FORM
20-F
 
 [ ]
REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR 12(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, 2007
 
 OR
 
 [ ]
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
 EXCHANGE
ACT OF 1934
 
 For the
transition period from ____ to ____
 
 OR
 
 [ ] SHELL
COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
 EXCHANGE
ACT OF 1934
 
 
 Date of
event requiring this shell company report: Not applicable
 
 Commission
file number 0001322587
 
 
 ARIES
MARITIME TRANSPORT LIMITED
 -----------------------------------------------
 (Exact
name of Registrant as specified in its charter)
 
 ----------------------------------------------
 (Translation
of Registrant’s name into English)
 
 BERMUDA
 ----------------------------------------------
 (Jurisdiction
of incorporation or organization)
 
 
 18 Zerva
Nap., Glyfada, Athens 166 75, Greece
 ----------------------------------------------
 (Address
of principal executive offices)
 
 
 Mons S.
      Bolin, President and Chief Executive Officer,
                Tel
      No. 1 30 (210) 898-3787, Fax No. 1 30 (210) 898-3788
                18
      Zerva Nap., Glyfada, Athens 166 75, Greece(Name,
      Telephone, E-mail and/or Facsimile number and
                Address
      of Company Contact Person
 
 
 Securities
registered or to be registered pursuant to Section 12(b)
 of the
Act:
  
 
 Common
share, $0.01 per share
 -----------------------------
 Title of
class
 
 Nasdaq
Global Market
 ----------------------------------------------
 Name of
exchange on which registered
  Securities
registered or to be registered pursuant to Section 12(g) of the
Act:  None
  Securities
for which there is a reporting obligation pursuant to Section 15(d)
 of the
Act: None
 Indicate
the number of outstanding shares of each of the issuer’s classes of capital or
common stock as of the close of the period covered by the annual
report:
 
 28,616,877
shares of Common Stock, par value $0.01 per share.
 
 Indicate
by check mark if the Registrant is a well-known seasoned issuer, as defined in
Rule 405 of the Securities Act.
 
 [_]
      Yes
              [X]
      No
 
 If this
report is an annual report or transition report, indicate by check mark if the
Registrant is not required to file reports pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934.
 
 [_]
      Yes
              [X]
      No
 
 Indicate
by check mark whether the Registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports) and (2) has been subject to such filing requirements for
the past 90 days.
 
 [X]
      Yes
              [_]
      No
 
 Indicate
by check mark whether the Registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting
company.  See the definitions of “large accelerated filer,”
“accelerated filer” and “smaller reporting company” in Rule 12b-2 of the
Exchange Act. (Check one):
 
 Large
      accelerated filer  [_]
              Accelerated
      filer  [X]Non-accelerated
      filer
                (Do
      not check if a smaller
                reporting
      company)  [_]
              Smaller
      reporting company  [_]
  Indicate
      by check mark which basis of accounting the Registrant has used to prepare
      the financial statements included in this filing:[X]  U.S.
      GAAP
   
   [_]  International
      Financial Reporting Standards as issued by the International Accounting
      Standards Board[_]  OtherIf
      “Other” has been checked in response to the previous question, indicate by
      check mark which financial statement item the Registrant has elected to
      follow.[_]  Item
      17[_]  Item
      18
  If this
is an annual report, indicate by check mark whether the Registrant is a shell
company (as defined in Rule 12b-2 of the Exchange Act).
 
 [_]
      Yes
              [X]
      No
 
 
 
    TABLE OF CONTENTS
 
 PageITEM
      1.
                IDENTITYOF DIRECTORS, SENIOR
      MANAGEMENT AND ADVISERS
                1ITEM
      2.
                OFFER
      STATISTICS AND EXPECTED TIMETABLE
                1ITEM
      3.
                KEY
      INFORMATION
                1ITEM
      4.
                INFORMATION
      ON THE COMPANY
                18ITEM
      4A.
                UNRESOLVED
      STAFF COMMENTS
                32ITEM
      5.
                OPERATING
      AND FINANCIAL REVIEW AND PROSPECTS
                32ITEM
      6.
                DIRECTORS,
      SENIOR MANAGEMENT AND EMPLOYEES
                53ITEM
      7.
                MAJOR
      SHAREHOLDERS AND RELATED PARTY TRANSACTIONS
                56ITEM
      8.
                FINANCIAL
      INFORMATION
                58ITEM
      9.
                THE
      OFFER AND LISTING
                59ITEM
      10.
                ADDITIONAL
      INFORMATION
                60ITEM
      11.
                QUANTITATIVE
      AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
                70ITEM
      12.
                DESCRIPTION
      OF SECURITIES OTHER THAN EQUITY SECURITIES
                70ITEM
      13.
                DEFAULTS,
      DIVIDEND ARREARAGES AND DELINQUENCIES
                71ITEM
      14.
                MATERIAL
      MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF
      PROCEEDS
                71ITEM
      15.
                CONTROLS
      AND PROCEDURES
                71ITEM
      16A.
                AUDIT
      COMMITTEE FINANCIAL EXPERT
                72ITEM
      16B.
                CODE
      OF ETHICS
                72ITEM
      16C.
                PRINCIPAL
      ACCOUNTANT FEES AND SERVICES
                72ITEM
      16D.
                EXEMPTIONS
      FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES
                72ITEM
      16E.
                PURCHASES
      OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED
PURCHASES
                73ITEM
      17.
                FINANCIAL
      STATEMENTS
                73ITEM
      18.
                FINANCIAL
      STATEMENTS
                73ITEM
      19.
                EXHIBITS
                73
 i
 
 
 CAUTIONARY
STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
  This
report includes assumptions, expectations, projections, intentions and beliefs
about future events. These statements are intended as “forward-looking
statements.”
We caution that assumptions, expectations, projections, intentions and beliefs
about future events may and often do vary from actual results and the
differences can be material. All statements in this document that are not
statements of historical fact are forward-looking statements. Forward-looking
statements include, but are not limited to, such matters as future operating or
financial results; statements about planned, pending or recent vessel disposals
and/or acquisitions, business strategy, future dividend payments and expected
capital spending or operating expenses, including drydocking and insurance
costs; statements about trends in the container vessel and products tanker
shipping markets, including charter rates and factors affecting supply and
demand; our ability to obtain additional financing; expectations regarding the
availability of vessel acquisitions; completion of repairs; length of off-hire;
availability of charters and anticipated developments with respect to any
pending litigation. The forward-looking statements in this press release are
based upon various assumptions, many of which are based, in turn, upon further
assumptions, including, without limitation, management’s examination of
historical operating trends, data contained in our records and other data
available from third parties. Although Aries Maritime Transport Limited believes
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, Aries Maritime
Transport Limited cannot assure you that it will achieve or accomplish these
expectations, beliefs or projections described in the forward-looking statements
contained in this press release. Important factors that, in our view, could
cause actual results to differ materially from those discussed in the
forward-looking statements include the strength of world economies and
currencies; general market conditions, including changes in charter rates and
vessel values; failure of a seller to deliver one or more vessels; failure of a
buyer to accept delivery of a vessel; inability to procure acquisition
financing; default by one or more charterers of our ships; our ability to
complete documentation of agreements in principle; changes in demand for oil and
oil products; the effect of changes in OPEC’s petroleum
production levels; worldwide oil consumption and storage; changes in demand that
may affect attitudes of time charterers; scheduled and unscheduled drydocking;
additional time spent in completing repairs; changes in Aries Maritime Transport
Limited’s
voyage and operating expenses, including bunker prices, drydocking and insurance
costs; changes in governmental rules and regulations or actions taken by
regulatory authorities; potential liability from pending or future litigation;
domestic and international political conditions; potential disruption of
shipping routes due to accidents, international hostilities and political events
or acts by terrorists; and other factors discussed in Aries Maritime Transport
Limited’s
filings with the U.S. Securities and Exchange Commission from time to time. When
used in this document, the words “anticipate,” “estimate,”
“project,” “forecast,” “plan,” “potential,” “may,” “should” and “expect” reflect
forward-looking statements.
  
   ii
  PART
I
  ITEM
      1.
              IDENTITY
      OF DIRECTORS, SENIOR MANAGEMENT AND
ADVISERS
  Not
Applicable.
  ITEM
      2.
              OFFER
      STATISTICS AND EXPECTED TIMETABLE
  Not
Applicable.
  ITEM
      3.
              KEY
      INFORMATION
  Unless
the context otherwise requires, as used in this report, the terms ‘‘the
Company,’’ ‘‘we,’’ ‘‘us,’’ “the Group” and ‘‘our’’ refer to Aries Maritime
Transport Limited and all of its subsidiaries, and ‘‘Aries Maritime Transport
Limited’’ refers only to Aries Maritime Transport Limited and not to its
subsidiaries.  We use the term deadweight, or dwt, in describing the
size of vessels. Dwt, expressed in metric tons, each of which is equivalent to
1,000 kilograms, refers to the maximum weight of cargo and supplies that a
vessel can carry. We use the term TEU, or TEUs, in describing the size of
vessels carrying containers. The size of one TEU is equivalent to 20 feet by 8
feet by 8 feet 6 inches (that is, 5.9 metres by 2.35 metres by 2.39
metres).
  A.           Selected
Financial Data
  The
following table sets forth our selected consolidated and combined financial and
other data. The selected consolidated and combined financial and other data may
not be indicative of the results we would have achieved had we operated as a
public company for the entire period presented or of our future results. This
information should be read in conjunction with “Item 5. Operating and Financial
Review and Prospects” and our historical consolidated and predecessor combined
carve-out financial statements and related notes. In accordance with standard
shipping industry practice, we did not obtain from the sellers historical
operating data for the vessels that we acquired, as that data was not material
to our decision to purchase the vessels. Accordingly, we have not included any
historical financial data relating to the results of operations of our vessels
for any period before we acquired them. Please see the discussion in “Item 5.
Operating and Financial Review and Prospects — Lack of Historical Operating Data
for Vessels Before their Acquisition.”
   1
   From
      inception,
                March
      7, 2003, to December 31, 2003
              
              
              Year
      ended
                December
      31, 2004
              
              
              Year
      ended
                December
      31, 2005
              
              
              Year
      ended
                December
      31, 2006
              
              
              Year
      ended
                December
      31, 2007(Dollars in thousands except per share data)Statement
      of Operations Data (for period ending)Revenue
      from voyages
              
              
              7,316
              
              
              
              48,269
              
              
              
              75,905
              
              
              
              94,199
              
              
              
              99,423Gain
      on disposal of vessels
              
              
              -
              
              
              
              14,724
              
              
              
              -
              
              
              
              -
              
              
              
              -Commissions
              
              
              (150
              )
              
              
              (1,189
              )
              
              
              (1,323
              )
              
              
              (1,403
              )
              
              
              (1,999
              )Voyage
      expenses
              
              
              (24
              )
              
              
              (312
              )
              
              
              (224
              )
              
              
              (4,076
              )
              
              
              (5,082
              )Vessel
      operating expenses
              
              
              (2,660
              )
              
              
              (12,460
              )
              
              
              (17,842
              )
              
              
              (27,091
              )
              
              
              (32,073
              )General
      & administrative expenses
              
              
              (34
              )
              
              
              (75
              )
              
              
              (1,649
              )
              
              
              (4,226
              )
              
              
              (5,666
              )Depreciation
              
              
              (1,721
              )
              
              
              (12,724
              )
              
              
              (19,446
              )
              
              
              (29,431
              )
              
              
              (30,653
              )Amortization
      of drydocking and special survey expenses
              
              
              (271
              )
              
              
              (1,552
              )
              
              
              (1,958
              )
              
              
              (3,568
              )
              
              
              (5,094
              )Management
      fees
              
              
              (199
              )
              
              
              (893
              )
              
              
              (1,511
              )
              
              
              (1,999
              )
              
              
              (2,171
              )Net
      operating income
              
              
              2,257
              
              
              
              33,788
              
              
              
              31,952
              
              
              
              22,405
              
              
              
              16,685Interest
      expense
              
              
              (1,539
              )
              
              
              (8,616
              )
              
              
              (18,793
              )
              
              
              (19,135
              )
              
              
              (21,875
              )Interest
      received
              
              
              5
              
              
              
              58
              
              
              
              672
              
              
              
              931
              
              
              
              762Other
      income (expenses), net
              
              
              6
              
              
              
              76
              
              
              
              (10
              )
              
              
              (214
              )
              
              
              (245
              )Change
      in fair value of derivatives
              
              
              (215
              )
              
              
              (33
              )
              
              
              950
              
              
              
              (1,788
              )
              
              
              (4,060
              )Net
      income/ (loss)
              
              
              514
              
              
              
              25,273
              
              
              
              14,771
              
              
              
              2,199
              
              
              
              (8,733
              )Earnings/
      (loss) per share (basic and diluted)
              
              
              0.03
              
              
              
              1.56
              
              
              
              0.64
              
              
              
              0.08
              
              
              
              (0.31
              )Cash
      dividends declared per share
              
              
              —
              
              
              
              —
              
              
              
              0.52
              
              
              
              0.89
              
              
              
              0.63Weighted
      average number of shares (basic and diluted)
              
              
              16,176,877
              
              
              
              16,176,877
              
              
              
              23,118,466
              
              
              
              28,416,877
              
              
              
              28,478,850Balance
      Sheet Data (at period end)Cash
      and cash equivalents
              
              
              667
              
              
              
              5,334
              
              
              
              19,248
              
              
              
              11,612
              
              
              
              12,444Restricted
      cash
              
              
              109
              
              
              
              4,803
              
              
              
              10
              
              
              
              3,242
              
              
              
              39Total
      current assets
              
              
              890
              
              
              
              12,371
              
              
              
              22,438
              
              
              
              22,430
              
              
              
              20,199Total
      assets
              
              
              45,534
              
              
              
              245,725
              
              
              
              377,898
              
              
              
              458,040
              
              
              
              425,491Total
      current liabilities
              
              
              4,177
              
              
              
              34,666
              
              
              
              21,356
              
              
              
              29,622
              
              
              
              311,997Current
      portion of long-term debt
              
              
              2,667
              
              
              
              21,910
              
              
              
              -
              
              
              
              -
              
              
              
              284,800
 Long-term
      debt, net of current portion
              
              
              37,743
              
              
              
              185,050
              
              
              
              183,820
              
              
              
              284,800
              
              
              
              -Total
      liabilities
              
              
              45,020
              
              
              
              229,072
              
              
              
              222,217
              
              
              
              325,452
              
              
              
              318,372Total
      stockholders’ equity
              
              
              514
              
              
              
              16,653
              
              
              
              155,681
              
              
              
              132,588
              
              
              
              107,119Other
      Financial Data (for period ending)Net
      cash provided by operating activities
              
              
              4,426
              
              
              
              21,899
              
              
              
              36,974
              
              
              
              24,215
              
              
              
              17,581Net
      cash used in investing activities
              
              
              (41,612
              )
              
              
              (161,773
              )
              
              
              (114,001
              )
              
              
              (101,815
              )
              
              
              (2,008
              )Net
      cash provided by used in financing activities
              
              
              37,853
              
              
              
              144,541
              
              
              
              90,941
              
              
              
              69,964
              
              
              
              (14,741
              )Net
      increase (decrease) in cash and cash equivalents
              
              
              667
              
              
              
              4,667
              
              
              
              13,914
              
              
              
              (7,636
              )
              
              
              832Cash
      dividends paid
              
              
              -
              
              
              
              -
              
              
              
              (14,776
              )
              
              
              (25,292
              )
              
              
              (17,970
              )Fleet
      Data (at period end)Number
      of products tankers owned
              
              
              2
              
              
              
              7
              
              
              
              8
              
              
              
              10
              
              
              
              10Number
      of container vessels owned
              
              
              -
              
              
              
              3
              
              
              
              5
              
              
              
              5
              
              
              
              5
   2
   
 (All
      amounts in thousands of U.S. dollars, unless otherwise
    stated)
              
              Period
      from inception, March 7, 2003, through
                December
      31,
              
              
              Year
      ended
                December
      31,
              
              
              Year
      ended
                December
      31,
              
              
              Year
      ended
                December
      31,
              
              
              Year
      ended
                December
      31,2003
              
              
              2004
              
              
              2005
              
              
              2006
              
              
              2007ADJUSTED EBITDA(1)NET
      INCOME/ (LOSS)
              
              
              514
              
              
              
              25,273
              
              
              
              14,771
              
              
              
              2,199
              
              
              
              (8,733
              )plus
      Net interest expense
              
              
              1,534
              
              
              
              8,558
              
              
              
              18,121
              
              
              
              18,204
              
              
              
              21,113plus
      Depreciation and Amortization
              
              
              1,992
              
              
              
              5,221
              
              
              
              12,112
              
              
              
              21,326
              
              
              
              29,737Plus/(minus)
      Change in fair value of derivatives
              
              
              215
              
              
              
              33
              
              
              
              (950
              )
              
              
              1,788
              
              
              
              4,060plus
      Stock-based compensation expense
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              1,232ADJUSTED
      EBITDA
              
              
              4,255
              
              
              
              39,085
              
              
              
              44,054
              
              
              
              43,517
              
              
              
              47,409
 
  (1) We
consider Adjusted EBITDA to represent the aggregate of net income, net interest
expense, depreciation, amortization change in the fair value of derivatives and
stock-based compensation expense.  The Company’s management uses
Adjusted EBITDA as a performance measure.  The Company believes that
Adjusted EBITDA is useful to investors because the shipping industry is capital
intensive and may involve significant financing costs.  Adjusted
EBITDA is not a measure recognized by GAAP and should not be considered as an
alternative to net income, operating income or any other indicator of a
Company’s operating performance required by GAAP.  The Company’s
definition of Adjusted EBITDA may not be the same as that used by other
companies in the shipping or other industries.
  3
 B.           Capitalization
and Indebtedness
  Not
Applicable.
  C.           Reasons
for the Offer and Use of Proceeds
  Not
Applicable.
  D.           Risk
Factors
  The
following risks relate principally to the industry in which we operate and our
business in general. Other risks relate to the securities market and ownership
of our common stock. If any of the circumstances or events described below
actually arises or occurs, our business, results of operations, cash flows,
financial condition and ability to pay dividends could be materially adversely
affected. In any such case, the market price of our common shares could decline,
and you may lose all or part of your investment.
  Industry
Specific Risk Factors
 
 Charter
rates for products tankers and container vessels may decrease in the future,
which may adversely affect our earnings.
  If the
shipping industry, which has been highly cyclical, is depressed in the future
when our charters expire or at a time when we may want to sell a vessel, our
earnings and available cash flow may be adversely affected.  Seven of
our period charters (one container vessel and six product tankers) are scheduled
to expire during 2008.  Our ability to re-charter our vessels on the
expiration or termination of our current charters, the charter rates payable
under any replacement charters and vessel values will depend upon, among other
things, economic conditions in the products tanker and container vessel markets
at that time, changes in the supply and demand for vessel capacity and changes
in the supply and demand for oil and oil products and container
transportation.
  You
should read the information contained in the table of vessel information under
“Item 4 – Information on the Company – Business Overview – Our
Fleet.”  The period charter expiration dates for all our vessels are
detailed in that table under ‘Charter Expiration,’ except for two products
tankers that are currently employed in the spot market.
  You
should read the information contained in “Item 5 – Operating and Financial
Review and Prospects – Operating Results – Important Factors to Consider When
Evaluating our Historical and Future Results of Operations.”
   4
  Factors beyond
our control may adversely affect the demand for and value of our
vessels.
  The
factors affecting the supply and demand for products tankers and container
vessels are outside of our control, and the nature, timing and degree of changes
in industry conditions are unpredictable.
  The
factors that influence the demand for vessel capacity include:
  ·
              demand
      for oil and oil products;
  ·
              supply of oil and oil
      products;
  ·
              regional
      availability of refining capacity;
  ·
              the
      globalization of manufacturing;
  ·
              global
      and regional economic and political conditions;
  ·
              developments
      in international trade;
  ·
              changes
      in seaborne and other transportation patterns, including changes in the
      distances over which cargoes are transported;
  ·
              environmental and other
      regulatory developments;
  ·
              currency exchange rates; and
  ·
              weather.
  The
factors that influence the supply of vessel capacity include:
  ·
              the number of newbuilding
      deliveries;
  ·
              the scrapping rate of older
      vessels;
  ·
              the number of vessels that are
      out of service; and
  ·
              port or canal congestion.
  If the
number of new ships delivered exceeds the number of vessels being scrapped and
lost, vessel capacity will increase. If the supply of vessel capacity increases
but the demand for vessel capacity does not increase correspondingly, charter
rates and vessel values could materially decline.
  The
value of our vessels may fluctuate, which may adversely affect our
liquidity.
  Vessel
values can fluctuate substantially over time due to a number of different
factors, including:
  ·
              general economic and market
      conditions affecting the shipping industry;
  ·
              competition from other shipping
      companies;
  ·
              the
      types and sizes of available vessels;
   5
  
  ·
              the availability of other modes
      of transportation;
  ·
              increases in the supply of vessel
      capacity;
  ·
              the cost of newbuildings;
  ·
              prevailing charter rates; and
  ·
              the cost of retrofitting or
      modifying second hand vessels as a result of charterer requirements,
      technological advances in vessel design or equipment, changes in
      applicable environmental or other regulations or standards, or otherwise.
  In
addition, as vessels grow older, they generally decline in value. Due to the
cyclical nature of the products tanker and container vessel markets, if for any
reason we sell vessels at a time when prices have fallen, we could incur a loss
and our business, results of operations, cash flows, financial condition and
ability to pay dividends could be adversely affected.
  The
market value of our vessels may decline, which could lead to a default under our
fully revolving credit facility and the loss of our vessels.
  If the
market value of our fleet declines, we may not be in compliance with certain
provisions of our fully revolving credit facility and we may not be able to
refinance our debt or obtain additional financing. If we are unable to pledge
additional collateral, our lenders could accelerate our debt and foreclose on
our fleet. For instance, if the market value of our fleet declines below 140% of
the aggregate outstanding principal balance of our borrowings under our fully
revolving credit facility, we will not be in compliance with certain provisions
of our fully revolving credit facility and, as a result, we will not be able to
pay dividends and may not be able to refinance our debt or obtain additional
financing.
  We pay
interest under our fully revolving credit facility at a rate of LIBOR plus a
margin which ranges from 1.125% to 1.75% to reflect the ratio of our total
liabilities divided by our total assets, adjusting the book value of our fleet
to its market value ranging from less than 50% to equal to or greater than
65%.  If the market value of our vessels declines, we may pay a higher
margin under the terms of our fully revolving credit facility. You should read
“Item 5 – Operating and Financial Review and Prospects – Liquidity and Capital
Resources – Indebtedness” for additional information concerning our fully
revolving credit facility.
  An
over-supply of tanker capacity may lead to reductions in charter hire rates 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. Factors that tend
to decrease tanker supply include the conversion of tankers to non-tanker
purposes and the phasing out of single-hull tankers due to legislation and
environmental concerns. We believe shipyards are expected to operate more or
less at full capacity with their present order books for tankers. An over-supply
of tanker capacity may result in a reduction of charter hire rates. A reduction
in charter rates may have a material adverse effect on our results of operations
and our ability to pay dividends.
 
 An
over-supply of container vessel capacity may lead to reductions in charter hire
rates and profitability.
  An
over-supply of container vessel capacity may result in a reduction of charter
hire rates. If such a reduction occurs, the value of our container vessels may
decrease and, under certain circumstances, affect the ability of our customers
who charter our container vessels to make charterhire payments to
us.  This and other factors affecting the supply and demand for
container vessels and the supply and demand for products shipped in containers
are outside our control and the nature, timing and degree of changes in the
industry may affect the ability of our charterers to make charterhire payments
to us.
  6
  
 We are subject to
complex laws and regulations, including environmental regulations that can
adversely affect the cost, manner or feasibility of doing
business.
  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
Convention on Civil Liability for Oil Pollution Damage of 1969; the
International Convention for the Prevention of Pollution from Ships; the
International Maritime Organization, or IMO; International Convention for the
Prevention of Marine Pollution of 1973; the IMO International Convention for the
Safety of Life at Sea of 1974; the International Convention on Load Lines of
1966 and the U.S. Marine Transportation Security Act of 2002. Compliance with
such laws, regulations and standards, 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, the management of ballast waters,
maintenance and inspection, elimination of tin-based paint, development and
implementation of emergency procedures and insurance coverage or other financial
assurance of our ability to address pollution incidents. These costs could have
a material adverse effect on our business, results of operations, cash flows and
financial condition and our ability to pay dividends. A failure to comply with
applicable laws and regulations may result in administrative and civil
penalties, criminal sanctions or the suspension or termination of our
operations. Environmental laws often impose strict liability for remediation of
spills and releases of oil and hazardous substances, which could subject us to
liability without regard to whether we were negligent or at fault. Under OPA,
for example, owners, operators and bareboat charterers are jointly and severally
strictly liable for the discharge of oil within the 200-mile exclusive economic
zone around the United States. An oil spill could result in significant
liability, including fines, penalties, criminal liability and remediation costs
for natural resource damages under other federal, state and local laws, as well
as third-party damages. 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 our ability to pay dividends.
  We
are subject to international safety regulations and the failure to comply with
these regulations may subject us to increased liability, 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
International Management Code for the Safe Operation of Ships and Pollution
Prevention, or 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.  The failure
of a shipowner or bareboat charterer to comply with the ISM Code may subject it
to increased liability, may invalidate existing insurance or decrease available
insurance coverage for the affected vessels and may result in a denial of access
to, or detention in, certain ports.  As of the date of this annual
report, each of our vessels is ISM code-certified.
  Our
vessels may suffer damage due to the inherent operational risks of the seaborne
transportation industry and we may experience unexpected drydocking costs, 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. 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, delay or rerouting. 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 earnings while these vessels
are being repaired and repositioned, as well as the actual cost of these
repairs, would decrease our earnings. 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 steam to more distant drydocking facilities would decrease
our earnings.
   7
   Our
insurance may not be adequate to cover our losses that may result from our
operations due to the inherent operational risks of the seaborne transportation
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 includes 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
ability to pay dividends. 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.
  In
addition, while we carry loss of hire insurance to cover 100% of our fleet, we
may not be able to maintain this level of coverage. Accordingly, any loss of a
vessel or extended vessel off-hire, due to an accident or otherwise, could have
a material adverse effect on our business, results of operations and financial
condition and our ability to pay dividends to our shareholders.
  Because
we obtain some of our insurance through protection and indemnity associations,
we may also be subject to calls in amounts based not only on our own claim
records, but also the claim records of other members of the protection and
indemnity associations.
  We may be
subject to calls in amounts based not only on our claim records but also 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. 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 ability to
pay dividends.
  Labor
interruptions could disrupt our business.
  Our
vessels are manned by masters, officers and crews that are employed by third
parties. 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 ability to
pay dividends.
  Maritime
claimants could arrest our vessels, which would interrupt our
business.
 
 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.
   8
  In
addition, in some jurisdictions, such as South Africa, under the “sister ship”
theory of liability, a claimant may arrest both the vessel that is subject to
the claimant’s maritime lien and any “associated” vessel, which is any vessel
owned or controlled by the same owner. Claimants could try to assert “sister
ship” liability against one vessel in our fleet for claims relating to another
of our ships.
  Increased
inspection procedures, tighter import and export controls and new security
regulations could increase costs and cause disruption of our container shipping
business.
  International
container shipping is subject to security and customs inspection and related
procedures in countries of origin, destination and trans-shipment points. These
security procedures can result in cargo seizure, delays in the loading,
offloading, trans-shipment, or delivery of containers and the levying of customs
duties, fines or other penalties against exporters or importers and, in some
cases, carriers.
  Since the
events of September 11 2001, U.S. authorities have significantly increased the
levels of inspection for all imported containers. Government investment in
non-intrusive container scanning technology has grown, and there is interest in
electronic monitoring technology, including so-called “e-seals” and “smart”
containers that would enable remote, centralized monitoring of containers during
shipment to identify tampering with or opening of the containers, along with
potentially measuring other characteristics such as temperature, air pressure,
motion, chemicals, biological agents and radiation.
  It is
unclear what changes, if any, to the existing security procedures will
ultimately be proposed or implemented, or how any such changes will affect the
container shipping industry. These changes have the potential to impose
additional financial and legal obligations on carriers and, in certain cases, to
render the shipment of certain types of goods by container uneconomical or
impractical. These additional costs could reduce the volume of goods shipped in
containers, resulting in a decreased demand for container vessels. In addition,
it is unclear what financial costs any new security procedures might create for
container vessel owners and operators. Any additional costs or a decrease in
container volumes could have an adverse impact on our customers that charter
container vessels from us and, under certain circumstances, may affect their
ability to make charterhire payments to us under the terms of our
charters.
  Governments
could requisition our vessels during a period of war or emergency without
adequate compensation.
  A
government could requisition or seize our vessels. Under requisition for title,
a government takes control of a vessel and becomes its owner. Under requisition
for hire, a government takes control of a vessel and effectively becomes its
charterer at dictated charter rates. Generally, requisitions occur during
periods of war or emergency. Although we would be entitled to compensation in
the event of a requisition, the amount and timing of payment would be
uncertain.
  We
operate our vessels worldwide and, as a result, our vessels are exposed to
international risks that could reduce revenue or increase expenses.
  The
international shipping industry is an inherently risky business involving global
operations. Our vessels are at 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 that may reduce our
revenue or increase our expenses.
   9
  Terrorist
attacks and international hostilities can affect the seaborne transportation
industry, which could 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 ability to pay
dividends may be adversely affected by changing economic, political and
government conditions in the countries and regions where our vessels are
employed or registered. Moreover, we operate in a sector of the economy that is
likely to be adversely impacted 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 United States to these attacks, as well as the threat of future
terrorist attacks, continue to contribute to world economic instability and
uncertainty in global financial markets. Future terrorist attacks could result
in increased volatility of the financial markets in the United States and
globally and could result in an economic recession in the United States or the
world. These uncertainties could also adversely affect our ability to obtain
additional financing on terms acceptable to us or at all.
  In the
past, political conflicts have 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. Any of these occurrences could have a material adverse impact
on our business, financial condition, results of operations and ability to pay
dividends.
  Company
Specific Risk Factors
 
 Our
fully revolving credit facility imposes significant operating and financial
restrictions.
  Our credit agreement requires us to adhere to certain financial covenants as of
the end of each fiscal quarter, including the following:
   ·
              our
      shareholders’ equity as a percentage of our total assets, adjusting the
      book value of our fleet to its market value, must be no less than
      35%;
  ·
              free
      cash and cash equivalents plus the undrawn element of the $5 million
      portion of the fully revolving credit facility available for general
      corporate purposes, must be no less than the aggregate of 5% of
      interest-bearing debt and 5% of the $5 million portion of the fully
      revolving credit facility available for general corporate
      purposes.  In addition, Magnus Carriers Corporation (“Magnus
      Carriers”) is
      required to maintain a credit balance of at least $1 million in an account
      opened with the lenders;
 ·
              our
      current liabilities, excluding deferred revenue, derivative financial
      instruments and voluntary and mandatory prepayments, may not exceed our
      current assets,  excluding derivative financial instruments and
      the value of any vessel committed for sale;
 ·
              the
      ratio of EBITDA (earnings before interest, taxes, depreciation and
      amortization) to interest expense must be no less than 3.00 to 1.00 on a
      trailing four-quarter basis. Primarily due to vessel out-of-service time
      during the year ended December 31, 2007, the interest coverage ratio
      financial covenant would not be met and the lenders agreed to lower the
      ratio for this financial covenant. This ratio was lowered to 2.25 to 1.00
      for the period ended December 31, 2007, and periods ending March 31, 2008
      and June 30, 2008. For the period ending September 30, 2008, the ratio for
      this financial covenant was lowered to 2.75 to 1.00, while for the
      subsequent periods the lower ratio will not apply and the ratio reverts
      back to 3.00 to 1.00. Until the lower ratio under this covenant no longer
      applies, the Company will pay an increased margin of
  1.75%;
 ·
              the
      aggregate fair market value of our vessels must be no less than 140% of
      the aggregate outstanding loans under the fully revolving credit
      facility.
 
  10
  The relaxation of the interest coverage covenant was, among other things,
conditioned on:
  ·
                an
      immediate reduction in the fully revolving credit facility commitment
      level from $360 million to $290.0
million;
  ·
                a reduction
      of the outstanding borrowings under the fully revolving credit facility
      from their current level of $284.8 million to $200.0 million, by disposal
      of vessels, by August 31, 2008. We sold three of our vessels for net
      proceeds of $61.03 million.  See “Subsequent Events – Sale of
      Vessels;”
  ·
                the
      Company’s continued payment of an increased margin of 1.75% until a
      compliance certificate is provided to its lenders advising the interest
      coverage ratio meets the required level of
  3.0:1.0;
  ·
                the
      Company’s not paying a dividend for the quarter ended December 31, 2007;
      and
  ·
                during
      the period of interest coverage covenant relaxation any advance for new
      investments requires the consent of all of the lenders under the fully
      revolving credit facility.
 On April 17, 2008, the lenders approved an amendment to the working capital
ratio financial covenant to exclude from its calculation voluntary and mandatory
prepayments.
  Our credit agreement requires the Group’s two principal beneficial equity
holders to maintain a beneficial ownership of no less than 10% each in the
issued stock of the Company.  The credit agreement also prevents us
from declaring dividends if any event of default, as defined in the credit
agreement, occurs or would result from such declaration. Each of the following
will be an event of default under the credit agreement:
   ·
              the
      failure to pay principal, interest, fees, expenses or other amounts when
      due;
 
 ·
              breach
      of certain financial covenants, including those which require Magnus
      Carriers to maintain a minimum cash
balance;
 
 ·
              the
      failure of any representation or warranty to be materially
      correct;
 
 ·
              the
      occurrence of a material adverse change (as defined in the credit
      agreement);
 
 ·
              the
      failure of the security documents or guarantees to be
      effective;
 
 ·
              judgments
      against us or any of our subsidiaries in excess of certain
      amounts;
 
 ·
              bankruptcy
      or insolvency events;
 
 ·
              the
      failure of our principal beneficial equity holders to maintain their
      investment in us; and
 
 ·
              the
      failure to reduce the outstanding borrowings under the fully revolving
      credit facility to $200.0 million, by disposal of vessels, by August
      31, 2008. In the event that such disposal of vessels is not completed
      by August 31, 2008, the lenders may extend the compliance date to
      September 30, 2008 subject to legally binding sale contracts having been
      executed by August 31, 2008.
 
  11
  Events beyond our control, including changes in the economic and business
conditions in the shipping markets in which we operate, may affect our ability
to comply with these covenants. We may be unable to enter into contracts for the
sale of additional vessels by August 31, 2008 such that we are able to reduce
the amount outstanding under the credit facility to $200 million on terms that
are favorable to us or at all.  We cannot assure you that we will meet
these ratios or satisfy these covenants or that our lenders will waive any
failure to do so. A breach of any of the covenants in, or our inability to
maintain the required financial ratios under, our fully revolving credit
facility would prevent us from borrowing additional money under the fully
revolving credit facility and could result in a default under the fully
revolving credit facility. If a default occurs under our fully revolving credit
facility, the lenders could elect to declare the outstanding debt, together with
accrued interest and other fees, to be immediately due and payable and proceed
against the collateral securing that debt, which could constitute all or
substantially all of our assets.
 
 Our
incurrence of a net loss during the year ended December 31, 2007, our
net working capital deficit and our inability to adhere to certain
financial covenants under our fully revolving credit facility raise substantial
doubt about our ability to continue as a going concern.
  During the year ended December 31, 2007, we have suffered losses amounting to
$8,733,000, have a net working
capital deficit of $291,798,000 and have not met certain of
our financial covenants under our fully revolving credit facility. As a result,
it is likely that we may not meet the covenants of our credit facility for
the foreseeable future and in the absence of our lenders’ consent our
outstanding indebtedness would be immediately due. Therefore, our ability to
continue as a going concern is dependent on management’s ability to successfully
execute the sale of the vessels described above and to continue to improve our
performance, which includes achieving profitable operations in the future, and
the continued support of our shareholders and our lenders. Our
independent registered public accounting firm has issued their opinion with an
explanatory paragraph in connection with our financial statements included in
this annual report that expresses substantial doubt about our ability to
continue as a going concern. Our
financial statements do not include any adjustments to reflect the possible
future effects on the recoverability and classification of assets or the amounts
and classification of liabilities that may result from the outcome of our
inability to continue as a going concern. However, there is a material
uncertainty related to events or conditions which raises significant doubt on
our ability to continue as a going concern and, therefore, we may be unable to
realize our assets and discharge our liabilities in the normal course of
business. Although management believes that the actions presently being taken to
further implement our business plan, to sell one or more vessels and generate
revenues, will provide the opportunity for us to continue as a going concern,
there can be no assurances to that effect.
  Servicing
our debt will substantially limit our funds available for other purposes, such
as vessel acquisitions and the payment of dividends.
  We are
subject to various financial covenants under our credit facility, including the
requirement to reduce the amount outstanding to $200 million by disposal of
vessels by August 31, 2008, which make it desirable for us to refinance our
existing credit facility.  We may be unable to refinance our existing
credit facility on terms that are favourable to us or at all. A large part of
our cash from operations may be required to pay principal and interest on our
debt. Our debt service payments will reduce our funds available for other
purposes, including those that may be in the best interests of our shareholders.
We cannot assure you that our future cash flows will be adequate to fund future
vessel acquisitions or to pay dividends.
 We
depend upon four significant charterers for the majority of our revenues. The
loss of one or more of these charterers could adversely affect our financial
performance.
 
 We have
historically derived a significant part of our revenue from a small number of
charterers. During 2007, 64% of our revenue was derived from four charterers,
Stena Group, Trafigura Beheer B.V., Deiulemar Compagnia di Navigazione S.p.A,
and CMA CGM S.A. If we were to lose any of these charterers, or if any of these
charterers significantly reduced its use of our services or was unable to make
charter payments to us, our results of operations, cash flows and financial
condition would be adversely affected.  Further, after the sales of three
vessels in April and June 2008, and assuming we sell an additional vessel in
order to reduce our outstanding balance under our credit facility, we will
operate a fleet of 11 vessels. As the size of our fleet decreases, we will
become increasingly dependent upon a limited number of charterers for our
revenues.
   12
  
  Our
charterers may terminate or default on their charters, which could adversely
affect our results of operations and cash flow.
  Our
charters may terminate earlier than the dates indicated in the section “Our
Fleet” in “Item 4 – Information on the Company.”  The terms of our
charters vary as to which events or occurrences will cause a charter to
terminate or give the charterer the option to terminate the charter, but these
generally include a total or constructive total loss of the related vessel, the
requisition for hire of the related vessel or the failure of the related vessel
to meet specified performance criteria. In addition, the ability of each of our
charterers to perform its obligations under a charter will depend on a number of
factors that are beyond our control. These factors may include general economic
conditions, the condition of a specific shipping market sector, the charter
rates received for specific types of vessels and various operating expenses. The
costs and delays associated with the default by a charterer of a vessel may be
considerable and may adversely affect our business, results of operations, cash
flows and financial condition and our ability to pay dividends.
  We cannot
predict whether our charterers will, upon the expiration of their charters,
recharter our vessels on favorable terms or at all. If our charterers decide not
to recharter our vessels, we may not be able to recharter them on terms similar
to the terms of our current charters or at all. In the future, we may also
employ our vessels on the spot charter market, which is subject to greater rate
fluctuation than the time charter market.
  If we
receive lower charter rates under replacement charters or are unable to
recharter all of our vessels, our business, results of operations, cash flows
and financial condition may be adversely affected and the amounts available, if
any, to pay dividends to our shareholders may be significantly reduced or
eliminated.
  Our
ability to obtain additional debt financing may depend 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 that capital. Our inability to obtain additional
financing or our ability to obtain additional financing at higher than
anticipated costs may materially and adversely affect our business, results of
operations, cash flows and financial condition and our ability to pay
dividends.
  Purchase
options with respect to two of our vessels could result in our receiving less
than if we were to sell these ships in the open market.
 
 The
charterer for two of our vessels, the Altius and the Fortius, has an option to purchase 50% of the
equity in those vessels for 50% of the difference between $29.5 million and the
debt balance on each vessel, exercisable six months before
the expiration of their current charters in June and August 2009,
respectively.  If the option prices are lower than the prevailing
market prices of these vessels at the time of exercise, we would receive less
for the equity interests than we would receive if we were to sell the vessels in
the open market, which could negatively impact our results of operations.
Currently, we believe the option prices are lower than the currently prevailing
market prices of these vessels and we expect the charterer to exercise the
option.
   13
 We
cannot assure you that we will pay dividends.
  We will
make dividend payments to our shareholders only if our board of directors,
acting in its sole discretion, determines that such payments would be in our
best interest and in compliance with relevant legal and contractual
requirements. The principal business factors that our board of directors expects
to consider when determining the timing and amount of dividend payments will be
our earnings, financial condition and cash requirements at the time. Currently,
the principal contractual and legal restrictions on our ability to make dividend
payments are those contained in our fully revolving credit facility agreement,
which we refer to as our credit agreement, and those created by Bermuda
law.
  Our
credit agreement prohibits us from paying a dividend if an event of default
under the credit agreement is continuing or would result from the payment of the
dividend. Our credit agreement further requires us to maintain specified
financial ratios and minimum liquidity and working capital amounts. Our
obligations pursuant to these and other terms of our fully revolving credit
facility could prevent us from making dividend payments under certain
circumstances.  In March 2008, pursuant to the condition imposed by
our lenders in connection with the relaxation of the interest coverage ratio
under our credit facility, our board of directors suspended the payment of
quarterly dividends commencing with the dividend in respect of the fourth
quarter of 2007.  The Company resumed payment of dividends with a
dividend of $0.10 per share in respect of the first quarter of
2008.
  Under
Bermuda law, we may not declare or pay dividends if there are reasonable grounds
for believing that (1) we are, or would after the payment be, unable to pay our
liabilities as they become due or (2) the realizable value of our assets would
thereby be less than the sum of our liabilities, our issued share capital (the
total par value of all outstanding shares) and share premium accounts (the
aggregate amount paid for the subscription for our shares in excess of the
aggregate par value of such shares). Consequently, events beyond our control,
such as a reduction in the realizable value of our assets, could cause us to be
unable to make dividend payments.
  We may
incur other expenses or liabilities that would reduce or eliminate the cash
available for distribution as dividends. We may also enter into new agreements
or new legal provisions may be adopted that will restrict our ability to pay
dividends. As a result, we cannot assure you that dividends will be paid with
the frequency set forth in this Annual Report or at all.
  We
will depend on Magnus Carriers, a private company, or other management companies
to manage and charter our fleet.
 
 We have
historically contracted the commercial and technical management of all the
vessels in our fleet (with the exception of the Chinook, Stena Compass and Stena Compassion), including
crewing, maintenance and repairs, to the management company, Magnus
Carriers.  In August 2007, we delivered notice of termination of the
twelve existing ship management agreements with Magnus Carriers, which was
accepted by Magnus Carriers.  As of the date of this annual report,
we, through our vessel-owning subsidiaries, have entered into new ship
management agreements with third-party technical managers for nine of the twelve
vessels that had previously been managed by Magnus
Carriers.  International Tanker Management Limited (“ITM”), based in
Dubai, performs technical management of six of these vessels and Barber Ship
Management Singapore Pte Ltd (“Barber”), based in Singapore, performs technical
management of three of these vessels.  In October 2007, we entered
into new commercial management agreements with Magnus Carriers for all of the
vessels in our fleet, with the exception of the Stena Compass and the Stena Compassion, which are
employed on bareboat charter.
  In
addition, we are generally required to obtain approval from our lenders to
change our ship managers. The loss of services of one or more of our
managers or the failure of one or more of our managers to perform their
obligations under the respective management agreements could materially and
adversely affect our business, results of operations, cash flows, financial
condition and our ability to pay dividends. Although we may have rights against
Magnus Carriers, ITM and Barber if they default on their obligations to us, our
shareholders will not directly share that recourse.
  The
ability of our ship managers to continue providing services for our benefit will
depend in part on their own financial strength. Circumstances beyond our control
could impair the financial strength of our ship managers. Because our ship
managers are privately held companies, it is unlikely that information about
their financial strength would become public prior to any default by such ship
manager under the management agreements. As a result, an investor in our shares
might have little advance warning of problems affecting our ship managers, even
though those problems could have a material adverse effect on us.
  Magnus
Carriers and its affiliates may acquire or charter vessels that compete with our
fleet.
  Magnus
Carriers, its principals or any of their controlled affiliates may acquire or
charter additional products tankers and container vessels in the future, subject
to a right of first refusal that Magnus Carriers and its principals have granted
to us for as long as Magnus Carriers performs management services for us,
including commercial management services. If we do not purchase or charter these
vessels, they could compete with our fleet, and Magnus Carriers and its
affiliates might be faced with conflicts of interest between their own interests
and Magnus Carriers’ obligations to us under the ship management
agreements.
  We
are a holding company, and we depend on the ability of our subsidiaries to
distribute funds to us in order to satisfy our financial and other obligations
and to make dividend payments.
  We are a
holding company, and we have no significant assets other than the equity
interests in our subsidiaries. Our subsidiaries own all our vessels, and
payments under the charters with our charterers are made to our subsidiaries. As
a result, our ability to satisfy our financial and other obligations and to pay
dividends depends on the performance of our subsidiaries and their ability to
distribute funds to us. If we are unable to obtain funds from our subsidiaries,
we will not be able to pay dividends unless we obtain funds from other sources.
We cannot assure you that we will be able to obtain the necessary funds from
other sources.
   14
  If
we are unable to operate our vessels profitably, we may be unsuccessful in
competing in the highly competitive international tanker market.
  The
operation of tanker vessels and transportation of crude and petroleum products
is extremely competitive. Competition arises primarily from other tanker owners,
including major oil companies as well as independent tanker companies, some of
whom have substantially greater resources. 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.
  We
may not be able to grow or effectively manage our growth.
  A
principal focus of our strategy is to grow by expanding our products tanker
fleet and other sectors as opportunities are identified.  Following
the disposal of vessels as required under our credit facility, we may
refinance our existing credit facility in order to position the Company for
future growth. Our future growth will depend on a number of factors, some of
which we can control and some of which we cannot. These factors include our
ability to:
  ·
              identify vessels for acquisition;
  ·
              consummate acquisitions;
  ·
              integrate
      acquired vessels successfully with our existing
  operations;
  ·
              identify
      businesses engaged in managing, operating or owning vessels for
      acquisitions or joint ventures;
  ·
              hire,
      train and retain qualified personnel and crew to manage and operate our
      growing business and fleet;
  ·
              identify
      additional new markets;
  ·
              improve our operating, financial
      and accounting systems and controls;
and
  ·
              obtain required financing for our
      existing and new operations.
  A
deficiency in any of these factors could adversely affect our ability to achieve
anticipated growth in cash flows or realize other anticipated benefits. In
addition, competition from other buyers could reduce our acquisition
opportunities or cause us to pay a higher price than we might otherwise
pay.
  The
process of integrating acquired vessels into our operations may result in
unforeseen operating difficulties, may absorb significant management attention
and may require significant financial resources that would otherwise be
available for the ongoing development and expansion of our existing operations.
Future acquisitions could result in the incurrence of additional indebtedness
and liabilities that could have a material adverse effect on our business,
results of operations, cash flows, financial condition and ability to pay
dividends. Further, if we issue additional common shares, your interest in our
Company will be diluted, and dividends to you, if any, may be
reduced.
   15
  
  Capital
expenditures and other costs necessary to operate and maintain our vessels may
increase due to changes in governmental regulations, safety or other equipment
standards.
  Changes
in governmental regulations, safety or other equipment standards, as well as
compliance with standards imposed by maritime self-regulatory organizations and
customer requirements or competition, may require us to make additional
expenditures. In order to satisfy these requirements, we may, from time to time,
be required to take our vessels out of service for extended periods of time,
with corresponding losses of revenues. In the future, market conditions may not
justify these expenditures or enable us to operate some or all of our vessels
profitably during the remainder of their economic lives.
  If
we are unable to fund our capital expenditures, we may not be able to continue
to operate some of our vessels, which would have a material adverse effect on
our business and our ability to pay dividends.
  In order
to fund our capital expenditures, we may be required to incur borrowings or
raise capital through the sale of debt or equity securities. Our ability to
access the capital markets through future offerings may be limited by our
financial condition at the time of any such offering as well as by adverse
market conditions resulting from, among other things, general economic
conditions and contingencies and uncertainties that are beyond our control. Our
failure to obtain the funds for necessary future capital expenditures would
limit our ability to continue to operate some of our vessels and could have a
material adverse effect on our business, results of operations, financial
condition and our ability to pay dividends. Even if we are successful in
obtaining such funds through financings, the terms of such financings could
further limit our ability to pay dividends.
  Unless
we set aside reserves or are able to borrow 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 and financial condition.
 
 Unless we
maintain reserves or are able 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 estimate to be 25 years. Our cash flows and
income are dependent on the revenues earned by the chartering of our vessels to
customers. 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 ability to pay dividends will be materially and adversely
affected. Any reserves set aside for vessel replacement may not be available for
dividends.
  The
operation of tankers involves certain unique operational risks.
 
 The
operation of tankers has unique operational risks associated with the
transportation of oil.  An oil spill may cause significant
environmental damage, and a catastrophic spill could exceed the insurance
coverage available.  Compared to other types of vessels, tankers are
exposed to a higher risk of damage and loss by fire, whether ignited by a
terrorist attack, collision, or other cause, due to the high flammability and
high volume of the oil transported in tankers.
  If we are
unable to adequately maintain or safeguard our vessels we may be unable to
prevent these events. Any of these circumstances or events could negatively
impact our business, financial condition, results of operations and ability to
pay dividends. In addition, the loss of any of our vessels could harm our
reputation as a safe and reliable vessel owner and operator.
   16
  Aries
Energy, an affiliate, is able to control our company, including the outcome of
shareholder votes through its wholly-owned indirect subsidiary, Rocket Marine
Inc.
  Aries
Energy, an affiliate through its wholly-owned indirect subsidiary Rocket Marine
Inc., owns approximately 52% of our outstanding common shares. As a result of
this share ownership and for so long as Aries Energy owns a significant
percentage of our outstanding common shares, Aries Energy will be able to
control or influence the outcome of any shareholder vote, including the election
of directors, the adoption or amendment of provisions in our memorandum of
association or bye-laws and possible mergers, amalgamations, corporate control
contests and other significant corporate transactions. This concentration of
ownership may have the effect of delaying, deferring or preventing a change in
control, merger, amalgamation, consolidation, takeover or other business
combination. This concentration of ownership could also discourage a potential
acquirer from making a tender offer or otherwise attempting to obtain control of
us, which could in turn have an adverse effect on the market price of our common
shares.
  Exposure
to currency exchange rate fluctuations will result in fluctuations in our cash
flows and operating results.
  We
generate all our revenues in U.S. dollars, but approximately 30% of vessel
operating expenses are in currencies other than U.S. dollars and we incur
general and administrative expenses in currencies other than the U.S. dollar.
This difference could lead to fluctuations in our vessel operating expenses,
which would affect our financial results. Expenses incurred in foreign
currencies increase when the value of the U.S. dollar falls, which would reduce
our profitability. For example, in the year ended December 31, 2007, the value
of the U.S. dollar depreciated by approximately 9.5% against the
Euro.
  Our
incorporation under the laws of Bermuda may limit the ability of our
shareholders to protect their interests.
  We are a
Bermuda company. Our memorandum of association and bye-laws and the Companies
Act 1981 of Bermuda, or the BCA, as amended, govern our corporate affairs.
Investors may have more difficulty in protecting their interests in the face of
actions by management, directors or controlling shareholders than would
shareholders of a corporation incorporated in a United States jurisdiction.
Under Bermuda law, a director generally owes a fiduciary duty only to the
company, not to the company’s shareholders. Our shareholders may not have a
direct cause of action against our directors. In addition, Bermuda law does not
provide a mechanism for our shareholders to bring a class action lawsuit under
Bermuda law. Further, our bye-laws provide for the indemnification of our
directors or officers against any liability arising out of any act or omission,
except for an act or omission constituting fraud or dishonesty. There is a
statutory remedy under Section 111 of the BVA, which provides that a shareholder
may seek redress in the courts as long as such shareholder can establish that
our affairs are being conducted, or have been conducted, in a manner oppressive
or prejudicial to the interests of some part of the shareholders, including such
shareholder. However, the principles governing Section 111 have not been well
developed.
  Anti-takeover
provisions in our organizational documents could have the effect of
discouraging, delaying or preventing a merger, amalgamation or acquisition,
which could adversely affect the market price of our common shares.
  Several
provisions of our bye-laws could discourage, delay or prevent a merger or
acquisition that shareholders may consider favorable. These include
provisions:
  ·
              authorizing our board of
      directors to issue “blank check” preference shares without shareholder
      approval;
  ·
              establishing
      a classified board of directors with staggered, three-year
      terms;
  17
   ·
              prohibiting
      us from engaging in a “business combination” with an “ interested
      shareholder” for a period of three years after the date of the transaction
      in which the person becomes an interested shareholder unless certain
      conditions are met;
 
 ·
              not permitting cumulative voting
      in the election of
directors;
  ·
              authorizing the removal of
      directors only for cause and only upon the affirmative vote of the holders
      of at least 80% of our outstanding common
  shares;
  ·
              limiting the persons who may call
      special meetings of shareholders to our board of directors, subject to
      certain rights guaranteed to shareholders under the BCA;
      and
  ·
              establishing advance notice
      requirements for nominations for election to our board of directors and
      for proposing matters that can be acted on by shareholders at our
      shareholder meetings.
  These
provisions could have the effect of discouraging, delaying or preventing a
merger, amalgamation or acquisition, which could adversely affect the market
price of our common shares.
  It
may not be possible for investors to enforce U.S. judgments against
us.
  We and
all our subsidiaries are incorporated in jurisdictions outside the U.S.,
substantially all of our assets and those of our subsidiaries are located
outside the U.S. In addition, most of our directors and officers are
non-residents of the U.S., and all or a substantial portion of the assets of
these non-residents are located outside the U.S. As a result, it may be
difficult or impossible for U.S. investors to serve process within the U.S. upon
us, our subsidiaries or our directors and officers or to enforce a judgment
against us for civil liabilities in U.S. courts. In addition, you should not
assume that courts in the countries in which we or our subsidiaries are
incorporated or where our or the assets of our subsidiaries are located (1)
would enforce judgments of U.S. courts obtained in actions against us or our
subsidiaries based upon the civil liability provisions of applicable U.S.
federal and state securities laws or (2) would enforce, in original actions,
liabilities against us or our subsidiaries based on those laws.
  U.S.
tax authorities could treat us as a “passive foreign investment company,” which
could have adverse U.S. federal income tax consequences to U.S.
shareholders.
  A foreign
corporation will be treated as a “passive foreign investment company”, or PFIC,
for U.S. 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.”  U.S. shareholders of a PFIC are subject to a
disadvantageous U.S. federal income tax regime applicable 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 method of operation, we do not believe that we will be a PFIC. In this
regard, we treat the gross income we derive or are deemed to derive from our
chartering activities as services income, rather than rental income.
Accordingly, we believe that our income from our chartering activities does not
constitute “passive income,” and the assets that we own and operate in
connection with the production of that income do not constitute passive
assets.
   18
  There is,
however, no direct legal authority under the PFIC rules addressing our method of
operation. Accordingly, no assurance can be given that the U.S. Internal Revenue
Service, or IRS, or a court of law will accept our 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 there were to be changes in the nature and extent of our
operations.
  If the
IRS were to find that we are or have been a PFIC for any taxable year, our U.S.
shareholders would face adverse and special U.S. tax consequences. Among other
things, the distributions a shareholder received with respect to our shares and
the gain, if any, a shareholder derived from his sale or other disposition of
our shares would be taxable as ordinary income (rather than as qualified
dividend income or capital gain, as the case may be), would be treated as
realized ratably over his holding period in our common shares, and would be
subject to an additional interest charge. However, a U.S. shareholder may be
able to make certain tax elections that would ameliorate these
consequences.
  We
may have to pay tax on United States source income, which would reduce our
earnings.
  Under the
Code, 50% of the gross shipping income of a vessel-owning or chartering
corporation, such as our Company and our subsidiaries, that is attributable to
transportation that begins or ends, but that does not both begin and end, in the
United States is characterized as U.S.-source shipping income and is subject to
a 4% United States federal income tax without allowance for deduction, unless
that corporation qualifies for exemption from tax under Section 883 of the Code
and the related Treasury Regulations.
  We expect
that we and each of our subsidiaries qualifies for this statutory tax exemption,
and we take this position for United States federal income tax 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
income.
  For
example, Aries Energy Corporation, or Aries Energy (through its wholly-owned
subsidiary Rocket Marine Inc., or Rocket Marine), owns approximately 52% of our
outstanding common shares. We are ineligible to qualify for exemption under
Section 883 for any taxable year in which Aries Energy alone or together with
other shareholders with a 5% or greater interest in our common shares, or the 5%
shareholder group, own 50% or more of our outstanding common shares on more than
half the days during such taxable year and we are unable to establish in
accordance with the Treasury Regulations that within the 5% shareholder group
there are sufficient qualified shareholders for purposes of Section 883 to
preclude non-qualified shareholders within such group from owning 50% or more of
the value of our common stock for more than half the number of days during the
taxable year. In order to establish this, qualified shareholders within the 5%
shareholder group would have to provide us with certain information in order to
substantiate their identity as qualified shareholders. Captain Gabriel Petridis,
the 50% beneficial owner of Aries Energy, has agreed to provide us with such
information. Notwithstanding this agreement, we may be unable to establish in
conformity with the Treasury Regulations that there are sufficient qualified
shareholders within the 5% shareholder group to allow us to qualify for
exemption under Section 883. Due to the factual nature of the issues involved,
we can give no assurances regarding our tax-exempt status or that of any of our
subsidiaries for any future taxable year.
  If we or
our subsidiaries are not entitled to exemption under Section 883 of the Code for
any taxable year, the imposition of a 4% U.S. federal income tax on our
U.S.-source shipping income and that of our subsidiaries could have a negative
effect on our business and would result in decreased earnings available for
distribution to our shareholders.
  Risks
Relating to Our Common Stock
  There
may not be an active market for our common shares, which may cause our common
shares to trade at a discount and make it difficult to sell the common shares
you purchase.
  We cannot
assure you that an active trading market for our common shares will be
sustained. We cannot assure you of the price at which our common shares will
trade in the public market in the future or that the price of our shares in the
public market will reflect our actual financial performance. You may not be able
to resell your common shares at or above their current market price.
Additionally, a lack of liquidity may result in wide bid-ask spreads, contribute
to significant fluctuations in the market price of our common shares and limit
the number of investors who are able to buy the common shares.
   19
  
  The
products tanker and container vessel sectors have been highly unpredictable and
volatile. The market price of our common shares may be similarly
volatile.
  Future
sales of our common shares could cause the market price of our common shares to
decline.
  The
market price of our common shares could decline due to sales of a large number
of shares in the market, including sales of shares by our large shareholders, or
the perception that these sales could occur. These sales, or the perception that
these sales could occur, could also make it more difficult or impossible for us
to sell equity securities in the future at a time and price that we deem
appropriate to raise funds through future offerings of common
shares.
  Aries
Energy owns approximately 52% of our common shares. Aries Energy through Rocket
Marine is eligible to sell any of our common shares, directly or indirectly, in
the public market following the applicable lock-up period, which expired in
December 2005. We have entered into a registration rights agreement with Rocket
Marine that entitles it to have all of its remaining shares registered for sale
in the public market following the expiration of that restricted period. In
addition, these shares could be sold into the public market after one year
pursuant to Rule 144 under the Securities Act of 1933, as amended, or the
Securities Act, subject to certain volume, manner of sale and notice
requirements. Sales or the possibility of sales of substantial amounts of our
common shares by Aries Energy in the public markets could adversely affect the
market price of our common shares.
  ITEM
4.             INFORMATION
ON THE COMPANY
  A.           History
and Development of the Company
  We are
Aries Maritime Transport Limited, or Aries Maritime, a Bermuda company
incorporated in January 2005 as a wholly-owned indirect subsidiary of Aries
Energy Corporation, or Aries Energy. We are an international shipping company
that owns products tankers and container vessels. In March 2005, subsidiaries of
Aries Energy contributed to us all of the issued and outstanding stock of 10
vessel-owning companies in exchange for shares in our Company. Before this
contribution, each of the Aries Energy subsidiaries held 100% of the issued and
outstanding stock of the respective vessel-owning company or companies owned by
it. We now hold 100% of the issued and outstanding stock of each vessel-owning
company. Because our ownership percentage in each vessel-owning company was
identical to each contributing subsidiary’s prior ownership percentage in the
same vessel-owning company, the group reorganization was accounted for as an
exchange of equity interests at historical cost. On June 8, 2005, Aries Maritime
closed its initial public offering of 12,240,000 common shares at an offering
price of $12.50 per share. Our common stock is listed on the Nasdaq Global
Market under the symbol “RAMS.” The address of our principal executive office is
18 Zerva Nap., Glyfada, Athens 166 75, Greece.
  Our
primary capital expenditures are in connection with the acquisitions of vessels.
Since the date of our incorporation, we have exercised an option to reacquire
two additional container vessels, CMA CGM Seine and Saronikos Bridge (ex CMA CGM Makassar), from an affiliate
of Aries Energy and took delivery of the ships in June and July 2005,
respectively. Also, in October 2005, contracts were entered into for the
purchase of two new products tankers, Stena Compass and Stena Compassion. The Stena Compass was delivered
in February 2006 and the Stena
Compassion in June 2006. In November 2005, we took delivery of the
2001-built products tanker Chinook. As a result of these
acquisitions, our fleet now consists of ten product tankers with an aggregate
capacity of approximately 575,325 dwt and five container vessels with an
aggregate capacity of approximately 12,509 TEU.  The aggregate
purchase price of the three vessels we acquired in 2005 was $103.2 million and
the aggregate purchase price of the two vessels we acquired in 2006 was $112.2
million. See note 6 to our consolidated financial statements included in this
report.
  In
February 2008 we entered into a contract for the sale of the Arius and the vessel was delivered to her new
owners in June 2008. In March 2008 we entered into contracts for the sale of the
MSC Oslo and Energy 1. The vessels were delivered to their
new owners in April 2008 and June 2008, respectively. The aggregate net sales
price of the three vessels was $61.04 million and we realized a gain of $15.4
million.  Under the terms of our credit facility as described below,
we are obligated to reduce the amount outstanding from the current level of
$284.8 million to $200.0 million, by disposal of vessels, by August 31,
2008.
   20
   In March
2008, we announced that the Board of Directors had initiated a review to
evaluate strategic alternatives to enhance shareholder value. After
careful consideration of various strategic alternatives, including potential
capital raises and the continued execution of the Company’s operating plan,
the Board of Directors has concluded its review of strategic alternatives and
decided that it is in the best interests of our shareholders to continue
execution of the Company's operating plan.
  B.           Business
Overview
  Our
Fleet
  As of December 31, 2007 our fleet consisted of ten products tankers and
five container vessels. Our ten products tankers consisted of five double-hulled
MR tankers, one of which has a cargo-carrying capacity of 41,450 dwt, one of
which has a cargo-carrying capacity of 41,502 dwt and three of which have a
cargo-carrying capacity of 38,701 dwt; four double-hulled Panamax tankers, two
of which have a cargo-carrying capacity of 73,400 dwt and two of which have a
cargo-carrying capacity of 72,750 dwt; and one double-hulled Aframax tanker,
which has a cargo-carrying capacity of 83,970 dwt. Our products tankers are
designed to transport several different refined petroleum products
simultaneously in segregated coated cargo tanks. These cargoes typically include
gasoline, jet fuel, kerosene, naphtha and heating oil, as well as edible oils.
The average age of our products tankers was approximately 8.5 years as of
December 31, 2007. All our products tankers were employed under period charters
as of December 31, 2007, with remaining terms ranging from approximately four
months to 1.7 years, with the exception of Ostria and Arius, which were operating
in the spot market. Our charterers include PDVSA, the state oil company of
Venezuela, Deiulemar Compagnia di Navigazione S.p.A./Enel S.p.A., Trafigura
Beheer B.V. and the Stena Group.
 
 Our five
container vessels ranged in capacity from 1,799 to 2,917 TEU and had an average
age of 18.3 years as of December 31, 2007. Container vessels of this size are
generally utilized in the North/South trade routes that link Europe and Asia
with Latin America, Africa, India, Australia and New Zealand. Our four largest
container vessels are also utilized in the East/West trade routes that link
Europe with the Far East and the United States. Our smaller container vessel may
be employed on the same trade routes or may serve as a feeder vessel trading
between hub ports, where larger vessels call, and smaller regional ports. All of
our container vessels were employed under time charters as of December 31, 2007,
with remaining terms ranging from approximately ten months to 2.7 years. Three
of our container vessels are currently chartered to China Shipping Group,
Mediterranean Shipping Co. S.A. (“MSC”) and Islamic Republic of Iran Shipping
Line (“IRISL”) with the remaining two container vessels currently chartered to
CMA CGM S.A.
  After our
period charters expire, we may employ our vessels under new period charters or
in the spot voyage market between period charters, depending on the prevailing
market conditions at that time.  Set forth below is summary
information concerning our fleet as of December 31, 2007.
  
 Vessel
      Name
              Size
              Year
      Built
              Charterer
              Charter
      Expiration
              
              Net
      Daily Charterhire RateProduct
      TankersAltius
              73,400
      dwt
              2004
              Deiulemar/Enel
              June
      2009
              
              $
              14,860Fortius
              73,400
      dwt
              2004
              Deiulemar/Enel
              August
      2009
              
              $
              14,860Nordanvind
              38,701
      dwt
              2001
              PDVSA
              November
      2008
              
              $
              19,988Ostria
      (ex Bora)
              38,701
      dwt
              2000
              Spot
              Spot
              
              SpotHigh Land
              41,450
      dwt
              1992
              Trafigura
              May
      2008
              
              $
              16,575
              (1)High
      Rider
              41,502
      dwt
              1991
              Trafigura
              April
      2008
              
              $
              16,575
              (2)Arius
      (ex Citius)(3)
              83,970
      dwt
              1986
              ST
      Shipping
              Spot
              
              SpotStena
      Compass
              72,750
      dwt
              2006
              Stena
      Group
              August
      2008
              
              $
              18,700
              (4)(5)Stena
      Compassion
              72,750
      dwt
              2006
              Stena
      Group
              December
      2008
              
              $
              18,700
              (4)(5)Chinook
              38,701
      dwt
              2001
              Stena
      Group
              August
      2008
              
              $
              17,062
              (4)
  21
  
 Container
      VesselsSaronikos Bridge
      (ex CMA CGM Makassar)
              2,917
      TEU
              1990
              CMA
      CGM
              May
      2010
              
              $
              20,400CMA
      CGM Seine
              2,917
      TEU
              1990
              CMA
      CGM
              September
      2010
              
              $
              20,400Energy
      1 (ex ANL Energy)(6)
              2,438
      TEU
              1989
              IRISL
              October
      2008
              
              $
              17,297MSC
      OSLO (ex SCI Tej)(6)
              2,438
      TEU
              1989
              MSC
              March
      2009
              
              $
              15,000Ocean
      Hope
              1,799
      TEU
              1989
              China
      Shipping Container Lines
              June
      2007
              
              $
              13,956
 
 (1)
              In
      June 2008, the High
      Land was redelivered under the time charter and is operating in the
      spot market.
 (2)
              In
      March 2008, the High
      Rider was redelivered under the time charter and is operating in
      the spot market.
 (3)
              In
      February 2008, we reached an agreement to sell the Arius
      to an unrelated party for net proceeds of $21.6 million. The vessel was
      delivered to her new owners on June 10, 2008.
 (4)
              Plus
      additional income under profitsharing provisions of our charter agreement
      with Stena Group.
 (5)
              Bareboat
      charters.
 (6)
              In
      March 2008, we reached an agreement to sell both the Energy
      1 and its sister ship, the MSC
      Oslo, to an unrelated party for net proceeds totalling $39.9
      million.  The vessels were delivered to their new owners on June
      2, 2008 and April 30, 2008
respectively.
  Vessel
Charters
  Our
products tankers and container vessels, except Ostria and High Rider, which
are currently operating in the spot market, and with the exception of Arius, MSC OsloandEnergy 1, which were sold
and delivered to their new owners in April 2008 and June 2008, are currently
committed under period employment agreements with national, regional and
international companies. Pursuant to these agreements, known as charterparties,
we provide these companies, or charterers, with a vessel and crew at a fixed,
per-day rate for a specified term.
  The
charterers under the time charters referenced below are generally responsible
for, among other things, the cost of all fuels with respect to the vessels (with
certain exceptions, including during off-hire periods); port charges; costs
related to towage, pilotage, mooring expenses at loading and discharging
facilities; and certain operating expenses. The charterers are not obligated to
pay us charterhire for off-hire days, which include days a vessel is out of
service due to, among other things, repairs or drydockings. Under the time
charters, we are generally required, among other things, to keep the related
vessels seaworthy, to crew and maintain the vessels and to comply with
applicable regulations. We are also required to provide protection and
indemnity, hull and machinery, war risk and oil pollution insurance cover. Our
ship management companies perform these duties for us under the ship management
agreements.
  Charter
periods are typically, at the charterer’s option, subject to (1) extension or
reduction by between 15 and 60 days at the end of the final charter period and
(2) extension by any amount of time during the charter period that the vessel is
off-hire. A vessel is generally considered to be “off-hire” during any period
that it is out of service due to damage to or breakdown of the vessel or its
equipment or a default or deficiency of its crew. Under certain circumstances
our charters may terminate prior to their scheduled termination dates. The terms
of our charters vary as to which events or occurrences will cause a charter to
terminate or give the charterer the option to terminate the charter, but these
generally include a total or constructive total loss of the related vessel, the
requisition for hire of the related vessel or the failure of the related vessel
to meet specified performance criteria.
   22
  Two of
our vessels, Altius and
Fortius, which are
sister ships, are employed under time charters with Deiulemar Compagnia di
Navigazione S.p.A (“Deiulemar”), an Italian shipping company, at a daily charter
rate of $14,860 per vessel, net of commissions, which commenced in August and
June 2004, respectively. Deiulemar has in turn sub-chartered these vessels to
Enel.FTL, an Italian energy company partly owned by the Italian state. Under the
Deiulemar charterparties, Deiulemar has the option to purchase 50% of each
vessel’s equity upon the expiration of the charter for 50% of the difference
between $29.5 million and the debt balance on each vessel. If Deiulemar
exercises this option, existing vessel technical managers will continue to
provide technical management services and Deiulemar will have a right of first
refusal for the provision of commercial management services for the purchased
vessel or vessels. The time charters with Deiulemar for Altius and Fortius are scheduled to
expire in August and June 2009, respectively, subject to the typical adjustments
discussed above.
  Our
vessel Nordanvind is
employed under a time charter with PDVSA, S.A. (“PDVSA”), the state oil company
of Venezuela. Under the terms of the time charter, which commenced in November
2005, PDVSA is required to pay a daily charter rate of $19,988, net of
commissions, until November 2008, subject to the typical adjustments discussed
above. In May 2006, we withdrew our sister vessel Ostria from its charter with
PDVSA and began marketing the vessel in the spot market.
  Two of
our vessels, High Land
and High Rider, which
are sister ships, had been employed since April 2006 under time charters to
Trafigura Beheer B.V. (“Trafigura”), a global trading group involved in the
trade, transportation, storage and distribution of oil, oil products, minerals
and metals. In March 2008, the High Rider was redelivered
under the time charter and is operating in the spot market.
  On August
1, 2006, our vessel Arius (ex Citius) entered into a new
time charter for an initial period of 6 months with ST Shipping and
Transportation Inc. (“ST Shipping”), the shipping division of Glencore
International A.G., a company based in Switzerland. Glencore International A.G.
supplies a range of commodities and raw materials to companies in industries
such as automotive, power generation, steel production and food processing.
Under the terms of the time charter, ST Shipping was required to pay us a basic
hire of $17,550 per day, net of commissions, plus an additional $243.75 net of
commissions per day for every oil major approval as and when obtained until
three were obtained. The charterer was also required to pay us additional hire
equalling 50% of any trading income (revenue less voyage-related expenses) in
excess of $18,000 per day. The charter to ST Shipping expired in August 2007.
The vessel has been employed in the spot market since redelivery under the
charter. The vessel was under the commercial management of ST Shipping from
redelivery under their charter until termination of the commercial management
agreement in February 2008.  In March 2008 we reached an agreement to
sell the vessel for a net price of $21.8 million and realized a gain of $10.1
million. The vessel was delivered to her new owners on June 11,
2008.
  Our
vessel Chinook, sister
ship to the Nordanvind
and Ostria, is employed
under time charter to the Stena Group for an initial period of 18 months at a
daily rate of $17,062.50, net of commissions. This charter commenced on February
20, 2007. The charterer has an option to extend the time charter for a period of
twelve months at the same rate subject to the typical adjustments discussed
above. The time charter also includes a profitsharing component with a 50% share
for the Company, based on any trading income (revenue less voyage-related
expenses) in excess of the daily hire, gross of commissions.
  Our
vessels Saronikos Bridge
(ex CMA CGM Makassar) and CMA CGM Seine, which are
sister ships, are employed under time charters to CMA CGM S.A. (“CMA CGM”), a
worldwide container shipping company based in France. Under the terms of these
time charters, CMA CGM is required to pay a daily charter rate of $20,400 per
vessel, net of commissions. These five-year time charters commenced in May 2005
and September 2005, respectively, and are subject to the typical adjustments
discussed above.
  Our
vessel Energy 1 (ex
ANL Energy) had been
employed under time charter to IRISL since October 2006. Under the terms of the
charter, IRISL was required to pay us a daily charter rate of $17,297, net of
commissions. The charterers exercised their right, in March 2008, to terminate
the charter before expiry due to the amount of time the vessel was out of
service. The vessel was out of service for a period of 108 days in 2008. The
charter was set to expire in October 2008, with the charterer having exercised
its option to extend the charter period by 6 months and subject to the typical
adjustments discussed above. In March 2008 we entered into an agreement to sell
Energy 1 and its sister
ship MSC Oslo for net
proceeds totalling approximately $40 million and realized a gain of $5.3
million. The vessel was delivered to her new owners on June 2,
2008.
   23
  Our
vessel MSC OSLO (ex
SCI Tej), sister vessel
of M/V Energy 1, was
employed under time charter to MSC, a privately-owned company founded in 1970,
which is the second largest container shipping line in the
world.  Under the terms of the time charter, MSC is required to pay us
a daily charter rate of $15,000, net of commissions, subject to the typical
adjustments discussed above. This time charter commenced on March 8, 2007 and is
for two years. As noted above, on March 25, 2008, the Company announced that it
has reached an agreement to sell both the Energy 1 and its sister ship,
the MSC Oslo, to an
unrelated party for net proceeds totaling approximately $40 million and realized
a gain of $5.3 million. The vessel was delivered to her new owners on April 30,
2008.
  Our
vessel Ocean Hope is
currently employed under a time charter with China Shipping Container Lines
(Asia) Co. Ltd. (“CSCL”), a company within the China Shipping Group, a
state-owned Chinese shipping conglomerate. Under the terms of the time charter,
CSCL is required to pay a daily charter rate of $13,956, net of commissions. The
time charter to CSCL commenced in June 2007 and is scheduled to expire in June
2009, subject to the typical adjustments discussed above.
  Our
vessels Stena Compass
and Stena Compassion
are currently employed under bareboat charters with two companies of the Stena
Group (Panvictory Ltd. and Panvision Ltd., respectively). Under the terms of the
bareboat charters, the Stena Group companies are required to pay a basic daily
charter rate of $18,700, there being no commissions. In addition, the Stena
Group companies are required to pay an additional hire equal to 30% of the time
charter equivalent weighted average hire for each quarter in excess of $24,500
per day. The bareboat charters expire in August 2008 and December 2008,
respectively.
  The
charterers under the bareboat charters referenced above are generally
responsible for the running cost of the vessels, which include, among other
things, operation, maintenance, insurance (protection and indemnity, hull and
machinery, war risk and oil pollution) and repairs, drydocking and crew. Also,
charterhire is not subject to deductions for off-hire days under the bareboat
charters.
  For the
periods ended December 31, 2007, 2006, 2005 and 2004, our revenues from products
tankers were $64 million, $53 million, $42.9 million and $20.7 million,
respectively.  For the periods ended December 31, 2007, 2006, 2005 and
2004, our revenues from container vessels were $35 million, $41.2 million, $33
million and $27.6 million, respectively. These revenues include Deferred Revenue
(for which please refer to “Item 5 – Operating and Financial Review and
Prospects”). Our fleet did not include any container vessels in
2003.
  Fleet
Management
 
 Certain
of our vessel-owning subsidiaries entered into ten-year ship management
agreements with Magnus Carriers, which were cancellable by us on two months’
prior notice. Eleven of these twelve management agreements with Magnus Carriers
were entered into in June 2005 with the last entered into in July 2005. Under
these management agreements, Magnus Carriers was responsible for all technical
management of our vessels, including crewing, maintenance, repair, capital
expenditures, drydocking, payment of vessel taxes and other vessel operating
activities. Magnus Carriers was also obligated under our management agreements
to maintain, at our expense, insurance for each of our vessels, including marine
hull and machinery insurance, protection and indemnity insurance (including
pollution risks and crew insurances), war risk insurance and off-hire
insurance.
  As
compensation for these services, we paid Magnus Carriers an amount equal to the
budgeted vessel operating expenses, which we had established jointly with Magnus
Carriers. Under our agreements, these initial budgeted vessel operating expenses
increased by 3% each year. They were also subject to adjustment every three
years. The initial annual management fee was set at $146,000 per vessel and
during 2006 and 2007 increased by 3% per annum per vessel. The ship management
agreements provided that, if actual total vessel operating expenses exceeded the
corresponding budgeted amounts, we and Magnus Carriers agreed to bear the excess
expenditures equally (except for costs relating to any improvement, structural
changes or installation of new equipment required by law or regulation, which
would have been paid solely by us). On the other hand, if actual total vessel
operating expenses were less than the corresponding budgeted amounts, we and
Magnus Carriers shared the cost savings equally. Vessel operating expenses were
payable by us monthly in advance.
   24
  
  On August
31, 2007, notice of termination was delivered to and accepted by Magnus Carriers
in relation to the twelve existing ship management agreements between Magnus
Carriers and certain vessel-owning subsidiaries.  As of the date of
the annual report, we, through our vessel-owning subsidiaries, have entered into
new ship management agreements with third-party technical managers for nine of
the twelve vessels that had previously been managed by Magnus
Carriers.  International Tanker Management Limited (“ITM”), based in
Dubai, performs technical management of six of these vessels and Barber Ship
Management Singapore Pte Ltd (“Barber”), based in Singapore, performs technical
management of three of these vessels.
  Under the
ITM and Barber management agreements, ITM and Barber are responsible for all
technical management of our vessels, including crewing, maintenance, repair,
capital expenditures, drydocking and other vessel operating activities. As
compensation for these services, we pay ITM and Barber an amount equal to the
budgeted vessel operating expenses, which we have established jointly with ITM
and Barber. The initial annual management fee is set at $145,000 for two of the
vessels and $120,000 for four of the vessels under the ITM management agreements
and $105,000 per vessel under the Barber management agreements. Vessel operating
expenses are payable by us monthly in advance.
  On
October 1, 2007, we entered into new commercial management agreements with
Magnus Carriers for all the vessels in our fleet (with the exception of the
Stena Compass and Stena Compassion). Under
these agreements, we use Magnus Carriers and its affiliates non-exclusively for
commercial management of all our vessels except Stena Compass and Stena Compassion, which
includes finding employment for our vessels and identifying and developing
vessel acquisition opportunities that will fit our strategy. Under the terms of
the commercial management agreements, Magnus Carriers provides chartering
services in accordance with our instructions and we pay Magnus Carriers either
1.25% of any gross charterhire and freight paid to us for new charters or $7,000
per month per vessel where no 1.25% chartering commission is payable. In
addition, Magnus Carriers supervises the sale of our vessels and the purchase of
additional vessels in accordance with our instructions. We pay Magnus Carriers
1% of the sale or purchase price in connection with a vessel sale or purchase
that Magnus Carriers brokers for us.
  Magnus
Carriers had agreed to indemnify us against the consequences of any failure by
Magnus Carriers to perform its obligations under the ship management agreements
up to an amount equal to ten times the annual management fee. Any
indemnification by Magnus Carriers for environmental matters is limited to the
insurance and indemnity coverage it is required to maintain for each vessel
under its ship management agreement.
  In
addition, as long as Magnus Carriers performs management services for us,
including commercial management services, Magnus Carriers and its principals
have granted us a right of first refusal to acquire or charter any container
vessels or any products tankers ranging from 20,000 to 85,000 dwt, which Magnus
Carriers, its principals or any of their controlled affiliates may consider for
acquisition or charter in the future.
  Magnus
Carriers is an established ship management company that provides ship management
services for affiliated companies, such as our company, as well as third parties
including commercial banks. Since its inception in 1997, Magnus Carriers has
managed more than 50 vessels, including oil tankers, products tankers, LPG
tankers, chemical tankers, container vessels, dry bulk carriers and reefer
vessels. Magnus Carriers and its affiliates have offices in Athens, Greece and
London, England and have 30 land-based administrative employees.
  ITM,
based in Dubai, and Barber Ship Management Singapore Pte Ltd (“Barber”), based
in Singapore, are companies within the Wilhelmsen Group, a global provider of
various services to the shipping industry and one of the largest technical ship
management service providers worldwide.
   25
 
 Crewing and Employees
  As of
December 31, 2007, our wholly-owned subsidiary, AMT Management Ltd., employed 6
employees, all of whom are shore-based. Magnus Carriers ensures that all seamen
have the qualifications and licenses required to comply with international
regulations and shipping conventions and that our vessels employ experienced and
competent personnel.
  All of
the employees of Magnus Carriers are subject to a general collective bargaining
agreement covering employees of shipping agents. These agreements set
industry-wide minimum standards. We have not had any labor interruptions with
our employees under this collective bargaining agreement. Our other ship
management service providers operate on a similar basis.
  Environmental
and Other Regulations
  Government
regulation significantly affects the ownership and operation of our fleet. We
are subject to various international conventions and treaties, laws and
regulations in force in the countries in which our vessels may operate or are
registered relating to safety and health and environmental protection including
the storage, handling, emission, transportation and discharge of hazardous and
non-hazardous materials, and the remediation of contamination and liability for
damage to natural resources.
  A variety
of governmental and private entities subject our vessels to both scheduled and
unscheduled inspections. These entities include the local port authorities
(applicable national authorities such as the U.S. Coast Guard and harbor
masters), classification societies, flag state administration (country of
registry) and charterers, particularly terminal operators, and oil companies.
Some of these entities require us to obtain permits, licenses, certificates and
other authorizations for the operation of our fleet. Our failure to maintain
necessary permits or approvals could require us to incur substantial costs or
temporarily suspend operation of one or more of the vessels in our
fleet.
  In recent
periods, heightened levels of environmental and quality concerns among insurance
underwriters, regulators and charterers have led to greater inspection and
safety requirements on all ships and may accelerate the scrapping of older
vessels throughout the industry. Increasing environmental concerns have created
a demand for vessels that conform to the stricter environmental standards. The
providers of technical management services to us are required to maintain
operating standards for all of our vessels emphasizing operational safety,
quality maintenance, continuous training of our officers and crews and
compliance with applicable local, national and international environmental laws
and regulations. We believe that the operation of our vessels is in substantial
compliance with applicable environmental laws and regulations and that our
vessels have all material permits, licenses, certificates or other
authorizations necessary for the conduct of our operations; however, because
such laws and regulations are frequently changed and may impose increasingly
stricter requirements, we cannot predict the ultimate cost of complying with
these requirements, or the impact of these requirements on the resale value or
useful lives of our vessels.  In addition, a future serious marine
incident that results in significant oil pollution or otherwise causes
significant adverse environmental impact could result in additional legislation
or regulation that could negatively affect our profitability.
  International
Maritime Organization
  The
International Maritime Organization, or IMO (the United Nations agency for
maritime safety and the prevention of marine pollution by ships), has adopted
the International Convention for the Prevention of Marine Pollution, 1973, as
modified by the Protocol of 1978 relating thereto, which has been updated
through various amendments (the “MARPOL Convention”). The MARPOL Convention
relates to environmental standards including oil leakage or spilling, garbage
management, as well as the handling and disposal of noxious liquids, harmful
substances in packaged forms, sewage and air emissions. The IMO adopted
regulations that set forth pollution prevention requirements applicable to
tankers. These regulations, which have been adopted by over 150 nations,
including many of the jurisdictions in which our tankers operate, provide for,
among other things, phase-out of single-hulled tankers and more stringent
inspection requirements, including, in part, that:
   26
  
  ·
              tankers between 25 and 30 years
      old must be of double-hulled construction or of a mid-deck design with
      double-sided construction, unless: (1) they have wing tanks or
      double-bottom spaces not used for the carriage of oil, which cover at
      least 30% of the length of the cargo tank section of the hull or bottom;
      or (2) they are capable of hydrostatically balanced loading (loading less
      cargo into a tanker so that in the event of a breach of the hull, water
      flows into the tanker, displacing oil upwards instead of into the
      sea);
 ·
              tankers 30 years old or older
      must be of double-hulled construction or mid-deck design with double sided
      construction; and
 ·
              all tankers are subject to
      enhanced inspections.
  Also,
under IMO regulations, a tanker must be of double-hulled construction or a
mid-deck design with double-sided construction or be of another approved design
ensuring the same level of protection against oil pollution if the
tanker:
  ·
              is the subject of a contract for
      a major conversion or original construction on or after July 6,
      1993;
 ·
              commences
      a major conversion or has its keel laid on or after January 6, 1994;
      or
 
 ·
              completes a major conversion or
      is a newbuilding delivered on or after July 6,
  1996.
  Effective
September 2002, the IMO accelerated its existing timetable for the phase-out of
single-hull oil tankers.  At that time, these regulations required the
phase-out of most single-hull oil tankers by 2015 or earlier, depending on the
age of the tanker and whether it has segregated ballast tanks. Under the
regulations, the flag state administration may allow for some newer single-hull
ships registered in its country that conform to certain technical specifications
to continue operating until the 25th anniversary of their
delivery.  Any port state, however, may deny entry of those
single-hull tankers that are allowed to operate until their 25th anniversary to
ports or offshore terminals.
  However,
as a result of the oil spill in November 2002 relating to the loss of the m.t. Prestige, which was
owned by a company not affiliated with us, in December 2003, the Marine
Environmental Protection Committee of the IMO, or MEPC, adopted an amendment to
the MARPOL Convention, which became effective in April 2005. The amendment
revised an existing regulation 13G accelerating the phase-out of single-hull oil
tankers and adopted a new regulation 13H on the prevention of oil pollution from
oil tankers when carrying heavy grade oil.  Under the revised
regulation, single-hull oil tankers must be phased out no later than April 5,
2005 or the anniversary of the date of delivery of the ship on the date or in
the year specified in the following table:
 
 Category
      of Oil Tankers
                
                Date
      or YearCategory 1 -
      oil tankers of 20,000 dwt and above carrying crude oil, fuel oil, heavy
      diesel oil or lubricating oil as cargo, and of 30,000 dwt and above
      carrying other oils, which do not comply with the requirements for
      protectively located segregated ballast tanks
                
                April
      5, 2005 for ships delivered on April 5, 1982 or earlier; or 2005 for ships
      delivered after April 5, 1982Category 2 -
      oil tankers of 20,000 dwt and above carrying crude oil, fuel oil, heavy
      diesel oil or lubricating oil as cargo, and of 30,000 dwt and above
      carrying other oils, which do comply with the protectively located
      segregated ballast tank requirements
                  and
                  Category 3 -
      oil tankers of 5,000 dwt and above but less than the tonnage specified for
      Category 1 and 2 tankers.
                
                April
      5, 2005 for ships delivered on April 5, 1977 or earlier; 2005 for ships
      delivered after April 5, 1977 but before January 1, 1978
                  2006
      for ships delivered in 1978 and 1979
                  2007
      for ships delivered in 1980 and 1981
                  2008
      for ships delivered in 1982
                  2009
      for ships delivered in 1983
                  2010
      for ships delivered in 1984 or
later
  27
  Under the
revised regulations, a flag state may permit continued operation of certain
Category 2 or 3 tankers beyond the phase-out date set forth in the above
schedule.  Under regulation 13G, the flag state may allow for some
newer single-hull oil tankers registered in its country that conform to certain
technical specifications to continue operating until the earlier of the
anniversary of the date of delivery of the vessel in 2015 or the 25th
anniversary of their delivery.  Under regulation 13G and 13H, as
described below, certain Category 2 and 3 tankers fitted with double bottoms or
double sides may be allowed by the flag state to continue operations until their
25th anniversary of delivery.  Any port state, however, may deny entry
of those single-hull oil tankers that are allowed to operate under any of the
flag state exemptions.
  The MEPC,
in October 2004, adopted a unified interpretation to regulation 13G that
clarified the date of delivery for tankers that have been
converted.  Under the interpretation, where an oil tanker has
undergone a major conversion that has resulted in the replacement of the
fore-body, including the entire cargo carrying section, the major conversion
completion date of the oil tanker shall be deemed to be the date of delivery of
the ship, provided that:
  ·
              the
      oil tanker conversion was completed before July 6, 1996;
  ·
              the
      conversion included the replacement of the entire cargo section and
      fore-body and the tanker complies with all the relevant provisions of the
      MARPOL Convention applicable at the date of completion of the major
      conversion; and
  ·
              the
      original delivery date of the oil tanker will apply when considering the
      15 years of age threshold relating to the first technical specifications
      survey to be completed in accordance with the MARPOL
      Convention.
  In
December 2003, the MEPC adopted a new regulation 13H on the prevention of oil
pollution from oil tankers when carrying heavy grade oil, or HGO.  The
new regulation bans the carriage of HGO in single-hull oil tankers of 5,000 dwt
and above after April 5, 2005, and in single-hull oil tankers of 600 dwt and
above but less than 5,000 dwt, no later than the anniversary of their delivery
in 2008.
  Under
regulation 13H, HGO means any of the following:
  ·
              crude
      oils having a density at 15oC higher than 900 kg/m3;
  ·
              fuel
      oils having either a density at 15oC higher than 900 kg/m3 or a kinematic
      viscosity at 50oC higher than 180 mm2/s;
  ·
              bitumen,
      tar and their emulsions.
  Under regulation
13H, the flag state administration may allow continued operation of oil tankers
of 5,000 dwt and above, carrying crude oil with a density at 15oC higher than
900 kg/m3 but lower than 945 kg/m3, that conform to certain technical
specifications and, in the opinion of the such administration, the ship is fit
to continue such operation, having regard to the size, age, operational area and
structural conditions of the ship and provided that the continued operation
shall not go beyond the date on which the ship reaches 25 years after the date
of its delivery.  The flag state administration may also allow
continued operation of a single-hull oil tanker of 600 dwt and above but less
than 5,000 dwt, carrying HGO as cargo, if, in the opinion of the such
administration, the ship is fit to continue such operation, having regard to the
size, age, operational area and structural conditions of the ship, provided that
the operation shall not go beyond the date on which the ship reaches 25 years
after the date of its delivery.
  The flag
state administration may also exempt an oil tanker of 600 dwt and above carrying
HGO as cargo if the ship is either engaged in voyages exclusively within an area
under its jurisdiction, or is engaged in voyages exclusively within an area
under the jurisdiction of another party, provided the party within whose
jurisdiction the ship will be operating agrees. The same applies to vessels
operating as floating storage units of HGO.
   28
 
  Any port
state, however, can deny entry of single-hull tankers carrying HGO which have
been allowed to continue operation under the exemptions mentioned above, into
the ports or offshore terminals under its jurisdiction, or deny ship-to-ship
transfer of HGO in areas under its jurisdiction except when this is necessary
for the purpose of securing the safety of a ship or saving life at
sea.
  Revised
Annex I to the MARPOL Convention entered into force in January
2007.  Revised Annex I incorporates various amendments adopted since
the MARPOL Convention entered into force in 1983, including the amendments to
Regulation 13G (regulation 20 in the revised Annex) and Regulation 13H
(regulation 21 in the revised Annex).  Revised Annex I also imposes
construction requirements for oil tankers delivered on or after January 1,
2010.  A further amendment to revised Annex I includes an amendment to
the definition of “heavy grade oil” that will broaden the scope of regulation
21.  On August 1, 2007, regulation 12A (an amendment to Annex I) came
into force requiring oil fuel tanks to be located inside the double hull in all
ships with an aggregate oil fuel capacity of 600 m3 and
above, which are delivered on or after August 1, 2010, including ships for which
the building contract is entered into on or after August 1, 2007 or, in the
absence of a contract, which keel is laid on or after February 1,
2008.
  Air
Emissions
  The IMO
has also negotiated international conventions that impose liability for oil
pollution in international waters and a signatory’s territorial waters. In
September 1997, the IMO adopted Annex VI to the MARPOL Convention to address air
pollution from ships. Annex VI was ratified in May 2004, and took effect May 19,
2005. Annex VI sets limits on sulfur oxide and nitrogen oxide emissions from
ship exhausts and prohibits deliberate emissions of ozone depleting substances,
such as chlorofluorocarbons. 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. Annex VI regulations pertaining to
nitrogen oxide emissions apply to diesel engines on vessels built on or after
January 1, 2000 or diesel engines undergoing major conversion after such date.
We believe that all our vessels comply with Annex VI in all material respects as
of its effective date. Additional or new conventions, laws and regulations may
be adopted that could adversely affect our business, cash flows, results of
operations and financial condition.
  In
February 2007, the United States proposed a series of amendments to Annex VI
regarding particulate matter, NOx and SOx emission standards.  The
proposed emission program would reduce air pollution from ships by establishing
a new tier of performance-based standards for diesel engines on all vessels and
stringent emission requirements for ships that operate in coastal areas with
air-quality problems.  On June 28, 2007, the World Shipping Council
announced its support for these amendments.  If these amendments are
implemented, we may incur costs to comply with the proposed
standards.
  Safety
Requirements
  The IMO
has also adopted the International Convention for the Safety of Life at Sea, or
SOLAS Convention, and the International Convention on Load Lines, 1966, or LL
Convention, which impose a variety of standards to regulate design and
operational features of ships. SOLAS Convention and LL Convention standards are
revised periodically. We believe that all our vessels are in substantial
compliance with SOLAS Convention and LL Convention standards.
  Under the
International Safety Management Code for the Safe Operation of Ships and for
Pollution Prevention, or ISM Code, promulgated by the IMO, the party with
operational control of a vessel is required 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. In 1994, the ISM Code became mandatory with the adoption of Chapter
IX of SOLAS. We intend to rely on the safety management systems that Magnus
Carriers and our other ship management companies have developed.
   29
 
  The ISM
Code requires that vessel operators 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 operator has been awarded a document of
compliance, issued by each flag state, under the ISM Code. We believe that
Magnus Carriers and our other ship management companies have all material
requisite documents of compliance for their offices and safety management
certificates for vessels in our fleet for which the certificates are required by
the IMO. Magnus Carriers and our other ship management companies will be
required to review these documents of compliance and safety management
certificates annually.
  Noncompliance
with the ISM Code and other IMO regulations may subject the shipowner to
increased liability, may lead to decreases in available insurance coverage for
affected vessels and may result in the denial of access to, or detention in,
some ports. For example, the U.S. Coast Guard and European Union authorities
have indicated that vessels not in compliance with the ISM Code will be
prohibited from trading in U.S. and European Union ports.
  Although
the United States is not a party to these conventions, many countries have
ratified and follow the liability plan adopted by the IMO and set out in the
International Convention on Civil Liability for Oil Pollution Damage of 1969.
Under this convention and depending on whether the country in which the damage
results is a party to the 1992 Protocol to the International Convention on Civil
Liability for Oil Pollution Damage, a vessel’s registered owner is strictly
liable for pollution damage caused in the territorial waters of a contracting
state by discharge of persistent oil, subject to certain complete defenses.
Under an amendment to the 1992 Protocol that became effective on November 1,
2003, for vessels of 5,000 to 140,000 gross tons (a unit of measurement for the
total enclosed spaces within a vessel), liability will be limited to
approximately $6.8 million plus $955.3 for each additional gross ton over 5,000.
For vessels of over 140,000 gross tons, liability will be limited to
approximately $136.0 million. As the Convention calculates liability in terms of
a basket of currencies, these figures are based on currency exchange rates on
March 22, 2006. Under the 1969 Convention, the right to limit liability is
forfeited where the spill is caused by the owner’s actual fault; under the 1992
Protocol, a shipowner cannot limit liability where the spill is caused by the
owner’s intentional or reckless conduct. Vessels trading in jurisdictions that
are parties to these conventions must provide evidence of insurance covering the
liability of the owner. In jurisdictions where the International Convention on
Civil Liability for Oil Pollution Damage 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 convention. We believe that our
protection and indemnity insurance will cover the liability under the plan
adopted by the IMO.
  Ballast
Water Requirements
  The IMO
adopted an International Convention for the Control and Management of Ships’
Ballast Water and Sediments, or the BWM Convention, in February 2004. The BWM
Convention’s implementing regulations call for a phased introduction of
mandatory ballast water exchange requirements (beginning in 2009), to be
replaced in time with mandatory concentration limits. The BWM Convention will
not enter into force until 12 months after it has been adopted by 30 states, the
combined merchant fleets of which represent not less than 35% of the gross
tonnage of the world’s merchant shipping.
  The flag
state, as defined by the United Nations Convention on Law of the Sea, has
overall responsibility for the implementation and enforcement of international
maritime regulations for all ships granted the right to fly its flag. The
“Shipping Industry Guidelines on Flag State Performance” evaluates flag states
based on factors such as sufficiency of infrastructure, ratification of
international maritime treaties, implementation and enforcement of international
maritime regulations, supervision of surveys, casualty investigations and
participation at IMO meetings.
   30
  U.S.
Oil Pollution Act of 1990 and Comprehensive Environmental Response, Compensation
and Liability Act
  The
United States regulates the tanker sector with an extensive regulatory and
liability regime for environmental protection and cleanup of oil spills,
consisting primarily of OPA and the Comprehensive Environmental Response,
Compensation and Liability Act, or CERCLA. OPA affects all owners and operators
whose vessels trade with the United States or its territories or possessions, or
whose vessels operate in the waters of the United States, which include the U.S.
territorial sea and the 200 nautical mile exclusive economic zone around the
United States. CERCLA 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”
who 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 and
the responsible party reports the incident and reasonably cooperates with the
appropriate authorities) for all containment and cleanup costs and other damages
arising from oil spills from their vessels. These other damages are defined
broadly to include:
  ·
              natural resource damages and
      related assessment costs;
 ·
              real and personal property
      damages;
 ·
              net loss of taxes, royalties,
      rents, profits or earnings capacity;
 ·
              net cost of public services
      necessitated by a spill response, such as protection from fire, safety or
      health hazards;
 ·
              loss of profits or impairment of
      earning capacity due to injury, destruction or loss of real property,
      personal property and natural resources; and
 ·
              loss of subsistence use of
      natural resources.
  OPA
previously limited the liability of responsible parties to the greater of $1,200
per gross ton or $10 million per tanker that is over 3,000 gross tons per
discharge (subject to possible adjustment for inflation).  Amendments
to OPA signed into law in July 2006 increased the OPA liability limits to the
greater of $1,900 per gross ton or $16.0 million per double-hull tanker that is
over 3,000 gross tons per discharge (subject to possible adjustment for
inflation).  The act specifically permits individual states to impose
their own liability regimes with regard to oil pollution incidents occurring
within their boundaries, including adjacent waters, and some states have enacted
legislation providing for unlimited liability for discharge of pollutants within
their waters. In some cases, states that have enacted this type of legislation
have not yet issued implementing regulations defining vessel owners’
responsibilities under these laws. 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.
  Although
OPA is primarily directed at oil tankers, it also applies to non-tanker vessels,
such as container vessels, with respect to the fuel carried on board. OPA limits
the liability of non-tanker owners to the greater of $600 per gross ton or
$500,000 per discharge, which may be adjusted periodically for
inflation.
  These
limits of liability do not apply, however, where the incident is caused by
violation of applicable U.S. federal safety, construction or operating
regulations, or by the gross negligence or wilful misconduct of the responsible
party or the responsible party’s agent or employee or any person acting in a
contractual relationship with the responsible party. In addition, these limits
do not apply if the responsible party or the responsible party’s agent or
employee or any person acting in a contractual relationship with the responsible
party fails or refuses to report the incident or to cooperate and assist in
connection with the substance removal activities. OPA and CERCLA each preserve
the right to recover damages under other laws, including maritime tort
law.
   31
   OPA also
requires 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 strict liability under the act. The U.S. Coast Guard has adopted
regulations requiring evidence of financial responsibility in the amount of
$1,500 per gross ton for tankers, combining the OPA limitation on liability of
$1,200 per gross ton with the CERCLA liability limit of $300 per gross ton. The
U.S. Coast Guard has indicated that it expects to adopt regulations requiring
evidence of financial responsibility in the amounts that reflect the higher
limits of liability imposed by the July amendments to OPA, as described
above.  Under the regulations, evidence of financial responsibility
may be demonstrated by insurance, surety bond, self-insurance, guaranty or an
alternative method subject to approval by the Director of the U.S. Coast Guard
National Pollution Funds Center. Under OPA regulations, an owner or operator of
more than one vessel is required to demonstrate evidence of financial
responsibility for the entire fleet in an amount equal only to the financial
responsibility requirement of the vessel having the greatest maximum strict
liability under OPA and CERCLA. Magnus Carriers has provided the requisite
guarantees and has received certificates of financial responsibility from the
U.S. Coast Guard for each of our vessels required to have one.
  Magnus
Carriers and the Stena Group companies managing Stena Compass and Stena Compassion have
arranged insurance for our tankers with pollution liability insurance in the
amount of $1 billion. However, a catastrophic spill could exceed the insurance
coverage available, in which event there could be a material adverse effect on
our business and on the ship management companies’ business, which could impair
their ability to manage our vessels.
  Under
OPA, oil tankers as to which a contract for construction or major conversion was
put in place after June 30, 1990 are required to have double hulls. In addition,
oil tankers without double hulls will not be permitted to come to U.S. ports or
trade in U.S. waters by 2015. All of the tankers in our fleet have double
hulls.
  OPA also
amended the Federal Water Pollution Control Act to require that owners or
operators of tankers operating in the waters of the United States must file
vessel response plans with the U.S. Coast Guard, and their tankers are required
to operate in compliance with their U.S. Coast Guard-approved plans. These
response plans must, among other things:
  ·
              address a “worst case” scenario
      and identify and ensure, through contract or other approved means, the
      availability of necessary private response resources to respond to a
      “worst case discharge”;
 ·
              describe crew training and
      drills; and
 ·
              identify
      a qualified individual with full authority to implement removal
      actions.
   Vessel
response plans for our tankers operating in the waters of the United States have
been approved by the U.S. Coast Guard. In addition, we conduct regular oil spill
response drills in accordance with the guidelines set out in OPA. The U.S. Coast
Guard has announced that it intends to propose similar regulations requiring
certain vessels to prepare response plans for the release of hazardous
substances. Under the management agreements, Magnus Carriers and our other ship
management companies are responsible for ensuring our vessels comply with any
such additional regulations.
  As
discussed above, OPA does not prevent individual states from imposing their own
liability regimes with respect to oil pollution incidents occurring within their
boundaries, including adjacent coastal waters. In fact, most U.S. states that
border a navigable waterway have enacted environmental pollution laws that
impose strict liability on a person for removal costs and damages resulting from
a discharge of oil or a release of a hazardous substance. These laws may be more
stringent than U.S. federal law.
   32
 
  Additional
U.S. Environmental Requirements
  The U.S.
Clean Air Act of 1970, as amended by the Clean Air Act Amendments of 1977 and
1990 (the “CAA”), requires the U.S. Environmental Protection Agency, or EPA, to
promulgate standards applicable to emissions of volatile organic compounds and
other air contaminants. Our vessels are subject to vapor control and recovery
requirements for certain cargoes when loading, unloading, ballasting, cleaning
and conducting other operations in regulated port areas. Our vessels that
operate in such port areas are equipped with vapor control systems that satisfy
these requirements. The CAA also requires states to draft State Implementation
Plans, or SIPs, designed to attain national health-based air quality standards
in primarily major metropolitan and/or industrial areas. Several SIPs regulate
emissions resulting from vessel loading and unloading operations by requiring
the installation of vapor control equipment. As indicated above, our vessels
operating in covered port areas are already equipped with vapor control systems
that satisfy these requirements. Although a risk exists that new regulations
could require significant capital expenditures and otherwise increase our costs,
we believe, based on the regulations that have been proposed to date, that no
material capital expenditures beyond those currently contemplated and no
material increase in costs are likely to be required.
  The Clean
Water Act (“CWA”) prohibits the discharge of oil or hazardous substances into
navigable waters and imposes strict liability in the form of penalties for any
unauthorized discharges. The CWA also imposes substantial liability for the
costs of removal, remediation and damages. State laws for the control of water
pollution also provide varying civil, criminal and administrative penalties in
the case of a discharge of petroleum or hazardous materials into state waters.
The CWA complements the remedies available under the more recent OPA and CERCLA,
discussed above. Under current regulations of the EPA, vessels are not required
to obtain CWA permits for the discharge of ballast water in U.S. ports. However,
on March 31, 2005, a U.S. District Court ruled that the EPA exceeded its
authority in creating an exemption for ballast water.  On September
18, 2006, the court issued an order invalidating the exemption in the EPA’s
regulations for all discharges incidental to the normal operation of a vessel as
of September 30, 2008, and directing the EPA to develop a system for regulating
all discharges from vessels by that date.  Although the EPA has
indicated that it will appeal this decision, if the exemption is repealed, we
may be subject to CWA permit requirements that may include ballast water
treatment obligations that could increase the cost of operating in the United
States.  For example, this 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 that may restrict our vessels from entering U.S.
ports.  We cannot assure you that any costs associated with compliance
with the CWA’s permitting requirements will not be material to our results of
operations.
  The U.S.
National Invasive Species Act, or NISA, was enacted in 1996 in response to
growing reports of harmful organisms being released into U.S. ports through
ballast water taken on by ships in foreign ports.  The United States
Coast Guard adopted regulations under NISA in July 2004 that impose mandatory
ballast water management practices for all vessels equipped with ballast water
tanks entering U.S. waters.  These requirements can be met by
performing mid-ocean ballast exchange, by retaining ballast water on board the
ship, or by using environmentally sound alternative ballast water management
methods approved by the United States Coast Guard.  (However,
mid-ocean ballast exchange is mandatory for ships heading to the Great Lakes or
Hudson Bay, or vessels engaged in the foreign export of Alaskan North Slope
crude oil.) Mid-ocean ballast exchange is the primary method for compliance with
the United States Coast Guard regulations, since holding ballast water can
prevent ships from performing cargo operations upon arrival in the United
States, and alternative methods are still under development. Vessels that are
unable to conduct mid-ocean ballast exchange due to voyage or safety concerns
may discharge minimum amounts of ballast water (in areas other than the Great
Lakes and the Hudson River), provided that they comply with recordkeeping
requirements and document the reasons they could not follow the required ballast
water management requirements. The United States Coast Guard is developing a
proposal to establish ballast water discharge standards, which could set maximum
acceptable discharge limits for various invasive species, and/or lead to
requirements for active treatment of ballast water.
   33
  Our
operations occasionally generate and require the transportation, treatment and
disposal of both hazardous and non-hazardous solid wastes that are subject to
the requirements of the U.S. Resource Conservation and Recovery Act, or RCRA, or
comparable state, local or foreign requirements. In addition, from time to time
we arrange for the disposal of hazardous waste or hazardous substances at
offsite disposal facilities. If such materials are improperly disposed of by
third parties, we may still be held liable for cleanup costs under applicable
laws.
  Recent
scientific studies have suggested that emissions of certain gases, commonly
referred to as “greenhouse gases,” may be contributing to warming of the Earth’s
atmosphere.  According to the IMO’s study of greenhouse gases
emissions from the global shipping fleet, greenhouse gases emissions from ships
are predicted to rise by 38% to 72% due to increased bunker consumption by 2020
if corrective measures are not implemented.  Any passage of climate
control legislation or other regulatory initiatives by the IMO or individual
countries where we operate that restrict emissions of greenhouse gases could
require us to make significant financial expenditures we cannot predict with
certainty at this time.
  European
Union Tanker Restrictions
  In July
2003, in response to the MT Prestigeoil
spill in November 2002, the European Union adopted legislation that prohibits
all single-hull tankers from entering into its ports or offshore terminals by
2010. The European Union has also banned all single-hull tankers carrying heavy
grades of oil from entering or leaving its ports or offshore terminals or
anchoring in areas under its jurisdiction. Commencing in 2005, certain
single-hull tankers above 15 years of age will also be restricted from entering
or leaving European Union ports or offshore terminals and anchoring in areas
under European Union jurisdiction. The European Union has also adopted
legislation that would: (1) ban manifestly sub-standard vessels (defined as
those over 15 years old that have been detained by port authorities at least
twice in a six-month period) from European waters and create an obligation of
port states to inspect vessels posing a high risk to maritime safety or the
marine environment; and (2) provide the European Union with greater authority
and control over classification societies, including the ability to seek to
suspend or revoke the authority of negligent societies. The sinking of the MT
Prestige and resulting oil spill in November 2002 has led to the adoption of
other environmental regulations by certain European Union nations, which could
adversely affect the remaining useful lives of all of our vessels and our
ability to generate income from them. It is impossible to predict what
legislation or additional regulations, if any, may be promulgated by the
European Union or any other country or authority.
  All of
the tankers in our fleet are double hulled; however, because of certain age
restrictions and requirements set forth in the regulations described above,
High Land and High Rider and the Arius (ex Citius) are subject to
certain restrictions in trading.
  Vessel
Security Regulations
  Since the
terrorist attacks of September 11, 2001, there has been a variety of initiatives
intended to enhance vessel security. On November 25, 2002, the U.S. Maritime
Transportation Security Act of 2002, or 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, or ISSC, from a recognized security organization
approved by the vessel’s flag state. Among the various requirements
are:
  ·
              on-board
      installation of automatic identification systems to provide a means for
      the automatic transmission of safety-related information from among
      similarly equipped ships and shore stations, including information on a
      ship’s identity, position, course, speed and navigational
      status;
  ·
              on-board
      installation of ship security alert systems, which do not sound on the
      vessel but only alert the authorities on
shore;
   34
  ·
              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 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 ISSC attesting to the vessel’s compliance
with SOLAS security requirements and the ISPS Code. We have implemented the
various security measures addressed by MTSA, SOLAS and the ISPS Code, and our
fleet is in compliance with applicable security requirements.
  Risk
of Loss and Insurance
  The
operation of any cargo vessel includes risks such as mechanical failure,
physical damage, 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.
The U.S. Oil Pollution Act of 1990, or OPA, which imposes virtually unlimited
liability upon owners, operators and 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 ship owners
and operators trading in the U.S. market. While we believe that our present
insurance coverage is adequate, not all risks can be insured 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.
  We have
obtained marine hull and machinery and war risk insurance, which includes the
risk of actual or constructive total loss, for all our vessels. The vessels are
each covered up to at least fair market value.
  We also
arranged increased value insurance for most of our vessels. Under the increased
value insurance, in case of total loss of the vessel, we will be able to recover
the sum insured under the policy in addition to the sum insured under our hull
and machinery policy. Increased value insurance also covers excess liabilities
that are not recoverable in full by the hull and machinery policies by reason of
under-insurance.
  Protection
and indemnity insurance, which covers our third-party liabilities in connection
with our shipping activities, is provided by mutual protection and indemnity
associations, or P&I Associations. This insurance covers third-party
liability and other related expenses of injury or death of crew, passengers and
other third parties, loss or damage to cargo, claims arising from collisions
with other vessels, damage to other third-party property, pollution arising from
oil or other substances, and salvage, towing and other related costs, including
wreck removal. Protection and indemnity insurance is a form of mutual indemnity
insurance, extended by protection and indemnity mutual associations, or “clubs.”
Our coverage, except for pollution, is unlimited.
  Our
current protection and indemnity insurance coverage for pollution is $1.0
billion per vessel per incident. The 13 P&I Associations that compose 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. Each P&I Association has capped its exposure to this pooling
agreement at $4.5 billion. As a member of a P&I Association that is a member
of the International Group, we are subject to calls payable to the associations
based on our claim records as well as the claim records of all other members of
the individual associations, and members of the International
Group.
   35
 
  Inspection
by a Classification Society
  Our
vessels have been certified as being “in class” by either Nippon Kaijori Kyokai
Corp., Lloyds Register of Shipping, Bureau Veritas, Germanischer Lloyd or Det
Norske Veritas, each of which is a member of the International Association of
Classification Societies. Every commercial vessel’s hull and machinery is
evaluated by a classification society authorized by its country of registry. The
classification society certifies 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. Each vessel is
inspected by a surveyor of the classification society in three surveys of
varying frequency and thoroughness: every year for the annual survey, every two
to three years for intermediate surveys and every four to five years for special
surveys. Should any defects be found, the classification surveyor will issue a
“recommendation” for appropriate repairs, which have to be made by the shipowner
within the time limit prescribed. Vessels may be required, as part of the annual
and intermediate survey process, to be drydocked for inspection of the
underwater portions of the vessel and for necessary repair stemming from the
inspection. Special surveys always require drydocking.
  Competition
  We
operate in markets that are highly competitive and based primarily on supply and
demand. We compete for charters on the basis of price, vessel location, size,
age and condition of the vessel, as well as on our reputation as an operator. We
typically arrange our charters in the period market through the use of brokers,
who negotiate the terms of the charters based on market conditions. We compete
primarily with owners of container ships and owners of products tankers in the
Aframax, Panamax and Handymax class sizes. Ownership of tankers is highly
fragmented and is divided among major oil companies and independent vessel
owners.
  C.           Organizational
Structure
  Aries
Maritime Transport Limited is the sole owner of all outstanding shares of the
subsidiaries listed in note 1 of our consolidated financial statements included
in this report.
  D.           Properties,
Plants and Equipment
  We lease
office space in Athens, Greece, from Domina Petridou O.E., which is owned by
Mons S. Bolin, our President and Chief Executive Officer, and Domina Petridou.
In November 2005 we entered into a ten-year lease agreement with the landowner.
In October 2007 we entered into an additional nine-year lease agreement with the
landowner. See note 17 to our audited consolidated financial statements included
in this report.  We refer you to “Our Fleet” above in this item for a
discussion of our vessels.
  ITEM
      4A.
              UNRESOLVED
      STAFF COMMENTS
  Not
Applicable.
   36
   ITEM
5.                OPERATING
AND FINANCIAL REVIEW AND PROSPECTS
  The
following discussion of our financial condition and results of operations should
be read in conjunction with our consolidated and predecessor combined carve-out
financial statements, which we call our consolidated and combined financial
statements, and the related notes, and the other financial and other information
included in this document. This discussion contains forward-looking statements,
which are based on our assumptions about the future of our business. Our actual
results will likely differ materially from those contained in the
forward-looking statements and such differences may be material. Please read
“Forward-Looking Statements” for additional information regarding
forward-looking statements used in this document. Reference in the following
discussion to “our” and “ us” and “the Company” refer to our company, our
subsidiaries and the predecessor operations of Aries Maritime Transport Limited,
except where the context otherwise indicates or requires.
  General
  We are
Aries Maritime Transport Limited, or Aries Maritime, a Bermuda company
incorporated in January 2005 as a wholly-owned indirect subsidiary of Aries
Energy Corporation, or Aries Energy. We are an international shipping company
that owns products tankers and container vessels. In March 2005, subsidiaries of
Aries Energy contributed to us all of the issued and outstanding stock of 10
vessel-owning companies in exchange for shares in our company. Before this
contribution, each of the Aries Energy subsidiaries held 100% of the issued and
outstanding stock of the respective vessel-owning company or companies owned by
it. We now hold 100% of the issued and outstanding stock of each vessel-owning
company. Because our ownership percentage in each vessel-owning company is
identical to each contributing subsidiary’s prior ownership percentage in the
same vessel-owning company, the group reorganization was accounted for as an
exchange of equity interests at historical cost. On June 8, 2005 Aries Maritime
closed its initial public offering of 12,240,000 common shares at an offering
price of $12.50 per share.
  The
combined financial statements for the year ended 2005 included in this document
have been carved out of the consolidated financial statements of Aries Energy,
which owned and operated seven products tankers and five container vessels
during the year ended December 31, 2004. Results have been included from the
respective dates that the vessel-owning subsidiaries came under the control of
the shareholders of Aries Energy. Aries Energy’s shipping interests and other
assets, liabilities, revenues and expenses that do not relate to the
vessel-owning subsidiaries acquired by us are not included in our combined
financial statements. Our financial position, results of operations and cash
flows reflected in our combined financial statements include all expenses
allocable to our business, but may not be indicative of those that would have
been achieved had we operated as a public entity for all periods presented or of
future results. From March 17, 2005, the consolidated financial statements
reflect the consolidated results of Aries Maritime.
  We were not in compliance with the interest coverage ratio financial covenant
with respect to our long-term debt as at December 31, 2006 and 2007 and for each
of the quarters during 2007. The lenders provided a relaxation of the covenant
for each of the periods from December 31, 2006 through to and including
September 30, 2008. As a result we have had to pay an increased margin of 1.75%
on our long-term debt and will continue to do so until the end of the relaxation
period. Additionally, as part of the relaxation received for December 31, 2007,
we are required to meet certain conditions including a reduction of the
outstanding borrowings under the credit facility from the level of $284.8
million to $200 million, by disposal of vessels, by August 31, 2008 or in the
event that such disposal of vessels is not completed by August 31, 2008, the
lenders may extend until September 30, 2008 subject to legally binding
contract(s) for sale having been executed.  If these conditions are
not met, or if we do not meet the financial covenants subsequent to August 31,
2008, absent any further relaxation from the lenders, then the lenders have the
ability to demand repayment of outstanding borrowings.  This debt is
reflected as current due to the high degree of uncertainty surrounding the
Company's ability to meet its existing
financial covenants in future periods.  While the consolidated financial
statements have been prepared using generally accepted accounting principles
applicable to a going concern, which contemplate the realization of assets and
liquidation of liabilities during the normal course of operations, the
conditions and events described above raise substantial doubt about our ability
to continue as a going concern.
 
 We
believe that we will meet the lender’s requirement to reduce our outstanding
borrowings to $200 million by August 31, 2008. As of June 25, 2008 we have sold
the vessels Arius,
Energy
1 and Oslo
and reduced the outstanding borrowings to $223.7 million and expect to sell one
or more vessels by August 2008. We also expect to reduce our operating expenses
following the transition away from Magnus Carriers to third party technical
managers.  However, there is no assurance that will be successful in
achieving these objectives.
 
 The
Company’s ability to continue as a going concern is dependent on management’s
ability to successfully execute the sale of the vessels and to continue to
improve the performance of the Company, which includes achieving profitable
operations in the future, and the continued support of its shareholders and its
lenders.
  A.           Operating
Results
  Important
Factors to Consider When Evaluating Our Historical and Future Results of
Operations
  We
acquired our first two vessels, the High Land and the High Rider, in March 2003.
These two vessels were the only vessels in our fleet to operate for the entire
year ended December 31, 2004. At various times between April and December 2004,
we acquired five products tankers and five container vessels. These ten vessels
were placed into service shortly after their respective delivery dates. In
December 2004, Aries Energy sold the Makassar and the Seine to an affiliate. As a
result of these disposals, our fleet consisted of seven products tankers and
three container vessels at December 31, 2004.
  We
exercised an option to re-acquire the Makassar and the Seine shortly after the
closing of the initial public offering and took delivery of these ships in June
and July 2005, respectively. In October 2005, contracts were entered into for
the purchase of two new products tankers -- two 72,750 dwt vessels, Stena Compass and Stena Compassion. The Stena Compass was delivered
in February 2006. The Stena
Compassion was delivered in June 2006. In November 2005, we took delivery
of the 2001- built products tanker Chinook. As a result of these
acquisitions, our fleet consisted of eight products tankers and five container
vessels as of December 31, 2005 and ten products tankers and five container
vessels as of December 31, 2006.  We did not purchase or sell any
vessels in 2007.
   37
  
  In March
2008, we announced that we entered into contracts for the sale of the Aframax
products tanker Arius
and the sister ships, Energy
1 and MSC Oslo.
The vessels were sold and delivered to their new owners in April and June 2008,
respectively, for net sales proceeds of $61.04 million, which were used to
reduce outstanding borrowings under the fully revolving credit facility. The
sale of the three vessels resulted in a gain of $15.4 million.
  The
products tanker and container vessel sectors have historically been highly
cyclical, experiencing volatility in profitability, vessel values and charter
rates. In particular, charter rates are strongly influenced by the supply of
vessels and the demand for oil and oil products and container transportation
services.
  Lack
of Historical Operating Data for Vessels Before their Acquisition
  Consistent
with shipping industry practice, other than inspection of the physical condition
of the vessels and examinations of classification society records, there is no
historical financial due diligence process when we acquire vessels. Accordingly,
we do not obtain the historical operating data for the vessels from the sellers
because that information is not material to our decision to make acquisitions,
nor do we believe it would be helpful to potential investors in our common
shares in assessing our business or profitability. Most vessels are sold under a
standardized agreement, which, among other things, provides the buyer with the
right to inspect the vessel and the vessel’s classification society records. The
standard agreement does not give the buyer the right to inspect, or receive
copies of, the historical operating data of the vessel. Prior to the delivery of
a purchased vessel, the seller typically removes from the vessel all records,
including past financial records and accounts related to the vessel. In
addition, the technical management agreement between the seller’s technical
manager and the seller is automatically terminated and the vessel’s trading
certificates are revoked by its flag state following a change in
ownership.
  Consistent
with shipping industry practice, we treat the acquisition of a vessel (whether
acquired with or without charter) as the acquisition of an asset rather than a
business. Although vessels are generally acquired free of charter, we have
acquired (and may in the future acquire) some vessels with period charters.
Where a vessel has been under a voyage charter, the vessel is delivered to the
buyer free of charter. It is rare in the shipping industry for the last
charterer of the vessel in the hands of the seller to continue as the first
charterer of the vessel in the hands of the buyer. In most cases, when a vessel
is under period charter and the buyer wishes to assume that charter, the vessel
cannot be acquired without the charterer’s consent and the buyer’s entering into
a separate direct agreement with the charterer to assume the charter. The
purchase of a vessel itself does not transfer the charter because it is a
separate service agreement between the vessel owner and the charterer. When we
purchase a vessel and assume a related period charter, we must take the
following steps before the vessel will be ready to commence
operations:
  ·
              obtain the charterer’s consent to
      us as the new owner;
 ·
              obtain the charterer’s consent to
      a new technical manager;
 ·
              in some cases, obtain the
      charterer’s consent to a new flag for the
vessel;
 ·
              arrange for a new crew for the
      vessel;
 ·
              replace all hired equipment on
      board, such as gas cylinders and communication
      equipment;
 ·
              negotiate and enter into new
      insurance contracts for the vessel through our own insurance
      brokers;
 ·
              register the vessel under a flag
      state and perform the related inspections in order to obtain new trading
      certificates from the flag state;
 ·
              implement
      a new planned maintenance program for the vessel;
  and
  38
   ·
              ensure that the new technical
      manager obtains new certificates for compliance with the safety and vessel
      security regulations of the flag
state.
 
 The
following discussion is intended to help you understand how acquisitions of
vessels affect our business and results of operations.
  Our
business is comprised of the following main elements:
  ·
              employment and operation of our
      products tankers and container vessels; and
 ·
              management of the financial,
      general and administrative elements involved in the conduct of our
      business and ownership of our products tankers and container
      vessels.
 
 The
employment and operation of our vessels require the following main
components:
  ·
              vessel maintenance and
      repair;
 ·
              crew selection and
      training;
 ·
              vessel spares and stores
      supply;
 ·
              contingency response
      planning;
 ·
              onboard safety procedures
      auditing;
 ·
              accounting;
 ·
              vessel insurance
      arrangement;
 ·
              vessel
      chartering;
 ·
              vessel hire
      management;
 ·
              vessel surveying;
      and
 ·
              vessel performance
      monitoring.
  The
management of financial, general and administrative elements involved in the
conduct of  our business and ownership of our vessels requires the
following main components:
  ·
              management of our financial
      resources, including banking relationships,i.e., administration of bank loans
      and bank accounts;
 ·
              management of our accounting
      system and records and financial reporting;
 ·
              administration
      of the legal and regulatory requirements affecting our business and
      assets; and
  39
   ·
              management
      of the relationships with our service providers and
    customers.
  Principal
Factors that Affect Our Business
  The
principal factors that affect our financial position, results of operations and
cash flows include:
  ·
              charter
      rates and periods of charter hire;
 ·
              vessel
      operating expenses and voyage costs, which are incurred in both U.S.
      Dollars and other currencies, primarily Euros;
 ·
              depreciation
      expenses, which are a function of the cost of our vessels, significant
      vessel improvement costs and our vessels’ estimated useful lives
      and
 ·
              financing
      costs related to our indebtedness, which totaled $284.8 million at
      December 31, 2007.
  You
should read the following discussion together with the information contained in
the table of vessel information under “Item 4 — Information on the Company —
Business Overview — Our Fleet.” The net daily charter hire rates detailed in
that table under “Net Daily charter hire Rate” are fixed rates and all detailed
vessels, except Ostria, Arius
and
High Rider, which are currently operating in the spot market, are
employed under period charters. Revenues from period charters are stable over
the duration of the charter, provided there are no unexpected or periodic survey
off-hire periods and no performance claims from the charterer or charterer
defaults. We cannot guarantee that actual results will be as
anticipated.
  Our
strategy is to employ vessels on period charters in order to generate stable
cash flow over a period of time. For the year ended December 31, 2007, eleven of
our fifteen vessels were employed on period charters and, with the exception of
the Stena Compass and
Stena Compassion, are
employed on time charters. The Stena Compass and Stena Compassion charters are
bareboat charters. The average remaining term under our existing period charters
on our fleet was 1.2 years, as of December 31, 2007, with 30% of the charter
parties for our products tankers containing profitsharing arrangements. The
Ostria and Arius were not employed on
period charter as of December 31, 2007.
  Our
policy is to carry loss-of-hire insurance, which will provide the equivalent of
the charter rate on the vessel in the event that a vessel is off-hire for more
than 14 days up to a maximum of 60 days. The total loss-of-hire insurance
recognized during the year ended December 31, 2007 was $1.23 million and is
included in revenues.
  The daily
net charter hire under our existing charter agreements is increased by any
profit sharing and by the amortization of the deferred revenue associated with
our assumption of charters when acquiring certain vessels. The total profit
sharing earned during the year ended December 31, 2007 was $1.68 million. The
total deferred revenue amortization in respect of the relevant vessels was $6
million during the year ended December 31, 2007. The recognition of deferred
revenue will only continue for the duration of the charters assumed with the
acquisition of the relevant vessels.
  Vessels
typically operate for 360 days per year, which is a level commonly used as an
industry average. The five days of non-operation per year are to provide for
time spent in drydock and off-hire time. Should a vessel be operational for 355
days, instead of 360 days, in any year, charter hire income from that vessel
would decrease by 1.4% in that year. We earned revenues, excluding deferred
revenue, of $93.4 million in the year ended December 31, 2007. An average 1.4%
decrease in charter hire income for the vessels then comprising our fleet would
have resulted in a decrease of revenues by $1.3 million to $92.1
million.
  The
management of twelve of our vessels was historically performed by Magnus
Carriers. Since September 2007 the management of those vessels has been
transferred to third-party managers. See “Technical and Commercial Management of
our Fleet” in “Item 5 – Operating and Financial Review and Prospects.” The main
factors that could increase total vessel operating expenses are crew salaries,
insurance premiums, drydocking and special survey costs, spare parts orders,
repairs that are not covered under insurance policies and lubricant
prices.
   40
   Revenues
  At
December 31, 2007, all our revenues were derived from the time, bareboat and
voyage charters of our ten products tankers and five container vessels. Our
vessels were chartered to reputable charterers with remaining periods ranging
from approximately 0.1 to 2.4 years, with an average of approximately 1.2 years
as of December 31, 2007. Our vessels have been employed with these charterers
for periods ranging from 8 months to 4.2 years. We believe that the performance
of the charterers to date has been in accordance with our charterparties. At the
maturity of each charter, we will seek to renew these charters with the same or
other reputable charterers.
  Our
revenues for the period ended December 31, 2007 reflect the operation of ten
products tankers and five container vessels for the entire year. During the year
ended December 31, 2007, the products tanker Ostria recorded 204
non-revenue days due to repairs and vessel upgrades. Non-revenue days are
defined as the days the vessel was in our possession, but off-hire or out of
service and not earning charter hire. In addition, certain of our vessels were
out of service due to scheduled drydocking and special survey, upgradings and
preventative maintenance works for total of 346 days.
  Our
revenues include an amount for the amortization of deferred revenue arising from
the purchase of vessels together with the assumption of a below market value
period charter. We value the liability upon acquisition of the vessel by
determining the difference between the market charter rate and assumed charter
rate, discounting the result using our weighted average cost of capital and
record the balance as deferred revenue, amortizing it to revenue over the
remaining life of the period charter.
  Commissions
  Chartering
commissions are paid to chartering brokers and are typically based on a
percentage of the charter hire rate. We are currently paying chartering
commissions ranging from 1.25% to 6.50%, with an average of
1.98%.  Commissions paid to related parties during the year ended
December 31, 2007 were 1.25%. We do not pay chartering commissions for vessels
on bareboat charters.
  Voyage
Expenses
 
 Voyage
expenses are incurred due to a vessel’s traveling from a loading port to a
discharging port, to repair facilities or on a repositioning voyage, and include
fuel (bunkers) cost, port expenses, agent’s fees, canal dues and extra war risk
insurance. Typically, under period charters, the charterer is responsible for
paying voyage expenses while the vessel is on hire.
  General
& Administrative Expenses
 
 These
expenses include executive and director compensation, audit fees, liability
insurance premium and company administration costs.
  Gain
on Disposal of Vessels
  Gain on
disposal of vessels is the difference between the net proceeds received from the
sale of vessels and their net book value at the date of sale.
  Vessel
Operating Expenses
  Vessel
operating expenses are the costs of operating a vessel, primarily consisting of
crew wages and associated costs, insurance premiums, management fees, lubricants
and spare parts, and repair and maintenance costs. Vessel operating expenses
exclude fuel cost, port expenses, agents’ fees, canal dues and extra war risk
insurance, which are included in “voyage expenses.”
   41
  Certain
vessel operating expenses are higher during the initial period of a vessel’s
operation. Initial daily vessel operating expenses are usually higher than
normal as newly acquired vessels are inspected and modified to conform to the
requirements of our fleet.
  Depreciation
  Depreciation
is the periodic cost charged to our income for the reduction in usefulness and
long-term value of our vessels. We depreciate the cost of our vessels over 25
years on a straight-line basis. No charge is made for depreciation of vessels
under construction until they are delivered.
  Amortization
of Special Survey and drydocking Costs
  Special
survey and drydocking costs incurred are deferred and amortized over a period of
five and two-and-one-half years, respectively, which reflects the period between
each required special survey and minimum period between each
drydocking.
  Interest
Expenses
  Interest
expenses include interest, commitment fees, arrangement fees, amortization of
deferred financing costs, debt discount and other similar charges. Interest
incurred during the construction of a newbuilding is capitalized in the cost of
the newbuilding. The amount of interest expense is determined by the amount of
loans and advances outstanding from time to time and interest rates. The effect
of changes in interest rates may be reduced by interest rate swaps or other
derivative instruments. We use interest rate swaps to hedge our interest rate
exposure under our loan agreements.
  Change
in Fair Value of Derivatives
  At the
end of each accounting period, the fair values of our interest rate swaps are
assessed by marking each swap to market. Changes in the fair value between
periods are recognized in the statements of operations.
  Foreign
Exchange Rates
  Foreign
exchange rate fluctuations, particularly between the Euro and Dollar, have had
an impact on our vessel operating expenses and administrative expenses. We
actively seek to manage such exposure. Currently, approximately 30% of our
vessel operating cost is incurred in currencies other than the U.S. dollar.
Close monitoring of foreign exchange rate trends, maintaining foreign currency
accounts and buying foreign currency in anticipation of our future requirements
are the main ways we manage our exposure to foreign exchange risk. See below
under “Results of Operations – Foreign Exchange Rates.”
  Technical
and Commercial Management of Our Fleet
  In June
and July 2005 twelve of our vessel-owning subsidiaries entered into ten-year
ship management agreements with Magnus Carriers, a related party, to provide
primarily for the technical management of our vessels, including crewing,
maintenance, repair, capital expenditures, drydocking, payment of vessel tonnage
taxes, maintaining insurance and other vessel operating activities. These ship
management agreements were cancellable by the vessel-owning subsidiaries with
two months’ notice, while Magnus Carriers had no such option.
  Under the
ship management agreements, we paid Magnus Carriers an amount equal to the
budgeted total vessel operating expenses, which we had established jointly with
Magnus Carriers and which ranged from $4,400 to $5,100 per vessel per day
initially. The budgeted initial total vessel operating expenses, which included
the management fees paid to Magnus Carriers of $146,000 per annum per vessel
initially, increased by 3% annually and were subject to adjustment every three
years.  The ship management agreements provided that if actual total
vessel operating expenses exceed the corresponding budgeted amounts, we and
Magnus Carriers agreed to bear the excess expenditures equally (except for costs
relating to any improvement, structural changes or installation of new equipment
required by law or regulation, which would have been paid solely by us). If the
actual total vessel operating expenses were less than the corresponding budgeted
amounts, we and Magnus Carriers shared the cost savings equally.
   42
  Magnus
Carriers had agreed to indemnify us against the consequences of any failure by
Magnus Carriers to perform its obligations under the ship management agreements
up to an amount equal to ten times the annual management fee. Any
indemnification by Magnus Carriers for environmental matters was limited to the
insurance and indemnity coverage it was required to maintain for each vessel
under its ship management agreement.
  On August
31, 2007, notice of termination was delivered to and accepted by Magnus Carriers
in relation to the twelve existing ship management agreements. As a result of
the termination, we received a termination payment from Magnus Carriers of $5
million, of which $2.5 million was received during the year ended December 31,
2007 and the remaining $2.5 million was received in 2008.
  On
September 7, 2007, six vessel-owning subsidiaries entered into new technical
ship management agreements with International Tanker Management Limited (“ITM”),
based in Dubai, relating to the M/T Altius, Fortius, High Land, High Rider, Ostria, and Arius,which are cancellable
by either party with two month’s
notice.
  On
October 1, 2007, we entered into new commercial management agreements with
Magnus Carriers for all the vessels in our fleet (with the exception of the
Stena Compass and Stena Compassion). Under
these agreements, we use Magnus Carriers and its affiliates non-exclusively for
commercial management of all our vessels except Stena Compass and Stena Compassion, which
includes finding employment for our vessels and identifying and developing
vessel acquisition opportunities that will fit our strategy. Under the terms of
the ship management agreements, Magnus Carriers provides chartering services in
accordance with our instructions and we pay Magnus Carriers either 1.25% of any
gross charter hire and freight paid to us for new charters or $7,000 per month
per vessel where no 1.25% chartering commission is payable. In addition, Magnus
Carriers supervises the sale of our vessels and the purchase of additional
vessels in accordance with our instructions. We pay Magnus Carriers 1% of the
sale or purchase price in connection with a vessel sale or purchase that Magnus
Carriers brokers for us.
  In
addition, as long as Magnus Carriers performs management services, including
commercial management services, Magnus Carriers and its principals have granted
us a right of first refusal to acquire or charter any container vessels or any
products tankers ranging from 20,000 to 85,000 dwt, which Magnus Carriers, its
principals or any of their controlled affiliates may consider for acquisition or
charter in the future.
  On
November 29, 2007, the vessel-owning company of M/V Ocean Hope entered into
an annual technical ship management agreement with Barber Ship Management
Singapore Pte Ltd, or Barber, which is cancellable by either party with two
months’ notice.
  On
January 9, 2008, the vessel owning company of M/V Saronikos Bridge entered
into an annual technical ship management agreement with Barber, which is
cancellable by either party with two months’ notice.
  On
January 23, 2008, the vessel owning company of M/V CMA CGM Seine entered
into an annual technical ship management agreement with Barber, which is
cancellable by either party with two months’ notice.
  Under the
ITM and Barber management agreements, ITM and Barber are responsible for all
technical management of our vessels, including crewing, maintenance, repair,
capital expenditures, drydocking and other vessel operating activities. As
compensation for these services, we pay ITM and Barber an amount equal to the
budgeted vessel operating expenses, which we have established jointly with ITM
and Barber. The initial annual management fee is set at $145,000 for two of the
vessels and $120,000 for four of the vessels under the ITM management agreements
and $105,000 per vessel under the Barber management agreements. Vessel operating
expenses are payable by us monthly in advance.
  Critical
Accounting Policies
  Critical
accounting policies are those that reflect significant judgments of
uncertainties and potentially result in materially different results under
different assumptions and conditions. We have described below what we believe
are our most critical accounting policies because they generally involve a
comparatively higher degree of judgment in their application. For a description
of our significant accounting policies see Note 2 to our consolidated financial
statements included herein.
   43
   Our
financial position, results of operations and cash flows include all expenses
allocable to our business, but may not be indicative of the results we would
have achieved had we operated as a public entity under our current chartering,
management and other arrangements for the entire periods presented or for future
periods.
  The
discussion and analysis of our financial condition and results of operations is
based upon our consolidated and combined financial statements, which have been
prepared in accordance with U.S. GAAP. The preparation of those financial
statements requires us to make estimates and judgments that affect the reported
amounts of assets and liabilities, revenues and expenses and related disclosure
of contingent assets and liabilities at the date of our financial statements.
Actual results may differ from these estimates under different assumptions and
conditions.
  Depreciation
  Our
vessels represent our most significant assets. We record the value of our
vessels at their cost (which includes acquisition costs directly attributable to
the vessel and expenditures made to prepare the vessel for its initial voyage)
less accumulated depreciation. We depreciate our vessels on a straight-line
basis over their estimated useful life, which is estimated to be 25 years from
date of initial delivery from the shipyard. We believe that a 25-year
depreciable life is consistent with that of other shipping companies and it
represents the most reasonable useful life for each of the vessels. Depreciation
is based on cost less the estimated residual scrap value. We estimate the
residual values of our vessels based on a scrap value of $180 or $190 per
lightweight ton, which we believe are levels common in the shipping industry. An
increase in the useful life of a vessel or in its residual 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 in its residual value
would have the effect of increasing the annual depreciation charge. However,
when regulations place limitations over the ability of a vessel to trade, the
vessel’s useful life is adjusted to end at the date such regulations become
effective.
  In the
year ended December 31, 2007, a one-year reduction in useful life would increase
our total depreciation charge by $3.7 million.
  If
circumstances cause us to change our assumptions in making determinations as to
whether vessel improvements should be capitalized, the amounts we expense each
year as repairs and maintenance costs could increase, partially offset by a
decrease in depreciation expense.
  Impairment
of Long-lived Assets
  We
evaluate the carrying amounts and periods over which long-lived assets are
depreciated to determine if events have occurred that would require modification
to their carrying values or useful lives. In evaluating useful lives and
carrying values of long-lived assets, we review certain indicators of potential
impairment, such as undiscounted projected operating cash flows, vessel sales
and purchases, business plans and overall market conditions. We determine
undiscounted projected net operating cash flow for each vessel and compare it to
the vessel’s carrying
value. In the event that an impairment were to occur, we would determine the
fair value of the related asset and record a charge to operations calculated by
comparing the asset’s carrying value to the estimated fair value. We estimate
fair value primarily through the use of third-party valuations performed on an
individual vessel basis. To date, we have not identified any impairment of our
long-lived assets.
  Deferred
Drydocking and Special Survey Costs
  Our
vessels are required to be drydocked every 30 months for major repairs and
maintenance that cannot be performed while the vessels are operating. Our
vessels are required to undergo special surveys every 60 months.
  We
capitalize the costs associated with drydockings and special surveys as they
occur and amortize these costs on a straight-line basis over the period between
drydockings and surveys, respectively. We believe that these criteria are
consistent with U.S. GAAP guidelines and industry practice and that our policy
of capitalization reflects the economics and market values of the
vessels.
   44
 
  Revenue
Recognition
  Revenues
are generated from bareboat, time and voyage charters. In recognizing revenue we
are required to make certain estimates and assumptions. Historically,
differences between our estimates and actual results have not been material to
our financial results.
  Bareboat
and time charter revenues are recorded over the term of the charter as service
is provided. Any profit sharing additional hires generated are recorded over the
term of the charter as the service is provided. Deferred income represents
revenue applicable to periods after the balance sheet date.
  The
operating results of voyages in progress at a reporting date are estimated and
recognized pro rata on a per day basis.
  Fair
Value of Financial Instruments
  In
determining the fair value of interest rate swaps, a number of assumptions and
estimates are required to be made. These assumptions include future interest
rates.
  These
assumptions are assessed at the end of each reporting period based on available
information existing at that time. Accordingly, the assumptions upon which these
estimates are based are subject to change and may result in a material change in
the fair value of these items.
  Purchase
of Vessels
  Where we
identify any intangible assets or liabilities associated with the acquisition of
a vessel, we record all identified tangible and intangible assets or liabilities
at fair value. Fair value is determined by reference to market data and the
discounted amount of expected future cash flows. Where we have assumed an
existing charter obligation at charter rates that are less than market charter
rates, we record a liability, being the difference between the assumed charter
rate and the market charter rate for an equivalent vessel. This deferred revenue
is amortized to revenue over the remaining period of the charter. The
determination of the fair value of acquired assets and assumed liabilities
requires us to make significant assumptions and estimates of many variables
including market charter rates, expected future charter rates, future vessel
operating expenses, the level of utilization of our vessels and our weighted
average cost of capital. The use of different assumptions could result in a
material change in the fair value of these items, which could have a material
impact on our financial position and results of operations.
  Results
of Operations
  For
the Year Ended December 31, 2007 Compared to the Year Ended December 31,
2006
  Revenues
  Total
revenues increased by approximately 5.5% to $99.4 million in the year ended
December 31, 2007 compared to $94.2 million in the year ended December 31, 2006.
This increase is primarily attributable to the growth of the Company’s fleet (we
acquired two products tankers, Stena Compass and Stena Compassion,during
2006) and increase in operating days. out of service and off-hire time for
certain vessels, primarily the products tanker Ostria, during the year ended
December 31, 2007, partially offset the increase in revenue.
   45
  During
the year ended December 31, 2007, vessel-operating days totalled 5,475 compared
to total vessel-operating days of 5,265 for the year ended December 31, 2006.
The Company defines operating days as the total days the vessels were in the
Company’s possession for the relevant period. Actual revenue days during the
year ended December 31, 2007 were 5,129 days compared to 4,485 days for the year
ended December 31, 2006. The Company defines revenue days as the total days the
vessels were not off-hire or out of service.
  Of the
total revenue earned by our vessels during the year ended December 31, 2007, 65%
(2006: 56%) was earned by our products tankers and 35% (2006: 44%) by our
container vessels.
  We have
recognized $6 million of deferred revenue during the year ended December 31,
2007 compared to $10.7 million during the year ended December 31, 2006, as a
result of the assumption of charters associated with certain vessel
acquisitions. These assumed charters were at set charter rates, which were less
than market rates at the date of the vessels’ acquisition.
  Commissions
  Chartering
commissions increased by approximately 43% to $2 million in the year ended
December 31, 2007 compared to $1.4 million in the year ended December 31, 2006.
This increase is primarily due to the aggregate effect of an increase in revenue
days and increased number of commissions paid to Magnus Carriers as a result of
new period charters and voyage charters.
  Voyage
Expenses
 
 Voyage
expenses increased by approximately 24% to $5.1 million in the year ended
December 31, 2007 compared to $4.1 million in the year ended December 31, 2006.
This increase is primarily due to the aggregate effect of increased incurrence
of such costs due to a higher number of voyage charters being undertaken and
costs incurred by certain vessels traveling to repair facilities and increased
fuel costs during the year ended December 31, 2007.
 
 Vessel
Operating Expenses
  Vessel
operating expenses increased by approximately 18% to $32.1 million during the
year ended December 31, 2007 compared to $27.1 million during the year ended
December 31, 2006.This increase
is mainly attributable to the greater number of operating days during the year
ended December 31, 2007 and higher average fleet running costs partially offset
by Magnus Carriers’ contribution
under the budget variance sharing arrangement under the ship management
agreements between certain of our vessel-owning subsidiaries and Magnus
Carriers. The Magnus Carriers contribution to vessel operating expenses totaled
$6.1 million during the year ended December 31, 2007. Excluding the Magnus
Carriers contribution, vessel operating expenses were $38.2 million for the year
ended December 31, 2007 compared to $31.6 million for the year ended December
31, 2006.
  Of the
total vessel operating expenses during the year ended December 31, 2007, 61% was
incurred by our products tankers and 39% by our container vessels.
  General
& Administrative Expenses
  General
and administrative expenses increased by approximately 36% to $5.7 million in
the year ended December 31, 2007 compared to $4.2 million in the year ended
December 31, 2006.  This increase is primarily due to higher audit
costs and compensation costs related to restricted stock grants.
   46
  Depreciation
and Amortization
  Depreciation
increased by approximately 4% to $30.7 million during the year ended December
31, 2007 compared to $29.4 million during the year ended December 31, 2006.
Amortization of drydocking and special survey costs increased by 42% to $5.1
million in the year ended December 31, 2007 compared to $3.6 million in the year
ended December 31, 2006. These increases are primarily due to the growth of the
Company’s fleet and consequent increase in operating days during the year ended
December 31, 2007 as well as higher drydocking and special survey
expenses.
  Management
Fees to Related Party
  Management
fees paid to Magnus Carriers remained at $1.8 million in the year ended December
31, 2007 compared to the year ended December 31, 2006.
 
 Interest
Expense
  Total
interest expense increased by approximately 15% to $21.9 million during the year
ended December 31, 2007 compared to $19 million during the year ended December
31, 2006. Interest expense on loans increased by approximately 24% to $20.2
million, compared to $16.3 million for the year ended December 31, 2006. This
increase is primarily due to the growth of the Company’s fleet and associated
increase in debt and financing days. In addition, as a result of the relaxed
interest rate covenants described below under “Liquidity and Capital Resources –
Indebtedness,” we paid an increased margin of 1.75% on amounts drawn under the
credit facility. Interest expense relating to amortization of deferred financing
costs decreased by approximately 19% to $1.3 million during the year ended
December 31, 2007 compared to $1.6 million during the year ended December 31,
2006.
  Interest
Rate Swaps
  The
marking to market of our seven interest rate swaps in effect as of December 31,
2007 resulted in an unrealized loss of $4.1 million, compared to an unrealized
loss for the year ended December 31, 2006 of $1.8 million, due to the change in
fair value over the period.  We had three interest rate swaps in place
as of December 31, 2005 for a notional amount of $46.67 million each, with a
termination date of March 6, 2009, under which we pay a maximum fixed rate of
4.88%.  In April 2006, one of these identical swaps was cancelled with
a settlement in our favor of $0.49 million. The marking to market valuation of
this set of two swaps as at December 31, 2007 resulted in a liability for the
Company of $0.57 million. On July 5, 2006, we entered into five additional swaps
for a notional amount of $20 million each with a termination date of April 4,
2011, under which we pay a maximum fixed rate of 5.63%. The marking to market
valuation of this set of five interest rate swaps as at December 31, 2007
resulted in a liability of $5.37 million.
  Foreign
Exchange Rates
 
 During
the year ended December 31, 2007, a charge of $0.3 million was recorded due to
adverse movement in foreign exchange rates. Foreign exchange differences are
included in General & Administrative Expenses.
  Net Income
(loss)
  Net loss
was $8.7 million in the year ended December 31, 2007 compared to $2.2 million
net income in the year ended December 31, 2006. This decrease is primarily due
to higher fleet running costs, increased voyage expenses, as well as the
increased depreciation and amortization charges, and the adverse change in the
fair value of derivatives, which are interest rate swaps entered into to hedge
the Company’s exposure to US interest rates on its debt.
   47
  For the Year Ended December 31, 2006
Compared to the Year Ended December 31, 2005
  Revenues
  Total
revenues increased by approximately 24% to $94.2 million in the year ended
December 31, 2006 compared to $75.9 million in the year ended December 31, 2005.
This increase is primarily attributable to the growth of the Company’s fleet (we
acquired two products tankers, Stena Compass and Stena Compassion), and
increase in operating days and certain vessels commencing period charters at
higher rates of charter hire during the year ended December 31, 2006.
Out-of-service and off-hire time for certain vessels, primarily the products
tankers Citius, now
named Arius, and Bora, now named Ostria, during the year ended
December 31, 2006, partially offset the increase in revenue.
  During
the year ended December 31, 2006, vessel-operating days totalled 5,265 compared
to total vessel-operating days of 4,042 for the year ended December 31, 2005.
The Company defines operating days as the total days the vessels were in the
Company’s possession for the relevant period. Actual revenue days during the
year ended December 31, 2006 were 4,485 days compared to 3,998 days for the year
ended December 31, 2005. The Company defines revenue days as the total days the
vessels were not off-hire or out of service.
  Of the
total revenue earned by our vessels during the year ended December 31, 2006, 56%
was earned by our products tankers and 44% by our container vessels. Of the
total revenue earned by our vessels during the year ended December 31, 2005, 57%
was earned by our products tankers and 43% by our container
vessels.
  We have recognized $11.7
million of deferred revenue during the year ended December 31, 2006 compared to
$9.3 million during the year ended December 31, 2005, as a result of the
assumption of charters associated with certain vessel acquisitions. These
assumed charters were at set charter rates, which were less than market rates at
the date of the vessels’ acquisition.
  Commissions
  Chartering
commissions increased by approximately 8% to $1.4 million in the year ended
December 31, 2006 compared to $1.3 million in the year ended December 31, 2005.
This increase is primarily due to the aggregate effect of an increase in
operating days.
  Voyage
Expenses
 
 Voyage
expenses increased by approximately 1,950% to $4.1 million in the year ended
December 31, 2006 compared to $0.2 million in the year ended December 31, 2005.
This increase is primarily due to the costs incurred by certain vessels
travelling on voyage charters and to repair facilities during the year ended
December 31, 2006. During the year ended December 31, 2005, all vessels were
employed on time charters, under which the charterers are responsible for voyage
expenses.
 
 Vessel
operating expenses
  Vessel
operating expenses increased by approximately 52% to $27.1 million during the
year ended December 31, 2006 compared to $17.8 million during the year ended
December 31, 2005.This increase
is mainly attributable to the greater number of operating days during the year
ended December 31, 2006 and higher average fleet running costs partially offset
by Magnus Carriers’ contribution
under the budget variance sharing arrangement within the ship management
agreements between certain of our vessel-owning subsidiaries and Magnus
Carriers. Magnus Carriers managed vessel operating expenses for the year
ended December 31, 2006 were budgeted at $18 million.  Excluding this
budget variance sharing arrangement, vessel operating expenses were $31.6
million for the year ended December 31, 2006 compared to $18.7 million for the
year ended December 31, 2005.
  48
  
 Of the
total vessel operating expenses during the year ended December 31, 2006, 54% was
incurred by our products tankers and 46% by our container vessels. Of the total
vessel operating expenses during the year ended December 31, 2005, 59% was
incurred by our products tankers and 41% by our container vessels.
  General & Administrative
Expenses
  General
and administrative expenses increased by approximately 162% to $4.2 million in
the year ended December 31, 2006 compared to $1.6 million in the year ended
December 31, 2005.  This increase is primarily due to the Company
operating as a public company for the entire year ended December 31, 2006 and
costs associated with implementing requirements of the Sarbanes-Oxley Act of
2002 incurred during 2006.
  Depreciation
and Amortization
  Depreciation
increased by approximately 52% to $29.4 million during the year ended December
31, 2006 compared to $19.4 million during the year ended December 31, 2005.
Amortization of drydocking and special survey costs increased by 84% to $3.5
million in the year ended December 31, 2006 compared to $1.9 million in the year
ended December 31, 2005. These increases are primarily due to the growth of the
Company’s fleet and increase in operating days during the year ended December
31, 2006 as well as higher drydocking and special survey expenses.
  The $5
million one-time accelerated payment by Magnus Carriers in respect of the
capitalized costs of the Citius, now named Arius, has been recognized as
a reduction in capitalized costs. This accelerated contribution by Magnus
Carriers made during 2006 was in full and final settlement of its share of the
costs of the works the vessel underwent during the period from December 3, 2005
to July 31, 2006.
  Management
Fees to Related Party
 
 Management
fees paid to Magnus Carriers increased by 27% to $1.8 million in the year ended
December 31, 2006 compared to $1.5 million in the year ended December 31, 2005.
This increase is primarily due to the increase in operating days.
 
 Interest
Expense
 
 Total
interest expense increased by approximately 1% to $19 million during the year
ended December 31, 2006 compared to $18.8 million during the year ended December
31, 2005. Interest expense on loans increased by approximately 81% to $16.3
million, compared to $9.0 million for the year ended December 31, 2005. This
increase is primarily due to the growth of the Company’s fleet and associated
increase in debt and financing days. Interest expense relating to amortization
of deferred financing costs and debt discount decreased by approximately 83% to
$1.6 million during the year ended December 31, 2006 compared to $9.2 million
during the year ended December 31, 2005. During the year ended December 31,
2005, amortization of debt discount as a result of refinancing was $7.6 million.
Debt discount was fully amortized during the year ended December 31, 2005.
Interest expense incurred from discounting the deferred revenue expense
increased by approximately 150% to $1 million during the year ended December 31,
2006, compared to $0.4 million during the year ended December 31, 2005. This
increase is primarily due to the increase in deferred revenue
amortization.
   49
  
  Interest
Rate Swaps
 
 The
marking to market of our seven interest rate swaps in effect as of December 31,
2006 resulted in an unrealized loss of $1.8 million compared to an unrealized
gain for the year ended December 31, 2005 of $0.95 million, due to the change in
fair value over the period.  We had three interest rate swaps in place
as of December 31, 2005.  In April 2006, one of these identical swaps
was cancelled with a settlement in our favor of $0.49 million.  On
July 5, 2006, we entered into five additional swaps for a total notional amount
of $100 million.  Our seven interest rate swaps comprise two sets of
swaps.  We entered into a set of five interest rate swaps with a
termination date of April 4, 2011 for a notional amount of $20 million each,
under which we pay a maximum fixed rate of 5.63%.  The marking to
market valuation of this set of five interest rate swaps as at December 31, 2006
resulted in an unrealized loss of $2.5 million.  We also entered into
a set of two swaps with a termination date of March 6, 2009 for a notional
amount of $46.67 million each, under which we pay a maximum fixed rate of
4.88%.  The marking to market valuation of this set of two swaps as at
December 31, 2006 resulted in an unrealized gain for the Company of $0.67
million.
  Foreign
Exchange Rates
 
 During
the year ended December 31, 2006, a charge of $0.4 million was recorded due to
adverse movement in foreign exchange rates. Foreign exchange differences are
included in General & Administrative Expenses.
  Net
Income
  Net
income was $2.2 million in the year ended December 31, 2006, compared to $14.8
million in the year ended December 31, 2005, a decrease of 85%. This decrease is
primarily due to the greater number of out of service and off-hire days, higher
fleet running costs, increased voyage expenses as fuel and port dues were
incurred in connection with certain vessels on voyage charters and travelling to
repair yards, costs associated with operating as a publicly traded company, as
well as the increased depreciation and amortization charges, and the adverse
change in the fair value of derivatives, which are interest rate swaps entered
into to hedge the Company’s exposure to US interest rates on its
debt.
  B.           Liquidity
and Capital Resources
 
 Overview
  We
operate in a capital intensive industry. Our principal sources of liquidity are
cash flows from operations, equity and debt. As of December 31, 2007 our future
liquidity requirements relate to: (1) our operating expenses, (2) payments under
our ship management agreements, (3) quarterly payments of interest and other
debt-related expenses and the repayment of principal, (4) maintenance of
financial covenants under our fully revolving credit facility agreement, (5)
maintenance of cash reserves to provide for contingencies and (6) payment of
dividends.
  As of
December 31, 2007 we had a working capital deficit of $291.8 million, including
the total of our outstanding borrowings of $284.8 million under our fully
revolving credit facility. As further explained below under “Indebtedness”, we
were not in compliance with the interest coverage ratio financial covenant with
respect to our long-term debt as at December 31, 2006 and 2007 and for each of
the quarters during 2007. The lenders provided a relaxation of the covenant for
each of the periods from December 31, 2006 through to and including September
30, 2008.  as a result of which we are obligated to reduce the
outstanding borrowings under the credit facility from the level of $284.8
million to $200 million, by entering into contracts for the sale of additional
vessels by August 31, 2008.  In the event that such disposal of
vessels is not completed by August 31, 2008, the lenders may extend the
compliance date to September 30, 2008, subject to legally binding contracts for
the sale being executed by August 31, 2008. In June 2008 we completed the sale
of three vessels, which reduced our outstanding borrowings to $223.7 million,
and expect  to sell one or more vessels by August 31,
2008.  If these conditions are not met, or if we do not meet the
financial covenants in the foreseeable future, absent any further relaxation
from the lenders, then the lenders have the ability to demand repayment of
outstanding borrowings. This debt is reflected as current due to the high degree
of uncertainty surrounding the Company's ability to meet its existing
financial covenants in future periods.  While the consolidated financial
statements have been prepared using generally accepted accounting principles
applicable to a going concern, which contemplate the realization of assets and
liquidation of liabilities during the normal course of operations, the
conditions and events described above raise substantial doubt about our ability
to continue as a going concern.
  50
  
  In March
2008, our board of directors, pursuant to the condition set by our lenders for
the relaxation of the interest rate covenant under our credit facility (as
further explained below under “Indebtedness”), temporarily suspended
payment of quarterly dividends with effect from the dividend in respect of the
fourth quarter of 2007. In May 2008, the Company resumed distribution of
quarterly dividends beginning with a dividend of $0.10 per share in respect of
the first quarter of 2008.
  We
believe that we will meet the lender’s requirement to reduce our outstanding
borrowings to $200 million by August 31, 2008. As of June 25, 2008 we have sold
the vessels Arius,
Energy
1 and Oslo
and reduced the outstanding borrowings to $223.7 million and expect to sell one
or more vessels by August 2008. We also expect to reduce our operating expenses
following the transition away from Magnus Carriers to third party technical
managers.  However, there is no assurance that will be successful in
achieving these objectives.
 Assuming
that we are successful in entering into contracts for the disposition of further
vessels for net proceeds of $23.7 million or more by August 31, 2008, and comply
with the financial covenants of our credit facility, we believe that our
anticipated cash flows and the availability of funds under our fully revolving
credit facility will be sufficient to permit us to pay dividends as contemplated
by our dividend policy and to meet our liquidity requirements over the next 12
months.   However, we may be unable to reduce the amount
outstanding under our credit facility to $200 million by the sale of vessels by
August 31, 2008 or comply with all the financial covenants of our
credit facility and, as a result, we may be in breach of our credit
facility.  If our lenders declare an event of default under our credit
facility, the lenders could elect to declare the outstanding debt, together with
accrued interest and other fees, to be immediately due and payable and proceed
against the collateral securing that debt, which could constitute all or
substantially all of our assets.  Our independent registered public
accounting firm has issued their opinion with an explanatory paragraph in
connection with our financial statements included in this annual report that
expresses substantial doubt about our ability to continue as a going
concern.  We believe that the actions presently being taken to further
implement our business plan, to sell one or more vessels and generate revenues,
will provide the opportunity for us to continue as a going
concern.  However, there is a material uncertainty related to events
or conditions that raises significant doubt on our ability to continue as a
going concern and, therefore, we may be unable to realize our assets and
discharge our liabilities in the normal course of business.  See Note
1 to our consolidated financial statements.
  Our
longer-term liquidity requirements include repayment of the outstanding debt
under our fully revolving credit facility. We will require new borrowings and/or
issuances of equity capital or other securities to meet the repayment obligation
when our fully revolving credit facility matures in April 2011.  For
further information on our fully revolving credit facility please read
“Indebtedness” below.
  Cash Flows
  As of
December 31, 2007, 2006 and 2005, we had cash balances of $12.4 million, $11.6
million and $19.2 million, respectively.
  For the
year ended December 31, 2007, our net cash provided by operating activities was
$17.6 million compared to $24.2 million during the year ended December 31, 2006,
a decrease of 27%. This decrease was primarily due to changes in working capital
and a net loss of $8.7 million for the year ended December 31, 2007 compared to
a net income of $2.2 million for the year ended December 31, 2006.
  For the
year ended December 31, 2007, our net cash used in investing activities was $0.2
million compared to $101.8 million in the year ended December 31, 2006, a
decrease of 98%.  This decrease was primarily due to no new vessel
acquisitions during the year ended December 31, 2007.
  In the
year ended December 31, 2007, our net cash used in financing activities was
$14.7 million compared to our net cash provided by financing activities of
$69.96 million in the year ended December 31, 2006.
  For the
year ended December 31, 2006, our net cash provided by operating activities was
$24.2 million compared to $36.97 million during the year ended December 31,
2005, a decrease of 34.5%.  This decrease was primarily due to an
increase of drydocking and special survey costs which were $15.1 million during
the year ended December 31, 2006 compared to $1.9 million during the year ended
December 31, 2005.
  For the
year ended December 31, 2006, our net cash used in investing activities was
$101.8 million compared to $114 million in the year ended December 31, 2005, a
decrease of 11%.  This decrease was primarily due to lower expenditure
on vessel acquisitions during the year ended December 31, 2006.
   51
  
  In the
year ended December 31, 2006, our net cash provided by financing activities was
$69.96 million compared to $90.9 million in the year ended December 31, 2005, a
decrease of 23%.  This decrease was primarily due to lower proceeds
from the issuance of long-term debt and higher dividend payments.
  In each
of these years, our investing activities primarily related to funding our
investments in our vessels. During the year ended December 31, 2006, we
purchased two vessels compared with the year ended December 31, 2005, during
which we purchased three vessels and the year ended December 31, 2004, during
which we purchased eight vessels.
  The net
cash used in financing activities, in the year ended December 31, 2007, related
primarily to dividend payments.
  The net
cash provided by financing activities in the year ended December 31, 2006
related primarily to drawings under our fully revolving credit facility, which
was used to (i) refinance our old $140 million drawn term loan; (ii) refinance
our old revolving acquisition facility, which was drawn to the extent of $43.8
million at December 31, 2005 and which was further drawn in February 2006 in the
amount of $50.5 million to complete the purchase of the Stena Compass; and (iii) complete the purchase of
the Stena
Compassion.
  Indebtedness
 
 We had
short-term debt outstanding of $284.8 million at December 31, 2007 compared to
long-term debt outstanding of $284.8 million at December 31, 2006 and $183.8
million at December 31, 2005.  As explained in the “Overview” in
“Liquidity and Capital Resourses,” we are obligated under the interest coverage
ratio covenant relaxation granted by our lenders in March 2008, which was
extended in June 2008, to reduce the outstanding borrowings under the credit
facility from the level of $284.8 million to $200 million, funded by entering
into contracts for the sale of additional vessels by August 31,
2008.  In June 2008 we completed the sale of three vessels, which
reduced our outstanding borrowings to $223.7 million, and expect to enter into
contracts for the sale of one or more vessels by August 31, 2008 and to be in
compliance with our obligation to reduce our outstanding borrowings to $200
million.
  As
of December 31, 2007, borrowings under our fully revolving credit facility bore
an annual interest rate, including the margin, of 6.96%.
 
 We use
interest rate swaps to swap our floating rate interest payment obligations for
fixed rate obligations. For additional information regarding our interest rate
swaps, please read “Quantitative and Qualitative Disclosures About Market
Risk—Interest Rate Exposure” below.
  We
entered into a $360 million fully revolving credit facility in April 2006 with
Bank of Scotland and Nordea Bank Finland as lead arrangers. We used the fully
revolving credit facility to (i) refinance our old $140 million drawn term loan;
(ii) refinance our old revolving acquisition facility, which was drawn to the
extent of $43.8 million at December 31, 2005 and which was further drawn in
February 2006 in the amount of $50.5 million to complete the purchase of the
Stena Compass; and
(iii) to complete the purchase of the Stena Compassion. The fully
revolving credit facility has a five-year term and is subject to fixed
reductions during the five years. The other main terms and conditions of the
fully revolving credit facility are as follows:
  Borrowings
under the fully revolving credit facility can be used to fund the purchase price
(and, with respect to newbuildings, reasonable pre-delivery interest and
inspection costs) of one or more additional vessels that meet the following
requirements:
  ·
                each
      vessel must be double-hulled crude or products tanker or container
      vessel;·
                each
      vessel must be aged 8 years or less, or such other age as may be agreed by
      the lenders, at the time of
acquisition;
  52
  
 ·
                each
      vessel’s purchase
      price may not exceed its fair market
value;
 
 ·
                each
      vessel must enter into a minimum employment of 12 months with a
      reputable charterer within 6 months of the relevant drawdown; and
      each vessel must maintain a flag and class acceptable to the
      lead arrangers and satisfy certain other
  conditions.
 
 The fully
revolving credit facility may also be used to the extent of $5.0 million for
general corporate purposes. As of  December 31, 2007 this amount
remains undrawn.
  Under the
original terms of the fully revolving credit facility, for the first thirty
months of the facility, if the total amount borrowed under the facility exceeds
65% of the fair market value of the collateral vessels, we will be unable to
borrow further amounts under the facility until we either prepay some of the
debt or the fair market value of the collateral vessels increases.  We
will be able to borrow further amounts under the facility again once the total
amount borrowed under the facilities no longer exceeds 65% of the fair market
value of the collateral vessels.  For the second thirty months of the
fully revolving credit facility, if the total amount borrowed under the facility
exceeds 60% of the fair market value of the collateral vessels, we will be
unable to borrow further amounts under the facility until we either prepay some
of the debt or the fair market value of the collateral vessels increases. We
will be able to borrow further amounts under the facility again once the total
amount borrowed under the facilities no longer exceeds 60% of the fair market
value of the collateral vessels.  If a vessel becomes a total loss or
is sold, no further amounts may be borrowed under this agreement, except
for advances for additional ships already approved by the lenders, until we have
applied the full sale or insurance proceeds in repayment of the facility, unless
the lenders otherwise agree.
  Our
obligations under the fully revolving credit facility are secured by a
first-priority security interest, subject to permitted liens, in all vessels in
our fleet and any other vessels we subsequently acquire.  In addition,
the lenders will have a first-priority security interest in all earnings from
and insurances on our vessels, all existing and future charters relating to our
vessels, our ship management agreements and all equity interests in our
subsidiaries.  Our obligations under the fully revolving credit
facility agreement are also guaranteed by all subsidiaries that have an
ownership interest in any of our vessels.
  The $327
million remaining commitment as of December 31, 2007 contained in the credit
agreement was subject to six scheduled semi-annual reductions of $11 million
each, from April 2008, with the residual commitment of $261 million to
be reduced to zero or repaid in full in one installment in April
2011.  As explained further below, in March 2008, the commitment was
reduced to $290 million and is subject to the remaining five semi-annual
reductions of $11 million each and therefore the residual commitment was reduced
to $235 million.
  Indebtedness
under the fully revolving credit facility bears interest at an annual rate equal
to LIBOR plus a margin equal to:
  ·
                  1.125%
      if our total liabilities divided by our total assets, adjusting the book
      value of our fleet to its market value, is less than 50%;
    and
  ·
                  1.25%
      if our total liabilities divided by our total assets, adjusting
      the book value of our fleet to its market value,
      is equal to or greater than 50% but less than 60%;
  and
  ·
                  1.375%
      if our total liabilities divided by our total assets, adjusting
      the book value of our fleet to its market value, is
      equal to or greater than 60% but less than 65%;
  and
  ·
                  1.5%
      if our total liabilities divided by our total assets, adjusting the book
      value of our fleet to its market value, is equal to or greater than
      65%.
  53
  The interest rate on overdue sums will be equal to the applicable rate described
above plus 2%.
 
 We paid a
one-time arrangement fee of approximately $2.3 million at the initial drawdown
of the facility together with the first year’s agency fee of
$50,000, and pay, quarterly in arrears, a commitment fee equal to 0.5% per annum
of the unused commitment of each lender under the facility.  We may
prepay all loans under the credit agreement without premium or penalty other
than customary LIBOR breakage costs.In April 2008, we paid a
one-time fee of $362,500 for an amendment to the credit agreement.
  The
credit agreement will require us to adhere to certain financial covenants as of
the end of each fiscal quarter, including the following:
  ·
                our
      shareholders’ equity as a
      percentage of  our total assets, adjusting the book value of our
      fleet to its market value, must be no less than
  35%;
  ·
                free
      cash and cash equivalents plus the undrawn element of the $5 million
      portion of the fully revolving credit facility available for general
      corporate purposes must be no less than the aggregate of 5% of interest
      bearing debt and 5% of the $5 million portion of the fully revolving
      credit facility available for general corporate
  purposes;
  ·
                the
      ratio of EBITDA (earnings before interest, taxes, depreciation and
      amortization) to interest expense must be no less than 3.00 to 1.00 on a
      trailing four-quarter basis.  Primarily due to vessel out of
      service time and off-hire days incurred during the year ended December 31,
      2007 and consequent adverse effect on revenues, the interest coverage
      ratio financial covenant contained in the fully revolving credit facility
      would not be met and the lenders agreed to lower the ratio for this
      covenant. This ratio was lowered to 2.25 to 1.00 for the three-month
      period ended December 31, 2007 and three-month periods ending March 31,
      2008 and June 30, 2008. For the three-month period ended September 30,
      2008 the ratio for this financial covenant was lowered to 2.75 to 1.00,
      while for subsequent three-month periods the lower ratio will not apply
      and the ratio reverts back to 3.00 to 1.00. Until the lower ratio under
      this covenant no longer applies, the Company will pay an increased margin
      of 1.75%; and
  ·
                our
      current liabilities, excluding deferred revenue, derivative financial
      instruments and voluntary and mandatory prepayments, may not exceed our
      current assets, excluding derivative financial instruments and the value
      of any ship committed for sale;
  ·
                the
      aggregate fair market value of our vessels must be no less than 140% of
      the aggregate outstanding loans under the credit
  facility.
 In addition, Magnus Carriers is required to
maintain a credit balance in an account opened with the lender of at least $1.0
million. The credit agreement also requires our two principal beneficial equity
holders to maintain a beneficial ownership interest in our company of no less
than 10% each.
 
 In March 2008, we noted above, we received consent from our lenders
to a relaxation of the interest coverage covenant contained in the fully
revolving credit facility, as follows:
  ·
                  for
      the periodsfrom December 31, 2007 through June 30, 2008, the
      interest coverage covenant is relaxed from 3.0:1.0 to
      2.25:1.0;
  ·
                  for
      the period ending September 30, 2008, the interest coverage covenant will
      increase from 2.25:1.0 to 2.75:1.0;
and
  ·
                  for
      the period ending December 31, 2008, the interest coverage covenant will
      increase from 2.75:1.0 to 3.0:1.0.
  54
 The relaxation of the interest coverage covenant was, among other things,
conditioned on:
  ·
                An
      immediate reduction in the credit facility commitment level to $290.0
      million;
  ·
                A
      reduction of the outstanding borrowings under the fully revolving credit
      facility from the level of $284.8 million to $200.0 million, by disposal
      of vessels, by June 30, 2008, which was extended to August 31,
      2008;
  ·
                The
      Company’s continued payment of an increased margin of 1.75% until a
      compliance certificate is provided to its lenders advising the interest
      coverage ratio meets the required level of
  3.0:1.0;
  ·
                The
      Company’s not paying a dividend for the quarter ended December 31, 2007;
      and
  ·
                During
      the period of interest coverage covenant relaxation, any advance for new
      investments requires the consent of all of the lenders under the fully
      revolving credit facility.
  In the event that such disposal of vessels is not completed by August 31, 2008,
the lenders may extend the compliance date to September 30, 2008 subject to
legally binding sale contract(s) having been executed by August 31, 2008. We
have entered into agreements to sell three of our vessels for net proceeds of
$61.04 million.  See “Subsequent Events – Sale of Vessels”
and  Note 20 “Post balance sheet events.” As of June 25, 2008, we have
$ 223.71 million of outstanding borrowings under the fully revolving credit
facility.
  On April 17, 2008, the lenders approved an amendment to the working capital
ratio financial covenant to exclude from its calculation voluntary and mandatory
prepayments.
 
 On June 18, 2007 a bank guarantee was issued for $1.5 million as security for a
claim made by Trafigura Beheer BV, the charterers of M/T
Ostria, against the vessel-owning company, Ostria Waves Ltd. Security for
the bank guarantee was obtained from Magnus Carriers in the form of cash
deposited in a restricted account in the name of Ostria Waves Ltd. with the
issuing bank.
 
 Our credit agreement prevents us from declaring dividends if any event of
default, as defined in the credit agreement, occurs or would result from such
declaration.  Each of the following will be an event of default under
the credit agreement:
 
 ·
                the
      failure to pay principal, interest, fees, expenses or other amounts when
      due;
  ·
                breach
      of certain financial covenants, including those which require
      Magnus Carriers to maintain a minimum cash
  balance;
  ·
                the
      failure of any representation or warranty to be materially correct; the
      occurrence of a material  adverse change (as defined in the
      credit agreement);
  ·
                the
      failure of the security documents or guarantees to be
      effective;
  ·
                judgments
      against us or any of our subsidiaries in excess of certain
      amounts; and
  ·
                bankruptcy
      or insolvency events; and the failure of
      our principal beneficial equity holders to maintain
      their investment in us; and
  ·
                the
      failure to reduce the outstanding borrowings under the fully revolving
      credit facility to $200.0 million by disposal of vessels by August 31,
      2008. As noted above, in the event that such disposal of vessels is not
      completed by August 31, 2008, the lenders may extend the compliance date
      to September 30, 2008, subject to legally binding sale contract(s) having
      been executed by August 31, 2008.
  55
 
 C.        
   Research and Development, Patents and Licenses
 
 Not Applicable.
 
 D.        
   Trend Information
 
 Not Applicable.
 
 E.        
   Off-Balance Sheet Arrangements
 
 We do not have any off-balance sheet arrangements.
 
 F.        
   Tabular Disclosure of Contractual Obligations
  As of
December 31, 2007, significant existing contractual obligations and
contingencies consisted of our obligations as borrower under our fully revolving
credit facility. In addition, we had contractual obligations under interest rate
swap contracts, ship management agreements and an office rental
agreement.
  Long-Term
Financial Obligations and Other Commercial Obligations
  The
following table sets out long-term financial and other commercial obligations,
outstanding as of December 31, 2007 (all figures in thousands of U.S.
Dollars):
  Payment
      due by PeriodContractual
      Obligations
              
              Total
              
              
              Less
      than 1 year
              
              
              1-3
      years
              
              
              3-5
      years
              
              
              More
      than 5 yearsLong-term
      debt obligation(1)
              
              
              284,800
              
              
              
              84,800
              
              
              
              -
              
              
              
              200,000
              
              
              
              -Interest
      payments(2)
              
              
              52,257
              
              
              
              17,285
              
              
              
              31,020
              
              
              
              3,952
              
              
              
              -Management
      fees(3)
              
              
              2,380
              
              
              
              2,380
              
              
              
              -
              
              
              
              -
              
              
              
              -Rental
      agreement (4)
              
              
              1,469
              
              
              
              146
              
              
              
              315
              
              
              
              347
              
              
              
              661Total
              
              
              340,906
              
              
              
              104,611
              
              
              
              31,335
              
              
              
              204,299
              
              
              
              661
 
 Notes:
  (1)
              Refers
      to our obligations to repay the indebtedness outstanding as of December
      31, 2007, assuming that the Company meets the covenants of the credit
      facility.
 (2)
              Refers
      to our expected interest payments over the term of the indebtedness
      outstanding as of December 31, 2007, assuming a weighted average interest
      rate of 6.838% per annum.
 (3)
              Refers
      to the management fees payable to Magnus, ITM and Barber under the ship
      management agreements. As of the date of this annual report, the Company
      has transferred the technical management of nine of twelve vessels that
      were managed by Magnus Carriers to ITM and Barber. The commercial
      management fees paid to Magnus Carriers are also
  included.
 (4)
              Refers
      to our obligations under the rental agreements for office space for the
      Company.
  56
  
 Quantitative
and Qualitative Disclosures About Market Risk
 
 Interest
Rate Exposure
  Our debt
obligations under our fully revolving credit facility bear interest at LIBOR
plus a margin ranging from 1.125% to 1.5% per annum. With effect from January 3,
2007 and until the relaxation of the interest cover financial convenant no
longer applies, the margin will be increased to 1.75%.  Increasing
interest rates could adversely affect our future profitability.  We
entered into three interest swap transactions with three banks during
2005.  On April 7, 2006, one of the interest rate swaps was terminated
and the settlement proceeds amounted to $0.49 million.  Under the two
swap agreements we have limited the interest rate we pay on $93.3 million of our
outstanding indebtedness to a maximum of 4.885% per annum, excluding the margin,
effective from January 3, 2006 and until the swap agreements mature in June
2009.
  On July
5, 2006, the Company entered into interest rate swaps with five banks on
identical terms. These five swaps had an effective date of July 3, 2006 and a
maturity date of April 3, 2011.  Under the terms of the swap
agreements, we pay a fixed interest rate of 5.63% per annum on a total of $100
million of the long-term debt drawn under the fully revolving credit facility.
In April 2008, we cancelled two of these swap agreements and entered into two
new swap agreements.  See note 15 of our consolidated financial
statements included herein.
  A 100
basis point increase in LIBOR would have resulted in an increase of
approximately $0.9 million in our interest expense on the $91.5 million unhedged
element of drawings under the fully revolving credit facility for the year ended
December 31, 2007.
  Foreign
Exchange Rate Exposure
  Our vessel-owning subsidiaries generate revenues in U.S. dollars but incur a
portion of their vessel operating expenses, and we incur our general and
administrative costs, in other currencies, primarily Euros.
  We
monitor trends in foreign exchange rates closely and actively manage our
exposure to foreign exchange rates. We maintain foreign currency accounts and
buy foreign currency in anticipation of our future requirements in an effort to
manage foreign exchange risk. As of December 31, 2007, a 1% adverse movement in
U.S. dollar exchange rates would have increased our vessel operating expenses by
approximately $96,220.
  Recent
Accounting Developments
 
 In
September 2006, the Financial Accounting Standard Board (FASB) issued Statement
of Financial Accounting Standards No. 157 (SFAS 157), “Fair Value Measurement.”
SFAS 157 defines fair value, establishes a framework for measuring fair value in
generally accepted accounting principles (GAAP) and expands disclosures about
fair value measurements. SFAS 157 is effective for financial statements issued
for fiscal years beginning after November 15, 2007, and interim periods within
those fiscal years. The FASB has issued FSP FAS 157-2, “The Effective Date of
FASB Statement 157,” which confirms the partial deferral of the effective date
of FAS 157, “Fair Value Measurement” for one year for non-financial assets and
non-financial liabilities that are recognized or disclosed at fair value in the
financial statements. The provisions of SFAS 157 should be applied prospectively
as of the beginning of the fiscal year in which it is initially applied. The
Group does not expect the adoption of this Accounting Standard to have an effect
on its financial statements. SFAS 157 will be effective for the Group for the
year beginning on January 1, 2008 for financial assets and liabilities and for
the year beginning on January 1, 2009 for non financial assets and
liabilities.
  In
February, 2007, the FASB issued SFAS No. 159, “The Fair Value Option for
Financial Assets and Financial Liabilities” (SFAS No. 159). SFAS No. 159 permits
entities to choose to measure many financial assets and financial liabilities at
fair value. Unrealized gains and losses on items for which the fair value option
has been elected are reported in earnings. SFAS No. 159 is effective for fiscal
years beginning after November 15, 2007. The Group is currently assessing the
impact of SFAS No. 159 on its consolidated financial position and results of
operations.
   57
  In
December 2007, the FASB issued SFAS No. 141 (R), “Business Combinations” (SFAS
No. 141 (R)), which amends principles and requirements for how the acquirer of a
business recognizes and measures in its financial statements the identifiable
assets acquired, the liabilities assumed and any non-controlling interest in the
acquiree. The statement also amends guidance for recognizing and measuring the
goodwill acquired in the business combination and determines what information to
disclose to enable users of the financial statements to evaluate the
financial effects of the business combination. FAS No. 141 (R) will be effective
for the Company’s financial statements for the year ending December 31, 2009.
Accordingly, any business combinations the Company engages in will be recorded
and disclosed following existing GAAP until January 1, 2009.
  In March
2008, the FASB issued Statement of Financial Accounting Standards No. 161 (“SFAS
161”), “Disclosures about Derivative Instruments and Hedging Activities—an
amendment of FASB Statement No. 133.” SFAS 161 changes the disclosure
requirements for derivative instruments and hedging activities. Entities are
required to provide enhanced disclosures about (a) how and why and entity uses
derivative instruments, (b) how derivative instruments and related hedged items
are accounted for under Statement 133 and its related interpretations, and (c)
how derivative instruments and related hedged items affect an entity’s financial
position, financial performance, and cash flows. This statement is effective for
financial statements issued for fiscal years and interim periods beginning after
November 15, 2008, with early application encouraged. This statement encourages,
but does not require, comparative disclosures for earlier periods at initial
adoption. We are currently evaluating the expected impact, if any, of the
adoption of SFAS 161 on our consolidated financial statements.
  Subsequent
Events
 
 Ship
Management Agreements
 
 On
January 9, 2008, the vessel-owning company of the M/V Saronikos Bridge entered
into an annual ship management agreement with Barber, which is cancellable by
either party with two months’ notice.
  On
January 23, 2008, the vessel-owning company of the M/V CMA CGM Seine entered
into an annual ship management agreement with Barber, which is cancellable by
either party with two months’ notice.
  Sale
of Vessels
  On March
3, 2008, the Company announced that it reached an agreement to sell the Arius to an unrelated party
for net proceeds of $21.8 million. The vessel was delivered to their new owners
on June 10, 2008 and the Company realized a gain of $10.1 million. The Company
paid 1% of the purchase price as sales commission  to Magnus
Carriers.
  On March
25, 2008, the Company announced that it reached an agreement to sell both the
MSC Oslo and its sister
ship, the Energy 1, to
an unrelated party for net proceeds totaling approximately $40 million. The
vessels were delivered to their new owners on April 30, 2008,
respectively, and June 2, 2008 and the Company realized a gain of $5.3
million. The Company paid 1% of the purchase price as sales commission to Magnus
Carriers.
  CFO
Resignation and New CFO Appointment
 
 In March
2008, the Company announced the resignation of Richard J.H. Coxall from his
position as Chief Financial Officer and Director. In June 2008, the Company
announced the appointment of Ioannis Makris as the Company’s Chief Financial
Officer.
  Credit
Facility
 
 In March
2008, we received consent from our lenders to a further relaxation of the
interest rate coverage ratio under our fully revolving credit facility that
imposes additional restrictions on us.  On April 17, 2008, the lenders
approved an amendment to the working capital ratio financial covenant to exclude
from its calculation voluntary and mandatory prepayments.  See
“Liquidity and Capital Resources – Indebtedness.”
   58
  
  Interest
Rate Hedge
 
 In April
2008, the Company cancelled two existing swap agreements and entered into two
new swap agreements. See note 15 of our consolidated financial statements
included herein.
  Restricted
Stock Issued Under 2005 Equity Incentive Plan
 
 On April
11, 2008, the board of directors of the Company resolved to accelerate the
vesting of the 100,000 shares unvested as of December 31, 2007 of 200,000
restricted shares awarded during 2007 under grants of restricted stock to the
Company’s Directors. All shares that had not vested became vested on April 11,
2008.
  Bank
Guarantee
 
 On June
18, 2007 a bank guarantee was issued for $1.5 million as security for a claim
made by Trafigura Beheer BV, the charterers of M/T
Ostria, against the vessel-owning company, Ostria Waves Ltd. Security for
the bank guarantee was obtained from Magnus Carriers in the form of cash
deposited in a restricted account in the name of Ostria Waves Ltd. with the
issuing bank.
  G.           Safe Harbor
 
 See section “Forward-Looking Statements” at the beginning of this annual
report.
 
 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 on a staggered basis, and each
director elected holds office until his successor shall have been duly elected,
except in the event of his death, resignation, removal or the earlier
termination of his office. The business address of each of our executive
officers and directors is 18 Zerva Nap., Glyfada, Athens 166 75,
Greece.
  Name
              
              Age
              
              PositionMons
      S. Bolin
              
              54
              
              Class
      I Director, President and Chief Executive OfficerRichard
      J.H. Coxall
              
              51
              
              Class
      I Director through February 2008 and Chief Financial Officer through May
      2008Ioannis
      Makris
              
              40
              
              Chief
      Financial Officer since June 2008Per
      Olav Karlsen
              
              54
              
              Class
      II Director and ChairmanHenry
      S. Marcus
              
              64
              
              Class
      II DirectorPanagiotis
      Skiadas
              
              37
              
              Class
      III Director and Deputy ChairmanCaptain
      Gabriel Petrides
              
              55
              
              Class
      I Director as of April 2008
 
 Certain
biographical information about each of these individuals is set forth
below.
   59
  Mons S. Bolin has served as
our President, Chief Executive Officer and a director since April 2005. He has
over 30 years of shipping industry experience. After graduating with distinction
in Law (LLB), Economics and Business Administration from the University of Lund
in Sweden, Mr. Bolin completed his military service as an officer in the Swedish
Royal Marines in 1975. Mr. Bolin worked as a shipbroker for Fearnleys A/S in
Oslo, Norway from 1975 to 1977 and was then a director and partner in the
shipbrokering firm of Alexandrakis Brandts in Greece for eight years before
co-founding an oil/commodity trading and ship operating business, Westminster
Oil and Gas Ltd., in London in 1985. In 1991 he co-founded with Gabriel
Petridis, Southern Seas Shipping Corporation, an affiliate of Aries Energy,
which he still beneficially owns with Mr. Petridis. From February 1997 to April
2005, Mr. Bolin was co-managing director of Magnus Carriers. He remains a
director of Sea Breeze UK Ltd., an affiliate of Aries Energy. Mr. Bolin is a
citizen of Sweden and a resident of Great Britain.
  Richard J. H. Coxall served as
our Chief Financial Officer from January 2005 to May 2008 and a director from
January 2005 to February 2008. Mr. Coxall served as the Finance Director of
Magnus Carriers from 2000 to 2005. Mr. Coxall studied at Havering Technical
College and Polytechnic of Central London. He holds an International Banking
Diploma from the Chartered Institute of Bankers. Between 1974 and 1994 Mr.
Coxall worked for Barclays Bank International in various banking operations and
for Barclays Bank PLC, London as a manager in ship finance. In 1995, Mr. Coxall
established the representative office of the Commercial Bank of Greece in London
and ran that office until 1996, developing shipping finance business for the
second largest bank in Greece. In 1996, Mr. Coxall was appointed director of
Barclays Bank ship finance in Greece. Between 1998 and 2000, Mr. Coxall was an
independent consultant in ship finance and projects to international shipping
companies. Mr. Coxall is a citizen of Great Britain and a resident of
Greece.
  Ioannis Makrishas served as
our Chief Financial Officer since June 2008.  Mr. Makris has
approximately 15 years of experience in finance and shipping. Previously, he
served as a Banking Executive at Cardiff Marine Inc., one of the largest
Greek-based shipping companies. Prior to that, Mr. Makris was a Finance and
Accounting Manager at Niki Shipping Company Inc., a private shipping company
based in Athens. He began his career at Ernst & Young, where he was an
auditor and a consultant from 1993 to 1996. Mr. Makris received a BS in
Economics from the London School of Economics and Political Science and an MS in
Economics from Birkbeck College in London. He is a Chartered Certified
Accountant.
  Per Olav Karlsen has served as
the Chairman of our board of directors since the closing of our initial public
offering in June 2005. Since 2000, Mr. Karlsen has been one of three partners
and the joint managing director of Cleaves Shipbrokers Ltd. Since September
2005, he has been responsible for the formation of a new marine finance company
in Oslo, Norway. From 1993 through 2000, he was President of R.S. Platou (S) Pte
Ltd., a ship brokerage company. Mr. Karlsen has also worked for Fearnleys AS for
10 years in various positions and capacities. Mr. Karlsen has also served as
managing director of Pacship (UK) Ltd., a company controlled by Pacific Carriers
Ltd, a company in the Kuok Group. He has worked in the shipping industry for
approximately 26 years. In 1993, Wind Shipping Group, a company for which Mr.
Karlsen served as a director, was the subject of an insolvency proceeding. He is
a citizen of Norway and a resident of England.
  Henry S. Marcus has served as
a member of our board of directors since the closing of our offering in June
2005. Dr. Marcus has been a faculty member of the Massachusetts Institute of
Technology for more than thirty years.  Currently, he is a Professor
of Marine Systems in the Center for Ocean Engineering.  Dr. Marcus
works as a consultant to various government organizations, academic institutions
and corporations. He holds a bachelor’s degree in Naval Architecture and Marine
Engineering from the Webb Institute of Naval Architecture. He holds master’s
degrees in Shipping and Shipbuilding Management and Naval Architecture and
Marine Engineering from Massachusetts Institute of Technology.  Dr.
Marcus also holds a doctorate degree in business administration, specializing in
Transportation and Logistics, from Harvard University, Graduate School of
Business Administration. He is a citizen and a resident of the United
States.
   60
  Panagiotis Skiadas has served
as a member of our board of directors and our Deputy Chairman since the closing
of our initial public offering in June 2005. Mr. Skiadas has been the
Environmental Manager of VIOHALCO S.A., the holding company of the largest Greek
metals processing group that incorporates approximately 90 companies and
accounts for approximately 9% of Greece’s total exports.
Prior to joining VIOHALCO in April 2006, Mr. Skiadas performed the same role for
a subsidiary of VIOHALCO, ELVAL S.A. since 2004. He has also served as the
Section Manager of Environmental Operations for the Organizational Committee of
Olympic Games, Athens 2004 S.A.
  Captain Gabriel Petridis was appointed to our board of directors in April
2008 to fill the vacancy resulting from the resignation of Richard
Coxall.  Capt Gabriel Petridis served as Officer and Master for over
18 years in various types of ships such as tankers, bulk carriers, multipurpose,
and gas carriers and served for 32 months as Officer and as Vice Commander in
mine sweepers in the Greek Navy.  He has been employed by various
shipping companies since 1986, holding managerial positions in different
departments.  In 1991, he co-founded with Mons Bolin, Southern Seas
Shipping Corporation, an affiliate of Aries Energy Corporation, which he still
beneficially owns with Mr. Bolin. From February 1997 until the end of 2005, Capt
Gabriel Petridis was the Managing Director of Magnus Carriers.  In
1986, he was employed as a director in World Carriers, a company based in
London that owned and managed a fleet of about 20 very large crude carriers
and product carriers.  He remains a co-director of Sea Breeze (UK)
Ltd., an affiliate of Aries Energy Corporation.  He graduated from the
Nautical College of Greece. Capt Gabriel Petridis is a citizen of Greece and
France and a resident of Greece.
  B.           Compensation
  During
2007, we paid to the members of our senior management and to our directors
aggregate compensation of approximately $592,916 and $77,925, respectively;
$540,833 and $78,216 in 2006, respectively; and $408,362 and $45,000 in 2005,
respectively. In addition, stock-based compensation costs in 2007 were
$1,231,947. In addition, each director will be reimbursed for out-of-pocket
expenses incurred while attending any meeting of the board of directors or any
board committee. Officers who also serve as directors do not receive additional
compensation for their service as directors.
  In August
2007, we issued under the 2005 Equity Incentive Plan, 40,000 restricted shares
to each director who was not also an officer of the Company for a total of
120,000 shares, subject to the following vesting periods:
  ·
                20,000
      shares vested on July 1, 2007;
  ·
                10,000
      shares were scheduled to vest on July 1, 2008;
  and
  ·
                10,000
      shares were scheduled to vest on July 1,
2009.
  In
October 2007, we issued under the 2005 Equity Incentive Plan, 40,000 restricted
common shares to each of the Chief Executive Officer and Chief Financial Officer
for a total of 80,000 shares, subject to the following vesting
periods:
  ·
                20,000
      shares vested on September 1, 2007;
  ·
                10,000
      shares were scheduled to vest on July 1, 2008; and
  ·
                10,000
      shares will vest on July 1, 2009.
 On April
11, 2008, the Board of Directors of the Company resolved to accelerate the
vesting of the 100,000 shares unvested as of December 31, 2007 of 200,000 shares
awarded during 2007 under grants of restricted stock to the Company’s directors.
All shares that had not vested became vested on April 11, 2008.
  We
adopted an equity incentive plan, which enables our officers, key employees and
directors to receive options to acquire common shares. We reserved a total of
500,000 common shares for issuance under the plan, of which 200,000 have been
issued. Our board of directors will administer this plan once it is implemented.
Under the terms of the plan, our board of directors will be able to grant new
options exercisable at a price per common share to be determined by our board of
directors. We expect that the exercise price for the first options granted under
the plan will be equal to the higher of the offering price in our initial public
offering or the price of our common shares on the date the options are granted.
All options will expire no later than ten years from the date of the grant.
Other securities, including restricted and unrestricted shares, performance
shares and stock appreciation rights, may also be granted under the plan. Unless
terminated earlier pursuant to its terms, the plan will terminate ten years from
the date it was adopted by the board of directors.
   61
  C.           Board
Practices
 
 Committees
of the Board of Directors
  We have
established an audit committee comprised of our three independent directors
responsible for reviewing our accounting controls and recommending to the board
of directors the engagement of our outside auditors.  The current
members of our audit committee are Messrs. Panagiotis Skiadas and Henry S.
Marcus, and there is one vacancy on our audit committee following the
resignation of Per Olav Karlsen from the audit committee in February 2008 in
order to avoid any possible conflicts of interest resulting from Mr. Karlsen’s
share ownership in a shipbroking firm that received a commission from the
purchaser of the Arius
in connection with the sale of that vessel.
  Corporate Governance
Practices
  We have
certified to Nasdaq that our corporate governance practices are in compliance
with, and are not prohibited by, the laws of Bermuda. Therefore, we are exempt
from many of Nasdaq’s corporate governance practices other than the requirements
regarding the disclosure of a going concern audit opinion, submission of a
listing agreement, notification of material non-compliance with Nasdaq corporate
governance practices and the establishment and composition of an audit committee
and a formal written audit committee charter. The practices that we follow in
lieu of Nasdaq’s corporate governance rules are described below.
  ·
              We
      have a board of directors with a majority of independent directors which
      holds at least one annual meeting at which only independent directors are
      present, consistent with Nasdaq corporate governance requirements. We are
      not required under Bermuda law to maintain a board of directors with a
      majority of independent directors, and we cannot guarantee that we will
      always in the future maintain a board of directors with a majority of
      independent directors.
 ·
              In
      lieu of a compensation committee comprised of independent directors, our
      board of directors is responsible for establishing the executive officers’
      compensation and benefits. Under Bermuda law, compensation of the
      executive officers is not required to be determined by an independent
      committee.
 ·
              In
      lieu of a nomination committee comprised of independent directors, our
      board of directors is responsible for identifying and recommending
      potential candidates to become board members and recommending directors
      for appointment to board committees. Shareholders may also identify and
      recommend potential candidates to become board members in writing. No
      formal written charter has been prepared or adopted because this process
      is outlined in our bye-laws.
 ·
              In
      lieu of obtaining an independent review of related party transactions for
      conflicts of interests, consistent with Bermuda law requirements, our
      bye-laws require any director who has a potential conflict of interest to
      identify and declare the nature of the conflict to our board of directors
      at the first meeting of the board of directors. Our bye-laws additionally
      provide that related party transactions must be approved by independent
      and disinterested directors.
 ·
              In
      lieu of obtaining shareholder approval prior to the issuance of
      securities, we were required to obtain the consent of the Bermuda Monetary
      Authority as required by Bermuda law before we issued securities. We have
      obtained blanket consent from the Bermuda Monetary Authority. If we choose
      to issue additional securities, we will not be required to obtain any
      further consent so long as our common shares are
listed.
 ·
              As
      a foreign private issuer, we are not required to solicit proxies or
      provide proxy statements to Nasdaq pursuant to Nasdaq corporate governance
      rules or Bermuda law. Consistent with Bermuda law, we will notify our
      shareholders of meetings between 15 and 60 days before the meeting. This
      notification will contain, among other things, information regarding
      business to be transacted at the meeting. In addition, our bye-laws
      provide that shareholders must give us advance notice to properly
      introduce any business at a meeting of the shareholders. Our bye-laws also
      provide that shareholders may designate a proxy to act on their behalf (in
      writing or by telephonic or electronic means as approved by our board from
      time to time).
  62
  
 Other
than as noted above, we are in full compliance with all other applicable Nasdaq
corporate governance standards.
  D.           Employees
  See “Item 4 — Information on the Company — Business Overview —Crewing and
Employees.”
  E. Share
Ownership
  The
common shares beneficially owned by our directors and senior managers and/or
companies affiliated with these individuals are disclosed in “Item 7
–  Major Shareholders and Related Party Transactions”
below.
  ITEM
      7.
              MAJOR
      SHAREHOLDERS AND RELATED PARTY
TRANSACTIONS
  Major
shareholders
  The
following table sets forth information regarding (i) the owners of more than
five percent of our common stock that we are aware of and (ii) the total number
of shares of our common stock held by officers and directors as of the date of
this report.
  Title
      of Class
              Identity
      of Person or Group
              
              Amount
      Owned
              
              
              Percent
      of ClassCommon
      stock, par value $0.01 per share
              Rocket
      Marine Inc. (1)
              
              
              14,766,877
              
              
              
              52
              %Mons
      Bolin (1)
              
              
              14,806,877
              
              
              
              52
              %Captain
      Gabriel Petridis (1)
              
              
              14,766,877
              
              
              
              52
              %Per
      Olav Karlsen
              
              
              *
              
              
              
              *Panagiotis
      Skiadas
              
              
              *
              
              
              
              *Henry
      S. Marcus
              
              
              *
              
              
              
              *Directors
      and Executive Officers as a Group
              
              
              14,966,877
              
              
              
              52
              %Transamerica
      Investment Management, LLC (2)
              
              
              2,029,730
              
              
              
              7.2
              %
 
 * Less
than one percent.
  (1)
              Rocket
      Marine Inc., a Marshall Islands corporation, is a wholly-owned indirect
      subsidiary of Aries Energy Corporation, which is also a Marshall Islands
      corporation.  Mons Bolin and Captain Gabriel Petridis each own
      50% of the issued and outstanding capital stock of Aries Energy
      Corporation and Magnus Carriers.  Each of Aries Energy
      Corporation, Mons Bolin and Captain Gabriel Petridis disclaims beneficial
      ownership of such shares.
 (2)
              According
      to Schedule 13G/A filed with the Securities and Exchange Commission by
      Transamerica Investment Management, LLC on February 14,
      2008.  According to such Schedule 13G/A Gary U. Rolle is the
      Chief Investment Officer of TransAmerica Investment Management,
      LLC.
  63
 
 Related
Party Transactions
  Aries
Energy, through its wholly-owned indirect subsidiary, Rocket Marine Inc., owns
52% of our outstanding common stock.  Mr. Mons Bolin, our President,
Chief Executive Officer and a director, owns 50% of the issued and outstanding
capital stock of Aries Energy and of Magnus Carriers. Captain Gabriel Petridis,
one of our directors, owns the remaining 50% of the outstanding capital stock of
Aries Energy and of Magnus Carriers.
  We have
entered into ship management agreements with Magnus Carriers. Consistent with
Bermuda law requirements, our bye-laws require any director who has a potential
conflict of interest to identify and declare the nature of the conflict to our
board of directors at the first meeting of the board of directors. Our bye-laws
additionally provide that related party transactions must be approved by
independent and disinterested directors.
  Contributions
under management agreements
 
 During
the year ended December 31, 2007, the Group received an additional $6.1 million
(2006 $6.5 million and 2005 $812,000) from Magnus Carriers under the ship
management cost-sharing agreements for vessel operating expenses and under the
termination agreement. These amounts are reflected in the operating expenses of
the vessels in the income statement. Also received, during the year ended
December 31, 2007, was an amount of $1.4 million (2006 $159,000 and 2005 $NIL)
for special survey and drydocking amortization. This amount is reflected in the
amortization and drydocking expense in the income statement. During the year
ended December 31, 2006, the Group received $5 million in full and final
settlement by Magnus Carriers of the drydocking expenses incurred by M/T
Arius. This amount has been deducted from the vessel’s drydocking
expenses.
  Amounts
due from/to related parties
 
 Amounts
due to related parties were $594,000 at December 31, 2007 and amounts due from
related parties were $2.5 million at December 31, 2006. These amounts represent
payments less receipts made by the Group on behalf of (i) other vessel-owning
companies with common ultimate beneficial stockholders with the Group,
consisting of $27,000 (due from) at December 31, 2007 and $27,000 (due from) at
December 31, 2006; (ii) Magnus Carriers Corporation, consisting of $805,000 (due
to) at December 31, 2007 and $2.5 million (due from) at December 31, 2006; (iii)
Rocket Marine, which is a wholly-owned subsidiary of Aries Energy Corporation,
consisting of $218,000 (due from) at December 31, 2007; and (iv) Board of
Directors for the non-vested shares dividends’ payment according to the
Company’s 2005 Equity Incentive Plan (refer to note 12), consisting of $34,000
(due to) at December 31, 2007. There are no terms of settlement for these
amounts, as of December 31, 2007.
  Management
fees
  The
vessel-owning companies included in the Group receive technical and commercial
management services from Magnus Carriers, a company with common ultimate
beneficial stockholders, pursuant to ship management agreements. Under these
agreements, the Group paid management fees of $1.8 million for the year ended
December 31, 2007; $1.8 million for the year ended December 31, 2006; and $1.5
million for the year ended December 31, 2005, which is separately reflected in
the statements of income.
  Commissions
  Magnus
Carriers and Trampocean S.A., related companies with common ultimate beneficial
stockholders, provide chartering services to the vessel-owning companies
included in the Group at a commission of 1.25% of hires and freights earned by
the vessels on new charters or $7,000 per month per vessel where no 1.25%
commission is payable. The Group paid these companies fees for chartering
services of $368,000 for the year ended December 31, 2007; $34,000 for the year
ended December 31, 2006; and $50,000 for the year ended December 31, 2005. These
commissions relate to agreements between Magnus Carriers and the vessel-owning
subsidiaries. Under the agreements, Magnus Carriers will be paid 1% of the sale
or purchase price in connection with a vessel sale or purchase that Magnus
Carriers brokers for the Group.
   64
   Rental
agreement
  During
2005 and 2007, the Group entered into a rental agreement with a related party, a
company with common ultimate beneficial stockholders (see note 17). The Group
paid $80,000 to the related party during the year ended December 31, 2007 (2006
$62,000 and 2005 $4,000).
  Crewing
  Part of
the crewing for the Group is undertaken by Magnus Carriers through a related
entity, Poseidon Marine Agency. The Group paid manning fees of $107,000 for the
year ended December 31, 2007; $288,000 for the year ended December 31, 2006; and
$310,000 for the year ended December 31, 2005.
  Vessel
purchase
  Aries
Maritime exercised its right to acquire the M/T Chinook under the Right
of First Refusal Agreement with Magnus Carriers in October 2005. The acquisition
was offered to Aries Maritime by Magnus Carriers on either of two bases: (a)
with retention of the five-year head charter dated June 16, 2003 between the
sellers and Pacific Breeze Tankers Ltd. (a joint venture company, 50% of which
is ultimately owned between Mons Bolin, President and Chief Executive Officer of
Aries Maritime, and Gabriel Petridis, equally) as charterers, at a rate of
$13,000 per day, in which case the purchase consideration would be $30.6
million; or (b) without the head charter, in which case the purchase
consideration would be $32.6 million. Aries Maritime exercised its right on
basis (b). The total purchase consideration of $32.6 million for the M/T Chinook, paid on November
30, 2005, comprised purchase consideration under the terms of a Memorandum of
Agreement dated October 25, 2006 of $30.6 million and a $2 million additional
purchase consideration to the sellers under the terms of a separate agreement
relating to the termination of the head charter.
  Pursuant
to an agreement, dated December 28, 2004, Aries Maritime exercised its right to
acquire CMA
CGM Seine and Saronikos
Bridge (ex
CMA CGM Makassar) in June 2005 and took delivery of these vessels on June
24, 2005 and July 15, 2005, respectively. Both vessels were purchased from
International Container Ships KS (a Norwegian limited partnership, of which Mons
Bolin, President and Chief Executive Officer of Aries Maritime, and Gabriel
Petridis, equally together, ultimately owned 25%). The purchase prices paid for
the CMA CGM Seine and
the Saronikos Bridge (ex
CMA CGM Makassar) were $35.4 and $35.3 million,
respectively.
  Minimum
liquidity
  Under our
credit facility, Magnus Carriers is required to maintain a credit balance in an
account opened with our lenders of at least $1.0 million.
  General
and administrative expenses
  During
the year ended December 31, 2007, the Group paid directors’ fees of $671,000
(2006 $619,000 and 2005 $467,000). Such fees are included in general and
administrative expenses in the accompanying consolidated statements of
income.
  C.           
Interests of experts and counsel.
  Not
Applicable.
  ITEM
      8.
              FINANCIAL
      INFORMATION
  A.           
Consolidated Statements and Other Financial Information
  See Item
18.
   65
  Legal
Proceedings Against Us
  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. Those claims, even if lacking merit, could result in the expenditure of
significant financial and managerial resources. Trafigura Beheer BV, the
charterer of the Ostria,
brought a claim against the vessel-owning company, Ostria Waves Ltd., for an
amount of $1.5 million alleging that such amount is due under the charter
agreement due to vessel out of service time.  On June 18, 2007, a bank
guarantee was issued for $1.5 million as security for the claim. Security for
the bank guarantee was obtained from Magnus Carriers in the form of cash
deposited in a restricted account in the name of Ostria Waves Ltd. with the
issuing bank.  In the event we are unsuccessful in disputing this
claim, the vessel-owning company will be putting forward an indemnity claim for
the same amount against Magnus Carriers on the basis of negligent
misrepresentation. ST Shipping, the charterer of the Arius,
brought a claim against the Company in the amount of $1.3 million alleging that
such amount is due under the charter agreement due to an indemnity claim arising
under the charter party.  On June 20, 2008, the Company entered into a
corporate guarantee as security for the claim.  The maximum amount
that the Company may be required to pay under the corporate guarantee is $2
million.
  Other
than as described above, we have not been involved in any legal
proceedings that may have, or have had a significant effect on our
financial position, nor are we aware of any proceedings that are pending or
threatened that may have a significant effect on our financial
position.
  Dividend
Policy
  We intend
to pay quarterly dividends to the holders of our common shares in March, May,
August and November of each year in such amounts as our Board of Directors may
determine from time to time.
  Under
Bermuda law, a company may not declare or pay dividends if there are reasonable
grounds for believing either that the company is, or would after the payment be,
unable to pay its liabilities as they become due, or that the realizable value
of its assets would thereby be less than the sum of its liabilities, its issued
share capital (the total par value of all outstanding shares) and share premium
accounts (the aggregate amount paid for the subscription for its shares in
excess of the aggregate par value of such shares). If the realizable value of
our assets decreases, our ability to pay dividends may require our shareholders
to approve resolutions reducing our share premium account by transferring an
amount to our contributed surplus account.
  Our board
of directors must approve the declaration and payment of any dividends. Under
the terms of our fully revolving credit facility, we will not be able to declare
or pay any dividends if we are in default under our fully revolving credit
facility or if paying a dividend will result in a default under the credit
facility. In addition, the requirement that we satisfy various financial
covenants under the credit agreement as well as the terms under any other loan
agreements that we may obtain in the future could impose restrictions on
our ability to pay dividends in the future.  In March 2008, as a
condition of the relaxation of our interest coverage ratio imposed by our
lenders, our board of directors temporarily suspended payment of quarterly
dividends with effect from the dividend in respect of the fourth quarter of
2007.  In May 2008, the Company resumed distribution of quarterly
dividends beginning with a dividend of $0.10 per share in respect of the first
quarter of 2008.
  B.           
Significant Changes
  Not
Applicable.
   66
   ITEM
      9.
              THE
      OFFER AND LISTING
  A.           Offer
and Listing Details
  The trading market for
our common stock is the Nasdaq Global Market, on which the shares are listed
under the symbol “RAMS”. The following
table sets forth the high and low closing prices for our common stock since our
initial public offering of common stock at $12.50 per share on June 3, 2005, as
reported by the Nasdaq Global Market. The high and low closing prices for our
common stock for the periods indicated were as follows:
  High
              
              
              LowFor
      the period from June 3, 2005 to December 31, 2005
              
              $
              15.99
              
              
              $
              12.50For
      the Fiscal Year Ended December 31, 2006
              
              $
              14.80
              
              
              $
              9.07For
      the Fiscal Year Ended December 31, 2007
              
              $
              10.45
              
              
              $
              5.91For
      the Quarter EndedMarch
      31, 2006
              
              $
              14.80
              
              
              $
              12.15June
      30, 2006
              
              $
              14.24
              
              
              $
              9.93September
      30, 2006
              
              $
              12.75
              
              
              $
              9.25December
      31, 2006
              
              $
              11.01
              
              
              $
              9.07March
      31, 2007
              
              $
              9.43
              
              
              $
              7.48June
      30, 2007
              
              $
              10.20
              
              
              $
              7.53September
      30, 2007
              
              $
              10.45
              
              
              $
              7.83December
      31, 2007
              
              $
              9.87
              
              
              $
              5.91March
      31, 2008
              
              $
              7.77
              
              
              $
              5.22For
      the MonthNovember
      2007
              
              $
              9.56
              
              
              $
              6.20December
      2007
              
              $
              8.63
              
              
              $
              5.91January
      2008
              
              $
              7.20
              
              
              $
              5.25February
      2008
              
              $
              7.50
              
              
              $
              6.14March
      2008
              
              $
              7.77
              
              
              $
              5.22April
      2008
              
              $
              6.29
              
              
              $
              4.98
 
 B.           Markets
 
 See Item 9. A. above.
 
 ITEM
      10.
              ADDITIONAL
      INFORMATION
  A.  Share Capital
  Not applicable
 
 B.          
Memorandum and Articles of Association
  The
following description of our capital stock summarizes the material terms of our
Memorandum of Association and our bye-laws.  Under our Memorandum of
Association, as amended, our authorized capital consists of 30 million shares of
preferred stock, par value $0.01 per share and 100 million shares of common
stock, par value of $0.01 per share.
  Common
shares
  Holders
of common shares have no pre-emptive, subscription, redemption, conversion or
sinking fund rights. Holders of common shares are entitled to one vote for each
share held of record on all matters submitted to a vote of our shareholders.
Holders of common shares have no cumulative voting rights. Holders of common
shares are entitled to dividends if and when they are declared by our board of
directors, subject to any preferred dividend right of holders of any preference
shares. Directors to be elected by holders of common shares require a plurality
of votes cast at a meeting at which a quorum is present. For all other matters,
unless a different majority is required by law or our bye laws, resolutions to
be approved by holders of common shares require approval by a majority of votes
cast at a meeting at which a quorum is present.
    67
  Upon our
liquidation, dissolution or winding up, our common shareholders will be entitled
to receive, ratably, our net assets available after the payment of all our debts
and liabilities and any preference amount owed to any preference
shareholders.
  The rights of our common
shareholders, including the right to elect directors, are subject to the rights
of any series of preference shares we may issue in the future.
  Preference Shares
  Under the
terms of our bye-laws, our board of directors has authority to issue up to 30
million “blank check” preference shares in one or more series and to fix the
rights, preferences, privileges and restrictions of the preference shares,
including voting rights, dividend rights, conversion rights, redemption terms
(including sinking fund provisions) and liquidation preferences and the number
of shares constituting a series or the designation of a series.
  The
rights of holders of our common shares will be subject to, and could be
adversely affected by, the rights of the holders of any preference shares that
we may issue in the future. Our board of directors may designate and fix rights,
preferences, privileges and restrictions of each series of preference shares
which are greater than those of our common shares. Our issuance of preference
shares could, among other things:
  ·
              restrict
      dividends on our common shares;
 ·
              dilute
      the voting power of our common shares;
 ·
              impair
      the liquidation rights of our common shares; and
 ·
              discourage,
      delay or prevent a change of control of our company.
  Our board
of directors does not at present intend to seek shareholder approval prior to
any issuance of currently authorized preference shares, unless otherwise
required by applicable law or Nasdaq requirements. Although we currently have no
plans to issue preference shares, we may issue them in the future.
  Dividends
  Under
Bermuda law, a company may not declare or pay dividends if there are reasonable
grounds for believing either that the company is, or would after the payment be,
unable to pay its liabilities as they become due, or that the realizable value
of its assets would thereby be less than the sum of its liabilities, its issued
share capital (the total par value of all outstanding shares) and share premium
accounts (the aggregate amount paid for the subscription for its shares in
excess of the aggregate par value of such shares). If the realizable value of
our assets decreases, our ability to pay dividends may require our shareholders
to approve resolutions reducing our share premium account by transferring an
amount to our contributed surplus account. There are no restrictions on our
ability to transfer funds (other than funds denominated in Bermuda dollars) in
and out of Bermuda or to pay dividends to U.S. residents who are holders of our
common shares.
  Anti-Takeover
Effects of Provisions of Our Constitutional Documents
  Several
provisions of our bye-laws may have anti-takeover effects. These provisions are
intended to avoid costly takeover battles, lessen our vulnerability to a hostile
change of control and enhance the ability of our board of directors to maximize
shareholder value in connection with any unsolicited offer to acquire us.
However, these anti-takeover provisions, which are summarized below, could also
discourage, delay or prevent (1) the merger, amalgamation or acquisition of our
company by means of a tender offer, a proxy contest or otherwise, that a
shareholder may consider in its best interest and (2) the removal of our
incumbent directors and executive officers.
   68
   Blank
Check Preference Shares
  Under the
terms of our bye-laws, subject to applicable legal or Nasdaq requirements, our
board of directors has authority, without any further vote or action by our
shareholders, to issue up to 30 million preference shares with such rights,
preferences and privileges as our board may determine. Our board of directors
may issue preference shares on terms calculated to discourage, delay or prevent
a change of control of our company or the removal of our
management.
  Classified Board of
Directors
  Our
bye-laws provide for the division of our board of directors into three classes
of directors, with each class as nearly equal in number as possible, serving
staggered, three year terms. One-third (or as near as possible) of our directors
will be elected each year. Our bye-laws also provide that directors may only be
removed for cause upon the vote of the holders of no less than 80% of our
outstanding common shares. These provisions could discourage a third party from
making a tender offer for our shares or attempting to obtain control of our
company. It could also delay shareholders who do not agree with the policies of
the board of directors from removing a majority of the board of directors for
two years.
  Business
Combinations
  Although
the BCA does not contain specific provisions regarding “business combinations”
between companies organized under the laws of Bermuda and “interested
shareholders”, we have included these provisions in our bye-laws. Specifically,
our bye-laws contain provisions which prohibit us from engaging in a business
combination with an interested shareholder for a period of three years after the
date of the transaction in which the person became an interested shareholder,
unless, in addition to any other approval that may be required by applicable
law:
  ·
              prior
      to the date of the transaction that resulted in the shareholder becoming
      an interested shareholder, our board of directors approved either the
      business combination or the transaction that resulted in the shareholder
      becoming an interested shareholder;
 ·
              upon
      consummation of the transaction that resulted in the shareholder becoming
      an interested shareholder, the interested shareholder owned at least 85%
      of our voting shares outstanding at the time the transaction commenced;
      or
 ·
              after
      the date of the transaction that resulted in the shareholder becoming an
      interested shareholder, the business combination is approved by the board
      of directors and authorized at an annual or special meeting of
      shareholders by the affirmative vote of at least 80% of our outstanding
      voting shares that are not owned by the interested
      shareholder.
  For
purposes of these provisions, a “business combination” includes mergers,
amalgamations, consolidations, exchanges, asset sales, leases, certain issues or
transfers of shares or other securities and other transactions resulting in a
financial benefit to the interested shareholder. An “interested shareholder” is
any person or entity that beneficially owns 15% or more of our outstanding
voting shares and any person or entity affiliated with or controlling or
controlled by that person or entity, except that so long as Rocket Marine owns
15% or more of our outstanding voting shares, Rocket Marine shall not be an
interested shareholder unless it acquires additional voting shares representing
8% or more of our outstanding voting shares.
   69
   Election
and Removal of Directors
  Our
bye-laws do not permit cumulative voting in the election of directors. Our
bye-laws require shareholders wishing to propose a person for election as a
director (other than persons proposed by our board of directors) to give advance
written notice of nominations for the election of directors. Our bye-laws also
provide that our directors may be removed only for cause and only upon the
affirmative vote of the holders of at least 80% of our outstanding common
shares, voted at a duly authorized meeting of shareholders called for that
purpose, provided that notice of such meeting is served on such director at
least 14 days before the meeting. These provisions may discourage, delay or
prevent the removal of our incumbent directors.
  Shareholder
Meetings
  Under our
bye-laws annual meetings of shareholders will be held at a time and place
selected by our board of directors each calendar year. Special meetings of
shareholders may be called by our board of directors at any time and must be
called at the request of shareholders holding at least 10% of our paid-up share
capital carrying the right to vote at general meetings. Under our bye-laws at
least 15, but not more than 60, days’ notice of an annual meeting or any special
meeting must be given to each shareholder entitled to vote at that meeting.
Under Bermuda law accidental failure to give notice will not invalidate
proceedings at a meeting. Our board of directors may set a record date between
15 and 60 days before the date of any meeting to determine the shareholders who
will be eligible to receive notice and vote at the meeting.
  Limited Actions by
Shareholders
  Any
action required or permitted to be taken by our shareholders must be effected at
an annual or special meeting of shareholders or (except for certain actions) by
unanimous written consent without a meeting. Our bye-laws provide that, subject
to certain exceptions and to the rights granted to shareholders pursuant to the
BCA, only our board of directors may call special meetings of our shareholders
and the business transacted at a special meeting is limited to the purposes
stated in the notice for that meeting. Accordingly, a shareholder may be
prevented from calling a special meeting for shareholder consideration of a
proposal over the opposition of our board of directors and shareholder
consideration of a proposal may be delayed until the next annual
meeting.
  Subject
to certain rights set out in the BCA, our bye-laws provide that shareholders are
required to give advance notice to us of any business to be introduced by a
shareholder at any annual meeting. The advance notice provisions provide that,
for business to be properly introduced by a shareholder when such business is
not specified in the notice of meeting or brought by or at the direction of our
board of directors, the shareholder must have given our secretary notice not
less than 90 nor more than 120 days prior to the anniversary date of the
immediately preceding annual meeting of the shareholders. In the event the
annual meeting is called for a date that is not within 30 days before or after
such anniversary date, the shareholder must give our secretary notice not later
than 10 days following the earlier of the date on which notice of the annual
meeting was mailed to the shareholders or the date on which public disclosure of
the annual meeting was made. The chairman of the meeting may, if the facts
warrant, determine and declare that any business was not properly brought before
such meeting and such business will not be transacted.
  Amendments to
Bye-Laws
  Our
bye-laws require the affirmative vote of the holders of not less than 80% of our
outstanding voting shares to amend, alter, change or repeal the following
provisions in our bye-laws:
  ·
              the
      classified board and director removal provisions;
 ·
              the
      percentage of approval required for our shareholders to amend our
      bye-laws;
 
 70
  
 ·
              the
      limitations on business combinations between us and interested
      shareholders;
 ·
              the
      provisions requiring the affirmative vote of the holders of not less than
      80% of our outstanding voting shares to amend the foregoing provisions;
      and
 ·
              the
      limitations on shareholders’ ability to call special meetings, subject to
      certain rights guaranteed to shareholders under the
BCA.
  These
requirements make it more difficult for our shareholders to make changes to the
provisions in our bye-laws that could have anti-takeover effects.
  C.           Material
Contracts
  As of
December 31, 2007 we had long term debt obligations under our fully revolving
credit facility, with a group of international lenders. On April 3, 2006 we
entered into a fully revolving credit facility for $360 million with Bank of
Scotland and Nordea Bank Finland as joint lead arrangers, which has been subject
to subsequent amendment. For a full description of our credit facilities see
“Item 5 — Operating and Financial Review and Prospects –
Indebtedness.”
  D.           Exchange
controls
  The
Company has been designated as a non-resident of Bermuda for exchange control
purposes by the Bermuda Monetary Authority, whose permission for the issue of
the Common Shares was obtained prior to the offering thereof.
  The
transfer of shares between persons regarded as resident outside Bermuda for
exchange control purposes and the issuance of Common Shares to or by such
persons may be effected without specific consent under the Bermuda Exchange
Control Act of 1972 and regulations thereunder. Issues and transfers of Common
Shares involving any person regarded as resident in Bermuda for exchange control
purposes require specific prior approval under the Bermuda Exchange Control Act
of 1972.
  Subject
to the foregoing, there are no limitations on the rights of owners of the Common
Shares to hold or vote their shares. Because the Company has been designated as
non-resident for Bermuda exchange control purposes, there are no restrictions on
its ability to transfer funds in and out of Bermuda or to pay dividends to
United States residents who are holders of the Common Shares, other than in
respect of local Bermuda currency.
  In
accordance with Bermuda law, share certificates may be issued only in the names
of corporations or individuals. In the case of an applicant acting in a special
capacity (for example, as an executor or trustee), certificates may, at the
request of the applicant, record the capacity in which the applicant is acting.
Notwithstanding the recording of any such special capacity, the Company is not
bound to investigate or incur any responsibility in respect of the proper
administration of any such estate or trust.
  The
Company will take no notice of any trust applicable to any of its shares or
other securities whether or not it had notice of such trust.
  As
an “exempted
company,” the
Company is exempt from Bermuda laws which restrict the percentage of share
capital that may be held by non-Bermudians, but as an exempted company, the
Company may not participate in certain business transactions including: (i) the
acquisition or holding of land in Bermuda (except that required for its business
and held by way of lease or tenancy for terms of not more than 21 years) without
the express authorization of the Bermuda legislature; (ii) the taking of
mortgages on land in Bermuda to secure an amount in excess of $50,000 without
the consent of the Minister of Finance of Bermuda; (iii) the acquisition of
securities created or issued by, or any interest in, any local company or
business, other than certain types of Bermuda government securities or
securities of another “exempted company,” exempted partnership or other
corporation or partnership resident in Bermuda but incorporated abroad; or (iv)
the carrying on of business of any kind in Bermuda, except insofar as may be
necessary for the carrying on of its business outside Bermuda or under a license
granted by the Minister of Finance of Bermuda.
   71
  There is
a statutory remedy under Section 111 of the Companies Act 1981 which provides
that a shareholder may seek redress in the Bermuda courts as long as such
shareholder can establish that the Company’s
affairs are being conducted, or have been conducted, in a manner oppressive or
prejudicial to the interests of some part of the shareholders, including such
shareholder. However, this remedy has not yet been interpreted by the Bermuda
courts.
  The
Bermuda government actively encourages foreign investment in “exempted” entities
like the Company that are based in Bermuda but do not operate in competition
with local business. In addition to having no restrictions on the degree of
foreign ownership, the Company is subject neither to taxes on its income or
dividends nor to any exchange controls in Bermuda. In addition, there is no
capital gains tax in Bermuda, and profits can be accumulated by the Company, as
required, without limitation. There is no income tax treaty between the United
States and Bermuda pertaining to the taxation of income other than applicable to
insurance enterprises.
  E.           
Taxation
 
 The
following is a discussion of the material Bermuda and United States federal
income tax considerations with respect to the Company and holders of 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, such as
dealers in securities, investors whose functional currency is not the United
States dollar and investors that own, actually or under applicable constructive
ownership rules, 10% or more of our common shares, may be subject to special
rules. This discussion deals only with holders who hold the common shares as a
capital asset. Holders of common shares are encouraged to consult their own tax
advisors concerning the overall tax consequences arising in their own particular
situation under United States federal, state, local or foreign law of the
ownership of common shares.
  BermudaTax
Considerations
  As of the
date of this document, we are not subject to taxation under the laws of Bermuda,
and distributions to us by our subsidiaries also are not subject to any Bermuda
tax. As of the date of this document, there is no Bermuda income, corporation or
profits tax, withholding tax, capital gains tax, capital transfer tax, estate
duty or inheritance tax payable by non-residents of Bermuda in respect of
capital gains realized on a disposition of our common shares or in respect of
distributions by us with respect to our common shares. This discussion does not,
however, apply to the taxation of persons ordinarily resident in Bermuda.
Bermuda holders should consult their own tax advisors regarding possible Bermuda
taxes with respect to dispositions of, and distributions on, our common
shares.
  United
States Federal Income Tax Considerations
  The
following are the material United States federal income tax consequences to us
of our activities and to U.S. Holders and Non-U.S. Holders, each as defined
below, of our 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, all
of which are subject to change, possibly with retroactive effect. The discussion
below is based, in part, on the description of our business as described in
“Item 4 — Information on the Company” above and assumes that we conduct our
business as described in that section. Except as otherwise noted, this
discussion is based on the assumption that we will not maintain an office or
other fixed place of business within the United States. References in the
following discussion to “we” and “us” are to Aries Maritime Transport Limited
and its subsidiaries on a consolidated basis.
  United
States Federal Income Taxation of Our Company
 Taxation
of Operating Income: In General
  We earn
substantially all of our income from the use of vessels, from the hiring or
leasing of vessels for use on a time, voyage or bareboat charter basis or from
the performance of services directly related to those uses, which we refer to as
“shipping income.”
   72
  Fifty
percent of shipping income that is attributable to transportation that begins or
ends, but that does not both begin and end, in the United States constitutes
income from sources within the United States, which we refer to as “U.S.-source
shipping income.”
  Shipping
income attributable to transportation that both begins and ends in the United
States is considered to be 100% from sources within the United States. We are
not permitted by law to engage in transportation that produces income which is
considered to be 100% from sources within the United States.
  Shipping
income attributable to transportation exclusively between non-U.S. ports is not
considered to be 100% derived from sources outside the United States. Shipping
income derived from sources outside the United States is not subject to any
United States federal income tax.
  In the
absence of exemption from tax under Section 883, our gross U.S. source shipping
income is subject to a 4% tax imposed without allowance for deductions as
described below.
  Exemption
of Operating Income from United States Federal Income Taxation
  Under
Section 883 of the Code, a foreign corporation will be exempt from United States
federal income taxation on its U.S.-source shipping income if:
  (1)
              it
      is organized in a qualified foreign country, which is one that grants an
      “equivalent exemption”  to corporations organized in the United
      States in respect of such category of the shipping income for which
      exemption is being claimed under Section 883 and which we refer to as the
      “Country of Organization Test”  and
 (2)
              either
 (A)
              more
      than 50% of the value of its stock is beneficially owned, directly or
      indirectly, by individuals who are “residents”  of a qualified
      foreign country, which we refer to as the “50% Ownership
      Test,”  or
 (B)
              its
      stock is “primarily and regularly traded on an established securities
      market” in its country of organization, in another qualified foreign
      country or in the United States, which we refer to as the “Publicly Traded
      Test.”
  The
Country of Organization Test is satisfied since we are incorporated in Bermuda,
and each of our subsidiaries is incorporated in the British Virgin Islands, the
Marshall Islands, or Malta, all of which we believe are qualified foreign
countries in respect of each category of Shipping Income we currently earn and
expect to earn in the future. Therefore, we and our subsidiaries are exempt from
United States federal income taxation with respect to our U.S.-source shipping
income as we and each of our subsidiaries meet either of the 50% Ownership Test
or the Publicly Traded Test. Under a special attribution rule of Section 883,
each of our Subsidiaries is deemed to have satisfied the 50% Ownership Test if
we satisfy such test or the Publicly Traded Test.  Due to the
widely-held nature of our stock, we may have difficulty satisfying the 50%
Ownership Test.
  The
Treasury Regulations provide, in pertinent part, that stock of a foreign
corporation is considered to be “primarily traded” on an established securities
market 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 are our sole class of issued and outstanding stock, are “primarily traded”
on the Nasdaq Global Market, which is an established securities market in the
United States.
    73
  Under the
Treasury Regulations, our common shares are considered to be “regularly traded”
on an established securities market if one or more classes of our shares
representing more than 50% of our outstanding shares, by total combined voting
power of all classes of shares entitled to vote and total value, is listed on an
established securities market, which we refer to as the listing threshold. Since
our common shares are our sole class of issued and outstanding stock and are
listed on the Nasdaq Global Market, we meet 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 the stock is traded on the market, other
than in minimal quantities, on at least 60 days during the taxable year or 1/6
of the days in a short taxable year; and (ii) the aggregate number of shares of
such class of stock traded on such market 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. We satisfy these
trading frequency and trading volume tests. Even if this were not the case, the
Treasury regulations provide that the trading frequency and trading volume tests
will be deemed satisfied if, as is currently the case with our common shares,
such class of stock is traded on an established market in the United States and
such stock is regularly quoted by dealers making a market in such
stock.
  Notwithstanding
the foregoing, the Treasury Regulations provide, in pertinent part, that our
shares are not to be considered to be “regularly traded”
on an established securities market for any taxable year in which 50% or more of
the vote and value of our outstanding common shares are owned, actually or
constructively under specified stock 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 our outstanding stock, which we refer to as the “5 Percent Override
Rule.”
  To
determine the persons who own 5% or more of the vote and value of our shares, or
“5% Shareholders,” the Treasury Regulations permit us to rely on those persons
that are identified on Form 13G and Form 13D filings with the United States
Securities and Exchange Commission, or the “SEC,” as having a 5% or more
beneficial interest in our common shares. The Treasury Regulations further
provide that an investment company which is registered under the Investment
Company Act of 1940, as amended, will not be treated as a 5% Shareholder for
such purposes.
  In the
event the 5 Percent Override Rule is triggered, the Treasury Regulations provide
that the 5 Percent Override Rule does not apply if we can establish in
conformity with the Treasury Regulations that within the group of 5%
Shareholders, sufficient shares are owned by qualified shareholders for purposes
of Section 883 to preclude non-qualified shareholders in such group from owning
50% or more of the value of our shares for more than half the number of days
during such year.
  Aries
Energy (through its wholly-owned subsidiary Rocket Marine Inc.) owns
approximately 52% of our outstanding common shares. If Aries Energy alone or
together with other 5% Shareholders were to own 50% of our outstanding shares on
more than half the days of any taxable year, the 5 Percent Override Rule would
be triggered. In order to preclude the application of the 5 Percent Override
Rule, Aries Energy, Rocket Marine Inc. and Captain Gabriel Petridis, the 50%
beneficial owner of Aries Energy, have provided information to establish that
Captain Petridis is a qualified shareholder.
  As a
result, we believe we are able to preclude the application of the 5 Percent
Override Rule and therefore satisfy the Publicly Traded Test. However, there can
be no assurance that we are able to continue to satisfy the Publicly Traded Test
if (i) Captain Petridis’s status as a qualified shareholder changes, (ii) the
direct or indirect beneficial ownership of the shares held by Captain Petridis
changes, (iii) the ownership of shares not directly or indirectly owned by
Captain Petridis comes to be concentrated in 5% Shareholders that either are not
qualified shareholders or who fail to comply with applicable documentation
requirements or (iv) Captain Petridis, Aries Energy or Rocket Marine fail to
satisfy the applicable documentation requirements.
  Even
though we believe that we will be able to qualify for the benefits of Section
883 under the Publicly-Traded Test, we can provide no assurance that we will be
able to continue to so qualify in the future.
   74
  
  Taxation
In The Absence of Section 883 Exemption
  To the
extent the benefits of Section 883 are unavailable, our U.S. source shipping
income, to the extent not considered to be “effectively
connected”  with the conduct of a U.S. trade or business, as described
below, would be subject to a 4% tax imposed by Section 887 of the Code on a
gross basis, without the benefit of deductions. Since under the sourcing rules
described above, no more than 50% of our shipping income would be treated as
being derived from U.S. sources, the maximum effective rate of U.S. federal
income tax on our shipping income would never exceed 2% under the 4% gross basis
tax regime.
  To the
extent the benefits of the Section 883 exemption are unavailable and our U.S.
source shipping income is considered to be “effectively connected” with the
conduct of a U.S. trade or business, as described below, any such “effectively
connected” U.S. source shipping income, net of applicable deductions, would, in
lieu of the 4% gross basis tax described above, be subject to the U.S. federal
corporate income tax currently imposed at rates of up to 35%. In addition, we
may 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 U.S. trade or business.
  Our U.S.
source shipping income would be considered “effectively connected” with the
conduct of a U.S. 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 shipping income; and
 ·
              substantially
      all of our U.S. 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
have, or permit circumstances that would result in our having, a fixed place of
business in the United States involved in the earning of shipping income and
therefore, we believe that none of our U.S. source shipping income will be
“effectively connected”  with the conduct of a U.S. trade or
business.
  United StatesTaxation of Gain onSaleof Vessels
  Regardless
of whether we qualify for exemption under Section 883, we will not be subject to
United States federal income taxation with respect to gain realized on a sale of
a vessel, provided the sale is considered to occur outside of the United States
under United States federal income tax principles. In general, a sale of a
vessel will be considered to occur outside of the United States for this purpose
if title to the vessel, and risk of loss with respect to the vessel, pass to the
buyer outside of the United States. It is expected that any sale of a vessel by
us will be considered to occur outside of the United States.
  United StatesFederal Income Taxation ofU.S.Holders
  As used
herein, the term “ U.S. Holder” means a beneficial owner of common shares that
is a United States citizen or resident, 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 our common shares,
you are encouraged to consult your tax advisor.
   75
   Distributions
  Subject
to the discussion of passive foreign investment companies below, any
distributions made by us with respect to our common shares to a U.S. Holder will
generally constitute dividends, which may be taxable as ordinary income or
“qualified dividend income” as described in more detail below, to the extent of
our current or accumulated earnings and profits, as determined under United
States federal income tax principles. Distributions in excess of our earnings
and profits will be treated first as a nontaxable return of capital to the
extent of the U.S. 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, U.S. 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” or, in the case of
certain types of U.S. Holders “general 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 U.S. Holder who is an individual, trust or estate
(a “U.S. Individual Holder” ) will generally be treated as “qualified dividend
income”  that is taxable to such U.S. Individual Holders at
preferential tax rates (through 2010) provided that (1) the common shares are
readily tradable on an established securities market in the United States (such
as the Nasdaq Global Market, 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 we do not
believe we are, have been or will be); and (3) the U.S. Individual 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 becomes ex-dividend. Legislation
has been recently introduced in the U.S. Congress which, if enacted in its
present form, would preclude our dividends from qualifying for such preferential
rates prospectively from the date of the enactment. Therefore, there is no
assurance that any dividends paid on our common shares will be eligible for
these preferential rates in the hands of a U.S. Individual Holder. Any dividends
paid by the Company which are not eligible for these preferential rates will be
taxed as ordinary income to a U.S. Individual Holder.
  Special
rules may apply to any “extraordinary dividend” generally, a dividend in an
amount which is equal to or in excess of ten percent of a shareholder’s adjusted
basis (or fair market value in certain circumstances) in a common share 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 U.S. Individual
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 U.S. Holder generally recognizes 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 U.S. Holder from such sale, exchange or other
disposition and the U.S. Holder’s tax basis in such stock. Such gain or loss is
treated as long-term capital gain or loss if the U.S. Holder’s holding period is
greater than one year at the time of the sale, exchange or other disposition.
Such capital gain or loss is generally treated as U.S.-source income or loss, as
applicable, for U.S. foreign tax credit purposes. A U.S. Holder’s ability to
deduct capital losses is subject to certain limitations.
  Passive
Foreign Investment Company Status and Significant Tax Consequences
  Special
United States federal income tax rules apply to a U.S. Holder that holds stock
in a foreign corporation classified as a passive foreign investment company for
United States federal income tax purposes. In general, we are treated as a
passive foreign investment company with respect to a U.S. Holder if, for any
taxable year in which such holder held our common shares, either
   76
 
  ·
              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 the assets held by the corporation
      during such taxable year produce, or are held for the production of,
      passive income.
  For
purposes of determining whether we are a passive foreign investment company, we
are 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 percent 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 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, and we
are not relying upon an opinion of counsel on this issue, 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. Correspondingly, such income should not constitute passive income, and
the assets that we or our wholly-owned subsidiaries own and operate in
connection with the production of such income, in particular, the vessels,
should not constitute passive assets for purposes of determining whether we are
a passive foreign investment company. We believe there is substantial legal
authority supporting our position consisting of case law and Internal Revenue
Service pronouncements concerning the characterization of income derived from
time charters and voyage charters as services income for other tax purposes.
However, in the absence of any legal authority specifically relating to the
statutory provisions governing passive foreign investment companies, the
Internal Revenue Service or a court could disagree with our position. In
addition, although we intend to conduct our affairs in a manner to avoid being
classified as a passive foreign investment company with respect to any taxable
year, we cannot assure you that the nature of our operations will not change in
the future.
  If we
were to be treated as a passive foreign investment company, special and adverse
United States federal income tax rules would apply to a U.S. Holder of our
shares. Among other things, the distributions a U.S. Holder received with
respect to our shares and gains, if any, a U.S. Holder derived from his sale or
other disposition of our shares would be taxable as ordinary income (rather than
as qualified dividend income or capital gain, as the case may be), would be
treated as realized ratably over his holding period in our common shares, and
would be subject to an additional interest charge. However, a U.S. Holder might
be able to make certain tax elections which ameliorate these
consequences.
  United StatesFederal Income Taxation of “Non-U.S.
Holders”
  A
beneficial owner of common shares that is not a U.S. Holder is referred to
herein as a “Non-U.S. Holder.”
  Dividends on Common
Shares
  Non-U.S.
Holders generally are not subject to United States federal income tax or
withholding tax on dividends received from us with respect to our common shares,
unless that income is effectively connected with the Non-U.S. Holder’s conduct
of a trade or business in the United States. If the Non-U.S. Holder is entitled
to the benefits of a United States income tax treaty with respect to those
dividends, that income is taxable only if it is attributable to a permanent
establishment maintained by the Non-U.S. Holder in the United
States.
   77
   Sale,
Exchange or Other Disposition of Common Shares
 
 Non-U.S.
Holders generally are not 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-U.S. Holder’s conduct of a
      trade or business in the United States. If the Non-U.S. Holder is entitled
      to the benefits of an income tax treaty with respect to that gain, that
      gain is taxable only if it is attributable to a permanent establishment
      maintained by the Non-U.S. Holder in the United States;
  or
 ·
              the
      Non-U.S. 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-U.S. Holder is engaged in a United States trade or business for United
States federal income tax purposes, the income from the common shares, including
dividends and the gain from the sale, exchange or other disposition of the stock
that is effectively connected with the conduct of that trade or business is
generally subject to regular United States federal income tax in the same manner
as discussed in the previous section relating to the taxation of U.S. Holders.
In addition, if you are a corporate Non-U.S. Holder, your earnings and profits
that are attributable to the effectively connected income, which are 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 income tax
treaty.
  F. Dividends and paying
agents
 
 Not
applicable.
 
 G.
Statement by experts
 
 Not
applicable.
 
 H.
Documents on display
 
 We file
annual reports and other information with the SEC. You may read and copy any
document we file with the SEC at its public reference room at 100 F Street,
N.E., Room 1580, Washington, D.C. 20549. You may also obtain copies of this
information by mail from the public reference section of the SEC, 100 F Street,
N.E., Room 1580, Washington, D.C. 20549, at prescribed rates. Please call the
SEC at 1-800-SEC-0330 for further information on the operation of the public
reference room. Our SEC filings are also available to the public at the web site
maintained by the SEC at http://www.sec.gov, as well as on our website at
http://www.ariesmaritime.com.
  I.
Subsidiary information
 
 Not
applicable.
 
 ITEM
      11.
              QUANTITATIVE
      AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK
  See “Item
5 – Operating and Financial Review and Prospects – Quantitative and Qualitative
Disclosures About Market Risk.”
  ITEM
      12.
              DESCRIPTION
      OF SECURITIES OTHER THAN EQUITY
SECURITIES
  Not
Applicable.
   78
  PART
II
  ITEM
      13.
              DEFAULTS,
      DIVIDEND ARREARAGES AND DELINQUENCIES
  Neither
we nor any of our subsidiaries have been subject to a material default in the
payment of principal, interest, a sinking fund or purchase fund installment or
any other material default that was not cured within 30 days. In addition, the
payment of our dividends is not, and has not been in arrears or has not been
subject to a material delinquency that was not cured within 30 days.
  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.
 
 The Chief
Executive Officer and Chief Financial Officer, after evaluating the
effectiveness of the Company’s disclosure controls and procedures (as defined by
Rules 13a-15(e) and 15d-15(e) under the securities and Exchange Act of 1934) as
of December 31, 2007, have concluded that, as of such date, the Company’s
disclosure controls and procedures were effective to provide reasonable
assurance that the information required to be disclosed by the Company in
reports filed under the Securities Exchange Act of 1934, is recorded, processed,
summarized and reported within the time period specified in the SEC’s rules and
forms. The Company further believes that a system of controls, no matter how
well designed and operated, cannot provide absolute assurance that the
objectives of the controls are met, and no evaluation of controls can provide
absolute assurance that all control issues and instances of fraud, if any,
within a company have been detected.
  (b)           Management’s
annual report on internal control over financial reporting.
 
 Our
management is responsible for establishing and maintaining adequate internal
control over financial reporting as defined in Rule 13a-15(f) or 15d-15(f) under
the Exchange Act. Our internal control system was designed to provide reasonable
assurance to our management and board of directors regarding the reliability of
financial reporting and the preparation of published financial statements in
accordance with Generally Accepted Accounting Principles.  All
internal control systems, no matter how well designed, have inherent
limitations. Therefore, even those systems determined to be effective may not
prevent or detect misstatements and can provide only reasonable assurance with
respect to financial statement preparation and presentation.
  Our
management assessed the effectiveness of our internal control over financial
reporting as of December 31, 2007. In making this assessment, management used
the criteria for effective internal control over financial reporting set forth
by the Committee of Sponsoring Organizations of the Treadway Commission
(‘‘COSO’’) in Internal Control-Integrated Framework. Based on this assessment,
management has concluded that, as of December 31, 2007, our internal control
over financial reporting was effective based on those criteria.
  (c)        Attestation
report of the independent registered public accounting firm.
  The
effectiveness of the Company’s internal control over financial reporting as of
December 31, 2007, has been audited by PricewaterhouseCoopers SA, an independent
registered public accounting firm, as stated in their report which appears
herein.
 (d)        Changes
in internal control over financial reporting.
  79
  There have been no changes in internal controls over financial reporting
(identified in connection with management’s evaluation of such internal controls
over financial reporting) that occurred during the year covered by this annual
report that have materially affected, or are reasonably likely to materially
affect, the Company’s internal controls over financial
reporting.
 
 ITEM
      16A.
              AUDIT
      COMMITTEE FINANCIAL EXPERT
  We have
established an audit committee comprised of three members which is responsible
for reviewing our accounting controls and recommending to the board of directors
the engagement of our outside auditors. Each member is an independent director
under the corporate governance rules of the Nasdaq Global Market that are
applicable to us. The members of the audit committee are Messrs. Henry S. Marcus
and Panagiotis Skiadas with one vacancy resulting from the resignation of our
Chairman, Per Olav Karlsen, from the audit committee in February,
2008.  Mr. Karlsen has previously served as the “audit committee
financial expert” as defined in Form 20-F.  The Company does not
currently have an audit committee financial expert following the resignation of
Mr. Karlsen from the audit committee because the Company believes that the
current members of the audit committee have ample knowledge and experience to
perform the functions of the audit committee.  In addition, the board
of directors intends to fill the vacancy on the audit committee with a director
who meets the criteria to qualify as an audit committee financial
expert.
  ITEM
      16B.
              CODE
      OF ETHICS
  As a
foreign private issuer, we are exempt from the rules of the Nasdaq Global Market
that require the adoption of a code of ethics. However, we have voluntarily
adopted a code of ethics that applies to our principal executive officer,
principal financial officer and persons performing similar functions. We will
also provide any person a hard copy of our code of ethics free of charge upon
written request. Shareholders may direct their requests to the Company at 18
Zerva Nap., Glyfada, Athens 166 75 Greece, Attn: Corporate
Secretary.
  ITEM
      16C.
              PRINCIPAL
      ACCOUNTANT FEES AND SERVICES
  Audit
Fees
  Our
principal accountants for the fiscal years ended December 31, 2007 and 2006 were
PricewaterhouseCoopers S.A.  Our audit fees for 2007 and 2006 were
$847,500 and $305,000 respectively.
  Audit-Related
Fees
  We
did not incur audit-related fees for 2007.  Our audit-related fees for
2006 were $78,000.
  Tax Fees
  We did
not incur tax fees for 2007 or 2006.
  All Other
Fees
  We did
not incur any other fees for 2007 or 2006.
  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.
  ITEM
      16D.
              EXEMPTIONS
      FROM THE LISTING STANDARDS FOR AUDIT
COMMITTEES
  Not
applicable.
   80
  ITEM
16E.            PURCHASES
OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED
PURCHASES
  None.
   Part
III
  ITEM
      17.
              FINANCIAL
      STATEMENTS
  See Item
18.
  ITEM
      18.
              FINANCIAL
      STATEMENTS
  The
following financial statements, together with the report of
PricewaterhouseCoopers S.A. thereon, are filed as part of this
report:
  
   81
 
 
 
  INDEX
      TO THE CONSOLIDATED FINANCIAL STATEMENTSPageReport
      of Independent Registered Public Accounting Firm
              
              
              
              F-2Balance
      Sheets
              
              
              
              F-3Statements
      of Operations
              
              F-4Statements
      of Stockholders’ Equity
              F-5Statements
      of Cash Flows
              F-6Notes
      to the Consolidated Financial Statements
              F-8
  F-1
  REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 To
the Board of Directors and Stockholders of
 Aries
Maritime Transport Limited:
  In our
opinion, the accompanying consolidated  balance sheets and the related
consolidated statements of operations, stockholders' equity and cash flows
present fairly, in all material respects, the financial position of Aries
Maritime Transport Limited and its subsidiaries (the “Company”) at December 31,
2007 and December 31, 2006 and the results of their operations and their cash
flows for each of the three years in the period ended December 31, 2007, in
conformity with accounting principles generally accepted in the United States of
America. Also in our opinion, the Company maintained, in all material respects,
effective internal control over financial reporting as of December 31, 2007,
based on criteria established in Internal
Control - Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO). The Company's management is
responsible for these financial statements, for maintaining effective internal
control over financial reporting and for its assessment of the effectiveness of
internal control over financial reporting, included in “Management’s Report on
Internal Control over Financial Reporting”, appearing in Item
15(b).  Our responsibility is to express opinions on these financial
statements and on the Company's internal control over financial reporting based
on our audits (which was an integrated audit in 2007).We conducted our audits of these statements in accordance with the
standards of the Public Company Accounting Oversight Board (United States).
Those standards require that we plan and perform the audits to obtain reasonable
assurance about whether the financial statements are free of material
misstatement and whether effective internal control over financial reporting was
maintained in all material respects. Our audits of the financial statements
included 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, and evaluating the overall
financial statement presentation. Our audit of internal control over financial
reporting included obtaining an understanding of internal control over financial
reporting, assessing the risk that a material weakness exists, and testing and
evaluating the design and operating effectiveness of internal control based on
the assessed risk.  Our audits also included performing such other
procedures as we considered necessary in the circumstances.We
believe that our audits provide a reasonable basis for our opinion.
  The
accompanying consolidated financial statements have been prepared assuming that
the Company will continue as a going concern. As discussed in Note 1 to the
consolidated financial statements, the Company has incurred a net loss, has a
net working capital deficit and has not met certain of its financial covenants
of debt agreements with lenders. These conditions raise substantial doubt about
its ability to continue as a going concern. Management’s plans in regard to this
matter are also described in Note 1. The consolidated financial statements do
not include any adjustments that might result from the outcome of this
uncertainty.
  A
company’s 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.  A company’s 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.
  Because
of its inherent limitations, internal control over financial reporting may not
prevent or detect misstatements.  Also, projections of any evaluation
of effectiveness to future periods are subject to the risk that controls may
become inadequate because of changes in conditions, or that the degree of
compliance with the policies or procedures may deteriorate.
  /s/
PricewaterhouseCoopers S.A.
  Athens,
Greece
 June 30,
2008
  F-2
  
  CONSOLIDATED
      BALANCE SHEETS
 (All amounts expressed in
      thousands of U.S. Dollars)
 
 Notes
              
              
              December
      31,
              
              
              December
      31,2006
              
              
              2007ASSETSCurrent
      assetsCash
      and cash equivalents
              
              
              
              
              
              11,612
              
              
              
              12,444Restricted
      cash
              
              
              4
              
              
              
              3,242
              
              
              
              39Trade
      receivables, net
              
              
              
              
              
              
              1,960
              
              
              
              2,219Other
      receivables
              
              
              
              
              
              
              172
              
              
              
              1,033Derivative
      financial instruments
              
              
              15
              
              
              
              671
              
              
              
              -Inventories
              
              
              5
              
              
              
              1,496
              
              
              
              1,969Prepaid
      expenses
              
              
              
              
              
              
              338
              
              
              
              1,681Due
      from managing agent
              
              
              
              
              
              
              444
              
              
              
              814Due
      from related parties
              
              
              19
              
              
              
              2,495
              
              
              
              -Total
      current assets
              
              
              
              
              
              
              22,430
              
              
              
              20,199Vessels
      and other fixed assets, net
              
              
              6
              
              
              
              431,396
              
              
              
              400,838Deferred
      charges, net
              
              
              9
              
              
              
              4,214
              
              
              
              2,906Restricted
      cash
              
              
              4
              
              
              
              -
              
              
              
              1,548Total
      non-current assets
              
              
              
              
              
              
              435,610
              
              
              
              405,292Total
      assets
              
              
              
              
              
              
              458,040
              
              
              
              425,491LIABILITIES
      AND STOCKHOLDERS’ EQUITYCurrent
      liabilitiesCurrent
      portion of long-term debt
              
              
              10
              
              
              
              -
              
              
              
              284,800Accounts
      payable, trade
              
              
              7
              
              
              
              11,828
              
              
              
              8,423Accrued
      liabilities
              
              
              8
              
              
              
              7,289
              
              
              
              5,297Deferred
      income
              
              
              
              
              
              
              1,947
              
              
              
              2,291Derivative
      financial instruments
              
              
              15
              
              
              
              2,547
              
              
              
              5,936Deferred
      revenue
              
              
              11
              
              
              
              6,011
              
              
              
              4,656Due
      to related parties
              
              
              19
              
              
              
              -
              
              
              
              594Total
      current liabilities
              
              
              
              
              
              
              29,622
              
              
              
              311,997Long-term
      debt, net of current portion
              
              
              10
              
              
              
              284,800
              
              
              
              -Deferred
      revenue
              
              
              11
              
              
              
              11,030
              
              
              
              6,375Total
      liabilities
              
              
              
              
              
              
              325,452
              
              
              
              318,372Commitments
      and contingencies
              
              
              10,
      17Stockholders’
      equityPreferred
      Stock, $0.01 par value, 30 million shares authorized, none
      issued.
                Common
      Stock, $0.01 par value, 100 million shares authorized,
      28.6  million shares  issued and
      outstanding  at December 31, 2007 (2006: 28.4 million
      shares)
              
              
              
              
              
              
              284
              
              
              
              286Additional
      paid-in capital
              
              
              
              
              
              
              132,304
              
              
              
              115,566Deficit
              
              
              
              
              
              
              -
              
              
              
              (8,733
              )Total
      stockholders’ equity
              
              
              
              
              
              
              132,588
              
              
              
              107,119Total
      liabilities and stockholders’
      equity
              
              
              
              
              
              
              458,040
              
              
              
              425,491
 
 
 The
accompanying notes are an integral part of these consolidated financial
statements.
  F-3
  ARIES
      MARITIME TRANSPORT LIMITED
 CONSOLIDATED
      STATEMENTS OF OPERATIONS
 (All
      amounts expressed in thousands of U.S. Dollars, except share and per share
      amounts)
 
 Notes
              
              
              Year
      ended
                December
      31, 2005
              
              
              Year
      ended
                December
      31, 2006
              
              
              Year
      ended
                December
      31, 2007REVENUES:Revenue
      from voyages
              
              
              11,
      14
              
              
              
              75,905
              
              
              
              94,199
              
              
              
              99,423EXPENSES:Commissions
              
              
              19
              
              
              
              (1,323
              )
              
              
              (1,403
              )
              
              
              (1,999
              )Voyage
      expenses
              
              
              
              
              
              
              (224
              )
              
              
              (4,076
              )
              
              
              (5,082
              )Vessel
      operating expenses
              
              
              18,
      19
              
              
              
              (17,842
              )
              
              
              (27,091
              )
              
              
              (32,073
              )General
      & administrative expenses
              
              
              19,
      12
              
              
              
              (1,649
              )
              
              
              (4,226
              )
              
              
              (5,666
              )Depreciation
              
              
              6
              
              
              
              (19,446
              )
              
              
              (29,431
              )
              
              
              (30,653
              )Amortization
      of drydocking and special survey expense
              
              
              6,
      19
              
              
              
              (1,958
              )
              
              
              (3,568
              )
              
              
              (5,094
              )Management
      fees
              
              
              19
              
              
              
              (1,511
              )
              
              
              (1,999
              )
              
              
              (2,171
              )(43,953
              )
              
              
              (71,794
              )
              
              
              (82,738
              )Net
      operating income
              
              
              
              
              
              
              31,952
              
              
              
              22,405
              
              
              
              16,685OTHER
      INCOME/( EXPENSES), NET:Interest
      expense
              
              
              9,
      10
              
              
              
              (18,793
              )
              
              
              (19,135
              )
              
              
              (21,875
              )Interest
      received
              
              
              
              
              
              
              672
              
              
              
              931
              
              
              
              762Other
      expenses, net
              
              
              
              
              
              
              (10
              )
              
              
              (214
              )
              
              
              (245
              )Change
      in fair value of derivatives
              
              
              15
              
              
              
              950
              
              
              
              (1,788
              )
              
              
              (4,060
              )Total
      other income/ (expenses), net
              
              
              
              
              
              
              (17,181
              )
              
              
              (20,206
              )
              
              
              (25,418
              )NET
      INCOME/ (LOSS)
              
              
              
              
              
              
              14,771
              
              
              
              2,199
              
              
              
              (8,733
              )Earnings/
      (loss) per share:Basic
      and diluted
              
              
              
              
              
              $
              0.64
              
              
              $
              0.08
              
              
              $
              (0.31
              )Weighted
      average number of shares:Basic
      and diluted
              
              
              
              
              
              
              23,118,466
              
              
              
              28,416,877
              
              
              
              28,478,850
 
 
 
 
 
 The
accompanying notes are an integral part of these consolidated financial
statements.
  F-4
  
 
 ARIES
MARITIME TRANSPORT LIMITED
 CONSOLIDATED
STATEMENTS OF STOCKHOLDERS’ EQUITY
 (All
amounts expressed in thousands of U.S. Dollars except as
indicated)
 
 Notes
              
              
              Common
      Stock (Number of Shares in Thousands)
              
              
              Invested
      Equity
              
              
              Share
      Capital
              
              
              Additional
      Paid-in Capital
              
              
              (Deficit)/
      Retained Earnings
              
              
              Total
      Stockholders’ EquityBalance
      at December 31, 2004
              
              
              
              
              
              
              
              
              16,653
              
              
              
              
              
              
              
              
              
              
              
              
              16,653Net income
              
              
              
              
              
              
              
              
              3,807
              
              
              
              
              
              
              
              
              
              
              
              
              3,807Capital contribution
              
              
              13
              
              
              
              1,200
              
              
              
              12
              
              
              
              
              
              
              
              
              
              
              
              
              12Balance
      at March 17,  2005
              
              
              
              
              
              
              1,200
              
              
              
              20,472
              
              
              
              
              
              
              
              
              
              
              
              
              20,472Reorganization
                adjustment
              
              
              
              
              
              
              
              
              
              
              (20,472
              )
              
              
              12
              
              
              
              20,460
              
              
              
              -
              
              
              
              -Distributions
              
              
              13
              
              
              
              14,977
              
              
              
              -
              
              
              
              150
              
              
              
              (2,058
              )
              
              
              -
              
              
              
              (1,908
              )Net income
              
              
              
              
              
              
              
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              10,964
              
              
              
              10,964Proceeds from initial
                publicoffering,
      net
              
              
              1
              
              
              
              12,240
              
              
              
              -
              
              
              
              122
              
              
              
              140,807
              
              
              
              -
              
              
              
              140,929Dividends paid
              
              
              13
              
              
              
              
              
              
              
              -
              
              
              
              -
              
              
              
              (3,812
              )
              
              
              (10,964
              )
              
              
              (14,776
              )Balance
      at December 31, 2005
              
              
              
              
              
              
              28,417
              
              
              
              -
              
              
              
              284
              
              
              
              155,397
              
              
              
              -
              
              
              
              155,681Net income
              
              
              
              
              
              
              
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              2,199
              
              
              
              2,199Dividends paid
              
              
              13
              
              
              
              
              
              
              
              -
              
              
              
              -
              
              
              
              (23,093
              )
              
              
              (2,199
              )
              
              
              (25,292
              )Balance
      at December 31, 2006
              
              
              
              
              
              
              28,417
              
              
              
              -
              
              
              
              284
              
              
              
              132,304
              
              
              
              -
              
              
              
              132,588Net loss
              
              
              
              
              
              
              
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              (8,733
              )
              
              
              (8,733
              )Issuance of restricted
                shares
              
              
              12
              
              
              
              200
              
              
              
              -
              
              
              
              2
              
              
              
              -
              
              
              
              -
              
              
              
              2Stock-based
                compensation
              
              
              12
              
              
              
              
              
              
              
              -
              
              
              
              -
              
              
              
              1,232
              
              
              
              -
              
              
              
              1,232Dividends paid
              
              
              13
              
              
              
              
              
              
              
              -
              
              
              
              -
              
              
              
              (17,970
              )
              
              
              -
              
              
              
              (17,970
              )Balance
      at December 31, 2007
              
              
              
              
              
              
              28,617
              
              
              
              -
              
              
              
              286
              
              
              
              115,566
              
              
              
              (8,733
              )
              
              
              107,119
 
  
 The
accompanying notes are an integral part of these consolidated financial
statements.
 
  F-5
  ARIES
      MARITIME TRANSPORT LIMITED
 CONSOLIDATED
      STATEMENTS OF CASH FLOWS
 (All
amounts expressed in thousands of U.S. Dollars)
 
 Notes
              
              
              Year
      ended
                December
      31, 2005
              
              
              Year
      ended
                December
      31, 2006
              
              
              Year
      ended
                December
      31, 2007Cash
      flows from operating activities:Net
      income/ (loss)
              
              
              
              
              
              14,771
              
              
              
              2,199
              
              
              
              (8,733
              )Adjustments
      to reconcile net income to net
                cash
      provided byoperating
      activities:Depreciation
              
              
              
              
              
              19,446
              
              
              
              29,431
              
              
              
              30,653Amortization
      of drydocking and special
                survey
              
              
              
              
              
              1,958
              
              
              
              3,727
              
              
              
              6,485Amortization
      and write-off of deferred
                financing
      costs
              
              
              
              
              
              1,598
              
              
              
              1,639
              
              
              
              1,308Amortization
      of debt discount
              
              
              
              
              
              7,640
              
              
              
              -
              
              
              
              -Amortization
      of deferred revenue
              
              
              
              
              
              (8,845
              )
              
              
              (10,715
              )
              
              
              (6,010
              )Unearned
      revenue
              
              
              
              
              
              (16
              )
              
              
              -
              
              
              
              -Change
      in fair value of derivative financial
                instruments
              
              
              
              
              
              (950
              )
              
              
              1,788
              
              
              
              4,060Payments
      for drydocking / special survey
                costs
              
              
              
              
              
              (1,896
              )
              
              
              (15,151
              )
              
              
              (6,144
              )Proceeds
      for vessel’s drydocking / special
                survey
      costs
              
              
              
              
              
              -
              
              
              
              5,000
              
              
              
              -Stock-based
      compensation
              
              
              
              
              
              -
              
              
              
              -
              
              
              
              1,232Changes
      in assets and liabilities
              
              
              16
              
              
              
              3,268
              
              
              
              6,297
              
              
              
              (5,270
              )Net
      cash provided by operating activities
              
              
              
              
              
              
              36,974
              
              
              
              24,215
              
              
              
              17,581Cash
      flows from investing activities:Vessel
      acquisitions/ additions
              
              
              
              
              
              
              (103,355
              )
              
              
              (101,765
              )
              
              
              (399
              )Other
      fixed asset acquisitions
              
              
              
              
              
              
              (96
              )
              
              
              (50
              )
              
              
              (37
              )Restricted
      cash
              
              
              
              
              
              
              813
              
              
              
              -
              
              
              
              (1,572
              )Advances
      for vessel acquisitions
              
              
              
              
              
              
              (11,363
              )
              
              
              -
              
              
              
              -Net
      cash used in investing activities
              
              
              
              
              
              
              (114,001
              )
              
              
              (101,815
              )
              
              
              (2008
              )Cash
      flows from financing activities:Proceeds from issuance of long-term debt
              
              
              
              
              
              
              183,820
              
              
              
              100,980
              
              
              
              -Principal repayments of long-term debt
              
              
              
              
              
              
              (214,600
              )
              
              
              -
              
              
              
              -Proceeds from termination of derivative
      financial  instruments
              
              
              
              
              
              
              301
              
              
              
              489
              
              
              
              -Payment of participation liability
              
              
              
              
              
              
              (6,500
              )
              
              
              -
              
              
              
              -Payment of financing costs
              
              
              
              
              
              
              (2,824
              )
              
              
              (2,981
              )
              
              
              -Restricted cash
              
              
              
              
              
              
              4,793
              
              
              
              (3,232
              )
              
              
              3,227Proceeds from issuance of capital stock
              
              
              
              
              
              
              140,941
              
              
              
              -
              
              
              
              2Distribution
              
              
              
              
              
              
              (214
              )
              
              
              -
              
              
              
              -Dividends paid
              
              
              
              
              
              
              (14,776
              )
              
              
              (25,292
              )
              
              
              (17,970
              )Net
      cash provided by/ (used in)
                financing activities
              
              
              
              
              
              
              90,941
              
              
              
              69,964
              
              
              
              (14,741
              )Net
      increase/ (decrease) in cash and
                cash
      equivalents
              
              
              
              
              
              
              13,914
              
              
              
              (7,636
              )
              
              
              832Cash
      and cash equivalentsBeginning of year
              
              
              
              
              
              
              5,334
              
              
              
              19,248
              
              
              
              11,612End of year
              
              
              
              
              
              
              19,248
              
              
              
              11,612
              
              
              
              12,444
 
 The
accompanying notes are an integral part of these consolidated financial
statements.
  F-6
  ARIES
      MARITIME TRANSPORT LIMITED
 CONSOLIDATED
      STATEMENTS OF CASH FLOWS
(CONTINUED)
 (All
      amounts expressed in thousands of U.S.
Dollars)
 
 Year
      ended
                December
      31, 2005
              
              
              Year
      ended
                December
      31, 2006
              
              
              Year 
      ended
                December
      31, 2007SUPPLEMENTAL
      CASH FLOW INFORMATIONInterest paid
              
              
              9,838
              
              
              
              13,466
              
              
              
              23,211Issuance of capital stock
              
              
              150
              
              
              
              -
              
              
              
              -Liability assumed in connection with vessel acquisitions
              
              
              28,387
              
              
              
              -
              
              
              
              -Distribution
              
              
              1,694
              
              
              
              -
              
              
              
              -
 
  The
accompanying notes are an integral part of these consolidated financial
statements.
  F-7
  ARIES
MARITIME TRANSPORT LIMITED
 (All
amounts in tables expressed in thousands of U.S. Dollars)
 
 Notes
to the Consolidated Financial Statements
 
 1.           Organization
and Basis of Presentation
 
 The
principal business of Aries Maritime Transport Limited (the “Company” or “Aries
Maritime”) is the ownership and chartering of ocean-going vessels world-wide.
The Company conducts its operations through its subsidiaries. The vessel-owning
subsidiaries own products tankers and container vessels that transport a variety
of refined petroleum products and containers world-wide. Aries Maritime was
incorporated on January 12, 2005 for the purpose of being the ultimate holding
company of 100% of certain of the companies listed below (companies 1 through to
12):
 
 Company  Name
              
              Country
      of Incorporation
              Vessel
      Name
              Date
      of Vessel Acquisition1.
      Mote Shipping Ltd.
              
              Malta
              **
              -2.
      Statesman Shipping Ltd.
              
              Malta
              **
              -3.
      Trans Continent Navigation Ltd.
              
              Malta
              **
              -4.
      Trans State Navigation Ltd.
              
              Malta
              **
              -5.
      Rivonia Marine Limited
              
              Cyprus
              *
              -6.
      Robin Marine Limited
              
              Cyprus
              *
              -7.
      Olympic Galaxy Shipping Ltd.
              
              Marshall
      Islands
              M/V
      Energy 1 ex ANL Energy****
              April
      28, 20048.
      Bora Limited
              
              British
      Virgin Islands
              **
              -9.
      Dynamic Maritime Co.
              
              Marshall
      Islands
              M/V
      MSC Oslo ex SCI Tej****
              June
      1, 200410.
      Jubilee Shipholding S.A.
              
              Marshall
      Islands
              M/V
      Ocean Hope
              July
      26, 200411.
      Vintage Marine S.A.
              
              Marshall
      Islands
              M/T
      Arius ex Citius****
              August
      5, 200412.
      Ermina Marine Ltd.
              
              Marshall
      Islands
              M/T
      Nordanvind
              December
      9, 200413.
      AMT Management Ltd.
              
              Marshall
      Islands
              -
              -14.
      Land Marine S.A.
              
              Marshall
      Islands
              M/T
      High Land**
              March
      7, 200315.
      Rider Marine S.A.
              
              Marshall
      Islands
              M/T
      High Rider**
              March
      18, 200316.
      Altius Marine S.A.
              
              Marshall
      Islands
              M/T
      Altius**
              June
      24, 200417.
      Seine Marine Ltd.
              
              Marshall
      Islands
              M/V
      CMA CGM Seine
              June
      24, 200518.
      Makassar Marine Ltd.
              
              Marshall
      Islands
              M/V
      Saronikos Bridge ex CMA CGM  Makassar
              July
      15, 200519.
      Fortius Marine S.A.
              
              Marshall
      Islands
              M/T
      Fortius**
              August
      2, 200420.
      Chinook Waves Corporation
              
              Marshall
      Islands
              M/T
      Chinook
              November
      30, 200521.
      Santa Ana Waves Corporation
              
              Marshall
      Islands
              ***
              -22.
      Compassion Overseas Ltd.
              
              Bermuda
              M/T
      Stena Compassion
              June
      16, 200623.
      Compass Overseas Ltd.
              
              Bermuda
              M/T
      Stena Compass
              February
      14, 200624.
      Ostria Waves Ltd.
              
              Marshall
      Islands
              M/T
      Ostria ex Bora**/***
              May
      25, 2004
 *
              These
      companies were transferred out of the Aries Maritime group of companies on
      March 24, 2005.
 **
              These
      vessels were transferred from Trans Continent Navigation Ltd, Mote
      Shipping Ltd, Statesman Shipping Ltd, Trans State Navigation Ltd and Bora
      Limited to Altius Marine S.A., Land Marine S.A., Rider Marine S.A.,
      Fortius Marine S.A. and Ostria Waves Ltd in November, July, August,
      November 2005 and January 2007 respectively. The original acquisitions for
      these vessels were made on June 24, 2004, on March 7, 2003, on March 18,
      2003, on August 2, 2004 and on May 25, 2004
  respectively.
 ***
              Santa
      Ana Waves Corporation was incorporated on March 23, 2006. Ostria Waves Ltd
      was incorporated on November 27,
2006.
 ****
              The
      following vessels have been agreed to be sold in 2008 (see note
      20).
  F-8
  
 ARIES
MARITIME TRANSPORT LIMITED
 (All
amounts in tables expressed in thousands of U.S. Dollars)
 
 Notes
to the Consolidated Financial Statements (continued)
 
 1.           Organization
and Basis of Presentation, cont’d
 
 Up to
March 17, 2005, the predecessor combined carve-out financial statements of Aries
Maritime had been prepared to reflect the combination of certain of the
vessel-owning companies listed above. The companies reflected in the predecessor
combined carve-out financial statements were not a separate legal group prior to
the re-organization, therefore reserves were represented by ‘Invested
Equity’.
 
 In a
group re-organization effective March 17, 2005 the stockholders of certain of
the vessel-owning companies listed above contributed their interest in the
individual vessel owning-companies in exchange for an equivalent shareholding in
Aries Maritime. Aries Maritime’s ownership percentages in the vessel-owning
companies are identical to the ownership percentages that the previous
stockholders held in each of the vessel-owning companies before the group
reorganization. Accordingly the group reorganization has been accounted for as
an exchange of equity interests at historical cost.
 
 After
March 17, 2005, the financial statements reflect the consolidated results of
Aries Maritime.
 
 On June
8, 2005 Aries Maritime closed its initial public offering of 12,240,000 common
shares at an offering price of $12.50 per share. The net proceeds of the
offering after expenses were $140.8 million.
 
 Aries
Maritime is a wholly-owned indirect subsidiary of Aries Energy Corporation, or
Aries Energy. Aries Energy, an affiliate through its wholly-owned indirect
subsidiary Rocket Marine Inc., owns approximately 52% of the Company’s
outstanding common shares.  Hereinafter, Aries Maritime and its
subsidiaries listed above will be referred to as “the Group”.
 
 During
the year ended December 31, 2007, the company incurred a loss of $8.7 million.
As at December 31, 2007, the company had a net working capital deficit of $291.8
million. The net working capital deficit includes $200 million of debt
which the lenders would have the ability to demand for repayment if the company
will not be in compliance with the financial covenants of the
credit facility. This debt is reflected as current due to the high degree of
uncertainty surrounding the Company's ability to meet its existing
financial covenants in  futureperiods.
 
 The
company was not in compliance with its interest coverage ratio financial
covenant with respect to its long-term debt as at December 31, 2006 and 2007 and
for each of the quarters during 2007. The lenders provided a relaxation of the
covenant for each of the periods from December 31, 2006 through to and including
September 30, 2008. As a result the company has had to pay an increased margin
of 1.75% on its long-term debt and will continue to do so until the end of the
relaxation period. Additionally, as part of the relaxation received for December
31, 2007, the company is required to meet certain conditions (see note 10)
including a reduction of the outstanding borrowings under the credit facility
from their current level of $284.8 million to $200 million, by disposal of
vessels, by August 31, 2008 or in the event that such disposal of vessels is not
completed by August 31, 2008, the lenders may extend until September 30, 2008
subject to legally binding contract(s) for sale having been
executed.  If these conditions are not met, or if the company does not
meet its financial covenants subsequent to August 31, 2008, absent any further
relaxation from the lenders, then the lenders have the ability
to demand repayment of outstanding borrowings.
  Management
is taking steps to try to meet the lender’s requirements disclosed in note 10
and to meet all of the financial covenants contained in the credit facility. In
order to meet the required reduction of the borrowings to $200 million by August
31, 2008, as of June 25, 2008 the Company has sold the vessels Arius, Energy 1
and Oslo and reduced the outstanding borrowings to $223.7 million and expects to
sell one or more vessels by August 2008.  Management also has plans in
place to improve the performance of the Company. These plans include focusing on
reducing operating expenses.  However, there is no assurance that
management will be successful in achieving these objectives.
  F-9
 ARIES
MARITIME TRANSPORT LIMITED
 (All
amounts in tables expressed in thousands of U.S. Dollars)
 
 Notes
to the Consolidated Financial Statements (continued)
  1.           Organization
and Basis of Presentation, cont’d
  While
these consolidated financial statements have been prepared using generally
accepted accounting principles applicable to a going concern, which contemplate
the realization of assets and liquidation of liabilities during the normal
course of operations, the conditions and events described above raise doubt
about the company’s ability to continue as a going concern. The company’s
ability to continue as a going concern is dependent on management’s ability to
successfully execute the sale of the vessels and to continue to improve the
performance of the company, which includes achieving profitable operations in
the future, and the continued support of its shareholders and its lenders. The
financial statements do not include any adjustments to reflect the possible
future effects on the recoverability and classification of assets or the amounts
and classification of liabilities that may result from the outcome of the
Company’s
inability to continue as a going concern. However, there is a material
uncertainty related to events or conditions which may raise
substantial doubt about the entity’s ability to continue as a going
concern and, therefore, that it may be unable to realize its assets and
discharge its liabilities in the normal course of business.
 
 2.           Summary
of Significant Accounting Policies
 
 Principles
of Consolidation:
 The
consolidated financial statements are prepared in accordance with accounting
principles generally accepted in the United States of America. All intercompany
balances and transactions have been eliminated upon consolidation.
 
 Use
of Estimates:
 The
preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities, revenues and expenses and
the disclosure of contingent assets and liabilities in the financial statements
and accompanying notes. Actual results could differ from those
estimates.
  Foreign Currency
Transactions:
 The
functional currency of all Group companies is the U.S. Dollar because the
Group’s vessels operate in international shipping markets, which typically
utilize the U.S. Dollar as the functional currency. The accounting records of
the companies comprising the Group are maintained in U.S. Dollars. Transactions
involving other currencies during a period are converted into U.S. Dollars using
the exchange rates in effect at the time of the transactions. At the balance
sheet dates, monetary assets and liabilities, which are denominated in other
currencies, are translated to reflect the period-end exchange rates. Resulting
gains or losses are reflected in the accompanying consolidated statements of
income.
 
 Cash
and Cash Equivalents:
 The Group
considers highly liquid investments, such as time deposits and certificates of
deposit, with an original maturity of three months or less to be cash
equivalents.
 
 Restricted
Cash:
 Various
restricted cash accounts held by the Group, consisting mainly of (i) retention
accounts, which are restricted for use as general working capital unless such
balances exceed the next quarter’s loan payments due to the vessel-owning
companies’ lenders and (ii) a cash collateral deposit from a related party
securing a contingent liability. The Group considers such accounts to be
restricted cash and classifies them separately from cash and cash equivalents
within current assets in respect of (i) and within non-current assets in respect
of (ii).
  F-10
  
 ARIES
MARITIME TRANSPORT LIMITED
 (All
amounts in tables expressed in thousands of U.S. Dollars)
 
 Notes
to the Consolidated Financial Statements (continued)
  2.           Summary
of Significant Accounting Policies (continued)
  Trade
Receivables:
 The
amount shown as trade receivables includes estimated recoveries from charterers
for hire, freight and demurrage billings, net of provision for doubtful
accounts. An estimate is made for the provision for doubtful accounts based on a
review of all outstanding trade receivables at year end. Bad debts are written
off in the period in which they are identified. No provision for doubtful debts
has been made for the years ended December 31, 2007, December 31, 2006 and
December 31, 2005 and the Group has not written off any trade receivables during
these periods.
 
 Inventories:
 Inventories that
are comprised of bunkers, lubricants, provisions and stores remaining on
board the vessels at period end are valued at the lower of cost and market
value. Cost is determined by the first in, first out method.
 
 Vessels
and Other Fixed Assets:
 Vessels
are stated at cost, which consists of the contract price, delivery and
acquisition expenses, interest cost while under construction, and, where
applicable, initial improvements. Subsequent expenditures for conversions and
major improvements are also capitalized when they appreciably extend the life,
increase the earning capacity or improve the efficiency or safety of a vessel;
otherwise, these amounts are charged to expenses as incurred.
 
 The
component of each new vessel’s initial capitalized cost that relates to
drydocking and special survey calculated by reference to the related estimated
economic benefits to be derived until the next scheduled drydocking and special
survey is treated as a separate component of the vessel’s cost and is accounted
for in accordance with the accounting policy for drydocking and special survey
costs.
 
 Where the
Group identifies any intangible assets or liabilities associated with the
acquisition of a vessel, the Group records all identified tangible and
intangible assets or liabilities at fair value. Fair value is determined by
reference to market data and the discounted amount of expected future cash
flows.   In addition, the portion of the vessel’s capitalized
costs that relates to drydocking and special survey is treated as a separate
component of the vessel’s costs and is accounted for in accordance with the
accounting policy for special survey and drydocking costs.
 
 Fixed
assets are stated at cost and are depreciated utilizing the straight-line method
at rates equivalent to their estimated economic useful lives. The cost and
related accumulated depreciation of fixed assets sold or retired are removed
from the accounts at the time of sale or retirement and any gain or loss is
included in the accompanying statement of income.
 
 Accounting
for Special Survey and Drydocking Costs:
 The Group
follows the deferral method of accounting for special survey and drydocking
expenses whereby actual costs incurred are deferred and are amortized over a
period of five and two and a half years, respectively. If a special survey
and/or drydocking is performed prior to the scheduled date, the remaining
unamortized balances are immediately written off.
 
 The
amortization periods for the special survey and drydocking expenses reflect the
periods between each legally required special survey and
drydocking.
 
 Debt
Finance:
 Where a
secured loan includes the right for the lender to participate in future
appreciation of the underlying vessels under lien, the Group establishes a
participation liability at the inception of the loan equal to the fair value of
the participation feature. At the end of each reporting period, the balance of
the participation liability is adjusted to be equal to the current fair value of
the participation. The corresponding amount of the adjustment is reflected as an
adjustment to the debt discount. As of December 31, 2007, 2006 and 2005 there is
no such participation liability.
  F-11
  ARIES
MARITIME TRANSPORT LIMITED
 (All
amounts in tables expressed in thousands of U.S. Dollars)
 
 Notes
to the Consolidated Financial Statements (continued)
  2.           Summary
of Significant Accounting Policies (continued)
 
 Debt
discount is amortized using the effective interest method over the term of the
related loan. Any adjustment to the debt discount is amortized prospectively.
The cost is included in interest expense.
 
 Deferred
Revenue:
 The Group
values any liability arising from the below-market value bareboat and time
charters assumed when a vessel is acquired. The liability, being the difference
between the market charter rate and assumed charter rate, is recorded as
deferred revenue and amortized to revenue over the remaining period of the time
charter.
 
 Impairment
of Long-lived Assets:
 Long-lived
assets and certain identifiable intangibles held and used or disposed of by the
Group are reviewed for impairment whenever events or changes in circumstances
indicate that the carrying amount of the assets may not be recoverable. An
impairment loss for an asset held for use should be recognized when the estimate
of undiscounted cash flows, excluding interest charges, expected to be generated
by the use of the asset is less than its carrying amount.
 
 Measurement
of the impairment loss is based on the fair value of the asset based upon
management’s best estimate as compared to its carrying amount. In this respect,
management regularly reviews the carrying amount of each vessel in connection
with the estimated recoverable amount for such vessel. Impairment losses on
assets to be disposed of, if any, are based on the estimated proceeds to be
received, less costs of disposal. The review of the carrying amount in
connection with the estimated recoverable amount for each of the Group’s vessels
indicated that no impairment loss has occurred in any of the periods
presented.
 
 Depreciation
of Vessels and Other Fixed Assets:
 Depreciation
is computed using the straight-line method over the estimated useful life of the
vessels, after considering the estimated salvage value of the vessels. Each
vessel’s salvage value is equal to the product of its lightweight tonnage and
estimated scrap value per lightweight ton.  Management estimates the
useful life of the Group’s vessels to be 25 years from the date of its initial
delivery from the shipyard. However, when regulations place limitations over the
ability of a vessel to trade, its useful life is adjusted to end at the date
such regulations become effective. Currently, there are no regulations which
affect the vessels’ useful lives.
 
 Depreciation
of fixed assets is computed using the straight-line method. Annual depreciation
rates, which approximate the useful life of the assets, are:
 
 Furniture,
fixtures and
equipment:                                                                           5
years
 Computer
equipment and
software:                                                                         5
years
 
 Financing
Costs:
 Fees
incurred for obtaining new loans or refinancing existing loans are deferred and
amortized over the life of the related debt, using the effective interest rate
method. Any unamortized balance of costs relating to loans repaid or refinanced
is expensed in the period the repayment or refinancing is made.
 
 Fees
incurred in a refinancing of existing loans continue to be amortized over the
remaining term of the new loan where there is a modification of the loan. Fees
incurred in a refinancing of existing loans where there is an extinguishment of
the old loan are written off and included in the debt extinguishment gain or
loss.
  F-12
  
 ARIES
MARITIME TRANSPORT LIMITED
 (All
amounts in tables expressed in thousands of U.S. Dollars)
  Notes
to the Consolidated Financial Statements (continued)
 
 2.           Summary
of Significant Accounting Policies (continued)
 
 Interest
Expense:
 Interest
costs are expensed as incurred and include interest on loans, financing costs
and amortization. Interest costs incurred while a vessel is being constructed
are capitalized.
 
 Accounting for Revenue and
Expenses:
 Revenues
are generated from bareboat, time and voyage charters. Bareboat, time and voyage
charter revenues are recorded over the term of the charter as the service is
provided. Any profit sharing additional hires generated are recorded over the
term of the charter as the service is provided. Deferred income represents
revenue applicable to periods after the balance sheet date.
 Vessel
operating expenses are accounted for on an accrual basis.
 
 Repairs and
Maintenance:
 Expenditure
for routine repairs and maintenance of the vessels is charged against income in
the period in which the expenditure is incurred. Major vessel improvements and
upgrades are capitalized to the cost of vessel.
    Derivative
Instruments:
  Derivative
financial instruments are recognized in the balance sheets at their fair values
as either assets or liabilities.  Changes in the fair value of
derivatives that are designated and qualify as cash flow hedges, and that are
highly effective, are recognized in other comprehensive income.  If
derivative transactions do not meet the criteria to qualify for hedge
accounting, any unrealized changes in fair value are recognized immediately in
the income statement.
 
 Amounts
receivable or payable arising on the termination of interest rate swap
agreements qualifying as hedging instruments are deferred and amortized over the
shorter of the life of the hedged debt or the hedge instrument.
 
 During
2005 and 2006, the Group entered into interest rate swap agreements that did not
qualify for hedge accounting. As such, the fair value of these agreements and
changes therein are recognized in the balance sheets and statements of income,
respectively.
 
  Stock-Based
Compensation:
  Stock-based
compensation represents the cost related to restricted stock-based awards
granted to directors. The Group measures stock-based compensation cost at grant
date, based on the estimated fair value of the award and recognizes the cost as
expense on the straight-line basis over the requisite service period. The Group
estimates the fair value of stock grants using the closing price of the
Company’s common stock trade on the NASDAQ on the grant date.
 
 Segment
Reporting:
 The Group
reports financial information and evaluates its operations by charter revenues
and not by the type of vessel, length of vessel employment, customer or type of
charter. Management, including the chief operating decision makers, reviews
operating results solely by revenue per day and operating results of the fleet
and, as such, the Group has determined that it operates under one reportable
segment.
 
 Earnings
Per Share:
 The Group
has presented basic earnings (loss) per share for all periods presented based on
the common shares outstanding of Aries Maritime. The common shares issued as a
result of the initial public offering have been included in the weighted average
calculation prospectively from the date of such offering for purposes of
disclosure of earnings per share. Diluted earnings (loss) per share is
calculated by dividing net earnings by the weighted average common shares
outstanding adjusted for the dilutive effect of unvested restricted common
shares using the treasury stock method. The 100,000 non-vested restricted common
shares have been excluded from the Group’s diluted computation as their effect
would be anti-dilutive.
  F-13
  
 ARIES
MARITIME TRANSPORT LIMITED
 (All
amounts in tables expressed in thousands of U.S. Dollars)
 
 Notes
to the Consolidated Financial Statements (continued)
 
 3.           Recent
Accounting Pronouncements
 
 In
September 2006, the Financial Accounting Standard Board (FASB) issued Statement
of Financial Accounting Standards No. 157 (SFAS 157) “Fair Value
Measurements.” SFAS 157 defines
fair value, establishes a framework for measuring fair value in generally
accepted accounting principles (GAAP) and expands disclosures about fair value
measurements. SFAS 157 is effective for financial statements issued for fiscal
years beginning after November 15, 2007, and interim periods within those fiscal
years. The FASB has issued FSP FAS 157-2 “The Effective Date of FASB Statement
157” which confirms the partial deferral of the effective date of FAS 157 “Fair
Value Measurements” for one year for
non-financial assets and non-financial liabilities that are recognized or
disclosed at fair value in the financial statements. The provisions of SFAS 157
should be applied prospectively as of the beginning of the fiscal year in which
it is initially applied. The Group does not expect the adoption of this
Accounting Standard to have an effect on its financial statements. SFAS 157 will
be effective for the Group for the year beginning on January 1, 2008 for
financial assets and liabilities and for the year beginning on January 1, 2009
for non-financial assets and liabilities.
 
 In
February, 2007, the FASB issued SFAS No. 159 “The Fair Value Option for
Financial Assets and Financial Liabilities” (SFAS No. 159). SFAS No. 159 permits
entities to choose to measure many financial assets and financial liabilities at
fair value. Unrealized gains and losses on items for which the fair value option
has been elected are reported in earnings. SFAS No. 159 is effective for fiscal
years beginning after November 15, 2007. The Group is currently assessing the
impact of SFAS No. 159 on its consolidated financial position and results of
operations.
 
 In
December, 2007, the FASB issued SFAS No. 141 (R) “Business Combinations” (SFAS
No 141 (R)), which amends principles and requirements for how the acquirer of a
business recognizes and measures in its financial statements the identifiable
assets acquired, the liabilities assumed and any non-controlling interest in the
acquiree. The statement also amends guidance for recognizing and measuring the
goodwill acquired in the business combination and determines what information to
disclose to enable users of the financial statements to evaluate the nature and
financial effects of the business combination. FAS No. 141 (R) will be effective
for the Company’s financial statements for the year ending December 31, 2009.
Accordingly, any business combinations the Company engages in will be recorded
and disclosed following existing GAAP until January 1, 2009.
 
 In March
2008, the FASB issued Statement of Financial Accounting Standards No. 161 (“SFAS 161”) “Disclosures
about Derivative Instruments and Hedging Activities—an amendment of FASB
Statement No. 133”. SFAS 161 changes the disclosure requirements for derivative
instruments and hedging activities. Entities are required to provide enhanced
disclosures about (a) how and why an entity uses derivative instruments, (b) how
derivative instruments and related hedged items are accounted for under
Statement 133 and its related interpretations, and (c) how derivative
instruments and related hedged items affect an entity’s financial
position, financial performance, and cash flows. This statement is effective for
financial statements issued for fiscal years and interim periods beginning after
November 15, 2008, with early application encouraged. This statement encourages,
but does not require, comparative disclosures for earlier periods at initial
adoption. We are currently evaluating the expected impact, if any, of the
adoption of SFAS 161 on our consolidated financial statements.
  4.            Restricted
Cash
  December
      31,
                
                
                December
      31,2006
                
                
                2007Retention account
                
                
                3,232
                
                
                
                5Other
                
                
                10
                
                
                
                34Short
      term restricted account
                
                
                3,242
                
                
                
                39Long
      term restricted account
                
                
                -
                
                
                
                1,5483,242
                
                
                
                1,587
 F-14
  
 ARIES
MARITIME TRANSPORT LIMITED
 (All
amounts in tables expressed in thousands of U.S. Dollars)
 
 Notes
to the Consolidated Financial Statements (continued)
 
 4.
              Restricted
      Cash (continued)
 
 Cash
deposited in the retention account was made available for loan interest payments
within three months of being deposited.
 The long
term restricted account balance mainly represents cash deposited by Magnus
Carriers Corporation (“Magnus Carriers”) on behalf of the Company as security
for the issue of a bank guarantee of $1.5 million (refer to note
17).
 
 5.
              Inventories
 
 December
      31,
              
              
              December
      31,2006
              
              
              2007Lubricants
              
              
              750
              
              
              
              879Bunkers
              
              
              699
              
              
              
              993Provisions
      (Stores)
              
              
              47
              
              
              
              971,496
              
              
              
              1,969
 
 6.
              Vessels
      and Other Fixed Assets
 
 Details
      are as follows:Other
      fixed assets
              
              
              Cost
      of vessel
              
              
              Special
      survey
              
              
              Drydocking
              
              
              TotalCostBalance
      at December 31, 2004
              
              
              -
              
              
              
              235,333
              
              
              
              3,327
              
              
              
              2,229
              
              
              
              240,889Additions
              
              
              96
              
              
              
              131,079
              
              
              
              1,528
              
              
              
              1,031
              
              
              
              133,734Balance
      at December 31, 2005
              
              
              96
              
              
              
              366,412
              
              
              
              4,855
              
              
              
              3,260
              
              
              
              374,623Additions
              
              
              50
              
              
              
              112,361
              
              
              
              1,562
              
              
              
              14,356
              
              
              
              128,329Proceeds
      received
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              (5,000
              )
              
              
              (5,000
              )Balance
      at December 31, 2006
              
              
              146
              
              
              
              478,773
              
              
              
              6,417
              
              
              
              12,616
              
              
              
              497,952Additions
              
              
              37
              
              
              
              399
              
              
              
              1,439
              
              
              
              4,705
              
              
              
              6,580Balance
      at December 31, 2007
              
              
              183
              
              
              
              479,172
              
              
              
              7,856
              
              
              
              17,321
              
              
              
              504,532Accumulated
      Depreciation and AmortizationBalance
      at December 31, 2004
              
              
              -
              
              
              
              (10,318
              )
              
              
              (853
              )
              
              
              (823
              )
              
              
              (11,994
              )Charge
      for the year
              
              
              (9
              )
              
              
              (19,437
              )
              
              
              (920
              )
              
              
              (1,038
              )
              
              
              (21,404
              )Balance
      at December 31, 2005
              
              
              (9
              )
              
              
              (29,755
              )
              
              
              (1,773
              )
              
              
              (1,861
              )
              
              
              (33,398
              )Charge
      for the year
              
              
              (26
              )
              
              
              (29,405
              )
              
              
              (1,290
              )
              
              
              (2,437
              )
              
              
              (33,158
              )Balance
      at December 31, 2006
              
              
              (35
              )
              
              
              (59,160
              )
              
              
              (3,063
              )
              
              
              (4,298
              )
              
              
              (66,556
              )Charge
      for the year
              
              
              (25
              )
              
              
              (30,628
              )
              
              
              (1,186
              )
              
              
              (5,299
              )
              
              
              (37,138
              )Balance
      at December 31, 2007
              
              
              (60
              )
              
              
              (89,788
              )
              
              
              (4,249
              )
              
              
              (9,597
              )
              
              
              (103,694
              )Net
      book value - December 31, 2006
              
              
              111
              
              
              
              419,613
              
              
              
              3,354
              
              
              
              8,318
              
              
              
              431,396Net
      book value - December 31, 2007
              
              
              123
              
              
              
              389,384
              
              
              
              3,607
              
              
              
              7,724
              
              
              
              400,838
 
 Agreements
to sell three vessels were entered into in 2008. Refer to note 1, note 10 and
note 20.
  F-15
  
 ARIES
MARITIME TRANSPORT LIMITED
 (All
amounts in tables expressed in thousands of U.S. Dollars)
 
 Notes
to the Consolidated Financial Statements (continued)
 
 6.
              Vessels
      and Other Fixed Assets (continued)
 
 Two
vessels, M/T
Altius and M/T
Fortius, are employed under time charters with Deiulemar Compagnia di
Navigazione S.p.A. (“Deiulemar”).  Under the Deiulemar charterparties,
Deiulemar has the option to purchase 50% of each vessel’s equity upon the
expiration of the charter for 50% of the difference between $29.5 million and
the debt balance on each vessel.  If Deiulemar exercises this option,
existing vessel technical managers will continue to provide technical management
services and Deiulemar will have a right of first refusal for the provision of
commercial management services for the purchased vessel or
vessels.  The time charters with Deiulemar for M/T
Altius and M/T
Fortius are scheduled to expire in August and June 2009, subject to the
above.
 
 During
the year ended December 31, 2006, the Group acquired two vessels, none of which
included the assumption of bareboat charters which had rates of hire below the
market value at the delivery date. In 2005, three vessels were acquired and in
2004, five vessels were acquired with rates of hire below market value. The cost
of these vessels in 2005 and 2004 totalled $103.2 million and $107.4 million
respectively. The fair value of the liability associated with the time charters
was $28.3 million in 2005 and $22.6 million in 2004.
 
 Under the
ship management agreements with Magnus Carriers, the Group received $5 million
during the year ended December 31, 2006, by way of a one-time accelerated
payment in respect of the drydocking costs of the M/T
Arius. This $5 million has been recognized as a reduction in the
capitalized costs (refer to note 19).
 
 During
the year ended December 31, 2007, the Group received $1.4 million (2006:
$158,000, 2005: nil) from Magnus Carriers for special survey and drydocking
amortization, pursuant to the excess cost sharing arrangement contained in the
management agreements (refer to note 17). The amount was received in respect of
the difference between the amortization of actual drydocking and special survey
expenses and the budgeted amounts and has been recognized as a reduction in
these expenses (refer to note 19).
 
 7.
              Accounts
      Payable
 
 December
      31,
              
              
              December
      31,2006
              
              
              2007Suppliers
              
              
              8,002
              
              
              
              5,765Agents
              
              
              615
              
              
              
              713Trade
      creditors
              
              
              3,211
              
              
              
              1,94511,828
              
              
              
              8,423
 
 8.
              Accrued
      Liabilities
 
 December
      31,
              
              
              December
      31,2006
              
              
              2007Accrued
      interest
              
              
              4,613
              
              
              
              1,562Other
      accrued expenses
              
              
              1,870
              
              
              
              3,491Crew
      payroll
              
              
              484
              
              
              
              233Claims
              
              
              322
              
              
              
              117,289
              
              
              
              5,297
  F-16
  
 ARIES
MARITIME TRANSPORT LIMITED
 (All
amounts in tables expressed in thousands of U.S. Dollars)
 
 Notes
to the Consolidated Financial Statements (continued)
 
 
 9.
              Deferred
      Charges
 
 Financing
      CostsNet
      Book Value at December 31, 2004
              
              
              1,646Additions
              
              
              2,824Amortization
              
              
              (837
              )Deferred
      charges written-off
              
              
              (761
              )Net
      Book Value at December 31, 2005
              
              
              2,872Additions
              
              
              2,981Amortization
              
              
              (877
              )Deferred
      charges written-off
              
              
              (762
              )Net
      Book Value at December 31, 2006
              
              
              4,214Amortization
              
              
              (1,308
              )Net
      Book Value at December 31, 2007
              
              
              2,906
 
 10.
              Long-Term
      Debt
 
 Vessel
              
              
              Balance
      as of
                December
      31,
                2007M/T
      Altius
              
              
              
              17,333M/V
      CMA CGM Seine
              
              
              
              13,565M/T
      Ostria ex Bora
              
              
              
              11,220M/T
      Nordanvind
              
              
              
              11,890M/T
      High Land
              
              
              
              9,043M/T
      High Rider
              
              
              
              8,708M/T
      Arius ex Citius
              
              
              
              7,201M/V
      Ocean Hope
              
              
              
              8,373M/V
      Energy 1 ex CMA CGM Energy
              
              
              
              10,885M/V
      MSC Oslo ex SCI Tej
              
              
              
              10,885M/V
      Saronikos Bridge ex CMA CGM Makassar
              
              
              
              13,565M/T
      Fortius
              
              
              
              17,332M/T
      Chinook
              
              
              
              32,600M/T
      Stena Compass
              
              
              
              56,100M/T
      Stena Compassion
              
              
              
              56,100Total
              
              
              284,800Short
      term
              
              
              284,800
 
  F-17
  ARIES
MARITIME TRANSPORT LIMITED
 (All
amounts in tables expressed in thousands of U.S. Dollars)
 
 Notes
to the Consolidated Financial Statements (continued)
 
 10.
              Long-Term
      Debt (continued)
 
 Senior
secured credit agreement
  Effective
April 3, 2006 the Company entered into a new $360 million revolving credit
facility, for the purposes of (a) refinancing amounts drawn under the previous
$140 million term loan facility and $150 million revolving credit facility, (b)
financing of the acquisition of M/T
“Stena
Compassion” and (c) general corporate purposes up to US$5 million. The
facility has a term of five years and is subject to nine semi-annual scheduled
commitment reductions of $11 million each, commencing six months from signature
of the facility, with the remaining commitment to be reduced to zero or repaid
in full in one installment in April, 2011 (see below for amended
terms).
 
 Interest
on the new credit facility is charged at LIBOR plus a margin equal to 1.125% if
the total liabilities divided by the total assets, adjusting the book value of
the fleet to its market value, is less than 50%; and 1.25% if equal to or
greater than 50% but less than 60%; and 1.375% if equal to or greater than 60%
but less than 65%; and 1.5% if equal to or greater than 65%. The effective
interest rate at December 31, 2007 was 6.94% p.a. (2006: 6.62% p.a.) for the new
credit facility.
 
 The
facility is guaranteed by the vessel-owning subsidiaries and secured by first
priority mortgages over the vessels, first priority assignment of earnings and
insurances of the mortgaged vessels, assignment of time charter contracts in
excess of twelve months and pledge of earnings and retention
accounts.
 
 The
credit facility contains various financial covenants,  requiring the
Company to maintain (a) minimum hull cover ratios, (b) minimum liquidity, (c)
minimum equity ratio and interest cover ratio, and (d) positive working capital.
The facility also contains restrictions as to changes in the management and
ownership of the vessels, limitation on incurring additional indebtedness and
requires the Group’s two principal beneficial equity holders to maintain a
beneficial ownership of no less than 10% each in the issued stock of the
Company. In addition, Magnus Carriers is required to maintain a credit balance
in an account with the lenders of at least $1 million (See also Note
19).
 
 Primarily
due to vessel out of service time during the years ended December 31, 2006 and
December 31, 2007, the interest coverage ratio financial covenant contained in
the debt agreement was not met during 2006 and 2007 and the lenders granted a
relaxation from 3.00 to 1.00 to 2.50 to 1.00 for the periods ending December 31,
2006, March 31, 2007, June 30, 2007 and September 30, 2007. With effect from
January 3, 2007 the Company paid an increased margin of 1.75% above
LIBOR.
 
 On March
17, 2008 the lenders granted a further relaxation in the interest coverage ratio
financial covenant from 3.00 to 1.00 to 2.25 to 1.00 for the periods ending
December 31, 2007, March 31, 2008, June 30, 2008, with the ratio increasing to
2.75 to 1.00 for the period ending September 30, 2008 and returning to 3.00 to
1.00 for the period ending December 31, 2008. In order for this further
relaxation to remain effective the Company has to meet the following
conditions:
  ·
                A
      reduction in the credit facility commitment level to $290 million with
      effect from April 3, 2008;
  ·
                A
      reduction of the outstanding borrowings under the credit facility from the
      level of $284.8 million to $200 million, by disposal of vessels, by June
      30, 2008, which, on June 20, 2008, was extended to August 31,
      2008;
  ·
                The
      Company’s continued payment of an increased margin of 1.75% above LIBOR
      until a compliance certificate is provided to its lenders advising the
      interest coverage ratio meets the required level of
    3.00:1.00;
  ·
                The
      Company’s not paying dividend for the quarter ended December 31, 2007;
      and
  ·
                During
      the period of the interest coverage covenant relaxation any advance for
      new investments requires the consent of all of the lenders under the
      credit facility.
  In the
event that such disposal of vessels is not completed by August 31, 2008, the
lenders may extend until September 30, 2008 subject to legally binding
contract(s) for sale having been executed.
 On April
17, 2008, the lenders approved an amendment to the working capital ratio
financial covenant to exclude from its calculation voluntary and mandatory
prepayments.
  If the covenants are not met, the entire amount may
become due and payable in 2008.
 
  F-18
  
 ARIES
MARITIME TRANSPORT LIMITED
 (All
amounts in tables expressed in thousands of U.S. Dollars)
 
 Notes
to the Consolidated Financial Statements (continued)
 
 10.
              Long-Term
      Debt (continued)
 
 As at
December 31, 2007 repayments of the long-term debt under the new credit
facility, assuming that the covenants of the credit facility will be
met,  are due as follows:
 
 2008
                84,8002011
                200,000Total
      amount
                284,800
  Settlement
of fee agreement with bank
 
 Certain
loans with an aggregate outstanding amount of $135.7 million at December 31,
2004 contained additional participation arrangements with the Bank of Scotland.
With $6.5 million of the proceeds of the Company’s initial public offering,
these obligations were settled in full on June 17, 2005.
 
 
 11.
              Deferred
      Revenue
 
 Deferred
      revenueDecember
      31, 2005
              
              
              27,756Amortization
              
              
              (10,715
              )December
      31, 2006
              
              
              17,041Amortization
              
              
              (6,010
              )December
      31, 2007
              
              
              11,031Short
      term
              
              
              4,656Long
      term
              
              
              6,37511,031
 
 12.
              Stock-Based
      Compensation
 
 The
Company’s 2005 Equity Incentive Plan (the “Plan”) is designed to provide certain
key persons, on whose initiative and efforts the successful conduct of the
Company depends, with incentives to: (a) enter into and remain in the service of
the Company, (b) acquire a proprietary interest in the success of the Company,
(c) maximize their performance, and (d) enhance the long-term performance of the
Company.
 
 On March
28, 2007 the Company made grants of restricted common stock in the amount of
120,000 shares to the three non-executive directors.
 
 The
Company measures stock-based compensation cost at grant date, based on the
estimated fair value of the restricted common stock awards which is determined
by the closing price of the Company’s common stock trade on the NASDAQ on the
grant date and recognizes the cost as expense on a straight-line basis over the
requisite service period.
  F-19
  ARIES
MARITIME TRANSPORT LIMITED
 (All
amounts in tables, except where indicated, expressed in thousands of U.S.
Dollars)
 
 Notes
to the Consolidated Financial Statements (continued)
 
 12.
              Stock-Based
      Compensation (continued)
 
 The fair
value of each share on the grant date was $7.80. The fair value of the
non-vested shares granted amounted to $247,000 and will be recognized as
compensation cost in the income statement over the one-year vesting
period.
 
 On August
7, 2007 the Company made grants of restricted common stock in the amount of
80,000 shares to the two executive directors. The fair value of each share on
the grant date was $9.90. The fair value of the non-vested shares granted
amounted to $266,000 and will be recognized as compensation cost in the income
statement over the one-year vesting period.
 
 On April
10, 2008 the Company accelerated the vesting period of the 100,000 shares
unvested as of December 31, 2007. These shares vested with effect from April 11,
2008 (See Note 20).
 
 The
summary of the status of the Company’s non-vested shares as of December 31, 2007
and movement during the year ended December 31, 2007 is as follows:
 
 Awards
      Number (No. of Shares)
              
              
              Weighted
      Average Grant date Fair Value (US$)January
      1, 2007
              
              
              -
              
              
              
              -Granted
              
              
              200
              
              
              $
              8.64Vested
              
              
              (100
              )
              
              $
              8.64December
      31, 2007
              
              
              100
              
              
              $
              8.64
 
 As of
December 31, 2007 there was $0.5 million of unrecognized compensation cost
related to non-vested restricted stock awards. This unrecognized compensation
cost at December 31, 2007 is expected to be recognized as a compensation expense
over a weighted average period of four months.
  13.     Stockholders’
Equity
 
 (a) On
incorporation of the Company on January 12, 2005, 12,000 shares were issued with
a par value of $1 per share resulting in net proceeds of $12,000. On January 17,
2005, the Company proceeded with a stock split resulting in 1,200,000 shares of
$0.01 each.
  (b) In
April 2005, the Company paid a dividend to existing stockholders of $1.9
million. $214,000 of the dividend was paid in cash and the balance of $1.7
million was settled by the transfer of two Group companies to existing
stockholders. In June 2005, the Company paid a dividend of $150,000, which the
Company settled by the issuance of 14,976,877 shares.
 
  F-20
  
 ARIES
MARITIME TRANSPORT LIMITED
 (All
amounts in tables expressed in thousands of U.S. Dollars)
 
 Notes
to the Consolidated Financial Statements (continued)
 
 13.
              Stockholders’
      Equity  (continued)
 (c) On
November 28, 2005, the Company paid a dividend of $0.52 per share ($14.7
million) to existing stockholders.
  (d)
During the year ended December 31, 2006, the Company paid dividends of $0.89 per
share ($25.2 million) to existing stockholders.
  (e)
During the year ended December 31, 2007, the Company paid dividends of $0.63 per
share ($17.9 million) to existing stockholders.
 
 14.
              Revenue
      From Voyages
  The
      Group operates on a worldwide basis in one operating segment – the
      shipping transportation market. The geographical analysis of revenue from
      voyages, based on point of destination, is presented as
      follows:
  December
      31,
              
              
              December
      31,
              
              
              December
      31,2005
              
              
              2006
              
              
              2007North
      America
              
              
              -
              
              
              
              5,962
              
              
              
              21,901Australia
              
              
              -
              
              
              
              5,609
              
              
              
              2,302Europe
              
              
              27,413
              
              
              
              25,406
              
              
              
              22,974Asia
              
              
              30,896
              
              
              
              34,710
              
              
              
              26,603Africa
              
              
              4,186
              
              
              
              9,169
              
              
              
              11,816South
      America
              
              
              13,410
              
              
              
              13,343
              
              
              
              13,82775,905
              
              
              
              94,199
              
              
              
              99,423
 
 During
      the year ended December 31, 2007, the Group received 64% of its income
      from four charterers (22%, 15%, 15% and 12%, respectively).
                During
      the year ended December 31, 2006, the Group received 65% of its income
      from four charterers (31%, 13%, 11% and 10%, respectively).
                During
      the year ended December 31, 2005, the Group received 91% of its income
      from five charterers (33%, 16%, 15%, 14% and 13%,
      respectively).
 
 15.
              Financial
      Instruments
 
 Fair
      ValuesThe
      carrying amounts of the following financial instruments approximate their
      fair values; cash and cash equivalents and restricted cash accounts, trade
      and other receivables, due from managing agent, due to related parties,
      derivative financial instruments and trade and other
      payables.  The fair values of long-term loans approximate the
      recorded values, generally, due to their variable interest
      rates.Credit
      RiskThe
      Group believes that no significant credit risk exists with respect to the
      Group’s cash due to the spread of this risk among various different banks
      and the high credit status of these counterparties. The Group is also
      exposed to credit risk in the event of non-performance by counterparties
      to derivative instruments. However, the Group limits this exposure by
      entering into transactions with counterparties that have high credit
      ratings. Credit risk with respect to trade accounts receivable is reduced
      by the Group by chartering its vessels to established international
      charterers (refer to note 14).
   F-21
 
 ARIES
MARITIME TRANSPORT LIMITED
 (All
amounts in tables expressed in thousands of U.S. Dollars)
 
 Notes
to the Consolidated Financial Statements (continued)
 
 
 15.
              Financial
      Instruments (continued)
  Interest
      Rate SwapsOutstanding
      swap agreements involve both the risk of a counterparty not performing
      under the terms of the contract and the risk associated with changes in
      market value. The Group monitors its positions, the credit ratings of
      counterparties and the level of contracts it enters into with any one
      party. The counterparties to these contracts are major financial
      institutions. The Group has a policy of entering into contracts with
      counterparties that meet stringent qualifications and, given the high
      level of credit quality of its derivative counter parties, the Group does
      not believe it is necessary to obtain collateral
arrangements.
                
                The
      Group has entered into interest rate swap agreements detailed as
      follows:
 
 Counterparty
                Value
                  Date
                Termination
      Date
                
                Notional
                  Amount
                  Dec.
      31, 2007 / 2006
                
                
                Maximum
      fixed rate
                  Dec.
      31, 2007 / 2006
                
                Floating
                  Rate
                
                Fair
      value
                  Dec. 31,
      2006
                
                
                Fair
      value
                  Dec.
      31,
                  2007SMBC
      Bank
                03/07/06
                04/04/11
                
                
                20,000
                
                
                
                5.63
                %
                
                3-month
      LIBOR
                
                
                (505
                )
                
                
                (1,103
                )Bank
      of Ireland
                03/07/06
                04/04/11
                
                
                20,000
                
                
                
                5.63
                %
                
                3-month
      LIBOR
                
                
                (504
                )
                
                
                (1,085
                )HSH
      Nordbank
                03/07/06
                04/04/11
                
                
                20,000
                
                
                
                5.63
                %
                
                3-month
      LIBOR
                
                
                (502
                )
                
                
                (1,054
                )Nordea
      Bank
                03/07/06
                04/04/11
                
                
                20,000
                
                
                
                5.63
                %
                
                3-month
      LIBOR
                
                
                (506
                )
                
                
                (1,054
                )Bank
      of Scotland
                03/07/06
                04/04/11
                
                
                20,000
                
                
                
                5.63
                %
                
                3-month
      LIBOR
                
                
                (530
                )
                
                
                (1,074
                )(2,547
                )
                
                
                (5,370
                )Nordea
      Bank*
                03/01/06
                03/06/09
                
                
                46,667
                
                
                
                4.885
                %
                
                3-month
      LIBOR
                
                
                340
                
                
                
                (280
                )Bank
      of Scotland**
                03/01/06
                03/06/09
                
                
                46,667
                
                
                
                4.885
                %
                
                3-month
      LIBOR
                
                
                331
                
                
                
                (286
                )671
                
                
                
                (566
                )
  These
interest rate swaps are used to hedge the interest expense arising from the
Group’s long-term borrowings detailed in Note 10. The interest rate swaps allow
the Group to raise long-term borrowings at floating rates and swap them into
effectively fixed rates. Under the interest rate swaps, the Group agrees with
the counterparty to exchange, at specified intervals, the difference between a
fixed rate and floating rate interest amount calculated by reference to the
agreed notional amount.
 
 The total
fair value change of the interest rate swaps indicated above is shown in the
income statement. These amounts were a loss of $4 million for the year ended
December 31, 2007, a loss of $1.8 million for the year ended December 31, 2006
and a gain of $950,000 for the year ended December 31, 2005. These fair values
are based upon valuations received from the relevant
financial institutions. The related asset or liability is shown under derivative
financial instruments in the balance sheet.
  F-22
 
 ARIES
MARITIME TRANSPORT LIMITED
 (All
amounts in tables expressed in thousands of U.S. Dollars)
 
 Notes
to the Consolidated Financial Statements (continued)
 
 15.
              Financial
      Instruments (continued)
 
 
 *Effective
April 3, 2008 this interest rate swap was replaced by the
following:
 
 Counterparty
              Value
                Date
              Termination
      Date
              
              Notional
                Amount
              
              
              Maximum
      fixed rate
              
              Floating
                RateNordea
      BankInterest
      rate swap:
              03/04/08
              04/04/11
              
              
              23,333
              
              
              
              4.14
              %
              3-month
      LIBORInterest
      rate cap:
              03/04/08
              04/04/11
              
              
              23,333
              
              
              
              4.14
              %
 
 
 **Effective
April 3, 2008 this interest rate swap was replaced by the
following:
 
 
 Counterparty
              Value
                Date
              Termination
      Date
              
              Notional
                Amount
              
              
              Maximum
      fixed rate
              
              Floating
                RateBank
      of ScotlandInterest
      rate swap:
              03/04/08
              03/04/11
              
              
              46,667
              
              
              
              4.285
              %
              3-month
      LIBORInterest
      rate floor:
              03/04/08
              03/04/11
              
              
              23,333
              
              
              
              4.285
              %
 
 These two
transactions effectively extended the maturity of the original interest rate
swap transactions (refer to note 20).
 
 
 16.
              Changes
      in Assets and Liabilities
  December
      31,
                2005
              
              
              December
      31,
                2006
              
              
              December
      31,
                2007(Increase)
      decrease inTrade
      receivables
              
              
              120
              
              
              
              (1,784
              )
              
              
              (259
              )Other
      receivables
              
              
              54
              
              
              
              (112
              )
              
              
              (861
              )Inventories
              
              
              (210
              )
              
              
              (851
              )
              
              
              (473
              )Prepaid
      expenses
              
              
              (192
              )
              
              
              183
              
              
              
              (1,343
              )Due
      from managing agent
              
              
              (84
              )
              
              
              (360
              )
              
              
              (370
              )Due
      from/to related parties
              
              
              (152
              )
              
              
              (1,202
              )
              
              
              3,089Increase
      (decrease) inAccounts
      payable, trade
              
              
              936
              
              
              
              7,230
              
              
              
              (3,405
              )Accrued
      liabilities
              
              
              1,684
              
              
              
              4,409
              
              
              
              (1,992
              )Deferred
      income
              
              
              1,112
              
              
              
              (1,216
              )
              
              
              3443,268
              
              
              
              6,297
              
              
              
              (5,270
              )
 
 
  F-23
  ARIES
MARITIME TRANSPORT LIMITED
 (All
amounts in tables expressed in thousands of U.S. Dollars)
 
 Notes
to the Consolidated Financial Statements (continued)
 
 17.
              Commitments
      and Contingent Liabilities
  (a) Commitments
  Management
agreements
 From June
8, 2005, certain of the vessel-owning subsidiaries commenced operating under new
ten-year ship management agreements with Magnus Carriers, a related party with
common ultimate beneficial stockholders.  These ship management
agreements were cancellable by the vessel-owning subsidiaries with two months
notice, while Magnus Carriers had no such option. Under these agreements, Magnus
Carriers provided both technical and commercial management services for the
vessel-owning subsidiaries. Each of the vessel-owning subsidiaries paid vessel
operating expenses to Magnus Carriers based on the jointly established budget
per vessel, which increased by 3% annually and was subject to adjustment every
three years. If actual vessel operating expenses exceed or are below the
budgeted amounts, the relevant subsidiary and Magnus Carriers would bear the
excess expenditures or benefit from the savings equally. Expenses that related
to any improvement, structural changes or installation of new equipment required
by law or regulation would be paid solely by the relevant subsidiary. Also, each
of these agreements provided for the payment to Magnus Carriers of an initial
management fee of $146,000 per annum for technical management
services.
 
 From
November 30, 2005, Chinook Waves Corporation commenced operating the vessel
M/T
Chinook under a ship management agreement with Ernst Jacob Shipmanagement
GmbH (“Ernst Jacob”). Under this agreement, Ernst Jacob provides technical
management services for the vessel-owning subsidiary and received an initial
annual management fee of Euro 128,000.
 
 From
August 8, 2007 there was an amendment in the terms of the commercial management
agreement between Chinook Waves Corporation and Magnus Carriers dated October 1,
2007 where it was agreed that the annual $60,000 fee payable to Magnus
Carriers under that agreement ceased with effect from August 1,
2007.
 
 From
August 31, 2007 notice of termination in relation to the twelve existing ship
management agreements between Magnus Carriers and certain vessel-owning
subsidiaries was delivered to and accepted by Magnus Carriers. The notice of
termination included agreement to the termination of the Magnus Carriers’
warranty in respect of vessel operating expenses excesses over agreed budgets.
In settlement of the warranty termination with effect from August 1, 2007,
Magnus Carriers agreed to pay a total of $5 million comprising of nine monthly
installments, commencing September 1, 2007 in an amount of $1 million, followed
by equal instalments of $500,000 on the first of each subsequent month up to and
including May 1, 2008.
 
 From
September 7, 2007 six vessel-owning subsidiaries entered into new technical ship
management agreements with International Tanker Management Limited (“ITM”),
based in Dubai. ITM and the vessel-owning companies of M/T
Altius, Fortius, High Land, High Rider, Ostria and Arius
have entered into annual ship management agreements, which are cancellable by
either party with two months notice.
 
 With
effect from October 1, 2007 certain vessel-owning subsidiaries entered into
commercial management agreements with Magnus Carriers for all vessels except
Stena
Compass and Stena
Compassion. The commercial management agreements commence as of the date
on which the vessels are delivered into the technical management of technical
managers other than Magnus Carriers Corporation and shall continue from year to
year until they are terminated by either party giving to the other not less than
two calendar months notice in writing of their intention to terminate the same.
Under these agreements the commercial manager shall receive 1.25% of the gross
earnings on any charter or in the event that no commission on the gross earning
on any charter is payable the vessel-owning company shall pay the sum of $7,000
monthly in advance. Under the sale/purchase of the vessel, the vessel-owning
company shall pay the commercial manager 1.0% of the gross sale/purchase price
as agreed between the vessel-owning company and the buyers.
 
  F-24
  
 
 
 ARIES
MARITIME TRANSPORT LIMITED
 (All
amounts in tables expressed in thousands of U.S. Dollars)
 
 Notes
to the Consolidated Financial Statements (continued)
 
 17.
              Commitments
      and Contingent Liabilities
(continued)
 
 
 On
November 29, 2007 Jubilee Shipholding S.A. entered into a new technical ship
management agreement with Barber Ship Management Singapore Pte Ltd, based in
Singapore. Barber Ship Management Singapore Pte Ltd and the vessel-owning
company of M/V
Ocean Hope have entered into an annual ship management agreement, which
is cancellable by either party with two months notice.
 
 Rental
agreement
 On
November 21, 2005 AMT Management Ltd entered into an office rental agreement
with a related party, a company with common ultimate beneficial stockholders,
with effect from December 1, 2005 for ten years at a monthly rental of Euro
4,000 plus stamp duty (approximately $6,000).
 
 On
October 1, 2007 AMT Management Ltd entered into an additional office rental
agreement with a related party, a company with common ultimate beneficial
stockholders, with effect from October 1, 2007 for nine years at a monthly
rental of Euro 4,000 plus stamp duty (approximately $6,000).
 
 The
following table sets out long-term commercial obligations for rent and
management fees, outstanding as of December 31, 2007:
 
 
 Rent
              
              
              Management
      fees
              
              
              Total2008
              
              
              146
              
              
              
              2,380
              
              
              
              2,5262009
              
              
              154
              
              
              
              -
              
              
              
              1542010
              
              
              162
              
              
              
              -
              
              
              
              1622011
              
              
              169
              
              
              
              -
              
              
              
              1692012
      and thereafter
              
              
              838
              
              
              
              -
              
              
              
              8381,469
              
              
              
              2,380
              
              
              
              3,849
    (b) Contingencies
 Legal
proceedings
 Other
than those listed below, there are no material legal proceedings to which the
Group is a party other than routine litigation incidental to the Group’s
business.  In the opinion of management, the disposition of these
lawsuits should not have a material impact on the Group’s results of operations,
financial position or cash flows.
 
 On June
18, 2007 a bank guarantee was issued as security for a claim made by Trafigura
Beheer BV, the charterers of M/T
Ostria, against the vessel-owning company, Ostria Waves Ltd.  for an
amount of $1.5 million alleging that such amount is due under the charter
agreement due to vessel out of service time.  Security for the bank
guarantee was obtained from Magnus Carriers in the form of cash deposited in a
restricted account in the name of Ostria Waves Ltd with the issuing bank (refer
to note 4).
 
 ST
Shipping, the charterer of the Arius,
brought a claim against the Company in the amount of $1.3 million alleging that
such amount is due under the charter agreement due to an indemnity claim arising
under the charter party.  On June 20, 2008, the Company entered into a
corporate guarantee as security for the claim.  The maximum amount
that the Company may be required to pay under the corporate guarantee is $2
million.
  F-25
 
 
 ARIES
MARITIME TRANSPORT LIMITED
 (All
amounts in tables expressed in thousands of U.S. Dollars)
 
 Notes
to the Consolidated Financial Statements (continued)
 
 
 18.
              Taxation
  The
      Group is not subject to tax on international shipping income in its
      respective jurisdictions of incorporation or in the jurisdictions in which
      their respective vessels are registered. However, the vessel-owning
      companies’ vessels are subject to tonnage taxes, which have been included
      in the vessel operating expenses in the accompanying statements of
      income.
                
                Pursuant
      to the U.S. Internal Revenue Code (the “Code”),
      U.S.-source income from the international operation of ships is generally
      exempt from U.S. tax if the company operating the ships meets certain
      requirements. Among other things, in order to qualify for this exemption,
      the company operating the ships must be incorporated in a country which
      grants an equivalent exemption from income taxes to U.S.
      corporations.
                
                All
      of the Company’s
      ship-operating subsidiaries satisfy these initial criteria. In addition,
      these companies must be more than 50% owned by individuals who are
      residents, as defined, in the countries of incorporation or another
      foreign country that grants an equivalent exemption to U.S. corporations.
      These companies also currently satisfy the more than 50% beneficial
      ownership requirement. In addition, should the beneficial ownership
      requirement not be met, the management of the Company believes that by
      virtue of a special rule applicable to situations where the ship operating
      companies are beneficially owned by a publicly traded company like the
      Company, the more than 50% beneficial ownership requirement can also be
      satisfied based on the trading volume and the anticipated widely-held
      ownership of the Company’s shares,
      but no assurance can be given that this will remain so in the future,
      since continued compliance with this rule is subject to factors outside of
      the Company’s
      control.
  19.
              Transactions
      Involving Related Parties
  (a)
      Management feesThe
      vessel-owning companies included in the Group receive technical and
      commercial management services from Magnus Carriers, a company with common
      ultimate beneficial stockholders, pursuant to ship management agreements.
      Under these agreements, the Group paid management fees of $1.8 million for
      the year ended December 31, 2007, $1.8 million for the year ended December
      31, 2006 and $1.5 million for the year ended December 31, 2005 which is
      separately reflected in the statements of income.(b)
      CommissionsMagnus
      Carriers and Trampocean S.A., related companies with common ultimate
      beneficial stockholders, provide chartering services to the vessel-owning
      companies included in the Group at a commission of 1.25% of hires and
      freights earned by the vessels on new charters or $7,000 per month per
      vessel where no 1.25% commission is payable. The Group paid these
      companies fees for chartering services of $368,000 for the year ended
      December 31, 2007, $34,000 for the year ended December 31, 2006 and
      $50,000 for the year ended December 31, 2005. These commissions relate to
      agreements between Magnus Carriers and the vessel-owning subsidiaries.
      Under the new ship management agreements, Magnus Carriers will be paid 1%
      of the sale or purchase price in connection with a vessel sale or purchase
      that Magnus Carriers brokers for the Group.(c)
      Rental agreementDuring
      2005 and 2007, the Group entered into a rental agreement with a related
      party, a company with common ultimate beneficial stockholders (see note
      17). The Group paid $80,000 to the related party during the year ended
      December 31, 2007 (2006 $62,000 and 2005 $4,000).(d)
      Amounts due to/from related partiesAmounts
      due to related parties were $594,000 at December 31, 2007 and amounts due
      from related parties were $2.5 million at December 31, 2006. These amounts
      represent payments less receipts made by the Group on behalf of (i) other
      vessel-owning companies with common ultimate beneficial stockholders with
      the Group, consisting of $27,000 (due from) at December 31, 2007 and
      $27,000 (due from) at December 31, 2006, (ii) Magnus Carriers Corporation,
      consisting of $805,000 (due to) at December 31, 2007 and $2.5 million (due
      from) at December 31, 2006, (iii) Rocket Marine which is a wholly-owned
      subsidiary of Aries Energy Corporation, consisting of $218,000 (due from)
      at December 31, 2007 and nil at December 31, 2006; and (iv) board of
      directors for the non-vested shares dividends’ payment according to the
      Company’s 2005 Equity Incentive Plan (refer to note 12), consisting of
      $34,000 (due to) at December 31, 2007. There are no terms of settlement
      for these amounts, as of December 31, 2007.(e) CrewingPart
      of the crewing for the Group is undertaken by Magnus Carriers through a
      related entity, Poseidon Marine Agency. The Group paid manning fees of
      $107,000 for the year ended December 31, 2007, $288,000 for the year ended
      December 31, 2006 and $310,000 for the year ended December 31,
      2005.
   F-26
  ARIES
MARITIME TRANSPORT LIMITED
 (All
amounts in tables expressed in thousands of U.S. Dollars)
  Notes
to the Consolidated Financial Statements (continued)
  
 19.
      Transactions Involving Related Parties (continued)
  (f)  General
      and administrative expensesDuring
      the year ended December 31, 2007 the Group paid directors’ fees of
      $839,000 (2006 $619,000 and 2005 $467,000). Such fees are included in
      general and administrative expenses in the accompanying consolidated
      statements of income.(g) Contributions under
      management agreementsDuring
      the year ended December 31, 2007 the Group received an additional $6.1
      million (2006 $6.5 million and 2005 $812,000) from Magnus Carriers under
      the ship-management cost-sharing agreements for vessel operating expenses
      and under the termination agreement (refer to note 17). These amounts are
      reflected in the operating expenses of the vessels in the income
      statement. Also received during the year ended December 31, 2007 was an
      amount of $1.4 million (2006 $159,000 and 2005 $NIL) for special survey
      and drydocking amortization. This amount is reflected in the amortization
      and drydocking expense in the income statement. During the year ended
      December 31, 2006 the Group received $5 million in full and final
      settlement by Magnus Carriers of the drydocking expenses incurred by M/T
      Arius. This amount has been deducted from the vessel’s drydocking
      expenses (refer to note 6).(h) Vessel
      purchaseAries
      Maritime exercised its right to acquire the M/T
      Chinook under the Right of First Refusal Agreement with Magnus
      Carriers in October 2005. The acquisition was offered to Aries Maritime by
      Magnus Carriers on either of two bases; (a) with retention of the five
      year head charter dated June 16, 2003 between the sellers and Pacific
      Breeze Tankers Ltd. (a joint venture company, 50% of which is ultimately
      owned between Mons Bolin, President and Chief Executive Officer of Aries
      Maritime and Gabriel Petridis equally) as charterers, at a rate of $13,000
      per day, in which case the purchase consideration would be $30.6 million,
      or (b) without the head charter, in which case the purchase consideration
      would be $32.6 million. Aries Maritime exercised its right on basis (b).
      The total purchase consideration of $32.6 million for the M/T
      Chinook, paid on November 30, 2005, comprised purchase
      consideration under the terms of a Memorandum of Agreement dated October
      25, 2006 of $30.6 million and a $2 million additional purchase
      consideration to the sellers under the terms of a separate agreement
      relating to the termination of the head
charter.
  Pursuant
to an agreement dated December 28, 2004 Aries Maritime exercised its right to
acquire CMA
CGM Seine and CMA
CGM Makassar in June, 2005 and took delivery of these vessels on June 24,
2005 and July 15, 2005 respectively. Both vessels were purchased from
International Container Ships KS (a Norwegian limited partnership, of which Mons
Bolin, President and Chief Executive Officer of Aries Maritime and Gabriel
Petridis equally together, ultimately owned 25%). The purchase price paid for
the CMA
CGM Seine was $35.4 million and for the CMA
CGM Makassar was $35.3 million.
  (i)  Commercial management
      agreementsFrom
      October 2007 twelve vessel-owning companies entered into new commercial
      management agreements with Magnus Carriers. The main objective of this
      agreement is for the commercial manager to enter into arrangements for the
      commercial employment, marketing and commercial operation of the vessels
      and other related activities so as to secure for the Company the highest
      possible earnings for the vessels.(j)  Minimum
      liquidityUnder
      the Group’s new credit facility, Magnus Carriers is required to maintain
      at least $1 million in an account with the lenders (See Note
      10).
   F-27
  
 ARIES
MARITIME TRANSPORT LIMITED
 (All
amounts in tables expressed in thousands of U.S. Dollars)
 
 Notes
to the Consolidated Financial Statements (continued)
 
 
 20.           Post
Balance Sheet Events
 
 a)
      On March 3, 2008 the Company announced that it has reached an agreement to
      sell the Arius
      to an unrelated party for net proceeds of $21.8 million. The vessel was
      delivered to their new owners on June 10, 2008. The gain on the sale of
      the vessel amounted to $10.1 million. The Company paid 1% of the purchase
      price as sales commission to Magnus Carriers. The Company also paid a
      1% commission to a brokerage firm of which one of the Company’s directors
      is a shareholder.
 
 On March
25, 2008 the Company announced that it had reached an agreement to sell both the
MSC
Oslo and its sister ship, the Energy
1, to an unrelated party for net proceeds totalling $39.9 million.
The vessels were delivered to their new owners on April 30, 2008 and June 2,
2008. The gain on the sale of the two vessels amounted to $5.3 million. The
Company paid 1% of the purchase price as sales commission to Magnus
Carriers.
 
 The
following represent the operating results of the three vessels for the year
ended December 31, 2007:
 
 Revenues:                      
$18.3 million
 Expenses:                      ($20.8
million)
 
 b)
      On April 7, 2008 the Company transacted interest rate hedging with Bank of
      Scotland, effective April 3, 2008, comprising simultaneous cancellation of
      the existing hedging transaction and replacement with similar longer term
      hedging instruments (refer to note
15).
 
 c)
      On April 11, 2008 the board of directors of the Company resolved to
      accelerate the vesting of the 100,000 shares unvested as of December 31,
      2007 of 200,000 shares awarded during 2007 under grants of restricted
      stock to Directors. The new vesting date is April 11, 2008 (refer to note
      12).
 
 d)
      On April 15, 2008 the Company transacted interest rate hedging with Nordea
      Bank, effective April 3, 2008, comprising simultaneous cancellation of the
      existing hedging transaction and replacement with similar longer term
      instruments (refer to note 15).
 
 e)
      On March 17, 2008 and April 17, 2008, the Company agreed certain
      amendments to the facility agreement (refer to note
  10).
 
 f)
      In March 2008, the Company announced the resignation of Richard J.H.
      Coxall from his position as Chief Financial Officer and
      Director.
 
 g)
      In June 2008, the Company announced the appointment of Ioannis Makris as
      Chief Financial Officer.
 
   F-28
  ITEM
      19.
              EXHIBITS
 
 Number
                
                Description of
      Exhibits1.1
                ____
                Articles
      of Incorporation of Aries Maritime Transport Limited
(1)1.2
                ____
                Bye-laws
      of the Company (2)4.1
                ____
                Credit
      Agreement, dated April 3, 2006 by and among the Company and The Bank of
      Scotland and Nordea Bank Finland as joint lead arrangers.
    (3)4.2
                ____
                First
      Supplemental Agreement, dated August 24, 2006 by and between the Company
      and The Bank of Scotland relating to the Credit Agreement.
    (4)4.3
                ____
                Second
      Supplemental Agreement, dated January 22, 2007 by and among the Company,
      certain subsidiaries, The Bank of Scotland and Magnus Carriers Corporation
      relating to the Credit Agreement. (5)4.4
                ____
                Third
      Supplemental Agreement, dated March 2, 2007 by and among the Company,
      certain subsidiaries, The Bank of Scotland and Magnus Carriers Corporation
      relating to the Credit Agreement. (6)4.5
                ____
                Form
      of Equity Incentive Plan. (7)4.6
                ____
                Fourth
      Supplemental Agreement, dated July 2007, by and among the Company, certain
      subsidiaries, Magnus Carriers Corporation and The Bank of Scotland
      relating to the Credit Agreement.4.7
                ____
                Fifth
      Supplemental Agreement, dated June 11, 2008, by and among the Company and
      The Bank of Scotland relating to the Credit Agreement.8.1
                ____
                List
      of Subsidiaries (8)12.1
                ____
                Rule
      13a-14(a)/15d-14(a) Certification of the Company’s Chief Executive
      Officer.12.2
                ____
                Rule
      13a-14(a)/15d-14(a) Certification of the Company’s Chief Financial
      Officer.13.1
                ____
                Certification
      of the Company’s 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 the Company’s 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)
Incorporated by reference to Exhibit 3.1 to the Company’s registration statement
on Form F-1 (Registration No. 333-124952).
  (2)
Incorporated by reference to Exhibit 3.2 to the Company’s registration statement
on Form F-1 (Registration No. 333-124952).
  (3)
Incorporated by reference to Exhibit 4.1 to the Company’s Annual Report on Form
20-F/A for the fiscal year ended December 31, 2005 filed on April 18,
2007.
  (4)
Incorporated by reference to Exhibit 4.2 to the Company’s Annual Report on Form
20-F/A for the fiscal year ended December 31, 2006 filed on April 20,
2007.
  (5)
Incorporated by reference to Exhibit 4.3 to the Company’s Annual Report on Form
20-F/A for the fiscal year ended December 31, 2006 filed on April 20,
2007.
   
  (6)
Incorporated by reference to Exhibit 4.4 to the Company’s Annual Report on Form
20-F/A for the fiscal year ended December 31, 2006 filed on April 20,
2007.
  (7)
Incorporated by reference to Exhibit 10.6 to the Company’s registration
statement on Form F-1/A (Registration No. 333-124952).
  (8)
Incorporated by reference to Exhibit 8.1 to the Company’s Annual Report on Form
20-F/A for the fiscal year ended December 31, 2006 filed on April 20,
2007.
   
  SIGNATURES
   The
registrant hereby certifies that it meets all of the requirements for filing on
Form 20-F and that it has duly caused and authorized the undersigned to sign
this registration statement on its behalf.
  ARIES
      MARITIME TRANSPORT LIMITEDBy:
              /s/
      Mons S. BolinName:  Mons
      S. Bolin
                Title:   Chief
      Executive OfficerJune 30,
      2008
 
 
 
 SK 23248 0002 896241
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