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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, 2010                           
|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 OF1934    
|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.            
|                                                                                             |  | Name of each exchange   
|Title of each class                                                                          |  |                          | 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, 2010, there were 24,879,059 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.

(1)

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|                                                                                                                                                                                                                                                                                                                                                                                           
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Yes o No x                                                                                                                                                                                                                                                                                                                                                                                 
|                                                                                                                                                                                                                                                                                                                                                                                           
|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 o                                                                                                                                                                                                                                                                                                                                                                       
|Non-accelerated
 filer x                                                                                                                                                                                                                                                                                                                                                                   
|                                                                                                                                                                                                                                                                                                                                                                                           
|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                                                                                                                                                                                                                                                                                                                                                                                 

(2)

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SCORPIO
TANKERS INC.
INDEX TO REPORT ON FORM 20-F

|                                                           |  |                                                                               |  |   
|---------------------------------------------------------- |  | ----------------------------------------------------------------------------- |  | --
|                                                           |  | Page                                                                         
|                                                          
|Cautionary Statement Regarding
 Forward-Looking Statements |  |                                                                              
|PART I.                                                    |  |                                                                               |  |   
|                                                           |  |                                                                               |  |   
|ITEM 1.                                                    |  | IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS                         |  | 2 
|ITEM 2.                                                    |  | OFFER STATISTICS AND EXPECTED TIMETABLE                                       |  | 2 
|ITEM 3.                                                    |  | KEY INFORMATION                                                               |  | 2 
|ITEM 4.                                                    |  | INFORMATION ON THE COMPANY                                                    |  | 18
|ITEM 4A.                                                   |  | UNRESOLVED STAFF COMMENTS                                                     |  | 33
|ITEM 5.                                                    |  | OPERATING AND FINANCIAL REVIEW AND PROSPECTS                                  |  | 33
|ITEM 6.                                                    |  | DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES                                    |  | 53
|ITEM 7.                                                    |  | MAJOR SHAREHOLDERS AND CERTAIN RELATIONSHIPS AND RELATED PARTY
 TRANSACTIONS  |  | 57
|ITEM 8.                                                    |  | FINANCIAL INFORMATION                                                         |  | 62
|ITEM 9.                                                    |  | THE OFFER AND LISTING                                                         |  | 63
|ITEM 10.                                                   |  | ADDITIONAL INFORMATION                                                        |  | 63
|ITEM 11.                                                   |  | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK                    |  | 70
|ITEM 12.                                                   |  | DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES                        |  | 71
|                                                           |  |                                                                               |  |   
|PART II.                                                   |  |                                                                               |  |   
|                                                           |  |                                                                               |  |   
|ITEM 13.                                                   |  | DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES                               |  | 72
|ITEM 14.                                                   |  | MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF
 PROCEEDS |  | 72
|ITEM 15.                                                   |  | CONTROLS AND PROCEDURES                                                       |  | 72
|ITEM 16A.                                                  |  | AUDIT COMMITTEE FINANCIAL EXPERT                                              |  | 73
|ITEM 16B.                                                  |  | CODE OF ETHICS                                                                |  | 73
|ITEM 16C.                                                  |  | PRINCIPAL ACCOUNTANT FEES AND SERVICES                                        |  | 73
|ITEM 16D.                                                  |  | EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES                    |  | 73
|ITEM 16E                                                   |  | PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED
 PURCHASERS       |  | 73
|ITEM 16F.                                                  |  | CHANGE IN REGISTRANTS CERTIFYING ACCOUNTANT                                  |  | 74
|ITEM 16G.                                                  |  | CORPORATE GOVERNANCE                                                          |  | 74
|                                                           |  |                                                                               |  |   
|PART III.                                                  |  |                                                                               |  |   
|                                                           |  |                                                                               |  |   
|ITEM 17.                                                   |  | FINANCIAL STATEMENTS                                                          |  | 75
|ITEM 18.                                                   |  | FINANCIAL STATEMENTS                                                          |  | 75
|ITEM 19.                                                   |  | EXHIBITS                                                                      |  | 75
|SIGNATURES                                                 |  | 76                                                                           

1

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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. The
Company desires 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. Please see our Risk Factors in Item 3 of this report for a more
complete discussion of these and other risks and uncertainties.

In this annual report, we, us, our, and the Company all refer
to Scorpio Tankers Inc.

ITEM 1. IDENTITY
OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS

Not applicable.

ITEM 2. OFFER
STATISTICS AND EXPECTED TIMETABLE

Not applicable.

ITEM 3. KEY
INFORMATION

A.   Selected
Financial Data

The
following table sets forth our selected consolidated financial data and other
operating data. The selected financial data in the tables as of December 31,
2010 and 2009 and for each of the three years in the period ended December 31,
2010 are derived from our audited consolidated financial statements, which have
been presented herein, and which have been prepared in accordance with
International Financial Reporting Standards (IFRS) as issued by the
International Accounting Standards Board (IASB). This data should be read in
conjunction with the consolidated financial statements and the notes thereto
included in ITEM 18. Financial Statements in this annual report and ITEM 5.
Operating and Financial Review and Prospects.

The
selected financial data as of December 31, 2008 and 2007 and for the period
ended December 31, 2007 is derived from our audited consolidated financial
statements, which have been prepared in accordance with IFRS as issued by the
IASB, and which are not presented herein. The selected financial data for 2006
has not been derived from audited financial statements as consolidated
financial statements of the Company for 2006 do not exist. Rather, the selected financial data for 2006 has been
prepared by aggregating the historical stand alone IFRS financial information
of each of the three subsidiaries which were transferred to us on October 1,
2009.

2

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Prior to
October 1, 2009, our historical consolidated financial statements were prepared
on a carve-out basis from the financial statements of our parent company,
Liberty Holding Company Ltd., or 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 Scorpio Group
entities, which are parties related to us, consisting of 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, Liberty, which provides us with administrative
services; and 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 the historical consolidated financial statements
included elsewhere in this annual report.

|                                                           |  |                                 |             |      |   |             |   |      |             |      |   |             |   |   |             |  
|---------------------------------------------------------- |  | ------------------------------- | ----------- | ---- | - | ----------- | - | ---- | ----------- | ---- | - | ----------- | - | - | ----------- | -
|                                                           |  | For the year ended December 31, |            
|                                                           |  |                                 |            
|                                                           |  | 2010                            |             | 2009 |   | 2008        |   | 2007 |             | 2006 |  
|                                                           |  |                                 |             |      |   |             |   |      |             |      |  
|Consolidated Income Statement Data                         |  |                                 |             |      |   |             |   |      |             |      |   |             |   |   |             |  
|Revenue:                                                   |  |                                 |             |      |   |             |   |      |             |      |   |             |   |   |             |  
|Vessel revenue                                             |  | $                               | 38,797,913  |      | $ | 27,619,041  |   | $    | 39,274,196  |      | $ | 30,317,138  |   | $ | 35,751,632  |  
|Operating Expenses:                                        |  |                                 |             |      |   |             |   |      |             |      |   |             |   |   |             |  
|Vessel operating costs                                     |  |                                 | (18,440,492 | )    |   | (8,562,118  | ) |      | (8,623,318  | )    |   | (7,600,509  | ) |   | (7,061,514  | )
|Voyage expenses                                            |  |                                 | (2,542,298  | )    |   |            |   |      |            |      |   |            |   |   |            |  
|Charter hire                                               |  |                                 | (275,532    | )    |   | (3,072,916  | ) |      | (6,722,334  | )    |   |            |   |   |            |  
|Impairment (1)                                             |  |                                 |            |      |   | (4,511,877  | ) |      |            |      |   |            |   |   |            |  
|Depreciation                                               |  |                                 | (10,178,908 | )    |   | (6,834,742  | ) |      | (6,984,444  | )    |   | (6,482,484  | ) |   | (7,058,093  | )
|General and administrative expenses                        |  |                                 | (6,200,094  | )    |   | (416,908    | ) |      | (600,361    | )    |   | (590,772    | ) |   | (376,338    | )
|                                                           |  |                                 |             |      |   |             |   |      |             |      |   |             |   |   |             |  
|Total operating expenses                                   |  |                                 | (37,637,324 | )    |   | (23,398,561 | ) |      | (22,930,457 | )    |   | (14,673,765 | ) |   | (14,495,945 | )
|                                                           |  |                                 |             |      |   |             |   |      |             |      |   |             |   |   |             |  
|Operating Income                                           |  |                                 | 1,160,589   |      |   | 4,220,480   |   |      | 16,343,739  |      |   | 15,643,373  |   |   | 21,255,687  |  
|Other expense and income, net                              |  |                                 |             |      |   |             |   |      |             |      |   |             |   |   |             |  
|Interest expensebank loan                                 |  |                                 | (3,230,895  | )    |   | (699,115    | ) |      | (1,710,907  | )    |   | (1,953,344  | ) |   | (3,041,684  | )
|Realized gain/(loss) on derivative financial instruments   |  |                                 | (279,560    | )    |   | (808,085    | ) |      | (405,691    | )    |   | (523,694    | ) |   | 133,647     |  
|Unrealized gain/(loss) on derivative financial instruments |  |                                 |            |      |   | 956,120     |   |      | (2,057,957  | )    |   | (1,245,472  | ) |   | 682,572     |  
|Interest income                                            |  |                                 | 36,534      |      |   | 4,929       |   |      | 35,492      |      |   | 142,233     |   |   | 152,066     |  
|Other expense, net                                         |  |                                 | (508,766    | )    |   | (256,292    | ) |      | (18,752     | )    |   | (9,304      | ) |   | (24,034     | )
|                                                           |  |                                 |             |      |   |             |   |      |             |      |   |             |   |   |             |  
|Total Other Income and Expense                             |  |                                 | (3,982,687  | )    |   | (802,443    | ) |      | (4,157,815  | )    |   | (3,589,581  | ) |   | (2,097,433  | )
|                                                           |  |                                 |             |      |   |             |   |      |             |      |   |             |   |   |             |  
|Net (loss)/income                                          |  | $                               | (2,822,098  | )    | $ | 3,418,037   |   | $    | 12,185,924  |      | $ | 12,053,792  |   | $ | 19,158,254  |  
|                                                           |  |                                 |             |      |   |             |   |      |             |      |   |             |   |   |             |  
|(Loss)/earnings per common share: (2)                      |  |                                 |             |      |   |             |   |      |             |      |   |             |   |   |             |  
|Basic (loss)/earnings per share                            |  | $                               | (0.18       | )    | $ | 0.61        |   | $    | 2.18        |      | $ | 2.16        |   | $ | 3.43        |  
|Diluted (loss)/earnings per share                          |  | $                               | (0.18       | )    | $ | 0.61        |   | $    | 2.18        |      | $ | 2.16        |   | $ | 3.43        |  
|Basic weighted average shares outstanding                  |  |                                 | 15,600,813  |      |   | 5,589,147   |   |      | 5,589,147   |      |   | 5,589,147   |   |   | 5,589,147   |  
|Diluted weighted average shares outstanding                |  |                                 | 15,600,813  |      |   | 5,589,147   |   |      | 5,589,147   |      |   | 5,589,147   |   |   | 5,589,147   |  
|                                                           |  |                                 |             |      |   |             |   |      |             |      |   |             |   |   |             |  
|Dividends per share                                        |  | $                               |            |      | $ | 1.55        |   | $    | 3.36        |      | $ | 1.27        |   | $ | 2.01        |  

3

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|                          |  |                    |             |      |   |             |  |      |             |      |   |             |  |   |             | 
|------------------------- |  | ------------------ | ----------- | ---- | - | ----------- |  | ---- | ----------- | ---- | - | ----------- |  | - | ----------- | 
|                          |  | As of December 31, |            
|                          |  |                    |            
|                          |  | 2010               |             | 2009 |   | 2008        |  | 2007 |             | 2006 |  
|                          |  |                    |             |      |   |             |  |      |             |      |  
|Balance
 Sheet Data       |  |                    |             |      |   |             |  |      |             |      |   |             |  |   |             | 
|Cash and cash equivalents |  | $                  | 68,186,902  |      | $ | 444,496     |  | $    | 3,607,635   |      | $ | 1,153,743   |  | $ | 6,016,470   | 
|Vessels and drydock       |  | $                  | 333,425,386 |      | $ | 99,594,267  |  | $    | 109,260,102 |      | $ | 116,244,546 |  | $ | 122,727,030 | 
|Total assets              |  | $                  | 412,268,440 |      | $ | 104,423,386 |  | $    | 117,111,827 |      | $ | 122,555,022 |  | $ | 137,728,758 | 
|Bank loan                 |  | $                  | 15,826,314  |      | $ | 36,200,000  |  | $    | 43,400,000  |      | $ | 47,000,000  |  | $ | 50,600,000  | 
|Shareholder payable(3)    |  | $                  |            |      | $ |            |  | $    | 22,028,323  |      | $ | 19,433,097  |  | $ | 27,612,576  | 
|Related party payable (3) |  | $                  |            |      | $ |            |  | $    | 27,406,408  |      | $ | 27,406,408  |  | $ | 34,338,356  | 
|Shareholders equity      |  | $                  | 264,783,182 |      | $ | 61,328,542  |  | $    | 20,299,166  |      | $ | 26,897,242  |  | $ | 21,936,949  | 

|                                                 |  |                    |              |      |   |             |   |      |             |      |   |             |   |   |             |  
|------------------------------------------------ |  | ------------------ | ------------ | ---- | - | ----------- | - | ---- | ----------- | ---- | - | ----------- | - | - | ----------- | -
|                                                 |  | For the Year Ended |             
|                                                 |  |                    |             
|                                                 |  | December 31,       |             
|                                                 |  |                    |             
|                                                 |  | 2010               |              | 2009 |   | 2008        |   | 2007 |             | 2006 |  
|                                                 |  |                    |              |      |   |             |   |      |             |      |  
|Condensed
 Cash Flows                            |  |                    |              |      |   |             |   |      |             |      |   |             |   |   |             |  
|Cash inflow from operating
 activities           |  | $                  | 4,906,478    |      | $ | 9,305,851   |   | $    | 24,837,892  |      | $ | 5,830,773   |   | $ | 13,226,007  |  
|Cash outflow from
 investing activities          |  |                    | (245,594,809 | )    |   |            |   |      |            |      |   |            |   |   |            |  
|Cash inflow/(outflow) from
 financing activities |  |                    | 308,430,737  |      |   | (12,468,990 | ) |      | (22,384,000 | )    |   | (10,693,500 | ) |   | (14,850,000 | )

| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (1) | In
 the year ended December 31, 2009, we recorded an impairment of two vessels
 for $4.5 million, see ITEM 5. Operating and Financial Review and Prospects.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| | (2) | Basic
 earnings per share is calculated by dividing the net income attributable to
 equity holders of the common shares by the weighted average number of common
 shares outstanding assuming that the transfer of the vessel owning
 subsidiaries was effective during the period. In addition, the stock split described
 in Note 13 in the consolidated financial statements as of and for the year
 ended December 31, 2010 has been given retroactive effect for all periods
 presented herein. Diluted earnings per share are calculated by adjusting the
 net income attributable to equity holders of the common shares 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.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   

4

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|                                            |  |                                 |         |      |   |           |  |      |        |      |   |        |  |   |         | 
|------------------------------------------- |  | ------------------------------- | ------- | ---- | - | --------- |  | ---- | ------ | ---- | - | ------ |  | - | ------- | 
|                                            |  | For the year ended December 31, |        
|                                            |  |                                 |        
|                                            |  | 2010                            |         | 2009 |   | 2008      |  | 2007 |        | 2006 |  
|                                            |  |                                 |         |      |   |           |  |      |        |      |  
|Average Daily Results                       |  |                                 |         |      |   |           |  |      |        |      |   |        |  |   |         | 
|TCE per Revenue day(1)                      |  | $                               | 16,213  |      | $ | 23,423    |  | $    | 29,889 |      | $ | 27,687 |  | $ | 33,165  | 
|Vessel operating costs per day(2)           |  |                                 | 8,166   |      |   | 7,819     |  |      | 7,875  |      |   | 6,941  |  |   | 6,449   | 
|                                            |  |                                 |         |      |   |           |  |      |        |      |   |        |  |   |         | 
|Aframax/LR2                                 |  |                                 |         |      |   |           |  |      |        |      |   |        |  |   |         | 
|TCE per Revenue day - pool(1)               |  |                                 | 12,460  |      |   |          |  |      |       |      |   |       |  |   |        | 
|Vessel operating costs per day(2)           |  |                                 | 8,293   |      |   |          |  |      |       |      |   |       |  |   |        | 
|Panamax/LR1                                 |  |                                 |         |      |   |           |  |      |        |      |   |        |  |   |         | 
|TCE per Revenue day - pool(1)               |  |                                 | 15,213  |      |   | 21,425    |  |      | 36,049 |      |   | 29,848 |  |   | 33,165  | 
|TCE per Revenue day - spot(1)               |  |                                 | 2,839   |      |   |          |  |      |       |      |   |       |  |   |        | 
|TCE per Revenue day - time charters (1)     |  |                                 | 22,729  |      |   | 24,825    |  |      | 24,992 |      |   | 24,382 |  |   |        | 
|Vessel operating costs per day(2)           |  |                                 | 8,189   |      |   | 7,819     |  |      | 7,875  |      |   | 6,941  |  |   | 6,449   | 
|Handymax                                    |  |                                 |         |      |   |           |  |      |        |      |   |        |  |   |         | 
|TCE per Revenue day - pool(1)               |  |                                 | 9,965   |      |   |          |  |      |       |      |   |       |  |   |        | 
|TCE per Revenue day - spot(1)               |  |                                 | 8,077   |      |   |          |  |      |       |      |   |       |  |   |        | 
|Vessel operating costs per day(2)           |  |                                 | 8,107   |      |   |          |  |      |       |      |   |       |  |   |        | 
|                                            |  |                                 |         |      |   |           |  |      |        |      |   |        |  |   |         | 
|Fleet data(3)                               |  |                                 |         |      |   |           |  |      |        |      |   |        |  |   |         | 
|Average number of owned vessels             |  |                                 | 6.19    |      |   | 3.00      |  |      | 3.00   |      |   | 3.00   |  |   | 3.00    | 
|Average number of time chartered-in vessels |  |                                 | 0.05    |      |   | 0.33      |  |      | 0.59   |      |   |       |  |   |        | 
|Drydock                                     |  |                                 |         |      |   |           |  |      |        |      |   |        |  |   |         | 
|Expenditures for drydock                    |  | $                               | 886,050 |      | $ | 1,680,784 |  | $    |       |      | $ |       |  | $ | 805,845 | 

| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (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 descriptions
 of TCE revenue, revenue days and voyage expenses.
|
| | (2) | Vessel
 operating costs per day represent Vessel operating costs, as 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                              

Some
of 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.

5

---



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. The recent global financial crisis 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 tanker 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:

| |   |                                                                                                 
| | - | ------------------------------------------------------------------------------------------------
| |  | demand
 for oil and oil products;                                                               
| |   |                                                                                                 
| |  | supply
 of oil and oil products;                                                                
| |   |                                                                                                 
| |  | regional
 availability of refining capacity;                                                    
| |   |                                                                                                 
| |  | global
 and regional economic and political conditions;                                         
| |   |                                                                                                 
| |  | 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;                                     
| |   |                                                                                                 
| |  | currency
 exchange rates;                                                                       
| |   |                                                                                                 
| |  | weather;                                                                                        
| |   |                                                                                                 
| |  | 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:

| |   |                                                    
| | - | ---------------------------------------------------
| |  | the
 number of newbuilding deliveries;             
| |   |                                                    
| |  | the
 scrapping rate of older vessels;              
| |   |                                                    
| |  | conversion
 of tankers to other uses;              
| |   |                                                    
| |  | the
 price of steel;                               
| |   |                                                    
| |  | the
 number of vessels that are out of service; and
| |   |                                                    
| |  | environmental
 concerns and regulations.           

Historically,
the tanker markets have been volatile as a result of the many conditions and
factors that can affect the price, supply and demand for tanker capacity. The
recent global economic crisis may further reduce demand for transportation of
oil over longer distances and supply of tankers to carry that oil, which may
materially affect our revenues, profitability and cash flows. One of our ten
owned vessels operates on a long-term time charter, while the remaining nine
vessels operate in the Scorpio Panamax Tanker Pool and Scorpio Handymax Tanker
Pool, which are spot-market oriented. One of our four time chartered-in vessels
operates in the Scorpio Panamax Tanker Pool and the remaining three operate in
the Scorpio Handymax Tanker Pool. Where we plan to employ a vessel in the spot
charter market, we intend to generally place such vessel in a tanker pool
managed by our commercial manager that pertains to that vessels size class. If
time charter or spot charter rates decline, we may be unable to achieve a level
of charterhire sufficient for us to operate our vessels profitably.

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

We
currently operate a fleet of ten owned vessels and four time chartered-in
vessels. Of those, 13 are employed in spot market-oriented tanker pools,
exposing us to fluctuations in spot market charter rates.

We
may employ additional vessels that we may acquire in the future in the spot
charter market. Where we plan to employ a vessel in the spot charter market, we
intend to generally place such vessel in a tanker pool managed by our
commercial manager that pertains to that vessels size class. Although spot
chartering is common in the tanker industry, 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 Scorpio Group pools, depends upon, 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 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
to 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.

6

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Our
ability to renew the charters on our vessels on the expiration or termination
of our current charters, or on vessels that we may acquire in the future, the
charter rates payable under any replacement charters and vessel values will
depend upon, among other things, economic conditions in the sectors in which
our vessels operate at that time, changes in the supply and demand for vessel
capacity and changes in the supply and demand for the seaborne transportation
of energy resources.

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

The
market supply of tankers is affected by a number of factors such as demand for
energy resources, oil, and petroleum products, as well as strong overall
economic growth in parts of the world economy including Asia. If the capacity
of new ships delivered exceeds the capacity of tankers being scrapped and lost,
tanker capacity will increase. In addition, according to Drewrys, as of the
end of March 2011, the newbuilding order book which extends to 2014 equaled
approximately 27.4% 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.

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

Acts
of piracy have historically affected ocean-going vessels trading in regions of
the world such as the South China Sea and in the Gulf of Aden off the coast of
Somalia extending throughout the Indian Ocean. Throughout 2008, 2009, 2010 and
continuing into 2011, the frequency of piracy incidents against commercial
shipping vessels has increased significantly, particularly in the Gulf of Aden
off the coast of Somalia. For example, in February 2011, the VLCC Irene SL, a
tanker vessel not affiliated with us, was captured by pirates in the Indian
Ocean while carrying crude oil estimated to be worth $200 million. If these
pirate attacks result in regions in which our vessels are deployed being
characterized as war risk zones by insurers, as the Gulf of Aden has been
since May 2008, premiums payable for insurance coverage could increase
significantly and such coverage may be more difficult to obtain. In addition,
crew costs, including costs in connection with employing 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, any of these events 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.

If the contraction of the global credit markets and the
resulting volatility in the financial markets continues or worsens, this could
have a material adverse impact on our results of operations, financial
condition and cash flows, and results of operation.

Since
2008,a number of major financial
institutions have experienced serious financial difficulties and, in some
cases, have entered into bankruptcy proceedings or are in regulatory
enforcement actions. These difficulties have resulted, in part, from declining
markets for assets held by such institutions, particularly the reduction in the
value of their mortgage and asset-backed securities portfolios. These
difficulties have been compounded by a general decline in the willingness by
banks and other financial institutions to extend credit, particularly in the
shipping industry due to the historically low asset values of ships. Although
banks and financial institutions have since resumed extending credit, its
availability remains significantly below its peak. 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. If we are unable
to obtain additional credit or draw down upon borrowing capacity, it may
negatively impact our ability to fund current and future obligations. These
outcomes could have a material adverse impact on our business, results of
operations, financial condition, ability to grow and cash flows, and could
cause the market price of our common shares to decline.

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

Fuel,
or bunkers, is a significant, if not the largest, expense in our shipping
operations for our vessels employed on the spot market and can have a
significant impact on pool earnings. With respect to our vessels employed on time
charter, the charterer is generally responsible for the cost of fuel, however
such cost may affect the charter rates we are able to negotiate for our
vessels. 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 and competitiveness of our business versus other forms of
transportation, such as truck or rail.

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 International Maritime Organization, or IMO, International
Convention on Civil Liability for Oil Pollution Damage of 1969 (as from time to
time amended and generally referred to as CLC), the IMO International
Convention for the Prevention of Pollution from Ships of 1973 (as from time to
time amended and generally referred to as MARPOL), the IMO International
Convention for the Safety of Life at Sea of 1974 (as from time to time amended
and generally referred to as SOLAS), the IMO International Convention on Load
Lines of 1966 (as from time to time amended) and the U.S. Maritime
Transportation Security Act of 2002. 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.

7

---



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 in U.S. waters,
including the 200-nautical mile exclusive economic zone around the United
States. An oil spill could also 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, 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.

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. The ISM Code requires shipowners, ship managers
and bareboat charterers to develop and maintain an extensive Safety Management
System that includes 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 or our existing
insurance coverage may be invalidated or decreased for our affected vessels.
Such failure may also result in a denial of access to, or detention in, certain
ports.

The market values of our vessels may decrease, which 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 shipping companies and other modes of transportation,
types, sizes and ages of vessels, applicable governmental regulations and the
cost of newbuildings. If the market value of our fleet declines, we may not be
able to obtain other financing or incur debt on terms that are acceptable to
us. 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, which
requires that the fair market value of the vessels pledged as collateral never
be less than 150% of the aggregate principal amount outstanding for the 2010
Credit Facility and 140% of the aggregate principal amount outstanding for the
STI Spirit Credit Facility. However a decrease in these values could cause us
to breach certain covenants that are contained in our credit facility and in
future financing agreements that we may enter into from time to time. If the
recoverable amounts of our vessels further decline and we do breach such
covenants and we are unable to remedy the relevant breach, our lenders could
accelerate our debt and foreclose on vessels in our fleet. If we sell any
vessel at any time when vessel prices have fallen and before we have recorded
an impairment adjustment to our financial statements, the sale may be at less
than the vessels carrying amount on our financial statements, resulting in a
loss and a reduction in earnings.

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.

Our
vessels and their cargoes will be at risk of being damaged or lost because of
events such as marine disasters, bad weather, business interruptions caused by
mechanical failures, grounding, fire, explosions and collisions, human error,
war, terrorism, piracy and other circumstances or events. For example, our
vessel Senatore suffered damage
to one of its ballast tanks in April 2010 which required a repair and resulted
in offhire days. 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,
environmental damage, higher insurance rates, damage to our customer relationships,
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.

8

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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 are at a risk of damage or loss because of
events such as mechanical failure, collision, human error, war, terrorism,
piracy, cargo loss and bad weather. 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. Terrorist attacks such as the
attacks on the United States on September 11, 2001, the bombings in Spain
on March 11, 2004 and in London on July 7, 2005 and the continuing
response of the international community to these attacks, as well as the
current political instability in the Middle East and Africa, continue to
contribute to 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.

In
the past, political instability has also resulted in attacks on vessels, such
as the attack on the M/T Limburgin
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.

From
time to time on charterers instructions, our vessels may call on ports located
in countries subject to sanctions and embargoes imposed by the United States
government and countries identified by the U.S. government as state sponsors of
terrorism. The U.S. 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 (CISADA), which expanded the scope of the former Iran
Sanctions Act. Among other things, CISADA expands the application of the
prohibitions to non-U.S. companies, such as our company, 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. Although we believe that we are 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
or other penalties and could result in some investors deciding, or being
required, to divest their interest, or not to invest, in our company.
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. 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.

9

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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 for title or seize our vessels. 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 once their initial charters expire
and the resale value of our vessels could significantly decrease. As a result,
our available cash could be adversely affected.

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

We have a limited history of operations on which investors
may assess our performance.

We
were formed on July 1, 2009, and our initial three vessel-owning
subsidiaries were transferred to us on October 1, 2009. Since our initial
public offering in April 2010, we have acquired seven additional vessels and
chartered-in four vessels. As such, we have been operating over two-thirds of
our vessels for approximately 12 months or less. We have a limited performance
record and operating history, and, therefore, limited historical financial
information, upon which you can evaluate our operating performance, ability to
implement and achieve our business strategy or ability to pay dividends in the
future. We cannot assure you that we will be successful
in implementing our business strategy. As a young company, we will face certain
operational challenges not faced by companies with a longer operating history.

10

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We have a limited history operating as a publicly traded
entity and will continue to incur increased costs in future years as a result
of being a publicly traded corporation.

We
have only operated as a public company since April 2010. As a public company,
we will continue to incur significant legal, accounting and other expenses that
we did not incur as a private company. 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.

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.
Section 404 of the Sarbanes-Oxley Act 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.

If we do not identify suitable tankers for acquisition or successfully
integrate any acquired tankers, we may not be able to grow or to effectively
manage our growth.

One
of our principal strategies is to continue to grow by expanding our operations
and adding to our fleet. Our future growth will 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; 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 available cash. If we are unable to
execute the points noted above, 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 such growth plans.

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Delays in deliveries of additional vessels, our decision to
cancel an order for purchase of a vessel or our inability to otherwise complete
the acquisitions of additional vessels for our fleet, could harm our operating
results.

We
expect to purchase additional vessels from time to time. The delivery of such
additional vessels could be delayed, not completed or cancelled, which would
delay or eliminate our expected receipt of revenues from the employment of such
vessels. The seller could fail to deliver vessels to us as agreed, or we could
cancel a purchase contract because the 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.

We will not be able to take advantage of favorable opportunities
in the current spot market with respect to vessels employed on medium- to
long-term time charters.

As
of the date of this annual report, we employed one tanker under fixed rate
long-term time charter agreement with a remaining duration of approximately 8.5
months. Vessels committed to medium- and long-term charters may not be
available for spot charters during periods of increasing charterhire rates,
when spot charters might be more profitable. Where we plan to employ a vessel
in the spot charter market, we intend to generally place such vessel in a
tanker pool managed by our commercial manager that pertains to that vessels
size class.

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.

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

Under
the charter agreements for one of our vessels, the charterer is responsible for
voyage costs and we are responsible for the vessel operating costs. Under the
tanker pool agreements for our remaining nine vessels, the pool is responsible
for the voyage expenses and we are responsible for vessel costs. 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.
Some of these costs, primarily relating to insurance and enhanced security
measures implemented after September 11, 2001, have been increasing. 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 second-hand vessels tend to fluctuate with changes in charter
rates and the cost of newbuildings. For the year ended December 31, 2009,
charter rates in the oil and petroleum products charter market declined
significantly and Panamax vessel values also declined, both as a result of a
slowdown in the availability of global credit and the significant deterioration
in charter rates. Due to these indicators of potential impairment, in the year
ended December 31, 2009, we evaluated the recoverable amount of our
vessels, and we recognized a total impairment loss of $4.5 million for two of
our vessels. Although, we did not record an impairment in 2010, we cannot
assure you that there will be no impairments in the 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.

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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.

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 from 2026
to 2033, 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 debt
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.

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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.

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.

Any dividends paid by us may not qualify for
preferential rates of United States federal income taxation in the hands of
United States non-corporate shareholders.

We expect
that any dividends paid on our common shares to a United States shareholder who
is an individual, trust or estate will generally be treated as qualified
dividend income that is taxable at preferential United States federal income
tax rates (through 2012). Our dividends will be so treated provided that
(1) our common shares are readily tradable on an established securities
market in the United States (such as the New York Stock Exchange, on which our
common shares are traded); (2) we are not a PFIC for the taxable year
during which the dividend is paid or the immediately preceding taxable year
(which we believe we have not been, are not and do not anticipate being in the
future); (3) the recipient of the dividend 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 recipient of the
dividend is not under an obligation to make related payments with respect to
positions in substantially similar or related property.

There is no
assurance that any dividends paid on our common shares will be eligible for
these preferential rates in the hands of a United States non-corporate
shareholder. For example, under current law, the preferential rate for
qualified dividend income is scheduled to expire on December 31, 2012. If
the preferential rate for such dividends is not extended, then any dividends
paid by us after December 31, 2012 will be treated as ordinary income. In
addition, legislation has been previously introduced in the United States
Congress which, if enacted in its present form, would preclude our dividends
from qualifying for such preferential rates prospectively from the date of
enactment. Finally, our dividends would not be qualified dividend income if
we are treated as a PFIC for the taxable year in which we pay the dividend or
the immediately preceding taxable year.

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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 $400,000 and $900,000, depending on
the size and condition of the vessel and the location of drydocking.

RISKS RELATED TO OUR RELATIONSHIP WITH
SCORPIO GROUP AND ITS AFFILIATES

We are dependent on our managers 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 April 1, 2011, our commercial
and technical managers provide commercial and technical management services to
approximately 75 and 18 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, are
involved in other business activities with members of the Scorpio Group, which
may result in their spending less time than is appropriate or necessary to
manage our business successfully. Based solely on the anticipated relative
sizes of our fleet and the fleet owned by members of the Scorpio Group over the
next twelve months, we estimate that Messrs. Lauro and Bugbee will spend
approximately 70-85% of their monthly business time on our business activities
and their remaining time on the business of members of the Scorpio Group.
However, the actual allocation of time could vary significantly from time to
time depending on various circumstances and needs of the businesses, such as
the relative levels of strategic activities of the businesses. This could have
a material adverse effect on our business, financial condition, results of
operations and cash flows.

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.

15

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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 various contracts, including charter agreements with our
customers, consisting of a long-term fixed-rate charter agreement and tanker
pool agreements for each of our vessels operating in the Scorpio Group pools,
and our credit facilities entered into in June 2010 and March 2011. 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 time charter agreements, on which we depend for a
majority of our revenues, could cause us to suffer losses or otherwise
adversely affect our business.

As of the
date of this annual report, we employed one tanker under a fixed rate long-term
time charter agreement with a remaining duration of approximately 8.5 months.
The ability and willingness of each of our counterparties to perform its
obligations under a time charter 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. Where we plan to employ a
vessel in the spot charter market, we intend to 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.

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.

As a result
of the September 11, 2001 attacks, the U.S. response to the attacks and
related concern regarding terrorism, insurers have increased premiums and
reduced or restricted coverage for losses caused by terrorist acts generally.
Accordingly, premiums payable for terrorist coverage have increased
substantially and the level of terrorist coverage has been significantly
reduced.

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.

16

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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 the credit facilities we entered into in June 2010 and March 2011
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 facility 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 facility, the lender 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 facility.

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 facility or if there is another default under
 our credit facility;
| |   |                                                                                                                                                                   
| |  | 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 facility
or future credit facilities which could affect our profitability, earnings and
cash flow.

Amounts
borrowed under our credit facility entered into in June 2010 bears interest at
an annual rate ranging from 3.0% to 3.5% above LIBOR, and amounts borrowed
under the credit facility entered into in March 2011 bears interest at an
annual rate of 2.75% above LIBOR. 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 facility 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 facility or future credit facilities, which in
turn, would have an adverse effect on our profitability, earnings and cash
flow.

17

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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 by Simon
Financial Limited, or Simon, the 100% owner of Liberty Holding Company Ltd., or
Liberty. On October 1, 2009, Simon transferred to Scorpio Tankers Inc.
three vessel owning and operating subsidiary companies. Prior to becoming a public
company, the operating subsidiaries were owned by Simon. 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. A subsidiary of
Liberty retained ownership of the 5,589,147 shares it owned before the
offering. Our principal executive offices are located at 9, Boulevard Charles
III, Monaco 98000. Our telephone number is +377-9798-5716. Our stock trades on
the New York Stock Exchange (NYSE) under the symbol STNG.

On April 9,
2010, using the proceeds of our initial public offering, we repaid in full the
outstanding balance of $38.9 million due under the credit facility entered into
by our subsidiaries Senatore Shipping Company Limited and Noemi Shipping
Company Limited with The Royal Bank of Scotland plc, as lender, in 2005, or the
2005 Credit Facility.

On April 19
and 22, 2010, we entered into agreements to purchase four double-hulled
Handymax tankers for an aggregate purchase price of $99.0 million. Three of the
ships, STI
Conqueror, STI Gladiator and STI Matador, were built at
the Shina Shipbuilding Co. Ltd. in South Korea: two ships in 2003 and one ship
in 2005. The fourth ship, STI Highlander, was built at the Hyundai
Mipo Dockyard in South Korea in 2007.

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 May 13,
2010, we entered into agreements to purchase two LR1 ice class 1A product
tankers (STI
Heritage and STI Harmony) each with an existing
short-term time charter contract. The two ships were built in 2008 and 2007,
respectively, at the Onomichi Dockyard in Japan. The aggregate purchase price
of $92.0 million included an estimated $2.3 million related to the value of
their existing time charter contracts. Both time charter contracts carried
rates of $25,500 per day per ship plus 50% profit sharing over the base rate
and expired in September 2010 for the vessel built in 2007 and November 2010
for the vessel built in 2008. The time charters, which were signed in 2007,
were with an affiliate of Scorpio Tankers Inc.

On June 9,
2010, we announced that we took
delivery of three products tanker vessels that we previously agreed to acquire,
STI Harmony, STI Heritage and STI Conqueror.

On July 9,
2010, we announced that we took delivery of STI Matador,and on August 3, 2010, we
announced that we took delivery of STI Gladiator and STI Highlander.

On
September 21, 2010, we entered into an agreement to purchase an LR2 Aframax
product tanker, STI Spirit, for a purchase price of $52.2 million. The ship
was built in 2008and is charter free. The agreement also includes two purchase
options with the seller. Each option grants the Company the right, but not the
obligation, to purchase a 2008 built LR1 ice class-1A product tanker
(approximately 63,600 dead weight tons) for a price of $45.0 million. Each
option can be exercised at any time until September 2011. These options have
not been exercised as of the date of this report.

On November
10, 2010, we announced that we took delivery of STI Spirit, the LR2 Aframax
product tanker (approximately 113,100 dead weight tons) that we previously
agreed to acquire.

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 approximately $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 686,250shares 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 December
12, 2010 the 2010 built LR1 product tanker, BW Zambesi (76,577 dwt), was delivered to
us on a time charter in agreement. The term of the agreement was for one year
from the date of delivery at a charterhire rate of $13,850 per day with an
option to extend for an additional year at a charterhire rate of $14,850 per
day. The vessel is currently operating in the Scorpio Panamax Tanker Pool.

18

---



On December
24, 2010, we agreed to charter in the Krisjanis Valdemars, a 2007 built Handymax
ice-class 1B product tanker (37,266 dwt) for 10 months at $12,000 per day. The
agreement also includes a profit and loss sharing provision whereby 50% of all
profits and losses (the difference between the vessels pool earnings and the
charter hire expense) will be shared with the owner of the vessel. The vessel
was delivered in February 2011.

On December
24, 2010, we agreed to charter in the Kraslava, a 2007 built Handymax ice-class
1B product tanker (37,258 dwt), for one year at $12,070 per day. The vessel was
delivered on January 26, 2011.

On December
30, 2010, we agreed to charter in the Histria Azure, a 2007 built Handymax product
tanker (40,394 dwt), for one year at $12,250 per day. The vessel was delivered
on February 6, 2011. The agreement includes an option for Scorpio Tankers to
extend for an additional year at $13,750 per day or $12,250 per day with a 50%
profit sharing agreement.

On March 9,
2011, we executed a credit facility with DVB Bank SE for a senior secured term
loan facility for $27.3 million, which partially finances the STI Spirit
which we acquired on November 10, 2010.

In
March 2011, we entered into an agreement pursuant to which an unaffiliated
third party has the option to purchase one of our Handymaxes. If the option is
exercised, we would realize a gain on the sale of approximately $5 million. The
buyer is required to notify us if it intends to exercise such option by the end
of May 2011.

On
April 5, 2011, we entered into a time charter agreement for a 2007 built
Handymax ice class 1B product tanker, the Kazdanga. This vessel will be chartered-in
for one year at $12,345 per day and is expected to be delivered in June 2011.
The agreement includes an option to extend the charter for an additional year
at $13,335 per day.

B.
Business Overview

We are
engaged in seaborne transportation of crude oil and refined petroleum products
in the international shipping markets. Our fleet as of December 31, 2010
consisted of ten wholly owned tankers (four LR1 tankers, four Handymax tankers,
one LR2 tanker and one post-Panamax tanker) and one time chartered-in LR1
tanker. Below is our fleet list as of the date of this annual report:

|   |                                    |  |            |      |     |  |            |  |            |    |  |  |                 |  |                   |        |            |  |              | 
|-- | ---------------------------------- |  | ---------- | ---- | --- |  | ---------- |  | ---------- | -- |  |  | --------------- |  | ----------------- | ------ | ---------- |  | ------------ | 
|   | Vessel Name                        |  | Year Built |      | DWT |  | Ice
 Class |  | Employment |    |  |  |                 | 
|   |                                    |  |            |      |     |  |            |  |            |    |  |  |                 | 
|   | Owned vessels                      |  |            |      |     |  |            |  |            |    |  |  |                 |  |                   |        |            |  |              | 
|1  | Noemi                              |  |            | 2004 |     |  | 72,515     |  |            |   |  |  | Time Charter(1) |  |                   |        |            |  |              | 
|2  | Senatore                           |  |            | 2004 |     |  | 72,514     |  |            |   |  |  | SPTP (2)        |  |                   |        |            |  |              | 
|3  | Venice                             |  |            | 2001 |     |  | 81,408     |  |            | 1C |  |  | SPTP (2)        |  |                   |        |            |  |              | 
|4  | STI
 Conqueror                     |  |            | 2005 |     |  | 40,158     |  |            | 1B |  |  | SHTP (3)        |  |                   |        |            |  |              | 
|5  | STI Harmony                        |  |            | 2007 |     |  | 73,919     |  |            | 1A |  |  | SPTP (2)        |  |                   |        |            |  |              | 
|6  | STI Heritage                       |  |            | 2008 |     |  | 73,919     |  |            | 1A |  |  | SPTP (2)        |  |                   |        |            |  |              | 
|7  | STI Matador                        |  |            | 2003 |     |  | 40,096     |  |            |   |  |  | SHTP (3)        |  |                   |        |            |  |              | 
|8  | STI
 Gladiator                     |  |            | 2003 |     |  | 40,083     |  |            |   |  |  | SHTP (3)        |  |                   |        |            |  |              | 
|9  | STI
 Highlander                    |  |            | 2007 |     |  | 37,145     |  |            | 1A |  |  | SHTP (3)        |  |                   |        |            |  |              | 
|10 | STI Spirit                         |  |            | 2008 |     |  | 113,100    |  |            |   |  |  | SLR2P(4)        |  |                   |        |            |  |              | 
|   |                                    |  |            |      |     |  |            |  |            |    |  |  |                 |  |                   |        |            |  |              | 
|   | Owned DWT                          |  |            |      |     |  | 644,857    |  |            |    |  |  |                 |  |                   |        |            |  |              | 
|   |                                    |  |            |      |     |  |            |  |            |    |  |  |                 |  |                   |        |            |  |              | 
|   |                                    |  |            |      |     |  |            |  |            |    |  |  |                 |  |                   |        |            |  |             
|   | Time Chartered-In
 (TC-IN) Vessels |  |            |      |     |  |            |  |            |    |  |  |                 |  | Daily BaseExpense |        | Expiry (5) | 
|   |                                    |  |            |      |     |  |            |  |            |    |  |  |                 |  |                   |        |            | 
|11 | BW Zambesi                         |  |            | 2010 |     |  | 76,577     |  |            |   |  |  | SPTP (2)        |  | $                 | 13,850 |            |  | 11-Dec-11(6) | 
|12 | Histria
 Azure                     |  |            | 2007 |     |  | 40,394     |  |            |   |  |  | SHTP (3)        |  | $                 | 12,250 |            |  | 06-Feb-12(7) | 
|13 | Kraslava                           |  |            | 2007 |     |  | 37,258     |  |            | 1B |  |  | SHTP (3)        |  | $                 | 12,070 |            |  | 26-Jan-11    | 
|14 | Krisjanis Valdemars                |  |            | 2007 |     |  | 37,266     |  |            | 1B |  |  | SHTP (3)        |  | $                 | 12,000 |            |  | 14-Dec-11(8) | 
|   |                                    |  |            |      |     |  |            |  |            |    |  |  |                 |  |                   |        |            |  |              | 
|   | TC-IN DWT                          |  |            |      |     |  | 191,495    |  |            |    |  |  |                 |  |                   |        |            |  |              | 
|   |                                    |  |            |      |     |  |            |  |            |    |  |  |                 |  |                   |        |            |  |              | 
|   |                                    |  |            |      |     |  |            |  |            |    |  |  |                 |  |                   |        |            |  |              | 
|   |                                    |  |            |      |     |  |            |  |            |    |  |  |                 |  |                   |        |            |  |              | 
|   | Total DWT                          |  |            |      |     |  | 836,352    |  |            |    |  |  |                 |  |                   |        |            |  |              | 
|   |                                    |  |            |      |     |  |            |  |            |    |  |  |                 |  |                   |        |            |  |              | 

19

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| |     |                                                                                                                                                                                                                        
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (1) | Noemi
 is time chartered by King Dustin, which is a related party.                                                                                                                                                     
| |     |                                                                                                                                                                                                                        
| | (2) | The vessel operates in Scorpio Panamax Tanker Pool (SPTP). SPTP is
 operated by Scorpio Commercial Management (SCM). SPTP and SCM are related
 parties to the Company.                                                 
| |     |                                                                                                                                                                                                                        
| | (3) | These vessels operate in the Scorpio Handymax Tanker Pool (SHTP). SHTP
 is operated by Scorpio Commercial Management (SCM). SHTP and SCM are related
 parties of the Company.                                          
| |     |                                                                                                                                                                                                                        
| | (4) | This vessel operates in the Scorpio LR2 Pool (SLR2P). SLR2P is
 operated by Scorpio Commercial Management (SCM). SLR2P and SCM are related
 parties to the Company.                                                    
| |     |                                                                                                                                                                                                                        
| | (5) | Redelivery from the charterer is plus or minus 30 days from the
 expiry date.                                                                                                                                          
| |     |                                                                                                                                                                                                                        
| | (6) | The agreement contains an optional second year for a rate of $14,850/
 day.                                                                                                                                            
| |     |                                                                                                                                                                                                                        
| | (7) | The agreement contains an option for a second year at a rate of
 $13,750/ day, or $12,250/day with a 50% profit sharing agreement whereby 50% of
 the profits over $12,250/day will be distributed to the vessel owner.
| |     |                                                                                                                                                                                                                        
| | (8) | The agreement contains a 50% profit and loss sharing agreement with
 the vessel owner whereby we would split all of the vessels profits and losses
 above or below $12,000/day with the vessel owner.                 

Operations

Generally,
we operate our vessels on time charters or in commercial pools (such as the
Scorpio Aframax Tanker Pool, Scorpio LR2 Pool, Scorpio Panamax Tanker Pool, and
Scorpio Handymax Tanker Pool).In certain circumstances (e.g. when a vessel is
acquired), our vessels can operate in the spot market. As of the date of this
annual report:

| |   |                                                                                                                                                                  
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Noemiwas
 on time charter.                                                                                                                                       
| |   |                                                                                                                                                                  
| |  | STI Spirit
 was operating in the Scorpio LR2 Pool.                                                                                                               
| |   |                                                                                                                                                                  
| |  | Senatore, Venice,
 STI Harmony, STI Heritage and BW Zambesi were operating
 in the Scorpio Panamax Tanker Pool.                                                  
| |   |                                                                                                                                                                  
| |  | STI Conqueror, STI
 Matador, STI Gladiator, STI Highlander, Krisjanis Valdemars,
 Kraslava and Histria Azure were operating in the Scorpio Handymax
 Tanker Pool.

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.

Commercial
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 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.

Commercial
Management Agreement

Our vessels
are commercially managed by Scorpio Commercial Management S.A.M., or SCM. SCM
is a related party and SCMs services include securing employment, in the spot
market and on time charters, for the Companys vessels. SCM also manages the
Scorpio LR2 Tanker Pool, Scorpio Panamax Tanker Pool and the Scorpio Handymax
Tanker Pool. When our vessels operate in one of the commercial pools managed by
SCM, we pay SCM an agent fee of $250 per vessel per day plus 1.25% commission
per charter fixture for Panamax, LR1 and LR2 vessels and $300 per vessel per day
for Handymax vessels. When our vessels are operating outside of such commercial
pools, we pay SCM a fee of $250 per vessel per day plus a 1.25% commission of
gross revenues per charter fixture for Panamax, LR1 and LR2 vessels and $300
per vessel per day for Handymax vessels, which are the same fees SCM charges
third parties.

20

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We signed
commercial management agreements in December 2009 for Noemi, Senatore and Venice
for a period of three years, which may be terminated upon a two year notice. We
have also signed similar agreements for the vessels that we acquired in 2010,
and we expect to sign similar agreements for additional vessels that we may
acquire in the future.

Technical
Management Agreement

Our vessels
are technically managed by Scorpio Ship Management S.A.M., or SSM, a related
party, with the exception of two vessels we have recently acquired which are
being technically managed by an unaffiliated technical manager. SSM is owned by
members of 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 Companys vessels such as
drydocks and vetting/inspection under a technical management agreement. We
currently pay SSM $548 per vessel per day to provide technical management
services for each of our vessels. This fee is the same charged to third parties
by SSM, and therefore the Company believes it represents a market rate for such
services.

We signed
the technical management agreements with SSM in December 2009 for a period of
three years, which may be terminated upon a two year notice. We have also signed
similar agreements for the vessels that we acquired and agreed to acquire so
far in 2010, and we expect to sign similar agreements for additional vessels
that may acquire in the future.

Administrative
Services Agreement

We have an
administrative services agreement with Liberty, or our Administrator. Liberty
provides accounting, legal compliance, financial, information technology
services, and the provision of administrative staff and office space. We
reimburse our Administrator for the reasonable direct or indirect expenses it
incurs in providing us with the administrative services described above.
Liberty also arranges vessel sales and purchases for us. Liberty sub-contracts
its responsibilities 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 seven vessels (STI Conqueror, STI Harmony, STI
Heritage, STI Matador, STI Gladiator, STI HighlanderandSTI Spirit)
purchased in 2010, the Administrator earned $2.4 million. We believe this 1%
fee on purchases and sales is customary in the tanker industry.

Further,
pursuant to our administrative services agreement, Liberty, 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.

Our
administrative services agreement, whose effective commencement began in
December 2009, has a duration of three years.

The International Tanker Market

General

International
seaborne oil and petroleum products transportation services are mainly provided
by two types of operators: major oil company captive fleets (both private and
state-owned) and independent shipowner fleets. Both types of operators
transport oil under short-term contracts (including single-voyage spot
charters) and long-term time charters with oil companies, oil traders, large
oil consumers, petroleum product producers and government agencies. The oil
companies own, or control through long-term time charters, approximately one
third of the current world tanker capacity, while independent companies own or
control the balance of the fleet. The oil companies use their fleets not only
to transport their own oil, but also to transport oil for third-party
charterers in direct competition with independent owners and operators in the
tanker charter market.

The current
international financial crisis is affecting the international tanker market. It
is expected that the global fleet will increase during 2011 because of the
present order book. However, some shipping companies are now facing challenges
in financing their large newbuilding programs, as shipping banks are more
restrictive than before in granting credit. The current financial upheaval may
delay deliveries of newbuildings and may also lead to the cancellation of
newbuilding orders, and there have been reports of cancellations of tanker
newbuildings from certain yards. Shipping companies with high debt or other
financial commitments may be unable to continue servicing their debt, which
could lead to foreclosure on vessels.

The oil
transportation industry has historically been subject to regulation by national
authorities and through international conventions. Over recent years, however,
an environmental protection regime has evolved which has a significant impact on the operations of
participants in the industry in the form of increasingly more stringent
inspection requirements, closer monitoring of pollution-related events, and
generally higher costs and potential liabilities for the owners and operators
of tankers.

21

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In order to
benefit from economies of scale, tanker charterers will typically charter the
largest possible vessel to transport oil or products, consistent with port and
canal dimensional restrictions and optimal cargo lot sizes. A tankers carrying
capacity is measured in deadweight tons, or dwt, which is the amount of crude
oil measured in metric tons that the vessel is capable of loading. The oil
tanker fleet is generally divided into the following five major types of
vessels, based on vessel carrying capacity: (i) Ultra Large Crude Carrier, or
ULCC, with a size range of approximately 320,000 to 450,000 dwt; (ii) Very
Large Crude Carrier, or VLCC, with a size range of approximately 200,000 to
320,000 dwt; (iii) Suezmax-size range of approximately 120,000 to 200,000 dwt;
(iv) Aframax-size range of approximately 80,000 to 120,000 dwt; (v)
Panamax-size range of approximately 60,000 to 70,000 dwt; and (vi) small
tankers of less than approximately 60,000 dwt. ULCCs and VLCCs typically
transport crude oil in long-haul trades, such as from the Arabian Gulf to
Rotterdam via the Cape of Good Hope. Suezmax tankers also engage in long-haul
crude oil trades as well as in medium-haul crude oil trades, such as from West
Africa to the East Coast of the United States. Aframax-size vessels generally
engage in both medium-and short-haul trades of less than 1,500 miles and carry
crude oil or petroleum products. Smaller tankers mostly transport petroleum
products in short-haul to medium-haul trades.

THE INTERNATIONAL OIL TANKER SHIPPING
INDUSTRY (Source: Drewrys)

All
the information and data presented in this section, including the analysis of
the various sectors of the oil tanker shipping industry has been provided by
Drewry. Drewry has advised that the statistical and graphical information
contained herein is drawn from its database and other sources. In connection
therewith, Drewry has advised that: (a) certain information in Drewrys
database is derived from estimates or subjective judgments; (b) the information
in the databases of other maritime data collection agencies may differ from the
information in Drewrys database; (c) 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 (including increases and decreases in
industrial production), oil prices, environmental concerns, weather conditions,
and competition from alternative energy sources.

As the
following figures indicate the world economy grew at a fairly consistent rate
in the period 2000 to 2008, but growth came to an abrupt halt in 2009 as the
world went into a global depression. The downturn was short-lived and the most
recent data suggest that the world economy returned to positive growth in 2010,
with China and India being the main engines of growth.

World Oil
Consumption: 1990 - 2010


(Million
Barrels Per Day)


(BAR CHART)

(1) Provisional

Source: Drewry Maritime Research

22

---



World oil
consumption has generally experienced sustained growth since 2000, albeit it
declined in 2009 due to the downturn in the global economy. The provisional
data for 2010 however suggests that world oil demand rebounded strongly.

World oil
consumption in 2010 is provisionally estimated at 86.9 million barrels per day.
Since 2000 it has grown at a compound annual growth rate, or CAGR, of
approximately 1.2%.

Regionally,
oil consumption is either static or declining in most of the developed world,
but is increasing in most of the developing world as the following chart
indicates. In recent years, Asia, in particular China has been
the main generator of additional demand for oil, with this demand largely
supplied from traditional sources such as the Middle East. In the period
2000 to 2010 Chinese oil consumption grew by a CAGR of 6.7% to reach 9.2
million barrels per day in 2010.

Oil
consumption on a per capita basis is still low in countries such as China and
India when compared with 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 quite
often precede seasonal consumption peaks, as refiners and suppliers anticipate
consumer demand. Seasonal peaks in oil demand can broadly be classified into
two main categories: increased demand prior to Northern Hemisphere winters as
heating oil consumption increases and increased demand for gasoline prior to
the summer driving season in the United States.

Production
trends have naturally followed the underlying pattern in oil consumption,
allowing for the fact that changes in the level of oil inventories also play a
part in determining production levels.

Production
and exports from the Middle East (largely 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 this
supply source 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 historically has had less of an
impact on the demand for larger vessels while increasing the demand for vessels
in the Handy, Panamax and Aframax market segments.

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, and thereby maximize revenue.

Changes in
refinery throughput are to a certain extent driven by changes in the location
of capacity, and capacity increases are taking place mostly in the developing
world, especially in Asia. In turn, 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, with the Middle East and
other emerging economies following behind. 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.

Chinese
refinery throughput has grown at the fastest rate of any global region in the
last decade, with the Middle East and other developing regions following
behind. 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 regions such as 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 it is important to recognize that in
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 the underlying changes in
world oil consumption and production. Seaborne trade in crude oil in 2010 is
provisionally estimated at 2.3 billion tons, while refined petroleum product
movements are provisionally estimated at 875 million tons.

23

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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 and is measured
as the product of the volume of oil carried (measured in metric tons)
multiplied by the distance over which it is carried (measured in miles).

The
transportation of crude oil is typically unidirectional, in that 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 multi-directional, in that
there are several areas of both production and consumption.

The growth
in the volume of oil moved by sea since 2000 had been quite modest, but the
absolute volume of trade hides the fact that changes in the pattern or trade
have had quite a positive impact on tanker demand when expressed in terms of
ton miles. In the period 2000 to 2010 ton mile demand in the tanker sector grew
at a CAGR of 3.2%, whereas the overall increase in trade over the same period
was 1.6%. As a result of changes in the pattern of trade the average haul
length of refined product trades has risen from a recent market low of 2,544
miles (loaded voyage only) in 2002 to 3,320 miles in 2010, equivalent to an
increase of 30%.

One
of the reasons for the increase in average voyage lengths is the growth in
Chinese crude oil imports and in particular the fact that it is sourcing crude
oil from long haul destinations such as West Africa and Brazil. Chinese crude
oil imports almost tripled in the period 2000 to 2009 and in so doing had a very
positive impact on demand for crude oil tankers, especially VLCCs.

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 crude oil or residual fuel
oil (dirty products), and product tankers that carry refined petroleum
products (clean products) such as gasoline, jet fuel, kerosene, naphtha and
gas oil.

The
main fleet categories are Very Large Crude Carrier (VLCC), Suezmax, Aframax,
Panamax and Handy oil tankers.

|         |  |                 
|-------- |  | ----------------
|Category |  | Size Range - Dwt
|         |  |                 
|Handy    |  | 10-49,999       
|Panamax  |  | 50-79,999       
|Aframax  |  | 80-119,999      
|Suezmax  |  | 120-199,999     
|VLCC     |  | 200,000 +       

In order to
benefit from economies of scale, tanker charterers transporting crude oil will
typically charter the largest possible vessel, taking into consideration port
and canal size restrictions and optimal cargo lot sizes. The main tanker vessel
types are:

While
product tankers can carry dirty products, they generally do not switch between
clean and dirty cargoes, as 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.

The
following analysis focuses on straight product tankers and does not include
ships with chemical carrying capability.

Oil Tanker
Fleet  March 31, 2011

|               |  |                   |  |                    |  |                      |  |                                   |       |                   |  |  |  |       |   |  |  |  |       |  |  |  |  |       |   | 
|-------------- |  | ----------------- |  | ------------------ |  | -------------------- |  | --------------------------------- | ----- | ----------------- |  |  |  | ----- | - |  |  |  | ----- |  |  |  |  | ----- | - | 
|Size
 Category |  | Deadweight 
 Tons |  | Number of
 Vessels |  | % of Fleet
 (Number) |  | Total 
 Capacity 
 (Million Dwt ) |       | % of Fleet
 (Dwt) | 
|               |  |                   |  |                    |  |                      |  |                                   |       |                   | 
|VLCC           |  |                   |  | >200,000           |  |                      |  |                                   | 548   |                   |  |  |  | 18.0  |   |  |  |  | 166.1 |  |  |  |  | 43.6  |   | 
|Suezmax        |  |                   |  | 120,000-199,000    |  |                      |  |                                   | 418   |                   |  |  |  | 13.7  |   |  |  |  | 64.2  |  |  |  |  | 16.9  |   | 
|Aframax        |  |                   |  | 80,000-119,000     |  |                      |  |                                   | 874   |                   |  |  |  | 28.7  |   |  |  |  | 92.6  |  |  |  |  | 24.3  |   | 
|Panamax        |  |                   |  | 50,000-79,999      |  |                      |  |                                   | 443   |                   |  |  |  | 14.6  |   |  |  |  | 30.8  |  |  |  |  | 8.1   |   | 
|Handymax/size  |  |                   |  | 10,000-49,999      |  |                      |  |                                   | 758   |                   |  |  |  | 24.9  |   |  |  |  | 27.3  |  |  |  |  | 7.2   |   | 
|               |  |                   |  |                    |  |                      |  |                                   |       |                   |  |  |  |       |   |  |  |  |       |  |  |  |  |       |   | 
|               |  |                   |  |                    |  |                      |  |                                   |       |                   |  |  |  |       |   |  |  |  |       |  |  |  |  |       |   | 
|Total          |  |                   |  |                    |  |                      |  |                                   | 3,041 |                   |  |  |  | 100.0 | % |  |  |  | 381.0 |  |  |  |  | 100.0 | % | 
|               |  |                   |  |                    |  |                      |  |                                   |       |                   |  |  |  |       |   |  |  |  |       |  |  |  |  |       |   | 
|               |  |                   |  |                    |  |                      |  |                                   |       |                   |  |  |  |       |   |  |  |  |       |  |  |  |  |       |   | 

Source: Drewry Maritime Research

24

---



Between
the end of 2000 and March 2011 the overall size of the tanker fleet grew by
close to 50% with increases in fleet size taking place across all sectors, with
the exception of the small ship category.

The
Product Tanker Fleet

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 (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 not available or
out of commission (collectively, lay-up or total inactivity).

The product tanker fleet as of March 31, 2011 by the above definition
comprises 1,218 ships of 66.6 million dwt.

World Product(1)
Tanker Fleet March31, 2011

|              |  |                             |               |                   |  |            |       |                                 |  |                    |  |       |   |  |  |  |      |  |  |  |  |       |   | 
|------------- |  | --------------------------- | ------------- | ----------------- |  | ---------- | ----- | ------------------------------- |  | ------------------ |  | ----- | - |  |  |  | ---- |  |  |  |  | ----- | - | 
|Size Category |  | SizeRange (Deadweight Tons) |               | Number of Vessels |  | % of Fleet |       | Total Capacity 
 (Million Dwt ) |  | % of Fleet 
 (Dwt) | 
|              |  |                             |               |                   |  |            |       |                                 |  |                    | 
|LR2           |  |                             | >80,000       |                   |  |            | 170   |                                 |  |                    |  | 14.0  | % |  |  |  | 18.4 |  |  |  |  | 27.6  | % | 
|LR1           |  |                             | 50,000-79,999 |                   |  |            | 308   |                                 |  |                    |  | 25.3  | % |  |  |  | 21.5 |  |  |  |  | 32.3  | % | 
|MR2           |  |                             | 25,000-49,999 |                   |  |            | 570   |                                 |  |                    |  | 46.8  | % |  |  |  | 24.1 |  |  |  |  | 36.2  | % | 
|MR1           |  |                             | 10,000-24,999 |                   |  |            | 170   |                                 |  |                    |  | 14.0  | % |  |  |  | 2.6  |  |  |  |  | 4.3   | % | 
|              |  |                             |               |                   |  |            |       |                                 |  |                    |  |       |   |  |  |  |      |  |  |  |  |       |   | 
|Total         |  |                             |               |                   |  |            | 1,218 |                                 |  |                    |  | 100.0 | % |  |  |  | 66.6 |  |  |  |  | 100.0 | % | 
|              |  |                             |               |                   |  |            |       |                                 |  |                    |  |       |   |  |  |  |      |  |  |  |  |       |   | 

(1) Excludes chemical tankers

Source: Drewry Maritime Research

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

World Product
Tanker Fleet: Age Profile, March 31, 2011

(BAR CHART)

Left Hand Scale = Million Dwt; Right Hand Scale = No
of Ships; Bottom Scale = Dwt Size Category

Source: Drewry Maritime Research

Oil
Tanker Orderbook

As
of March 31, 2011 the tanker orderbook amounted to 656 tankers of 104.4 million
dwt, equivalent to 27.4% of the current fleet.

25

---



World Oil
Tanker Orderbook, March 31, 2011

|              |  |                   |                 |                    |  |                      |     |                                   |  |                   |  |      |   |  |  |  |       |  |  |  |  |      |   | 
|------------- |  | ----------------- | --------------- | ------------------ |  | -------------------- | --- | --------------------------------- |  | ----------------- |  | ---- | - |  |  |  | ----- |  |  |  |  | ---- | - | 
|Size Category |  | Deadweight 
 Tons |                 | Number of
 Vessels |  | % of Fleet
 (Number) |     | Total 
 Capacity 
 (Million Dwt ) |  | % of Fleet
 (Dwt) | 
|              |  |                   |                 |                    |  |                      |     |                                   |  |                   | 
|VLCC          |  |                   | >200,000        |                    |  |                      | 179 |                                   |  |                   |  | 32.7 |   |  |  |  | 56.3  |  |  |  |  | 33.9 |   | 
|Suezmax       |  |                   | 120,000-199,999 |                    |  |                      | 150 |                                   |  |                   |  | 35.9 |   |  |  |  | 23.2  |  |  |  |  | 36.2 |   | 
|Aframax       |  |                   | 80,000-119,999  |                    |  |                      | 135 |                                   |  |                   |  | 15.4 |   |  |  |  | 14.8  |  |  |  |  | 16.0 |   | 
|Panamax       |  |                   | 50,000-79,999   |                    |  |                      | 104 |                                   |  |                   |  | 23.5 |   |  |  |  | 6.8   |  |  |  |  | 22.1 |   | 
|Handy         |  |                   | 10,000-49,9999  |                    |  |                      | 88  |                                   |  |                   |  | 11.6 |   |  |  |  | 3.3   |  |  |  |  | 12.0 |   | 
|              |  |                   |                 |                    |  |                      |     |                                   |  |                   |  |      |   |  |  |  |       |  |  |  |  |      |   | 
|Total         |  |                   |                 |                    |  |                      | 656 |                                   |  |                   |  | 21.6 | % |  |  |  | 104.4 |  |  |  |  | 27.4 | % | 
|              |  |                   |                 |                    |  |                      |     |                                   |  |                   |  |      |   |  |  |  |       |  |  |  |  |      |   | 

Source: Drewry Maritime Research

Product
Tanker Orderbook

As of March
31, 2011 the product tanker orderbook amounted to 212 ships of 13.4 million
dwt, equivalent to 20.1% of the current fleet. Other tankers within these size
ranges that do not have protective coatings and are thus suitable for carrying
only crude cargoes have been excluded from the table below.

World
Product Tanker Orderbook, March 31, 2011

|              |  |                   |               |                     |  |                            |     |                                  |  |                            |  |      |   |  |  |  |      |  |  |  |  |      |   | 
|------------- |  | ----------------- | ------------- | ------------------- |  | -------------------------- | --- | -------------------------------- |  | -------------------------- |  | ---- | - |  |  |  | ---- |  |  |  |  | ---- | - | 
|Size Category |  | Deadweight 
 Tons |               | Number of 
 Vessels |  | % of Existing 
 Fleet - No |     | Total 
 Capacity 
 (Million Dwt) |  | % of Existing
 Fleet - Dwt | 
|              |  |                   |               |                     |  |                            |     |                                  |  |                            | 
|LR2           |  |                   | >80,000       |                     |  |                            | 40  |                                  |  |                            |  | 23.5 | % |  |  |  | 4.5  |  |  |  |  | 24.5 | % | 
|LR1           |  |                   | 50,000-79,999 |                     |  |                            | 90  |                                  |  |                            |  | 29.2 | % |  |  |  | 5.8  |  |  |  |  | 27.0 | % | 
|MR2           |  |                   | 25,000-49,999 |                     |  |                            | 66  |                                  |  |                            |  | 11.6 | % |  |  |  | 2.9  |  |  |  |  | 12.0 | % | 
|MR1           |  |                   | 10,000-24,999 |                     |  |                            | 16  |                                  |  |                            |  | 9.4  | % |  |  |  | 0.2  |  |  |  |  | 7.7  | % | 
|              |  |                   |               |                     |  |                            |     |                                  |  |                            |  |      |   |  |  |  |      |  |  |  |  |      |   | 
|Total         |  |                   |               |                     |  |                            | 212 |                                  |  |                            |  | 17.4 | % |  |  |  | 13.4 |  |  |  |  | 20.1 | % | 
|              |  |                   |               |                     |  |                            |     |                                  |  |                            |  |      |   |  |  |  |      |  |  |  |  |      |   | 

Source:Drewry Maritime Research

World
Product Tanker Orderbook Delivery Schedule, November 30, 2010

|              |  |      |  |       |  |      |    |       |     |       |  |       |    |     |  |       |  |     |  |       |  |  |  |     |  |  |  |  |      |  | 
|------------- |  | ---- |  | ----- |  | ---- | -- | ----- | --- | ----- |  | ----- | -- | --- |  | ----- |  | --- |  | ----- |  |  |  | --- |  |  |  |  | ---- |  | 
|              |  | 2011 |  | 2012  |  | 2013 |    | 2014+ |     | Total | 
|              |  |      |  |       |  |      |    |       |     |       | 
|Size          |  | No.  |  | M Dwt |  | No.  |    | M Dwt |     | No.   |  | M Dwt |    | No. |  | M Dwt |  | No. |  | M Dwt | 
|              |  |      |  |       |  |      |    |       |     |       |  |       |    |     |  |       |  |     |  |       | 
|10,000-24,999 |  | 14   |  | 0.2   |  |      | 2  |       | 0.0 |       |  |       | 0  |     |  | 0.0   |  | 0   |  | 0.0   |  |  |  | 16  |  |  |  |  | 0.2  |  | 
|25,000-49,999 |  | 41   |  | 1.8   |  |      | 22 |       | 1.0 |       |  |       | 3  |     |  | 0.1   |  | 0   |  | 0.0   |  |  |  | 66  |  |  |  |  | 2.9  |  | 
|50,000-79,999 |  | 49   |  | 3.4   |  |      | 25 |       | 1.4 |       |  |       | 16 |     |  | 1.0   |  | 0   |  | 0.0   |  |  |  | 90  |  |  |  |  | 5.8  |  | 
|80,000+       |  | 19   |  | 2.1   |  |      | 16 |       | 1.8 |       |  |       | 2  |     |  | 0.2   |  | 3   |  | 0.4   |  |  |  | 40  |  |  |  |  | 4.5  |  | 
|              |  |      |  |       |  |      |    |       |     |       |  |       |    |     |  |       |  |     |  |       |  |  |  |     |  |  |  |  |      |  | 
|Total         |  | 123  |  | 7.5   |  |      | 65 |       | 4.2 |       |  |       | 21 |     |  | 1.3   |  | 3   |  | 0.4   |  |  |  | 212 |  |  |  |  | 13.4 |  | 
|              |  |      |  |       |  |      |    |       |     |       |  |       |    |     |  |       |  |     |  |       |  |  |  |     |  |  |  |  |      |  | 

No. = Number of Vessels. M Dwt = Millions of Dwt.

Source: Drewry Maritime Research

The
Product Tanker Freight Market

Freight Rates

26

---



Tanker
charter hire rates and vessel values for all tankers are influenced by the
supply and demand for tanker capacity. However, the product segment generally
appears 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. Also, time charter rates are
generally less volatile than spot rates, because they reflect the fact that the
vessel is 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. The 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
the 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 2007, time charter rates for all sizes of oil tankers rose quite steeply,
reflecting the fact that buoyant demand for oil and increased sea-borne
movements of oil generated additional demand for tanker capacity. This led to a
much tighter balance between vessel demand and supply. However, as the world
economy weakened in the second half of 2008, demand for oil also fell and had a
negative impact on tanker demand and freight rates. Rates therefore declined in
2009, only to recover in the early part of 2010, before falling once again in
the summer months and then remaining weak into 2011.

Oil Tanker One
Year Time Charter Rates: 2000-2011(US$/Day Period Averages)

|              |  |           |  |          |  |           |  |         |  |        
|------------- |  | --------- |  | -------- |  | --------- |  | ------- |  | -------
|Size Category |  | Handysize |  | Handymax |  | Aframax   |  | Suezmax |  | VLCC   
|              |  |           |  |          |  |           |  |         |  |        
|DWT           |  | 30,000    |  | 45,000   |  | 90-95,000 |  | 150,000 |  | 280,000
|              |  |           |  |          |  |           |  |         |  |        
|2000          |  | 12,454    |  | 13,958   |  | 18,854    |  | 27,042  |  | 35,250 
|2001          |  | 15,583    |  | 17,563   |  | 23,125    |  | 30,500  |  | 37,958 
|2002          |  | 11,417    |  | 13,288   |  | 16,896    |  | 17,750  |  | 23,458 
|2003          |  | 13,267    |  | 14,846   |  | 19,146    |  | 26,104  |  | 33,604 
|2004          |  | 15,629    |  | 19,029   |  | 29,500    |  | 37,875  |  | 53,900 
|2005          |  | 18,854    |  | 25,271   |  | 35,021    |  | 42,292  |  | 60,125 
|2006          |  | 21,417    |  | 26,792   |  | 35,233    |  | 42,667  |  | 55,992 
|2007          |  | 22,000    |  | 24,500   |  | 33,143    |  | 43,042  |  | 53,333 
|2008          |  | 21,438    |  | 23,092   |  | 34,708    |  | 46,917  |  | 74,662 
|2009          |  | 13,675    |  | 14,850   |  | 19,663    |  | 27,825  |  | 38,533 
|2010          |  | 11,000    |  | 12,388   |  | 18,571    |  | 25,967  |  | 36,083 
|              |  |           |  |          |  |           |  |         |  |        
|March 2011    |  | 12,000    |  | 13,000   |  | 16,000    |  | 21,000  |  | 29,000 
|              |  |           |  |          |  |           |  |         |  |        

Source: Drewry Maritime Research

In general
terms, time charter rates are less volatile than spot rates, because they
reflect the fact that the vessel is 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.

Environmental and Other Regulations

Government
laws and regulations significantly affect the ownership and operation of our
tankers. We are subject to international conventions, national, state and local
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 modifications and
implementation of certain operating procedures.

A variety
of government, quasi-governmental and private organizations subject our tankers
to both scheduled and unscheduled inspections. These organizations include the
local port authorities, national authorities, harbor masters or equivalent,
classification societies, flag state administrations (countries of registry),
labor organizations (including but not limited to the International Transport
Workers Federation), charterers, terminal operators and oil companies. Some of
these entities require us to obtain permits, licenses, certificates and
approvals for the operation of our tankers. 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.

27

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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 tanker 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. Such laws
and regulations frequently change 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 tankers. In addition, any serious marine incident that results in
significant oil pollution or otherwise causes significant adverse environmental
impact, including 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 IMO,
the United Nations agency for maritime safety and the prevention of pollution,
has adopted the International Convention for the Prevention of Pollution from
Ships, or MARPOL, which has been updated through various
amendments. MARPOL establishes environmental standards relating to oil
leakage or spilling, garbage management, sewage, air emissions, handling and
disposal of noxious liquids and the handling of harmful substances in packaged
forms.

Air
Emissions

In
September 1997, the IMO adopted Annex VI to MARPOL to address air
pollution from ships. Effective May 2005, Annex VI sets limits on sulfur
oxide and nitrogen oxide emissions from all commercial vessel exhausts and
prohibits deliberate emissions of ozone depleting substances (such as halons
and chlorofluorocarbons), emissions of volatile organic compounds from cargo
tanks, and the shipboard incineration of specific substances. Annex VI
also includes a global cap on the sulfur content of fuel oil and allows for
special areas to be established with more stringent controls on sulfur
emissions. Additional or new conventions, laws and regulations may be
adopted that could require the installation of expensive emission control systems
and adversely affect our business, cash flows, results of operations and
financial condition. In October 2008, the IMO adopted amendments to Annex VI
regarding emissions of sulfur oxide, nitrogen oxide, particulate matter and
ozone-depleting substances, which amendments entered into force on July 1,
2010. The amended Annex VI is expected to reduce air pollution from
vessels by, among other things, (i) implementing a progressive reduction
of sulfur oxide emissions from ships by reducing the global sulfur fuel cap
initially to 3.50% (from the current cap of 4.50%), effective from
January 1, 2012, then progressively to 0.50%, effective from
January 1, 2020, subject to a feasibility review to be completed no later
than 2018; and (ii) establishing new tiers of stringent nitrogen oxide
emissions standards for new marine engines, depending on their date of
installation. The United States ratified the Annex VI amendments in October
2008, and the U.S. Environmental Protection Agency, or EPA, has since
implemented equivalent emissions standards.

On
March 26, 2010, the IMO amended MARPOL to designate areas extending up to
200 nautical miles from the Atlantic/Gulf and Pacific coasts of the United
States and Canada and the Hawaiian Islands and certain portions of French
waters as Emission Control Areas under the MARPOL Annex VI
amendments. Once the designations take effect in August 2012, ocean-going
vessels in these areas will be subject to stringent emission controls. 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.

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
SOLAS. The ISM Code requires the party with operational control 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.

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. SSM has 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.

28

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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. The U.S. Coast
Guard and European Union authorities have indicated that vessels not in
compliance with the ISM Code by the applicable deadlines will be prohibited
from trading in U.S. and European Union ports, as the case may be.

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, or the CLC, although the United
States is not a party. Under this convention 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, subject to certain affirmative
defenses, for pollution damage caused in the territorial waters of a
contracting state by discharge of persistent oil. The limits on liability
outlined in the 1992 Protocol use the International Monetary Fund currency unit
of Special Drawing Rights, or SDR. 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 conduct. Vessels trading with states that are
parties to these conventions must provide evidence of insurance covering the
liability of the owner. In jurisdictions where the CLC has not been
adopted, various legislative schemes or common law govern, and liability is
imposed either on the basis of fault or in a manner similar to that of the
CLC. The IMO adopted the International Convention on Civil Liability for Bunker
Oil Pollution Damage, or the Bunker Convention, to impose strict liability on
ship owners for pollution damage in jurisdictional waters of ratifying states
caused by discharges of bunker fuel. The Bunker Convention, which became
effective on November 21, 2008, requires registered owners of ships over
1,000 gross tons to maintain insurance or other financial security 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, IMO adopted an International Convention for the Control and
Management of Ships Ballast Water and Sediments, or BWM, in February
2004. BWMs implementing regulations call for a phased introduction of
mandatory ballast water exchange requirements, to be replaced in time with
mandatory concentration limits. BWM will not become effective until 12
months after it has been adopted by 30 states, the consolidated 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, the IMOs Marine Environment
Protection Committee passed a resolution in March 2010 encouraging the
ratification of the Convention and calling upon those countries that have already
ratified to encourage the installation of ballast water management systems. If
ballast water treatment becomes mandatory, the cost of compliance could be
significant.

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.

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. Both OPA and CERCLA impact our operations.

Under OPA,
vessel owners, operators and bareboat charterers 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:

| |   |                                                                                                                                                                          
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | natural resources damage and related assessment costs;                                                                                                                   
| |   |                                                                                                                                                                          
| |  | real and personal property damage;                                                                                                                                       
| |   |                                                                                                                                                                          
| |  | net loss of taxes, royalties, rents, fees and other lost revenues;                                                                                                       
| |   |                                                                                                                                                                          
| |  | lost profits or impairment of earning capacity due to property or natural
 resources damage; and                                                                         
| |   |                                                                                                                                                                          
| |  | net cost of public services necessitated by a spill response, such as
 protection from fire, safety or health hazards, and loss of subsistence use
 of natural resources.

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 possible adjustment for
inflation), and our fleet is entirely composed of vessels of this size class.
CERCLA, which applies to owners and operators of vessels, contains a similar
liability regime and provides for cleanup, removal and natural resource
damages. 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 $0.5 million for any other vessel. These
OPA and CERCLA limits of liability do not apply if an incident was directly
caused by violation of applicable U.S. federal safety, construction or
operating regulations or by a responsible partys gross negligence or willful
misconduct, or if the responsible party fails or refuses to report the incident
or to cooperate and assist in connection with oil removal activities.

29

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OPA and the
U.S. Coast Guard also require owners and operators of vessels to establish and
maintain with the U.S. Coast Guard evidence of financial responsibility
sufficient to meet the limit of their potential liability under OPA and CERCLA.
Vessel owners and operators may satisfy their financial responsibility
obligations by providing a proof of insurance, a surety bond, self-insurance or
a guaranty.

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 or hazardous substances
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 and remediation and damages and complements the remedies
available under OPA and CERCLA.

The EPA
regulates the discharge of ballast water and other substances in U.S. waters
under the CWA. Effective February 6, 2009, EPA regulations require vessels
79 feet in length or longer (other than commercial fishing and recreational
vessels) to comply with a Vessel General Permit authorizing ballast water
discharges and other discharges incidental to the operation of vessels. The
Vessel General Permit imposes technology and water-quality based effluent
limits for certain types of discharges and establishes specific inspection,
monitoring, recordkeeping and reporting requirements to ensure the
effluent limits are met. U.S. Coast Guard regulations adopted under the
U.S. National Invasive Species Act, or NISA, also impose mandatory ballast
water management practices for all vessels equipped with ballast water tanks
entering or operating in U.S. waters, and in 2009 the Coast Guard proposed new
ballast water management standards and practices, including limits regarding
ballast water releases. 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. Criminal liability for pollution may result in substantial
penalties or fines and increased civil liability claims.

Greenhouse Gas Regulation

The IMO is
evaluating mandatory measures to reduce greenhouse gas emissions from
international shipping, which may include market-based instruments or a carbon
tax. 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. In the United States, the EPA has issued
a proposed finding that greenhouse gases threaten the public health and safety.
In addition, climate change initiatives are being considered in the U.S.
Congress. Any passage of climate control legislation or other regulatory
initiatives by the IMO, EU, 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 that we cannot predict with certainty at
this time.

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. Similarly, in December 2002, amendments to SOLAS
created a new chapter of the convention dealing specifically with maritime
security. The new chapter became effective in July 2004 and imposes
various detailed security obligations on vessels and port authorities, most of
which are contained in the International Ship and Port Facilities Security
Code, or the ISPS Code. The ISPS Code is designed to protect ports and
international shipping against terrorism. After July 1, 2004, to trade
internationally, a vessel must attain an International Ship Security
Certificate from a recognized security organization approved by the vessels
flag state. Among the various requirements are:

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| |   |                                                                                                                                                                                                                                                                                                                                                                                   
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | 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 and of 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.                                                                                                                                                                                                                                                                                                                   

The
U.S. Coast Guard regulations, intended to align with international maritime
security standards, exempt from MTSA vessel security measures non-U.S. vessels
that have on board, as of July 1, 2004, a valid International Ship
Security Certificate attesting to the vessels compliance with SOLAS security
requirements and the ISPS Code. We have implemented the various security measures
addressed by the MTSA, SOLAS and the ISPS Code, and our fleet is in compliance
with applicable security requirements.

Inspection by classification societies

Every
oceangoing 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.

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, at intervals of 12 months from the date of commencement of the class
 period indicated in the certificate.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |  | Intermediate Surveys.Extended
 annual surveys are referred to as intermediate surveys and typically are
 conducted two and one-half years after commissioning and each class renewal.
 Intermediate surveys may be carried out on the occasion of the second or
 third annual survey.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |  | Class Renewal Surveys.Class renewal
 surveys, also known as special surveys, are carried out for the ships hull,
 machinery, including the electrical plant and for any special equipment
 classed, at the intervals indicated by the character of classification for
 the hull. At the special survey the vessel is thoroughly examined,
 including audio-gauging to determine the thickness of 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 ship 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.

Vessels
have their underwater parts inspected every 30 to 36 months. Depending on the
vessels age and other factors, this inspection can often be done afloat with
minimal disruption to the vessels commercial deployment. However, vessels are
required to be drydocked, meaning physically removed from the water, for
inspection and related repairs at least once every five years from delivery. 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. 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.

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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.

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

As of December 31, 2010, Scorpio Tankers
Inc. owned 100% of the 12 subsidiaries listed below.

|                                        |  |                                            
|--------------------------------------- |  | -------------------------------------------
|Company                                 |  | Incorporated in                            
|                                        |  |                                            
|Noemi Shipping Company Limited          |  | The Republic of The Marshall Islands       
|Senatore Shipping Company Limited       |  | The Republic of The Marshall Islands       
|Venice Shipping Company Limited         |  | The Republic of The Marshall Islands       
|STI Harmony Shipping Company Limited    |  | The Republic of The Marshall Islands       
|STI Heritage Shipping Company Limited   |  | The Republic of The Marshall Islands       
|STI Conqueror Shipping Company Limited  |  | The Republic of The Marshall Islands       
|STI Matador Shipping Company Limited    |  | The Republic of The Marshall Islands       
|STI Gladiator Shipping Company Limited  |  | The Republic of The Marshall Islands       
|STI Highlander Shipping Company Limited |  | The Republic of The Marshall Islands       
|STI Spirit Shipping Company Limited     |  | The Republic of The Marshall Islands       
|STI Chartering and Trading Limited      |  | The Republic of The Marshall Islands       
|Sting LLC                               |  | State of Delaware, United States of America

32

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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.

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 Risk Factors, The
International Tanker Industry, Cautionary Statement Regarding Forward-Looking
Statements. The consolidated financial statements as of December 31, 2010 and
2009 and for the three years ended December 31, 2010 have been prepared in
accordance with IFRS as issued by the IASB. The consolidated financial
statements are presented in U.S. Dollars ($) unless otherwise indicated. Any
amounts converted from another non-U.S. currency to U.S. Dollars in this annual
report are at the rate applicable at the relevant date, or the average rate
during the applicable period.

Prior to
October 1, 2009, our historical consolidated financial statements were prepared
on a carve-out basis from the financial statements of Liberty and include all
assets, liabilities and results of operations of our three vessel-owning
subsidiaries, formerly subsidiaries of Liberty, for those periods. The other
financial information included in this filing represents the aggregated
financial information of the operations of our three vessel-owning
subsidiaries.

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, we have purchased seven vessels, all
of which have been delivered as of December 31, 2010. We also time chartered-in
four vessels, one prior to December 31, 2010 and three after December 31, 2010,
all of which have been delivered and put into our pools as of the date of this
annual report.

We generate
revenues by charging customers for the transportation of their crude 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; and                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| |  | Time charters, whereby vessels we operate
 and for which we are responsible for crewing and other vessel operating costs
 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, 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 COAs, thus generating higher effective TCE revenues
 than otherwise might be obtainable in the spot market. We are responsible for
 crewing and other vessel operating costs for our vessels that operate in
 these pools.

33

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The table
below illustrates the primary distinctions among these types of 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 (3) |  | We pay                 |  | We pay                 |  | We pay             | 
|                            |  |                        |  |                        |  |                    | 
|Off-hire(4)                 |  | Customer
 does not pay |  | Customer
 does not pay |  | Pool does
 not pay | 

| |     |                                                                                                                                                                                                                                                   | 
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | 
| |    
| | (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 drydocking.                                                                                                           

As of
December 31, 2010, ten vessels, the Venice, Senatore,
STI Conqueror, STI Gladiator, STI Harmony, STI Heritage, STI Highlander, STI
Matador STI SpiritandBW Zambesi, were operating in the pools
managed by SCM. The majority of the vessels in these pools trade in the spot
market. The Noemi was chartered to
a customer under a fixed-rate long-term time charter contract that, as of the
date of this annual report, has a remaining duration of approximately 8.5
months.

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. The shipowner pays all voyage expenses, and all vessel
operating costs unless the vessel to which the charter relates has been time
chartered-in.

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. 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 drydockings. 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 charged by SSM. Historically, our
fees under technical management arrangements with SSM were under management
agreements with other Scorpio Group entities, which are related parties of
ours. 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
the historical consolidated financial statements included elsewhere in this
annual report. We are currently party to a technical management agreement with
SSM. Under this agreement, SSM provides us with technical services and the
ability to subcontract technical management of the ships with our approval. We
pay market-based fees for this service.

Drydocking. We
must periodically drydock each of our 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.
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.

34

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Depreciation.
Depreciation expense typically consists of:

| |  |   |                                                                                                                                                                 
| |  | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  |  | charges related to the depreciation of the historical cost of
 our fleet (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 revenue or rates. Time charter equivalent, or TCE, revenue or
rates, is a standard shipping industry performance measure which is used to
compare results between different charter types. TCE revenue is vessel revenue
less voyage expenses. The TCE rate achieved on a given voyage is expressed in
U.S. dollars/day and is generally calculated by taking TCE revenue and dividing
that figure by the number of days in the period.

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 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 ship owner 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 ship
owner may use different ships to perform these individual voyages. As a result,
COAs are mostly entered into by large fleet operators such as pools or ship
owners with large fleets of the same vessel type. All of the ships operating,
voyage and capital costs are borne by the ship owner while the freight rate
normally is agreed on a per cargo ton basis.

Commercial
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. 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.

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:

| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |                                                                                                 
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ | ------------------------------------------------------------------------------------------------
| |  | Our vessel revenues 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 we trade in the spot market. If we choose to pay
 dividends in the future, this will, from period to period, affect the cash
 available to pay such dividends. We intend to 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. In addition, unpredictable weather patterns
 during the winter months tend to disrupt vessel 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.                                                                                                                                                                                                                                                                                                                                                                                       

35

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| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Our general and administrative expenses
       were affected by the commercial management and administrative services
       agreements we entered into with SCM and Liberty Holding Company Ltd.,
       respectively in December 2009, and costs incurred from being a public
       company.
       Historically, we incurred management fees for commercial and administrative
       management under management agreements with other Scorpio Group entities,
       which are parties related to us. Since agreements with related parties are by
       definition not at arms 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 the historical consolidated financial
      statements included elsewhere in this annual report.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| |   | In
 December 2009, we entered into a commercial management agreement with SCM. We
 also entered into an administrative services agreement with Liberty Holding
 Company Ltd., our Administrator. Under these agreements, SCM provides us with
 commercial services and our Administrator provides us with administrative
 services. We pay fees under our commercial management agreement, 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. Our
 general and administrative management fees incurred prior to December 1, 2009
 are estimates of the value of the general and administrative services
 provided by Scorpio Group affiliates to us. These fees may not have been
 equivalent to a market-based fee. The new technical and administrative
 services agreements were negotiated at rates similar to the rates under the
 previous agreements, which we believe are customary in the tanker industry.
 In addition, we continue to incur additional general and administrative
 expenses as a result of being a publicly traded company, including costs
 associated with annual reports to shareholders and SEC filings, 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, 2010, 2009 and 2008.

RESULTS OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 2010
COMPARED TO THE YEAR ENDED DECEMBER 31, 2009

|                                                                              |  |                    |             |      |   |            |            |        |            |   |  |      |   
|----------------------------------------------------------------------------- |  | ------------------ | ----------- | ---- | - | ---------- | ---------- | ------ | ---------- | - |  | ---- | --
|                                                                              |  | For the year       |             |      |   |            |            |        |           
|                                                                              |  | Ended December 31, |             |      |   |            |            |       
|                                                                              |  |                    |             |      |   |            | Percentage |       
|                                                                              |  | 2010               |             | 2009 |   | Change     |            | Change |           
|                                                                              |  |                    |             |      |   |            |            |        |           
|Vessel revenue                                                                |  | $                  | 38,797,913  |      | $ | 27,619,041 |            | $      | 11,178,872 |   |  | 40   | % 
|Vessel operating costs                                                        |  |                    | (18,440,492 | )    |   | (8,562,118 | )          |        | (9,878,374 | ) |  | 115  | % 
|Voyage expenses                                                               |  |                    | (2,542,298  | )    |   |           |            |        | (2,542,298 | ) |  | 100  | % 
|Charterhire                                                                   |  |                    | (275,532    | )    |   | (3,072,916 | )          |        | 2,797,384  |   |  | (91  | %)
|Impairment                                                                    |  |                    |            |      |   | (4,511,877 | )          |        | 4,511,877  |   |  | (100 | %)
|Depreciation                                                                  |  |                    | (10,178,908 | )    |   | (6,834,742 | )          |        | (3,344,166 | ) |  | 49   | % 
|General and administrative
 expenses                                          |  |                    | (6,200,094  | )    |   | (416,908   | )          |        | (5,783,186 | ) |  | 1387 | % 
|Interest expensebank loan                                                    |  |                    | (3,230,895  | )    |   | (699,115   | )          |        | (2,531,780 | ) |  | 362  | % 
|Net realized and unrealized
 (loss)/gain on derivative financial
 instruments |  |                    | (279,560    | )    |   | 148,035    |            |        | (427,595   | ) |  | (289 | %)
|Interest income                                                               |  |                    | 36,534      |      |   | 4,929      |            |        | 31,605     |   |  | 641  | % 
|Other expense, net                                                            |  |                    | (508,766    | )    |   | (256,292   | )          |        | (252,474   | ) |  | 99   | % 
|                                                                              |  |                    |             |      |   |            |            |        |            |   |  |      |   
|Net (Loss)/income                                                             |  | $                  | (2,822,098  | )    | $ | 3,418,037  |            | $      | (6,240,135 | ) |  | (183 | %)
|                                                                              |  |                    |             |      |   |            |            |        |            |   |  |      |   

36

---



Net
Loss/income. For the year ended December 31, 2010,we incurred a net loss of $2.8 million,
compared to net income of $3.4 million for the year ended December 31, 2009.
The differences between the two periods are discussed below.

Vessel
revenue. Vessel
revenue was $38.8 million for the year ended December 31, 2010, an increase of
$11.2 million, or 40%, from vessel revenue of $27.6 million for the year ended
December 31, 2009. The following table summarizes our revenue:

|                          |  |                    |            |      |   |            |  |          |            |   |  |     |   
|------------------------- |  | ------------------ | ---------- | ---- | - | ---------- |  | -------- | ---------- | - |  | --- | --
|                          |  | For the year       |            |      |   |            |  |          |           
|                          |  | Ended December 31, |            |      |   |            |  |          |           
|                          |  |                    |            |      |   |            |  |          |           
|                          |  | 2010               |            | 2009 |   | Change     |  | % change |           
|                          |  |                    |            |      |   |            |  |          |           
|Owned vessels             |  |                    |            |      |   |            |  |          |            |   |  |     |   
|Time charter revenue      |  | $                  | 19,417,128 |      | $ | 17,203,709 |  | $        | 2,213,419  |   |  | 13  | % 
|Pool revenue              |  |                    | 15,179,603 |      |   | 7,438,726  |  |          | 7,740,877  |   |  | 104 | % 
|Voyage revenue            |  |                    | 3,916,529  |      |   |           |  |          | 3,916,529  |   |  | 0   | % 
|Time chartered-in vessels |  |                    |            |      |   |            |  |          |            |   |  |     |   
|Pool revenue              |  |                    | 284,653    |      |   | 2,976,606  |  |          | (2,691,953 | ) |  | (90 | %)
|                          |  |                    |            |      |   |            |  |          |            |   |  |     |   
|TOTAL                     |  | $                  | 38,797,913 |      | $ | 27,619,041 |  | $        | 11,178,872 |   |  | 40  | % 
|                          |  |                    |            |      |   |            |  |          |            |   |  |     |   

The
increase in time charter revenue of $2.2 million, or 13%, was the result of an
increase in the overall number of days of vessels on time charter from 693 in
2009 to 854 in 2010. This increase was driven by the acquisition of the STI Harmony and STI Heritage in June 2010, which were acquired with existing
time charter contracts that expired in September and December 2010,
respectively. These contracts, along with the time charter contracts for Noemi and Senatore
comprised the time charter revenue for 2010. The Noemi and Senatore,
which were under time charter arrangements beginning in 2007, comprised the
time charter revenue for 2009. The time charter contract for the Senatore expired in August 2010 and the
time charter contract for the Noemi
is scheduled to expire in December 2011. This increase was offset by a decrease
in the daily TCE rates from $24,824 per day in 2009 to $22,729 in 2010.

The
increase in pool revenue of $7.7 million, or 104%, was due to an increase in the
number of days that vessels were employed in the pools from 486 in 2009 to
1,205 in 2010. In 2009 the Venice and Noemi (which was under a time
charter in arrangement until May 2009) were the only vessels operating in the
pool (Scorpio Panamax Tanker Pool). In 2010, nine of our owned vessels and one
of our time chartered-in vessels operated in either the Scorpio Aframax,
Scorpio Panamax or Scorpio Handymax tanker pools. This increase was offset by
an overall decrease in daily TCE rates from $21,425 per day in 2009, to $12,833
per day in 2010.          The increase in voyage revenue is a result of an increase in
the number of days that our vessels operated in the spot market from 0 in 2009
to 177 in 2010. 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, the 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
reduction of pool revenue for time chartered-in vessels of $2.7 million, or
90%, was due to a reduction of time chartered-in operating days from 121 in
2009 to 20 in 2010. In 2009, the Noemi was time chartered-in for 121 days, while in 2010, the BW Zambesi was time chartered in for 20
days. Both vessels operated in the Scorpio Panamax Tanker Pool.

Vessel operating costs. Vessel operating costs for owned vessels of
$18.4 million for the year ended December 31, 2010, increased $9.9 million, or
115%, from $8.6 million for the year ended December 31, 2009. The increase is
the result of an additional 1,163 operating days in 2010 which was driven by
the purchase of seven additional vessels 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 from 0 in 2009 to 177 in 2010.
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, the 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.

Charterhire. Charterhire expense of $0.3 million for the
year ended December 31, 2010 decreased $2.8 million, or 91%, from $3.1 million
for the year ended December 31, 2009. The decrease was due to 101 less
operating days in the year ended December 31, 2010 and a reduction in the
charter-hire rate we paid on our time chartered-in vessels in 2010 compared to
2009. The BW Zambesi was
chartered in for a total of 20 days in 2010 at a charter-hire rate of $13,850
per day. The Noemi was
chartered-in by us for 121 days in 2009 at a charter-hire rate of $26,750 per
day plus a 50% profit and loss arrangement where we agreed to pay 50% of the
vessels earnings
in the pool above the daily charter-hire rate, and we would receive 50% of the
vessels earnings in the pool below $26,750 per day. For year ended December 31,
2009, we recorded a reduction in the charterhire expense of $108,000 because
the vessels earnings in the pool were less than $26,750 per day.

37

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Impairment. In the
year ended December 31, 2009, we recognized an impairment loss of $4.5 million
for Noemi and Senatore. 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. We determined the fair value of each vessel by adding (i) the charter
free market value of the vessel to (ii) the discounted value of each vessels
time charter, which is the difference between each vessels time charter
contracted rate and the market rate for a similar type of vessel with a similar
contracted duration. In determining the charter free market value, we took into
consideration the estimated valuations provided by an independent ship broker.
No impairments were recognized in the year ended December 31, 2010.

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 tend to 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.

Our
evaluation is performed on an individual vessel basis. The first step of our
impairment evaluation is to assess the fair value less cost to sell of our
vessels by obtaining vessel valuations from leading, independent and
internationally recognized ship brokers. We do this once each year. We then
compare the market values from the broker valuations (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
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.          All of our owned vessels were built within
the past ten years and delivered to us within the past seven years, with seven
of our ten owned vessels being delivered in the year ended December 31, 2010.
Thus, our fleet is relatively new. However, given the current and historical
volatility in market prices for similar vessels and recent downward pressure on
charter rates, the independent broker valuations we obtained in the current
year reflected potential indicators of impairment for six of our ten owned
vessels.

At
December 31, 2010, 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 six of our ten owned vessels. In line with our
policy, for each of the aforementioned six vessels we performed a value in use
calculation where we estimated the vessels 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), the ten year historical average
of charter rates in the shipping industry for periods thereafter, and our best
estimate of vessel operating expenses. These cash flows were then discounted to
their present value, using a discount rate 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 in all instances, which resulted in no
impairment being recognized. In addition, if the charter rates were adjusted
downward by 5% or the discount rate was increased by 1% the value in use of the
vessels would still have exceeded the carrying value of the six vessels in
question.

Illustrative
comparison of possible 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. As described above,
our accounting policy is such that while this is considered to be an impairment
triggering event, recoverable amount which considers value in use must also be
considered. In this regard, we have concluded that the value in use for our
vessels is higher than their carrying values and consequently, no impairment is
required.

The
table set forth below indicates (i) the carrying amount of each of our vessels as
of December 31, 2010, (ii) which of our vessels had a higher or lower carrying
value than vessel valuations we received from two shipping brokers, and (iii)
the aggregate difference
between the carrying amount and the market value represented by such vessels.
This aggregate difference represents the approximate analysis of the amount by
which we believe we would record a loss if we sold those vessels with a
carrying value higher than their vessel valuations, or a gain if we sold those
vessels with a carrying value lower than their vessel valuations, 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 current basic market values. However, we are not holding our
vessels for sale.

38

---



Our
estimates of basic market value assume 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.

|   |                |  |            |      |                                |   |       |    
|-- | -------------- |  | ---------- | ---- | ------------------------------ | - | ----- | ---
|   | Vessel Name    |  | Year Built |      | Carrying value (in $ millions) |  
|   |                |  |            |      |                                |  
|1  | Noemi          |  |            | 2004 |                                | $ | 37.4  | (1)
|2  | Senatore       |  |            | 2004 |                                |   | 35.7  | (2)
|3  | Venice         |  |            | 2001 |                                |   | 21.2  | (2)
|4  | STI Conqueror  |  |            | 2005 |                                |   | 26.1  | (1)
|5  | STI Harmony    |  |            | 2007 |                                |   | 44.5  | (1)
|6  | STI Heritage   |  |            | 2008 |                                |   | 44.2  | (2)
|7  | STI Matador    |  |            | 2003 |                                |   | 22.6  | (1)
|8  | STI Gladiator  |  |            | 2003 |                                |   | 22.7  | (1)
|9  | STI Highlander |  |            | 2007 |                                |   | 26.8  | (2)
|10 | STI Spirit     |  |            | 2008 |                                |   | 52.3  | (1)
|   |                |  |            |      |                                |   |       |    
|   | Total          |  |            |      |                                | $ | 333.5 |    
|   |                |  |            |      |                                |   |       |    

|    |                                                                                                                                                                                                                                                                                                                
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Indicates
 vessels for which we believe, as of December 31, 2010, the basic charter-free
 market value is lower than the vessels carrying value. We believe that the
 aggregate carrying value of these vessels exceeds their aggregate basic
 charter-free market value by approximately $5.5 million.       
|    |                                                                                                                                                                                                                                                                                                                
|(2) | Indicates
 vessels for which we believe, as of December 31, 2010, the basic charter-free
 market value is higher than the vessels carrying value. We believe that the
 aggregate carrying value of these vessels is less than their aggregate basic
 charter-free market value by approximately $14.6 million.

We
note that one of our vessels, the Noemi,
is currently employed under a long-term, time charter, which expires in
December 2011. If we sell this vessel with the charter attached, the sale price
may be affected by the relationship of the charter rate to the prevailing
market rate for a comparable charter with the same terms. In the case of the Noemi, we believe this is an above-market
time charter, and that if this vessel were sold with the charter attached, we
would receive a premium over its basic charter-free market value.

We
refer you to the risk factor entitled The market values of our vessels may
decrease, which could cause us to breach covenants in our credit facilities and
adversely affect our operating results and the discussion herein under the
heading Risks Related To Our Industry.

39

---



Depreciation. Depreciation
of $10.2 million for the year ended December 31, 2010 increased $3.3 million, or
49%, from $6.8 million for the year ended December 31, 2009. The increase in
depreciation expense was primarily due to an increase in our average number of
owned vessels from 3.00 in 2009 to 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. This change
will result in a decrease in depreciation expense of approximately $1.6 million
for each year prospectively until the 20 year anniversary date of the vessels
impacted by this change. It was also offset by an increase in the estimated
residual value due to changes in scrap rates since December 31, 2009. This
change resulted in a decrease in depreciation expense of $0.4 million in the year ended December
31, 2010, as compared to the depreciation which would have been recorded using
the estimated residual values prevailing at December 31, 2009. See discussion
of this change in estimate in Note 1 to the audited consolidated financial
statements included in ITEM 18 Financial Statements.

General
and administrative expense. General and
administrative expense, which includes the commercial management and
administrative fees, of $6.2 million for the year ended December 31, 2010,
increased $5.8 million, or 1,387%, from $0.4 million for the year ended
December 31, 2009. This increase is a result of incremental costs incurred to
operate as a public company. Specifically, general and administrative expenses
in 2010 were comprised of salaries of $2.4 million, restricted stock
amortization of $1.0 million, legal and professional fees of $0.9 million,
commercial management fees of $0.9 million, directors and officers insurance
and fees of $0.6 million and other related expenses. General and administrative
expenses in 2009 were comprised of commercial management fees of $0.3 million
and other related expenses.

Interest
expensebank loan. Interest expense-bank loan was
$3.2 million for the year ended December 31, 2010, an increase of $2.5 million
or 362% from $0.7 million for year ended December 31, 2009. The year ended
December 31, 2010 included interest expense of $2.6 million on the 2010 Credit
Facility and 2005 Credit Facility in addition to $0.5 million of lender
commitment fees on the undrawn portion of the 2010 Credit Facility and $0.1
million of other finance charges. The year ended December 31, 2009 included
interest expense on the 2005 Credit Facility.

Net
realized/unrealized (loss) on derivative financial instruments. Gain/(loss)
on derivatives from our interest rate swap, which consists of realized and
unrealized gains and losses, was a realized loss of $0.3 million for the year
ended December 31, 2010. For the year ended December 31, 2009, there was an
unrealized gain of $1.0 million offset by a realized loss of $0.8 million. The
unrealized gains and losses reflect the adjustment of the market value of the
swap (the contract rate versus the current market rate). 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 was terminated on April 9, 2010.

Interest
income. Interest income was $36,534 for the year
ended December 31, 2010, an increase of $31,605 or 641% from the $4,929 for the
year ended December 31, 2009. The increase was primarily due to an increase in
our cash balance during the period.

Other
expense, net. Other expense, net was a loss of
$508,766 for the year ended December 31, 2010, and a net loss of $256,292 for
the year ended December 31, 2009. The increase was primarily driven by expenses
incurred for the initial public offering in April 2010.

40

---



Results
of operations  segment analysis

Panamax/LR1
segment

The
following table summarizes vessel operations for our Panamax segment

|                                                                         |  |                    |             |      |   |                    |   |   |            |   |  |      |   
|------------------------------------------------------------------------ |  | ------------------ | ----------- | ---- | - | ------------------ | - | - | ---------- | - |  | ---- | --
|                                                                         |  | For the year       |             |      |   |                    |  
|Panamax/LR1 segment                                                      |  | Ended December 31, |             |      |   |                    |  
|                                                                         |  |                    |             |      |   | Percentage
 Change |  
|                                                                         |  | 2010               |             | 2009 |   | Change             |   |  
|                                                                         |  |                    |             |      |   |                    |   |   |           
|Vessel
 revenue                                                          |  | $                  | 29,344,505  |      | $ | 27,619,041         |   | $ | 1,725,464  |   |  | 6    | % 
|Vessel
 operating costs                                                  |  |                    | (12,363,968 | )    |   | (8,562,118         | ) |   | 3,801,850  |   |  | 44   | % 
|Voyage
 expenses                                                         |  |                    | (253,106    | )    |   |                   |   |   | 253,106    |   |  | (100 | %)
|Charterhire
 expense                                                     |  |                    | (275,532    | )    |   | (3,072,916         | ) |   | (2,797,384 | ) |  | (91  | %)
|Impairment                                                               |  |                    |            |      |   | (4,511,877         | ) |   | (4,511,877 | ) |  | (100 | %)
|Depreciation                                                             |  |                    | (7,493,632  | )    |   | (6,834,742         | ) |   | 658,890    |   |  | 10   | % 
|General and
 administrative expenses                                     |  |                    | (600,476    | )    |   | (416,908           | ) |   | 183,568    |   |  | 44   | % 
|Interest
 expense, net                                                   |  |                    | (133,708    | )    |   | (694,186           | ) |   | (560,478   | ) |  | (81  | %)
|Realized and
 unrealized (loss)/gain on derivative financial instruments |  |                    | (279,560    | )    |   | 148,035            |   |   | 427,595    |   |  | (289 | %)
|Other
 expense, net                                                      |  |                    | (4,420      | )    |   | (256,292           | ) |   | (251,872   | ) |  | (98  | %)
|                                                                         |  |                    |             |      |   |                    |   |   |            |   |  |      |   
|Segment
 profit                                                          |  | $                  | 7,940,103   |      | $ | 3,418,037          |   |   | 4,522,066  |   |  | 132  | % 
|                                                                         |  |                    |             |      |   |                    |   |   |            |   |  |      |   
|Time charter
 revenue per day                                            |  |                    | 22,729      |      |   | 24,824             |   |   | (2,095     | ) |  | (8   | %)
|Pool revenue
 per day                                                    |  |                    | 15,213      |      |   | 21,425             |   |   | (6,212     | ) |  | (29  | %)
|Voyage
 revenue per day                                                  |  |                    | 2,839       |      |   |                   |   |   | 2,839      |   |  | 100  | % 
|Operating
 costs per day                                                 |  |                    | 8,189       |      |   | 7,819              |   |   | 370        |   |  | 5    | % 
|                                                                         |  |                    |             |      |   |                    |   |   |            |   |  |      |   
|Time charter
 revenue days                                               |  |                    | 854         |      |   | 693                |   |   | 161        |   |  | 23   | % 
|Pool revenue
 days                                                       |  |                    | 634         |      |   | 486                |   |   | 148        |   |  | 30   | % 
|Voyage
 revenue days                                                     |  |                    | 10          |      |   |                   |   |   | 10         |   |  | 100  | % 
|Operating
 days                                                          |  |                    | 1,510       |      |   | 1,095              |   |   | 415        |   |  | 38   | % 
|                                                                         |  |                    |             |      |   |                    |   |   |            |   |  |      |   
|Average
 number of owned vessels                                         |  |                    | 4.14        |      |   | 3.00               |   |   | 1.14       |   |  | 38   | % 
|Average
 number of time chartered-in vessels                             |  |                    | 0.05        |      |   | 0.33               |   |   | (0.28      | ) |  | (85  | %)

Vessel
Revenue. The increase in revenue of $1.7 million,
or 6%, was the result of an increase in the overall number of total revenue
days from 1,179 days in 2009 to 1,499 days in 2010. This was driven by the
acquisition of the STI Harmony and STI Heritage in June 2010
which were acquired with existing time charter contracts that expired in
September and December 2010, respectively. These, along with the time charter
contracts with the Noemi and Senatore comprised the time
charter revenue for 2010. This is compared to 2009 where only the Noemi
and Senatore were under time charter arrangements beginning in 2007. The time charter
contract for the Senatore expired in August 2010 and the time charter
contract for the Noemi is scheduled to expire in December 2011.

The number
of days of vessels employed in the pool increased from 486 in 2009 to 634 in
2010. In 2010, four of our owned vessels and one of our time chartered-in
vessels operated in the Scorpio Panamax Tanker Pool. In 2009 the Venice and Noemi
(which was under a time charter-in arrangement) were the only vessels operating
in the pool (Scorpio Panamax Tanker Pool). The increase was offset by an
overall decrease in daily TCE rates from $21,425 per day in 2009, to $15,213
per day in 2010.

Vessel
operating costs. Vessel operating costs increased
as a result of an increase in the number of operating days from 1,095 in 2009
to 1,510 in 2010 which was driven by the purchase of the STI Harmony and STI Heritage
in the second quarter 2010.

Voyage
expenses. The increase in voyage expenses is a
result of the 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 $0.3 million for the year ended December 31, 2010 decreased $2.8
million, or 91%, from $3.1 million for the year ended December 31, 2009. The
decrease was due to 101 less operating days in the year ended December 31,
2010and a reduction in the charter-hire rate we paid on our time chartered-in
vessels in 2010 compared to 2009. The BW Zambesi was chartered in for a total of
20 days in 2010 at a charter-hire rate of $13,850 per day. The Noemi
was chartered-in by us for 121 days in 2009 at a charter-hire rate of $26,750
per day plus a 50% profit and loss arrangement where we agreed to pay 50% of
the vessels earnings in the pool above the daily charter-hire rate, and we
would receive 50% of the vessels earnings in the pool below $26,750 per day.
For the year ended December 31, 2009, we recorded a reduction in the
charterhire expense of $108,000 because the vessels earnings in the pool were
less than $26,750 per day.

Impairment. In the year ended December 31, 2009, we
recognized an impairment loss of $4.5 million for Noemi and Senatore,both
Panamax vessels. No impairment was recognized in 2010.

Depreciation. Depreciation
and amortization expense of $7.5 million for the year ended December 31,
2010, increased $0.7 million, or 10%, from $6.8 million for the year ended
December 31, 2009. The increase in depreciation expense was primarily due to an
increase in our average number of owned vessels from 3.00 in 2009 to 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. See discussion of these changes in Note 1 to the audited
consolidated financial statements included in ITEM 18 Financial Statements.

General
and administrative expense. General and administrative
expense of $0.6 million for the year ended December 31, 2010, increased $0.2
million or 44% from $0.4 million for the year ended December 31, 2009. 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 from 3.00 in 2009
to 4.14 in 2010. These fees are described in Note 14 to the audited
consolidated financial statements in ITEM 18 Financial Statements.

Interest
expense, net. Interest expense, net was $0.2
million for the year ended December 31, 2010, a decrease of approximately $0.6
million or 81% from $0.7 million for year ended December 31, 2009. Interest
expense for the Panamax/LR1 segment represents interest for the 2005 Credit Facility. Interest expense in 2010
represents only three months of interest as this facility was repaid in April
2010 while 2009 represents interest expense incurred for the entire year.

41

---





Net
realized/unrealized (loss) on derivative financial instruments. Gain/(loss)
on derivatives from our interest rate swap, which consists of realized and
unrealized gains and losses, was a realized loss of $0.3 million for the year
ended December 31, 2010. For the year ended December 31, 2009, there was an
unrealized gain of $1.0 million offset by a realized loss of $0.8 million. The
unrealized gains and losses reflect the adjustment of the market value of the
swap (the contract rate versus the current market rate). 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, was terminated on April 9, 2010.

Other
expense, net. Other expense, net was a loss of
$4,420 for the year ended December 31, 2010, and a net loss of $256,292 for the
year ended December 31, 2009. The change was primarily driven by expenses
incurred in 2009 for the initial public offering in April 2010. IPO related
expenses incurred in 2010 were not recorded as part of the Panamax/LR1 segment.

Aframax/LR2
segment

On
November 2010, we took delivery of the STI
Spirit, a 113,091 dwt Aframax/LR2 product tanker. From
delivery on November 10, 2010 through January 11, 2011, the 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. This is the only vessel operating in our
Aframax/LR2 segment. We did not have vessels operating in this segment in prior
years.

The
following table summarizes vessel operations for our Aframax segment.

|                                     |  |                    |          |  
|------------------------------------ |  | ------------------ | -------- | -
|                                     |  | For the year       |         
|Aframax/LR2 segment                  |  | Ended December 31, |         
|                                     |  |                    |         
|                                     |  | 2010               |         
|                                     |  |                    |         
|Vessel
 revenue                      |  | $                  | 641,278  |  
|Vessel
 operating costs              |  |                    | (426,788 | )
|Depreciation                         |  |                    | (293,211 | )
|General and
 administrative expenses |  |                    | (14,747  | )
|Interest
 income                     |  |                    | 778      |  
|                                     |  |                    |          |  
|Segment loss                         |  | $                  | (92,690  | )
|                                     |  |                    |          |  
|                                     |  |                    |          |  
|Pool revenue
 per day                |  |                    | 12,460   |  
|Operating
 costs per day             |  |                    | 8,293    |  
|                                     |  |                    |          |  
|Pool revenue
 days                   |  |                    | 51       |  
|Operating
 days                      |  |                    | 51       |  
|                                     |  |                    |          |  
|Average
 number of owned vessels     |  |                    | 0.14     |  

42

---



Handymax
segment

In June and
July 2010 we took delivery of the Handymax vessels STI Conqueror, STI Gladiator, STI
Matador and STI Highlander. These vessels operated in
the spot market prior to their entry in the Scorpio Handymax Tanker Pool for a
total of 167 days. These vessels currently comprise all of the vessels in our
Handymax operating segment. We did not have vessels operating in this segment in prior years.

The
following table summarizes vessel operations for our Handymax segment.

|                                     |  |                    |            |  
|------------------------------------ |  | ------------------ | ---------- | -
|                                     |  | For the year       |           
|Handymax segment                     |  | Ended December 31, |           
|                                     |  |                    |           
|                                     |  | 2010               |           
|                                     |  |                    |           
|Vessel
 revenue                      |  | $                  | 8,812,130  |  
|Vessel
 operating costs              |  |                    | (5,649,736 | )
|Voyage
 expenses                     |  |                    | (2,289,192 | )
|Charterhire
 expense                 |  |                    |           |  
|Depreciation                         |  |                    | (2,389,669 | )
|General and
 administrative expenses |  |                    | (266,509   | )
|Interest
 income                     |  |                    | 1,383      |  
|                                     |  |                    |           
|Segment loss                         |  | $                  | (1,781,593 | )
|                                     |  |                    |           
|                                     |  |                    |            |  
|Pool revenue
 per day                |  |                    | 9,965      |  
|Voyage
 revenue per day              |  |                    | 8,077      |  
|Operating
 costs per day             |  |                    | 8,107      |  
|                                     |  |                    |            |  
|Pool revenue
 days                   |  |                    | 520        |  
|Voyage
 revenue days                 |  |                    | 167        |  
|Operating
 days                      |  |                    | 697        |  
|                                     |  |                    |            |  
|Average
 number of owned vessels     |  |                    | 1.91       |  

43

---



RESULTS OF OPERATIONS FOR THE YEAR ENDED
DECEMBER 31, 2009 COMPARED TO THE YEAR ENDED DECEMBER 31, 2008

|                                                                             |  |                    |            |      |   |                    |   |   |             |   |  |       |   
|---------------------------------------------------------------------------- |  | ------------------ | ---------- | ---- | - | ------------------ | - | - | ----------- | - |  | ----- | --
|                                                                             |  | For the year       |            |      |   |                    |  
|                                                                             |  | Ended December 31, |            |      |   |                    |  
|                                                                             |  |                    |            |      |   | Percentage
 Change |  
|                                                                             |  | 2009               |            | 2008 |   | Change             |   |  
|                                                                             |  |                    |            |      |   |                    |   |   |            
|Vessel
 revenue                                                              |  | $                  | 27,619,041 |      | $ | 39,274,196         |   | $ | (11,655,155 | ) |  | (30   | %)
|Vessel
 operating costs                                                      |  |                    | (8,562,118 | )    |   | (8,623,318         | ) |   | 61,200      |   |  | (1    | %)
|Charterhire                                                                  |  |                    | (3,072,916 | )    |   | (6,722,334         | ) |   | 3,649,418   |   |  | (54   | %)
|Impairment                                                                   |  |                    | (4,511,877 | )    |   |                   |   |   | (4,511,877  | ) |  |      |   
|Depreciation                                                                 |  |                    | (6,834,742 | )    |   | (6,984,444         | ) |   | 149,702     |   |  | (2    | %)
|General and
 administrative expenses                                         |  |                    | (416,908   | )    |   | (600,361           | ) |   | 183,453     |   |  | (31   | %)
|Interest
 expensebank loan                                                  |  |                    | (699,115   | )    |   | (1,710,907         | ) |   | 1,011,792   |   |  | (59   | %)
|Net realized
 and unrealized gain/(loss) on derivative financial instruments |  |                    | 148,035    |      |   | (2,463,648         | ) |   | 2,611,683   |   |  | (106  | %)
|Interest
 income                                                             |  |                    | 4,929      |      |   | 35,492             |   |   | (30,563     | ) |  | (86   | %)
|Other
 expense, net                                                          |  |                    | (256,292   | )    |   | (18,752            | ) |   | (237,540    | ) |  | (1267 | %)
|                                                                             |  |                    |            |      |   |                    |   |   |             |   |  |       |   
|Net Income                                                                   |  | $                  | 3,418,037  |      | $ | 12,185,924         |   | $ | (8,767,887  | ) |  | (72   | %)
|                                                                             |  |                    |            |      |   |                    |   |   |             |   |  |       |   

Net
income. Net income for the year ended
December 31, 2009 was $3.4 million, a decrease of $8.8 million, or 72%,
when compared to net income of $12.2 million for the year ended
December 31, 2008. The differences between the two periods are discussed
below.

Vessel
revenue. Revenue was $27.6 million for the year
ended December 31, 2009, a decrease of $11.7 million, or 30%, from revenue
of $39.3 million for the year ended December 31, 2008. The following table
summarizes our revenue:

|                           |  |                    |            |      |   |            |  |          |             |   |  |     |   
|-------------------------- |  | ------------------ | ---------- | ---- | - | ---------- |  | -------- | ----------- | - |  | --- | --
|                           |  | For the year       |            |      |   |            | 
|                           |  | Ended December 31, |            |      |   |            | 
|                           |  |                    |            |      |   |            | 
|                           |  | 2009               |            | 2008 |   | Change     |  | % change |            
|                           |  |                    |            |      |   |            |  |          |            
|Owned
 vessels             |  |                    |            |      |   |            |  |          |             |   |  |     |   
|Time charter
 revenue      |  | $                  | 17,203,709 |      | $ | 18,293,963 |  | $        | (1,090,254  | ) |  | (6  | %)
|Pool revenue               |  |                    | 7,438,726  |      |   | 13,201,424 |  |          | (5,762,698  | ) |  | (44 | %)
|Time
 chartered-in vessels |  |                    |            |      |   |            |  |          |             |   |  |     |   
|Pool revenue               |  |                    | 2,976,606  |      |   | 7,778,809  |  |          | (4,802,203  | ) |  | (62 | %)
|                           |  |                    |            |      |   |            |  |          |            
|TOTAL                      |  | $                  | 27,619,041 |      | $ | 39,274,196 |  | $        | (11,655,155 | ) |  | (30 | %)
|                           |  |                    |            |      |   |            |  |          |            

The
reduction in time charter revenue of $1.1 million, or 6%, was primarily the
result of Noemiand Senatore both being drydocked in 2009. Noemi was drydocked in August 2009
(off-hire for 23 days), which reduced revenue by $0.6 million, and Senatore was drydocked in May 2009
(off-hire for 14 days), which reduced revenue by $0.4 million. Noemi and Senatore
were employed on time charters that began in 2007 for the years ended
December 31, 2009 and 2008.

The
reduction in pool revenue for the owned vessel Venice
of $5.8 million, or 44%, was due to a decrease in the spot market rates. The
majority of the vessels in the Scorpio Panamax Tanker Pool operate in the spot
market.

The
reduction of the pool revenue for time chartered-in vessels of $4.8 million, or
62%, was due to 95 less operating days in the year ended December 31, 2009
due to the termination of a time charter-in of a vessel that was chartered in
for the period of April 29, 2008 to May 1, 2009 and a decrease in spot
market rates, which resulted in a decrease in the pool rates.

Vessel
operating costs. Vessel operating costs for owned
vessels for the years ended December 31, 2009 and 2008 were $8.6 million
in each year; there were no significant changes in vessel operating costs from
one year to another.

44

---



Charterhire. Charterhire
expense of $3.1 million for the year ended December 31, 2009 decreased
$3.6 million, or 54%, from $6.7 million for the year ended December 31,
2008. The decrease was due to 95 less operating days in the year ended
December 31, 2009 due to the termination of a time charter-in vessel in
May 2009, and a reduction in the profit and loss arrangement included in the
charterparty. The vessel was chartered-in by us from May 29, 2008 to
May 1, 2009 at $26,750 per day plus a 50% profit and loss arrangement
where we agreed to pay 50% of the vessels earnings in the pool above the daily
charterhire rate, and we would receive 50% of the vessels earnings in the pool
below $26,750 per day. For the year ended December 31, 2009, we recorded a
reduction in charterhire expense of $108,000 because the vessels earnings in
the pool were less than $26,750 per day. For the year ended December 31,
2008, we recorded an increase in the charterhire expense of $1.0 million
because the vessels earnings in the pool were more than $26,750 per day.

Impairment. In
the year ended December 31, 2009, we recognized an impairment loss of $4.5
million for Noemi and Senatore. 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. We
determined the fair value of each vessel by adding (i) the charter free
market value of the vessel to (ii) the discounted value of each vessels
time charter, which is the difference between each vessels time charter
contracted rate and the market rate for a similar type of vessel with a similar
contracted duration. In determining the charter free market value, we took into
consideration the estimated valuations provided by an independent ship broker.

General
and administrative expense. General and
administrative expense, which includes commercial management and administrative
fees, of $0.4 million for the year ended December 31, 2009, decreased $0.2
million, or 31%, from $0.6 million for the year ended December 31, 2008.
This decrease in 2009 primarily resulted from the reduction in the
administrative fees charged by our managers.

Interest
expensebank loan. Interest expense-bank loan was
$0.7 million for the year ended December 31, 2009, a decrease of $1.0
million, or 59%, from $1.7 million for year ended December 31, 2008. The
decrease in interest expense was primarily due to a reduction in LIBOR and a
decrease in the principal outstanding during the periods the 2005 Credit
Facility was outstanding, which was paid in full from the proceeds of the
initial public offering. The average interest rate including margin decreased
to 1.70% for the year ended December 31, 2009 from 3.71% for the year
ended December 31, 2008. The average principal for the year ended
December 31, 2009 and 2008 was $41.6 million and $45.2 million,
respectively.

Gain/(loss)
on derivative financial instruments. Gain/(loss)
on derivatives from our interest rate swap, which consists of realized and
unrealized gains and losses, was a gain of $0.1 million for the year ended
December 31, 2009; there was an unrealized gain of $1.0 million offset by
a realized loss of $0.8 million. For the year ended December 31, 2008,
there was a loss on derivatives of $2.5 million, which was from an unrealized
loss of $2.1 million and a realized loss of $0.4 million. The unrealized gains
and losses reflect the adjustment of the market value of the swap (the contract
rate versus the current market rate). The realized loss is the result of the
settlement difference between contracted interest rates and the actual market
interest rates (LIBOR).

Interest
income. Interest income was $4,929 for the year
ended December 31, 2009, a decrease of $30,563, or 86%, from the $35,492
for the year ended December 31, 2008. The decrease was primarily due a
reduction in interest rates for our cash deposits and reduction in the cash balance.

Other
expense, net. Other expense, net was a loss of
$256,292 for the year ended December 31, 2009, and a loss of $18,752 for
the year ended December 31, 2008. This change was primarily the result of
sundry finance expenses and changes in foreign currency gains and losses.

Results
of operations  segment analysis

Panamax
segment

As
discussed in Note 1 to the consolidated financial statements in Item 18 below,
the Panamax/LR1 segment was our only operating segment in 2009 and 2008.
Therefore, all discussion regarding fluctuations in income statement account
line items between the periods can be obtained from the 2009 compared to 2008
consolidated results of operations discussion above.

45

---



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

|                                                                         |  |                    |            |      |   |                    |   |   |             |   |  |      |   
|------------------------------------------------------------------------ |  | ------------------ | ---------- | ---- | - | ------------------ | - | - | ----------- | - |  | ---- | --
|                                                                         |  | For the year       |            |      |   |                    |  
|Panamax/LR1 segment                                                      |  | Ended December 31, |            |      |   |                    |  
|                                                                         |  |                    |            |      |   | Percentage
 Change |  
|                                                                         |  | 2009               |            | 2008 |   | Change             |   |  
|                                                                         |  |                    |            |      |   |                    |   |   |            
|Vessel
 revenue                                                          |  | $                  | 27,619,041 |      | $ | 39,274,196         |   | $ | (11,655,155 | ) |  | (30  | %)
|Vessel
 operating costs                                                  |  |                    | (8,562,118 | )    |   | (8,623,318         | ) |   | (61,200     | ) |  | (1   | %)
|Charterhire
 expense                                                     |  |                    | (3,072,916 | )    |   | (6,722,334         | ) |   | (3,649,418  | ) |  | (54  | %)
|Impairment                                                               |  |                    | (4,511,877 | )    |   |                   |   |   | 4,511,877   |   |  | (100 | %)
|Depreciation                                                             |  |                    | (6,834,742 | )    |   | (6,984,444         | ) |   | (149,702    | ) |  | (2   | %)
|General and
 administrative expenses                                     |  |                    | (416,908   | )    |   | (600,361           | ) |   | (183,453    | ) |  | (31  | %)
|Interest
 expense, net                                                   |  |                    | (694,186   | )    |   | (1,675,415         | ) |   | (981,229    | ) |  | (59  | %)
|Realized and
 unrealized (loss)/gain on derivative financial instruments |  |                    | 148,035    |      |   | (2,463,648         | ) |   | (2,611,683  | ) |  | (106 | %)
|Other
 expense, net                                                      |  |                    | (256,292   | )    |   | (18,752            | ) |   | 237,540     |   |  | 1267 | % 
|                                                                         |  |                    |            |      |   |                    |   |   |             |   |  |      |   
|Segment
 profit                                                          |  | $                  | 3,418,037  |      | $ | 12,185,924         |   |   | (8,767,887  | ) |  | (72  | %)
|                                                                         |  |                    |            |      |   |                    |   |   |             |   |  |      |   
|                                                                         |  |                    |            |      |   |                    |   |   |             |   |  |      |   
|Time charter
 revenue per day                                            |  |                    | 24,824     |      |   | 36,049             |   |   | (11,225     | ) |  | (31  | %)
|Pool revenue
 per day                                                    |  |                    | 21,425     |      |   | 24,992             |   |   | (3,567      | ) |  | (14  | %)
|Operating
 costs per day                                                 |  |                    | 7,819      |      |   | 7,875              |   |   | (56         | ) |  | (1   | %)
|                                                                         |  |                    |            |      |   |                    |   |   |             |   |  |      |   
|Time charter
 revenue days                                               |  |                    | 693        |      |   | 732                |   |   | (39         | ) |  | (5   | %)
|Pool revenue
 days                                                       |  |                    | 486        |      |   | 582                |   |   | (96         | ) |  | (16  | %)
|Operating
 days                                                          |  |                    | 1,095      |      |   | 1,314              |   |   | (219        | ) |  | (17  | %)
|                                                                         |  |                    |            |      |   |                    |   |   |             |   |  |      |   
|Average
 number of owned vessels                                         |  |                    | 3.00       |      |   | 3.00               |   |   |            |   |  | 0    | % 
|Average
 number of time chartered-in vessels                             |  |                    | 0.33       |      |   | 0.59               |   |   | (0.26       | ) |  | (44  | %)

B.  Liquidity and Capital Resources

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
April 9, 2010, we repaid in full the outstanding balance of $38.9 million of
our 2005 Credit Facility from the proceeds of the initial public offering. On
May 4, 2010, we closed the issuance of 450,000 shares of common stock at $13.00
and received $5.2 million, after deducting underwriters discounts, when the
underwriters in the Companys initial public offering partially exercised their
over-allotment option.

On June 2,
2010, we executed our $150.0 million loan facility, the 2010 Credit Facility,
which is described below. During 2010 we drew the entire amount of the 2010
Credit Facility to partially finance the vessel acquisitions.

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 approximately $41.8 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. Additionally, 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.

The
remaining proceeds of our initial public offering and follow-on offering will
be used for working capital, general corporate expenses, and vessel
acquisitions.

On March 9,
2011, we executed a credit facility with DVB Bank SE (described below) for a
senior secured term loan facility for $27.3 million.

Our primary
source of funds for our short-term and long-term liquidity needs will be the
cash flows generated from our vessel operations, which are currently derived
from our time charter-out contract for the Noemi and the pool income from our
remaining vessels. Time charters provide contracted revenue that reduces the
volatility (rates can fluctuate within months) and seasonality (rates are
generally stronger in first and fourth quarters of the year) from vessels that
operate in the spot market. The 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. We believe these cash flows
from operations, 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, 2010, our cash balance was $68.2 million, which is up from our
cash balance of $0.4 million as of December 31, 2009. The increase in cash
balance was due to proceeds from our initial public offering in April 2010
along with the subsequent follow-on offering in November 2010 in addition to
the full draw down of our 2010 Credit Facility. These proceeds were offset by
the purchase of seven vessels throughout the year. For the year ended December
31, 2010, our net cash inflow from operating activities was $4.9 million, our
net cash outflow from investing activities was $245.6 million and the net cash
inflow from financing activities was $308.4 million. For the year ended
December 31, 2009, our net cash inflow from operating activities was $9.3
million and the net cash outflow from financing activities was $12.5 million,
which included a dividend $8.7 million.

46

---



As of
December 31, 2010, our long-term liquidity needs were comprised of our debt
repayment obligations for our 2010 Credit Facility and obligations under our
four time charter-in arrangements.

The 2010
Credit Facility and STI Spirit Credit Facility require us to comply with a
number of covenants, including financial covenants related to liquidity,
consolidated net worth, 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 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.

We have one
vessel which as of December 31, 2010, is scheduled to be drydocked within the
next 12 months for an estimated cost of $0.9 million.

Cash Flows

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

|                                                 |  |                    |              |      |   |             |   |   |             |  
|------------------------------------------------ |  | ------------------ | ------------ | ---- | - | ----------- | - | - | ----------- | -
|                                                 |  | For the Year Ended |             
|                                                 |  | December 31,       |             
|                                                 |  | 2010               |              | 2009 |   | 2008        |  
|                                                 |  |                    |              |      |   |             |  
|Condensed Cash Flows                             |  |                    |              |      |   |             |   |   |             |  
|Cash inflow from operating activities            |  | $                  | 4,906,478    |      | $ | 9,305,851   |   | $ | 24,837,892  |  
|Cash outflow from investing activities           |  |                    | (245,594,809 | )    |   |            |   |   |            |  
|Cash inflow/(outflow) from financing
 activities |  |                    | 308,430,737  |      |   | (12,468,990 | ) |   | (22,384,000 | )

Cash flows for the year ended December 31,
2010 compared to the year ended December 31, 2009

Cash
inflow from operating activities

Net cash
inflow from operating activities was $4.9 million for the year ended December
31, 2010, which was a decrease of $4.4 million from the year ended December 31,
2009. The primary reasons for the decrease were (i) an increase in vessel
operating expenses of $9.9 million, (ii) an increase in voyage expenses of $2.5
million (iii) an increase in general and administrative expenses of $5.8
million, (iv) an increase in interest expense of $2.5 million, (v) a net
increase in other assets and liabilities of $7.5 million and (vii) an interest
rate swap termination payment of $1.9 million. These increases were offset by
(i) an increase in vessel revenue of $11.2 million, (ii) a decrease in charter
hire expense of $2.8 million, (iii) a decrease of realized losses on derivative
financial instruments of $0.5 million, (iv) a decrease in drydock payments of
$0.6 million, (v) a decrease of shareholder receivables $3.9 million, (vi) a
one-time payment to shareholders of $3.2 million in 2009 and (vii) non-cash
amortization expense of $3.3 million (relating to the amortization of acquired
time charter contracts of $2.3 million and restricted stock amortization of
$1.0 million which is included in the change in vessel revenue and general and
administrative expenses above).

Cash
outflow from investing activities

Cash
outflow from investing activities was $245.6 million for the year ended
December 31, 2010; no cash was used for investing activities in the year ended
December 31, 2009. This increase is entirely attributable to the cash payments
for the purchase and delivery of three vessels in June 2010, two vessels in
July 2010, one vessel in August 2010 and one vessel in November 2010.

| |  |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| |  | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  |  | Two of the tankers delivered in June 2010 are LR1 ice class 1A sister
 ships, STI Harmony and STI Heritage, and were acquired for an
 aggregate price of $92.9 million (including a 1% commission paid to Liberty,
 a related party administrator), which included an estimated $2.3 million
 related to the value of the existing time charter contracts. The third vessel
 delivered in June 2010 was the STI
 Conqueror, which is a Handymax ice class 1B ship, and was acquired
 for $26.3 million (including a 1% commission paid to Liberty, a related party
 administrator).
| |  |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| |  |  | The vessels delivered in July 2010 were the STI Matador and STI Gladiator which are Handymax vessels
 and were acquired for an aggregate price of $46.4 million (including a 1%
 commission paid to Liberty, a related party administrator).                                                                                                                                                                                                                                                                                                                                       
| |  |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| |  |  | The vessel delivered in August 2010, the STI Highlander, which is a Handymax vessel was acquired
 for a purchase price of $27.3 million (including a 1% commission paid to
 Liberty, a related party administrator).                                                                                                                                                                                                                                                                                                                                                               

47

---



| |  |   |                                                                                                                                                                                                         |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| |  | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  |  | The vessel acquired in November
 2010, the STI Spirit, an LR2
 Aframax product tanker for a purchase price of $52.7 million(including a 1%
 commission paid to Liberty, a related party administrator).
| |  |   |                                                                                                                                                                                                         |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| |  |   |                                                                                                                                                                                                         | o | The agreement also included two purchase options with the seller.
 Each option grants us the right, but not the obligation, to purchase a 2008
 built LR1 ice class-1A product tanker (approximately 63,600 dead weight tons)
 for a price of $45.0 million. Each option can be exercised at any time until
 September 2011. The combined fair value of the two options has been estimated
 at $126,337. The fair value of the options has been reflected as part of
 other assets and the options will be expensed through the income statement if
 they are impaired or expire unexercised.

Cash
inflow from/(outflow from) financing activities

Cash flow
from financing activities was an inflow $308.4 million for the year ended
December 31, 2010, and an outflow of $12.5 million for the year ended December
31, 2009 representing a $320.9 million increase in cash flow compared to the
prior year. This increase was due to the net proceeds of the initial public
offering of $154.8 million, proceeds from the issuance of long-term debt under
the 2010 Credit Facility of $150.0 million and net proceeds from the follow-on
offering in November 2010 of $53.2 million offset by principal payments on the
2010 Credit Facility of $4.8 million, the repayment of the 2005 Credit Facility
of $39.8 million, payment of deferred financing fees under the 2010 Credit Facility
of $2.2 million and the acquisition of treasury shares of $2.6 million. Cash
outflow from financing activities for the year ended December 31, 2009 was
attributable to dividends paid of $8.6 million, bank loan repayments of $3.6
million and the payment expenses related to the initial public offering of $0.3
million.

Cash flows for the year ended December 31,
2009 compared to the year ended December 31, 2008

Cash
inflow from operating activities

Net cash
inflow from operating activities was $9.3 million for the year ended December
31, 2009, which was a decrease of $15.5 million from the year ended December
31, 2008. The primary reasons for the decrease were (i) lower revenues from the
vessels in the pool ($10.6 million), (ii) 37 off-hire days for two of the
vessels that were in drydock during 2009 ($1.0 million); changes in the
shareholder receivable and payable ($7.7 million) and (iii) drydock payments
for two of our vessels that were performed in 2009 ($1.6 million). These
reductions were partially offset by (i) a decrease in the charterhire expense
($3.6 million), and (ii) changes in other assets and liabilities ($1.8
million).

Cash
flow from investing activities

There was
no cash used in investing activities for either of the periods.

Cash
outflow from financing activities

Cash
outflow from financing activities was $12.5 million for the year ended December
31, 2009, which was $9.9 million less than the cash used for the year ended
December 31, 2008. This decrease was due to a reduction in dividends paid of
$10.1 million ($8.7 million for the year ended December 31, 2009 and $18.8
million in the year ended December 31, 2008). During the years ended December
31, 2009 and 2008, we made scheduled principal payments on our debt of $3.6
million.

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 $56,000,000 and consisted of two tranches, one for
each vessel-owning subsidiary. Each tranche was repayable in 40 consecutive
quarterly installments of $450,000, plus a balloon payment of $10,000,000, to
be made together with the 40th installment of each tranche. The 2005
Credit Facility was due to mature on May 18, 2015. The interest rate on the
loan was 0.70% above LIBOR. As of December 31, 2009, the outstanding balance
was $39.8 million, with $3.6 million due within the next 12 months. As of
December 31, 2009, we were in compliance with all of our loan covenants. 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
Credit Facility

On June 2,
2010, 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 Fortis Bank Nederland, or the lead arrangers, for a senior secured
term loan facility of up to $150 million. Drawdowns under the credit facility
were available until December 2, 2011 and bear interest 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%. 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 15, 2015 and can only be used to partially finance the cost of vessel acquisitions
where the acquired vessels would then become collateral for the credit facility.

48

---



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 fifteen years of age. Our
subsidiaries, which may at any time own one or more of our initial vessels,
will act as guarantors under the credit facility. This facility was fully drawn
as of December 31, 2010. The amount outstanding at that date of $145.2 million
reflects principal payments made at September 30, 2010 and December 31, 2010.

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;
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 debt to capitalization shall be no greater than 0.60 to
 1.00.                                                                                                                                                                                                                                                                                                                                                                              
| |  |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| |  | * | Consolidated tangible net worth 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 75% of the value of any
 new equity issues from July 1, 2010 going forward.                                                                                                                                                                     
| |  |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| |  | * | The ratio of EBITDA to actual interest expense shall be no less than
 2.50 to 1.00 commencing with the fifth fiscal quarter following the closing
 of the credit facility. Such ratio shall be calculated quarterly on a
 trailing quarter basis from and including the fifth fiscal quarter however
 for the ninth fiscal quarter and periods thereafter the ratio shall be
 calculated on a trailing four quarter basis.                               
| |  |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| |  | * | Unrestricted cash and cash equivalents including amounts on deposit
 with the lead arrangers for the first five fiscal quarters following the
 closing of our initial public offering shall at all times be no less than the
 higher of (i) US$ 2,000,000 per vessel or (ii) US$ 10,000,000 and thereafter
 unrestricted cash and cash equivalents shall at all times be no less than the
 higher of (i) US$ 1,000,000 per vessel or (ii) US$ 10,000,000.
| |  |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| |  | * | 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.                                                                                                                                                                                                                                                               

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 with the STI Spirit as collateral, which was acquired on November 10, 2010. The
credit facility has a maturity date of seven years after the drawdown date, and
the loan bears interest at LIBOR plus a margin of 2.75% per annum. A commitment
fee equal to 1.50% per annum is calculated on the undrawn loan from the date of
execution. The credit facility may only be used to finance the STI Spirit. The loan will be repaid over
28 equal quarterly installments and a lump sum payment at maturity. The
quarterly installments, which commence three months after the drawdown, are
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. This credit facility was fully drawn on March
17, 2011.

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;
restrictions on consolidations, mergers or sales of assets; approval on changes
in the Manager; 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 which pertain to Scorpio Tankers Inc. include:

| |  |   |                                                                                                                                                                                                                                                                                                                                                                               
| |  | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | * | The ratio of debt to capitalization shall be no greater than 0.60 to
 1.00.                                                                                                                                                                                                                                                                                                   
| |  |   |                                                                                                                                                                                                                                                                                                                                                                               
| |  | * | Consolidated tangible net worth shall be no less than US$ 150,000,000
 plus 25% of cumulative positive net income (on a consolidated basis) for each
 fiscal quarter.                                                                                                                                                                                                         
| |  |   |                                                                                                                                                                                                                                                                                                                                                                               
| |  | * | The ratio of EBITDA to actual interest expense shall be no less than
 2.50 to 1.00 commencing with the third fiscal quarter of 2011. Such ratio
 shall be calculated quarterly on a trailing quarterly basis from and
 including the third fiscal quarter of 2011 until the third fiscal quarter of 2012 when
 the ratio shall be calculated on a trailing four quarter basis.

49

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| |  |   |                                                                                                                                                                                                                                                                                                                           
| |  | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | * | Unrestricted cash and cash equivalents shall be no less than the
       higher of (i) US$500,000 per vessel at all times or (ii) US$10,000,000 during
       the earlier of the first five fiscal quarters after the first drawdown date
      or the third fiscal quarter of 2011.                                       
| |  |   |                                                                                                                                                                                                                                                                                                                           
| |  | * | The aggregate fair market value of the collateral vessels 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.

Interest
Rate Swaps

As of
December 31, 2009, we had one interest rate swap. The notional value was $19.9
million, and the effective fixed interest rate was 4.79%. The swap began in May
2005 and was scheduled to end in May 2015. The interest rate swap was
terminated when the 2005 Credit Facility was repaid in April 2010. We had no
interest rate swaps in place as of December 31, 2010. In the future, we may
enter into interest rate swaps to manage our exposure interest rates.

CAPITAL EXPENDITURES

Vessel acquisitions

In the
first half of June 2010, we took delivery of three product tanker vessels that
we previously agreed to acquire. STI
Conqueror, a Handymax ice class 1B ship, was acquired for $26.0
million and trades in the Scorpio Handymax Tanker Pool. STI Harmony and STI Heritage, LR1 ice class 1A sister ships, were acquired
for an aggregate price of $92.0 million, which included $2.3 million for the
value of the existing time charter contracts. The value of the time charter
contracts is amortized as a reduction to vessel revenue over the remaining life
of the time charter contracts. STI Harmony
and STI Heritage entered the
Scorpio Panamax Tanker Pool upon the completion of their time charters in
September 2010 and December 2010, respectively.           In July 2010, we took delivery
of three Handymax tankers, STI Matador,
STI Gladiator and STI Highlander for an aggregate price of
$73.0 million. These vessels trade in the Scorpio Handymax Tanker Pool.

In November
2010, we took delivery of an LR2 Aframax product tanker, STI Spirit, for which we paid a purchase
price of $52.2 million.           Additionally, we capitalized $2.4 million as part of
these vessel purchases for the 1% fee of the gross purchase or sale price that
we pay our Administrator upon the consummation of any such purchase or sale.

Drydock

The Noemi and Senatore
were drydocked in 2009 for an aggregate cost of $1.6 million and 37 off-hire
days, and Venice received an underwater
survey in 2009. The STI HeritageandSTI Conqueror were drydocked in the third
quarter of 2010. The aggregated drydock cost for the two vessels was $0.9
million. The aggregate offhire for both vessels was 24 days. The Venice is scheduled to be drydocked in
2011 for an estimated cost of $0.9 million.

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 buy-back program of $20
million. As of December 31, 2010, we have repurchased 244,146 of its shares at
an average price per share of $10.85. See Item 16.E for further information.

C.
Research and Development, Patents and Licenses, Etc.

Not applicable.

50

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D.
Trend Information

See ITEM 4.B The International Tanker Industry.

E.
Off-Balance Sheet Arrangements

As of
December 31, 2010, we were committed to make charter-hire payments to third
parties for certain chartered-in vessels. These arrangements are accounted for
as operating leases.

F.
Tabular Disclosure of Contractual Obligations

The
following table sets forth our total contractual obligations at December 31,
2010 (1):

|                                |  |                   |            |               |   |               |  |                    |             |  |   |   | 
|------------------------------- |  | ----------------- | ---------- | ------------- | - | ------------- |  | ------------------ | ----------- |  | - | - | 
|                                |  | in millions of $  |           
|                                |  |                   |           
|                                |  | Less than
 1 year |            | 1 to 3
 years |   | 3 to 5
 years |  | More than
 5 years |            
|                                |  |                   |            |               |   |               |  |                    |            
|Bank Loan(1)                    |  | $                 | 16,271,020 |               | $ | 32,542,040    |  | $                  | 96,361,522  |  | $ |  | 
|Bank
 LoanInterest payments(2) |  |                   | 7,077,971  |               |   | 11,596,800    |  |                    | 5,515,248   |  |   |  | 
|Time
 charter-in commitment(3)  |  |                   | 16,542,140 |               |   | 787,323       |  |                    |            |  |   |  | 
|Technical
 management fees(4)   |  |                   | 2,000,000  |               |   | 1,833,333     |  |                    |            |  |   |  | 
|Commercial
 management fees(5)  |  |                   | 91,250     |               |   | 5,250         |  |                    |            |  |   |  | 
|                                |  |                   |            |               |   |               |  |                    |             |  |   |   | 
|Total                           |  | $                 | 41,982,381 |               | $ | 46,764,746    |  | $                  | 101,876,770 |  | $ |  | 
|                                |  |                   |            |               |   |               |  |                    |             |  |   |   | 

| |     |                                                                                                                                                                                                                                                                                                                                                                                
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    
| |     |                                                                                                                                                                                                                                                                                                                                                                                
| | (1) | On June 2, 2010, we executed a new $150 million credit facility to
 partially finance the acquisition of new vessels. As of December 31, 2010, we
 have drawn down the full amount of this credit facility and made principal
 payments of $4.8 million.                                                                                                                       
| |     |                                                                                                                                                                                                                                                                                                                                                                                
| | (2) | The interest expense on our loan is variable and based on LIBOR. The
 payments in the above schedule were calculated using a 5 year interest swap
 rate of 2.20% (as published by the US Federal Reserve as of December 31,
 2010) plus a margin of 3.00%, which is the margin for the 2010 Credit
 Facility so long as our debt to capitalization ratio remains less than 50%.
| |     |                                                                                                                                                                                                                                                                                                                                                                                
| | (3) | Represents amounts due under our Time Charter-In arrangement for the BW Zambesi, Kraslava, Krisjanis Valdemars
 and Histria Azure.                                                                                                                                                                                                                                             
| |     |                                                                                                                                                                                                                                                                                                                                                                                
| | (4) | We pay our technical manager, SSM, $548 per day per owned vessel.                                                                                                                                                                                                                                                                                                              
| |     |                                                                                                                                                                                                                                                                                                                                                                                
| | (5) | We pay our commercial manager, SCM, $250 per day per owned vessel
 plus 1.25% of gross revenue for vessels that are not in a pool. This amount
 represents the estimated minimum commercial management fees for the Noemi, which is under a time charter-out
 contract until December 2011.                                                                                    
| |     |                                                                                                                                                                                                                                                                                                                                                                                

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 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 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 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
year ended December 31, 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. Since, at the time of
discharge, management generally knows the next load port and expected discharge
port, the discharge-to-discharge calculation of spot voyage revenues can be
estimated with a greater degree of accuracy.

51

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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. In 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 recognizing 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 lower of
fair value less cost to sell and value in use.

At December
31, 2010, the carrying amounts of our vessels were greater than the independent
broker valuation (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 where we estimated the vessels 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), the ten year historical average
of charter rates in the shipping industry for periods thereafter, and our best
estimate of vessel operating expenses. These cash flows were then discounted to
their present value, using a discount rate 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 in all instances, which resulted in no
impairment being recognized. In addition, if the charter rates were adjusted
downward by 5% or the discount rate was increased by 1% the value in use of the
vessels would still have exceeded the carrying value of the six vessels in
question.

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. 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. See the Changes in accounting estimates section in Note 1 to the
Consolidated Financial Statements included in Item 18, Financial Statements,
for a discussion of changes in the residual values during the period.           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.

52

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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 initial term of office of
each director is as follows: Two will serve for a term expiring at the 2011
annual meeting of shareholders, two will serve for a term expiring at the 2012
annual meeting of shareholders, and one will serve for a term expiring at the
2013 annual meeting of the 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 Mr. Bugbee, our Chief Executive
Officer and President, respectively, are involved in other business activities
with members of the Scorpio Group, which may result in their spending less time
than is appropriate or necessary to manage our business successfully. We
estimate that Messrs. Lauro and Bugbee spend approximately 70-85% of their
monthly business time on our business activities and their remaining time on
the business of members of the Scorpio Group. However, the actual allocation of
time could vary significantly from time to time depending on various
circumstances and needs of the businesses, such as the relative levels of
strategic activities of the businesses. 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.

|                    |  |     |  |                                                         
|------------------- |  | --- |  | --------------------------------------------------------
|Name                |  | Age |  | Position                                                
|                    |  |     |  |                                                         
|Emanuele A.
 Lauro  |  | 32  |  | Chairman,
 Class I Director, and Chief Executive Officer
|Robert
 Bugbee      |  | 50  |  | President
 and Class II Director                        
|Brian Lee           |  | 44  |  | Chief
 Financial Officer                                
|Cameron
 Mackey     |  | 42  |  | Chief
 Operating Officer                                
|Luca
 Forgione      |  | 34  |  | General
 Counsel                                        
|Sergio
 Gianfranchi |  | 66  |  | Vice
 President, Vessel Operations                      
|Alexandre Albertini |  | 34  |  | Class III
 Director                                     
|Ademaro Lanzara     |  | 67  |  | Class I
 Director                                       
|Donald C.
 Trauscht |  | 76  |  | 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, Chairman and Chief Executive Officer, 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 an operator or manager of approximately 67 vessels in
2011. Over the course of the last six years, Mr. Lauro has founded and
developed the Scorpio Aframax Tanker Pool, Scorpio LR2 Pool, Scorpio Panamax
Tanker Pool and the Scorpio Handymax Tanker Pool. He also founded Scorpio
Logistics in May 2007, a company
within the Scorpio Group which owns and operates specialized assets engaged in
coal transshipment in Indonesia and which engages in strategic investments in
coastal shipping and port development in India. Furthermore, Mr. Lauro formed a
joint venture with Koenig &cie., Scorship Navigation, in August 2005 which
engages in the identification, placement, and management of certain
international shipping investments on behalf of German investors. Mr. Lauro has
a degree in international business from the European Business School, London,
and he has served as the Vice President of the Chamber of Shipping of Monaco
since 2006.

Robert Bugbee,President and
Director

Robert Bugbee, our President, has more than 25 years of experience in
the shipping industry. 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) in from London
University.

Brian Lee,Chief Financial Officer

Brian Lee,
our Chief Financial Officer, joined Scorpio Group in April 2009. In June 2009,
he became the Scorpio Groups Controller. 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.

53

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Cameron Mackey,Chief Operating
Officer

Cameron
Mackey, our Chief Operating Officer, joined Scorpio Group in March 2009, where
he has served as Chief Operating Officer. 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.

Luca Forgione,General Counsel

Luca
Forgione, our General Counsel, joined Scorpio Group in August 2009 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 six 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, our Vice President of Vessel Operations, 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s Panamax, Handymax and Aframax 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 shipowning 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 is also a director of Istituto dellEnciclopedia Italiana fondata
da Giovanni Treccani Spa, Rome. 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 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

54

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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.

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 EyesForLearning 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 $3.0 million to our senior executive officers
in 2010 for the period April 6, 2010 to December 31, 2010. For the period April
6, 2010 through December 31, 2010 executive management remuneration was as
follows:

|                                         |  |                   |           | 
|---------------------------------------- |  | ----------------- | --------- | 
|                                         |  | As of December 31 |          
|                                         |  |                   |          
|                                         |  | 2010              |          
|                                         |  |                   |          
|                                         |  |                   |           | 
|Short term
 employee benefits (salaries) |  | $                 | 2,059,907 | 
|Share-based
 compensation (1)            |  |                   | 922,123   | 
|                                         |  |                   |           | 
|Total                                    |  | $                 | 2,982,030 | 
|                                         |  |                   |           | 

| |     |                                                                                                                                                         
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------
| | (1) | Represents restricted stock issued under the 2010 Equity Incentive
 Plan. See Note 13 in the consolidated financial statements for further
 description.

Each of our
non-employee directors receive annual 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. We paid an
aggregate compensation of $0.3 million to our directors in 2010 for the period
April 6, 2010 to December 31, 2010. 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 consist of equity interests in the Company in order to provide them
on an on-going basis with a meaningful percentage of ownership in the Company.

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

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 vest 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

55

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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.

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

We have
agreed to enter 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 will be
prohibited from disclosing or unlawfully using any of our material confidential
information.

Upon a
change in control of the Company, 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.

56

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D.
Employees

As
of December 31, 2010, we had seven employees. The commercial and operational
responsibility of the Company was administered by SSM and SCM.

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)                          |  | 465,151        |  |         | 1.9 | % | 
|Robert
 Bugbee (2)                             |  | 563,958        |  |         | 2.3 | % | 
|Cameron
 Mackey (3)                            |  | 269,246        |  |         | 1.1 | % | 
|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.                                  
| |     |                                                                                                                    
| | (3) | Includes 145,108 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.

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 |     
|                                                                                                            |  |                |  |         |     
|Steelhead Partners, LLC; James Michael
 Johnston; Brian Katz Klein and Steelhead Navigator Master, L.P. (1) |  | 2,961,700      |  |         | 11.9 | % | 
|Annalisa Lolli-Ghetti (2)                                                                                   |  | 2,280,101      |  |         | 9.1  | % | 
|Giovanna Lolli-Ghetti (2)                                                                                   |  | 1,863,049      |  |         | 7.5  | % | 
|Maria Amelia Lolli-Ghetti (2)                                                                               |  | 1,863,049      |  |         | 7.5  | % | 
|Kensico Capital Management Corporation,
 Michael Lowenstein and Thomas J. Coleman (3)                       |  | 1,797,794      |  |         | 7.2  | % | 
|Robeco Investment Management, Inc. (4)                                                                      |  | 1,573,732      |  |         | 6.3  | % | 
|Robert Bugbee (5)                                                                                           |  | 563,958        |  |         | 2.3  | % | 
|Emanuele A. Lauro (2) (5)                                                                                   |  | 465,151        |  |         | 1.9  | % | 
|Cameron Mackey (5)                                                                                          |  | 269,246        |  |         | 1.1  | % | 
|All other officers and directors
 individually (5)                                                          |  | *              |  |         | *    |   | 

| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (1) | This
 information is based on the Schedule 13G/A filed jointly by Steelhead
 Partners, LLC; James Michael Johnston; Brian Katz Klein and Steelhead
 Navigator Master, L.P. on November 19, 2010. Steelhead Navigator Master, L.P.
 reports ownership of 2,911,700 shares of common stock, representing 11.7% of
 our issued and outstanding shares as of the date of this annual report.                                                                                                                                           
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| | (2) | Denotes members of the Lolli-Ghetti family. In January 2011, Scorpio
 Owning Holding Ltd. distributed its shares in Scorpio Tankers Inc. (via a
 dividend) to the shareholders of Liberty, which is 97% owned by members of
 the Lolli-Ghetti family, of which our CEO and Chairman is a member. The
 holdings of Maria Amelia Lolli-Ghetti, Giovanna Lolli-Ghetti and Annalisa
 Lolli-Ghetti are derived from the Schedule 13Gs filed with the SEC on
 February 17, 2011, February 17, 2011, and February 25, 2011, respectively.

57

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| |     |                                                                                                                                                                         
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (3) | This
 information is based on the Schedule 13G filed jointly by Kensico Capital
 Management Corporation, Michael Lowenstein and Thomas J. Coleman on November
 24, 2010.
| |     |                                                                                                                                                                         
| | (4) | This
 information is based on the Schedule 13G filed by Robeco Investment
 Management, Inc. on February 4, 2011.                                                        
| |     |                                                                                                                                                                         
| | (5) | Includes shares
 of restricted stock issued pursuant to our 2010 Equity Incentive Plan.                                                                                 
| |     |                                                                                                                                                                         
| | *   | The
 remaining officers and directors individually each own less than 1% of our
 outstanding shares of common stock.                                                    
| |     |                                                                                                                                                                         
| | B.  | Related Party Transactions                                                                                                                                              

Administrative Services Agreement

Liberty
Holding Company Ltd., which we refer to as our Administrator, is a Scorpio
Group affiliate which provides us with administrative services pursuant to an
administrative services agreement. 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. Our Administrator will also arrange vessel sales and purchases
for us. Further, pursuant to our administrative services agreement, Liberty, 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 our Administrator will sub-contract many of its
responsibilities to other entities within the Scorpio Group.

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.

Commercial and Technical Management
Agreements

As our
commercial and technical managers, SCM and SSM provide us with commercial and
technical services pursuant to their respective commercial and technical
management agreements with us. We expect to enter into similar agreements with
respect to each vessel we acquire going forward. Commercial management services
include securing employment, on both spot market and time charters, for our
vessels. Where we plan to employ a vessel on the spot charter market, we intend
to generally place such vessel in a tanker pool managed by our commercial
manager that pertains to that vessels size class. Technical management
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 pay our managers fees for these services and reimburse
our managers for the reasonable direct or indirect expenses they incur in
providing us with these services.

We pay
management fees to our commercial manager, SCM, a related party within the
Scorpio Group. In the years ended December 31, 2009 and 2008, certain of
the expenses incurred for commercial management services were under management
agreements with other Scorpio Group entities, which were also related parties.
Since agreements with related parties are by definition not at arms 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 the
historical combined financial statements included elsewhere in this filing. In
December 2009, we entered into new commercial management agreements with SCM
for each of our vessels, each for a period of three years and which may be
terminated upon two years notice. Pursuant to these agreements, since
December 1, 2009, we pay SCM as our commercial manager a fee of $250 per
vessel per day for each post-Panamax/LR1/LR2 vessels and $300 per vessel per
day for each Handymax vessel, plus a 1.25% commission per charter fixture when
SCM provides commercial management services for vessels that are not in any of
the Scorpio Group pools. The Scorpio Aframax Tanker Pool, Scorpio LR2 Pool,
Scorpio Panamax Tanker Pool and Scorpio Handymax Tanker Pool participants collectively
pay SCMs agent fee of $250 per vessel per day, with respect to
post-Panamax/LR1/LR2 vessels, or $300 per vessel per day, with respect to
Handymax vessels, plus a 1.25% commission per charter fixture. These are the
same fees that SCM charges other vessels in these pools, including third party
owned vessels.

Additionally,
we pay our technical manager, SSM, also a related party within the Scorpio
Group, $548 per vessel per day to provide technical management services for
each of our vessels. New technical services agreements were signed for each of
our vessels in December 2009 at rates similar to the rates under the previous
agreements, which were the rates that SSM charged to third parties at the time
the agreement was signed.

58

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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. Where
we plan to employ a vessel in the spot charter market, we intend to 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 three pools: the Scorpio LR2 Tanker Pool, the Scorpio
Panamax 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 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 97% of all
issued and outstanding stock of SLR2P, SPTP 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 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.

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 members of the Lolli-Ghetti
family and manages their shipping interests. On October 1, 2009, (i) Simon
transferred three operating subsidiary companies to us, which owned the vessels
in our fleet consisting of the Venice,
Senatoreand Noemi; (ii) Liberty Holding Company Ltd.,
or 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 the Scorpio Groups logistics operations in
Southeast Asia, owning an offshore floating terminal, vessel pools, chartered-in
vessels, and interests in joint ventures and investments. As of December 31,
2010, Scorpio Group and its affiliates, through Scorpio Owning Holding Ltd.,
owned 22.7% of the outstanding shares of our common stock, which represent
22.7% of the voting and economic interest in our common stock. 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 and have an ownership stake in Liberty,
which is our Administrator, and which is also an affiliate of the Scorpio
Group.

The Scorpio
Group is owned and controlled by members of 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, and both entities are affiliates within the Scorpio
Group. Mr. Lauro and Mr. Bugbee have a restricted stock ownership interest of
2% and 1.75%, respectively, in Liberty, an affiliate of the Scorpio Group, but
they have no other ownership interests in the Scorpio Group. 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 97% owned by
members of the Lolli-Ghetti family, of which our CEO and Chairman is a member.
The members of the Lolli-Ghetti family have not sold the shares.

SCM
and SSM, which as noted previously are affiliates of Scorpio
Group, provide commercial and technical management services to us pursuant
to our commercial and technical management agreements. Under the
commercial management agreement, we pay SCM a fee of 1.25% commission per
charter fixture plus $250 per vessel per day for Panamax, LRI, and LR2 vessels
and $300 per vessel per day for Handymax vessels for vessels that do not
participate in one of the Scorpio Group pools. For vessels operating in a Scorpio Group pool, we pay a fee of 1.25% commission per charter
fixture plus $250 per vessel per day for Panamax, LRI, and LR2 vessels and $300
per vessel per day for Handymax vessels. We pay SSM $548 per vessel
per day to provide technical management services for each of our
vessels. We have entered into separate commercial and technical management
agreements for each of our vessels and expect to enter into similar agreements
with respect to each vessel that we acquire going forward. The commercial
and technical management agreements with SCM and SSM are each for a
period of three years, and may be terminated upon two years notice.

59

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We will
reimburse Liberty, which as noted previously is our Administrator and also an
affiliate of the Scorpio Group, for the reasonable direct or indirect expenses
it incurs in providing us with the administrative services described above. We
will 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.

Pursuant to
our administrative services agreement, Liberty, 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 have no
other agreements with SCM, SSM, our Administrator, or any other party providing
for a resolution of potential conflicts in our favor.

For further
details about our relationship and agreements with the Scorpio Group and its
affiliates, please read Related Party Transactions and ManagementBoard of
Directors and Committees.

Related Party Payable and Shareholder Payable

Prior to
November 18, 2009, we had a shareholder payable of $18.9 million and a related
party payable to a subsidiary of Liberty of $27.4 million. On November 30,
2009, these payables were converted to equity as a capital contribution with no
shares being exchanged in this transaction.

King Dustin

King
Dustin Tankschiffahrts GmbH&Co.KG, or King Dustin,
is a special purpose entity that is owned equally by affiliates of
Koenig & cie and Scorpio Group. King Dustin time charters-in Noemi from us at $24,500 per day pursuant
to a time charter that expires in January 2012. The time charter began in
January 2007. King Dustin time charters-out Noemi
to ST Shipping, a wholly owned subsidiary of Glencore S.A. of Zug, Switzerland.

Transactions
with subsidiaries of Simon

Transactions
with subsidiaries of Simon (herein referred to as Simon subsidiaries) and
transactions with entities outside of Simon but controlled by the Lolli-Ghetti
family (herein referred to as related party affiliates) in the consolidated
income statements and balance sheet are as follows:

|                                        |  |      |            |                                        |  |            |   |  |            |  
|--------------------------------------- |  | ---- | ---------- | -------------------------------------- |  | ---------- | - |  | ---------- | -
|                                        |  | 2010 |            | For the year
 ended December 31,
 2009 |  | 2008       |  
|                                        |  |      |            |                                        |  |            |  
|                                        |  | $    |            | $                                      |  | $          |  
|Pool
 revenue(1)                        |  |      |            |                                        |  |            |   |  |            |  
|Scorpio Panamax Tanker Pool Limited     |  |      | 9,645,173  |                                        |  | 10,415,332 |   |  | 20,980,233 |  
|Scorpio Handymax Tanker Pool Limited    |  |      | 5,177,805  |                                        |  |           |   |  |           |  
|Scorpio Aframax Tanker Pool Limited     |  |      | 641,278    |                                        |  |           |   |  |           |  
|Time charter
 revenue(2)                |  |      |            |                                        |  |            |   |  |            |  
|King Dustin                             |  |      | 8,700,195  |                                        |  | 8,288,767  |   |  | 8,879,913  |  
|Liberty                                 |  |      | 4,779,605  |                                        |  |            |   |  |            |  
|Vessel
 operating costs(3)              |  |      | (1,058,699 | )                                      |  | (600,000   | ) |  | (765,422   | )
|Commissions(4)                          |  |      | (233,546   | )                                      |  |           |   |  |            |  
|General and
 administrative expenses(5) |  |      | (932,460   | )                                      |  | (344,162   | ) |  | (619,421   | )
|Other(6)                                |  |      | (130,602   | )                                      |  |           |   |  |            |  

| |     |                                                                  
| | --- | -----------------------------------------------------------------
| | (1) | These transactions relate to revenue earned in the Scorpio Pools.

60

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| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (2) | The revenue earned was for Noemis time charter with King Dustin
 (which is 50% jointly controlled by a Simon subsidiary) along with STI
 Harmonys and STI Heritages time charter with
 Liberty, a Simon subsidiary. See Note 14 to the consolidated financial
 statements in Item 18 for the terms of these time charters.                                                                                                                                                                                                                                                                                                                                                                                
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| | (3) | These transactions represent technical management fees charged by
 SSM, a related party affiliate, and included in the vessel operating costs in
 the consolidated income statement. We believe our technical management fees
 for the year ended December31, 2010 and 2009 were at market rates because
 they were the same rates charged to other vessels managed by SSM.
 Additionally, in December 2009, we signed a Technical Management Agreement
 (see description below) for each ship with SSM. Each ship will pay $548 per
 day for technical management. This fee is the same charged to third parties
 by SSM, and therefore the Company believes it represents a market rate for
 such services.
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| |     | The Companys fees under technical management arrangements with SSM
 were not at market rates for the year ended December 31, 2008. The Company
 estimates that its technical management fees for the year ended December 31,
 2008 would have been $601,704 and would have increased net income for the
 periods by $163,718 had the Company operated as an unaffiliated entity. The
 Companys estimate is based upon the rates charged to third party
 participants by SSM in 2008.                                                                                                                                                                                                                       
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| | (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
 will pay 1.25% of their revenue when the vessels are not in the pool. When
 our vessels are in the pool, SCM, the pool manager, charges all vessels in
 the pool (including third party participants) $250 per day and 1.25% of their
 revenue. We believe that the commercial management agreement represents a
 market rate for such services.                                                                                                                                 
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| |     | There were no charges related to these services for the years ended
 December 31, 2009 and 2008 and we estimate that the commissions on its fees
 for years ended December 31, 2009 and 2008 would have been $215,046 and
 $228,675, respectively and would have decreased net income for the period by
 the same amount if we operated as an unaffiliated entity. Our estimate is
 based upon the rates charged by SCM to third party participants in the pools
 for 2009 and 2008.                                                                                                                                                                                                                         
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| | (5) | Prior to December 2009, SSM provided administrative services directly
 to us. In December 2009, we signed an administrative services agreement for
 each vessel with Liberty. We pay the administrator (Liberty) a fixed monthly
 fee calculated at cost with no profit for providing us with administrative
 services, and reimburses it for the reasonable direct or indirect expenses it
 incurs in providing us with such services. SSM continues to provide
 administrative services to us under this agreement, but now does so on behalf
 of Liberty.                                                                                                                                                 
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| |     | The administrative fee included services provided to us for
 accounting, administrative, information technology and management. Our fees
 under administrative services arrangements for the years ended December 31,
 2009 and 2008 may not have been at market rates. We cannot estimate what the
 cost would have been if we operated as an unaffiliated party, but believe the
 charges for the years ended December 31, 2009 and 2008 were reasonable and
 appropriate for the services provided.                                                                                                                                                                                                       
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| |     | 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 is $250 per day for Panamax/LR1 and Aframax
 vessels and $300 per day for Handymax vessels. The flat fee is the same rate
 charged by SCM for vessels in the pools managed by SCM.                                                                                                                                                                                                                                                                                                                                             

| |  |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| |  | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  |  | The expense for the year ended December 31, 2010 of $932,460 included
 the flat fee of $203,405 charged by SCM and administrative fees of $729,055
 charged by Liberty and are both included in general and administrative
 expenses in the consolidated income statement.                                                                                                                                                                              
| |  |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| |  |  | The expense for the year ended December 31, 2009 of $344,162 included
 fees of $70,418 charged by SCM and $273,744 charged by SSM for administrative
 services under the previous administrative agreement. The fees charged by SCM
 for the year ended December 31, 2009 were not at market rates. We estimate
 the fees charged by SCM for the year ended December 31, 2009 would have been
 $182,500 and would have decreased net income by $112,082.
| |  |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| |  |  | The expense for the year ended December 31, 2008 of 619,421 included
 fees of $37,996 charged by SCM and $581,426 charged by SSM for administrative
 services under the previous administrative agreement. The fees charged by SCM
 for the year ended December 31, 2009 were not at market rates. We estimate
 the fees charged by SCM for the year ended December 31, 2009 would have been
 $183,000 and would have decreased net income by $145,034. 

61

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| |     |                                                                                                                                                                                                                                                                                                                   | 
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | 
| | (6) | In accordance with our Administrative Services Agreement with
 Liberty, we are required to reimburse Liberty for any direct expenses. These
 transactions represent reimbursements of $130,602 to Liberty for the year
 ended December 31, 2010 for expenses related to the registration of the
 existing shares.

Balances with related
parties

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

|                                        |  |                    |           |      |  |           | 
|--------------------------------------- |  | ------------------ | --------- | ---- |  | --------- | 
|                                        |  | As of December 31, |          
|                                        |  | 2010               |           | 2009 | 
|                                        |  |                    |           |      | 
|                                        |  | $                  |           | $    | 
|Assets:                                 |  |                    |           |      |  |           | 
|Accounts
 receivable -due from the Pool |  |                    | 6,767,770 |      |  | 1,133,030 | 
|Accounts
 receivable - SSM              |  |                    | 117       |      |  |          | 
|Accounts
 receivable - SCM              |  |                    | 3,463     |      |  |          | 
|Vessels and
 drydock (7)                |  |                    | 2,431,700 |      |  |          | 
|Shareholder
 receivable(8)              |  |                    |          |      |  | 1,928,253 | 
|Liabilities:                            |  |                    |           |      |  |           | 
|Accounts
 payable - owed to the Pool    |  |                    | 22,349    |      |  |          | 
|Accounts
 payable - SSM                 |  |                    | 101,412   |      |  |           | 
|Shareholders equity:                   |  |                    |           |      |  |           | 
|Additional
 paid in capital(9)          |  |                    | 344,490   |      |  |          | 

| |     |                                                                                                                                                                                                                                                                                                                                                                                                         |                                                                                                                                                                                                                                        
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (7) | The
 Administrative Services Agreement with Liberty 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.                                                                           
| |     |                                                                                                                                                                                                                                                                                                                                                                                                        
| |     |                                                                                                                                                                                                                                                                                                                                                                                                        | The balance
 as of December 31, 2010 of $2,431,700 was the 1% fee for administrative
 services provided for the purchases of the STI Harmony, STI
 Heritage, STI Conqueror, STI Matador, STI Gladiator, STI
 Highlander and STI Spirit.
| |     |                                                                                                                                                                                                                                                                                                                                                                                                         |                                                                                                                                                                                                                                        
| | (8) | During
 December 2009, we advanced $1,928,253 to a shareholder, which was recognized
 as a receivable in the condensed consolidated balance sheet as of December
 31, 2009. The receivable was due upon demand and was non-interest bearing and
 unsecured. The amount was repaid in the first quarter of 2010.                                                                                        
| |     |                                                                                                                                                                                                                                                                                                                                                                                                        
| | (9) | As per the
 Administrative Services Agreement, we have to reimburse Liberty for any
 direct expenses. The $344,490 as of December 31, 2010 related to expenses for
 the registration of the shares in the initial public offering, which closed
 on April 6, 2010 and were recorded as an offset against the proceeds from the
 offering. The liability has been cash settled as of September 30, 2010.

Key
management remuneration

Our
executive management was provided by a related party affiliate and included in
the management fees described in (5) above, until April 6, 2010 when our
initial public offering closed. If we were not part of Simon, and had the same
ownership structure and a contract for administrative services for the periods
up to April 6, 2010, we estimate our general and administrative expenses would
have been comparable with the general and administrative expenses presented in
the condensed consolidated income statement for the years ended December 31,
2009 and 2008. For the period April 6, 2010 through December 31, 2010 cash and
non-cash executive management remuneration of $3.0 million has been included as
part of general and administrative expenses.

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

Not
applicable.

ITEM 8.FINANCIAL INFORMATION

| |    |                                                         
| | -- | --------------------------------------------------------
| | A. | Consolidated
 Statements and Other Financial Information

See Item
18.

62

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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.

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

See ITEM 18  Financial Statements: Note 22  Subsequent Events.

ITEM 9.THE OFFER AND LISTING

Share History and Markets

Since
our initial public offering, our shares have traded on the New York Stock
Exchange (NYSE) under the symbol STNG. The high and low market prices for our
common stock for the periods set forth below were as follows:

|                       |  |     |       |      |   |       | 
|---------------------- |  | --- | ----- | ---- | - | ----- | 
|For the
 Year Ended    |  | Low |       | High |  
|                       |  |     |       |      |  
|December 31,
 2010     |  | $   | 9.50  |      | $ | 13.01 | 
|                       |  |     |       |      |   |       | 
|For the
 Quarter Ended |  | Low |       | High |  
|                       |  |     |       |      |  
|March 31,
 2010        |  | $   | 12.10 |      | $ | 12.90 | 
|June 30,
 2010         |  |     | 10.05 |      |   | 13.01 | 
|September
 30, 2010    |  |     | 10.04 |      |   | 11.92 | 
|December 31,
 2010     |  |     | 9.50  |      |   | 11.95 | 
|March 31,
 2011        |  |     | 9.62  |      |   | 10.82 | 
|                       |  |     |       |      |   |       | 
|For the
 Month         |  | Low |       | High |  
|                       |  |     |       |      |  
|October 2010           |  | $   | 11.06 |      | $ | 11.89 | 
|November
 2010         |  |     | 9.50  |      |   | 11.95 | 
|December
 2010         |  |     | 9.61  |      |   | 10.85 | 
|January 2011           |  |     | 9.62  |      |   | 10.82 | 
|February
 2011         |  |     | 9.75  |      |   | 10.59 | 
|March 2011             |  |     | 9.80  |      |   | 10.42 | 

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 our
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

63

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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
the shares is described in the section entitled Description of Capital Stock
in our Prospectus Supplement on Form 424B4, filed with the SEC on November 18,
2010, which supplements our Registration Statement on Form F-1 (Registration
No. 333-170375) with an effective date of November 16, 2010, provided that
since the date of that Prospectus Supplement, our total issued and outstanding
common shares has increased to 24,924,913 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 the Company is 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

MarshallIslands 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.

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 the Company 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.

64

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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 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 2010 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. The Company currently satisfies and anticipates 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.

65

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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
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, the Company must satisfy certain
substantiation requirements in regards to the identify of its 5% Shareholders.

Based on
Schedule 13G and Schedule 13D filings with the SEC, the Company believes that
the 5% Override Rule may have been triggered for the 2010 taxable year, in
which case the Company will not satisfy the Publicly-Traded Test for the 2010
taxable year unless within the group of our 5% Shareholders there were
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 the 2010 taxable year. We believe that, during the 2010 taxable
year, there existed sufficient qualified 5% Shareholders for the Company to
avail itself of this exception to the 5% Override Rule. The Company intends to
take this position on its United Sates federal income tax return for the 2010
taxable year and expects that it will be able to satisfy the substantiation
requirements in regards to its 5% Shareholders.

Accordingly,
we believe that we currently satisfy the Publicly-Traded Test. 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 there from is not subject to United States federal income tax. However,
there is no assurance we will be able to do so.

66

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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. 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.

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 (through 2012) 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 have not been, 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.

Legislation
has been previously introduced in the United States Congress which, if enacted
in its present form, would preclude our dividends from qualifying for such
preferential rates prospectively from the date of its enactment. Further, in
the absence of legislation extending the term of the preferential tax rates for
qualified dividend income, all dividends received by a taxpayer in tax years
beginning on January 1, 2013 or later will be taxed at ordinary graduated
tax rates. 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 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.

67

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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.

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 taxable year of the Company during which it is 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.

68

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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.

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.

69

---



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.

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.

| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | -- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 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.                                                                                                                                                                                                                                                                                                                                                                                                                                                                  

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. Our interest rate swap expired in April 2010 when the
2005 Credit Facility was repaid. There were no interest rate swaps in place at
December 31, 2010.

70

---



Changes in
the fair value of our interest rate swaps are offset against the fair value of
assets or liabilities through income. As of December 31, 2009 the floating
rate debt was $39.8 million, and the notional balance of the interest rate swap
was $19.9 million. The fair market value of our interest rate swaps was a
liability of $1.7 million as of December 31, 2009.

Based on
the floating rate debt at December 31, 2010, a one-percentage point increase in
the floating interest rate would increase interest expense by $1.5 million per
year. The following table presents the principal payments on their due dates
for our floating rate debt:

|                                         |  |                         |            |               |   |               |  |            |            |  |   |   | 
|---------------------------------------- |  | ----------------------- | ---------- | ------------- | - | ------------- |  | ---------- | ---------- |  | - | - | 
|                                         |  | as of December 31, 2010 |           
|                                         |  |                         |           
|                                         |  | 2011                    |            | 2012 - 
 2013 |   | 2014 - 
 2015 |  | Thereafter |           
|                                         |  |                         |            |               |   |               |  |            |           
|Principal
 payments - floating rate debt |  | $                       | 16,271,020 |               | $ | 32,542,040    |  | $          | 96,361,522 |  | $ |  | 

Since we
did not use hedge accounting for our interest rate swap that commenced in May
2005 and terminated in April 2010, the changes in the fair value of the
interest rate swap were either offset against the fair value of assets or
liabilities through income. As of December 31, 2010, our outstanding floating
rate debt was $145.2 million. As of December 31, 2009, our outstanding floating
rate debt was $39.8 million and the notional balance of the interest rate swap
was $19.9 million.

The fair
market value of our interest rate swaps was a liability of $1.7 million as of
December 31, 2009.

| | 
| | 
| | 

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 participate in pools that are concentrated in the spot market such
as the Scorpio LR2, Scorpio Panamax and Scorpio Handymax Tanker Pools. To
reduce this risk, we currently have one vessel that is on a time charter
contract, which is expected to expire in January 2012 and 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 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.

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.

71

---



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. The Companys 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)) as of December 31, 2010. 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, 2010 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 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, 2010 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, 2010 based on the criteria in
Internal ControlIntegrated Framework issued by COSO.

C. Attestation Report of the Registered Public
Accounting Firm.

The
annual report does not include an attestation report of the Companys
registered public accounting firm regarding internal control over financial
reporting, pursuant to the exemption found in Section 404(c) of the
Sarbanes-Oxley Act of 2002, as added by Section 989G of the Dodd-Frank
Wall Street Reform and Consumer Protection Act.

D.
Changes in Internal Control Over Financial Reporting.

None

72

---



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. Our
code of ethics complies with applicable guidelines issued by the SEC and is
filed as an exhibit to this annual report.

ITEM 16C.
PRINCIPAL ACCOUNTANT FEES AND SERVICES

| |    |                                                                                                                                                                                                                                                                          
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | A. | Audit Fees                                                                                                                                                                                                                                                               
| |    |                                                                                                                                                                                                                                                                          
| |    | Our principal accountant for fiscal years ended December 31, 2010 and
 2009 was Deloitte LLP (London, United Kingdom), and the audit fees for those
 periods were $141,432 and $155,338, respectively.                                                                   
| |    |                                                                                                                                                                                                                                                                          
| | B. | Audit-Related Fees                                                                                                                                                                                                                                                       
| |    |                                                                                                                                                                                                                                                                          
| |    | During 2010 our principal accountant provided audit related services
 for quarterly review procedures and Sarbanes-Oxley readiness. Fees for those
 services were $107,234.                                                                                              
| |    |                                                                                                                                                                                                                                                                          
| | C. | Tax Fees                                                                                                                                                                                                                                                                 
| |    |                                                                                                                                                                                                                                                                          
| |    | None.                                                                                                                                                                                                                                                                    
| |    |                                                                                                                                                                                                                                                                          
| | D. | All Other Fees                                                                                                                                                                                                                                                           
| |    |                                                                                                                                                                                                                                                                          
| |    | During 2010, our principal accountant provided services related to
 the initial public offering and follow-on offering, which were completed on
 April 6, 2010 and November 22, 2010 respectively. The fees for these services
 were $313,532 and $249,658, 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.              
| |    |                                                                                                                                                                                                                                                                          
| | 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. As of December 31, 2010, 244,146 shares have been
purchased under the plan at an average price of $10.85 per share, including
commissions. The amounts purchased, by month, are set out in the table below:

|                                       |  |                                    |         |                                   |   |                                                                               |  |                                                                                         |         |  |   |            | 
|-------------------------------------- |  | ---------------------------------- | ------- | --------------------------------- | - | ----------------------------------------------------------------------------- |  | --------------------------------------------------------------------------------------- | ------- |  | - | ---------- | 
|Issuer
 Purchases of Equity Securities | 
|                                       | 
|                                      
|Period                                 |  | Total Number of 
 Shares Purchased |         | Average 
 Price Paid 
 Per Share* |   | Total Number of Shares 
 Purchased as Part of 
 Publicly Announced 
 Programs |  | Maximum Amount in US $ 
 that may Yet Be Expected on 
 Share Repurchases Under Programs |        
|                                       |  |                                    |         |                                   |   |                                                                               |  |                                                                                         |        
|July 2010                              |  |                                    | 75,500  |                                   | $ | 11.13                                                                         |  |                                                                                         | 75,500  |  | $ | 19,159,883 | 
|August 2010                            |  |                                    | 154,846 |                                   | $ | 10.73                                                                         |  |                                                                                         | 154,846 |  | $ | 17,498,969 | 
|September 2010                         |  |                                    | 13,800  |                                   | $ | 10.64                                                                         |  |                                                                                         | 13,800  |  | $ | 17,352,194 | 
|                                       |  |                                    |         |                                   |   |                                                                               |  |                                                                                         |         |  |   |            | 
|Total                                  |  |                                    | 244,146 |                                   | $ | 10.85                                                                         |  |                                                                                         | 244,146 |  | $ | 17,352,194 | 
|                                       |  |                                    |         |                                   |   |                                                                               |  |                                                                                         |         |  |   |            | 

|  |                      
|- | ---------------------
|* | Includes
 commissions

73

---



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 2010
and through the date of this annual report, our non-management directors met in
executive session five 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.

74

---



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-35
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 (6)                                                                                                     
|                
|2.1              | Form of Stock Certificate (2)                                                                                                                      
|                
|4.1              | Loan Agreement for 2010 Credit Facility (6)                                                                                                        
|                
|4.2              | 2010 Equity Incentive Plan (6)                                                                                                                     
|                
|4.3              | Administrative Services Agreement between the Company and Liberty
 Holding Company Ltd. (3)                                                        
|                
|4.4              | Form of Commercial Management Agreement with SCM (4)                                                                                               
|                
|4.5              | Form of Technical Management Agreement with SSM (5)                                                                                                
|                
|4.6              | Loan Agreement for STI Spirit entered into in 2011                                                                                                 
|                
|8.1              | Subsidiaries of the Company                                                                                                                        
|                
|11.1             | Code of Ethics (6)                                                                                                                                 
|                
|12.1             | Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer                                                                                  
|                
|12.2             | Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer                                                                                  
|                
|13.1             | Certification of Chief 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 Chief Financial Officer pursuant to 18 U.S.C.
 Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
 2002

| | 
| | 
| | 

(1) Filed as Exhibit 3.1 to the Companys Amended Registration
Statement on Form F-1/A (Amendment No. 2) (File No. 333-164940) on March 18,
2010.


(2) Filed as Exhibit 4.1 to the Companys Amended Registration
Statement on Form F-1/A (Amendment No. 1) (File No. 333-164940) on March 10,
2010.

(3) Filed as Exhibit 10.1 to the Companys Amended Registration
Statement on Form F-1/A (Amendment No. 2) (File No. 333-164940) on March 18,
2010.

(4) Filed as Exhibit 10.5 to the Companys Amended Registration
Statement on Form F-1/A (Amendment No. 2) (File No. 333-164940) on March 18,
2010.

(5) Filed as Exhibit 10.8 to the Companys Amended Registration
Statement on Form F-1/A (Amendment No. 2) (File No. 333-164940) on March 18,
2010.

(6) Filed as an Exhibit to the Companys Annual Report filed on Form
20-F on June 29, 2010.

75

---



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: April
 21, 2011 |                         
|                      
|                       | /s/Emanuele
 Lauro      
|                       |                         
|                       | Emanuele
 Lauro         
|                       | Chief
 Executive Officer

SK 26596 0004
1189769 v2

76

---



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, 2010 and 2009                                                    |  | F-3
|                                                                                                               
|Consolidated
Income Statements for the years ended December 31, 2010, 2009 and 2008                             |  | F-4
|                                                                                                               
|Consolidated
Statements of Changes in Shareholders Equity for the years ended December
31, 2010, 2009 and 2008 |  | F-5
|                                                                                                               
|Consolidated Cash
Flow Statements for the years ended December 31, 2010, 2009 and 2008                          |  | F-6
|                                                                                                               
|Notes to the
Consolidated Financial Statements                                                                  |  | F-7

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, 2010 and 2009,
and the related consolidated income statements, consolidated statements of
changes in shareholders equity, and consolidated cash flow statements for each
of the three years in the period ended December 31, 2010. These consolidated
financial statements are the responsibility of the Companys management. Our
responsibility is to express an opinion on the consolidated 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. The Company is not
required to have, nor were we engaged to perform, an audit of its internal
control over financial reporting. Our audits included consideration of internal
control over financial reporting as a basis for designing audit procedures that
are appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Companys internal control over financial
reporting. Accordingly, we express no such opinion. An audit also includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, 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, 2010 and 2009, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 2010, in conformity with International Financial Reporting
Standards as issued by the International Accounting Standards Board.

DELOITTE LLP

London, United
Kingdom

April 21, 2011

F-2

---



Scorpio Tankers Inc. and Subsidiaries

Consolidated balance sheets
December 31, 2010 and 2009

|                                                    |  |       |  |                    |             |      |   |             | 
|--------------------------------------------------- |  | ----- |  | ------------------ | ----------- | ---- | - | ----------- | 
|                                                    |  |       |  | As of
December 31, |            
|                                                    |  |       |  |                    |            
|                                                    |  | Notes |  | 2010               |             | 2009 |  
|                                                    |  |       |  |                    |             |      |  
|Assets                                              |  |       |  |                    |             |      |   |             | 
|Current assets                                      |  |       |  |                    |             |      |   |             | 
|Cash and cash equivalents                           |  | 2     |  | $                  | 68,186,902  |      | $ | 444,496     | 
|Accounts receivable                                 |  | 3     |  |                    | 7,354,252   |      |   | 1,438,998   | 
|Prepaid expenses                                    |  | 4     |  |                    | 460,680     |      |   | 583,944     | 
|Shareholder receivable                              |  | 14    |  |                    |            |      |   | 1,928,253   | 
|Inventories                                         |  | 5     |  |                    | 1,286,507   |      |   | 433,428     | 
|                                                    |  |       |  |                    |             |      |   |             | 
|Total current assets                                |  |       |  |                    | 77,288,341  |      |   | 4,829,119   | 
|Non-current assets                                  |  |       |  |                    |             |      |   |             | 
|Vessels and drydock                                 |  | 6     |  |                    | 333,425,386 |      |   | 99,594,267  | 
|Other assets                                        |  | 8     |  |                    | 1,554,713   |      |   |            | 
|                                                    |  |       |  |                    |             |      |   |             | 
|Total non-current assets                            |  |       |  |                    | 334,980,099 |      |   | 99,594,267  | 
|                                                    |  |       |  |                    |             |      |   |             | 
|Total assets                                        |  |       |  | $                  | 412,268,440 |      | $ | 104,423,386 | 
|                                                    |  |       |  |                    |             |      |   |             | 
|                                                    |  |       |  |                    |             |      |   |             | 
|Current liabilities                                 |  |       |  |                    |             |      |   |             | 
|Bank loan                                           |  | 10    |  |                    | 15,826,314  |      |   | 3,600,000   | 
|Accounts payable                                    |  | 9     |  |                    | 3,173,505   |      |   | 656,002     | 
|Accrued expenses                                    |  |       |  |                    | 1,123,351   |      |   | 953,532     | 
|Derivative financial
instruments                    |  | 11    |  |                    |            |      |   | 814,206     | 
|                                                    |  |       |  |                    |             |      |   |             | 
|Total current liabilities                           |  |       |  |                    | 20,123,170  |      |   | 6,023,740   | 
|Non-current liabilities                             |  |       |  |                    |             |      |   |             | 
|Bank loan                                           |  | 10    |  |                    | 127,362,088 |      |   | 36,200,000  | 
|Derivative financial
instruments                    |  | 11    |  |                    |            |      |   | 871,104     | 
|                                                    |  |       |  |                    |             |      |   |             | 
|Total non-current liabilities                       |  |       |  |                    | 127,362,088 |      |   | 37,071,104  | 
|                                                    |  |       |  |                    |             |      |   |             | 
|Total liabilities                                   |  |       |  |                    | 147,485,258 |      |   | 43,094,844  | 
|                                                    |  |       |  |                    |             |      |   |             | 
|                                                    |  |       |  |                    |             |      |   |             | 
|Shareholders equity                                |  |       |  |                    |             |      |   |             | 
|Issued, authorized and
fully paid in share capital: |  |       |  |                    |             |      |   |             | 
|Share capital                                       |  | 13    |  |                    | 248,791     |      |   | 55,891      | 
|Additional paid-in capital                          |  | 13    |  |                    | 255,003,984 |      |   | 46,272,339  | 
|Merger reserve                                      |  |       |  |                    | 13,292,496  |      |   | 13,292,496  | 
|Treasury shares                                     |  | 13    |  |                    | (2,647,807  | )    |   |            | 
|(Cumulative deficit)/Retained earnings              |  |       |  |                    | (1,114,282  | )    |   | 1,707,816   | 
|                                                    |  |       |  |                    |             |      |   |             | 
|Total shareholders equity                          |  |       |  |                    | 264,783,182 |      |   | 61,328,542  | 
|                                                    |  |       |  |                    |             |      |   |             | 
|Total liabilities and shareholders equity          |  |       |  | $                  | 412,268,440 |      | $ | 104,423,386 | 
|                                                    |  |       |  |                    |             |      |   |             | 

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

F-3

---



Scorpio Tankers Inc. and Subsidiaries

Consolidated income statements
For the years ended December 31, 2010, 2009 and 2008

|                                                           |  |       |  |                                  |             |      |   |             |   |   |             |  
|---------------------------------------------------------- |  | ----- |  | -------------------------------- | ----------- | ---- | - | ----------- | - | - | ----------- | -
|                                                           |  | Notes |  | For the years ended December 31, |            
|                                                           |  |       |  |                                  |            
|                                                           |  |       |  | 2010                             |             | 2009 |   | 2008        |  
|                                                           |  |       |  |                                  |             |      |   |             |  
|Revenue:                                                   |  |       |  |                                  |             |      |   |             |   |   |             |  
|Vessel revenue                                             |  | 15    |  | $                                | 38,797,913  |      | $ | 27,619,041  |   | $ | 39,274,196  |  
|Operating
expenses:                                        |  |       |  |                                  |             |      |   |             |   |   |             |  
|Vessel operating costs                                     |  | 17    |  |                                  | (18,440,492 | )    |   | (8,562,118  | ) |   | (8,623,318  | )
|Voyage expenses                                            |  |       |  |                                  | (2,542,298  | )    |   |            |   |   |            |  
|Charter hire                                               |  | 16    |  |                                  | (275,532    | )    |   | (3,072,916  | ) |   | (6,722,334  | )
|Impairment                                                 |  | 7     |  |                                  |            |      |   | (4,511,877  | ) |   |            |  
|Depreciation                                               |  |       |  |                                  | (10,178,908 | )    |   | (6,834,742  | ) |   | (6,984,444  | )
|General and administrative expenses                        |  |       |  |                                  | (6,200,094  | )    |   | (416,908    | ) |   | (600,361    | )
|                                                           |  |       |  |                                  |             |      |   |             |   |   |             |  
|Total operating expenses                                   |  |       |  |                                  | (37,637,324 | )    |   | (23,398,561 | ) |   | (22,930,457 | )
|                                                           |  |       |  |                                  |             |      |   |             |   |   |             |  
|Operating
income                                           |  |       |  |                                  | 1,160,589   |      |   | 4,220,480   |   |   | 16,343,739  |  
|                                                           |  |       |  |                                  |             |      |   |             |   |   |             |  
|Other
expense and income, net:                             |  |       |  |                                  |             |      |   |             |   |   |             |  
|Interest expensebank loan                                 |  |       |  |                                  | (3,230,895  | )    |   | (699,115    | ) |   | (1,710,907  | )
|Realized loss on derivative financial instruments          |  | 11    |  |                                  | (279,560    | )    |   | (808,085    | ) |   | (405,691    | )
|Unrealized gain/(loss) on derivative financial instruments |  |       |  |                                  |            |      |   | 956,120     |   |   | (2,057,957  | )
|Interest income                                            |  |       |  |                                  | 36,534      |      |   | 4,929       |   |   | 35,492      |  
|Other expense, net                                         |  |       |  |                                  | (508,766    | )    |   | (256,292    | ) |   | (18,752     | )
|                                                           |  |       |  |                                  |             |      |   |             |   |   |             |  
|Total other expense, net                                   |  |       |  |                                  | (3,982,687  | )    |   | (802,443    | ) |   | (4,157,815  | )
|                                                           |  |       |  |                                  |             |      |   |             |   |   |             |  
|Net
(loss)/ income                                         |  |       |  | $                                | (2,822,098  | )    | $ | 3,418,037   |   | $ | 12,185,924  |  
|                                                           |  |       |  |                                  |             |      |   |             |   |   |             |  
|Attributable to:                                           |  |       |  |                                  |             |      |   |             |   |   |             |  
|Equity holders of the parent                               |  |       |  | $                                | (2,822,098  | )    | $ | 3,418,037   |   | $ | 12,185,924  |  
|(Loss)/earnings
per share:                                 |  |       |  |                                  |             |      |   |             |   |   |             |  
|Basic                                                      |  | 19    |  | $                                | (0.18       | )    | $ | 0.61        |   | $ | 2.18        |  
|Diluted                                                    |  | 19    |  | $                                | (0.18       | )    | $ | 0.61        |   | $ | 2.18        |  

For the three years ended December 31, 2010
(i) there were no sources of comprehensive income other than those shown above,
and (ii) all operations were continuing.

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

F-4

---



Scorpio Tankers Inc. and Subsidiaries

Consolidated
statements of changes in shareholders equity 
For the years ended December 31, 2010, 2009 and 2008

|                                  |  |                                |   |                |         |                             |   |                  |   |                 |            |                                          |   |             |   |   |            |   |   |             |  
|--------------------------------- |  | ------------------------------ | - | -------------- | ------- | --------------------------- | - | ---------------- | - | --------------- | ---------- | ---------------------------------------- | - | ----------- | - | - | ---------- | - | - | ----------- | -
|                                  |  | Common Stock                   |   |                |         |                             |   |                  |   |                 |            |                                          |  
|                                  |  |                                |   |                |         |                             |   |                  |   |                 |            |                                          |  
|                                  |  | Number of
 shares
 outstanding |   | Share
 capital |         | Additional
 paid-in capital |   | Treasury
 Shares |   | Merger
 reserve |            | Retained
 earnings/(cumulative
 deficit) |   | Total       |  
|                                  |  |                                |   |                |         |                             |   |                  |   |                 |            |                                          |   |             |  
|                                  |  |                                |   |                |         |                             |   |                  |   |                 |            |                                          |   |             |  
|Balance as of January 1, 2008     |  | 5,589,147                      |   | $              | 55,891  |                             | $ |                 |   | $               |           |                                          | $ | 26,841,351  |   | $ |           |   | $ | 26,897,242  |  
|                                  |  |                                |   |                |         |                             |   |                  |   |                 |            |                                          |   |             |   |   |            |   |   |             |  
|Net income for the period         |  |                               |   |                |        |                             |   |                 |   |                 |           |                                          |   | 12,185,924  |   |   |           |   |   | 12,185,924  |  
|                                  |  |                                |   |                |         |                             |   |                  |   |                 |            |                                          |   |             |   |   |            |   |   |             |  
|Dividends paid ($3.36 per share)  |  |                               |   |                |        |                             |   |                 |   |                 |           |                                          |   | (18,784,000 | ) |   |           |   |   | (18,784,000 | )
|                                  |  |                                |   |                |         |                             |   |                  |   |                 |            |                                          |   |             |   |   |            |   |   |             |  
|                                  |  |                                |   |                |         |                             |   |                  |   |                 |            |                                          |   |             |   |   |            |   |   |             |  
|Balance as of December 31, 2008   |  | 5,589,147                      |   |                | 55,891  |                             |   |                 |   |                 |           |                                          |   | 20,243,275  |   |   |           |   |   | 20,299,166  |  
|                                  |  |                                |   |                |         |                             |   |                  |   |                 |            |                                          |   |             |   |   |            |   |   |             |  
|                                  |  |                                |   |                |         |                             |   |                  |   |                 |            |                                          |   |             |   |   |            |   |   |             |  
|Net income for the period         |  |                               |   |                |        |                             |   |                 |   |                 |           |                                          |   | 1,710,221   |   |   | 1,707,816  |   |   | 3,418,037   |  
|                                  |  |                                |   |                |         |                             |   |                  |   |                 |            |                                          |   |             |   |   |            |   |   |             |  
|Capital contribution              |  |                               |   |                |        |                             |   | 46,272,339       |   |                 |           |                                          |   |            |   |   |           |   |   | 46,272,339  |  
|                                  |  |                                |   |                |         |                             |   |                  |   |                 |            |                                          |   |             |   |   |            |   |   |             |  
|Dividends paid ($1.55 per share)  |  |                               |   |                |        |                             |   |                 |   |                 |           |                                          |   | (8,661,000  | ) |   |           |   |   | (8,661,000  | )
|                                  |  |                                |   |                |         |                             |   |                  |   |                 |            |                                          |   |             |   |   |            |   |   |             |  
|                                  |  |                                |   |                |         |                             |   |                  |   |                 |            |                                          |   |             |   |   |            |   |   |             |  
|Balance as of December 31, 2009   |  | 5,589,147                      |   |                | 55,891  |                             |   | 46,272,339       |   |                 |           |                                          |   | 13,292,496  |   |   | 1,707,816  |   |   | 61,328,542  |  
|                                  |  |                                |   |                |         |                             |   |                  |   |                 |            |                                          |   |             |   |   |            |   |   |             |  
|                                  |  |                                |   |                |         |                             |   |                  |   |                 |            |                                          |   |             |   |   |            |   |   |             |  
|Net loss for the period           |  |                               |   |                |        |                             |   |                 |   |                 |           |                                          |   |            |   |   | (2,822,098 | ) |   | (2,822,098  | )
|                                  |  |                                |   |                |         |                             |   |                  |   |                 |            |                                          |   |             |   |   |            |   |   |             |  
|Issuance of shares                |  | 18,721,454                     |   |                | 187,215 |                             |   | 207,749,057      |   |                 |           |                                          |   |            |   |   |           |   |   | 207,936,272 |  
|                                  |  |                                |   |                |         |                             |   |                  |   |                 |            |                                          |   |             |   |   |            |   |   |             |  
|Issuance of restricted shares     |  | 568,458                        |   |                | 5,685   |                             |   | (5,685           | ) |                 |           |                                          |   |            |   |   |           |   |   |            |  
|                                  |  |                                |   |                |         |                             |   |                  |   |                 |            |                                          |   |             |   |   |            |   |   |             |  
|Amortization of restricted shares |  |                               |   |                |        |                             |   | 988,273          |   |                 |           |                                          |   |            |   |   |           |   |   | 988,273     |  
|                                  |  |                                |   |                |         |                             |   |                  |   |                 |            |                                          |   |             |   |   |            |   |   |             |  
|Purchase of treasury shares       |  | (244,146                       | ) |                |        |                             |   |                 |   |                 | (2,647,807 | )                                        |   |            |   |   |           |   |   | (2,647,807  | )
|                                  |  |                                |   |                |         |                             |   |                  |   |                 |            |                                          |   |             |   |   |            |   |   |             |  
|                                  |  |                                |   |                |         |                             |   |                  |   |                 |            |                                          |   |             |   |   |            |   |   |             |  
|Balance as of December 31, 2010   |  | 24,634,913                     |   |                | 248,791 |                             |   | 255,003,984      |   |                 | (2,647,807 | )                                        |   | 13,292,496  |   |   | (1,114,282 | ) |   | 264,783,182 |  
|                                  |  |                                |   |                |         |                             |   |                  |   |                 |            |                                          |   |             |   |   |            |   |   |             |  

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

F-5

---



Scorpio Tankers Inc. and Subsidiaries

Consolidated cash
flow statements 
For the years ended December 31, 2010, 2009 and 2008

|                                                                     |  |                                  |              |      |   |             |   |   |             |  
|-------------------------------------------------------------------- |  | -------------------------------- | ------------ | ---- | - | ----------- | - | - | ----------- | -
|                                                                     |  | For the years ended December 31, |             
|                                                                     |  |                                  |             
|                                                                     |  | 2010                             |              | 2009 |   | 2008        |  
|                                                                     |  |                                  |              |      |   |             |  
|Operating activities                                                 |  |                                  |              |      |   |             |   |   |             |  
|Net (loss)/income                                                    |  | $                                | (2,822,098   | )    | $ | 3,418,037   |   | $ | 12,185,924  |  
|Depreciation                                                         |  |                                  | 10,178,908   |      |   | 6,834,742   |   |   | 6,984,444   |  
|Impairment                                                           |  |                                  |             |      |   | 4,511,877   |   |   |            |  
|Amortization of restricted stock                                     |  |                                  | 988,273      |      |   |            |   |   |            |  
|Amortization of deferred financing fees                              |  |                                  | 246,130      |      |   |            |   |   |            |  
|Amortization of acquired time charter contracts                      |  |                                  | 2,344,495    |      |   |            |   |   |            |  
|                                                                     |  |                                  |              |      |   |             |   |   |             |  
|                                                                     |  |                                  | 10,935,708   |      |   | 14,764,656  |   |   | 19,170,368  |  
|                                                                     |  |                                  |              |      |   |             |   |   |             |  
|Changes in assets and liabilities:                                   |  |                                  |              |      |   |             |   |   |             |  
|Drydock payments                                                     |  |                                  | (974,430     | )    |   | (1,580,826  | ) |   |            |  
|(Increase)/decrease in inventories                                   |  |                                  | (853,079     | )    |   | 69,086      |   |   | (112,778    | )
|(Increase)/decrease in accounts receivable                           |  |                                  | (5,915,254   | )    |   | 2,262,984   |   |   | 1,002,953   |  
|Decrease/(increase) in prepaid expenses                              |  |                                  | 123,265      |      |   | (4,345      | ) |   | 22,469      |  
|Increase/(decrease) in accounts payable                              |  |                                  | 2,600,483    |      |   | (279,628    | ) |   | 352,254     |  
|Increase/(decrease) in accrued expenses                              |  |                                  | 175,218      |      |   | 120,641     |   |   | (250,557    | )
|Decrease/(increase) in the value of derivative financial instruments |  |                                  | 164,690      |      |   | (956,120    | ) |   | 2,057,957   |  
|Interest rate swap termination payment                               |  |                                  | (1,850,000   | )    |   |            |   |   |            |  
|Decrease/(increase) in shareholder receivable                        |  |                                  | 1,928,253    |      |   | (1,928,253  | ) |   |            |  
|(Decrease)/increase in shareholder payable                           |  |                                  |             |      |   | (3,162,344  | ) |   | 2,595,226   |  
|Increase in other assets                                             |  |                                  | (1,428,376   | )    |   |            |   |   |            |  
|                                                                     |  |                                  |              |      |   |             |   |   |             |  
|                                                                     |  |                                  | (6,029,230   | )    |   | (5,458,805  | ) |   | 5,667,524   |  
|                                                                     |  |                                  |              |      |   |             |   |   |             |  
|Net cash inflow from operating activities                            |  |                                  | 4,906,478    |      |   | 9,305,851   |   |   | 24,837,892  |  
|                                                                     |  |                                  |              |      |   |             |   |   |             |  
|Investing activities                                                 |  |                                  |              |      |   |             |   |   |             |  
|Acquisition of vessels                                               |  |                                  | (243,121,582 | )    |   |            |   |   |            |  
|Purchases of other assets                                            |  |                                  | (128,732     | )    |   |            |   |   |            |  
|Acquisition of time charter contracts                                |  |                                  | (2,344,495   | )    |   |            |   |   |            |  
|                                                                     |  |                                  |              |      |   |             |   |   |             |  
|Net cash outflow from investing activities                           |  |                                  | (245,594,809 | )    |   |            |   |   |            |  
|                                                                     |  |                                  |              |      |   |             |   |   |             |  
|Financing activities                                                 |  |                                  |              |      |   |             |   |   |             |  
|Dividends paid                                                       |  |                                  |             |      |   | (8,661,000  | ) |   | (18,784,000 | )
|Bank loan repayment                                                  |  |                                  | (44,625,418  | )    |   | (3,600,000  | ) |   | (3,600,000  | )
|Proceeds of long term debt                                           |  |                                  | 150,000,000  |      |   |            |   |   |            |  
|Debt issuance fees                                                   |  |                                  | (2,232,310   | )    |   |            |   |   |            |  
|Net proceeds from issuance of common stock                           |  |                                  | 207,936,272  |      |   | (207,990    | ) |   |            |  
|Acquisition of Treasury Shares                                       |  |                                  | (2,647,807   | )    |   |            |   |   |            |  
|                                                                     |  |                                  |              |      |   |             |   |   |             |  
|Net cash inflow/(outflow) from financing activities                  |  |                                  | 308,430,737  |      |   | (12,468,990 | ) |   | (22,384,000 | )
|                                                                     |  |                                  |              |      |   |             |   |   |             |  
|Increase/(decrease)
 in cash and cash equivalents                    |  |                                  | 67,742,406   |      |   | (3,163,139  | ) |   | 2,453,892   |  
|Cash and cash equivalents
 at January 1,                             |  |                                  | 444,496      |      |   | 3,607,635   |   |   | 1,153,743   |  
|                                                                     |  |                                  |              |      |   |             |   |   |             |  
|Cash and
 cash equivalents at December 31                            |  | $                                | 68,186,902   |      | $ | 444,496     |   | $ | 3,607,635   |  
|                                                                     |  |                                  |              |      |   |             |   |   |             |  
|Supplemental
 information:                                           |  |                                  |              |      |   |             |   |   |             |  
|Interest paid                                                        |  | $                                | 2,276,694    |      | $ | 760,974     |   | $ | 1,821,439   |  

During
2009 there were two significant non-cash transactions requiring disclosure (i)
the legal formation of the Scorpio Tankers Inc. and its subsidiaries (see Note
1) and (ii) the conversion of the related party payable of $27.4 million and
shareholder payable of $18.9 million to equity. There were no non-cash
transactions during 2010 requiring disclosure.

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

F-6

---



|                                                |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |                                                         
|----------------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ | --------------------------------------------------------
|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 crude oil and refined petroleum
 products in the international shipping markets. Scorpio Tankers Inc. was
 incorporated in the Republic of the Marshall Islands on July 1, 2009.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|                                                |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |                                                         
|                                                | On
 October 1, 2009, Simon Financial Limited (Simon) transferred to Scorpio
 Tankers Inc. three operating subsidiary companies, as described further
 below. Prior to the initial public offering, a subsidiary of Simon owned 100%
 of our shares (or 5,589,147 shares). As of December 31, 2010 and after
 completion of both the initial public offering and subsequent follow on
 offering, the Lolli Ghetti family no longer maintains a controlling interest
 in the Company. Simon is owned by members of the Lolli-Ghetti family of
 which, Emanuele Lauro, our founder, Chairman and Chief Executive Officer is a
 member.On April 6, 2010, we closed on the initial public offering of
 12,500,000 shares of common stock at $13.00 per share. The stock trades on
 the New York Stock Exchange under the symbol STNG. After deducting
 underwriters discounts and paying offering expenses, the net proceeds were
 approximately $149.6 million. On May 4, 2010, we closed the issuance of 450,000
 shares of common stock at $13.00 and received $5.2 million, after deducting
 underwriters discounts, when the underwriters in our initial public offering
 partially exercised their over-allotment option.
|                                                |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |                                                         
|                                                | 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 approximately
 $41.8 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. In addition, 510,204
 shares were issued at the follow on public offering price in a concurrent
 private placement to a member of the Lolli-Ghetti family for total proceeds
 of $5.0 million.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|                                                |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |                                                         
|                                                | Business                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|                                                |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |                                                         
|                                                | Our
 owned fleet at December 31, 2010 consisted of one LR2 product tanker, four
 LR1 product tankers, four Handymax tankers and one post-Panamax tanker
 engaged in seaborne transportation of crude oil and refined petroleum
 products in the international shipping markets. We also had one LR1 product
 tanker on time charter-in as of December 31, 2010.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|                                                |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |                                                         
|                                                | Our
 vessels, as described in Note 14, are commercially managed by Scorpio
 Commercial Management S.A.M. (SCM), which was a subsidiary of Simon until
 October 1, 2009 and is currently owned by members of the Lolli-Ghetti family.
 SCMs services include securing employment, in pools, in the spot market and
 on time charters. Our vessels, as described in Note 14, are technically
 managed by Scorpio Ship Management S.A.M. (SSM), which is also owned by
 members of 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.                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|                                                |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |                                                         
|                                                | We
 have an administrative services agreement with Liberty Holding Company
 (Liberty), which is a subsidiary of Simon. 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. Liberty has contracted these services
 to SCM. We pay its 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 have been presented in United States
 dollars (USD or $), which is the functional currency of Scorpio Tankers Inc.
 and all its subsidiaries. The 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.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            

F-7

---



|                                               |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|---------------------------------------------- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Scorpio Tankers Inc. and Subsidiaries         
|                                               |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|Notes to the Consolidated Financial Statements
|                                               |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|                                               | Simon
       transferred three subsidiaries to the Company (see below) on October 1, 2009
       for a nominal consideration. For accounting purposes, this transfer
       represented a combination of entities under common control, with Simon being
       the ultimate parent company of all entities in the Company prior to our
       initial public offering. As such, this business combination was outside the
       scope of IFRS 3 (2004), Business Combinations, and for the years ended December
       31, 2009 and 2008 the results have therefore been prepared using the
      principles of merger accounting. Under this method:
|                                               |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|                                               |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          | the
 carrying values of the assets and liabilities of the parties to the
 combination are recorded at the historical carrying amount of those assets
 and liabilities and are not adjusted to fair value on combination;                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|                                               |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|                                               |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          | the results and cash flows of all the combining entities are brought
 into the consolidated financial statements of the combined entity from the
 beginning of the financial year in which the combination occurred. Prior year
 comparatives are also presented on the basis that the combination was in
 place throughout the prior year; and                                                                                                                                                                                                                                                                                                                          
|                                               |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|                                               |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          | the difference between the historical carrying amount of net assets
 transferred and the consideration provided on transfer has been recognized in
 equity through share capital and the merger reserve. The share capital as of
 December 31, 2008 represents the share capital of Scorpio Tankers Inc. as if
 Scorpio Tankers Inc. has been incorporated throughout the periods presented.
 The remaining difference between historical carrying amount of net assets
 transferred and consideration paid was recognized in a merger reserve.Any
 profits recognized after the October 1, 2009 reorganization have been
 recognized in equity within retained earnings.
|                                               |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|                                               | Subsidiaries transferred to
 Scorpio Tankers Inc. on October 1, 2009 were:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               

|                                   |  |          |  |                |  |                                       | 
|---------------------------------- |  | -------- |  | -------------- |  | ------------------------------------- | 
|Company                            |  | Vessel   |  | Percent
 owned |  | Incorporated in                       | 
|                                   |  |          |  |                |  |                                       | 
|Noemi Shipping Company
 Limited    |  | Noemi    |  | 100%           |  | The Republic of the
 Marshall Islands | 
|Senatore Shipping Company
 Limited |  | Senatore |  | 100%           |  | The Republic of the
 Marshall Islands | 
|Venice Shipping Company
 Limited   |  | Venice   |  | 100%           |  | The Republic of the
 Marshall Islands | 

| |                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | All
 inter-company transactions, balances, income and expenses were eliminated on
 consolidation. There have been no cost allocations from Simon, as all costs
 of doing business have been included in the operations of the subsidiaries.                                                                                                                                                                                                      
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | Going concern                                                                                                                                                                                                                                                                                                                                                                                                                                    
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | The
 financial statements have been prepared in accordance with the going concern
 basis of accounting for the reasons outlined in the Liquidity Risk section
 of Note 20.                                                                                                                                                                                                                                                                     
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | Significant Accounting Policies                                                                                                                                                                                                                                                                                                                                                                                                                  
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | Common control transactions                                                                                                                                                                                                                                                                                                                                                                                                                      
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | The
 assets and liabilities transferred from entities under common control were
 recorded at the transferors carrying values. Any difference between the
 carrying value of the net assets acquired, and the consideration paid by
 us was accounted for as an adjustment to shareholders equity. The net assets
 transferred and their results were recognized from the date on which control
 was obtained by the ultimate controlling party.
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | 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.                                                                                                                                                                                           

F-8

---



|                                               |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |     |                                                                                                                                                                                                                                                                                                      |                                                                                                                                                             
|---------------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------
|Scorpio Tankers Inc. and Subsidiaries         
|                                               |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |     |                                                                                                                                                                                                                                                                                                      |                                                                                                                                                             
|Notes to the Consolidated Financial Statements
|                                               |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |     |                                                                                                                                                                                                                                                                                                      |                                                                                                                                                             
|                                               | 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.
|                                               |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |     |                                                                                                                                                                                                                                                                                                      |                                                                                                                                                             
|                                               |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                | (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.Interest receivable is accrued on a time basis and includes
 interest earned on cash deposits.
|                                               |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |     |                                                                                                                                                                                                                                                                                                      |                                                                                                                                                             
|                                               | Acquired time charter contracts                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|                                               |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |     |                                                                                                                                                                                                                                                                                                      |                                                                                                                                                             
|                                               | Acquired
 time charter contracts arise from the purchase of time charter contracts from
 third parties and are stated at cost at the date of acquisition, less
 accumulated amortization. Where the time charter contract is acquired along
 with a vessel, the cost of the acquisition is determined based on the
 relative fair values of each element acquired. Amortization expense is
 recognized on a straight line basis over the useful life of the asset, which
 has been determined to be the remaining contract life at the date of
 acquisition. The useful life and amortization method are reviewed at least
 annually. Changes in the expected useful life or the expected pattern of
 consumption of future economic benefits embodied in the asset are accounted
 for by changing the amortization period or method, as appropriate, and are
 treated as changes in accounting estimates. The amortization expense related
 to the assets is recognized as an offset to revenue.                                                                                                                                                                                                                                                                             
|                                               |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |     |                                                                                                                                                                                                                                                                                                      |                                                                                                                                                             
|                                               | 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.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|                                               |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |     |                                                                                                                                                                                                                                                                                                      |                                                                                                                                                             
|                                               | (Loss)/earnings per share                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|                                               |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |     |                                                                                                                                                                                                                                                                                                      |                                                                                                                                                             
|                                               | Basic
 earnings per share is calculated by dividing the net income attributable to
 equity holders of the common shares by the weighted average number of common
 shares outstanding assuming that the reorganization described under Basis of
 Accounting was effective during the period. In addition, the stock split
 described in Note 13 has been given retroactive effect for all periods
 presented herein. Diluted earnings per share are calculated by adjusting the
 net 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. For the years ended December 31, 2009 and
 2008, we had no potentially dilutive common shares. In the year ended
 December 31, 2010, there were potentially dilutive items as a result of our
 restricted stock plan (see note 13). However, we were in a loss making
 position for the year ended December 31, 2010 and therefore there was no
 impact of these potentially dilutive items on earnings per share.                  

F-9

---



|                                                |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|----------------------------------------------- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Scorpio Tankers Inc. and Subsidiaries          
|                                                |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|Notes to the Consolidated Financial
 Statements
|                                                |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|                                                | Operating leases                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|                                                |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|                                                | Costs
 in respect of operating leases are charged to the consolidated income
 statement on a straight line basis over the lease term.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|                                                |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|                                                | 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 income statement. The amount charged to the
 consolidated income statement during 2010 was a loss of $506, a loss of
 $36,626 in 2009 and a gain of $43,937 in 2008.                                                                                                                                                                                                                       
|                                                |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|                                                | Segment reporting                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|                                                |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|                                                | For
 the years ended December 31, 2009 and 2008 we reported one business segment
 and one geographical segment since (i) all of the vessels during those
 periods were Panamax vessels that transport oil and refined petroleum
 products and (ii) all of the vessels can trade in the international shipping
 market and are not limited to specific parts of the world. During those
 years, the chief operating decision makers of Simon did not evaluate our
 operating results on a discrete basis including on an individual subsidiary
 or individual vessel basis or by distinct geographical locations. Rather, our
 operating results were assessed on an aggregated owned vessel basis. We have
 therefore not presented separate tables for the results of operations in
 those periods as all relevant information can be obtained directly from the
 consolidated income statement.
|                                                |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|                                                | During
 2010, we owned or chartered-in eleven vessels spanning three different
 classes, Panamax/LR1, Handymax and Aframax/LR2, all of which earn revenues in
 the seaborne transportation of crude oil and refined petroleum products in
 the international shipping markets. The Panamax/LR1 class contained six
 vessels, the Handymax class contained four vessels and the Aframax/LR2 class
 contained one vessel. 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 net income 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 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. 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 scrap market rates at the balance
 sheet date with changes accounted for in the period of change
 and in future periods. See our Changes in accounting estimate section below
 for discussion of changes in useful lives and residual values during the
 period.                                                                                                                                                                                                                                                           

F-10

---



|                                                |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|----------------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Scorpio Tankers Inc. and Subsidiaries          
|                                                |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|Notes to the Consolidated Financial
 Statements
|                                                |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|                                                | 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.                                                                                                                                                                                                                                                                                                                         
|                                                |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|                                                | 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.
|                                                |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|                                                | Impairment of vessels and drydock                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|                                                |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|                                                | At
 each balance sheet date, we review the carrying amount of our vessels and
 drydock 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 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 realisable value. Cost is determined
 using the first in first out method. Stores and spares are charged to vessel
 operating costs when purchased.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|                                                |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|                                                | 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.                                                                                                                                                                                                                                                                                                                                                                                                                                                                 

F-11

---



Scorpio Tankers Inc. and Subsidiaries

Notes to the Consolidated Financial Statements

| |                                                                                                                                                                                                                                                                                                                                                                                                                                                          |                                                                                                                                                           
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ----------------------------------------------------------------------------------------------------------------------------------------------------------
| | Income
 is recognized on an effective interest basis for debt instruments other than
 those financial assets classified as at FVTPL.                                                                                                                                                                                                                                                                                                                    
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| | 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:                                                                                                                                                                                                                                                                                                                                                                                                
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                          |                                                                                                                                                           
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                         | it
 has been acquired principally for the purpose of selling in the near future;
 or                                                                      
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                          |                                                                                                                                                           
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                         | 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
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                          |                                                                                                                                                           
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                         | 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 20.                                                                                                                                               
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| | 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:                                                                                                                                                                                                                                                                                                                                                                                       
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                         | significant
 financial difficulty of the issuer or counterparty; or                                                                                       
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                          |                                                                                                                                                           
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                         | default
 or delinquency in interest or principal payments; or                                                                                             
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                          |                                                                                                                                                           
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                         | it
 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 as we choose not to disclose the effective
 interest rate for debt instruments that are classified as at fair value
 through 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 20.        
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                         

F-12

---



Scorpio Tankers Inc. and Subsidiaries

Notes to the Consolidated Financial Statements

| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 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.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | Derivative financial instruments                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | For
 the years ended December 31, 2009 and 2008, we were party to
 derivative financial instruments to manage our exposure to interest rate
 fluctuations. With a portion of the net proceeds from our initial public
 offering, on April 9, 2010, we settled the outstanding portion of an interest
 rate swap entered into in April 2005 and therefore have no derivatives
 outstanding as of December 31, 2010.Further details of derivative financial
 instruments are disclosed in Notes 11 and 20 to the consolidated financial
 statements.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.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.
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | 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
 have 24,879,059 registered shares authorized and issued with a par value of
 $0.01 per share at December 31, 2010. These shares provide the holders with
 rights to dividends and voting rights. See Note 13 for details of a stock
 split that occurred in 2010 which has been retroactively reflected in these
 financial statements.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | 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 the 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 Scorpio Tankers Incs
 subsidiaries by the number of Scorpio Tankers Inc 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
 (Note 13) 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.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               

F-13

---



Scorpio Tankers Inc. and Subsidiaries

Notes to the Consolidated Financial Statements

| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 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 estimate 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 income 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 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 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 year ended December 31, 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. Since, at the time of discharge, management generally
 knows the next load port and expected discharge port, the
 discharge-to-discharge calculation of spot voyage revenues can be estimated with
 a greater degree of accuracy.                                                                                                                                                                             
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | 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. In 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 lower of fair value less cost to sell and value
 in use.

F-14

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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 valuation (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 where we estimated the vessels 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), the
 ten year historical average of charter rates in the shipping industry for
 periods thereafter, and our best estimate of vessel operating expenses. These
 cash flows were then discounted to their present value, using a discount rate
 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 in all instances, which resulted in no impairment being recognized.
 In addition, if the charter rates were adjusted downward by 5% or the
 discount rate was increased by 1% the value in use of the vessels would still
 have exceeded the carrying value of the six vessels in question.                                                                                                                                                                                                                                                                                                                                                                                           
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| | 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. 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. See the Changes in accounting estimates
 section below for discussion of changes in the residual values during the
 period.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.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| | Changes in accounting estimates                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| | Vessel lives and residual value                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| | 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 change in
 estimated useful life is not driven by a change in the use of the vessel as
 this continues to be the same as prior periods but as the vessels get older
 and continue to demonstrate a longer than anticipated useful life, we have
 increased our
 confidence in extending the useful life to be in line with industry practice.
 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 of $1.2 million. Based on current scrap rates, this
 change in estimate will result in a decrease in depreciation expense of $1.6
 million for year prospectively until the 20 year anniversary date of the
 vessels impacted by this change.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  

F-15

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Scorpio Tankers Inc. and Subsidiaries

Notes to the Consolidated Financial Statements

| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | During
 2010, we revised the method of estimating the residual values of our vessels
 to base expected value off of a four year historical average of scrap rates
 rather than using only the period end scrap rate. 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 of
 $0.4 million and an increase in vessel value for the same amount. Scrap
 market rates are historically volatile and therefore it is impracticable for
 us to estimate the effect of further changes in the scrap market rate and the
 residual values of the vessels on our depreciation expense in periods
 subsequent to December 31, 2010.
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| | Standards and Interpretations adopted during the period                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| | We
 adopted the following Standards and Interpretations as of January 1, 2010:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       

| |                       |                                                
| | --------------------- | -----------------------------------------------
| | IFRIC 18              | Transfers
 of Assets from Customers            
| | IFRS 2 (amended)      | Share-based
 payments                          
| | IFRIC 17              | Distributions
 of Non-cash Assets to Owners    
| | IFRS 3 (revised 2008) | Business
 Combinations                         
| | IAS 27 (revised 2008) | Consolidated
 and Separate Financial Statements
| | IAS 28 (revised 2008) | Investments
 in Associates                     

| |                                                                                                                                                                                                                       
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Improvements
 to IFRSs (April 2009)                                                                                                                                                                                   
| |                                                                                                                                                                                                                       
| | The
 adoption of these standards did not have a material impact on any of the
 information contained within the consolidated financial information for any
 periods presented.                                        
| |                                                                                                                                                                                                                       
| | 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
 financial statements were in issue but not yet effective:

|                                   |                                                                               
|---------------------------------- | ------------------------------------------------------------------------------
|IFRS 1 (amended)/IAS 27
 (amended) | Cost of
 an Investment in a Subsidiary, Jointly Controlled Entity or Associate
|IFRS 9                             | Financial
 Instruments                                                        
|IFRIC 12 (amended)                 | Service
 Concession Arrangements                                              
|IFRIC 19                           | Extinguishing
 Financial Liabilities with Equity Instruments                  

|   |                                                                                                                                                       
|-- | ------------------------------------------------------------------------------------------------------------------------------------------------------
|   | Improvements
 to IFRSs (May 2010)                                                                                                                     
|   |                                                                                                                                                       
|   | 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, |           
|                |  |                 |           
|                |  | 2010            |            | 2009 |  
|                |  |                 |            |      |  
|Operating cash  |  | $               | 18,050,278 |      | $ | 444,496 | 
|Deposits (1)    |  |                 | 50,000,000 |      |   |        | 
|Cash on vessels |  |                 | 136,624    |      |   |        | 
|                |  |                 |            |      |   |         | 
|                |  | $               | 68,186,902 |      | $ | 444,496 | 
|                |  |                 |            |      |   |         | 

| |                                                                           
| | --------------------------------------------------------------------------
| | (1) Represents bank
 deposits with original maturities of 3 months or less

F-16

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Scorpio Tankers Inc. and Subsidiaries

Notes to the Consolidated Financial Statements

|   |                     
|-- | --------------------
|3. | Accounts
 receivable

|                                      |  |                 |           |      |   |           | 
|------------------------------------- |  | --------------- | --------- | ---- | - | --------- | 
|                                      |  | At December 31, |          
|                                      |  |                 |          
|                                      |  | 2010            |           | 2009 |  
|                                      |  |                 |           |      |  
|Scorpio Panamax Tanker
 Pool Limited  |  | $               | 3,277,808 |      | $ | 1,133,030 | 
|Scorpio Handymax Tanker
 Pool Limited |  |                 | 1,347,509 |      |   |          | 
|Scorpio Aframax Tanker
 Pool Limited  |  |                 | 714,078   |      |   |          | 
|Insurance receivables                 |  |                 | 991,606   |      |   | 96,195    | 
|Other receivables                     |  |                 | 1,023,251 |      |   | 209,773   | 
|                                      |  |                 |           |      |   |           | 
|                                      |  | $               | 7,354,252 |      | $ | 1,438,998 | 
|                                      |  |                 |           |      |   |           | 



|   |                                                                                                                                                                                                                                                                                                                                                                               
|-- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   | Scorpio
 Aframax Tanker Pool Limited, Scorpio Panamax Tanker Pool Limited, and Scorpio
 Handymax Tanker Pool Limited are related parties, as described in Note 14.                                                                                                                                                                                                            
|   |                                                                                                                                                                                                                                                                                                                                                                               
|   | On
 April 25, 2010, Senatore, one of the Companys LR-1 tankers on time charter,
 suffered damage to one of its ballast tanks. This resulted in the vessel
 being off-hire for 17 days in the second quarter while the vessel was being
 repaired. The insurance receivables primarily represent the amount collectible
 on our insurance policy in relation to these 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, 2010 and December 31, 2009, no material
 receivable balances were past due or impaired.                                                                                         
|   |                                                                                                                                                                                                                                                                                                                                                                               
|4. | Prepaid expenses                                                                                                                                                                                                                                                                                                                                                              

|                              |  |                 |         |      |   |         | 
|----------------------------- |  | --------------- | ------- | ---- | - | ------- | 
|                              |  | At December 31, |        
|                              |  |                 |        
|                              |  | 2010            |         | 2009 |  
|                              |  |                 |         |      |  
|Initial public offering
 fees |  | $               |        |      | $ | 540,054 | 
|Prepaid insurance             |  |                 | 314,120 |      |   | 10,113  | 
|Other prepayments             |  |                 | 146,560 |      |   | 33,777  | 
|                              |  |                 |         |      |   |         | 
|                              |  | $               | 460,680 |      | $ | 583,944 | 
|                              |  |                 |         |      |   |         | 

|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|-- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   | The
 initial public offering fees were fees incurred prior to December 31, 2009
 related to the initial public offering of our common shares, which was
 completed on April 6, 2010 (see Note 13). The fees include professional fees
 (legal and accounting) and other fees which were directly attributable to the
 issuance of the new shares. These fees were recognized as a reduction to
 additional paid in capital in April 2010. Additional fees of $241,475 which
 relate to the listing of our pre-existing shares were charged to the 2009
 income statement within Other expenses, net.
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|5. | Inventories                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           

|                 |  |                 |           |      |   |         | 
|---------------- |  | --------------- | --------- | ---- | - | ------- | 
|                 |  | At December 31, |          
|                 |  |                 |          
|                 |  | 2010            |           | 2009 |  
|                 |  |                 |           |      |  
|Lubricating oils |  | $               | 1,267,144 |      | $ | 422,153 | 
|Other            |  |                 | 19,363    |      |   | 11,275  | 
|                 |  |                 |           |      |   |         | 
|                 |  | $               | 1,286,507 |      | $ | 433,428 | 
|                 |  |                 |           |      |   |         | 

During
2010, we recorded $3.0 million of expense related to the purchases of inventory
items.

F-17

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Scorpio Tankers Inc. and Subsidiaries

Notes to the Consolidated Financial
Statements

|   |                    
|-- | -------------------
|6. | Vessels and drydock

|                                          |  |         |             |         |   |            |   |   |             |  
|----------------------------------------- |  | ------- | ----------- | ------- | - | ---------- | - | - | ----------- | -
|                                          |  | Vessels |             | Drydock |   | Total      |  
|                                          |  |         |             |         |   |            |  
|Cost                                      |  |         |             |         |   |            |   |   |             |  
|As of January 1, 2010                     |  | $       | 138,713,588 |         | $ | 1,680,784  |   | $ | 140,394,372 |  
|Additions                                 |  |         | 241,009,812 |         |   | 2,997,820  |   |   | 244,007,632 |  
|Write off of fully depreciated assets (1) |  |         |            |         |   | (89,583    | ) |   | (89,583     | )
|                                          |  |         |             |         |   |            |   |   |             |  
|As of December 31, 2010                   |  |         | 379,723,400 |         |   | 4,589,021  |   |   | 384,312,421 |  
|                                          |  |         |             |         |   |            |   |   |             |  
|                                          |  |         |             |         |   |            |   |   |             |  
|Accumulated Depreciation                  |  |         |             |         |   |            |   |   |             |  
|As of January 1, 2010                     |  |         | (40,499,502 | )       |   | (300,603   | ) |   | (40,800,105 | )
|Charge for the period                     |  |         | (9,002,011  | )       |   | (1,174,502 | ) |   | (10,176,513 | )
|Write off of fully depreciated assets (1) |  |         |            |         |   | 89,583     |   |   | 89,583      |  
|                                          |  |         |             |         |   |            |   |   |             |  
|As of December 31, 2010                   |  |         | (49,501,513 | )       |   | (1,385,522 | ) |   | (50,887,035 | )
|                                          |  |         |             |         |   |            |   |   |             |  
|Net Book Value                            |  |         |             |         |   |            |   |   |             |  
|                                          |  |         |             |         |   |            |   |   |             |  
|As of December 31, 2010                   |  |         | 330,221,887 |         |   | 3,203,499  |   |   | 333,425,386 |  
|                                          |  |         |             |         |   |            |   |   |             |  
|                                          |  |         |             |         |   |            |   |   |             |  
|Cost                                      |  |         |             |         |   |            |   |   |             |  
|As of January 1, 2009                     |  |         | 138,713,588 |         |   | 2,105,847  |   |   | 140,819,435 |  
|Additions                                 |  |         |            |         |   | 1,680,784  |   |   | 1,680,784   |  
|Write off of fully depreciated assets (1) |  |         |            |         |   | (2,105,847 | ) |   | (2,105,847  | )
|                                          |  |         |             |         |   |            |   |   |             |  
|As of December 31, 2009                   |  |         | 138,713,588 |         |   | 1,680,784  |   |   | 140,394,372 |  
|                                          |  |         |             |         |   |            |   |   |             |  
|                                          |  |         |             |         |   |            |   |   |             |  
|Accumulated Depreciation                  |  |         |             |         |   |            |   |   |             |  
|As of January 1, 2009                     |  |         | (29,718,644 | )       |   | (1,840,689 | ) |   | (31,559,333 | )
|Charge for the period                     |  |         | (6,268,981  | )       |   | (565,761   | ) |   | (6,834,742  | )
|Impairment                                |  |         | (4,511,877  | )       |   |           |   |   | (4,511,877  | )
|Write off of fully depreciated assets (1) |  |         |            |         |   | 2,105,847  |   |   | 2,105,847   |  
|                                          |  |         |             |         |   |            |   |   |             |  
|As of December 31, 2009                   |  | $       | (40,499,502 | )       | $ | (300,603   | ) | $ | (40,800,105 | )
|                                          |  |         |             |         |   |            |   |   |             |  
|Net Book Value                            |  |         |             |         |   |            |   |   |             |  
|                                          |  |         |             |         |   |            |   |   |             |  
|As of December 31, 2009                   |  | $       | 98,214,086  |         | $ | 1,380,181  |   | $ | 99,594,267  |  
|                                          |  |         |             |         |   |            |   |   |             |  

| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (1)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       | Write off of fully depreciated
 assets represents the write off of fully depreciated drydock costs. STI Conqueror and STI Heritage were
 drydocked as scheduled in 2010 for a total cost of $886,050. The remaining
 additions to drydock of $2,022,186 during 2010 resulted from the notional
 drydock calculated on our vessel purchases during the year. The Noemi and Senatore were drydocked as scheduled in
 2009 for a total cost of $1,680,784 of which $1,580,826 had been paid by
 December 31, 2009.
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| | Vessel Purchases                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| | In the first half of June 2010, we took delivery of three product
 tanker vessels that we previously agreed to acquire. STI Conqueror, a Handymax ice class 1B
 ship, was acquired for $26.0 million and trades in the Scorpio Handymax
 Tanker Pool. STI Harmony and STI Heritage, Panamax/LR1 ice class 1A sister ships, were acquired for
 an aggregate price of $92.0 million, which included $2.3 million for the
 value of the existing time charter contracts. The value of the time charter contracts is amortized as a
 reduction to vessel revenue over the remaining life of the time charter
 contracts. STI Harmony and STI Heritage entered the Scorpio Panamax
 Tanker Pool upon the completion of their time charters in September 2010 and
 December 2010, respectively.

F-18

---



Scorpio Tankers Inc. and Subsidiaries

Notes to the Consolidated Financial
Statements

|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|-- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   | In July 2010, we took delivery of three Handymax tankers, STI
 Matador, STI Gladiator and STI Highlander for an aggregate
 price of $73.0 million. These vessels
 trade in the Scorpio Handymax Tanker Pool.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|   | In November 2010,we took delivery of an LR2 Aframax product tanker, STI Spirit,
 for which we paid a purchase price of $52.2 million.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|   | Collateral agreements                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|   | Noemi, Senatore,
 Venice,
 STI Harmony, STI Heritage, STI Conqueror, STI Matador, STI
 Gladiator and STI Highlander, with an aggregated net book value of
 $281.2 million as of December 31, 2010 were provided as collateral under a
 loan agreement dated June 2, 2010 (the 2010 Credit Facility, See Note
 10)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|   | Noemi and Senatorewith an aggregated net book value as of December 31, 2009 of $77.4
 million and $85.3 million as of December 31, 2008 were provided as collateral
 under a loan agreement dated May 17, 2005 (the 2005 Credit Facility). See Note 10 for full details as to the
 nature of this collateral. On April 9, 2010, we repaid all borrowings under
 the 2005 Credit Facility and consequently these vessels are no longer
 collateralized under this agreement (see Note 10).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|   | Prior to December 2009, the Venice was provided as collateral to a
 third party under an agreement between a subsidiary of Liberty and a third
 party. Neither the Venice,
 Scorpio Tankers Inc. nor any of its subsidiaries were party to this agreement,
 nor did they have a relationship with the third party involved. At the request of Liberty, in December
 2009, the third party agreed to release the Venice from the agreement
 in exchange for Liberty providing other collateral in place of the Venice. Scorpio Tankers Inc. and its subsidiaries
 have no remaining collateral obligation under the agreement.                                                                                                                                                                                                                                                                                                                                                                             
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|7. | Impairment of
 vessels                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|   | At the end of each reporting
 period, we evaluate the carrying amounts of vessels and related drydock costs
 to determine if there is any indication that those vessels and related
 drydock costs 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 discounted projected operating cash flows,
 business plans and overall market conditions.                                                                                                                                                                                                                                                                                                                                                                                                  
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|   | In the nine months ended
 September 30, 2009, the charter rates in the oil and petroleum products
 charter market declined significantly and Panamax vessel values also
 declined, both as a result of a slowdown in the availability of global credit
 and the significant deterioration in charter rates. These were both conditions we considered indicators of a
 potential impairment, and therefore we performed an impairment test as of
 September 30, 2009 for each vessel to determine if any impairment loss had
 occurred.                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|   | To test for impairment, we estimated
 the recoverable amount by determining the higher of fair value
 less costs to sell and value in use for each vessel as of September 30,
 2009.  The fair value less costs to
 sell was estimated by adding (i) the charter free market value of the vessel
 and (ii) the discounted value of each vessels time charter, which is the
 difference between each vessels time charter contracted rate and the market
 rate for a similar type of vessel with a similar contracted duration. In determining the charter free market
 value, we took into consideration the estimated valuations provided by an
 independent ship broker. In assessing value in use, the estimated
 future cash flows of each vessel were discounted to their present value using
 a pre-tax discount rate reflecting current market assessments of the time
 value of money and the risks specific to the vessel for which the estimates
 of future cash flows have not been adjusted.
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|   | As a result of the test, we
 determined that the recoverable amount of each vessel to be the fair value
 less costs to sell. The recoverable
 amounts of Noemi and Senatore were below the carrying
 values. This resulted in an
 impairment loss of $4,511,877 for Noemi and Senatore which was
 recognized as a loss in the consolidated income statement for the year ended
 December 31, 2009 and a reduction in the carrying value of the vessels at
 that date.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     

F-19

---



Scorpio Tankers Inc. and Subsidiaries

Notes to the Consolidated Financial
Statements

|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|-- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   | At December 31, 2009, we
 considered certain indicators of potential impairment, such as discounted
 projected operating cash flows, business plans and overall market conditions
 and concluded that there were no indications of a further deterioration in
 the recoverable amount of the vessels and drydock costs.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|   | At December 31, 2010, the carrying amounts of our vessels were
 greater than the independent broker valuation (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 where we
 estimated the vessels 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), the ten year historical average of charter rates in
 the shipping industry for periods thereafter, and our best estimate of vessel
 operating expenses. These cash flows were then discounted to their present
 value, using a discount rate 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 in all instances, which resulted in no
 impairment being recognized. In addition, if the charter rates were adjusted
 downward by 5% or the discount rate was increased by 1% the value in use of
 the vessels would still have exceeded the carrying value of the six vessels
 in question.
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|8. | Other assets                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|   | Working capital contributions                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|   | 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. We intend to operate
 our vessels currently in the SHTP for the foreseeable future and therefore
 have classified the working capital receivables as long term. The total value
 of the working capital contributions at December 31, 2010 was $1,428,376
 (2009 was $0).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|   | Purchase options                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|   | As described in Note 6 above, we purchased and took delivery of the STI Spirit
 during the year. The agreement to purchase the STI Spirit also included
 two separate purchase options with the seller which grant us the right, but
 not the obligation, to purchase a 2008 built Panamax LR1 ice class-1A product
 tanker for a price of $45.0 million each. Each option can be exercised at any
 time until September 2011. As of
 December 31, 2010, these options were not exercised.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|   | The combined fair value of the two options has been estimated at
 $126,337. The fair value of the
 options has been reflected as part of Other non-current assets and the
 options will be expensed through the income statement if they are impaired or
 expire unexercised. If exercised, the
 value of the options will be added to the vessel cost and amortised on a
 straight line basis over the estimated useful life of the vessel. There were
 no indicators of impairment related to the options as of December 31, 2010.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|9. | Accounts payable                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             

|                                      |  |                 |           |      |   |         | 
|------------------------------------- |  | --------------- | --------- | ---- | - | ------- | 
|                                      |  | At December 31, |          
|                                      |  |                 |          
|                                      |  | 2010            |           | 2009 |  
|                                      |  |                 |           |      |  
|Suppliers                             |  | $               | 3,049,744 |      | $ | 656,002 | 
|Scorpio Handymax Tanker
 Pool Limited |  |                 | 22,349    |      |   |        | 
|Scorpio Ship Management               |  |                 | 101,412   |      |   |        | 
|                                      |  |                 |           |      |   |         | 
|                                      |  | $               | 3,173,505 |      | $ | 656,002 | 
|                                      |  |                 |           |      |   |         | 

F-20

---



Scorpio Tankers Inc. and Subsidiaries

Notes to the Consolidated Financial
Statements

|    |                                                                                                                                                                                                                          
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    | 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 approximate to their fair value.
|    |                                                                                                                                                                                                                          
|10. | Bank loans                                                                                                                                                                                                               
|    |                                                                                                                                                                                                                          
|    | The following is a breakdown of the current and non-current portion
 of our debt outstanding at December 31, 2010 and 2009:                                                                                              

|                        |  |                 |             |      |   |            | 
|----------------------- |  | --------------- | ----------- | ---- | - | ---------- | 
|                        |  | At December 31, |            
|                        |  |                 |            
|                        |  | 2010            |             | 2009 |  
|                        |  |                 |             |      |  
|Current portion (1)     |  | $               | 15,826,314  |      | $ | 3,600,000  | 
|Non-current portion (1) |  |                 | 127,362,088 |      |   | 36,200,000 | 
|                        |  |                 |             |      |   |            | 
|                        |  | $               | 143,188,402 |      | $ | 39,800,000 | 
|                        |  |                 |             |      |   |            | 

|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | The current portion and non current portion at December 31, 2010 were
 net of unamortized deferred financing fees of $444,706 and $1,541,474,
 respectively.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|    | 2005
 Credit Facility                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|    | On April 6, 2010, we completed an initial public offering of our
 common shares (see Note 13). With a
 portion of the net proceeds from the offering, on April 9, 2010, we repaid
 the remaining balance of $38,900,000 under the 2005 Credit Facility (there
 was a payment of principal of $900,000 in February 2010).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|    | 2010 Credit
 Facility                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|    | On June 2, 2010, we executed a credit facility with Nordea Bank
 Finland plc, acting through its New York branch, DnB NOR Bank ASA, also
 acting through its New York branch, and Fortis Bank Nederland, collectively
 the lead arrangers, for a senior secured term loan facility of up to
 $150 million. Available
 borrowings under the credit facility can be drawn upon until December 2, 2011
 and bear interest 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%. A commitment fee
 equal to 40% of the applicable margin is payable on the unused daily portion
 of the credit facility. Amounts drawn
 under this credit facility mature on May 15, 2015 and can only be used to
 finance vessels (see Note 20 for remaining obligations under this
 facility). Any vessels financed under
 the credit facility become collateral assets of the 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 instalments, with a lump
 sum payment at maturity, based on a full repayment of such tranche when the
 vessel to which it relates is fifteen years of age. Our subsidiaries, which may, at any time, own one or more of
 our initial vessels, act as guarantors under the credit facility. As of December 31, 2010, we had drawn down
 $150.0 million under this facility, and we were in compliance with the loan
 covenants (as described below). On
 September 30, 2010 and December 31, 2010, we made principle payments of $1.4
 million and $3.4 million, respectively.
 As of December 31, 2010, the outstanding balance was $145.2 million.                                                                                                                                                    
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|    | The credit facility requires us to comply with a number of covenants,
 including; 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 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.                                                                                                                                                                                                                                                                                                     
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     

F-21

---



Scorpio Tankers Inc. and Subsidiaries

Notes to the Consolidated Financial
Statements

| |                                                                              
| | -----------------------------------------------------------------------------
| | The financial covenants included in the 2010 Credit Facility are as
 follows:
| |                                                                              

| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | The ratio of debt to capitalization shall be
no greater than 0.60 to 1.00.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| |  | Consolidated
tangible net worth 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 75% of the value of any new
equity issues from July 1, 2010 going forward.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| |  | The
ratio of EBITDA (as defined below) to actual interest expense shall be no
less than 2.50 to 1.00 commencing with the fifth fiscal quarter following the
closing of the credit facility. EBITDA is defined as earnings before net
interest expense, income taxes, depreciation, amortization, non-cash expenses
or gains, extraordinary gains or losses not incurred in the ordinary course
of business, expenses incurred in connection with a special or intermediate
survey of a vessel and any drydocking expenses. Such ratio shall be
calculated quarterly on a trailing quarter basis from and including the fifth
fiscal quarter however for the ninth fiscal quarter and in periods thereafter
the ratio shall be calculated on a trailing four quarter basis.
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| |  | Unrestricted
cash and cash equivalents including amounts on deposit with the lead
arrangers for the first five fiscal quarters following the closing of our
initial public offering shall at all times be no less than the higher of (i)
US$2,000,000 per vessel or (ii) US$10,000,000 and thereafter unrestricted
cash and cash equivalents shall at all times be no less than the higher of
(i) US$1,000,000 per vessel or (ii) US$10,000,000.                                                                                                                                                                                                                                                                                                                          
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| |  | 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.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  

| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 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 has a maturity date of seven years after the date the funds
are drawn, and the loan bears interest at LIBOR plus a margin of 2.75% per
annum. A commitment fee equal to 1.50% per annum is calculated on the undrawn
loan from the date of execution. The credit facility may only be used to
finance the STI Spirit. The loan will be repaid over 28 equal quarterly
installments and a lump sum payment at maturity. The quarterly installments,
which commence three months after the drawdown, are 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. This credit facility was fully drawn on March 14, 2011.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; 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 which pertain to Scorpio Tankers Inc. include:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 

| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | The ratio of debt to capitalization shall
be no greater than 0.60 to 1.00.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| |  | Consolidated
tangible net worth shall be no less than US$150,000,000 plus 25% of
cumulative positive net income (on a consolidated basis) for each fiscal
quarter.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| |  | The
ratio of EBITDA, as defined below, to actual interest expense shall be no
less than 2.50 to 1.00 commencing with the third fiscal quarter of 2011.
EBITDA is defined as earnings before net interest expense, income taxes,
depreciation, amortization, non-cash expenses or gains, extraordinary gains
or losses not incurred in the ordinary course of business, expenses incurred
in connection with a special or intermediate survey of a vessel and any
drydocking expenses. Such ratio shall be calculated quarterly on a trailing
quarterly basis from and including the third fiscal quarter of 2011 until the
third fiscal quarter of 2012 when the ratio shall be calculated on a trailing
four quarter basis.

F-22

---



Scorpio Tankers Inc. and Subsidiaries

Notes to the Consolidated Financial
Statements

|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |                                                                                                                                                                                                                                                                  
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                | Unrestricted
cash and cash equivalents shall be no less than the higher of (i) US$ 500,000
per vessel at all times or (ii) US$ 10,000,000 during the earlier of the
first five fiscal quarters after the first drawdown date or the third fiscal
quarter of 2011.
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |                                                                                                                                                                                                                                                                  
|    | 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.                                                                                                                                                                                                                                                                                                                                                                                                                 
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|    | 2005 Credit Facility                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|    | Two
of our wholly-owned subsidiaries, Senatore Shipping Company Limited and Noemi
Shipping Company Limited, were joint and several borrowers under the 2005
Credit Facility, entered into with The Royal Bank of Scotland plc. The
initial amount of the 2005 Credit Facility was $56,000,000, consisting of two
tranches, one for each vessel-owning subsidiary. Each tranche was repayable in
40 consecutive quarterly installments of $450,000, plus a balloon payment of
$10,000,000, to be made together with the 40th installment of each
tranche (due on May 18, 2015).The facility included a variety of restrictive
operating covenants including a loan to value financial covenant and a change
of control covenant.
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|    | As
security for the loan the lender had:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |                                                                                                                                                                                                                                                                  
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                | a
first preferred mortgage on Senatore
and Noemi; and                                                                                                                                                                                                            
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |                                                                                                                                                                                                                                                                  
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                | an
assignment of the earnings and any insurance proceeds onSenatore and Noemi.                                                                                                                                                                                   
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |                                                                                                                                                                                                                                                                  
|11. | Derivative financial instruments                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|    | In
order to fix the interest rate of the 2005 Credit Facility, Senatore Shipping
Company Limited and Noemi Shipping Company Limited each signed an amortizing
interest rate swap with The Royal Bank of Scotland plc on April 15, 2005 for
an initial notional amount of $56,000,000. On February 15, 2007, these swap
contracts were amended by reducing the then notional amount by 50% to
$24,850,000.                                                                                                                                                                                                                                                                                                                      
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|    | The
notional interest rate swap amount was $19,900,000 as of December 31, 2009
and $21,700,000 as of December 31, 2008. We did not elect to apply hedge
accounting for these swaps.On April 6, 2010, we completed an initial public
offering of our common shares. With a portion of the net proceeds from the
offering, on April 9, 2010, we settled the outstanding portion of the
interest rate swap for a payment of $1,850,000. The realized loss recorded in
2010 relating to this facility was $279,560.                                                                                                                                                                                                                
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|    | The
carrying value (liability) of our interest rate swaps was as follows:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      

|                    |  |                 |   |      |   |            |  
|------------------- |  | --------------- | - | ---- | - | ---------- | -
|                    |  | At December 31, |  
|                    |  |                 |  
|                    |  | 2010            |   | 2009 |  
|                    |  |                 |   |      |  
|Current portion     |  | $               |  |      | $ | (814,206   | )
|Non-current portion |  |                 |  |      |   | (871,104   | )
|                    |  |                 |   |      |   |            |  
|                    |  | $               |  |      | $ | (1,685,310 | )
|                    |  |                 |   |      |   |            |  

| |                                                                                                       
| | ------------------------------------------------------------------------------------------------------
| | These
instruments were carried at fair value through profit and loss. See Note 20
for further details.

F-23

---



Scorpio Tankers Inc. and Subsidiaries

Notes to the Consolidated Financial
Statements

|    |                                                                                                     
|--- | ----------------------------------------------------------------------------------------------------
|12. | Segment reporting                                                                                   
|    |                                                                                                     
|    | Information
about our reportable segments for the three years ended December 31, 2010 is
as follows:

|                                                                        |  |             |             |          |   |             |   |           |          |       |   |            |   |   |             |  
|----------------------------------------------------------------------- |  | ----------- | ----------- | -------- | - | ----------- | - | --------- | -------- | ----- | - | ---------- | - | - | ----------- | -
|As of and
for
the year
Ended
December
31, 2010                          |  |             |             |          |   |             |   |           |          |       |   |            |   |   |             |  
|                                                                        |  | Panamax LR1 |             | Handymax |   | Aframax/LR2 |   | Other (2) |          | Total |  
|                                                                        |  |             |             |          |   |             |   |           |          |       |  
|Revenue from external customers                                         |  | $           | 29,344,505  | (1)      | $ | 8,812,130   |   | $         | 641,278  |       | $ |           |   | $ | 38,797,913  |  
|Vessel operating costs                                                  |  |             | (12,363,968 | )        |   | (5,649,736  | ) |           | (426,788 | )     |   |           |   |   | (18,440,492 | )
|Voyage expenses                                                         |  |             | (253,106    | )        |   | (2,289,192  | ) |           |         |       |   |           |   |   | (2,542,298  | )
|Charter hire                                                            |  |             | (275,532    | )        |   |            |   |           |         |       |   |           |   |   | (275,532    | )
|Depreciation                                                            |  |             | (7,493,632  | )        |   | (2,389,669  | ) |           | (293,211 | )     |   | (2,396     | ) |   | (10,178,908 | )
|General and administrative expenses                                     |  |             | (600,476    | )        |   | (266,509    | ) |           | (14,747  | )     |   | (5,318,362 | ) |   | (6,200,094  | )
|Interest expense, net                                                   |  |             | (133,708    | )        |   | 1,383       |   |           | 778      |       |   | (3,062,814 | ) |   | (3,194,361  | )
|Realized and unrealized gain/(loss) on derivative financial
instruments |  |             | (279,560    | )        |   |            |   |           |         |       |   |           |   |   | (279,560    | )
|Other expense, net                                                      |  |             | (4,420      | )        |   |            |   |           |         |       |   | (504,346   | ) |   | (508,766    | )
|                                                                        |  |             |             |          |   |             |   |           |          |       |   |            |   |   |             |  
|Segment profit or loss                                                  |  | $           | 7,940,103   |          | $ | (1,781,593  | ) | $         | (92,690  | )     | $ | (8,887,918 | ) | $ | (2,822,098  | )
|                                                                        |  |             |             |          |   |             |   |           |          |       |   |            |   |   |             |  

|    |                                                                                                                                                  
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Includes amortization expense of $2.3 million related to the
amortization of time charter contracts acquired on the STI Harmony and
STI Heritage.
|    |                                                                                                                                                  
|(2) | Other represents items that are not allocable to any of our reportable segments                                                                  

| |                                                                                                                                                                                                                     
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | The
Panamax/LR1 and 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:

|            |  |                                          |  |      |            |      |   |            |  |   |            | 
|----------- |  | ---------------------------------------- |  | ---- | ---------- | ---- | - | ---------- |  | - | ---------- | 
|Segment     |  | Customer                                 |  | 2010 |            | 2009 |   | 2008       | 
|            |  |                                          |  |      |            |      |   |            | 
|Panamax/LR1 |  | Scorpio Panamax Tanker Pool
Limited (1)  |  | $    | 9,645,173  |      | $ | 10,415,331 |  | $ | 20,980,233 | 
|            |  | King Dustin (1)                          |  |      | 8,700,195  |      |   | 8,288,767  |  |   | 8,879,913  | 
|            |  | Liberty (1)                              |  |      | 4,779,605  |      |   |           |  |   |           | 
|            |  | BP                                       |  |      | 5,937,328  |      |   | 8,914,941  |  |   | 9,414,050  | 
|            |  |                                          |  |      |            |      |   |            |  |   |            | 
|Handymax    |  | Scorpio Handymax Tanker
Pool Limited (1) |  |      | 5,177,805  |      |   |           |  |   |           | 
|            |  |                                          |  |      |            |      |   |            |  |   |            | 
|            |  |                                          |  | $    | 34,240,106 |      | $ | 27,619,039 |  | $ | 39,274,196 | 
|            |  |                                          |  |      |            |      |   |            |  |   |            | 

|    |                                                   
|--- | --------------------------------------------------
|(1) | These
customers are related parties (see Note 14).

F-24

---



Scorpio Tankers Inc. and Subsidiaries

Notes to the Consolidated Financial
Statements

|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|13. | Common shares                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|    | At
December 31, 2009, we had 1,500 registered shares authorized and issued with
a par value of $1.00 per share. These shares provide the holders with rights
to dividends and voting rights.On March 17, 2010, the board of directors
amended and restated the Articles of Incorporation to (i) authorize
275,000,000 registered shares of which 250,000,000 were designated as common
shares with a par value of $0.01 and 25,000,000 were designated as preferred
shares with a par value of $0.01, and (ii) authorize a stock split of
3,726.098 to 1 for the issued and outstanding common shares, which increased
the number of shares from 1,500 common shares issued and outstanding to
5,589,147 common shares issued and outstanding. All common share amounts in
the consolidated financial statements have been retroactively adjusted for
all periods presented, including the share amounts used in the calculation of
earnings per share, to give effect to the stock split.                                                                                                                                                                                                                                                                                                                                                                                                            
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|    | On
April 6, 2010, we completed an initial public offering of our common shares
on the New York Stock Exchange. In connection with the offering, we issued
and sold 12,500,000 additional common shares. In addition, we listed our
existing shares. The costs related to the listing of our existing shares of
$0.5 million in the year ended December 31, 2010 were expensed and included
in Other (expense) and income, net in the consolidated income statement. On
May 4, 2010, the underwriters of the initial public offering exercised their
over-allotment option to purchase an additional 450,000 shares. Net proceeds
from the issuance of the common shares of 12,950,000, which included the
over-allotment, were $154.8 million Prior to the offering, the Lolli-Ghetti
Family, of which Emanuele Lauro, our Chairman and Chief Executive Officer, is
a member, owned 100% of our outstanding common shares and maintained a
controlling interest in Scorpio Tankers Inc. Total fees and commissions
relating to the initial public offering and exercise of the over-allotment
option were $14.2 million, of which, $0.7 million were recognized as expense
in the income statement ($0.2 million in 2009 and $0.5 million in 2010) as
being related to the registration of existing shares and the remaining $13.5
million were recorded as a reduction to additional paid in capital.
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|    | On
November 22, 2010, we completed 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 approximately
$41.8 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 exercised their over-allotment option. In addition, 510,204 shares
were issued at the follow on public offering price in a concurrent private
placement to a member of the Lolli-Ghetti family for total proceeds of $5.0 million.
Total fees and commissions relating to the follow-on offering and exercise of
the over-allotment option were $3.4 million and were recorded as a reduction
to additional paid in capital.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|    | Prior
to the initial public offering, a subsidiary of Simon owned 100% of our
shares (or 5,589,147 shares). Simon is incorporated in Liberia and is owned
by members of the Lolli-Ghetti family. Emanuele Lauro, our founder, Chairman
and Chief Executive Officer is a member of the Lolli-Ghetti family which,
after completion of the initial public offering, issuance of restricted
shares and subsequent follow on offering, no longer maintains a controlling
interest.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|    | Stock buyback plan  Treasury Shares                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|    | 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. As of December 31,
 2010, 244,146 shares have been purchased under the plan at an average price
 of $10.85 per share, including commissions.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       

F-25

---



Scorpio Tankers Inc. and Subsidiaries

Notes to the Consolidated Financial
Statements

| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Restricted stock issuance                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| | On
 June 18, 2010, we issued 559,458 shares of restricted stock to the 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 for the executive
 officers 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. For the year ended
 December 31, 2010, we recorded $922,123 in expense for these shares.
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| | On
 June 21, 2010, 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
 $10.85 per share. These shares vest on April 6, 2011. For the year ended
 December 31, 2010, we recorded $66,150 in expense for these shares.                                                                                                                                                                                                                                                                                                                       
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| | Assuming
 that all the restricted stock will vest, the stock compensation expense
 relating to these issuances in future periods will be:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            

|                                       |  |           |           |           |   |        |  |   |           | 
|-------------------------------------- |  | --------- | --------- | --------- | - | ------ |  | - | --------- | 
|                                       |  | Employees |           | Directors |   | Total  | 
|                                       |  |           |           |           |   |        | 
|For the year ending
 December 31, 2011 |  | $         | 1,702,382 |           | $ | 31,500 |  | $ | 1,733,882 | 
|For the year ending
 December 31, 2012 |  |           | 1,702,382 |           |   |       |  |   | 1,702,382 | 
|For the year ending December
 31, 2013 |  |           | 1,151,776 |           |   |       |  |   | 1,151,776 | 
|For the year ending
 December 31, 2014 |  |           | 562,849   |           |   |       |  |   | 562,849   | 
|For the year ending
 December 31, 2015 |  |           | 106,929   |           |   |       |  |   | 106,929   | 
|                                       |  |           |           |           |   |        |  |   |           | 
|                                       |  | $         | 5,226,318 |           | $ | 31,500 |  | $ | 5,257,818 | 
|                                       |  |           |           |           |   |        |  |   |           | 

|    |                                                                                                                                                                                                                                                                                                          
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|14. | Related party transactions                                                                                                                                                                                                                                                                               
|    |                                                                                                                                                                                                                                                                                                          
|    | Transactions
 with subsidiaries of Simon (herein referred to as Simon subsidiaries) and
 transactions with entities outside of Simon but controlled by the
 Lolli-Ghetti family (herein referred to as related party affiliates) in the
 consolidated income statements and balance sheet are as follows:

|                                       |  |                    |            |      |   |            |   |   |            |  
|-------------------------------------- |  | ------------------ | ---------- | ---- | - | ---------- | - | - | ---------- | -
|                                       |  | For the year       |           
|                                       |  | ended December 31, |           
|                                       |  | 2010               |            | 2009 |   | 2008       |  
|                                       |  |                    |            |      |   |            |  
|Pool revenue(1)                        |  |                    |            |      |   |            |   |   |            |  
|Scorpio Panamax Tanker Pool Limited    |  | $                  | 9,645,173  |      | $ | 10,415,332 |   | $ | 20,980,233 |  
|Scorpio Handymax Tanker Pool Limited   |  |                    | 5,177,805  |      |   |           |   |   |           |  
|Scorpio Aframax Tanker Pool Limited    |  |                    | 641,278    |      |   |           |   |   |           |  
|Time charter revenue(2)                |  |                    |            |      |   |            |   |   |            |  
|King Dustin                            |  |                    | 8,700,195  |      |   | 8,288,767  |   |   | 8,879,913  |  
|Liberty and subsidiaries               |  |                    | 4,779,605  |      |   |            |   |   |            |  
|Vessel operating costs(3)              |  |                    | (1,058,699 | )    |   | (600,000   | ) |   | (765,422   | )
|Commissions(4)                         |  |                    | (233,546   | )    |   |           |   |   |            |  
|General and administrative expenses(5) |  |                    | (932,460   | )    |   | (344,162   | ) |   | (619,421   | )
|Other(6)                               |  |                    | (130,602   | )    |   |           |   |   |            |  

F-26

---



Scorpio Tankers Inc. and Subsidiaries

Notes to the Consolidated Financial
Statements

| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (1) | These
 transactions relate to revenue earned in the Scorpio Aframax, Scorpio
 Panamax, and Scorpio Handymax Tanker Pools (the Pools). The Pools are
 operated by Scorpio Aframax Tanker Pool Limited, Scorpio Panamax Tanker Pool
 Limited and Scorpio Handymax Tanker Pool Limited, respectively which are
 Simon subsidiaries.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | (2) | The
 revenue earned was for Noemis time charter with King Dustin (which is 50%
 jointly controlled by a Simon subsidiary) along with STI Harmonys and STI
 Heritages time charter with Liberty, a Simon subsidiary. See Note 15 for the
 terms of these time charters.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | (3) | These
 transactions represent technical management fees charged by SSM, a related
 party affiliate, and included in the vessel operating costs in the
 consolidated income statement. We believe our technical management fees for
 the year ended December 31, 2010 and 2009 were at market rates because they
 were the same rates charged to other vessels managed by SSM. Additionally, in
 December 2009, we signed a Technical Management Agreement (see description
 below) for each ship with SSM. Each vessel pays $548 per day for technical
 management. This fee is the same charged to third parties by SSM, and
 therefore the Company believes it represents a market rate for such services.
 The Companys fees under technical management arrangements with SSM were not
 at market rates for the year ended December 31, 2008. The Company estimates
 that its technical management fees for the year ended December 31, 2008 would
 have been $601,704 and would have increased net income for the periods by
 $163,718 had the Company operated as an unaffiliated entity. The Companys
 estimate is based upon the rates charged to third party participants by SSM
 in 2008.
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | (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 will pay
 1.25% of their revenue when the vessels are not in the Pools. When our
 vessels are in the Pools, SCM, the pool manager, charges all vessels in the
 Pools (including third party participants) $250 per day for Panamax/LR1 and
 Aframax vessels and $300 per day for Handymax vessels and 1.25% of their
 revenue. We believe that the commercial management agreement represents a
 market rate for such services.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| |     | There
 were no charges related to these services for the years ended December 31,
 2009 and 2008 and we estimate that the commissions on its fees for years
 ended December 31, 2009 and 2008 would have been $215,046 and $228,675,
 respectively and would have decreased net income for the period by the same
 amount if we operated as an unaffiliated entity. Our estimate is based upon
 the rates charged by SCM to third party participants in the pools for 2009
 and 2008.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | (5) | Prior
 to December 2009, SSM provided administrative services directly to us. In
 December 2009, we signed an administrative services agreement for each vessel
 with Liberty. We pay the administrator (Liberty) a fixed monthly fee
 calculated at cost with no profit for providing us with administrative
 services, and reimburses it for the reasonable direct or indirect expenses it
 incurs in providing us with such services. SSM provided administrative
 services to us under this agreement until September 30, 2010. From October 1,
 2010, SCM has provided us administrative services under this agreement.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| |     | The
 administrative fee included services provided to us for accounting, administrative,
 information technology and management. Our fees under administrative services
 arrangements for the year ended December 31, 2009 and 2008 may not have been
 at market rates. We cannot estimate what the cost would have been if we
 operated as an unaffiliated party, but believe the charges for the year ended
 December 31, 2009 and 2008 were reasonable and appropriate for the services
 provided.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| |     | 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 is $250 per day for Panamax/LR1 and Aframax vessels and
 $300 per day for Handymax vessels. The flat fee is the same rate charged by
 SCM for vessels in the pools managed by SCM.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   

F-27

---



Scorpio Tankers Inc. and Subsidiaries

Notes to the Consolidated Financial
Statements

| |                                                                                                                   |                                                                                                                                                                                                                                                                                                                   |                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| | ----------------------------------------------------------------------------------------------------------------- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |                                                                                                                   |                                                                                                                                                                                                                                                                                                                  | The
 expense for the year ended December 31, 2010 of $932,460 included the flat
 fee of $203,405 charged by SCM and administrative fees of $729,055 charged by
 Liberty and are both included in general and administrative expenses in the
 consolidated income statement.                                                                                                                                                                              
| |                                                                                                                   |                                                                                                                                                                                                                                                                                                                   |                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| |                                                                                                                   |                                                                                                                                                                                                                                                                                                                  | The
 expense for the year ended December 31, 2009 of $344,162 included fees of
 $70,418 charged by SCM and $273,744 charged by SSM for administrative
 services under the previous administrative agreement. The fees charged by SCM
 for the year ended December 31, 2009 were not at market rates. We estimate
 the fees charged by SCM for the year ended December 31, 2009 would have been
 $182,500 and would have decreased net income by $112,082.
| |                                                                                                                   |                                                                                                                                                                                                                                                                                                                   |                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| |                                                                                                                   |                                                                                                                                                                                                                                                                                                                  | The
 expense for the year ended December 31, 2008 of 619,421 included fees of
 $37,996 charged by SCM and $581,426 charged by SSM for administrative
 services under the previous administrative agreement. The fees charged by SCM
 for the year ended December 31, 2009 were not at market rates. We estimate
 the fees charged by SCM for the year ended December 31, 2009 would have been
 $183,000 and would have decreased net income by $145,004. 
| |                                                                                                                   |                                                                                                                                                                                                                                                                                                                   |                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| | (6)                                                                                                               | In
 accordance with our Administrative Services Agreement with Liberty, we are
 required to reimburse Liberty for any direct expenses. These transactions
 represent reimbursements of $130,602 to Liberty for the year ended December
 31, 2010 for expenses related to the registration of the existing shares.
| |                                                                                                                   |                                                                                                                                                                                                                                                                                                                   |                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| | We
 had the following balances with related parties which have been included in
 the consolidated balance sheets: |                                                                                                                                                                                                                                                                                                                  

|                                         |  |                    |           |      |   |           | 
|---------------------------------------- |  | ------------------ | --------- | ---- | - | --------- | 
|                                         |  | As of December 31, |          
|                                         |  | 2010               |           | 2009 |  
|                                         |  |                    |           |      |  
|Assets:                                  |  |                    |           |      |   |           | 
|Accounts receivable (due from the Pools) |  | $                  | 6,767,770 |      | $ | 1,133,030 | 
|Accounts receivable (SSM)                |  |                    | 117       |      |   |          | 
|Accounts receivable (SCM)                |  |                    | 3,463     |      |   |          | 
|Vessels and drydock (7)                  |  |                    | 2,431,700 |      |   |          | 
|Shareholder receivable(8)                |  |                    |          |      |   | 1,928,253 | 
|Liabilities:                             |  |                    |           |      |   |           | 
|Accounts payable (owed to the Pools)     |  |                    | 22,349    |      |   |          | 
|Accounts payable (SSM)                   |  |                    | 101,412   |      |   |           | 
|Shareholders equity:                    |  |                    |           |      |   |           | 
|Additional paid in capital(9)            |  |                    | 344,490   |      |   |          | 

| |     |                                                                                                                                                                                                                                                                                                                                                                                                         |                                                                                                                                                                                                                                       
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (7) | The
 Administrative Services Agreement with Liberty 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.                                                                           
| |     |                                                                                                                                                                                                                                                                                                                                                                                                         |                                                                                                                                                                                                                                       
| |     |                                                                                                                                                                                                                                                                                                                                                                                                        | The
 balance as of December 31, 2010 of $2,431,700 was the 1% fee for
 administrative services provided for the purchases of the STI Harmony, STI Heritage, STI
 Conqueror, STI Matador, STI Gladiator, STI Highlander and STI Spirit.
| |     |                                                                                                                                                                                                                                                                                                                                                                                                         |                                                                                                                                                                                                                                       
| | (8) | During
 December 2009, we advanced $1,928,253 to a shareholder, which was recognized
 as a receivable in the consolidated balance sheet as of December 31, 2009.
 The receivable was due upon demand and was non-interest bearing and
 unsecured. The amount was repaid in the first quarter of 2010.                                                                                                  
| |     |                                                                                                                                                                                                                                                                                                                                                                                                         |                                                                                                                                                                                                                                       
| | (9) | As
 per the Administrative Services Agreement, we have to reimburse Liberty for
 any direct expenses. The $344,490 as of December 31, 2010 related to expenses
 for the registration of the shares in the initial
 public offering, which closed on April 6, 2010 and were recorded as an offset
 against the proceeds from the offering. The liability has been cash settled
 as of December 31, 2010.

F-28

---



Scorpio Tankers Inc. and Subsidiaries

Notes to the Consolidated Financial
Statements

| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       | 
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | 
| | Key
 management remuneration                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       | 
| | Our executive management
 was provided by a related party affiliate and included in the management fees
 described in (5) above, until April 6, 2010 when the initial public offering
 closed. If we were not part of Simon, and had the same ownership structure
 and a contract for administrative services for the periods up to April 6,
 2010, we estimate our general and administrative costs would have been
 comparable with the general and administrative costs presented in the
 consolidated income statement for the years ended December 31, 2010, 2009 and
 2008. For the period April 6, 2010 through December 31, 2010 key management
 remuneration was as follows:

|                                         |  |                   |           | 
|---------------------------------------- |  | ----------------- | --------- | 
|                                         |  | As of December 31 |          
|                                         |  |                   |          
|                                         |  | 2010              |          
|                                         |  |                   |          
|                                         |  |                   |           | 
|Short term employee
 benefits (salaries) |  | $                 | 2,059,907 | 
|Share-based compensation
 (1)            |  |                   | 922,123   | 
|                                         |  |                   |           | 
|Total                                    |  | $                 | 2,982,030 | 
|                                         |  |                   |           | 

|    |                                                                                                                                                                                                                                                                                                                                                
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Represents
 restricted stock issued under the 2010 Equity Incentive Plan. See Note 13 for
 further description.                                                                                                                                                                                                                                
|    |                                                                                                                                                                                                                                                                                                                                                
|    | There
 are no post-employment benefits.                                                                                                                                                                                                                                                                                                        
|    |                                                                                                                                                                                                                                                                                                                                                
|15. | Vessel revenue                                                                                                                                                                                                                                                                                                                                 
|    |                                                                                                                                                                                                                                                                                                                                                
|    | During
 2010, we had four vessels that were time chartered out and the remainder
 either operated in the various Scorpio pools or in the spot market, on voyage
 charter. During 2009 and 2008, we had two vessels that were time chartered
 out. The remaining revenue in those earlier years was derived from vessels
 operating in the Pool.
|    |                                                                                                                                                                                                                                                                                                                                                
|    | Revenue sources                                                                                                                                                                                                                                                                                                                                

|                     |  |                    |            |      |   |            |  |   |            | 
|-------------------- |  | ------------------ | ---------- | ---- | - | ---------- |  | - | ---------- | 
|                     |  | For the year       |           
|                     |  | Ended December 31, |           
|                     |  |                    |           
|                     |  | 2010               |            | 2009 |   | 2008       | 
|                     |  |                    |            |      |   |            | 
|Time charter revenue |  | $                  | 19,417,128 |      | $ | 17,203,709 |  | $ | 18,293,963 | 
|Pool revenue         |  |                    | 15,464,256 |      |   | 10,415,332 |  |   | 20,980,233 | 
|Voyage revenue       |  |                    | 3,916,529  |      |   |           |  |   |            | 
|                     |  |                    |            |      |   |            |  |   |            | 
|                     |  | $                  | 38,797,913 |      | $ | 27,619,041 |  | $ | 39,274,196 | 
|                     |  |                    |            |      |   |            |  |   |            | 

| |                             
| | ----------------------------
| | Time
 charter out contracts:

|                 |  |                  |            |       |  |            |  |   |        | 
|---------------- |  | ---------------- | ---------- | ----- |  | ---------- |  | - | ------ | 
|                 |  | Time Charter Out |            |       |  |           
|                 |  |                  |            |       |  |           
|Vessel           |  | From             |            | To(1) |  | Daily rate | 
|                 |  |                  |            |       |  |            | 
|Noemi            |  |                  | Jan
 2007  |       |  | Jan
 2012  |  | $ | 24,500 | 
|Senatore(2)      |  |                  | Sep
 2007  |       |  | Aug
 2010  |  | $ | 26,000 | 
|STI
 Harmony(3)  |  |                  | June
 2010 |       |  | Sep
 2010  |  | $ | 25,500 | 
|STI Heritage (3) |  |                  | June 2010  |       |  | Dec 2010   |  | $ | 25,500 | 

F-29

---



Scorpio Tankers Inc. and Subsidiaries

Notes to the Consolidated Financial
Statements

| |                                                                                  |                                                                                                                                                                                                                                                                                                                                                                                                                     
| | -------------------------------------------------------------------------------- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (1)                                                                              | The
 time charter contracts terminate plus or minus 30 days from the end date.                                                                                                                                                                                                                                                                                                                                      
| | (2)                                                                              | The
 time charter contract with the Senatore was
 terminated on August 26, 2010.                                                                                                                                                                                                                                                                                                                                    
| | (3)                                                                              | STI Harmony and STI Heritage were
 acquired from unaffiliated third parties in June 2010 with existing time
 charter contracts that commenced in October 2007 and January 2008,
 respectively. The vessels are chartered to subsidiaries of Liberty, which are
 related parties. The time charter contract with the STI Harmony was terminated on September 7, 2010 and with
 the STI Heritage on December 8,
 2010.
| |                                                                                  |                                                                                                                                                                                                                                                                                                                                                                                                                     
| | The
 estimated minimum future time charter revenue to be received is as follows:

|                      |  |                    |           |      |   |            |  |   |            | 
|--------------------- |  | ------------------ | --------- | ---- | - | ---------- |  | - | ---------- | 
|                      |  | As of December 31, |          
|                      |  |                    |          
|                      |  | 2010               |           | 2009 |   | 2008       | 
|                      |  |                    |           |      |   |            | 
|Within 1 year         |  | $                  | 8,722,000 |      | $ | 16,144,500 |  | $ | 18,432,500 | 
|Between 1 and 5 years |  |                    |          |      |   | 9,457,000  |  |   | 25,601,500 | 
|                      |  |                    |           |      |   |            |  |   |            | 
|                      |  | $                  | 8,722,000 |      | $ | 25,601,500 |  | $ | 44,034,000 | 
|                      |  |                    |           |      |   |            |  |   |            | 

F-30

---



|                                               |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|---------------------------------------------- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Scorpio Tankers Inc. and Subsidiaries         
|                                               |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|Notes to the Consolidated Financial Statements
|                                               |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|16.                                            | Charter
 hire                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|                                               |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|                                               | On
 December 12, 2010 the 2010 built LR1 product tanker, BW Zambesi, was
 delivered to us on a time charter in agreement. The term of the agreement was
 for one year from the date of delivery at a charter hire rate of $13,850 per
 day with an option to extend for an additional year at a charter hire rate of
 $14,850 per day. The vessel is currently operating in the Scorpio Panamax
 Tanker Pool. The undiscounted remaining future minimum lease payments under
 the arrangement as of December 31, 2010 are $4,792,100 in 2011. The total
 expense during the year ended December 31, 2010 was $275,532.                                                                                                                                                                                                                                                                                                                                                      
|                                               |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|                                               | On
 May 29, 2008, one of the vessels owned by us, the Noemi, that was chartered
 out was chartered-in until May 1, 2009 at a rate of $26,750 per day and
 treated as an operating lease. The vessel operated in the Scorpio Panamax
 Tanker Pool until the time charter ended on May 1, 2009. The time charter
 contract also included a profit and loss sharing arrangement where (i) we
 agreed to pay 50% of the vessels earnings from the pool in excess of $26,750
 per day (an increase in charter hire expense) to the charterer, and (ii) the
 charterer agreed to pay 50% of the vessels earnings from the Pool below
 $26,750 per day (a decrease in charter hire expense). The total expense,
 including income and expense from the profit and loss sharing agreement was
 $3,072,916 and $6,722,334 in 2009 and 2008, respectively. The profit sharing
 arrangement resulted in additional income of $108,426 in 2009, and an expense
 of $1,007,000 in 2008.
|                                               |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|17.                                            | Vessel operating costs                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|                                               |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|                                               | Vessel
 operating costs primarily represent crew related costs, stores, routine
 maintenance and repairs, insurance, technical management fees, and other
 related costs. The procurement of these services is managed on our behalf by
 our technical manager, SSM (see Note 14).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|                                               |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|18.                                            | 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, 2010, 2009 and 2008.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|                                               |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|19.                                            | (Loss)/Earnings per share                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|                                               |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|                                               | The
 calculation of both basic and diluted earnings per share is based on net
 income attributable to equity holders of the parent and weighted average
 outstanding shares of the Company, adjusted for potentially dilutive items.
 See the calculation below:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            

|                                                               |  |                                 |            |      |   |           |  |   |            | 
|-------------------------------------------------------------- |  | ------------------------------- | ---------- | ---- | - | --------- |  | - | ---------- | 
|                                                               |  | For the year ended December 31, |           
|                                                               |  |                                 |           
|                                                               |  | 2010                            |            | 2009 |   | 2008      | 
|                                                               |  |                                 |            |      |   |           | 
|Net (loss)/income attributable to equity holders of the parent |  | $                               | (2,822,098 | )    | $ | 3,418,037 |  | $ | 12,185,924 | 
|                                                               |  |                                 |            |      |   |           |  |   |            | 
|Basic weighted average number of shares                        |  |                                 | 15,600,813 |      |   | 5,589,147 |  |   | 5,589,147  | 
|Effect of dilutive potential basic shares:                     |  |                                 |            |      |   |           |  |   |            | 
|                                                               |  |                                 |            |      |   |           |  |   |            | 
|Restricted stock                                               |  |                                 |           |      |   |          |  |   |           | 
|                                                               |  |                                 |            |      |   |           |  |   |            | 
|Diluted weighted average number of shares                      |  |                                 | 15,600,813 |      |   | 5,589,147 |  |   | 5,589,147  | 
|                                                               |  |                                 |            |      |   |           |  |   |            | 
|Basic earnings per share                                       |  |                                 | (0.18      | )    |   | 0.61      |  |   | 2.18       | 
|                                                               |  |                                 |            |      |   |           |  |   |            | 
|Diluted earnings per share                                     |  |                                 | (0.18      | )    |   | 0.61      |  |   | 2.18       | 



| |                                                                                                                                                                                                                                 
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | The
 weighted average number of shares presented above includes the stock split
 mentioned in Note 13 and assumes that the reorganization mentioned in Note 1
 was effective during the period ended December 31, 2009 and 2008.

F-31

---



|                                               |                                                                                                                                                                                                                                                                                                                                                                                                                                          
|---------------------------------------------- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Scorpio Tankers Inc. and Subsidiaries         
|                                               |                                                                                                                                                                                                                                                                                                                                                                                                                                          
|Notes to the Consolidated Financial Statements
|                                               |                                                                                                                                                                                                                                                                                                                                                                                                                                          
|                                               | We
 incurred a loss for the year ended December 31, 2010. As a result, the
 inclusion of potentially dilutive items related entirely to the issuance of
 568,458 restricted shares in the diluted earnings per share calculation would
 have an antidilutive effect on the loss per share for the period. Therefore,
 all potentially dilutive items have been excluded from the diluted earnings
 per share calculation for this period.
|                                               |                                                                                                                                                                                                                                                                                                                                                                                                                                          
|20.                                            | 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 |            
|                                                                       |  |                                   |            
|                                                                       |  | 2010                              |             | 2009 |   | 2008       | 
|                                                                       |  |                                   |             |      |   |            | 
|Financial
 assets (at amortized cost)                                  |  |                                   |             |      |   |            |  |   |            | 
|Cash and cash equivalents                                              |  | $                                 | 68,186,902  |      | $ | 444,496    |  | $ | 3,607,635  | 
|Loans and receivable                                                   |  |                                   | 8,782,628   |      |   | 3,367,251  |  |   | 3,701,980  | 
|                                                                       |  |                                   |             |      |   |            |  |   |            | 
|Financial
 liabilities                                                 |  |                                   |             |      |   |            |  |   |            | 
|Fair value through profit
 and loss - Derivative financial instruments |  |                                   |            |      |   | 1,685,310  |  |   | 2,641,430  | 
|Other liabilities (at
 amortized cost)                                 |  |                                   | 147,485,258 |      |   | 41,409,534 |  |   | 94,171,231 | 

| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | On
 April 6, 2010, we completed an initial public offering of our common shares.
 With a portion of the net proceeds from the offering, on April 9, 2010, we
 settled the outstanding portion of an interest rate swap in April 2005, for a
 payment of $1,850,000.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | Derivative
 financial instruments in 2008 and 2009, comprised solely of interest rate
 swaps, were measured 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 swap in 2008 and 2009 was
 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 and liquidity
 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. See
 Note 10 for a description of the interest rate risk.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              

F-32

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|                                                |                                                                                                                                                                                                                                                   
|----------------------------------------------- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Scorpio Tankers Inc. and Subsidiaries          
|                                                |                                                                                                                                                                                                                                                   
|Notes to the Consolidated Financial
 Statements
|                                                |                                                                                                                                                                                                                                                   
|                                                | In
 the years ended December 31, 2009 and 2008, we were party to interest rate
 swaps to mitigate the risk of rising interest rates. The outstanding portion
 of the interest rate swap was settled on April 9, 2010 for a payment of
 $1,850,000.
|                                                |                                                                                                                                                                                                                                                   
|                                                | The
 consolidated income statement includes the following material items in
 respect of such instruments:                                                                                                                                         

|                                               |  |                                |         |      |   |          |   |   |           | 
|---------------------------------------------- |  | ------------------------------ | ------- | ---- | - | -------- | - | - | --------- | 
|                                               |  | For the year ended December 31 |        
|                                               |  |                                |        
|                                               |  | 2010                           |         | 2009 |   | 2008     |  
|                                               |  |                                |         |      |   |          |  
|Realized loss on interest
 rate swaps          |  | $                              | 279,560 |      | $ | 808,085  |   | $ | 405,691   | 
|Unrealized (gain)/loss on
 interest rate swaps |  |                                |        |      |   | (956,120 | ) |   | 2,057,957 | 
|                                               |  |                                |         |      |   |          |   |   |           | 
|                                               |  | $                              | 279,560 |      | $ | (148,035 | ) | $ | 2,463,648 | 
|                                               |  |                                |         |      |   |          |   |   |           | 

| |                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 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, 2010 would have
 decreased/increased by $0.7 million. This is mainly attributable to our
 exposure to interest rate movements on the 2010 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, 2009 would have
 decreased/increased by $1.0 million (2008: decreased/increased by $1.0
 million). This is mainly attributable to our exposure to interest rate
 movements for the portion of the 2005 Credit Facility that was not hedged by
 the interest rate swap in place at the time (see Note 11).
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | Credit risk                                                                                                                                                                                                                                                                                                                                                                                                                                      
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | Credit
 risk is the potential exposure of loss in the event of non-performance by
 customers and derivative instrument counterparties.                                                                                                                                                                                                                                                                                                           
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | 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, 2010, 2009 and 2008.                                                                                   
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | 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, 2010,
 2009 and 2008.                                                                                                             
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | 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.                                                                                                                                                                                                                                                
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | 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 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.                     

F-33

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|                                                |                                                                                                                                                                                                                                                                                                            
|----------------------------------------------- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Scorpio Tankers Inc. and Subsidiaries          
|                                                |                                                                                                                                                                                                                                                                                                            
|Notes to the Consolidated Financial
 Statements
|                                                |                                                                                                                                                                                                                                                                                                            
|                                                | Remaining contractual maturity on secured
 bank loan (Note 10)                                                                                                                                                                                                                                             
|                                                |                                                                                                                                                                                                                                                                                                            
|                                                | 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.
|                                                |                                                                                                                                                                                                                                                                                                            
|                                                | 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 |            
|                   |  |                   |            
|                   |  | 2010              |             | 2009 |  
|                   |  |                   |             |      |  
|Less than 1 month  |  | $                 |            |      | $ |           | 
|1-3 months         |  |                   | 6,101,892   |      |   | 1,273,280  | 
|3 months to 1 year |  |                   | 17,591,716  |      |   | 3,757,572  | 
|1-5 years          |  |                   | 147,705,130 |      |   | 18,786,996 | 
|5+ years           |  |                   |            |      |   | 22,200,479 | 
|                   |  |                   |             |      |   |            | 
|                   |  | $                 | 171,398,738 |      | $ | 46,018,327 | 
|                   |  |                   |             |      |   |            | 

|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|21. | Commitments                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|    | On
 December 24, 2010, we agreed to charter in the Krisjanis Valdemars, a 2007
 built Handymax ice-class 1B product tanker for 10 months at $12,000 per day.
 The agreement also includes a profit and loss sharing provision whereby 50%
 of all profits and losses (the difference between the vessels pool earnings
 and the charter hire expense) will be shared with the owner of the vessel.
 The vessel was delivered on February 14, 2011.                                                                              
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|    | On
 December 24, 2010, we agreed to charter in the Kraslava, a 2007 built
 Handymax ice-class 1B product tanker, for one year at $12,070 per day. The
 vessel was delivered on January 26, 2011.                                                                                                                                                                                                                                                                                                                                 
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|    | On
 December 30, 2010, we agreed to charter in the Histria Azure, a 2007 built
 Handymax product tanker, for one year at $12,250 per day. The vessel was
 delivered on February 6, 2011. The agreement includes an option for Scorpio
 Tankers to extend for an additional year at $13,750 per day or $12,250 per
 day with a 50% profit sharing agreement.                                                                                                                                                                      
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|22. | Subsequent events                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|    | January 2011 restricted stock issuance                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|    | 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 will be recognized ratably over the
 vesting periods for each tranche using the straight-line method.
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|    | 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 vest on January 31, 2012.                                                                                                                                                                                                                                                                                                      
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  

F-34

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|                                                |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|----------------------------------------------- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Scorpio Tankers Inc. and Subsidiaries          
|                                                |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|Notes to the Consolidated Financial
 Statements
|                                                |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|                                                | 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 has a maturity
 date of seven years after the date the funds are drawn, and the loan bears
 interest at LIBOR plus a margin of 2.75% per annum. A commitment fee equal to
 1.50% per annum is calculated on the undrawn loan from the date of execution.
 The credit facility may only be used to finance the STI Spirit. The STI Spirit, with a net book value of
 $52.3 million as of December 31, 2010 was provided as collateral under the
 loan agreement. The loan will be repaid over 28 equal quarterly installments
 and a lump sum payment at maturity. The quarterly installments, which
 commence three months after the drawdown, are 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.
|                                                |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|                                                | Delivery of time chartered in vessels                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|                                                |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|                                                | On
 January 26, 2011, we took delivery of Kraslava,
 a 2007 built Handymax ice-class 1B product tanker, which we previously agreed
 to time charter in as described in Note 21.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|                                                |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|                                                | On
 February 6, 2011, we took delivery of Histria
 Azure, a 2007 built Handymax product tanker, which we previously
 agreed to time charter in as described in Note 21.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|                                                |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|                                                | On
 February 14, 2011, we took delivery of Krisjanis
 Valdemars, a 2007 built Handymax product tanker, which we
 previously agreed to time charter in as described in Note 21.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|                                                |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|                                                | Change in vessel operations                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|                                                |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|                                                | On
 January 11, 2011, the STI Spiritleft
 the Scorpio Aframax Tanker Pool and is now trading in the Scorpio LR2 Pool.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|                                                |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|                                                | Share distribution                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|                                                |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|                                                | In
 January 2011, Scorpio Owning Holding Ltd. distributed its shares in Scorpio
 Tankers Inc. (via a dividend) to the shareholders of Liberty, which is 97%
 owned by members of the Lolli-Ghetti family, of which our CEO and Chairman is
 a member. The members of the Lolli-Ghetti family have not sold the shares.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|                                                |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|                                                | Potential sale of a Handymax vessel                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|                                                |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|                                                | In
 March 2011, we entered into an agreement pursuant to which an unaffiliated
 third party has the option to purchase one of our Handymaxes. If the option
 is exercised, we would realize a gain on the sale of approximately $5
 million. The buyer is required to notify us if it intends to exercise such
 option at the end of May 2011.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|                                                |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|                                                | Time charter-in agreement                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|                                                |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|                                                | On
 April 5, 2011, we entered into a time charter agreement for a 2007 built
 Handymax ice class 1B product tanker, the Kazdanga. This vessel will be
 chartered-in for one year at $12,345 per day and is expected to be delivered
 in June 2011. The agreement includes an option to extend the charter for an
 additional year at $13,335 per day.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   

F-35

---