:

|                                     |  |                                 |        |      |   |        |   |   |        |  
|------------------------------------ |  | ------------------------------- | ------ | ---- | - | ------ | - | - | ------ | -
|                                     |  | For the year ended December 31, |       
|In
 thousands of US dollars          |  | 2012                            |        | 2011 |   | 2010   |  
|Pool revenue(1)                      |  |                                 |        |      |   |        |   |   |        |  
|Scorpio Panamax Tanker Pool Limited  |  | $                               | 26,884 |      | $ | 22,594 |   | $ | 9,645  |  
|Scorpio Handymax Tanker Pool Limited |  |                                 | 31,280 |      |   | 32,238 |   |   | 5,178  |  
|Scorpio MR Pool Limited              |  |                                 | 9,558  |      |   |       |   |   |       |  
|Scorpio LR2 Pool Limited             |  |                                 | 4,540  |      |   | 5,195  |   |   |       |  
|Scorpio Aframax Tanker Pool Limited  |  |                                 |       |      |   | 170    |   |   | 641    |  
|Time charter revenue(2)              |  |                                 |        |      |   |        |   |   |        |  
|King Dustin                          |  |                                 |       |      |   | 8,507  |   |   | 8,700  |  
|Liberty and subsidiaries             |  |                                 |       |      |   |       |   |   | 4,780  |  
|Vessel operating costs(3)            |  |                                 | (2,280 | )    |   | (2,203 | ) |   | (1,059 | )
|Commissions(4)                       |  |                                 | (532   | )    |   | (270   | ) |   | (234   | )
|Administrative expenses(5)           |  |                                 | (1,862 | )    |   | (1,937 | ) |   | (932   | )
|Other(6)                             |  |                                 |       |      |   |       |   |   | (131   | )

85

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| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |                                                                                                                                                                                                                                                                                                            
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (1) | These
 transactions relate to revenue earned in the Scorpio LR2, Scorpio Aframax,
 Scorpio Panamax, Scorpio MR and Scorpio Handymax Tanker Pools (the Pools).
 The Pools are owned by Scorpio LR2 Tanker Pool Limited, Scorpio Aframax Pool
 Limited, Scorpio Panamax Tanker Pool Limited, Scorpio MR Pool Limited and
 Scorpio Handymax Tanker Pool Limited, respectively. The Pools are related
 party affiliates.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |                                                                                                                                                                                                                                                                                                            
| | (2) | The
 revenue earned was for Noemis
 time charter with King Dustin (which is 50% jointly controlled by a related
 party affiliate). In 2010, STI Harmony
 and STI Heritage were on a time
 charter with Liberty, a related party affiliate. See Note 16 to the
 consolidated financial statements for the terms of this time charter.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |                                                                                                                                                                                                                                                                                                            
| | (3) | These
 transactions represent technical management fees charged by SSM, a related
 party affiliate, and included in the vessel operating costs in the
 consolidated profit or loss statement. We believe our technical management
 fees for the years ended December 31, 2012, 2011 and 2010 were at market rates
 because they were the same rates charged to other vessels managed by SSM.
 Each vessel pays $548 per day for technical management, which was, as noted,
 lower than that charged to third parties by SSM.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |                                                                                                                                                                                                                                                                                                            
| | (4) | These
 transactions represent the expense due to SCM for commissions related to the
 commercial management services provided by SCM under the Master Agreement
 (see description below). Each of the vessels paid a commission of 1.25% of
 their revenue when not in the Pools. When our vessels were in the Pools, SCM,
 the pool manager, charged fees of $250 per vessel per day with respect to our
 Panamax/LR1 and LR2 vessels, $300 per vessel per day with respect to each of
 our Handymax and MR vessels, plus 1.25% commission on gross revenues per
 charter fixture. These were the same fees that SCM charges other vessels in
 these pools, including third party owned vessels.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |                                                                                                                                                                                                                                                                                                            
| | (5) | We
 have an Administrative Services Agreement with Scorpio Services Holding
 Limited, or SSH or our Administrator, for the provision of administrative
 staff and office space, and administrative services, including accounting,
 legal compliance, financial and information technology services. SSH is a
 related party to us. Liberty Holding Company Ltd., or Liberty, a company
 affiliated with us, acted as our Administrator until March 13, 2012 when the
 Administrative Services Agreement was assigned to SSH. The effective date of
 the novation was November 9, 2009, the date that we first entered into the
 agreement with Liberty. We reimburse our current Administrator for the
 reasonable direct or indirect expenses it incurs in providing us with the
 administrative services described above. Our Administrator also arranges
 vessel sales and purchases for us. The services provided to us by our
 Administrator may be sub-contracted to other entities within the Scorpio
 Group.Our Master Agreement with SCM includes a daily flat fee charged
 payable to SCM for the vessels that are not in one of the pools managed by
 SCM. The flat fee was $250 per day for Panamaxes/LR1 and Aframax/LR2 vessels
 and $300 per day for Handymax and MR vessels. The flat fee was the same rate
 charged by SCM for vessels in the pools managed by SCM.
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |                                                                                                                                                                                                                                                                                                            
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      | The
 expense for the year ended December 31, 2012 of $1.9 million included the
 flat fee of $0.7 million charged by SCM and administrative fees of $1.2
 million charged by SSH and were included in voyage expenses and general and
 administrative expenses in the consolidated profit or loss statement.
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |                                                                                                                                                                                                                                                                                                            
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      | The
 expense for the year ended December 31, 2011 of $1.9 million included the
 flat fee of $0.3 charged by SCM and administrative fees of $1.7 million
 charged by SSH and were both included in general and administrative expenses
 in the consolidated profit or loss statement.                       
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |                                                                                                                                                                                                                                                                                                            
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      | The
 expense for the year ended December 31, 2010 of $0.9 million included the
 flat fee of $0.2 million charged by SCM and administrative fees of $0.7
 million charged by SSH and were both included in general and administrative
 expenses in the consolidated profit or loss statement.               

86

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| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (6) | In
 accordance with our Administrative Services Agreement with SSH, we have to
 reimburse SSH for any direct expenses. These transactions represent
 reimbursements of $0.1 million to SSH for the year ended December 31, 2010
 for expenses related to the registration of the existing shares in the
 initial public offering which closed on April 6, 2010. In addition, $0.3
 million related to expenses for the registration of the shares in the initial
 public offering were recorded as an offset against the proceeds from the
 offering. The cash payment was made in 2010.
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         | Furthermore,
 the Administrative Services Agreement with SSH includes a fee for arranging
 vessel purchases and sales, on our behalf, equal to 1% of the gross purchase
 or sale price, payable upon the consummation of any such purchase or sale.
 These fees are capitalized as part of the carrying value of the related
 vessel. In the year ended December 31, 2012, we paid SSH an aggregate fee of
 $2.4 million, which consisted of $0.5 million (recorded to loss from sale of
 vessels) on the sales ofSTI Conqueror,
 STI Gladiator, and STI Matadorand
 $1.9 million on the purchase and delivery of the first five Newbuilding
 vessels. In the year ended December 31, 2011, we paid SSH an aggregate fee of
 $0.7 million in May 2011 for the purchase of the STI Coral and STI
 Diamond. In the year ended December 31, 2010, we paid SSH an
 aggregate fee of $2.4 million for the purchases of the STI Harmony, STI Heritage, STI
 Conqueror, STI Matador, STI Gladiator, STI HighlanderandSTI Spirit.

We
had the following balances with related parties, which have been included in
the consolidated balance sheets:

|                                          |  |                    |        |      |   |        | 
|----------------------------------------- |  | ------------------ | ------ | ---- | - | ------ | 
|                                          |  | As of December 31, |       
|In
 thousands of US dollars               |  | 2012               |        | 2011 |  
|Assets:                                   |  |                    |        |      |   |        | 
|Accounts receivable (due
 from the Pools) |  | $                  | 33,271 |      | $ | 18,102 | 
|                                          |  |                    |        |      |   |        | 
|Liabilities:                              |  |                    |        |      |   |        | 
|Accounts payable (owed to
 the Pools)     |  |                    | 59     |      |   | 50     | 
|Accounts payable (SSM)                    |  |                    | 70     |      |   | 8      | 
|Accounts payable (SCM)                    |  |                    | 146    |      |   | 52     | 

In
2011, we also entered into an agreement to reimburse costs to SSM as part of
its supervision agreement for newbuilding vessels. $0.1 million has been
charged under this agreement during the year ended December 31, 2012. No
amounts were charged under this agreement during the year ended December 31,
2011.

Key management remuneration

Prior
to April 6, 2010, our executive management services were provided by a related
party affiliate and included in the management fees described in (5) above. If
we were not part of a related party affiliate, and had the same ownership
structure and a contract for administrative services for the periods up to
April 6, 2010, we estimate our executive management remuneration would have
been comparable with the executive management remuneration presented within
general and administrative expenses in subsequent periods. Please see Item 6.B.
Compensation for information regarding the remuneration we pay our key
management.

|   |                                  
|-- | ---------------------------------
|C. | INTERESTS
 OF EXPERTS AND COUNSEL

Not
applicable.

|        |                                                          | 
|------- | -------------------------------------------------------- | 
|ITEM 8. | FINANCIAL
 INFORMATION                                  
|        |                                                          | 
|A.      | Consolidated
 Statements and Other Financial Information
|        |                                                          | 
|        | See Item 18.                                            

87

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Legal Proceedings

To our
knowledge, we are not currently a party to any lawsuit that, if adversely
determined, would have a material adverse effect on our financial position,
results of operations or liquidity. As such, we do not believe that pending
legal proceedings, taken as a whole, should have any significant impact on our
financial statements. From time to time in the future we may be subject to
legal proceedings and claims in the ordinary course of business, principally
personal injury and property casualty claims. While we expect that these claims
would be covered by our existing insurance policies, those claims, even if
lacking merit, could result in the expenditure of significant financial and
managerial resources. We have not been involved in any legal proceedings which
may have, or have had, a significant effect on our financial position, results
of operations or liquidity, nor are we aware of any proceedings that are
pending or threatened which may have a significant effect on our financial
position, results of operations or liquidity.

Dividend Policy

Since our
initial public offering closed on April 6, 2010, we have not paid a dividend.
We will continue to assess our dividend policy and our board of directors may
determine to pay dividends in the future. Depending on prevailing charter
market conditions, our operating results and capital requirements and other
relevant factors, our board of directors may re-evaluate our dividend policy.
In addition, Marshall Islands law generally prohibits the payment of dividends
other than from surplus or when a company is insolvent or if the payment of the
dividend would render the company insolvent. Any future dividend payments will
be subject to determination by our board of directors in its discretion.

|   |                    
|-- | -------------------
|B. | Significant Changes

See Note 23
 Subsequent Events to our consolidated financial statements and notes thereto,
included herein.

|        |                      
|------- | ---------------------
|ITEM 9. | THE OFFER AND LISTING

|   |                          
|-- | -------------------------
|A. | Offer and Listing Details

Since our initial
public offering, our shares of common stock have traded on the NYSE under the
symbol STNG. The high and low market prices for our shares of common stock on
the NYSE are presented for the periods listed below:

|                                           |  |      |       |     |   |      | 
|------------------------------------------ |  | ---- | ----- | --- | - | ---- | 
|For the
 Year Ended                        |  | High |       | Low |  
|December 31,
 2010*                        |  | $    | 13.01 |     | $ | 9.50 | 
|December 31,
 2011                         |  |      | 12.18 |     |   | 4.28 | 
|December 31,
 2012                         |  |      | 7.50  |     |   | 4.93 | 
|* For the
 period beginning March 31, 2010 |  |      |       |     |   |      | 

|                                                       |  |      |       |     |  |      | 
|------------------------------------------------------ |  | ---- | ----- | --- |  | ---- | 
|For the
 Quarter Ended:                                |  | High |       | Low | 
|March 31,
 2011                                        |  |      | 10.82 |     |  | 9.62 | 
|June 30,
 2011                                         |  |      | 12.18 |     |  | 9.25 | 
|September
 30, 2011                                    |  |      | 10.08 |     |  | 4.93 | 
|December 31,
 2011                                     |  |      | 7.03  |     |  | 4.28 | 
|March 31,
 2012                                        |  |      | 7.50  |     |  | 4.93 | 
|June 30,
 2012                                         |  |      | 7.50  |     |  | 5.14 | 
|September
 30, 2012                                    |  |      | 6.88  |     |  | 5.14 | 
|December 31,
 2012                                     |  |      | 7.14  |     |  | 5.19 | 
|March 31,
 2013 (through and including March 27, 2013) |  |      | 8.93  |     |  | 6.92 | 

88

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|                                                   |  |      |      |     |   |      | 
|-------------------------------------------------- |  | ---- | ---- | --- | - | ---- | 
|Most
 Recent Six Months:                           |  | High |      | Low |  
|September
 2012                                    |  | $    | 6.24 |     | $ | 5.20 | 
|October 2012                                       |  |      | 6.07 |     |   | 5.19 | 
|November
 2012                                     |  |      | 6.63 |     |   | 5.30 | 
|December
 2012                                     |  |      | 7.14 |     |   | 6.11 | 
|January 2013                                       |  |      | 8.50 |     |   | 6.92 | 
|February
 2013                                     |  |      | 8.81 |     |   | 7.72 | 
|March 2013
 (through and including March 27, 2013) |  |      | 8.93 |     |   | 8.10 | 

|         |                       
|-------- | ----------------------
|ITEM 10. | ADDITIONAL INFORMATION

|   |                                       
|-- | --------------------------------------
|A. | Share Capital                         
|   |                                       
|   | Not
 applicable                       
|   |                                       
|B. | Memorandum and Articles of Association

Our amended
and restated articles of incorporation have been filed as exhibit 3.1 to
Amendment No. 2 to our Registration Statement on Form F-1 (Registration No.
333-164940), filed with the SEC on March 18, 2010. Our amended and restated
bylaws are filed as exhibit 1.2 to our Annual Report on Form 20-F filed on June
29, 2010. The information contained in these exhibits is incorporated by
reference herein.

Information
regarding the rights, preferences and restrictions attaching to each class of
our shares of common stock is described in the section entitled Description of
Capital Stock in the accompanying prospectus to our Registration Statement on
Form F-3 (Registration No. 333-186815) with an effective date of February 25,
2013, provided that since the date of that Prospectus Supplement, our total
issued and outstanding common shares has increased to 123,511,846 as of the date
of this annual report.

|   |                   
|-- | ------------------
|C. | Material Contracts

Attached as exhibits to this annual report are the contracts we
consider to be both material and not entered into in the ordinary course of
business. Descriptions are included within Item 5.B. with respect to our credit
facilities, and Item 7.B. with respect to our related party transactions.

Other than these contracts, we have no other material contracts, other
than contracts entered into in the ordinary course of business, to which we are
a party.

|   |                  
|-- | -----------------
|D. | Exchange Controls

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

|   |         
|-- | --------
|E. | Taxation

Marshall Islands Tax Considerations

The
following are the material Marshall Islands tax consequences of our activities
to us and holders of our common shares. We are incorporated in the Marshall
Islands. Under current Marshall Islands law, we are not subject to tax on
income or capital gains, and no Marshall Islands withholding tax will be
imposed upon payments of dividends by us to our shareholders.

89

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United
States Federal Income Tax Considerations

The
following are the material United States federal income tax consequences to us
of our activities and to United States Holders and Non-United States Holders,
each as defined below, of the ownership of common shares. The following
discussion of United States federal income tax matters is based on the United
States Internal Revenue Code of 1986, or the Code, judicial decisions,
administrative pronouncements, and existing and proposed regulations issued by
the United States Department of the Treasury, or the Treasury Regulations, all
of which are subject to change, possibly with retroactive effect. The
discussion below is based, in part, on the description of our business in this
Report and assumes that we conduct our business as described herein. References
in the following discussion to the Company, we, our and us are to
Scorpio Tankers Inc. and its subsidiaries on a consolidated basis.

United
States Federal Income Taxation of Operating Income: In General

We earn and
anticipate that we will continue to earn substantially all our income from the
hiring or leasing of vessels for use on a time charter basis, from
participation in a pool or from the performance of services directly related to
those uses, all of which we refer to as shipping income.

Unless
exempt from United States federal income taxation under the rules of Section 883
of the Code, or Section 883, as discussed below, a foreign corporation such as
us will be subject to United States federal income taxation on its shipping
income that is treated as derived from sources within the United States, which
we refer to as United States source shipping income. For United States
federal income tax purposes, United States source shipping income includes
50% of shipping income that is attributable to transportation that begins or
ends, but that does not both begin and end, in the United States.

Shipping
income attributable to transportation exclusively between non-United States
ports will be considered to be 100% derived from sources entirely outside the
United States. Shipping income derived from sources outside the United States
will not be subject to any United States federal income tax.

Shipping
income attributable to transportation exclusively between United States ports
is considered to be 100% derived from United States sources. However, we are
not permitted by United States law to engage in the transportation of cargoes
that produces 100% United States source shipping income.

Unless
exempt from tax under Section 883, our gross United States source shipping
income would be subject to a 4% tax imposed without allowance for deductions,
as described more fully below.

Exemption
of Operating Income from United States Federal Income Taxation

Under
Section 883 and the Treasury Regulations thereunder, a foreign corporation will
be exempt from United States federal income taxation on its United States
source shipping income if:

(1)           it is
organized in a qualified foreign country, which is one that grants an
equivalent exemption from tax to corporations organized in the United States
in respect of each category of shipping income for which exemption is being
claimed under Section 883; and

(2)           one of
the following tests is met:

(A)           more
than 50% of the value of its shares is beneficially owned, directly or
indirectly, by qualified shareholders, which as defined includes individuals
who are residents of a qualified foreign country, which we refer to as the
50% Ownership Test; or

(B)           its
shares are primarily and regularly traded on an established securities market
in a qualified foreign country or in the United States, to which we refer as
the Publicly-Traded Test.

The
Republic of The Marshall Islands, the jurisdiction where we and our ship-owning
subsidiaries are incorporated, has been officially recognized by the United
States Internal Revenue Service, or the IRS, as a qualified

90

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foreign country that grants the requisite equivalent exemption from
tax in respect of each category of shipping income we earn and currently expect
to earn in the future. Therefore, we will be exempt from United States federal
income taxation with respect to our United States source shipping income if we
satisfy either the 50% Ownership Test or the Publicly-Traded Test.

For our
2012 taxable tax year, we intend to take the position that we satisfy the
Publicly-Traded Test and we anticipate that we will continue to satisfy the
Publicly-Traded Test for future taxable years. However, as discussed below,
this is a factual determination made on an annual basis. We do not currently
anticipate a circumstance under which we would be able to satisfy the 50%
Ownership Test.

Publicly-Traded Test

The
Treasury Regulations under Section 883 provide, in pertinent part, that shares
of a foreign corporation will be considered to be primarily traded on an
established securities market in a country if the number of shares of each
class of stock that are traded during any taxable year on all established
securities markets in that country exceeds the number of shares in each such
class that are traded during that year on established securities markets in any
other single country. Our common shares, which constitute our sole class of
issued and outstanding stock, are primarily traded on the New York Stock
Exchange, or the NYSE.

Under the
Treasury Regulations, our common shares will be considered to be regularly
traded on an established securities market if one or more classes of our stock
representing more than 50% of our outstanding stock, by both total combined
voting power of all classes of stock entitled to vote and total value, are
listed on such market, to which we refer as the Listing Threshold. Since our
common shares are listed on the NYSE, we expect to satisfy the Listing
Threshold.

It is
further required that with respect to each class of stock relied upon to meet
the Listing Threshold, (i) such class of stock is traded on the market, other
than in minimal quantities, on at least 60 days during the taxable year or
one-sixth of the days in a short taxable year, or the Trading Frequency Test;
and (ii) the aggregate number of shares of such class of stock traded on such
market during the taxable year is at least 10% of the average number of shares
of such class of stock outstanding during such year or as appropriately
adjusted in the case of a short taxable year, or the Trading Volume Test. We
currently satisfy and anticipate that it will continue to satisfy the Trading
Frequency Test and Trading Volume Test. Even if this were not the case, the
Treasury Regulations provide that the Trading Frequency Test and Trading Volume
Tests will be deemed satisfied if, as is the case with our common shares, such
class of stock is traded on an established securities market in the United
States and such class of stock is regularly quoted by dealers making a market
in such stock.

Notwithstanding
the foregoing, the Treasury Regulations provide, in pertinent part, that a
class of stock will not be considered to be regularly traded on an
established securities market for any taxable year during which 50% or more of
the vote and value of the outstanding shares of such class are owned, actually
or constructively under specified attribution rules, on more than half the days
during the taxable year by persons who each own 5% or more of the vote and
value of such class of outstanding shares, to which we refer as the 5%
Override Rule.

For
purposes of being able to determine the persons who actually or constructively
own 5% or more of the vote and value of our common shares, or 5%
Shareholders, the Treasury Regulations permit us to rely on those persons that
are identified on Schedule 13G and Schedule 13D filings with the United States
Securities and Exchange Commission, or the SEC, as owning 5% or more of our
common shares. The Treasury Regulations further provide that an investment
company which is registered under the Investment Company Act of 1940, as
amended, will not be treated as a 5% Shareholder for such purposes.

In the
event the 5% Override Rule is triggered, the Treasury Regulations provide that
the 5% Override Rule will nevertheless not apply if we can establish that
within the group of 5% Shareholders, there are sufficient qualified 92
shareholders for purposes of Section 883 to preclude non-qualified shareholders
in such group from owning 50% or more of our common shares for more than half
the number of days during the taxable year. In order to benefit from this
exception to the 5% Override Rule, we must satisfy certain substantiation
requirements in regards to the identity of its 5% Shareholders.

91

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We believe
that we currently satisfy the Publicly-Traded Test and intend to take this
position on our United States federal income tax return for the 2012 taxable
year However, there are factual circumstances beyond our control that could
cause us to lose the benefit of the Section 883 exemption. For example, if we
trigger the 5% Override Rule for any future taxable year, there is no assurance
that we will have sufficient qualified 5% Shareholders to preclude nonqualified
5% Shareholders from owning 50% or more of our common shares for more than half
the number of days during such taxable year, or that we will be able to satisfy
the substantiation requirements in regards to our 5% Shareholders.

United States Federal Income Taxation In Absence of
Section 883 Exemption

If the
benefits of Section 883 are unavailable, our United States source shipping income
would be subject to a 4% tax imposed by Section 887 of the Code on a gross
basis, without the benefit of deductions, which we refer to as the 4% gross
basis tax regime, to the extent that such income is not considered to be
effectively connected with the conduct of a United States trade or business,
as described below. Since under the sourcing rules described above, no more
than 50% of our shipping income would be treated as being United States source
shipping income, the maximum effective rate of United States federal income tax
on our shipping income would never exceed 2% under the 4% gross basis tax
regime.

To the
extent our United States source shipping income is considered to be
effectively connected with the conduct of a United States trade or business,
as described below, any such effectively connected United States source
shipping income, net of applicable deductions, would be subject to United
States federal income tax, currently imposed at rates of up to 35%. In
addition, we would generally be subject to the 30% branch profits tax on
earnings effectively connected with the conduct of such trade or business, as
determined after allowance for certain adjustments, and on certain interest
paid or deemed paid attributable to the conduct of our United States trade or
business.

Our United
States source shipping income would be considered effectively connected with
the conduct of a United States trade or business only if:

•           we have, or
are considered to have, a fixed place of business in the United States involved
in the earning of United States source shipping income; and

•           substantially
all of our United States source shipping income is attributable to regularly
scheduled transportation, such as the operation of a vessel that follows a
published schedule with repeated sailings at regular intervals between the same
points for voyages that begin or end in the United States.

We do not
currently have, intend to have, or permit circumstances that would result in
having, any vessel sailing to or from the United States on a regularly
scheduled basis. Based on the foregoing and on the expected mode of our
shipping operations and other activities, it is anticipated that none of our
United States source shipping income will be effectively connected with the
conduct of a United States trade or business.

United States Federal Income Taxation of Gain on Sale
of Vessels

If we
qualify for exemption from tax under Section 883 in respect of the shipping
income derived from the international operation of our vessels, then gain from
the sale of any such vessel should likewise be exempt from United States
federal income tax under Section 883. If, however, our shipping income from
such vessels does not for whatever reason qualify for exemption under Section
883, then any gain on the sale of a vessel will be subject to United States
federal income tax if such sale occurs in the United States. To the extent
possible, we intend to structure the sales of our vessels so that the gain
therefrom is not subject to United States federal income tax. However, there is
no assurance we will be able to do so.

United States Federal Income Taxation of United States
Holders

The
following is a discussion of the material United States federal income tax
considerations relevant to an investment decision by a United States Holder, as
defined below, with respect to our common shares. This discussion does not
purport to deal with the tax consequences of owning common shares to all
categories of investors, some of which may be subject to special rules. This
discussion only addresses considerations relevant to those United States
Holders who hold the common shares as capital assets, that is, generally for
investment purposes. You are encouraged to consult your own
tax advisors concerning the overall tax consequences arising in your
own particular situation under United States federal, state, local or foreign
law of the ownership of common shares.

92

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As used
herein, the term United States Holder means a beneficial owner of common
shares that is an individual United States citizen or resident, a United States
corporation or other United States entity taxable as a corporation, an estate the
income of which is subject to United States federal income taxation regardless
of its source, or a trust if a court within the United States is able to
exercise primary jurisdiction over the administration of the trust and one or
more United States persons have the authority to control all substantial
decisions of the trust.

If a
partnership holds our common shares, the tax treatment of a partner will
generally depend upon the status of the partner and upon the activities of the
partnership. If you are a partner in a partnership holding common shares, you
are encouraged to consult your tax advisor.

Distributions

Subject to
the discussion of passive foreign investment companies below, any distributions
made by us with respect to our common shares to a United States Holder will
generally constitute dividends to the extent of our current or accumulated
earnings and profits, as determined under United States federal income tax
principles. Distributions in excess of such earnings and profits will be
treated first as a nontaxable return of capital to the extent of the United
States Holders tax basis in his common shares on a dollar-for-dollar basis and
thereafter as capital gain. Because we are not a United States corporation,
United States Holders that are corporations will not be entitled to claim a
dividends received deduction with respect to any distributions they receive
from us. Dividends paid with respect to our common shares will generally be
treated as passive category income for purposes of computing allowable
foreign tax credits for United States foreign tax credit purposes.

Dividends
paid on our common shares to a United States Holder who is an individual, trust
or estate (a United States Non-Corporate Holder) will generally be treated as
qualified dividend income that is taxable to such United States Non-Corporate
Holder at preferential tax rates provided that (1) the common shares are
readily tradable on an established securities market in the United States (such
as the NYSE, on which our common shares are traded); (2) we are not a passive
foreign investment company for the taxable year during which the dividend is
paid or the immediately preceding taxable year (which, as discussed below, we
believe we have not been, we believe we are not and do not anticipate being in
the future); (3) the United States Non-Corporate Holder has owned the common
shares for more than 60 days in the 121-day period beginning 60 days before the
date on which the common shares become ex-dividend; and (4) the United States
Non-Corporate Holder is not under an obligation to make related payments with
respect to positions in substantially similar or related property. Any
distributions out of earnings and profits we pay which are not eligible for
these preferential rates will be taxed as ordinary income to a United States
Non-Corporate Holder.

Special
rules may apply to any extraordinary dividendgenerally, a dividend in an
amount which is equal to or in excess of 10% of a shareholders adjusted tax
basis in his common sharespaid by us. If we pay an extraordinary dividend on
our common shares that is treated as qualified dividend income, then any loss
derived by a United States Non-Corporate Holder from the sale or exchange of
such common shares will be treated as long-term capital loss to the extent of
such dividend.

Sale, Exchange or Other Disposition of Common Shares

Assuming we
do not constitute a passive foreign investment company for any taxable year, a
United States Holder generally will recognize taxable gain or loss upon a sale,
exchange or other disposition of our common shares in an amount equal to the
difference between the amount realized by the United States Holder from such
sale, exchange or other 94 disposition and the United States Holders tax basis
in such shares. Such gain or loss will be treated as long-term capital gain or
loss if the United States Holders holding period is greater than one year at
the time of the sale, exchange or other disposition. Such capital gain or loss
will generally be treated as United States source income or loss, as
applicable, for United States foreign tax credit purposes. Long-term capital
gains of United States Non-Corporate Holders are currently eligible for reduced
rates of taxation. A United States Holders ability to deduct capital losses is
subject to certain limitations.

93

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3.8% Tax on Net Investment Income

For taxable
years beginning after December 31, 2012, a United States Holder that is an
individual will generally be subject to a 3.8% tax on the lesser of (1) the
United States Holders net investment income for the taxable year and (2) the
excess of the United States holders modified adjusted gross income for the
taxable year over a certain threshold (which in the case of individuals will be
between $125,000 and $250,000). A United States Holders net investment income
will generally include dividends paid on our common shares and net gains from
the sale, exchange or other disposition of our common shares. Similar rules
apply to estates and, in certain cases, trusts. If you are a United States
Holder that is an individual, estate or trust, you are encouraged to consult
your tax advisors regarding the applicability of these rules.

Passive Foreign Investment Company Status and
Significant Tax Consequences

Special
United States federal income tax rules apply to a United States Holder that
holds shares in a foreign corporation classified as a passive foreign
investment company, or a PFIC, for United States federal income tax purposes.
In general, we will be treated as a PFIC with respect to a United States Holder
if, for any taxable year in which such Holder holds our common shares, either:

| |   |                                                                                                                                                                                                           
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | at least 75% of our gross income for such taxable year consists
 of passive income (e.g., dividends, interest, capital gains and rents derived
 other than in the active conduct of a rental business); or
| |   |                                                                                                                                                                                                           
| |  | at least 50% of the average value of our assets during such
 taxable year produce, or are held for the production of, passive income.                                                                     

For
purposes of determining whether we are a PFIC, we will be treated as earning
and owning our proportionate share of the income and assets, respectively, of
any of our subsidiary corporations in which we own at least 25% of the value of
the subsidiarys stock. Income earned, or deemed earned, by us in connection
with the performance of services would not constitute passive income. By
contrast, rental income would generally constitute passive income unless we
were treated under specific rules as deriving our rental income in the active
conduct of a trade or business.

Based on
our current operations and future projections, we do not believe that we have
been, are, nor do we expect to become, a passive foreign investment company
with respect to any taxable year. Although there is no legal authority directly
on point, our belief is based principally on the position that, for purposes of
determining whether we are a passive foreign investment company, the gross
income we derive or are deemed to derive from the time chartering and voyage
chartering activities of our wholly-owned subsidiaries should constitute
services income, rather than rental income. Accordingly, such income should not
constitute passive income, and the assets that we own and operate in connection
with the production of such income, in particular, the vessels, should not
constitute assets that produce or are held for the production of passive income
for purposes of determining whether we are a PFIC. Therefore, based on our
current operations and future projections, we should not be treated as a PFIC
with respect to any taxable year. There is substantial legal authority
supporting this position, consisting of case law and IRS pronouncements
concerning the characterization of income derived from time charters and voyage
charters as services income for other tax purposes. However, there is also
authority that characterizes time charter income as rental income rather than
services income for other tax purposes. It should be noted that in the absence
of any legal authority specifically relating to the statutory provisions
governing PFICs, the IRS or a court could disagree with our position.
Furthermore, although we intend to conduct our affairs in a manner to avoid
being classified as a PFIC with respect to any taxable year, we cannot assure
you that the nature of our operations will not change in the future.

As
discussed more fully below, if we were to be treated as a PFIC for any taxable
year, a United States Holder would be subject to different United States
federal income taxation rules depending on whether the United States Holder
makes an election to treat us as a Qualified Electing Fund, which election we
refer to as a QEF election. As an alternative to making a QEF election, a
United States Holder should be able to make a mark-to-market election with
respect to our common shares, as discussed below. In addition, if we were to be
treated as a PFIC for any taxable year after 2010, a United States Holder would
be required to file an annual report with the IRS for that year with respect to
such Holders common shares.

94

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Taxation of United
States Holders Making a Timely QEF Election

If a United
States Holder makes a timely QEF election, which United States Holder we refer
to as an Electing Holder, the Electing Holder must report for United States
federal income tax purposes his pro rata share of our ordinary earnings and net
capital gain, if any, for each of our taxable years during which we are a PFIC
that ends with or within the taxable year of the Electing Holder, regardless of
whether distributions were received from us by the Electing Holder. No portion
of any such inclusions of ordinary earnings will be treated as qualified
dividend income. Net capital gain inclusions of United States Non-Corporate
Holders would be eligible for preferential capital gain tax rates. The Electing
Holders adjusted tax basis in the common shares will be increased to reflect
taxed but undistributed earnings and profits. Distributions of earnings and
profits that had been previously taxed will result in a corresponding reduction
in the adjusted tax basis in the common shares and will not be taxed again once
distributed. An Electing Holder would not, however, be entitled to a deduction
for its pro rata share of any losses that we incur with respect to any taxable
year. An Electing Holder would generally recognize capital gain or loss on the
sale, exchange or other disposition of our common shares. A United States
Holder would make a timely QEF election for our shares by filing one copy of
IRS Form 8621 with his United States federal income tax return for the first
year in which he held such shares when we were a PFIC. If we were to be treated
as a PFIC for any taxable year, we would provide each United States Holder with
all necessary information in order to make the QEF election described above.

Taxation of United States Holders Making a
Mark-to-Market Election

Alternatively,
if we were to be treated as a PFIC for any taxable year and, as we anticipate
will be the case, our common shares are treated as marketable stock, a United
States Holder would be allowed to make a mark-to-market election with respect
to our common shares, provided the United States Holder completes and files IRS
Form 8621 in accordance with the relevant instructions and related Treasury
Regulations. If that election is made, the United States Holder generally would
include as ordinary income in each taxable year the excess, if any, of the fair
market value of the common shares at the end of the taxable year over such
Holders adjusted tax basis in the common shares. The United States Holder
would also be permitted an ordinary loss in respect of the excess, if any, of
the United States Holders adjusted tax basis in the common shares over its
fair market value at the end of the taxable year, but only to the extent of the
net amount previously included in income as a result of the mark-to-market
election. A United States Holders tax basis in his common shares would be
adjusted to reflect any such income or loss amount. Gain realized on the sale,
exchange or other disposition of our common shares would be treated as ordinary
income, and any loss realized on the sale, exchange or other disposition of the
common shares would be treated as ordinary loss to the extent that such loss
does not exceed the net mark-to-market gains previously included by the United
States Holder.

Taxation of United States Holders Not Making a Timely
QEF or Mark-to-Market Election

Finally, if
we were to be treated as a PFIC for any taxable year, a United States Holder
who does not make either a QEF election or a mark-to-market election for that
year, whom we refer to as a Non-Electing Holder, would be subject to special
rules with respect to (1) any excess distribution (i.e., the portion of any
distributions received by the Non-Electing Holder on the common shares in a
taxable year in excess of 125% of the average annual distributions received by
the Non-Electing Holder in the three preceding taxable years, or, if shorter,
the Non-Electing Holders holding period for the common shares), and (2) any
gain realized on the sale, exchange or other disposition of our common shares.
Under these special rules:

|  |                                                                                                                                                                                                                                                                                                                                         
|- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | the excess distribution or gain would be allocated ratably over
 the Non-Electing Holders aggregate holding period for the common shares;                                                                                                                                                                                              
|  |                                                                                                                                                                                                                                                                                                                                         
| | the amount allocated to the current taxable year, and any
 taxable year prior to the first taxable year in which we were a PFIC, would
 be taxed as ordinary income and would not be qualified dividend income; and                                                                                                                   
|  |                                                                                                                                                                                                                                                                                                                                         
| | the amount allocated to each of the other taxable years would be
 subject to tax at the highest rate of tax in effect for the applicable class of
 taxpayer for that year, and an interest charge for the deemed tax deferral
 benefit would be imposed with respect to the resulting tax attributable to
 each such other taxable year.

95

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United States Federal Income Taxation of Non-United
States Holders

A
beneficial owner of common shares (other than a partnership) that is not a
United States Holder is referred to herein as a Non-United States Holder.

If a
partnership holds common shares, the tax treatment of a partner will generally
depend upon the status of the partner and upon the activities of the
partnership. If you are a partner in a partnership holding common shares, you
are encouraged to consult your tax advisor.

Dividends
on Common Stock

A
Non-United States Holder generally will not be subject to United States federal
income tax or withholding tax on dividends received from us with respect to his
common shares, unless that income is effectively connected with the Non-United
States Holders conduct of a trade or business in the United States. If the
Non-United States Holder is entitled to the benefits of a United States income
tax treaty with respect to those dividends, that income is subject to United
Stated federal income tax only if it is attributable to a permanent
establishment maintained by the Non-United States Holder in the United States.

Sale, Exchange or Other Disposition of Common Shares

Non-United
States Holders generally will not be subject to United States federal income
tax or withholding tax on any gain realized upon the sale, exchange or other
disposition of our common shares, unless:

|  |                                                                                                                                                                                                                                                                                                                                                                                             
|- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | the gain is effectively connected with the Non-United States
 Holders conduct of a trade or business in the United States (and, if the
 Non-United States Holder is entitled to the benefits of a United States
 income tax treaty with respect to that gain, that gain is attributable to a
 permanent establishment maintained by the Non-United States Holder in the
 United States); or
|  |                                                                                                                                                                                                                                                                                                                                                                                             
| | the Non-United States Holder is an individual who is present in
 the United States for 183 days or more during the taxable year of disposition
 and other conditions are met.                                                                                                                                                                                                               

If the
Non-United States Holder is engaged in a United States trade or business for
United States federal income tax purposes, dividends on the common shares, and
gains from the sale, exchange or other disposition of such shares, that are
effectively connected with the conduct of that trade or business will generally
be subject to regular United States federal income tax in the same manner as
discussed in the previous section relating to the taxation of United States
Holders. In addition, if you are a corporate Non-United States Holder, your
earnings and profits that are attributable to the effectively connected income,
subject to certain adjustments, may be subject to an additional branch
profits tax at a rate of 30%, or at a lower rate as may be specified by an
applicable United States income tax treaty.

Backup Withholding and Information Reporting

In general,
dividend payments, or other taxable distributions, made within the United
States to you will be subject to information reporting requirements if you are
a non-corporate United States Holder. Such payments or distributions may also
be subject to backup withholding if you are a non-corporate United States
Holder and you:

|  |                                                                                                                                                             
|- | ------------------------------------------------------------------------------------------------------------------------------------------------------------
| | fail to provide an accurate taxpayer identification number;                                                                                                 
|  |                                                                                                                                                             
| | are notified by the IRS that you have failed to report all
 interest or dividends required to be shown on your United States federal
 income tax returns; or
|  |                                                                                                                                                             
| | in certain circumstances, fail to comply with applicable
 certification requirements.                                                                       

Non-United
States Holders may be required to establish their exemption from information
reporting and backup withholding by certifying their status on IRS Form W-8BEN,
W-8ECI or W-8IMY, as applicable.

96

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If you are
a Non-United States Holder and you sell your common shares to or through a United
States office of a broker, the payment of the proceeds is subject to both
United States backup withholding and information reporting unless you certify
that you are a non-United States person, under penalties of perjury, or you
otherwise establish an exemption. If you sell your common shares through a
non-United States office of a non-United States broker and the sales proceeds
are paid to you outside the United States, then information reporting and
backup withholding generally will not apply to that payment. However, United
States information reporting requirements, but not backup withholding, will
apply to a payment of sales proceeds, even if that payment is made to you
outside the United States, if you sell your common shares through a non-United States
office of a broker that is a United States person or has some other contacts
with the United States. Such information reporting requirements will not apply,
however, if the broker has documentary evidence in its records that you are a
non-United States person and certain other conditions are met, or you otherwise
establish an exemption.

Backup
withholding is not an additional tax. Rather, you generally may obtain a refund
of any amounts withheld under backup withholding rules that exceed your United
States federal income tax liability by filing a refund claim with the IRS.

Pursuant to
recently enacted legislation, individuals who are United States Holders (and to
the extent specified in applicable Treasury Regulations, certain individuals
who are Non- United States Holders and certain United States entities) who hold
specified foreign financial assets (as defined in Section 6038D of the Code)
are required to file IRS Form 8938 with information relating to the asset for
each taxable year in which the aggregate value of all such assets exceeds
$75,000 at any time during the taxable year or $50,000 on the last day of the
taxable year (or such higher dollar amount as prescribed by applicable Treasury
regulations). Specified foreign financial assets would include, among other
assets, our common shares, unless the shares are held through an account
maintained with a United States financial institution. Substantial penalties
apply to any failure to timely file IRS Form 8938, unless the failure is shown
to be due to reasonable cause and not due to willful neglect. Additionally, in
the event an individual United States Holder (and to the extent specified in
applicable Treasury Regulations, an individual Non- United States Holder or a
United States entity) that is required to file IRS Form 8938 does not file such
form, the statute of limitations on the assessment and collection of United
States federal income taxes of such holder for the related tax year may not
close until three years after the date that the required IRS Form 8938 is
filed. United States Holders (including United States entities) and Non- United
States Holders are encouraged consult their own tax advisors regarding their
reporting obligations under this legislation.

|   |                            
|-- | ---------------------------
|F. | Dividends and Paying Agents
|   |                            
|   | Not
 applicable.           
|   |                            
|G. | Statement by Experts       
|   |                            
|   | Not
 applicable.           
|   |                            
|H. | Documents on Display       

We file
reports and other information with the SEC. These materials, including this
annual report and the accompanying exhibits, may be inspected and copied at the
public reference facilities maintained by the Commission at 100 F Street, N.E.
Washington, D.C. 20549, or from the SECs website http://www.sec.gov. You may
obtain information on the operation of the public reference room by calling 1
(800) SEC-0330, and you may obtain copies at prescribed rates.

|   |                       
|-- | ----------------------
|I. | Subsidiary Information
|   |                       
|   | Not
 applicable.      

97

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|         |                                                            
|-------- | -----------------------------------------------------------
|ITEM 11. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS

Interest Rate Risk

We are exposed
to the impact of interest rate changes primarily through our unhedged
variable-rate borrowings. Significant increases in interest rates could
adversely affect our operating margins, results of operations and our ability
to service our debt. From time to time, we will use interest rate swaps to
reduce our exposure to market risk from changes in interest rates. The
principal objective of these contracts is to minimize the risks and costs
associated with our variable-rate debt and is not for speculative or trading
purposes. We had one interest rate swap which expired in April 2010 when the
2005 Credit Facility was repaid. We have six interest rate swaps which we
entered into in August 2011 and went into effect on July 1, 2012 for an
aggregate notional amount of $75 million, which was reduced to $66.0 million in
September 2012. See Note 12 of the consolidated financial statements for
further information. The fair market value of our interest rate swaps was a
liability of $1.4 million at December 31, 2012.

Based on
the floating rate debt at December 31, 2012, a one-percentage point increase in
the floating interest rate would increase interest expense by $1.6 million per
year. The following table presents the due dates for the principal payments on
our fixed and floating rate debt:

|                                                  |  |                         |       |              |   |              |  |            |        |  |   |        | 
|------------------------------------------------- |  | ----------------------- | ----- | ------------ | - | ------------ |  | ---------- | ------ |  | - | ------ | 
|                                                  |  | As of December 31, 2012
|Amounts in thousands of US dollars                |  | 2013                    |       | 2014 -
 2015 |   | 2016 -
 2017 |  | Thereafter |       
|Principal payments floating
 rate debt (unhedged) |  | $                       | 3,007 |              | $ | 27,410       |  | $          | 26,784 |  | $ | 76,913 | 
|Principal payments fixed
 rate debt (hedged)      |  |                         | 4,600 |              |   | 7,564        |  |            |       |  |   |       | 
|Total principal payments on
 outstanding debt     |  | $                       | 7,607 |              | $ | 34,974       |  | $          | 26,784 |  | $ | 76,913 | 

Spot Market Rate Risk

The
cyclical nature of the tanker industry causes significant increases or
decreases in the revenue that we earn from our vessels, particularly those
vessels that operate in the spot market or participate in pools that are
concentrated in the spot market such as the Scorpio Group Pools. We currently
do not have any vessels on time charter contracts. Additionally, we have the
ability to remove our vessels from the pools on relatively short notice if
attractive time charter opportunities arise.

Foreign Exchange Rate Risk

Our primary
economic environment is the international shipping market. This market utilizes
the US dollar as its functional currency. Consequently, virtually all of our
revenues and the majority of our operating expenses are in US dollars. However,
we incur some of our combined expenses in other currencies, particularly the
Euro. The amount and frequency of some of these expenses (such as vessel
repairs, supplies and stores) may fluctuate from period to period. Depreciation
in the value of the US dollar relative to other currencies will increase the US
dollar cost of us paying such expenses. The portion of our business conducted
in other currencies could increase in the future, which could expand our
exposure to losses arising from currency fluctuations.

There is a
risk that currency fluctuations will have a negative effect on our cash flows.
We have not entered into any hedging contracts to protect against currency
fluctuations. However, we have some ability to shift the purchase of goods and
services from one country to another and, thus, from one currency to another,
on relatively short notice. We may seek to hedge this currency fluctuation risk
in the future.

Bunker Price Risk

Our
operating results are affected by movement in the price of fuel oil consumed by
the vessels  known in the industry as bunkers. The price and supply of fuel is
unpredictable and fluctuates based on events outside our control, including
geopolitical developments, supply and demand for oil and gas, actions by the
Organization of the Petroleum Exporting Countries, or OPEC, and other oil and
gas producers, war and unrest in oil producing countries and regions, regional
production patterns and environmental concerns. Further, fuel may become much
more expensive in the future, which may reduce the profitability. We do not
hedge our exposure to bunker price risk.

98

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Inflation

We do not
expect inflation to be a significant risk to direct expenses in the current and
foreseeable economic environment.

|         |                                                       
|-------- | ------------------------------------------------------
|ITEM 12. | DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES

| |                 
| | ----------------
| | Not
 applicable.

PART II

|         |                                                
|-------- | -----------------------------------------------
|ITEM 13. | DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES

| |                 
| | ----------------
| | Not
 applicable.

|         |                                                                              
|-------- | -----------------------------------------------------------------------------
|ITEM 14. | MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF
 PROCEEDS

| |                 
| | ----------------
| | Not
 applicable.

|         |                        
|-------- | -----------------------
|ITEM 15. | CONTROLS AND PROCEDURES

|   |                                    
|-- | -----------------------------------
|A. | Disclosure Controls and Procedures.

We maintain
disclosure controls and procedures that are designed to ensure that information
required to be disclosed in our reports under the Securities Exchange Act of
1934, as amended (the Exchange Act) is recorded, processed, summarized and
reported within time periods specified in the SECs rules and forms, and that
such information is accumulated and communicated to management, including the
Chief Executive Officer and Chief Financial Officer, as appropriate, to allow
timely decisions regarding required disclosures. Our controls and procedures
are designed to provide reasonable assurance of achieving their objectives.

We carried
out an evaluation under the supervision, and with the participation of our
management, including our Chief Executive Officer and Chief Financial Officer,
of the effectiveness of the design and operation of our disclosure controls and
procedures (as defined in Exchange Act Rule 13a-15(e) and 15d-15e under the
Securities Act of 1934) as of December 31, 2012. Based upon that evaluation,
our Chief Executive Officer and Chief Financial Officer concluded that our
disclosure controls and procedures were effective as of December 31, 2012 to
provide reasonable assurance that (1) information required to be disclosed by
us in the reports that we file under the Exchange Act is recorded, processed,
summarized and reported within the time periods specified in the SECs rules
and forms, and (2) that such information is accumulated and communicated to our
management, including our Chief Executive Officer and our Chief Financial
Officer, as appropriate, to allow timely decisions regarding required disclosures.

There are
inherent limitations to the effectiveness of any system of disclosure controls
and procedures, including the possibility of human error and the circumvention
or overriding of the controls and procedures. Accordingly, even effective
disclosure controls and procedures can only provide reasonable assurance of
achieving their control objectives.

|   |                                                                          
|-- | -------------------------------------------------------------------------
|B. | Managements Annual Report on Internal Control Over Financial
 Reporting.

In
accordance with Rule 13a-15(f) of the Securities Exchange Act of 1934, the
management of Scorpio Tankers Inc. and its subsidiaries (the Company) is
responsible for the establishment and maintenance of adequate internal 100
controls over financial reporting for the Company. Internal control over
financial reporting is a process designed to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with generally
accepted accounting principles. The Companys system of internal control over
financial reporting includes those policies and procedures that (i) pertain to
the maintenance of records that, in reasonable detail, accurately and fairly
reflect the transactions and dispositions of the assets of the Company; (ii)
provide reasonable assurance that transactions are recorded as necessary to
permit preparation of financial statements in accordance with generally accepted accounting principles, and that
receipts and expenditures of the Company are being made only in accordance with
authorizations of management and directors of the Company; and (iii) provide
reasonable assurance regarding prevention or timely detection of unauthorized
acquisition, use, or disposition of the Companys assets that could have a
material effect on the financial statements. Management has performed an
assessment of the effectiveness of the Companys internal controls over
financial reporting as of December 31, 2012 based on the provisions of Internal
ControlIntegrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO). Based on our assessment,
management determined that the Companys internal controls over financial
reporting was effective as of December 31, 2012 based on the criteria in
Internal ControlIntegrated Framework issued by COSO.

The Companys internal control over financial reporting, at December
31, 2012, has been audited by Deloitte LLP, an independent registered public
accounting firm, who also audited the Companys consolidated financial
statements. Their audit report on the effectiveness of internal control over
financial reporting is presented below.

99

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|   |                                                              
|-- | -------------------------------------------------------------
|C. | Attestation
 Report of the Registered Public Accounting Firm.

To the Board of Directors and Shareholders of
Scorpio Tankers Inc.

Majuro, Marshall Island

We have audited the internal control over financial
reporting of Scorpio Tankers Inc. and subsidiaries (the Company) as of
December 31, 2012, based on criteria established in Internal Control  Integrated Frameworkissued by the
Committee of Sponsoring Organizations of the Treadway Commission. The Companys
management is responsible for maintaining effective internal control over
financial reporting and for its assessment of the effectiveness of internal
control over financial reporting, included in the accompanying Managements Annual Report
on Internal Control Over Financial Reporting. Our responsibility is to express an opinion
on the Companys internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards
of the Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain reasonable
assurance about whether effective internal control over financial reporting was
maintained in all material respects. Our audit included obtaining an
understanding of internal control over financial reporting, assessing the risk
that a material weakness exists, testing and evaluating the design and
operating effectiveness of internal control based on the assessed risk, and
performing such other procedures as we considered necessary in the circumstances.
We believe that our audit provides a reasonable basis for our opinion.

A companys internal control over financial reporting is
a process designed by, or under the supervision of, the companys principal
executive and principal financial officers, or persons performing similar
functions, and effected by the companys board of directors, management, and
other personnel to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external purposes
in accordance with generally accepted accounting principles. A companys
internal control over financial reporting includes those policies and
procedures that (1) pertain to the maintenance of records that, in reasonable
detail, accurately and fairly reflect the transactions and dispositions of the
assets of the company; (2) provide reasonable assurance that transactions are
recorded as necessary to permit preparation of financial statements in
accordance with generally accepted accounting principles, and that receipts and
expenditures of the company are being made only in accordance with
authorizations of management and directors of the company; and (3) provide
reasonable assurance regarding prevention or timely detection of unauthorized
acquisition, use, or disposition of the companys assets that could have a
material effect on the financial statements.

Because of the inherent limitations of internal
control over financial reporting, including the possibility of collusion or
improper management override of controls, material misstatements due to error
or fraud may not be prevented or detected on a timely basis. Also, projections
of any evaluation of the effectiveness of the internal control over financial
reporting to future periods are subject to the risk that the controls may
become inadequate because of changes in conditions, or that the degree of
compliance with the policies or procedures may deteriorate.

In our opinion, the Company maintained, in all
material respects, effective internal control over financial reporting as of
December 31, 2012, based on the criteria established in Internal Control  Integrated Frameworkissued
by the Committee of Sponsoring Organizations of the Treadway Commission.

We have also audited, in accordance with the
standards of the Public Company Accounting Oversight Board (United States), the
consolidated financial statements as of and for the year ended December 31,
2012 of the Company and our report dated March 28, 2013 expressed an
unqualified opinion on those financial statements.

/s/ DELOITTE LLP

London, United Kingdom

March 28, 2013

100

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|   |                                                      
|-- | -----------------------------------------------------
|D. | Changes in Internal Control Over Financial Reporting.

None

|          |                                 
|--------- | --------------------------------
|ITEM 16A. | AUDIT COMMITTEE FINANCIAL EXPERT

Our Board
of Directors has determined that Mr. Ademaro Lanzara, who serves on the Audit
Committee, qualifies as an audit committee financial expert and that he is
independent according to Securities and Exchange Commission rules.

|          |               
|--------- | --------------
|ITEM 16B. | CODE OF ETHICS

We have
adopted a code of ethics applicable to officers, directors and employees, which complies with applicable guidelines issued by
the SEC. Our code of ethics is filed as an exhibit to this annual report and can be found on our website at
www.scorpiotankers.com. We will also provide a hard copy of our code of ethics free of charge upon written request to Scorpio
Tankers Inc., 9 Boulevard Charles III, Monaco, 98000.

|          |                                       
|--------- | --------------------------------------
|ITEM 16C. | PRINCIPAL ACCOUNTANT FEES AND SERVICES

|   |           
|-- | ----------
|A. | Audit Fees

Our
principal accountant for fiscal years ended December 31, 2012, 2011 and 2010
was Deloitte LLP (London, United Kingdom), and the audit fees for those periods
were $434,247, $380,174 and $218,167, respectively.

|   |                   
|-- | ------------------
|B. | Audit-Related Fees

None.

|   |         
|-- | --------
|C. | Tax Fees

None.

|   |               
|-- | --------------
|D. | All Other Fees

During
2012, our principal accountant provided services related to SEC comment letter
review and follow-on offerings were completed in April and December 2012. The
fees for these services were $38,743, $80,675 and $97,128, respectively. During
2011, our principal accountant provided services related to our F-3 shelf registration
and follow-on offerings were completed on May 10, 2011, May 18, 2011 and
December 6, 2011, respectively. The fees for these services were $28,982,
$72,896 and $86,206, respectively.

|   |                                                       
|-- | ------------------------------------------------------
|E. | Audit Committees Pre-Approval Policies and Procedures

Our Audit
Committee pre-approves all audit, audit-related and non-audit services not
prohibited by law to be performed by our independent auditors and associated
fees prior to the engagement of the independent auditor with respect to such
services.

101

---



|   |                                                                             
|-- | ----------------------------------------------------------------------------
|F. | Audit Work Performed by Other Than Principal Accountant if Greater
 Than 50%

Not
applicable.

|          |                                                           
|--------- | ----------------------------------------------------------
|ITEM 16D. | EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES

Not
applicable.

|          |                                                                      
|--------- | ---------------------------------------------------------------------
|ITEM 16E. | PURCHASE OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS

On July 9,
2010, the board of directors authorized a share buyback program of $20 million.
We repurchase these shares in the open market at the time and prices that we
consider to be appropriate. During the year ended December 31, 2012, 447,322
shares have been purchased under the plan at an average price of $5.4546 per
share, including commissions. As of the date of this report, 1,170,987 shares
have been purchased under the plan at an average price of $6.7793 per share.
The amounts purchased during 2012, by month, are set out in the table below:

|                                      |  |                                       |         |                                       |   |                                                                                  |  |                                                                                                    |         |  |   |            | 
|------------------------------------- |  | ------------------------------------- | ------- | ------------------------------------- | - | -------------------------------------------------------------------------------- |  | -------------------------------------------------------------------------------------------------- | ------- |  | - | ---------- | 
|Issuer Purchases of Equity Securities | 
|Period                                |  | (A) Total Number
 of Shares Purchased |         | (B)
 Average
 Price Paid
 Per
 Shares |   | ( C ) Total Number of
 Shares Purchased as Part of
 Publicly Announced
 Programs |  | (D) Maximum Amount in US $
 million that may Yet Be
 Expected on Share Repurchases
 Under Programs |        
|June 2012                             |  |                                       | 365,000 |                                       | $ | 5.48                                                                             |  |                                                                                                    | 365,000 |  | $ | 12,501,305 | 
|August 2012                           |  |                                       | 75,422  |                                       | $ | 5.35                                                                             |  |                                                                                                    | 75,422  |  | $ | 12,098,149 | 
|September 2012                        |  |                                       | 6,900   |                                       | $ | 5.30                                                                             |  |                                                                                                    | 6,900   |  | $ | 12,061,547 | 
|Total                                 |  |                                       | 447,322 |                                       | $ | 5.45                                                                             |  |                                                                                                    | 447,322 |  | $ | 12,061,547 | 

Officers
and directors acquired 163,994 shares during 2012.

|          |                                             
|--------- | --------------------------------------------
|ITEM 16F. | CHANGE IN REGISTRANTS CERTIFYING ACCOUNTANT

Not
applicable.

|          |                     
|--------- | --------------------
|ITEM 16G. | CORPORATE GOVERNANCE

Pursuant to
an exception for foreign private issuers, we, as a Marshall Islands company,
are not required to comply with the corporate governance practices followed by
U.S. companies under the NYSE listing standards. We believe that our
established practices in the area of corporate governance are in line with the
spirit of the NYSE standards and provide adequate protection to our
shareholders. In this respect, we have voluntarily adopted NYSE required
practices, such as (i) having a majority of independent directors, (ii)
establishing audit, compensation and nominating committees and (iii) adopting a
Code of Ethics.

There
are two significant differences between our corporate governance practices and
the practices required by the NYSE. The NYSE requires that non-management
directors meet regularly in executive sessions without management. The NYSE
also requires that all independent directors meet in an executive session at
least once a year. The Marshall Islands law and our bylaws do not require our
non-management directors to regularly hold executive sessions without
management. During 2012 and through the date of this annual report, our non-management
directors met in executive session four times. The NYSE requires companies to
adopt and disclose corporate governance guidelines. The guidelines must
address, among other things: director qualification standards, director
responsibilities, director access to management
and independent advisers, director compensation, director orientation and
continuing education, management succession and an annual performance
evaluation. We are not required to adopt such guidelines under Marshall Islands
law and we have not adopted such guidelines.

102

---



ITEM 16H. Mine
Safety Disclosure

Not
applicable

PART III

|         |                     
|-------- | --------------------
|ITEM 17. | FINANCIAL STATEMENTS

Not
applicable

|         |                     
|-------- | --------------------
|ITEM 18. | FINANCIAL STATEMENTS

The
financial information required by this Item is set forth on pages F-1 to F-42
and is filed as part of this annual report.

|         |         
|-------- | --------
|ITEM 19. | EXHIBITS

|                |  |                                                                                                               
|--------------- |  | --------------------------------------------------------------------------------------------------------------
|Exhibit
 Number |  | Description                                                                                                   
|1.1             |  | Amended and Restated
 Articles of Incorporation of the Company (1)                                            
|1.2             |  | Amended and Restated
 Bylaws of the Company (3)                                                               
|2.1             |  | Form of Stock Certificate
 (1)                                                                                
|2.3             |  | Form of Senior Debt
 Securities Indenture (5)                                                                 
|2.4             |  | Form of Subordinated Debt
 Securities Indenture (5)                                                           
|4.1             |  | Amended and Restated Loan
 Agreement for $150 Million Revolving Credit Facility, dated July 12, 2011 (6)      
|4.2             |  | Letter Agreement to July
 12, 2011 Amended and Restated Loan Agreement, dated September 22, 2011(6)           
|4.3             |  | First Amendatory Agreement
 to July 12, 2011 Amended and Restated Loan Agreement, dated December 22, 2011
 (6)
|4.4             |  | 2010 Equity Incentive Plan
 (3)                                                                               
|4.5             |  | Administrative Services
 Agreement between the Company and Liberty Holding Company Ltd. (2)                   
|4.6             |  | Master Agreement between
 the Company, SSM and SCM dated January 24, 2013                                     
|4.7             |  | Loan Agreement for STI
 Spirit, dated March 9, 2011 (4)                                                       
|4.8             |  | Letter Agreement to March
 9, 2011 Loan Agreement, dated September 28, 2011 (6)                               
|4.9             |  | First Amendatory Agreement
 to March 9, 2011 Loan Agreement, dated December 30, 2011 (6)                      
|4.10            |  | Loan Agreement for $150
 Million Term Loan Credit Facility, dated May 3, 2011 (6)                             
|4.11            |  | Letter Agreement to May 3,
 2011 Loan Agreement, dated September 22, 2011 (6)                                 
|4.12            |  | First Amendatory Agreement
 to May 3, 2011 Loan Agreement, dated June 27, 2011 (6)                            
|4.13            |  | Second Amendatory
 Agreement to May 3, 2011 Loan Agreement, dated December 22, 2011 (6)                       
|4.14            |  | Loan Agreement for a
 $92,000,000 Term Loan Credit Facility, dated December 21, 2011 (6)                      
|8.1             |  | Subsidiaries of the
 Company                                                                                  
|11.1            |  | Code of Ethics                                                                                                
|11.2            |  | Whistleblower Policy                                                                                          
|12.1            |  | Rule 13a-14(a)/15d-14(a)
 Certification of Principal Executive Officer                                        
|12.2            |  | Rule 13a-14(a)/15d-14(a)
 Certification of Principal Financial Officer                                        



103

---



|     |  |                                                                                                                                                        
|---- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------
|13.1 |  | Certification of Principal
 Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
 Section 906 of the Sarbanes-Oxley Act of 2002
|13.2 |  | Certification of Principal
 Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
 Section 906 of the Sarbanes-Oxley Act of 2002
|15.1 |  | Consent of Independent
 Registered Public Accounting Firm                                                                                              
|15.2 |  | Consent of Drewry Shipping
 Consultants, Ltd.                                                                                                          

|    |                                                                                                                                                | 
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------- | 
|    |                                                                                                                                               
|(1) | Filed as an Exhibit to the
 Companys Amended Registration Statement on Form F-1/A (Amendment No. 1)
 (File No. 333-164940) on March 10, 2010.
|    |                                                                                                                                               
|(2) | Filed as an Exhibit to the
 Companys Amended Registration Statement on Form F-1/A (Amendment No. 2)
 (File No. 333-164940) on March 18, 2010.
|    |                                                                                                                                               
|(3) | Filed as an Exhibit to the
 Companys Annual Report filed on Form 20-F on June 29, 2010.                                                      
|    |                                                                                                                                               
|(4) | Filed as an Exhibit to the
 Companys Annual Report filed on Form 20-F on April 21, 2011.                                                     
|    |                                                                                                                                               
|(5) | Filed as an Exhibit to the
 Companys Registration Statement on Form F-3 (File No. 333-173929) on May 4,
 2011.                               
|    |                                                                                                                                               
|(6) | Filed
 as an Exhibit to the Companys Annual Report on Form 20-F on April 13, 2012,
 as amended.                                              



104

---



SIGNATURES

The
registrant hereby certifies that it meets all of the requirements for filing on
Form 20-F and has duly caused and authorized the undersigned to sign this
annual report on its behalf.

|                      |                         | 
|--------------------- | ----------------------- | 
|                      | Scorpio Tankers Inc.    | 
|                      | (Registrant)            | 
|Dated: March 28, 2013 |                         | 
|                      | /s/Emanuele Lauro       | 
|                      | Emanuele Lauro          | 
|                      | Chief Executive Officer | 



105

---





INDEX TO CONSOLIDATED FINANCIAL STATEMENTS



|Report of Independent Registered Public Accounting Firm                                                         |  | F-2
|--------------------------------------------------------------------------------------------------------------- |  | ---
|Audited Consolidated Financial Statements                                                                       |  |    
|Consolidated Balance Sheets as of December 31, 2012 and 2011                                                    |  | F-3
|Consolidated Statements of Profit or Loss for the years ended December 31, 2012, 2011 and 2010                  |  | F-4
|Consolidated Statements of Comprehensive Income or Loss for the years ended December 31, 2012, 2011 and 2010    |  | F-5
|Consolidated Statements of Changes in Shareholders’ Equity for the years ended December 31, 2012, 2011 and 2010 |  | F-6
|Consolidated Cash Flow Statements for the years ended December 31, 2012, 2011 and 2010                          |  | F-7
|Notes to the Consolidated Financial Statements                                                                  |  | F-8





F-1





Report of Independent Registered
Public Accounting Firm



To the Board of Directors and Shareholders of Scorpio Tankers Inc.



Majuro, Marshall Island



We have audited the accompanying consolidated balance sheets of
Scorpio Tankers Inc. and subsidiaries (the "Company") as of December 31, 2012 and 2011, and the related consolidated
statements of profit or loss, consolidated statements of comprehensive loss or income, consolidated statements of changes in shareholders’
equity, and consolidated cash flow statements for each of the three years in the period ended December 31, 2012. 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 audits.



We conducted our audits in accordance with the standards of the
Public Company Accounting Oversight Board (United States). 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 audits provide a reasonable basis for our opinion.



In our opinion, such consolidated financial statements present fairly,
in all material respects, the financial position of Scorpio Tankers Inc. and subsidiaries as of December 31, 2012 and 2011, and
the results of their operations and their cash flows for each of the three years in the period ended December 31, 2012, in conformity
with International Financial Reporting Standards as issued by the International Accounting Standards Board.



We have also audited, in accordance with the standards of the
Public Company Accounting Oversight Board (United States), the Company's internal control over financial reporting as of
December 31, 2012, based on the criteria established in Internal Control—Integrated Framework issued by the
Committee of Sponsoring Organizations of the Treadway Commission and our report dated March 28, 2013 expressed an unqualified
opinion on the Company's internal control over financial reporting.



/s/ DELOITTE LLP



London, United Kingdom



March 28, 2013







F-2





Scorpio Tankers Inc. and Subsidiaries



Consolidated balance sheets

December 31, 2012 and 2011



|                                                    |  |       |    | As of            
|--------------------------------------------------- |  | ----- | -- | -----------------
|In thousands of U.S. dollars                        |  | Notes |    | December 31, 2012
|Assets                                              |  |       |    |                  
|Current assets                                      |  |       |    |                  
|Cash and cash equivalents                           |  |       |    |                  
|Accounts receivable                                 |  |       | 3  |                  
|Prepaid expenses and other current assets           |  |       | 4  |                  
|Inventories                                         |  |       | 5  |                  
|Total current assets                                |  |       |    |                  
|Non-current assets                                  |  |       |    |                  
|Vessels and drydock                                 |  |       | 6  |                  
|Vessels under construction                          |  |       | 6  |                  
|Other assets                                        |  |       | 8  |                  
|Total non-current assets                            |  |       |    |                  
|Total assets                                        |  |       |    |                  
|                                                    |  |       |    |                  
|Current liabilities                                 |  |       |    |                  
|Bank loans                                          |  |       | 11 |                  
|Accounts payable                                    |  |       | 9  |                  
|Accrued expenses                                    |  |       | 10 |                  
|Derivative financial instruments                    |  |       | 12 |                  
|Total current liabilities                           |  |       |    |                  
|Non-current liabilities                             |  |       |    |                  
|Bank loans                                          |  |       | 11 |                  
|Derivative financial instruments                    |  |       | 12 |                  
|Total non-current liabilities                       |  |       |    |                  
|Total liabilities                                   |  |       |    |                  
|                                                    |  |       |    |                  
|Shareholders' equity                                |  |       |    |                  
|Issued, authorized and fully paid in share capital: |  |       |    |                  
|Share capital                                       |  |       | 14 |                  
|Additional paid in capital                          |  |       | 14 |                  
|Treasury shares                                     |  |       | 14 |                  
|Hedging reserve                                     |  |       | 12 |                  
|Accumulated deficit                                 |  |       |    |                  
|Total shareholders' equity                          |  |       |    |                  
|Total liabilities and shareholders' equity          |  |       |    |                  



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





F-3











Scorpio Tankers Inc. and Subsidiaries



Consolidated statements of profit or loss

For the years ended December 31, 2012, 2011 and 2010



|                                                                 |  |  |       |  |  |    | For the year ended December
    31, |  
|---------------------------------------------------------------- |  |  | ----- |  |  | -- | ----------------------------------- | -
|In thousands of U.S. dollars except per share
    and share data |  |  | Notes |  |  |    | 2012                                |  
|Revenue:                                                         |  |  |       |  |  |    |                                     |  
|Vessel revenue                                                   |  |  | 16    |  |  | $  | 115,381                             |  
|                                                                 |  |  |       |  |  |    |                                     |  
|Operating expenses:                                              |  |  |       |  |  |    |                                     |  
|Vessel operating costs                                           |  |  |       |  |  |    | (30,353                             | )
|Voyage expenses                                                  |  |  |       |  |  |    | (21,744                             | )
|Charterhire                                                      |  |  | 17    |  |  |    | (43,701                             | )
|Impairment                                                       |  |  | 7     |  |  |    | —                                   |  
|Depreciation                                                     |  |  | 6     |  |  |    | (14,818                             | )
|Loss from sale of vessels                                        |  |  | 6     |  |  |    | (10,404                             | )
|General and administrative expenses                              |  |  | 18    |  |  |    | (11,536                             | )
|Total operating expenses                                         |  |  |       |  |  |    | (132,556                            | )
|Operating (loss)/profit                                          |  |  |       |  |  |    | (17,175                             | )
|Other (expense) and income, net                                  |  |  |       |  |  |    |                                     |  
|Financial expenses                                               |  |  | 19    |  |  |    | (8,512                              | )
|Earnings from profit or loss sharing agreements                  |  |  | 12    |  |  |    | 443                                 |  
|Realized loss on derivative financial instruments                |  |  | 12    |  |  |    | —                                   |  
|Unrealized loss on derivative financial instruments              |  |  | 12    |  |  |    | (1,231                              | )
|Financial income                                                 |  |  |       |  |  |    | 35                                  |  
|Other expenses, net                                              |  |  |       |  |  |    | (97                                 | )
|Total other expense, net                                         |  |  |       |  |  |    | (9,362                              | )
|Net loss                                                         |  |  |       |  |  | ($ | 26,537                              | )
|                                                                 |  |  |       |  |  |    |                                     |  
|Attributable to:                                                 |  |  |       |  |  |    |                                     |  
|Equity holders of the parent                                     |  |  |       |  |  | ($ | 26,537                              | )
|                                                                 |  |  |       |  |  |    |                                     |  
|Loss per share                                                   |  |  |       |  |  |    |                                     |  
|                                                                 |  |  |       |  |  |    |                                     |  
|Basic and diluted                                                |  |  | 21    |  |  | ($ | 0.64                                | )
|Basic and diluted weighted average shares outstanding            |  |  | 21    |  |  |    | 41,413,339                          |  





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





F-4









Scorpio Tankers Inc. and Subsidiaries



Consolidated statements of comprehensive income or loss

For the years ended December 31, 2012, 2011 and 2010



|                                                                                      |  | For the year ended December 31, |       
|------------------------------------------------------------------------------------- |  | ------------------------------- | ------
|In thousands of U.S. dollars                                                          |  | 2012                            |       
|Net loss                                                                              |  | ($                              | 26,537
|Other comprehensive income / (loss):                                                  |  |                                 |       
|Items that may be reclassified subsequently to profit or loss                         |  |                                 |       
|Cash flow hedges                                                                      |  |                                 |       
|Unrealized loss on derivative financial instruments                                   |  |                                 | (904  
|Reclassification adjustment for derivative financial instruments included in net loss |  |                                 | 1,276 
|Other comprehensive income / (loss)                                                   |  |                                 | 372   
|                                                                                      |  |                                 |       
|Total comprehensive loss                                                              |  | ($                              | 26,165
|                                                                                      |  |                                 |       
|Attributable to:                                                                      |  |                                 |       
|Equity holders of the parent                                                          |  | ($                              | 26,165



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





F-5







Scorpio Tankers Inc. and Subsidiaries



Consolidated statements of changes in shareholders’
equity

For the years ended December 31, 2012, 2011 and 2010



|In thousands of U.S. dollars          |  | Number of          |            | Share   |  | Additional      |     | Treasury |  | Merger  |         | Accumulated |  | Hedging |        |      
|------------------------------------- |  | ------------------ | ---------- | ------- |  | --------------- | --- | -------- |  | ------- | ------- | ----------- |  | ------- | ------ | -----
|except share data                     |  | shares outstanding |            | capital |  | paid-in capital |     | shares   |  | reserve |         | deficit     |  | reserve |        | Total
|                                      |  |                    |            |         |  |                 |     |          |  |         |         |             |  |         |        |      
|Balance at January 1, 2010            |  |                    | 5,589,147  |         |  | $               | 56  |          |  | $       | 46,272  |             |  | $       | 0      |      
|Net loss for the period               |  |                    | —          |         |  |                 | —   |          |  |         | —       |             |  |         | —      |      
|Net proceeds from offerings           |  |                    | 18,721,454 |         |  |                 | 187 |          |  |         | 207,750 |             |  |         | —      |      
|Issuance of restricted shares         |  |                    | 568,458    |         |  |                 | 6   |          |  |         | (6      | )           |  |         | —      |      
|Amortization of restricted shares     |  |                    | —          |         |  |                 | —   |          |  |         | 988     |             |  |         | —      |      
|Purchase of treasury shares           |  |                    | (244,146   | )       |  |                 | —   |          |  |         | —       |             |  |         | (2,647 | )    
|Balance at December 31, 2010          |  |                    | 24,634,913 |         |  | $               | 249 |          |  | $       | 255,004 |             |  | ($      | 2,647  | )    
|                                      |  |                    |            |         |  |                 |     |          |  |         |         |             |  |         |        |      
|Balance as of January 1, 2011         |  |                    | 24,634,913 |         |  | $               | 249 |          |  | $       | 255,004 |             |  | ($      | 2,647  | )    
|Net loss for the period               |  |                    | —          |         |  |                 | —   |          |  |         | —       |             |  |         | —      |      
|Other comprehensive loss              |  |                    | —          |         |  |                 | —   |          |  |         | —       |             |  |         | —      |      
|Net proceeds from follow on offerings |  |                    | 13,900,000 |         |  |                 | 139 |          |  |         | 104,847 |             |  |         | —      |      
|Issuance of restricted stock          |  |                    | 290,000    |         |  |                 | 3   |          |  |         | (3      | )           |  |         | —      |      
|Amortization of restricted stock      |  |                    | —          |         |  |                 | —   |          |  |         | 3,362   |             |  |         | —      |      
|Purchase of treasury shares           |  |                    | (479,519   | )       |  |                 | —   |          |  |         | —       |             |  |         | (2,851 | )    
|Transfer to/ (from) reserves          |  |                    | —          |         |  |                 | —   |          |  |         | —       |             |  |         | —      |      
|Balance as of December 31, 2011       |  |                    | 38,345,394 |         |  | $               | 391 |          |  | $       | 363,210 |             |  | ($      | 5,498  | )    
|                                      |  |                    |            |         |  |                 |     |          |  |         |         |             |  |         |        |      
|Balance as of January 1, 2012         |  |                    | 38,345,394 |         |  | $               | 391 |          |  | $       | 363,210 |             |  | ($      | 5,498  | )    
|Net loss for the period               |  |                    | —          |         |  |                 | —   |          |  |         | —       |             |  |         | —      |      
|Other comprehensive income            |  |                    | —          |         |  |                 | —   |          |  |         | —       |             |  |         | —      |      
|Net proceeds from follow on offerings |  |                    | 25,639,774 |         |  |                 | 256 |          |  |         | 152,796 |             |  |         | —      |      
|Issuance of restricted stock          |  |                    | 290,000    |         |  |                 | 3   |          |  |         | (3      | )           |  |         | —      |      
|Amortization of restricted stock      |  |                    | —          |         |  |                 | —   |          |  |         | 3,490   |             |  |         | —      |      
|Purchase of treasury shares           |  |                    | (447,322   | )       |  |                 | —   |          |  |         | —       |             |  |         | (2,440 | )    
|Balance as of December 31, 2012       |  |                    | 63,827,846 |         |  | $               | 650 |          |  | $       | 519,493 |             |  | ($      | 7,938  | )    



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



F-6







Scorpio Tankers Inc. and Subsidiaries



Consolidated cash flow statements

For the years ended December 31, 2012, 2011 and 2010



|                                                                   |  |       |   | For the year ended December 31,
|------------------------------------------------------------------ |  | ----- | - | -------------------------------
|In thousands of U.S. dollars                                       |  |       |   | 2012                           
|                                                                   |  | Notes |   |                                
|Operating activities                                               |  |       |   |                                
|Net loss                                                           |  |       |   |                                
|Loss from sale of vessels                                          |  |       |   |                                
|Depreciation                                                       |  |       | 6 |                                
|Impairment                                                         |  |       | 7 |                                
|Amortization of restricted stock                                   |  |       |   |                                
|Amortization of deferred financing fees                            |  |       |   |                                
|Amortization of acquired time charter contracts                    |  |       |   |                                
|Write off of vessel purchase options                               |  |       |   |                                
|Straight-line adjustment for charterhire expense                   |  |       |   |                                
|Unrealized loss on derivative financial instruments                |  |       |   |                                
|                                                                   |  |       |   |                                
|Changes in assets and liabilities:                                 |  |       |   |                                
|Drydock payments                                                   |  |       |   |                                
|Decrease/(increase) in inventories                                 |  |       |   |                                
|Increase in accounts receivable                                    |  |       |   |                                
|Decrease/(increase) in prepaid expenses and other current assets   |  |       |   |                                
|Decrease/(increase) in other assets                                |  |       |   |                                
|Increase/(decrease) in accounts payable                            |  |       |   |                                
|Increase in accrued expenses                                       |  |       |   |                                
|Decrease in the value of derivative financial instruments          |  |       |   |                                
|Interest rate swap termination payment                             |  |       |   |                                
|Decrease in shareholder receivable                                 |  |       |   |                                
|                                                                   |  |       |   |                                
|Net cash (outflow)/inflow from operating activities                |  |       |   |                                
|Investing activities                                               |  |       |   |                                
|Acquisition of vessels and payments for vessels under construction |  |       |   |                                
|Proceeds from disposal of vessels                                  |  |       |   |                                
|Acquisition of time charter contracts                              |  |       |   |                                
|Purchases of other assets                                          |  |       |   |                                
|Net cash outflow from investing activities                         |  |       |   |                                
|Financing activities                                               |  |       |   |                                
|Bank loan repayment                                                |  |       |   |                                
|Bank loan drawdown                                                 |  |       |   |                                
|Debt issuance costs                                                |  |       |   |                                
|Net proceeds from issuance of common stock                         |  |       |   |                                
|Purchase of treasury shares                                        |  |       |   |                                
|Net cash inflow from financing activities                          |  |       |   |                                
|Increase/(decrease) in cash and cash equivalents                   |  |       |   |                                
|Cash and cash equivalents at January 1,                            |  |       |   |                                
|Cash and cash equivalents at December 31,                          |  |       |   |                                
|                                                                   |  |       |   |                                
|Supplemental information:                                          |  |       |   |                                
|Interest paid                                                      |  |       |   |                                



As of December 31,2012 and 2011, we
accrued $3.5 million and $9.4 million, respectively, for installment payments on our newbuilding vessels (see Note 6) which
represent significant non-cash transactions. These payments were made in January 2013 and 2012, respectively. There were no
non-cash transactions during 2010 requiring disclosure.



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





F-7







Scorpio Tankers Inc. and Subsidiaries



Notes to the consolidated financial statements



1.    General
information and significant accounting policies



Company





Scorpio Tankers
Inc. and its subsidiaries (together “we”, “our” or the “Company”) are engaged in seaborne transportation
of refined petroleum products and crude oil in the international shipping markets. Scorpio Tankers Inc. was incorporated in the
Republic of the Marshall Islands on July 1, 2009.



On April 6, 2010,
we closed on our initial public offering. The stock trades on the New York Stock Exchange under the symbol STNG.



Our owned fleet
at December 31, 2012 consisted of 12 tankers (one LR2 tanker, four LR1 tankers, one Handymax tanker, five MR tankers, and one post-Panamax
tanker), 19 time chartered-in tankers (three LR2, three LR1, eight MR and five Handymax tankers), and 11 newbuilding MR’s
under construction.



Our vessels
are commercially managed by Scorpio Commercial Management S.A.M. (“SCM”), which is currently owned by the
Lolli-Ghetti family of which, Emanuele Lauro, our founder, Chairman and Chief Executive Officer is a member. SCM’s
services include securing employment, in pools, in the spot market and on time charters.



Our vessels are
technically managed by Scorpio Ship Management S.A.M. (“SSM”), which is also owned by the Lolli-Ghetti family. SSM
facilitates vessel support such as crew, provisions, deck and engine stores, insurance, maintenance and repairs, and other services
as necessary to operate the vessels such as drydocks and vetting/inspection under a technical management agreement.



Until March 13,
2012, we had an administrative services agreement with Liberty Holding Company (“Liberty”), which is owned by the Lolli-Ghetti
family. On March 13, 2012, the agreement was assigned to Scorpio Services Holding Ltd (“SSH”), an entity also
owned by the Lolli-Ghetti family. The administrative services provided under the agreement primarily include accounting, legal
compliance, financial, information technology services, and the provision of administrative staff and office space, which are contracted
to SCM. We pay our managers fees for these services and reimburse them for direct or indirect expenses that they incur in providing
these services.



Basis of accounting



The consolidated
financial statements incorporate the financial statements of Scorpio Tankers Inc. and its subsidiaries. The consolidated financial
statements have been presented in United States dollars (USD or $), which is the functional currency of Scorpio Tankers Inc. and
all its subsidiaries and have been authorized for issue on March 28, 2013. The consolidated financial statements have been prepared
in accordance with International Financial Reporting Standards (IFRSs) as issued by the International Accounting Standards Board
and on a historical cost basis, except for the revaluation of certain financial instruments.



All inter-company
transactions, balances, income and expenses were eliminated on consolidation. During the year-ended December 31, 2012, our revenue
recognition policy with regards to voyage charter revenue was amended to the policy indicated below. This amendment did not have
a material impact on each of vessel revenues, operating loss, and net loss as of and for the years ended December 31, 2012, December
31, 2011 and December 31, 2010.



Going concern



The financial statements
have been prepared in accordance with the going concern basis of accounting as described further in the “Liquidity risk”
section of Note 22.



Significant Accounting Policies



Revenue recognition



Vessel revenue is
measured at the fair value of the consideration received or receivable and represents amounts receivable for services provided
in the normal course of business, net of discounts, and other sales-related or value added taxes.



Vessel revenue is comprised
of time charter revenue, voyage revenue and pool revenue.



(1)Time
charter revenue is recognized as services are performed based on the daily rates specified in the time charter contract.



(2)Voyage
charter agreements are charter hires, where a contract is made in the spot market for the use of a vessel for a specific
voyage for a specified charter rate. Revenue from voyage charter agreements is recognized as voyage revenue on a pro-rata
basis over the duration of the voyage on a discharge to discharge basis. In the application of this policy, we do not begin
recognizing revenue until (i) the amount of revenue can be measured reliably, (ii) it is probable that the economic benefits
associated with the transaction will flow to the entity, (iii) the transactions stage of completion at the balance sheet date
can be measured reliably and (iv) the costs incurred and the costs to complete the transaction can be
measured reliably.





F-8





Scorpio Tankers Inc. and Subsidiaries



Notes to the consolidated financial statements



(3)Pool
revenue for each vessel is determined in accordance with the profit sharing terms specified within each pool agreement. In particular,
the pool manager aggregates the revenues and expenses of all of the pool participants and distributes the net earnings to participants
based on:



·the
pool points (vessel attributes such as cargo carrying capacity, fuel consumption, and construction characteristics are taken into
consideration); and



·the
number of days the vessel participated in the pool in the period.



We recognize pool
revenue on a monthly basis, when the vessel has participated in a pool during the period and the amount of pool revenue for the
month can be estimated reliably. We receive estimated vessel earnings based on the known number of days the vessel has participated
in the pool, the contract terms, and the estimated monthly pool revenue. On a quarterly basis, we receive a report from the pool
which identifies the number of days the vessel participated in the pool, the total pool points for the period, the total pool revenue
for the period, and the calculated share of pool revenue for the vessel. We review the quarterly report for consistency with each
vessel's pool agreement and vessel management records. The estimated pool revenue is reconciled quarterly, coinciding with our
external reporting periods, to the actual pool revenue earned, per the pool report. Consequently, in our financial statements,
reported revenues represent actual pooled revenues. While differences do arise in the performance of these quarterly reconciliations,
such differences are not material to total reported revenues.



Voyage expenses



Voyage
expenses, which primarily include bunkers, port charges, canal tolls, cargo handling operations and brokerage commissions
paid by us under voyage charters are expensed ratably over the estimated length of each voyage, which can be allocated
between reporting periods based on the timing of the voyage. The impact of recognizing voyage expenses ratably over the
length of each voyage is not materially different on a quarterly and annual basis from a method of recognizing such costs as
incurred. Consistent with our revenue recognition for voyage charters, voyage expenses are calculated on a
discharge-to-discharge basis. The procurement of these services is managed on our behalf by our commercial manager, SCM (see
Note 15).



Vessel operating costs



Vessel operating
costs, which include crewing, repairs and maintenance, insurance, stores, lube oils, communication expenses, and technical
management fees, are expensed as incurred. The procurement of these services is managed on our behalf by our technical
manager, SSM (see Note 15).



Loss per share



Basic loss per share
is calculated by dividing the net loss attributable to equity holders of the common shares by the weighted average number of common
shares outstanding. Diluted earnings per share are calculated by adjusting the net loss attributable to equity holders of the parent
and the weighted average number of common shares used for calculating basic per share for the effects of all potentially dilutive
shares. Such dilutive common shares are excluded when the effect would be to increase earnings per share or reduce a loss per share.
In the years ended December 31, 2012, 2011 and 2010, there were dilutive items as a result of our restricted stock plan (see Note
14). However, we were in a loss making position for those years, and therefore there was no impact of these dilutive items on earnings
per share.



Charterhire expense



Charterhire expense
is the amount we pay the owner for time chartered-in vessels.  The amount is usually for a fixed period of time at rates that
are generally fixed, but may contain a variable component based on inflation, interest rates, profit sharing, or current
market rates.  The vessel’s owner is responsible for crewing and other vessel operating costs.  Charterhire expense
is recognized ratably over the charterhire period.



Operating leases



Costs in respect
of operating leases are charged to the consolidated statement of profit or loss on a straight line basis over the lease term.





F-9







Scorpio Tankers Inc. and Subsidiaries



Notes to the consolidated financial statements



Foreign currencies



The individual financial
statements of Scorpio Tankers Inc. and each of its subsidiaries are presented in the currency of the primary economic environment
in which we operate (its functional currency), which in all cases is US dollars. For the purpose of the consolidated financial
statements, our results and financial position are also expressed in US dollars.



In preparing the financial
statements of Scorpio Tankers Inc. and each of its subsidiaries, transactions in currencies other than the US dollar are recorded
at the rate of exchange prevailing on the dates of the transactions. At the end of each reporting period, monetary assets and liabilities
denominated in other currencies are retranslated into the functional currency at rates ruling at that date. All resultant exchange
differences have been recognized in the consolidated profit or loss statement. The amount charged to the consolidated profit or
loss statement during 2012, 2011 and 2010 was not material.



Segment reporting



During the years ended
December 31, 2012 and 2011, we owned or chartered-in vessels spanning four different classes, Handymax, MR, Panamax/LR1, and Aframax/LR2,
all of which earn revenues in the seaborne transportation of crude oil and refined petroleum products in the international shipping
markets. Each vessel within its respective class qualifies as an operating segment under IFRS. However, each vessel also exhibits
similar long-term financial performance and similar economic characteristics to the other vessels within the respective vessel
class, thereby meeting the aggregation criteria in IFRS. We have therefore chosen to present our segment information by vessel
class using the aggregated information from the individual vessels.



Segment results are
evaluated based on reported profit or loss from each segment. The accounting policies applied to the reportable segments are the
same as those used in the preparation of our consolidated financial statements.



It is not practical
to report revenue or non-current assets on a geographical basis due to the international nature of the shipping market.



Vessels under construction



As of December 31,
2012 and 2011, we had 11 and six vessels under construction, respectively. Vessels under construction are measured at cost and
include costs incurred that are directly attributable to bringing the asset to the location and condition necessary for it to be
capable of operating in the manner intended by management. These costs include installment payments made to the shipyards, directly
attributable financing costs, professional fees and other costs deemed directly attributable to the construction of the asset.



Vessels and drydock



Our fleet is measured
at cost, which includes directly attributable financing costs and the cost of work undertaken to enhance the capabilities of the
vessels, less accumulated depreciation and impairment losses.



Depreciation is calculated
on a straight-line basis to the estimated residual value over the anticipated useful life of the vessel from date of delivery.
Vessels under construction are not depreciated until such time as they are ready for use. The residual value is estimated as the
lightweight tonnage of each vessel multiplied by scrap value per ton. The scrap value per ton is estimated taking into consideration
the historical four year average scrap market rates at the balance sheet date with changes accounted for in the period of change
and in future periods.



The vessels are required
to undergo planned drydocks for replacement of certain components, major repairs and maintenance of other components, which cannot
be carried out while the vessels are operating, approximately every 30 months or 60 months depending on the nature of work and
external requirements. These drydock costs are capitalized and depreciated on a straight-line basis over the estimated period until
the next drydock. We only include in deferred drydocking those direct costs that are incurred as part
of the drydocking to meet regulatory requirements, or are expenditures that add economic life to the vessel, increase the vessel’s
earnings capacity or improve the vessel’s efficiency. Direct costs include shipyard costs as well as the costs of placing
the vessel in the shipyard. Expenditures for normal maintenance and repairs, whether incurred as part of the drydocking or not,
are expensed as incurred.



For an acquired or
newly built vessel, a notional drydock is allocated from the vessel’s cost. The notional drydock cost is estimated by us,
based on the expected costs related to the next drydock, which is based on experience and past history of similar vessels, and
carried separately from the cost of the vessel. Subsequent drydocks are recorded at actual cost incurred. The drydock asset is
amortized on a straight-line basis to the next estimated drydock. The estimated amortization period for a drydock is based on the
estimated period between drydocks. We estimate the period between drydocks to be 30 months to 60 months. When the drydock expenditure
is incurred prior to the expiry of the period, the remaining balance is expensed.





F-10







Scorpio Tankers Inc. and Subsidiaries



Notes to the consolidated financial statements



Impairment of vessels and drydock
and vessels under construction



At each balance sheet
date, we review the carrying amount of our vessels and drydock and vessels under construction to determine whether there is any
indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the vessels
and drydock and vessels under construction is estimated in order to determine the extent of the impairment loss (if any). We treat
each vessel and the related drydock as a cash generating unit.



Recoverable amount
is the higher of the fair value less cost to sell and value in use. In assessing value in use, the estimated future cash flows
are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value
of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted.



If the recoverable
amount of the cash generating unit is estimated to be less than its carrying amount, the carrying amount of the cash-generating
unit is reduced to its recoverable amount. An impairment loss is recognized as an expense immediately.



Where an impairment
loss subsequently reverses, the carrying amount of the cash generating unit is increased to the revised estimate of its recoverable
amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment
loss been recognized for the cash generating unit in the prior years. A reversal of impairment is recognized as income immediately.



Inventories



Inventories consist
of lubricating oils and other items including stock provisions, and are stated at the lower of cost and net realizable value. Cost
is determined using the first in first out method. Stores and spares are charged to vessel operating costs when purchased.



Borrowing costs



Borrowing costs directly
attributable to the acquisition, construction or production of qualifying assets, which are assets that necessarily take a substantial
period of time to get ready for their intended use or sale, are added to the cost of those assets, until such time as the assets
are substantially ready for their intended use or sale.



To the extent that
variable rate borrowings are used to finance a qualifying asset and are hedged in an effective cash flow hedge of interest rate
risk, the effective portion of the derivative is recognised in other comprehensive income and released to profit or loss when the
qualifying asset impacts profit or loss. To the extent that fixed rate borrowings are used to finance a qualifying asset and are
hedged in an effective fair value hedge of interest rate risk, the capitalised borrowing costs reflect the hedged interest rate.



Investment income
earned on the temporary investment of specific borrowings pending their expenditure on qualifying assets is deducted from the borrowing
costs eligible for capitalisation.



All other borrowing costs
are recognised in the consolidated profit or loss statement in the period in which they are incurred.



Financial instruments



Financial
assets and financial liabilities are recognized in our balance sheet when we become a party to the contractual provisions of the
instrument.



Financial assets



All financial
assets are recognized and derecognized on a trade date where the purchase or sale of a financial asset is under a contract whose
terms require delivery within the timeframe established by the market concerned, and are initially measured at fair value, plus
transaction costs, except for those financial assets classified as at fair value through profit or loss, which are initially measured
at fair value.



Financial
assets are classified into the following specified categories: financial assets 'at fair value through profit or loss' (FVTPL),
and 'loans and receivables'. The classification depends on the nature and purpose of the financial assets and is determined at
the time of initial recognition.



Income
is recognized on an effective interest basis for debt instruments other than those financial assets classified as at FVTPL.





F-11







Scorpio Tankers Inc. and Subsidiaries



Notes to the consolidated financial statements



Financial assets at FVTPL



Financial
assets are classified as at FVTPL where the financial asset is held for trading.



A financial
asset is classified as held for trading if:

| | l | it has been acquired principally for the purpose of selling in the
near future; or
| | - | ----------------------------------------------------------------------------------

| | l | it is a part of an identified portfolio of financial instruments
that we manage together and has a recent actual pattern of short-term profit-taking; or
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------

| | l | it is a derivative that is not designated and effective as a hedging
instrument.
| | - | --------------------------------------------------------------------------------



Financial
assets at FVTPL are stated at fair value, with any resultant gain or loss recognized in profit or loss. The net gain or loss recognized
in profit or loss incorporates any dividend or interest earned on the financial asset. Fair value is determined in the manner described
in Note 22.



Loans and receivables



Amounts due from
the pool and other receivables that have fixed or determinable payments and are not quoted in an active market are classified as
accounts receivable. Accounts receivable are measured at amortized cost using the effective interest method, less any impairment.
Interest income is recognized by applying the effective interest rate, except for short-term receivables when the recognition of
interest would be immaterial.



Impairment of financial assets



Financial assets,
other than those at FVTPL, are assessed for indicators of impairment at each balance sheet date. Financial assets are impaired
where there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the financial
asset, the estimated future cash flows of the investment have been impacted.



Financial assets objective evidence of
impairment could include:



lsignificant
financial difficulty of the issuer or counterparty; or

ldefault
or delinquency in interest or principal payments; or

lit becomes probable that the borrower will enter bankruptcy or financial
re-organization.

Cash and cash equivalents



Cash and cash equivalents
comprise cash on hand and demand deposits, and other short-term highly-liquid investments with original maturities of three months
or less, and that are readily convertible to a known amount of cash and are subject to an insignificant risk of changes in value.
The carrying value of cash and cash equivalents approximates fair value due to the short-term nature of these instruments.



Financial liabilities



Financial liabilities
are classified as either financial liabilities 'at FVTPL' or 'other financial liabilities'.



Financial liabilities at FVTPL



Financial liabilities
are classified as at FVTPL where the financial liability is held for trading, using the criteria set out above for financial assets.



Financial liabilities
at FVTPL are stated at fair value, with any resultant gain or loss recognized in profit or loss. The net gain or loss recognized
in profit or loss incorporates any interest paid on the financial liability. Fair value is determined in the manner described in
Note 22.



Other financial liabilities



Other financial liabilities,
including borrowings, are initially measured at fair value, net of transaction costs. Other financial liabilities are subsequently
measured at amortized cost using the effective interest method.



Effective interest method



The effective interest
method is a method of calculating the amortized cost of a financial asset and a financial liability. It allocates interest income
and interest expense over the relevant period. The effective interest rate is the rate that discounts estimated future cash flows
(including all fees on points paid or received that form an integral part of the effective interest rate, transaction costs and
other premiums or discounts) over the expected life of the financial asset and financial liability, or, where appropriate, a shorter
period.





F-12







Scorpio Tankers Inc. and Subsidiaries



Notes to the consolidated financial statements



Derivative financial instruments



Derivatives are initially
recognized at fair value at the date a derivative contract is entered into and are subsequently remeasured to their fair value
at each balance sheet date. A derivative with a positive fair value is recognized as a financial asset whereas a derivative with
a negative fair value is recognized as a financial liability. The resulting gain or loss is recognized in profit or loss immediately
unless the derivative is designated and effective as a hedging instrument, in which event the timing of the recognition in profit
or loss depends on the nature of the hedging relationship. We designate certain derivatives as hedges of highly probable forecast
transactions (cash flow hedges) as described further below.



A derivative is presented
as a non-current asset or a non-current liability if the remaining maturity of the instrument is more than 12 months, and it is
not expected to be realized or settled within 12 months.



Our derivative financial
instruments for the years ended December 31, 2012, 2011 and 2010 consisted of interest rate swaps and profit or loss sharing arrangements
on time-chartered in vessels with third parties. See Notes 12 and 22 to the consolidated financial statements for further description.



Hedge accounting for cash flow
hedges



Our
policy is to designate certain hedging instruments, which can include derivatives, embedded derivatives and non-derivatives
in respect of foreign currency risk, as either fair value hedges, cash flow hedges, or hedges of net investments in foreign
operations. At the inception of the hedge relationship, we document the relationship between the hedging instrument and the
hedged item, along with its risk management objectives and its strategy for undertaking various hedge transactions.
Furthermore, at the inception of the hedge and on an ongoing basis, we document whether the hedging instrument is highly
effective in offsetting changes in fair values or cash flows of the hedged item.



For
the years ended December 31, 2012, 2011, and 2010 we were party to derivative financial instruments to manage our exposure to
interest rate fluctuations. InAugust2011, we entered into six interest rate swap
agreements to manage interest costs and the risk associated with changing interest rates on our 2011 Credit Facility and 2010
Revolving Credit Facility. The swaps relating to the 2011 Credit Facility were designated and accounted for as cash flow
hedges at December 31, 2012. The swaps relating to the 2010 Credit Facility were de-designated at December 31, 2012 as
further described below.



Derivative financial
instruments are initially recognized in the balance sheet at fair value at the date the derivative contract is entered into and
are subsequently measured at their fair value as other assets or other liabilities, respectively. Changes in fair value of derivative
financial instruments, which are designated as cash flow hedges and deemed to be effective, are recognized directly in other comprehensive
income and classified as ‘hedging reserves’. Changes in fair value of a portion of a hedge deemed to be ineffective
are recognized in net profit or loss. Hedge effectiveness is measured quarterly.



Amounts
previously recognized in other comprehensive income and accumulated in the hedging reserve are reclassified to profit or loss in
theperiodswhen the hedged item is recognized in profit or loss, in the same line of the statement
of profit or loss as the recognized hedged item. However, when the forecast transaction that is hedged results in the recognition
of a non-financial asset or a non-financial liability, the gains and losses previously accumulated in equity are transferred from
equity and included in the initial measurement of the cost of the non-financial asset or non-financial liability.



Hedge accounting
is discontinued when we revoke the hedging relationship, the hedging instrument expires or is sold, terminated, or exercised, or
no longer qualifies for hedge accounting. Any gain or loss recognized in other comprehensive income at that time is accumulated
in the hedge reserve and is recognized when the forecast transaction is ultimately recognized in profit or loss. When a forecast
transaction is no longer expected to occur, the gain or loss accumulated in the hedge reserve is recognized immediately in profit
or loss.



In conjunction
with the sales of STI Diamond and STI Coralin August and September 2012, respectively, we reduced the notional
amount on the interest rate swaps relating to the 2011 Credit Facility to $15.0 million from $24.0 million in aggregate. As a
result of the reduction, we recognized a loss of $0.2 million which was recorded as a component of the loss from sale of STI
Coral, which was reclassified out of Other Comprehensive Loss.



In December 2012,
we raised net proceeds of $127.2 million from a registered direct placement of common shares and as part of the use of proceeds
of this offering, we voluntarily repaid $50.0 million into our 2010 Revolving Credit Facility, as described in Note 11. After
the payment, we had $17.2 million of debt outstanding under the 2010 Credit Facility, which is less than the total notional amount
of the three interest rate swaps related to the facility of $51.0 million. As such, the swaps relating to the 2010 Revolving Credit
Facility no longer met the criteria for hedge accounting, and we therefore de-designated the hedge relationship prospectively and
reclassified all amounts accumulated in other comprehensive loss for the 2010 Revolving Credit Facility to the statement of profit
or loss as of December 31, 2012.





F-13







Scorpio Tankers Inc. and Subsidiaries



Notes to the consolidated financial statements



Equity instruments



An equity instrument
is any contract that evidences a residual interest in our assets after deducting all of its liabilities. Equity instruments issued
by us are recorded at the proceeds received, net of direct issue costs.



We had
63,827,846 registered shares authorized and issued with a par value of $0.01 per share at December 31, 2012. These shares
provide the holders with rights to dividends and voting rights.



Provisions



Provisions are recognized
when we have a present obligation as a result of a past event, and it is probable that we will be required to settle that obligation.
Provisions are measured at our best estimate of the expenditure required to settle the obligation at the balance sheet date, and
are discounted to present value where the effect is material.



Dividends



A provision for dividends
payable is recognized when the dividend has been declared in accordance with the terms of the shareholder agreement.



Dividend per share
presented in these consolidated financial statements is calculated by dividing the aggregate dividends declared by all of our subsidiaries
by the number of our shares assuming these shares have been outstanding throughout the periods presented.



Restricted stock



The restricted
stock awards granted to our employees and directors in June 2010, January 2011 and January 2012 (Note 14) contain only
service conditions and are classified as equity settled. Accordingly, the fair value of our restricted stock awards was
calculated by multiplying the average of the high and low share price on the grant date and the number of restricted stock
shares granted that are expected to vest.  We believe that the share price at the grant date serves as a proxy for the
fair value of services to be provided by the employees and directors under the plan.



Compensation expense
related to the awards is recognized ratably over the vesting period, based on our estimate of the number of awards that will eventually
vest. The vesting period is the period during which an employee or director is required to provide service in exchange for an award
and is updated at each balance sheet date to reflect any revisions in estimates of the number of awards expected to vest as a result
of the effect of non-market-based vesting conditions. The impact of the revision of the original estimate, if any, is recognized
in the profit or loss statement such that the cumulative expense reflects the revised estimate, with a corresponding adjustment
to equity reserves.



Critical accounting judgements and
key sources of estimation uncertainty



In the application
of the accounting policies, we are required to make judgements, estimates and assumptions about the carrying amounts of assets
and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical
experience and other factors that are considered to be relevant. Actual results may differ from these estimates.



The estimates and
underlying assumptions are reviewed on an on-going basis. Revisions to accounting estimates are recognized in the period in which
the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision
affects both current and future periods.



The significant judgements
and estimates are as follows:



Revenue recognition



We currently generate
all revenue from time charters, spot voyages, or pools. Revenue recognition for time charters and pools is generally not as complex
or as subjective as voyage charters (spot voyages). Time charters are for a specific period of time at a specific rate per day.
For long-term time charters, revenue is recognized on a straight-line basis over the term of the charter. Pool revenues are determined
by the pool managers from the total revenues and expenses of the pool and allocated to pool participants using a mechanism set
out in the pool agreement.



We
generated revenue from spot voyages during the years ended December 31, 2012, 2011 and 2010. Within the shipping industry,
there are two methods used to account for spot voyage revenue: (1) ratably over the estimated length of each voyage or (2)
completed voyage. The recognition of voyage revenues ratably over the estimated length of each voyage is the most prevalent
method of accounting for voyage revenues and the method used by us. Under each method, voyages may be calculated on either
a load-to-load or discharge-to-discharge basis. In applying our revenue recognition method, we believe that
the discharge-to-discharge basis of calculating voyages more accurately estimates voyage results than the load-to-load basis.
In the application of this policy, we do not begin recognizing revenue until (i) the amount of revenue can be measured
reliably, (ii) it is probable that the economic benefits associated with the transaction will flow to the entity, (iii) the
transactions stage of completion at the balance sheet date can be measured reliably and (iv) the costs incurred and the costs
to complete the transaction can be measured reliably.





F-14







Scorpio Tankers Inc. and Subsidiaries



Notes to the consolidated financial statements



Vessel impairment



We evaluate the carrying
amounts of our vessels and vessels under construction to determine whether there is any indication that those vessels have suffered
an impairment loss. If any such indication exists, the recoverable amount of vessels is estimated in order to determine the extent
of the impairment loss (if any).



Recoverable amount is
the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows
are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time
value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted. The
projection of cash flows related to vessels is complex and requires us to make various estimates including future freight
rates, earnings from the vessels and discount rates. All of these items have been historically volatile. As part of our
process of assessing the fair value less cost to sell of the vessel, we obtain vessel valuations from leading, independent
and internationally recognized ship brokers on an annual basis or when there is an indication that an asset or assets may be
impaired. If an indication of impairment is identified, the need for recognising an impairment loss is assessed by comparing
the carrying amount of the vessels to the higher of the fair value less cost to sell and the value in use. Likewise, if there
is an indication that an impairment loss recognized in prior periods no longer exists or may have decreased, the need for
recognizing an impairment reversal is assessed by comparing the carrying amount of the vessels to the latest estimate of
recoverable amount.



At December 31, 2012,
the carrying amounts of all our vessels were greater than their fair values less costs to sell (determined by taking into
consideration two independent broker valuations) which served as indicators of impairment. In line with our policy, for each
vessel and vessel under construction we performed a value in use calculation where we estimated the vessel’s future
cash flows based on a combination of the latest, published, forecast time charter rates for the next three years, a steady
growth rate in freight rates in each period thereafter which is based on management’s long-term view of the market, and
our best estimate of vessel operating expenses and drydock costs. These cash flows were then discounted to their present
value, using a pre-tax discount rate based on our current borrowing rates adjusted for certain credit risks. The value in use
calculations were greater than the carry amounts of the vessels in all instances, which resulted in no impairment being
recognized.



Vessel lives and residual value



The carrying value
of each of our vessels represents its original cost at the time it was delivered or purchased less depreciation and impairment.
We depreciate our vessels to their residual value on a straight-line basis over their estimated useful lives. Effective April 1,
2010, we revised the estimated useful life of our vessels from 20 years to 25 years from the date of initial delivery from the
shipyard. The estimated useful life of 25 years is management’s best estimate and is also consistent with industry practice
for similar vessels. The residual value is estimated as the lightweight tonnage of each vessel multiplied by a forecast scrap value
per ton. The scrap value per ton is estimated taking into consideration the historical four year scrap market rate average at the
balance sheet date.



An increase in the
estimated useful life of a vessel or in its scrap value would have the effect of decreasing the annual depreciation charge and
extending it into later periods. A decrease in the useful life of a vessel or scrap value would have the effect of increasing the
annual depreciation charge.



When regulations
place significant limitations over the ability of a vessel to trade on a worldwide basis, the vessel's useful life is adjusted
to end at the date such regulations become effective. The estimated salvage value of the vessels may not represent the fair market
value at any one time since market prices of scrap values tend to fluctuate.



Deferred drydock cost



We recognize
drydock costs as a separate component of the each vessel’s carrying amount and amortize the drydock cost on a
straight-line basis over the estimated period until the next drydock. We use judgment when estimating the period between
drydocks performed, which can result in adjustments to the estimated amortization of the drydock expense. If the vessel is
disposed of before the next drydock, the remaining balance of the deferred drydock is written-off and forms part of the gain
or loss recognized upon disposal of vessels in the period when contracted. We expect that our vessels will be required to be
drydocked approximately every 30 to 60 months for major repairs and maintenance that cannot be performed while the vessels
are operating. Costs capitalized as part of the drydock include actual costs incurred at the drydock yard and parts and
supplies used in making such repairs.





F-15







Scorpio Tankers Inc. and Subsidiaries



Notes to the consolidated financial statements



Standards and Interpretations adopted during the period



IAS 24 (amended)                                 Related party disclosures

Improvements to IFRS (May 2010)



This standard did not have an impact on
these consolidated financial statements.



Standards
and Interpretations in issue not yet adopted



At the date
of authorization of these consolidated financial statements, the following Standards and Interpretations which have not been applied
in these consolidated financial statements were in issue but not yet effective:



|                                |                                                            
|------------------------------- | -----------------------------------------------------------
|IFRS 7                          | Financial Instruments: Disclosures                         
|Amendments to IFRS 7 (Oct 2010) | Disclosures – Transfers of Financial Assets                
|IFRS 9                          | Financial Instruments                                      
|IFRS 10                         | Consolidated Financial Statements                          
|IFRS 11                         | Joint Arrangements                                         
|IFRS 12                         | Disclosure of Interests in Other Entities                  
|IFRS 13                         | Fair Value Measurement                                     
|IFRIC 19                        | Extinguishing Financial Liabilities with Equity Instruments
|IAS 27 (revised May 2011)       | Separate Financial Statements                              
|IAS 32                          | Financial Instruments: Presentation                        
|Amendment to IAS 32 (Oct. 2009) | Classification of Rights Issues                            



We do not expect that the adoption of
these Standards and Interpretations in future periods will have a material impact on our financial statements.



2.    Cash and
cash equivalents



|                             |  | At December 31,
|---------------------------- |  | ---------------
|In thousands of U.S. dollars |  | 2012           
|Cash at banks                |  | $              
|Deposits (1)                 |  |                
|Cash on vessels              |  |                
|                             |  | $              



| | (1) | Represents bank deposits with original maturities of three months
or less
| | --- | -------------------------------------------------------------------------



3.    Accounts
receivable



|                                     |  | At December 31,
|------------------------------------ |  | ---------------
|In thousands of US dollars           |  | 2012           
|Scorpio MR Pool Limited              |  | $              
|Scorpio Panamax Tanker Pool Limited  |  |                
|Scorpio Handymax Tanker Pool Limited |  |                
|Scorpio LR2 Tanker Pool Limited      |  |                
|Freight receivables                  |  |                
|Insurance receivables                |  |                
|Scorpio Aframax Tanker Pool Limited  |  |                
|Other receivables                    |  |                
|                                     |  | $              





F-16







Scorpio Tankers Inc. and Subsidiaries



Notes to the consolidated financial statements



Scorpio MR Pool
Limited, Scorpio Panamax Tanker Pool Limited, Scorpio Handymax Tanker Pool Limited, Scorpio LR2 Tanker Pool Limited, and
Scorpio Aframax Tanker Pool Limited are related parties, as described in Note 15. The Scorpio MR Pool was established in
August 2012 and accordingly, no vessels were in that pool during the year ended December 31, 2011.



Freight receivables
primarily represent amounts collectible from customers for our vessels operating in the spot market.



Insurance receivables
primarily represent the amounts collectible on our insurance policies in relation to vessel repairs.



We consider that the
carrying amount of accounts receivable approximates their fair value due to the short maturity thereof. Accounts receivable are
non-interest bearing. At December 31, 2012 and December 31, 2011, no material receivable balances were either past due or impaired.



4.    Prepaid
expenses and other current assets



|                                                              |  | At December 31,
|------------------------------------------------------------- |  | ---------------
|In thousands of US dollars                                    |  | 2012           
|Vessel related prepaid expenses                               |  | $              
|Prepaid insurance                                             |  |                
|Derivative financial instruments (profit and loss agreements) |  |                
|                                                              |  | $              



5.    Inventories



|                           |  | At December 31,
|-------------------------- |  | ---------------
|In thousands of US dollars |  | 2012           
|Lubricating oils           |  | $              
|Stock bunkers              |  |                
|Other                      |  |                
|                           |  | $              



The balance in
stock bunkers as of December 31, 2012 relates to Pacific Duchess, which was our only vessel operating in the spot
market at year end. The balance in stock bunkers as of December 31, 2011 relates to STI Coral and STI
Diamond which were operating in the spot market at year end.



During the years
ended December 31, 2012 and 2011, we expensed inventory items of $16.7 million and $6.9 million, respectively.





F-17







Scorpio Tankers Inc. and Subsidiaries



Notes to the consolidated financial statements



6.    Vessels



Vessels and drydock





|In thousands of US dollars              |  | Vessels |          | Drydock |  | Total
|--------------------------------------- |  | ------- | -------- | ------- |  | -----
|Cost                                    |  |         |          |         |  |      
|As of January 1, 2012                   |  | $       | 450,658  |         |  | $    
|Additions(1)                            |  |         | 192,413  |         |  |      
|Disposals (2)                           |  |         | (142,375 | )       |  |      
|Write-offs (3)                          |  |         | —        |         |  |      
|As of December 31, 2012                 |  |         | 500,696  |         |  |      
|                                        |  |         |          |         |  |      
|Accumulated depreciation and impairment |  |         |          |         |  |      
|As of January 1, 2012                   |  |         | (132,019 | )       |  |      
|Charge for the period                   |  |         | (12,595  | )       |  |      
|Disposals (2)                           |  |         | 32,039   |         |  |      
|Write-offs (3)                          |  |         | —        |         |  |      
|As of December 31, 2012                 |  |         | (112,575 | )       |  |      
|Net book value                          |  |         |          |         |  |      
|As of December 31, 2012                 |  | $       | 388,121  |         |  | $    
|                                        |  |         |          |         |  |      
|Cost                                    |  |         |          |         |  |      
|As of January 1, 2011                   |  | $       | 379,723  |         |  | $    
|Additions(4)                            |  |         | 70,935   |         |  |      
|Write-offs (5)                          |  |         | —        |         |  |      
|As of December 31, 2011                 |  |         | 450,658  |         |  |      
|                                        |  |         |          |         |  |      
|Accumulated depreciation and impairment |  |         |          |         |  |      
|As of January 1, 2011                   |  |         | (49,502  | )       |  |      
|Charge for the period                   |  |         | (15,907  | )       |  |      
|Impairment (6)                          |  |         | (66,611  | )       |  |      
|Write-offs (5)                          |  |         | —        |         |  |      
|As of December 31, 2011                 |  |         | (132,019 | )       |  |      
|Net book value                          |  |         |          |         |  |      
|As of December 31, 2011                 |  | $       | 318,639  |         |  | $    





|(1) | Additions in 2012 relate to (i) the delivery of the first five vessels under our Newbuilding program and corresponding calculation of notional drydock on these vessels and (ii) $2.9 million of drydock costs for STI Spirit and STI Heritage.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                
|(2) | Represents the write off of the net book value of vessels sold during 2012 as further described below.                                                                                                                                         
|    |                                                                                                                                                                                                                                                
|(3) | Represents the write off of the net book value of drydock costs for STI Spirit of $0.2 million, which was drydocked in November 2012.                                                                                                          
|    |                                                                                                                                                                                                                                                
|(4) | Additions in 2011 relate to the purchases of STI Coral and STI Diamond in May 2011 and corresponding calculation of notional drydock on these vessels.                                                                                         
|    |                                                                                                                                                                                                                                                
|(5) | Represents the write off of the net book value of drydock costs for STI Harmony of $0.2 million, which was drydocked in August 2011 and STI Highlander of $37,869 which was drydocked in October 2011.                                         
|    |                                                                                                                                                                                                                                                
|(6) | See Note 7 for impairment discussion.                                                                                                                                                                                                          



Loss from sale of vessels



In March, April
and May 2012, we sold three of our Handymax vessels, STI Conqueror for $21.0 million, STI
Gladiator for $16.2 million, and STI Matador for $16.2 million; as part of these sales, we recorded a
$4.5 million loss from disposal. Additionally, the availability of our 2010 Revolving Credit Facility decreased by $31.0
million as a consequence of these disposals.



In August and September
2012, we sold STI Diamond and STI Coral for $25.25 million each. As part of these sales, we recorded a $5.9 million
total loss from disposal. See Note 11 for the impact on our 2011 Credit Facility resulting from these sales.



Total proceeds from
the sale of vessels was $103.9 million and was reduced by selling costs of $2.5 million.





F-18







Scorpio Tankers Inc. and Subsidiaries



Notes to the consolidated financial statements



Newbuilding vessel deliveries



During the
third quarter of 2012, we took delivery of the first five vessels under our Newbuilding program, STI Amber in July, STI
Topaz in August and STI Ruby, STI Garnet and STI Onyx in September 2012. As a result of these deliveries,
we transferred $195.3 million from Vessels under construction to Vessels and drydock (the remaining 2012 additions of $0.8
million of costs related to the newbuilding vessels recorded directly into Vessels and drydock and $2.9 million related to
drydock expenditures for STI Heritage and STI Spirit.)



Vessels under construction



We had eleven newbuilding MR’s
(seven with Hyundai Mipo Dockyard Co. Ltd of South Korea (“HMD”) and four with SPP Shipbuilding Co. Ltd. of South
Korea(“SPP”) under construction as of December 31, 2012 for an aggregate purchase price of $376.3 million, of
which $45.3 million was paid as of that date. Subsequent to December 31, 2012, we signed agreements for an additional 24
newbuilding vessels at these yards as further described in Note 23



A roll-forward of activity within Vessels
under construction is as follows:



|In thousands of US dollars                          |  |  
|--------------------------------------------------- |  | -
|Balance as of January 1, 2011                       |  | $
|Installment payments and other capitalized expenses |  |  
|Capitalized interest                                |  |  
|Balance as of December 31, 2011                     |  | $
|                                                    |  |  
|Installment payments and other capitalized expenses |  |  
|Capitalized interest                                |  |  
|Transferred to Vessels and drydock                  |  |  
|Balance as of December 31, 2012                     |  | $



The following table is a timeline of future
expected payments and dates as of December 31, 2012*:



| | Q1 2013 |  |  | $ | 71.0  |  |  |  | million** | 
| | ------- |  |  | - | ----- |  |  |  | --------- | 
| | Q2 2013 |  |  |   | 31.6  |  |  |  | million   | 
| | Q3 2013 |  |  |   | 22.7  |  |  |  | million   | 
| | Q4 2013 |  |  |   | 22.5  |  |  |  | million   | 
| | Q1 2014 |  |  |   | 58.4  |  |  |  | million   | 
| | Q2 2014 |  |  |   | 104.5 |  |  |  | million   | 
| | Q3 2014 |  |  |   | 20.3  |  |  |  | million   | 
| | Total   |  |  | $ | 331.0 |  |  |  | million   | 



*These are estimates only and are subject
to change as construction progresses.



**As of the date of this report, all
Q1 2013 payments have been made, which includes the delivery instalments of STI Sapphireand STI Emerald in
January 2013 and March 2013, respectively.



Capitalized interest



In accordance with
IAS 23 “Borrowing Costs”, applicable interest costs are capitalized during the period that vessels are under construction.
For the years ended December 31, 2012 and 2011, we capitalized interest expense for the vessels under construction of $3.2 million
and $0.6 million, respectively. The interest capitalized was calculated by applying a rate of 4.5% to expenditure on such assets.





F-19







Scorpio Tankers Inc. and Subsidiaries



Notes to the consolidated financial statements



Collateral agreements



Noemi, Senatore,
Venice, STI Harmony, STI Heritage,andSTI Highlander with an aggregated net book value of $164.4 million as of December
31, 2012 were provided as collateral under a loan agreement dated June 2, 2010 and amended on July 13, 2011 (the "2010 Revolving
Credit Facility", See Note 11).



In August
and September 2012, we sold STI Diamond and STI Coral for $25.25 million each, which were provided as
collateral under a loan agreement dated May 3, 2011 and amended on July 20, 2012 (the “2011 Credit Facility, See Note
11”). A portion of the proceeds from the sales was used to repay $16.1 million of debt outstanding under the 2011
Credit Facility relating to STI Coral. The fifth newbuilding vessel, STI Onyx with a net book value of $38.8
million as of December 31, 2012, was substituted as collateral under the 2011 Credit Facility on the outstanding borrowing
relating to STI Diamond.



STI Spirit,with
a net book value of $37.4 million as of December 31, 2012, was provided as collateral under a loan agreement dated March 9, 2011
(the “STI Spirit Credit Facility,” See Note 11).



STI Amber, STI
Topaz, STI Ruby and STI Garnet, with an aggregated net book value of $154.8 million as of December 31, 2012 were provided
as collateral under a loan agreement dated December 21, 2011 (the “Newbuilding Credit Facility,” See Note 11).



The vessels which collateralize
the 2011 Credit Facility and 2010 Revolving Credit Facility also serve as collateral for the designated interest rate swap agreements
(as described in Note 12), subordinated to the outstanding borrowings under each credit facility.



7.     Carrying
Values of Vessels



At the end of
each reporting period, we evaluate the carrying amounts of vessels and related drydock costs and vessels under construction
to determine if there is any indication that those vessels and related drydock costs and vessels under construction have
suffered an impairment loss. If such indication exists, the recoverable amount of the vessels and related drydock costs is
estimated in order to determine the extent of the impairment loss (if any). As part of this evaluation, we consider certain
indicators of potential impairment, such as market conditions including forecast time charter rates and values for second
hand product tankers, discounted projected vessel operating cash flows and our overall business plans.



At December 31, 2012,
the carrying amounts of all our vessels were greater than their fair values less costs to sell (determined by taking
into consideration two independent broker valuations) which served as indicators of impairment. In line with our policy, for
each vessel and vessel under construction we performed a value in use calculation where we estimated the vessel’s
future cash flows based on a combination of the latest forecast, published, time charter rates for the next three years, a
steady growth rate in freight rates in each period thereafter which is based on management’s long-term view of the
market, and our best estimate of vessel operating expenses and drydock costs. These cash flows were then discounted to their
present value, using a pre-tax discount rate of 7.91% based on our current borrowing rates adjusted for certain credit risks.
The value in use calculations were greater than the carrying amounts of the vessels and vessels under construction in
all instances, which resulted in no impairment being recognized. The calculation of value in use is sensitive to changes in
the key assumptions made above.



At December
31, 2011, we determined fair value less estimated costs to sell for our vessels, taking into consideration three
independent broker valuations for each vessel and adjusting for estimated disposal costs. Our estimate of fair value less
costs to sell was then compared to each vessel’s respective carrying amount. The fair value less estimated costs to
sell were lower than the carrying amount for all vessels indicating that an impairment might exist. We then performed a value
in use calculation and the value in use calculations for all vessels were less than the fair value less estimated costs to
sell and accordingly, the recoverable amount of all vessels was determined to be its fair value less costs to sell. As a
result, we recorded an impairment loss of $66.6 million to adjust the carrying amounts of our vessels to their fair value
less estimated selling costs. The value in use calculations were greater than the carrying amounts for our vessels under
construction in all instances, which resulted in no impairment being recognized.





F-20







Scorpio Tankers Inc. and Subsidiaries



Notes to the consolidated financial statements



At December 31, 2010,
the carrying amounts of our vessels were greater than the independent broker valuations (after adjusting for estimated selling
costs) for six of our ten owned vessels, which served as indicators of impairment. In line with our policy, for each of the aforementioned
six vessels we performed a value in use calculation using similar principles to those outlined above. The value in use calculations
were greater than the carrying amounts of the vessels in all instances, which resulted in no impairment being recognized.



8.     Other non-current
assets



|                                                                             |  | At December 31,
|---------------------------------------------------------------------------- |  | ---------------
|In thousands of US dollars                                                   |  | 2012           
|Capitalized loan fees (1)                                                    |  | $              
|Scorpio Handymax Tanker Pool Ltd.
    pool working capital contributions (2) |  |                
|                                                                             |  | $              

| | (1) | Primarily represents upfront loan fees on our Newbuilding
                                                                                                     credit                                                                                                      facilities being
                                                                                                     used to finance our newbuilding vessels. These are reclassified to Bank Loans when the tranche of the loan
                                                                                                     to which the newbuilding vessel relates is drawn.
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (2) | Upon entrance into the Scorpio Handymax Tanker Pool (“SHTP”),
all vessels are required to make working capital contributions of both cash and bunkers. The contribution amount is repaid, without
interest, upon a vessel’s exit from the SHTP no later than six months after the exit date. Bunkers on board a vessel exiting
the SHTP are credited against such repayment at the actual invoice price of the bunkers. For all owned vessels we assume that these
contributions will not be repaid within 12 months and for time chartered-in vessels we classify the amounts according to the expiration
of the contract. The decrease from December 31, 2011 is attributable to (i) the sale of three Handymax vessels during 2012 and
(ii) the reclassification of amounts relating to time chartered-in vessels whose terms expire within one year of the balance sheet
date to current assets (other receivables within accounts receivable).
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



9.     Accounts
payable



|                                                            |  | At December 31,
|----------------------------------------------------------- |  | ---------------
|In thousands of US dollars                                  |  | 2012           
|Suppliers                                                   |  | $              
|Progress payments due for
    vessels under construction(1) |  |                
|Scorpio Commercial Management                               |  |                
|Scorpio Ship Management                                     |  |                
|Scorpio Handymax Tanker Pool Limited                        |  |                
|                                                            |  | $              



(1)     The
progress payment of $3.5 million as of December 31, 2012 related to Hull 2369 and was made in January 2013.



The majority of accounts
payable are settled with a cash payment within 90 days. No interest is charged on accounts payable. We consider that the carrying
amount of accounts payable approximates fair value.



10.     Accrued
expenses



|                                            |  | At December 31,
|------------------------------------------- |  | ---------------
|In thousands of US dollars                  |  | 2012           
|Other accruals                              |  | $              
|Upfront
    fees due on loan facilities (1) |  |                
|                                            |  | $              

| | (1) | Primarily represents upfront fees due for our Newbuilding Credit Facility at December 31, 2011.
This facility was executed on December 21, 2011 and these fees were paid in February 2012.
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------





F-21







Scorpio Tankers Inc. and Subsidiaries



Notes to the consolidated financial statements



11.    Bank
loans



The following is a breakdown of the
current and non-current portion of our bank loans outstanding at December 31, 2012 and 2011:



|                           |  | As of December 31,
|-------------------------- |  | ------------------
|In thousands of US dollars |  | 2012              
|Current portion (1)        |  | $                 
|Non-current portion (1)    |  |                   
|                           |  | $                 

| | (1) | The current portion and non-current portion at December 31, 2012
were net of unamortized deferred financing fees of $0.1 million and $3.3 million, respectively. The current portion and non-current
portion at December 31, 2011 were net of unamortized deferred financing fees of $1.4 million and $3.9 million, respectively.
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

2010 Revolving Credit Facility



On June 2, 2010,
we executed a credit facility with Nordea Bank Finland plc, acting through its New York branch, DNB Bank ASA, acting through
its New York branch, and ABN AMRO Bank N.V, for a senior secured term loan facility of up to $150 million. On July 12, 2011,
we amended and restated the credit facility to convert it from a term loan to a reducing revolving credit facility. This gave us
the ability to pay down and re-borrow from the total available commitments under the loan.



In
March, April and May 2012, we sold three of our Handymax vessels,STI Conqueror for $21.0 million, STI
Gladiator for $16.2 million, and STI Matador for $16.2 million. The availability of the 2010
Revolving Credit Facility decreased by $31.0 million as a consequence of these disposals. The total available commitments,
after taking into consideration the impact of these sales, reduces by $3.1 million each quarter, with a lump sum reduction of
$39.9 million at the maturity date of June 2, 2015.  Our subsidiaries that own vessels that are collateralized by this
loan act as guarantors under the amended and restated credit facility.  All terms mentioned are defined in the
agreement.



Drawdowns under
the credit facility bear interest as follows: (1) through December 29, 2011, at LIBOR plus an applicable margin of 3.00% per
annum when our debt to capitalization (total debt plus equity) ratio is equal to or less than 50% and 3.50% per annum when
our debt to capitalization ratio is greater than 50%; (2) from December 30, 2011 through September 30, 2013, at LIBOR plus an applicable
margin of 3.50% per annum; and (3) from October 1, 2013 and at all times thereafter, at LIBOR plus an applicable margin of
3.25% per annum when our debt to capitalization (total debt plus equity) ratio is equal to or less than 50% and 3.50% per
annum when our debt to capitalization ratio is greater than 50%. A commitment fee equal to 40% of the applicable margin is payable
on the unused daily portion of the credit facility. The credit facility matures on June 2, 2015 and can only be used to refinance
amounts outstanding from the original loan agreement and for general corporate purposes.



The credit facility
requires us to comply with a number of covenants, including financial covenants; delivery of quarterly and annual financial statements
and annual projections; maintaining adequate insurances; compliance with laws (including environmental); compliance with ERISA
(Employee Retirement Income Security Act); maintenance of flag and class of the initial vessels; restrictions on consolidations,
mergers or sales of assets; approval on changes in the Manager of our initial vessels; limitations on liens; limitations on additional
indebtedness; prohibitions on paying dividends if a covenant breach or an event of default has occurred or would occur as a result
of payment of a dividend; prohibitions on transactions with affiliates; and other customary covenants.



The financial covenants include:

| | · | The ratio of net debt to capitalization shall be no greater than 0.60 to 1.00.
| | - | ------------------------------------------------------------------------------

| | · | Consolidated tangible net worth (i.e. total shareholders’ equity) shall be no less than US$150,000,000
plus 25% of cumulative positive net income (on a consolidated basis) for each fiscal quarter from July 1, 2010 going forward and
50% of the value of any new equity issues from July 1, 2010 going forward.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------





F-22







Scorpio Tankers Inc. and Subsidiaries



Notes to the consolidated financial statements



| | · | The ratio of EBITDA to interest expense shall be no less than 1.25 to 1.00 commencing with the
fourth fiscal quarter of 2011 until the fourth quarter of 2012, at which point it will increase to 1.50 to 1.00 for the first quarter
of 2013, 1.75 to 1.00 for the second quarter of 2013, 2.00 to 1.00 at all times thereafter.  Such ratio shall be calculated
quarterly on a trailing four quarter basis. In addition, we are restricted from paying dividends until our EBITDA to interest expense
ratio is 2.00 to 1.00 or greater. EBITDA, as defined in the loan agreement, excludes non-cash charges such as impairment.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | · | Consolidated liquidity (cash, cash equivalents, and availability under the 2010 Revolving Credit
Facility) needs to be not less than $25.0 million, of which unrestricted cash and cash equivalents shall be not less than $15.0
million, until we own, directly or indirectly, more than 15 vessels, at which time the amount increases by $750,000 per each additional
vessel.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | · | The aggregate fair market value of the collateral vessels (see note
6) shall at all times be no less than 150% of the then aggregate outstanding principal amount of loans under the credit facility.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



We drew down
$16.0 million and $16.2 million in February and August 2012, respectively from the 2010 Revolving Credit Facility. We made
payments of $14.0 million, $16.0 million, $26.0 million and $50 million in March, April, May, and December 2012,
respectively.



The outstanding balance
at December 31, 2012 and December 31, 2011 was $17.2 million and $91.0 million, respectively. There was $67.4 and $37.9 million
available to be drawn at December 31, 2012 and December 31, 2011, respectively.



We were in compliance
with the financial covenants relating to this facility as of December 31, 2012.



STI Spirit Credit Facility



On March 9, 2011,
we executed a credit facility with DVB Bank SE for a senior secured term loan facility of $27.3 million for STI Spirit, which was
acquired on November 10, 2010. The credit facility was drawn down on March 17, 2011 and matures on March 17, 2018. The loan bears
interest at LIBOR plus a margin of 2.75% per annum. The loan will be repaid over 28 equal quarterly installments and a lump sum
payment at maturity. The quarterly installments commenced three months after the drawdown and were calculated using an 18 year
amortization profile. Our subsidiary, STI Spirit Shipping Company Limited, which owns the vessel, is the borrower and Scorpio Tankers
Inc. is the guarantor. The credit facility requires us to comply with a number of covenants, including financial covenants; delivery
of quarterly and annual financial statements and annual projections; maintaining adequate insurances; compliance with laws (including
environmental); compliance with ERISA (Employee Retirement Income Security Act); maintenance of flag and class of the vessel; restrictions
on consolidations, mergers or sales of assets; approval of changes in the Manager of our vessels; limitations on liens; limitations
on additional indebtedness; prohibitions on paying dividends if a covenant breach or an event of default has occurred or would
occur as a result of payment of a dividend; prohibitions on transactions with affiliates; and other customary covenants.



All terms mentioned
are defined in the agreement.



The financial covenants of the credit
facility are described below.

| | · | The ratio of debt to capitalization shall be no greater than 0.60 to 1.00.
| | - | --------------------------------------------------------------------------

| | · | Consolidated tangible net worth (i.e. shareholders equity) shall be no less than $ 150.0 million
plus 25% of cumulative positive net income (on a consolidated basis) for each fiscal quarter.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | · | The ratio of EBITDA to interest expense shall be no less than 1.25 to 1.00 for the period commencing
with the fourth quarter of 2011 through the fourth quarter of 2012, at which time it will increase to 1.50 to 1.00 for the first
quarter of 2013, 1.75 to 1.00 for the second quarter of 2013 and 2.00 to 1.00 at all times thereafter.  Such ratio shall
be calculated quarterly on a trailing four quarter basis. In addition, we are restricted from paying dividends until our EBITDA
to interest expense ratio is 2.00 to 1.00 or greater. EBITDA, as defined in the loan agreement, excludes non-cash charges such
as impairment.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | · | Consolidated liquidity (cash, cash equivalents, and availability under the 2010 Revolving Credit
Facility) needs to be not less than $25.0 million, of which unrestricted cash and cash equivalents shall be not less than $15.0
million, until we own, directly or indirectly, more than 15 vessels, at which time the amount increases by $750,000 per each additional
vessel.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | · | The aggregate fair market value of the STI Spirit shall at all times be no less than (i) 140% of
the then outstanding loan balance if the vessel is operating in a pool or in the spot market or (ii) 130% of the then outstanding
loan if the vessel is on time charter with a duration of at least one year.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------





F-23







Scorpio Tankers Inc. and Subsidiaries



Notes to the consolidated financial statements



As described above, the credit facility
requires that the charter-free market value of the STI Spirit shall be no less than 140% of the then outstanding loan balance.
In order to stay in compliance with this covenant, we made a prepayment of $0.8 million in June 2012, and a prepayment of
$1.3 million in December 2012, which is being applied to the next four quarterly payments.



The outstanding balance at December 31,
2012 and December 31, 2011 was $23.4 million and $26.2 million, respectively, which considers the aforementioned payments along
with principal payments of $0.4 million made in March 2012 and June 2012, respectively.



We were in compliance with the financial
covenants relating to this facility as of December 31, 2012.



2011 Credit facility



On May 3, 2011, we
executed a credit facility with Nordea Bank Finland plc, acting through its New York branch, DnB NOR Bank ASA, acting through
its New York branch, and ABN AMRO Bank N.V., for a senior secured term loan facility of up to $150.0 million. On July 20,
2012, we extended the availability period of the 2011 Credit Facility until January 31, 2014. The availability period was previously
scheduled to expire in May 2013. Due to the amendment, we wrote-off $3.0 million in deferred financing fees within Financial Expenses
(see note 19), which includes all loan fees from May 2011.



All terms mentioned
in this section are defined in the agreement.



Drawdowns
under this credit facility are available until January 31, 2014 and bear interest as follows: (1) until December 29, 2011, at
LIBOR plus an applicable margin of (i) 2.75% per annum when our debt to capitalization (total debt plus equity) ratio is
less than 45%, (ii) 3.00% per annum when our debt to capitalization ratio is greater than or equal to 45% but less than
or equal to 50% and (iii) 3.25% when our debt to capitalization ratio is greater than 50%; (2) from December 30, 2011 through
September 30, 2013, at LIBOR plus an applicable margin of 3.50% per annum and (3) from October 1, 2013 and at all times
thereafter, at LIBOR plus an applicable margin of (i) 3.25% per annum when our debt to capitalization (total debt plus
equity) ratio is equal to or less than 50% and (ii) 3.50% per annum when our debt to capitalization ratio is greater
than 50%.  A commitment fee equal to 40% of the applicable margin is payable on the unused daily portion of the
credit facility. The credit facility matures on May 3, 2017 and can only be used to finance up to 50% of the cost of future
vessel acquisitions, which vessels would be the collateral for the credit facility.



Borrowings for
each vessel financed under this facility represent a separate tranche, with repayment terms dependent on the age of the vessel
at acquisition. Each tranche under the credit facility is repayable in equal quarterly installments, with a lump sum payment at
maturity, based on a full repayment of such tranche when the vessel to which it relates is sixteen years of age. Our subsidiaries,
which may at any time, own one or more of our vessels, will act as guarantors under the credit facility.



The credit facility
requires us to comply with a number of covenants, including financial covenants; delivery of quarterly and annual financial statements
and annual projections; maintaining adequate insurances; compliance with laws (including environmental); compliance with ERISA
(Employee Retirement Income Security Act); maintenance of flag and class of the initial vessels; restrictions on consolidations,
mergers or sales of assets; approvals on changes in the Manager of our initial vessels; limitations on liens; limitations on additional
indebtedness; prohibitions on paying dividends if a covenant breach or an event of default has occurred or would occur as a result
of payment of a dividend; prohibitions on transactions with affiliates; and other customary covenants.



The financial covenants include:

| | · | The ratio of net debt to capitalization shall be no greater than 0.60 to 1.00.
| | - | ------------------------------------------------------------------------------

| | · | Consolidated tangible net worth (i.e. shareholders’ equity) shall be no less than $150.0
million plus 25% of cumulative positive net income (on a consolidated basis) for each fiscal quarter from July 1, 2010 going forward
and 50% of the value of any new equity issues from July 1, 2010 going forward.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | · | The ratio of EBITDA to interest expense shall be no less than 1.25 to 1.00 commencing with the
fourth fiscal quarter of 2011 until the fourth quarter of 2012, at which point it will increase to 1.50 to 1.00 for the first quarter
of 2013, 1.75 to 1.00 for the second quarter of 2013 and 2.00 to 1.00 at all times thereafter.  Such ratio shall be calculated
quarterly on a trailing four quarter basis. In addition, we are restricted from paying dividends until our EBITDA to interest expense
ratio is 2.00 to 1.00 or greater. EBITDA, as defined in the loan agreement, excludes non-cash charges such as impairment.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



F-24







Scorpio Tankers Inc. and Subsidiaries



Notes to the consolidated financial statements



| | · | Consolidated liquidity (cash, cash equivalents, and availability under the 2010 Revolving Credit
Facility) needs to be not less than $25 million, of which unrestricted cash and cash equivalents shall be not less than $15.0 million,
until we own, directly or indirectly, more than 15 vessels, at which time the amount increases by $750,000 per each additional
vessel.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | · | The aggregate fair market value of the collateral vessels shall at all times be no less than 150%
of the then aggregate outstanding principal amount of loans under the credit facility.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



In August and September
2012, we sold STI Diamond and STI Coral for $25.25 million each. A portion of the proceeds from the sales was used
to repay $16.1 million of debt outstanding on the 2011 Credit Facility relating to STI Coral. In addition, the fifth newbuilding
vessel, STI Onyx was substituted as collateral under the 2011 Credit Facility on the outstanding borrowing relating to STI
Diamond.



As of December 31,
2012, there was $115 million available for borrowing which can be used to finance up to 50% of future vessel acquisitions. $2.0
million of principal payments were made during 2012 in addition to the $16.1 million repayment relating to the sale of STI Coral.
The outstanding balance at December 31, 2012 and December 31, 2011 was $15.5 million and $33.6 million, respectively.



We were in compliance
with the financial covenants relating to this facility as of December 31, 2012.



Newbuilding Credit Facility



On December
21, 2011, we executed a credit facility agreement with Credit Agricole Corporate and Investment Bank and Skandinaviska
Enskilda Banken AB for a senior secured term loan facility of up to $92.0 million. During the year ended December 31, 2012,
we drew down an aggregate of $92.0 million from this facility to partially finance the deliveries of STI Amber, STI Topaz,
STI Ruby and STI Garnet ($23.0 million per vessel). These vessels are owned individually by certain of our
subsidiaries, who together are the borrowers under this credit facility, and Scorpio Tankers Inc. is the guarantor.
Borrowings under the credit facility bear interest at LIBOR plus an applicable margin of 2.70% per annum.  A
commitment fee equal to 1.10% per annum was payable on the unused daily portion of the credit facility, and the facility was
fully drawn as of December 31, 2012.



All terms mentioned
in this section are defined in the agreement.



The facility is
separated into four tranches (one per each vessel) and repayment of the tranche relating to the respective vessel commenced after
delivery of that vessel in quarterly installments of $375,000, which equates to a repayment profile of 15.33 years. Each tranche
is scheduled to mature approximately seven years after delivery of the relevant vessel from the shipyard.



The credit facility
requires us to comply with a number of covenants, including financial covenants; delivery of quarterly and annual financial statements
and annual projections; maintaining adequate insurances; compliance with laws (including environmental); compliance with ERISA;
maintenance of flag and class of the initial vessels; restrictions on consolidations, mergers or sales of assets; approvals on
changes in the Manager of our initial vessels; limitations on liens; limitations on additional indebtedness; prohibitions on paying
dividends if a covenant breach or an event of default has occurred or would occur as a result of payment of a dividend; prohibitions
on transactions with affiliates; and other customary covenants.



The financial covenants include:

| | · | The ratio of debt to capitalization shall be no greater than 0.60 to 1.00.
| | - | --------------------------------------------------------------------------

| | · | Consolidated tangible net worth (i.e. shareholders equity) shall be no less than US$ 150,000,000
plus 25% of cumulative positive net income (on a consolidated basis) for each fiscal quarter from July 1, 2010 going forward and
50% of the value of any new equity issues from July 2, 2010 going forward.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | · | The ratio of EBITDA to interest expense shall be no less than 2.00 to 1.00 commencing with the
third fiscal quarter of 2011 until the fourth quarter of 2012, and 2.50 to 1.00 for all times thereafter. Such ratio shall be calculated
quarterly on a trailing four quarter basis. EBITDA, as defined in the loan agreement, excludes non-cash charges such as impairment.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | · | Unrestricted cash and cash equivalents shall at all times be no less than$15.0 million, until we
own, directly or indirectly, more than 15 vessels, at which time the amount increases by $750,000 per each additional vessel.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | · | The aggregate fair market value of the collateral vessels shall at all times be no less than 140%
(120% if the vessel is subject to acceptable long term employment) of the aggregate principal amount outstanding plus a pro rata
amount of any allocable swap exposure for the credit facility.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------





F-25







Scorpio Tankers Inc. and Subsidiaries



Notes to the consolidated financial statements



This facility is now
fully drawn, and there is currently $89.8 million outstanding under this facility as of December 31, 2012, which reflects principal
payments of $0.7 million and $1.5 million made in September and December 2012, respectively.



We had no borrowings
under this facility outstanding at December 31, 2011. We were in compliance with the financial covenants relating to this facility
as of December 31, 2012.



12.     	Derivative financial instruments



Interest rate swaps



InAugust2011, we entered into six interest rate swap agreements to manage interest costs and the
risk associated with changing interest rates on our 2011 and 2010 Credit Facilities with three different banks. Pursuant to these
interest rate swap contracts, we agreed to exchange the difference between fixed and floating rate interest amounts calculated
on agreed notional principal amounts. Such contracts enable us to partially mitigate the risk of changing interest rates on the
cash flow exposures on the issued variable rate debt held. We determined the estimated fair value of our derivatives by discounting
the future cash flows using the curves at the reporting date and the credit risk inherent in the contract. These swaps have been
designated and accounted for as cash flow hedges.



In August and
September 2012, we completed the sales of STI Coral and STI Diamond, respectively and as a result, we reduced
the notional amount on the interest rate swaps relating to the 2011 Credit Facility to $15.0 million from $24.0 million in
aggregate. As a result of the reduction, we recognized a realized loss of $0.2 million, which was reclassified out of other
comprehensive loss and recorded as a component of loss from sale of vessels.



The notional principal
amounts of these swaps aggregate $66 million, the details of which are as follows as of December 31, 2012 and 2011, respectively:



As of December 31, 2012



|Hedged item          |  | Notional amount |  | Start date   |  | Expiration date |  | Fixed interest rate |       | Floating interest rate
|-------------------- |  | --------------- |  | ------------ |  | --------------- |  | ------------------- | ----- | ----------------------
|2010 Credit Facility |  | $51 million     |  | July 2, 2012 |  | June 2, 2015    |  |                     | 1.27% |                       
|2011 Credit Facility |  | $15 million     |  | July 2, 2012 |  | June 30, 2015   |  |                     | 1.30% |                       





As of December 31, 2011



|Hedged item          |  | Notional amount |  | Start date   |  | Expiration date |  | Fixed interest rate |       | Floating interest rate
|-------------------- |  | --------------- |  | ------------ |  | --------------- |  | ------------------- | ----- | ----------------------
|2010 Credit Facility |  | $51 million     |  | July 2, 2012 |  | June 2, 2015    |  |                     | 1.27% |                       
|2011 Credit Facility |  | $24 million     |  | July 2, 2012 |  | June 30, 2015   |  |                     | 1.30% |                       





The vessels which collateralize
the 2011 Credit Facility and 2010 Revolving Credit Facility also serve as collateral for the designated interest rate swap agreements,
subordinated to the outstanding borrowings under each credit facility.



In December 2012, we
raised net proceeds of $127.2 million from a registered direct placement of common shares and as part of the use of proceeds of
this offering, we voluntarily repaid $50.0 million into our 2010 Revolving Credit Facility. After the payment, we had $17.2 million
of debt outstanding under the 2010 Credit Facility, which is less than the total notional amount of $51 million for the three interest
rate swaps related to the facility. As such, the swaps related to the 2010 Revolving Credit Facility no longer met the criteria
for hedge accounting and we therefore de-designated the hedge relationship prospectively and reclassified all amounts accumulated
in other comprehensive income ($1.0 million) to the statement of profit or loss for the year ended December 31, 2012 as a component
of Financial Expenses.



The interest rate swaps
relating to the 2011 Credit Facility continue to qualify for hedge accounting. Accordingly, changes in their fair value, which
the hedge is deemed to be effective, are recognized directly in other comprehensive income and classified as ‘hedging reserves’.
Changes in their fair value for any portion deemed to be ineffective are recognized in the consolidated statement of profit or
loss.





F-26







Scorpio Tankers Inc. and Subsidiaries



Notes to the consolidated financial statements



Profit or loss sharing agreements



In July 2012, we
entered into a profit or loss sharing arrangement on the earnings of an LR1 vessel that is not owned or operated by us. The agreement
stipulates that 50% of the profits and losses will be shared with the counterparty. The counterparty to this agreement was time
chartering-in this vessel for a period of six months at $12,750 per day and this agreement expired in January 2013.



In September 2012,
we took delivery of an LR1, FPMC P Eagle, on a time charter-in arrangement for one year at $12,800 per day. We also entered
into a profit and loss sharing arrangement whereby 50% of the profits and losses relating to this vessel above or below the charterhire
rate will be shared with a third party who neither owns nor operates FPMC P Eagle.



Both of these agreements
are being treated as derivatives, recorded at fair value with any resultant gain or loss recognized in the statement of profit
or loss. Changes in fair value are recorded as unrealized gains and losses on derivative financial instruments and actual earnings
are recorded as earnings from profit or loss sharing agreements, within the consolidated statement of profit or loss. The fair
value of these instruments is determined by comparing published time charter rates to the charterhire rate and discounting those
cash flows to their estimated present value.



The following table
summarizes the fair value of our derivative financial instruments as of December 31, 2012 and 2011, which are included in the consolidated
balance sheet:



|                                                                        |  | At December 31,
|----------------------------------------------------------------------- |  | ---------------
|In thousands of US dollars                                              |  | 2012           
|Assets                                                                  |  |                
|Prepaid expenses and other current assets (profit and loss agreements)  |  | $              
|                                                                        |  |                
|Liabilities                                                             |  |                
|Derivative financial instrument  (profit and loss agreements - current) |  |                
|Derivative financial instrument (interest rate swap - current)          |  |                
|Total current liabilities                                               |  |                
|                                                                        |  |                
|Derivative financial instrument (interest rate swap - non-current)      |  |                
|Total liabilities                                                       |  | $              



The following has been recorded as realized
and unrealized losses from changes in the fair value of our derivative financial instruments:



|                                     |  | Fair value adjustments     
|------------------------------------ |  | ---------------------------
|                                     |  | Statement of profit or loss
|In thousands of US dollars           |  | Realized gain/ (loss)      
|Profit and loss agreements           |  |                            
|Interest rate swap                   |  |                            
|                                     |  |                            
|Total period ended December 31, 2012 |  | $                          
|                                     |  |                            
|Interest rate swap                   |  |                            
|                                     |  |                            
|Total period ended December 31, 2011 |  | $                          
|                                     |  |                            
|Interest rate swap                   |  |                            
|                                     |  |                            
|Total period ended December 31, 2010 |  | $                          



| | (1) | The realized loss on our interest rate swaps related to the
                                                                                                      2011 Credit Facility due to the disposal of STI Coral and STI Diamond was recorded as a component of the loss
                                                                                                      from sale of vessels on the consolidated statement of profit or loss.
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (2) | The realized loss of $0.3 million in the year ended December 31,
2010 relates to the loss recorded upon settlement of an interest rate swap in April 2010
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------





F-27







Scorpio Tankers Inc. and Subsidiaries



Notes to the consolidated financial statements



13.	    Segment reporting



Information about our reportable segments
for the years ended December 31, 2012, 2011 and 2010 is as a follows:



|For the year ended December 31, 2012                |  |             |         |          |  |             |         |    | 
|--------------------------------------------------- |  | ----------- | ------- | -------- |  | ----------- | ------- | -- | 
|In thousands of US dollars                          |  | Panamax/LR1 |         | Handymax |  | Aframax/LR2 |         | MR | 
|                                                    |  |             |         |          |  |             |         |    | 
|Vessel revenue                                      |  | $           | 28,602  |          |  | $           | 35,381  |    | 
|Vessel operating costs                              |  |             | (14,137 | )        |  |             | (5,428  | )  | 
|Voyage expenses                                     |  |             | (999    | )        |  |             | (2,741  | )  | 
|Charterhire                                         |  |             | (1,629  | )        |  |             | (23,192 | )  | 
|Depreciation                                        |  |             | (7,352  | )        |  |             | (1,716  | )  | 
|Loss from sale of vessels                           |  |             | —       |          |  |             | (4,525  | )  | 
|General and administrative expenses                 |  |             | (495    | )        |  |             | (195    | )  | 
|Financial expenses                                  |  |             | —       |          |  |             | —       |    | 
|Earnings from profit and loss sharing agreements    |  |             | 443     |          |  |             | —       |    | 
|Unrealized loss on derivative financial instruments |  |             | (184    | )        |  |             | —       |    | 
|Financial income                                    |  |             | —       |          |  |             | —       |    | 
|Other expenses, net                                 |  |             | —       |          |  |             | —       |    | 
|Segment profit or loss                              |  | $           | 4,249   |          |  | ($          | 2,416   | )  | 



|For the year ended December 31, 2011 |  |             |         |          |  |             |         |    | 
|------------------------------------ |  | ----------- | ------- | -------- |  | ----------- | ------- | -- | 
|In thousands of US dollars           |  | Panamax/LR1 |         | Handymax |  | Aframax/LR2 |         | MR | 
|Vessel revenue                       |  | $           | 31,101  |          |  | $           | 32,238  |    | 
|Vessel operating costs               |  |             | (14,428 | )        |  |             | (11,217 | )  | 
|Voyage expenses                      |  |             | (13     | )        |  |             | (26     | )  | 
|Charterhire                          |  |             | (4,554  | )        |  |             | (17,357 | )  | 
|Impairment                           |  |             | (28,616 | )        |  |             | (12,962 | )  | 
|Depreciation                         |  |             | (9,279  | )        |  |             | (5,069  | )  | 
|General and administrative expenses  |  |             | (692    | )        |  |             | (762    | )  | 
|Financial expenses                   |  |             | —       |          |  |             | —       |    | 
|Financial income                     |  |             | —       |          |  |             | —       |    | 
|Other expenses, net                  |  |             | 23      |          |  |             | —       |    | 
|Segment profit or loss               |  | ($          | 26,458  | )        |  | ($          | 15,155  | )  | 





F-28







Scorpio Tankers Inc. and Subsidiaries



Notes to the consolidated financial statements



|For the year ended December 31, 2010              |  |             |         |          |  |             |        |    | 
|------------------------------------------------- |  | ----------- | ------- | -------- |  | ----------- | ------ | -- | 
|In thousands of US dollars                        |  | Panamax/LR1 |         | Handymax |  | Aframax/LR2 |        | MR | 
|Vessel revenue                                    |  | $           | 29,345  |          |  | $           | 8,812  |    | 
|Vessel operating costs                            |  |             | (12,364 | )        |  |             | (5,650 | )  | 
|Voyage expenses                                   |  |             | (253    | )        |  |             | (2,289 | )  | 
|Charterhire                                       |  |             | (276    | )        |  |             | —      |    | 
|Depreciation                                      |  |             | (7,494  | )        |  |             | (2,390 | )  | 
|General and administrative expenses               |  |             | (600    | )        |  |             | (267   | )  | 
|Financial expenses                                |  |             | (135    | )        |  |             | —      |    | 
|Financial income                                  |  |             | 1       |          |  |             | 1      |    | 
|Realized loss on derivative financial instruments |  |             | (280    | )        |  |             | —      |    | 
|Other expense, net                                |  |             | (4      | )        |  |             | —      |    | 
|Segment profit or loss                            |  | $           | 7,940   |          |  | ($          | 1,782  | )  | 



The Panamax/LR1and Handymax segments
each contained revenue from at least one major customer representing greater than 10% of total revenue. The revenue from those
customers within their respective segments was:



|In thousands of US dollars |             |          |  |                                          |  |     
|-------------------------- | ----------- | -------- |  | ---------------------------------------- |  | ----
|Segment                    |             | Customer |  | 2012                                     |  | 2011
|                           | Panamax/LR1 |          |  | Scorpio Panamax Tanker Pool Limited (1)  |  | $   
|                           |             |          |  | King Dustin (1)                          |  |     
|                           |             |          |  | Liberty (1)                              |  |     
|                           |             |          |  | BP                                       |  |     
|                           |             |          |  |                                          |  |     
|                           | Handymax    |          |  | Scorpio Handymax Tanker Pool Limited (1) |  |     
|                           |             |          |  |                                          |  | $   



(1)      These customers are related parties (see Note 15)





F-29







Scorpio Tankers Inc. and Subsidiaries



Notes to the consolidated financial statements



14.    Common
shares



At December 31,
2010, we had 24,634,913 registered shares authorized and issued with a par value of $0.01 per share. These shares provide the holders
with rights to dividends and voting rights.



In May 2011, we
closed on a follow-on public offering of 6,000,000 shares of common stock at $10.50 per share. On the same day, the underwriters
exercised their over-allotment option to purchase an additional 900,000 shares at $10.50 per share After deducting underwriters’
discounts and paying offering expenses, the net proceeds of the follow-on public offering and the over-allotment were approximately
$68.5 million. Total fees and commissions relating to the follow-on offering and exercise of the over-allotment option were $4.0
million and were recorded as a reduction to additional paid-in capital.



In December 2011,
we closed on the sale 7,000,000 shares of common stock in an underwritten public offering at an offering price of $5.50 per share.
We received net proceeds of approximately $36.5 million, after deducting underwriters' discounts and offering expenses. Total
fees and commissions relating to the follow-on offering and exercise of the over-allotment option were $2.0 million and were recorded
as a reduction to additional paid-in capital.



In April
2012, we closed on the sale of 4,000,000 shares common stock in a registered direct placement of common shares at an offering
price of $6.75 per share. We received net proceeds of approximately $25.9 million, after deducting the placement
agents’ discounts and offering expenses. Total fees and commissions relating to the registered direct placement were
$1.1 million and were recorded as a reduction to additional paid-in capital.



In December 2012,
we closed on the sale of 21,639,774 shares of common stock in a registered direct placement of common shares at an offering price
of $6.10 per share. We received net proceeds of approximately $127.2 million, after deducting the placement agents' discount
and offering expenses. Total fees and commissions relating to the registered direct placement were $4.8 million and were recorded
as a reduction to additional paid-in capital.



Stock buyback plan



On July 9,
2010, the board of directors authorized a share buyback program of $20.0 million. We repurchase these shares in the open market
at the times and prices that we consider to be appropriate. During 2012, we repurchased 447,322 shares at an average price of $5.4546
per share, including commissions. As of December 31, 2012 and December 31, 2011, 1,170,987 and 723,665 shares, respectively
have been purchased under the plan at an average price of $6.7793 and $7.5981, respectively, per share including commissions. As
of December 31, 2012, the remaining stock buyback authorization was $12.1 million.



Restricted stock issuance



On June 18,
2010, we issued 559,458 shares of restricted stock to our employees for no cash consideration. The share price at the date of
issue was $10.99 per share. The vesting schedule of the restricted stock is (i) one-third of the shares vest on April 6,
2013, (ii) one-third of the shares vest on April 6, 2014, and (iii) one-third of the shares vest on April 6, 2015.
Compensation expense is recognized ratably over the vesting periods for each tranche using the straight-line method.



On June 18,
2010, we issued 9,000 shares of restricted stock to our directors for no cash consideration. The share price at the date of
issue was $10.85 per share and these shares vested on April 6, 2011.



On January 31,
2011, we issued 281,000 shares of restricted stock to the employees for no cash consideration. The share price at the date of issue
was $9.83 per share. The vesting schedule of the restricted stock is (i) one-third of the shares vest on January 31, 2012, (ii)
one-third of the shares vest on January 31, 2013, and (iii) one-third of the shares vest on January 31, 2014. Compensation expense
is recognized ratably over the vesting periods for each tranche using the straight-line method. 93,667 shares vested on January
31, 2012.



On January 31,
2011, we issued 9,000 shares of restricted stock to our independent directors for no cash consideration. The share price at the
date of issue was $9.83 per share. These shares vested on January 31, 2012.



On January 31,
2012, we issued 281,000 shares of restricted stock to employees for no cash consideration. The share price at the date of issue
was $5.65 per share. The vesting schedule of the restricted stock is (i) one-third of the shares vest on January 31, 2013, (ii)
one-third of the shares vest on January 31, 2014, and (iii) one-third of the shares vest on January 31, 2015. Compensation expense
is recognized ratably over the vesting periods for each tranche using the straight-line method.



On January 31, 2012,
we issued 9,000 shares of restricted stock to our independent directors for no cash consideration. The share price at the date
of issue was $5.65 per share. These shares vest on January 31, 2013.





F-30







Scorpio Tankers Inc. and Subsidiaries



Notes to the consolidated financial statements



We recognized $3.5
million, $3.4 million and $0.9 million in expense relating to these issuances during the years ended December 31, 2012, 2011 and
2010, respectively. No shares were forfeited during these periods.



Assuming that all
the restricted stock will vest, the stock compensation expense in future periods, including that related to restricted stock issued
in prior periods will be:



|In thousands of US dollars            |  | Employees |       | Directors |  | Total
|------------------------------------- |  | --------- | ----- | --------- |  | -----
|For the year ending December 31, 2013 |  | $         | 1,982 |           |  | $    
|For the year ending December 31, 2014 |  |           | 787   |           |  |      
|For the year ending December 31, 2015 |  |           | 122   |           |  |      
|                                      |  | $         | 2,891 |           |  | $    



Shares outstanding



As of December 31, 2012,
we had 275,000,000 registered shares of which 250,000,000 are designated as common shares with a par value of $0.01 and 25,000,000
designated as preferred shares with a par value of $0.01,



As of December 31, 2012
we had 63,827,846 shares outstanding.



15.     Related
party transactions



Transactions with
entities controlled by the Lolli-Ghetti family (herein referred to as related party affiliates) in the consolidated profit or loss
statement and balance sheet are as follows:



|                                     |  | For the year ended December 31,
|------------------------------------ |  | -------------------------------
|In thousands of US dollars           |  | 2012                           
|Pool revenue(1)                      |  |                                
|Scorpio Panamax Tanker Pool Limited  |  | $                              
|Scorpio Handymax Tanker Pool Limited |  |                                
|Scorpio MR Pool Limited              |  |                                
|Scorpio LR2 Pool Limited             |  |                                
|Scorpio Aframax Tanker Pool Limited  |  |                                
|Time charter revenue(2)              |  |                                
|King Dustin                          |  |                                
|Liberty and subsidiaries             |  |                                
|Vessel operating costs(3)            |  |                                
|Commissions(4)                       |  |                                
|Administrative expenses(5)           |  |                                
|Other(6)                             |  |                                



| | (1) | These transactions relate to revenue earned in the Scorpio LR2, Scorpio Aframax, Scorpio
                                                                          Panamax, Scorpio MR and Scorpio Handymax Tanker Pools (the Pools). The Pools are owned by Scorpio LR2 Tanker Pool Limited,
                                                                          Scorpio Aframax Pool Limited, Scorpio Panamax Tanker Pool Limited,Scorpio MR Pool Limited and Scorpio Handymax Tanker Pool
                                                                          Limited, respectively. The Pools are related party affiliates.
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (2) | The revenue earned was for Noemi's time charter with King Dustin (which is 50% jointly controlled
by a related party affiliate). In 2010, STI Harmony and STI Heritage were on a time charter with Liberty, a related
party affiliate. See Note 16 for the terms of this time charter.
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (3) | These transactions represent technical management fees charged by SSM, a related party affiliate,
and included in the vessel operating costs in the consolidated statement of profit or loss. We believe our technical management
fees for the years ended December 31, 2012, 2011 and 2010 were at market rates because they were the same rates charged to other
vessels managed by SSM. Each vessel pays $548 per day for technical management, which was, lower than that charged
to third parties by SSM.
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------





F-31







Scorpio Tankers Inc. and Subsidiaries



Notes to the consolidated financial statements



| | (4) | These transactions represent the expense due to SCM for commissions related to the commercial management
services provided by SCM under the Commercial Management Agreement (see description below). Each of the vessels pays a commission
of 1.25% of their revenue when not in the Pools.  When our vessels were in the Pools, SCM,
the pool manager, charged fees of $250 per vessel per day with respect to our Panamax/LR1 and LR2 vessels, $300 per vessel per
day  with respect to each of our Handymax and MR vessels, plus 1.25% commission on gross revenues per charter fixture.  These
were the same fees that SCM charges other vessels in these pools, including third party owned vessels.
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (5) | We have an Administrative Services Agreement with Scorpio Services Holding Limited, or SSH or our
Administrator, for the provision of administrative staff and office space, and administrative services, including accounting, legal
compliance, financial and information technology services. SSH is a related party to us.  Liberty Holding Company Ltd.,
or Liberty, a company affiliated with us, acted as our Administrator until March 13, 2012 when the Administrative Services Agreement
was assigned to SSH. The effective date of the novation was November 9, 2009, the date that we first entered into the agreement
with Liberty. We reimburse our current Administrator for the reasonable direct or indirect expenses it incurs in providing us with
the administrative services described above. Our Administrator also arranges vessel sales and purchases for us. The services provided
to us by our Administrator may be sub-contracted to other entities within the Scorpio Group.
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Our Commercial Management Agreement
with SCM includes a daily flat fee charged payable to SCM for the vessels that are not in one of the pools managed by SCM. The
flat fee was $250 per day for Panamaxes/LR1 and Aframax/LR2 vessels and $300 per day for Handymax and MR vessels. The flat fee
was the same rate charged by SCM for vessels in the pools managed by SCM.



| | · | The expense for the year ended December 31, 2012 of $1.9 million included the flat fee of $0.7
million charged by SCM and administrative fees of $1.2 million charged by SSH and were included in voyage expenses and general
and administrative expenses in the consolidated statement of profit or loss.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | · | The expense for the year ended December 31, 2011 of $1.9 million included the flat fee of $0.3
charged by SCM and administrative fees of $1.7 million charged by SSH and were both included in general and administrative expenses
in the consolidated statement of profit or loss.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | · | The expense for the year ended December 31, 2010 of $0.9 million included the flat fee of $0.2
million charged by SCM and administrative fees of $0.7 million charged by SSH and were both included in general and administrative
expenses in the consolidated statement of profit or loss.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (6) | In accordance with our Administrative Services Agreement with SSH, we have to reimburse SSH for
any direct expenses. These transactions represent reimbursements of $0.1 million to SSH for the year ended December 31, 2010 for
expenses related to the registration of the existing shares in the initial public offering which closed on April 6, 2010. In addition,
$0.3 million related to expenses for the registration of the shares in the initial public offering were recorded as an offset against
the proceeds from the offering. The cash payment was made in 2010.
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Furthermore, the Administrative
Services Agreement with SSH includes a fee for arranging vessel purchases and sales, on our behalf, equal to 1% of the gross
purchase or sale price, payable upon the consummation of any such purchase or sale. These fees are capitalized as part of the
carrying value of the related vessel for a vessel purchase and are included as part of the gain or loss on sale for a vessel
disposal. In the year ended December 31, 2012, we paid SSH an aggregate fee of $2.4 million, which consisted of $0.5 million
(recorded within loss from sale of vessels) on the sales ofSTI Conqueror, STI Gladiator, and STI Matadorand
$1.9 million on the purchase and delivery of the first five Newbuilding vessels. In the year ended December 31, 2011, we paid
SSH an aggregate fee of $0.7 million in May 2011 for the purchase of the STI Coral and STI Diamond. In the year
ended December 31, 2010, we paid SSH an aggregate fee of $2.4 million for the purchases of the STI Harmony, STI
Heritage, STI Conqueror, STI Matador, STI Gladiator, STI HighlanderandSTI Spirit.





F-32







Scorpio Tankers Inc. and Subsidiaries



Notes to the consolidated financial statements



We had the following balances
with related parties, which have been included in the consolidated balance sheets:



|                                         |  | As of December 31,
|---------------------------------------- |  | ------------------
|In thousands of US dollars               |  | 2012              
|Assets:                                  |  |                   
|Accounts receivable (due from the Pools) |  | $                 
|                                         |  |                   
|Liabilities:                             |  |                   
|Accounts payable (owed to the Pools)     |  |                   
|Accounts payable (SSM)                   |  |                   
|Accounts payable (SCM)                   |  |                   



In 2011, we
also entered into an agreement to reimburse costs to SSM as part of its supervision agreement for newbuilding vessels. $0.1
million has been charged under this agreement during the year ended December 31, 2012 and capitalized within vessels under
construction. No amounts were charged under this agreement during the year ended December 31, 2011.



Key management remuneration



Prior to April
6, 2010, our executive management services were provided by a related party affiliate and included in the management fees described
in (5) above. If we were not part of a related party affiliate, and had the same ownership structure and a contract for administrative
services for the periods up to April 6, 2010, we estimate our executive management remuneration would have been comparable with
the executive management remuneration presented within general and administrative expenses in subsequent periods. The table below
therefore depicts key management remuneration for the periods April 6, 2010 through December 31, 2010 and the years ended December
31, 2012 and 2011 as follows:



|                                        |  | For the period ended December 31,
|--------------------------------------- |  | ---------------------------------
|In thousands of US dollars              |  | 2012                             
|Short-term employee benefits (salaries) |  | $                                
|Share-based compensation (1)            |  |                                  
|Total                                   |  | $                                



| | (1) | Represents the amortization of restricted stock issued under our
equity incentive plans in June 2010, January 2011 and January 2012. See note 14.
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------



There are no post
employment benefits.



16.    Vessel
revenue



During the
years ended December 31, 2011, and 2010 we had two and four vessels, respectively that earned revenue through time
charter contracts. During the year ended December 31, 2012, there were no vessels on time charter contracts. The remaining
revenue was generated from vessels operating in pools or in the spot market.



Revenue Sources



|                           |  | For the year ended December 31,
|-------------------------- |  | -------------------------------
|In thousands of US dollars |  | 2012                           
|Pool revenue               |  | $                              
|Voyage revenue             |  |                                
|Time charter revenue       |  |                                
|                           |  | $                              





F-33







Scorpio Tankers Inc. and Subsidiaries



Notes to the consolidated financial statements



Time charter out contracts:



|                 |  | Time Charter Out |  |   
|---------------- |  | ---------------- |  | --
|Vessel           |  | From             |  | To
|Noemi (1)        |  | Jan 2007         |  |   
|Senatore (2)     |  | Sep 2007         |  |   
|STI Spirit (3)   |  | Jan 2011         |  |   
|STI Harmony (4)  |  | Jun 2010         |  |   
|STI Heritage (4) |  | Jun 2010         |  |   



| |  |  | 
| |  |  | 

| | (1) | The time charter contract with the Noemi was terminated on
December 22, 2011.
| | --- | -----------------------------------------------------------------------------

| | (2) | The time charter contract with the Senatore was terminated
on August 26, 2010.
| | --- | ------------------------------------------------------------------------------

| | (3) | The STI Spirit was on a short term time charter from January
11, 2011 through March 3, 2011 at a charterhire rate of $15,000 per day. From March 4, 2011 through March 26, 2011, the date the
vessel entered the Scorpio LR2 Pool, the charterhire rate increased to $17,000 per day.
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (4) | STI Harmony and STI Heritage were acquired in June
2010 with existing time charter contracts that commenced in October 2007 and January 2008, respectively. The vessels were chartered
to subsidiaries of Liberty, which are related parties. `
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------





F-34







Scorpio Tankers Inc. and Subsidiaries



Notes to the consolidated financial statements



17.	    Charterhire



The following
table depicts our time chartered-in vessel commitments during the years ended December 31, 2012, 2011 and 2010:



| |                                                                                                                       | Name |  | Year built          |  | Type |      | Delivery |  | Charter Expiration(1) |          | Rate ($/ day) |  | 
| | --------------------------------------------------------------------------------------------------------------------- | ---- |  | ------------------- |  | ---- | ---- | -------- |  | --------------------- | -------- | ------------- |  | 
| | Active as of December 31, 2012                                                                                        |      |  |                     |  |      |      |          |  |                      
| | 1                                                                                                                     |      |  | Kraslava            |  |      | 2007 |          |  |                       | Handymax |               |  | 
| | 2                                                                                                                     |      |  | Krisjanis Valdemars |  |      | 2007 |          |  |                       | Handymax |               |  | 
| | 3                                                                                                                     |      |  | Histria Azure       |  |      | 2007 |          |  |                       | Handymax |               |  | 
| | 4                                                                                                                     |      |  | Histria Coral       |  |      | 2006 |          |  |                       | Handymax |               |  | 
| | 5                                                                                                                     |      |  | Histria Perla       |  |      | 2005 |          |  |                       | Handymax |               |  | 
| | 6                                                                                                                     |      |  | Endeavour           |  |      | 2004 |          |  |                       | MR       |               |  | 
| | 7                                                                                                                     |      |  | STX Ace 6           |  |      | 2007 |          |  |                       | MR       |               |  | 
| | 8                                                                                                                     |      |  | Pacific Duchess     |  |      | 2009 |          |  |                       | MR       |               |  | 
| | 9                                                                                                                     |      |  | Targale             |  |      | 2007 |          |  |                       | MR       |               |  | 
| | 10                                                                                                                    |      |  | Freja Lupus         |  |      | 2012 |          |  |                       | MR       |               |  | 
| | 11                                                                                                                    |      |  | Valle Bianca        |  |      | 2007 |          |  |                       | MR       |               |  | 
| | 12                                                                                                                    |      |  | Gan-Trust           |  |      | 2013 |          |  |                       | MR       |               |  | 
| | 13                                                                                                                    |      |  | Usma                |  |      | 2007 |          |  |                       | MR       |               |  | 
| | 14                                                                                                                    |      |  | SN Federica         |  |      | 2003 |          |  |                       | LR1      |               |  | 
| | 15                                                                                                                    |      |  | Hellespont Promise  |  |      | 2007 |          |  |                       | LR1      |               |  | 
| | 16                                                                                                                    |      |  | FPMC P Eagle        |  |      | 2009 |          |  |                       | LR1      |               |  | 
| | 17                                                                                                                    |      |  | FPMC P Hero         |  |      | 2011 |          |  |                       | LR2      |               |  | 
| | 18                                                                                                                    |      |  | FPMC P Ideal        |  |      | 2012 |          |  |                       | LR2      |               |  | 
| | 19                                                                                                                    |      |  | Fair Seas           |  |      | 2008 |          |  |                       | LR2      |               |  | 
| | Expired
                                                                                      as of December 31, 2012 |      |  |                     |  |      |      |          |  |                       |          |               |  | 
| | 1                                                                                                                     |      |  | Kazdanga            |  |      | 2007 |          |  |                       | Handymax |               |  | 
| | 2                                                                                                                     |      |  | BW Zambesi          |  |      | 2010 |          |  |                       | LR1      |               |  | 
| | 3                                                                                                                     |      |  | Khawr Aladid        |  |      | 2006 |          |  |                       | LR2      |               |  | 



|(1)  | Redelivery is plus or minus 30 days from the expiry date.                                                                                                                                                                                                                  
|---- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(2)  | We have an option to extend the charter for an additional year at $13,070 per day.                                                                                                                                                                                         
|(3)  | We have an option to extend the charter for an additional year at $13,000 per day.  The agreement also contains a 50% profit and loss sharing provision whereby we split all of the vessel's profits and losses above or below the daily base rate with the vessel’s owner.
|(4)  | In April 2013, the daily base rate will increase to $12,600 per day for one year thereafter. We have an option to extend the term of the charter for an additional year at $13,550 per day.                                                                                
|(5)  | Represents the average rate for the two year duration of the agreement.  The rate for the first year is $12,750 per day and the rate for the second year is $13,250 per day. We have an option to extend the charter for an additional year at $14,500 per day.            
|(6)  | This vessel was redelivered in February 2013.                                                                                                                                                                                                                              
|(7)  | We have an option to extend the charter for an additional year at $15,150 per day.                                                                                                                                                                                         
|(8)  | We have an option to extend the charter for an additional year at $14,800 per day.                                                                                                                                                                                         
|(9)  | We have options to extend the charter for up to three consecutive one year periods at $14,850 per day, $15,200 per day and $16,200 per day, respectively.                                                                                                                  
|(10) | We have an option to extend the charter for an additional year at $16,000 per day.                                                                                                                                                                                         





F-35







Scorpio Tankers Inc. and Subsidiaries



Notes to the consolidated financial statements



|(11) | We have an option to extend the charter for an additional six months at $13,000 per day.                                                                                                                                                                                                                                                                                                  
|---- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(12) | The daily base rate represents the average rate for the three year duration of the agreement.  The rate for the first year is $15,750 per day, the rate for the second year is $16,250 per day, and the rate for the third year is $16,750 per day. We have options to extend the charter for up to two consecutive one year periods at $17,500 per day and $18,000 per day, respectively.
|(13) | We have an option to extend the charter for an additional year at $14,500 per day.                                                                                                                                                                                                                                                                                                        
|(14) | We have an option to extend the charter for an additional year at $12,500 per day.  We have also entered into an agreement with the owner whereby we split all of the vessel's profits above the daily base rate.                                                                                                                                                                         
|(15) | We have an option to extend the charter for an additional six months at $14,250 per day.                                                                                                                                                                                                                                                                                                  
|(16) | We have options to extend the charter for up to two consecutive one year periods at $13,400 per day and $14,400 per day, respectively.  We have also entered into an agreement with a third party whereby we split all of the vessel's profits and losses above or below the daily base rate.                                                                                             
|(17) | We have options to extend the charters for three consecutive six month periods at $15,000 per day, $15,250 per day, and $15,500 per day respectively. FPMC P Hero is expected to be delivered in April 2013 and FPMC P Ideal was delivered in January 2013.                                                                                                                               
|(18) | We have options to extend the charter for three consecutive six month periods at $16,250 per day, $16,500 per day, and $16,750 per day respectively.                                                                                                                                                                                                                                      



The undiscounted
remaining future minimum lease payments under these arrangements as of December 31, 2012 are $86.3 million. The obligations under
these agreements will be repaid as follows:



|                           |  | As of December 31,
|-------------------------- |  | ------------------
|In thousands of US dollars |  | 2012              
|Less than 1 year           |  | $                 
|1-5 years                  |  |                   
|5+ years                   |  |                   
|Total                      |  | $                 



The total
expense recognized under charter hire agreements during the year ended December 31, 2012, 2011 and 2010 was $43.7 million,
$22.8 million and $0.3 million, respectively.



18.	    General and administrative expenses



General and administrative
expenses primarily represent employee benefit expenses, professional fees and administration/commercial management fees (see note
15). Employee benefit expenses consist of:



|                                        |  | For the year ended December 31,
|--------------------------------------- |  | -------------------------------
|In thousands of US dollars              |  | 2012                           
|Short term employee benefits (salaries) |  | $                              
|Share based compensation (see note 14)  |  |                                
|                                        |  | $                              



19.	    Financial expenses



Financial expenses
comprise:



|                                                  |  | For the year ended December 31,
|------------------------------------------------- |  | -------------------------------
|In thousands of US dollars                        |  | 2012                           
|Interest payable on bank loans                    |  | $                              
|Amortization of deferred financing fees           |  |                                
|Commitment fees on undrawn portions of bank loans |  |                                
|Total financial expenses                          |  | $                              



The amortization
of deferred financing fees in the year ended December 31, 2012 includes a $3.0 million charge arising from the amendment of the
2011 Credit Facility (see note 11).





F-36







Scorpio Tankers Inc. and Subsidiaries



Notes to the consolidated financial statements



20.	    Tax



Scorpio Tankers
Inc. and its subsidiaries are incorporated in the Republic of the Marshall Islands, and in accordance with the income tax laws
of the Marshall Islands, are not subject to Marshall Islands' income tax. We are also exempt from income tax in other jurisdictions
including the United States of America due to tax treaties; therefore, we did not have any tax charges, benefits, or balances as
of or for the periods ended December 31, 2012, 2011 and 2010.



21.    	Loss per
share



The calculation
of both basic and diluted loss/earnings per share is based on net loss attributable to equity holders of the parent and weighted
average outstanding shares of:



|                                                      |  | For the year ended December 31,
|----------------------------------------------------- |  | -------------------------------
|In thousands of US dollars except for share data      |  | 2012                           
|Net loss attributable to equity holders of the parent |  | $                              
|Basic and diluted weighted average number of shares   |  |                                



We incurred a
loss in the years ended December 31, 2012, 2011 and 2010. As a result, the inclusion of potentially dilutive shares (being the
restricted shares outlined in note 14) in the diluted loss per share calculation would have an antidilutive effect on the loss
per share for the period. Therefore, all restricted shares (1,036,791, 849,458 and 568,458 for the years ended December 31, 2012,
2011 and 2010, respectively) have been excluded from the diluted loss per share calculation for these periods.



22.	    Financial instruments



Funding and capital risk management



We manage our funding
and capital resources to ensure our ability to continue as a going concern while maximizing the return to the shareholder through
optimization of the debt and equity balance.



Categories of financial instruments



|                                                 |  | Carrying value   
|------------------------------------------------ |  | -----------------
|                                                 |  | As of December 31
|In thousands of US dollars                       |  | 2012             
|Financial assets                                 |  |                  
|Cash and cash equivalents                        |  | $                
|Loans and receivables                            |  |                  
|Derivatives at fair value through profit or loss |  |                  
|                                                 |  |                  
|Financial liabilities                            |  |                  
|Derivatives designated in a cash flow hedge      |  |                  
|Derivatives at fair value through profit or loss |  |                  
|Other liabilities (at amortized cost)            |  |                  



Derivative financial
instruments in 2012 consisted of(i) interest rate swaps, recorded at the present value of future cash flows estimated and discounted
based on the applicable yield curves derived from quoted interest rates to determine the fair value, and (ii) profit or loss sharing
agreements on time charter-in agreements with third parties, where the fair value of these instruments is determined by comparing
published time charter rates to the charterhire rate and discounting those cash flows to their estimated present value.





F-37







Scorpio Tankers Inc. and Subsidiaries



Notes to the consolidated financial statements



Derivative
financial instruments in 2011 and 2010 solely comprised of interest rate swaps, recorded at the present value of future cash
flows estimated and discounted based on the applicable yield curves derived from quoted interest rates to determine the fair
value.



IFRS 7 requires
classification of fair value measures into Levels 1, 2 and 3. Level 1 fair value measurements are those derived from quoted
prices (unadjusted) in active markets for identical assets or liabilities. Level 2 fair value measurements are those derived
from inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly
(i.e. as prices) or indirectly (i.e. derived from prices); and Level 3 fair value measurements are those derived from
valuation techniques that include inputs for the asset or liability that are not based on observable market data
(unobservable inputs). In accordance with IFRS 7, the fair value measurement for the interest rate swaps and profit or loss
sharing agreements in 2012, 2011 and 2010 were classified as Level 2.



The
fair value of other financial assets and liabilities are approximately equal to their carrying values.



Financial risk management objectives



We identify and evaluate
significant risks on an ongoing basis with the objective of managing the sensitivity of our results and financial position to those
risks. These risks include market risk, credit risk, liquidity risk and foreign exchange risk.



The use of financial derivatives
is governed by our policies as approved by the board of directors.



Market risk



Our activities expose
us to the financial risks of changes in interest rates.



In the years
ended December 31, 2012, 2011, and 2010, we were party to interest rate swaps to mitigate the risk of rising interest rates. InAugust2011, we entered into six interest rate swap agreements to manage interest costs and the risk associated with changing
interest rates on our 2011 Credit Facility and 2010 Revolving Credit Facility with three different banks. Additionally, in
April 2010,we paid $1.9 million to settle an interest rate swap that was entered into in April 2005.



Details of the amounts
recorded in the consolidated statement of profit or loss and statement of other comprehensive income in respect of such instruments
are provided in note 12.



Sensitivity analysis – Interest
rate risk



The sensitivity analyses
below have been determined based on the exposure to interest rates for non-derivative instruments at the balance sheet date. For
floating rate liabilities, the analysis is prepared assuming the amount of liability outstanding at balance sheet date was outstanding
for the whole year.



If interest rates
had been 1% higher/lower and all other variables were held constant, our net income for the year ended December 31, 2012 would
have decreased/increased by $1.6 million. This is mainly attributable to our exposure to interest rate movements on our Newbuilding
Credit Facility, 2010 Revolving Credit Facility, 2011 Credit Facility and STI Spirit Credit Facility.



If interest
rates had been 1% higher/lower and all other variables were held constant, our net income for the year ended December 31,
2011 would have decreased/increased by $1.6 million. This is mainly attributable to our exposure to interest rate movements
on our 2010 Revolving Credit Facility, 2011 Credit Facility and STI Spirit Credit Facility.



If interest rates
had been 1% higher/lower and all other variables were held constant, our net income for the year ended December 31, 2010 would
have decreased/increased by $0.7 million. This is mainly attributable to our exposure to interest rate movements in our 2010 Revolving
Credit Facility.



Credit risk



Credit risk is the
potential exposure of loss in the event of non-performance by customers and derivative instrument counterparties.



We only place cash deposits with major banks
covered with strong and acceptable credit ratings.



Accounts receivable are generally not collateralized;
however, we believe that the credit risk is partially offset by the creditworthiness of our counterparties including the commercial
and technical managers. We did not experience material credit losses on our accounts receivables portfolio in the years ended December
31, 2012, 2011, and 2010.





F-38







Scorpio Tankers Inc. and Subsidiaries



Notes to the consolidated financial statements



The carrying amount
of financial assets recognized in the consolidated financial statements represents the maximum exposure to credit risk without
taking account of the value of any collateral obtained. We did not experience any impairment losses on financial assets in the
years ended December 31, 2012, 2011, and 2010.



We monitor exposure
to credit risk, and believe that there is no substantial credit risk arising from counterparties.



Liquidity risk



Liquidity risk is
the risk that an entity will encounter difficulty in raising funds to meet commitments associated with financial instruments.



We manage liquidity
risk by maintaining adequate reserves and borrowing facilities and by continuously monitoring forecast and actual cash flows.



Current
economic conditions make forecasting difficult, and there is the possibility that our actual trading performance during the
coming year may be materially different from expectations. It is also likely that additional, currently uncommitted, sources
of financing will be required to fully meet the financial commitments under our newbuilding program, further details of which
are provided in note 6 and note 23. However, based on internal forecasts and projections that take into account reasonably
possible changes in our trading performance, we believe that we have adequate financial resources to continue in operation
and meet our financial commitments (including but not limited to newbuilding instalments, debt service obligations and
charterhire commitments) for a period of at least twelve months from the date of approval of these consolidated financial
statements. Accordingly, we continue to adopt the going concern basis in preparing our financial statements.



Remaining contractual maturity
on secured bank loans (Note 11)



The following
table details our remaining contractual maturity for our secured bank loan. The amounts represent the future undiscounted
cash flows of the financial liability based on the earliest date on which we can be required to pay. The table includes both
interest and principal cash flows and takes into consideration the amount fixed via the interest rate swap discussed
above.



As the interest cash
flows are not fixed, the interest amount included has been determined by reference to the projected interest rates as illustrated
by the yield curves existing at the reporting date.



To be repaid as follows:



|                                   |  | As of December 31
|---------------------------------- |  | -----------------
|Amounts in thousands of US dollars |  | 2012             
|Less than 1 month                  |  | $                
|1-3 months                         |  |                  
|3 months to 1 year                 |  |                  
|1-5 years                          |  |                  
|5+ years                           |  |                  
|Total                              |  | $                



The following
table details our remaining contractual maturity for our interest rate swaps. The amounts represent the future undiscounted cash
flows of the financial liability based on the earliest date on which we can be required to pay.



|                           |  | As of December 31
|-------------------------- |  | -----------------
|In thousands of US dollars |  | 2012             
|Less than 1 month          |  | $                
|1 - 3 months               |  |                  
|3 months to 1 year         |  |                  
|1 - 5 years                |  |                  
|5+ years                   |  |                  
|                           |  | $                



All other current
liabilities fall due within less than one month.





F-39







Scorpio Tankers Inc. and Subsidiaries



Notes to the consolidated financial statements



Foreign Exchange Rate Risk



Our primary economic
environment is the international shipping market. This market utilizes the U.S. Dollar as its functional currency. Consequently,
virtually all of our revenues and the majority of our operating expenses are in U.S. Dollars. However, we incur some of our combined
expenses in other currencies, particularly the Euro. The amount and frequency of some of these expenses (such as vessel repairs,
supplies and stores) may fluctuate from period to period. Depreciation in the value of the U.S. dollar relative to other currencies
will increase the U.S. dollar cost of us paying such expenses. The portion of our business conducted in other currencies could
increase in the future, which could expand our exposure to losses arising from currency fluctuations.



There is a risk
that currency fluctuations will have a negative effect on our cash flows. We have not entered into any hedging contracts to protect
against currency fluctuations. However, we have some ability to shift the purchase of goods and services from one country to another
and, thus, from one currency to another, on relatively short notice. We may seek to hedge this currency fluctuation risk in the
future.



23. 	   Subsequent events



2013 Credit Facility



In February 2013, we signed a commitment letter
for a $267.0 million senior secured credit facility, or the 2013 Credit Facility, with Nordea Bank Finland plc, acting through
its New York branch, ABN AMRO Bank N.V., and Skandinaviska Enskilda Banken AB.



The 2013 Credit Facility is expected to
consist of a $114.0 million delayed draw term loan facility and a $153.0 million revolving credit facility. The 2013 Credit Facility
is expected to be secured by, among other things, a first-priority cross-collateralized mortgage on certain vessels for which we
have entered into newbuilding contracts, or the Firm Vessels, and certain vessels for which we may exercise construction options,
or the Option Vessels, and together with the Firm Vessels, the Collateral Vessels. Our subsidiaries that own the Collateral Vessels
are expected to act as joint and several guarantors under the 2013 Credit Facility.



A single drawdown of the term loan may occur
in connection with the delivery of each Firm Vessel in an amount equal to the lesser of 60% of (i) the loan amount allocated for
such vessel or (ii) its fair market value. The initial drawdown of each revolving loan may occur in connection with the delivery
of an Option Vessel and is similarly capped at the lesser of 60% of the loan amount or fair market value, with such amount, once
drawn, available on a revolving basis. Drawdowns under the term loan are expected to be available until January 31, 2015 and drawdowns
under the revolving loan are expected to be available until July 31, 2015 and each will bear interest at LIBOR plus an applicable
margin of 3.50%.



Under the terms outlined in the commitment letter,
the term loan shall be repaid and the revolving loans reduced, in each case, in an amount equal to 1/60th of such loan on a consecutive
quarterly basis until final maturity on the sixth anniversary of the facility.



In addition to restrictions imposed upon
the owners of the Collateral Vessels (such as, limitations on liens and limitations on the incurrence of additional indebtedness),
the 2013 Credit Facility is expected to include financial covenants that require us to maintain:



| | · | minimum liquidity of at least the greater of $25 million or 5% of total
indebtedness;
| | - | -------------------------------------------------------------------------------------

| | · | a consolidated tangible net worth no less than (i) $150 million plus
25% of cumulative positive net income (on a consolidated basis) for each fiscal quarter beginning on July 1, 2010 and (ii) 50%
of the value of any new equity issues from July 1, 2010 going forward;
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | · | a ratio of net debt to total capitalization no greater than 0.60 to
1.00;
| | - | -------------------------------------------------------------------------

| | · | a ratio of EBITDA to net interest expense greater than 2.00 to 1.00
through September 30, 2013 and 2.50 to 1.00 thereafter;
| | - | ---------------------------------------------------------------------------------------------------------------------------

| | · | the aggregate fair market value of the Collateral Vessels shall at all
times be no less than 140% of the then aggregate outstanding principal amount of loans under the credit facility.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Our ability to close the 2013 Credit Facility
and our ability to draw down on the facility are each subject to usual and customary conditions precedent, including the negotiation
and execution of final documentation.





F-40







Scorpio Tankers Inc. and Subsidiaries



Notes to the consolidated financial statements



Follow-on offerings



In February 2013, we
closed on the sale of 30,672,000 shares of common stock in a registered direct placement of common shares at an offering price
of $7.50 per share. We received net proceeds of approximately $222.1 million, after deducting the placement agents’ discount
and offering expenses.



In March 2013, we closed
on the sale 29,012,000 shares of common stock in a registered direct placement of common shares at an offering price of $8.10 per
share. We received net proceeds of $226.7 million, after deducting placement agents’ discounts and offering expenses. After
the close of this offering, we had 123,511,846 shares outstanding.



February 2013 Shelf Registration
statement



On February 22,
2013, we filed a Form F-3 with the Securities and Exchange Commission, with an effective date of February 25, 2013, which can
be used to issue common shares, preferred shares, debt securities, warrants, purchase contracts, and units. If a debt
security is issued, all of our subsidiaries may guarantee the securities issued by the parent company. Each subsidiary is
100% owned and each guarantee of the registered security will be full, unconditional, and join and several with all other
subsidiary guarantees.



Delivery of Newbuilding Vessels



In
January and March 2013, we took delivery of our sixth and seventh vessels under our Newbuilding program, STI
SapphireandSTI Emerald, respectively. These vessels were partially financed by drawing down $34.4 million from
our 2011 Credit Facility. As of the date of this report, there is $49.9 million outstanding under this facility and $80.6
million available for borrowing which can be used to finance up to 50% of future vessel acquisitions.



Time chartered-in vessels



In January 2013, we
agreed to time charter-in and took delivery of a 2007 built MR ice-class 1B product tanker on a one year time charter-in agreement
at $14,000 per day. The agreement also contains an option for us to extend the charter by one year at $15,000 per day.



In January 2013,
we took delivery of a 2013 built MR product tanker. This vessel is a sister ship of our newbuilding vessels from HMD. The
vessel will be chartered-in for three years at $15,750 per day in year one, $16,250 per day in year two and $16,750 per
day in year three. The agreement includes two consecutive options for us to extend the charter for up to two consecutive one
year periods at $17,500 per day and $18,000 per day.



In January 2013, we
took delivery of a 2007 built MR ice-class 1B product tanker on a one year time charter-in agreement at $13,500 per day. The agreement
includes an option for us to extend the charter for an additional year at $14,500 per day.



In January 2013, we
took delivery of a 2003 built LR1product tanker on a two year time charter-in agreement at $11,250 per day with a 50% profit sharing
provision whereby we split any of the vessel's profits above $11,250 per day with the vessel owner. The agreement includes an option
for us to extend the charter for an additional year at $12,500 per day with a 50% profit sharing provision.



In January 2013,
we took delivery of a 2012 built LR2 product tanker on a six month time charter-in agreement at $14,750 per day. We have
options to extend the charter for three consecutive six month periods at $15,000 per day, $15,250 per day, and $15,500 per
day respectively.



In January 2013,
we took delivery of a 2008 built LR2 product tanker on a six month time charter-in agreement at $16,000 per day. We have
options to extend the charter for three consecutive six month periods at $16,250 per day, $16,500 per day, and $16,750 per
day respectively.



In March 2013, we took
delivery of a 2013 built MR product tanker on a two year time charter-in agreement at $ 14,300 per day. We have an option to extend
the charter for an additional year at $15,700 per day.



In March 2013, we
agreed to time charter-in a 2010 built LR2 product tanker and a 2011 built LR2 product tanker, each on a one year time
charter-in agreements at $16,125 per day. We expect to take delivery of these two vessels in April 2013.



In
March 2013, we agreed to time charter-in 2004 built ice class 1B Handymax product tanker for one year at $12,700 per day. We have
an option to extend the charter for an additional year at $14,000 per day. This vessel is expected to be delivered by the middle
of April 2013.





F-41







Scorpio Tankers Inc. and Subsidiaries



Notes to the consolidated financial statements



Newbuilding vessels



In January 2013,
we reached an agreement with HMD for the construction of two MR product tankers for $32.5 million each. These vessels will be delivered
in May and June 2014.



In February 2013, we
exercised options with HMD for the construction of four MR product tankers for approximately $33.0 million each and two Handymax
ice class-1A product tankers for $31.25 million each. Two of the MR’s will deliver in the second quarter of 2014 with the
third and fourth MR’s to be delivered in the third and fourth quarter of 2014, respectively. The two Handymax vessels will
be delivered in the second quarter of 2014.



In February 2013,
we exercised options with HMD for the construction of four Handymax, ice class 1A product tankers for $31.3 million each. These
vessels will be delivered in the third quarter of 2014.



In February 2013, we
reached an agreement with SPP for the construction of four MR product tankers for $32.5 million each. These vessels will be
delivered in the third and fourth quarters of 2014.



In March 2013, we
reached an agreement with Hyundai Samho Heavy Industries Co. Ltd., or HSHI for the construction of six additional 114,000
dwt LR2 product tankers for approximately $50.5 million each. These vessels are expected to be delivered to us in the third
and fourth quarter of 2014.



In
March 2013, we reached an agreement withand Daewoo Shipbuilding & Marine Engineering
Co., Ltd or DSME for the construction of two 114,000 dwt LR2 product tankers for approximately $50.0 million each. These vessels
are expected to be delivered to us in the fourth quarter of 2014.



As of the
date of this report, we have a total of 33 newbuilding product tanker orders with HMD, SPP, HSHI and DSME which include 19
MR, six Handymax ice class-1A vessels and eight LR2. One of the newbuildings is expected to be delivered to us by April 2013
and the remaining 32 within 2014. We also have fixed-price options to construct additional newbuilding product tankers at
these yards.



We made $152.5
million of installment payments during the first quarter of 2013, which includes $44.2 million in aggregate for the delivery
installment payments on STI Sapphire in January 2013 and STI Emerald in March 2013. Our commitments at the date
of this report under all newbuilding vessel agreements, including the above mentioned vessels are as follows*:



| | Q2 2013 |  |  | $ | 41.6    |  |  |  | million | 
| | ------- |  |  | - | ------- |  |  |  | ------- | 
| | Q3 2013 |  |  |   | 114.3   |  |  |  | million | 
| | Q4 2013 |  |  |   | 74.1    |  |  |  | million | 
| | Q1 2014 |  |  |   | 77.6    |  |  |  | million | 
| | Q2 2014 |  |  |   | 302.0   |  |  |  | million | 
| | Q3 2014 |  |  |   | 241.0   |  |  |  | million | 
| | Q4 2014 |  |  |   | 250.9   |  |  |  | million | 
| | Total   |  |  | $ | 1,101.5 |  |  |  | million | 



*These are estimates only and are subject
to change as construction progresses.





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SCORPIO TANKERS
INC.