UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


WASHINGTON,
DC 20549





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 001-13944








NORDIC
AMERICAN TANKER SHIPPING LIMITED


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


(Exact
name of Registrant as specified in its charter)





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


(Translation
of Registrant’s name into English)





BERMUDA


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


(Jurisdiction
of incorporation or organization)








LOM
Building


27
Reid Street


Hamilton
HM 11


Bermuda


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


(Address
of principal executive offices)








Herbjørn
      Hansson, Chairman, President, and Chief Executive Officer,
              Tel
      No. 1 (441) 292-7202,
              LOM
      Building, 27 Reid Street, Hamilton HM 11, Bermuda(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
Stock, $0.01 par value


Series
A Participating Preferred Stock


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


Title
of class





New
York Stock Exchange


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


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:





As
of December 31, 2007, there were 29,975,312 shares outstanding of the
Registrant’s common stock, $0.01 par value per share.





Indicate
by check mark if the Registrant is a well-known seasoned issuer, as defined in
Rule 405 of the Securities Act.





[X]
      Yes
            [_]
      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  [X]
            Accelerated
      filer  [_]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





Page





ITEM
      1.
              IDENTITY
      OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS
              1
  ITEM
      2.
              OFFER
      STATISTICS AND EXPECTED TIMETABLE
              1
  ITEM
      3.
              KEY
      INFORMATION
              1
  A.
              Selected
      Financial Data
              1
  B.
              Capitalization
      And Indebtedness
              1
  C.
              Reasons
      For The Offer And Use Of Proceeds
              3
  D.
              Risk
      Factors
              3
  ITEM
      4.
              INFORMATION
      ON THE COMPANY
              13
  A.
              History
      And Development Of The Company
              13
  B.
              Business
      Overview
              13
  C.
              Organizational
      Structure
              28
  D.
              Property,
      Plant And Equipment
              28
  ITEM
      4A.
              UNRESOLVED
      STAFF COMMENTS
              28
  ITEM
      5.
              OPERATING
      AND FINANCIAL REVIEW AND PROSPECTS
              28
  A.
              Operating
      Results
              28
  B.
              Liquidity
      and Capital Resources
              30
  C.
              Research
      and Development, Patents and Licenses, Etc
              31
  D.
              Trend
      Information
              31
  E.
              Off
      Balance Sheet Arrangements
              32
  F.
              Tabular
      Disclosure Of Contractual Obligations
              32
  ITEM
      6.
              DIRECTORS,
      SENIOR MANAGEMENT AND EMPLOYEES
              34
  A.
              Directors
      And Senior Management
              34
  B.
              Compensation
              36
  C.
              Board
      Practices
              37
  D.
              Employees
              38
  E.
              Share
      Ownership
              38
   
    ITEM
      7.
              MAJOR
      SHAREHOLDERS AND RELATED PARTY TRANSACTIONS
              38
  A.
              Major
      Shareholders
              38
  B.
              Related
      Party Transactions
              38
  C.
              Interests
      Of Experts And Counsel
              38
  ITEM
      8.
              FINANCIAL
      INFORMATION
              38
  A.
              Consolidated
      Statements And Other Financial Information
              38
  B.
              Significant
      Changes
              39
  ITEM
      9.
              THE
      OFFER AND LISTING
              39
  ITEM
      10.
              ADDITIONAL
      INFORMATION
              40
  A.
              Share
      Capital
              40
  B.
              Memorandum
      And Articles Of Association
              40
  C.
              Material
      Contracts
              41
  D.
              Exchange
      Controls
              42
  E.
              Taxation
              42
  F.
              Dividends
      And Paying Agents
              43
  G.
              Statement
      By Experts
              43
  H.
              Documents
      On Display
              43
  I.
              Subsidiary
      Information
              43
  ITEM
      11.
              QUANTITATIVE
      AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
              43
  ITEM
      12.
              DESCRIPTION
      OF SECURITIES OTHER THAN EQUITY SECURITIES
              44
  ITEM
      13.
              DEFAULTS,
      DIVIDEND ARREARAGES AND DELINQUENCIES
              44
   ITEM
      14.
              MATERIAL
      MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF
      PROCEEDS
              44
   
    ITEM
      15.
              CONTROLS
      AND PROCEDURES
              44
  A.
              Disclosure
      Controls And Procedures
              44
  B.
              Management’s
      annual report on internal control over financial
      reporting
              44
  C.
              Attestation
      report of the registered public accounting firm
              45
  D.
              Changes
      in internal control over financial reporting
              45
  ITEM
      16.
              RESERVED
              45
  ITEM
      16A.
              AUDIT
      COMMITTEE FINANCIAL EXPERT
              45
  ITEM
      16B.
              CODE
      OF ETHICS
              45
  ITEM
      16C.
              PRINCIPAL
      ACCOUNTANT FEES AND SERVICES
              45
  A.
              Audit
      Fees
              45
  B.
              Audit-Related
      Fees (1)
              45
  C.
              Tax
      Fees
              46
  D.
              All
      Other Fees
              46
  E.
              Audit
      Committee’s Pre-Approval Policies and Procedures
              46
  F.
              Not
      applicable
              46
  ITEM
      16D.
              EXEMPTIONS
      FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES
              46
  ITEM
      16E.
              PURCHASES
      OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED
      PERSONS
              46
  ITEM
      17.
              FINANCIAL
      STATEMENTS
              46
  ITEM
      18.
              FINANCIAL
      STATEMENTS
              46
  ITEM
      19.
              EXHIBITS
              46







CAUTIONARY
STATEMENT REGARDING FORWARD-LOOKING STATEMENTS




Certain
matters discussed herein may constitute forward-looking statements. The Private
Securities Litigation Reform Act of 1995 provides safe harbor protections for
forward-looking statements in order to encourage companies to provide
prospective information about their business. Forward-looking statements include
statements concerning plans, objectives, goals, strategies, future events or
performance, and underlying assumptions and other statements, which are other
than statements of historical facts.




The
Company desires to take advantage of the safe harbor provisions of the Private
Securities Litigation Reform Act of 1995 and is including this cautionary
statement in connection with this safe harbor legislation. The words “believe,”
“anticipate,” “intend,” “estimate,” “forecast,” “project,” “plan,” “potential,”
“may,” “should,” “expect,” “pending” and similar expressions identify
forward-looking statements.




The
forward-looking statements are based upon various assumptions, many of which are
based, in turn, upon further assumptions, including without limitation, our
management’s examination of historical operating trends, data contained in our
records and other data available from third parties. Although we believe that
these assumptions were reasonable when made, because these assumptions are
inherently subject to significant uncertainties and contingencies which are
difficult or impossible to predict and are beyond our control, we cannot assure
you that we will achieve or accomplish these expectations, beliefs or
projections. We undertake no obligation to update any forward-looking statement,
whether as a result of new information, future events or otherwise.




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 fluctuations in
charter rates and vessel values, changes in demand in the tanker market, as a
result of changes in OPEC’s petroleum production levels and world wide oil
consumption and storage, changes in our operating expenses, including bunker
prices, drydocking and insurance costs, the market for our vessels, availability
of financing and refinancing, changes in governmental rules and regulations or
actions taken by regulatory authorities, potential liability from pending or
future litigation, general domestic and international political conditions,
potential disruption of shipping routes due to accidents or political events,
vessels breakdowns and instances of off-hires and other important factors
described from time to time in the reports filed by the Company with the
Securities and Exchange Commission.




Please
note in this annual report, “we”, “us”, “our”, and “The Company”, all refer to
Nordic American Tanker Shipping Limited.











ITEM
      1.
            IDENTITY
      OF DIRECTORS, SENIOR MANAGEMENT AND
ADVISERS




Not
Applicable




ITEM
      2.
            OFFER
      STATISTICS AND EXPECTED TIMETABLE




Not
Applicable




ITEM
      3.
            KEY
      INFORMATION




A.
            SELECTED
      FINANCIAL DATA




The
following historical financial information should be read in conjunction with
our audited financial statements and related notes all of which are included
elsewhere in this document and “Operating and Financial Review and Prospects.”
The statement of operations data for each of the three years ended December 31,
2007, 2006, and 2005 and selected balance sheet data as of December 31, 2007 and
2006 are derived from our audited financial statements included elsewhere in
this document. The statements of operations data for each of the years ended
December 31, 2004 and 2003 and selected balance sheet data for each of the years
ended December 31, 2005, 2004 and 2003 are derived from our audited financial
statements not included in this document.







1








SELECTED
      FINANCIAL DATA
            
            Year
      Ended December 31,All
      figures in thousands of USD except share data
            
            2007
            
            
            2006
            
            
            2005
            
            
            2004
            
            
            2003Voyage
      revenue
            
            
            186,986
            
            
            
            175,520
            
            
            
            117,110
            
            
            
            67,452
            
            
            
            37,371Voyage
      expenses
            
            
            (47,122
            )
            
            
            (40,172
            )
            
            
            (30,981
            )
            
            
            (4,925
            )
            
            
            (185
            )Vessel
      operating expense –
              excl.
      depreciation expense presented below
            
            
            (32,124
            )
            
            
            (21,102
            )
            
            
            (11,221
            )
            
            
            (1,977
            )
            
            
            -General
      and administrative expenses
            
            
            (12,132
            )
            
            
            (12,750
            )
            
            
            (8,492
            )
            
            
            (10,852
            )
            
            
            (468
            )Depreciation
            
            
            (42,363
            )
            
            
            (29,254
            )
            
            
            (17,529
            )
            
            
            (6,918
            )
            
            
            (6,831
            )Net
      operating income
            
            
            53,245
            
            
            
            72,242
            
            
            
            48,887
            
            
            
            42,780
            
            
            
            29,887Interest
      income
            
            
            904
            
            
            
            1,602
            
            
            
            850
            
            
            
            143
            
            
            
            26Interest
      expense
            
            
            (9,683
            )
            
            
            (6,339
            )
            
            
            (3,454
            )
            
            
            (1,971
            )
            
            
            (1,798
            )Other
      financial (expense) income
            
            
            (260
            )
            
            
            (112
            )
            
            
            34
            
            
            
            (136
            )
            
            
            (15
            )Total
      other expenses
            
            
            (9,039
            )
            
            
            (4,849
            )
            
            
            (2,570
            )
            
            
            (1,964
            )
            
            
            (1,787
            )Net
      income
            
            
            44,206
            
            
            
            67,393
            
            
            
            46,317
            
            
            
            40,816
            
            
            
            28,100


Basic
      earnings per share
            
            
            1.56
            
            
            
            3.14
            
            
            
            3.03
            
            
            
            4.05
            
            
            
            2.89Diluted
      earnings per share
            
            
            1.56
            
            
            
            3.14
            
            
            
            3.03
            
            
            
            4.05
            
            
            
            2.89Cash
      dividends declared per share
            
            
            3.81
            
            
            
            5.85
            
            
            
            4.21
            
            
            
            4.84
            
            
            
            3.05Basic
      weighted average shares outstanding
            
            
            28,252,472
            
            
            
            21,476,196
            
            
            
            15,263,622
            
            
            
            10,078,391
            
            
            
            9,706,606Diluted
      weighted average shares outstanding
            
            
            28,294,997
            
            
            
            21,476,196
            
            
            
            15,263,622
            
            
            
            10,078,391
            
            
            
            9,706,606


Other
      financial data:Net
      cash from operating activities
            
            
            83,649
            
            
            
            106,613
            
            
            
            51,056
            
            
            
            62,817
            
            
            
            29,894Dividends
      paid
            
            
            107,349
            
            
            
            122,590
            
            
            
            64,279
            
            
            
            47,196
            
            
            
            29,605Selected
      Balance Sheet Data (at period end):Cash
      and cash equivalents
            
            
            13,342
            
            
            
            11,729
            
            
            
            14,240
            
            
            
            30,733
            
            
            
            566Total
      assets
            
            
            804,628
            
            
            
            800,180
            
            
            
            505,844
            
            
            
            224,203
            
            
            
            136,896Total
      debt
            
            
            105,500
            
            
            
            173,500
            
            
            
            130,000
            
            
            
            0
            
            
            
            30,000Common
      stock
            
            
            300
            
            
            
            269
            
            
            
            166
            
            
            
            131
            
            
            
            97Total
      shareholders’ equity
            
            
            672,105
            
            
            
            611,946
            
            
            
            370,872
            
            
            
            221,868
            
            
            
            105,708








2





B.
            CAPITALIZATION
      AND INDEBTEDNESS




Not
Applicable




C.
            REASONS
      FOR THE OFFER AND USE OF PROCEEDS




Not
Applicable




D.
            RISK
      FACTORS




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




Industry
Specific Risk Factors




If
the tanker industry, which has been cyclical, is depressed in the future, our
earnings and available cash flow may decrease.




If
the tanker industry, which has been cyclical, is depressed in the future, our
earnings and available cash flow may decrease. Our ability to recharter our
vessels or to sell them on the expiration or termination of their charters and
the charter rates payable in respect of our eleven vessels currently operating
in the spot market, or any renewal or replacement charters, will depend upon,
among other things, economic conditions in the tanker market. Fluctuations in
charter rates and tanker values result from changes in the supply and demand for
tanker capacity and changes in the supply and demand for oil and oil
products.




The
factors affecting the supply and demand for tankers are outside of our control,
and the nature, timing and degree of changes in industry conditions are
unpredictable.




The
factors that influence demand for tanker capacity include:




·
            demand
      for oil and oil products,








·
            supply
      of oil and oil products,




·
            regional
      availability of refining capacity,




·
            global
      and regional economic conditions,




·
            the
      distance oil and oil products are to be moved by
  sea,




·
            changes
      in seaborne and other transportation
patterns,




·
            weather,
      and




·
            competition
      from alternative sources of energy.




The factors that
influence the supply of tanker capacity include:




·
            the
      number of newbuilding deliveries,




·
            the
      scrapping rate of older vessels,




·
            conversion
      of tankers to other uses,




·
            the
      number of vessels that are out of service,
and




·
            environmental
      concerns and regulations.






3




Historically, the tanker markets have been
volatile as a result of the many conditions and factors that can affect the
price, supply and demand for tanker capacity. Changes in demand for
transportation of oil over longer distances and supply of tankers to carry that
oil may materially affect our revenues, profitability and cash flows. Eleven of
our twelve vessels are currently operated in the spot market, of which six
vessels are under a cooperative agreement with Frontline Ltd. (NYSE:FRO) and
five vessels with Stena AB of Sweden.  We are highly dependent on spot
market charter rates. If spot charter rates decline, we may be unable to achieve
a level of charterhire sufficient for us to operate our vessels
profitably.




Changes
in the oil markets could result in decreased demand for our vessels and
services.





Demand
for our vessels and services in transporting oil will depend upon world and
regional oil markets. Any decrease in shipments of crude oil in those markets
could have a material adverse effect on our business, financial condition and
results of operations. Historically, those markets have been volatile as a
result of the many conditions and events that affect the price, production and
transport of oil, including competition from alternative energy sources. A
slowdown of the U.S. and world economies may result in reduced consumption of
oil products and a decreased demand for our vessels and lower charter rates,
which could have a material adverse effect on our earnings and our ability to
pay dividends.




We
will be dependent on spot charters and any decrease in spot charter rates in the
future may adversely affect our earnings and our ability to pay
dividends.




We
currently operate a fleet of twelve vessels.  Of those twelve vessels,
one is on a long-term fixed-rate charter, while the other eleven are employed in
the spot market.  Therefore we are highly dependent on spot market
charter rates.




Charter
rates for tankers are below their historically high levels reached during the
period between late 2004 and mid 2005 but remain high relative to historic
levels. If the tanker 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 ability to pay dividends may be adversely
affected.




We
may enter into spot charters for any additional vessels that we may acquire in
the future. Although spot chartering is common in the tanker industry, the spot
charter market may fluctuate significantly based upon tanker and oil supply and
demand. The successful operation of our vessels in the spot charter market
depends upon, among other things, obtaining profitable spot charters and
minimizing, to the extent possible, time spent waiting for charters and time
spent travelling unladen to pick up cargo. The spot market is very volatile,
and, in the past, there have been periods when spot rates have declined below
the operating cost of vessels. If future spot charter rates decline, then we may
be unable to operate our vessels trading in the spot market profitably, meet our
obligations, including payments on indebtedness, or to pay dividends. 
Furthermore, as charter rates for spot charters are fixed for a single voyage
which may last up to several weeks, during periods in which spot charter rates
are rising, we will generally experience delays in realizing the benefits from
such increases.




Normally,
tanker markets are stronger in the fall and winter months (the fourth and first
quarters of the calendar year) in anticipation of increased oil consumption in
the Northern Hemisphere during the winter months. Unpredictable weather patterns
and variations in oil reserves disrupt tanker scheduling. Seasonal variations in
tanker demand will affect any spot market related rates that we may
receive.




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




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





The
market supply of tankers is affected by a number of factors such as demand for
energy resources, oil, and petroleum products, as well as strong overall
economic growth in parts of the world economy including Asia. If the capacity of
new ships delivered exceeds the capacity of tankers being scrapped and lost,
tanker capacity will increase. In addition, the newbuilding order book which
extends to 2012 equalled approximately 35% of the existing world tanker fleet as
of March 31, 2008 and the order book may increase further in proportion to the
existing fleet. If the supply of tanker capacity increases and the demand for
tanker capacity does not increase correspondingly, charter rates could
materially decline. A reduction in charter rates and the value of our vessels
may have a material adverse effect on our results of operations and our ability
to pay dividends.






4




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





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.




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





The
operation of our vessels is affected by the requirements set forth in the IMO,
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.  If we fail to
comply with the ISM Code, we may be subject to increased liability, may
invalidate existing insurance or decrease available insurance coverage for our
affected vessels and such failure may result in a denial of access to, or
detention in, certain ports.  As of the date of this annual report,
each of our vessels is ISM code-certified.




The
value of our vessels may fluctuate and any decrease in the value of our vessels
could result in a lower price of our common shares.




Tanker
values have generally experienced high volatility. You should expect the market
value of our oil tankers to fluctuate, depending on general economic and market
conditions affecting the tanker industry and competition from other shipping
companies, types and sizes of vessels, and other modes of transportation. In
addition, as vessels grow older, they generally decline in value. These factors
will affect the value of our vessels. Declining tanker values could affect our
ability to raise cash by limiting our ability to refinance our vessels, thereby
adversely impacting our liquidity, or result in a breach of our loan covenants,
which could result in defaults under our $500 million revolving credit facility,
or the 2005 Credit Facility. Under the 2005 Credit Facility, we are required to
maintain equity, defined as total assets less total debt, of at least $150.0
million. If we determine at any time that a vessel’s future limited useful life
and earnings require us to impair its value on our financial statements, that
could result in a charge against our earnings and the reduction of our
shareholders’ equity. Due to the cyclical nature of the tanker market, if for
any reason we sell vessels at a time when tanker prices have fallen, the sale
may be at less than the vessel’s carrying amount on our financial statements,
with the result that we would also incur a loss and a reduction in earnings. Any
such reduction could result in a lower price of our common shares.






5




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





Our
vessels and their cargoes will be at risk of being damaged or lost because of
events such as marine disasters, bad weather, business interruptions caused by
mechanical failures, grounding, fire, explosions and collisions, human error,
war, terrorism, piracy and other circumstances or events. 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.




In
addition, the operation of tankers has unique operational risks associated with
the transportation of oil. An oil spill may cause significant environmental
damage, and the costs associated with a catastrophic spill could exceed the
insurance coverage available to us.  Compared to other types of
vessels, tankers are exposed to a higher risk of damage and loss by fire,
whether ignited by a terrorist attack, collision, or other cause, due to the
high flammability and high volume of the oil transported in tankers.


If
our vessels suffer damage, they may need to be repaired at a dry-docking
facility. The costs of dry-dock repairs are unpredictable and may be
substantial. We may have to pay dry-docking 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, may adversely affect
our business and financial condition. In addition, space at dry-docking
facilities is sometimes limited and not all dry-docking facilities are
conveniently located. We may be unable to find space at a suitable dry-docking
facility or our vessels may be forced to travel to a dry-docking facility that
is not conveniently located to our vessels’ positions. The loss of earnings
while these vessels are forced to wait for space or to travel to more distant
dry-docking facilities may adversely affect our business and financial
condition. Further, the total loss of any of our vessels could harm our
reputation as a safe and reliable vessel owner and operator.  If we
are unable to adequately maintain or safeguard our vessels, we may be unable to
prevent any such damage, costs, or loss which could negatively impact our
business, financial condition, results of operations and ability to pay
dividends.




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





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





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




The
international shipping industry is an inherently risky business involving global
operations. Our vessels are at risk of damage or loss because of events such as
mechanical failure, collision, human error, war, terrorism, piracy, cargo loss
and bad weather. In addition, changing economic, regulatory and political
conditions in some countries, including political and military conflicts, have
from time to time resulted in attacks on vessels, mining of waterways, piracy,
terrorism, labor strikes and boycotts. These sorts of events could interfere
with shipping routes and result in market disruptions which may reduce our
revenue or increase our expenses.




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





We
conduct most of our operations outside of the United States, and our business,
results of operations, cash flows, financial condition and ability to pay
dividends may be adversely affected by the effects of political instability,
terrorist or other attacks, war or international hostilities. Terrorist attacks
such as the attacks on the United States on September 11, 2001, the bombings in
Spain on March 11, 2004 and in London on July 7, 2005 and the continuing
response of the 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 instability has also resulted in attacks on vessels, such as
the attack on the M/T Limburgin October 2002, mining of waterways and other efforts to disrupt
international shipping, particularly in the Arabian Gulf region. Acts of
terrorism and piracy have also affected vessels trading in regions such as the
South China Sea. Any of these occurrences could have a material adverse impact
on our business, financial condition, results of operations and ability to pay
dividends.




Our
vessels call on ports located in countries that are subject to restrictions
imposed by the U.S. government.




From
time to time, vessels in our fleet call on ports located in countries subject to
sanctions and embargoes imposed by the U.S. government and countries identified
by the U.S. government as state sponsors of terrorism. Although these sanctions
and embargoes do not prevent our vessels from making calls to ports in these
countries, potential investors could view such port calls negatively, which
could adversely affect our reputation and the market for our common stock.
Investor perception of the value of our common stock may be adversely affected
by the consequences of war, the effects of terrorism, civil unrest and
governmental actions in these and surrounding countries.






6




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





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





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




Governments could
requisition our vessels during a period of war or emergency, whichmay
negatively impact our business, financial condition, results of operations and
ability to pay dividends.




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






Company
Specific Risk Factors





We operate in a
cyclical and volatile industry and cannot guarantee that we will continue to
make cash distributions.




We
have made cash distributions quarterly since October 1997. It is possible that
our revenues could be reduced as a result of decreases in charter rates or that
we could incur other expenses or contingent liabilities that would reduce or
eliminate the cash available for distribution as dividends. The 2005 Credit
Facility prohibits the declaration and payment of dividends if we are in default
under the 2005 Credit Facility. We refer you to Item 4—Information on the
Company—Business Overview—Our Credit Facility for more details.




In
addition, the declaration and payment of dividends is subject at all times to
the discretion of our Board of Directors and compliance with Bermuda law, and
may be dependent upon the adoption at the annual meeting of shareholders of a
resolution effectuating a reduction in our share premium in an amount equal to
the estimated amount of dividends to be paid in the next succeeding year. We
refer you to Item 8—Financial Information—Dividend Policy for more details. We
may not continue to pay dividends at rates previously paid or at
all.




If we do not
identify suitable tankers for acquisition or successfully integrate any acquired
tankers, we may not be able to grow or to effectively manage our
growth.
  One
of our principal strategies is to continue to grow by expanding our operations
and adding to our fleet. Our future growth will depend upon a number of factors,
some of which may not be within our control. These factors include our ability
to:
  ·
              identify
      suitable tankers and/or shipping companies for
    acquisitions,






7








·
            identify
      businesses engaged in managing, operating or owning tankers for
      acquisitions or joint ventures,




·
            integrate
      any acquired tankers or businesses successfully with our existing
      operations,




·
            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.




Our
failure to effectively identify, purchase, develop and integrate any tankers or
businesses could adversely affect our business, financial condition and results
of operations. In addition, in November 2004, we transitioned from a bareboat
charter company to an operating company. We may incur unanticipated expenses as
an operating company. The number of employees of Scandic American Shipping Ltd.,
or the Manager, that perform services for us and our current operating and
financial systems may not be adequate as we implement our plan to expand the
size of our fleet, and we may not be able to require the Manager to hire more
employees or adequately improve those systems.  Finally, acquisitions
may require additional equity issuances or debt issuances (with amortization
payments), both of which could lower dividends per share. If we are unable to
execute the points noted above, our financial condition and dividend rates may
be adversely affected.




Purchasing
and operating secondhand vessels may result in increased operating costs which
could adversely affect our earnings and, as our fleet ages, the risks associated
with older vessels could adversely affect our operations.




Our
current business strategy includes additional growth through the acquisition of
new and secondhand vessels. The twelfth vessel that we took delivery of in early
December 2006 is secondhand. While we typically inspect secondhand vessels prior
to purchase, this does not provide us with the same knowledge about their
condition that we would have had if these vessels had been built for and
operated exclusively by us. Generally, we do not receive the benefit of
warranties from the builders for the secondhand vessels that we
acquire.




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




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




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





If
we do not set aside funds and are unable to borrow or raise funds for vessel
replacement, we will be unable to replace the vessels in our fleet upon the
expiration of their remaining useful lives, which we expect to range from 14
years to 23 years, depending on the type of vessel. Our cash flows and income
are dependent on the revenues earned by the chartering of our vessels. If we are
unable to replace the vessels in our fleet upon the expiration of their useful
lives, our business, results of operations, financial condition and ability to
pay dividends would be adversely affected. Any funds set aside for vessel
replacement will not be available for dividends.






8






We
are dependent on the Manager and there may be conflicts of interest arising from
the relationship between our Chairman and the Manager.




Our
success depends to a significant extent upon the abilities and efforts of the
Manager and our management team. Our success will depend upon our and the
Manager’s ability to hire and retain key members of our management team. The
loss of any of these individuals could adversely affect our business prospects
and financial condition. Difficulty in hiring and retaining personnel could
adversely affect our results of operations. We do not maintain “key man” life
insurance on any of our officers.




A
company which is 100% owned by Herbjørn Hansson, our Chairman, President and
Chief Executive Officer and his family, is the owner of the Manager. Until June
2007, one of our directors was also an owner of the Manager. The Manager may
engage in business activities other than with respect to the Company. The
fiduciary duty of a director may compete with or be different from the interests
of the Manager and may create conflicts of interest in relation to that
director’s duties to the Company.




Under
Bermuda law, non-Bermudians (other than spouses of Bermudians) may not engage in
any gainful occupation in Bermuda without an appropriate governmental work
permit. Work permits may be granted or extended by the Bermuda government upon
showing that, after proper public advertisement in most cases, no Bermudian (or
spouse of a Bermudian) is available who meets the minimum standard requirements
for the advertised position. In 2001, the Bermuda government announced a new
policy limiting the duration of work permits to six years, with certain
exemptions for key employees. We may not be able to use the services of one or
more of our key employees in Bermuda if we are not able to obtain work permits
for them, which could have a material adverse effect on our
business.




An increase in
operating costswould decrease earnings and dividends per share.




Under
the charter agreement for one of our vessels, the charterer is responsible for
vessel operating expenses and voyage costs.  Under the spot charters
of eleven of our twelve vessels, we are responsible for such costs. Our vessel
operating expenses include the costs of crew, fuel (for spot chartered vessels),
provisions, deck and engine stores, insurance and maintenance and repairs, which
fuels depend on a variety of factors, many of which are beyond our control. Some
of these costs, primarily relating to insurance and enhanced security measures
implemented after September 11, 2001, have been increasing. The price of
fuel is near historical high levels and may increase in the future. If our
vessels suffer damage, they may need to be repaired at a drydocking facility.
The costs of drydock repairs are unpredictable and can be substantial. 
 Increases in any of these expenses would decrease earnings and dividends
per share.




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 than we do. Competition for the
transportation of oil and oil products can be intense and depends on price,
location, size, age, condition and the acceptability of the tanker and its
operators to the charterers. We will have to compete with other tanker owners,
including major oil companies as well as independent tanker
companies.






9




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.




Servicing
debt which we may incur in the future would limit funds available for other
purposes and if we cannot service our debt, we may lose our
vessels.




Borrowing
under the 2005 Credit Facility requires us to dedicate a part of our cash flow
from operations to paying interest on our indebtedness. These payments limit
funds available for working capital, capital expenditures and other purposes,
including making distributions to shareholders and further equity or debt
financing in the future. Amounts borrowed under the 2005 Credit Facility bear
interest at variable rates. Increases in prevailing rates could increase the
amounts that we would have to pay to our lenders, even though the outstanding
principal amount remains the same, and our net income and cash flows would
decrease. We expect our earnings and cash flow to vary from year to year due to
the cyclical nature of the tanker industry. In addition, our current policy is
not to accumulate cash, but rather to distribute our available cash to
shareholders. If we do not generate or reserve enough cash flow from operations
to satisfy our debt obligations, we may have to undertake alternative financing
plans, such as:




·
            seeking
      to raise additional capital,




·
            refinancing
      or restructuring our debt,




·
            selling
      tankers or other assets, or




·
            reducing
      or delaying capital investments.




However,
these alternative financing plans, if necessary, may not be sufficient to allow
us to meet our debt obligations. If we are unable to meet our debt obligations
or if some other default occurs under the 2005 Credit Facility, the lenders
could elect to declare that debt, together with accrued interest and fees, to be
immediately due and payable and proceed against the collateral securing that
debt, which constitutes our entire fleet and substantially all of our
assets.




Our
2005 Credit Facility contains restrictive covenants which may limit our
liquidity and corporate activities.




The
2005 Credit Facility imposes operating and financial restrictions on us. These
restrictions may limit our ability to:




·
            pay
      dividends and make capital expenditures if we do not repay amounts drawn
      under the 2005 Credit Facility or if there is another default under the
      2005 Credit Facility,




·
            incur
      additional indebtedness, including the issuance of
    guarantees,




·
            create
      liens on our assets,




·
            change
      the flag, class or management of our vessels or terminate or materially
      amend the management agreement relating to each
  vessel,




·
            sell
      our vessels,




·
            merge
      or consolidate with, or transfer all or substantially all our assets to,
      another person, or




·
            enter
      into a new line of business.




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






10




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





We
carry insurance to protect us against most of the accident-related risks
involved in the conduct of our business, including marine hull and machinery
insurance, protection and indemnity insurance, which 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.




We
may be required to make additional premium payments because we obtain some of
our insurance through protection and indemnity associations.





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




Because
some of our expenses are incurred in foreign currencies, we are exposed to
exchange rate risks.




The
charterers of our vessels pay us in U.S. dollars. While we currently incur all
of our expenses in U.S. dollars, we have in the past incurred expenses in other
currencies, most notably the Norwegian Kroner. Declines in the value of the U.S.
dollar relative to the Norwegian Kroner, or the other currencies in which we may
incur expenses in the future, would increase the U.S. dollar cost of paying
these expenses and thus would adversely affect our results of
operations.




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




Under
the United States Internal Revenue Code of 1986, or the Code, 50% of the gross
shipping income of a vessel owning or chartering corporation, such as ourselves,
attributable to transportation that begins or ends, but that does not both begin
and end, in the U.S. will be characterized as U.S. source shipping income and
such income will be subject to a 4% United States federal income tax unless that
corporation is entitled to a special tax exemption under the Code which applies
to the international shipping income derived by certain non-United States
corporations. We believe that we currently qualify for this statutory tax
exemption and we will take this position for U.S. tax return reporting purposes.
However, there are several risks that could cause us to become taxed on our U.S.
source shipping income. Due to the factual nature of the issues involved, we can
give no assurances on our tax-exempt status.




If
we are not entitled to this statutory tax exemption for any taxable year, we
would be subject for any such year to a 4% United States federal income tax on
our U.S. source shipping income. The imposition of this tax could have a
negative effect on our business and would result in decreased earnings available
for distribution to our shareholders.






11




We may become
subject to taxes in Bermuda after 2016.




We
have received a standard assurance from the Bermuda Minister of Finance, under
Bermuda’s Exempted Undertakings Tax Protection Act 1966, that if any legislation
is enacted in Bermuda that would impose tax computed on profits or income, or
computed on any capital asset, gain or appreciation, or any tax in the nature of
estate duty or inheritance tax, then the imposition of any such tax will not be
applicable to us or to any of our operations or our shares, debentures or other
obligations until March 28, 2016. Consequently, if our Bermuda tax exemption is
not extended past March 28, 2016, we may be subject to any Bermuda tax after
that date.




Given
the limited duration of the Minister of Finance’s assurance, we cannot be
certain that we will not be subject to any Bermuda tax after March 28, 2016. In
the event that we become subject to any Bermuda tax after such date, it would
have a material adverse effect on our financial condition and results of
operations.




If
U.S. tax authorities were to treat us as a “passive foreign investment company,”
that could have adverse consequences on U.S. holders.




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, cash is treated as an asset that produces “passive income” and
“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 may be subject to a disadvantageous U.S. federal
income tax regime with respect to the distributions they receive from the
PFIC and the gain, if any, they derive from the sale or other disposition of
their shares in the PFIC.





Based
on our current and expected future operations, we believe that we ceased to be a
passive foreign investment company beginning with the 2005 taxable year. We do
not anticipate that we will be a passive foreign investment company for any
taxable year in the future.  As a result, noncorporate U.S.
shareholders should be eligible to treat dividends paid by us in 2006, 2007, and
thereafter as “qualified dividend income” which is subject to preferential tax
rates (through 2010). Since we expect to derive more than 25% of our income each
year from our time chartering and voyage chartering activities, we believe that
such income will be treated for relevant U.S. Federal income tax purposes as
services income, rather than rental income. Correspondingly, such income should
not constitute “passive income,” and the assets that we own and operate in
connection with the production of that income (which should constitute more than
50% of our assets each year), in particular our vessels, should not constitute
passive assets for purposes of determining whether we are a passive foreign
investment company in any taxable year. However, no assurance can be given that
the Internal Revenue Service will accept this position or that we would not
constitute a passive foreign investment company 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
beginning with the 2005 taxable year, our U.S. shareholders who owned their
shares during such year will face adverse U.S. tax consequences. Under the PFIC
rules, unless those shareholders make an election available under the Code
(which election could itself have adverse consequences for such shareholders),
such shareholders would be liable to pay U.S. federal income tax at the then
highest income tax rates on ordinary income plus interest upon excess
distributions (i.e., distributions received in a taxable year that are greater
than 125% of the average annual distributions received during the shorter of the
three preceding taxable years or the shareholder’s holding period for our common
shares) and upon any gain from the disposition of our common shares, as if the
excess distribution or gain had been recognized ratably over the shareholder’s
holding period of our common shares. In addition, non-corporate U.S.
shareholders will not be eligible to treat dividends paid by us as “qualified
dividend income” if we are a PFIC in the taxable year in which such dividends
are paid or in the preceding taxable year.




Risks
Relating to Our Common Shares




Our
common share price may be highly volatile and future sales of our common shares
could cause the market price of our common shares to decline.




The
market price of our common shares has historically fluctuated over a wide range
and may continue to fluctuate significantly in response to many factors, such as
actual or anticipated fluctuations in our operating results, changes in
financial estimates by securities analysts, economic and regulatory trends,
general market conditions, rumors and other factors, many of which are beyond
our control. Investors in our common shares may not be able to resell their
shares at or above their purchase price due to those factors, which include the
risks and uncertainties set forth in this annual report.






12




Because
we are a foreign corporation, you may not have the same rights that a
shareholder in a U.S. corporation may have.




We
are a Bermuda exempted company. Our memorandum of association and bye-laws and
The Companies Act, 1981 of Bermuda, or the Companies Act, govern our affairs.
The Companies Act does not as clearly establish your rights and the fiduciary
responsibilities of our directors as do statutes and judicial precedent in some
U.S. jurisdictions. Therefore, you may have more difficulty in protecting your
interests as a shareholder in the face of actions by the management, directors
or controlling shareholders than would shareholders of a corporation
incorporated in a United States jurisdiction. There is a statutory remedy under
Section 111 of the Companies Act 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.




It
may not be possible for our investors to enforce U.S. judgments against
us.




We
are incorporated in the Islands of Bermuda. Substantially all of our assets 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, 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 are incorporated or where our are located (1) would
enforce judgments of U.S. courts obtained in actions against us 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 based on those
laws.




ITEM
      4.
            INFORMATION
      ON THE COMPANY




A.
            HISTORY
      AND DEVELOPMENT OF THE COMPANY




Nordic
American Tanker Shipping Limited, or the Company, was founded on June 12,
1995 under the laws of the Islands of Bermuda and we maintain our principal
offices at LOM Building, 27 Reid Street, Hamilton HM 11, Bermuda. Our telephone
number at such address is (441) 292-7202.




The
Company was formed for the purpose of acquiring and chartering three double-hull
Suezmax tankers that were built in 1997.  These three vessels were
initially bareboat chartered to BP Shipping Ltd., or BP Shipping, for a period
of seven years.  BP Shipping redelivered the three vessels to the
Company in September 2004, October 2004 and November 2004,
respectively.  We continued contracts with BP Shipping by time
chartering to it two of our original three vessels at spot market related rates
for three year terms that expired in the fourth quarter of
2007.  These two vessels are currently chartered in the spot market
pursuant to cooperative agreements with third parties. We have bareboat
chartered the third of our original three vessels to Gulf Navigation Company
LLC, or Gulf Navigation, of Dubai, U.A.E. at a fixed rate charterhire for a
five-year term that expires in November 2009, subject to two one-year extensions
at Gulf Navigation’s option.  Our fourth vessel was delivered to us in
November 2004, our fifth and sixth vessels in March 2005, our seventh vessel in
August 2005, our eighth vessel in November 2005, our ninth vessel in April 2006,
our tenth and eleventh vessels in November 2006 and our twelfth vessel in
December 2006. These vessels are currently chartered in the spot market pursuant
to cooperative agreements with third parties.




In
July 2007, the Company issued 3,000,000 common shares at a public offering price
of $41.50 per share in a registered transaction.  The net proceeds of
the offering were used to repay debt on our Credit Facility and to prepare for
further expansion.




In
November 2007, the Company agreed to acquire two Suezmax newbuildings, which are
expected to be delivered in the fourth quarter of 2009 and by the end April
2010, respectively.  The Company acquired these two newbuildings from
First Olsen Ltd. at a price at delivery of $90,000,000 per vessel, including
calculated predelivery interest and supervision expenses. The acquisitions will
be financed by borrowings under the Company’s 2005 Credit
Facility.  See Note 8 to the Company’s Audited Financial Statements
for more information.




In
April 2008, the Company extended the term of the 2005 Credit Facility for three
years.  As a result, the 2005 Credit Facility matures in September
2013.






13




In
May 2008, the Company declared a dividend of $1.18 per share in respect of the
first quarter of 2008 which will be paid to shareholders in June
2008.




B.
            BUSINESS
      OVERVIEW




We
are an international tanker company that owns twelve modern double-hull Suezmax
tankers averaging approximately 155,000 dwt each. As of December 31, 2007, we
have chartered eleven of our twelve vessels in the spot market pursuant to
cooperative arrangements with third parties and have bareboat chartered one
vessel to Gulf Navigation.  We have agreed to acquire two Suezmax
newbuildings, one of which is expected to be delivered in the fourth quarter of
2009 and one of which is expected to be delivered by the end April
2010.




Tanker
markets are typically stronger in the fall and winter months (the fourth and
first quarters of the calendar) in anticipation of increased oil consumption in
the northern hemisphere during the winter months.  Seasonal variations
in tanker demand normally result in seasonal fluctuations in spot market charter
rates.




Our
Fleet




Our
fleet consists of fourteen modern double-hull Suezmax tankers of which two are
newbuildings.  The following chart provides information regarding each
vessel status.




Vessel
            Yard
            Year
              Built
            Dwt(1)
            Employment
      Status
              (Expiration
      Date)
            FlagGulf
      Scandic
            Samsung
            1997
            151,475
            Bareboat
      (Nov. 2009)
            Isle
      of ManNordic
      Hawk
            Samsung
            1997
            151,475
            Spot
            BahamasNordic
      Hunter
            Samsung
            1997
            151,400
            Spot
            BahamasNordic
      Voyager
            Dalian
      New
            1997
            149,591
            Spot
            NorwayNordic
      Freedom
            Daewoo
            2005
            163,455
            Spot
            BahamasNordic
      Fighter
            Hyundai
            1998
            153,328
            Spot
            NorwayNordic
      Discovery
            Hyundai
            1998
            153,328
            Spot
            NorwayNordic
      Saturn
            Daewoo
            1998
            157,332
            Spot
            Marshall
      IslandsNordic
      Jupiter
            Daewoo
            1998
            157,411
            Spot
            Marshall
      IslandsNordic
      Apollo
            Samsung
            2003
            159,999
            Spot
            Marshall
      IslandsNordic
      Cosmos
            Samsung
            2002
            159,998
            Spot
            Marshall
      IslandsNordic
      Moon
            Samsung
            2003
            159,999
            Spot
            Marshall
      IslandsNewbuilding
            Bohai
            2009
            163,000
            Expected
      delivery 4Q ‘09Newbuilding
            Bohai
            2010
            163,000
            Expected
      delivery 2Q ‘10


*Deadweight ton





OUR
CHARTERS




It
is our policy to operate our vessels either in the spot market, on time charters
or on bareboat charters. Our goal is to take advantage of potentially higher
market rates with spot market related rates and voyage charters. We currently
operate eleven of our twelve vessels in the spot market although we may consider
charters at fixed rates depending on market conditions.




Cooperative
Arrangements




We
currently operate eleven of our twelve trading vessels in spot market
cooperative arrangements with other vessels that are not owned by us. These
arrangements are managed and operated by the Swedish group Stena Bulk AB and by
Frontline Management Limited, both of which are third party administrators. The
administrators have the responsibility for the commercial management of the
participating vessels, including marketing, chartering, operating and bunker
purchasing (fuel oil) for the vessels. The participants remain responsible for
all other costs including the financing, insurance, crewing and technical
management of their vessels. The earnings of all of the vessels are aggregated
and divided according to the relative performance capabilities of each vessel
and the actual earning days each vessel was available during the period. The
vessels are operated in the spot market under our supervision.








14




Spot
Charters






During
the fiscal year ending December 31, 2007, we temporarily operated several
vessels (Nordic Saturn, Nordic Jupiter, Nordic Hawk, Nordic Hunter, Nordic
Apollo, Nordic Cosmos and Nordic Moon) pursuant to spot market charters outside
of the cooperative arrangements discussed above. Tankers operating in the spot
market are typically chartered for a single voyage which may last up to several
weeks. Tankers operating in the spot market may generate increased profit
margins during improvements in tanker rates, while tankers on fixed-rate time
charters generally provide more predictable cash flows.




Under
a typical voyage charter in the spot market, we are paid freight on the basis of
moving cargo from a loading port to a discharge port. We are responsible for
paying both operating costs and voyage costs and the charterer is responsible
for any delay at the loading or discharging ports.





Bareboat
Charters






We
have chartered one of our vessels (Gulf Scandic) under a bareboat charter to
Gulf Navigation for a five- year term terminating in November 2009 and subject
to two one-year extensions at Gulf Navigation’s option. Under the terms of this
bareboat charter, Gulf Navigation is obligated to pay a fixed charterhire of
$17,325 per day for the entire charter period. During the charter period, Gulf
Navigation is responsible for operating and maintaining the vessel and is
responsible for covering all operating costs and expenses with respect to the
vessel.






Management
Agreement




Under
the Management Agreement by and between the Company and Scandic American
Shipping Ltd., or the Manager, the Manager assumes commercial and operational
responsibility of our vessels and is generally required to manage our day-to-day
business subject to our objectives and policies as established from time to time
by the Board of Directors. All decisions of a material nature concerning our
business are reserved to our Board of Directors. The Management Agreement will
terminate on June 30, 2019, unless earlier terminated pursuant to its terms, as
discussed below, or extended by the parties following mutual
agreement.




For
its services under the Management Agreement, the Manager is reimbursed for all
its costs incurred plus a management fee payable to the Manager quarterly in
advance.  This management fee was equal to $100,000 per annum through
June 30, 2007, and was adjusted to $225,000 per annum as of July 1, 2007. Prior
to October 12, 2004, the Management Agreement provided that the Manager would
receive 1.25% of any gross charterhire paid to us. In order to further align the
Manager’s interests with those of the Company, on October 12, 2004, the Manager
agreed with us to amend the Management Agreement to eliminate this payment, and
we issued to the Manager restricted common shares equal to 2% of our outstanding
common shares. Anytime additional common shares are issued, the Manager will
receive additional restricted common shares to maintain the number of common
shares issued to the Manager at 2% of our total outstanding common shares. These
restricted shares are nontransferable for three years from
issuance.




Under
the Management Agreement, the Manager pays, and receives reimbursement from us,
for our administrative expenses including such items as:




·
            all
      costs and expenses incurred on our behalf, including operating expenses
      and other costs for vessels that are chartered out on time charters or
      traded in the spot market and for monitoring the condition of our vessel
      that is operating under bareboat
charter,




·
            executive
      officer and staff salaries,




·
            administrative
      expenses, including, among others, for third party public relations,
      insurance, franchise fees and registrars’
fees,






15




·
            all
      premiums for insurance of any nature, including directors’ and officers’
      liability insurance and general liability
  insurance,




·
            brokerage
      commissions payable by us on the gross charter hire received in connection
      with the charters,




·
            directors’
      fees and meeting expenses,




·
            audit
      fees,




·
            other
      expenses approved by the Board of the Directors
  and




·
            attorneys’
      fees and expenses, incurred on our behalf in connection with (A) any
      litigation commenced by or against us or (B) any claim or investigation by
      any governmental, regulatory or self-regulatory authority involving
      us.




We
have agreed to defend, indemnify and hold the Manager and its affiliates (other
than us and our subsidiaries that we may form in the future), officers,
directors, employees and agents harmless from and against any and all loss,
claim, damage, liability, cost or expense, including reasonable attorneys’ fees,
incurred by the Manager or any such affiliates based upon a claim by or
liability to a third party arising out of the operation of our business, unless
due to the Manager’s or such affiliates’ negligence or willful
misconduct.




We
may terminate the Management Agreement in the event that:




·
            the
      Manager commits any material breach or omission of its material
      obligations or undertakings thereunder that is not remedied within thirty
      days of our notice to the Manager of such breach or
    omission,




·
            the
      Manager fails to maintain adequate authorization to perform its duties
      thereunder that is not remedied within thirty
  days,




·
            certain
      events of the Manager’s bankruptcy occur,
or




·
            it
      becomes unlawful for the Manager to perform its duties under the
      Management Agreement.




Commercial
and Technical Management Agreements




The
Company consolidated its commercial operating functions. The Company is now
working together with Frontline Ltd. (NYSE:FRO) and the private Stena group of
Sweden, both names in the tanker industry. These arrangements are expected to
create synergies through economies of scale, resulting in a positive impact on
our overall results. Under the supervision of the Manager, Frontline and Stena’s
duties include seeking and negotiating charters for the Company’s
vessels.




During
the fiscal year ended December 31, 2007, the Company also consolidated its
technical operating functions. Under the supervision of the Manager, the ship
management firm of V.Ships Norway AS, or V.Ships, is now managing eleven of the
Company’s twelve vessels. This consolidation is expected to facilitate crew
rotation among the vessels which together with economies of scale should result
in cost improvements.





We
believe that compensation under the commercial and technical management
agreements is in accordance with industry standards.




The
International Tanker Market




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






16




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




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




The
Tanker Market 2007




Despite
world-wide fleet growth of 5% and an almost unchanged level of oil production,
tanker freight rates only fell moderately from 2006 to 2007.





As
discussed above, the oil tanker fleet is generally divided into five major
categories of vessels, based on carrying capacity.  A tanker’s
carrying capacity is measured in dwt, which is the amount of crude oil measured
in metric tons that the vessel is capable of loading. In the single voyage
market, the VLCC spot rates reached an average of $51,000 per day, a decline
from $56,000 per day in 2006. Suezmaxes, whose carrying capacity ranges from
120,000 dwt to 200,000 dwt, achieved average spot rates of $40,000 per day, down
from $48,000 in 2006. Corresponding average spot rates for Aframaxes, whose
carrying capacity ranges from 80,000 dwt to 120,000 dwt, were $35,000 per day
compared with $38,000 per day in 2006.





On
an annual average basis, the tanker fleet increased by 5.3% from 2006 to 2007.
Deliveries of new tankers reached 29 million dwt, up from 23 million dwt in
2006. Scrapping amounted to 3.5 million dwt. No VLCCs were sold for scrapping;
although one Suezmax, eight Aframaxes and 81 smaller tankers were reported as
sold for scrapping. The average scrapping age for all tankers was 27.6 years
compared with 26.0 years in 2006. It has further been reported that 7.6 million
dwt or 36 tankers were undergoing conversions to other uses, of which 21 were
VLCCs and 11 were Suezmaxes.





Estimates
indicate an increase in seaborne oil trade of 1% from 2006 to 2007 and a
relatively strong increase in the average transport distance, driven by
increased oil consumption in China. The trade growth in ton-mile terms is
estimated at approximately 2.5%. There have also been some additional factors
contributing to the tonnage demand growth. Among these factors, one of the most
significant was a reduction in the productivity of single-hull tankers (in 2007
single-hull tankers accounted for approximately 25% of the total
fleet).  Tonnage demand growth increased by approximately 4%, although
capacity increased by a larger percentage, resulting in a decrease in capacity
utilization from 88.5% in 2006 to 87.5% in 2007.





After
the strong 4% growth in oil consumption in 2004, oil production capacity has
been basically fully utilized. With continued high economic growth in subsequent
years, capacity constraints have reduced the growth in oil consumption to
between 1.0% and 1.5% since 2004 and crude oil prices rose to $72 per barrel for
Brent crude reported as an average for 2007.  Non-OPEC producers again
failed to meet expectations and their production increased only by 0.5 mbd
(million barrels per day).





The
weak trend in non-OPEC production led to more pressure on OPEC to increase
production. However, most of OPEC’s unused production capacity is in heavy-sour
crude that the refining industry is not designed to handle. Furthermore,
given the high level of commercial oil stocks in 2006, OPEC reduced output for
most of the second half of 2006 in order to avoid a price collapse in
2007.  OPEC’s production (excluding Angola which became a member in
2007) fell by 0.7 mbd, of which production in the Middle East dropped 0.4 mbd.
At the end of 2007, commercial oil stocks in OECD countries were down to 52 days
compared to 55 days at mid-year.






17





In
mid-November, charter rate averages for 2007 were below expectations, but a
sudden rise in oil production, longer transport distances and increased
slowsteaming due to higher bunker prices led to a very tight spot market in the
last six weeks of 2007. We believe this was not anticipated by charterers and,
in response to fears of an industry slowdown, VLCC rates climbed from $20,000
per day to $200,000-$300,000 per day. Suezmax rates increased from $21,000
mid-November to $100,000 in the last three weeks of December.





From
2006 to 2007, tanker sales increased by 20 percent after the extreme upturn in
December 2006. Prices for double-hull tankers reached an all time high and ended
2007 approximately 5 to 10 percent higher than at the start. There were an
estimated 400 vessels sold during the year, of which about 20 percent are
assumed to be converted into dry cargo ships.





According
to Oil and Gas Journal, the Middle East had 56% of the world’s proven oil
reserves in January 2008, which will continue to drive long and medium haul
seaborne transportation. The Middle East supplied approximately 30% of total
world oil production. Given the dominance of world oil reserves located in this
region, this share is expected to grow in coming years as oil fields in other
parts of the world gradually reach maturity and begin a process of natural
decline. The length of transportation distances between the Middle East and oil
importing regions means that such a trend would boost ton-miles (the product of
volumes and transport distances) and may increase tanker demand.





A
significant and ongoing shift toward quality in vessels and operations has taken
place during the last decade as charterers and regulators increasingly focus on
safety and protection of the environment. Since 1990, there has been an
increasing emphasis on environmental protection through legislation and
regulations such as the Oil Pollution Act of 1990 (OPA), International Maritime
Organization (IMO) protocols and Classification Society procedures. Such
regulations emphasize higher quality tanker construction, maintenance, repair
and operations. Operators that have proven an ability to seamlessly integrate
these required safety regulations into their operations are being rewarded. For
example, the emergence of vessels equipped with double-hulls represented a
differentiation in vessel quality and enabled such vessels to command improved
earnings in the spot charter markets. The effect has been a shift in major
charterers’ preference towards greater use of double-hulls and, therefore, more
difficult trading conditions for older single-hull vessels.




Environmental
and Other Regulation




Government
regulations and laws significantly affect the ownership and operation of our
vessels.  We are subject to various international conventions, laws
and regulations in force in the countries in which our vessels may operate or
are registered.




A
variety of government, quasi-governmental and private organizations subject our
vessels to both scheduled and unscheduled inspections.  These
organizations include the local port authorities, national authorities, harbor
masters or equivalent entities, classification societies, relevant flag state
(country of registry) and charterers, particularly terminal operators and oil
companies.  Some of these entities require us to obtain permits,
licenses and certificates for the operation of our vessels.  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.




We
believe that the heightened levels of environmental and quality concerns among
insurance underwriters, regulators and charterers have led to greater inspection
and safety requirements on all vessels and may accelerate the scrapping of older
vessels throughout the industry.  Increasing environmental concerns
have created a demand for tankers that conform to the stricter environmental
standards.  We are required to maintain operating standards for all of
our vessels that emphasize operational safety, quality maintenance, continuous
training of our officers and crews and compliance with applicable local,
national and international environmental laws and regulations.  We
believe that the operation of our vessels is in substantial compliance with
applicable environmental laws and regulations and that our vessels have all
material permits, licenses, certificates or other authorizations necessary for
the conduct of our operations; however, because such laws and regulations are
frequently changed and may impose increasingly 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.







18




International
Maritime Organization




The
IMO (the United Nations agency for maritime safety and the prevention of
pollution by ships), has adopted the International Convention for the Prevention
of Marine Pollution from Ships, 1973, or the MARPOL Convention, as modified by
the Protocol of 1978 relating thereto, which has been updated through various
amendments. The MARPOL Convention implements 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. These regulations, which have been implemented in many
jurisdictions in which our vessels operate, provide, in part, that:




·
            25-year
      old tankers must be of double-hull 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);




·
            30-year
      old tankers must be of double-hull construction or mid-deck design with
      double-sided construction; and




·
            all
      tankers will be subject to enhanced
inspections.




Also,
under IMO regulations, a tanker must be of double-hull 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.




Our
vessels are also subject to regulatory requirements, including the phase-out of
single-hull tankers, imposed by the IMO. 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. We do not currently own any single-hull
tankers.




Under
the regulations, the flag state 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. These regulations
have been adopted by over 150 nations, including many of the jurisdictions in
which our tankers operate.




As
a result of the oil spill in November 2002 relating to the loss of the
MT 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 were required to 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:






19




Category
      of Oil Tankers
            Date
      or Year for Phase OutCategory 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, fueloil, 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; and
              
              2010
      for ships delivered in 1984 or later.




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
table.  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.




In
October 2004, the MEPC adopted a unified interpretation of regulation 13G that
clarified the delivery date for converted tankers.  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 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
      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 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, which
includes most of the grades of marine fuel.  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;
      or




·
            bitumen,
      tar and their emulsions.






20




Under the regulation 13H, the flag state 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 flag
state, 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 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 flag
state, 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 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.




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 effect 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, and 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




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 became
effective 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. We believe that
all our vessels are currently compliant in all material respects with these
regulations. 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
emission program proposed by the United States 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
Chapter IX of SOLAS, the requirements contained in the International Safety
Management Code for the Safe Operation of Ships and for Pollution Prevention, or
ISM Code, promulgated by the IMO, also affect our operations. The ISM Code
requires the party with operational control of a vessel to develop and maintain
an extensive safety management system that includes, among other things, the
adoption of a safety and environmental protection policy setting forth
instructions and procedures for operating its vessels safely and describing
procedures for responding to emergencies.






21




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 have obtained
documents of compliance for our offices and safety management certificates for
all of our vessels for which the certificates are required by the IMO. As
required by the ISM Code, we renew these documents of compliance and safety
management certificates annually.




Noncompliance
with the ISM Code and other IMO regulations may subject the shipowner or
bareboat charterer 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. The U.S. Coast Guard and European Union
authorities have indicated that vessels not in compliance with the ISM Code by
the applicable deadlines will be prohibited from trading in U.S. and European
Union ports, respectively.




The
IMO has negotiated international conventions that impose liability for oil
pollution in international waters and a signatory’s territorial waters.
Additional or new conventions, laws and regulations may be adopted which could
limit our ability to do business and which could have a material adverse effect
on our business and results of operations.




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 become effective until 12 months after it has been adopted by 30 states, the
combined merchant fleets of which represent not less than 35% of the gross
tonnage of the world’s merchant shipping.




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.




Oil
Pollution Liability




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, or
the CLC, as amended in 2000. Under this convention and depending on whether the
country in which the damage results is a party to the 1992 Protocol to the CLC,
a vessel’s registered owner is strictly liable for pollution damage caused in
the territorial waters of a contracting state by discharge of persistent oil,
subject to certain complete defenses.  The limits on liability
outlined in the 1992 Protocol use the International Monetary Fund currency unit
of Special Drawing Rights, or SDR. 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 4.51 million SDR plus 631 SDR for
each additional gross ton over 5,000. For vessels of over 140,000 gross tons,
liability will be limited to 89.77 million SDR.  The exchange rate
between SDRs and U.S. dollars was 0. 615181 SDR per U.S. dollar on April 29,
2008. The right to limit liability is forfeited under the CLC where the spill is
caused by the owner’s actual fault and under the 1992 Protocol where the spill
is caused by the owner’s intentional or reckless conduct. Vessels trading with
states thatare
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, or P&I, insurance will coverthe liability under the
plan adopted by the IMO.




In
2005, the European Union adopted a directive on ship-source pollution, imposing
criminal sanctions for intentional, reckless or negligent pollution discharges
by ships.  The directive could result in criminal liability for
pollution from vessels in waters of European countries that adopt implementing
legislation.  Criminal liability for pollution may result in
substantial penalties or fines and increased civil liability
claims.






22




United
States Requirements




In 1990, the United States Congress enacted OPA to establish an extensive
regulatory and liability regime for environmental protection and cleanup of oil
spills. 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. The
Comprehensive Environmental Response, Compensation and Liability Act, or CERCLA,
imposes liability for cleanup and natural resource damage from the release 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) for all containment and clean-up 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; 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 $10.0 million per tanker that is over 3,000 gross tons
(subject to possible adjustment for inflation). Amendments to OPA signed into
law in July 2006 increased these limits on the liability of responsible parties
to the greater of $1,900 per gross ton or $16.0 million per double-hull tanker
that is over 3,000 gross tons.  The act specifically permits
individual states to impose their own liability regimes with regard to oil
pollution incidents occurring within their boundaries, and some states have
enacted legislation providing for unlimited liability for discharge of
pollutants within their waters. In some cases, states which have enacted this
type of legislation have not yet issued implementing regulations defining tanker
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 $5.0 million.




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 responsible party’s gross negligence or willful
misconduct. These limits do not apply if 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 existing law, including maritime tort law. We believe that we are
in substantial compliance with OPA, CERCLA and all applicable state regulations
in the ports where our vessels call.




OPA
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 enacted
regulations requiring evidence of financial responsibility in the amount of
$1,500 per gross ton for tankers, coupling the former 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 amounts that
reflect the higher limits of liability imposed by the July 2006 amendments to
OPA, as described above.  Under the regulations, evidence of financial
responsibility may be demonstrated by insurance, surety bond, self-insurance or
guaranty. Under OPA regulations, an owner or operator of more than one tanker is
required to demonstrate evidence of financial responsibility for the entire
fleet in an amount equal only to the financial responsibility requirement of the
tanker having the greatest maximum strict liability under OPA and CERCLA. We
have provided such evidence and received certificates of financial
responsibility from the U.S. Coast Guard as required.




Under OPA, with certain limited exceptions, all newly-built or converted vessels
operating in U.S. waters must be built with double-hulls, and existing vessels
that do not comply with the double-hull requirement will be prohibited from
trading in U.S. waters over a 20-year period (1995-2015) based on size, age and
place of discharge, unless retrofitted with double-hulls.  Our current
fleet of 12 vessels are all of double-hull construction.






23




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.




We have obtained vessel response plans approved by the U.S. Coast Guard for our
vessels operating in the waters of the United States.   We
conduct regular oil spill response drills in accordance with the guidelines set
out in OPA.  In addition, the U.S. Coast Guard has announced it
intends to propose similar regulations requiring certain vessels to prepare
response plans for the release of hazardous substances.




In addition, the United States Clean Water Act prohibits the discharge of oil or
hazardous substances in United States navigable waters and imposes strict
liability in the form of penalties for unauthorized discharges.  The
Clean Water Act also imposes substantial liability for the costs of removal,
remediation and damages and complements the remedies available under OPA and
CERCLA, discussed above.  The United States Environmental Protection
Agency, or EPA, has exempted the discharge of ballast water and other substances
incidental to the normal operation of vessels in U.S. ports from Clean Water Act
permitting requirements.  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 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.  The EPA filed a notice of appeal of this decision and, if the
EPA’s appeals are unsuccessful and the exemption is repealed, our vessels may be
subject to Clean Water Act permit requirements that could 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 at a
substantial cost, and/or otherwise restrict our vessels from entering U.S.
waters.  On June 21, 2007, the EPA provided notice of its intention to
develop a permit program for discharge of ballast water incidental to the normal
operations of vessels and solicited comments.




In
addition, 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.




The
U.S. Clean Air Act of 1970, as amended by the Clean Air Act Amendments of 1977
and 1990, or 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. In December 1999 and January 2003, the EPA issued
final rules regarding emissions standards for marine diesel
engines.  The final rules apply emissions standards to new engines
beginning with the 2004 model year.  In the preambles to the final
rules, the EPA noted that it may revisit the application of emissions standards
for marine diesel engines.  These final rules are applicable to marine
diesel engines on vessels flagged or registered in the United
States.  While we do not believe that these current standards are
applicable to our vessels, adoption of future standards could require
modifications to some existing marine diesel engines, and the extent to which
our vessels could be affected cannot be determined at this
time.  Although a risk exists that new regulations could require
significant capital expenditures and otherwise increase our costs, based on the
regulations that have been proposed to date, we believe that no material capital
expenditures beyond those currently contemplated and no material increase in
costs are likely to be required of us.




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.






24






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 clean up costs under applicable
laws.




Other
Regulations




In
July 2003, in response to the MT Prestige oil 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. We are unable to predict what legislation or additional regulations,
if any, may be adopted by the European Union or any other country or
authority.




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 gas emissions
from the global shipping fleet, greenhouse 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.




Vessel
Security Regulations




Since
the terrorist attacks of September 11, 2001, there have been a variety of
initiatives intended to enhance vessel security. On November 25, 2002, the U.S.
Maritime Transportation Security Act of 2002, or 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;






25




·
            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.




Inspection
by Classification Societies




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




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




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




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




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




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




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




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






26




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




Most
insurance underwriters make it a condition for insurance coverage that a vessel
be certified as ‘‘in class’’ by a classification society which is a member of
the International Association of Classification Societies. All our vessels are
certified as being ‘‘in class’’ by Lloyd’s Register of Shipping (one vessel),
American Bureau of Shipping (three vessels) and Det norske Veritas
(eight vessels).  All new and secondhand vessels that we purchase must
be certified prior to their delivery under our standard contracts.




Risk
of Loss and Liability Insurance




The
operation of any cargo vessel includes risks such as mechanical failure,
collision, property loss, cargo loss or damage and business interruption due to
political circumstances in foreign countries, hostilities and labor strikes. In
addition, there is always an inherent possibility of marine disaster, including
oil spills and other environmental mishaps, and the liabilities arising from
owning and operating vessels in international trade. OPA, which imposes
virtually unlimited liability upon owners, operators and demise charterers of
any vessel trading in the United States exclusive economic zone for certain oil
pollution accidents in the United States, has made liability insurance more
expensive for ship owners and operators trading in the United States market.
While we carry loss of hire insurance to cover 100% of our fleet, we may not be
able to maintain this level of coverage. Furthermore, while we believe that our
present insurance coverage is adequate, not all risks can be insured, any
specific claim may not be paid, and we may not always be able to obtain adequate
insurance coverage at reasonable rates.




Hull
and Machinery Insurance




We
have obtained marine hull and machinery and war risk insurance, which include
the risk of actual or constructive total loss, for all of the vessels in our
fleet. The vessels in our fleet are each covered up to at least fair market
value, with deductibles of $350,000 per vessel per incident. We also arranged
increased value coverage for each vessel. Under this increased value coverage,
in the event of total loss of a vessel, we will be able recover for amounts not
recoverable under the hull and machinery policy by reason of any
under-insurance.




Protection
and Indemnity Insurance




Protection
and indemnity insurance is provided by mutual protection and indemnity
associations, or P&I Associations, which covers our third party liabilities
in connection with our shipping activities. This includes 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 billion
per vessel per incident. The thirteen P&I Associations that comprise the
International Group insure approximately 90% of the world’s commercial tonnage
and have entered into a pooling agreement to reinsure each association’s
liabilities. Each P&I Association has capped its exposure to this pooling
agreement at $5.4 billion. As a member of a P&I Association, which is a
member of the International Group, we are subject to calls payable to the
associations based on its claim records as well as the claim records of all
other members of the individual associations, and members of the pool of P&I
Associations comprising the International Group.




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.
Pursuant to our cooperative agreements with Stena Bulk AB and Frontline
Management Ltd., both of which are third party administrators, the
administrators have the responsibility for the commercial management of 11 of
the 12 vessels in our operating fleet. From time to time, we may also arrange
our time charters and voyage charters in the spot market through the use of
brokers, who negotiate the terms of the charters based on market conditions. We
compete primarily with owners of tankers in the Suezmax and class size.
Ownership of tankers is highly fragmented and is divided among major oil
companies and independent vessel owners.










27




Permits and
Authorizations




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




C.
            ORGANIZATIONAL
      STRUCTURE




Prior
to September 30, 1997, the Company was a wholly owned subsidiary of Ugland
Nordic Shipping ASA, or UNS, a Norwegian shipping company whose shares were
listed on the Oslo Stock Exchange.  On September 30, 1997, 11,731,613
warrants for the purchase of the Company’s common shares, which had been sold to
the public in 1995, were exercised.  Until May 30, 2003, UNS acted as
the Manager, and provided managerial, administrative and advisory services to
the Company pursuant to the Management Agreement.  Since May 30, 2003,
Scandic American Shipping Ltd. has acted as the Company’s Manager, and provides
such services pursuant to the Management Agreement.  The Management
Agreement was amended on October 12, 2004 to further align the Manager’s
interests with those of the Company as a shareholder of the
Company.  See Item 4—Information on the Company — Business Overview
—The Management Agreement.




D.
            PROPERTY,
      PLANT AND EQUIPMENT




See
Items 4 – Information on the Company – Business Overview – Our Fleet, for a
description of our vessels. The vessels are mortgaged as collateral under the
2005 Credit Facility.




ITEM
      4A.
            UNRESOLVED
      STAFF COMMENTS




None.




ITEM
      5.
            OPERATING
      AND FINANCIAL REVIEW AND PROSPECTS




A.
            OPERATING
      RESULTS




We
present our income statement using voyage revenues and voyage expenses. The
Company’s vessels are operated under bareboat charters and spot charters. During
2007, we operated two of our vessels on time charters on spot market related
terms. Under a bareboat charter the charterer pays substantially all of the
vessel voyage and operating costs. Under a spot related time charter, the
charterer pays substantially all of the vessel voyage costs. Under a spot
charter, the vessel owner pays all such costs. Vessel voyage costs consist
primarily of fuel, port charges and commissions.




Since
the amount of voyage expenses that we incur for a charter depends on the type of
the charter, we use net voyage revenues to provide comparability among the
different types of charters. Management believes that net voyage revenue, a
non-GAAP financial measure, provides more meaningful disclosure than voyage
revenues, the most directly comparable financial measure under accounting
principles generally accepted in the United States, or US GAAP because it
enables us to compare the profitability of our vessels which are employed under
bareboat charters, spot related time charters and spot charters. Net voyage
revenues divided by the number of days on the charter provides the Time Charter
Equivalent (TCE) Rate. For bareboat charters, operating costs must be added in
order to calculate TCE rates. Net voyage revenues and TCE rates are widely used
by investors and analysts in the tanker shipping industry for comparing the
financial performance of companies and for preparing industry averages. We
believe that our method of calculating net voyage revenue is consistent with
industry standards. The following table reconciles our net voyage revenues to
voyage revenues.






All
      amounts in thousands of USD
            
            Year
      Ended December 31, 2007
            
            
            Year
      Ended December 31, 2006
            
            
            Year
      Ended December 31, 2005Voyage
      Revenue
            
            
            186,986
            
            
            
            175,520
            
            
            
            117,110Voyage
      Expenses
            
            
            (47,122
            )
            
            
            (40,172
            )
            
            
            (30,981
            )Net
      Voyage Revenue
            
            
            139,864
            
            
            
            135,348
            
            
            
            86,129







28




YEAR
ENDED DECEMBER 31, 2007 COMPARED TO YEAR ENDED DECEMBER 31, 2006




Voyage
revenues increased from $175.5 million for year ended December 31, 2006 to
$187.0 million for year ended December 31, 2007, an increase of 6.5%. Voyage
expenses increased by 17.2% to $47.1 million in 2007 from $40.2 million in 2006.
The increase in net voyage revenues was primarily the result of having twelve
vessels in operation during the entire year resulting in an increase in the
number of revenue days by 26.1% offset by lower spot market rates for the
period. The average spot market rate during 2007 was $35,600 per day compared to
$44,500 per day for 2006, a decrease of 20.0%.





Vessel
operating expenses were $32.1 million for the year ended December 31, 2007
compared to $21.1 million for the year ended December 31, 2006, an increase of
approximately 52.1%. The increase is primarily the resultof having all twelve
vessels in operation for the entire year. The average operating expenses for the
vessels increased from $7,200 per day per vessel in 2006 to $8,000 per day per
vessel in 2007.  The increases in daily operating expenses are
primarily due to increases in vessel operating costs, in particular crewing
costs, lubricating oil costs and repair and maintenance costs, which we believe
to be industry-wide.





General
and administrative expenses were $12.1 million for the year ended December 31,
2007 compared to $12.8 million for the year ended December 31, 2006. The general
and administrative expenses in 2006 included a non-cash charge of $6.3 million
of stock-based compensation to, our Manager
related to two public common stock offerings concluded last year. The general
and administrative expenses in 2007 include a non-cash charge related to
stock-based compensation to our Manager of $2.2 million related to one public
common stock offering in 2007 and expenses of $2.7 million related to the
pension plan for the Company’s Chief Executive Officer (“CEO”).  We
refer you to the section “Management Agreement” on page 16 for further details
of the management agreement and Note 5 for further details of our general and
administrative expenses.





Depreciation
expense was $42.4 million for the year ended December 31, 2007 compared to $29.3
million for the year ended December 31, 2006, an increase of approximately
44.7%. The increase is primarily the result of owning twelve vessels for all of
2007.





Net
operating income was $53.2 million for year ended December 31, 2007 compared to
$72.2 million for the year ended December 31, 2006, a decrease of approximately
26.3%. This decrease is primarily due to lower spot market rates during 2007
compared to 2006 and higher average daily operating expenses.





Interest
income was $0.9 million for the year ended December 31, 2007 compared to $1.6
million for the year ended December 31, 2006. Interest income was higher in 2006
in part because of the excess cash in interim periods from the proceeds of the
two public common stock offerings and the timing of subsequent payments for
vessels acquired during the year.





Interest
expense was $9.7 million for the year ended December 31, 2007 compared to $6.3
million for the year ended December 31, 2006. The increase is primarily due to
the expansion of our fleet. Our policy in the current market conditions is to
maintain a debt level of approximately $15 million per vessel.





YEAR
ENDED DECEMBER 31, 2006 COMPARED TO YEAR ENDED DECEMBER 31, 2005




Voyage
revenues increased by 49.8% to $175.5 million in 2006 from $117.1 million in
2005. Net voyage revenues increased by 57.1% to $135.3 million in 2006 from
$86.1 million in 2005.  Voyage expenses increased by 29.7% to $40.2
million in 2006 from $31.0 million in 2005.  The increase in net
voyage revenues was primarily due to the expansion of the fleet resulting in an
increase in the number of revenue days by 48.8% from 2,193 days to 3,264 days.
The Company took delivery of one vessel in April 2006, two vessels in November
2006 and one vessel in December 2006.




Vessel
operating expenses were $21.1 million for the year ended December 31, 2006
compared to $11.2 million for the year ended December 31, 2005. The increase is
primarily due to the addition of four vessels as described above. The average
operating expenses for the vessels were approximately $7,200 per day per vessel
during fiscal year 2006 compared to $6,200 per day per vessel for the fiscal
year 2005.  The increase in daily operating expenses is primarily due
to an industry wide price increase on the vessel operating costs, in particular
crewing costs, lubricating oil costs and repair and maintenance
costs.






29




General
and administrative expenses were $12.8 million for the year ended December 31,
2006 compared to $8.5 million for the year ended December 31, 2005. The increase
in general and administrative expenses was primarily due to a non-cash charge
related to stock-based compensation to our Manager of $6.3 million associated
with the two follow-on offerings in 2006, compared to $3.6 million for the one
follow-on offering in 2005. See Item 4—Information on the Company — Business
Overview —The Management Agreement and Note 5 to our audited financial
statements for further details of the general and administrative
expenses.




Depreciation
expense was $29.3 million for the year ended December 31, 2006 compared to $17.5
million for the year ended December 31, 2005. The increase is primarily due to
the addition of four vessels as described above.




Net
operating income for the year ended December 31, 2006 increased 47.8% compared
to year ended December 31, 2005 from $48.9 million to $72.2 million primarily
due to increased revenues resulting from an increase in the number of revenue
days from 2,193 days to 3,264 days offset by increased vessel operating expenses
as described above.




Interest
income was $1.6 million for the year ended December 31, 2006 compared to $0.8
million for the year ended December 31, 2005. The increase is primarily due to
excess cash in interim periods in connection with the two follow-on offerings
and the timing of subsequent payments for vessels acquired during
2006.




Interest
expense was $6.3 million for the year ended December 31, 2006 compared to $3.4
million for the year ended December 31, of 2005. The increase is primarily due
to an increase in borrowings under the 2005 Credit Facility in order to
partially finance expansion of the fleet. Our policy is to maintain a debt level
of approximately $15 million per vessel in the current market
conditions.




B.
            LIQUIDITY
      AND CAPITAL RESOURCES




Our
Credit Facility




In September 2005, the Company entered
into a $300 million revolving credit facility, which is referred to as the 2005
Credit Facility. The 2005 Credit Facility provides funding for future vessel
acquisitions and general corporate purposes. The 2005 Credit Facility cannot be
reduced by the lender and there is no repayment obligation of the principal
during the original five year term, which was scheduled to mature in September
2010. Amounts borrowed under the 2005 Credit Facility bear interest at an annual
rate equal to LIBOR plus a margin between 0.70% and 1.20% (depending on the loan
to vessel value ratio). The Company pays a commitment fee of 30% of the
applicable margin on any undrawn amounts.  Total commitment fees paid
for the year ended December 31, 2007 and December 31, 2006 were $0.8 million and
$0.7 million, respectively.





In
September 2006, the Company increased the 2005 Credit Facility to $500
million.  In April 2008, the Company extended the term of the 2005 Credit
Facility for three years.  As a result, the 2005 Credit Facility will
mature in September 2013. The other terms of the 2005 Credit Facility were
not amended. The undrawn amount of this facility as of December 31, 2007 and
2006 was $394.5 million and $326.5 million, respectively.





Borrowings
under the 2005 Credit Facility are secured by first priority mortgages over the
Company’s vessels and assignment of earnings and insurance. The Company is
permitted to pay dividends in accordance with its dividend policy as long as it
is not in default under the 2005 Credit Facility.





As
of December 31, 2007, accrued interest was $0.6 million which was paid during
the first quarter of 2008.





The
terms and conditions of the 2005 Credit Facility require compliance with certain
restrictive covenants, which we believe are consistent with loan facilities
incurred by other shipping companies. Under the 2005 Credit Facility, we are,
among other things, required to:




·
            maintain
      certain loan to vessel value
ratios,




·
            maintain
      a book equity of no less than $150.0
million,




·
            remain
      listed on a recognized stock exchange,
and






30




·
            obtain
      the consent of the lenders prior to creating liens on or disposing of our
      vessels.




The
2005 Credit Facility provides that we may not pay dividends if following such
payment we would not be in compliance with certain financial covenants or there
is a default under the 2005 Credit Facility.  The Company was in
compliance with its restrictive covenants for the year ended December 31,
2007.




YEAR
ENDED DECEMBER 31, 2007 COMPARED TO YEAR ENDED DECEMBER 31, 2006




Cash
flows provided by operating activities decreased by 21.6% for the year ended
December 31, 2007 to $83.6 million from $106.6 million for the year ended
December 31, 2006, primarily due to lower spot market rates during 2007, as
described above, partially offset by an increase in accounts payable of $4.3
million.




Cash
flows used in investing activities decreased by 91.7% for the year ended
December 31, 2007 to $26.4 million compared to $317.8 million for the year ended
December 31, 2006. The Company acquired four vessels during 2006 compared to no
vessel acquisitions during 2007. In November 2007, the Company agreed to acquire
two Suezmax newbuildings one of which is expected to be delivered in the fourth
quarter of 2009 and one of which is expected to be delivered by end ofApril 2010.




Cash
flows provided by financing activities decreased 126.7% for the year ended
December 31, 2007 to -$55.6 million compared to $208.7 million for the year
ended December 31, 2006. The cash flows provided by financing activities were
attributable to (i) net repayment of debt under the 2005 Credit Facility of
$68.0 million, (ii) payment of deposit on contracts of $18.0 million and
(iii) dividends paid of $107.3 million, offset by proceeds from a public common
stock offering of $119.7 million.  The net decrease is primarily
attributable to one less public stock offering and a net repayment of debt
rather than net borrowings under the 2005 Credit Facility.





In
July 2007, the Company sold 3,000,000 shares in a public offering in the U.S. to
repay borrowings under the 2005 Credit Facility, and to prepare the Company for
further expansion. The offering was priced at $41.50 per share, and net proceeds
to the Company were $119.7 million.




The
Company believes that its borrowing capacity under the 2005 Credit Facility,
together with its working capital, are sufficient to fund its ongoing operations
and commitments for capital expenditures.




YEAR
ENDED DECEMBER 31, 2006 COMPARED TO YEAR ENDED DECEMBER 31, 2005




Cash
flows provided by operating activities increased by 109.7% in fiscal year 2006
to $107.1 million from $51.1 million in fiscal year 2005 primarily due to the
addition of four vessels.




Cash
flows provided by financing activities decreased 8.1% in fiscal year 2006 to
$208.2 million compared to $226.6 million in fiscal year 2005. The net decrease
was attributable to (i) proceeds from two follow-on offerings of $288.3 million,
(ii) net proceeds from drawdowns under the 2005 Credit Facility of $43.5 million
offset by (iii) dividends paid of $122.6 million, and (iv) the payment of credit
facility costs of $0.6 million related to the increase in the 2005 Credit
Facility from $300 million to $500 million.




Cash
flows used in investing activities increased by 8.0% in fiscal year 2006 to
$317.8 million compared to $294.1 million in fiscal year 2005. The increase was
primarily due to higher vessel acquisition costs in fiscal year 2006 compared to
fiscal year 2005.




In
March 2006, the Company sold 4,297,500 shares (including the over-allotment) in
a public offering in the U.S. to repay outstanding debt and to finance the
acquisition of the ninth vessel that was delivered to us in April 2006. The
offering was priced at $28.50 per share, and net proceeds to the Company were
$115.2 million.




In
October 2006, the Company sold 5,750,000 shares (including the over-allotment)
in a public offering in the U.S. to partly finance the acquisition of the tenth,
eleventh and twelfth vessels that were delivered to us in November 2006 and
December 2006. The offering was priced at $32.00 per share, and net proceeds to
the Company were $173.1 million.




C.
            RESEARCH
      AND DEVELOPMENT, PATENTS AND LICENSES,
ETC.




Not
applicable.




D.
            TREND
      INFORMATION






31




The
oil tanker industry has been highly cyclical, experiencing volatility in
charterhire rates and vessel values resulting from changes in the supply of and
demand for crude oil and tanker capacity.  See Item 4. Information on
the Company – Business Overview – The Tanker Market 2006.




E.
            OFF
      BALANCE SHEET ARRANGEMENTS




We
have not created, and are not party to, any special-purpose or off-balance sheet
entities for the purpose of raising capital, incurring debt or operating our
business.  We do not have any arrangements or relationship with
entities that are not consolidated into our financial statements that have or
are reasonably likely to have a current or future effect on the Company’s
financial condition, changes in financial condition, revenues or expenses,
results of operations, liquidity, capital expenditures or capital resources that
is material to investors.




F.
            TABULAR
      DISCLOSURE OF CONTRACTUAL
OBLIGATIONS




As
of December 31, 2007 significant contractual obligations consisted of our
obligations as borrower under our 2005 Credit Facility and our obligations under
the Management Agreement with Scandic American Shipping Ltd.




The
following table sets out long-term financial and other commercial obligations
outstanding as of December 31, 2007 (all figures in thousands of
USD)









Contractual
      Obligations
            
            Total
            
            
            Less
      than 1 year
            
            
            1-3
      years
            
            
            3-5
      years
            
            
            More
      than 5 yearsCredit
      Facility (1)
            
            
            105,500
            
            
            
            0
            
            
            
            0
            
            
            
            105,500
            
            
            0Interest
      Payments (2)
            
            
            21,375
            
            
            
            3,754
            
            
            
            11,231
            
            
            
            6,390
            
            
            0Commitment
      Fees (3)
            
            
            4,796
            
            
            
            842
            
            
            
            2,520
            
            
            
            1,434
            
            
            0Deposit
      on Contract(4)
            
            
            162,000
            
            
            
            7,370
            
            
            
            154,630
            
            
            
            0
            
            
            0Management
      Fees (5)
            
            
            2,588
            
            
            
            225
            
            
            
            675
            
            
            
            675
            
            
            
            1,013Total
            
            
            296,259
            
            
            
            12,191
            
            
            
            169,056
            
            
            
            113,999
            
            
            
            1,013





Notes:(1)
            Refers
      to our obligation to repay indebtedness outstanding as of December 31,
      2007(2)
            Refers
      to estimated interest payments over the term of the indebtedness
      outstanding as of December 31, 2007 assuming a weighted average interest
      rate of 3.50% per annum.(3)
            Refers
      to estimated commitment fees over the term of the indebtedness outstanding
      as of December 31, 2007(4)
            Refers
      to payment obligations in connection with the agreement to acquire two
      newbuildings entered into in November 2007(5)
            Refers
      to the management fees payable to Scandic American Shipping Ltd. under the
      Management Agreement with the
Manager.





CRITICAL
ACCOUNTING ESTIMATES




We
prepare our financial statements in accordance with accounting principles
generally accepted in the United States of America (US
GAAP).  Following is a discussion of the accounting policies that
involve a high degree of judgment and the methods of their application. For a
further description of our material accounting policies, please read Item 18 –
Financial Statements— Note 1 – Summary of Significant Accounting
Policies.




Revenue
recognition




We
generate a majority of our revenues from vessels operating in cooperative
chartering arrangements based upon spot charters. Within the shipping industry,
the two methods used to account for voyage revenues and expenses are the
percentage of completion and the completed voyage methods. Most shipping
companies, including our commercial managers under our cooperative arrangements
are using the percentage of completion method. In applying the percentage of
completion method, we believe that in most cases the discharge-to-discharge
basis of calculating voyages more accurately reflects voyage results than the
load-to-load basis. At the time of cargo discharge, we generally have
information about the next load port and expected discharge port, whereas at the
time of loading we are normally less certain what the next load port will
be.






32




If
actual results are not consistent with our estimates in applying the percentage
of completion method, our revenues could be overstated or understated for any
given period by the amount of such difference.




Long-lived
assets and impairment




A
significant part of the Company’s total assets consists of our vessels. The oil
tanker market is highly cyclical and the useful lives of our vessels are
principally dependent on of the technical condition of our vessels and other
factors, such as future market demand for oil and future market supply of tanker
capacity.




Our
vessels are evaluated for impairment whenever events or changes in circumstances
indicate that the carrying amount of a vessel may not be recoverable. If the
estimated undiscounted future cash flows expected to result from the use of the
vessel and its eventual disposition is less than the carrying amount of the
vessel, the vessel is deemed impaired.  The amount of the impairment
is measured as the difference between the carrying value and the fair value of
the vessel. These assessments are based on our judgment.




We
are not aware of any indicators of impairments nor any regulatory changes or
environmental liabilities that we anticipate will have a material impact on our
current or future operations.




Depreciable
lives




Management
uses considerable judgment when establishing the depreciable lives of our
vessels. In order to estimate useful lives of our vessels, Management must make
assumptions about future market conditions in the oil tanker market. The Company
considers the establishment of depreciable lives to be a critical accounting
estimate.




We
are not aware of any regulatory changes or environmental liabilities that we
anticipate will have a material impact on our current or future
operations.




Drydocking




Our
vessels are required to be drydocked approximately every 30 to 60 months
for overhaul repairs and maintenance that cannot be performed while the vessels
are in operation. We follow the deferral method of accounting for drydocking
costs whereby actual costs incurred are deferred and are amortized on a
straight-line basis through the expected date of the next drydocking. Ballast
tank improvements are capitalized and amortized on a straight-line basis over a
period of eight years. Major steel improvements are capitalized and amortized on
a straight-line basis over the remaining useful life of the
vessel.  Unamortized drydocking costs of vessels that are sold are
written off to income in the year of the vessel's sale. The capitalized and
unamortized drydocking costs are included in the book value of the vessels.
Amortization expense of the drydocking costs is included in depreciation
expense.




If
we change our estimate of the next drydock date we will adjust our annual
amortization of drydocking expenditures.




RECENT
ACCOUNTING PRONOUNCEMENTS




Recent Accounting
Pronouncements:  In July 2006, the FASB issued FASB
Interpretation No. 48 “Accounting for Uncertainty in Income Taxes” (“FIN 48”),
which clarifies the criteria that must be met prior to recognition of the
financial statement benefit of a position taken in a tax return. FIN 48 provides
a benefit recognition model with a two-step approach consisting of a
“more-likely-than-not” recognition criteria, and a measurement attribute that
measures the position as the largest amount of tax benefit that is greater than
50% likely of being realized upon ultimate settlement. FIN 48 also requires the
recognition of liabilities created by differences between tax positions taken in
a tax return and amounts recognized in the financial statements. FIN 48 is
effective as of the beginning of the first annual period beginning after
December 15, 2006, which is the year ended December 31, 2007. The adoption
of FIN 48 did not have any impact on the Company’s financial position, results
of operations and cash flows.





In
September 2006, the FASB issued SFAS No. 157, “Fair Value Measurement,” (“SFAS 157”) which defines
fair value, establishes a framework for measuring fair value and expands
disclosures about assets and liabilities measured at fair value. This Statement
does not require any new fair value measurements. SFAS 157 is effective for
financial statements issued for fiscal years beginning after November 15, 2007.
The adoption of SFAS 157 did not have any impact on the Company’s financial
position, results of operations and cash flows.






33





In
February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for
Financial Assets and Financial Liabilities” (“SFAS 159”). SFAS 159 permits
entities to choose to measure many financial instruments and certain other items
at fair value that are not currently required to be measured at fair value. SFAS
159 also establishes presentation and disclosure requirements designed to
facilitate comparisons between entities that choose different measurement
attributes for similar types of assets and liabilities. SFAS 159 is effective
for fiscal years beginning after November 15, 2007. The adoption of SFAS 159 did
not have any impact on the Company’s financial position, results of operations
and cash flows.





In
December 2007, the FASB issued SFAS No. 141(R) “Business Combinations” (“SFAS
141(R)”), which replaces SFAS No. 141, “Business Combinations”. This statement
establishes principles and requirements for how an acquirer recognizes and
measures in its financial statements the identifiable assets acquired, the
liabilities assumed, any noncontrolling interest in the acquiree and the
goodwill acquired. SFAS 141(R) also establishes disclosure requirements to
enable the evaluation of the nature and financial effects of the business
combination. SFAS 141(R) is effective for fiscal years beginning after December
15, 2008. The Company is currently evaluating the potential impact, if any, of
the adoption of SFAS 141(R) on our financial position, results of operations or
cash flows.




In
December 2007, the FASB issued SFAS No. 160 “Noncontrolling Interests in
Consolidated Financial Statements, an Amendment of Accounting Research Bulletin
No. 51” (“SFAS 160”). This statement establishes accounting and reporting
standards for ownership interests in subsidiaries held by parties other than the
parent, the amount of consolidated net income attributable to the parent and to
the noncontrolling interest, changes in a parent’s ownership interest, and the
valuation of retained noncontrolling equity investments when a subsidiary is
deconsolidated. SFAS 160 also establishes disclosure requirements that clearly
identify and distinguish between the interests of the parent and the interests
of the noncontrolling owners. SFAS 160 is effective for fiscal years beginning
after December 15, 2008. The Company is currently evaluating the potential
impact, if any, of the adoption of SFAS 160 on our financial position, results
of operations or cash flows.




In
March 2008, the FASB issued FASB Statement No. 161, “Disclosures about
Derivative Instruments and Hedging Activities”. The new standard is intended to
improve financial reporting about derivative instruments and hedging activities
by requiring enhanced disclosures to enable investors to better understand their
effects on an entity’s financial position, financial performance, and cash
flows. It is effective for financial statements issued for fiscal years and
interim periods beginning after November 15, 2008, with early application
encouraged. The Company is currently evaluating the potential impact, if any, of
the adoption of SFAS 161 on our financial statements.




ITEM
      6.
            DIRECTORS,
      SENIOR MANAGEMENT AND EMPLOYEES




A.
            DIRECTORS
      AND SENIOR MANAGEMENT




Directors
and Senior Management of the Company and the Manager




Pursuant
to the Management Agreement with Scandic American Shipping Ltd., or the Manager,
the Manager provides management, administrative and advisory services to us. The
Manager is owned by a company controlled by Herbjørn Hansson, our Chairman and
Chief Executive Officer. The Manager may engage in business activities other
than with respect to the Company.




Set
forth below are the names and positions of the directors of the Company and
executive officers of the Company and the Manager. The directors of the Company
are elected annually, and each director elected holds office until a successor
is elected. Officers of both the Company and the Manager are elected from time
to time by vote of the respective board of directors and hold office until a
successor is elected.




The
Company




Name
            Age
            PositionHerbjørn
      Hansson
            60
            Chairman,
      Chief Executive Officer, President and DirectorTurid
      M. Sørensen
            48
            Chief
      Financial OfficerRolf
      Amundsen
            63
            Chief
      Investor Relations Officer






34




Hon.
      Sir David Gibbons
            80
            DirectorAndreas
      Ove Ugland
            53
            DirectorTorbjørn
      Gladsø
            61
            DirectorAndrew
      W. March
            52
            DirectorPaul
      J. Hopkins
            60
            DirectorRichard
      H. K. Vietor
            62
            Director





The
Manager




Name
            Age
            PositionHerbjørn
      Hansson
            60
            Director,
      President and Chief Executive OfficerTurid
      M. Sørensen
            48
            Chief
      Financial OfficerRolf
      Amundsen
            63
            Chief
      Investor Relations OfficerFrithjof
      Bettum
            46
            Vice
      President Technical Operations & CharteringJan
      Erik Langangen
            58
            Executive
      Vice President—Business Development and
Legal





Certain
biographical information with respect to each director and executive officer of
the Company and the Manager listed above is set forth below.




Herbjørn Hansson earned his
M.B.A. at the Norwegian School of Economics and Business Administration and
Harvard Business School. In 1974 he was employed by the Norwegian Shipowners’
Association. In the period from 1975 to 1980, he was Chief Economist and
Research Manager of INTERTANKO, an industry association whose members control
about 70% of the world’s independently owned tanker fleet, excluding state owned
and oil company fleets. During the 1980s, he was Chief Financial Officer of
Kosmos/Andres Jahre, at the time one of the largest Norwegian based shipping and
industry groups. In 1989, Mr. Hansson founded Ugland Nordic Shipping AS, or
UNS, which became one of the world’s largest owners of specialized shuttle
tankers. He served as Chairman in the first phase and as Chief Executive Officer
as from 1993 to 2001 when UNS, under his management, was sold to Teekay Shipping
Corporation, or Teekay, for an enterprise value of $780.0 million. He continued
to work with Teekay, most recently as Vice Chairman of Teekay Norway AS, until
he started working full-time for the Company on September 1, 2004.
Mr. Hansson is the founder and has been Chairman and Chief Executive
Officer of the Company since its establishment in 1995. He also is a member of
various governing bodies of companies within shipping, insurance, banking,
manufacturing, national/international shipping agencies including classification
societies and protection and indemnity associations. Mr. Hansson is fluent
in Norwegian and English, and has a command of German and French for
conversational purposes.




Turid M. Sørensen was
appointed Chief Financial Officer by the Board of Directors on February 6,
2006. Ms. Sørensen has a M.B.A. in Management Control from the Norwegian School
of Economics and Business Administration and a bachelor degree in Business
Administration from the Norwegian School of Management. She has 20 years of
experience in the shipping industry. During the period from 1984 to 1987, she
worked for Anders Jahre AS and Kosmos AS in Norway and held various positions
within accounting and information technology. In the period from 1987 to 1995,
Ms. Sørensen was Manager of Accounting and IT for Skaugen PetroTrans Inc.,
in Houston, Texas. After returning to Norway she was employed by Ugland Nordic
Shipping ASA and Teekay Norway AS as Vice President, Accounting. From October
2004 until her appointment as Chief Financial Officer in February 2006, she
served as our Treasurer and Controller.




Rolf Amundsenwas appointed
Chief Investor Relations Officer and Advisor to the Chairman by the Board of
Directors on February 6, 2006 and prior to that time served as our Chief
Financial Officer from June 2004. Mr. Amundsen has an M.B.A. in economics
and business administration, and his entire career has been in international
banking. Previously, Mr. Amundsen has served as the president of the
financial analysts society in Norway. Mr. Amundsen served as the chief
executive officer of a Nordic investment bank for many years, where he
established a large operation for the syndication of international shipping
investments.






35




Andreas Ove Ugland has been a
director of the Company since February 1997. Mr. Ugland has also served as
director and Chairman of Ugland International Holding plc, a shipping/transport
company listed on the London Stock Exchange, Andreas Ugland & Sons AS,
Grimstad, Norway, Høegh Ugland Autoliners AS, Oslo and Buld Associates Inc.,
Bermuda. Mr. Ugland has had his whole career in shipping in the Ugland
family owned shipping group.




Andrew W. March has been a
director of the Company since June 2005. Mr. March also currently serves in
a management position with Vitol S.A., an international oil trader, involved in
supply, logistics and transport and as a director for Imarex, an electronic
trading platform for freight derivatives. From 1978 to 2004, Mr. March
served in various positions with subsidiaries of BP p.l.c., an international oil
major company. Most recently, from January 2001 to 2004, Mr. March was
Commercial Director of BP Shipping Ltd., responsible for all aspects of the
business including long term strategy. From 1986 to 2000, Mr. March was
employed in various positions with BP Trading, serving as Global Product Trading
Manager from 1999. Mr. March received his MBA from Liverpool
University.




Sir David Gibbonshas been a
director of the Company since September 1995. Sir David served as the Premier of
Bermuda from August 1977 to January 1982. Sir David has served as Chairman of
The Bank of N.T. Butterfield and Son Limited from 1986 to 1997, Chairman of
Colonial Insurance Co. Ltd. since 1986 and as Chief Executive Officer of Edmund
Gibbons Ltd. since 1954. Sir David Gibbons is a member of our Audit
Committee.




Richard H. K. Vietorhas been
a director of the Company since July 2007. Mr. Vietor is the Senator John Heinz
Professor of Environmental Management at the Harvard Graduate School of Business
Administration where he teaches courses on the regulation of business and the
international political economy.  He was appointed Professor in
1984.  Before coming to Harvard Business School in 1978, Professor
Vietor held faculty appointments at Virginia Polytechnic Institute and the
University of Missouri.  He received a B.A. in economics from Union
College in 1967, an M.A. in history from Hofstra University in 1971, and a Ph.D.
from the University of Pittsburgh in 1975.




Paul J. Hopkins has been a
director of the Company since June 2005. Until March 2008, Mr. Hopkins was
also a Vice President and a director of Corridor Resources Inc., a Canadian
publicly traded exploration and production company. From 1989 through 1993 he
served with Lasmo as Project Manager during the start-up of the Cohasset/Panuke
oilfield offshore Nova Scotia, the first offshore oil production in Canada.
Earlier, Mr. Hopkins served as a consultant on frontier engineering and
petroleum economic evaluations in the international oil industry.
Mr. Hopkins was seconded to Chevron UK in 1978 to assist with the gas
export system for the Ninian Field. From 1973, he was employed with Ranger Oil
(UK) Limited, being involved in the drilling and production testing of oil wells
in the North Sea. Through the end of 1972 he worked with Shell Canada as part of
its offshore Exploration Group.




Torbjørn Gladsøhas been a
director of the Company since October 2003. Mr. Gladsø is a partner in Saga
Corporate Finance AS. He has extensive experience within investment banking
since 1978. He has been the Chairman of the Board of the Norwegian Register of
Securities and Vice Chairman of the Board of Directors of the Oslo Stock
Exchange. Mr. Gladsø is Chairman of our Audit Committee.




Jan Erik Langangen has been
the Executive Vice President, Business Development and Legal, of the Manager
since November 2004. Mr. Langangen previously served as the Chief Financial
Officer from 1979 to 1983, and as Chairman of the Board from 1987 to 1992, of
Statoil, an oil and gas company that is controlled by the Norwegian government
and that is the largest company in Norway. He also served as Chief Executive
Officer of UNI Storebrand from 1985 to 1992. Mr. Langangen was also
Chairman of the Board of the Norwegian Governmental Value Commission from 1998
to 2001. Mr. Langangen is a partner of Langangen & Helset, a
Norwegian law firm and previously was a partner of the law firm
Langangen & Engesæth from 1996 to 2000 and of the law firm
Thune & Co. from 1994 to 1996. Mr. Langangen received a Masters of
Economics from The Norwegian School of Business Administration and his law
degree from the University of Oslo.




Frithjof Bettumwas appointed
Vice President—Technical Operations & Chartering of the Manager on
October 1, 2005. Mr. Bettum has a Mechanical Engineering degree from
Vestfold University College. Mr. Bettum has 21 years of experience in the
shipping and the offshore business. From 1984 to 1992, Mr. Bettum was
employed by Allum Engineering AS in Sandefjord, Norway where he served as
project manager. At Allum Engineering AS Mr. Bettum worked on projects in
the areas of engineering, the new building and conversion management of shuttle
tankers, Floating Production, Storage and Offloading (FPSO), semi-submersible
drilling units and the shore based manufacturer industry. From 1993 to
2001, Mr. Bettum was employed by Nordic American Shipping AS (which later
became Ugland Nordic Shipping ASA) where he served as Vice
President—Offshore. In 2004, Mr. Bettum joined Teekay Norway AS as
Vice President Offshore where he was responsible for business development, the
daily operations of the company and the conversion of shuttle tankers and
offshore units.




B.
            COMPENSATION






36




Compensation
of Directors




The
six non-employee directors received, in the aggregate, approximately $360,000 in
cash fees for their services as directors during 2007. The Vice Chairman of the
Board of Directors receives an additional annual cash retainer of $5,000 per
year. The members of the Audit Committee receive an additional annual cash
retainer of $10,000 each per year.  The Chairman of the Audit
Committee receives an additional annual cash retainer of $5,000 per year. We do
not pay director fees to employee directors. We do, however, reimburse all of
our directors for all reasonable expenses incurred by them in connection with
serving on our Board of Directors.  Directors may receive restricted
shares or other grants under our 2004 Stock Incentive Plan described
below.





2004
Stock Incentive Plan





Under
the terms of the Company’s 2004 Stock Incentive Plan, the directors, officers
and certain key employees of the Company and the Manager are eligible to receive
awards which include incentive stock options, non-qualified stock options, stock
appreciation rights, dividend equivalent rights, restricted stock, restricted
stock units, performance shares and phantom stock units. A total of 400,000
common shares are reserved for issuance upon exercise of options, as restricted
share grants or otherwise under the plan. Included under the 2004 Stock
Incentive Plan are options to purchase common shares at an exercise price equal
to $38.75, subject to annual downward adjustment if the payment of dividends in
the related fiscal year exceed a 3% yield calculated based on the initial strike
price. During 2005 the Company granted, under the terms of the Company’s 2004
Stock Incentive Plan, an aggregate of 320,000 stock options that the Board of
Directors had agreed to issue during 2004. These options vest in equal
installments on each of the first four anniversaries of the grant dates. During
2006, the Company granted an aggregate of 16,700 restricted shares. No stock
options were granted in 2006.  The Company granted 10,000 stock
options in 2007 at an exercise price equal to $35.17, subject to annual downward
adjustment as described above.  These options vest in equal
installments on each of the first four anniversaries of the grant
date.





Executive
Pension Plan





In
May 2007, the Board of Directors approved the implementation of an executive
pension plan for Herbjørn Hansson, our Chairman, President and Chief Executive
Officer, who has served in his present positions since the inception of the
Company in 1995. Pursuant to this plan, the Company shall offer Mr. Hansson a
pension of 66 percent of salary from 67 years of age, such pension to be fully
earned following a service period of 11 years (from 2004 until 2015), in
addition to normal disability coverage and contingent right of pension for his
spouse, in line with the practice in Norway. Please see Note 6 of the financial
statements for further information about this plan.





Employment
Agreements




We
have an employment agreement with Herbjørn Hansson, our Chairman, President and
Chief Executive Officer, Turid M. Sørensen, our Chief Financial Officer, and
Rolf I. Amundsen, our Chief Investor Relations Officer and Advisor to the
Chairman. Mr. Hansson does not receive any additional compensation for serving
as a director or the Chairman of the Board. The aggregate compensation of our
executive officers during 2007 was approximately $1.3 million. The aggregate
compensation of our executive officers is expected to be approximately $1.5
million during 2008. On certain terms, the employment agreement may be
terminated by us or Mr. Hansson upon six months’ written notice to the other
party. The employment agreement with Ms. Sørensen may be terminated by us or by
Ms. Sørensen upon six months’ written notice to the other party. The
employment agreement with Mr. Amundsen may be terminated by us or Mr. Amundsen
upon three months’ written notice to the other party.





C.
            BOARD
      PRACTICES




The
members of the Company’s board of directors serve until the next annual general
meeting following his or her election to the board.  The members of
the current board of directors were elected at the annual general meeting held
in 2007.  The Company’s Board of Directors has established an Audit
Committee, consisting of two independent directors, Messrs. Gladsø and
Gibbons.  Mr. Gladsø serves as the audit committee financial
expert.  The members of the Audit Committee receive additional
remuneration of $25,000 in aggregate for serving on the Audit
Committee.  The Audit Committee provides assistance to the Company’s
board of directors in fulfilling their responsibility to shareholders, and
investment community relating to corporate accounting, reporting practices of
the Company, and the quality and integrity of the financial reports of the
Company.  The Audit Committee, among other duties, recommends to the
Company’s board of directors the independent auditors to be selected to audit
the financial statements of the Company; meets with the independent auditors and
financial management of the Company to review the scope of the proposed audit
for the current year and the audit procedures to be utilized; reviews with the
independent auditors, and financial and accounting personnel, the adequacy and
effectiveness of the accounting and financial controls of the Company; and
reviews the financial statements contained in the annual report to shareholders
with management and the independent auditors.






37




Pursuant
to an exemption for foreign private issuers, we are not required to comply with
many of the corporate governance requirements of the New York Stock Exchange
that are applicable to U.S. listed companies.  A description of the
significant differences between our corporate governance practices and the New
York Stock Exchange requirements is available on our website www.nat.bm under
“Corporate Governance”.




D.
            EMPLOYEES




As
at December 31, 2007, the Company had two full-time employees and one part-time
employee.




E.
            SHARE
      OWNERSHIP




The
following table sets forth information regarding the share ownership of the
Company as of May 1, 2008 by its directors and officers.  All of the
shareholders are entitled to one vote for each share of common stock
held.




Title
            Identity
      of Person
            No.
      of Shares
            Percent
      of ClassCommon
            Herbjørn
      Hansson(1)
            532,506
            1.78%Hon.
      Sir David Gibbons
            
            *Thorbjørn
      Gladsø
            
            *Andrew  W.
      March
            
            *Paul
      J. Hopkins
            
            *Andreas
      Ove Ugland
            
            *Turid
      M. Sørensen
            
            *Rolf
      Amundsen
            
            *Richard
      Vietor
            
            *





(1) 
Includes 517,506 shares held by the Manager, of which Mr. Hansson is the sole
shareholder.




*  Less
than 1% of our outstanding shares of common stock.




ITEM
      7.
            MAJOR
      SHAREHOLDERS AND RELATED PARTY
TRANSACTIONS




A.
            MAJOR
      SHAREHOLDERS




The
Company is not aware of any shareholder who beneficially owns 5% or more of the
Company’s outstanding common stock.




B.
            RELATED
      PARTY TRANSACTIONS




Since
May 30, 2003, Scandic American Shipping Ltd., which is owned by a company
controlled by Mr. Hansson and owned by Mr. Hansson and members of his family,
has been our Manager pursuant to the Management Agreement with the
Company.  See Item 4—Information on the Company — Business Overview —
The Management Agreement.




Mr.
Jan Erik Langangen, Executive Vice President of the Manager, is a partner of
Langangen & Helset Advokatfirma AS which in the past has also provided and
may continue to provide legal services to us.




C.
            INTERESTS
      OF EXPERTS AND COUNSEL




Not
Applicable.




ITEM
      8.
            FINANCIAL
      INFORMATION




A.
            CONSOLIDATED
      STATEMENTS AND OTHER FINANCIAL
INFORMATION






38




See
Item 18.




Legal
Proceedings




To
the best of the Company’s knowledge, the Company is not currently involved in
any legal or arbitration proceedings that would have a significant effect on the
Company’s financial position or profitability and no such proceedings are
pending or known to be contemplated by governmental authorities.




Dividend
Policy




Our
policy is to declare quarterly dividends to shareholders, substantially equal to
our net operating cash flow during the previous quarter after reserves as the
Board of Directors may from time to time determine are required, taking into
account contingent liabilities, the terms of our 2005 Credit Facility, our other
cash needs and the requirements of Bermuda law. However, if we declare a
dividend in respect of a quarter in which an equity issuance has taken place, we
calculate the dividend per share as our net operating cash flow for the quarter
(after taking into account the factors described above) divided by the weighted
average number of shares over that quarter. Net operating cash flow represents
net income plus depreciation and non-cash administrative charges. The dividend
paid is the calculated dividend per share multiplied by the number of shares
outstanding at the end of the quarter.




Total
dividends paid in 2007 were $107.3 million or $3.81 per share.  The
dividend payments per share in 2007, 2006, 2005, 2004 and 2003 have been as
follows:




Period
            2007
            2006
            2005
            2004
            20031st
      Quarter
            $1.00
            $1.88
            $1.62
            $1.15
            $0.632nd
      Quarter
            1.24
            1.58
            1.15
            1.70
            1.273rd
      Quarter
            1.17
            1.07
            0.84
            0.88
            0.784th
      Quarter
            0.40
            1.32
            0.60
            1.11
            0.37Total
            $3.81
            $5.85
            $4.21
            $4.84
            $3.05





The
dividend paid in any quarter is in respect of the results of the previous
quarter.




The
Company declared a dividend of $0.50 per share in respect of the fourth quarter
of 2007 which was paid to shareholders in March 2008.  In addition,
the Company declared a dividend of $1.18 per share in respect of the first
quarter of 2008 which will be paid to shareholders in June 2008.




B.
            SIGNIFICANT
      CHANGES




Not
applicable.




ITEM
      9.
            THE
      OFFER AND LISTING




Not
applicable except for Item 9.A.4. and Item 9.C.




Share
History and Markets




Since
November 16, 2004, the primary trading market for our common shares has been the
New York Stock Exchange, or the NYSE, on which our shares are listed under the
symbol “NAT.” The primary trading market for our common shares was the American
Stock Exchange, or the AMEX, until November 15, 2004, at which time trading of
our common shares on the AMEX ceased. The secondary trading market for our
common shares was the Oslo Stock Exchange, or the OSE, until January 14, 2005,
at which time trading of our common share on the OSE ceased.




The
following table sets forth the high and low market prices for shares of our
common stock as reported by the New York Stock Exchange, the American Stock
Exchange and the Oslo Stock Exchange:




NYSE
            NYSE
            AMEX
            AMEX
            OSE
            OSEThe
      year ended:
            HIGH
            LOW
            HIGH
            LOW
            HIGH
            LOW2003
            N/A
            N/A
            $16.90
            $11.25
            NOK
      125.00
            NOK  90.002004
            $41.30
            $35.26
            $41.59
            $15.00
            NOK
      300.00
            NOK
      115.002005
      (1)
            $56.68
            $28.60
            N/A
            N/A
            NOK
      225.00
            NOK
      205.002006
            $41.70
            $27.90
            N/A
            N/A
            N/A
            N/A2007
            $44.16
            $29.50
            N/A
            N/A
            N/A
            N/A






39





For
      the quarter ended:
            NYSE
              HIGH
            NYSE
              LOWMarch 31,
      2006
            $36.92
            $27.90June 30,
      2006
            $36.60
            $28.50September 30,
      2006
            $41.70
            $31.95December 31,
      2006
            $36.40
            $31.00March 31,
      2007
            $37.53
            $32.06June 30,
      2007
            $41.24
            $35.79September 30,
      2007
            $40.20
            $32.00December 31,
      2007
            $36.49
            $29.50March
      31, 2008
            $34.30
            $25.51







(1)           The
OSE numbers for 2005 are based on trading through January 14,
2005





The
high and low market prices for our common shares by month since December 2007
have been as follows:




For
      the month:
            NYSE
              HIGH
            NYSE
              LOWNovember
      2007
            $38.40
            $29.50December
      2007
            $36.71
            $31.66January
      2008
            $34.30
            $25.75February
      2008
            $31.98
            $28.10March
      2008
            $29.29
            $25.51April
      2008
            $34.54
            $27.90May
      1 - May 8, 2008
            $37.95
            $33.70





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
51,200,000 common shares having a par value of $0.01 per share.




The
purposes and powers of the Company are set forth in Items 6 and 7 of our
Memorandum of Association and in paragraphs (b) to (n) and (p) to (u) of the
Second Schedule of the Bermuda Companies Act of 1981, or the Companies Act,
which is attached as an exhibit to our Memorandum of
Association.  These purposes include the entering into of any
guarantee, contract, indemnity or suretyship and to assure, support, secure,
with or without the consideration or benefit, the performance of any obligations
of any person or persons; and the borrowing and raising of money in any currency
or currencies to secure or discharge any debt or obligation in any
manner.




Our
bye-laws provide that our board of directors shall convene and the Company shall
hold annual general meetings in accordance with the requirements of the
Companies Act at such times and places as the Board shall decide.  Our
board of directors may call special meetings at its discretion or as required by
the Companies Act.  Under the Companies Act, holders of one-tenth of
our issued common shares may call special meetings of shareholders.






40




Bermuda
law permits the bye-laws of a Bermuda company to contain a provision eliminating
personal liability of a director or officer to the company for any loss arising
or liability attaching to him by virtue of any rule of law in respect of any
negligence default, breach of duty or breach of trust of which the officer or
person may be guilty.  Bermuda law also grants companies the power
generally to indemnify directors and officers of the company if any such person
was or is a party or threatened to be made a party to a threatened, pending or
completed action, suit or proceeding by reason of the fact that he or she is or
was a director and officer of the company or was serving in a similar capacity
for another entity at the company’s request.




Our
bye-laws do not prohibit a director from being a party to, or otherwise having
an interest in, any transaction or arrangement with the Company or in which the
Company is otherwise interested.  Our bye-laws provide that a director
who has an interest in any transaction or arrangement with the Company and who
has complied with the provisions of the Companies Act and with our bye-laws with
regard to disclosure of such interest shall be taken into account in
ascertaining whether a quorum is present, and will be entitled to vote in
respect of any transaction or arrangement in which he is so
interested.  Our bye-laws provide our board of directors the authority
to exercise all of the powers of the Company to borrow money and to mortgage or
charge all or any part of our property and assets as collateral security for any
debt, liability or obligation.  Our directors are not required to
retire because of their age, and our directors are not required to be holders of
our common shares.  Directors serve for one year terms, and shall
serve until re-elected or until their successors are appointed at the next
annual general meeting.




Our
bye-laws provide that each director, alternate director, officer, person or
member of a committee, if any, resident representative, or his heirs, executors
or administrators, which we refer to collectively as an indemnitee, will be
indemnified and held harmless out of our funds to the fullest extent permitted
by Bermuda law against all liabilities, loss, damage or expense (including
liabilities under contract, tort and statute or any applicable foreign law or
regulation and all reasonable legal and other costs and expenses properly
payable) incurred or suffered by him as such director, alternate director,
officer, person or committee member or resident representative (or in his
reasonable belief that he is acting as any of the above).  In
addition, each indemnitee shall be indemnified against all liabilities incurred
in defending any proceedings, whether civil or criminal, in which judgment is
given in such indemnitee’s favor, or in which he is acquitted.




There
are no pre-emptive, redemption, conversion or sinking fund rights attached to
our common shares.  The holders of common shares are entitled to one
vote per share on all matters submitted to a vote of holders of common
shares.  Unless a different majority is required by law or by our
bye-laws, resolutions to be approved by holders of common shares require
approval by a simple majority of votes cast at a meeting at which a quorum is
present.




Special
rights attaching to any class of our shares may be altered or abrogated with the
consent in writing of not less than 75% of the issued and outstanding shares of
that class or with the sanction of a resolution passed at a separate general
meeting of the holders of such shares voting in person or by proxy.




Our
Memorandum of Association and our bye-laws may be amended upon the consent of
not less than two-thirds of the issued and outstanding common
shares.




In
the event of our liquidation, dissolution or winding up, the holders of common
shares are entitled to share in our assets, if any, remaining after the payment
of all of our debts and liabilities, subject to any liquidation preference on
any outstanding preference shares.




Our
bye-laws provide that our board of directors may, from time to time, declare and
pay dividends out of contributed surplus.  Each common share is
entitled to dividends if and when dividends are declared by our board of
directors, subject to any preferred dividend right of the holders of any
preference shares.




There
are no limitations on the right of non-Bermudians or non-residents of Bermuda to
hold or vote our common shares.




Our
bye-laws permit the Company to refuse to register the transfer of any common
shares if the effect of that transfer would result in 50% or more of our
aggregated issued share capital, or 50% or more of the outstanding voting power
being held by persons who are resident for tax purposes in Norway or the United
Kingdom.




Our
bye-laws permit the Company to increase its capital, from time to time, with the
consent of not less than two-thirds of the outstanding voting power of the
Company’s issued and outstanding common shares.




C.
            MATERIAL
      CONTRACTS




For
a description of our 2005 Credit Facility, which was extended in April 2008, see
Item 4 — Information on the Company — Business Overview — Our Credit
Facility.






41




Otherwise,
the Company has not entered into any material contracts outside the ordinary
course of business during the past two years.




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
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 in so far 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.




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
Company is incorporated in Bermuda.  Under current Bermuda law, the
Company is not subject to tax on income or capital gains, and no Bermuda
withholding tax will be imposed upon payments of dividends by the Company to its
shareholders.  No Bermuda tax is imposed on holders with respect to
the sale or exchange of Shares.  Furthermore, the Company has received
from the Minister of Finance of Bermuda under the Exempted Undertakings Tax
Protection Act 1966, as amended, an assurance that, in the event that Bermuda
enacts any legislation imposing any tax computed on profits or income, including
any dividend or capital gains withholding tax, or computed on any capital asset,
appreciation, or any tax in the nature of an estate, duty or inheritance tax,
then the imposition of any such tax shall not be applicable.  The
assurance further provides that such taxes, and any tax in the nature of estate
duty or inheritance tax, shall not be applicable to the Company or any of its
operations, nor to the shares, debentures or other obligations of the Company,
until March 2016.






42




F.
            DIVIDENDS
      AND PAYING AGENTS




Not
Applicable.




G.
            STATEMENT
      BY EXPERTS




Not
Applicable.




H.
            DOCUMENTS
      ON DISPLAY




The
Company is subject to the informational requirements of the Securities Exchange
Act of 1934, as amended. In accordance with these requirements we file reports
and other information with the Securities and Exchange Commission. These
materials, including this annual report and the accompanying exhibits may be
inspected and copied at the public reference facilities maintained by the
Commission at 100 F Street, NE, Room 1580, Washington, D.C.
20549.  You may obtain information on the operation of the public
reference room by calling 1 (800) SEC-0330, and you may obtain copies at
prescribed rates from the Public Reference Section of the Commission at its
principal office in Washington, D.C.  The SEC maintains a website
(http://www.sec.gov.) that contains reports, proxy and information statements
and other information regarding registrants that file electronically with the
SEC.  In addition, documents referred to in this annual report may be
inspected at the Company’s headquarters at LOM Building, 27 Reid Street,
Hamilton, HM11, Bermuda.




We
furnish holders of our common shares with annual reports containing audited
financial statements and a report by our independent public accountants, and
intend to make available quarterly reports containing selected unaudited
financial data for the first three quarters of each fiscal year. The audited
financial statements will be prepared in accordance with United States generally
accepted accounting principles. As a “foreign private issuer,” we are exempt
from the rules under the Securities Exchange Act prescribing the furnishing and
content of proxy statements to shareholders. While we intend to furnish proxy
statements to shareholders in accordance with the rules of the New York Stock
Exchange, those proxy statements do not conform to Schedule 14A of the proxy
rules promulgated under the Exchange Act. All reports, proxy statements and
other information filed by us with the New York Stock Exchange may be inspected
at the New York Stock Exchange’s offices at 20 Broad Street, New York, New York
10005. In addition, as a “foreign private issuer,” we are exempt from the rules
under the Exchange Act relating to short swing profit reporting and
liability.




I.
            SUBSIDIARY
      INFORMATION




Not
applicable.




ITEM
      11.
            QUANTITATIVE
      AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK




The
Company is exposed to market risk from changes in interest rates related to the
variable rate of the Company’s borrowings, or the Loan under our 2005 Credit
Facility.




Amounts
borrowed under the 2005 Credit Facility bears interest at a rate equal to LIBOR
plus a margin between 0.70% to 1.20% per year (depending on the loan to vessel
value ratio). Increasing interest rates could affect our future profitability.
In certain situations, the Company may enter into financial instruments to
reduce the risk associated with fluctuations in interest rates.




A
100 basis point increase in LIBOR would have resulted in an increase of
approximately $1.4 million in our interest expense for the year ended December
31, 2007.




The
Company is exposed to the spot market. Historically, the tanker markets have
been volatile as a result of the many conditions and factors that can affect the
price, supply and demand for tanker capacity. Changes in demand for
transportation of oil over longer distances and supply of tankers to carry that
oil may materially affect our revenues, profitability and cash flows. Eleven of
our twelve vessels are currently operated in the spot market or on spot market
related time charters.  We believe that over time, spot employment
generates premium earnings compared to longer-term employment.




We
estimate that during 2007, a $1,000 per day decrease in the spot market rate
would have decreased our voyage revenue by approximately $3.7
million.







43




ITEM
      12.
            DESCRIPTION
      OF SECURITIES OTHER THAN EQUITY
SECURITIES




Not
Applicable.




PART
II




ITEM
      13.
            DEFAULTS,
      DIVIDEND ARREARAGES AND
DELINQUENCIES




Not
Applicable.




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




On
February 13, 2007, the Board of Directors adopted a shareholders’ rights
agreement and declared a dividend of one preferred share purchase right to
purchase one one-thousandth of a share of the Company’s Series A Participating
Preferred Stock for each outstanding share of the Company’s common stock, par
value $0.01 per share. The dividend was payable on February 27, 2007 to
stockholders of record on that date.  Each right entitles the
registered holder to purchase from the Company one one-thousandth of a share of
Series A Participating Preferred Stock at an exercise price of $115, subject to
adjustment.  The Company can redeem the rights at any time prior to a
public announcement that a person has acquired ownership of 15% or more of the
company’s common stock.




This
shareholder rights plan was designed to enable the Company to protect
shareholder interests in the event that an unsolicited attempt is made for a
business combination with or takeover of the Company. The Company believes that
the  shareholder  rights plan should  enhance the
Board’s negotiating  power on behalf of shareholders in the event of a
coercive offer or proposal.  The Company is not currently aware of any
such offers or proposals.




ITEM
      15.
            CONTROLS
      AND PROCEDURES




A.
            DISCLOSURE
      CONTROLS AND PROCEDURES.




Pursuant
to Rules 13a-15(e) of the Securities Exchange Act of 1934 (the “Exchange Act”),
the Company’s management, under the supervision and with the participation of
the Chief Executive Officer and Interim Chief Financial Officer, evaluated the
effectiveness of the design and operation of the Company’s disclosure controls
and procedures as of December 31, 2007. The term disclosure controls and
procedures means controls and other procedures of an issuer that are designed to
ensure that information required to be disclosed by the issuer in the reports
that it files or submits under the Act is recorded, processed, summarized and
reported, within the time periods specified in the Commission’s rules and forms.
Disclosure controls and procedures include, without limitation, controls and
procedures designed to ensure that information required to be disclosed by an
issuer in the reports that it files or submits under the Act is accumulated and
communicated to the issuer’s management, including its principal executive and
principal financial officers, or persons performing similar functions, as
appropriate to allow timely decisions regarding required
disclosure.




Based
on that evaluation, our Chief Executive Officer and Interim Chief Financial
Officer have concluded that our disclosure controls and procedures are
effective.




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 for
external purposes 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.






44




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 REGISTERED PUBLIC ACCOUNTING
FIRM.




The
Company’s internal control over financial reporting as of December 31, 2007 has
been audited by Deloitte AS, an independent registered public accounting firm,
as stated in their report included in this annual report.




D.
            CHANGES
      IN INTERNAL CONTROL OVER FINANCIAL
REPORTING.




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
      16.
            RESERVED.




ITEM
      16A.
            AUDIT
      COMMITTEE FINANCIAL EXPERT




The
Board of Directors has determined that Mr. Torbjørn Gladsø is an audit committee
financial expert and the Chairman of the committee. Mr. Gladsø is “independent”
as determined in accordance with the rules of the New York Stock
Exchange.




ITEM
      16B.
            CODE
      OF ETHICS.




The
Company has adopted a code of ethics that applies to all of the Company’s
employees, including our principal executive officer, principal financial
officer, principal accounting officer or controller.  The Code may be
downloaded at our website (www.nat.bm).  Additionally, any person,
upon request, may ask for a hard copy of electronic file of the
Code.  If we make any substantive amendment to the Code of Ethics or
grant any waivers, including any implicit waiver, from a provision of our Code
of Ethics, we will disclose the nature of that amendment or waiver on our
website.  During the year ended December 31, 2007, no such amendment
was made or waiver granted.




ITEM
      16C.
            PRINCIPAL
      ACCOUNTANT FEES AND SERVICES.




A.
            AUDIT
      FEES




The
Company’s Board of Directors has established preapproval and procedures for the
engagement of the Company’s independent public accounting firms for all audit
and non-audit services. The following table sets forth, for the two most recent
fiscal years, the aggregate fees billed for professional services rendered by
our principal accountant, Deloitte AS,  for the audit of the Company’s
annual financial statements and services provided by the principal accountant in
connection with statutory and regulatory filings or engagements for the two most
recent fiscal years.




FISCAL
      YEAR ENDED DECEMBER 31, 2007
            
            $
            336,126FISCAL
      YEAR ENDED DECEMBER 31, 2006
            
            $
            199,600





(1)
            Included
      in the amounts are costs associated with the implementation of the
      requirements of Section 404 of the Sarbanes-Oxley Act of 2002 for the
      fiscal years 2007 and 2006 of $81,200 and $36,000,
      respectively.




B.
            AUDIT-RELATED
      FEES (1)




FISCAL
      YEAR ENDED DECEMBER 31, 2007
            
            $
            59,541FISCAL
      YEAR ENDED DECEMBER 31, 2006
            
            $
            132,300





(1)
            Audit-Related-Fees
      consists of accounting consultations related to accounting, financial
      reporting or disclosure matters not classified as “Audit
      Services”.






45




C.
            TAX
      FEES




Not
applicable.




D.
            ALL
      OTHER FEES




Not
applicable.




E.
            AUDIT
      COMMITTEE’S PRE-APPROVAL POLICIES AND
PROCEDURES




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




F.
            NOT
      APPLICABLE.




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




Not
Applicable.




ITEM
      16E.
            PURCHASES
      OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED
  PERSONS.




Not
Applicable.




PART
III




ITEM
      17.
            FINANCIAL
      STATEMENTS




See
Item 18.




ITEM
      18.
            FINANCIAL
      STATEMENTS




See
pages F-1 through F-20.




ITEM
      19.
            EXHIBITS




1.1  Memorandum
of Association of the Company, incorporated by reference to Exhibit 3.1 to the
Company's registration statement on Form F-1 filed with the Securities and
Exchange Commission on August 28, 1995 (Registration No. 33-96268) (the “1995
Registration Statement).





1.2  Bye-Laws
of the Company incorporated by reference to Form 6-K filed with the Securities
and Exchange Commission on November 18, 2004.





2.1  Form
of Share Certificate incorporated by reference to Exhibit 4.1 to the 1995
Registration Statement.





4.1  Amended
and Restated Management Agreement dated October 12, 2004, between Scandic
American Shipping Ltd. and Nordic American Tanker Shipping Limited, incorporated
by reference to Form 6-K filed with the Securities and Exchange Commission on
October 29, 2004.





4.2  Amendment
to Restated Management Agreement dated April 29, 2005, between Scandic American
Shipping Ltd. and Nordic American Tanker Shipping, incorporated by reference to
Exhibit 4.3 to the Company’s annual report on Form 20-F for the fiscal year
ended December 31, 2006 filed with the Securities and Exchange Commission on
June 29, 2007.





4.3  Amendment
to Restated Management Agreement dated May 3, 2008, between Scandic American
Shipping Ltd. and Nordic American Tanker Shipping Limited.





4.4  2004
Stock Incentive Plan incorporated by reference to Exhibit 4.5 to the Company's
annual report on Form 20-F for the fiscal year ended December 31, 2004 filed
with the Securities and Exchange Commission on June 30, 2005.






46





4.5  Amendment
to 2004 Stock Incentive Plan.





4.6  Revolving
Credit Facility Agreement by and among the Company and the financial
institutions listed in schedule 1 thereto, dated September 14, 2005,
incorporated by reference into the Company's annual report on Form 20-F filed
June 30, 2006.





4.7  Addendum
No. 1 to Revolving Credit Facility Agreement by and among the Company and the
financial institutions listed in schedule 2 thereto, dated September 21, 2006,
incorporated by reference to Exhibit 4.6 to the Company’s annual report on Form
20-F for the fiscal year ended December 31, 2006 filed with the Securities and
Exchange Commission on June 29, 2007.





4.8  Addendum
No. 2 to Revolving Credit Facility Agreement by and among the Company and the
financial institutions listed in schedule 2 thereto, dated April 15,
2008.





12.1
Rule 13a-14(a)/15d-14(a) Certification of the Chief Executive
Officer.





12.2
Rule 13a-14(a)/15d-14(a) Certification of the Chief Financial
Officer.





13.1
Certification of the 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 Chief Financial Officer pursuant to 18 U.S.C. Section 1350,
as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.





15.1
Consent of Independent Registered Public Accounting Firm.








47





NORDIC
AMERICAN TANKER SHIPPING LIMITED






TABLE OF
      CONTENTSPageREPORT OF
      INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
            F-2FINANCIAL
      STATEMENTS:Statements of
      Operations for the years ended December 31, 2007, 2006 and
      2005
            F-3Balance Sheets as of
      December 31, 2007 and 2006
            F-4Statements of
      Shareholders’ Equity for the years ended December 31, 2007, 2006 and
      2005
            F-5Statements of Cash
      Flows for the years ended December 31, 2007, 2006 and 2005
            F-6Notes to Financial
      Statements
            F-7







F-1





REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM




To the
Board of Directors and Stockholders of Nordic American Tanker Shipping
Limited
 Hamilton,
Bermuda
 
 We have audited the accompanying balance sheets of Nordic American
Tanker Shipping Ltd. (the “Company”) as of December 31, 2007 and 2006, and the
related statements of operations, shareholders’ equity and cash flows for each
of the three years ended December 31, 2007. We also have audited the Company’s
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. 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 the accompanying Management’s annual report on internal
control over financial reporting.  Our responsibility is to express an
opinion on these financial statements and an opinion on the Company’s internal
control over financial reporting based on our audits.
 
 We
conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement 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, 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
opinions.
 
 A
company's internal control over financial reporting is a process designed by, or
under the supervision of, the company's principal executive and principal
financial officers, or persons performing similar functions, and effected by the
company's board of directors, management, and other personnel to provide
reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with
generally accepted accounting principles.  A company's internal
control over financial reporting includes those policies and procedures that (1)
pertain to the maintenance of records that, in reasonable detail, accurately and
fairly reflect the transactions and dispositions of the assets of the company;
(2) provide reasonable assurance that transactions are recorded as necessary to
permit preparation of financial statements in accordance with generally accepted
accounting principles and that receipts and expenditures of the company are
being made only in accordance with authorizations of management and directors of
the company; and (3) provide reasonable assurance regarding prevention or timely
detection of unauthorized acquisition, use, or disposition of the company's
assets that could have a material effect on the financial
statements.
  Because
of the inherent limitations of internal control over financial reporting,
including the possibility of collusion or improper management override of
controls, material misstatements due to error or fraud may not be prevented or
detected on a timely basis.  Also, projections of any evaluation of
the effectiveness of the internal control over financial reporting to future
periods are subject to the risk that the controls may become inadequate because
of changes in conditions, or that the degree of compliance with the policies or
procedures may deteriorate.
 
 In our
opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of Nordic American Tanker Shipping Ltd
as of December 31, 2007 and 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 the criteria established in Internal Control – Integrated
Framework issued by the Committee of Sponsoring Organizations of the
Treadway Commission.
  \s\
Deloitte AS
 
 Oslo,
Norway
 May 9,
2008


F-2





Statements
      of Operations for the Years Ended December 31, 2007, 2006 and
      2005All
      figures in USD ‘000, except share and per share amountYear
      Ended December 31,
 Notes
              
              
              2007
              
              
              2006
              
              
              2005Voyage
      Revenues
              
              
              3
              
              
              
              186,986
              
              
              
              175,520
              
              
              
              117,110Voyage
      Expenses
              
              
              
              
              
              
              (47,122
              )
              
              
              (40,172
              )
              
              
              (30,981
              )Vessel
      Operating Expenses -
                excluding
      depreciation expense presented below
              
              
              
              
              
              
              (32,124
              )
              
              
              (21,102
              )
              
              
              (11,221
              )General
      and Administrative Expenses
              
              
              2,
      5, 6, 9
              
              
              
              (12,132
              )
              
              
              (12,750
              )
              
              
              (8,492
              )Depreciation
      Expense
              
              
              7
              
              
              
              (42,363
              )
              
              
              (29,254
              )
              
              
              (17,529
              )Net
      Operating Income
              
              
              
              
              
              
              53,245
              
              
              
              72,242
              
              
              
              48,887Interest
      Income
              
              
              
              
              
              
              904
              
              
              
              1,602
              
              
              
              850Interest
      Expense
              
              
              11
              
              
              
              (9,683
              )
              
              
              (6,339
              )
              
              
              (3,454
              )Other
      Financial (Expense) Income
              
              
              
              
              
              
              (260
              )
              
              
              (112
              )
              
              
              34Total
      Other Expense
              
              
              
              
              
              
              (9,039
              )
              
              
              (4,849
              )
              
              
              (2,570
              )Net
      Income
              
              
              
              
              
              
              44,206
              
              
              
              67,393
              
              
              
              46,317Basic
      Earnings per Share
              
              
              14
              
              
              
              1.56
              
              
              
              3.14
              
              
              
              3.03Diluted
      Earnings per Share
              
              
              14
              
              
              
              1.56
              
              
              
              3.14
              
              
              
              3.03Basic
      Weighted Average Number of Common Shares Outstanding
              
              
              
              28,252,472
              
              
              
              21,476,196
              
              
              
              15,263,622Diluted
      Weighted Average Number of Common Shares Outstanding
              
              
              
              28,294,997
              
              
              
              21,476,196
              
              
              
              15,263,622
 
 
 
 The
footnotes are an integral part of these financial statements.
  F-3
  
 Balance
      Sheets as of December 31, 2007 and 2006All
      figures in USD ‘000, except share and per share amountNotes
              
              
              December
      31, 2007
              
              
              December
      31, 2006AssetsCurrent
      AssetsCash
      and Cash Equivalents
              
              
              
              
              
              13,342
              
              
              
              11,729Accounts
      Receivable, net $0 allowance at December 31, 2007 and 2006
              
              
              3
              
              
              
              14,489
              
              
              
              13,417Voyages
      in Progress
              
              
              
              
              
              
              7,753
              
              
              
              7,853Prepaid
      Expenses and Other Assets
              
              
              4
              
              
              
              9,219
              
              
              
              11,479Total
      Current Assets
              
              
              
              
              
              
              44,803
              
              
              
              44,478Non-current
      AssetsVessels,
      Net
              
              
              7
              
              
              
              740,631
              
              
              
              752,478Deposit
      on contract
              
              
              8
              
              
              
              18,305
              
              
              
              -Other
      Non-current Assets
              
              
              
              
              
              
              889
              
              
              
              3,224Total
      Non-current Assets
              
              
              
              
              
              
              759,825
              
              
              
              755,702Total
      Assets
              
              
              
              
              
              
              804,628
              
              
              
              800,180Liabilities
      and Shareholders’ EquityCurrent
      LiabilitiesAccounts
      Payable
              
              
              2
              
              
              
              7,290
              
              
              
              3,006Deferred
      Revenue
              
              
              12
              
              
              
              537
              
              
              
              537Accrued
      Liabilities
              
              
              13
              
              
              
              16,531
              
              
              
              11,191Total
      Current Liabilities
              
              
              
              
              
              
              24,358
              
              
              
              14,734Long-term
      Debt
              
              
              10
              
              
              
              105,500
              
              
              
              173,500Deferred
      Compensation Liability
              
              
              6
              
              
              
              2,665
              
              
              
              -Total
      Liabilities
              
              
              
              
              
              
              132,523
              
              
              
              188,234Commitments
      and Contingencies
              
              
              16Shareholders’
      EquityCommon
      Stock, par value $0.01 per Share;
              
              
              15
              
              
              
              300
              
              
              
              26951,200,000
      shares authorized, 29,975,312shares
      issued and outstanding and 26,914,088 shares issued and outstanding at
      December 31, 2007 and December 31, 2006, respectivelyAdditional
      Paid-in Capital
              
              
              
              
              
              
              852,121
              
              
              
              728,851Accumulated
      Deficit
              
              
              
              
              
              
              (180,316
              )
              
              
              (117,174
              )Total
      Shareholders’ Equity
              
              
              
              
              
              
              672,105
              
              
              
              611,946Total
      Liabilities and Shareholders’ Equity
              
              
              
              
              
              
              804,628
              
              
              
              800,180
 
 The
footnotes are an integral part of these financial statements.
  F-4
  
 Statements
      of Shareholders’ Equity for the Years Ended December 31, 2007, 2006 and
      2005All
      figures in USD ‘000, except number of shares
  Number
      of Shares
              Common
      Shares
              Additional
      Paid-in Capital
              Accumulated
      Deficit
              Total
      Shareholders’ Equity
  Balance
      at December 31, 2004
              
              
              13,067,838
              
              
              
              131
              
              
              
              265,753
              
              
              
              (44,015
              )
              
              
              221,868Net
      Income
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              46,318
              
              
              
              46,318Common
      Shares Issued, net of $11.3 million issuance costs
              
              
              3,500,000
              
              
              
              35
              
              
              
              161,932
              
              
              
              
              
              
              
              161,967Compensation
      - Restricted Shares
              
              
              76,658
              
              
              
              
              
              
              
              3,583
              
              
              
              
              
              
              
              3,583Share-based
      Compensation
              
              
              
              
              
              
              
              
              
              
              1,415
              
              
              
              
              
              
              
              1,415Dividend
      Paid, $4.21 per share
              
              
              
              
              
              
              
              
              
              
              
              (64,279
              )
              
              
              (64,279
              )Balance
      at December 31, 2005
              
              
              16,644,496
              
              
              
              166
              
              
              
              432,682
              
              
              
              (61,977
              )
              
              
              370,872Net
      Income
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              67,393
              
              
              
              67,393Common
      Shares Issued, net of $16.5 million issuance costs
              
              
              10,047,500
              
              
              
              103
              
              
              
              288,254
              
              
              
              
              
              
              
              288,357Compensation
      - Restricted Shares
              
              
              222,092
              
              
              
              
              
              
              
              6,369
              
              
              
              
              
              
              
              6,369Share-based
      Compensation
              
              
              
              
              
              
              
              
              
              
              1,545
              
              
              
              
              
              
              
              1,545Dividend
      Paid, $5.85 per share
              
              
              
              
              
              
              
              
              
              
              
              (122,590
              )
              
              
              (122,590
              )Balance
      at December 31, 2006
              
              
              26,914,088
              
              
              
              269
              
              
              
              728,851
              
              
              
              (117,174
              )
              
              
              611,946Net
      Income
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              44,206
              
              
              
              44,206Common
      Shares Issued, net of $4.5 million issuance costs
              
              
              3,000,000
              
              
              
              31
              
              
              
              119,720
              
              
              
              
              
              
              
              119,751Compensation
      - Restricted Shares
              
              
              61,224
              
              
              
              
              
              
              
              2,289
              
              
              
              
              
              
              
              2,289Share-based
      Compensation
              
              
              
              
              
              
              
              
              
              
              1,261
              
              
              
              
              
              
              
              1,261Dividend
      Paid, $3.81 per share
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              (107,349
              )
              
              
              (107,349
              )Balance
      at December 31, 2007
              
              
              29,975,312
              
              
              
              300
              
              
              
              852,121
              
              
              
              (180,316
              )
              
              
              672,105
  The
footnotes are an integral part of these financial statements.
  F-5
  
 Statements
      of Cash Flows for the Years Ended December 31, 2007, 2006 and
      2005All
      figures in USD ‘000
  Year
      Ended December 31,2007
              
              
              2006
              
              
              2005Cash
      Flows from Operating ActivitiesNet
      Income
              
              
              44,206
              
              
              
              67,393
              
              
              
              46,317Reconciliation
      of Net Income to Net Cash
                Provided
      by Operating ActivitiesDepreciation
      Expense
              
              
              42,363
              
              
              
              29,254
              
              
              
              17,529Amortization
      of Deferred Finance Costs
              
              
              514
              
              
              
              402
              
              
              
              718Deferred
      Compensation Liability
              
              
              2,665
              
              
              
              -
              
              
              
              -Compensation
      - Restricted Shares
              
              
              2,289
              
              
              
              6,369
              
              
              
              3,583Share-based
      Compensation
              
              
              1,261
              
              
              
              1,545
              
              
              
              1,415Capitalized
      Interest on Conract
              
              
              (305
              )
              
              
              -
              
              
              
              -Changes
      in Operating Assets and Liabilities:Accounts
      Receivables
              
              
              (1,072
              )
              
              
              6,140
              
              
              
              (15,019
              )Accounts
      Payable and Accrued Liabilities
              
              
              (2,971
              )
              
              
              9,763
              
              
              
              2,545Dry-dock
      Expenditures
              
              
              (9,496
              )
              
              
              -
              
              
              
              -Prepaid
      and Other Assets
              
              
              2,260
              
              
              
              (8,332
              )
              
              
              (
      1,667
              )Deferred
      Revenue
              
              
              -
              
              
              
              -
              
              
              
              (749
              )Voyages
      in Progress
              
              
              100
              
              
              
              (5,407
              )
              
              
              (2,446
              )Other
      Non-current Assets
              
              
              1,835
              
              
              
              (514
              )
              
              
              (1,171
              )Net
      Cash Provided by Operating Activities
              
              
              83,649
              
              
              
              106,613
              
              
              
              51,056Cash
      Flows from Investing ActivitiesDeposit
      on Contract
              
              
              (18,000
              )
              
              
              -
              
              
              
              -Investment
      in Vessels
              
              
              (8,424
              )
              
              
              (317,800
              )
              
              
              (294,161
              )Net
      Cash Used in Investing Activities
              
              
              (26,424
              )
              
              
              (317,800
              )
              
              
              (294,161
              )Cash
      Flows from Financing ActivitiesProceeds
      from Issuance of Common Stock
              
              
              119,751
              
              
              
              288,357
              
              
              
              161,967Proceeds
      from Use of Credit Facility
              
              
              55,000
              
              
              
              274,500
              
              
              
              135,000Repayments
      on Credit Facility
              
              
              (123,000
              )
              
              
              (231,000
              )
              
              
              (5,000
              )Credit
      Facility Costs
              
              
              (14
              )
              
              
              (591
              )
              
              
              (1,075
              )Dividends
      Paid
              
              
              (107,349
              )
              
              
              (122,590
              )
              
              
              (64,279
              )Net
      Cash (Used in) Provided by Financing Activities
              
              
              (55,612
              )
              
              
              208,676
              
              
              
              226,613Net
      Increase (Decrease)  in Cash and Cash
Equivalents
              
              
              1,613
              
              
              
              (2,
      511
              )
              
              
              (16,492
              )Cash
      and Cash Equivalents at the Beginning of Year
              
              
              11,729
              
              
              
              14,240
              
              
              
              30,732Cash
      and Cash Equivalents at the End of Year
              
              
              13,342
              
              
              
              11,729
              
              
              
              14,240Cash
      Paid for Interest
              
              
              9,690
              
              
              
              5,499
              
              
              
              916Cash
      Paid for Taxes
              
              
              -
              
              
              
              -
              
              
              
              -
 
 The
footnotes are an integral part of these financial statements.
  F-6
  NORDIC
AMERICAN TANKER SHIPPING LIMITED
 
 NOTES
TO FINANCIAL STATEMENTS
 
 (All
amounts in USD ‘000 except where noted)
 
 
 1.
              BUSINESS
      AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES
 
 
 Nature of Business: Nordic
American Tanker Shipping Limited (the “Company”) was formed on June 12, 1995
under the laws of the Islands of Bermuda. The Company owns and operates crude
oil tankers.  The Company trades under the symbol “NAT” on the New
York Stock Exchange.
 
 As
of December 31, 2007 the Company owns 14 double hull Suezmax tankers of which
two are newbuildings. The following chart provides information regarding each
vessel.
 
 Vessel
                Yard
                Year
      Built
                Dwt(1)
                Employment
      Status
                  (Expiration
      Date)
                FlagGulf
      Scandic
                Samsung
                1997
                151,475
                Bareboat
      (Nov. 2009)
                Isle
      of ManNordic
      Hawk
                Samsung
                1997
                151,475
                Spot
                BahamasNordic
      Hunter
                Samsung
                1997
                151,400
                Spot
                BahamasNordic
      Freedom
                Daewoo
                2005
                163,455
                Spot
                BahamasNordic
      Voyager
                Dalian
      New
                1997
                149,591
                Spot
                NorwayNordic
      Fighter
                Hyundai
                1998
                153,328
                Spot
                NorwayNordic
      Discovery
                Hyundai
                1998
                153,328
                Spot
                NorwayNordic
      Saturn
                Daewoo
                1998
                157,332
                Spot
                Marshall
      IslandsNordic
      Jupiter
                Daewoo
                1998
                157,411
                Spot
                Marshall
      IslandsNordic
      Apollo
                Samsung
                2003
                159,999
                Spot
                Marshall
      IslandsNordic
      Cosmos
                Samsung
                2002
                159,998
                Spot
                Marshall
      IslandsNordic
      Moon
                Samsung
                2003
                159,999
                Spot
                Marshall
      IslandsNewbuilding
                Bohai
                2009
                163,000
                Expected
      delivery 4Q’09Newbuilding
                Bohai
                2010
                163,000
                Expected
      delivery 1Q’10
 
  (1)  Deadweight
tons.
  
 Basis of Accounting:These
financial statements have been prepared in accordance with accounting principles
generally accepted in the United States of America (“US GAAP”).
 
 Use of Estimates: Preparation
of financial statements in accordance with US GAAP requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities, the disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenue and expenses during
the reporting period. Actual results could differ from those amounts. The
affects of changes in accounting estimates are accounted for in the same period
in which the estimates are changed.
 
 Reclassifications: Certain
amounts in the prior year note disclosures have been reclassified to conform to
the current year presentation
  F-7
  
 Foreign Currency
Translation:The functional currency of the Company is the
United States (“U.S.”) dollar as all revenues are received in U.S. dollars and
the majority of the Company’s expenditures are incurred and paid in U.S.
dollars.  The Company’s reporting currency is also the U.S.
dollar.
  Cash and Cash Equivalents:
Cash and cash equivalents consist of deposits with original maturities of three
months or less.
 
 Inventories:Inventories,
which comprise principally of bunker fuel, are stated at cost which is
determined on a first-in, first-out (FIFO) basis.  Inventory is
reported within "Prepaid Expenses and Other Current Assets" within the balance
sheet.
 
 Vessels, net: Vessels are
stated at their historical cost, which consists of the contracted purchase price
and any direct material expenses incurred upon acquisition (including
improvements, on site supervision expenses incurred during the construction
period, commissions paid, delivery expenses and other expenditures to prepare
the vessel for her initial voyage) less accumulated depreciation. Financing
costs incurred during the construction period of the vessels are also
capitalized and included in vessels’ cost based on the weighted average method.
Certain subsequent expenditures for conversions and major improvements are also
capitalized if it is determined that they appreciably extend the life, increase
the earning capacity or improve the efficiency or safety of the vessel.
Depreciation is calculated based on cost less estimated salvage value and is
provided over the estimated useful life of the related assets using the
straight-line method. The estimated useful life of a vessel is 25 years from the
date the vessel is delivered from the shipyard. Repairs and maintenance are
expensed as incurred.
 
 Impairment of Long-Lived
Assets: Long-lived assets are required to be reviewed for impairment
whenever events or changes in circumstances indicate that the carrying amount of
an asset may not be recoverable.  If the estimated undiscounted future
cash flows expected to result from the use of the asset and its eventual
disposition is less than the carrying amount of the asset, the asset is deemed
impaired.  The amount of the impairment is measured as the difference
between the carrying value and the fair value of the asset. There have been no
impairments recorded for the years ended December 31, 2007, 2006 or
2005.
 
 Drydocking: The Company's
vessels are required to be drydocked approximately every 30 to 60 months
for overhaul repairs and maintenance that cannot be performed while the vessels
are in operation. The Company follows the deferral method of accounting for
drydocking costs whereby actual costs incurred are deferred and are amortized on
a straight-line basis through the expected date of the next drydocking. Ballast
tank improvements are capitalized and amortized on a straight-line basis over a
period of eight years. Major steel improvements are capitalized and amortized on
a straight-line basis over the remaining useful life of the
vessel.  Unamortized drydocking costs of vessels that are sold are
written off to income in the year of the vessel's sale. The capitalized and
unamortized drydocking costs are included in the book value of the vessels.
Amortization expense of the drydocking costs is included in depreciation
expense.
 
 Segment Information:The
Company has identified only one operating segment under Statement of Financial
Accounting Standards (“SFAS”) No. 131 “Segments of an Enterprise and Related
Information.” The Company has only one type of vessel – Suezmax crude oil
tankers – operating on time charter contracts at market related rates, in the
spot market and on long-term bareboat contract.
 
 Geographical
Segment:  The Company currently operates 11 of its 12 vessels
in spot market cooperations with other vessels that are not owned by the
Company. The cooperations are managed by third party commercial managers. The
earnings of all of the vessels are aggregated and divided according to the
relative performance capabilities of the vessel and the actual earning days each
vessel is available. The vessels in the cooperations are operated in the spot
market by the commercial managers. As a significant portion of the Company’s
vessels are operated in cooperations, it is not practical to allocate
geographical data to each vessel nor would it give meaningful information to the
reader.
  F-8
  
 Fair Value of Financial
Instruments: The fair values of cash and cash equivalents, accounts
receivable, accounts payable and accrued liabilities approximate carrying value
because of the short-term nature of these instruments.
 
 Deferred Financing
Costs:  Finance costs, including fees, commissions and legal
expenses, which are recorded as “Other assets” on the balance sheet are deferred
and amortized on a straight-line basis over the term of the relevant debt
borrowings.  Amortization of finance costs is included in “Interest
Expense” in the statement of operations.
 
 Revenue andExpenseRecognition:  Revenue and
expense recognition policies for voyage and time charter agreements are as
follows:
 
 Cooperative agreements:
Revenues and voyage expenses of the vessels operating in cooperative agreements
are combined and the resulting net revenues, calculated on a time charter
equivalent basis, are allocated to the participants according to an agreed
formula. Formulas used to allocate net revenues vary among different cooperative
arrangements, but generally, revenues are allocated to participants on the basis
of the number of days a vessel operates with weighting adjustments made to
reflect each vessels’ differing capacities and performance capabilities. The
administrators of the cooperations are responsible for collecting voyage
revenue, paying voyage expenses and distributing net pool revenues to the
participants.
 
 Based
on the guidance from Emerging Issuance Task Force (“EITF”) No. 99-19, “Reporting
Revenue Gross as a Principal versus Net as an Agent” (“EITF 99-19”), earnings
generated from cooperative agreements in which the Company is the principal of
its vessels’ activities are recorded based on gross method. Earnings generated
from cooperative agreements in which the Company is not regarded as the
principal of its vessels’ activities are recorded per the net
method.
 
 The
Company accounts for the net revenues allocated by these cooperative agreements
as “Voyage Revenue” in its statements of operations.
 
 Spot charters:  Voyage
revenues are recognized on a pro rata basis based on the relative transit time
in each period. Estimated losses on voyages are provided for in full at the time
such losses become evident. A voyage is deemed to commence upon the completion
of discharge of the vessel’s previous cargo and is deemed to end upon the
completion of discharge of the current cargo. Voyage expenses are recognized as
incurred and primarily include only those specific costs which are borne by the
Company in connection with voyage charters which would otherwise have been borne
by the charterer under time charter agreements. These expenses principally
consist of fuel, canal and port charges. Demurrage income represents payments by
the charterer to the vessel owner when loading and discharging time exceed the
stipulated time in the voyage charter. Demurrage income is measured in
accordance with the provisions of the respective charter agreements and the
circumstances under which demurrage claims arise and is recognized on a pro rata
basis over the length of the voyage to which it pertains. At December 31, 2007
and 2006, the Company had no reserves against its due from charterers balance
associated with demurrage revenues.
 
 Bareboat:  Revenues
from bareboat charters are recorded at a fixed charterhire rate per day over the
term of the charter. The charterhire is payable monthly in advance. During the
charter period the charterer is responsible for operating and maintaining the
vessel and bears all costs and expenses with respect to the vessel. Expected
minimum payments to be received under the charter amounts to $ 6,3 mill
annually. The contract is terminating in the fourth quarter of 2009 and subject
to two one-year extensions.
 
 
 Vessel Operating Expenses:
Vessel operating expenses include crewing, repair and maintenance, insurance,
stores, lubricants and communication expenses. These expenses are recognized
when incurred.
 
 Derivative Instruments: The
Company did not hold any derivative instruments at December 31, 2007 or
2006.
  F-9
  
 
 Share-Based Compensation:
Effective December 31, 2005, the Company adopted Statement of Financial
Accounting Standards (“SFAS”) No. 123(R) “Share-Based Payment” (“SFAS 123R”),
using the modified prospective application transition method which requires
measurement of compensation cost for all stock based awards at fair value and
recognition of compensation over the requisite service period for awards
expected to vest. See Note 9 for additional information.
 
 Restricted Shares to Manager:
Restricted shares issued to the Manager are accounted for in accordance with
EITF Issue No. 00-18, "Accounting for Certain Transactions Involving Equity
Instruments Granted to Other Than Employees", which states that the measurement
date for an award that is nonforfeitable and that vests immediately should be
the date the award is issued, even though services have not yet been performed.
Accordingly the compensation expense for each of the respective issuances was
measured at fair value on the date the award was issued, or the grant date, and
expensed immediately as performance was deemed to be complete. The fair value
was determined using the stated par value, the number of shares issued, and the
Company's stock price on the date of grant.
 
 Income
Taxes:The Company is incorporated in
Bermuda. Under current Bermuda law, the Company is not subject to corporate
income taxes.
 
 Other Comprehensive Income
(Loss):   The Company follows the provisions of SFAS No.
130 "Statement of Comprehensive Income” (“SFAS 130”) which requires separate
presentation of certain transactions that are recorded directly as components of
stockholders' equity. The Company has no other comprehensive income / (loss) and
accordingly comprehensive income / (loss) equal net income for the periods
presented.
 
 Concentrations:
 Fair value:  The
Company operates in the shipping industry which historically has been cyclical
with corresponding volatility in profitability and vessel values. Vessel values
are strongly influenced by charter rates which in turn are influenced by the
level and pattern of global economic growth and the world-wide supply and demand
for vessels. The spot market for tankers is highly competitive and charter rates
are subject to significant fluctuations. Dependence on the spot market may
result in lower utilization. Each of the aforementioned factors are important
considerations associated with the Company’s assessment of whether the carrying
amount of its own vessels are recoverable.
 
 Credit risk: Financial
instruments that potentially subject the Company to concentrations of credit
risk consist principally of cash and cash equivalents and accounts receivable.
The fair value of the financial instrument approximates the net book value. The
Company maintains its cash with reputable financial institutions. The terms of
these deposits are on demand to minimize risk. The Company has not experienced
any losses related to these cash deposits and believes it is not exposed to any
significant credit risk.  However, the maximum credit risk the Company
would be exposed to is a total loss of outstanding accounts receivable. See Note
3 for further information.
 
 Accounts
receivable consist of uncollateralized receivables from international customers
engaged in the international shipping industry. The Company routinely assesses
the financial strength of its customers. Accounts receivable are presented net
of allowances for doubtful accounts. If amounts become uncollectible, they will
be charged to operations when that determination is made.  For the
years ended December 31, 2007 and 2006, the Company did not record an allowance
for doubtful accounts.
 
 Interest risk:  The
Company is exposed to interest rate risk for its debt borrowed under the 2005
Credit Facility.  In certain situations, the Company may enter into
financial instruments to reduce the risk associated with fluctuations in
interest rates. The Company has no outstanding derivatives at December 31, 2007
and has not entered into any such arrangements in 2007.
  F-10
  
 Recent Accounting
Pronouncements:  In July 2006, the FASB issued FASB
Interpretation No. 48 “Accounting for Uncertainty in Income Taxes” (“FIN 48”),
which clarifies the criteria that must be met prior to recognition of the
financial statement benefit of a position taken in a tax return. FIN 48 provides
a benefit recognition model with a two-step approach consisting of a
“more-likely-than-not” recognition criteria, and a measurement attribute that
measures the position as the largest amount of tax benefit that is greater than
50% likely of being realized upon ultimate settlement. FIN 48 also requires the
recognition of liabilities created by differences between tax positions taken in
a tax return and amounts recognized in the financial statements. FIN 48 is
effective as of the beginning of the first annual period beginning after
December 15, 2006, which is the year ended December 31, 2007. The adoption
of FIN 48 did not have any impact on the Company’s financial position, results
of operations and cash flows.
 
 In
September 2006, the FASB issued SFAS No. 157, “Fair Value Measurement,” (“SFAS 157”) which defines
fair value, establishes a framework for measuring fair value and expands
disclosures about assets and liabilities measured at fair value. This Statement
does not require any new fair value measurements. SFAS 157 is effective for
financial statements issued for fiscal years beginning after November 15, 2007.
The adoption of SFAS 157 did not have any impact on the Company’s financial
position, results of operations and cash flows.
 
 In
February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for
Financial Assets and Financial Liabilities” (“SFAS 159”). SFAS 159 permits
entities to choose to measure many financial instruments and certain other items
at fair value that are not currently required to be measured at fair value. SFAS
159 also establishes presentation and disclosure requirements designed to
facilitate comparisons between entities that choose different measurement
attributes for similar types of assets and liabilities. SFAS  159 is
effective for fiscal years beginning after November 15, 2007. The adoption of
SFAS 159 did not have any impact on the Company’s financial position, results of
operations and cash flows.
 
  In
December 2007, the FASB issued SFAS No. 141(R) “Business Combinations” (“SFAS
141(R)”), which replaces SFAS No. 141, “Business Combinations”. This statement
establishes principles and requirements for how an acquirer recognizes and
measures in its financial statements the identifiable assets acquired, the
liabilities assumed, any noncontrolling interest in the acquiree and the
goodwill acquired. SFAS 141(R) also establishes disclosure requirements to
enable the evaluation of the nature and financial effects of the business
combination. SFAS 141(R) is effective for fiscal years beginning after December
15, 2008. The Company is currently evaluating the potential impact, if any, of
the adoption of SFAS 141(R) on its financial position, results of operations or
cash flows.
   In
December 2007, the FASB issued SFAS No. 160 “Noncontrolling Interests in
Consolidated Financial Statements, an Amendment of Accounting Research Bulletin
No. 51” (“SFAS 160”). This statement establishes accounting and reporting
standards for ownership interests in subsidiaries held by parties other than the
parent, the amount of consolidated net income attributable to the parent and to
the noncontrolling interest, changes in a parent’s ownership interest, and the
valuation of retained noncontrolling equity investments when a subsidiary is
deconsolidated. SFAS 160 also establishes disclosure requirements that clearly
identify and distinguish between the interests of the parent and the interests
of the noncontrolling owners. SFAS 160 is effective for fiscal years beginning
after December 15, 2008. The Company is currently evaluating the potential
impact, if any, of the adoption of SFAS 160 on its financial position, results
of operations or cash flows.
   In
March 2008, the FASB issued FASB Statement No. 161, “Disclosures about
Derivative Instruments and Hedging Activities”. The new standard is intended to
improve financial reporting about derivative instruments and hedging activities
by requiring enhanced disclosures to enable investors to better understand their
effects on an entity’s financial position, financial performance, and cash
flows. It is effective for financial statements issued for fiscal years and
interim periods beginning after November 15, 2008, with early application
encouraged. The Company is currently evaluating the potential impact, if any, of
the adoption of SFAS 161 on our financial statements.
   F-11
   2.
              RELATED
      PARTY TRANSACTIONS
  Scandic
American Shipping Ltd. (the “Manager”), is owned by a company owned by the
Chairman and Chief Executive Officer (“CEO”) of the Company, Mr. Herbjørn
Hansson, and his family. The Manager, under a management agreement with the
Company (the “Management Agreement”), assumes commercial and operational
responsibility of the Company’s vessels and is required to manage the Company’s
day-to-day business, subject to the objectives and policies as established by
the Board of Directors. For its services under the Management Agreement, the
Manager is entitled to reimbursement of costs directly related to the Company
plus a management fee equal to $225,000 per annum. The Manager also has a right
to ownership of 2% of the Company’s total outstanding shares. During 2007, the
Company issued to the Manager 61,224 shares at an average fair value of $35.13.
The Company recognized $2.2 million, $1.6 million and $1.5 million of total
costs for services provided under the Management Agreement for the years ended
December 31, 2007, 2006, and 2005, respectively. Additionally, the Company
recognized $2.3 million, $6.3 million and $3.6 million in non-cash share-based
compensation expense for the years ended December 31, 2007, 2006 and 2005,
respectively, related to the issuance of shares to the Manager.  All
of these costs are included in “General and Administrative Expenses” within the
statement of operations.  The related party balances included within
accounts payable were $680,501 and $491,081 at December 31, 2007 and 2006,
respectively.
 
 Mr.
Jan Erik Langangen, Executive Vice President of the Manager, is a partner of
Langangen & Helset Advokatfirma AS, a firm which provides legal services to
the Company. The Company recognized $157,265, $97,071, and $77,526 in costs for
the years ended December 31, 2007, 2006 and 2005, respectively, for the services
provided by Langangen & Helset Advokatfirma AS. These costs are included in
“General and Administrative Expenses” within the statement of
operations.  There were no related amounts included within “Accounts
Payable” at December 31, 2007 and December 31, 2006, respectively.
 
 3.
              REVENUE
  For
the twelve months ending December 31, 2007, the Company’s only source of revenue
was from the Company’s 12 vessels.
 
 Revenues
generated from cooperations in which the Company is the principal of its vessels
activities are recorded based on the gross method. Revenues generated from
cooperations in which the Company is not regarded as the principal of its
vessels’ activities are recorded per the net method.
 
 The
table below provides the breakdown of revenues recorded as per the net method
and the gross method.
 
 All
      figures in USD ‘000
              
              2007
              
              
              2006
              
              
              2005Net
      Method
              
              
              65,354
              
              
              
              53,177
              
              
              
              30,116Gross
      Method
              
              
              121,632
              
              
              
              122,343
              
              
              
              86,994Total
      Voyage Revenue
              
              
              186,986
              
              
              
              175,520
              
              
              
              117,110
 
  Five
Customers accounted for 24%, 23%, 16%, 15% and 14%, respectively, for the year
ended December 31, 2007. One customer accounted for 23% and  37% of
the Company’s revenues during the year ended December 31, 2006, and 2005,
respectively.
   F-12
  
 Accounts
receivable as per December 31, 2007 and 2006 are $14.5 million and $13.4
million, respectively. The following is a breakdown of the account:
 
 All
      figures in USD ‘000
              
              2007
              
              
              2006Accounts
      Receivable
              
              
              113
              
              
              
              7,784Accounts
      Receivable  - Technical and Commercial Managers
              
              
              14,376
              
              
              
              5,633Total
      as per December 31,
              
              
              14,489
              
              
              
              13,417
 
 Accounts
receivable are recorded at their expected net realized value.
  Two
cooperations accounted for 45% and 40%, respectively, for the year ended
December 31, 2007 . Five cooperations accounted for  23%, 22%, 21%,
18%, 16% of the accounts receivable balance for the year ended December 31, 2006
respectively.
  
 4.
              PREPAID
      EXPENSES AND OTHER ASSETS
 
 All
      figures in USD ‘000
              
              2007
              
              
              2006Bunkers
      and lubricants - Technical and Commercial Managers
              
              
              6,835
              
              
              
              5,110Other
      current assets - Technical and Commercial Managers
              
              
              580
              
              
              
              3,247Prepaid
      expenses - Technical and Commercial Managers
              
              
              1,046
              
              
              
              1,716Other
              
              
              758
              
              
              
              1,406Total
      as per December 31,
              
              
              9,219
              
              
              
              11,479
 
 5.
              GENERAL
      AND ADMINISTRATIVE EXPENSES
 
 All
      figures in USD ‘000
              
              2007
              
              
              2006
              
              
              2005Management
      fee to related party
              
              
              162
              
              
              
              100
              
              
              
              100Directors
      and officers insurance
              
              
              109
              
              
              
              116
              
              
              
              121Salary
      and wages
              
              
              1,331
              
              
              
              1,022
              
              
              
              635Audit,
      legal and consultants
              
              
              849
              
              
              
              1,171
              
              
              
              679Administrative
      services provided by related party
              
              
              2,162
              
              
              
              1,564
              
              
              
              1,461Other
      fees and expenses
              
              
              1,304
              
              
              
              864
              
              
              
              498Total
      General and Administration expense with cash effect
              
              
              5,917
              
              
              
              4,836
              
              
              
              3,494Compensation
      – restricted shares issued to related party
              
              
              2,289
              
              
              
              6,369
              
              
              
              3,583Share-based
      compensation (2004 Stock Incentive Plan)
              
              
              1,261
              
              
              
              1,545
              
              
              
              1,415Deferred
      compensation plan
              
              
              2,665
              
              
              
              -
              
              
              
              -Total
      General and Administrative expense without cash effect
              
              
              6,215
              
              
              
              7,914
              
              
              
              4,998Total
      as per December 31,
              
              
              12,132
              
              
              
              12,750
              
              
              
              8,492
 
 The
line item Pension Costs is related to the implementation of a deferred
compensation plan for the CEO. See Note 6 for further details of the deferred
compensation plan.
 
 6.
              DEFERRED
      COMPENSATION LIABILITY
 
 In
May 2007, the Board of Directors approved a new unfunded deferred compensation
plan for Herbjorn Hansson, the Chairman, President and CEO. The plan provides
for unfunded deferred compensation computed as a percentage of salary. Benefits
are vested over the period of employment of 11 years up to a maximum of 66% of
the salary level at the time of retirement. Interest is imputed at
4.5%.
  F-13
  The
rights under the plan commenced on October 2004. The total expense recognized in
2007 was $2.7 million, of which $1.8 million relates to retroactive effect.
 As the plan was effective in 2007, the full expense is recognized in 2007.
The deferred compensation liability as of December 2007 was $2.7 million and was
recorded as a non-current liability in the balance sheet. The CEO has served in
his present position since the inception of the Company in 1995.
 
 7.
              VESSELS,
      NET
  Vessels,
net consist of 12 modern double hull Suezmax crude oil tankers and drydocking
charges.  Depreciation is calculated on a straight-line basis over the
estimated useful life of the vessels. The estimated useful life of a new vessel
is 25 years.
 
 
 All
      figures in USD ‘000
              
              Vessels
              
              
              Drydocking
              
              
              TotalNet
      Book Value December 31, 2006
              
              
              749,230
              
              
              
              3,248
              
              
              
              752,478Accumulated
      depreciation December 31, 2006
              
              
              95,655
              
              
              
              741
              
              
              
              96,396Depreciation
      expense 2006
              
              
              28,673
              
              
              
              581
              
              
              
              29,254Net
      Book Value December 31, 2007
              
              
              717,799
              
              
              
              22,832
              
              
              
              740,631Accumulated
      depreciation December 31, 2007
              
              
              135,548
              
              
              
              3,211
              
              
              
              138,759Depreciation
      expense 2007
              
              
              39,893
              
              
              
              2,470
              
              
              
              42,363
 
 8.
              DEPOSIT
      ON CONTRACT
 
 In
November 2007, the Company entered into an agreement to acquire two Suezmax
newbuildings which are expected to be delivered in the fourth quarter of 2009
and by the end of April 2010, respectively. The Company will take ownership of
the vessels upon delivery from the shipyard at which time the title is
transferred from the seller. The vessels will be built by a Chinese shipyard.
The sellers are subsidiaries of First Olsen Ltd. and the agreed all inclusive
price at delivery is $90.0 million per vessel, including  supervision
expenses.
 
 The
Company has agreed to furnish to the sellers a loan equivalent to the remaining
payment installments under the shipbuilding contract. The loan will be paid in
installments on the dates and in amounts corresponding to the payment schedule
under the shipbuilding contract. The debt shall accrue interest at a rate equal
to the Company’s cost of funds at any time. The debt will be repayable on
delivery of the vessels.
 
 As
of December 31, 2007, the Company has paid a deposit of 10% of the purchase
price in the aggregate amount of $18.0 million for both vessels.
 
 The
table below shows total capitalized costs related to the two
newbuildings:
 
 All
      figures in USD ‘000
              
              2007
              
              
              2006Newbuilding
      #1
              
              
              9,152
              
              
              
              -Newbuilding
      #2
              
              
              9,153
              
              
              
              -Total
      as per December 31,
              
              
              18,305
              
              
              
              -
 
 Included
in the balance above is capitalized interest in the aggregate amount of
$305,000.
 
 9.
              SHARE-BASED
      COMPENSATION PLAN
 
 The
Company has a share-based compensation plan which is described
below.  Total compensation cost related the plan in the amount of $1.3
million, $1.5 million and $1.4 million for the years ended December 31, 2007,
2006, and 2005, respectively was recorded within “General and Administrative
expense” in the
  F-14
  statement
of operations.  Unrecognized compensation cost related to the plan was
$1.2 million as of December 31, 2007, which is expected to be recognized over a
weighted-average period of 1,13 years.
 
  2004
Stock Incentive Plan
  Under
the terms of the Company’s 2004 Stock Incentive Plan (the “Plan”), the
directors, officers and certain key employees of the Company and the Manager
will be eligible to receive awards which include incentive stock options,
non-qualified stock options, stock appreciation rights, dividend equivalent
rights, restricted stock, restricted stock units, performance shares and phantom
stock units. The Company believes that such awards better align the interests of
its employees with those of its shareholders. A total of 400,000 common shares
are reserved for issuance upon exercise of options, as restricted share grants
or otherwise under the plan.A total of
330,000 options and 16,700 restricted shares have been issued as of December 31,
2007.  New shares will be issued upon exercise of stock options. In
August 2007, the Board of Directors adopted amendments to the Plan to provide
for the issuance of Phantom Stock Units and to give discretion to the
Administrator of the Plan with respect to dividends paid on common shares
awarded under the Plan. There are no modifications made to the terms of the
Plan.
 
 Stock
option awards were granted with an exercise price equal to the market price of
the Company’s stock at the date of a public offering in November 2004, with
later adjustments for dividends to shareholders exceeding 3% of the initial
stock option exercise price. Stock option awards generally vest equally over
four years from grant date and have a 10-year contractual term.
 
 The
fair value of each option award is estimated on the date of grant using the
Black-Scholes option valuation model that uses the assumptions noted in the
table below. Stock options to non-employees are measured at each reporting
date and fair value is estimated with the same model used for estimating fair
value of the options granted to employees.  Because the option
valuation model incorporates ranges of assumptions for inputs, those ranges are
disclosed. Expected volatilities are based on implied volatilities from
historical volatility of the Company’s stock and other factors. Expected life of
the options is estimated to be equal to the vesting period for employees when
calculating the fair value of the options. When calculating the fair value of
the options issued to non-employees the expected life is equal to the actual
life of options. The Company recognizes the compensation cost for stock options
issued to non-employees over the service period, which is considered to be equal
to the vesting period. All options issued are expected to be
exercised.
 
 Stock
options to employees are measured at fair value at the grant date and the
compensation cost is recognized on a straight-line basis over the vesting
period. The assumptions used when estimating the fair value at grant date are
specified in the table below.
 
 Stock
options to non-employees are treated in accordance with EITF 96-18
and unvested options are measured at fair value at each balance sheet date
with a final measurement date upon vesting. Fair value measurement of unvested
options is considered to be appropriate due to that the performance commitment
for non-employees has not been reached for unvested options. The fair value of
the options is used to measure the value of the services provided by the
non-employees as it is considered to be more reliable than measuring the fair
value of the services received. The compensation cost is recognized using the
accelerated method. The assumptions used are specified separately in the table
below.
 
 The
assumptions used are specified separately in the table below.
 
 The
risk-free rate for periods within the contractual life of the stock options is
based on the U.S. Treasury yield curve in effect at the time of grant for
options to employees. The risk-free rate at year-end is used for stock options
issued to non-employees.
  F-15
  
 December
      31, 2007Weighted
      average figures
              
              Employees
              
              
              Non-employeesExpected
      volatility
              
              
              40.90
              %
              
              
              31.84
              %Expected
      dividends
              
              
              3.0
              %
              
              
              3.0
              %Expected
      life
              
              
              3.81
              
              
              
              7.27Risk-free
      rate (range)
              
              
              3.25
      % - 4.43
              %
              
              
              3.60
      – 3.80
              %
 
 A
summary of option activity under the Plan as of December 31, 2007, and changes
during the year then ended is presented below:
 
 
 Options
              
              Options
                employees
              
              
              Options
                non-employees
              
              
              Weighted-average
      exercise priceOutstanding
      at January 1, 2007
              
              
              240,000
              
              
              
              80,000
              
              
              $
              31.01Granted
              
              
              10,000
              
              
              
              -
              
              
              $
              33.92Exercised
              
              
              -
              
              
              
              -
              
              
              
              -Forfeited
      or expired
              
              
              -
              
              
              
              -
              
              
              
              -Outstanding
      at December 31, 2007
              
              
              250,000
              
              
              
              80,000
              
              
              $
              28.54Exercisable
      at December 31, 2007
              
              
              175,000
              
              
              
              52,500
              
              
              $
              28.37
 
 Outstanding
and exercisable stock options as at December 31, 2007 have a weighted-average
remaining term of 7.21 years for employees and 7.32 for non-employees. The
exercise price for outstanding stock options as at December 31, 2007 is in the
range of $28.37 – $33.92.  The intrinsic value of options outstanding
at December 31, 2007 was $1,424,000 and the intrinsic value of exercisable
options was $1,012,375.
 
 Options
                -Employees
              
              
              Weighted-average
      grant-date fair value
                -
      Employees
              
              
              Options
                -
                Non-employees
              
              
              Weighted-average
      grant-date fair value
                -
      Non-employeesNon-vested
      at January 1, 2005
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -Granted
      during the year
              
              
              240,000
              
              
              $
              18.44
              
              
              
              80,000
              
              
              $
              22.93Vested
      during the year
              
              
              (55,000
              )
              
              $
              18.65
              
              
              
              (12,500
              )
              
              $
              29,29Forfeited
      during the year
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -Estimated
      forfeitures unvested options
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -Non-vested
      at December 31, 2005
              
              
              185,000
              
              
              $
              18.38
              
              
              
              67,500
              
              
              $
              21.75
 
 
 Options
      –Employees
              
              
              Weighted-average
      grant-date fair value
                -
      Employees
              
              
              Options
                -
                Non-employees
              
              
              Weighted-average
      grant-date fair value
                -
      Non-employeesNon-vested
      at January 1, 2006
              
              
              185,000
              
              
              $
              18.38
              
              
              
              67,500
              
              
              $
              21.75Granted
      during the year
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -Vested
      during the year
              
              
              (60,000
              )
              
              $
              17.84
              
              
              
              (20,000
              )
              
              $
              22.93Forfeited
      during the year
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -Estimated
      forfeitures unvested options
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -Non-vested
      at December 31, 2006
              
              
              125,000
              
              
              $
              18.64
              
              
              
              47,500
              
              
              $
              21.25
 
  F-16
  
 
 Options
                -Employees
              
              
              Weighted-average
      grant-date fair value
                -
      Employees
              
              
              Options
                -
                Non-employees
              
              
              Weighted-average
      grant-date fair value
                -
      Non-employeesNon-vested
      at January 1, 2007
              
              
              125,000
              
              
              $
              18.64
              
              
              
              47,500
              
              
              $
              21.25Granted
      during the year
              
              
              10,000
              
              
              $
              7.00
              
              
              
              -
              
              
              
              -Vested
      during the year
              
              
              (60,000
              )
              
              $
              17.84
              
              
              
              (20,000
              )
              
              $
              22.93Forfeited
      during the year
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -Estimated
      forfeitures unvested options
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -Non-vested
      at December 31, 2007
              
              
              75,000
              
              
              $
              17.73
              
              
              
              27,500
              
              
              $
              20.03
 
 The
total fair value of shares vested during the years ended December 31, 2007, 2006
and 2005 was $1.2million,  $1.3million and $1.1million,
respectively
 
 Specification
of the aggregate compensation cost related to the 2004 Stock Incentive Plan
recognized in the profit and loss account is disclosed in note 5. Unrecognized
compensation cost related to the Plan is $1,221,896 as at December 31, 2007.
That cost is expected to be recognized over a weighted-average period of 1.13
years. There have been no exercise or any payments related to the stock option
plan during the financial period 2005 - 2007 and hence no related cash flow
effects.
 
 There
is no material income tax benefit for stock-based compensation due to the
Company’s tax structure.
 
 Restricted
Shares to Employees and Non-Employees
  Under
the terms of the Company’s 2004 Stock Incentive Plan 16,700 shares of restricted
stock awards were granted to certain employees and non-employees during 2006.
The restricted shares were granted on May 12, 2006 (approved by the Board) at a
grant date fair value of $31.99 per share.
 
 The
fair value of restricted shares is estimated based on the market price of the
Company’s share. The fair value of restricted shares granted to employees is
measured at grant date and the fair value of unvested restricted shares granted
to non-employees is measured at fair value at each reporting date. See further
comments above related to measurement of options and restricted shares issued to
non-employees.
 
 The
shares are considered restricted as the holders of the shares cannot dispose of
them for a period of up to four years from issuance and the restricted shares
vest in yearly installments during this period. The holders of the restricted
shares do have ordinary shareholder rights in this period and the holder is
entitled to declared dividends in the period and has voting rights.
 
 The
restricted shares vest in four equal amounts in May 2007, May 2008, May 2009 and
May 2010. There were 9,700 restricted shares granted to employees and 7,000
restricted shares granted to non-employees in 2006. 2,425 restricted shares to
employees and 1,750 restricted shares to non-employees vested in
2007.
 
 The
compensation cost for employees and non-employees are recognized on a
straight-line basis over the vesting period. The total compensation cost in 2007
related to restricted shares was $ 60,618. The intrinsic value of outstanding
and vested restricted shares at December 31,2007 was $ 548,094 and $ 137,024,
respectively.
 
 At
December 31, 2007, there were 16,700 restricted shares outstanding at a
weighted-average grant date fair value of $31.99 for employees and $31.99 for
non-employees. As of December 31, 2007, unrecognized compensation cost related
to unvested restricted stock aggregated $333,466 ($467,017 per December 31
2006), which will be recognized over a weighted average period of 2.4
years.
 
 Specification
of the aggregate compensation cost related to the 2004 Stock Incentive Plan
recognized in the profit and loss account is disclosed in note
5.
  F-17
  
 The
table below summarizes the Company’s restricted stock awards as of December 31,
2007:
 
 Restricted
      shares -Employees
              
              
              Weighted-average
      grant-date fair value
                -
      Employees
              
              
              Restricted
      shares
                -
      Non-employees
              
              
              Weighted-average
      grant-date fair value
                -
      Non-employeesNon-vested
      at January 1, 2007
              
              
              9,700
              
              
              $
              31.99
              
              
              
              7,000
              
              
              $
              31.99Granted
      during the year
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -Vested
      during the year
              
              
              2,425
              
              
              
              -
              
              
              
              1,750
              
              
              
              -Forfeited
      during the year
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -Non-vested
      at December 31, 2007
              
              
              7,275
              
              
              $
              31.99
              
              
              
              5,250
              
              
              $
              31.99
 
 10.
              LONG-TERM
      DEBT
  In
September 2005, the Company entered into a $300 million revolving credit
facility, which is referred to as the 2005 Credit Facility. The 2005 Credit
Facility provides funding for future vessel acquisitions and general corporate
purposes. The 2005 Credit Facility cannot be reduced by the lender and there is
no repayment obligation of the principal during the five year term with maturity
that was scheduled for September 2010. Amounts borrowed under the 2005 Credit
Facility bear interest at an annual rate equal to LIBOR plus a margin between
0.70% and 1.20% (depending on the loan to vessel value ratio). The Company pays
a commitment fee of 30% of the applicable margin on any undrawn
amounts.  Total commitment fees paid for the year ended December 31,
2007 and December 31, 2006 were $0.8 million and $0.7 million,
respectively.
 
 In
September 2006, the Company increased the 2005 Credit Facility to $500
million.  The other terms of the 2005 Credit Facility were not
amended. The undrawn amount of this facility as of December 31, 2007 and 2006
was $394.5 million and $ 326.5 million, respectively.
 
 Borrowings
under the 2005 Credit Facility are secured by first priority mortgages over the
Company’s vessels and assignment of earnings and insurance. The Company is
permitted to pay dividends in accordance with its dividend policy as long as it
is not in default under the 2005 Credit Facility.
 
 As
at December 31, 2007, accrued interest was $0.6 million which was paid during
the first quarter of 2008.
 
 The
Company was in compliance with its restrictive covenants for the year ended
December 31, 2007.
 
  11.
              INTEREST
      EXPENSE
  Interest
expense consists of interest expense on the long-term debt, the commitment fee
and amortization of the deferred financing costs related to the 2005 Credit
Facility. The $105.5 million drawn on the facility bears interest equal to LIBOR
plus a margin between 0.7% and 1.2%.  The deferred financing costs
incurred in connection with the refinancing of the previous credit facility are
deferred and amortized over the term of the 2005 Credit Facility on a
straight-line basis. The amortization of deferred financing costs for the years
ended December 2007, 2006 and 2005 was $0.5 million, $0.4 million and $0.7
million, respectively. Total capitalized deferred financing costs were $1.4
million and $1.9 million at December 31, 2007 and 2006,
respectively.
 
 12.
              DEFERRED
      REVENUE
  Deferred
revenue as at December 31, 2007 in the amount of $0.5 million represents prepaid
freight received from one of our customers prior to December 31, 2007 for
services to be rendered during January 2008.
  F-18
  
 13.
              ACCRUED
      LIABILITIES
 
 All
      figures in USD ‘000
              
              2007
              
              
              2006Accrued
      Interest
              
              
              572
              
              
              
              1,003Accrued
      Expenses - Technical and Commercial Managers
              
              
              12,179
              
              
              
              9,862Other
      Current Liabilities
              
              
              3,780
              
              
              
              326Total
      as per December 31,
              
              
              16,531
              
              
              
              11,191
 
 14.
              EARNING
      PER SHARE
 
 Basic
earnings per share (“EPS”) is computed by dividing net income by the weighted
average number of common shares outstanding for the period. Diluted EPS is
computed by dividing net income by the weighted average number of common shares
and dilutive common stock equivalents (i.e. stock options, warrants) outstanding
during the period.
 
 
 All
      figures in USD
              
              2007
              
              
              2006
              
              
              2005Numerator:Net
      Income
              
              
              44,205,635
              
              
              
              67,393,423
              
              
              
              46,317,742Denominator:Basic
      - Weighted Average Common Shares Outstanding
              
              
              28,252,472
              
              
              
              21,476,196
              
              
              
              15,263,622Dilutive
      Effect of Stock Options *
              
              
              42,525
              
              
              
              -
              
              
              
              -Dilutive
      – Weighted Average Common Shares Outstanding
              
              
              28,294,997
              
              
              
              21,476,196
              
              
              
              15,263,622Income
      per Common Share:Basic
              
              
              1.56
              
              
              
              3.14
              
              
              
              3.03Diluted
              
              
              1.56
              
              
              
              3.14
              
              
              
              3.03
 
 *
For 2006 and 2005 the Company’s average stock price was above the average
exercise price of the option and a dilutive effect on EPS could potentially
arise. However, the proceeds of an exercise of all outstanding options
calculated as per the Treasury Stock Method would exceed the costs of acquiring
stocks at the average stock price. The potential effect of the outstanding
options is therefore anti-dilutive and is not included in the calculation of
diluted earnings per share.  The average number of potentially
dilutive options was 320,000 for the year ended December 31, 2006, and 295,000
for the year ended December 31, 2005, respectively.
  F-19
  
 15.
              SHAREHOLDERS’
      EQUITY
 
 Authorized,
and issued and outstanding common shares roll-forward is as
follows:
 
 Authorized
      Shares
              
              
              Issued
      and Out-standing SharesBalance
      at December 31, 2004
              
              
              51,200,000
              
              
              
              13,067,838Issuance
      of Common Shares in Follow-on Offering
              
              
              
              
              
              
              3,500,000Share-based
      Compensation
              
              
              
              
              
              
              76,658Balance
      at December 31, 2005
              
              
              51,200,000
              
              
              
              16,644,496Issuance
      of Common Shares in Follow-on Offering
              
              
              
              
              
              
              4,297,500Share-based
      Compensation
              
              
              
              
              
              
              87,704Issuance
      of Common Shares in Follow-on Offering
              
              
              
              
              
              
              5,750,000Share-based
      Compensation
              
              
              
              
              
              
              117,347Restricted
      Shares
              
              
              
              
              
              
              16,700Share-based
      Compensation
              
              
              
              
              
              
              341Balance
      at December 31, 2006
              
              
              51,200,000
              
              
              
              26,914,088Issuance
      of Common Shares in Block Trade transaction
              
              
              
              
              
              
              3,000,000Share-based
      Compensation
              
              
              
              
              
              
              61,224Balance
      at December 31, 2007
              
              
              51,200,000
              
              
              
              29,975,312
 
 In
July 2007, the Company completed an underwritten public offering of 3,000,000
common shares.  The net proceeds of the offering were $119.8 million which
were used to repay indebtedness under the Company's revolving credit facility
and to prepare the Company for further expansion.
 
 The
total issued and outstanding shares as of December 31, 2007 were 29,975,312
shares of which 343,274 shares were restricted to the Manager and 12,525
shares were restricted to employees and non-employees as described in Note
9.  The total issued and outstanding shares as of December 31, 2006
was 26,914,088 shares of which 538,282 shares were restricted as described in
Note 9.
 
 16.
              COMMITMENTS
      AND CONTINGENCIES
 
 The
Company may be a party to various legal proceedings generally incidental to its
business and is subject to a variety of environmental and pollution control laws
and regulations. As is the case with other companies in similar industries, the
Company faces exposure from actual or potential claims and legal proceedings.
Although the ultimate disposition of legal proceedings cannot be predicted with
certainty, it is the opinion of the Company’s management that the outcome of any
claim which might be pending or threatened, either individually or on a combined
basis, will not have a materially adverse effect on the financial position of
the Company, but could materially affect the Company’s results of operations in
a given year.
 
 No
claims have been made against the Company for the fiscal year 2007 or 2006. The
Company is not a party to any legal proceedings for the year ended December 31,
2007 and December 31, 2006, respectively.
 
 At
December 31, 2007, the Company had payment obligations totalling $162.0 million
in connection with the agreement to acquire two newbuildings entered into in
November 2007. The payments due in 2008, 2009 and 2010 are $7.4 million, $103.1
million and $51.5 million, respectively.  Please see Note 8 for
further information.
 
  F-20
  
 17.
              SUBSEQUENT
      EVENTS
 
  In
February 2008, the Company declared a dividend of $0.50 per share in respect of
the fourth quarter of 2007 which was paid to shareholders in March
2008.
 
 In
April 2008, the Company extended the tenure of the 2005 Credit Facility to 2013.
All other terms are unchanged. The Company paid a fee in the amount of $2.1
million for the extension of the tenure from 2010 to 2013. This
amount  will be amortized over the new term of the
facility.
 
 In
May 2008, the Company declared a dividend of  $1.18 per share in
respect of the first quarter of 2008 which will be paid to shareholders in June
2008.
 
  *
* * * *


F-21





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 annual report on its behalf.











NORDIC
      AMERICAN TANKER SHIPPING LIMITEDBy:
            /s/ Herbjørn
      HanssonName:
            Herbjørn
      HanssonTitle:
            Chairman, Chief
      Executive Officer and President






















DATED:  May
9, 2008














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