UNITED
      STATESSECURITIES
      AND EXCHANGE COMMISSIONWASHINGTON,
      DC 20549FORM
      20-F[_]
            REGISTRATION
      STATEMENT PURSUANT TO SECTION 12(b) OR 12(g) OF THESECURITIES
      EXCHANGE ACT OF 1934OR[X]
            ANNUAL
      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
      EXCHANGEACT
      OF 1934For
      the fiscal year ended December 31, 2009OR[_]
            TRANSITION
      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIESEXCHANGE
      ACT OF 1934For
      the transition period from ____ to ____OR[_]
            SHELL
      COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
      SECURITIESEXCHANGE
      ACT OF 1934Date
      of event requiring this shell company report: Not
    applicableCommission
      file number 001-13944NORDIC
      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 valueSeries
      A Participating Preferred StockTitle
      of classNew
      York Stock ExchangeName
      of exchange on which registeredSecurities
      registered or to be registered pursuant to Section 12(g) of the
      Act:  NoneSecurities
      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, 2009, there were 42,204,904 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


Note –
Checking the box above will not relieve any registrant required to file reports
pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 from
their obligations under those Sections.





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 has submitted electronically and posted on
its corporate website, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T during this
preceding 12 months (or for such shorter period that the registrant was required
to submit and post such files)





[_]
      Yes
            [_]
      No


Indicate
by check mark whether the Registrant is a large accelerated filer, an
accelerated filer, or a non-accelerated filer.  See the definitions of
"accelerated filer" and "large accelerated filer"  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)  [_]











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

















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.





TABLE
OF CONTENTS




PageCAUTIONARY
      STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
            IVITEM
      1.
            IDENTITY
      OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS
            3ITEM
      2.
            OFFER
      STATISTICS AND EXPECTED TIMETABLE
            3ITEM
      3.
            KEY
      INFORMATION
            3A.
            Selected
      Financial Data
            3B.
            Capitalization
      And Indebtedness
            5C.
            Reasons
      For The Offer And Use Of Proceeds
            5D.
            Risk
      Factors
            5ITEM
      4.
            INFORMATION
      ON THE COMPANY
            19A.
            History
      And Development Of The Company
            19B.
            Business
      Overview
            20 C.
            ORGANIZATIONAL
      STRUCTURE
            32D.
            PROPERTY,
      PLANT AND EQUIPMENT
            32ITEM
      4A.
            UNRESOLVED
      STAFF COMMENTS
            32ITEM
      5
            OPERATING
      AND FINANCIAL REVIEW AND PROSPECTS
            33A.
            Operating
      Results
            33B.
            Liquidity
      and Capital Resources
            35C.
            Research
      and Development, Patents and Licenses, Etc.
            36D.
            Trend
      Information
            36E.
            Off
      Balance Sheet Arrangements
            37F.
            TABULAR
      Disclosure Of Contractual Obligations
            37ITEM
      6
            DIRECTORS,
      SENIOR MANAGEMENT AND EMPLOYEES
            39A.
            Directors
      And Senior Management
            39B.
            Compensation
            42C.
            Board
      Practices
            43D.
            Employees
            44E.
            Share
      Ownership
            44ITEM
      7.
            MAJOR
      SHAREHOLDERS AND RELATED PARTY TRANSACTIONS
            44A.
            Major
      Shareholders
            44B.
            Related
      Party Transactions
            44C.
            Interests
      Of Experts And Counsel
            45ITEM
      8.
            FINANCIAL
      INFORMATION
            45A.
            Consolidated
      Statements And Other Financial Information
            45B.
            Significant
      Changes
            45ITEM
      9.
            THE
      OFFER AND LISTING
            46ITEM
      10.
            ADDITIONAL
      INFORMATION
            46A.
            Share
      Capital
            46B.
            Memorandum
      And Articles Of Association
            47C.
            Material
      Contracts
            48D.
            Exchange
      Controls
            49E.
            Taxation
            49F.
            Dividends
      And Paying Agents
            57G.
            Statement
      By Experts
            57H.
            Documents
      On Display
            57I.
            Subsidiary
      Information
            57ITEM
      11.
            QUANTITATIVE
      AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
            57ITEM
      12.
            DESCRIPTION
      OF SECURITIES OTHER THAN EQUITY SECURITIES
            58ITEM
      13.
            DEFAULTS,
      DIVIDEND ARREARAGES AND DELINQUENCIES
            58ITEM
      14.
            MATERIAL
      MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF
      PROCEEDS
            58ITEM
      15.
            CONTROLS
      AND PROCEDURES
            58A.
            Disclosure
      Controls And Procedures.
            58B.
            Management's
      annual report on internal control over financial
reporting.
            59C.
            Attestation
      report of the registered public accounting firm.
            59D.
            Changes
      in internal control over financial reporting.
            59ITEM
      16.
            RESERVED.
            59ITEM
      16A.
            AUDIT
      COMMITTEE FINANCIAL EXPERT
            59ITEM
      16B.
            CODE
      OF ETHICS.
            59ITEM
      16C.
            PRINCIPAL
      ACCOUNTANT FEES AND SERVICES.
            59A.
            Audit
      Fees
            60B.
            Audit-Related
      Fees (1)
            60C.
            Tax
      Fees
            60D.
            All
      Other Fees
            60E.
            Audit
      Committee's Pre-Approval Policies and Procedures
            60F.
            Not
      applicable.
            60ITEM
      16D.
            EXEMPTIONS
      FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES
            60ITEM
      16E.
            PURCHASES
      OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PERSONS.
            60ITEM
      16G.
            CORPORATE
      GOVERNANCE
            60ITEM
      17.
            FINANCIAL
      STATEMENTS
            61ITEM
      18.
            FINANCIAL
      STATEMENTS
            61ITEM
      19.
            EXHIBITS
            61




1










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,
2009, 2008 and 2007 and selected balance sheet data as of December 31, 2009 and
2008 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, 2006 and 2005 and selected balance sheet data for each of the years
ended December 31, 2007, 2006 and 2005 are derived from our audited financial
statements not included in this Annual Report on Form 20- F.




2





SELECTED
      FINANCIAL DATA  All
      figures in thousands of USD except share data
              
              2009
              
              
              2008
              
              
              2007
              
              
              2006
              
              
              2005Voyage
      revenue
              
              
              124,370
              
              
              
              228,000
              
              
              
              186,986
              
              
              
              175,520
              
              
              
              117,110Voyage
      expenses
              
              
              (8,959
              )
              
              
              (10,051
              )
              
              
              (47,122
              )
              
              
              (40,172
              )
              
              
              (30,981
              )Vessel
      operating expense –
                excl.
      depreciation expense presented below
              
              
              (43,139
              )
              
              
              (35,593
              )
              
              
              (32,124
              )
              
              
              (21,102
              )
              
              
              (11,221
              )General
      and administrative expenses
              
              
              (14,819
              )
              
              
              (12,785
              )
              
              
              (12,132
              )
              
              
              (12,750
              )
              
              
              (8,492
              )Depreciation
              
              
              (55,035
              )
              
              
              (48,284
              )
              
              
              (42,363
              )
              
              
              (29,254
              )
              
              
              (17,529
              )Net
      operating income
              
              
              2,418
              
              
              
              121,288
              
              
              
              53,245
              
              
              
              72,242
              
              
              
              48,887Interest
      income
              
              
              614
              
              
              
              931
              
              
              
              904
              
              
              
              1,602
              
              
              
              850Interest
      expense
              
              
              (1,794
              )
              
              
              (3,392
              )
              
              
              (9,683
              )
              
              
              (6,339
              )
              
              
              (3,454
              )Other
      financial (expense) income
              
              
              (226
              )
              
              
              17
              
              
              
              (260
              )
              
              
              (112
              )
              
              
              34Total
      other expenses
              
              
              (1,406
              )
              
              
              (2,443
              )
              
              
              (9,039
              )
              
              
              (4,849
              )
              
              
              (2,570
              )Net
      income
              
              
              1,012
              
              
              
              118,844
              
              
              
              44,206
              
              
              
              67,393
              
              
              
              46,317Basic
      earnings per share
              
              
              0.03
              
              
              
              3.63
              
              
              
              1.56
              
              
              
              3.14
              
              
              
              3.03Diluted
      earnings per share
              
              
              0.03
              
              
              
              3.62
              
              
              
              1.56
              
              
              
              3.14
              
              
              
              3.03Cash
      dividends declared per share
              
              
              2.35
              
              
              
              4.89
              
              
              
              3.81
              
              
              
              5.85
              
              
              
              4.21Basic
      weighted average shares outstanding
              
              
              40,449,522
              
              
              
              32,739,057
              
              
              
              28,252,472
              
              
              
              21,476,196
              
              
              
              15,263,622Diluted
      weighted average shares outstanding
              
              
              40,449,522
              
              
              
              32,832,854
              
              
              
              28,294,997
              
              
              
              21,476,196
              
              
              
              15,263,622Other
      financial data:Net
      cash from operating activities
              
              
              63,195
              
              
              
              127,900
              
              
              
              83,649
              
              
              
              106,613
              
              
              
              51,056Dividends
      paid
              
              
              95,431
              
              
              
              165,886
              
              
              
              107,349
              
              
              
              122,590
              
              
              
              64,279Selected
      Balance Sheet Data (at period end):Cash
      and cash equivalents
              
              
              30,496
              
              
              
              31,378
              
              
              
              13,342
              
              
              
              11,729
              
              
              
              14,240Total
      assets
              
              
              946,578
              
              
              
              813,878
              
              
              
              804,628
              
              
              
              800,180
              
              
              
              505,844Total
      debt
              
              
              -
              
              
              
              15,000
              
              
              
              105,500
              
              
              
              173,500
              
              
              
              130,000Common
      stock
              
              
              422
              
              
              
              344
              
              
              
              300
              
              
              
              269
              
              
              
              166Total
      shareholders' equity
              
              
              934,084
              
              
              
              788,586
              
              
              
              672,105
              
              
              
              611,946
              
              
              
              370,872





3


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.




The
tanker industry is both cyclical and volatile in terms of charter rates and
profitability.  The current global financial crisis may adversely
affect 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 14
vessels currently operating in the spot market, or any renewal or replacement
charters. 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,
  ·
                            competition
      from alternative sources of energy;
and
 ·
                                  international
      sanctions, embargoes, import and export restrictions, nationalizations and
      wars.


The
factors that influence the supply of tanker capacity include:


·
                  the
      number of newbuilding deliveries,
  ·
                      the
      scrapping rate of older vessels,


4




·
                  conversion
      of tankers to other uses,
 ·
                        the
      price of steel;
 ·
                              the
      number of vessels that are out of service,
and
 ·
                                    environmental
      concerns and regulations.


Historically,
the tanker markets have been volatile as a result of the many conditions and
factors that can affect the price, supply and demand for tanker capacity. The
current global economic crisis may reduce demand for transportation of oil over
longer distances and supply of tankers to carry that oil, which may materially
affect our revenues, profitability and cash flows. As of December 31, 2009
fourteen of our sixteen operating vessels were operated in the spot market, of
which eight vessels were under a cooperative agreement with Frontline Ltd.
(NYSE:FRO) and six vessels were operated under a cooperative agreement with
Stena Bulk AB of Sweden. During 2010, it is expected that all our vessels will
be in the cooperation, Gemini Tankers LLC, where Frontline Ltd. and Teekay
Corporation are main members.  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. The
current recession affecting 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
are 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 16 vessels and have agreed to acquire four
newbuilding vessels. Two newbuilding vessels are expected to be delivered to us
in 2010, and two newbuilding vessels are expected to be delivered to us in 2011.
One of our vessels is on a long-term fixed-rate charter, one is employed under
an approximate two-month contract before being employed in the spot market and
the other 14 operating vessels are employed in the spot market. Given that the
vast majority of our fleet is employed in the spot market, we are highly
dependent on spot market charter rates.




We intend
to operate our newbuilding vessels in the spot market following their delivery
to us and 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.




5





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.




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




Our
vessels are evaluated for impairment annually or whenever events or changes in
circumstances indicate that the carrying amount of a vessel may not be
recoverable. The review for potential impairment indicators and projection of
future cash flows related to the vessel is complex and requires us to make
various estimates, including future freight rates and earnings from the
vessel.  All of these items have been historically volatile. We
evaluate the recoverable amount as the undiscounted estimated cash flow from the
vessels over their remaining useful lives. If the recoverable amount is less
than the carrying amount of the vessel and less than the estimated fair market
value, the vessel is deemed impaired. The carrying values of our vessels may not
represent their fair market value at any point in time because the new market
prices of second-hand vessels tend to fluctuate with changes in charter rates
and the cost of newbuildings. Any impairment charges incurred as a result of
declines in charter rates could negatively affect our business, financial
condition, operating results or the trading price of our common
shares.




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. If the supply of tanker capacity increases and if
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.




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





Acts of
piracy have historically affected ocean-going vessels trading in regions of the
world such as the South China Sea and in the Gulf of Aden off the coast of
Somalia. Throughout 2008 and 2009, the frequency of piracy incidents against
commercial shipping vessels has increased significantly, particularly in the
Gulf of Aden off the coast of Somalia. For example, in November 2008, the M/V
Sirius Star, a tanker
vessel not affiliated with us, was captured by pirates in the Indian Ocean while
carrying crude oil estimated to be worth $100 million. If these pirate attacks
result in regions in which our vessels are deployed being characterized as "war
risk" zones by insurers, as the Gulf of Aden temporarily was in May 2008,
premiums payable for such coverage could increase significantly and such
insurance coverage may be more difficult to obtain. In addition, crew costs,
including due to employing onboard security guards, could increase in such
circumstances. We may not be adequately insured to cover losses from these
incidents, which could have a material adverse effect on us. In addition, any of
these events may result in loss of revenues, increased costs and decreased cash
flows to our customers, which could impair their ability to make payments to us
under our charters.






6


Changes
in the economic and political environment in China and policies adopted by the
government to regulate its economy may have a material adverse effect on our
business, financial condition and results of operations.
 
 The
Chinese economy differs from the economies of most countries belonging to the
Organization for Economic Cooperation and Development, or OECD, in such respects
as structure, government involvement, level of development, growth rate, capital
reinvestment, allocation of resources, rate of inflation and balance of payments
position.  Prior to 1978, the Chinese economy was a planned
economy.  Since 1978, increasing emphasis has been placed on the
utilization of market forces in the development of the Chinese
economy.  Annual and five-year plans, or State Plans, are adopted by
the Chinese government in connection with the development of the
economy.  Although state-owned enterprises still account for a
substantial portion of the Chinese industrial output, in general, the Chinesegovernment is reducing the level of direct control that it exercises over
the economy through State Plans and other measures.  There is an
increasing level of freedom and autonomy in areas such as allocation of
resources, production, pricing and management and a gradual shift in emphasis to
a "market economy" and enterprise reform.  Limited price reforms were
undertaken, with the result that prices for certain commodities are principally
determined by market forces.  Many of the reforms are unprecedented or
experimental and may be subject to revision, change or abolition based upon the
outcome of such experiments.  If the Chinese government does not
continue to pursue a policy of economic reform the level of imports to and
exports from China could be adversely affected by changes to these economic
reforms by the Chinese government, as well as by changes in political, economic
and social conditions or other relevant policies of the Chinese government, such
as changes in laws, regulations or export and import restrictions, all of which
could adversely affect our business, operating results and financial
condition.




If the contraction of the global
credit markets and the resulting volatility in the financial markets continues
or worsens, that could have a material adverse impact on our results of
operations, financial condition and cash flows, and could cause the market price
of our common shares to decline.





Recently,
a number of major financial institutions have experienced serious financial
difficulties and, in some cases, have entered into bankruptcy proceedings or are
in regulatory enforcement actions. These difficulties have resulted, in part,
from declining markets for assets held by such institutions, particularly the
reduction in the value of their mortgage and asset-backed securities portfolios.
These difficulties have been compounded by a general decline in the willingness
by banks and other financial institutions to extend credit, particularly in the
shipping industry. As the shipping industry is highly dependent on the
availability of credit to finance and expand operations, it has been negatively
affected by this decline. In addition, these difficulties may adversely affect
the financial institutions that provide us with our $500 million revolving
credit facility, or the Credit Facility, and may impair their ability to
continue to perform under their financing obligations to us, which could
negatively impact our ability to fund current and future obligations, including
our ability to take delivery of our two newbuildings.





If
further emergency governmental measures are implemented in response to the
economic downturn, that could have a material adverse impact on our results of
operations, financial condition and cash flows.





Over the
last year, global financial markets have experienced extraordinary disruption
and volatility following adverse changes in the global credit markets. The
credit markets in the United States have experienced significant contraction,
deleveraging and reduced liquidity, and governments around the world have taken
highly significant measures in response to such events, including the enactment
of the Emergency Economic Stabilization Act of 2008 in the United States, and
may implement other significant responses in the future. Securities and futures
markets and the credit markets are subject to comprehensive statutes,
regulations and other requirements. The U.S. Securities and Exchange Commission,
or the SEC, other regulators, self-regulatory organizations and exchanges have
enacted temporary emergency regulations and may take other extraordinary actions
in the event of market emergencies and may effect permanent changes in law or
interpretations of existing laws. We cannot predict what, if any, such measures
would be, but changes to securities, tax, environmental, or the laws of
regulations, could have a material adverse effect on our results of operations,
financial condition or cash flows.





Changes
in the price of fuel, or bunkers, may adversely affect our profits.




Fuel, or
bunkers, is a significant, if not the largest, expense in our shipping
operations.  Changes in the price of fuel may adversely affect our
profitability.  The price and supply of fuel is unpredictable and
fluctuates based on events outside our control, including geopolitical
developments, supply and demand for oil and gas, actions by the Organization of
Petroleum Exporting Countries (OPEC) and other oil and gas producers, war and
unrest in oil producing countries and regions, regional production patterns and
environmental concerns.  Further, fuel may become much more expensive
in the future, which may reduce the profitability and competitiveness of our
business versus other forms of transportation, such as truck or
rail.


7





We
are subject to complex laws and regulations, including environmental laws and
regulations, which 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
Maritime Organization, or IMO, International Convention on Civil Liability for
Oil Pollution Damage of 1969 (as from time to time amended and generally
referred to as CLC), the IMO International Convention for the Prevention of
Pollution from Ships of 1973 (as from time to time amended and generally
referred to as MARPOL), the IMO International Convention for the Safety of Life
at Sea of 1974 (as from time to time amended and generally referred to as
SOLAS), the IMO International Convention on Load Lines of 1966 (as from time to
time amended) and the U.S. Maritime Transportation Security Act of 2002.
Compliance with such laws, 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, including
greenhouse gases, 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-nautical 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 international and U.S. 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.




Climate change and greenhouse gas
restrictions may adversely impact our operations and
markets.





Due to concern over the risk of climate
change, a number of countries and the IMO have adopted, or are considering the
adoption of, regulatory frameworks to reduce greenhouse gas emissions. These
regulatory measures may include, among others, adoption of cap and trade
regimes, carbon taxes, increased efficiency standards, and incentives or
mandates for renewable energy. In addition, although the emissions of greenhouse
gases from international shipping currently are not subject to the Kyoto
Protocol to the United Nations Framework Convention on Climate Change, which
required adopting countries to implement national programs to reduce emissions
of certain gases, a new treaty may be adopted in the future that includes
restrictions on shipping emissions. Compliance with changes in laws, regulations
and obligations relating to climate change could increase our costs related to
operating and maintaining our vessels and require us to install new emission
controls, acquire allowances or pay taxes related to our greenhouse gas
emissions, or administer and manage a greenhouse gas emissions program. Revenue
generation and strategic growth opportunities may also be adversely
affected.





Adverse effects upon the oil and gas
industry relating to climate change, including growing public concern about the
environmental impact of climate change, may also adversely affect demand for our
services. For example, increased regulation of greenhouse gases or other
concerns relating to climate change may reduce the demand for oil and gas in the
future or create greater incentives for use of alternative energy sources. Any
long-term material adverse effect on the oil and gas industry could have a
significant financial and operational adverse impact on our business that we
cannot predict with certainty at this time.





8







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




The
operation of our vessels is affected by the requirements set forth in the IMO's
International Management Code for the Safe Operation of Ships and Pollution
Prevention, or the ISM Code.  The ISM Code requires shipowners, ship
managers and bareboat charterers to develop and maintain an extensive "Safety
Management System" that includes the adoption of a safety and environmental
protection policy setting forth instructions and procedures for safe operation
and describing procedures for dealing with emergencies.  If we fail to
comply with the ISM Code, we may be subject to increased liability, 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. The market prices for tankers
declined significantly from historically high levels reached in early 2008 and
remain at relatively low levels.  You should expect the market value
of our 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. The
current volatility in global financial markets may result in a decrease in
tanker values. 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 the Credit
Facility. Under the 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.




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 of our vessels, which may adversely affect our business and financial
condition.





Our
vessels and their cargoes will be at risk of being damaged or lost because of
events such as marine disasters, bad weather, business interruptions caused by
mechanical failures, grounding, fire, explosions and collisions, human error,
war, terrorism, piracy and other circumstances or events. Changing economic,
regulatory and political conditions in some countries, including political and
military conflicts, have from time to time resulted in attacks on vessels,
mining of waterways, piracy, terrorism, labor strikes and boycotts. These
hazards may result in death or injury to persons, loss of revenues or property,
environmental damage, higher insurance rates, damage to our customer
relationships, market disruptions, delay or rerouting.  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.


9





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





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





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





We
conduct most of our operations outside of the United States, and our business,
results of operations, cash flows, financial condition and 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, in London on
July 7, 2005 and in Mumbai on November 26, 2008, 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. As a result of the above, insurers have increased
premiums and reduced or restricted coverage for loses caused by terrorist acts
generally. 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 and the Gulf of Aden off the coast of Somalia. Any of these
occurrences could have a material adverse impact on our business, financial
condition, results of operations and ability to pay dividends.




If
our vessels call on ports located in countries that are subject to restrictions
imposed by the U.S. government, that could adversely affect our reputation and
the market for our common stock.




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.




10




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





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





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




Governments
could requisition our vessels during a period of war or emergency, which may
negatively impact our business, financial condition, results of operations and
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. Our Credit Facility
prohibits the declaration and payment of dividends if we are in default under
the Credit Facility. We refer you to Item 5—Operating and Financial Review and
Prospectus — Liquidity and Capital Resources —Our Credit Facility for more
details. We may not continue to pay dividends at rates previously paid or at
all.





A
decision of our Board of Directors and the laws of Bermuda may prevent the
declaration and payment of dividends.





Our
ability to declare and pay 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 at attractive
      prices,




11








·
            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.




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




We have
contracted to purchase four newbuilding vessels and we expect to purchase
additional vessels from time to time.  The delivery of these vessels
could be delayed, not completed or cancelled, which would delay or eliminate our
expected receipt of revenues from the employment of these
vessels.  The seller could fail to deliver these vessels to us as
agreed, or we could cancel a purchase contract because the seller has not met
its obligations.  If the delivery of any vessel is materially delayed
or cancelled, our business, financial condition and results of operations could
be adversely affected.





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




Our
current business strategy includes additional growth through the acquisition of
new and secondhand vessels. The fourteenth, fifteenth and sixteenth vessels that
we took deliveries of in July 2009, November 2009 and March 2010, respectively,
are 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.




12







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.




We
are dependent on the Manager and there may be conflicts of interest arising from
the relationship between our Chairman and the Manager that may not be resolved
in our favor.




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. 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 costs would 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 14 of our 16 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. 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, which would
negatively affect our financial condition and our ability to expand our
business.




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




13







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 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 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 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
Credit Facility contains restrictive covenants which limit our liquidity and
corporate activities,which could
negatively affect our growth and cause our financial performance to
suffer.




The
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 Credit Facility or if there is another default under the 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.




14






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.




If
we were to drawdown amounts under our Credit Facility, and if the recent
volatility in LIBOR rates continues, it could affect our profitability, earnings
and cash flow.





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





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





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





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.


15





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.




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





We may be
subject to increased premium payments, or calls, in amounts based on our claim
records, the claim records of our 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 fluctuations, which could negatively affect our results of
operations.




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 U.S. source income, which would reduce our
earnings.




Under the
U.S. Internal Revenue Code of 1986, as amended, 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 United States will be characterized as U.S. source shipping
income and such income is subject to a 4% U.S. federal income tax, without the
benefit of deductions, unless that corporation is entitled to a special tax
exemption under the Code which applies to income derived by certain non-U.S.
corporations from the international operations of ships. We believe that we
currently qualify for this statutory tax exemption and we have taken, and will
continue to take, this position on the Company's U.S. federal income tax
returns. However, there are several risks that could cause us to become subject
to tax 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% U.S. federal income tax on our U.S. source
shipping income, without the benefit of deductions. 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.




If
we become subject to taxes in Bermuda after 2016, our net income and cash flow
would decrease.




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 common stock, debentures or
other obligations until March 28, 2016. 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 decrease our net income and
cash flow.




16







If
the U.S. Internal Revenue Service were to treat us as a "passive foreign
investment company," that could have adverse consequences for U.S.
shareholders.




A foreign
corporation is 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. 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.





We
believe that we ceased to be a PFIC beginning with the 2005 taxable year. Based
on our current and expected future operations, we believe that we are not
currently a PFIC, nor do we anticipate that we will become a PFIC for any future
taxable year.  As a result, non-corporate U.S. shareholders should be
eligible to treat dividends paid by us in 2006, 2007, 2008, 2009 and thereafter
as "qualified dividend income" which is subject to preferential tax rates
(through 2010).





We expect
to derive more than 25% of our income each year from our time chartering and
voyage chartering activities.  We also expect that more than 50% of
the value of our assets to be devoted to our time chartering and voyage
chartering activities.  Therefore, since we believe that such income
will be treated for relevant U.S. federal income tax purposes as services
income, rather than rental income, we have taken, and will continue to take, the
position that such income should not constitute "passive income," and that the
assets that we own and operate in connection with the production of that income,
in particular our vessels, should not constitute assets that produce or are held
for the production of passive income for purposes of determining whether we are
a PFIC in any taxable year.





There is,
however, no direct legal authority under the PFIC rules addressing our method of
operation. We believe there is substantial legal authority supporting our
position consisting of case law and U.S. Internal Revenue Service, or IRS,
pronouncements concerning the characterization of income derived from time
charters and voyage charters as services income rather than rental income for
other tax purposes.  However, there is also authority which
characterizes time charter income as rental income rather than services income
for other tax purposes.  Accordingly, no assurance can be given that
the IRS or a court of law will accept our position, and there is a risk that the
IRS or a court of law could determine that we are a PFIC. Moreover, no assurance
can be given that we would not constitute a PFIC for any future taxable year if
there were to be changes in the nature and extent of our
operations.





If the
IRS were to find that we are or have been a PFIC for any taxable year beginning
with the 2005 taxable year, our U.S. shareholders who owned their shares during
such year would face adverse U.S. federal income tax consequences and certain
information reporting obligations. Under the PFIC rules, unless those U.S.
shareholders made or make an election available under the Code (which election
could itself have adverse consequences for such U.S. shareholders), such U.S.
shareholders would be subject to 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 U.S. 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 U.S. 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
immediately preceding taxable year.




17







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. Since 2008, the stock market has experienced extreme price and
volume fluctuations. If the volatility in the market continues or worsens, it
could have a adverse affect on the market price of our common shares. The
Investors in our common shares may not be able to resell their shares at or
above their purchase price, which include the risks and uncertainties set forth
in this annual report.




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.




We
are incorporated in Bermuda and 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 re-delivered these three vessels to us in
September 2004, October 2004 and November 2004, respectively.  Two of
these vessels are currently chartered in the spot market pursuant to cooperative
agreements with third parties. We bareboat chartered the third of our original
three vessels, the Gulf Scandic, to Gulf Navigation Company LLC, or Gulf
Navigation, at a fixed rate charterhire for a five-year term that expired in
November 2009.  The charter is subject to two one-year extensions at
Gulf Navigation's option.  The last one-year option was not exercised
and thus the vessel is scheduled to be re-delivered to us in November
2010.  We expect to operate the Gulf Scandic in the spot market upon
re-delivery.




18







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, our twelfth vessel in December 2006, our thirteenth vessel in February
2009, our fourteenth vessel in July 2009, our fifteenth vessel in November 2009
and our sixteenth vessel in March 2010. Fifteen of these vessels are 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
will be built at Bohai Shipyard in China.  The Company acquired these
two newbuildings from First Olsen Ltd. for a price at delivery of $90,000,000
per vessel, for which we have paid an aggregate deposit of
$18,000,000.  The vessels are expected to be delivered to the Company
in June 2010 and September 2010, respectively.  See Note 8 to the
Company's Audited Financial Statements for more information.




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




In May
2008, the Company issued 4,310,000 common shares at $37.00 per share in a
registered transaction. The net proceeds were used to prepare for further
expansion, repay the remaining debt on our Credit Facility and for working
capital.





In
January 2009, the Company issued 3,450,000 common shares at $32.50 per share in
a registered transaction. The net proceeds of the offering were used to fund
further acquisitions under planning and for general corporate
purposes.





In
February 2009, the Company took delivery of the vessel, Nordic Sprite, which it
had agreed to acquire for a purchase price of $56.7 million in January
2009.  The Nordic Sprite is currently charted in the spot market or on
spot market-related charters.





In May
2009, the Company issued 4,225,000 common shares at $32.00 per share in a
registered transaction.  The net proceeds of the offering were used to
fund further acquisitions under planning and for general corporate
purposes.





In July
2009, the Company took delivery of the vessel, Nordic Grace, which it had agreed
to acquire for a purchase price of $57.0 million.  The Nordic Grace is
currently chartered in the spot market or on spot market-related
charters.





In
October 2009, the Company announced the acquisition of the vessel, Nordic
Mistral, for a purchase price of $51.5 million.  We took delivery of
this vessel in November 2009 and it is currently chartered in the spot market or
on spot market-related charters.





In
November 2009, the Company announced the acquisition of the vessel, Nordic
Passat, for a purchase price of $51.5 million. We took delivery of this vessel
in March 2010 and intend to employ it in the spot market beginning in May 2010
after an approximate two-month period on a bareboat charter.





In
January 2010, the Company issued 4,600,000 common shares at $30.50 per share in
a registered transaction.  The net proceeds of the offering are
expected to be used to fund future acquisitions and for general corporate
purposes.





In April
2010, the Company entered into agreements with Samsung Heavy Industries Co.,
Ltd. to build two Suezmax tankers of 158,000 dwt each.  The purchase
prices of these two newbuilding vessels are $64,500,000 and $65,000,000,
respectively, and their delivery dates are scheduled for the third and fourth
quarters of 2011.


19





B.
            BUSINESS
      OVERVIEW




We are an
international tanker company that owns 20 modern double-hull Suezmax tankers,
including four newbuilding vessels, averaging approximately 157,000 dwt each. We
currently operate 14 of our 16 existing vessels in the spot market or on spot
market-related charters pursuant to cooperative arrangements with third parties.
We currently operate two of our sixteen existing vessels on bareboat charters
that we expect to expire in June and in November 2010. In November 2007, we
agreed to acquire two Suezmax newbuildings. The vessels are expected to be
delivered to the Company in June 2010 and September 2010, respectively. In
addition, we recently entered into agreements to purchase two newbuilding
Suezmax tankers, which are expected to be delivered in the third and forth
quarters of 2011, respectively.




Tanker
markets are typically 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.  Seasonal variations in tanker demand normally result in
seasonal fluctuations in spot market charter rates.




Our FleetOur fleet consists
of 20 modern double-hull Suezmax tankers of which four are newbuildings. The
following table provides information regarding the status of each
vessel.




Vessel
            Yard
            Built
            
            Dwt (1)
            
            Flag
            Delivered to NAT
            EmploymentGulf
      Scandic
            Samsung
            1997
            
            
            151,475
            
            Isle
      of Man
            August
      1997
            Bareboat
      exp. 2010Nordic
      Hawk
            Samsung
            1997
            
            
            151,475
            
            Bahamas
            October
      1997
            SpotNordic
      Hunter
            Samsung
            1997
            
            
            151,400
            
            Bahamas
            December
      1997
            SpotNordic
      Freedom
            Daewoo
            2005
            
            
            163,455
            
            Bahamas
            March
      2005
            SpotNordic
      Voyager
            Dalian
      New
            1997
            
            
            149,591
            
            Norway
            November
      1997
            SpotNordic
      Fighter
            Hyundai
            1998
            
            
            153,328
            
            Norway
            March
      2005
            SpotNordic
      Discovery
            Hyundai
            1998
            
            
            153,328
            
            Norway
            August
      2005
            SpotNordic
      Sprite
            Samsung
            2003
            
            
            147,188
            
            Norway
            February
      2009
            SpotNordic
      Grace
            Hyundai
            2002
            
            
            149,921
            
            Norway
            July
      2009
            SpotNordic
      Saturn
            Daewoo
            1998
            
            
            157,332
            
            Marshall
      Islands
            November
      2005
            SpotNordic
      Jupiter
            Daewoo
            1998
            
            
            157,411
            
            Marshall
      Islands
            April
      2006
            SpotNordic
      Apollo
            Samsung
            2003
            
            
            159,999
            
            Marshall
      Islands
            November
      2006
            SpotNordic
      Cosmos
            Samsung
            2002
            
            
            159,998
            
            Marshall
      Islands
            December
      2006
            SpotNordic
      Moon
            Samsung
            2002
            
            
            159,999
            
            Marshall
      Islands
            November
      2006
            SpotNordic
      Mistral
            Hyundai
            2002
            
            
            164,236
            
            Marshall
      Islands
            November
      2009
            SpotNordic
      Passat
            Hyundai
            2002
            
            
            164,274
            
            Marshall
      Islands
            March
      2010
            Bareboat
      exp. 2010Nordic
      Galaxy
            Bohai
            2010
            
            
            163,000
            
            
            Expected
      June 2010Nordic
      Vega
            Bohai
            2010
            
            
            163,000
            
            
            Expected
      September 2010Newbuilding
            Samsung
            2011
            
            
            158,000
            
            
            Expected
      September 2011Newbilding
            Samsung
            2011
            
            
            158,000
            
            
            Expected
      December 2011Total
            
            
            
            
            3,136,410





(1)
            Deadweight
      tons.





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
14 of our 16 existing vessels in the spot market or on spot market -related time
charters although we may consider charters at fixed rates depending on market
conditions. Our fifteenth and sixteenth vessels are on bareboat charters that
are expected to be re-delivered to the Company in June 2010 and in November
2010.




20







Cooperative
Arrangements




We
currently operate 14 of our 16 existing vessels in spot market cooperations 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 Chartering Services
Inc, both of which are third party administrators. During the second quarter of
2010, it is expected that all of our vessels will be in the cooperation, Gemini
Tankers LLC, owned by Teekay Corporation and where Frontline Ltd. and Teekay
Corporation are, together with us, the main owners of participating vessels. The
administrators have the responsibility for the commercial management of the
participating vessels, including marketing, chartering, operating and purchasing
bunker (fuel oil) for the vessels. The owners of the participating vessels
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.





Spot
Charters




During
the year ended December 31, 2009, we temporarily operated several vessels
(Nordic Sprite, Nordic Hawk, Nordic Saturn and Nordic Grace) in the spot market,
other than in cooperative arrangements. 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
currently operate two of our sixteen existing vessels on bareboat
charters.





The Gulf
Scandic is under a bareboat charter to Gulf Navigation, for a five- year term
which terminated in the fourth quarter of 2009, but was subject to two one-year
extensions at Gulf Navigation's option. Gulf Navigation exercised its first
one-year option, extending the charter for one additional year through the
fourth quarter of 2010.  The last one-year option was not exercised,
thus the vessel is scheduled to be re-delivered to the Company in November 2010.
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.





The
Nordic Passat is under a bareboat charter to the previous owner, concurrent with
the delivery of the vessel, and for a period of 60 to 80 days at the charterer's
option. The vessel is expected to be re-delivered to us in June 2010. Under the
terms of this bareboat charter, the charterer is obligated to pay a fixed
charterhire of $13,300 per day, subject to additional hire based on current
market rates during the charter period.





During
the charter period, the charterers are responsible for operating and maintaining
the vessel and are responsible for covering all operating costs and expenses
with respect to the vessel. We expect to operate the Gulf Scandic and Nordic
Passat in the spot market upon redelivery.





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 by the Board of
Directors. All decisions of a material nature concerning our business are
reserved to our Board of Directors.  The Management Agreement is
effective through June 30, 2019.  The Management Agreement terminates
10 years from the calendar date unless it is terminated earlier in accordance
with its terms, essentially related to non-performance or negligence by the
Manager.


21


For its
services under the Management Agreement, the Manager is reimbursed for all of
its costs incurred plus a management fee of $265,000 per annum. The management
fee was increased from $225,000 per annum to $265,000 per annum effective July
1, 2009.  In order to align the Manager's interests with those of the
Company, the Company issued to the Manager restricted common shares equal to 2%
of our outstanding common shares. Any time additional common shares are issued
while the Management Agreement is in effect, the Manager will receive restricted
common shares to maintain the number of common shares issued to the Manager at
2% of our total outstanding common shares. In connection with nine follow-on
offerings, we have issued a total of 937,976 restricted shares to our Manager
pursuant to the Management Agreement. These restricted shares are
non-transferable for three years from the date of 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,




·
            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 wilful 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 30 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 30
days,




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




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




22






Commercial
and Technical Management Agreements




The
Company has outsourced the commercial and technical management of its vessels to
third party operators.





Under the
supervision of the Manager, Frontline Ltd. (NYSE:FRO) and Stena Bulk AB of
Sweden provide commercial management services for 14 of the Company's 16
existing vessels. Frontline and Stena's duties include seeking and negotiating
charters for these vessels. These cooperative arrangements are expected to
create synergies through economies of scale, resulting in a positive impact on
the overall results. During 2010, it is expected that all of our vessels will be
in the cooperation, Gemini Tankers LLC, where Frontline Ltd. and Teekay
Corporation are the main owners of participating vessels.





Under the
supervision of the Manager, the ship management firm of V.Ships Norway AS or
V.Ships, provides the technical management for 13 of the Company's 16 existing
vessels. The ship management firm of Columbia Shipmanagement Ltd, Cyprus
provides the technical management for one of the Company's 16 vessels and
will provide technical management for one of the two vessels
which are on bareboat charters that are expected to expire in June and November
2010, respectively.





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.




The
current international financial crisis is affecting the international tanker
market. It is expected that the global fleet will increase during 2009 and 2010
because of the present order book. However, some shipping companies are now
facing challenges in financing their large newbuilding programs, as shipping
banks are more restrictive than before in granting credit. The current financial
upheaval may delay deliveries of newbuildings and may also lead to the
cancellation of newbuilding orders, and there have been reports of cancellations
of tanker newbuildings from certain yards. Shipping companies with high debt or
other financial commitments may be unable to continue servicing their debt,
which could lead to foreclosure on vessels.




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




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.


23







The 2009 Tanker
Market (Source: Fearnleys)





Following
the onset of the global financial crisis in 2008, expectations, in general
terms, were quite dismal for 2009. In a broader sense, the tanker market fared
quite poorly in 2009, but had huge discrepancies between the various
sub-segments.





The oil
tanker fleet is generally divided into five major categories of vessels, based
on carrying capacity and the types of cargoes carried.  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 Very Large Crude Carrier ("VLCC"), whose carrying capacity ranges
from 200,000 dwt to 320,000 dwt, reached an average of about $29,000 per day, a
significant decrease from $88,000 per day in 2008. Suezmaxes, whose carrying
capacity ranges from 120,000 dwt to 200,000 dwt, achieved an average rate of
$31,500 per day, down from $67,000 the year before. Corresponding rates for
Aframaxes, whose carrying capacity ranges from 80,000 dwt to 120,000 dwt, were
$10,000 per day compared with $50,000 per day in 2008. In comparison with asset
values the Suezmax market showed the strongest resilience in the
downturn.





Seaborne
crude oil trade, measured in tonne-miles, declined approximately 1.0% in
2009.  This was markedly less than anticipated. Crude oil imports to
the United States declined approximately 7.5%, but transportation work declined
by about 13.5%. This was, to a certain degree, offset by strongly increased
imports to China resulting in the U.S. becoming the second largest crude oil
importing country.





The use
of tankers for floating storage increased in 2009. At the beginning of the year
as a pure commodity price play (contango in the oil futures market) but later in
the year a significant number of tankers were employed for storage due to
brimming on-shore storage facilities. For greater parts of the year more than 30
VLCCs were employed in storage.





Periodically
the crude tanker spot market yielded negative time charter results during 2009.
It was expected that several single-hull (SH) ships would have been sold for
demolition given the cut-off date in 2010 (IMO Phase out). However, demolition
sales were low and only 8 VLCCs and 2 Suezmax tankers were sold for demolition.
Currently, the world fleet contains 66 SH VLCCs and 24 SH Suezmax tankers that,
given strict adherence to the IMO phase out schedule, are supposed to cease oil
trading by the end of 2010.





In 2009 a
total of 55 VLCCs and 46 Suezmax tankers were delivered from yards. The Suezmax
fleet expanded by 13% and the VLCC fleet by 8% (both measured by deadweight). In
total, net tanker fleet growth ended at 8.6%. Following
the decline in crude oil prices in mid-2008, prices gradually rose throughout
2009 despite the fact that global oil demand decreased 1.2 mb/d, or 1.4%, to 85
mb/d. OPEC crude oil production declined 2.5 mb/d, or 8%, to 28.7 mb/d. OPEC NGL
was only marginally up compared to 2008.





The sale
and purchase market for tankers, measured by the number of transactions,
decreased again in 2009. A total of about 155 transactions were concluded. There
are several reasons for this decline, but primarily the difficulties in securing
financing for acquisitions must be considered the prime cause. Secondly, the
market was characterized by few sellers willing to take losses on either
newbuildings ordered at record price levels or existing vessels purchased at the
height of the market in 2007/08.





The IEA,
in their latest market report, have become quite optimistic for growth in global
oil demand in 2010. According to their March 2010 report global demand is
estimated to increase 1.8% this year. At the same time, the downturn in North
Sea output as well as new infrastructure in the FSU will have a quite negative
impact on demand for short-haul crude oil tankers. A similar development is
observed in North America where Mexican crude oil output is expected to continue
falling. Both of these developments are expected to have a negative impact on
Aframax tankers whereas the effects for Suezmax and VLCC crude tankers will be
quite positive as crude oil has to be sourced in areas farther away generating a
significant growth in transportation work.


24








The
Tanker Market 2010





Notwithstanding
the volatility in the financial and commodities markets, the Suezmax tanker spot
market continued to be strong through the first quarter of fiscal year 2010.
Going into second quarter of fiscal year 2010, we have seen a hike in rates
during the month of April. In May, the tanker spot market has tapered off while
remaining subject to volatility. The Company does not predict future spot
rates.





Environmental
and Other Regulation





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




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




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





International
Maritime Organization





The
International Maritime Organization, or IMO, the United Nations agency for
maritime safety and the prevention of pollution, has adopted the International
Convention for the Prevention of Pollution from Ships, or MARPOL, which has been
updated through various amendments. MARPOL establishes environmental standards
relating to oil leakage or spilling, garbage management, sewage, air emissions,
handling and disposal of noxious liquids and the handling of harmful substances
in packaged forms.




Air
Emissions




In
September 1997, the IMO adopted Annex VI to MARPOL to address air pollution from
ships. Effective May 2005, Annex VI sets limits on sulfur oxide and nitrogen
oxide emissions from all commercial vessel exhausts and prohibits deliberate
emissions of ozone depleting substances (such as halons and
chlorofluorocarbons), emissions of volatile organic compounds from cargo tanks,
and the shipboard incineration of specific substances. Annex VI also includes a
global cap on the sulfur content of fuel oil and allows for special areas to be
established with more stringent controls on sulfur emissions. Additional or new
conventions, laws and regulations may be adopted that could require the
installation of expensive emission control systems and adversely affect our
business, cash flows, results of operations and financial condition. In October
2008, the IMO adopted amendments to Annex VI regarding emissions of sulfur
oxide, nitrogen oxide, particulate matter and ozone-depleting substances, which
amendments enter into force on July
1, 2010.  The amended Annex VI will reduce air pollution from vessels
by, among other things, (i) implementing a progressive reduction of sulfur oxide
emissions from ships by reducing the global sulfur fuel cap initially to 3.50%
(from the current cap of 4.50%), effective from January 1, 2012, then
progressively to 0.50%, effective from January 1, 2020, subject to a feasibility
review to be completed no later than 2018; and (ii) establishing new tiers of
stringent nitrogen oxide emissions standards for new marine engines, depending
on their date of installation. The United States ratified the Annex VI
amendments in October 2008, and the U.S. Environmental Protection Agency, or
EPA, promulgated equivalent emissions standards in late
2009.




25




The
United States and Canada have requested IMO to designate the area extending 200
nautical miles from the Atlantic/Gulf and Pacific coasts of the U.S. and Canada
and the Hawaiian Islands as Emission Control Areas under the MARPOL Annex VI
amendments, which would subject ocean-going vessels in these areas to stringent
emissions controls and cause us to incur additional costs. In July 2009, the IMO
accepted the proposal in principle, and all member states party to MARPOL Annex
VI will vote on the proposal in March 2010. Even if the proposal is not adopted,
we cannot assure you that the United States or Canada will not adopt more
stringent emissions standards independent of the IMO.




Safety
Management System Requirements




The IMO
also adopted the International Convention for the Safety of Life at Sea, or
SOLAS, and the International Convention on Load Lines, or LL, which impose a
variety of standards that regulate the design and operational features of ships.
The IMO periodically revises the SOLAS and LL standards.




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




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




Noncompliance
with the ISM Code and other IMO regulations may subject the shipowner or
bareboat charterer to increased liability, may lead to decreases in, or
invalidation of, available insurance coverage for affected vessels and may
result in the denial of access to, or detention in, some ports. The U.S. Coast
Guard and European Union authorities have indicated that vessels not in
compliance with the ISM Code by the applicable deadlines will be prohibited from
trading in U.S. and European Union ports, as the case may be.




Pollution
Control and Liability Requirements




IMO has
negotiated international conventions that impose liability for pollution in
international waters and the territorial waters of the signatory nations to such
conventions. For example, many countries have ratified and follow the liability
plan adopted by the IMO and set out in the International Convention on Civil
Liability for Oil Pollution Damage, or the CLC, although the United States is
not a party. Under this convention and depending on whether the country in which
the damage results is a party to the 1992 Protocol to the CLC, a vessel's
registered owner is strictly liable, subject to certain affirmative defenses,
for pollution damage caused in the territorial waters of a contracting state by
discharge of persistent oil. The limits on liability outlined in the 1992
Protocol use the International Monetary Fund currency unit of Special Drawing
Rights, or SDR. The right to limit liability is forfeited under the CLC where
the spill is caused by the shipowner's actual fault and under the 1992 Protocol
where the spill is caused by the shipowner's intentional or reckless conduct.
Vessels trading with states that are parties to these conventions must provide
evidence of insurance covering the liability of the owner. In jurisdictions
where the CLC has not been adopted, various legislative schemes or common law
govern, and liability is imposed either on the basis of fault or in a manner
similar to that of the CLC. We believe that our protection and indemnity
insurance will cover the liability under the plan adopted by the
IMO.




26







The IMO
adopted the International Convention on Civil Liability for Bunker Oil Pollution
Damage, or the Bunker Convention, to impose strict liability on ship owners for
pollution damage in jurisdictional waters of ratifying states caused by
discharges of bunker fuel. The Bunker Convention, which became effective on
November 21, 2008, requires registered owners of ships over 1,000 gross tons to
maintain insurance or other financial security for pollution damage in an amount
equal to the limits of liability under the applicable national or international
limitation regime (but not exceeding the amount calculated in accordance with
the Convention on Limitation of Liability for Maritime Claims of 1976, as
amended). With respect to non-ratifying states, liability for spills or releases
of oil carried as fuel in ship's bunkers typically is determined by the national
or other domestic laws in the jurisdiction where the events or damages
occur.




In
addition, IMO adopted an International Convention for the Control and Management
of Ships' Ballast Water and Sediments, or BWM, in February 2004. BWM's
implementing regulations call for a phased introduction of mandatory ballast
water exchange requirements, to be replaced in time with mandatory concentration
limits. BWM will not become effective until 12 months after it has been adopted
by 30 states, the combined merchant fleets of which represent not less than 35%
of the gross tonnage of the world's merchant shipping. To date, there has not
been sufficient adoption of this standard for it to take force.




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





U.S.
Regulations





The U.S.
Oil Pollution Act of 1990, or OPA, established an extensive regulatory and
liability regime for the protection and cleanup of the environment from oil
spills. OPA affects all owners and operators whose vessels trade in the United
States, its territories and possessions or whose vessels operate in U.S. waters,
which includes the U.S. territorial sea and its 200 nautical mile exclusive
economic zone. The United States has also enacted the Comprehensive
Environmental Response, Compensation and Liability Act, or CERCLA, which applies
to the discharge of hazardous substances other than oil, whether on land or at
sea. Both OPA and CERCLA impact our operations.




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




·
            natural
      resources damage and related assessment
costs;




·
            real
      and personal property damage;




·
            net
      loss of taxes, royalties, rents, fees and other lost
    revenues;




·
            lost
      profits or impairment of earning capacity due to property or natural
      resources damage; and




·
            net
      cost of public services necessitated by a spill response, such as
      protection from fire, safety or health hazards, and loss of subsistence
      use of natural resources.




Effective
July 31, 2009, the U.S. Coast Guard adjusted the limits of OPA liability to the
greater of $2,000 per gross ton or $17.088 million for any double-hull tanker
that is over 3,000 gross tons (subject to possible adjustment for inflation),
and our fleet is entirely composed of vessels of this size class. CERCLA, which
applies to owners and operators of vessels, contains a similar liability regime
and provides for cleanup, removal and natural resource damages. Liability under
CERCLA is limited to the greater of $300 per gross ton or $5 million for vessels
carrying a hazardous substance as cargo and the greater of $300 per gross ton or
$0.5 million for any other vessel. These OPA and CERCLA limits of liability do
not apply if an incident was directly caused by violation of applicable U.S.
federal safety, construction or operating regulations or by a responsible
party's gross negligence or willful misconduct, or if the responsible party
fails or refuses to report the incident or to cooperate and assist in connection
with oil removal activities.




27







OPA and
the U.S. Coast Guard also require owners and operators of vessels to establish
and maintain with the U.S. Coast Guard evidence of financial responsibility
sufficient to meet the limit of their potential liability under OPA and CERCLA.
Vessel owners and operators may satisfy their financial responsibility
obligations by providing a proof of insurance, a surety bond, self-insurance or
a guaranty. We have provided such evidence and received certificates of
financial responsibility from the U.S. Coast Guard's for each of our vessels as
required to have one.




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




The U.S.
Clean Water Act, or CWA, prohibits the discharge of oil or hazardous substances
in U.S. navigable waters unless authorized by a duly-issued permit or exemption,
and imposes strict liability in the form of penalties for any unauthorized
discharges. The CWA also imposes substantial liability for the costs of removal
and remediation and damages and complements the remedies available under OPA and
CERCLA.




The EPA
regulates the discharge of ballast water and other substances in U.S. waters
under the CWA. Effective February 6, 2009, EPA regulations require vessels 79
feet in length or longer (other than commercial fishing and recreational
vessels) to comply with a Vessel General Permit authorizing ballast water
discharges and other discharges incidental to the operation of vessels. The
Vessel General Permit imposes technology and water-quality based effluent limits
for certain types of discharges and establishes specific inspection, monitoring,
recordkeeping and reporting requirements to ensure the effluent limits are met.
U.S. Coast Guard regulations adopted under the U.S. National Invasive Species
Act, or NISA, also impose mandatory ballast water management practices for all
vessels equipped with ballast water tanks entering or operating in U.S. waters,
and in 2009 the Coast Guard proposed new ballast water management standards and
practices, including limits regarding ballast water releases. Compliance with
the EPA and the U.S. Coast Guard regulations could require the installation of
equipment on our vessels to treat ballast water before it is discharged or the
implementation of other port facility disposal arrangements or procedures at
potentially substantial cost, and/or otherwise restrict our vessels from
entering U.S. waters.





European
Union Regulations





In
October 2009, the European Union amended a directive to impose criminal
sanctions for illicit ship-source discharges of polluting substances, including
minor discharges, if committed with intent, recklessly or with serious
negligence and the discharges individually or in the aggregate result in
deterioration of the quality of water. Criminal liability for pollution may
result in substantial penalties or fines and increased civil liability
claims.





Greenhouse
Gas Regulation





In
February 2005, the Kyoto Protocol to the United Nations Framework Convention on
Climate Change, or UNFCCC, which we refer to as the Kyoto Protocol, entered into
force. Pursuant to the Kyoto Protocol, adopting countries are required to
implement national programs to reduce emissions of certain gases, generally
referred to as greenhouse gases, which are suspected of contributing to global
warming. Currently, the emissions of greenhouse gases from international
shipping are not subject to the Kyoto Protocol. However, international
negotiations are continuing with respect to a successor to the Kyoto Protocol,
which sets emission reduction targets through 2012, and restrictions on shipping
emissions may be included in any new treaty. In December 2009, more than 27
nations, including the United States and China, signed the Copenhagen Accord,
which includes a non-binding commitment to reduce greenhouse gas emissions. The
European Union has indicated that it intends to propose an expansion of the
existing European Union emissions trading scheme to include emissions of
greenhouse gases from vessels, if such emissions are not regulated through the
IMO or the UNFCCC by December 31, 2010. In the United States, the EPA has issued
a final finding that greenhouse gases threaten public health and safety, and has
proposed regulations governing the emission of greenhouse gases from motor
vehicles and stationary sources. The EPA may decide in the future to regulate
greenhouse gas emissions from ships and has already been petitioned by the
California Attorney General to regulate greenhouse gas emissions from
ocean-going vessels. Other federal and state regulations relating to the control
of greenhouse gas emissions may follow, including the climate change initiatives
that are being considered in the U.S. Congress. In addition, the IMO is
evaluating various mandatory measures to reduce greenhouse gas emissions from
international shipping, including market-based instruments. Any passage of
climate control legislation or other regulatory initiatives by the EU, U.S., IMO
or other countries where we operate that restrict emissions of greenhouse gases
could require us to make significant financial expenditures that we cannot
predict with certainty at this time.




28







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;




·
            the
      development of vessel security
plans;




·
            ship
      identification number to be permanently marked on a vessel's
      hull;




·
            a
      continuous synopsis record kept onboard showing a vessel's history
      including the name of the ship and of the state whose flag the ship is
      entitled to fly, the date on which the ship was registered with that
      state, the ship's identification number, the port at which the ship is
      registered and the name of the registered owner(s) and their registered
      address; and




·
            compliance
      with flag state security certification
  requirements.




The U.S.
Coast Guard regulations, intended to align with international maritime security
standards, exempt from MTSA vessel security measures non-U.S. vessels that have
on board, as of July 1, 2004, a valid 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.




29







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.




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, American Bureau
of Shipping and Det norske Veritas. 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.




30







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 15 of
the 16 vessels in our operating fleet as of December 31, 2009. During 2010,
it is expected that all of our vessels will be in the cooperation, Gemini
Tankers LLC, where Frontline Ltd. and Teekay Corporation are the main members.
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.




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.




31




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
Credit Facility.




ITEM
      4A.
            UNRESOLVED
      STAFF COMMENTS




None.




ITEM
      5.
            OPERATING
      AND FINANCIAL REVIEW AND PROSPECTS




A.
            OPERATING
      RESULTS




We
present our statement of operations using voyage revenues and voyage expenses.
The Company's vessels are operated under bareboat charters and spot charters.
During 2009, we operated 14 of the 15 vessels we owned in that year in the spot
market or on time charters on spot market -related terms, while the fifteenth
vessel operated on a long-term fixed rate charter, which expires in November
2010. We took delivery of our sixteenth vessel in March 2010.  Under a
bareboat charter the charterer pays substantially all of the vessel voyage
expenses. Under a spot related time charter, the charterer pays substantially
all of the vessel voyage expenses. Under a spot charter, the vessel owner pays
all vessel voyage expenses. Vessel voyage expenses 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, vessel voyage expenses 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, 2009
            
            
            Year
      Ended December 31, 2008
            
            
            Year
      Ended December 31, 2007Voyage
      Revenue
            
            
            124,370
            
            
            
            228,000
            
            
            
            186,986Voyage
      Expenses
            
            
            (8,959
            )
            
            
            (10,051
            )
            
            
            (47,122
            )Net
      Voyage Revenue
            
            
            115,411
            
            
            
            217,950
            
            
            
            139,864




YEAR
ENDED DECEMBER 31, 2009 COMPARED TO YEAR ENDED DECEMBER 31, 2008




Voyage
revenues decreased by 45.4% from $228.0 million for the year ended December 31,
2008 to $124.4 million for the year ended December 31, 2009. Voyage expenses
decreased by 10.9% to $9.0 million in 2009 from $10.1 million in 2008. The
decrease in net voyage revenues was primarily the result of a decrease in the
spot market rates for the period, offset by an increase in revenue days due to
the expansion of the fleet by three vessels in 2009. The average spot market
rate for our fleet during 2009 was $24,600 per day compared to $54,900 during
2008.


32





Vessel
operating expenses were $43.1 million for the year ended December 31, 2009
compared to $35.6 million for the year ended December 31, 2008, an increase of
21.2%. The increase in vessel operating expenses was primarily the result of an
increase in operating days due to the expansion of the fleet, and because the
average operating expenses increased to approximately $9,500 per day per vessel
during 2009 from approximately $8,800 per day per vessel during 2008. The
increase in average operating expenses during 2009 is primarily a result of an
increase in replacement of spare parts and repair and maintenance projects for 3
of our 16 vessels.





General
and administrative expenses were $14.8 million for the year ended December 31,
2009 compared to $12.8 million for the year ended December 31, 2008, an increase
of 15.9%. The general and administrative expenses in 2009 include a non-cash
charge related to stock-based compensation to our manager, Scandic American
Shipping Ltd., or the Manager, of $5.4 million related to two follow-on
offerings in 2009, and costs of $1.6 million related to the deferred
compensation plan for the Company's CEO and $0.2 million related to the
outstanding stock option awards under the 2004 Stock Incentive Plan which were
cancelled in August 2009. The outstanding stock option awards under the 2004
Stock Incentive Plan were cancelled in exchange for a payment equal to the
difference between the strike price of the options and the closing price per
share for the Company's shares on the New York Stock Exchange. The compensation
resulted in a cash outlay of $2.3 million for the Company. For further details
of the management agreement and administrative expenses we refer you to the
section "The Management Agreement" on page 7 and Note 5 of our audited financial
statements included herein. The general and administrative expenses in 2008
included a non-cash charge of $3.6 million of stock-based compensation to our
Manager, related to one follow-on offering concluded in that year, costs of $1.4
million related to the deferred compensation plan for the Company's CEO and $1.2
million related to under the 2004 Stock Incentive Plan.





Depreciation
expenses were $55.0 million for the year ended December 31, 2009 compared to
$48.3 million for the year ended December 31, 2008, an increase of 14.0%. The
increase in depreciation expenses is primarily the result of expansion of the
fleet by three vessels and capitalized ballast tank improvements during
2009.





The
foregoing resulted in net operating income of $2.4 million for the year ended
December 31, 2009 compared to $121.3 million for the year ended December 31,
2008, a decrease of 98.0%.





Interest
income was $0.6 million for the year ended December 31, 2009 compared to $0.9
million for the year ended December 31, 2008. Interest income was derived from
the excess cash held in interim periods from the proceeds of the follow-on
offerings and the timing of subsequent repayment of debt during the year. The
decrease in interest income is primarily the result of a decrease in market
rates in 2009 compared to 2008.





Interest
expense was $1.8 million for the year ended December 31, 2009 compared to $3.4
million for the year ended December 31, 2008. The decrease is primarily due to
repayment of debt, combined with a lower interest rate on the Credit Facility
during 2009 compared to 2008.





YEAR
ENDED DECEMBER 31, 2008 COMPARED TO YEAR ENDED DECEMBER 31, 2007




Voyage
revenues increased by 21.9% from $187.0 million for the year ended December 31,
2007 to $228.0 million for the year ended December 31, 2008. Voyage expenses
decreased by 78.7% to $10.1 million in 2008 from $47.1 million in 2007. The
increase in net voyage revenues was primarily the result of increase in the spot
market rates during 2008. The average spot market rate for our fleet during 2008
was $54,900 per day compared to $35,600 during 2007, a 54.2%
increase.





Vessel
operating expenses were $35.6 million for the year ended December 31, 2008
compared to $32.1 million for the year ended December 31, 2007. The average
operating expenses for the vessels increased from approximately $8,000 per day
per vessel for the fiscal year 2007 to approximately $8,800 per day per vessel
during fiscal year 2008. The increase in vessel operating expenses was primarily
a result of increased repair and maintenance activity in 2008. In addition, we
experienced an industry wide price increases in vessel operating costs, in
particular crewing costs, lubricating oil costs and repair and maintenance
costs.


33





General
and administrative expenses were $12.8 million for the year ended December 31,
2008 compared to $12.1 million for the year ended December 31, 2007. The general
and administrative expenses in 2008 include a non-cash charge related to
stock-based compensation to our Manager, Scandic American Shipping Ltd. of $3.6
million related to one follow-on offering in 2008 and costs of $1.4 million
related to the deferred compensation plan for the Company's Chief Executive
Officer. For further details of the management agreement and administrative
expenses we refer you to the section "The Management Agreement" on page 18 and
Note 5 of the annual financial statements included elsewhere herein. The general
and administrative expenses in 2007 included a non-cash charge of $2.2 million
of stock-based compensation to our Manager, related to one follow-on offering
concluded last year and costs of $2.7 million related to the deferred
compensation plan for the Company's CEO.





Depreciation
expense was $48.3 million for the year ended December 31, 2008 compared to $42.4
million for the year ended December 31, 2007. The increase is primarily the
result of the depreciation of the costs deferred for the drydocking of seven
vessels during 2008.





Net
operating income was $121.3 million for year ended December 31, 2008 compared to
$53.2 million for the year ended December 31, 2007, an increase of approximately
127.8%. This increase is primarily due to significant higher spot market rates
during 2008 compared to 2007.





Interest
income was $0.9 million for both the year ended December 31, 2008 and the year
ended December 31, 2007. Interest income was derived from the excess cash in
interim periods from the proceeds of the follow-on offering in May 2008 and the
timing of subsequent repayment of debt during the year.





Interest
expense was $3.4 million for the year ended December 31, 2008 compared to $9.7
million for the year ended December 31, 2007. The decrease is primarily due
repayment of debt during 2008 with the proceeds from the follow-on offering
concluded in May 2008.





B.
            LIQUIDITY
      AND CAPITAL RESOURCES




Our
Credit Facility




The Company has a $500 million
revolving credit facility, which is referred to as the Credit
Facility.





The
Company entered into the Credit Facility in September 2005. During 2006 the
Company increased the Credit Facility from $300 million to $500 million, and in
March 2008 the term was extended from September 2010 to September 2013. All
other terms are unchanged.





The
Credit Facility provides funding for future vessel acquisitions and general
corporate purposes. The Credit Facility cannot be reduced by the lender and
there is no repayment obligation of the principal during the five year term.
Amounts borrowed under the Credit Facility bear interest at an annual rate equal
to LIBOR plus a margin between 0.7% and 1.2% (depending on the loan to vessel
value ratio). The Company pays a commitment fee of 30% of the applicable margin
on any undrawn amounts. Borrowings under the Credit Facility are secured by
first priority mortgage over the Company's vessels and assignment of earnings
and insurance.





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




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




34






The
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 Credit Facility.  The Company had no debt and was in
compliance with its restrictive covenants for the year ended December 31,
2009.





YEAR
ENDED DECEMBER 31, 2009 COMPARED TO YEAR ENDED DECEMBER 31, 2008




Cash
flows provided by operating activities decreased by 50.6% to $63.2 million for
the year ended December 31, 2009 from $127.9 million for the year ended December
31, 2008 primarily due to significantly lower spot market rates, and an increase
in vessel operating expenses during 2009, as described above.





Cash
flows used in investing activities increased to $190.3 million for the year
ended December 31, 2009 compared to $10.1 million for the year ended December
31, 2008. The increase in cash flows used in investing activities is a result of
expansion of our fleet by three vessels, and loan to the sellers related to the
two newbuildings which are expected to be delivered to us in 2010.





Cash
flows provided by financing activities increased to $126.3 million for the year
ended December 31, 2009 compared to cash flow used by financing activities of
$99.8 million for the year ended December 31, 2008. The primary source of the
cash in flow from financing activities for the year ended December 31, 2009 was
the $236.7 million proceeds from two follow-on offerings (as discussed below)
reduced by or offset by (i) net repayment of debt under the Credit Facility of
$15.0 million and (ii) dividends paid of $95.4 million





The
Company, in January and May 2009, completed underwritten public offerings of
3,450,000 and 4,225,000 of its common shares, respectively. The net proceeds
from the January 2009 and May 2009 offerings were $107.2 million and $129.5
million, respectively. The net proceeds from the offerings were used to prepare
the Company for further expansions and repay borrowings under the Credit
Facility.





The
Company believes that its borrowing capacity under the Credit Facility, together
with its working capital, are sufficient to fund its ongoing operations and
commitments for capital expenditures. For further information on capital
commitments and expenditures please see Item 5F.





YEAR
ENDED DECEMBER 31, 2008 COMPARED TO YEAR ENDED DECEMBER 31, 2007




Cash
flows provided by operating activities increased by 53.0% for the year ended
December 31, 2008 to $127.9 million from $83.6 million for the year ended
December 31, 2007 primarily due to significant higher spot market rates during
2008.





Cash
flows used in investing activities decreased by 62.0% for the year ended
December 31, 2008 to $10.1 million compared to $26.4 million for the year ended
December 31, 2007. The investing activities during 2008 represent vessel
improvements, while the investing activities during 2007 represent both deposits
and vessel improvements.





Cash
flows used in financing activities increased by 79.5% for the year ended
December 31, 2008 to $99.8 million compared to $55.6 million for the year ended
December 31, 2007. The financing activities represent (i) net repayment of debt
under the Credit Facility of $90.5 million, (ii) payment of $2.3 million related
to the extension of the Credit Facility, and (iii) dividends paid of $165.9
million, all of which were offset by proceeds from a follow-on offering of
$158.9 million.





In May
2008, the Company completed an underwritten public offering of 4,310,000 common
shares.  The net proceeds of the offering were $158.9 million which
were used to repay borrowings under the Credit Facility and prepare the Company
for further expansions.





The
Company believes that its borrowing capacity under the Credit Facility, together
with its working capital, are sufficient to fund its ongoing operations and
commitments for capital expenditures. For further information on capital
commitments and expenditures please see Item 5F.




35







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




Not
applicable.




D.
            TREND
      INFORMATION




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 2009 Tanker Market.




Passage
of any climate control legislation or other regulatory initiatives that restrict
emissions of greenhouse gases could have a significant financial and operational
impact on our business, which we cannot predict with certainty at this time.
Such regulatory measures could increase our costs related to operating and
maintaining our vessels and require us to install new emission controls, acquire
allowances or pay taxes related to our greenhouse gas emissions, or administer
and manage a greenhouse gas emissions program. In addition, growing public
concern about climate change and increased regulation of greenhouse gases may,
in the long-term, lead to reduced demand for oil and reduced demand for our
services. See Item 4. Information on the Company – Business Overview
—Environmental and Other Regulation—Greenhouse Gas Regulation.




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, 2009 significant contractual obligations consisted of our
obligations as borrower under our 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, 2009 (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)
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -Interest
      Payments (2)
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -Commitment
      Fees (3)
            
            
            3,947
            
            
            
            1,065
            
            
            
            2,132
            
            
            
            750
            
            
            
            -Deposit
      in Contract(4)
            
            
            182,555
            
            
            
            182,555
            
            
            
            -
            
            
            
            -
            
            
            
            -Management
      Fees (5)
            
            
            2,650
            
            
            
            265
            
            
            
            530
            
            
            
            530
            
            
            
            1,325Total
            
            
            189,152
            
            
            
            183,885
            
            
            
            2,662
            
            
            
            1,280
            
            
            
            1,325





Notes:(1)
            Refers
      to our obligation to repay indebtedness outstanding as of December 31,
      2009(2)
            Refers
      to estimated interest payments over the term of the indebtedness
      outstanding as of December 31, 2009.(3)
            Refers
      to estimated commitment fees over the term of the indebtedness outstanding
      as of December 31, 2009(4)
            Refers
      to payment obligations in connection with the agreement to acquire two
      newbuildings entered into in November 2007, and the agreement to acquire
      the double-hull Suezmax tanker Nordic Passat entered into November
      2009(5)
            Refers
      to the management fees payable to Scandic American Shipping Ltd. under the
      Management Agreement with the
Manager.





36





CRITICAL
ACCOUNTING ESTIMATES




We
prepare our financial statements in accordance with accounting principles
generally accepted in the United States of America, or U.S. 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 –
Business and 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
use 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.




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.




The
Company has performed analysis of undiscounted future cashflows and concluded
that based on such analysis the vessels are not impaired.




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.




37






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 June 2009, the FASB issued "Accounting
Standards Codification and the Hierarchy of Generally Accepted Accounting
Principles" (the "Codification") which became the single source of authoritative
accounting principles recognized by the FASB and the framework for selecting the
principles used in the preparation of financial statements of nongovernmental
entities that are presented in conformity with generally accepted accounting
principles in the United States. The Codification's content carries the same
level of authority, effectively superseding previous guidance. In other words,
the GAAP hierarchy was modified to include only two levels of GAAP:
authoritative and non-authoritative. Rules and interpretive releases of the SEC
under the authority of federal securities laws are also source of authoritative
GAAP for SEC registrants. The guidance is effective for financial statements
issued for interim and annual periods ending after September 15, 2009. The
Company adopted the Codification in 2009.





In
February 2008, the FASB issued FASB Staff Position No. 157-2 codified into ASC
Topic 820 "Fair Value Measurement and Disclosures", which delays the effective
date of SFAS No. 157, "Fair Value Measurement," to fiscal years beginning
after November 15, 2008 for all nonfinancial assets and liabilities, except
those that are recognized or disclosed at fair value in the financial statements
on a recurring basis (at least annually). The Company adopted SFAS 157, except
as it applies to nonfinancial assets and liabilities as noted in FSP 157-2,
beginning from January 1, 2008. Effective January 1, 2009, the Company adopted
this guidance for nonfinancial assets and liabilities measured at fair value on
a nonrecurring basis. The application of this guidance did not have a
significant impact on the Company's financial statement.




In May
2009, the Financial Accounting Standard Board (FASB) issued SFAS No. 165
(codified into ASC Topic 855) "Subsequent Events", which provides guidance on
management's assessment of subsequent events. The new guidance:




·
            Clarifies
      that management must evaluate, as of each reporting period (i.e. interim
      and annual), events or transactions that occur after the Balance Sheet
      date "through the date that the financial statements are issued or are
      available to be issued."




·
            Does
      not change the recognition and disclosure requirements in AICPA
      Professional Standards, AU Section 560, "Subsequent Events" ("AU Section
      560") for Type I and Type II subsequent events; however, the guidance
      refers to them as recognized (Type I) and non-recognized subsequent events
      (Type II).




·
            Indicates
      that management should consider supplementing historical financial
      statements with the pro forma impact of non-recognized subsequent events
      if the event is so significant that disclosure of the event could be best
      made through the use of pro forma financial
  data.






This new
guidance is effective prospectively for interim or annual financial periods
ending after June 15, 2009. Adoption of this new guidance in the second quarter
of 2009 did not have significant impact on the Company's financial
statements.




In June
2009, the FASB issued SFAS No. 167 "Amendments to FASB Interpretation No. 46(R)"
codified into ASC Topic 810 "Consolidation".This guidance eliminates Interpretation
46(R)'s exceptions to consolidating qualifying special-purpose entities,
contains new criteria for determining the primary beneficiary, and increases the
frequency of required reassessments to determine whether a company is the
primary beneficiary of a variable interest entity. This guidance also contains a
new requirement that any term, transaction or arrangement that does not have a
substantive effect on an entity's status as a variable interest entity, a
company's power over a variable interest entity, or a company's obligation to
absorb losses or its right to receive benefits of an entity must be disregarded
in applying Interpretation 46(R)'s provisions. The elimination of the qualifying
special-purpose entity concept and its consolidation exceptions means more
entities will be subject to consolidation assessments and reassessments. This
new guidance will be effective January 1, 2010. The adoption of this
pronouncement is not expected to have a material impact on the Company's
financial position and results of operations.


38







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
            62
            Chairman,
      Chief Executive Officer, President and DirectorAndreas
      Ove Ugland
            55
            Vice
      Chairman and DirectorTurid
      M. Sørensen
            49
            Chief
      Financial OfficerRolf
      Amundsen
            65
            Chief
      Investor Relations OfficerHon.
      Sir David Gibbons
            82
            DirectorTorbjørn
      Gladsø
            63
            DirectorAndrew
      W. March
            54
            DirectorPaul
      J. Hopkins
            62
            DirectorRichard
      H. K. Vietor
            65
            Director




The
Manager




Name
            Age
            PositionHerbjørn
      Hansson
            62
            Director,
      President and Chief Executive OfficerTurid
      M. Sørensen
            49
            Chief
      Financial OfficerRolf
      Amundsen
            65
            Chief
      Investor Relations OfficerFrithjof
      Bettum
            48
            Senior
      Vice President Technical OperationsJanne
      O. Foyn
            39
            Financial
      ManagerPer
      Christian Jæger
            33
            Vice
      President Commercial OperationsJan
      Erik Langangen
            60
            Executive
      Vice President—Business Development and
Legal





39





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.




Andreas Ove Ugland has been a
director of the Company since 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.




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. He previously served as our Chief Financial
Officer from June 2004 until he assumed his current position. 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.




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. 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., where he was responsible for all aspects of the business,
including long -term strategy. From 1986 until 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.




40







Richard H. K. Vietorhas been
a director of the Company since July 2007. Mr. Vietor is the Paul Whiton
Cherrington Professor 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.
Previously, beginning in 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 Scandinavia. 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, being appointed by the Norwegian Prime Minister. 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
Senior 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 22 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.




Janne O. Foyn was appointed
Financial Manager of the Manager on May 1, 2006. Ms. Foyn has a Registered
Auditor degree from Bodø University College and Vestfold University College. Ms.
Foyn has 12 years of experience in the shipping industry. During the period 1995
to 2001, she was employed by Deloitte & Touche Statsautoriserte Revisorer AS
in Tønsberg, Norway where she served as an auditor. In the period from 2001 to
2005, she was employed by Ugland Nordic Shipping ASA and Teekay Norway AS as
Accounting Manager. From 2005 until her appointment as Financial Manager in May
2006, she worked as an auditor for Inter Revisjon AS in Tønsberg,
Norway.




Per Christian Jæger was
appointed Vice President – Commercial Operations of the Manager on November 1,
2009. Mr. Jæger has a BSc in Nautical Science from Vestfold University College,
and an MSc in Shipping, Trade and Finance from Cass Business School, London. Mr.
Jæger has 13 years of experience in the shipping industry. In the period from
1998 to 2008 Mr. Jæger had various positions in Odfjell SE, as deck officer, and
on shore primarily with focus on commercial operations. In the period 2008 to
2009 Mr. Jæger was employed as analyst in DnB NOR Bank ASA – focusing on
Shipping, Offshore and Logistics.




41







B.
            COMPENSATION




Compensation
of Directors




The six
non-employee directors received, in the aggregate, approximately $413,000 in
cash fees for their services as directors for the year ended December 31, 2009.
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 $12,000 each per year.  The
Chairman of the Audit Committee receives an additional annual cash retainer of
$6,000 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.




2004
Stock Incentive Plan





Outstanding
stock option awards under the Company's 2004 Stock Incentive Plan, were
cancelled in 2009.





Under the
terms of the Company's 2004 Stock Incentive Plan, or (the "Plan"), the
directors, officers and certain key employees of the Company and the Manager
were eligible to receive awards which included 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 Plan were 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 exceeds a 3% yield calculated based on the
initial strike price. During 2005, the Company granted an aggregate of 320,000
stock options under the Plan which were subject to vesting 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. During 2007, the Company granted 10,000 stock options to a
newly elected Board member with an exercise price equal to $35.17, subject to
annual downward adjustment if the payment of dividends in the related fiscal
year exceeds a 3% yield calculated based on the initial strike price. During
2008, a former Board member cancelled his stock incentive award in agreement
with the Company and received compensation of $100,000. During 2009, we
cancelled an aggregate of 320,000 outstanding stock options under the Plan
previously granted to directors of the Company (60,000 in total), the Chairman
and Chief Executive Officer (100,000), employees of the Company (80,000) and
employees of Scandic American Shipping Limited (80,000). The outstanding stock
option awards were cancelled in exchange for a payment equal to the difference
between the strike price of the options and $30.70, which was the closing price
of the Company's common stock on the New York Stock Exchange on August 13, 2009.
Following the cancellation of the outstanding stock option awards described
above, the Company has no outstanding stock options under the Plan. Please see
Note 10 to the audited financial statements included herein for further
information about the Plan.





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 his 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 his services as a
director or the Chairman of the Board. The aggregate compensation of our
executive officers during 2009 was approximately $2.9 million, of which $1.2
million relates to the cancellation of the Plan. The aggregate compensation of
our executive officers is expected to be approximately $1.9 million during 2010.
Under certain circumstances, 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.


42








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 2009.  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 $30,000 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.




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, see Item 16G – Corporate
Governance.




There are
no contracts between us and any of our directors providing for benefits upon
termination of their employment.





D.
            EMPLOYEES





As at
December 31, 2009, the Company had two full-time employees and one part-time
employee.





The
Manager, under the Management Agreement, assumes the 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 by the Board of
Directors.





E.
            SHARE
      OWNERSHIP





The
following table sets forth information regarding the share ownership of the
Company as of May 21, 2010 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)
            869,976
            1.86%Hon.
      Sir David Gibbons
            
            *Thorbjørn
      Gladsø
            
            *Andrew  W.
      March
            
            *Paul
      J. Hopkins
            
            *Andreas
      Ove Ugland
            
            *Turid
      M. Sørensen
            
            *Rolf
      Amundsen
            
            *Richard
      Vietor
            
            *





(1)
Includes 869,976 shares held by the Manager, of which Mr. Hansson is the sole
shareholder.




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




43







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





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 (determined as described below) 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
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 2009 were $95.4 million or $2.35 per share. The dividend
payments per share in 2009, 2008, 2007, 2006 and 2005 have been as
follows:




Period
            
            2009
            
            
            2008
            
            
            2007
            
            
            2006
            
            
            20051st
      Quarter
            
            $
            0.87
            
            
            $
            0.50
            
            
            $
            1.00
            
            
            $
            1.88
            
            
            $
            1.622nd
      Quarter
            
            
            0.88
            
            
            
            1.18
            
            
            
            1.24
            
            
            
            1.58
            
            
            
            1.153rd
      Quarter
            
            
            0.50
            
            
            
            1.60
            
            
            
            1.17
            
            
            
            1.07
            
            
            
            0.844th
      Quarter
            
            
            0.10
            
            
            
            1.61
            
            
            
            0.40
            
            
            
            1.32
            
            
            
            0.60Total
            
            $
            2.35
            
            
            $
            4.89
            
            
            $
            3.81
            
            
            $
            5.85
            
            
            $
            4.21







44




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




The
Company declared a dividend of $0.25 per share in respect of the fourth quarter
of 2009 which was paid to shareholders in March 2010. In addition, the Company
declared a dividend of $ 0.60 per share in respect of the first quarter of 2010,
which is scheduled to be paid to shareholders in June 2010.




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
            
            
            OSE
            
            
            OSEThe
      year ended:
            
            HIGH
            
            
            LOW
            
            
            HIGH
            
            
            LOW2005(1)
            
            $
            56.68
            
            
            $
            28.60
            
            
            NOK
      225.00
            
            
            NOK
      205.002006
            
            $
            41.70
            
            
            $
            27.90
            
            
            
            N/A
            
            
            
            N/A2007
            
            $
            44.16
            
            
            $
            29.50
            
            
            
            N/A
            
            
            
            N/A2008
            
            $
            42.00
            
            
            $
            22.00
            
            
            
            N/A
            
            
            
            N/A2009
            
            $
            38.10
            
            
            $
            22.25
            
            
            
            N/A
            
            
            
            N/A





For
      the quarter ended:
            
            NYSE
              HIGH
            
            
            NYSE
              LOWMarch
      31, 2008
            
            $
            34.30
            
            
            $
            25.51June
      30, 2008
            
            $
            42.00
            
            
            $
            27.90September
      30, 2008
            
            $
            41.39
            
            
            $
            28.27December
      31, 2008
            
            $
            36.00
            
            
            $
            22.00March
      31, 2009
            
            $
            38.05
            
            
            $
            22.25June
      30, 2009
            
            $
            38.10
            
            
            $
            28.50September
      30, 2009
            
            $
            32.32
            
            
            $
            28.92December
      31, 2009
            
            $
            33.23
            
            
            $
            27.85







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


45





The high
and low market prices for our common shares by month since October 2009 have
been as follows:




For
      the month:
            
            NYSE
              HIGH
            
            
            NYSE
              LOWNovember
      2009
            
            $
            32.75
            
            
            $
            27.85December
      2009
            
            $
            33.23
            
            
            $
            29.99January
      2010
            
            $
            34.19
            
            
            $
            29.67February
      2010
            
            $
            30.05
            
            
            $
            27.56March
      2010
            
            $
            31.07
            
            
            $
            28.65April
      2010
            
            $
            32.18
            
            
            $
            30.39





ITEM
      10.
            ADDITIONAL
      INFORMATION




A.
            SHARE
      CAPITAL




Not
applicable.




B.
            MEMORANDUM
      AND ARTICLES OF ASSOCIATION




Memorandum
of Association and Bye-Laws




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 of Directors 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.




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.




46







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.




Dividend
Reinvestment and Direct Stock Purchase Plan





On March
26, 2009, the Company filed a registration statement on Form F-3ASR relating to
the Dividend Reinvestment and Direct Stock Purchase Plan for 1,664,450 shares of
common stock to allow existing shareholders to purchase additional common stock
by reinvesting all or a portion of the dividends paid on their common stock and
by making optional cash investments and new investors to enter into the plan by
making an initial investment.  As at December 31, 2009, no shares were
issued pursuant to the plan.





Stockholders
Rights Agreement





On
February 13, 2007, the Board of Directors adopted a stockholders rights
agreement and declared a dividend of one preferred stock purchase right to
purchase one one-thousandth of a share of our Series A Participating Preferred
Stock for each outstanding share of our 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 us one
one-thousandth of a share of Series A Participating Preferred Stock at an
exercise price of $115, subject to adjustment. We 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.


47








This
stockholders rights plan was designed to enable us to protect stockholder
interests in the event that an unsolicited attempt is made for a business
combination with, or a takeover of, the Company. We believe that the
stockholders rights plan should enhance our Board's negotiating power on behalf
of stockholders in the event of a coercive offer or proposal. We are not
currently aware of any such offers or proposals.







C.
            MATERIAL
      CONTRACTS




For a
description of our Credit Facility, which was extended in April 2008, see Item 5
— Operating and Financial Review and Prospectus — Liquidity and Capital
Resources — Our Credit Facility.




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.




48







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




Bermuda
Tax Considerations




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.




United
States Federal Income Tax Considerations




The
following discussion is a summary of the material United States federal income
tax considerations relevant to us and to a United States Holder and Non-United
States Holder (each defined below) of our common shares.  This
discussion is based on advice received by us from Seward & Kissel LLP, our
United States counsel.  This discussion does not purport to deal with
the tax consequences of owning common shares to all categories of investors,
some of which (such as dealers in securities or currencies, investors whose
functional currency is not the United States dollar, financial institutions,
regulated investment companies, real estate investment trusts, tax-exempt
organizations, insurance companies, persons holding our common shares as part of
a hedging, integrated, conversion or constructive sale transaction or a
straddle, persons liable for alternative minimum tax and persons who are
investors in pass-through entities) may be subject to special rules. This
discussion only applies to shareholders who (i) own common shares as a capital
asset and (ii) own less than 10% of our common shares. Shareholders are
encouraged to consult their own tax advisors with respect to the specific tax
consequences to them of purchasing, holding or disposing of common
shares.




United
States Taxation of the Company





Taxation
of Operating Income: In General




Unless
exempt from United States taxation under Code section 883 as amended, a foreign
corporation is subject to United States federal income taxation in the manner
described below in respect of any income that is derived from the use of
vessels, from the hiring or leasing of vessels for use on a time, voyage or
bareboat charter basis, or from the performance of services directly related to
such use, which we refer to as Shipping Income, to the extent that such Shipping
Income is derived from sources within the United States, referred to as United
States-Source Shipping Income.




Shipping
Income that is attributable to transportation that begins or ends, but that does
not both begin and end, in the United States will be considered to be 50%
derived from sources within the United States. Shipping Income that is
attributable to transportation that both begins and ends in the United States
will be considered to be 100% derived from sources within the United
States.


49








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




Our
vessels will be operated in various parts of the world and, in part, are
expected to be involved in transportation of cargoes that begins or ends, but
that does not both begin and end, in United States ports. Accordingly, it is not
expected that we will engage in transportation that gives rise to 100% United
States-Source Shipping Income.




Exemption
of Operating Income from United States Taxation




Pursuant
to Code section 883, we will be exempt from United States taxation on our United
States-Source Shipping Income if (i) we are organized in a foreign country that
grants an equivalent exemption from income taxation (an "equivalent exemption")
to corporations organized in the United States, which we refer to as the Country
of Organization Requirement, and (ii) either (A) more than 50% of the value of
our common shares is owned, directly or indirectly, by individuals who are
"residents" of such country or of another foreign country that grants an
equivalent exemption to corporations organized in the United States, which we
refer to as the 50% Ownership Test, or (B) our common shares are "primarily and
regularly traded on an established securities market" in such country, in
another country that grants an equivalent exemption to United States
corporations, or in the United States, which we refer to as the Publicly-Traded
Test.




Bermuda,
the country in which we are incorporated, grants an equivalent exemption to
United States corporations. Therefore, we will satisfy the Country of
Organization Requirement and will be exempt from United States federal income
taxation with respect to our United States-Source Shipping Income if we satisfy
either the 50% Ownership Test or the Publicly-Traded Test.





We
believe that we satisfied the Publicly-Traded Test for our 2009 taxable year.
Under Treasury regulations interpreting Code section 883, stock of a corporation
is treated as "primarily and regularly traded on an established securities
market" in any taxable year if (i) the stock is primarily traded on a national
securities exchange such as the New York Stock Exchange (on which our common
shares are traded) and satisfies certain trading volume and trading frequency
tests, and (ii) the corporation complies with certain record keeping and
reporting requirements.





However,
a foreign corporation will not satisfy the Publicly-Traded Test if, subject to
certain exceptions, 50% or more of the stock is beneficially owned (or is
treated as owned under certain stock ownership attribution rules) by persons
each of whom owns (or is treated as owning under certain stock ownership
attribution rules) 5% or more of the stock, which we refer to as 5%
Shareholders, for more than half the days during the taxable year.





We are
not aware of any facts which would indicate that 50% or more of our common
shares were actually or constructively owned by 5% Shareholders during our 2009
taxable year, although there can be no assurance that subsequent changes in the
ownership of our common shares will not result in 50% or more of our common
shares being so owned at any time in the future.





Accordingly,
we expect that our common shares will be considered to be "primarily and
regularly traded on an established securities market" and that we will,
therefore, qualify for the Code section 883 exemption for our 2009 taxable
year.  However, because of the factual nature of the issues relating
to this determination, no assurance can be given that we will qualify for the
tax exemption in any future taxable year. If 5% Shareholders owned 50% or more
of our common shares, then we would have to satisfy certain requirements
regarding the identity and residence of our 5% shareholders. These requirements
are onerous and there is no assurance that we could satisfy them.




United
States Taxation of Gain on Sale of Vessels




Regardless
of whether we qualify for exemption under Code section 883, we will generally
not be subject to United States taxation with respect to gains realized on sales
of vessels.


50








Four
Percent Gross Basis Tax Regime


To the
extent the benefits of Code section 883 are unavailable with respect to any item
of United States-Source Shipping Income, such Shipping Income that is considered
not to be "effectively connected" with the conduct of a trade or business in the
United States as discussed below, would be subject to a four percent tax imposed
by Code section 887 on a gross basis, without benefit of deductions. Since under
the sourcing rules described above, no more than 50% of our Shipping Income
would be derived from United States sources, the maximum effective rate of
United States federal income tax on our gross Shipping Income would never exceed
two percent.




Net
Basis and Branch Profits Tax Regime




To the
extent the benefits of the Section 883 exemption are unavailable and our United
States-Source Shipping Income is considered to be "effectively connected" with
the conduct of a U.S. trade or business, as described below, any such
"effectively connected" United States-Source Shipping Income, net of applicable
deductions, would be subject to the U.S. federal corporate income tax currently
imposed at rates of up to 35%. In addition, we may be subject to the 30% "branch
profits" taxes on earnings effectively connected with the conduct of such trade
or business, as determined after allowance for certain adjustments, and on
certain interest paid or deemed paid attributable to the conduct of its U.S.
trade or business.




Our
United States-Source Shipping Income would be considered "effectively connected"
with the conduct of a U.S. trade or business only if we have, or are considered
to have, a fixed place of business in the United States involved in the earning
of Shipping Income and certain other requirements are satisfied.




We do not
intend to have a fixed place of business in the United States involved in the
earning of Shipping Income. Based on the foregoing and on the expected mode of
our shipping operations and other activities, we believe that none of our United
States-Source Shipping Income will be "effectively connected" with the conduct
of a U.S. trade or business.




United
States Taxation of United States Shareholders




As used
herein, the term "United States Holder" means, for United States federal income
tax purposes, a beneficial owner of common shares who is (A) an individual
citizen or resident of the United States, (B) a corporation (or other entity
treated as a corporation) created or organized in or under the laws of the
United States or of any state or the District of Columbia, (C) an estate the
income of which is includible in gross income for United States federal income
tax purposes regardless of its source, or (D) a trust if a court within the
United States is able to exercise primary supervision over the administration of
the trust and one or more United States persons have the authority to control
all substantial decisions of the trust.




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




Distributions




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


51








Dividends
paid on our common shares to a United States Holder who is an individual, trust
or estate (a "United States Individual Holder") will generally be treated as
"qualified dividend income" that is taxable to such United States Individual
Holders at preferential tax rates (through 2011) provided that (1) the common
shares are readily tradable on an established securities market in the United
States (such as the New York Stock Exchange on which our common shares are
traded); (2) we are not a passive foreign investment company for the taxable
year during which the dividend is paid or the immediately preceding taxable year
(as discussed below); (3) the United States Individual Holder has owned the
common shares for more than 60 days in the 121-day period beginning 60 days
before the date on which the common shares becomes ex-dividend, and (4) the
United States Individual Holder is not under an obligation (whether pursuant to
a short sale or otherwise) to make payments with respect to positions in
substantially similar or related positions. There is no assurance that any
dividends paid on our common shares will be eligible for these preferential
rates in the hands of a United States Individual Holder. Any dividends paid by
the company which are not eligible for these preferential rates will be taxed as
ordinary income to a United States Individual Holder. Legislation was previously
introduced in the U.S. Congress which, if enacted in its present form, would
preclude our dividends from qualifying for such preferential rates prospectively
from the date of enactment. We cannot assure you as to whether this legislation
will be enacted.  In addition, absent legislative action, any
dividends paid by us on or after January 1, 2011 will be taxed as ordinary
income to a United States Individual Holder.




For
taxable years through 2004, we were a passive foreign investment company, or
PFIC. Therefore, the dividends paid by us through 2005 were not treated as
"qualified dividend income" but rather were taxed as ordinary income to a United
States Individual Holder. If we pay an "extraordinary dividend" on our common
shares (generally, a dividend in an amount which is equal to or in excess of 10%
of a shareholder's adjusted basis (or fair market value in certain
circumstances) in the shareholder's common shares) that is treated as "qualified
dividend income," then any loss derived by a United States Individual Holder
from the sale or exchange of such common shares will be treated as long-term
capital loss to the extent of such dividend.




Sale,
Exchange or other Disposition of Common Shares




Assuming
we do not constitute a PFIC for taxable years after 2004, a United States Holder
generally will recognize taxable gain or loss upon a sale, exchange or other
disposition of our common shares in an amount equal to the difference between
the amount realized by the United States Holder from such sale, exchange or
other disposition and the United States Holder's tax basis in such shares. Such
gain or loss will be treated as long-term capital gain or loss if the United
States Holder's holding period is greater than one year at the time of the sale,
exchange or other disposition. Such capital gain or loss will generally be
treated as United States-source income or loss, as applicable, for United States
foreign tax credit purposes. A United States Holder's ability to deduct capital
losses is subject to certain limitations.





Special
rules may apply to a United States Holder who purchased shares before 2005 and
did not make a timely QEF election or a mark-to-market election (as discussed
below).  Such United States Holders are encouraged to consult their
tax advisors regarding the United States federal income tax consequences to them
of the disposal of our common shares.




Passive
Foreign Investment Company Considerations




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





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


52





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




For
taxable years through 2004, we were a PFIC. However, based on our current
operations and future projections, we do not believe that we have been, or will
become, a PFIC with respect to our taxable years after 2004. Although there is
no legal authority directly on point, and we are not relying upon an opinion of
counsel on this issue, our belief is based principally on the position that, for
purposes of determining whether we are a PFIC, the gross income we derive or are
deemed to derive from the time chartering and voyage chartering activities of
our wholly-owned subsidiaries should constitute services income, rather than
rental income. Correspondingly, such income should not constitute passive
income, and the assets that we or our wholly-owned subsidiaries own and operate
in connection with the production of such income, in particular, the vessels,
should not constitute passive assets for purposes of determining whether we are
a PFIC. We believe there is substantial legal authority supporting our position
consisting of case law and Internal Revenue Service pronouncements concerning
the characterization of income derived from time charters and voyage charters as
services income for other tax purposes. However, we note that there is also
authority which characterizes time charter income as rental income rather than
services income for other tax purposes. In the absence of any legal authority
specifically relating to the statutory provisions governing passive foreign
investment companies, the Internal Revenue Service or a court could disagree
with our position. In addition, although we intend to conduct our affairs in a
manner to avoid being classified as a PFIC, we cannot assure you that the nature
of our operations will not change in the future.




As
discussed more fully below, if we were to be treated as a PFIC for any taxable
year which included a United States Holder's holding period in our common
shares, then such United States Holder would be subject to different taxation
rules depending on whether the United States Holder makes an election to treat
us as a "Qualified Electing Fund," which election we refer to as a "QEF
election." As an alternative to making a QEF election, a United States Holder
should be able to make a "mark-to-market" election with respect to our common
shares, as discussed below.  In addition, for taxable years beginning
after March 18, 2010, a United States Holder of Shares in a PFIC must file
annual information returns with the Internal Revenue Service.




Taxation
of United States Holders Making a Timely QEF Election




Pass-Through of Ordinary Earnings and
Net Capital Gain. A United States Holder who makes a timely QEF election
with respect to its common shares, or an Electing Holder, would report for
United States federal income tax purposes his pro rata share of our "ordinary
earnings" (i.e., the net operating income determined under United States federal
income tax principles) and our net capital gain, if any, for our taxable year
that ends with or within the taxable year of the Electing Holder. Our "net
capital gain" is any excess of any of our net long term capital gains over our
net short term capital losses and is reported by the Electing Holder as long
term capital gain. Our net operating losses or net capital losses would not pass
through to the Electing Holder and will not offset our ordinary earnings or net
capital gain reportable to Electing Holders in subsequent years (although such
losses would ultimately reduce the gain, or increase the loss, if any,
recognized by the Electing Holder on the sale of his common
shares).




For
purposes of calculating our ordinary earnings, the cost of each vessel is
depreciated on a straight-line basis over 18 years. Any gain on the sale of a
vessel would be treated as ordinary income, rather than capital gain, to the
extent of such depreciation deductions with respect to such vessel.




In
general, an Electing Holder would not be taxed twice on its share of our income.
Thus, distributions received from us by an Electing Holder are excluded from the
Electing Holder's gross income to the extent of the Electing Holder's prior
inclusions of our ordinary earnings and net capital gain. The Electing Holder's
basis in its shares would be increased by any amount included in the Electing
Holder's income under the QEF rules with respect to such holder. Distributions
received by an Electing Holder,which are not includible in income because they have been previously
taxed under the QEF rules, would decrease the Electing Holder's tax basis in the
common shares. Distributions, if any, in excess of such basis would be treated
as capital gain (which gain will be treated as long term capital gain if the
Electing Holder held its common shares for more than one year at the time of
distribution).


53







Disposition of Common Shares.An Electing Holder would generally recognize capital gain or loss on the
sale or exchange of common shares in an amount equal to the difference between
the amount realized by the Electing Holder from such sale or exchange and the
Electing Holder's tax basis in the common shares. Such gain or loss would
generally be treated as long term capital gain or loss if the Electing Holder's
holding period in the common shares at the time of the sale or exchange is more
than one year. A United States Holder's ability to deduct capital losses may be
limited.




Making a QEF Election.A
United States Holder makes a QEF election for a taxable year by completing and
filing IRS Form 8621, Return by a Shareholder of a Passive Foreign Investment
Company or Qualified Electing Fund, in accordance with the instructions thereto.
If we were aware that we were to be treated as a PFIC for any taxable year, we
would provide each United States Holder with all necessary information in order
to make the QEF election described above.




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




Mark-to-Market Regime.A
United States Holder who does not make a QEF election may make a mark-to-market
election under Code section 1296, provided that the common shares are regularly
traded on a "qualified exchange." A "qualified exchange" includes a foreign
exchange that is regulated by a governmental authority in which the exchange is
located and with respect to which certain other requirements are met. The New
York Stock Exchange, on which the common shares are traded, is a "qualified
exchange" for United States federal income tax purposes. A United States Holder
who makes a timely mark-to-market election with respect to the common shares
would include annually in the United States Holder's income, as ordinary income,
any excess of the fair market value of the common shares at the close of the
taxable year over the United States Holder's then adjusted basis in the common
shares. The excess, if any, of the United States Holder's adjusted basis at the
close of the taxable year over the then fair market value of the common shares
would be deductible in an amount equal to the lesser of the amount of the excess
or the net mark-to-market gains on the common shares that the United States
Holder included in income in previous years. A United States Holder's basis in
its common shares would be adjusted to reflect any income or loss amount
recognized pursuant to the mark-to-market rules.




Disposition of Common Shares.A United States Holder who makes a timely mark-to-market election would
recognize ordinary income or loss on a sale, exchange or other disposition of
the common shares in an amount equal to the difference between the amount
realized by the United States Holder from such sale, exchange or other
disposition and the United States Holder's tax basis in the common shares,
provided, however, that any ordinary loss on the sale, exchange or other
disposition may not exceed the net mark-to-market gains on the common shares
that the United States Holder included in income in previous years. The amount
of any loss in excess of such net mark-to market gains is treated as capital
loss.




Making the Mark-to-Market Election.A United States Holder makes a mark-to-market election for a taxable year
by completing and filing IRS Form 8621, Return by a Shareholder of a Passive
Foreign Investment Company or Qualified Electing Fund, in accordance with the
instructions thereto.




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




A United
States Holder who does not make a timely QEF election or a timely mark-to-market
election, which we refer to as a Non-Electing Holder, would be subject to
special rules with respect to (i) any "excess distribution" (generally, the
portion of any distributions received by the Non-Electing Holder on the common
shares in a taxable year in excess of 125% of the average annual distributions
received by the Non-Electing Holder in the three preceding taxable years, or, if
shorter, the Non-Electing Holder's holding period for the common shares), and
(ii) any gain realized on the sale or other disposition of common shares. Under
these rules, (i) the excess distribution or gain would be allocated ratably over
the Non-Electing Holder's holding period for the common shares; (ii) the amount
allocated to the current taxable year, and any taxable year prior to the first
taxable year in which we were a PFIC, would be taxed as ordinary income; and
(iii) the amount allocated to each of the other prior taxable years would be
subject to tax at the highest rate of tax in effect for the applicable class of
taxpayer for that year, and an interest charge for the deemed deferral benefit
would be imposed with respect to the resulting tax attributable to each such
other taxable year. If a Non-Electing Holder dies while owning common shares,
the Non-Electing Holder's successor would be ineligible to receive a step-up in
tax basis of those common shares.





54





Distributions
received by a Non-Electing Holder that are not "excess distributions" would be
includible in the gross income of the Non-Electing Holder as dividend income to
the extent that such distributions are paid out of our current or accumulated
earnings and profits as determined under United States federal income tax
purposes. Such dividends would not be eligible to be treated as "qualified
dividend income" eligible for preferential tax rates. Distributions in excess of
our current or accumulated earnings and profits would be treated first as a
return of the United States Holder's tax basis in the common shares (thereby
increasing the amount of any gain or decreasing the amount of any loss realized
on the subsequent sale or disposition of such common shares) and thereafter as
capital gain.





Taxation
of United States Holders Who Acquired Shares Before 2005





We were a
passive foreign investment company through the 2004 taxable
year.  Therefore, a United States Holder who acquired our common
shares before 2005 may be subject to special rules with respect to our common
shares.  In particular, a United States Holder who did not make a
timely QEF Election or a mark-to-market election may continue to be subject to
the passive foreign investment company rules with respect to our common
shares.  Such United States Holders are encouraged to consult their
tax advisors regarding the application of these rules as well as the
availability of certain elections which may ameliorate the application of these
rules.




United
States Federal Income Taxation of "Non-United States Holders"




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




Dividends
on Common Shares




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




Sale,
Exchange or Other Disposition of Common Shares




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




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


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


55




Backup
Withholding and Information Reporting




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





·
              fail
      to provide an accurate taxpayer identification
      number;
  ·
                are
      notified by the Internal Revenue Service that you have failed to report
      all interest or dividends required to be shown on your federal income tax
      returns; or


·
              in
      certain circumstances, fail to comply with applicable certification
      requirements.


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


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




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




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.


56





We
furnish holders of our common shares with annual reports containing audited
financial statements and a report by our independent registered public
accounting firm, 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 Credit
Facility.




Amounts
borrowed under the 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 $0.1 million in our interest expense for the year ended December
31, 2009.




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. Fourteen
of our 16 operating 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 2009, a $1,000 per day decrease in the spot market rate
would have decreased our voyage revenue by approximately $4.4
million.




ITEM
      12.
            DESCRIPTION
      OF SECURITIES OTHER THAN EQUITY
SECURITIES




Not
applicable.




PART
II




ITEM
      13.
            DEFAULTS,
      DIVIDEND ARREARAGES AND
DELINQUENCIES




Not
applicable.




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




Not
applicable.




57







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 Chief Financial Officer, evaluated the
effectiveness of the design and operation of the Company's disclosure controls
and procedures as of December 31, 2009. 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 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.




Our
management assessed the effectiveness of our internal control over financial
reporting as of December 31, 2009. 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, 2009, 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, 2009 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.


58





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, 2009, 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, 2009
            
            $
            259,417FISCAL
      YEAR ENDED DECEMBER 31, 2008
            
            $
            197,974





Included
in the amounts are costs associated with the requirements of Section 404 of the
Sarbanes-Oxley Act of 2002 for the fiscal years 2009 and 2008 of $58,400 and
$59,400, respectively.





B.
            AUDIT-RELATED
      FEES (1)





FISCAL
      YEAR ENDED DECEMBER 31, 2009
            
            $
            152,707FISCAL
      YEAR ENDED DECEMBER 31, 2008
            
            $
            111,935





(1)
            Audit-Related-Fees
      consists of professional services related to follow on
      offerings.





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.




59







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





Not
applicable.





ITEM
      16G.
            CORPORATE
      GOVERNANCE





Pursuant
to an exception for foreign private issuers, we, as a Bermuda company, are not
required to comply with the corporate governance practices followed by U.S.
companies under the NYSE listing standards. We believe that our established
practices in the area of corporate governance are in line with the spirit of the
NYSE standards and provide adequate protection to our shareholders.





There are
four significant differences between our corporate governance practices and the
NYSE standards applicable to listed U.S. companies. The NYSE requires that
non-management directors meet regularly in executive sessions without
management. The NYSE also requires that all independent directors meet in an
executive session at least once a year. As permitted under Bermuda law and our
bye-laws, our non-management directors do not regularly hold executive sessions
without management and we do not expect them to do so in the future. The NYSE
requires that a listed U.S. company have a nominating/corporate governance
committee of independent directors and a committee charter specifying the
purpose, duties and evaluation procedures of the committee. As permitted under
Bermuda law and our bye-laws, we do not currently have a nominating or corporate
governance committee. The NYSE requires, among other things, that a listed U.S.
company have an audit committee with a minimum of three members. As permitted by
Rule 10A-3 under the Securities Exchange Act of 1934, our audit committee
consists of two independent members of our Board of Directors. The NYSE requires
U.S. companies to adopt and disclose corporate governance guidelines. The
guidelines must address, among other things: director qualification standards,
director responsibilities, director access to management and independent
advisers, director compensation, director orientation and continuing education,
management succession and an annual performance evaluation. We are not required
to adopt such guidelines under Bermuda law and we have not adopted such
guidelines.





Information
about our corporate governance practices may also be found on our web-site,
www.nat.bm under "Investor Relations/Corporate
Governance."






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.


60





4.1  Restated
Management Agreement dated October 12, 2004, between Scandic American Shipping
Ltd. and Nordic American Tanker Shipping Limited, incorporated by reference to
Exhibit 4.4 to the Company's annual report on Form 20-F filed with the
Securities and Exchange Commission on June 30, 2005





4.2
Amendment to 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.





4.3  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.





4.4  Amendment
to Restated Management Agreement dated May 3, 2008, between Scandic American
Shipping Ltd. and Nordic American Tanker Shipping Limited incorporated by
reference to Exhibit 4.3 to the Company's annual report on Form 20-F for the
fiscal year ended December 31, 2007 filed with the Securities and Exchange
Commission on May 9, 2008.





4.5
Amendment to Restated Management Agreement dated May 31, 2009, between Scandic
American Shipping Ltd. and Nordic American Tanker Shipping Limited.





4.6  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.





4.7  Amendment
to 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, 2007
filed with the Securities and Exchange Commission on May 9, 2008.





4.8  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 for the
fiscal year ended December 31, 2005 filed June 30, 2006.





4.9  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.





4.10  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,
incorporated by reference to Exhibit 4.8 to the Company's annual report on Form
20-F for the fiscal year ended December 31, 2007 filed with the Securities and
Exchange Commission on May 9, 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.








61


NORDIC
AMERICAN TANKER SHIPPING LIMITED








TABLE OF
CONTENTS





PageREPORT
      OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
            F-2FINANCIAL
      STATEMENTS:Statements
      of Operations for the years ended December 31, 2009, 2008 and
      2007
            F-3Balance
      Sheets as of December 31, 2009 and 2008
            F-4Statements
      of Shareholders' Equity for the years ended December 31, 2009, 2008 and
      2007
            F-5Statements
      of Cash Flows for the years ended December 31, 2009, 2008 and
      2007
            F-6Notes
      to Financial Statements
            F-7








F-1


REPORT OF
INDEPENDENT REGISTRED 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, 2009 and 2008, and the related statements of
operations, shareholders' equity and cash flows for each of the three years
ended December 31, 2009. We also have audited the Company's internal control
over financial reporting as of December 31, 2009, 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, 2009 and 2008, and the results of their operations and their
cash flows for each of the three years in the period ended December 31, 2009, 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, 2009,
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 21,
2010


F-2





Statements of Operations for the
      Years Ended December 31, 2009, 2008, AND 2007
              All
      figures in USD '000, except share and per share
  amount








Year
      Ended December 31,Notes
            
            
            2009
            
            
            2008
            
            
            2007Voyage
      Revenues
            
            
            3
            
            
            
            124,370
            
            
            
            228,000
            
            
            
            186,986Voyage
      Expenses
            
            
            
            
            
            
            (8,959
            )
            
            
            (10,051
            )
            
            
            (47,122
            )Vessel
      Operating Expense - excluding depreciation expense presented
      below
            
            
            
            
            
            
            (43,139
            )
            
            
            (35,593
            )
            
            
            (32,124
            )General
      and Administrative Expenses
            
            
            2,5,6,10
            
            
            
            (14,819
            )
            
            
            (12,785
            )
            
            
            (12,132
            )Depreciation
      Expenses
            
            
            7
            
            
            
            (55,035
            )
            
            
            (48,284
            )
            
            
            (42,363
            )Net
      Operating Income
            
            
            
            
            
            
            2,418
            
            
            
            121,288
            
            
            
            53,245Interest
      Income
            
            
            
            
            
            
            614
            
            
            
            931
            
            
            
            904Interest
      Expenses
            
            
            12
            
            
            
            (1,794
            )
            
            
            (3,392
            )
            
            
            (9,683
            )Other
      Financial Income (Expense)
            
            
            
            
            
            
            (226
            )
            
            
            17
            
            
            
            (260
            )Total
      Other Expenses
            
            
            
            
            
            
            (1,406
            )
            
            
            (2,443
            )
            
            
            (9,039
            )Net
      Income
            
            
            
            
            
            
            1,012
            
            
            
            118,844
            
            
            
            44,206Basic
      Earnings per Share
            
            
            15
            
            
            
            0.03
            
            
            
            3.63
            
            
            
            1.56Diluted
      Earnings per Share
            
            
            15
            
            
            
            0.03
            
            
            
            3.62
            
            
            
            1.56Basic
      Weighted Average Number of Common Shares Outstanding
            
            
            
            
            
            
            40,449,522
            
            
            
            32,739,057
            
            
            
            28,252,472Diluted
      Weighted Average Number of Common Shares Outstanding
            
            
            
            
            
            
            40,449,522
            
            
            
            32,832,854
            
            
            
            28,294,997














The
footnotes are an integral part of these financial statements.


F-3





Balance
      Sheets as of December 31, 2009 AND 2008All
      figures in USD '000, except share and per share amount





Notes
            
            
            December
      31, 2009
            
            
            December
      31, 2008AssetsCurrent
      AssetsCash
      and Cash Equivalents
            
            
            
            
            
            30,496
            
            
            
            31,378Accounts
      Receivable, net $0 allowance at December 31, 2009 and 2008
            
            
            3
            
            
            
            22,685
            
            
            
            40,335Prepaid
      Expenses and Other Current Assets
            
            
            4,8
            
            
            
            57,020
            
            
            
            22,406Total
      Current Assets
            
            
            
            
            
            
            110,201
            
            
            
            94,119Non-current
      AssetsVessels,
      Net
            
            
            7
            
            
            
            825,449
            
            
            
            707,853Deposit
      on Contract
            
            
            8
            
            
            
            -
            
            
            
            9,000Other
      Non-current Assets
            
            
            9
            
            
            
            10,928
            
            
            
            2,906Total
      Non-current Assets
            
            
            
            
            
            
            836,377
            
            
            
            719,759Total
      Assets
            
            
            
            
            
            
            946,578
            
            
            
            813,878Liabilities
      and Shareholders' EquityCurrent
      LiabilitiesAccounts
      Payable
            
            
            2
            
            
            
            3,364
            
            
            
            1,947Deferred
      Revenue
            
            
            13
            
            
            
            537
            
            
            
            449Accrued
      Liabilities
            
            
            14
            
            
            
            2,909
            
            
            
            3,817Total
      Current Liabilities
            
            
            
            
            
            
            6,810
            
            
            
            6,214Long-term
      Debt
            
            
            11
            
            
            
            -
            
            
            
            15,000Deferred
      Compensation Liability
            
            
            6
            
            
            
            5,684
            
            
            
            4,078Total
      Liabilities
            
            
            
            
            
            
            12,494
            
            
            
            25,292Commitments
      and Contingencies
            
            
            17
            
            
            
            -
            
            
            
            -Shareholders'
      EquityCommon
      Stock, par value $0.01 per Share; 51,200,000 shares authorized, 42,204,904
      shares issued and outstanding and 34,373,271 shares issued and outstanding
      at December 31, 2009 and December 31, 2008, respectively
            
            
            16
            
            
            
            422
            
            
            
            344Additional
      Paid-in Capital
            
            
            
            
            
            
            933,662
            
            
            
            905,262Retained
      Earnings
            
            
            
            
            
            
            -
            
            
            
            (117,020
            )Total
      Shareholders' Equity
            
            
            
            
            
            
            934,084
            
            
            
            788,586Total
      Liabilities and Shareholders' Equity
            
            
            
            
            
            
            946,578
            
            
            
            813,878





The
footnotes are an integral part of these financial statements.


F-4





Statements of Shareholders'
      Equity for the Years Ended December 31, 2009, 2008,AND2007All
      figures in USD '000, except number of shares  Number
      of Shares
              
              
              Common
      Stock
              
              
              Additional
      Paid-in Capital
              
              
              Retained
      Earnings
              
              
              Total
      Shareholders' EquityBalance
      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
              )
              
              
              672,105Net
      Income
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              118,844
              
              
              
              118,844Common
      Shares Issued, net of $6.5 million issuance costs
              
              
              4,310,000
              
              
              
              43
              
              
              
              158,847
              
              
              
              -
              
              
              
              158,890Compensation
      - Restricted Shares
              
              
              87,959
              
              
              
              1
              
              
              
              3,617
              
              
              
              -
              
              
              
              3,618Share-based
      Compensation
              
              
              -
              
              
              
              -
              
              
              
              1,015
              
              
              
              -
              
              
              
              1,015Dividend
      Paid, $4.89 per share
              
              
              
              
              
              
              -
              
              
              
              (110,338
              )
              
              
              (55,548
              )
              
              
              (165,886
              )Balance
      at December 31, 2008
              
              
              34,373,271
              
              
              
              344
              
              
              
              905,262
              
              
              
              (117,020
              )
              
              
              788,586Accumulated
      dividend distributions
                defined
      as return of capital.
              
              
              -
              
              
              
              -
              
              
              
              (117,020
              )
              
              
              117,020
              
              
              
              -Net
      Income
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              1,012
              
              
              
              1,012Common
      Shares Issued, net of $10.6  million issuance
    costs
              
              
              7,675,000
              
              
              
              77
              
              
              
              236,607
              
              
              
              -
              
              
              
              236,684Compensation
      - Restricted Shares
              
              
              156,633
              
              
              
              1
              
              
              
              5,365
              
              
              
              -
              
              
              
              5,366Share-based
      Compensation
              
              
              -
              
              
              
              -
              
              
              
              (2,133
              )
              
              
              -
              
              
              
              (2,133
              )Dividend
      Paid, $2.35 per share
              
              
              -
              
              
              
              -
              
              
              
              (94,419
              )
              
              
              (1,012
              )
              
              
              (95,431
              )Balance
      at December 31, 2009
              
              
              42,204,904
              
              
              
              422
              
              
              
              933,662
              
              
              
              -
              
              
              
              934,084





The
footnotes are an integral part of these financial statements.


F-5





Statements
      of Cash Flows for the Years Ended December 31, 2009,  2008,
      AND
    2007All
      figures in USD '000





Year
      Ended December 31,2009
            
            
            2008
            
            
            2007Cash
      Flows from Operating ActivitiesNet
      Income
            
            
            1,012
            
            
            
            118,844
            
            
            
            44,206Reconciliation
      of Net Income to Net Cash
              Provided
      by Operating ActivitiesDepreciation
      Expense
            
            
            55,035
            
            
            
            48,284
            
            
            
            42,363Dry-dock
      Expenditures
            
            
            (5,330
            )
            
            
            (18,049
            )
            
            
            (9,496
            )Amortization
      of Deferred Finance Costs
            
            
            653
            
            
            
            618
            
            
            
            514Deferred
      Compensation Liability
            
            
            1,606
            
            
            
            1,413
            
            
            
            2,665Compensation
      - Restricted Shares
            
            
            5,366
            
            
            
            3,618
            
            
            
            2,289Share-based
      Compensation
            
            
            (2,133
            )
            
            
            1,015
            
            
            
            1,261Capitalized
      Interest
            
            
            124
            
            
            
            (607
            )
            
            
            (305
            )Changes
      in Operating Assets and Liabilities:Accounts
      Receivables
            
            
            17,650
            
            
            
            (25,846
            )
            
            
            (1,072
            )Accounts
      Payable and Accrued Liabilities
            
            
            (38
            )
            
            
            (5,461
            )
            
            
            (2,971
            )Prepaid
      and Other Current Assets
            
            
            (1,706
            )
            
            
            (3,585
            )
            
            
            2,260Deferred
      Revenue
            
            
            88
            
            
            
            (88
            )
            
            
            -Voyages
      in Progress
            
            
            -
            
            
            
            7,753
            
            
            
            100Other
      Non-current Assets
            
            
            (9,132
            )
            
            
            (9
            )
            
            
            1,835Net
      Cash Provided by Operating Activities
            
            
            63,195
            
            
            
            127,900
            
            
            
            83,649Cash
      Flows from Investing ActivitiesDeposit
      on Contract
            
            
            -
            
            
            
            -
            
            
            
            (18,000
            )Investment
      in Vessels
            
            
            (190,330
            )
            
            
            (10,053
            )
            
            
            (8,424
            )Net
      Cash Used in Investing Activities
            
            
            (190,330
            )
            
            
            (10,053
            )
            
            
            (26,424
            )Cash
      Flows from Financing ActivitiesProceeds
      from Issuance of Common Stock
            
            
            236,684
            
            
            
            158,890
            
            
            
            119,751Proceeds
      from Use of Credit Facility
            
            
            66,000
            
            
            
            25,000
            
            
            
            55,000Repayments
      on Credit Facility
            
            
            (81,000
            )
            
            
            (115,500
            )
            
            
            (123,000
            )Credit
      Facility Costs
            
            
            -
            
            
            
            (2,316
            )
            
            
            (14
            )Dividends
      Paid
            
            
            (95,431
            )
            
            
            (165,886
            )
            
            
            (107,349
            )Net
      Cash Provided by (Used in) Financing Activities
            
            
            126,253
            
            
            
            (99,812
            )
            
            
            (55,612
            )Net
      (Decrease) Increase in Cash and Cash Equivalents
            
            
            (882
            )
            
            
            18,036
            
            
            
            1,613Cash
      and Cash Equivalents at the Beginning of Year
            
            
            31,378
            
            
            
            13,342
            
            
            
            11,729Cash
      and Cash Equivalents at the End of Year
            
            
            30,496
            
            
            
            31,378
            
            
            
            13,342Cash
      Paid for Interest
            
            
            1,249
            
            
            
            3,441
            
            
            
            9,690Cash
      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 double
hull crude oil tankers. The Company's shares trade under the symbol "NAT" on the
New York Stock Exchange.





Our fleet
consists of 20 modern double-hull Suezmax tankers of which four are
newbuildings. The following chart provides information regarding each vessel,
including its employment status.








Vessel
            Yard
            Built
            
            Dwt (1)
            
            Flag
            Delivered to NAT
            EmploymentGulf
      Scandic
            Samsung
            1997
            
            
            151,475
            
            Isle
      of Man
            August
      1997
            Bareboat
      exp 2010Nordic
      Hawk
            Samsung
            1997
            
            
            151,475
            
            Bahamas
            October
      1997
            SpotNordic
      Hunter
            Samsung
            1997
            
            
            151,400
            
            Bahamas
            December
      1997
            SpotNordic
      Freedom
            Daewoo
            2005
            
            
            163,455
            
            Bahamas
            March
      2005
            SpotNordic
      Voyager
            Dalian
      New
            1997
            
            
            149,591
            
            Norway
            November
      1997
            SpotNordic
      Fighter
            Hyundai
            1998
            
            
            153,328
            
            Norway
            March
      2005
            SpotNordic
      Discovery
            Hyundai
            1998
            
            
            153,328
            
            Norway
            August
      2005
            SpotNordic
      Sprite
            Samsung
            2003
            
            
            147,188
            
            Norway
            February
      2009
            SpotNordic
      Grace
            Hyundai
            2002
            
            
            149,921
            
            Norway
            July
      2009
            SpotNordic
      Saturn
            Daewoo
            1998
            
            
            157,332
            
            Marshall
      Islands
            November
      2005
            SpotNordic
      Jupiter
            Daewoo
            1998
            
            
            157,411
            
            Marshall
      Islands
            April
      2006
            SpotNordic
      Apollo
            Samsung
            2003
            
            
            159,999
            
            Marshall
      Islands
            November
      2006
            SpotNordic
      Cosmos
            Samsung
            2002
            
            
            159,998
            
            Marshall
      Islands
            December
      2006
            SpotNordic
      Moon
            Samsung
            2002
            
            
            159,999
            
            Marshall
      Islands
            November
      2006
            SpotNordic
      Mistral
            Hyundai
            2002
            
            
            164,236
            
            Marshall
      Islands
            November
      2009
            SpotNordic
      Passat
            Hyundai
            2002
            
            
            164,274
            
            Marshall
      Islands
            March
      2010
            Bareboat
      exp 2010Nordic
      Galaxy
            Bohai
            2010
            
            
            163,000
            
            
            Expected
      June 2010Nordic
      Vega
            Bohai
            2010
            
            
            163,000
            
            
            Expected
      September 2010Newbuilding
            Samsung
            2011
            
            
            158,000
            
            
            Expected
      September 2011Newbuilding
            Samsung
            2011
            
            
            158,000
            
            
            Expected
      December 2011





(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.





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. Transactions in foreign currencies
during the year are translated into U.S dollars at the rates of exchange in
effect at the date of the transaction.


F-7





Cash and Cash Equivalents:
Cash and cash equivalents consist of deposits with original maturities of three
months or less.





Inventories:Inventories,
which are comprised of bunker fuel and lubrication oil, 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 its 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 residual 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, and less than the estimated fair
market value 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,
2009, 2008 or 2007.





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. 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 Accounting Standard
Codification (ASC) Topic 280, "Segment Reporting." 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
contracts.





Geographical Segment: The
Company currently operates 14 of its 16 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. 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. The Company currently operates 2 of its 16
vessels on bareboat charterers that expire within November 2010.





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 and Expense Recognition:Revenue and expense recognition policies for voyage and time charter
agreements are as follows:





F-8


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 participating vessels 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 owners
of the participating vessels.





Earnings
generated from cooperative agreements in which the Company is the principal of
its vessels' activities are recorded based on the gross method. Earnings
generated from cooperative agreements in which the Company is not regarded as
the principal of its vessels' activities are recorded based on the net method.
The Company accounts for the net revenues allocated by these cooperative
agreements as "Voyage Revenue" in its Statements of Operations. See Note 3 for
further information.





Spot charters: Voyage
revenues are recognized on a pro rata basis based on the relative transit time
in each period. 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 when earned.
Demurrage income is included in "Voyage Revenues" in the Statement of
Operations. At December 31, 2009 and 2008, the Company had no reserves
associated with the outstanding receivables from 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.





Vessel Operating Expenses:
Vessel operating expenses include crewing, repair and maintenance, insurance,
stores, lubricants, communication expenses and tonnage tax. These expenses are
recognized when incurred.





Derivative Instruments:The
Company did not hold any derivative instruments as at December 31, 2009 or
2008.





Share-Based Compensation:The
compensation costs for all of the Company's stock –based compensation awards are
based on the fair value method as defined in ASC Topic 718, "Compensation –
Stock Compensation". The Company records the compensation expense for such
awards over the vesting period. See Note 10 for additional
information.





Restricted Shares to Manager:
Restricted shares issued to the Manager are non-forfeitable and vest
immediately. 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 guidance in ASC Topic 220, "Comprehensive
Income" 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) is equal to net income for the periods presented.


F-9





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 financial institutions it believes are
reputable. 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, due to the
current financial crisis the maximum credit risk the Company would be exposed to
is a total loss of outstanding cash and cash equivalents and 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, 2009 and 2008, 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 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, 2009 and 2008, and has not entered
into any such arrangements during 2009.




Recent Accounting
Pronouncements:




In June
2009, the FASB issued "Accounting Standards Codification and the Hierarchy of
Generally Accepted Accounting Principles" (the "Codification") which became the
single source of authoritative accounting principles recognized by the FASB and
the framework for selecting the principles used in the preparation of financial
statements of nongovernmental entities that are presented in conformity with
generally accepted accounting principles in the United States. The
Codification's content carries the same level of authority, effectively
superseding previous guidance. In other words, the GAAP hierarchy was modified
to include only two levels of GAAP: authoritative and non-authoritative. Rules
and interpretive releases of the SEC under the authority of federal securities
laws are also source of authoritative GAAP for SEC registrants. The guidance is
effective for financial statements issued for interim and annual periods ending
after September 15, 2009. The Company adopted the Codification in
2009.




In
February 2008, the FASB issued FASB Staff Position No. 157-2 (codified into ASC
Topic 820) "Fair Value Measurement and Disclosures", which delays the effective
date of SFAS No. 157, "Fair Value Measurement," to fiscal years beginning
after November 15, 2008 for all non-financial assets and liabilities, except
those that are recognized or disclosed at fair value in the financial statements
on a recurring basis (at least annually). The Company adopted SFAS 157, except
as it applies to non-financial assets and liabilities as noted in FSP 157-2,
beginning from January 1, 2008. Effective January 1, 2009, the Company adopted
this guidance for non financial assets and liabilities measured at fair value on
a non recurring basis. The application of this guidance did not have a
significant impact on the Company's financial statement.





In May
2009, the Financial Accounting Standard Board (FASB) issued SFAS No. 165
(codified into ASC Topic 855) "Subsequent Events", which provides guidance on
management's assessment of subsequent events. The new guidance:




·
                Clarifies
      that management must evaluate, as of each reporting period (i.e. interim
      and annual), events or transactions that occur after the Balance Sheet
      date "through the date that the financial statements are issued or are
      available to be
  issued."


F-10


·
                Does
      not change the recognition and disclosure requirements in AICPA
      Professional Standards, AU Section 560, "Subsequent Events" ("AU Section
      560") for Type I and Type II subsequent events; however, the guidance
      refers to them as recognized (Type I) and non-recognized subsequent events
      (Type
II).
 ·
                      Indicates
      that management should consider supplementing historical financial
      statements with the pro forma impact of non-recognized subsequent events
      if the event is so significant that disclosure of the event could be best
      made through the use of pro forma financial
      data.


This new
guidance is effective prospectively for interim or annual financial periods
ending after June 15, 2009. Adoption of this new guidance in the second quarter
of 2009 did not have significant impact on the Company's financial
statements.




In June
2009, the FASB issued SFAS No. 167 "Amendments to FASB Interpretation No. 46(R)"
codified into ASC Topic 810 "Consolidation". This guidance eliminates
Interpretation 46(R)'s exceptions to consolidating qualifying special-purpose
entities, contains new criteria for determining the primary beneficiary, and
increases the frequency of required reassessments to determine whether a company
is the primary beneficiary of a variable interest entity. This guidance also
contains a new requirement that any term, transaction or arrangement that does
not have a substantive effect on an entity's status as a variable interest
entity, a company's power over a variable interest entity, or a company's
obligation to absorb losses or its right to receive benefits of an entity must
be disregarded in applying Interpretation 46(R)'s provisions. The elimination of
the qualifying special-purpose entity concept and its consolidation exceptions
means more entities will be subject to consolidation assessments and
reassessments. This new guidance will be effective January 1, 2010. The adoption
of this pronouncement is not expected to have a material impact on the Company's
financial position and results of operations.




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 for the Company's vessels and is required to manage the Company's
day-to-day business, subject to the objectives and policies 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 $265,000 per annum. The Manager also has a right to
ownership of 2% of the Company's total outstanding shares. During 2009, the
Company issued to the Manager 156,633 shares at an average fair value of $33.37.
The Company recognized $2.6 million, $2.2 million, and $2.2 million of total
costs for services provided under the Management Agreement for the years ended
December 31, 2009, 2008 and 2007, respectively. Additionally, the Company
recognized $5.4 million, $3.6 million and $2.3 million in non-cash share-based
compensation expense for the years ended December 31, 2009, 2008 and 2007,
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
$0.6 million and $0.4 million at December 31, 2009 and 2008,
respectively.





Mr. Jan
Erik Langangen, Executive Vice President of the Manager, is a partner of
Langangen & Helset Advokatfirma AS, a firm which provides services to the
Company. The Company recognized $0.1 million, $0.1 million, and $0.2 million in
costs for the years ended December 31, 2009, 2008 and 2007, 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, 2009 and December 31, 2008, respectively.





F-11





3.
            REVENUE




For year
ending December 31, 2009, the Company's only source of revenue was from the
Company's 15 existing 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
            
            2009
            
            
            2008
            
            
            2007Net
      Method
            
            
            102,229
            
            
            
            204,402
            
            
            
            65,354Gross
      Method
            
            
            22,141
            
            
            
            23,598
            
            
            
            121,632Total
      Voyage Revenue
            
            
            124,370
            
            
            
            228,000
            
            
            
            186,986





Two
cooperation arrangements accounted for 41% and 40% of the Company's revenues for
the year ended December 31, 2009. Two cooperation arrangements accounted for 50%
and 41% of the Company's revenues for the year ended December 31, 2008. Five
cooperation arrangements accounted for 24%, 23%, 16%, 15% and 14% of the
Company's revenues, respectively, for the year ended December 31,
2007.





Accounts
receivable at December 31, 2009 and 2008 are $22.7 million and $40.3 million,
respectively. Two cooperation arrangements accounted for 61% and 33% of the
Company's accounts receivables, for the year ended December 31, 2009. Two
cooperation arrangements accounted for 53% and 43% of the Company's accounts
receivables for the year ended December 31, 2008.





4.
            PREPAID
      EXPENSES AND OTHER CURRENT ASSETS




All
      figures in USD '000
            
            2009
            
            
            2008Lubricants
            
            
            2,850
            
            
            
            2,137Prepaid
      expenses
            
            
            3,067
            
            
            
            2,304Deposit
      on Vessel, Nordic Passat
              Deposit
      on Contracts, Nordic Galaxy and Nordic Vega
            
            
            5,150
              18,000
            
            
            
            -
              9,000Loans
      to seller, Nordic Galaxy and Nordic Vega
            
            
            25,795
            
            
            
            7,370Financial
      Charges
            
            
            653
            
            
            
            653Other
            
            
            1,505
            
            
            
            942Total
      as per December 31,
            
            
            57,020
            
            
            
            22,406





5.
            GENERAL
      AND ADMINISTRATIVE EXPENSES




All
      figures in USD '000
            
            2009
            
            
            2008
            
            
            2007Management
      fee to related party
            
            
            245
            
            
            
            225
            
            
            
            162Directors
      and officers insurance
            
            
            82
            
            
            
            87
            
            
            
            109Salary
      and wages
            
            
            2,202
            
            
            
            1,711
            
            
            
            1,331Audit,
      legal and consultants
            
            
            954
            
            
            
            684
            
            
            
            849Administrative
      services provided by related party
            
            
            2,514
            
            
            
            2,208
            
            
            
            2,162Other
      fees and expenses
            
            
            1,670
            
            
            
            1,724
            
            
            
            1,304Total
      General and Administration expense with cash effect
            
            
            7,667
            
            
            
            6,639
            
            
            
            5,917Compensation
      to Manager – restricted shares issued to related party
            
            
            5,366
            
            
            
            3,618
            
            
            
            2,289Share-based
      compensation (2004 Stock Incentive Plan)
            
            
            180
            
            
            
            1,115
            
            
            
            1,261Deferred
      compensation plan
            
            
            1,606
            
            
            
            1,413
            
            
            
            2,665Total
      General and Administrative expense without cash effect
            
            
            7,152
            
            
            
            6,146
            
            
            
            6,215Total
      for year ended December 31,
            
            
            14,819
            
            
            
            12,785
            
            
            
            12,132





F-12





6.
            DEFERRED
      COMPENSATION LIABILITY




In May
2007, the Board of Directors approved a new unfunded deferred compensation plan
for Herbjørn Hansson, the Chairman, President and CEO. The plan provides for
unfunded deferred compensation computed as a percentage of salary. Benefits vest
over a 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 5.4% and 6.0% as per
December 31, 2009 and 2008, respectively.





The
rights under the plan commenced in October 2004. The total expense recognized in
2009, 2008 and 2007 were $1.6 million, $1.4 million and $2.7 million (of which
$1.8 million relates to retroactive effect), respectively. As the plan was
effective in 2007, the full expense was recognized in 2007.The CEO has served in
his present position since the inception of the Company in 1995.





7.
            VESSELS,
      NET




Vessels,
net consist of 15 modern double hull Suezmax crude oil tankers and drydocking
charges. Depreciation is calculated based on cost less estimated residual value
of $4.0 million and is provided over the estimated useful life of the vessel
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.





All
      figures in USD '000
            
            Vessels
            
            
            Drydocking
            
            
            TotalNet
      Book Value December 31, 2008
            
            
            686,788
            
            
            
            21,066
            
            
            
            707,853Accumulated
      depreciation December 31, 2008
            
            
            176,611
            
            
            
            9,339
            
            
            
            185,950Depreciation
      expense 2008
            
            
            41,063
            
            
            
            7,222
            
            
            
            48,284Net
      Book Value December 31, 2009
            
            
            807,714
            
            
            
            17,735
            
            
            
            825,449Accumulated
      depreciation December 31, 2009
            
            
            222,563
            
            
            
            15,994
            
            
            
            238,557Depreciation
      expense 2009
            
            
            45,953
            
            
            
            9,082
            
            
            
            55,035





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 June and September 2010. 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 are being built
by a Chinese shipyard. The sellers are subsidiaries of First Olsen Ltd. and the
agreed total 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, 2009, the Company has paid a deposit of 10% of the purchase price
in the aggregate amount of $18.0 million for both vessels, and furnished to the
seller a loan of $25.8 million.





The table
below shows total capitalized costs related to the two
newbuildings:





All
      figures in USD '000
            
            2009
            
            
            2008Newbuilding
      - Nordic Galaxy expected delivery 2Q10Deposit
      on contract
            
            
            9,000
            
            
            
            9,000Capitalized
      interest
            
            
            225
            
            
            
            163Capitalized
      cost
            
            
            153
            
            
            
            108Total
      Newbuilding – Nordic Galaxy as per December 31,
            
            
            9,378
            
            
            
            9,271Newbuilding
      – Nordic Vega expected delivery 3Q10Deposit
      on contract
            
            
            9,000
            
            
            
            9,000Capitalized
      interest
            
            
            205
            
            
            
            143Capitalized
      cost
            
            
            130
            
            
            
            108Total
      Newbuilding - Nordic Vega as per December 31,
            
            
            9,335
            
            
            
            9,251Total
      as per December 31,
            
            
            18,713
            
            
            
            18,522





F-13





Due to
the expected delivery of the newbuildings in 2010, items related to these
vessels have been classified as current assets and recorded within "Prepaid
Expenses and Other Current Assets" in the Balance Sheet.





9.
            OTHER
      NON-CURRENT ASSETS




All
      figures in USD '000
            
            2009
            
            
            2008Working
      Capital, cooperative arrangements
            
            
            9,133
            
            
            
            -Financial
      Charges
            
            
            1,795
            
            
            
            2,448Other
      Non-current assets
            
            
            -
            
            
            
            458Total
      as per December 31,
            
            
            10,928
            
            
            
            2,906








10.
            SHARE-BASED
      COMPENSATION PLAN




The
Company has a share-based compensation plan which is described below. Total
compensation cost related to the plan was $0.2 million, $1.1 million and $1.3
million for the years ended December 31, 2009, 2008 and 2007, respectively and
was recorded within "General and Administrative expense" in the Statement of
Operations. Unrecognized compensation cost related to the plan was $0.1 million
(restricted shares) as of December 2009.





2004
Stock Incentive Plan




Outstanding
stock option awards under the Company`s 2004 Stock Incentive Plan, were
cancelled in 2009.





Under the
terms of the Plan, the directors, officers and certain key employees of the
Company and the Manager were 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 award 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 had been issued as of December 31, 2008. New shares were
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. No modifications were
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 options granted in 2007 had an exercise price
equal to the market price of the shares at the grant date, with later
adjustments for dividends exceeding 3%. 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 was estimated on the date of grant using the
Black-Scholes option valuation model. Stock options to non-employees were
measured at each reporting date and fair value was estimated with the same model
used for estimating fair value of the options granted to employees. Because the
option valuation model incorporated ranges of assumptions for inputs, those
ranges were disclosed. Expected volatilities were based on implied volatilities
from historical volatility of the Company's stock and other factors. Expected
life of the options was 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 was equal to
the actual life of options. The Company recognized the compensation cost for
stock options issued to non-employees over the service period, which was
considered to be equal to the vesting period. All options issued were expected
to be exercised.





Stock
options to employees were measured at fair value at the grant date and the
compensation cost was recognized on a straight-line basis over the vesting
period.





Stock
options to non-employees were treated in accordance with ASC 505-50 and unvested
options were measured at fair value at each Balance Sheet date with a final
measurement date upon vesting. Fair value measurement of unvested options was
considered to be appropriate since the performance commitment for non-employees
had not been reached for unvested options. The fair value of the options was
used to measure the value of the services provided by the non-employees as it
was considered to be more reliable than measuring the fair value of the services
received. The compensation cost was recognized using the accelerated
method.


F-14





The
risk-free rate for periods within the contractual life of the stock options was
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 was used for stock options
issued to non-employees.





A summary
of option activity under the Plan as of December 31, 2009, and changes during
the year then ended is presented below:





Options
            
            Options
              employees
            
            
            Options
              non-employees
            
            
            Weighted-average
      exercise priceOutstanding
      at January 1, 2009
            
            
            240,000
            
            
            
            80,000
            
            
            $
            24.81Granted
            
            
            -
            
            
            
            -
            
            
            
            -Exercised
            
            
            -
            
            
            
            -
            
            
            
            -Forfeited
      or expired
            
            
            (240,000
            )
            
            
            (80,000
            )
            
            $
            30.70Outstanding
      at December 31, 2009
            
            
            -
            
            
            
            -
            
            
            
            -Exercisable
      at December 31, 2009
            
            
            -
            
            
            
            -
            
            
            
            -





In August
2009 the Company announced that it had cancelled all stock options (400,000)
granted under the Plan including the 320,000 options previously granted to its
directors (10,000 each, 60,000 in total), to the Chairman and CEO (100,000), to
employees of the Company (80,000) and to employees of its Manager (80,000). The
stock options were cancelled in exchange for a payment equal to the difference
between the strike price of the options and the closing price of $30.70 per
share for the Company`s shares on the New York Stock Exchange. The compensation
of $7.23 per option resulted in a cash outlay of $2.3 million for the Company,
which decreased the Additional Paid in Capital.





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








Options
              -
      Employees
            
            
            Weighted-average
      grant-date fair value
              -
      Employees
            
            
            Options
              -
              Non-employees
            
            
            Weighted-average
      grant-date fair value
              -
      Non-employeesNon-vested
      at January 1, 2008
            
            
            75,000
            
            
            $
            17.73
            
            
            
            27,500
            
            
            $
            20.03Granted
      during the year
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -Vested
      during the year
            
            
            (52,500
            )
            
            $
            16.84
            
            
            
            (20,000
            )
            
            $
            22.93Forfeited
      during the year
            
            
            (10,000
            )
            
            $
            20.36
            
            
            
            -
            
            
            
            -Estimated
      forfeitures unvested options
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -Non-vested
      at December 31, 2008
            
            
            12,500
            
            
            $
            7.78
            
            
            
            7,500
            
            
            $
            12.32





Following
the cancellation described above, there are no more outstanding stock options
under the Plan. The total fair value of options vested during the years ended
December 31, 2009, 2008 and 2007 approximates the amounts expensed in the
periods





Specification
of the aggregate compensation cost related to the Plan recognized in the
Statements of Operations account is disclosed in Note 5.





There is
no material income tax benefit for stock-based compensation due to the Company's
tax structure.


F-15







Restricted
Shares to Employees and Non-Employees




Under the
terms of the 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 (the date the awards were 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 shares. 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 shares vest equally in annual
installments over a period of four years. The holders of the restricted shares
are entitled to receive dividends paid in the period as well as 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 (2008: 2,425)
restricted shares granted to employees and 1,750 (2008: 1,750) restricted shares
granted to non-employees vested in 2009.





The
compensation cost for employees and non-employees is recognized on a
straight-line basis over the vesting period. The total compensation cost in 2009
related to restricted shares was $ 0.1 million (2008: $0.1 million). The
intrinsic value of restricted shares outstanding and restricted shares vested at
December 31, 2009 was $0.5 million and $0.4 million, respectively.





At
December 31, 2009, 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, 2009, unrecognized compensation cost related
to unvested restricted stock aggregated $0.1 million ($0.2 million per December
31, 2008), which will be recognized over a weighted average period of 0.36
years.





Specification
of the aggregate compensation cost related to the Plan recognized in the
Statements of Operations is disclosed in Note 5.





The
tables below summarize the Company's restricted stock awards as of December 31,
2009 and December 31, 2008:





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, 2008
            
            
            7,275
            
            
            $
            31.99
            
            
            
            5,250
            
            
            $
            31.99Granted
      during the year
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -Vested
      during the year
            
            
            2,425
            
            
            
            -
            
            
            
            1,750
            
            
            
            -Forfeited
      during the year
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -Non-vested
      at December 31, 2008
            
            
            4,850
            
            
            $
            31.99
            
            
            
            3,500
            
            
            $
            31.99





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, 2009
            
            
            4,850
            
            
            $
            31.99
            
            
            
            3,500
            
            
            $
            31.99Granted
      during the year
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -Vested
      during the year
            
            
            2,425
            
            
            
            -
            
            
            
            1,750
            
            
            
            -Forfeited
      during the year
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -Non-vested
      at December 31, 2009
            
            
            2,425
            
            
            $
            31.99
            
            
            
            1,750
            
            
            $
            31.99


F-16





11.
            LONG-TERM
      DEBT




The
Company has a $500 million revolving credit facility (the "Credit Facility"),
with a maturity in 2013.





The
Credit Facility provides funding for future vessel acquisitions and general
corporate purposes. The Credit Facility cannot be reduced by the lender and
there is no repayment obligation of the principal during the term of the
facility. Amounts borrowed under the 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, 2009 and December 31, 2008 were $1.0 million and $1.0
million, respectively. The undrawn amount of this facility as of December 31,
2009 and December 31, 2008 was $500.0 million and $485.0 million,
respectively.





Borrowings
under the Credit Facility are secured by first priority mortgages over the
Company's vessels and assignment of earnings and insurance. Under the terms and
conditions of the Credit Facility the Company is, among other things, required
to maintain certain loan to vessel value ratios, and to maintain a book equity
of no less than $150.0 million, and to remain listed on a recognized stock
exchange, and to obtain the consent of the lenders prior to creating liens on or
disposing of the Company's vessels. The Company is permitted to pay dividends in
accordance with its dividend policy as long as it is not in default under the
Credit Facility.





At
December 31, 2009, accrued interest and commitment fee was $0.05 million which
was paid during the first quarter of 2010.





The
Company was in compliance with its loan covenants for the year ended December
31, 2009.





12.
            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 Credit Facility.
Amounts borrowed under the Credit Facility bear interest equal to LIBOR plus a
margin between 0.7% and 1.2%. The financing costs incurred in connection with
the refinancing of the previous Credit Facility are deferred and amortized over
the term of the Credit Facility on a straight-line basis. The amortization of
deferred financing costs for the years ended December 31, 2009, 2008 and 2007
was $0.6 million, $0.6 million and $0.5 million, respectively. Total capitalized
deferred financing costs were $2.5 million and $3.1 million at December 31, 2009
and 2008, respectively.





13.
            DEFERRED
      REVENUE




Deferred
revenue at December 31, 2009 of $0.5 million represents prepaid freight received
from one of our customers prior to December 31, 2009 for services to be rendered
during January 2010.





14.
            ACCRUED
      LIABILITIES




All
      figures in USD '000
            
            2009
            
            
            2008Accrued
      Interest
            
            
            174
            
            
            
            85Accrued
      Expenses
            
            
            2,735
            
            
            
            2,997Accrued
      Commission
            
            
            -
            
            
            
            462Other
      Liabilities
            
            
            -
            
            
            
            273Total
      as per December 31,
            
            
            2,909
            
            
            
            3,817








15.
            EARNING
      PER SHARE




Basic
earnings per share ("EPS") are 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.





F-17





All
      figures in USD
            
            2009
            
            
            2008
            
            
            2007Numerator:Net
      Income
            
            
            1,012,240
            
            
            
            118,844,410
            
            
            
            44,205,635Denominator:Basic
      - Weighted Average Common Shares Outstanding
            
            
            40,449,522
            
            
            
            32,739,057
            
            
            
            28,252,472Dilutive
      Effect of Stock Options *
            
            
            -
            
            
            
            93,797
            
            
            
            42,525Dilutive
      – Weighted Average Common Shares Outstanding
            
            
            40,449,522
            
            
            
            32,832,854
            
            
            
            28,294,997Income
      per Common Share:Basic
            
            
            0.03
            
            
            
            3.63
            
            
            
            1.56Diluted
            
            
            0.03
            
            
            
            3.62
            
            
            
            1.56





* In
August 2009, the Company announced that it had cancelled all outstanding stock
options. Following the cancellation described in Note 10, there are no more
outstanding stock options under the Plan.




16.
            SHAREHOLDERS'
      EQUITY




Authorized,
and issued and outstanding common shares roll-forward is as
follows:





All
      figures in USD  ́000, except number of shares
            
            Authorized
      Shares
            
            
            Issued
      and Outstanding Shares
            
            
            Common
      StockBalance
      at January 1, 2007
            
            
            51,200,000
            
            
            
            26,914,088
            
            
            
            269Issuance
      of Common Shares in Follow-on Offering
            
            
            
            
            
            
            3,000,000
            
            
            
            30Share-based
      Compensation
            
            
            
            
            
            
            61,224
            
            
            
            1Balance
      at December 31, 2007
            
            
            51,200,000
            
            
            
            29,975,312
            
            
            
            300Issuance
      of Common Shares in Follow-on Offering
            
            
            
            
            
            
            4,310,000
            
            
            
            43Share-based
      Compensation
            
            
            
            
            
            
            87,959
            
            
            
            1Balance
      at December 31, 2008
            
            
            51,200,000
            
            
            
            34,373,271
            
            
            
            344Issuance
      of Common Shares in Follow-on Offering
            
            
            
            
            
            
            3,450,000
            
            
            
            35Share-based
      Compensation
            
            
            
            
            
            
            70,408
            
            
            
            -Issuance
      of Common Shares in Follow-on Offering
            
            
            
            
            
            
            4,225,000
            
            
            
            42Share-based
      Compensation
            
            
            
            
            
            
            86,225
            
            
            
            1Balance
      at December 31, 2009
            
            
            51,200,000
            
            
            
            42,204,904
            
            
            
            422





In
January 2009, the Company completed an underwritten public offering of 3,450,000
common shares. The net proceeds from the offering were $107.2 million. In May
2009, the Company completed an underwritten public offering of 4,225,000 common
shares. The net proceeds from the offering were $129.5 million. The net proceeds
from the offerings increased the Company's Share Premium Fund and the proceeds
were used to prepare the Company for further expansions and repay borrowings
under the Credit Facility.





The total
issued and outstanding shares as of December 31, 2009 were 42,204,904 shares of
which 305,816 shares were restricted shares issued to the Manager and 4,175
shares were restricted shares issued to employees and non-employees as described
in Note 9. The total issued and outstanding shares as of December 31, 2008 were
34,373,271 shares of which 354,575 shares were restricted.





F-18





Additional
Paid in Capital





Included
in Additional Paid in Capital is the Company's Share Premium Fund as defined by
Bermuda Law. The Share Premium Fund cannot be distributed without complying with
certain legal procedures designed to protect the creditors of the Company. The
Share Premium Fund was $0.0 million and $0.0 million as of December 31, 2009 and
2008 respectively.





On June
19, 2009, at the Company's Annual General Meeting, shareholders voted to reduce
the Share Premium Fund by the amount of $236.7 million. The legal procedures
related to this reduction were finalized on August 12, 2009, upon which the
amount became eligible for distribution.





17.
            COMMITMENTS
      AND CONTINGENCIES




The
Company may become 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 filed against the Company for the fiscal year 2009 or 2008. The
Company is not a party to any legal proceedings for the year ended December 31,
2009 and December 31, 2008.





At
December 31, 2009, the Company had payment obligations totalling $182.6 million
in connection with the agreement to acquire two newbuildings entered into in
November 2007 and the double-hull Suezmax tanker Nordic Passat agreed to acquire
in November 2009. The payments obligations of $182.6 million are due in 2010.
Please see Note 8 for further information related to the
newbuildings.




18.
            SUBSEQUENT
      EVENTS




In
January 2010, the Company completed an underwritten public offering of 4,600,000
common shares which strengthened its equity by $136.8 million before expenses
relating to the offering. The underwritten public offering enhances the capacity
of the Company to make further accretive acquisitions.





In
February 2010, the Company declared a dividend of $0.25 per share in respect of
the results for the fourth quarter of 2009 which was paid to shareholders in
March 2010.





In March
2010, the double-hull Suezmax tanker Nordic Passat was delivered to the
Company.





In March
2010, the Company announced that it has decided to place all its vessels in the
Gemini Suezmax cooperation. Frontline Ltd. and Teekay Corporation are among
other key members of the Gemini arrangement.





In April
2010, we announced agreements with Samsung Heavy Industries Co., Ltd, to build
two Suezmax tankers of 158,000 dwt each to be delivered in the third and fourth
quarters of 2011. The purchase prices of the two newbuilding vessels are
$64.5/$65.0 million, with about half to be paid on the execution of the
contracts and the balance to be paid on delivery.





In May
2010, the Company declared a dividend of $0.60 per share in respect of the
results for the first quarter of 2010 which is scheduled to be paid to
shareholders in June 2010.





* * * *
*





SK 01318 0002
1101767


F-19









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/ Turid M. SørensenName:
            Turid M. SørensenTitle:
            Chief Financial Officer




DATED:
May 23,
2010