UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 20-F

(Mark One)

[_]         REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g)
                     OF THE SECURITIES EXCHANGE ACT OF 1934

                                       OR

[X]              ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended      December 31, 2004

                                       OR

[_]            TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from

Commission file number              0-22704

                                 Frontline Ltd.
--------------------------------------------------------------------------------
             (Exact name of Registrant as specified in its charter)

                                 Frontline Ltd.
--------------------------------------------------------------------------------
                 (Translation of Registrant's name into English)

                                     Bermuda
--------------------------------------------------------------------------------
                 (Jurisdiction of incorporation or organisation)

       Par-la-Ville Place, 14 Par-la-Ville Road, Hamilton, HM 08, Bermuda
--------------------------------------------------------------------------------
                    (Address of principal executive offices)

Securities registered or to be registered pursuant to section 12(b) of the Act.

            Title of each class                      Name of each exchange
                                                      on which registered
     Ordinary Shares, $2.50 Par Value               New York Stock Exchange
------------------------------------------     ---------------------------------

Securities registered or to be registered pursuant to section 12(g) of the Act.

--------------------------------------------------------------------------------
                                (Title of class)

Securities for which there is a reporting obligation pursuant to Section 15(d)
of the Act.

                        Ordinary Shares, $2.50 Par Value
--------------------------------------------------------------------------------
                                (Title of class)

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

                  74,825,169 Ordinary Shares, $2.50 Par Value
--------------------------------------------------------------------------------

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.

     Yes |X|             No |_|

Indicate by check mark which financial statement item the registrant has elected
to follow.

     Item 17 |_|         Item 18 |X|
<PAGE>

                          INDEX TO REPORT ON FORM 20-F

                                                                            PAGE

PART I

Item 1.     Identity of Directors, Senior Management and Advisers .......      1

Item 2.     Offer Statistics and Expected Timetable .....................      1

Item 3.     Key Information .............................................      1

Item 4.     Information on the Company ..................................      8

Item 5.     Operating and Financial Review and Prospects ................     23

Item 6.     Directors, Senior Management and Employees ..................     39

Item 7.     Major Shareholders and Related Party Transactions ...........     41

Item 8.     Financial Information .......................................     43

Item 9.     The Offer and Listing .......................................     44

Item 10.    Additional Information ......................................     45

Item 11.    Quantitative and Qualitative Disclosures about Market Risk ..     55

Item12.     Description of Securities other than Equity Securities ......     56

PART II

Item 13.    Defaults, Dividend Arrearages and Delinquencies .............     56

Item 14.    Material Modifications to the Rights of Security
            Holders and Use of Proceeds .................................     56

Item 15.    Controls and Procedures .....................................     56

Item16A.    Audit Committee Financial Expert ............................     57

Item 16B.   Code of Ethics ..............................................     57

Item16C.    Principal Accountant Fees ...................................     57

Item16D.    Exemptions from the Listing Standards for Audit Committees ..     57

PART III

Item 17.    Financial Statements ........................................     58

Item 18.    Financial Statements ........................................     58

Item 19.    Exhibits ....................................................     58
<PAGE>

            CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

Matters discussed in this document 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.

Frontline Ltd., or 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. This document and any other written or oral statements made by us
or on our behalf may include forward-looking statements, which reflect our
current views with respect to future events and financial performance. The words
"believe," "anticipate," "intends," "estimate," "forecast," "project," "plan,"
"potential," "will," "may," "should," "expect" and similar expressions identify
forward-looking statements.

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

In addition to these important factors and matters discussed elsewhere herein,
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, fluctuations in currencies and interest rates,
general market conditions, including fluctuations in charterhire rates and
vessel values, changes in demand in the tanker market, including changes in
demand resulting from changes in OPEC's petroleum production levels and world
wide oil consumption and storage, changes in the Company's operating expenses,
including bunker prices, drydocking and insurance costs, changes in governmental
rules and regulations or actions taken by regulatory authorities, potential
liability from pending or future litigation, general domestic and international
political conditions, potential disruption of shipping routes due to accidents
or political events, and other important factors described from time to time in
the reports filed by the Company with the Securities and Exchange Commission.
<PAGE>

                                     PART I

ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS

Not Applicable

ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE

Not Applicable

ITEM 3. KEY INFORMATION

A. SELECTED FINANCIAL DATA

The selected income statement data of the Company with respect to the fiscal
years ended December 31, 2004, 2003 and 2002 and the selected balance sheet data
of the Company with respect to the fiscal years ended December 31, 2004 and 2003
have been derived from the Company's Consolidated Financial Statements included
herein and should be read in conjunction with such statements and the notes
thereto. The selected income statement data with respect to the fiscal years
ended December 31, 2001 and 2000 and the selected balance sheet data with
respect to the fiscal years ended December 31, 2002, 2001 and 2000 have been
derived from consolidated financial statements of the Company not included
herein. The following table should also be read in conjunction with Item 5.
"Operating and Financial Review and Prospects" and the Company's Consolidated
Financial Statements and Notes thereto included herein.

<TABLE>
<CAPTION>
                                                                   Fiscal Year Ended December 31,
                                               2004            2003            2002            2001            2000
                                                            (restated)      (restated)      (restated)      (restated)
                                            ----------      ----------      ----------      ----------      ----------
(in thousands of $, except Ordinary Shares, per Ordinary Share data and ratios)
<S>                                         <C>             <C>             <C>             <C>             <C>
Income Statement Data:
Total operating revenues(1)                  1,855,666       1,161,383         545,440         705,271         689,659
Total operating expenses(1)                    738,334         684,719         451,281         369,981         317,996
Net operating income                         1,136,906         482,290          92,931         370,910         372,823
Net income from continuing operations          971,601         438,969          10,430         319,103         300,916
before income taxes, minority interest
andcumulative effect of change in
accounting principle
Net income from continuing operations          906,428         438,966          10,452         318,659         300,875
before cumulative effect of change in
accounting principle
Discontinued operations(2)                     116,954           4,161          (5,209)         32,524          12,992
Cumulative effect of change in                      --         (33,767)        (14,142)         31,545              --
accounting principle(3)
Net income (loss)                            1,023,382         409,360          (8,899)        382,728         313,867
Earnings from continuing operations
before cumulative effect of change in
accounting principle per Ordinary Share
- basic                                          12.22            5.86            0.14            4.15            4.10
- diluted                                        12.22            5.85            0.14            4.14            4.09
Net income (loss) per Ordinary Share
- basic                                          13.79            5.47           (0.12)           4.99            4.28
- diluted                                        13.79            5.45           (0.12)           4.98            4.27
Cash dividends                               1,040,093         338,033          19,117         115,206              --

Balance Sheet Data (at end of year):
Cash and cash equivalents                      105,702         124,189          92,078         178,176         103,514
Newbuildings and vessel purchase options        24,231           8,370          27,405         102,781          36,326
Vessels and equipment, net                   2,254,361       2,165,239       2,373,329       2,196,959       2,254,921
Vessels under capital lease, net               718,842         765,126         264,902         317,208         108,387
Investments in associated companies             22,955         173,329         119,329         109,898
                                                                                                                27,361
Total assets                                 4,338,760       4,463,535       3,034,743       3,033,774       2,780,988
Short-term debt and current portion of
long-term debt                                 151,614         191,131         167,807         227,597         212,767
Current portion of obligations under
capital lease                                   21,498          20,138          13,164          17,127           7,888
Long-term debt                               1,990,131       2,091,286       1,277,665       1,164,354       1,331,372
Obligations under capital lease                732,153         753,823         259,527         283,663         101,875
Share capital                                  187,063         184,120         191,166         191,019         195,172
Stockholders' equity                           917,968       1,255,417       1,226,973       1,252,401       1,029,490
Ordinary Shares outstanding                 74,825,169      73,647,930      76,466,566      76,407,566      78,068,811
Weighted average ordinary shares
outstanding                                 74,192,939      74,901,900      76,456,340      76,714,000      73,390,654

Cash Flow Data
Cash provided by (used in) operating           909,787         534,861         143,805         477,607         271,582
activities
Cash provided by (used in) investing
activities                                     174,690        (280,639)       (224,673)       (103,782)       (508,938)
Cash provided by (used in) financing
activities                                  (1,102,964)       (233,303)         (5,230)       (299,163)        275,403

Other Financial Data
Equity to assets ratio (percentage)(4)            21.2%           28.1%           40.4%           41.3%           37.0%
Debt to equity ratio(5)                            3.2             2.4             1.4             1.4             1.6
Price earnings ratio(6)                            3.2             4.7             neg             2.1             3.3
Net voyage revenues                          1,192,910         766,205         354,356         551,524         559,601
</TABLE>

Certain comparative figures have been reclassified to conform to the
presentation adopted in the current period.

The Company's vessels are operated under time charters, bareboat charters,
voyage charters pool arrangements and COAs. Under a time charter, the charterer
pays substantially all of the vessel voyage costs. Under a bareboat charter the
charterer pays substantially all of the vessel voyage and operating costs. Under
a voyage charter, the vessel owner pays such costs. Vessel voyage costs are
primarily fuel and port charges. Accordingly, charter income from a voyage
charter would be greater than that from an equally profitable time charter to
take account of the owner's payment of vessel voyage costs. In order to compare
vessels trading under different types of charters, it is standard industry
practice to measure the revenue performance of a vessel in terms of average
daily time charter equivalent earnings, or TCEs. For voyage charters, this is
calculated by dividing net voyage revenues by the number of days on charter.
Days spent off-hire are excluded from this calculation. For comparability, TCEs
for bareboat charters include an allowance for estimated operating costs that
would be paid by us under an equivalently profitable time charter. In 2004 we
included an allowance of $6,500 per day for estimated operating costs (2003 -
$6,300 per day). Net voyage revenues, a non-GAAP measure, provides more
meaningful information to us than voyage revenues, the most directly comparable
GAAP measure. Net voyage revenues are also widely used by investors and analysts
in the tanker shipping industry for comparing financial performance between
companies and to industry averages. The following table reconciles our net
voyage revenues to voyage revenues.

<TABLE>
<CAPTION>
                                       2004          2003          2002          2001          2000
(in thousands of $)
<S>                               <C>           <C>            <C>            <C>           <C>
Voyage revenues                   1,554,519     1,089,583       489,286       639,807       656,917
Voyage expenses and commission     (361,609)     (323,378)     (134,930)      (88,283)      (97,316)
                                 ------------------------------------------------------------------
Net voyage revenues               1,192,910       766,205       354,356       551,524       559,601
                                 ==================================================================
</TABLE>

Notes:

(1)  Previously we have reported net operating revenues in our income statement
     data. Effective December 31, 2003 we have reclassified voyage expenses and
     commission as a component of total operating expenses and now report total
     operating revenues and total operating expenses.

(2)  During the years ended December 31, 2004 and 2002 the Company disposed of
     portions of its dry-bulk operations which have been recorded as
     discontinued operations in the years ended December 31, 2004, 2003, 2002,
     2001 and 2000. These operations were acquired in 2000.

(3)  In 2003, the Company adopted FIN 46R Consolidation of Variable Interest
     Entities and recorded a charge of $33.7 million as a result of this change
     in accounting principle. On January 1,2002, the Company adopted FAS 142
     Goodwill and Other Intangible Assets and subsequently wrote off goodwill of
     $14.1 million. In 2001, the Company changed its accounting policy for
     drydockings to an "expense as incurred" method which resulted in a credit
     of $31.5 million.

(4)  Equity to assets ratio is calculated as total stockholders' equity divided
     by total assets. 4. Debt to equity ratio is calculated as total interest
     bearing current and long-term liabilities, including obligations under
     capital leases, divided by stockholders' equity.

(5)  Price earnings ratio is calculated using the closing year end share price
     divided by basic Earnings per Share.

B. CAPITALIZATION AND INDEBTEDNESS

Not Applicable

C. REASONS FOR THE OFFER AND USE OF PROCEEDS

Not Applicable

D. RISK FACTORS

We are engaged primarily in transporting crude oil and oil products. The
following summarises some of the risks that may materially affect our business,
financial condition or results of operations. Please note, in this section,
"we", "us" and "our" all refer to the Company and its subsidiaries.

The cyclical nature of the tanker industry may lead to volatile changes in
charter rates and vessel values which may adversely affect our earnings

Historically, the tanker industry has been highly cyclical, with volatility in
profitability and asset values resulting from changes in the supply of and
demand for tanker capacity. If the tanker market is depressed in the future our
earnings and available cash flow may decrease. Our ability to re-charter our
vessels on the expiration or termination of their current spot and time charters
and the charter rates payable under any renewal or replacement charters will
depend upon, among other things, economic conditions in the tanker market.
Fluctuations in charter rates and vessel values result from changes in the
supply and demand for tanker capacity and changes in the supply and demand for
oil and oil products.

The factors affecting the supply and demand for oil 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:

o    demand for oil and oil products;
o    global and regional economic conditions;
o    the distance oil and oil products are to be moved by sea; and
o    changes in seaborne and other transportation patterns.

The factors that influence the supply of tanker capacity include:

o    the number of newbuilding deliveries;
o    the scrapping rate of older vessels;
o    the number of vessels that are out of service; and
o    national or international regulations that may effectively cause reductions
     in the carrying capacity of vessels or early obsolescence of tonnage.

We are highly dependent on spot oil voyage charters. Any decrease in spot
charter rates in the future may adversely affect our earnings

The majority of our vessels currently operate on a spot charter basis or under
contracts of affreightment under which we carry an agreed upon quantity of cargo
over a specified route and time period. Although spot chartering is common in
the tanker industry, the spot charter market is highly competitive and spot
charter rates 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
minimising, to the extent possible, time spent waiting for charters and time
spent travelling unladen to pick up cargo. We cannot assure you that future spot
charters will be available at rates sufficient to enable our vessels trading in
the spot market to operate profitably. In addition, bunkering, or fuel, charges
that account for a substantial portion of the operating costs, and generally
reflect prevailing oil prices, are subject to sharp fluctuations.

Our revenues experience seasonal variations that may affect our income

We operate our tankers in markets that have historically exhibited seasonal
variations in demand and, therefore, charter rates. Historically, oil trade and
therefore charter rates increased in the winter months and eased in the summer
months as demand for oil in the Northern Hemisphere rose in colder weather and
fell in warmer weather. In addition, unpredictable weather patterns in the
winter months tend to disrupt vessel scheduling. The tanker industry in general
is less dependent on the seasonal transport of heating oil than a decade ago as
new uses for oil and oil products have developed, spreading consumption more
evenly over the year. Most apparent is a higher seasonal demand during the
summer months due to energy requirements for air conditioning and motor
vehicles. The oil price volatility resulting from these factors has historically
led to increased oil trading activities and demand for vessels. The change in
demand for vessels may affect the charter rates that we receive.

As at December 31, 2004, we charter 46 vessels from Ship Finance International
Limited at fixed rates on long-term charters. In addition, we charter 16 vessels
under medium term charters from third parties. We are obliged to make fixed rate
hire payments even though our income may decrease to levels that make these
charters unprofitable.

The long term time charters to us extend for various periods depending on the
age of the vessels, ranging from approximately seven to 22 years. With certain
exceptions as discussed below in Item 4A Spin-off of Ship Finance International
Limited, the daily base charter rates, which are payable by us range from
$25,575 in 2004 to $24,175 from 2011 and beyond for VLCCs and $21,100 in 2004 to
$19,700 from 2011 and beyond for Suezmaxes. The medium term charters to us
extend for 10 to 11 years. Daily base charter rates payable by us under these
charters range from $20,210 in 2004 to $22,310 in 2015 for Suezmaxes and from
$30,850 in 2004 to $29,140 in 2015 for VLCCs.

If our earnings from the use of these vessels fall below these rates we will
incur losses.

Because the market value of our vessels may fluctuate significantly, we may
incur losses when we sell vessels which may adversely affect our earnings

The fair market value of vessels may increase and decrease depending on the
following factors:

o    general economic and market conditions affecting the shipping industry;
o    competition from other shipping companies;
o    types and sizes of vessels;
o    other modes of transportation;
o    cost of newbuildings;
o    governmental or other regulations;
o    prevailing level of charter rates; and
o    technological advances.

If we sell a vessel at a time when ship prices have fallen, the sale may be at
less than the vessel's carrying amount on our financial statements, with the
result that we could incur a loss and a reduction in earnings. In addition, 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 a reduction of our shareholder's equity. It is
possible that the market value of our vessels will decline in the future.

An acceleration of the current prohibition to trade deadlines for our non-double
hull tankers could adversely affect our operations.

Our tanker fleet includes 24 non-double hull tankers. The United States, the
European Union and the International Maritime Organization, or the IMO, have all
imposed limits or prohibitions on the use of these types of tankers in specified
markets after certain target dates, which range from 2010 to 2015. The sinking
of the single hull m.t. Prestige offshore Spain in November 2002 led to
proposals by the European Union and the IMO to accelerate the prohibition to
trade of all non-double hull tankers, with certain limited exceptions. In
December 2003, the Marine Environmental Protection Committee of the IMO adopted
an amendment to the International Convention for the Prevention of Pollution
from Ships to accelerate the phase out of single hull tankers from 2015 to 2010
unless the relevant flag states extend the date to 2015. As a result of these
regulations, we re-evaluated the estimated useful life of our single hull
vessels and determined this to be either 25 years or the vessel's anniversary
date in 2015 whichever comes first. As a result, the estimated useful lives of
fourteen of our wholly owned vessels and two vessels owned by associated
companies were reduced in the fourth quarter of 2003. A change in accounting
estimate was recognised to reflect this decision, resulting in an increase in
depreciation expense and consequently decreasing net income by $1.3 million and
basic and diluted earnings per share by $0.02, for 2003. The IMO may adopt
further regulations that could adversely affect the useful lives of our
non-double hull tankers as well as our ability to generate income from them.
Based on the present and future oil consumption, the tanker fleet, the current
order books for tankers and the available capacities of shipyards, we believe
that in order to meet the world transport demand for oil, the industry will need
to continue to employ single hull tankers after 2010.

Compliance with safety, environmental and other governmental and other
requirements may adversely affect our business

The shipping industry is affected by numerous regulations in the form of
international conventions, national, state and local laws and national and
international regulations in force in the jurisdictions in which such tankers
operate, as well as in the country or countries in which such tankers are
registered. These regulations include the U.S. Oil Pollution Act of 1990, or
OPA, the International Convention on Civil Liability for Oil Pollution Damage of
1969, International Convention for the Prevention of Pollution from Ships, the
IMO International Convention for the Safety of Life at Sea of 1974, or SOLAS,
the International Convention on Load Lines of 1966 and the U.S. Marine
Transportation Security Act of 2002. In addition, vessel classification
societies also impose significant safety and other requirements on our vessels.
We believe our vessels are maintained in good condition in compliance with
present regulatory and class requirements relevant to areas in which they
operate, and are operated in compliance with applicable safety/environmental
laws and regulations. However, regulation of vessels, particularly in the areas
of safety and environmental impact may change in the future and require
significant capital expenditures be incurred on our vessels to keep them in
compliance.

We may be unable to successfully compete with other tanker operators for
charters

The operation of tankers and transportation of crude and petroleum products and
the other businesses in which we operate are extremely competitive. Through our
operating subsidiaries we compete with other oil tanker and dry bulk carrier
owners (including major oil companies as well as independent companies), and, to
a lesser extent, owners of other size vessels. The tanker market is highly
fragmented. As of June 22, 2005, we are the largest single tanker operator,
controlling approximately 8.5% of the world's tanker fleet measured capacity.
Although we currently operate approximately 7.7% of the world VLCC and 10.6% of
the world Suezmax tanker fleet, this market share does not enable us to enforce
any degree of pricing discipline in the markets in which we compete. It is
possible that our competitive position will erode in the future.

Our debt service obligations could affect our ability to incur additional
indebtedness or engage in certain transactions

Our existing financing agreements impose operational and financing restrictions
on us which may significantly limit or prohibit, among other things, our ability
to incur additional indebtedness, create liens, sell capital shares of
subsidiaries, make certain investments, engage in mergers and acquisitions,
purchase and sell vessels, enter into time or consecutive voyage charters or pay
dividends without the consent of our lenders. In addition, our lenders may
accelerate the maturity of indebtedness under our financing agreements and
foreclose on the collateral securing the indebtedness upon the occurrence of
certain events of default, including our failure to comply with any of the
covenants contained in our financing agreements, not rectified within the
permitted time. For instance, declining vessel values could lead to a breach of
covenants under our financing agreements. If we are unable to pledge additional
collateral or obtain waivers from our lenders, our lenders could accelerate our
debt and foreclose on our vessels.

An increase in interest rates could materially and adversely affect our
financial performance

At December 31, 2004 we had total long-term debt outstanding of $2,141.7
million, of which $1,039.8 million is floating rate debt. We use interest rate
swaps to manage interest rate risk. As at December 31, 2004, our interest rate
swap arrangements effectively fix the Company's interest rate exposure on $631.4
million of floating rate debt. Our maximum exposure to interest rate
fluctuations is $408.5 million at December 31, 2004. If interest rates rise
significantly, our results of operations could be materially or adversely
affected.

Fluctuations in the Yen could affect our earnings

One of our vessels has financing arrangements that require payments of principal
and interest in Yen. As we have not hedged our Yen exposure against the Dollar,
a change in the exchange rate for Yen could have an adverse impact on our
financial condition and results of operations. At December 31, 2004, we have Yen
debt outstanding with a principal amount of (Yen)1.3 billion (equivalent to
$13.1 million). The Company also has Yen charter income receivable in the amount
of (Yen)2.9 billion (equivalent to $28.8 million), in relation to bareboat
charter agreements. At December 31, 2004 the Company has Yen denominated foreign
currency contracts with a notional principal of (Yen)14.6 billion (equivalent to
$141.9 million). A one Yen movement in the exchange rate would increase or
decrease net income by $1.3 million in total, in relation to the aforementioned
Yen denominated debt, foreign currency contracts and future charter hire
receivable.

We may be unable to attract and retain key management personnel in the tanker
industry, which may negatively impact the effectiveness of our management and
our results of operation

Our success depends to a significant extent upon the abilities and efforts of
our senior executives, and particularly John Fredriksen, our Chairman and Chief
Executive Officer, and Tor Olav Troim, our Vice-President, for the management of
our activities and strategic guidance. While we believe that we have an
experienced management team, the loss or unavailability of one or more of our
senior executives, and particularly Mr. Fredriksen or Mr. Troim, for any
extended period of time could have an adverse effect on our business and results
of operations.

Risks involved with operating ocean-going vessels could affect our business and
reputation, which would adversely affect our revenues

The operation of an ocean-going vessel carries inherent risks. These risks
include the possibility of:

o    marine disaster;
o    piracy;
o    environmental accidents;
o    cargo and property losses or damage; and
o    business interruptions caused by mechanical failure, human error, war,
     terrorism, piracy, political action in various countries, labour strikes,
     or adverse weather conditions.

Any of these circumstances or events could increase our costs or lower our
revenues. The involvement of our vessels in an oil spill or other environmental
disaster may harm our reputation as a safe and reliable tanker operator.

We may not have adequate insurance to compensate us if our vessels are damaged
or lost

We procure insurance for our fleet against those risks that we believe the
shipping industry commonly insures against. These insurances include hull and
machinery insurance, protection and indemnity insurance, which includes
environmental damage and pollution insurance coverage, and war risk insurance.
We can give no assurance that we are adequately insured against all risks. We
may not be able to obtain adequate insurance coverage at reasonable rates for
our fleet in the future. Additionally, our insurers may not pay particular
claims. Our insurance policies contain deductibles for which we will be
responsible, limitations and exclusions which, although we believe are standard
in the shipping industry, may nevertheless increase our costs or lower our
revenue.

An increase in costs could materially and adversely affect our financial
performance

Our vessel operating expenses depend on a variety of factors including crew
costs, provisions, deck and engine stores, lubricating oil, insurance,
maintenance and repairs, many of which are beyond our control and affect the
entire shipping industry. Some of these costs, primarily insurance and enhanced
security measures implemented after September 11, 2001, are increasing. The
terrorist attack of the VLCC Limburg in Yemen during October 2002 has resulted
in even more emphasis on security and pressure on insurance rates. If costs
continue to rise, our results of operations could be materially or adversely
affected.

Maritime claimants could arrest our tankers, which could interrupt our cash flow

Crew members, suppliers of goods and services to a vessel, shippers of cargo and
other parties may be entitled to a maritime lien against that vessel for
unsatisfied debts, claims or damages. In many jurisdictions a maritime
lienholder may enforce its lien by arresting a vessel through foreclosure
proceedings. The arrest or attachment of one or more of our vessels could
interrupt our cash flow and require us to pay a significant amount of money to
have the arrest lifted.

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,
resulting in loss of earnings

A government could requisition for title or seize our vessels. Requisition for
title occurs when a government takes control of a vessel and becomes her 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 her
charterer at dictated charter rates. Generally, requisitions occur during a
period of war or emergency. Government requisition of one or more of our vessels
would negatively impact our revenues.

Our operations outside the United States expose us to global risks that may
interfere with the operation of our vessels

We are an international company and primarily conduct our operations outside of
the United States. Changing economic, regulatory, political and governmental
conditions in the countries where we are engaged in business or where our
vessels are registered affect us. Hostilities or other political instability in
regions where our vessels trade could affect our trade patterns and adversely
affect our operations and performance. The terrorist attacks against targets in
the United States on September 11, 2001 and the military response by the United
States has increased the likelihood of acts of terrorism worldwide. Acts of
terrorism, regional hostilities or other political instability, as shown by the
attack on the Limburg in Yemen in October 2002, attacks on oil pipelines during
and subsequent to the Iraq war in 2003 and attacks on expatriate workers in the
Middle East could adversely affect the oil trade and reduce our revenue or
increase our expenses.

Terrorist attacks, such as the attacks on the United States on September 11,
2001, and other acts of violence or war may affect the financial markets and our
business, results of operations and financial condition

As a result of the September 11, 2001 terrorist attacks and subsequent events,
there has been considerable uncertainty in the world financial markets. The full
effect of these events, as well as concerns about future terrorist attacks, on
the financial markets is not yet known, but could include, among other things,
increased volatility in the price of securities. These uncertainties could also
adversely affect our ability to obtain additional financing on terms acceptable
to us or at all. Future terrorist attacks may also negatively affect our
operations and financial condition and directly impact our vessels or our
customers. 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. Any of these occurrences
could have a material adverse impact on our operating results, revenue, and
costs.

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 corporation. Our memorandum of association and bye-laws and the
Bermuda Companies Act 1981, as amended, govern our affairs. Investors may have
more difficulty in protecting their interests in the face of actions by
management, directors or controlling shareholders than would shareholders of a
corporation incorporated in a United States jurisdiction. Under Bermuda law a
director generally owes a fiduciary duty only to the company; not to the
company's shareholder. Our shareholders may not have a direct course of action
against our directors. In addition, Bermuda law does not provide a mechanism for
our shareholders to bring a class action lawsuit under Bermuda law. Further, our
Bye-laws provide for the indemnification of our directors or officers against
any liability arising out of any act or omission except for an act or omission
constituting fraud, dishonesty or illegality.

Because our offices and most of our assets are outside the United Sates, you may
not be able to bring suit against us, or enforce a judgement obtained against us
in the United States.

Our executive officers, administrative activities and assets are located outside
the United States. As a result, it may be more difficult for investors to effect
service of process within the United States upon us, or to enforce both in the
United States and outside the United States judgments against us in any action,
including actions predicated upon the civil liability provisions of the federal
securities laws of the United States.

We may not be exempt from U.S. taxation on our U.S. source shipping income,
which would reduce our net income and cash flow by the amount of the applicable
tax

Under the U.S. Internal Revenue Code of 1986, or the Code, a portion of the
gross shipping income of a vessel owning or chartering corporation, such as
ourselves and our subsidiaries, may be subject to a 4% U.S. federal income tax
on 50% of the gross shipping income that is attributable to transportation that
begins or ends, but that does not both begin and end, in the United States,
unless that corporation is entitled to a special tax exemption under the Code
which applies to the international shipping income derived by some non-U.S.
corporations. We believe that we and each of our subsidiaries qualify for this
statutory tax exemption for the year ended December 31, 2004.

However, due to the factual nature of the issues involved, we can give no
assurances on our tax-exempt status or that of any of our subsidiaries.

If we or our subsidiaries are not entitled to this statutory tax exemption for
any taxable year, we or our subsidiaries could be subject for those years to an
effective 4% U.S. federal income tax on the portion of the income we or our
subsidiaries derive during the year from U.S. sources. The imposition of this
taxation could have an adverse effect on our net income and cash flow.

ITEM 4. INFORMATION ON THE COMPANY

A. HISTORY AND DEVELOPMENT OF THE COMPANY

The Company

We are Frontline Ltd., a Bermuda based shipping company and we were incorporated
in Bermuda on June 12, 1992 (Company No. EC-17460). Our registered and principal
executive offices are located at Par-la-Ville Place, 14 Par-la-Ville Road,
Hamilton, HM 08, Bermuda, and our telephone number is +1 (441) 295-6935.

We are engaged primarily in the ownership and operation of oil tankers,
including oil/bulk/ore, or OBO carriers. We operate tankers of two sizes: very
large crude carriers, or VLCCs, which are between 200,000 and 320,000 deadweight
tons, or dwt, and Suezmaxes, which are vessels between 120,000 and 170,000 dwt.
We operate through subsidiaries and partnerships located in the Bahamas,
Bermuda, the Cayman Islands, the Isle of Man, Liberia, Norway, Panama, Marshall
Islands, Cyprus and Singapore. We are also involved in the charter, purchase and
sale of vessels. Since 1996, we have emerged as a leading tanker company within
the VLCC and Suezmax size sectors of the market.

We have our origin in Frontline AB, which was founded in 1985, and which was
listed on the Stockholm Stock Exchange from 1989 to 1997. In May 1997, Frontline
AB was redomiciled from Sweden to Bermuda and its shares were listed on the Oslo
Stock Exchange. The change of domicile was executed through a share for share
exchange offer from the then newly formed Bermuda company, Frontline Ltd ("Old
Frontline"). In September 1997, Old Frontline initiated an amalgamation with
London & Overseas Freighters Limited ("LOF"), also a Bermuda company. This
process was completed in May 1998. As a result of this transaction, Frontline
became listed on the London Stock Exchange and on the NASDAQ National Market (in
the form of American Depositary Shares, or ADSs, represented by American
Depositary Receipts, or ADRs) in addition to its listing on the Oslo Stock
Exchange.

The ADR program was terminated on October 5, 2001 and the ADSs were delisted
from the NASDAQ National Market on August 3, 2001. The Company's Ordinary Shares
began trading on the NYSE on August 6, 2001.

Acquisitions and Disposals

In 2002, we took delivery of five wholly-owned newbuilding double-hull VLCCs for
total delivered cost of $383.7 million. Joint ventures in which we had a 33.3%
interest took delivery of two newbuilding double-hulled VLCCs for a total
delivered cost of $161.8 million. In addition, we sold five dry bulk carriers
for total proceeds of $93.4 million, realising a net loss of $3.1 million.

In 2003, we acquired two Suezmax tankers for $6.7 million which were previously
40% and 35% owned. These vessels were subsequently sold for proceeds of $8.1
million realising gains of $1.2 million. A further two Suezmax tankers were sold
in 2003 for proceeds of $100.3 million realising gains of $7.1 million.

We also took delivery of a newbuilding double-hull VLCC for delivered cost of
$79.2 million in 2003 which was subsequently sold for $76.0 million realising a
loss of $2.7 million and acquired the remaining 50% of a double-hull VLCC which
was already 50% owned for $9.5 million.

Through a reorganisation of interests in joint ventures, we disposed of 50%
interests in two VLCCs and increased interests in a further four double-hull
VLCCs from 33.3% to 50.1% through a combination of sale, acquisition and
exchange of interest transactions. Our net cash investment in these transactions
was $3.3 million and we recorded impairment losses of $5.2 million.

As discussed below, the consolidation of Independent Tankers Corporation, which
we refer to as ITC, and Golden Fountain resulted in the addition of seven VLCCs
and four Suezmax tankers to our fleet.

In February 2004 through a further reorganization of joint ventures, we
exchanged its 50.1% interests in three double-hull VLCCs for the remaining 49.9%
interests in three double-hull VLCCs of which we already owned 50.1%. We
accounted for these exchanges as non-cash exchanges of assets at book value. We
received a net cash settlement of $2.3 million as a result of equalization of
the values of the assets exchanged and recorded a gain of $0.2 million on the
transactions.

We also acquired five single-hull Suezmax tankers in 2004 for a total cost of
$125.1 million. Golden Fountain was sold for gross proceeds of $61.0 million,
realising a gain of $19.7 million. The spin-off of Golden Ocean discussed below
resulted in the disposal of two dry bulk carriers in 2004.

Acquisitions and disposals occurring in 2005 are discussed below in Spin-off of
Ship Finance International Limited.

Spin-Off of Ship Finance International Limited

In October 2003, we formed Ship Finance International Limited, which we refer to
as Ship Finance, as our wholly-owned subsidiary for the purpose of acquiring
certain of our shipping assets. In December 2003, Ship Finance issued $580
million of 8.5% Senior Notes due 2013. In the first quarter of 2004, Ship
Finance used the proceeds of the Notes issue, together with a refinancing of
existing debt, to fund the acquisition from us of a fleet of 46 crude oil
tankers and an option to purchase one additional tanker from a third party. We
have chartered each of the ships back from Ship Finance for most of their
remaining lives through our wholly owned subsidiary Frontline Shipping Limited
which we refer to as Frontline Shipping. We also entered into fixed rate
management and administrative services agreements with Ship Finance to provide
for the operation and maintenance of the Company's vessels and administrative
support services. The charters and the management agreements were each given
economic effect as of January 1, 2004.

The sales price for the assets transferred to Ship Finance was determined as the
book value of each asset as at December 31, 2003 and the transfers were also
recorded at book value. Ship Finance paid an aggregate purchase price of $950
million, excluding working capital and other intercompany balances retained by
us, for the 46 vessels and purchase option that it acquired from us. Ship
Finance also assumed senior secured indebtedness with respect to its fleet in
the amount of approximately $1.158 billion. The purchase price for the 46
vessels and the option and the refinancing of the existing senior secured
indebtedness on those vessels, which was completed in January of 2004, were
financed through a combination of the net proceeds from Ship Finance's issuance
of $580 million of 8.5% Senior Notes, due 2013, funds from a $1.058 billion
senior secured credit facility and a deemed equity contribution from us to Ship
Finance.

Ship Finance has agreed with us that it will treat all of these vessels as being
under time charters to us, on the same terms and effective on the same date as
the other 39 vessels for all economic purposes.

In 2005, to date we have sold a further three vessels to Ship Finance and
chartered them back under long term charters to our wholly owned subsidiary
Frontline Shipping II Limited which we refer to as Frontline Shipping II. We
refer to Frontline Shipping and Frontline Shipping II as the charterers. In
January 2005, we acquired the VLCCs Front Century and Front Champion which were
previously chartered in by us under operating leases for a total purchase price
of $141.9 million pursuant to the exercise of purchase options. The vessels were
immediately sold to Ship Finance for a total of $196.0 million, and chartered
back on 199 and 204 month charters, respectively, following the structure in
place for other vessels chartered from Ship Finance. In March 2005, we acquired
the VLCC Golden Victory for $75.0 million pursuant to the exercise of its
purchase option. The vessel was previously chartered in by us under an operating
lease. The vessel owning company was immediately be sold to Ship Finance for
$98.0 million, and chartered back on a 204 month charter, following the
structure in place for other vessels chartered from Ship Finance.

On January 17, 2005 Ship Finance exercised its option to acquire the VLCC
Oscilla and the vessel was delivered to Ship Finance on April 4, 2005 and
renamed Front Scilla. The purchase price paid to acquire the vessel was
approximately $16.5 million which is equal to the outstanding mortgage debt
under four loan agreements between lenders and the vessel's owning company. In
addition, Ship Finance will make a payment of $14.6 million to us to reflect the
fact that the original purchase price was set assuming delivery to Ship Finance
on January 1, 2004 whereas delivery did not occur until April 4, 2005. On the
same date the vessel commenced a fixed rate time charter to us following the
structure in place for other vessels chartered from Ship Finance.

In January 2005, Ship Finance sold the Suezmax Front Fighter for $68.25 million
and the vessel was delivered to its new owners in March 2005. The charter of the
Front Fighter to Frontline Shipping has been cancelled as a result of this sale.

In May 2005, Ship Finance sold the three Suezmaxes, Front Lillo, Front Emperor
and Front Spirit, for a total consideration of $92.0 million. These vessels were
delivered to their new owners in June 2005. In May 2005, Ship Finance also
agreed to buy a further three vessels from us, namely Front Traveller, Front
Transporter, and Front Target, for an aggregate amount of $92.0 million. The
time charter and management arrangements between Ship Finance and us have been
cancelled for the three sold vessels and will be replaced with new agreements on
similar terms for the vessels acquired.

In May 2005 Ship Finance entered into an agreement with parties affiliated with
Hemen Holding Ltd., which we refer to as Hemen, to acquire two vessel owning
companies, each owning one 2005 built containership for a total consideration of
$98.6 million. The first vessel, the Sea Alpha, was delivered in May 2005, and
the Sea Beta will be delivered from the ship yard in September 2005. Hemen is a
Cyprus holding company indirectly controlled by Mr. John Fredriksen, who our
Chairman and Chief Executive Officer . The Sea Alpha is currently trading on a
medium term time charter to an unrelated third party.

Ship Finance entered into an agreement in June 2005 with parties affiliated with
Hemen to acquire two vessel owning companies, each owning one 2004 built VLCC,
for a total consideration of $184 million.

The long term time charters to us extend for various periods depending on the
age of the vessels, ranging from approximately seven to 22 years. Five of the
vessels that Ship Finance acquired are on existing long term time charters and
three vessels were on existing long term bareboat charters, of which two have
since been terminated during 2004. With certain exceptions, the daily base
charter rates, which are payable by Frontline Shipping monthly in advance for a
maximum of 360 days per year (361 days per leap year), are as follows:

Year                                                  VLCC               Suezmax
----                                                  ----               -------

2003 to 2006 ...........................             $25,575             $21,100
2007 to 2010 ...........................             $25,175             $20,700
2011 and beyond ........................             $24,175             $19,700

The daily base charterhire for our vessels that are chartered to Frontline
Shipping II, which is also payable monthly in advance for a maximum of 360 days
per year (361 days per leap year), is as follows:

Vessel                 2005 to 2006  2007 to 2010  2011 to 2018  2019 and beyond
------                 ------------  ------------  ------------  ---------------

Front Champion ........     $31,340       $31,140       $30,640          $28,464
Front Century .........     $31,501       $31,301       $30,801          $28,625
Golden Victory ........     $33,793       $33,793       $33,793          $33,793

The daily base charter rates for vessels that reach their 18th delivery date
anniversary, in the case of non-double hull vessels, or their 20th delivery date
anniversary, in the case of double hull vessels, will decline to $18,262 per day
for VLCCs and $15,348 for Suezmax tankers after such dates, respectively.

In addition, the base charter rate for Ship Finance's non-double hull vessels
will decline to $7,500 per day after 2010, at which time we will have the option
to terminate the charters for those vessels. Each charter also provides that the
base charter rate will be reduced if the vessel does not achieve the performance
specifications set forth in the charter. The related management agreement
provides that we will reimburse Ship Finance for any such reduced charter
payments. We have the right under a charter to direct Ship Finance to bareboat
charter the related vessel to a third party. During the term of the bareboat
charter, we will continue to pay us the daily base charter rate for the vessel,
less $6,500 per day. The related management agreement provides that Ship
Finance's obligation to pay the $6,500 fixed fee to us will be suspended for so
long as the vessel is bareboat chartered.

Under the charters, Ship Finance is required to keep the vessels seaworthy, and
to crew and maintain them. We perform those duties for Ship Finance under the
management agreements. If a structural change or new equipment is required due
to changes in classification society or regulatory requirements, we may make
them, at our expense, without Ship Finance's consent, but those changes or
improvements will become Ship Finance's property. We are not obligated to pay
Ship Finance charterhire for off hire days in excess of five off hire days per
year per vessel calculated on a fleet-wide basis, which include days a vessel is
unable to be in service due to, among other things, repairs or drydockings.
However, under the management agreements, we will reimburse Ship Finance for any
loss of charter revenue in excess of five off hire days per vessel, calculated
on a fleet-wide basis.

The terms of the charters do not provide us with an option to terminate the
charter before the end of its term, other than with respect to non-double hull
vessels after 2010. Ship Finance may terminate any or all of the charters in the
event of an event of default under a charter ancillary agreement. The charters
may also terminate in the event of (1) a requisition for title of a vessel or
(2) the total loss or constructive total loss of a vessel. In addition, each
charter provides that Ship Finance may not sell the related vessel without our
consent.

Under the terms of charter ancillary agreements, beginning with the 11-month
period from February 1, 2004 and for each calendar year after that, we have
agreed to pay Ship Finance a profit sharing payment equal to 20% of the charter
revenues for the applicable period, calculated on a time charter equivalent
basis, realised by us from use of its fleet in excess of the daily base
charterhire. The profit sharing payment is due two months after the end of each
calendar year.

On May 28, 2004, we announced the distribution of 25% of Ship Finance's common
shares to our common shareholders in a partial spin off. On June 16, 2004, each
Frontline shareholder of record on June 7, 2004, received one share in Ship
Finance for every four Frontline shares held. On June 17, 2004, the Ship Finance
common shares commenced trading on the New York Stock Exchange under the ticker
symbol "SFL". Two further dividends of shares in Ship Finance were distributed
in 2004: On September 24, 2004 every Frontline shareholder received one share of
Ship Finance for every 10 shares of ours that they held and on December 15, 2004
every Frontline shareholder received two shares of Ship Finance for every 15
shares of ours that they held. At December 31, 2004, the Company's remaining
shareholding in Ship Finance was approximately 50.8%.

On January 28, 2005 and February 23, 2005 our Board approved further spin-offs
of the shares in Ship Finance. On February 18, 2005, each shareholder of
Frontline received one share of Ship Finance for every four shares of ours held
and on March 24, 2005 each shareholder of Frontline received one share of Ship
Finance for every ten shares of ours held. Following these transactions our
shareholding in Ship Finance is approximately 15.8% at June 22, 2005.

It is our Board's intention that Frontline shall divest all its remaining shares
in Ship Finance either through a straight sale, a corporate transaction or
through further distributions to Frontline's shareholders.

A detailed discussion of the contracts relating to the spin off of Ship Finance
is provided in Item 10. Additional Information.

Spin-Off of Golden Ocean Group Limited

In November 2004, we established Golden Ocean Group Limited, which we refer to
as Golden Ocean, as a wholly owned subsidiary in Bermuda for the purpose of
transferring, by way of contribution, certain of our dry bulk shipping
interests. Three of our subsidiaries and cash equal to the difference between
$22.45 million and the historical net book value of those subsidiaries was
transferred to Golden Ocean on December 1, 2004. On the same date, our Board
resolved to distribute all of our shares of Golden Ocean to our shareholders in
proportion to their ownership in Frontline. On December 13, 2004 we distributed
76.0% of the shares of Golden Ocean to our shareholders in a three for one stock
dividend. Certain of our U.S. shareholders were excluded from the distribution
and received a cash payment in lieu of shares equal to $0.60 per Golden Ocean
share, which represents the average price per share of the Golden Ocean shares
during their first five days of trading on the Oslo Stock Exchange. Golden Ocean
was listed on the Oslo Stock Exchange on December 15, 2004. The Company sold 30
million Golden Ocean shares, equivalent to 13.3%, to provide funds for the cash
payment and the Company retained a 10.7% interest in Golden Ocean which was
subsequently sold in February 2005.The Company will not have any significant
continuing involvement in these dry bulk operations.

Acquisition of Independent Tankers Corporation

In May 1998, we acquired Independent Tankers Corporation, which we refer to as
ITC from a third party in an arms length transaction for a price of $9.5
million. Our investment in ITC was subsequently sold to Hemen,a related party,
for $9.5 million with effect from July 1, 1998. On July 1, 2003, we purchased a
call option for $10.0 million to acquire all of the shares of ITC from Hemen for
a total consideration of $4.0 million plus 4% interest per year. Hemen is
indirectly controlled by our Chairman, John Fredriksen. In December 2003 the
Company implemented the provisions of FASB Interpretation 46, Consolidation of
Variable Interest Entities ("FIN 46") and consequently was required to
consolidate ITC. On May 27, 2004 we exercised this purchase option and acquired
all of the shares of ITC. ITC operates a total of six VLCCs and four Suezmax
tankers, which are on long-term charters to subsidiaries of BP Plc and
ChevronTexaco Corp. The initial fixed terms of the charters range from 8 to 10
years. After the initial fixed term the charterers have options to extend the
charters of the vessels for further periods of between 8 to 12 years. ITC is
financed by Term and Serial Notes. These Notes mature between 2004 and 2021 and
are secured on ITC's vessels and long-term charters. Interest is payable on the
Notes at fixed rates which range between 6.42% and 8.52%.

B. BUSINESS OVERVIEW

Our tanker fleet, which we believe is one of the largest and most modern in the
world, consists of 29 VLCCs, of which one is part-owned, and 32 Suezmax tankers,
of which eight are Suezmax OBOs. In addition, we have one Handymax size dry bulk
carrier. We also charter in ten modern VLCCs and three modern Suezmax tankers
from third parties.

As of June 22, 2005, the fleet that we operate has a total tonnage of
approximately 15.5 million dwt, and our tanker vessels have an average age of
9.5 years compared with an estimated industry average of over 8.4 years. We
believe that our vessels comply with the most stringent of generally applicable
environmental regulations for tankers.

We own various vessel owning and operating subsidiaries. Our operations take
place substantially outside of the United States. Our subsidiaries, therefore,
own and operate vessels which may be affected by changes in foreign governments
and other economic and political conditions. We are engaged primarily in
transporting crude oil and, in addition, raw materials like coal and iron ore.
Our VLCCs are specifically designed for the transportation of crude oil and, due
to their size, are primarily used to transport crude oil from the Middle East
Gulf to the Far East, Northern Europe, the Caribbean and the Louisiana Offshore
Oil Port, or LOOP. Our Suezmax tankers are similarly designed for worldwide
trading, but the trade for these vessels is mainly in the Atlantic Basin and
Middle East to South East Asia. Historically, the tanker industry has been
highly cyclical, with attendant volatility in profitability and asset values
resulting from changes in the supply of and demand for tanker capacity. Our OBO
carriers are specifically designed to carry oil or dry cargo and may be used to
transport either oil or dry cargo on any voyage. When freight rates in both the
oil and dry cargo markets are equivalent OBO carriers are operated most
profitably transporting oil on one leg of the voyage and dry cargo on the other
leg of a voyage. The supply of tanker and OBO capacity is influenced by the
number of new vessels built, the number of older vessels scrapped, converted,
laid up and lost, the efficiency of the world tanker or OBO fleet and government
and industry regulation of maritime transportation practices. The demand for
tanker and OBO capacity is influenced by global and regional economic
conditions, increases and decreases in industrial production and demand for
crude oil and petroleum products, the proportion of world oil output supplied by
Middle Eastern and other producers, political changes and armed conflicts
(including wars in the Middle East) and changes in seaborne and other
transportation patterns. The demand for OBO capacity is, in addition, influenced
by increases and decreases in the production and demand for raw materials such
as iron ore and coal. In particular, demand for our tankers and our services in
transporting crude oil and petroleum products and dry cargoes has been dependent
upon world and regional markets. Any decrease in shipments of crude oil or raw
materials in world markets could have a material adverse effect on our earnings.
Historically, these markets have been volatile as a result of, among other
things, general economic conditions, prices, environmental concerns, weather and
competition from alternative energy sources. Because many factors influencing
the supply of and demand for tankers and OBO carriers are unpredictable, the
nature, timing and degree of changes in industry conditions are also
unpredictable.

We are committed to providing quality transportation services to all of our
customers and to developing and maintaining long term relationships with the
major charterers of tankers. Increasing global environmental concerns have
created a demand in the petroleum products/crude oil seaborne transportation
industry for vessels that are able to conform to the stringent environmental
standards currently being imposed throughout the world. Our fleet of modern
single hull VLCCs may discharge crude oil at LOOP until the year 2015, and our
modern single hull Suezmax tankers may call at U.S. ports until the year 2010
under the phase-in schedule for double hull tankers presently prescribed under
OPA.

The tanker industry is highly cyclical, experiencing volatility in
profitability, vessel values and freight rates. Freight rates are strongly
influenced by the supply of tanker vessels and the demand for oil
transportation. Refer to Item 5 "Operating and Financial Review and Prospects"
for a discussion of the tanker market in 2004.

Similar to structures commonly used by other shipping companies, our vessels are
all owned by, or chartered to, separate subsidiaries or associated companies.
Frontline Management AS and Frontline Management (Bermuda) Limited which we
refer to as Frontline Management, both wholly-owned subsidiaries, support us in
the implementation of our decisions. Frontline Management is responsible for the
commercial management of our shipowning subsidiaries, including chartering and
insurance. Each of our vessels is registered under the Bahamas, French, Hong
Kong, Liberian, Cyprus, Singaporean, Norwegian, Isle of Man, Marshall Islands or
Panamanian flag.

Frontline has a strategy of extensive outsourcing. Ship management, crewing and
accounting services are provided by a number of independent and competing
suppliers.

o    Our vessels are managed by independent ship management companies. Pursuant
     to management agreements, each of the independent ship management companies
     provides operations, ship maintenance, crewing, technical support, shipyard
     supervision and related services to Frontline. A central part of our
     strategy is to benchmark operational performance and cost level amongst our
     ship managers.

o    Independent ship managers provide crewing for our vessels. Currently, our
     vessels are crewed with Russian, Ukranian, Croatian, Baltic, Indian and
     Filipino officers and crews, or combinations of these nationalities.

o    Accounting services for each of our shipowning subsidiaries are provided by
     the ship managers.

Strategy

Following the spin off of Ship Finance and Golden Ocean discussed above, our
operations will be comprised of the following main components:

     o    Our charter and management agreements with Ship Finance including a
          $271 million cash deposit we are required to reserve to secure the
          charters by Frontline Shipping and Frontline Shipping II.

     o    The ownership of ITC.

     o    The ownership of our remaining directly owned vessels.

Our strategy is to be a world leading operator and charterer of modern, high
quality oil tankers with flexibility to adjust our exposure to the tanker market
depending on existing factors such as charter rates, newbuilding costs, vessel
resale and scrapping values and vessel operating expenses resulting from, among
other things, changes in the supply of and demand for tanker capacity. In
addition, we will, when the financing arrangements permit, consider divesting
our vessels that Ship Finance has not purchased. This may be done through sale
and leaseback or straight sales of the vessels.

Our business strategy is primarily based upon the following principles:

     o    emphasising operational safety and quality maintenance for all of our
          vessels;
     o    complying with all current and proposed environmental regulations;
     o    outsourcing technical operations and crewing;
     o    controlling operational costs of vessels;
     o    operating one of the most modern and homogeneous fleets of tankers in
          the world;
     o    achieving high utilisation of our vessels;
     o    achieving competitive financing arrangements;
     o    achieving a satisfactory mix of term charters, contracts of
          afffeightment and spot voyages; and
     o    developing and maintaining relationships with major oil companies and
          industrial charterers.

After having delivered their cargo, spot market vessels typically operate in
ballast until being rechartered. It is the time element associated with these
ballast legs that we seek to minimize by efficiently chartering OBO carriers and
tankers that we operate. Our strategies to minimize time spent on ballast legs
include allocating cargoes among our vessels so as to achieve the minimum total
time spent on ballast legs across our fleet.

We believe that fleet size in the industrial shipping sector is important in
negotiating terms with major clients and charterers. We believe that a large,
high-quality VLCC and Suezmax fleet will enhance our ability to obtain
competitive terms from suppliers and shipbuilders and to produce cost savings in
chartering and operations.

Although there has been a trend to consolidation over the past 15 years, the
tanker market remains highly fragmented. We estimate, based on available
industry data, that we currently own or operate approximately 7.7% of the world
VLCC fleet and 10.6% of the world Suezmax tanker fleet. It is our intention to
use the strong financial position that we believe our strategy and governing
principles will create, to continue the consolidation of the tanker market. We
plan to make acquisitions with the proceeds of equity and debt issuances and
bank debt and by issuing shares as consideration for vessel purchases, and
believe that such acquisitions will help us to consolidate the tanker market.
Our role in the consolidation of the tanker market may include the acquisition
of new vessels and secondhand vessels and we may also engage in business
acquisitions and strategic transactions such as marketing joint ventures. In the
ordinary course of our business, we engage in the evaluation of potential
candidates for acquisitions and strategic transactions. While we are constantly
evaluating opportunities for acquisitions and growth, at this time we do not
have any planned acquisitions.

Following the spin-off of Ship Finance, we will be more financially exposed to
the chartering market. This is likely to increase our activity in the chartering
market with respect to both short and long-term charters of vessels in and out.
Our purpose will be to manage risk through a portfolio of charters.
Consolidation of the tanker market will remain an important objective for us.

Seasonality

Historically, oil trade and therefore charter rates increased in the winter
months and eased in the summer months as demand for oil in the Northern
Hemisphere rose in colder weather and fell in warmer weather. The tanker
industry in general is less dependent on the seasonal transport of heating oil
than a decade ago as new uses for oil and oil products have developed, spreading
consumption more evenly over the year. Most apparent is a higher seasonal demand
during the summer months due to energy requirements for air conditioning and
motor vehicles.

Customers

Our customers include major oil companies, petroleum products traders,
government agencies and various other entities. During each of the years ended
December 31, 2003 and 2002, there were no customers that accounted for 10% or
more of our consolidated operating revenues. During the year ended December 31,
2004, two customers each accounted for more than 10% of our consolidated
operating revenues.

Competition

The market for international seaborne crude oil transportation services is
highly fragmented and competitive. Seaborne crude oil transportation services
generally are provided by two main types of operators: major oil company captive
fleets (both private and state-owned) and independent shipowner fleets. In
addition, several owners and operators pool their vessels together on an ongoing
basis, and such pools are available to customers to the same extent as
independently owned and operated fleets. Many major oil companies and other oil
trading companies, the primary charterers of the vessels owned or controlled by
us, also operate their own vessels and use such vessels not only to transport
their own crude oil but also to transport crude oil for third party charterers
in direct competition with independent owners and operators in the tanker
charter market. Competition for charters is intense and is based upon price,
location, size, age, condition and acceptability of the vessel and its manager.
Competition is also affected by the availability of other size vessels to
compete in the trades in which the Company engages.

Risk of Loss and Insurance

Our business is affected by a number of risks, including mechanical failure of
the vessels, collisions, property loss to the vessels, cargo loss or damage and
business interruption due to political circumstances in foreign countries,
hostilities and labour strikes. In addition, the operation of any ocean-going
vessel is subject to the inherent possibility of catastrophic marine disaster,
including oil spills and other environmental mishaps, and the liabilities
arising from owning and operating vessels in international trade.

Frontline Management is responsible for arranging for the insurance of our
vessels in line with standard industry practice. In accordance with that
practice, we maintain marine hull and machinery and war risks insurance, which
includes the risk of actual or constructive total loss, and protection and
indemnity insurance with mutual assurance associations. From time to time we
carry insurance covering the loss of hire resulting from marine casualties in
respect of some of our vessels. Currently, the amount of coverage for liability
for pollution, spillage and leakage available to us on commercially reasonable
terms through protection and indemnity associations and providers of excess
coverage is $1 billion per vessel per occurrence. Protection and indemnity
associations are mutual marine indemnity associations formed by shipowners to
provide protection from large financial loss to one member by contribution
towards that loss by all members.

We believe that our current insurance coverage is adequate to protect us against
the accident-related risks involved in the conduct of our business and that we
maintain appropriate levels of environmental damage and pollution insurance
coverage, consistent with standard industry practice. However, there is no
assurance that all risks are adequately insured against, that any particular
claims will be paid or that we will be able to procure adequate insurance
coverage at commercially reasonable rates in the future.

Inspection by a Classification Society

Every commercial vessel's hull and machinery is "classed" by a classification
society authorised by its country of registry. The classification society
certifies that the vessel has been built and maintained in accordance with the
rules of such classification society and complies with applicable rules and
regulations of the country of registry of the vessel and the international
conventions to which that country is a member. Our vessels have all been
certified as "in class."

Each vessel is inspected by a surveyor of the classification society every year,
every two and a half years and every four to five years. Should any defects be
found, the classification surveyor will issue a "recommendation" for appropriate
repairs which have to be made by the shipowner within the time limit prescribed.

Environmental and Other Regulations

International conventions and national, state and local laws and regulations of
the jurisdictions where our tankers operate or are registered significantly
affect the ownership and operation of our tankers. We believe we are currently
in substantial compliance with applicable environmental and regulatory laws
regarding the ownership and operation of our tankers. However, because existing
laws may change or new laws may be implemented, we cannot predict the ultimate
cost of complying with all applicable requirements or the impact they will have
on the resale value or useful lives of our tankers. Future, non-compliance could
require us to incur substantial costs or to temporarily suspend operation of our
tankers.

We believe the heightened environmental and quality concerns of insurance
underwriters, regulators and charterers are leading to greater inspection and
safety requirements on all vessels and creating an increasing demand for modern
vessels that are able to conform to the stricter environmental standards. We
maintain high operating standards for our vessels that emphasizes operational
safety, quality maintenance, continuous training of our crews and officers and
compliance with United States and international regulations. Our vessels are
subject to both scheduled and unscheduled inspections by a variety of
governmental and private entities, each of which may have unique requirements.
These entities include the local port authorities such as the U.S. Coast Guard,
harbour master or equivalent, classification societies, flag state
administration or country of registry, and charterers, particularly terminal
operators and major oil companies which conduct frequent vessel inspections.
Each of these entities may have unique requirements that we must comply with.

International Maritime Organisation

In 1992, the International Maritime Organization, or IMO ( the United Nations
agency for maritime safety and the prevention of marine pollution by ships),
adopted MARPOL 73/78 regulations that set forth pollution prevention
requirements applicable to tankers. These regulations, which have been adopted
by more than 150 nations, including many of the jurisdictions in which our
tankers operate, provide, in part, that:

     o    tankers between 25 and 30 years old must be of double-hull
          construction or of a mid-deck design with double-sided construction,
          unless:

          (1)  they have wing tanks or double-bottom spaces not used for the
               carriage of oil which cover at least 30% of the length of the
               cargo tank section of the hull or bottom; or

          (2)  they are capable of hydrostatically balanced loading (loading
               cargo into a tanker in such a way that, in the event of a breach
               of the hull, water flows into the tanker, displacing oil upwards
               instead of into the sea);

     o    tankers 30 years old or older must be of double-hull construction or
          mid-deck design with double-sided construction; and

     o    all tankers are subject to enhanced inspections.

Also, under IMO regulations, a tanker must be of double-hull construction or a
mid-deck design with double-sided construction, or be of another approved design
ensuring the same level of protection against oil pollution, if the tanker:

          o    is the subject of a contract for a major conversion or original
               construction on or after July 6, 1993;

          o    commences a major conversion or has its keel laid on or after
               January 6, 1994; or

          o    completes a major conversion or is a newbuilding delivered on or
               after July 6, 1996.

These regulations were amended in 2001 and provided a timetable for the phase
out of single hull tankers. This timetable was amended again in December 2003 in
response to European Union ("EU") proposals, further accelerating the final
phase-out dates for single hull tankers.

The baseline phase out dates apply to tankers according to their certified
arrangement (protectively located segregated ballast tanks or PL/SBT) and the
type of oil carried as cargo. These regulations identify 3 categories of single
hull tankers, including double side and double bottom tankers:

a)   Category 1 (Pre- PL/SBT) oil tankers - any tanker of 20,000 dwt or above
     carrying crude oil, fuel oil, heavy diesel oil or lubricating oil as cargo
     or of 30,000 dwt or above carrying other types of oil .

b)   Category 2 (PL/SBT) oil tankers - any tanker of 20,000 dwt or above
     carrying crude oil, fuel oil, heavy diesel oil or lubricating oil as cargo
     or of 30,000 dwt or above carrying other types of oil.

c)   Category 3 oil tankers - any tanker of between 5,000 dwt and 20,000 dwt
     carrying crude oil, fuel oil, heavy diesel oil or lubricating oil as cargo
     or less than 30,000 dwt carrying other types of oil .

All of the single-hull tankers we operate are Category 2 oil tankers. The table
below provides the specific phase out dates according to each category of oil
tanker. Oil tankers that meet 13F or have double bottoms and double sides with
dimensions in compliance with 13G1(c) continue to be exempt from the accelerated
phase out.

Baseline Phase Out Scheme

--------------------------------------------------------------------------------
                                      Year of Delivery
Phase Out Date
                     Category 1         Category 2                    Category 3
--------------------------------------------------------------------------------
 5 April 2005     before 5 April 82                before 5 April 1977
    + 2005       after 5 April 1982      After 5 April 77 but before 1 Jan 1978
    + 2006                                           1978* and 1979*
    + 2007                                           1980* and 1981*
    + 2008                                                1982*
    + 2009                                                1983*
    + 2010                                           1984* or later
                    + by Anniversary of Delivery Date In Year
                                * subject to CAS

For Category 2 and 3 tankers, a successful completion of the Condition
Assessment Scheme (CAS) is required by 15 years of age or by the first
intermediate or renewal survey due after 5 April 2005, which ever occurs later.

The new phase-out regime became effective on April 5, 2005. For Category 1
tankers (pre-MARPOL tankers without segregated ballast tanks, generally built
before 1982), the final phase-out date has been brought forward to 2005 from
2007. For Category 2 tankers (MARPOL tankers, generally built after 1982) the
final phase out date has brought forward to 2010 from 2015.

To soften the significant impact that would occur if the approximately 700
tankers (approximately 67 million tons dwt) were to be phased out globally in
2010 as per above, two exceptions to the baseline phase out dates were adopted
which allow Category 2 and 3 oil tankers that have passed the CAS to operate
beyond the 2010 cut-off date as summarized below:

Exception One - a flag State may permit oil tankers to operate to 25 years of
age provided that, not later than 1 July 2001, the entire cargo tank length is
protected with one of the following arrangements which cannot be used for the
carriage of oil:

o    Double bottoms having a height at centerline which does not meet that
     required by the MARPOL 13E; or

o    Wing tanks having a width which does not meet that required by IBC Code -
     Type 2.

Exception Two - a flag State may permit oil tankers, that do not have double
bottoms nor double sides, to operate to the age of 25 years of age or the
anniversary date of the tanker's delivery in 2015, whichever occurs earlier.

Although the flag States are permitted to grant extensions in both of the above
cases provided CAS is satisfactorily completed and IMO has been so informed of
the extension, coast States have the right to deny oil tankers that have been
granted such extensions into their ports and offshore terminals.

Oil tankers granted life extension under Exception One may be denied entry after
2015 if they are 25 years of age and older. Oil tankers with neither double
bottoms nor double sides which have been granted an extension under Exception
Two may be denied entry after the relevant phase out date.

Based on the present oil consumption, expected future oil consumption , the
present tanker fleet, the order book for tankers forward and the yard
capacities, we believe that in order to meet the world demand for transport of
oil, the industry will need to use single hulls after 2010 and hence we believe
exemptions will be granted for trading well maintained single hull tankers after
2010.

The following table summarizes the impact of such regulations on the Company's
single hull and double sided tankers:

                                                                       OPA 90
                    Vessel      Vessel      Year    IMO phase out   Flag state
Vessel Name          type     Category(s)   Built   No exemption    exemption

Front Birch         Suezmax       SH        1991        2010           2015
Front Comor         Suezmax       SH        1993        2010           2015
Front Emperor       Suezmax       SH        1992        2010           2015
Front Granite       Suezmax       SH        1991        2010           2015
Front Horizon       Suezmax       SH        1988        2010           2013
Front Lillo         Suezmax       SH        1991        2010           2015
Front Maple         Suezmax       SH        1991        2010           2015
Front Spirit        Suezmax       SH        1993        2010           2015
Front Sunda         Suezmax       SH        1992        2010           2015
Front Target        Suezmax       SH        1990        2010           2015
Front Transporter   Suezmax       SH        1989        2010           2014
Front Traveller     Suezmax       SH        1990        2010           2015
Marble              Suezmax       SH        1992        2010           2015
Edinburgh           VLCC          SH        1993        2010           2015
Front Ace           VLCC          SH        1993        2010           2015
Front Duchess       VLCC          SH        1993        2010           2015
Front Duke          VLCC          SH        1992        2010           2015
Front Highness      VLCC          SH        1991        2010           2015
Front Lady          VLCC          SH        1991        2010           2015
Front Lord          VLCC          SH        1991        2010           2015
Front Sabang        VLCC          SH        1990        2010           2015
Front Tobago        VLCC          SH        1993        2010           2015
Front Vanadis       VLCC          SH        1990        2010           2015
Golden Stream       VLCC          SH        1995        2010           2015
Navix Astral        VLCC          SH        1996        2010           2015

MARPOL Regulation 13H was also introduced, banning the carriage of heavy grade
oils in single hull tankers of more than 5,000 dwt after April 5, 2005. This
regulation will affect heavy crude oil from Latin America as well as heavy fuel
oil, bitumen, tar and related products. Flag states, however, may permit
Category 2 tankers to continue to carry heavy grade oil beyond 2005, subject to
satisfactory CAS results.

The IMO has also negotiated international conventions that impose liability for
oil pollution in international waters and a signatory's territorial waters. In
September 1997, the IMO adopted Annex VI to the International Convention for the
Prevention of Pollution from Ships to address air pollution from ships. Annex VI
was ratified in May 2004, and will become effective in May 2005. Annex VI, when
it becomes effective, will set limits on sulfur oxide and nitrogen oxide
emissions from ship exhausts and prohibit deliberate emissions of ozone
depleting substances, such as halons, chlorofluorocarbons, emissions of volatile
compounds from cargo tanks and prohibition of 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. We are formulating a plan to comply with the Annex VI
regulations once they come into effect. Compliance with these regulations could
require the installation of expensive emission control systems and could have an
adverse financial impact on the operation of our vessels.

The operation of our vessels is also affected by the requirements set forth in
the IMO's Management Code for the Safe Operation of Ships and Pollution
Prevention, or ISM Code. The ISM Code requires ship owners and bareboat
charterers to 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
emergencies. The failure of a ship owner or a bareboat charterer to comply with
the ISM Code may subject such party to increased liability, may decrease
available insurance coverage for the affected vessels and may result in a denial
of access to, or detention in certain ports. We rely on the safety management
system that we and our third party technical managers have developed.

United States Oil Pollution Act of 1990 and Comprehensive Environmental
Response, Compensation and Liability Act

The United States regulates the tanker industry with an extensive regulatory and
liability regime for environmental protection and cleanup of oil spills,
consisting primarily of the United States Oil Pollution Act of 1990, or OPA, and
the Comprehensive Environmental Response, Compensation and Liability Act of
1980, or CERCLA. OPA affects all owners and operators whose vessels trade with
the United States or its territories or possessions, or whose vessels operate in
the waters of the United States., which include the United States territorial
sea and the 200 nautical mile exclusive economic zone around the United States.
CERCLA applies to the discharge of hazardous substances (other than oil) whether
on land or at sea. Both OPA and CERCLA impact our operations.

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

     o    natural resources damages and related assessment costs;
     o    real and personal property damages;
     o    net loss of taxes, rents, royalties, rents, fees and other lost
          revenues;
     o    net cost of public services necessitated by a spill response such as
          protection from fire, safety or health hazards; and
     o    loss of subsistence use of natural resources.

OPA limits the liability of responsible parties to the greater of $1,200 per
gross ton or $10 million per tanker that is over 3,000 gross tons (subject to
possible adjustment for inflation). The act specifically permits individual
states to impose their own liability regimes with regard to oil pollution
incidents occurring within their boundaries, and some states have enacted
legislation providing for unlimited liability for discharge of pollutants within
their waters. In some cases, states that have enacted this type of legislation
have not yet issued implementing regulations defining tanker owners'
responsibilities under these laws. CERCLA, which applies to owners and operators
of tankers, contains a similar liability regime and provides for cleanup and
removal of hazardous substances and for natural resource damages. Liability
under CERCLA is limited to the greater of $300 per gross ton or $5 million.

These limits of liability do not apply, however, where the incident is caused by
violation of applicable United States federal safety, construction or operating
regulations, or by the responsible party's gross negligence or wilful
misconduct. These limits do not apply if the responsible party fails or refuses
to report the incident or to co-operate and assist in connection with the
substance removal activities. OPA and CERCLA each preserve the right to recover
damages under existing law, including maritime tort law.

OPA also requires owners and operators of vessels to establish and maintain with
the United States Coast Guard evidence of financial responsibility sufficient to
meet the limit of their potential strict liability under the act. The United
States Coast Guard has enacted regulations requiring evidence of financial
responsibility in the amount of $1,500 per gross ton for tankers, coupling the
OPA limitation on liability of $1,200 per gross ton with the CERCLA liability
limit of $300 per gross ton. Under these regulations, an owner or operator of
more than one tanker is required to obtain a certificate of financial
responsibility for the entire fleet in an amount equal only to the financial
responsibility requirement of the tanker having the greatest maximum strict
liability under OPA and CERCLA. We have provided requisite guarantees and
received certificates of financial responsibility from the United States Coast
Guard for each of our tankers that calls in United States waters.

Frontline Management insures each of our tankers with pollution liability
insurance in the maximum commercially available amount of $1.0 billion per
incident per vessel. A catastrophic spill could exceed the insurance coverage
available, in which event there could be a material adverse effect on our
business.

Under OPA, oil tankers without double hulls will not be permitted to come to
United States ports or trade in the United States waters by 2015. Based on the
current phase-out requirement, our 24 single hull tankers will not be eligible
to carry oil as cargo within the 200-mile United States exclusive economic zone
starting in 2010, except that these tankers and our three double sided tankers
may trade in United States waters until 2015 if their operations within United
States waters are limited to discharging their cargoes at the Louisiana Offshore
Oil Port ("LOOP") or unloading with the aid of another vessel, a process
referred to as "lightering," within authorized lightering zones more than 60
miles off-shore.

OPA also amended the Federal Water Pollution Control Act to require owners or
operators of tankers operating in the waters of the United States to file vessel
response plans with the United States Coast Guard, and their tankers are
required to operate in compliance with their United States Coast Guard approved
plans. These response plans must, among other things:

     o    address a "worst case" scenario and identify and ensure, through
          contract or other approved means, the availability of necessary
          private response resources to respond to a "worst case discharge";

     o    describe crew training and drills; and

     o    identify a qualified individual with full authority to implement
          removal actions.

Vessel response plans for our tankers operating in the waters of the United
States have been approved by the United States Coast Guard. In addition, the
United States Coast Guard has announced it intends to propose similar
regulations requiring certain vessels to prepare response plans for the release
of hazardous substances. We are responsible for ensuring our vessels comply with
any additional regulations.

OPA does not prevent individual states from imposing their own liability regimes
with respect to oil pollution incidents occurring within their boundaries. In
fact, most U.S. states that border a navigable waterway have enacted
environmental pollution laws that impose strict liability on a person for
removal costs and damages resulting from a discharge of oil or a release of a
hazardous substance. These laws may be more stringent than United States federal
law.

European Union Tanker Restrictions

In July 2003, the European Union adopted legislation, which was amended in
October 2003, that prohibits all single hull tankers from entering into its
ports or offshore terminals by 2010 or earlier, depending on their age. The
European Union has also already banned all single hull tankers carrying heavy
grades of oil from entering or leaving its ports or offshore terminals or
anchoring in areas under its jurisdiction. Commencing in 2005, certain single
hull tankers above 15 years of age will also be restricted from entering or
leaving European Union ports or offshore terminals and anchoring in areas under
European Union jurisdiction. The European Union is also considering legislation
that would: (1) ban manifestly sub-standard vessels (defined as those more than
15 years old that have been detained by port authorities at least twice in a six
month period) from European waters and create an obligation of port states to
inspect vessels posing a high risk to maritime safety or the marine environment;
and (2) provide the European Union with greater authority and control over
classification societies, including the ability to seek to suspend or revoke the
authority of negligent societies. The sinking of the m.t. Prestige and resulting
oil spill in November 2002 has led to the adoption of other environmental
regulations by certain European Union nations, which could adversely affect the
remaining useful lives of all of our tankers and our ability to generate income
from them. It is impossible to predict what legislation or additional
regulations, if any, may be promulgated by the European Union or any other
country or authority.

International Conventions on Civil Liability for Oil Pollution Damage

Although the United States is not a party thereto, many countries have ratified
and follow the liability scheme adopted by the IMO and set out in the
International Convention on Civil Liability for Oil Pollution Damage, 1969, as
amended, or the CLC, and the Convention for the Establishment of an
International Fund for Oil Pollution of 1971, as amended. Under these
conventions, a vessel's registered owner is strictly liable for pollution damage
caused on the territorial waters of a contracting state by discharge of
persistent oil, subject to certain complete defenses. Many of the countries that
have ratified the CLC have increased the liability limits through a 1992
Protocol to the CLC. The liability limits in the countries that have ratified
this Protocol are currently approximately $4.0 million plus approximately $566.0
per gross registered tonne above 5,000 gross tonnes with an approximate maximum
of $80.5 million per vessel, with the exact amount tied to a unit of account
which varies according to a basket of currencies. The right to limit liability
is forfeited under the CLC where the spill is caused by the owner's actual fault
or privity and, under the 1992 Protocol, where the spill is caused by the
owner's intentional or reckless conduct. Vessels trading to contracting states
must provide evidence of insurance covering the limited 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 the CLC.

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
Maritime Transportation Security Act of 2002 ("MTSA") came into effect. To
implement certain portions of the MTSA, in July 2003, the United States 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 the International
Convention for the Safety of Life at Sea ("SOLAS") created a new chapter of the
convention dealing specifically with maritime security. The new chapter came
into effect in July 2004 and imposes various detailed security obligations on
vessels and port authorities, most of which are contained in the newly created
International Ship and Port Facilities Security Code ("ISPS"). Among the various
requirements are:

     o    on-board installation of automatic information systems, or AIS, to
          enhance vessel-to-vessel and vessel-to-shore communications;

     o    on-board installation of ship security alert systems;

     o    the development of vessel security plans; and

     o    compliance with flag state security certification requirements.

The United States Coast Guard regulations, intended to align with international
maritime security standards, exempt non-U.S. vessels from MTSA vessel security
measures provided such vessels have on board a valid International Ship Security
Certificate that attests to the vessel's compliance with SOLAS security
requirements and the ISPS Code. All of our vessels comply with the various
security measures addressed by the MTSA, SOLAS and the ISPS Code.

C. ORGANIZATIONAL STRUCTURE

See Exhibit 8.1 for a list of our significant subsidiaries and equity interests.

D. PROPERTY, PLANT AND EQUIPMENT

The Company's Vessels

We operate a modern fleet of tankers and the following table sets forth the
fleet that we operate as of June 24, 2005:

<TABLE>
<CAPTION>
                                    Approximate                          Type of
Vessel                      Built   Dwt.           Construction   Flag   Employment
------                      -----   ----           ------------   ----   ----------

Tonnage Owned Directly
----------------------

VLCCs
-----
<S>                         <C>     <C>            <C>            <C>    <C>
Front Tobago (40%)          1993    261,000        Single-hull    LIB    Tankers Pool
Golden Stream               1995    276,000        Single-hull    MI     Spot market
Antares Voyager             1998    308,500        Double-hull    BA     Bareboat charter
Phoenix Voyager             1999    308,500        Double-hull    BA     Bareboat charter

Suezmax Tankers
---------------
Front Horizon               1998    151,000        Single-hull    MI     Spot market
Marble                      1992    142,000        Single-hull    BA     Spot market
Virgo Voyager               1992    150,000        Single-hull    BA     Bareboat charter
Cygnus Voyager              1993    150,000        Double-hull    BA     Bareboat charter
Altair Voyager              1993    130,000        Double-hull    BA     Bareboat charter
Sirius Voyager              1994    150,000        Double-hull    BA     Bareboat charter

Handymax Drybulk Carrier
------------------------
Cos Hero                    1999    46,000         Single-hull    PAN    Bareboat Charter

Tonnage Owned Through Ship Finance
----------------------------------

VLCCs
-----
Front Sabang                1990    286,000        Single-hull    SG     Spot market
Front Vanadis               1990    286,000        Single-hull    SG     Spot market
Front Highness              1991    284,000        Single-hull    SG     Spot market
Front Lady                  1991    284,000        Single-hull    SG     Spot market
Front Lord                  1991    284,000        Single-hull    SG     Spot market
Front Duke                  1992    284,000        Single-hull    SG     Spot market
Front Duchess               1993    284,000        Single-hull    SG     Spot market
Front Edinburgh             1993    302,000        Double-side    LIB    Spot market
Front Ace                   1993    275,000        Single-hull    LIB    Spot market
Navix Astral                1996    276,000        Single-hull    PAN    Bareboat charter
New Vanguard                1998    300,000        Double-hull    MI     Spot market
Front Century               1998    311,000        Double-hull    MI     Spot market
Front Champion              1998    311,000        Double-hull    BA     Spot market
New Vista                   1998    300,000        Double-hull    MI     Spot market
Front Comanche              1999    300,000        Double-hull    FRA    Time charter
Golden Victory              1999    305,000        Double-hull    MI     Spot market
Omala (ex New Circassia)    1999    306,000        Double-hull    IoM    Bareboat charter
Opalia                      1999    302,000        Double-hull    IoM    Bareboat charter
Ocana (ex Front Commerce)   1999    300,000        Double-hull    IoM    Bareboat charter
Front Scilla                2000    302,000        Double-hull    IoM    Spot market
Ariake                      2001    299,000        Double-hull    BA     Spot market
Front Serenade              2002    299,000        Double-hull    LIB    Spot market
Otina (ex Hakata)           2002    296,000        Double-hull    IoM    Bareboat charter
Front Stratus               2002    299,000        Double-hull    LIB    Spot market
Front Falcon                2002    308,000        Double-hull    BA     Spot market
Front Page                  2002    299,000        Double-hull    LIB    Spot market
Sea Energy                  2004    306,000        Double-hull    CYP    Spot market
Sea Force                   2004    306,000        Double-hull    CYP    Spot market

Suezmax OBO Carriers
--------------------
Front Breaker               1991    169,000        Double-hull    MI     Time charter
Front Climber               1991    169,000        Double-hull    SG     Time charter
Front Driver                1991    169,000        Double-hull    MI     Time charter
Front Guider                1991    169,000        Double-hull    SG     Time charter
Front Leader                1991    169,000        Double-hull    SG     Time charter
Front Rider                 1992    169,000        Double-hull    SG     Time charter
Front Striver               1992    169,000        Double-hull    SG     Time charter
Front Viewer                1992    169,000        Double-hull    SG     Time charter

Suezmax Tankers
---------------
Front Transporter           1989    150,000        Single-hull    MI     Spot market
Front Target                1990    150,000        Single-hull    MI     Spot market
Front Traveller             1990    153,000        Single-hull    MI     Spot market
Front Birch                 1991    152,000        Double-side    MI     Spot market
Front Maple                 1991    152,000        Double-side    MI     Spot market
Front Granite               1991    142,000        Single-hull    MI     Spot market
Front Sunda                 1992    142,000        Single-hull    MI     Spot market
Front Comor                 1993    142,000        Single-hull    NIS    Spot market
Front Pride                 1993    150,000        Double-hull    NIS    Spot market
Front Glory                 1995    150,000        Double-hull    NIS    Spot market
Front Splendour             1995    150,000        Double-hull    NIS    Spot market
Front Ardenne               1997    153,000        Double-hull    NIS    Spot market
Front Brabant               1998    153,000        Double-hull    NIS    Spot market
Mindanao                    1998    158,000        Double-hull    SG     Spot market
Front Hunter                1998    153,000        Double-hull    NIS    Spot market

Containerships
--------------
Sea Alpha                   2005    1,700 teu(1)   n/a            CYP    Time charter
Sea Beta (newbuilding)      2005    1,700 teu(2)   n/a            CYP    N/A

Tonnage Chartered In from Third Parties
---------------------------------------

VLCCs
-----
Front Chief                 1999    311,000        Double-hull    BA     Spot market
Front Commander             1999    311,000        Double-hull    BA     Spot market
Front Crown                 1999    311,000        Double-hull    BA     Spot market
British Pioneer             1999    307,000        Double-hull    IoM    Bareboat charter
Front Tina                  2000    298,000        Double-hull    LIB    Spot market
Front Commodore             2000    299,000        Double-hull    LIB    Time charter
British Pride               2000    307,000        Double-hull    IoM    Bareboat charter
British Progress            2000    307,000        Double-hull    IoM    Bareboat charter
British Purpose             2000    307,000        Double-hull    IoM    Bareboat charter
Front Eagle                 2002    309,000        Double-hull    BA     Spot market

Suezmax Tankers
---------------
Front Warrior               1998    153,000        Double-hull    BA     Spot market
Front Melody                2001    150,000        Double-hull    LIB    Spot market
Front Symphony              2001    150,000        Double-hull    LIB    Spot market
</TABLE>

Our chartered in fleet is contracted to us under leasing arrangements with fixed
terms of between eight and twenty four years. Lessors have options to require us
to extend nine of these leases by up to an additional five years from expiry of
the fixed term. We have fixed price purchase options to buy nine of these
vessels at certain future dates and the lessors have fixed price options to put
nine of these vessels to us at the end of the lease period. The remaining four
lease agreements are not cancellable by us without agreement of the end-user of
the vessel.

Key to Flags:

BA - Bahamas, HK - Hong Kong, IoM - Isle of Man, LIB - Liberia, NIS - Norwegian
International Ship Register, PAN - Panama, SG - Singapore, FRA - France, MI -
Marshall Islands, CYP - Cyprus.

(1)  Measured in "twenty-foot equivalent units" (Teu)
(2)  Vessel expected to be delivered September 2005

Other than our interests in the vessels described above, we do not own any
material physical properties. We lease office space in Hamilton, Bermuda from an
unaffiliated third party. Frontline Management leases office space, at market
rates, in Oslo, Norway from Sea Shipping AS, a company indirectly affiliated
with Hemen, our principal shareholder.

ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS

Overview

The following discussion should be read in conjunction with Item 3 "Selected
Financial Data", Item 4 "Information on the Company" and our audited
Consolidated Financial Statements and Notes thereto included herein.

Our principal focus and expertise is the transportation of crude oil and oil
product cargoes for major integrated oil companies and other customers. As at
December 31, 2004, our tanker fleet consisted of 26 VLCCs, of which one is
part-owned, and 33 Suezmax tankers, of which eight are Suezmax OBOs. We also
charter in 13 modern VLCCs and three modern Suezmax tankers from third parties.
In addition, we have one Handymax size dry bulk carrier. A full fleet list is
provided in Item 4 "Information on the Company" showing the vessels that we
currently own and charter in.

Fleet Changes

Refer to Item 4 for discussion on acquisitions and disposals of vessels. A
summary of our fleet changes for the years ended December 31, 2004, 2003 and
2002 is as follows:

--------------------------------------------------------------------------------
                                                              2004   2003   2002
--------------------------------------------------------------------------------
VLCCs
At start of period                                              36     28     23
Acquisitions                                                     3      2      5
Disposals                                                        1      1     --
Consolidated from 12/31/03 due to adoption of FIN 46            --      7     --
--------------------------------------------------------------------------------
At end of period                                                38     36     28
--------------------------------------------------------------------------------

VLCCs owned by equity investees
At start of period                                               7     11      9
Acquisitions                                                    --     --      2
Disposals                                                        6      3     --
Consolidated from 12/31/03 due to adoption of FIN 46            --      1     --
--------------------------------------------------------------------------------
At end of period                                                 1      7     11
--------------------------------------------------------------------------------

Suezmax
At start of period                                              23     21     21
Acquisitions                                                     5     --     --
Disposals                                                       --      2     --
Consolidated from 12/31/03 due to adoption of FIN 46             4     --
--------------------------------------------------------------------------------
At end of period                                                28     23     21
--------------------------------------------------------------------------------

Suezmax OBOs
--------------------------------------------------------------------------------
At start and end of period                                       8      8      8
--------------------------------------------------------------------------------

Drybulk
At start of period                                               3      3      8
Disposals                                                        2     --      5
--------------------------------------------------------------------------------
At end of period                                                 1      3      3
--------------------------------------------------------------------------------

Total fleet
At start of period                                              77     71     69
Acqusitions                                                      8      2      7
Disposals                                                        9      6      5
Consolidated from 12/31/03 due to adoption of FIN 46            --     10     --
--------------------------------------------------------------------------------
At end of period                                                76     77     71
--------------------------------------------------------------------------------

Summary of Fleet Employment

As discussed below, our vessels are operated under time charters, bareboat
charters, voyage charters, pool arrangements and COAs.

--------------------------------------------------------------------------------
                                                   As at December 31,
                                     2004             2003             2002
                                         Per-             Per-             Per-
                                  No.    cent      No.    cent      No.    cent
--------------------------------------------------------------------------------

VLCCs
Spot or pool                       25      66%      23      64%      22      79%
Time charter                        2       5%       3       8%       2       7%
Bareboat charter                   11      29%      10      28%       4      14%
--------------------------------------------------------------------------------
Total                              38     100%      36     100%      28     100%
--------------------------------------------------------------------------------

VLCCs owned by
equity investees
Spot or pool                        1     100%       7     100%      11     100%
--------------------------------------------------------------------------------
Total                               1     100%       7     100%      11     100%
--------------------------------------------------------------------------------

Suezmax
Spot or pool                       24      86%      18      78%      20      95%
Time charter                       --      --        1       4%       1       5%
Bareboat charter                    4      14%       4      18%      --      --
--------------------------------------------------------------------------------
Total                              28     100%      23     100%      21     100%
--------------------------------------------------------------------------------

Suezmax OBOs
Spot or pool                       --      --       --      --        8     100%
Time charter                        8     100%       8     100%      --      --
--------------------------------------------------------------------------------
Total                               8     100%       8     100%       8     100%
--------------------------------------------------------------------------------

Drybulk
Time charter                       --      --        2      67%       2      67%
Bareboat charter                    1     100%       1      33%       1      33%
--------------------------------------------------------------------------------
Total                               1     100%       3     100%       3     100%
--------------------------------------------------------------------------------

Total fleet
Spot or pool                       50      66%      48      62%      61      86%
Time charter                       10      13%      14      18%       5       7%
Bareboat charter                   16      21%      15      20%       5       7%
--------------------------------------------------------------------------------
Total                              76     100%      77     100%      71     100%
--------------------------------------------------------------------------------

Market Overview

The tanker market experienced a good year in 2004 as freight rates increased
dramatically compared to 2003, mainly due to limited fleet growth and strong
growth in the demand for oil, and implicitly for oil tankers.

According to the International Energy Agency, world oil demand grew by 2.65
million barrels per day (mbd) compared to 2003 with the total world demand
ending up at 82.44 mbd. The main driver for this growth was the strong economic
growth in China and the USA resulting in record import levels.

The world supply of oil increased with 3.39 mbd from 2003 to a total of 83.03
mbd in 2004. The rapid economic growth in China led to a large growth in imports
of oil into China during the year. In addition, the hurricane Ivan which hit the
US Gulf led to the shut down of oil production in the area which had to be
replaced by additional imports. This resulted in strong demand for VLCCs, and a
very healthy market for most of the year. The continuing unrest in Iraq kept the
output from that country to about 1.9 mbd. compared with a pre-war level of
about 2.2 mbd. However, the shortfall in production from Iraq was replaced by
increased production in the rest of the OPEC countries.

The size of the world VLCC fleet increased by 2.5% in 2004 from 433 vessels to
452 vessels. A total of 11 VLCC's were scrapped during the year and 30 were
delivered. The total order book for VLCCs was at 84 vessels at the end of the
year (86 as of May 1st), of which 43 were ordered during the year. The size of
the world Suezmax fleet increased by 5% in 2004 from 295 vessels to 310. A total
of 11 suezmaxes was scrapped and 26 were delivered. The total order book for
Suezmaxes was at 76 at the end of the year (79 as of May 1st), of which 30 were
ordered during the year. The total order books for VLCC and Suezmax were at
19.1% and 24.5%, respectively of the existing fleet.

While spot market rates have declined during the second quarter of 2005, the
Company believes that the outlook for the tanker market for the remainder of
2005 is positive due to the continued growth in oil consumption, which should
lead to a positive demand environment for tankers.

Accounting Changes

In December 2003 we implemented the provisions of FIN 46. The effect of our
implementation of FIN 46 was to require consolidation of certain entities in
which we held interests but which had not previously been consolidated. This
resulted in us recording an increase in total assets of $918.3 million, an
increase in total liabilities of $952.1 million and the cumulative effect of a
change in accounting principle of $33.7 million effective December 31, 2003 as
discussed below.

     >>   During 2004, we owned 50% of the issued shares of and had made loans
          to Golden Fountain Corporation, owner of a VLCC. Prior to the adoption
          of FIN 46, we accounted for our interest in Golden Fountain
          Corporation using the equity method. We determined that Golden
          Fountain Corporation was a variable interest entity and that we were
          the primary beneficiary. Accordingly we consolidated the assets and
          liabilities of Golden Fountain Corporation effective December 31,
          2003. The effect of consolidation of Golden Fountain Corporation as of
          December 31, 2003 was to increase total assets by $7.8 million,
          increase total liabilities by $16.4 million and to record the
          cumulative effect of a change in accounting principle of $8.5 million.
          Golden Fountain Corporation sold its vessel in December 17, 2004.

     >>   On July 1, 2003, we purchased a call option for $10.0 million to
          acquire all of the shares of ITC from Hemen, a related party, for a
          total consideration of $4.0 million plus 4% interest per year. Prior
          to the adoption of FIN 46 we did not consolidate ITC. We determined
          that ITC was a variable interest entity and that we were the primary
          beneficiary. Accordingly we consolidated the assets and liabilities of
          ITC effective December 31, 2003. The effect of consolidation of ITC as
          of December 31, 2003 was to increase total assets by $910.5 million,
          increase total liabilities by $935.7 million and to record the
          cumulative effect of a change in accounting principle of $25.2
          million.

     >>   Twelve of the vessels we leased as at December 31, 2004 are leased
          from special purpose lessor entities which were established and are
          owned by independent third parties who provide financing through debt
          and equity participation. Each entity owns one vessel, which is leased
          to us, and has no other activities. Prior to the adoption of FIN 46R,
          we did not consolidate these special purpose lessor entities. At
          December 31, 2004, four of these leases are accounted for as operating
          leases and eight of these leases are accounted for as capital leases.
          We determined that due to the existence of certain put and call
          options over the leased vessels, these entities are variable interest
          entities. The determination of the primary beneficiary of a variable
          interest entity requires knowledge of the participations in the equity
          of that entity by individual and related equity holders. Our lease
          agreements with the leasing entities do not give us any right to
          obtain this information and we have been unable to obtain this
          information by other means. Accordingly we are unable to determine the
          primary beneficiary of these leasing entities. At December 31, 2004,
          the original cost to the lessor of the assets under such arrangements
          was $856.5 million. At December 31, 2004, our residual value
          guarantees associated with these leases, which represent the maximum
          exposure to loss, are $132.3 million.

     >>   We had both an obligation and an option to purchase the VLCC Oscilla
          on expiry of a five-year time charter, which commenced in March 2000.
          Oscilla was owned and operated by an unrelated special purpose entity.
          Prior to the adoption of FIN 46R, this special purpose entity was not
          consolidated by Frontline. We determined that the entity that owns
          Oscilla is a variable interest entity and that Frontline was the
          primary beneficiary. At December 31, 2004 through January 2005, when
          we exercised our option to acquire the vessel, we were unable to
          obtain the accounting information necessary to be able to consolidate
          the entity that owns Oscilla. If we had exercised our option at
          December 31, 2004, the cost to us of the Oscilla would have been
          approximately $28.5 million and the maximum exposure to loss was $15.4
          million. On January 17, 2005, we exercised our option to acquire the
          Oscilla and the vessel was delivered to us on April 4, 2005

With effect from December 2003, the International Maritime Organisation
implemented new regulations that result in the accelerated phase-out of single
hull vessels. As a result of this, we have re-evaluated the estimated useful
life of our single hull vessels and determined this to be either 25 years or the
vessel's anniversary date in 2015 whichever comes first. As a result, the
estimated useful lives of fourteen of our wholly owned vessels and two vessels
owned by associated companies were reduced in the fourth quarter of 2003. A
change in accounting estimate was recognised to reflect this decision, resulting
in an increase in depreciation expense and consequently decreasing net income by
$1.3 million and basic and diluted earnings per share by $0.02, for 2003.

Discontinued Operations

In November 2004, we established Golden Ocean as a wholly owned subsidiary in
Bermuda for the purpose of transferring, by way of contribution, certain dry
bulk shipping interests. We will not have any significant continuing involvement
in these dry bulk operations and as a result, the financial results from our dry
bulk operations transferred to Golden Ocean have been reported under
"discontinued operations" for 2004, 2003 and 2002. We have accounted for the
spin off of Golden Ocean at fair value and have recorded a gain of $99.5 million
in the year ended December 31, 2004.

In 2002, we disposed of a portion of our dry bulk operations which were
accounted for as discontinued operations as we did not plan to have any
significant continuing involvement in dry bulk operations.

Critical Accounting Policies and Estimates

The preparation of our financial statements in accordance with accounting
principles generally accepted in the United States requires that management make
estimates and assumptions affecting the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. The following is a discussion of the accounting
policies applied by us that are considered to involve a higher degree of
judgement in their application. See Note 2 to our audited Consolidated Financial
Statements included herein for details of all of our material accounting
policies.

Revenue Recognition

Revenues are generated from freight billings, time charter and bareboat charter
hires. Time charter and bareboat charter revenues are recorded over the term of
the charter as service is provided. Under a voyage charter the revenues and
associated voyage costs are recognised rateably over the estimated duration of
the voyage. The operating results of voyages in progress at a reporting date are
estimated and recognised pro-rata on a per day basis. Probable losses on voyages
are provided for in full at the time such losses can be estimated. Amounts
receivable or payable arising from profit sharing arrangements are accrued based
on the estimated results of the voyage recorded as at the reporting date.

Revenues and voyage expenses of the vessels operating in pool arrangements, are
pooled and the resulting net pool revenues, calculated on a time charter
equivalent basis, are allocated to the pool participants according to an agreed
formula. Formulae used to allocate net pool revenues vary among different pools
but generally allocate revenues to pool participants on the basis of the number
of days a vessel operates in the pool with weighting adjustments made to reflect
vessels' differing capacities and performance capabilities. The same revenue and
expenses principles stated above are applied in determining the pool's net pool
revenues. Certain pools are responsible for paying voyage expenses and
distribute net pool revenues to the participants. We account for the net pool
revenues allocated by these pools as "pool revenues" in our statements of
operations. Certain pools require the participants to pay and account for voyage
expenses, and distribute gross pool revenues to the participants such that the
participants' resulting net pool revenues are equal to net pool revenues
calculated according to the agreed formula. We account for gross pool revenues
allocated by these pools as "pool revenues" in our statements of operations.

Vessels and Depreciation

The cost of the vessels less estimated residual value is depreciated on a
straight-line basis over the vessels' estimated remaining economic useful lives.
The estimated economic useful life of the Company's double hull vessels is 25
years and for single hull vessels is either 25 years or the vessel's anniversary
date in 2015, whichever comes first. Other equipment is depreciated over its
estimated remaining useful life, which approximates five years.

With effect from December 2003, the International Maritime Organisation
implemented new regulations that resulted in the accelerated phase-out of single
hull vessels. As a result of this, the Company re-evaluated the estimated useful
life of its single hull vessels and determined this to be either 25 years or the
vessel's anniversary date in 2015 whichever comes first. As a result, the
estimated useful lives of fourteen of the Company's wholly owned vessels and two
vessels owned by associated companies were reduced in the fourth quarter of
2003.

If the estimated economic useful life is incorrect, or circumstances change such
that the estimated economic useful life has to be revised, an impairment loss
could result in future periods. We will continue to monitor the situation and
revise the estimated useful lives of our non-double hull vessels as appropriate
when new regulations are implemented.

The vessels held and used by us are reviewed for impairment whenever events or
changes in circumstances indicate that the carrying amount of an asset may not
be recoverable. In assessing the recoverability of the vessels' carrying
amounts, we must make assumptions regarding estimated future cash flows. These
assumptions include assumptions about the spot market rates for vessels, the
operating costs of our vessels and the estimated economic useful life of our
vessels. In making these assumptions we refer to historical trends and
performance as well as any known future factors. Factors we consider important
which could affect recoverability and trigger impairment include significant
underperformance relative to expected operating results, new regulations that
change the estimated useful economic lives of our vessels and significant
negative industry or economic trends.

Variable Interest Entities

A variable interest entity is a legal entity that lacks either (a) equity
interest holders as a group that lack the characteristics of a controlling
financial interest, including: decision making ability and an interest in the
entity's residual risks and rewards or (b) the equity holders have not provided
sufficient equity investment to permit the entity to finance its activities
without additional subordinated financial support. FIN 46 requires a variable
interest entity to be consolidated if any of its interest holders are entitled
to a majority of the entity's residual return or are exposed to a majority of
its expected losses.

In applying the provisions of Interpretation 46, we must make assumptions in
respect of, but not limited to, the sufficiency of the equity investment in the
underlying entity. These assumptions include assumptions about the future
revenues, operating costs and estimated economic useful lives of assets of the
underlying entity.

We initially applied the provisions of Interpretation 46 to all special purpose
entities and other entities created after January 31, 2003 on December 31, 2003.
We initially applied its provisions to entities that are not considered to be
special purpose entities that were created before January 31, 2003 as of March
31, 2004. The impact on the results of operations and financial position of the
Company is explained above in "Accounting Changes".

Leases

Leases are classified as either capital leases or operating leases based on an
assessment of the terms of the lease. Classification of leases involves the use
of estimates or assumptions about fair values of leased vessels, expected future
values of vessels and, if lessor's rates of return are not known, lessee's cost
of capital. We generally base our estimates of fair value on the average of 3
independent broker valuations of a vessel. Our estimates of expected future
values of vessels are based on current fair values amortised in accordance with
our standard depreciation policy for owned vessels. Lessee's cost of capital is
estimated using an average which includes estimated return on equity and
estimated incremental borrowing cost. The classification of leases in our
accounts as either capital leases or operating leases is sensitive to changes in
these underlying estimates and assumptions.

Factors Affecting Our Results

The principal factors that have affected our historical results of operations
and financial position prior to our spin-off of Ship Finance include:

     o    the earnings of our vessels in the charter market;

     o    vessel expenses;

     o    administrative expenses;

     o    depreciation;

     o    interest expense; and

     o    foreign exchange.

We have derived our earnings from bareboat charters, time charters, voyage
charters, pool arrangements and contracts of affreightment.

As at December 31, 2004, 2003 and 2002, 50, 48 and 61 respectively, of our
vessels operated in the voyage charter market. The tanker industry has
historically been highly cyclical, experiencing volatility in profitability,
vessel values and freight rates. In particular, freight and charter rates are
strongly influenced by the supply of tanker vessels and the demand for oil
transportation services.

Our dry bulk carrier is fixed on a medium to long-term bareboat charter. This
arrangement provides sufficient cash flows to cover the debt service on the
vessel.

Operating costs are the direct costs associated with running a vessel and
include crew costs, vessel supplies, repairs and maintenance, drydockings,
lubricating oils and insurance.

Administrative expenses are composed of general corporate overhead expenses,
including personnel costs, property costs, legal and professional fees and other
general administrative expenses. Personnel costs include, among other things,
salaries, pension costs, fringe benefits, travel costs and health insurance. In
2002, administrative expenses also included administrative costs associated with
Frontline's participation in Tankers International LLC, or Tankers, a pooling
arrangement for the commercial operation of the VLCCs of Frontline and five
other VLCC operators, entered into in December of 1999. Frontline withdrew from
the pool in July of 2002 and these costs ceased in the second half of 2002.

Depreciation, or the periodic cost charged to our income for the reduction in
usefulness and long-term value of our vessels, is also related to the number of
vessels we own. We depreciate the cost of our vessels, less their estimated
residual value, over their estimated useful life on a straight-line basis. No
charge is made for depreciation of vessels under construction until they are
delivered.

Interest expense relates to vessel specific debt facilities and corporate debt.
Interest expense depends on our overall borrowing levels and may significantly
increase when we acquire vessels or on the delivery of newbuildings. Interest
incurred during the construction of a newbuilding is capitalized in the cost of
the newbuilding. Interest expense may also change with prevailing interest
rates, although the effect of these changes may be reduced by interest rate
swaps or other derivative instruments.

Principal factors that affect our results of operations and financial position
after our spin-off of Ship Finance include:

     o    the earnings of our vessels;

     o    the earnings and expenses related to any additional vessels that we
          acquire;

     o    charter payments we make to Ship Finance;

     o    profit sharing payments we make to Ship Finance;

     o    vessel operating costs of vessels, including those for the vessels we
          manage for Ship Finance;

     o    administrative expenses

     o    interest costs and;

     o    depreciation

Initially after our spin-off of Ship Finance, a large portion of our revenues
are derived from our operation of the vessels that we charter from Ship
Finance under long term charters, described above under "Spin-Off of Ship
Finance International Limited." In addition, beginning with the final 11-month
period in 2004 and for each calendar year thereafter, we will pay Ship Finance
profit sharing payment if our earnings from use of vessels we charter from Ship
Finance exceed certain amounts.

Our expenses after our spin-off of Ship Finance consist primarily of vessel
operating costs and administrative expenses. With respect to vessel operating
costs, our subsidiary Frontline Management has entered into fixed cost
management agreements with Ship Finance under which Frontline Management is
responsible for all technical management of the vessels we charter from Ship
Finance, including crewing, maintenance, repair, capital expenditures,
drydocking, vessel taxes and other vessel operating and voyage expenses.
Frontline Management receives a fixed fee of $6,500 per day per vessel for all
of the above services.

Frontline Management has entered into an administrative services agreement with
Ship Finance under which Frontline Management provides Ship Finance with
administrative support services such as the maintenance of corporate books and
records, the preparation of tax returns and financial statements, assistance
with corporate and regulatory compliance matters not related to Ship Finance's
vessels, payroll services, legal services, and other non-vessel related
administrative services. Ship Finance pays Frontline Management a fixed fee of
$20,000 per year per vessel for its services under the agreement, and reimburses
Frontline Management for reasonable third party costs advanced on their behalf
by Frontline, including directors fees and expenses, shareholder communications
and public relations, registrars, audit, legal fees and listings costs.

As at December 31, 2004, 49% of our debt was floating rate debt. We may enter
into interest rate swap arrangements if we believe it is advantageous to do so.
As at December 31, 2004, certain of our subsidiaries had Yen denominated debt
and charters denominated in Yen, which expose us to exchange rate risk. As at
December 31, 2004 and 2003, we had Yen denominated debt in subsidiaries of
(Yen)1.3billion and (Yen)9.6 billion respectively.

As of December 31, 2004, Ship Finance had a $1.058 billion secured six-year
credit facility with a syndicate of financial institutions. This credit facility
provided Ship Finance with a portion of the capital required to complete the
acquisition of their fleet of vessels from us and to refinance related secured
indebtedness. They have entered into interest rate swaps to fix the interest on
$500.0 million of the borrowings under this facility for a period of five years
at an average rate of 3.4%.

Management is currently evaluating the accounting impact of the spinoff of our
remaining shareholding in Ship Finance, including whether the financial results
and position of Ship Finance will be deconsolidated from Frontline. The spin-off
may be achieved through a straight sale, a corporate transaction or through a
distribution to our shareholders. Management is considering the accounting
treatment in view of the contractual arrangements that exist between us and Ship
Finance and the potential variable interests that both we and related parties
may hold in Ship Finance.

Inflation

Although inflation has had a moderate impact on our vessel operating expenses
and corporate overheads management does not consider inflation to be a
significant risk to direct costs in the current and foreseeable economic
environment. In addition, in a shipping downturn, costs subject to inflation can
usually be controlled because shipping companies typically monitor costs to
preserve liquidity and encourage suppliers and service providers to lower rates
and prices in the event of a downturn.

Results of Operations

Year ended December 31, 2004 compared with the year ended December 31, 2003

Total operating revenues and Voyage expenses and commission

(in thousands of $)                            2004          2003        Change

Voyage charter revenues                   1,554,519     1,089,583            43%
Time charter revenues                       108,246        40,759           166%
Bareboat charter revenues                   178,477        27,930           539%
Finance lease interest income                10,794            --           100%
Other income                                  3,630         3,111            17%
--------------------------------------------------------------------------------
Total Operating Revenues                  1,855,666     1,161,383            60%
--------------------------------------------------------------------------------

The increase in voyage charter revenues primarily reflects the strength in the
freight market in 2004 as discussed above. Voyage charter revenues includes pool
revenues. Certain pools are responsible for paying voyage expenses and
distribute net pool revenues to the participants while other pools require the
participants to pay and account for voyage expenses, and distribute gross pool
revenues to the participants such that the participants' resulting net pool
revenues are equal to net pool revenues calculated according to the agreed
formula. An analysis of the Company's pool revenues included in voyage revenues
is as follows:

(in thousands of $)                                           2004          2003

Pool earnings allocated on gross basis                      78,429        45,749
Pool earnings allocated on net basis                       117,179        65,799
--------------------------------------------------------------------------------
Total pool earnings                                        195,608       111,548
--------------------------------------------------------------------------------

The increase in time charter revenues mainly reflects the change in employment
of our eight Suezmax OBOs from the spot market to employment on time charters in
the third and fourth quarters of 2003 along with the employment of an additional
VLCC on time charter late in 2003.

In March and April of 2004, we placed four wholly owned VLCCs on bareboat
charters which provide for a flat rate bareboat rate along with a profit share
based on market rates. Total bareboat earnings for these vessels reported in
2004 were $96.1 million. The consolidation of ITC effective December 31, 2003
has resulted in an increase in bareboat revenues of $56.2 million as a result of
the inclusion of six vessels which are on bareboat charters.

ITC also has four Suezmax tankers that are on long-term bareboat charters which
are accounted for as direct finance leases and as such, finance lease interest
income of $10.7 million is reported in 2004.

Our vessels are operated under time charters, bareboat charters, voyage
charters, pool arrangements and COAs. Under a time charter, the charterer pays
substantially all of the vessel voyage costs. Under a bareboat charter the
charterer pays substantially all of the vessel voyage and operating costs. Under
a voyage charter, the vessel owner pays such costs. Vessel voyage costs are
primarily fuel and port charges. Accordingly, charter income from a voyage
charter would be greater than that from an equally profitable time charter to
take account of the owner's payment of vessel voyage costs. In order to compare
vessels trading under different types of charters, it is standard industry
practice to measure the revenue performance of a vessel in terms of average
daily time charter equivalent earnings, or TCEs. For voyage charters, this is
calculated by dividing net voyage revenues by the number of days on charter.
Days spent off-hire are excluded from this calculation. For comparability, TCEs
for bareboat charters include an allowance for estimated operating costs that
would be paid by us under an equivalently profitable time charter. In 2004 we
include an allowance of $6,500 per day for estimated operating costs (2003 -
$6,300 per day).

A summary of average time charter equivalent earnings per day for our fleet is
as follows:

(in $ per day)              2004        2003        2002        2001        2000

VLCC                      78,000      42,300      22,500      40,800      46,300
Suezmax                   57,900      33,900      18,400      30,700      35,500
Suezmax OBO               27,900      31,900      17,700      28,900      33,300

Net voyage revenues, a non-GAAP measure, provides more meaningful information to
us than voyage revenues, the most directly comparable GAAP measure. Net voyage
revenues are also widely used by investors and analysts in the tanker shipping
industry for comparing financial performance between companies and to industry
averages. The following table reconciles our net voyage revenues to voyage
revenues.

<TABLE>
<CAPTION>
                                       2004          2003          2002          2001          2000
<S>                               <C>           <C>            <C>            <C>           <C>
Voyage revenues                   1,554,519     1,089,583       489,286       639,807       656,917
Voyage expenses and commission     (361,609)     (323,378)     (134,930)      (88,283)      (97,316)
                                 ----------    ----------    ----------    ----------    ----------
Net voyage revenues               1,192,910       766,205       354,356       551,524       559,601
                                 ==========    ==========    ==========    ==========    ==========
</TABLE>

Ship operating expenses

(in thousands of $)                       2004            2003           Change

Suezmax OBO                             15,350          15,962              - 4%
Suezmax                                 43,523          41,242                6%
VLCC                                    71,522          58,129               23%
--------------------------------------------------------------------------------
                                       130,395         115,333               13%
--------------------------------------------------------------------------------

The addition of an additional five Suezmax vessels in the third and fourth
quarter of 2004 has resulted in additional Suezmax operating expenses of $5.8
million. This increase is largely off-set by a decrease in operating expenses as
a result of the sale of four Suezmax vessels in the first and second quarters of
2003.

VLCC operating costs have increased by $13.4 million in 2004 primarily due to
changes in our fleet and the cost of routine drydockings. The acquisition of
three VLCCs which were previously accounted for under the equity method and the
consolidation of Golden Fountain has resulted in additional costs of $7.9
million in 2004. The change in employment of two VLCCs from bareboat charters to
the spot market in the third quarter of 2004 has resulted in increased operating
costs of $2.6 million. Vessels drydocked in the year resulted in an increase of
approximately $4.6 million while general repairs and purchases of spares
resulted in an increase of approximately $2.4 million. Off-setting these
increases is a reduction in costs of $2.9 million as a result of placing two
VLCCs on bareboat charters in April 2004.

Charterhire expenses

(in thousands of $)                             2004           2003       Change

Charterhire expenses                          39,302         80,539         -51%
--------------------------------------------------------------------------------

Number of vessels chartered in and accounted for as         2004            2003
operating leases:

     VLCC                                                      3               7
     Suezmax                                                   1               1
--------------------------------------------------------------------------------
                                                               4               8
--------------------------------------------------------------------------------

Charterhire expenses have decreased by $41.2 million in the year primarily as a
result of a decrease in the number of vessels that are chartered in and
accounted for as operating leases. During the third and fourth quarters of 2004,
the Company chartered in an additional Suezmax on a short term charter which
increased charterhire expense by $6.1 million. The expiration of charters
relating to four VLCCs in the fourth quarter of 2003 and the first quarter of
2004 has resulted in a reduction of charterhire expense of $45.4 million.

Administrative expenses

(in thousands of $)                            2004          2003         Change
Administrative expenses                      25,754        20,999            23%

The increase in administrative expenses in 2004 is mainly attributable to audit
fees, legal fees, staff costs and professional fees. Audit and legal fees have
increased by $2.5 million from 2003 primarily as a result of increased work
related to the spin-off of Ship Finance and Golden Ocean during the year. The
restructuring of the group with regard to Ship Finance and Golden Ocean has also
resulted in an increase in listing, registrar and other professional fees of
$0.6 million in 2004. Staff costs also increased in 2004 by $1.1 million. In
2004 and 2003, administrative expenses include charges related to employee stock
options of $5.5 million and $5.6 million, respectively. The employee stock
option plans terminated in June 2004.

Depreciation

(in thousands of $)                        2004            2003           Change
Depreciation                            181,274         144,470              25%

The increase in depreciation charge of $36.8 million is primarily as a result of
the addition of eight vessels into the fleet and the consolidation of ITC and
Golden Fountain.

ITC and Golden Fountain combined reported approximately $22.8 million in
depreciation in 2004. The acquisition of an additional five Suezmaxes in the
third and fourth quarter of 2004 along with the acquisition of three VLCCs in
the first quarter of 2004 which were previously jointly owned has increased
depreciation by $9.4 million. The effect of revising the estimated useful lives
of our single hull vessels in the fourth quarter of 2003 has resulted in an
increase in depreciation of $3.2 million. On June 30, 2003, we purchased the
remaining 50% of a vessel which was previously jointly owned. This has increased
our depreciation charge by approximately $1.4 million in 2004.

Interest income

(in thousands of $)                          2004           2003          Change
Interest income                            31,595          9,185            244%

Interest income has increased by $22.4 million primarily as a result of the
consolidation of ITC offset by a restructuring of our investment in associated
companies.

ITC generated $23.4 million in interest income in 2004: the group maintains
large average cash restricted cash deposits which are restricted for the lease
payments on four VLCCs. Interest income from associated companies has decreased
by $5.2 million as a result of a restructuring of our investment as discussed in
Note 14 of the financial statements included herein. Off-setting this decrease
is an increase in bank interest income which reflects both an increase in
interest rates and an increase in average cash balances held.

Interest expense

(in thousands of $)                        2004            2003           Change
Interest expense                        205,641          74,376             176%

The increase in interest expense of $131.1 million is primarily attributable to
the consolidation of ITC with effect from December 31, 2003 and the inclusion of
a full year's interest on Senior Notes issued by Ship Finance in December 2003.

Interest expense incurred by ITC is approximately $65.8 million and interest of
Ship Finance Senior Notes has increased by $45.1 million. Swap interest expense
has increased by $10.1 million in 2004 as a result of us having entered into
eleven new interest rate swap agreements in the first quarter of 2004. Capital
lease interest has increased by $6.6 million in 2004 as a result of a full
year's capital lease interest on leases entered into part way through 2003. In
February 2004, Ship Finance entered into a senior secured credit facility with a
syndicate of banks as discussed below. In connection with this refinancing we
wrote off of previously recorded deferred charges resulting in an increase in
interest expense of $7.3 million.

Share of results of associated companies

(in thousands of $)                                     2004       2003   Change
Share of results of associated companies              10,553     33,533     -69%

Our share of results of associated companies has decreased primarily due to the
termination of six joint ventures with OSG and the consolidation of another
joint venture under FIN 46 effective December 31, 2003. As of December 31, 2004,
we account for two investees under the equity method as discussed in Note 14 of
the financial statements included herein.

Foreign currency exchange gains and losses

(in thousands of $)                                   2004        2003    Change
Foreign currency exchange losses                     5,377      11,963      -55%

Our foreign currency exchange losses are principally due to Yen debt in
subsidiaries and certain forward currency exchange contracts which are also
denominated in Yen. As at December 31, 2004, we had total Yen debt of Yen 1.3
billion (equivalent of $13.1 million) compared with (Yen) 16.8 billion
(equivalent of $156.9 million) as at December 31, 2003. The Yen strengthened
against the US Dollar from 107.1 at December 31, 2003 to 103.1 at December 31,
2004.

At December 31, 2004, we were party to five Yen denominated forward currency
exchange contracts with a notional principal of (Yen)14.6 billion. In 2004, we
incurred losses of $5.3 million in relation to forward currency exchange
contracts.

Other financial items, net

(in thousands of $)                                       2004     2003   Change

Mark to market adjustments for financial derivatives     9,000   28,180     -68%
Gains and losses from freight forward agreements       (14,844) (32,964)     55%
Other                                                    9,410    5,084      85%
--------------------------------------------------------------------------------
                                                         3,566      300    1088%
--------------------------------------------------------------------------------

The decrease in mark to market adjustments for financial derivatives of $19.2
million in 2004 is primarily a result of a gain recorded in 2003. In September
2001, we established a facility for a Stock Indexed Total Return Swap Programme
or Equity Swap Line with the Bank of Nova Scotia, or BNS, whereby the latter
acquired shares in Frontline, and we carried the risk of fluctuations in the
share price. We terminated this Equity Swap Line on June 17, 2003 resulting in
3,070,000 shares being repurchased at an average cost of $8.98 per share at a
time when the market share price was $16.31 As a result we recorded income of
$22.0 million in 2003. In addition, in 2003, we recorded income of $6.1 million
relating to the market value adjustment on our interest rate swaps. In 2004 we
recorded income of $9.0 million relating to the market value adjustment on our
interest rate swaps.

We incurred losses on freight future contracts amounting to $14.8 million in
2004 ($33.0 million in 2003). This decrease substantially relates to speculative
freight forward agreements based on the Baltic Capesize Index which increased
substantially in 2004 as a result of the freight market.

Other financial items in 2004 include a realised gain on the sale of marketable
securities of $7.1 million - an increase of $6.6 million in the year. This
increase is partially off-set by a decrease of $3.4 million in dividends
received as a result of the Bank of Nova Scotia Equity Swap Line.

Minority interest

Minority interest represents minority investors' interests in the net income of
our subsidiary Ship Finance and the 50% of Golden Fountain Corporation owned by
our joint venture partner. As at December 31, 2004, minority investors owned
49.25% of the shares of Ship Finance. Since December 31, 2004, we have
distributed an additional 34.95% of Ship Finance.

Discontinued operations

As discussed in Item 4A above, the financial results of certain dry bulk
interests transferred to Golden Ocean have been reported under discontinued
operations for 2004, 2003 and 2002. Of the $116.9 million reported as
discontinued operations in 2004, $99.5 million relates to a gain on disposal due
to accounting for the non pro-rata distribution of Golden Ocean shares at fair
value. This gain comprises of $84.6 million from the distribution of shares and
$14.9 million from the sale of shares on behalf of our US shareholders who were
excluded from the distribution. The fair value of the spin off was determined by
reference to the average quoted share price of NOK 3.71 (US$ 0.60) which
represents the average share price of Golden Ocean on the Oslo stock exchange in
the first five days of trading.

The $84.6 million gain on the distribution of shares and cash has been
calculated as the difference between the fair value of the shares distributed of
$102.3 million and their book value of $17.7 million. The $14.9 million gain on
the sale of shares is calculated as the difference between the sale proceeds of
$18.0 million and the book value of the shares of $3.1 million.

As at December 31, 2004, the Company held 23,918,832 Golden Ocean shares
representing 10.6% of the shares outstanding which have been classified as
marketable securities. These shares were subsequently sold in February 2005.

Year ended December 31, 2003 compared with the year ended December 31, 2002

Total operating revenues and Voyage expenses and commission

(in thousands of $)                          2003           2002          Change

Voyage charter revenues                 1,089,583        489,286            123%
Time charter revenues                      40,759         21,590             89%
Bareboat charter revenues                  27,930         31,924            -13%
Other income                                3,111          2,639             18%
--------------------------------------------------------------------------------
Total operating revenues                1,161,383        545,439            113%
--------------------------------------------------------------------------------

Voyage charter revenues, which represented 94% of out total operating revenues
in 2003, increased in 2003 primarily as a result of a strengthening of the
tanker market as freight rates were significantly higher compared to 2002 mainly
due to limited fleet growth and strong growth in the demand for oil.

Voyage charter revenues includes pool revenues. Certain pools are responsible
for paying voyage expenses and distribute net pool revenues to the participants
while other pools require the participants to pay and account for voyage
expenses, and distribute gross pool revenues to the participants such that the
participants' resulting net pool revenues are equal to net pool revenues
calculated according to the agreed formula. An analysis of our pool revenues
included in voyage revenues is as follows:

(in thousands of $)                                           2003          2002

Pool earnings allocated on gross basis                      45,749        27,914
Pool earnings allocated on net basis                        65,799       120,188
--------------------------------------------------------------------------------
Total pool earnings                                        111,548       148,102
--------------------------------------------------------------------------------

Time charter revenues increased by $19.1 million primarily as a result of the
employment of our fleet of OBOs on time charters in the third and fourth
quarters of 2003.

Ship operating expenses

(in thousands of $)                                 2003         2002     Change

Suezmax OBO                                       15,962       16,677        -4%
Suezmax                                           41,242       42,902        -4%
VLCC                                              58,129       46,676        25%
--------------------------------------------------------------------------------
                                                 115,333      106,255         9%
--------------------------------------------------------------------------------

The increase in operating costs in 2003 is primarily due to the increase in the
size of the fleet due to the addition of five VLCCs in 2002 which has resulted
in an increase in operating costs of $5.0 million. The purchase on June 30, 2003
of the remaining 50% of a VLCC that was previously jointly owned has resulted in
an additional $1.9 million in operating costs in the year.

Charterhire expenses

(in thousands of $)                          2003           2002          Change
Charterhire expenses                       80,539         60,198             34%
--------------------------------------------------------------------------------

Number of vessels chartered in and accounted for as         2003            2002
operating leases:
     VLCC                                                      7               7
     Suezmax                                                   1               1
--------------------------------------------------------------------------------
                                                               8               8
--------------------------------------------------------------------------------

Charterhire expenses increased by $20.3 million primarily due to the inclusion a
full year's expense in 2003 for four vessels on charters that commenced in July
2002 and were terminated in December 2003 and January 2004.

Administrative expenses

(in thousands of $)                            2003          2002         Change
Administrative expenses                      20,999        15,443            36%

Administrative expenses increased by $5.6 million primarily as a result of the
Company recording a non-cash charge of $5.5 million in connection with employee
stock options compared with $0.5 million in 2002.

Depreciation

(in thousands of $)                        2003            2002           Change
Depreciation                            144,470         134,454               7%

Depreciation increased by $10.0 million in 2003 as a result of fleet changes in
the year. The acquisition of five VLCCs during 2002 has increased depreciation
by $8.4 million in 2003 due to the inclusion of a full year's depreciation. In
the fourth quarter of 2003, we revised the estimated useful lives of our single
hull vessels which resulted in an increase in depreciation of $1.3 million in
2003. The purchase on June 30, 2003 of the remaining 50% of a VLCC that was
previously jointly owned has resulted in an additional $1.5 million in
depreciation being reported in 2003.

Interest income

(in thousands of $)                           2003            2002        Change
Interest income                              9,185          13,042          -30%

The decrease in interest income in 2003 is primarily as a result of a decrease
in interest income from loans to associated companies due to a reduction in the
principal loaned.

Interest expense

(in thousands of $)                          2003           2002          Change
Interest expense                           74,376         70,575              5%

The increase in interest expense of $3.8 million in 2003 is primarily due to an
increase in capital lease interest expense as a result of the sale and leaseback
of four vessels in the year. In addition, interest costs of $2.1 million were
incurred due to the issuance in December 2003 of $580 million 8.5% Senior Notes
by Ship Finance.

Share of results of associated companies

(in thousands of $)                                 2003       2002       Change
Share of results of associated companies          33,533    (10,711)        413%

Our share in results of associated companies increased due to a combination of
the strength of tanker earnings in 2003 compared with 2002 and foreign currency
exchange losses recognised in 2002 by associated companies with Yen denominated
long-term debt. In 2003, we recorded an impairment charge of $5.2 million
related to the other-than-temporary decline in value of our investments in two
joint ventures. This impairment charge was triggered by signing agreements on
June 25, 2003 for the sale of our investments for proceeds which were less than
the book value of those investments.

Foreign currency exchange gains and losses

(in thousands of $)                                    2003      2002     Change
Foreign currency exchange gains and losses           11,963     5,644       112%

Our foreign exchange losses increased in 2003 as a result of the strengthening
of the Yen against the US Dollar from 118.54 at December 31, 2002 to 107.1 at
December 31, 2003. At December 31, 2003, we had Yen debt of Yen 16.8 billion,
compared with Yen 13.1 billion at December 31, 2002.

Other financial items, net

(in thousands of $)                                      2003    2002     Change

Mark to market adjustments for financial derivatives   28,180  (6,997)     503%
Gains and losses from freight forward agreements      (32,964)   (500)  (6,493)%
Other                                                   5,084  (1,117)     555%
--------------------------------------------------------------------------------
                                                          300  (8,614)     103%
--------------------------------------------------------------------------------

In 2003 we recorded income of $28.2 million on mark to market adjustment or
financial derivatives primarily due to the termination of the BNS Equity Swap
Line as discussed above. This compared to a charge of $4.0 million in 2002. In
addition, in 2003, we recorded income of $6.1 million relating to the market
value adjustment on our interest rate swaps compared to a charge of $3.0 million
in 2002. We incurred losses on freight future contracts amounting to $33.0
million in 2003 ($0.5 million in 2002). This increase substantially relates to
speculative freight forward agreements based on the Baltic Capesize Index.

Cumulative change in accounting principle

We adopted FIN 46 on December 31, 2003 and recorded the cumulative effect of
change in accounting principle of $33.8 million. Net income for 2003 before the
cumulative effect of change in accounting principle was $443.1 million and basic
earnings per share were $5.92 (diluted - $5.90).

Liquidity and Capital Resources

Liquidity

We operate in a capital intensive industry and have historically financed our
purchase of tankers and other capital expenditures through a combination of cash
generated from operations, equity capital and borrowings from commercial banks.
Our ability to generate adequate cash flows on a short and medium term basis
depends substantially on the trading performance of our vessels in the market.
Market rates for charters of our vessels have been volatile historically.
Periodic adjustments to the supply of and demand for oil tankers causes the
industry to be cyclical in nature. We expect continued volatility in market
rates for our vessels in the foreseeable future with a consequent effect on our
short and medium term liquidity.

Our funding and treasury activities are conducted within corporate policies to
maximise investment returns while maintaining appropriate liquidity for our
requirements. Cash and cash equivalents are held primarily in U.S. dollars with
some balances held in Japanese Yen, British Pound and Norwegian Kroner.

Our short-term liquidity requirements relate to servicing our debt, payment of
operating costs, lease payments for our chartered in fleet, funding working
capital requirements and maintaining cash reserves against fluctuations in
operating cash flows. Sources of short-term liquidity include cash balances,
restricted cash balances, short-term investments and receipts from our
customers. Revenues from time charters and bareboat charters are generally
received monthly or fortnightly in advance while revenues from voyage charters
are received upon completion of the voyage.

At December 31, 2004 we estimated cash breakeven average daily TCE rates of
$13,326 for our Suezmax tankers and $18,592 for our VLCCs. These are the daily
rates our vessels must earn to cover payment of budgeted operating costs
(including corporate overheads), estimated interest and scheduled loan principal
repayments. These rates do not take into account loan bullet repayments at
maturity, which we expect to refinance with new loans.

Our long-term liquidity requirements include funding the equity portion of
investments in new or replacement vessels, repayment of long-term debt balances
including our $530.3 million 8.5% Senior Notes due 2013 and funding any payments
we may be required to make due to lessor put options on certain vessels we
charter in. During 2004 we bought back and cancelled notes with a principal
amount of $49.7 million. Sources of funding our long-term liquidity requirements
include new loans or equity issues, vessel sales and sale and leaseback
arrangements.

As of December 31, 2004, 2003 and 2002, we had cash and cash equivalents of
$105.7million, $124.2 million and $92.1 million, respectively. As of December
31, 2004, 2003 and 2002, we had restricted cash balances of $592.6 million,
$891.9 million and $8.2 million respectively. Our restricted cash balances
contribute to our total short and medium term liquidity as they are used to fund
payment of certain loans and lease payments which would otherwise be paid out of
our cash balances. The large decrease in restricted cash balances as at December
31, 2004 is due to two factors. In 2003, a cash deposit of $565.5 million,
representing net proceeds from our offering of $580.0 million 8.5% Senior Notes
due 2013, was retained by the trustee of the Notes pending our satisfaction of
certain covenants. We satisfied those covenants during the first quarter of 2004
and the cash deposit was released to us. To offset this release of restricted
funds, there was a new restricted deposit of $250.0 million established in 2004.
These amounts serve to support our obligations to make charterhire payments to
Ship Finance, and are subject to adjustment based on the number of charters that
we are a party to. We are entitled to use these funds only (1) to make
charterhire payments (including profit sharing payments) to Ship Finance and (2)
for reasonable working capital purposes to meet short term voyage expenses

During the year ended December 31, 2004 we paid total cash dividends of $1.0
billion. In the first quarter of 2005, we declared a cash dividend of $3.50 per
share for total cash proceeds of $261.9 million.

We consolidated the assets and liabilities of ITC with effect from December 31,
2003 and acquired ITC in May 2004. At December 31, 2004 ITC's assets include
$325.9 million (2003: $323.8 million) of restricted cash deposits which is held
for the benefit of the holders of the Notes issued on behalf of ITC subsidiaries
This restricted cash also includes deposits which can only be used to meet
liabilities under the lease agreements.

Borrowing activities

In February 2004, Ship Finance entered into a senior secured credit facility
with a syndicate of banks with a principal amount of $1,058.0 million and a six
year term. The proceeds were used in part to fund the acquisition of our vessels
and to refinance existing debt on all of its vessels. This facility bears
interest at Libor plus 1.25% and is repayable between 2004 and 2010 with a final
bullet of $499.7 million payable on maturity. In common with other secured
loans, this facility contains a minimum value covenant which requires that the
aggregate value of Ship Finance's vessels exceed 140% of the outstanding amount
of the facility.

In June 2004 we drew $49.5 million under a short-term loan facility from a
related party and used the proceeds to repay Yen denominated debt of Yen 5.5
billion (equivalent to $49.4 million). In August 2004 we drew a new secured
long-term loan of $50.0 million and repaid the short-term facility.

In the second and third quarters of 2004 we bought back and cancelled 8.5%
Senior Notes with a principal amount of $49.7 million.

In September 2004, we drew $65.0 million under a new five year secured loan
facility. We used the proceeds to repay loans totalling $28.0 million and to
part finance the acquisition in September and October of three 1989-1990 built
Suezmax Tankers.

In October 2004, we drew $20.0 million under a new five year secured loan
facility. We used the proceeds to finance the acquisition of a 1992 built
Suezmax tanker.

In January 2005, we drew $20.0 million under a new five year secured loan
facility. The proceeds were used to finance the acquisition of a 1988 built
Suezmax tanker.

In February 2005, Ship Finance completed a refinancing of its senior secured
credit facility. The new facility of $1,131.0 million bears interest at LIBOR
plus a margin of 0.7%, is repayable over a term of six years and has similar
security terms to the repaid facility.

Covenants contained in our secured loan agreements may restrict our ability to
obtain new secured facilities in future. We were in compliance with all loan
covenants at December 31, 2004.

Acquisitions and Disposals

Ship Finance

In 2004, we distributed 49.2% of the common shares of Ship Finance to Frontline
common shareholders. In the first quarter of 2005, we distributed a further 35%
of the our shares in Ship Finance and following these transactions our
shareholding in Ship Finance is approximately 15.8% at June 22, 2005.

Golden Ocean

In the fourth quarter of 2004, we completed the non pro-rata spin off of its
subsidiary Golden Ocean. In connection with the spin off, total cash of $32.1
million was paid to non qualifying U.S. shareholders who received a cash
equivalent of $1.80 ($0.60 per Golden Ocean share) per Frontline share held. The
spin off resulted in the recognition of a gain of $99.5 million. We retained
10.7% of the shares of Golden Ocean as at December 31, 2004. These shares were
subsequently sold in February 2005 for proceeds of NOK 100.5 million, equivalent
to approximately $16.5 million.

Vessel Acquisitions and Disposals

In the first quarter of 2004, we completed an agreement with our joint venture
partner, Overseas Shipholding Group, Inc. (OSG), to exchange interests in six
joint companies, which each own a VLCC. This agreement resulted us becoming the
100% owner of three VLCCs.

In July 2004, we secured two VLCC newbuildings for delivery in 2006 through the
purchase of two resale contracts for a total price of $158.5 million. 10% of the
contract price was paid in cash.

In 2004 we acquired five 1989 to 1992 built Suezmax tankers for a combined
purchase price of $125.7 million.

In the fourth quarter of 2004 we sold the jointly owned single hull VLCC for net
proceeds of $59.1 million. As a result of the sale, we recorded an accounting
gain to Frontline of approximately $19.7 million and a release of cash of
approximately $27 million representing the net of cash proceeds less debt
repayments.

In 2005, to date we have sold a further three vessels to Ship Finance and
chartered them back under long term charters to Frontline Shipping II. In
January 2005, we acquired the VLCCs Front Century and Front Champion which were
previously chartered in by us under operating leases for a total purchase price
of $141.9 million pursuant to the exercise of purchase options. The vessels were
immediately sold to Ship Finance for a total of $196.0 million, and chartered
back on 199 and 204 month charters, respectively, following the structure in
place for other vessels chartered from Ship Finance. In March 2005, we acquired
the VLCC Golden Victory for $76.9 million pursuant to the exercise of its
purchase option. The vessel was previously chartered in by us under an operating
lease. The vessel owning company was immediately be sold to Ship Finance for
$98.0 million, and chartered back on a 204 month charter, following the
structure in place for other vessels chartered from Ship Finance.

On January 17, 2005 Ship Finance exercised its option to acquire the VLCC
Oscilla and the vessel was delivered to Ship Finance on April 4, 2005. The
purchase price paid to acquire the vessel was approximately $16.5 million which
is equal to the outstanding mortgage debt under four loan agreements between
lenders and the vessel's owning company. In addition, Ship Finance will make a
payment of $14.6 million to us to reflect the fact that the original purchase
price was set assuming delivery to Ship Finance on January 1, 2004 whereas
delivery did not occur until April 4, 2005. On the same date the vessel
commenced a fixed rate time charter to us following the structure in place for
other vessels chartered from Ship Finance.

In January 2005, Ship Finance sold the Suezmax Front Fighter for $68.25 million
and the vessel was delivered to its new owners in March 2005. The charter of the
Front Fighter to Frontline Shipping Limited, which we refer to as Frontline
Shipping, has been cancelled as a result of this sale.

In May 2005, Ship Finance sold the three Suezmaxes, Front Lillo, Front Emperor
and Front Spirit, for a total consideration of $92.0 million. These vessels were
delivered to their new owners in June 2005. In May 2005, Ship Finance also
agreed to buy a further three vessels from us, namely Front Traveller, Front
Transporter, and Front Target, for an aggregate amount of $92.0 million. The
time charter and management arrangements between Ship Finance and us have been
cancelled for the three sold vessels and will be replaced with new agreements on
similar terms for the vessels acquired.

In May 2005 Ship Finance entered into an agreement with parties affiliated with
Hemen to acquire two vessel owning companies, each owning one 2005 built
containership for a total consideration of $98.6 million. The first vessel, the
Sea Alpha, was delivered in May 2005, and the Sea Beta will be delivered from
the ship yard in September 2005. The Sea Alpha is currently trading on a medium
term time charter to an unrelated third party.

Ship Finance entered into an agreement in June 2005 with parties affiliated with
Hemen to acquire two vessel owning companies, each owning one 2004 built VLCC,
for a total consideration of $184 million.

Equity

In the first quarter of 2004, a Special General Meeting of our shareholders
approved the compulsory repurchase of all registered shareholdings of 49 or less
of the our ordinary shares. Consequently, on April 6, 2004, we compulsorily
repurchased and cancelled 20,197 ordinary shares at the closing market price of
the ordinary shares on April 5, 2004 which was $31.22 per ordinary share. Total
cash used to repurchase these shares was $0.6 million.

In 2004, we issued a total of 900,000 ordinary shares in two private placements
to institutional investors. In July 2004, we issued 600,000 ordinary shares at a
purchase price of NOK 246 per share, which was the equivalent of $35.84 per
share at the time of the sale. In October 2004, we issued 300,000 ordinary
shares at a purchase price of NOK 352 per share, which was the equivalent of
$55.33 per share at the time of sale. Total proceeds from these issues were
$37.2 million.

In July 2004, Ship Finance issued 1,600,000 common shares to an institutional
investor at $15.75 per share. Total proceeds from this issue were $25.2 million.

In November and December 2004, Ship Finance repurchased and cancelled a total of
625,000 shares at an average cost of $23.54 per share. Total cash used to
repurchase these shares was $14.7 million. The effect of this repurchase was to
increase our percentage shareholding by 0.53%.

During 2004, we issued 297,436 shares in connection with the exercise of
employee share options for total cash proceeds of $1.8 million.

Derivative Activities

We use financial instruments to reduce the risk associated with fluctuations in
interest rates. We have a portfolio of interest rate swaps that swap floating
rate interest to fixed rate, which from a financial perspective hedge interest
rate exposure. We do not hold or issue instruments for speculative or trading
purposes. As at December 31, 2004 our interest rate swap arrangements
effectively fix our interest rate exposure on $631.4 million of floating rate
debt. These interest rate swap agreements expire between January 2006 and
February 2009.

We enter into forward freight agreements for trading purposes in order to manage
its exposure to the risk of movements in the spot market for certain trade
routes and, to some extent, for speculative purposes. Market risk exists to the
extent that spot market fluctuations may have a negative effect on our cash
flows and consolidated statements of operations. See Item 11. "Quantitative and
Qualitative Disclosures about Market Risk".

We enter into Yen denominated forward currency contracts for speculative
purposes. Transaction risk exists to the extent that currency fluctuations will
have an effect on the value of our cash flows.

Tabular disclosure of contractual obligations

At December 31 2004, we had the following contractual obligations and
commitments:

<TABLE>
<CAPTION>
                                                       Payment due by period

                                   Less than 1       1 - 3       3 - 5       After
                                          year       years       years     5 years       Total
                                   -----------------------------------------------------------
(In thousands of $)
<S>                                    <C>         <C>         <C>       <C>         <C>
8.5% Senior  notes                          --          --          --     530,270     530,270
Serial loans (7.6% to 7.6%)              7,740       2,530          --          --      10,270
Serial notes (6.47% to 6.855%)          22,800      36,000      15,900       1,200      75,900
Term notes (7.84% to 8.04%)                 --       1,340      13,365     351,495     366,200
8.52% term loans                         6,542      20,468      21,884      65,651     114,545
Other long-term debt                   114,531     228,173     206,826     495,031   1,044,560
Operating lease obligations             34,140      68,323      62,269      55,506     220,238
Capital lease obligations               80,360     162,915     240,545     656,420   1,140,240
                                   -----------------------------------------------------------

Total contractual cash obligations     266,113     519,749     560,789   2,155,573   3,502,221
                                   -----------------------------------------------------------
</TABLE>

At December 31 2004, we leased twelve vessels that were sold by us at various
times during the period from November 1998 to December 2003, and leased back on
charters that range for periods of eight to twelve and a half years with
lessors' options to extend the charters for periods that range up to five years.
Four of these vessels are accounted for as operating leases and eight as capital
leases. We have fixed price purchase options at certain specified dates and the
lessors have options to put these twelve vessels to us at the end of each lease
term.

Additionally, our newly acquired subsidiary ITC leases four VLCCs on 24 year
charters which began on delivery of the vessels in 1999 and 2000. These leases
are classified as capital leases.

Off balance sheet financing:

Charter hire payments to third parties for certain contracted-in vessels are
accounted for as operating leases. We are also committed to make rental payments
under operating leases for office premises. The future minimum rental payments
under our non-cancellable operating leases are disclosed above in "Tabular
disclosure of contractual obligations."

The total amount that we could be required to pay under put options with respect
vessels leased under operating leases is $56.8 million.

ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES

A. DIRECTORS AND SENIOR MANAGEMENT

Certain biographical information about each of our directors and executive
officers is set forth below.

Name              Age  Position
----              ---  --------

John Fredriksen    61  Chairman, Chief Executive Officer, President and Director
Tor Olav Troim     42  Vice-President and Director
Kate Blankenship   40  Chief Accounting Officer, Company Secretary and Director
Tom E. Jebsen      47  Chief Financial Officer of Frontline Management
Oscar Spieler      44  Chief Executive Officer of Frontline Management

John Fredriksen has been the Chairman of the Board, Chief Executive Officer,
President and a director of the Company since November 3, 1997. He was
previously the Chairman and Chief Executive Officer of Old Frontline. Mr.
Fredriksen has served for over nine years as a director of Seatankers Management
Co. Ltd. ("Seatankers"), a ship operating company and an affiliate of the
Company's principal shareholder. Mr. Fredriksen indirectly controls Hemen
Holding Ltd, a Cyprus company who is our principal shareholder. Mr. Fredriksen
is a director of and indirectly controls Golar LNG Limited, a Bermuda company
listed on the Oslo Stock Exchange and the NASDAQ National Market and has been a
director of Golden Ocean Group Limited, a Bermuda company, since November 2004.

Tor Olav Troim has been Vice-President and a director of the Company since
November 3, 1997. He previously served as Deputy Chairman of Frontline from July
4, 1997, and was a director of Old Frontline from July 1, 1996. Until April,
2000 Mr. Troim was the Chief Executive Officer of Frontline Management AS, a
company which supports the Company in the implementation of decisions made by
the Board of Directors. Mr. Troim also serves as a consultant to Seatankers and
since May 2000, has been a director and Vice-Chairman of Knightsbridge Tankers
Ltd, a Bermuda company listed on the NASDAQ National Market. He is a director of
Aktiv Inkasso ASA and Northern Oil ASA, both Norwegian Oslo Stock Exchange
listed companies and Golden Ocean Group Limited, a Bermuda company listed on the
Oslo Stock Exchange. Mr. Troim is President and Chief Executive Officer of Ship
Finance International since October 15, 2003. Prior to his service with
Frontline, from January 1992, Mr. Troim served as Managing Director and a member
of the Board of Directors of DNO AS, a Norwegian oil company. Mr. Troim has
served as a director of Golar LNG Limited since May 2001.

Kate Blankenship is Chief Accounting Officer and Secretary of the Company and
has been a director since August, 2003. Mrs. Blankenship joined the Company in
1994. She is a member of the Institute of Chartered Accountants in England and
Wales. Mrs. Blankenship has been Chief Financial Officer of Knightsbridge
Tankers Ltd since April 2000 and Secretary of Knightsbridge since December 2000.
Mrs. Blankenship is Director and Secretary of Ship Finance International Limited
since October 15, 2003. Mrs. Blankenship has served as a director of Golar LNG
Limited since July, 2003 and Golden Ocean Group Limited since November 2004.

Tom E. Jebsen has served as Chief Financial Officer of Frontline Management
since June 1997. From December 1995 until June 1997, Mr. Jebsen served as Chief
Financial Officer of Tschudi & Eitzen Shipping ASA, a publicly traded Norwegian
shipowning company. From 1991 to December 1995, Mr. Jebsen served as Vice
President of Dyno Industrier ASA, a publicly traded Norwegian explosives
producer. Mr. Jebsen is also a director of Assuranceforeningen Skuld and Hugin
ASA, an internet company.

Oscar Spieler has served as Chief Executive Officer of Frontline Management AS
since October 2003, and prior to that time as Technical Director of Frontline
Management AS since November 1999. From 1995 until 1999, Mr. Spieler served as
Fleet Manager for Bergesen, a major Norwegian gas tanker and VLCC owner. From
1986 to 1995, Mr. Spieler worked with the Norwegian classification society DNV,
working both with shipping and offshore assets.

B. COMPENSATION

During the year ended December 31, 2004, we paid to our directors and executive
officers (five persons) aggregate cash compensation of $1,258,576 and an
aggregate amount of $154,366 for pension and retirement benefits.

We did not grant any options to acquire Ordinary Shares of Frontline to the
Directors and officers during 2004.

C. BOARD PRACTICES

In accordance with the Bye-laws of the Company the number of Directors shall be
such number not less than two as the Company by Ordinary Resolution may from
time to time determine and each Director shall hold office until the next annual
general meeting following his election or until his successor is elected. The
Company currently has three Directors. The Board does not have any committees.

We do not currently have any Board committees, nor are we required to under
Bermuda law. In lieu of an audit committee comprised of independent directors,
our Board of Directors is responsible for overseeing the quality and integrity
of the Company's financial statements and its accounting, auditing and financial
reporting practices, the Company's compliance with legal and regulatory
requirements, the independent auditor's qualifications, independence and
performance and the Company's internal audit function.

In lieu of a compensation committee comprised of independent directors, our
Board of Directors is responsible for establishing the executive officers'
compensation and benefits. In lieu of a nomination committee comprised of
independent directors, our Board of Directors is responsible for identifying and
recommending potential candidates to become board members and recommending
directors for appointment to board committees.

The officers of the Company are elected by the Board of Directors as soon as
possible following each Annual General Meeting and shall hold office for such
period and on such terms as the Board may determine.

There are no service contracts between the Company and any of our Directors
providing for benefits upon termination of their employment or service.

The Company does not currently have an audit committee.

D. EMPLOYEES

As of December 31, 2004, Frontline and its subsidiaries employed approximately
40 people in their respective offices in Bermuda and Oslo. We contract with
independent ship managers to manage and operate our vessels.

E. SHARE OWNERSHIP

The beneficial interests of our Directors and officers in the Ordinary Shares of
Frontline as of June 22, 2005, were as follows:

                                                                   Percentage of
                                            Ordinary Shares of   Ordinary Shares
Director or Officer                                 $2.50 each       Outstanding
-------------------                         ------------------   ---------------

John Fredriksen*                                    26,079,053       34.85%
Tor Olav Troim                                         194,994          **
Kate Blankenship                                         2,000          **
Tom E. Jebsen                                           39,557          **
Oscar Spieler                                           10,000          **

*    Includes Ordinary Shares held by Hemen Holding Ltd. and other companies
     indirectly controlled by Mr. John Fredriksen.
**   Less than one per cent

As of June 22, 2005, none of our Directors and officers hold any options to
acquire Frontline's Ordinary Shares and there are no authorised and unissued
Ordinary Shares reserved for issue pursuant to subscription under options
granted under share option plans. We maintained a Bermuda Employee Share Option
Plan and a United Kingdom Employee Share Option Plan. These plans expired in
2004 and have not been replaced.

ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS

A. MAJOR SHAREHOLDERS

Frontline is indirectly controlled by another corporation (see below). The
following table presents certain information regarding the current ownership of
our Ordinary Shares with respect to (i) each person who we know to own more than
five percent of our outstanding Ordinary Shares; and (ii) all directors and
officers as a group as of June 22, 2005.

                                                              Ordinary Shares
Owner                                                          Amount    Percent

Hemen Holding Ltd. and associated companies (1)            26,079,053     34.85%
All Directors and Officers as a group (five persons) (2)   26,325,604     35.18%

(1)  Hemen is a Cyprus holding company indirectly controlled by Mr. John
     Fredriksen, who is our Chairman and Chief Executive Officer.
(2)  Includes Ordinary Shares held by Hemen and associated companies indirectly
     controlled by Mr. John Fredriksen.

At both June 2004 and June 2003, Hemen and associated companies held 47.45% and
47.74% of the Company's Ordinary Shares, respectively.

As at June 22, 2005, 8,078,817 of our Ordinary Shares were held by 190 holders
of record in the United States.

Our major shareholders have the same voting rights as our other shareholders. No
corporation or foreign government owns more than 50% of our outstanding Ordinary
Shares. We are not aware of any arrangements, the operation of which may at a
subsequent date result in a change in control of Frontline.

B. RELATED PARTY TRANSACTIONS

Management believes transactions with related parties are under terms similar to
those that would be arranged with other parties.

In May 1998, we acquired ITC from a third party in an arms length transaction
for a price of $9.5 million. Our investment in ITC was subsequently sold to
Hemen for $9.5 million with effect from July 1, 1998. On July 1, 2003, we
purchased a call option to acquire all of the shares of ITC from Hemen for a
total consideration of $4.0 million plus 4% interest per year. Hemen is
indirectly controlled by our Chairman and Chief Executive Officer, John
Fredriksen. On May 27, 2004, we exercised this option. The total purchase price
paid to Hemen for ITC was $14.1 million which comprised a payment of $10.0
million for the purchase option and a payment of $4.1 million to exercise the
option. This purchase price represents the initial arms length price paid by the
Company in May 1998 plus an interest component calculated from that date.

In June 2004, we drew down $49.5 million under a short-term loan facility from a
related party and used the proceeds to repay Yen denominated debt of Yen 5.5
billion (equivalent to $49.4 million). This short-term loan facility was repaid
in August 2004.

In June 2004, we participated in a bidding process to acquire from the
Indonesian state oil enterprise's shipping division, PT Pertamina (Persero) two
VLCCs that were under construction by Hyundai Heavy Industries Co. Ltd. We were
successful in this process and nominated two single purpose companies, Windstar
Marine Inc. ("Windstar") and Speed Shipping Corp. ("Speed"), to acquire the
vessels for total consideration of $184 million. Windstar and Speed are
controlled by Hemen. Hemen took delivery of these vessels in July and September
2004.

In November 2004, we formed Golden Ocean as a wholly owned subsidiary for the
purpose of transferring, by way of contribution, certain of our dry bulk
shipping interests. These assets were transferred to Golden Ocean on December 1,
2004 and a summary of the assets and liabilities contributed is as follows:-

--------------------------------------------------------------------------------
(in thousands of $)
--------------------------------------------------------------------------------
Vessels and equipment, net                                                48,918
Long-term debt                                                            48,950
Cash and other assets and liabilities, net                                22,418

As discussed in Item 4, 76.0% of the shares in Golden Ocean were spun-off on
December 13, 2004 to Frontline's shareholders with a further 13.3% being sold to
provide cash in lieu of shares for certain U.S. shareholders. In the period
ended December 31, 2004, we provided certain administrative services under the
terms of an administrative management contract with Golden Ocean.

In the year ended December 31, 2004, we provided services to Seatankers Ltd
("Seatankers"), Golar LNG Limited ("Golar") and Northern Offshore Ltd ("Northern
Offshore"). The services provided include management support, corporate and
administrative services. We also rented office space to Northern Oil ASA
("Northern Oil"). Seatankers, Golar, Northern Offshore and Northern Oil are each
indirectly controlled by John Fredriksen. We recognise the fees paid by these
companies as a reduction in total administrative expenses.

A summary of amounts earned from related parties in the year ended December 31,
2004 is as follows:

--------------------------------------------------------------------------------
(in thousands of $)                                                         2004
--------------------------------------------------------------------------------
Seatankers                                                                    49
Golar                                                                        495
Northern Offshore                                                             25
Northern Oil                                                                  92
Golden Ocean                                                                   8

A summary of balances with related parties as at December 31, 2004 is as
follows:

--------------------------------------------------------------------------------
(in thousands of $)                                                        2004
--------------------------------------------------------------------------------
Seatankers                                                                  907
Golar                                                                      (186)
Northern Offshore                                                            46
Golden Ocean                                                             (1,854)

We also lease office premises in Oslo from a related party. Rental expense in
the year ended December 31, 2004, was $0.7 million.

C. INTERESTS OF EXPERTS AND COUNSEL

Not Applicable

ITEM 8. FINANCIAL INFORMATION

A. CONSOLIDATED STATEMENTS AND OTHER FINANCIAL INFORMATION

See Item 18.

Legal Proceedings

We are a party, as plaintiff or defendant, to several lawsuits in various
jurisdictions for demurrage, damages, off-hire and other claims and commercial
disputes arising from the operation of its vessels, in the ordinary course of
business or in connection with its acquisition activities. We believe that the
resolution of such claims will not have a material adverse effect on the
Company's operations or financial condition.

Dividend Policy

Prior to May 2003, we had not paid regular quarterly or annual dividends
pursuant to a specific policy since 1997. In May 2003, we announced the adoption
of a policy to provide a more predictable minimum dividend stream whereby we
seek to have a minimum quarterly dividend of $0.25 per share, equivalent to
$1.00 per share per annum. In February 2005, we increased the targeted minimum
quarterly dividend to $0.625 per share, equivalent to $2.50 per share per annum.
We have paid the following cash dividends in 2002, 2003 and 2004.

Payment Date                                       Amount per Share

2002
March 20, 2002                                           $0.20
June 12, 2002                                            $0.05

2003
March 24, 2003                                           $0.15
June 6, 2003                                             $1.00
July 7, 2003                                             $1.00
September 2, 2003                                        $1.10
December 12, 2003                                        $1.30

2004
March 29, 2004                                           $4.50
June 16, 2004                                            $5.00
September 13, 2004                                       $1.60
December 17, 2004                                        $2.50

On February 23, 2005 the Board declared a dividend of $3.50 per share to be paid
on or about March 18, 2005. On May 31, 2005, the Board declared a dividend of
$3.10 per share to be paid on or about June 24, 2005.

The timing and amount of dividends, if any, is at the discretion of our Board of
Directors and will depend upon our results of operations, financial condition,
cash requirements, restrictions in financing arrangements and other relevant
factors.

B. SIGNIFICANT CHANGES

During 2004, we distributed approximately 48.3% of our shares in Ship Finance to
our shareholders and at December 31, 2004 held 50.8% of Ship Finance. See Item
4. Information on the Company - Spin-Off of Ship Finance International Limited.
In February and March 2005, we have spun off a further 35% of our shares in Ship
Finance to our shareholders and at June 24, 2005 hold approximately 15.8% of
Ship Finance.

ITEM 9. THE OFFER AND LISTING

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

The Company's Ordinary Shares are traded on the New York Stock Exchange
("NYSE"), the Oslo Stock Exchange ("OSE") and on the London Stock Exchange
("LSE") under the symbol "FRO".

The Company's ADSs, each of which represented one Ordinary Share, were traded on
the NASDAQ National Market under the symbol "FRONY" until August 3, 2001 when
the ADSs were delisted. The ADR program was terminated on October 5, 2001. The
Company's Ordinary Shares began trading on the NYSE on August 6, 2001.

The New York Stock Exchange is the Company's "primary listing". As an overseas
company with a secondary listing on the LSE, the Company is not required to
comply with certain listing rules applicable to companies with a primary listing
on the LSE. The listing on the OSE is also a secondary listing. The Company's
Ordinary Shares have been thinly traded on the London Stock Exchange since 1999.

The following table sets forth, for the five most recent fiscal years, the high
and low prices for the Ordinary Shares on the NYSE and OSE and the high and low
prices for the ADSs as reported by the NASDAQ National Market.

                            NYSE                OSE                   NASDAQ
                       High      Low        High        Low       High       Low
Fiscal year ended
December 31
2004a                $62.33   $24.36   NOK367.81   NOK158.06        --        --
2003a                $27.69    $8.93   NOK185.00    NOK61.00        --        --
2002a                $13.05    $3.19   NOK108.50    NOK25.90        --        --
2001a                $15.45    $6.55   NOK215.50    NOK59.50    $24.50   $11.563
2000a                    --       --   NOK164.00    NOK37.00   $18.250    $3.938

The following table sets forth, for each full financial quarter for the two most
recent fiscal years, the high and low prices of the Ordinary Shares on the NYSE
and the OSE.

                                               NYSE                 OSE
                                           High      Low        High         Low
Fiscal year ended December 31, 2004
First quarter                            $35.89   $25.10   NOK249.50   NOK165.50
Second quarter                           $40.13   $24.36   NOK235.71   NOK158.06
Third quarter                            $47.47   $34.04   NOK307.14   NOK221.82
Fourth quarter                           $62.33   $42.61   NOK367.81   NOK267.00

                                               NYSE                 OSE
                                           High      Low        High         Low
Fiscal year ended December 31, 2003
First quarter                            $12.54    $8.93    NOK87.50    NOK61.00
Second quarter                           $16.85   $10.00   NOK117.00    NOK73.00
Third quarter                            $19.89   $13.40   NOK146.50    NOK95.50
Fourth quarter                           $27.69   $15.47   NOK185.00   NOK108.50

The following table sets forth, for the most recent six months, the high and low
prices for the Ordinary Shares on the NYSE and OSE.

                                               NYSE                 OSE
                                           High      Low        High         Low
May 2005                                 $46.45   $40.52   NOK289.50   NOK263.00
April 2005                               $50.96   $42.51   NOK321.00   NOK272.00
March 2005                               $56.01   $43.75   NOK355.00   NOK270.00
February 2005                            $57.97   $44.75   NOK354.00   NOK288.50
January 2005                             $51.29   $40.65   NOK318.50   NOK254.00
December 2004                            $61.18   $43.56   NOK356.43   NOK267.00

ITEM 10. ADDITIONAL INFORMATION

A. SHARE CAPITAL

Not Applicable

B. MEMORANDUM AND ARTICLES OF ASSOCIATION

The Memorandum of Association of the Company has previously been filed as
Exhibit 3.1 to the Company's Registration Statement on Form F-1, (Registration
No. 33-70158) filed with the Securities and Exchange Commission on October 13,
1993, and is hereby incorporated by reference into this Annual Report.

The Amended and Restated Bye-Laws of the Company as adopted on April 5, 2004,
have previously been filed as Exhibit 1.4 to the Company's Annual Report on Form
20-F for the fiscal year ended December 31 2003, filed with the Securities and
Exchange Commission on June 30, 2004, and are hereby incorporated by reference
into this Annual Report.

The purposes and powers of the Company are set forth in Items 6(1) and 7(a)
through (h) of our Memorandum of Association and in the Second Schedule of the
Bermuda Companies Act of 1981 which is attached as an exhibit to our Memorandum
of Association. These purposes include exploring, drilling, moving, transporting
and refining petroleum and hydro-carbon products, including oil and oil
products; the acquisition, ownership, chartering, selling, management and
operation of ships and aircraft; 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.

The Company's Bye-laws provide that its board of directors shall convene and the
Company shall hold annual general meetings in accordance with the requirements
of the Bermuda Companies Act of 1981 at such times and places (other than
Norway) as the Board shall decide. The board of directors may call special
meetings at its discretion or as required by the Bermuda Companies Act of 1981.

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.

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 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.

The Company's 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. The Company's 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 Acts and with
its 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.
The Company's Bye-laws provide its 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. The Company's directors are not required to retire
because of their age, and the directors are not required to be holders of the
Company's ordinary 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.

The Company's Bye-laws provide that no 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, is
liable for the acts, receipts, neglects, or defaults of any other such person or
any person involved in our formation, or for any loss or expense incurred by us
through the insufficiency or deficiency of title to any property acquired by us,
or for the insufficiency of deficiency of any security in or upon which any of
our monies shall be invested, or for any loss or damage arising from the
bankruptcy, insolvency, or tortuous act of any person with whom any monies,
securities, or effects shall be deposited, or for any loss occasioned by any
error of judgment, omission, default, or oversight on his part, or for any other
loss, damage or misfortune whatever which shall happen in relation to the
execution of his duties, or supposed duties, to us or otherwise in relation
thereto. Each 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 but not limited to 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.
The Company is authorized to purchase insurance to cover any liability it may
incur under the indemnification provisions of its Bye-laws.

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

In the event of our liquidation, dissolution or winding up, the holders of
ordinary 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.

The Company's Bye-laws provide that its board of directors may, from time to
time, declare and pay dividends out of contributed surplus. Each ordinary share
is entitled to dividends if and when dividends are declared by the 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 ordinary shares.

The Company's Bye-laws provide that any person, other than its registrar, who
acquires or disposes of an interest in shares which triggers a notice
requirement of the Oslo Stock Exchange must notify the Company's registrar
immediately of such acquisition or disposal and the resulting interest of that
person in shares.

The Company's Bye-laws laws require the Company to provide notice to the Oslo
Stock Exchange if a person resident for tax purposes in Norway (or such other
jurisdiction as the Board may nominate from time to time) is found to hold 50%
or more of the Company's aggregate issued share capital, or holds shares with
50% or more of the outstanding voting power, other than the Company's registrar.
The Company's Bye-laws also require it to comply with requirements that the Oslo
Stock Exchange may impose from time to time relating to notification of the Oslo
Stock Exchange in the event of specified changes in the ownership of the
Company's ordinary shares.

The Company has in place a Shareholders Rights Plan that would have the effect
of delaying, deferring, preventing a change in control of the Company. The
Shareholders Rights Plan has been filed as part of the Form 8-A filed with the
Securities and Exchange Commission on December 9, 1996, and is hereby
incorporated by reference into this Annual Report.

C. MATERIAL CONTRACTS

Spin Off of Ship Finance International Limited

Fleet Purchase Agreement

In October 2003, we formed Ship Finance, as our wholly-owned subsidiary to
acquire and operate some of our crude oil tankers. On December 11, 2003 we
entered into a fleet purchase agreement with Ship Finance pursuant to which Ship
Finance purchased from us a fleet of 46 crude oil tankers and an option to
purchase one additional tanker from a third party. Ship Finance paid an
aggregate purchase price of $950 million, excluding working capital and other
intercompany balances retained by us, for the 46 vessels and purchase option
that it acquired from us. Ship Finance also assumed senior secured indebtedness
with respect to its fleet in the amount of approximately $1.158 billion. The
purchase price for the 46 vessels and the option and the refinancing of the
existing senior secured indebtedness on those vessels, which was completed in
January of 2004, were financed through a combination of the net proceeds from
Ship Finance's issuance of $580 million of 8.5% Senior Notes, due 2013, funds
from a $1.058 billion senior secured credit facility and a deemed equity
contribution from us to Ship Finance.

Ship Finance has chartered its fleet of 46 vessels under long term, fixed rate
time charters to Frontline Shipping Limited, also a wholly-owned subsidiary of
ours, which we refer to as Frontline Shipping. Ship Finance has entered into
fixed rate management and administrative services agreements with Frontline
Management (Bermuda) Ltd.,. Frontline Management Bermuda provides the technical
management of Ship Finance's vessels and also provides administrative support
services. The charters and the management agreements were each given economic
effect as of January 1, 2004.

Charter Ancillary Agreement

We have entered into charter ancillary agreements with Ship Finance, its vessel
owning subsidiaries that own the vessels and the Charterers which remain in
effect until the last long term charter with Ship Finance terminates in
accordance with its terms. We have guaranteed the Charterers' obligations under
the charter ancillary agreements.

Charter Service Reserve. We made initial capital contributions to Frontline
Shipping and Frontline Shipping II in the amount of $250 million and $21 million
in cash respectively. These amounts serve to support our obligations to make
charterhire payments to Ship Finance, and are subject to adjustment based on the
number of charters that we are a party to. The Charterers are entitled to use
the charter service reserve only (1) to make charter payments to Ship Finance
and (2) for reasonable working capital to meet short term voyage expenses. The
Charterers are required to provide Ship Finance with monthly certifications of
the balances of and activity in the charter service reserve.

Material Covenants. Pursuant to the terms of the charter ancillary agreement,
the Charterers have agreed not to pay dividends or other distributions to its
shareholders or loan, repay or make any other payment in respect of their
indebtedness or of any of their affiliates (other than Ship Finance or its
wholly owned subsidiaries), unless (1) the Charterers are then in compliance
with its obligations under the charter ancillary agreements, (2) after giving
effect to the dividend or other distribution, (A) they remain in compliance with
such obligations, (B) the balance of the charter service reserves equal at least
$250 million in the case of Frontline Shipping and $21 million in the case of
Frontline Shipping II (which threshold will be reduced by $5.3 million and $7.0
million upon the termination of each charter other than by reason of a default
by Frontline Shipping or Frontline Shipping II respectively) which we refer to
as the "Minimum Reserve", and (C) they certify to Ship Finance that they
reasonably believe that the charter service reserves will be equal to or greater
than the Minimum Reserve level for at least 30 days after the date of that
dividend or distribution, taking into consideration their reasonably expected
payment obligations during such 30-day period, (3) any charter payments deferred
pursuant to the deferral provisions described below by Frontline Shipping have
been fully paid to Ship Finance and (4) any profit sharing payments deferred by
Frontline Shipping pursuant to the profit sharing payments provisions described
below have been fully paid. In addition, the Charterers have agreed to certain
other restrictive covenants, including restrictions on their ability to, without
the consent of Ship Finance:

          o    amend its organizational documents in a manner that would
               adversely affect Ship Finance;

          o    violate its organizational documents;

          o    engage in businesses other than the operation and chartering of
               Ship Finance vessels;

          o    incur debt, other than in the ordinary course of business;

          o    sell all or substantially all of its assets or the assets of any
               of its subsidiaries or enter into any merger, consolidation or
               business combination transaction;

          o    enter into transactions with affiliates, other than on an
               arm's-length basis;

          o    permit the incurrence of any liens on any of its assets, other
               than liens incurred in the ordinary course of business;

          o    issue any capital stock to any person or entity other than
               Frontline; and

          o    make any investments in, provide loans or advances to, or grant
               guarantees for the benefit of any person or entity other than in
               the ordinary course of business.

In addition, we have agreed that we will cause the Charterers at all times to
remain our wholly owned subsidiaries.

Deferral of Charter Payments. For any period during which the cash and cash
equivalents held by Frontline Shipping are less than $75 million, Frontline
Shipping is entitled to defer from the payments payable to Ship Finance under
each charter up to $4,600 per day for each of our vessels that is a VLCC and up
to $3,400 per day for each of our vessels that is a Suezmax, in each case
without interest. However, no such deferral with respect to a particular charter
may be outstanding for more than one year at any given time. Frontline Shipping
will be required to immediately use all revenues that it receives that are in
excess of the daily charter rates payable to Ship Finance to pay any deferred
amounts at such time as the cash and cash equivalents held by Frontline Shipping
are greater than $75 million, unless Frontline Shipping reasonably believes that
the cash and cash equivalents held by it will not exceed $75 million for at
least 30 days after the date of the payment. In addition, Frontline Shipping
will not be required to make any payment of deferred charter amounts until the
payment would be at least $2 million.

Profit Sharing Payments. Under the terms of the charter ancillary agreement,
beginning with the final 11-month period in 2004 and for each calendar year
after that, the Charterers have agreed to pay Ship Finance a profit sharing
payment equal to 20% of the charter revenues for the applicable period,
calculated annually on a TCE basis, realized by them for the Ship Finance fleet
in excess of the daily base charterhire. After 2010, all of Ship Finance's
non-double hull vessels will be excluded from the annual profit sharing payment
calculation. For purposes of calculating bareboat revenues on a TCE basis,
expenses are assumed to equal $6,500 per day. Each Charterer has agreed to
use its commercial best efforts to charter the Ship Finance vessels on market
terms and not to give preferential treatment to the marketing of any other
vessels owned or managed by us or our affiliates.

Frontline Shipping is entitled to defer, without interest, any profit sharing
payment to the extent that, after giving effect to the payment, the charter
service reserve would be less than the Minimum Reserve. Frontline Shipping is
required to immediately use all revenues that it receives that are in excess of
the daily charter rates payable to Ship Finance to pay any deferred profit
sharing amounts at such time as the charter service reserve exceeds the minimum
reserve, unless Frontline Shipping reasonably believes that the charter service
reserve will not exceed the minimum reserve level for at least 30 days after the
date of the payment. In addition, Frontline Shipping will not be required to
make any payment of deferred profit sharing amounts until the payment would be
at least $2 million.

Collateral Arrangements. The charter ancillary agreement provides that the
obligations of the Charterers to Ship Finance under the charters and the
charter ancillary agreement are secured by a lien over all of the assets of
the Charterers and a pledge of the equity interests in the Charterers.

Default. An event of default shall be deemed to occur under the charter
ancillary agreement if:

          o    the relevant Charterer materially breaches any of its obligations
               under any of the charters, including the failure to make
               charterhire payments when due, subject to Frontline Shipping's
               deferral rights explained above

          o    the relevant Charterer or Frontline materially breaches any of
               its obligations under the charter ancillary agreement or the
               Frontline performance guarantee,

          o    Frontline Management materially breaches any of its obligations
               under any of the management agreements or

          o    the relevant Charterer fails at any time to hold at least $55
               million in cash and cash equivalents.

The occurrence of any event of default under the charter ancillary agreements
that continues for 30 days after notice, Ship Finance may elect to:

          o    terminate any or all of the charters with the relevant Charterer,

          o    foreclose on any or all of our security interests described above
               with respect to the relevant Charterer and/or

          o    pursue any other available rights or remedies.

Vessel Management Agreements

Ship Finance's vessel owning subsidiaries entered into fixed rate management
agreements with Frontline Management. Under the management agreements, Frontline
Management is responsible for all technical management of the vessels, including
crewing, maintenance, repair, certain capital expenditures, drydocking, vessel
taxes and other vessel operating expenses. In addition, if a structural change
or new equipment is required due to changes in classification society or
regulatory requirements, Frontline Management will be responsible for making
them, unless the Charterer does so under the charters.

Frontline Management is also obligated under the management agreements to
maintain insurance for each of Ship Finance's vessels, including marine hull and
machinery insurance, protection and indemnity insurance (including pollution
risks and crew insurances) and war risk insurance. Frontline Management will
also reimburse Ship Finance for all lost charter revenue caused by our vessels
being off hire for more than five days per year on a fleet-wide basis or failing
to achieve the performance standards set forth in the charters. Under the
management agreements, Ship Finance pays Frontline Management a fixed fee of
$6,500 per day per vessel for all of the above services, for as long as the
relevant charter is in place. If Frontline Shipping exercises its right under a
charter to bareboat charter the related vessel to a third party, the related
management agreement provides that Ship Finance's obligation to pay the $6,500
fixed fee to Frontline Management will be suspended for so long as the vessel is
bareboat chartered. Both Ship Finance and Frontline Management have the right to
terminate any of the management agreements if the relevant charter has been
terminated.

Administrative Services Agreement

Ship Finance and its vessel owning subsidiaries have entered into an
administrative services agreement with Frontline Management under which
Frontline Management provides administrative support services such as the
maintenance of our corporate books and records, payroll services, the
preparation of tax returns and financial statements, assistance with corporate
and regulatory compliance matters not related to our vessels, legal and
accounting services, assistance in complying with United States and other
relevant securities laws, obtaining non-vessel related insurance, if any, cash
management and bookkeeping services, development and monitoring of internal
audit controls, disclosure controls and information technology, furnishing any
reports or financial information that might be requested by us and other
non-vessel related administrative services. Under this agreement Frontline
Management also provides Ship Finance with office space in Bermuda. Ship Finance
and its vessel owning subsidiaries pay Frontline Management a fixed fee of
$20,000 each per year for its services under the agreement, and reimburse
Frontline Management for reasonable third party costs, including directors fees
and expenses, shareholder communications and public relations, registrars,
audit, legal fees and listing costs, if Frontline Management advances them on
their behalf. Before any public equity offering by Ship Finance, neither party
may terminate this agreement for a period of two years without cause, but after
two years or after public equity offering either party may terminate the
agreement on 180 days' notice.

Spin Off of Golden Ocean Group Limited

Contribution Agreement

Golden Ocean was incorporated as our wholly owned subsidiary on November 8,
2004. On November 29, 2004, we entered into a Contribution Agreement with Golden
Ocean pursuant to which we agreed to contribute assets and cash with a net book
value of $22,450,000 to Golden Ocean on December 1, 2004. The assets contributed
consisted of:

(i)   All of the shares in Golden Hilton Corporation, owner of the Capesize bulk
      carrier Channel Navigator.

(ii)  All of the shares in Golden President Corporation, owner of the Capesize
      bulk carrier Channel Alliance.

(iii) All of the shares in Front Carriers Inc., charterer of the Capesize bulk
      carrier Irfon.

(iv)  Cash equal to the difference between $22,450,000 and the accounted value
      in our books of the assets referred to in (i) to (iii) as of November 30,
      2004 with some minor items being excluded.

On December 13, 2004, we distributed 76.0% of the shares of Golden Ocean to our
shareholders in a three for one stock dividend. Certain of our U.S. shareholders
were excluded from the distribution and received a cash payment in lieu of 13.3%
of the shares equal to $0.60 per Golden Ocean share, which represents the
average price per share of the Golden Ocean shares during their first five days
of trading on the Oslo Stock Exchange.

Agency Agreement

We have entered into an agency agreement with Golden Ocean pursuant to which
Golden Ocean will provide various management services to us relevant to the
operation of our OBO carrier fleet from time to time. The arrangement commenced
on January 1, 2005.

Golden Ocean shall receive a fixed fee of $1,000 per month per vessel in
relation to the eight OBO carriers which at present is part of the agreement and
any subsequent OBO carriers which becomes part of our OBO carrier fleet, until
the month in which such OBO is first fixed on a dry charter by Golden Ocean.
With effect from such month, Golden Ocean shall, for such OBO carrier, receive a
fixing commission of 0.625% of the gross freight earned by such OBO carrier
under such and all subsequent dry charters as long as the agreement is in
effect. The fixed fee terminates when the fixing commission enters into effect.
The fees and the commission are subject to annual review and may, on this basis,
be adjusted upwards only. Each party may terminate the agreement with six
months' prior notice.

D. EXCHANGE CONTROLS

The Company is classified by the Bermuda Monetary Authority as a non-resident of
Bermuda for exchange control purposes.

The transfer of Ordinary Shares between persons regarded as resident outside
Bermuda for exchange control purposes may be effected without specific consent
under the Exchange Control Act of 1972 and regulations there under and the
issuance of Ordinary Shares to persons regarded as resident outside Bermuda for
exchange control purposes may be effected without specific consent under the
Exchange Control Act of 1972 and regulations there under. Issues and transfers
of Ordinary Shares involving any person regarded as resident in Bermuda for
exchange control purposes require specific prior approval under the Exchange
Control Act of 1972.

The owners of Ordinary Shares who are ordinarily resident outside Bermuda are
not subject to any restrictions on their rights to hold or vote their shares.
Because the Company has been designated as a 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 U.S. residents who are holders of
Ordinary Shares, other than in respect of local Bermuda currency.

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.

E. TAXATION

Bermuda currently imposes no tax (including a tax in the nature of an income,
estate duty, inheritance, capital transfer or withholding tax) on profits,
income, capital gains or appreciations derived by, or dividends or other
distributions paid to U.S. Shareholders of Ordinary Shares. Bermuda has
undertaken not to impose any such Bermuda taxes on U.S. Shareholders of Ordinary
Shares prior to the year 2016 except in so far as such tax applies to persons
ordinarily resident in Bermuda.

There is no income tax treaty between the United States and Bermuda pertaining
to the taxation of income except in the case of insurance enterprises. There
also is no estate tax treaty between the United States and Bermuda.

United States Taxation

The following discussion is based upon the provisions of the U.S. Internal
Revenue Code of 1986, as amended (the "Code"), existing and proposed U.S.
Treasury Department regulations, administrative rulings, pronouncements and
judicial decisions, all as of the date of this Annual Report. Unless otherwise
noted, references to the "Company" include the Company's subsidiaries. This
discussion assumes that we do not have an office or other fixed place of
business in the United States.

Taxation of the Company's Shipping Income: In General

The Company anticipates that it will derive substantially all of its gross
income from the use and operation of vessels in international commerce and that
this income will principally consist of freights from the transportation of
cargoes, hire or lease from time or voyage charters and the performance of
services directly related thereto, which the Company refers to as "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 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. The Company
does not engage in transportation that gives rise to 100% U.S. source income.

Shipping income attributable to transportation exclusively between non-U.S.
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 U.S. federal income tax.

Based upon the Company's anticipated shipping operations, the Company's vessels
will operate in various parts of the world, including transportation to or from
U.S. ports. Unless exempt from U.S. taxation under Section 883 of the Code, the
Company will be subject to U.S. federal income taxation, in the manner discussed
below, to the extent its shipping income is considered derived from sources
within the United States.

Application of Code Section 883

Under the relevant provisions of Section 883 of the Code ("Section 883"), the
Company will be exempt from U.S. taxation on its U.S. source shipping income for
a particular taxable year if:

     (i)  it is organised in a country that grants an equivalent exemption from
          tax to corporations organized in the United States in respect of the
          shipping income for which exemption is being claimed under Section 883
          (a "qualified foreign country") and which the Company refers to as the
          "Country of Organisation Requirement"; and

     (ii) it can satisfy any one of the following two (2) stock ownership
          requirements for more than half the days during the taxable year:

          o    the Company's stock is "primarily and regularly" traded on an
               established securities market located in the United States or a
               qualified foreign country, which the Company refers to as the
               "Publicly-Traded Test"; or

          o    more than 50% of the Company's stock, in terms of value, is
               beneficially owned by any combination of one or more individuals
               who are residents of a qualified foreign country or foreign
               corporations that satisfy the Country of Organisation Requirement
               and the Publicly-Traded Test, which the Company refers to as the
               "50% Ownership Test."

The U.S. Treasury Department has recognised Bermuda, the country of
incorporation of the Company, as a qualified foreign country. In addition, the
U.S. Treasury Department has recognized Liberia, Panama, the Isle of Man,
Singapore and the Bahamas, the countries of incorporation of certain of the
Company's shipowning subsidiaries, as qualified foreign countries. Accordingly,
the Company and its vessel owning subsidiaries satisfy the Country of
Organisation Requirement.

Therefore, the Company's eligibility to qualify for exemption under Section 883
is wholly dependent upon being able to satisfy one of the stock ownership
requirements.

For the 2004 tax year, the Company satisfied the Publicly-traded Test since, on
more than half the days of the taxable year, the Company's stock was primarily
and regularly traded on the New York Stock Exchange.

Final regulations interpreting Section 883 were promulgated by the U.S. Treasury
Department in August 2003, which the Company refers to as the "final
regulations." While the final regulations only become effective for calendar
year taxpayers, such as ourselves, beginning with the calendar year 2005, we
have assumed for purposes of this discussion that these regulations are
currently applicable for 2004.

Taxation in Absence of Internal Revenue Code Section 883 Exemption

To the extent the benefits of Section 883 are unavailable with respect to any
item of U.S. source income, the gross amount of the Company's U.S. source
shipping income, would be subject to a 4% tax imposed by Section 887 of the Code
without reduction for any deductions. Since under the sourcing rules described
above, no more than 50% of the Company's shipping income for any taxable year
would be treated as being derived from U.S. sources, the maximum effective rate
of U.S. federal income tax on the Company's shipping income would never exceed
2% (i.e. 4% of 50%).

Gain on Sale of Vessels.

Regardless of whether we qualify for exemption under Section 883, we will not be
subject to United States federal income taxation with respect to gain realised
on a sale of a vessel, provided the sale is considered to occur outside of the
United States under United States federal income tax principles. In general, a
sale of a vessel will be considered to occur outside of the United States for
this purpose if title to the vessel, and risk of loss with respect to the
vessel, pass to the buyer outside of the United States. It is expected that any
sale of a vessel by us will be considered to occur outside of the United States.

Taxation of U.S. Holders

The following is a discussion of the material U.S. federal income tax
considerations relevant to an investment decision by a U.S. Holder, as defined
below, with respect to the Company's common stock. This discussion does not
purport to deal with the tax consequences of owning common stock to all
categories of investors, some of which may be subject to special rules. You are
encouraged to consult your own tax advisors concerning the overall tax
consequences arising in your own particular situation under U.S. federal, state,
local or foreign law of the ownership of common stock.

As used herein, the term "U.S. Holder" means a beneficial owner of our common
stock that (i) is a U.S. citizen or resident, a U.S. corporation or other U.S.
entity taxable as a corporation, an estate, the income of which is subject to
U.S. federal income taxation regardless of its source, or a trust if a court
within the United States is able to exercise primary jurisdiction over the
administration of the trust and one or more U.S. persons have the authority to
control all substantial decisions of the trust and (ii) owns the our common
stock as a capital asset, generally, for investment purposes.

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

Distributions

Subject to the discussion of passive foreign investment companies below, any
distributions made by us to a U.S. Holder with respect to our common stock 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 U.S.
federal income tax principles. Distributions in excess of our earnings and
profits will be treated first as a nontaxable return of capital to the extent of
the U.S. Holder's tax basis in his common stock on a dollar-for-dollar basis and
thereafter as capital gain. Because we are not a United States corporation, U.S.
Holders that are corporations will not be entitled to claim a dividends received
deduction with respect to any distributions they receive from us.

Dividends paid on our common stock to a U.S. Holder who is an individual, trust
or estate (a "U.S. Individual Holder") will generally be treated as "qualified
dividend income" that is taxable to such U.S. Individual Holders at preferential
tax rates (through 2008) provided that (1) the common stock is readily tradable
on an established securities market in the United States (such as the New York
Stock Exchange); (2) we are not a passive foreign investment company, or PFIC,
for the taxable year during which the dividend is paid or the immediately
preceding taxable year (which we do not believe we are, have been or will be);
and (3) the U.S. Individual Holder has owned the common stock for more than 60
days in the 121-day period beginning 60 days before the date on which the common
stock becomes ex-dividend.

There is no assurance that any dividends paid on our common stock will be
eligible for these preferential rates in the hands of a U.S. Individual Holder.
Any dividends paid by the Company which are not eligible for these preferential
rates will be taxed as ordinary income to a U.S. Individual Holder.

Sale, Exchange or other Disposition of Common Stock

Assuming we do not constitute a passive foreign investment company for any
taxable year, a U.S. Holder generally will recognise taxable gain or loss upon a
sale, exchange or other disposition of our common stock in an amount equal to
the difference between the amount realised by the U.S. Holder from such sale,
exchange or other disposition and the U.S. Holder's tax basis in such stock.
Such gain or loss will be treated as long-term capital gain or loss if the U.S.
Holder's holding period is greater than one year at the time of the sale,
exchange or other disposition. A U.S. Holder's ability to deduct capital losses
is subject to certain limitations.

Passive Foreign Investment Company Status and Significant Tax Consequences

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

     o    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

     o    at least 50% of the average value of the assets held by the
          corporation during such taxable year produce, or are held for the
          production of, passive income.

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

Based on our current operations and future projections, we do not believe that
we are, nor do we expect to become, a PFIC with respect to any taxable year.
Although there is no legal authority directly on point, our belief is based
principally on the position that, for purposes of determining whether we are a
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,
we believe that such income does 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, do 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, 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 with respect to any taxable year, we cannot
assure you that the nature of our operations will not change in the future.

As discussed more fully below, if we were to be treated as a PFIC for any
taxable year, a U.S. Holder would be subject to different taxation rules
depending on whether the U.S. 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 U.S. Holder should be able to make a
"mark-to-market" election with respect to our common stock, as discussed below.

Taxation of U.S. Holders Making a Timely QEF Election

If a U.S. Holder makes a timely QEF election, which U.S. Holder we refer to as
an "Electing Holder," the Electing Holder must report each year for U.S. federal
income tax purposes his pro rata share of our ordinary earnings and our net
capital gain, if any, for our taxable year that ends with or within the taxable
year of the Electing Holder, regardless of whether or not distributions were
received from us by the Electing Holder. The Electing Holder's adjusted tax
basis in the common stock will be increased to reflect taxed but undistributed
earnings and profits. Distributions of earnings and profits that had been
previously taxed will result in a corresponding reduction in the adjusted tax
basis in the common stock and will not be taxed again once distributed. An
Electing Holder would generally recognize capital gain or loss on the sale,
exchange or other disposition of our common stock.

Taxation of U.S. Holders Making a "Mark-to-Market" Election

Alternatively, if we were to be treated as a PFIC for any taxable year and, as
we anticipate, our stock is treated as "marketable stock," a U.S. Holder would
be allowed to make a "mark-to-market" election with respect to our common stock.
If that election is made, the U.S. Holder generally would include as ordinary
income in each taxable year the excess, if any, of the fair market value of the
common stock at the end of the taxable year over such holder's adjusted tax
basis in the common stock. The U.S. Holder would also be permitted an ordinary
loss in respect of the excess, if any, of the U.S. Holder's adjusted tax basis
in the common stock over its fair market value at the end of the taxable year,
but only to the extent of the net amount previously included in income as a
result of the mark-to-market election. A U.S. Holder's tax basis in his common
stock would be adjusted to reflect any such income or loss amount. Gain realized
on the sale, exchange or other disposition of our common stock would be treated
as ordinary income, and any loss realized on the sale, exchange or other
disposition of the common stock would be treated as ordinary loss to the extent
that such loss does not exceed the net mark-to-market gains previously included
by the U.S. Holder.

Taxation of U.S. Holders Not Making a Timely QEF or Mark-to-Market Election

Finally, if we were to be treated as a PFIC for any taxable year, a U.S. Holder
who does not make either a QEF election or a "mark-to-market" election for that
year, whom we refer to as a "Non-Electing Holder," would be subject to special
rules with respect to (1) any excess distribution (i.e., the portion of any
distributions received by the Non-Electing Holder on our common stock in a
taxable year in excess of 125 percent 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 stock), and (2)
any gain realized on the sale, exchange or other disposition of our common
stock. Under these special rules:

     o    the excess distribution or gain would be allocated ratably over the
          Non-Electing Holders' aggregate holding period for the common stock;

     o    the amount allocated to the current taxable year and any taxable years
          before the Company became a PFIC would be taxed as ordinary income;
          and

     o    the amount allocated to each of the other taxable years would be
          subject to tax at the highest rate of tax in effect for the applicable
          class of taxpayer for that year, and an interest charge for the deemed
          deferral benefit would be imposed with respect to the resulting tax
          attributable to each such other taxable year.

These penalties would not apply to a qualified pension, profit sharing or other
retirement trust or other tax-exempt organization that did not borrow funds or
otherwise utilize leverage in connection with its acquisition of our common
stock. If a Non-Electing Holder who is an individual dies while owning our
common stock, such holder's successor generally would not receive a step-up in
tax basis with respect to such stock.

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. Such
payments will also be subject to "backup withholding" if you are a non-corporate
U.S. Holder and you:

     o    fail to provide an accurate taxpayer identification number;

     o    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

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

If you sell your common shares to or through a U.S. office or broker, the
payment of the proceeds is subject to both U.S. backup withholding and
information reporting unless you establish an exemption. If you sell your common
shares through a non-U.S. office of a non-U.S. 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, U.S. information
reporting requirements, but not backup withholding, will apply to a payment of
sales proceeds, including a payment made to you outside the United States, if
you sell your common stock through a non-U.S. office of a broker that is a U.S.
person or has some other contacts with the United States.

Backup withholding is not an additional tax. Rather, you generally may obtain a
refund of any amounts withheld under backup withholding rules that exceed your
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 the
Company files 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 450 Fifth Street, N.W., Room 1024, 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. 20549. 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 Par-la-Ville Place, 14 Par-la-Ville Road, Hamilton, Bermuda.

I. SUBSIDIARY INFORMATION

Not Applicable

ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We are exposed to various market risks, including interest rates, spot market
rates for vessels and foreign currency fluctuations. We use interest rate swaps
to manage interest rate risk. We have entered into forward freight agreements
and futures for trading purposes in order to manage its exposure to the risk of
movements in the spot market for certain trade routes and, to some extent, for
speculative purposes. We enter into other derivative instruments from time to
time for speculative purposes.

Our exposure to interest rate risk relates primarily to our debt and related
interest rate swaps. The majority of this exposure derives from our floating
rate debt, which totalled $1,039.8 million at December 31, 2004 (2003: $1,095.1
million). We have entered into interest rate swap agreements to manage its
exposure to interest rate changes by swapping floating interest rates with fixed
interest rates. At December 31, 2004, we had fourteen swaps with a total
notional principal of $631.4 million (2003 - three swaps with notional principal
of $140.5 million). The swap agreements mature between January 2006 and February
2009, and we estimate that we would receive $2.3 million to terminate these
agreements as of December 31, 2004 (2003 - pay $9.1 million). Our net exposure
to interest rate fluctuations is $408.5 million at December 31, 2004 (2003:
$954.6million). Our net exposure is based on our total floating rate debt less
the notional principal of our floating to fixed interest rate swaps. A one per
cent change in interest rates would increase or decrease interest expense by
$4.1 million per year as of December 31, 2004 (2003: $9.5 million).

The fair market value of our fixed rate debt was $1,161.3 million as of December
31, 2004 (2003: $1,194.9 million). If interest rates were to increase or
decrease by one per cent with all other variables remaining constant, we
estimate that the market value of our fixed rate debt would decrease or increase
by approximately $63.9 and $70.2 million respectively (2003: decrease by $72.1
and increase by $79.4 million).

We are exposed to market risk in relation to our forward freight agreements and
futures contracts. Fluctuations in underlying freight market indices upon which
our forward agreements are based have a consequent effect on our cash flows and
consolidated statements of operations. As at December 31, 2004, the notional
principal amounts of our forward freight contracts and futures contracts was
$37.0 million (December 31, 2003: $49.9 million). A ten per cent change in
underlying freight market indices would increase or decrease net income by $2.7
million as of December 31, 2004 (2003: $6.9 million).

The majority of our transactions, assets and liabilities are denominated in U.S.
dollars, our functional currency. Certain of our subsidiaries report in
Sterling, Swedish kronor or Norwegian kroner and risks of two kinds arise as a
result: a transaction risk, that is, the risk that currency fluctuations will
have an effect on the value of our cash flows; and a translation risk, which is
the impact of currency fluctuations in the translation of foreign operations and
foreign assets and liabilities into U.S. dollars in the our consolidated
financial statements. Certain of our subsidiaries, and associated companies in
which we have investments, have Yen denominated long-term debt and charter
contracts denominated in Yen. There is a risk that currency fluctuations will
have a negative effect on the value of our cashflows. At December 31, 2004, we
had Yen denominated long-term debt of (Yen)1.3 billion (2003 - (Yen)16.8
billion). At December 31, 2004 we had (Yen)2.3 billion receivable in relation to
long term Yen denominated charter contracts (2003 - (Yen) 2.5 billion).

At December 31, 2004 we had five Yen denominated forward currency contracts
which were entered into for speculative purposes. The fair values of these
forward currency contracts are recognised as assets or liabilities with changes
in fair value recognised in the consolidated statements of operations. These
contracts have a notional principal of (Yen)14.6 billion (equivalent to
approximately $141.9 million). The contracts mature in February and March 2005,
and we estimate that we would pay $0.9 million to terminate these contracts at
December 31, 2004. A one Yen movement in the exchange rate would increase or
decrease net income by $1.3 million in total, in relation to the aforementioned
yen denominated debt, foreign currency contracts and future charter hire
receivable.

ITEM 12. DESCRIPTION OF SECURITIES

Not Applicable

                                     PART II

ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES

None

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

None

ITEM 15. CONTROLS AND PROCEDURES

As of December 31, 2004, the Company carried out an evaluation of the
effectiveness of the design and operation of the Company's disclosure controls
and procedures pursuant to Exchange Act Rule 13a-14. Based upon that evaluation,
the principal executive officers and principal financial officers concluded that
the Company's disclosure controls and procedures are effective in alerting them
timely to material information relating to the Company required to be included
in the Company's periodic SEC filings.

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 has materially affected, or is reasonably likely to materially
affect, the Company's internal controls over financial reporting.

ITEM 16 A. AUDIT COMMITTEE FINANCIAL EXPERT

The Company does not currently have a separate audit committee. The Company
expects to have an audit committee and an audit committee financial expert in
the year 2005.

ITEM 16 B. CODE OF ETHICS.

The Company has adopted a Code of Ethics that applies to all employees of the
Company. The Code of Ethics has previously been filed as Exhibit 14.1 to the
Company's Annual Report on Form 20-F for the fiscal year ended December 31 2003,
filed with the Securities and Exchange Commission on June 30, 2004, and is
hereby incorporated by reference into this Annual Report.

The Company has posted a copy of its Code of Ethics on its website at
www.frontline.bm. The Company will provide any person, free of charge, a copy of
its Code of Ethics upon written request to the Company's registered office.

ITEM 16 C. PRINCIPAL ACCOUNTANT FEES AND SERVICES

Our principal accountant for 2004 and 2003 was PricewaterhouseCoopers AS. The
following table sets forth for the two most recent fiscal years the fees paid or
accrued for audit and services provided by our PricewaterhouseCoopers AS.

     ---------------------------------------------------------------------------
     (in thousands of $)
                                                              2004          2003
     ---------------------------------------------------------------------------

     Audit Fees (a)                                          2,833         1,489
     Audit-Related Fees (b)                                     --            --
     Tax Fees (c)                                               23            33
     All Other Fees (d)                                         --             5
     Total                                                   2,856         1,527

(a) Audit Fees

Audit fees represent professional services rendered 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.

(b) Audit -Related Fees

Audit-related fees consisted of assurance and related services rendered by the
principal accountant related to the performance of the audit or review of the
Company's financial statements which have not been reported under Audit Fees
above.

(c) Tax Fees

Tax fees represent fees for professional services rendered by the principal
accountant for tax compliance, tax advice and tax planning.

(d) All Other Fees

All other fees include services other than audit fees, audit-related fees and
tax fees set forth above.

The Company's Board of Directors has adopted pre-approval policies and
procedures in compliance with paragraph (c) (7)(i) of Rule 2-01 of Regulation
S-X that require the Board to approve the appointment of the independent auditor
of the Company before such auditor is engaged and approve each of the audit and
non-audit related services to be provided by such auditor under such engagement
by the Company. All services provided by the principal auditor in 2004 were
approved by the Board pursuant to the pre-approval policy.

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

Not applicable

ITEM 17. FINANCIAL STATEMENTS

Not Applicable

ITEM 18. FINANCIAL STATEMENTS

The following financial statements listed below and set forth on pages F-1
through F-54 are filed as part of this annual report:

Index to Consolidated Financial Statements of Frontline Ltd

Report of Independent Registered Public Accounting Firm                      F-2
Report of Independent Registered Public Accounting Firm                      F-3
Report of Independent Registered Public Accounting Firm                      F-4
Report of Independent Auditors                                               F-5
Consolidated Statements of Operations for the years ended December 31,
2004, 2003 and 2002                                                          F-6
Consolidated Balance Sheets as of December 31, 2004 and 2003                 F-7
Consolidated Statements of Cash Flows for the years ended December 31,
2004, 2003 and 2002                                                          F-8
Consolidated Statements of Changes in Stockholders' Equity for the
years ended December 31, 2004,                                              F-10
2003 and 2002
Notes to Consolidated Financial Statements                                  F-11

Index to Consolidated Financial statements of Independent Tankers
Corporation

Report of Independent Registered Public Accounting Firm                     F-41
Consolidated Statements of Operations for the years ended December 31,
2004 and 2003                                                               F-42
Consolidated Balance Sheets as of December 31, 2004 and 2003                F-43
Consolidated Statements of Cash Flows for the years ended December 31,
2004 and 2003                                                               F-44
Consolidated Statements of Changes in Stockholders' Equity for the years
ended December 31, 2004 and 2003                                            F-45
Notes to Consolidated Financial Statements                                  F-46

ITEM 19.            EXHIBITS

Number              Description of Exhibit

1.1*                Memorandum of Association of the Company, incorporated by
                    reference to Exhibit 3.1 of the Company's Registration
                    Statement on Form F-1, Registration No. 33-70158 filed on
                    October 12, 1993 (the "Original Registration Statement").

1.4*                Amended and Restated Bye-Laws of the Company, incorporated
                    by reference to Exhibit 1.4 of the Company's Annual Report
                    on Form 20-F for the fiscal year ended December 31, 2003.

2.1*                Form of Ordinary Share Certificate, incorporated by
                    reference to Exhibit 4.1 of the Original Registration
                    Statement.

2.2*                Form of Deposit Agreement dated as of November 24, 1993,
                    among Frontline Ltd. (F/K/A London & Overseas Freighters
                    Limited), The Bank of New York as Depositary, and all
                    Holders from time to time of American Depositary Receipts
                    issued there under, including form of ADR, incorporated by
                    reference to Exhibit 4.2 of the Original Registration
                    Statement.

2.3*                Form of Deposit Agreement dated as of November 24, 1993, as
                    amended and restated as of May 29, 2001, among Frontline
                    Ltd. (F/K/A London & Overseas Freighters Limited), The Bank
                    of New York as Depositary, and all Holders from time to time
                    of American Depositary Receipts issued there under,
                    including form of ADR, incorporated by reference to Exhibit
                    2 of the Company's Annual Report on Form 20-F, filed on June
                    13, 2001 for the fiscal year ended December 31, 2000.

2.4*                Rights Agreement (the "Rights Agreement") between the
                    Company and the Bank of New York incorporated by reference
                    to Exhibit 1.3 of the Company's Registration Statement on
                    Form 8-A, File No.0-22704 filed on December 9, 1996.

2.5*                Amendment No. 1 to the Rights Agreement incorporated by
                    reference to Exhibit 4.3 of the Amalgamation Registration
                    Statement.

2.6*                The Subregistrar Agreement related to the registration of
                    certain securities issued by Frontline Ltd. in the Norwegian
                    Registry of Securities between Frontline Ltd. and
                    Christiania Bank og Kreditkasse ASA together with the Form
                    of Warrant Certificate and Conditions attaching thereto,
                    incorporated by reference to Exhibit 1.1 of the Company's
                    Annual Report on Form 20-F for the fiscal year ended
                    December 31, 1998.

4.1*                Form of United Kingdom Share Option Plan, incorporated by
                    reference to Exhibit 10.1 of the Original Registration
                    Statement.

4.2*                Form of Bermuda Share Option Plan, incorporated by reference
                    to Exhibit 10.2 of the Original Registration Statement.

4.3*                The Subordinated Convertible Loan Facility Agreement USD
                    89,000,000 dated July 13, 1999, between Frontline Ltd. as
                    Borrower and Metrogas Holdings Inc. as Lender, incorporated
                    by reference to Exhibit 2.1 of the Company's Annual Report
                    on Form 20-F for the fiscal year ended December 31, 1998.

4.4*                Master Agreement, dated September 22, 1999, among Frontline
                    AB and Frontline Ltd (collectively "FL"), Acol Tankers Ltd.
                    ("Tankers"), ICB Shipping AB ("ICB"), and Ola Lorentzon (the
                    "Agent"), incorporated by reference to Exhibit 3.1 of the
                    Company's Annual Report on Form 20-F for the fiscal year
                    ended December 31, 1999.

8.1                 Subsidiaries of the Company.

10.1                Fleet Purchase Agreement between Frontline Ltd and Ship
                    Finance International Limited dated December 11, 2003

10.2                Charter Ancillary Agreement between Frontline Ltd and Ship
                    Finance International Limited dated January 1, 2004.

10.3                Addendum to Charter Ancillary Agreement between Frontline
                    Ltd and Ship Finance International Limited dated June 15,
                    2004.

10.4                Form of Performance Guarantee issued by the Company.

10.5                Form of Time Charter

10.6                Form of Vessel Management Agreements

10.7                Administrative Services Agreement

10.8                Contribution Agreement between Frontline Ltd and Golden
                    Ocean Group Limited dated November 29, 2004 12.1
                    Certification of the Principal Executive Officer

12.2                Certification of the Principal Financial Officer

13.1                Certifications under Section 906 of the Sarbanes-Oxley act
                    of 2002 of the Principal Executive Officer

13.2                Certifications under Section 906 of the Sarbanes-Oxley act
                    of 2002 of the Principal Financial Officer

14.1*               Code of Ethics, incorporated by reference to Exhibit 14.1 of
                    the Company's Annual Report on Form 20-F for the fiscal year
                    ended December 31, 2003.

* Incorporated herein by reference.
<PAGE>

                                   SIGNATURES

Pursuant to the requirements of Section 12 of the Securities Exchange Act of
1934, the registrant certifies that it meets all of the requirements for filing
on Form 20-F and has duly caused this annual report to be signed on its behalf
by the undersigned, thereunto duly authorised.

                                               Frontline Ltd.
                                        ----------------------------------------
                                               (Registrant)

Date June 30, 2005                      By /s/ Kate Blankenship
                                           -------------------------------------
                                               Kate Blankenship
                                  Company Secretary and Chief Accounting Officer
<PAGE>

Index to Consolidated Financial Statements of Frontline Ltd

Report of Independent Registered Public Accounting Firm                      F-2
Report of Independent Registered Public Accounting Firm                      F-3
Report of Independent Registered Public Accounting Firm                      F-4
Report of Independent Auditors                                               F-5
Consolidated Statements of Operations for the years ended December 31,
2004, 2003 and 2002                                                          F-6
Consolidated Balance Sheets as of December 31, 2004 and 2003                 F-7
Consolidated Statements of Cash Flows for the years ended December 31,
2004, 2003 and 2002                                                          F-8
Consolidated Statements of Changes in Stockholders' Equity for the years
ended December 31, 2004, 2003 and 2002                                      F-10
Notes to Consolidated Financial Statements                                  F-11
<PAGE>

Report of Independent Registered Public Accounting Firm

To the Board of Directors
and Stockholders of Frontline Ltd.

In our opinion, based on our audits and the report of other auditors, the
accompanying consolidated balance sheets and the related consolidated statements
of operations, of cash flows and of changes in stockholders' equity present
fairly, in all material respects, the financial position of Frontline Ltd. and
its subsidiaries at December 31, 2003 and 2004 and the results of their
operations and their cash flows for the two years then ended in conformity with
accounting principles generally accepted in the United States of America. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits. We did not audit the financial statements for the year ended
December 31, 2004 of Independent Tankers Corporation ("ITC"), a wholly -owned
subsidiary as of May 27, 2004, which statements reflect total assets of $ 892.0
million as of December 31, 2004 and total revenues of $ 56.2 million for the
year ended December 31, 2004. Those statements were audited by other auditors
whose report thereon has been furnished to us, and our opinion expressed herein,
insofar as it relates to the amounts included for ITC, is based solely on the
report of the other auditors. We conducted our audits of these statements in
accordance with the standards of the Public Company Accounting Oversight Board
(United States). Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits and the report of other auditors provide a reasonable basis for our
opinion.

As discussed in Note 2 to the financial statements the Company adopted FASB
Interpretation No. 46 Revised on December 31, 2003.


PricewaterhouseCoopers AS
Oslo, Norway
June 30, 2005
<PAGE>

Report of Independent Registered Public Accounting Firm

To the Board of Directors
and Stockholders of Frontline Ltd.

In our opinion, based on our audit and the report of other auditors, the
accompanying consolidated statements of operations, of cash flows and of changes
in stockholders' equity present fairly, in all material respects, the results of
operations and their cash flows of Frontline Ltd. and its subsidiaries for the
year ended December 31, 2002 in conformity with accounting principles generally
accepted in the United States of America. These financial statements are the
responsibility of the Company's management; our responsibility is to express an
opinion on these financial statements based on our audit. We did not audit the
financial statements of Golden Ocean Group Limited, a wholly-owned subsidiary,
which statements reflect total revenues of approximately $22.3 million for the
year ended December 31, 2002. The financial statements of Golden Ocean Group
Limited were audited by other auditors whose report thereon has been furnished
to us, and our opinion expressed herein, insofar as it relates to the amounts
included for Golden Ocean Group Limited, is based solely on the report of the
other auditors. We conducted our audit of these statements in accordance with
the standards of the Public Company Accounting Oversight Board (United States).
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audit and the report of other auditors provide a reasonable basis for our
opinion.

As discussed in Note 2 to the financial statements the Company adopted Statement
of Financial Accounting Standard No. 142 on January 1, 2002. As discussed in
Note 28 to the financial statements, the Company adopted Statement of Financial
Accounting Standard No. 144 on January 1, 2002.


PricewaterhouseCoopers
Hamilton, Bermuda
June 24, 2003, except for Note 28 for which the date is June 30, 2005
<PAGE>

Report of Independent Registered Public Accounting Firm
-------------------------------------------------------

To the Board of Directors
and Stockholder of Independent Tankers Corporation

We have audited the accompanying consolidated balance sheets of Independent
Tankers Corporation as of December 31, 2004 and 2003 and the related
consolidated statements of operations and retained earnings, and cash flows for
the years then ended. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.

We conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. We were not engaged to perform an
audit of the Company's internal control over financial reporting. An audit
includes consideration of internal control over financial reporting as a basis
for designing audit procedures that are appropriate in the circumstances, but
not for the purpose of expressing an opinion on the effectiveness of the
Company's internal control over financial reporting. Accordingly, we express no
such opinion. An audit also includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes, assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provides a reasonable basis
for our opinion.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Independent Tankers
Corporation at December 31, 2004 and 2003, and the results of its operations and
its cash flows for the years then ended in conformity with accounting principles
generally accepted in the United States of America.


Grant Thornton LLP

New York, New York
June 21, 2005
<PAGE>

Golden Ocean Group Limited
Report of Independent Auditors

TO THE BOARD OF DIRECTORS AND STOCKHOLDER OF GOLDEN OCEAN GROUP LIMITED

We have audited the accompanying consolidated balance sheets of Golden Ocean
Group Limited and subsidiaries as of December 31, 2002 and the related
consolidated statements of operations, changes in stockholders' equity and cash
flows for the years ended December 31, 2002. These consolidated financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.

We conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of Golden
Ocean Group Limited and subsidiaries as of December 31, 2002, and the
consolidated results of their operations and their cash flows for the years
ended December 31, 2002, in conformity with U.S. generally accepted accounting
principles.


Moore Stephens
Chartered Accountants
London, England
February 19, 2003
<PAGE>

<TABLE>
Frontline Ltd.
Consolidated Statements of Operations for the years ended
December 31, 2004, 2003 and 2002
(in thousands of $, except per share data)
<CAPTION>
                                                            2004          2003          2002
                                                                    (restated)    (restated)
<S>                                                    <C>           <C>             <C>
Operating revenues
  Time charter revenues                                  108,246        40,759        21,591
  Bareboat charter revenues                              178,477        27,930        31,924
  Voyage charter revenues                              1,554,519     1,089,583       489,286
  Finance lease interest income                           10,794            --            --
  Other income                                             3,630         3,111         2,639
---------------------------------------------------------------------------------------------
  Total operating revenues                             1,855,666     1,161,383       545,440
---------------------------------------------------------------------------------------------
Gain (loss) on sale of assets                             19,574         5,626        (1,228)
Operating expenses
  Voyage expenses and commission                         361,609       323,378       134,930
  Ship operating expenses                                130,395       115,333       106,255
  Charterhire expenses                                    39,302        80,539        60,198
  Administrative expenses                                 25,754        20,999        15,444
  Depreciation and amortisation                          181,274       144,470       134,454
---------------------------------------------------------------------------------------------
  Total operating expenses                               738,334       684,719       451,281
---------------------------------------------------------------------------------------------
Net operating income                                   1,136,906       482,290        92,931
---------------------------------------------------------------------------------------------
Other income (expenses)
  Interest income                                         31,595         9,185        13,042
  Interest expense                                      (205,641)      (74,376)      (70,575)
  Share in results from associated companies              10,553        33,533       (10,711)
  Foreign currency exchange loss                          (5,378)      (11,963)       (5,643)
  Other financial items, net                               3,566           300        (8,614)
---------------------------------------------------------------------------------------------
  Net other expenses                                    (165,305)      (43,321)      (82,501)
---------------------------------------------------------------------------------------------
Net income from continuing operations before             971,601       438,969        10,430
income taxes, minority interest and cumulative
effect of change in accounting principle
Minority interest                                        (64,995)           --            --
Income taxes                                                (178)           (3)           22
---------------------------------------------------------------------------------------------
Net income from continuing operations before             906,428       438,966        10,452
cumulative effect of change in accounting
principle
Discontinued operations                                  116,954         4,161        (5,209)
Cumulative effect of change in accounting principle           --       (33,767)      (14,142)
---------------------------------------------------------------------------------------------
Net income(loss)                                       1,023,382       409,360        (8,899)
=============================================================================================

Earnings (loss) per share:
Basic earnings per share from continuing
operations before cumulative effect of
change in accounting principle                            $12.22         $5.86         $0.14
Diluted earnings per share from continuing
operations before cumulative effect of change
in accounting principle                                   $12.22         $5.85         $0.14

Basic earnings per share before cumulative effect
of change in accounting principle                         $13.79         $5.92         $0.07
Diluted earnings per share before cumulative effect
of change in accounting principle                         $13.79         $5.90         $0.07

Basic earnings (loss) per share                           $13.79         $5.47        $(0.12)
Diluted earnings (loss) per share                         $13.79         $5.45        $(0.12)
=============================================================================================
</TABLE>

See accompanying Notes that are an integral part of these Consolidated Financial
Statements
<PAGE>

Frontline Ltd.
Consolidated Balance Sheets as of December 31, 2004 and 2003
(in thousands of $)

                                                               2004        2003

ASSETS
Current Assets
  Cash and cash equivalents                                 105,702     124,189
  Restricted cash                                           592,607     891,887
  Marketable securities                                      78,327          44
  Trade accounts receivable                                 141,301      48,165
  Other receivables                                          13,787      15,313
  Inventories                                                32,017      26,148
  Voyages in progress                                       148,900      60,282
  Prepaid expenses and accrued income                        11,872      12,241
  Net investment in finance lease, current portion           13,488      15,511
  Derivative instruments receivable amounts                  14,490          78
  Other current assets                                       16,903       4,146
--------------------------------------------------------------------------------
  Total current assets                                    1,169,394   1,198,004
Newbuildings and vessel purchase options                     24,231       8,370
Vessels and equipment, net                                2,254,361   2,165,239
Vessels and equipment under capital lease, net              718,842     765,126
Investment in associated companies                           22,955     173,329
Net investment in finance lease, long term portion          107,664     120,894
Deferred charges                                             28,219      22,454
Other long-term assets                                       13,094      10,119
--------------------------------------------------------------------------------
  Total assets                                            4,338,760   4,463,535
================================================================================

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
  Short-term debt and current portion of long-term debt     151,614     191,131
  Current portion of obligations under capital leases        21,498      20,138
  Trade accounts payable                                      8,268       7,289
  Accrued expenses                                           80,694      76,910
  Deferred charter revenue                                    4,382       5,309
  Derivative instruments liabilities                          6,431       9,217
  Other current liabilities                                  72,976      11,318
--------------------------------------------------------------------------------
  Total current liabilities                                 345,863     321,312
Long-term liabilities
  Long-term debt                                          1,990,131   2,091,286
  Obligations under capital leases                          732,153     753,823
  Deferred gains on sales of vessels                         20,028      21,964
  Other long-term liabilities                                 3,887      19,733
--------------------------------------------------------------------------------
  Total liabilities                                       3,092,062   3,208,118
Commitments and contingencies                                    --          --
Minority interest                                           328,730          --

Stockholders' equity
  Share capital                                             187,063     184,120
  Additional paid in capital                                565,130     513,859
  Accumulated other comprehensive income (loss)               5,414      (6,953)
  Retained earnings                                         160,361     564,391
--------------------------------------------------------------------------------
  Total stockholders' equity                                917,968   1,255,417
--------------------------------------------------------------------------------
  Total liabilities and stockholders' equity              4,338,760   4,463,535
================================================================================

See accompanying Notes that are an integral part of these Consolidated Financial
Statements
<PAGE>

<TABLE>
Frontline Ltd.
Consolidated Statements of Cash Flows for the years ended December 31, 2004, 2003 and 2002
<CAPTION>
(in thousands of $)                                                 2004          2003          2002
<S>                                                           <C>           <C>           <C>
Operating activities
Net income (loss)                                              1,023,382       409,360        (8,899)
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
  Depreciation and amortisation                                  183,711       146,907       139,855
  Amortisation of deferred charges                                10,372         2,862         2,299
  (Gain) loss from sale of assets (including marketable         (126,230)       (5,626)        4,337
  securities)
  Share in results from associated companies                     (10,552)      (33,533)       10,711
  Unrealised foreign exchange loss                                   390        17,955        14,176
  Change in accounting principle                                      --        33,767        14,142
  Adjustment of derivatives to market value                      (15,675)      (28,180)        7,495
  Minority interest                                               64,995            --            --
  Other, net                                                      (3,337)        1,311         1,968
  Changes in operating assets and liabilities,
  net of effect of acquisitions:
  Trade accounts receivable                                      (93,497)       (7,495)       18,066
  Other receivables                                                1,193        (8,647)       (6,118)
  Inventories                                                     (5,966)        3,489       (17,413)
  Voyages in progress                                            (88,619)       (9,853)      (40,928)
  Prepaid expenses and accrued income                             (3,584)       (2,837)       (2,951)
  Trade accounts payable                                           1,353          (417)          723
  Accrued expenses                                                11,986        (3,281)        4,781
  Deferred charter revenue                                          (927)        2,727          (500)
  Other, net                                                     (43,008)        4,771           281
  Dividends received from associated companies                     3,800        11,581         1,780
-----------------------------------------------------------------------------------------------------
  Net cash provided by operating activities                      909,787       534,861       143,805
-----------------------------------------------------------------------------------------------------
Investing activities
  Maturity (placement) of restricted cash                        299,280      (559,430)        2,881
  Additions to newbuildings, vessels and equipment              (126,947)      (66,589)     (376,844)
  Purchase of option                                                  --       (10,042)           --
  Proceeds from sale of vessels and equipment                     59,787       427,305       177,902
  Acquisition of subsidiaries and businesses, net of cash        (18,858)       (2,363)           --
  acquired
  Investments in associated companies                            (37,424)      (91,611)      (21,790)
  Purchase of minority interest                                  (14,713)           --        (6,822)
  Proceeds from sale of investments in associated companies       11,181         7,343            --
  Receipts from investments in finance leases and loans           17,482            --            --
  receivable
  Purchases and sales of other assets, net                       (15,098)       14,748            --
-----------------------------------------------------------------------------------------------------
  Net cash provided by (used in) investing activities            174,690      (280,639)     (224,673)
-----------------------------------------------------------------------------------------------------
Financing activities
  Proceeds from long-term debt                                 1,724,014       627,300       383,828
  Repayments of long-term debt                                (1,814,269)     (465,313)     (341,959)
  Payment of obligations under capital leases                    (20,310)      (13,134)      (24,671)
  Debt fees paid                                                 (16,359)      (18,492)       (3,534)
  Cash dividends paid                                         (1,038,315)     (338,033)      (19,117)
  Repurchase of shares and warrants                                 (631)      (28,562)           --
  Proceeds from issuance of equity                                62,906         2,931           223
-----------------------------------------------------------------------------------------------------
  Net cash (used in) provided by financing activities         (1,102,964)     (233,303)       (5,230)
-----------------------------------------------------------------------------------------------------
Net increase (decrease) in cash and cash equivalents             (18,487)       20,919       (86,098)
before change in accounting principle
Cash effect of change in accounting principle                         --        11,192            --
Net increase (decrease) in cash and cash equivalents             (18,487)       32,111       (86,098)
after change in accounting principle
Cash and cash equivalents at beginning of year                   124,189        92,078       178,176
Cash and cash equivalents at end of year                         105,702       124,189        92,078
=====================================================================================================
Supplemental disclosure of cash flow information:
  Interest paid, net of capitalised interest                     188,517        73,206        73,161
  Income taxes paid                                                  114             3         2,203
=====================================================================================================
</TABLE>

See accompanying Notes that are an integral part of these Consolidated Financial
Statements
<PAGE>

<TABLE>
Frontline Ltd.
Consolidated Statements of Changes in Stockholders' Equity for the years ended
December 31, 2004, 2003 and 2002
(in thousands of $, except number of shares)
<CAPTION>
                                                                        2004           2003           2002
<S>                                                              <C>            <C>            <C>
NUMBER OF SHARES OUTSTANDING
Balance at beginning of year                                      73,647,930     76,466,566     76,407,566
Shares issued                                                      1,197,436        251,364         59,000
Shares bought back                                                   (20,197)    (3,070,000)            --
-----------------------------------------------------------------------------------------------------------
Balance at end of year                                            74,825,169     73,647,930     76,466,566
-----------------------------------------------------------------------------------------------------------

SHARE CAPITAL
Balance at beginning of year                                         184,120        191,166        191,019
Shares issued                                                          2,994            629            147
Shares bought back and cancelled                                         (51)        (7,675)            --
-----------------------------------------------------------------------------------------------------------
Balance at end of year                                               187,063        184,120        191,166
-----------------------------------------------------------------------------------------------------------

CONTRIBUTED SURPLUS
Balance at beginning of year                                         513,859        552,241        552,166
Shares issued                                                         42,802          3,774             75
Shares bought back and warrants exercised or expired                    (581)       (42,156)            --
Excess of cash proceeds over book value on issue of shares by          9,050             --             --
subsidiary
-----------------------------------------------------------------------------------------------------------
Balance at end of year                                               565,130        513,859        552,241
-----------------------------------------------------------------------------------------------------------

ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)
Balance at beginning of year                                          (6,953)        (9,498)       (11,864)
Other comprehensive income                                            12,367          2,545          2,366
-----------------------------------------------------------------------------------------------------------
Balance at end of year                                                 5,414         (6,953)        (9,498)
-----------------------------------------------------------------------------------------------------------

RETAINED EARNINGS
Balance at beginning of year                                         564,391        493,064        521,080
Net income (loss)                                                  1,023,382        409,360         (8,899)
Cash dividends                                                    (1,040,093)      (338,033)       (19,117)
Stock dividends                                                     (390,316)            --             --
Minority interest in deemed equity contributions and deemed            2,997             --             --
dividends
-----------------------------------------------------------------------------------------------------------
Balance at end of year                                               160,361        564,391        493,064
-----------------------------------------------------------------------------------------------------------
Total Stockholders' Equity                                           917,968      1,255,417      1,226,973
-----------------------------------------------------------------------------------------------------------

COMPREHENSIVE INCOME (LOSS)
Net income (loss)                                                  1,023,382        409,360         (8,899)
Unrealised gains from marketable securities                           10,441              4            710
Unrealised gains from cash flow hedging derivative instruments         2,471          1,591            843
Foreign currency translation and other                                  (545)           950            813
-----------------------------------------------------------------------------------------------------------
Other comprehensive income                                            12,367          2,545          2,366
-----------------------------------------------------------------------------------------------------------
Comprehensive income (loss)                                        1,035,749        411,905         (6,533)
-----------------------------------------------------------------------------------------------------------
</TABLE>

See accompanying Notes that are an integral part of these Consolidated Financial
Statements

<PAGE>

1.   GENERAL

Frontline Ltd. (the "Company" or "Frontline") is a Bermuda based shipping
company engaged primarily in the ownership and operation of oil tankers,
including oil/bulk/ore ("OBO") carriers. The Company operates tankers of two
sizes: very large crude carriers ("VLCCs") which are between 200,000 and 320,000
deadweight tons ("dwt"), and Suezmaxes, which are vessels between 120,000 and
170,000 dwt. The Company operates primarily through subsidiaries and
partnerships located in Bermuda, Isle of Man, Liberia, Norway, Panama,
Singapore, Cayman Islands and the Bahamas. The Company is also involved in the
charter, purchase and sale of vessels.

The Company's ordinary shares are listed on the New York Stock Exchange, the
Oslo Stock Exchange and the London Stock Exchange.

In October 2003, the Company established a new subsidiary, Ship Finance
International Limited ("Ship Finance"), in Bermuda. Through transactions
executed in January 2004, the Company transferred to Ship Finance ownership of
46 vessel-owning entities each owning one vessel and its corresponding
financing, and one entity owning an option to acquire a VLCC. The Company then
leased the vessels back on long-term charters. The assets and liabilities were
transferred to, and recorded by Ship Finance, at the historical net book value
of each asset at December 31, 2003. In May 2004 the Board of Frontline declared
a share dividend of 25% of the issued share capital of Ship Finance to
Frontline's shareholders. Frontline's shareholders received one share in Ship
Finance for every four Frontline shares held. Further share dividends were
declared in August and November 2004 and as at December 31, 2004, the Company's
remaining shareholding in Ship Finance was 50.75%. The Company has accounted for
the spin off of Ship Finance at historical cost. Ship Finance shares are traded
on the New York Stock Exchange under the ticker symbol SFL.

In November 2004, the Company established Golden Ocean Group Limited ("Golden
Ocean") as a wholly owned subsidiary in Bermuda for the purpose of transferring,
by way of contribution, certain dry bulk shipping interests. Three Frontline
subsidiaries and cash equal to the difference between $22.45 million and the
historical net book value of those subsidiaries was transferred to Golden Ocean
on December 1, 2004. On the same date, the Board of Frontline resolved to
distribute its shares in Golden Ocean to its shareholders in proportion to their
ownership in Frontline. Frontline's shareholders received three shares in Golden
Ocean for every Frontline share held. Certain of the Company's U.S. shareholders
were excluded from the distribution and received a cash payment in lieu of
shares equal to $0.60 per Golden Ocean share, which represents the average price
per share of the Golden Ocean shares during their first five days of trading on
the Oslo Stock Exchange Golden Ocean was listed on the Oslo Stock Exchange on
December 15, 2004. The Company will not have any significant continuing
involvement in these dry bulk operations and as a result, the financial results
from the Company's dry bulk operations transferred to Golden Ocean have been
reported under "discontinued operations" for 2004, 2003 and 2002. The Company
has accounted for the spin off of Golden Ocean at fair value and has recorded a
gain of $99.5 million in the year ended December 31, 2004 which has been
classified as discontinued operations in the statement of operations (See Note
28).

2.   ACCOUNTING POLICIES

Basis of accounting

The consolidated financial statements are prepared in accordance with accounting
principles generally accepted in the United States. The consolidated financial
statements include the assets and liabilities of the Company and its
subsidiaries and certain variable interest entities in which the Company is
deemed to be subject to a majority of the risk of loss from the variable
interest entity's activities or entitled to receive a majority of the entity's
residual returns or both. All intercompany balances and transactions have been
eliminated on consolidation.

Investments in companies over which the Company exercises significant influence
but does not consolidate, are accounted for using the equity method. The Company
records its investments in equity-method investees on the consolidated balance
sheets as "Investments in associated companies" and its share of the investees'
earnings or losses in the consolidated statements of operations as "Share in
results from associated companies". The excess, if any, of purchase price over
book value of the Company's investments in equity method investees is included
in the accompanying consolidated balance sheets in "Investment in associated
companies".

Investments in which the Company has a majority shareholding but which it does
not control, due to the participating rights of minority shareholders, are
accounted for using the equity method. The preparation of financial statements
in accordance with generally accepted accounting principles requires that
management make estimates and assumptions affecting the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates.

Certain comparative figures have been reclassified to conform with the
presentation adopted in the current period. Effective December 31, 2003 we have
reclassified voyage expenses and commission and depreciation and amortisation as
components of total operating expenses.

Cash and cash equivalents

For the purposes of the consolidated statements of cash flows, all demand and
time deposits and highly liquid, low risk investments with original maturities
of three months or less are considered equivalent to cash.

Restricted cash

Restricted cash consists of bank deposits which may only be used to settle
certain pre-arranged loan or lease payments or minimum deposits which must be
maintained in accordance with contractual arrangements.

Marketable Securities

Marketable equity securities held by the Company are considered to be
available-for-sale securities and as such are carried at fair value with
resulting unrealised gains and losses, net of deferred taxes if any, recorded as
a separate component of other comprehensive income in stockholders' equity.

Inventories

Inventories comprise principally of fuel and lubricating oils and are stated at
the lower of cost and market value. Cost is determined on a first-in, first-out
basis.

Investment in finance leases

Certain vessels are chartered under agreements that are classified as direct
financing leases. The minimum payments under the charter agreements are recorded
as the gross investment in the finance lease. The difference between the gross
investment in the finance lease and the cost of the vessel is recorded as
unearned income. Throughout the term of the charter agreement, the Company
records as revenue interest income and unearned income, which is amortized to
income over the life of the charter agreement to produce a constant periodic
rate of return on the net investment in the finance lease.

Vessels and equipment

The cost of the vessels less estimated residual value is depreciated on a
straight-line basis over the vessels' estimated remaining economic useful lives.
The estimated economic useful life of the Company's double hull vessels is 25
years and for single hull vessels is either 25 years or the vessel's anniversary
date in 2015, whichever comes first. Other equipment is depreciated over its
estimated remaining useful life, which approximates five years.

With effect from December 2003, the International Maritime Organisation
implemented new regulations that resulted in the accelerated phase-out of single
hull vessels. As a result of this, the Company re-evaluated the estimated useful
life of its single hull vessels and determined this to be either 25 years or the
vessel's anniversary date in 2015 whichever comes first. As a result, the
estimated useful lives of fourteen of the Company's wholly owned vessels and two
vessels owned by associated companies were reduced in the fourth quarter of
2003. A change in accounting estimate was recognised to reflect this decision,
resulting in an increase in depreciation expense and consequently decreasing net
income by $1.3 million and basic and diluted earnings per share by $0.02, for
2003.

Vessels and equipment under capital lease

The Company charters in certain vessels under agreements that are classified as
capital leases. Depreciation of vessels under capital lease is included within
depreciation and amortisation expense in the Statement of Operations. Vessels
under capital lease are depreciated on a straight-line basis over the vessels'
remaining economic useful lives, or on a straight-line basis over the term of
the lease. The method applied is determined by the criteria by which the lease
has been assessed to be a capital lease.

Newbuildings and vessel purchase options

The carrying value of the vessels under construction ("Newbuildings") represents
the accumulated costs to the balance sheet date which the Company has had to pay
by way of purchase instalments and other capital expenditures together with
capitalised loan interest and associated finance costs. No charge for
depreciation is made until the vessel is put into operation.

Vessel purchase options are capitalised at the time option contracts are
acquired or entered into. The Company reviews expected future cash flows, which
would result from exercise of each option contract on a contract by contract
basis to determine whether the carrying value of the option is recoverable. If
the expected future cash flows are less than the carrying value of the option
plus further costs to delivery, provision is made to write down the carrying
value of the option to the recoverable amount. The carrying value of each option
payment is written off as and when the Company adopts a formal plan not to
exercise the option. Purchase price payments are capitalised and the total of
the option payment, if any, and purchase price payment is transferred to cost of
vessels, upon exercise of the option and delivery of the vessel to the Company.

Impairment of long-lived assets

The carrying value of long-lived assets that are held and used by the Company
are reviewed whenever events or changes in circumstances indicate that the
carrying amount of an asset may no longer be appropriate. We assess
recoverability of the carrying value of the asset by estimating the future net
cash flows expected to result from the asset, including eventual disposition. If
the future net cash flows are less than the carrying value of the asset, an
impairment loss is recorded equal to the difference between the asset's carrying
value and fair value. In addition, long-lived assets to be disposed of are
reported at the lower of carrying amount and fair value less estimated costs to
sell.

Deferred charges

Loan costs, including debt arrangement fees, are capitalised and amortised on a
straight-line basis over the term of the relevant loan. The straight line basis
of amortisation approximates the effective interest method in the Company's
statement of operations. Amortisation of loan costs is included in interest
expense. If a loan is repaid early, any unamortised portion of the related
deferred charges is charged against income in the period in which the loan is
repaid.

Revenue and expense recognition

Revenues and expenses are recognised on the accrual basis. Revenues are
generated from freight billings, time charter and bareboat charter hires. The
operating results of voyages in progress are estimated and recorded pro-rata on
a per day basis in the consolidated statements of operations. Probable losses on
voyages are provided for in full at the time such losses can be estimated. Time
charter and bareboat charter revenues are recorded over the term of the charter
as service is provided. Amounts receivable or payable arising from profit
sharing arrangements are accrued based on the estimates of amounts earned as at
the reporting date.

Revenues and voyage expenses of the vessels operating in pool arrangements are
pooled and the resulting net pool revenues, calculated on a time charter
equivalent basis, are allocated to the pool participants according to an agreed
formula. Formulae used to allocate net pool revenues vary among different pools
but generally allocate revenues to pool participants on the basis of the number
of days a vessel operates in the pool with weighting adjustments made to reflect
vessels' differing capacities and performance capabilities. The same revenue and
expenses principles stated above are applied in determining the pool's net pool
revenues. Certain pools are responsible for paying voyage expenses and
distribute net pool revenues to the participants. The Company accounts for the
net pool revenues allocated by these pools as "pool revenues" in its statements
of operations. Certain pools require the participants to pay and account for
voyage expenses, and distribute gross pool revenues to the participants such
that the participants' resulting net pool revenues are equal to net pool
revenues calculated according to the agreed formula. The Company accounts for
gross pool revenues allocated by these pools as "pool revenues" in its
statements of operations. Refer to Note 29 for further analysis of pool
revenues.

Drydocking provisions

Normal vessel repair and maintenance costs are charged to expense when incurred.
The Company recognises the cost of a drydocking at the time the drydocking takes
place, that is, it applies the "expense as incurred" method. The expense as
incurred method is considered by management to be a more reliable method of
recognising drydocking costs as it eliminates the uncertainty associated with
estimating the cost and timing of future drydockings.

Goodwill

Goodwill represents the excess of the purchase price over the fair value of
assets acquired in business acquisitions accounted for under the purchase
method. As of January 1, 2002, the Company adopted SFAS No. 142, "Goodwill and
Other Intangible Assets" ("SFAS 142") and recorded an impairment charge of $14.1
million for the unamortised goodwill on that date. This is shown separately in
the 2002 consolidated statement of operations as a cumulative effect of change
in accounting principle. The valuation of the reporting unit used to assess the
recoverability of goodwill, was based on a combination of independent third
party valuations and the quoted market price of the Company's shares.

As at December 31, 2004 and 2003 no goodwill was recorded in our consolidated
financial statements.

Derivatives

The Company enters into interest rate swap transactions to hedge a portion of
its exposure to floating interest rates. These transactions involve the
conversion of floating rates into fixed rates over the life of the transactions
without an exchange of underlying principal. Hedge accounting may be used to
account for these swaps provided certain hedging criteria are met. On January 1,
2002, the Company discontinued hedge accounting for two interest rate swaps
previously accounted for as cash flow hedges. This resulted in a balance of $4.1
million being frozen in accumulated other comprehensive income as at that date
and this amount was reclassified into the consolidated statement of operations
over the remaining lives of the underlying debt instruments.

SFAS 133, as amended by SFAS 137 "Accounting for Derivative Instruments and
Hedging Activities-Deferral of the Effective Date of FASB Statement No.133" and
SFAS 138 "Accounting for Certain Derivative Instruments and Certain Hedging
Activities an amendment of FASB Statement No. 133", requires an entity to
recognize all derivatives as either assets or liabilities on the balance sheet
and measure these instruments at fair value. Changes in the fair value of
derivatives are recorded each period in current earnings or other comprehensive
income, depending on whether a derivative is designated as part of a hedge
transaction and, if it is, the type of hedge transaction. In order to qualify
for hedge accounting under SFAS 133, certain criteria and detailed documentation
requirements must be met.

The Company enters into forward freight contracts and options in order to hedge
exposure to the spot market for certain trade routes and in some cases, for
speculative purposes. These transactions involve entering into a contract to
swap theoretical market index based voyage revenues for a fixed daily rate. The
fair values of the forward freight contracts are recognised as assets or
liabilities with changes in fair values recognised in the consolidated
statements of operations.

In 2001 the Company established a facility for a Stock Indexed Total Return Swap
Programme or Equity Swap Line (See Note 20) whereby the counterparty acquired
shares in the Company, and the Company carried the risk of fluctuations in the
share price of those acquired shares. The fair value of the Equity Swap was
recognised as an asset or liability with the change in fair values recognised in
the consolidated statements of operations. This facility was terminated in 2003.
We recorded a gain of $22.1 million in our consolidated statement of operations
for the year ended December 31, 2003 in respect of the change in fair value of
the Equity Swap (2002 - loss of $4.0 million).

In 2004, the Company entered into Yen denominated forward currency contracts for
speculative purposes. The fair values of forward currency contracts are
recognised as assets or liabilities with changes in fair value recognised in the
consolidated statements of operations.

Other than the forward freight and Yen contracts discussed above, the Company
has not entered into any derivative contracts for speculative or trading
purposes.

Financial Instruments

In determining fair value of its financial instruments, the Company uses a
variety of methods and assumptions that are based on market conditions and risks
existing at each balance sheet date. For the majority of financial instruments
including most derivatives and long-term debt, standard market conventions and
techniques such as options pricing models are used to determine fair value. All
methods of assessing fair value result in a general approximation of value, and
such value may never actually be realised.

Foreign currencies

The Company's functional currency is the U.S. dollar as the majority of revenues
are received in U.S. dollars and a majority of the Company's expenditures are
made in U.S. dollars. The Company's reporting currency is U.S. dollars. Most of
the Company's subsidiaries report in U.S. dollars. For subsidiaries that
maintain their accounts in currencies other than U.S. dollars, the Company uses
the current method of translation whereby the statements of operations are
translated using the average exchange rate and the assets and liabilities are
translated using the year end exchange rate. Foreign currency translation gains
or losses are recorded as a separate component of other comprehensive income in
stockholders' equity.

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.
Foreign currency monetary assets and liabilities are translated using rates of
exchange at the balance sheet date. Foreign currency non-monetary assets and
liabilities are translated using historical rates of exchange. Foreign currency
transaction gains or losses are included in the consolidated statements of
operations.

Stock-based compensation

In accordance with Accounting Principles Board Opinion No. 25 ("APB 25")
"Accounting for Stock Issued to Employees" the compensation cost for stock
options is recognised as an expense over the service period based on the excess,
if any, of the quoted market price of the stock at the grant date of the award
or other measurement date, over the exercise price to be paid to acquire the
stock.

In 2004, 2003 and 2002, the Company has recorded compensation expense of $4.2
million, $5.6 million and $0.5 million, respectively in connection with employee
share options.

Had the compensation costs for these plans been determined consistent with the
fair value method recommended in SFAS 123, the Company's net income and earnings
per share would have been reduced to the following pro forma amounts in 2004,
2003 and 2002:

--------------------------------------------------------------------------------
(in thousands, except per share data)              2004      2003       2002

--------------------------------------------------------------------------------
Net income (loss)
   As reported                                1,023,382   409,360     (8,899)
   Add: Compensation expenses as reported         4,231     5,574        481
   Compensation expense determined under         (2,756)   (1,011)    (1,711)
   fair value based method for all awards
   Adjusted net income (loss), fair value     1,024,857   413,923    (10,129)
   based method for all awards

Basic earnings (loss) per share
   As reported                                   $13.79     $5.47     $(0.12)
   SFAS 123 adjusted                             $13.81     $5.53     $(0.13)

Diluted earnings (loss) per share
   As reported                                   $13.79     $5.45     $(0.12)
   SFAS 123 adjusted                             $13.81     $5.51     $(0.13)

Earnings per share

Basic EPS is computed based on the income (loss) available to common
stockholders and the weighted average number of shares outstanding for basic
EPS. Diluted EPS includes the effect of the assumed conversion of potentially
dilutive instruments (see Note 6).

Consolidation of variable interest entities

During 2004, the Company owned 50% of the issued shares of and had made loans to
Golden Fountain Corporation, owner of a VLCC. Prior to the adoption of FIN 46
Frontline accounted for its interest in Golden Fountain Corporation using the
equity method. The Company determined that Golden Fountain Corporation was a
variable interest entity and that Frontline was the primary beneficiary.
Accordingly the Company consolidated the assets and liabilities of Golden
Fountain Corporation effective December 31, 2003. The effect of consolidation of
Golden Fountain Corporation as of December 31, 2003 was to increase total assets
by $7.8 million, increase total liabilities by $16.4 million and to record the
cumulative effect of a change in accounting principle of $8.5 million. Golden
Fountain Corporation sold its vessel on December 17, 2004 which resulted in an
accounting gain of $19.7 million.

On July 1, 2003, the Company purchased a call option for $10.0 million to
acquire all of the shares of Independent Tankers Corporation ("ITC") from Hemen
Holding Ltd ("Hemen"), a related party, for a total consideration of $4.0
million plus 4% interest per year. ITC operates a total of six VLCCs and four
Suezmax tankers, which are on long-term charters to subsidiaries of BP Plc and
ChevronTexaco Corp. Prior to the adoption of FIN 46 Frontline did not
consolidate ITC. The Company determined that ITC was a variable interest entity
and that Frontline was the primary beneficiary. Accordingly the Company
consolidated the assets and liabilities of ITC effective December 31, 2003. The
effect of consolidation of ITC as of December 31, 2003 was to increase total
assets by $910.5 million, increase total liabilities by $935.7 million and to
record the cumulative effect of a change in accounting principle of $25.2
million. On May 27, 2004 the Company exercised its option to acquire all of the
shares of ITC - refer to Note 24.

Issuance of shares by a subsidiary

The Company recognizes a profit when its subsidiary sells its stock to third
parties at a price per share in excess of its carrying amount if such profit is
realisable. If such profit is not realisable, it is recorded as an increase to
paid in capital.

3.   RECENTLY ISSUED ACCOUNTING STANDARDS

In December 2004, the FASB issued Statement of Financial Accounting Standards
No. 123 - Revised, Share-Based Payment ("SFAS 123R"). SFAS 123R revises SFAS 123
Accounting for Stock-Based Compensation ("SFAS 123") and supersedes Accounting
Principles Board Opinion No. 25 Accounting for Stock issued to Employees ("APB
25") and requires companies to expense the fair value of employee stock options
and other forms of stock-based compensation. SFAS 123R adopts a similar approach
to SFAS 123 and sets forth criteria that must be met in order for an award to
fall under the scope of the Standard. SFAS 123R requires companies to fair value
its stock based compensation awards and cease using the intrinsic value method
off accounting allowed under APB 25. SFAS 123R is effective for public companies
for interim or annual reporting periods ending after June 15, 2005 and applies
to awards that are granted, modified or settled after the effective date. As
discussed in more detail in Note 22, the Company did not grant any options in
2004 and 2003 and all option plans expired in 2004.

In December 2004, the FASB issued Statement of Financial Accounting Standards
153 Exchanges of Nonmonetary Assets, an amendment of APB Opinion No. 29 ("SFAS
153"). APB Opinion No. 29 Accounting for Nonmonetary Transactions ("APB 29")
provides that accounting for nonmonetary transactions should be measured based
on the fair value of the assets exchanged but allows certain exceptions to this
principle. SFAS 153 amends APB 29 to eliminate the exception for nonmonetary
exchanges of similar productive assets and replaces it with a general exception
for exchanges of nonmonetary assets that don't have commercial substance. A
nonmonetary exchange has commercial substance if the future cash flows of the
entity are expected to change significantly as a result of the exchange. SFAS
153 is effective for nonmonetary asset exchanges occurring in fiscal periods
beginning after June 15, 2005 and shall be applied prospectively. As such,
adoption of SFAS 153 will not have an effect on the Company's results until that
date.

4.   SEGMENT INFORMATION

The Company has three reportable segments: tankers, oil bulk ore carriers
("OBOs"), and dry bulk carriers. The Company has re-evaluated its segments due
to the change in employment of its OBOs which previously operated in the tanker
market. Prior years have been restated to allow comparability of results.

Segment results are evaluated based on income from vessel operations before
general and administrative expenses. The accounting policies used in the
reportable segments are the same as those followed in the preparation of the
Company's consolidated financial statements.

The Company's management does not evaluate performance by geographical region as
this information is not meaningful.

Information about the Company's reportable segments as of and for each of the
years ended December 31, 2004, 2003 and 2002 is as follows:

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------
(in thousands of $ )                                                      Dry Bulk
                                                Tankers          OBOs     Carriers         Total
2004
------------------------------------------------------------------------------------------------
<S>                                           <C>             <C>          <C>         <C>
Total operating revenues                      1,765,525        84,114        2,096     1,851,735
Voyage expenses                                 358,863         2,746           --       361,609
Ship operating expenses                         114,984        15,350           61       130,395
Depreciation and amortisation                   159,478        20,745          777       181,000
Interest income                                  22,142            16           --        22,158
Interest expense                                190,303        13,275          183       203,761
Share in results from associated companies        9,063            --           --         9,063
Net income                                      942,329        31,883      117,570     1,091,781
Discontinued operations                              --            --      116,954       116,954
Vessels and equipment, net                    1,975,447       261,953       15,698     2,253,098
Vessels under capital lease                     718,842            --           --       718,842
Investment in associated companies               15,288            --           --        15,288
Total assets                                  3,575,626       265,949       33,067     3,874,642
Expenditure for vessels                         126,947            --           --       126,947
<CAPTION>
------------------------------------------------------------------------------------------------
(in thousands of $ )                                                      Dry Bulk
                                                Tankers          OBOs     Carriers         Total
2003
------------------------------------------------------------------------------------------------
<S>                                           <C>             <C>          <C>         <C>
Total operating revenues                      1,039,569       116,213        1,945     1,157,727
Voyage expenses                                 299,953        23,424           --       323,377
Ship operating expenses                          99,384        15,962          (13)      115,333
Depreciation and amortisation                   122,607        20,688          894       144,189
Interest income                                     215            12           --           227
Interest expense                                 65,057         3,638          193        68,888
Share in results from associated companies       33,533            --           --        33,533
Net income                                      384,335        52,728         (329)      436,734
Discontinued operations                              --            --        4,159         4,159
Vessels and equipment, net                    1,813,907       282,698       67,735     2,164,340
Vessels under capital lease                     765,126            --           --       765,126
Investment in associated companies              173,329            --           --       173,329
Total assets                                  3,406,472       292,017       72,551     3,771,040
Expenditure for vessels                          66,589            --       66,589
<CAPTION>
------------------------------------------------------------------------------------------------
(in thousands of $ )                                                      Dry Bulk
                                                Tankers          OBOs     Carriers         Total
2002
------------------------------------------------------------------------------------------------
<S>                                           <C>             <C>          <C>         <C>
Total operating revenues                        462,279        78,462        1,803       542,544
Voyage expenses                                 107,496        27,434           --       134,930
Ship operating expenses                          89,554        16,677           --       106,231
Depreciation and amortisation                   112,785        20,681          894       134,360
Interest income                                     360            11           --           371
Interest expense                                 56,922         6,515          204        63,641
Share in results from associated companies       (9,855)           --         (856)      (10,711)
Net income                                         (311)        8,179      (19,995)      (12,127)
Discontinued operations                              --            --       (5,209)       (5,209)
Vessels and equipment, net                    1,997,489       303,386       71,066     2,371,941
Vessels under capital lease                     264,902            --           --       264,902
Investment in associated companies              119,329            --           --       119,329
Total assets                                  2,532,157       323,011       73,269     2,928,437
Expenditure for vessels                         376,844       376,844
</TABLE>

Reconciliations of reportable segments information to the Company's consolidated
totals follows:

<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------
(in thousands of $)                                               2004          2003          2002
--------------------------------------------------------------------------------------------------
<S>                                                          <C>           <C>           <C>
Total operating revenues
Total operating revenues for reportable segments             1,851,727     1,157,727       542,544
Other operating revenues                                         3,939         3,656         2,896
                                                         -----------------------------------------
Total consolidated operating revenues                        1,855,666     1,161,383       545,440
                                                         -----------------------------------------
Interest income
Total interest income for reportable segments                   22,158           227           371
Interest income attributable to corporate holding                9,437         8,958        12,671
and management companies
                                                         -----------------------------------------
Total consolidated interest income                              31,595         9,185        13,042
                                                         -----------------------------------------
Interest expense
Total interest expense for reportable segments                 203,761        68,888        63,641
Interest expense attributable to corporate holding               1,880         5,488         6,934
and management companies
                                                         -----------------------------------------
Total consolidated interest expense                            205,641        74,376        70,575
                                                         -----------------------------------------
Depreciation
Total depreciation for reportable segments                     181,000       144,189       134,360
Depreciation not attributed to segments                            274           281            94
                                                         -----------------------------------------
Total consolidated depreciation                                181,274       144,470       134,454
                                                         -----------------------------------------
Net income
Net income for reportable segments                           1,091,782       436,734       (12,127)
Minority interest                                              (57,602)           --            --
Net income attributable to corporate holding                   (10,798)      (27,374)        3,228
and management companies
                                                         -----------------------------------------
Total net income                                             1,023,382       409,360        (8,899)
                                                         -----------------------------------------
Vessels and equipment, net
Vessels and equipment, net for reportable segments           2,253,098     2,164,340     2,371,941
Vessels and equipment not attributed to segments                 1,263           899         1,298
                                                         -----------------------------------------
Total consolidated vessels and equipment, net                2,254,361     2,165,239     2,373,239
                                                         -----------------------------------------
Assets
Total assets for reportable segments                         3,874,642     3,771,040     2,928,437
Cash and cash equivalents attributable to holding company      333,507       630,633        62,663
Marketable securities held by corporate holding company         78,327            44            45
Other assets  attributable to corporate holding                 52,284        61,818        43,598
and management companies
                                                         -----------------------------------------
Total consolidated assets                                    4,338,760     4,463,535     3,034,743
                                                         -----------------------------------------
</TABLE>

During the year ended December 31, 2004, the Company reported total income from
two customers of $268.7 million and $264.4 million which represents over 10% of
consolidated operating revenues. These revenues are reported under the tanker
segment. During the years ended December 31, 2003 and 2002, no single customer
accounted for 10% or more of consolidated operating revenues.

5.   TAXATION

Bermuda

Under current Bermuda law, the Company is not required to pay taxes in Bermuda
on either income or capital gains. The Company has received written assurance
from the Minister of Finance in Bermuda that, in the event of any such taxes
being imposed, the Company will be exempted from taxation until the year 2016.

United States

The Company does not accrue U.S. income taxes as, in the opinion of U.S.
counsel, the Company is not engaged in a U.S. trade or business and is exempted
from a gross basis tax under Section 883 of the U.S. Internal Revenue Code.

A reconciliation between the income tax expense resulting from applying the U.S.
Federal statutory income tax rate and the reported income tax expense has not
been presented herein as it would not provide additional useful information to
users of the financial statements as the Company's net income is subject to
neither Bermuda nor U.S. tax.

Other Jurisdictions

Certain of the Company's subsidiaries in other jurisdictions including Norway,
Singapore, Sweden and the United Kingdom are subject to taxation in their
respective jurisdictions. The tax paid by subsidiaries of the Company which are
subject to taxation is not material.

The tax charge for the year comprises:

(in thousands of $)                         2004            2003            2002

Current tax                                (178)             (3)            (22)
Deferred tax                                 --              --              --
--------------------------------------------------------------------------------
                                           (178)             (3)            (22)
================================================================================

Temporary differences and carry forwards which give rise to deferred tax assets,
liabilities and related valuation allowances are as follows:

(in thousands of $)                                         2004            2003

Deferred tax liability - non current                        (175)          (197)
Tax loss carry forwards                                   18,426         16,836
Valuation allowance                                      (18,251)       (16,639)
--------------------------------------------------------------------------------
Net deferred tax asset (liability)                            --             --
================================================================================

As of December 31, 2004, 2003 and 2002, the Company had $65,806,000, $60,129,000
and $20,815,000 of net operating loss carry forwards, respectively. In 2004,
2003 and 2002, tax loss carry forwards have been utilised to offset taxable
income in Sweden. Tax loss carry forwards can be utilised only against future
taxable income of the respective subsidiary. Our subsidiary Frontline AB
accounts for a total of $57,863,000 gross (net $16,202,000) as at December 31,
2004 and our subsidiary Frontline Invest AB accounts for a total of $7,942,000
gross ( net $2,224,000) as of December 31, 2004. These net operating losses do
not have an expiration date. Carried forward losses accounted for by
subsidiaries that have been placed in liquidation during the year have been
excluded .The Company's deferred tax assets are reduced by a valuation allowance
when, in the opinion of management, it is more likely than not that some portion
or all of the deferred tax assets will not be realised in the future. Since
2002, the Company's Swedish subsidiaries have remained dormant, and as a
consequence not generated taxable profits against which the historical tax
losses could be utilized. At this time, the Company does not intend to engage in
any business activities that would generate taxable income within those Swedish
entities that would enable the Company to utilize the tax carry forwards.
Accordingly the Company recorded a full valuation allowance at December 31, 2004
and 2003.

6.   EARNINGS PER SHARE

The computation of basic EPS is based on the weighted average number of shares
outstanding during the year. The computation of diluted EPS assumes the
foregoing and the exercise of stock options using the treasury stock method (see
Note 22).

The components of the numerator for the calculation of basic EPS and diluted EPS
for net income from continuing operations and net income are as follows:

<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------
(in thousands of $)                                           2004        2003         2002

-------------------------------------------------------------------------------------------
<S>                                                      <C>           <C>          <C>
Net income from continuing operations after tax before     906,428     438,966       10,452
cumulative effect of change in accounting principle
Discontinued operations                                    116,954       4,161       (5,209)
Cumulative effect of change in accounting principle             --     (33,767)     (14,142)
-------------------------------------------------------------------------------------------
Net income (loss) available to stockholders              1,023,382     409,360       (8,899)
===========================================================================================
</TABLE>

The components of the denominator for the calculation of basic EPS and diluted
EPS are as follows:

--------------------------------------------------------------------------------
(in thousands )                                           2004     2003     2002

--------------------------------------------------------------------------------
Basic earnings per share:
Weighted average number of ordinary shares outstanding  74,192   74,902   76,456
================================================================================

Diluted earnings per share:
Weighted average number of ordinary shares outstanding  74,192   74,902   76,456
Warrants and stock options                                  --      158       52
--------------------------------------------------------------------------------
                                                        74,192   75,060   76,508
================================================================================

Basic EPS and diluted EPS for discontinued operations and basic EPS for the
cumulative effect of change in accounting principle are as follows:

Basic and diluted earnings per share                    $1.58   $0.06    $(0.07)
for discontinued operations

Basic earnings per share for cumulative                    --   $(0.45)  $(0.19)
effect of change in accounting principle

In the years ended December 31, 2004 and 2003, no options were anti-dilutive. In
the year ended December 31, 2002, 420,300 options were anti-dilutive in the year
and have been excluded from the calculation of the diluted earnings per share.

7.   LEASES

At December 31, 2004 the Company leased in sixteen vessels on long-term time
charters and bareboat charters from third parties. Four of those leases are
classified as operating leases and twelve as capital leases. The Company's
long-term leases of vessels generally contain optional renewal periods and
purchase and put options.

Rental expense

Charter hire payments to third parties for certain contracted-in vessels are
accounted for as operating leases. The Company is also committed to make rental
payments under operating leases for office premises. The future minimum rental
payments under the Company's non-cancellable operating leases are as follows:

--------------------------------------------------------------------------------
Year ending December 31,
(in thousands of $)
--------------------------------------------------------------------------------
2005                                                                      34,140
2006                                                                      34,096
2007                                                                      34,227
2008                                                                      34,222
2009                                                                      28,047
2010 and later                                                            55,506
--------------------------------------------------------------------------------
Total minimum lease payments                                             220,238
================================================================================

Total rental expense for operating leases was $46,854,000, $81,835,000 and
$61,429,000 for the years ended December 31, 2004, 2003 and 2002, respectively.

The following table discloses information about the terms of the Company's
leases of vessels contracted in which are accounted for as operating leases:

<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------
Vessel              Expiry of       Extended Lease    Extended Lease       Company's        Lessor's Put
(Type)           Mandatory Lease      Periods at        Periods at      Purchase Option   Option Exercise
                      Period       Lessor's Option   Company's Option       Periods             date
---------------------------------------------------------------------------------------------------------
<S>                         <C>          <C>                <C>            <C>                       <C>
Front Warrior               2007         2008-2011          2010-2011      2007 to 2011              2011
(Suezmax)
Front Champion              2006         2007-2010          2009-2013      2004 to 2013              2010
(VLCC)
Front Century               2006         2007-2010          2009-2013      2004 to 2013              2010
(VLCC)
Golden Victory              2007         2008-2014          2012-2014      2004 to 2011              2011
(VLCC)
</TABLE>

In February and March 2005 the Company exercised its purchase options on Front
Champion, Front Century and Golden Victory. The leases of these vessels were
cancelled concurrently with the exercise of each purchase option.

A liability for put options on vessels leased under leases classified as
operating leases is recorded at such time that market conditions make it likely
that a put option will be exercised on the exercise date. A liability is
recognised based on the amount, if any, by which the put option price exceeds
the fair market value of the related vessel. At December 31, 2004 no such
liability had arisen.

Twelve of the sixteen vessels leased by the company are leased from special
purpose lessor entities which were established and are owned by independent
third parties who provide financing through debt and equity participation. Each
entity owns one vessel, which is leased to the Company, and has no other
activities. Prior to the adoption of FIN 46R, these special purpose entities
were not consolidated by Frontline. Four of these leases are accounted for as
operating leases and eight of these leases are accounted for as capital leases.
We have determined that due to the existence of certain put and call options
over the leased vessels, these entities are variable interest entities. The
determination of the primary beneficiary of a variable interest entity requires
knowledge of the participations in the equity of that entity by individual and
related equity holders. Our lease agreements with the leasing entities do not
give us any right to obtain this information and we have been unable to obtain
this information by other means. Accordingly we are unable to determine the
primary beneficiary of these leasing entities. At December 31, 2004, the
original cost to the lessor of the assets under such arrangements was $856.5
million. At December 31, 2004 and 2003, the company's residual value guarantees
associated with these leases, which represent the maximum exposure to loss, are
$132.3 million.

The following table discloses information about our activity with these
non-consolidated lessor entities in the three year period ended December 31,
2004:

<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------
                                                               Year ended December 31,
                                                              2004      2003      2002
---------------------------------------------------------------------------------------
<S>                                                         <C>       <C>       <C>
Incurrence of obligations under capital leases                  --   218,844    68,167
Repayments of principal obligations under capital leases    19,686    13,135     9,634
Interest expense for capital leases                         38,436    29,431    15,395
Charterhire expense for operating leases                    31,839    32,195    30,785
</TABLE>

At December 31, 2004 the Company leased out twenty six of its vessels to third
parties on time and bareboat charters with initial periods ranging between two
and ten years. Twenty two of those leases are classified as operating leases and
four as capital leases.

Rental income

The minimum future revenues to be received on time and bareboat charters which
are accounted for as operating leases and other contractually committed income
as of December 31, 2004 are as follows:

--------------------------------------------------------------------------------
Year ending December 31,         Yen revenues                  Dollar      Total
                                                             revenues
(in thousands of (Yen) and $)   (in (Yen))  ($ equivalent)
--------------------------------------------------------------------------------
2005                               992,800           9,629     231,011   240,640
2006                               385,900           3,743     202,160   205,903
2007                               226,300           2,195     133,004   135,199
2008                               226,300           2,195      99,090   101,285
2009                               226,300           2,195      90,053    92,248
2010 and later                     912,640           8,852      40,732    49,584
--------------------------------------------------------------------------------
Total minimum lease revenues     2,970,240          28,809     796,050   824,859
================================================================================

The cost and accumulated depreciation of the vessels leased to a third party at
December 31, 2004 were approximately $1,580.1 million and $454.5 million,
respectively, and at December 31, 2003 were approximately $1,626.3 million and
$411.6 million, respectively.

Minimum future revenues disclosed above include five leases which were
contracted prior to December 31, 2004 and commenced subsequent to December 31,
2004.

8.   MARKETABLE SECURITIES

Marketable securities held by the Company are equity securities considered to be
available-for-sale securities.

--------------------------------------------------------------------------------
(in thousands of $)                                        2004            2003
--------------------------------------------------------------------------------
Cost                                                     67,901              59
Gross unrealised gain (loss)                             10,426             (15)
--------------------------------------------------------------------------------
Fair value                                               78,327              44
================================================================================

The net unrealised gain on marketable securities, including a component of
foreign currency translation, included in comprehensive income increased by
$10.4 million for the year ended December 31, 2004 (2003 - increase in net
unrealised loss of $6,000).

--------------------------------------------------------------------------------
(in thousands of $ )                                     2004     2003     2002
--------------------------------------------------------------------------------
Proceeds from sale of available-for-sale securities    57,450   12,689       --
Realised gain (loss)                                    7,151      402     (984)
================================================================================

The cost of sale of available-for-sale marketable securities is calculated on an
average costs basis.

9.   TRADE ACCOUNTS RECEIVABLE

Trade accounts receivable are presented net of allowances for doubtful accounts
relating to demurrage claims amounting to $2,972,000 and $1,486,000 for each of
the years ended December 31, 2004 and 2003, respectively.

10.  OTHER RECEIVABLES

--------------------------------------------------------------------------------
(in thousands of $)                                       2004             2003
--------------------------------------------------------------------------------
Agent receivables                                        4,086            5,623
Due from related parties                                   953             (464)
Other receivables                                        8,748           10,154
--------------------------------------------------------------------------------
                                                        13,787           15,313
================================================================================

Other receivables are presented net of allowances for doubtful accounts
amounting to $nil for each of the years ended December 31, 2004 and 2003. Other
receivables of $8,748 and $10,154 at December 31, 2004 and 2003, respectively
consist of claims and other miscellaneous receivables.

11.  NEWBUILDINGS AND VESSEL PURCHASE OPTIONS

--------------------------------------------------------------------------------
(in thousands of $)                                        2004             2003
--------------------------------------------------------------------------------
Newbuildings                                             15,861               --
Vessel purchase options                                   8,370            8,370
--------------------------------------------------------------------------------
                                                         24,231            8,370
================================================================================

The carrying value of newbuildings represents the accumulated costs to the
balance sheet date, which the Company has paid by way of purchase instalments,
and other capital expenditures together with capitalised loan interest. There
was no interest capitalised in the cost of newbuildings for 2004 (2003 -
$290,000). There were no newbuilding deliveries during 2004 (2003 - one). See
Note 26 for contractual commitments regarding newbuildings.

The Company has both an obligation and an option to purchase the VLCC Oscilla on
expiry of a five-year time charter, which commenced in March 2000. The purchase
price is equal to the outstanding mortgage debt under four loan agreements
between lenders and the vessel's owning company. As at December 31, 2004 the
outstanding mortgage debt of the Oscilla's owning company amounted to $26.4
million plus (Yen)330,259,045 (equivalent to $3.2 million). (2003--$36.0 million
plus (Yen)674,645,262 (equivalent to $6.3 million)). Included in this amount at
December 31, 2004 is debt of $7.1 million due to the Company (2003 - $9.0
million). The fair value assigned to this option and obligation is $8.4 million.
Fair value was calculated at the time of purchase as the difference between the
fair value of the vessel and the mortgage debt outstanding.

Oscilla is owned and operated by an unrelated special purpose entity. This
entity owns the Oscilla, which is leased to a third party, and has no other
activities. Prior to the adoption of FIN 46R, this special purpose entity was
not consolidated by Frontline. We have determined that the entity that owns
Oscilla is a variable interest entity and that Frontline is the primary
beneficiary. At the current date we have been unable to obtain the accounting
information necessary to be able to consolidate the entity that owns Oscilla. If
the Company has exercised its option at December 31, 2004, the cost to the
Company of the Oscilla would have been approximately $28.5 million and the
maximum exposure to loss was $15.4 million.

The following table discloses information about the Company's activity with this
non-consolidated entity in the three year period ended December 31, 2004:

--------------------------------------------------------------------------------
(in thousands of $)                                 Year ended December 31,
                                                2004          2003          2002
--------------------------------------------------------------------------------

Loan advances made                                --            --         1,489
Loan repayments received                       1,972         2,262           181
Interest income                                  989         1,247         1,147

On January 17, 2005 the Company exercised its option to acquire the VLCC
Oscilla. The vessel was delivered to the Company on April 4 , 2005

12.  VESSELS AND EQUIPMENT, NET

--------------------------------------------------------------------------------
(in thousands of $)                                      2004              2003
--------------------------------------------------------------------------------
Cost                                                3,200,713         2,997,286
Accumulated depreciation                             (946,352)         (832,047)
--------------------------------------------------------------------------------
Net book value at end of year                       2,254,361         2,165,239
================================================================================

Included in the above amounts as at December 31, 2004 and 2003 is equipment with
a net book value of $1.3 million and $0.9 million respectively. Depreciation
expense for vessels and equipment was $137.0 million, $122.8 million, and $139.9
million for the years ended December 31, 2004, 2003 and 2002, respectively,
including amounts recorded in discontinued operations.

13.  VESSELS UNDER CAPITAL LEASE, NET

--------------------------------------------------------------------------------
(in thousands of $)                                      2004              2003
--------------------------------------------------------------------------------
Cost                                                  835,746           853,169
Accumulated depreciation                             (116,904)          (88,043)
--------------------------------------------------------------------------------
Net book value at end of year                         718,842           765,126
================================================================================

Depreciation expense for vessels under capital lease was $46.3million, $24.0
million and $16.6 million for the years ended December 31, 2004, 2003 and 2002,
respectively.

The outstanding obligations under capital leases are payable as follows:

--------------------------------------------------------------------------------
Year ending December 31,
(in thousands of $)
--------------------------------------------------------------------------------
2005                                                                     80,361
2006                                                                     80,877
2007                                                                     82,038
2008                                                                     82,976
2009                                                                    157,569
2010 and later                                                          656,419
--------------------------------------------------------------------------------
Minimum lease payments                                                1,140,240
--------------------------------------------------------------------------------
Less imputed interest                                                  (386,589)
--------------------------------------------------------------------------------
Present value of obligations under capital leases                       753,651
================================================================================

At December 31 2004, the Company held twelve vessels under capital leases (2003
- twelve). These leases are for terms that range from eight to twenty four
years. Four of these vessels were sold by the Company in 2003 and leased back
for a period of nine years with lessor's options to extend the charters for a
further two years followed by a further two years. The Company has purchase
options over eight of these vessels at certain specified dates and the lessor
has options to put these vessels to the Company at the end of the lease term.
Gains arising from the sale and leaseback transactions have been deferred and
are being amortised over the lease terms.

The following table discloses information about the terms of the Company's
leases of vessels contracted in which are accounted for as capital leases:

<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------
Vessel               Expiry of     Extended Lease   Extended Lease      Company's       Lessor's Put
 (Type)              Mandatory       Periods at       Periods at     Purchase Option   Option Periods
                   Lease Period   Lessor's Option      Company's         Periods
                                                        Option
-----------------------------------------------------------------------------------------------------
<S>                        <C>          <C>              <C>            <C>                      <C>
Front Crown                2009         2010-2014        2013-2014      2009 to 2014             2014
(VLCC)
Front Chief                2009         2010-2014        2013-2014      2009 to 2014             2014
(VLCC)
Front Commander            2009         2010-2014        2013-2014      2009 to 2014             2014
(VLCC)
Front Eagle                2010         2011-2015        2014-2015      2010 to 2015             2015
(VLCC)
Front Melody               2011         2012-2015        2014-2015      2011 to 2015             2015
(Suezmax)
Front Symphony             2011         2012-2015        2014-2015      2011 to 2015             2015
(Suezmax)
Front Tina                 2011         2012-2015        2014-2015      2011 to 2015             2015
 (VLCC)
Front Commodore            2011         2012-2015        2014-2015      2011 to 2015             2015
(VLCC)
British Pioneer            2024              none         Note (2)          Note (1)             none
(VLCC)
British Progress           2025              none         Note (2)          Note (1)             none
(VLCC)
British Purpose            2025              none         Note (2)          Note (1)             none
(VLCC)
British Pride              2025              none         Note (2)          Note (1)             none
(VLCC)
</TABLE>

Put options on vessels leased under leases classified as capital leases are
recorded as part of the lease's minimum lease payments. Lease liabilities are
amortised so that the remaining balance at the date the put option becomes
exercisable is equal to the put option amount. An additional liability is
recognised based on the amount, if any, by which the put option price exceeds
the fair market value of the related vessel. At December 31, 2004 no such
additional liability had arisen.

Note 1. The Company does not have options to purchase the vessel but it has
first refusal if the vessel's owner offers the vessel for sale. Note 2. The
Company has the right to terminate the lease at any time but only with
permission of the charterer.

14.  INVESTMENT IN ASSOCIATED COMPANIES

At December 31, 2004, the Company has the following participation in investments
that are recorded using the equity method:

--------------------------------------------------------------------------------
                                                                 2004       2003
--------------------------------------------------------------------------------
International Maritime Exchange ASA                            26.56%     18.01%
Front Tobago Shipping Corporation                              40.00%     40.00%
Dundee Navigation SA                                              --      50.10%
Edinburgh Naviagtion SA                                           --      50.10%
Ariake Transport Corporation                                      --      50.10%
Sakura Transport Corporation                                      --      50.10%
Tokyo Transport Corporation                                       --      50.10%
Hitachi Hull 4983 Ltd.                                            --      50.10%

Summarised balance sheet information of the Company's equity method investees is
as follows:

--------------------------------------------------------------------------------
(in thousands of $)                                      2004               2003
--------------------------------------------------------------------------------
Current assets                                         32,741             38,057
Noncurrent assets                                      29,004            417,653
Current liabilities                                     1,978            115,323
Non current liabilities                                   (62)           205,087

Summarised statement of operations information of the Company's equity method
investees is as follows:

--------------------------------------------------------------------------------
(in thousands of $ )                           2004          2003          2002
--------------------------------------------------------------------------------
Net operating revenues                       41,693       108,489        82,641
Net operating income                         33,923        91,732        25,740
Net income (loss)                            31,116        54,768       (16,149)

In December 2003, Frontline agreed with its partner, Overseas Shipholding,
Group, Inc ("OSG"), to swap interests in six joint venture companies, which each
own a VLCC. These agreements resulted in Frontline exchanging its interest in
three vessels in exchange for OSG's interest in three other vessels, thereby
increasing its interest in those vessels to 100% each. The exchanges of
interests were completed on February 24, 2004. These transactions have been
accounted for as a non-monetary exchange of productive assets. The Company
received a net cash settlement of $2.3 million in the exchange transaction to
reflect the difference in values of the assets exchanged and recognized a gain
of $0.2 million.

In the second quarter of 2003, the Company recorded an impairment loss in the
amount of $2.4 million related to its 50% interest in Golden Lagoon Corporation.
In the third quarter, the Company entered into an agreement to sell this
interest for an amount less than its carrying value. No gain or loss was
subsequently recorded on the sale of this interest.

In the third quarter of 2003, the Company entered into an agreement to exchange
its 33% interest in Ichiban Transport Corporation for a 17% interest in Tokyo
Transport Corporation and a 17% interest of Hitachi Hull 4983 Ltd. with a net
settlement cost of $0.4 million. At the time of signing the exchange agreement,
the Company booked an impairment of $2.8 million in respect of its investment in
Ichiban Transport Corporation. The exchange of investments in Ichiban, Tanabe
and Hakata was then accounted for at book value of the assets exchanged.

Additionally, during the third quarter of 2003, the Company entered into an
agreement regarding the acquisition of a 17% interest in Ariake Transport
Corporation and a 17% interest in Sakura Transport Corporation for fair market
value cash consideration of $10.2 million. The Company accounted for the
acquisition of these interests at historical cost.

The Company held 50% of the shares of Golden Tide Corporation during the year
ended December 31, 2002 and the six months ended June 30, 2003. The statement of
operations includes 50% share of the earnings of Golden Tide Corporation for the
year ended December 31, 2002 and the six months ended June 30, 2003. On June 30,
2003, the Company acquired the remaining 50% of the shares of Golden Tide
Corporation for $9.5 million, being $2.4 million net of cash acquired, and has
combined the assets, principally the vessel, and liabilities, principally the
long-term debt, from that date. The statement of operations includes 100% of
Golden Tide Corporation's earnings for the period from June 30, 2003 to December
31, 2003. At December 31, 2003 the Company determined that it was the primary
beneficiary of Golden Fountain Corporation under FIN 46 and therefore
consolidated the entity at that date.

In 2004, the Company's investment in International Maritime Exchange ASA
increased to 26.56% as of December 31, 2004. Accordingly, the Company has
changed our accounting treatment of the investment from a cost basis to the
equity method. Prior years have not been restated as the impact was
insignificant.

In December 2004, the vessel and all related balances in relation to the
operation of Front Tobago was transferred from Front Tobago Inc to a new company
Front Tobago Shipping Corporation. The Company's 40% investment in Front Tobago
Inc was replaced with an investment in Front Tobago Shipping Corporation.

15.  INVESTMENT IN FINANCE LEASES

The consolidation of ITC as of December 31,2003 resulted in the Company
recording a net investment in finance leases. Four Suezmax vessels are on long
term charters to Chevron Transport Corporation ("Chevron"). Each charter has a
term expiring on April 1, 2015 subject to Chevron's right to terminate on
certain specified dates. Chevron has the right to terminate each charter on any
of four, in the case of the double-hulled vessels, or three, in the case of the
single-hulled vessel, termination dates which, for each vessel, occur at
two-year intervals. Chevron is required to provide non-binding notice of its
intent to exercise an option at least twelve months prior to the termination
date. Irrevocable notice that the initial termination option will be exercised
must be received nine months prior to the date and for each option subsequent to
the initial termination option, irrevocable notice must be received seven months
prior to the termination date. Chevron is required to pay the following
termination payments on or prior to the remaining termination dates as follows:

--------------------------------------------------------------------------------
Approximate Termination Payments (in thousands of $)

Optional
Termination     Sirius Voyager   Altair Voyager   Cygnus Voyager   Virgo Voyager
Date
--------------------------------------------------------------------------------
April 1, 2005           12,260                            10,930
April 1, 2006                            11,110                            5,050
April 1, 2007           11,120                             9,910
April 1, 2008                            10,030                            4,570
April 1, 2009            9,970                             8,890
April 1, 2010                             8,940                            4,080
April 1, 2011                                              7,880

Chevron holds options to purchase each vessel for $1 on April 1, 2015 provided
no earlier optional termination of the bareboat charter has occurred.

The following schedule lists the components of the net investment in finance
lease:

--------------------------------------------------------------------------------
(in thousands of $)                                          2004          2003
--------------------------------------------------------------------------------
Total minimum lease payments to be received               177,046       203,674
Less: Unearned income                                     (55,894)      (67,269)
--------------------------------------------------------------------------------
Net investment in finance leases                          121,152       136,405
================================================================================

Lease payments under the charter agreement for each of the five succeeding years
are as follows: $23.4 million in 2005, $20.6 million in 2006, $19.1 million in
2007, $18.2 million in 2008 and $17.2 million in 2009.

16.  DEFERRED CHARGES

Deferred charges represent debt arrangement fees that are capitalised and
amortised on a straight-line basis to interest expense over the life of the debt
instrument. The deferred charges are comprised of the following amounts:

--------------------------------------------------------------------------------
(in thousands of $)                                      2004              2003
--------------------------------------------------------------------------------
Debt arrangement fees                                  55,424            39,411
Accumulated amortisation                              (27,205)          (16,957)
--------------------------------------------------------------------------------
                                                       28,219            22,454
================================================================================

17.  OTHER LONG-TERM ASSETS

--------------------------------------------------------------------------------
(in thousands of $)                                        2004             2003
--------------------------------------------------------------------------------
Long-term debt receivable                                 7,051            9,023
Other                                                     6,043            1,096
--------------------------------------------------------------------------------
                                                         13,094           10,119
================================================================================

18.  ACCRUED EXPENSES

--------------------------------------------------------------------------------
(in thousands of $)                                        2004             2003
--------------------------------------------------------------------------------
Voyage expenses                                          18,182           11,520
Ship operating expenses                                  16,745            9,391
Administrative expenses                                   4,592            5,668
Interest expense                                         40,455           38,490
Taxes                                                       304              188
Other                                                       416           11,653
--------------------------------------------------------------------------------
                                                         80,694           76,910
================================================================================

19.  OTHER CURRENT LIABILITIES

--------------------------------------------------------------------------------
(in thousands of $)                                             2004        2003
--------------------------------------------------------------------------------
Dividends payable                                             32,157           7
Payable for purchases of marketable securities                36,321          --
Accrued charterhire                                              895      10,608
Related party payables                                         2,040          --
Other                                                          1,563         703
--------------------------------------------------------------------------------
                                                              72,976      11,318
================================================================================

Other current liabilities of $1,563 and $703 in 2004 and 2003 respectively
consists of miscellaneous current liabilities.

20.  DEBT

--------------------------------------------------------------------------------
(in thousands of $)                                         2004           2003
--------------------------------------------------------------------------------

US Dollar denominated floating rate debt
(LIBOR + 0.70% to1.25%) due through 2011               1,026,771        937,937
Yen denominated floating rate debt
(LIBOR + 1.25%) due through 2007                          13,060        157,210
Fixed rate debt 0% due through 2005                        2,000          2,000
8.5% Senior notes                                        530,270        580,000
Serial loans due through 2006 (7.6% to 7.62%)             10,270         23,220
Serial First Preferred Mortgage Term Notes
(6.47% to 6.855%) due through 2010                        75,900         97,400
8.52% Term loans due 2015                                114,545        117,900
First Preferred Mortgage Term Notes
(7.84% to 8.04%) due through 2019                        366,200        366,200
--------------------------------------------------------------------------------
                                                       2,139,016      2,281,867
Credit facilities                                          2,729            550
--------------------------------------------------------------------------------
Total debt                                             2,141,745      2,282,417
Less: short-term and current portion of
long-term debt                                          (151,614)      (191,131)
--------------------------------------------------------------------------------
                                                       1,990,131      2,091,286
================================================================================

The outstanding debt as of December 31, 2004 is repayable as follows:

Year ending December 31,
(in thousands of $)

2005                                                                     151,613
2006                                                                     144,224
2007                                                                     142,947
2008                                                                     130,047
2009                                                                     114,563
2010 and later                                                         1,458,351
--------------------------------------------------------------------------------
Total debt                                                             2,141,745
================================================================================

The weighted average interest rate for the floating rate debt denominated in US
dollars was 3.91 per cent as of December 31, 2004 (2003 - 3.08 per cent). The
weighted average interest rate for the floating rate debt denominated in Yen was
1.38 per cent as of December 31, 2004 (2003 - 1.33 per cent). These rates take
into consideration related interest rate swaps.

8.5% Senior Notes due 2013

On December 15, 2003, Ship Finance issued $580 million of senior notes. Interest
on the notes accrues at the rate of 8.50% per annum and is payable in cash
semi-annually in arrears on June 15 and December 15, commencing on June 15,
2004. As at December 31, 2004 the outstanding amount of Notes was $530.3 million
(December 31, 2003 - $580.0 million).

$1,058.0 million syndicated senior secured credit facility

On February 17, 2004, Ship Finance entered into a senior secured credit facility
agreement with a syndicate of banks with principal amount $1,058.0 million and a
six year term. Obligations under the loan facility are secured by, amongst other
things, all of Ship Finance's assets and the equity interests of vessel owning
subsidiaries. The loan facility bears interest at the LIBOR rate plus 1.25% per
year and may be prepaid on a pro-rata basis without penalty. As required under
the terms of the facility, Ship Finance has entered into an interest rate swap
to fix the interest on at least $500.0 million of the borrowings under the
facility for a period of at least five years. The undrawn amount under this
facility was $41.0 million at December 31, 2004 and the total amount outstanding
was $948.6 million. This facility was refinanced in 2005 as discussed in Note
30.

Term and Serial Notes

ITC is the holding company for three separate structures involved in financing
and leasing transactions. Two of these structures have Term Notes and Serial
Notes maturing between 2006 and 2019. The Notes are collateralised by first
preferred mortgages on the vessels owned by the ITC subsidiaries. As of December
31, 2004 the effective interest rate for the Term and Serial Notes was 7.85%

The 7.84% First Preferred Mortgage Term Notes due 2010 and the 8.04% First
Preferred Mortgage Term Notes due 2019 are each subject to redemption through
the operation of mandatory sinking funds according to the schedule of sinking
fund redemption payments set forth below. The sinking fund redemption price is
100% of the principal amount of Term Notes being redeemed, together with accrued
and unpaid interest to the date fixed for redemption.

Year ending December 31,
(in thousands of $)
2007                                                                       1,340
2008                                                                       5,765
2009                                                                       7,600
2010 and later                                                           351,495
--------------------------------------------------------------------------------
Total debt                                                               366,200
================================================================================

Term and Serial Loans

One of the ITC structures has Term Loans and Serial Loans from a third party
maturing between 2006 and 2015. The Loans are collateralised by first preferred
mortgages on the vessels owned by the ITC subsidiaries. Principal is repayable
on the 8.52% Term loans due 2015 in accordance with a twelve-year sinking fund
schedule. The tables below provide the revised scheduled sinking fund redemption
amounts and final principal payment following termination of the related
charters on each of the optional termination dates.

Scheduled       Charter not               Charter terminated
payment date    terminated
                               2005     2006     2007     2008     2009     2010
(in thousands of $)

2005                 6,542    3,355    3,187    3,355    3,187    3,355    3,187
2006                 9,526    3,330    3,187    6,339    3,187    6,339    3,187
2007                10,942    3,610    2,270    6,339    4,603    6,339    4,603
2008                10,942    3,920    2,460    3,390    4,603    6,339    4,603
2009                10,942    4,260    2,670    3,680    2,180    6,339    4,603
2010, and later     65,651   48,274   34,022   43,646   30,236   38,038   27,613
--------------------------------------------------------------------------------
Total              114,545   66,749   47,796   66,749   47,796   66,749   47,796
================================================================================

Certain of the fixed rate debt, floating rate debt, term notes and serial notes
are collateralised by ship mortgages and, in the case of some debt, pledges of
shares by each guarantor subsidiary. The Company's existing financing agreements
impose operation and financing restrictions on the Company which may
significantly limit or prohibit, among other things, the Company's ability to
incur additional indebtedness, create liens, sell capital shares of
subsidiaries, make certain investments, engage in mergers and acquisitions,
purchase and sell vessels, enter into time or consecutive voyage charters or pay
dividends without the consent of our lenders. In addition, our lenders may
accelerate the maturity of indebtedness under our financing agreements and
foreclose upon the collateral securing the indebtedness upon the occurrence of
certain events of default, including our failure to comply with any of the
covenants contained in our financing agreements. Various debt agreements of the
Company contain certain covenants which require compliance with certain
financial ratios. Such ratios include equity ratio covenants, minimum value
clauses, and minimum free cash restrictions. As of December 31, 2004 and 2003,
the Company complied with all the debt covenants of its various debt agreements.

21.  SHARE CAPITAL

Authorised share capital:

--------------------------------------------------------------------------------
(in thousands of $)                                              2004       2003
--------------------------------------------------------------------------------
125,000,000 ordinary shares of $2.50 each                     312,500    312,500
================================================================================

Issued and fully paid share capital:

--------------------------------------------------------------------------------
(in thousands of $, except share numbers)                        2004       2003
--------------------------------------------------------------------------------
74,825,169 ordinary shares of $2.50 each                      187,063    184,120
(2003 - 73,647,930)
================================================================================

The Company's ordinary shares are listed on the New York Stock Exchange, the
Oslo Stock Exchange and the London Stock Exchange.

As at December 31, 2004, none of the unissued share capital of the Company is
under option or is conditionally or unconditionally to be put under option. In
2004, 2003 and 2002, the Company issued 297,436, 251,364 and 59,000 ordinary
shares respectively, in connection with the exercise of employee share options.

In 2004, the Company issued a total of 900,000 ordinary shares in two private
placements to institutional investors. In July 2004, the Company issued 600,000
ordinary shares at a purchase price of NOK 246 per share, which was the
equivalent of $35.84 per share at the time of the sale. In October 2004, the
Company issued 300,000 ordinary shares at a purchase price of NOK 352 per share,
which was the equivalent of $52.33 per share at the time of the sale.

On April 5, 2004, a Special General Meeting of the Company's shareholders
approved the compulsory repurchase of all registered shareholdings of 49 or less
of the Company's ordinary shares. Consequently, on April 6, 2004, the Company
compulsorily repurchased and cancelled 20,197 ordinary shares at the closing
market price of the ordinary shares on April 5, 2004 which was $31.22 per
ordinary share.

In July 2004, Ship Finance issued 1,600,000 common shares to an institutional
investor at $15.75 per share. The Company recorded an amount of $9.1 million in
additional paid in capital as a result of this share issue.

In September 2001 the Company established a twelve month facility for a Stock
Indexed Total Return Swap Programme or Equity Swap Line with the Bank of Nova
Scotia ("BNS"), whereby the latter acquired shares in the Company, and the
Company carried the risk of fluctuations in the share price of those acquired
shares. BNS was compensated at their cost of funding plus a margin. In 2002, the
term of the Equity Swap Line was extended until February 2004. At December 31,
2002 and 2001, BNS had acquired a total of 2,695,000 and 2,100,000 Frontline
shares under the Programme, respectively. In June 2003, the Equity Swap Line was
terminated and the Company consequently acquired and cancelled 3,070,000 of its
Ordinary Shares.

A number of the Company's bank loans contain a clause that permit dividend
payments subject to the Company meeting certain equity ratio and cash covenants
immediately after such dividends being paid.

On December 6, 1996, the Company's Board of Directors adopted a Shareholder
Rights Plan (the "Plan"). The Company adopted the Plan to protect shareholders
against unsolicited attempts to acquire control of the Company that do not offer
an adequate price to all shareholders or are otherwise not in the best interests
of the Company and its shareholders. Under the Plan, each shareholder of record
on December 20, 1996 received one right for each Ordinary Share held, and each
registered holder of outstanding warrants received one right for each Ordinary
Share for which they are entitled to subscribe. Each right entitles the holder
to purchase from the Company one-quarter of an Ordinary Share at an initial
purchase price of $1.50. The rights will become exercisable and will detach from
the Ordinary Shares a specified period of time after any person has become the
beneficial owner of 20 per cent or more of the Company's Ordinary Shares.

If any person becomes the beneficial owner of 20 per cent or more of the
Company's Ordinary Shares, each right will entitle the holder, other than the
acquiring person, to purchase for the purchase price, that number of Ordinary
Shares having a market value of eight times the purchase price.

If, following an acquisition of 20 per cent or more of the Company's Ordinary
Shares, the Company is involved in certain amalgamations or other business
combinations or sells or transfers more than 50% of its assets or earning power,
each right will entitle the holder to purchase for the purchase price ordinary
shares of the other party to the transaction having a market value of up to
eight times the purchase price.

The Company may redeem the rights at a price of $0.001 per right at any time
prior to a specified period of time after a person has become the beneficial
owner of 20 per cent or more of its Ordinary Shares. The rights will expire on
December 31, 2006, unless earlier exchanged or redeemed.

In connection with the Company's one-for-ten reverse stock split, the rights
were adjusted pursuant to the Plan, so that there are currently ten rights
attached to each outstanding Ordinary Share.

22.  SHARE OPTION PLANS

The Company had in place a Bermuda Share Option Plan (the "Bermuda Plan") and a
United Kingdom Share Option Plan (the "U.K. Plan"), both of which expired in
2004. Both share option plans have been accounted for as variable plans. Under
the terms of the plans, the exercise price set on the grant of share options
could not be less than the average of the fair market value of the underlying
shares for the three dealing days before the date of grant. The number of shares
granted under the plans could not in any ten year period exceed 7% of the issued
share capital of the Company. No consideration was payable for the grant of an
option. In 2001, the Bermuda Plan was amended to provide that the exercise price
set on the grant can subsequently be adjusted so that dividends paid after the
date of grant will be deducted from the exercise price. In 2004, the Bermuda
Plan was amended to provide that all outstanding options that had not vested
became immediately exercisable.

The following summarises the share options transactions relating to the Bermuda
Plan:

--------------------------------------------------------------------------------
(in thousands, except per share data)                         Shares    Weighted
                                                                         average
                                                                        exercise
                                                                           price
--------------------------------------------------------------------------------

Options outstanding at December 31, 2001                         360       $7.71
         Granted                                                 252      $11.90
         Exercised                                               (59)      $4.47
         Cancelled                                                (6)     $11.90
Options outstanding at December 31, 2002                         547      $11.24
     Granted                                                      --          --
     Exercised                                                  (250)      $6.86
     Cancelled                                                    --          --
Options outstanding at December 31, 2003                         297       $8.49
     Granted                                                      --          --
     Exercised                                                  (297)      $5.91
     Cancelled                                                    --          --
--------------------------------------------------------------------------------
Options outstanding at December 31, 2004                          --          --
================================================================================

Options exercisable at:
December 31, 2002                                                 187      $8.09
================================================================================
December 31, 2003                                                  94      $9.14
================================================================================
December 31, 2004                                                  --         --
================================================================================

At December 31, 2004, 2003 and 2002 there were no options remaining outstanding
under the U.K. Plan.

There were no options granted in the years ended December 31, 2004 and 2003. The
weighted average fair value of options granted under the Bermuda Plan in the
year ended December 31, 2002 was $6.80. The fair value of each option grant is
estimated on the date of grant using the Black-Scholes option pricing model
using the following weighted average assumptions:

--------------------------------------------------------------------------------
                                                                            2002
--------------------------------------------------------------------------------
Risk free interest rate                                                     2.8%
Expected life                                                            5 years
Expected volatility                                                          64%
Expected dividend yield                                                       0%

23.  FINANCIAL INSTRUMENTS

Interest rate risk management

In certain situations, the Company may enter into financial instruments to
reduce the risk associated with fluctuations in interest rates. The Company has
a portfolio of swaps that swap floating rate interest to fixed rate, which from
a financial perspective hedge interest rate exposure. The Company does not hold
or issue instruments for speculative or trading purposes. The counterparties to
such contracts are J.P. Morgan Chase, Credit Agricole Indosuez, Deutsche
Schiffsbank, Den norske Bank, Skandinaviska Enskilda Banken AB, Fortis Bank,
Scotia Bank, Nordea Bank Norge ASA, Citibank, and HSH Nordbank. Credit risk
exists to the extent that the counterparties are unable to perform under the
contracts.

The Company manages its debt portfolio with interest rate swap agreements in
U.S. dollars to achieve an overall desired position of fixed and floating
interest rates. The Company has entered into the following interest rate swap
transactions involving the payment of fixed rates in exchange for LIBOR:

--------------------------------------------------------------------------------
                                                                           Fixed
Principal                                  Inception         Maturity   Interest
                                                Date             Date       Rate
--------------------------------------------------------------------------------
(in thousands of $)
$50,000                                 January 2001     January 2006      5.64%
$50,000                                February 2004    February 2009      3.49%
$100,000                               February 2004    February 2009      3.49%
$50,000                                February 2004    February 2009      3.49%
$50,000                                February 2004    February 2009      3.35%
$50,000                                February 2004    February 2009      3.35%
$50,000                                February 2004    February 2009      3.35%
$50,000                                February 2004    February 2009      3.37%
$25,000                                February 2004    February 2009      3.32%
$25,000                                February 2004    February 2009      3.32%
$25,000                                February 2004    February 2009      3.33%
$25,000                                February 2004    February 2009      3.32%
$37,528 reducing monthly to $29,793     March 1998       March 2006        6.04%
$43,833 reducing monthly to $17,527   September 1998   September 2008      6.24%

As at December 31, 2004, the notional principal amounts subject to such swap
agreements was $631.4 million (2003 - $140.5 million).

Foreign currency risk

The majority of the Company's transactions, assets and liabilities are
denominated in U.S. dollars, the functional currency of the Company. Certain of
the Company's subsidiaries report in Sterling, Swedish kronor or Norwegian
kroner and risks of two kinds arise as a result: a transaction risk, that is,
the risk that currency fluctuations will have a negative effect on the value of
the Company's cash flows; and a translation risk, the impact of adverse currency
fluctuations in the translation of foreign operations and foreign assets and
liabilities into U.S. dollars for the Company's consolidated financial
statements. The Company has not entered into derivative contracts for either
transaction or translation risk.

One of the Company's subsidiaries has Yen denominated long-term debt which as of
December 31, 2004 stood at (Yen)1,346,522,756 and two of the Company's
subsidiaries have charter contracts denominated in Yen with contracted payments
as set forth in Note 7. There is a risk that currency fluctuations will have a
negative effect on the value of the Company's cashflows.

From time to time the Company may enter into forward currency contracts for
speculative purposes. At December 31, 2004 the Company had four forward currency
contracts outstanding with a notional principal of (Yen)14.6 billion expiring
February and March 2005 with exchange rates ranging from 102.5 to 103.7121.

Accordingly, such risk may have an adverse effect on the Company's financial
condition and results of operations.

Forward freight contracts

The Company may enter into forward freight contracts and futures contracts in
order to manage its exposure to the risk of movements in the spot market for
certain trade routes for speculative purposes. Market risk exists to the extent
that spot market fluctuations have a negative effect on the Company's cash flows
and consolidated statements of operations. As at December 31, 2004, the notional
principal amounts subject to such forward freight contracts and futures
contracts was $37.0 million (2003: $49.9 million).

Fair Values

The carrying value and estimated fair value of the Company's financial
instruments at December 31, 2004 and 2003 are as follows:

<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------
                                                     2004        2004        2003        2003
(in thousands of $)                                  Fair    Carrying        Fair    Carrying
                                                    Value       Value       Value       Value
---------------------------------------------------------------------------------------------
<S>                                             <C>         <C>         <C>         <C>
Non-Derivatives:
Cash and cash equivalents                         105,702     105,702     124,189     124,189
Restricted cash                                   592,607     592,607     891,887     891,887
Marketable securities                              78,327      78,327          44          44
Floating rate debt and credit facilities        1,042,560   1,042,560   1,095,697   1,095,697
Fixed rate debt 0% due through 2005                 1,843       2,000       1,843       2,000
8.5% Senior notes                                 546,178     530,270     580,000     580,000
Serial loans due through 2006 (7.6% to 7.62%)      10,448      10,270      24,224      23,220
Serial First Preferred Mortgage Term Notes         78,350      75,900     103,154      97,400
(6.47% to 6.855%) due through 2010
8.52% Term loans due 2015                         131,297     114,545     131,839     117,900
First Preferred Mortgage Term Notes (7.84% to     393,187     366,200     353,792     366,200
8.04%) due through 2019 Derivatives:
Interest rate swap transactions receivable          7,737       7,737          --          --
Interest rate swap transactions payable           (5,482)     (5,482)     (9,216)     (9,216)
Forward freight contracts                           6,753       6,753          78          78
Forward currency contracts                          (949)       (949)          --          --
</TABLE>

The carrying value of cash and cash equivalents, which are highly liquid, is a
reasonable estimate of fair value.

The estimated fair value of marketable securities is based on the quoted market
price of these or similar instruments when available.

The estimated fair value for floating rate long-term debt is considered to be
equal to the carrying value since it bears variable interest rates, which are
reset on a quarterly basis. The estimated fair value for fixed rate long-term
senior notes is based on the quoted market price. The estimated fair value for
the remaining fixed rate long-term loans and notes is based on the quoted market
price of these or similar instruments when available.

The fair value of interest rate swaps is estimated by taking into account the
cost of entering into interest rate swaps to offset the Company's outstanding
swaps.

The fair value of forward freight contracts is the estimated amount that the
Company would receive or pay to terminate the agreements at the reporting date.

Concentrations of risk

There is a concentration of credit risk with respect to cash and cash
equivalents to the extent that substantially all of the amounts are carried with
Skandinaviska Enskilda Banken, BNP Paribas, Den norske Bank and Nordea Bank
Norge. There is a concentration of credit risk with respect to restricted cash
to the extent that substantially all of the amounts are carried with Pacific
Life, The Bank of New York, HSBC Midland, CIBC World Markets and JP Morgan
Chase. However, the Company believes this risk is remote as these banks are high
credit quality financial institutions.

The majority of the vessels' gross earnings are receivable in U.S. dollars.
During the year ended December 31, 2004, two customers each accounted for more
than 10% of our consolidated operating revenues. In 2003 and 2002, no customer
accounted for 10 % or more of freight revenues.

24.  RELATED PARTY TRANSACTIONS

In February 2001, the Company acquired newbuilding contracts from Seatankers
Management Co. Ltd for the construction and purchase of three VLCC tankers at
the Hitachi shipyard in Japan. These contracts were acquired for the original
contract price of $72 million each plus $0.5 million per contract. These three
newbuildings were delivered in 2002. Seatankers Management Co. Ltd is indirectly
controlled by John Fredriksen who is Frontline's Chairman, Chief Executive
Officer and a major stockholder.

In May 1998 the Company acquired ITC from a third party in an arms length
transaction for a price of $9.5 million. The Company's investment in ITC was
subsequently sold to Hemen for $9.5 million with effect from July 1, 1998. On
July 1, 2003, the Company purchased a call option to acquire all of the shares
of ITC from Hemen for a total consideration of $4.0 million plus 4 percent
interest per year. Hemen is indirectly controlled by John Fredriksen. On May 27,
2004 the Company exercised this option. The total purchase price paid to Hemen
for ITC was $14.1 million which comprised a payment of $10.0 million for the
purchase option and a payment of $4.1 million to exercise the option. This
purchase price represents the initial arms length price paid by the Company in
May 1998 plus an interest component calculated from that date. The Company
initially recorded the $10.0 million paid in 2003 on the Company's balance sheet
as an asset at cost. In December 2003 the Company implemented the provisions of
FIN 46 and consequently was required to consolidate ITC. The consolidation of
ITC resulted in the Company recording a $25.2 million expense as the cumulative
effect of a change in accounting principle in accordance with the guidance of
FIN 46. The Company accounted for the exercise payment in 2004 as an addition to
the total purchase price for ITC and specifically as an addition to the recorded
cost of the underlying long-term assets, being the vessels owned by ITC. The
results of ITC have been reflected in the consolidated results of the
Company.The following table reflects unaudited pro-forma combined results of
operations of the Company for 2003:

--------------------------------------------------------------------------------
                                                                            2003
(in thousands of $)                                                  (Unaudited)
--------------------------------------------------------------------------------
Total operating revenues                                                  56,202
Net income                                                                 3,023
Basic earnings per share                                                   $0.04
Diluted earnings per share                                                 $0.04

In June 2004, the Company drew down $49.5 million under a short-term loan
facility from a related party and used the proceeds to repay Yen denominated
debt of (Yen)5.5 billion (equivalent to $49.4 million). This short-term loan
facility was repaid in August 2004.

In June 2004, the Company participated in a bidding process to acquire from the
Indonesian state oil enterprise's shipping division, PT Pertamina (Persero) two
VLCCs that were under construction by Hyundai Heavy Industries Co. Ltd. The
Company was successful in this process and nominated two single purpose
companies, Windstar Marine Inc. ("Windstar") and Speed Shipping Corp. ("Speed"),
to acquire the vessels for total consideration of $184 million. Windstar and
Speed are controlled by Hemen. Hemen took delivery of these vessels in July and
September, 2004.

In November 2004, the Company formed Golden Ocean as a wholly owned subsidiary
for the purpose of transferring, by way of contribution, certain dry bulk
shipping interests held by the Company. These assets were transferred to Golden
Ocean on December 1, 2004 and a summary of the assets and liabilities
contributed is as follows:-

--------------------------------------------------------------------------------
(in thousands of $)
--------------------------------------------------------------------------------
Vessels and equipment, net                                                48,918
Long-term debt                                                            48,950
Cash and other assets and liabilities, net                                22,418

The assets and liabilities contributed by Frontline are recorded at their
historical net book values as recorded in Frontline's consolidated financial
statements. Golden Ocean was spun-off on December 15, 2004 to Frontline's
shareholders. See Note 28.

In the years ended December 31, 2004, 2003 and 2002, Frontline provided services
to Seatankers Ltd ("Seatankers"). These services comprise management support and
administrative.

In the years ended December 31, 2003 and 2002 Frontline provided management
support and administrative services to Osprey Maritime Ltd ("Osprey").

In the years ended December 31, 2004, 2003 and 2002, Frontline provided services
to Golar LNG Limited ("Golar") and Northern Offshore Ltd ("Northern Offshore").
The services provided include management support, corporate and administrative
services. The Company has also rented office space to Northern Oil ASA
("Northern Oil").

In the year ended December 31, 2004, Frontline provided certain administrative
services under the terms of an administrative management contract with Golden
Ocean.

Golar, Northern Offshore, Northern Oil, Osprey and Seatankers are each
indirectly controlled by John Fredriksen. The Company recognises the fees paid
by these companies as a reduction in total administrative expenses.

A summary of amounts earned and balances with related parties is as follows:

--------------------------------------------------------------------------------
Amounts earned from related parties (in $'000s)
                                                     Year ended December 31,
                                                2004          2003          2002
--------------------------------------------------------------------------------
Seatankers                                        49           108           254
Osprey                                            --            52            42
Golar                                            495           261           391
Northern Offshore                                 25           134           174
Northern Oil                                      92            98            74
Golden Ocean                                       8            --            --

--------------------------------------------------------------------------------
Balances with related parties (in $'000s)                   As of December 31,
Receivable (payable)                                     2004               2003
--------------------------------------------------------------------------------
Seatankers                                                907                 18
Osprey                                                     --                 19
Golar                                                    (186)                79
Northern Offshore                                          46                  2
Golden Ocean                                           (1,854)                --

The Company leases office premises in Oslo from a related party. Rental expense
in the years ended December 31, 2004, 2003 and 2002 were $0.7 million, $0.7
million and $0.6 million respectively.

25.  MINORITY INTEREST AND NON-CASH DIVIDENDS

The Company accounts for pro-rata distributions to owners in a spin-off at the
book value of shares distributed and accounts for non pro-rata distributions to
owners in a spin-off at the fair value of shares distributed.

On June 16, 2004, the Company completed the pro-rata partial spin off of Ship
Finance and distributed 25% of Ship Finance's common shares to the Company's
shareholders with each shareholder receiving one share in Ship Finance for every
four shares held in the Company. The value of the non-cash dividend and the
corresponding increase in minority interests has been established as $142.5
million, representing 25% of the book value of Ship Finance on the date of
distribution.

On September 24, 2004 the Company completed a further pro-rata partial spin off
of Ship Finance and distributed 9.9% of Ship Finance's common shares to the
Company's shareholders with each shareholder receiving one share in Ship Finance
for every ten shares held in the Company. The value of the non-cash dividend and
the corresponding increase in minority interests has been established as $59.8
million, representing 9.9% of the book value of Ship Finance on the date of
distribution.

On December 13, 2004 the Company completed the non pro-rata spin off of its
subsidiary Golden Ocean and distributed 76.0% of Golden Ocean's common shares to
the Company's shareholders with each qualifying shareholder receiving three
shares in Golden Ocean for every one share held in the Company. Non qualifying
shareholders received a cash equivalent of $1.80 per Frontline share held. The
value of the non-cash dividend has been established as $102.3 million,
representing 76.0% of the fair value of Golden Ocean on the date of
distribution. Fair value was established by using the average price of Golden
Ocean's shares over the first five trading days after the shares were listed on
the Oslo Stock Exchange.

On December 15, 2004 the Company completed a further pro-rata partial spin off
of Ship Finance and distributed 13.3% of Ship Finance's common shares to the
Company's shareholders with each shareholder receiving two shares in Ship
Finance for every fifteen shares held in the Company. The value of the non-cash
dividend and the corresponding increase in minority interests has been
established as $85.7 million, representing 13.3% of the book value of Ship
Finance on the date of distribution.

26.  COMMITMENTS AND CONTINGENCIES

Assets Pledged

--------------------------------------------------------------------------------
(in thousands of $)                                       2004              2003
--------------------------------------------------------------------------------
Ship mortgages                                       2,253,098         2,164,340
Restricted bank deposits                               592,607           891,887
--------------------------------------------------------------------------------
                                                     2,845,705         3,056,227
================================================================================

Other Contractual Commitments

The Company insures the legal liability risks for its shipping activities with
Assuranceforeningen SKULD, Assuranceforeningen Gard Gjensidig and Britannia
Steam Ship Insurance Association Limited, all mutual protection and indemnity
associations. As a member of these mutual associations, the Company is subject
to calls payable to the associations based on the Company's claims record in
addition to the claims records of all other members of the associations. A
contingent liability exists to the extent that the claims records of the members
of the associations in the aggregate show significant deterioration, which
result in additional calls on the members.

The charterer of one of the Company's vessels has contractual rights to
participate in the profit on sale of that vessel. The charterer is entitled to
50% of the profit realised on any qualifying sale. The vessel may only be sold
if the profit from sale will exceed $3.0 million. Profit is defined as sale
proceeds less debt outstanding in the relevant profit share agreements.

The charterer of the Company's vessel, Navix Astral, holds a purchase option
denominated in yen to purchase the vessel. The purchase option reduces on a
sliding scale over the term of the related charter and is at a strike price that
is in excess of the related debt on the vessel. The option is exercisable at any
time after the end of the seventh year of the charter. As at December 31, 2004,
the option price would have been approximately $52.4 million.

At December 31, 2004, the Company had twelve vessels that were sold by the
Company at various times during the period from November 1998 to December 31,
2003, and leased back on charters that range for periods of eight to twelve and
a half years with options on the lessors' side to extend the charters for
periods that range up to five years. Eight of these charters are accounted for
as capital leases and four are accounted for as operating leases. The Company
has purchase options at certain specified dates and the lessor has options to
put the vessels on the Company at the end of the lease terms for all of these
twelve vessels. The total amount that the Company would be required to pay under
these put options with respect to the operating leases is $56.8 million.

At December 31, 2004 Chevron Transport Corporation charters four vessels on
long-term bareboat charters recorded as investments in finance leases. Chevron
holds options to purchase each vessel for $1 on April 1, 2015 provided no
earlier optional termination of the bareboat charter has occurred. Details of
Chevron's optional termination dates for the charters are contained in Note 15.

At December 31, 2004 the Company had two contracts for the construction of two
VLCC newbuildings, scheduled for delivery in 2006. At December 31, 2004, the
Company is committed to make further instalments of $142.7 million.

27.  SUPPLEMENTAL INFORMATION

Non-cash investing and financing activities included the following:

<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------
(in thousands of $)                                      2004        2003        2002
-------------------------------------------------------------------------------------
<S>                                                   <C>        <C>          <C>
Sales of vessels:
Proceeds received in the form of shares                    --      14,160          --

Sale and leaseback of vessels:
Additions to vessels under capital leases, net             --     218,844      68,167
Incurrence of obligations under capital leases             --    (218,844)    (68,167)

Exchange of interests in associated companies:
Additions to investments in associated companies       96,072       9,902          --
Disposals of investments in associated companies      (96,072)     (9,902)         --

Acquisition of subsidiaries and businesses:
Assets acquired, including goodwill                        --      75,949          --
Liabilities assumed and incurred                           --      53,470          --

Exercise of employee share options:
Non-cash proceeds recorded for issuance of shares:      7,585       2,685          --

Stock dividends:
Spin-off of Golden Ocean (1)                          102,335          --          --
Spin-off of Ship Finance (2)                          287,995          --          --

Purchase of marketable securities:
Forward contract                                       25,084          --          --
</TABLE>

(1)  In the year ended December 31, 2004, the Company spun off 170.6 million
     shares of Golden Ocean in a non pro-rata share distribution accounted for
     at fair value.

(2)  In the year ended December 31, 2004 the Company spun off 35.9 million
     shares of Ship Finance in pro-rata share distributions accounted for at
     book value.

28.  DISCONTINUED OPERATIONS

During the years ended December 31, 2004 and 2002, the Company disposed of
portions of its dry bulk operations. In 2004, these dry bulks were disposed of
in connection with the spin off of Golden Ocean. The portions disposed of have
been recorded as discontinued operations in accordance with the requirements of
FAS 144 adopted on January 1, 2002 as the operations and cash flows of the
operations have been eliminated from the ongoing operations of the Company as a
result of the disposal and the Company will not have any significant continuing
involvement in these dry bulk operations in the future. As a result, the
statement of operations for the years ended December 31, 2003 and 2002 have been
restated to report the results of the dry bulk interests disposed of under the
caption "discontinued operations". These activities have previously been
reported in the dry bulk carriers segment (See Note 4). The Company has two dry
bulk newbuildings scheduled for delivery in 2005. Golden Ocean has the option to
acquire these vessels from the Company and the assets have been classified as
held for sale and reported within Other Current Assets. As at December 31, 2004,
the Company had one remaining dry bulk carrier which is reported under
continuing operations.

The following table presents the information required by FAS 144 in respect of
discontinued operations:

--------------------------------------------------------------------------------
(in thousands of $)                                    2004      2003      2002
--------------------------------------------------------------------------------
Carrying amount of assets disposed of                72,592        --    95,548
Carrying amount of debt or lease retired             48,950        --    70,215

Amounts recorded in discontinued operations
   Operating revenues                                30,498    15,510    21,341
   Net income (loss) before cumulative effect of    116,954     4,161    (5,209)
   change in accounting principle
   Gain (loss) on disposal                           99,505        --    (3,109)

================================================================================

The gain on disposal of $99.5 million in 2004 comprises of $84.6 million from to
the distribution of 170,558,775 shares of Golden Ocean (equivalent of 76.0% of
outstanding shares) and $14.9 million from the sale of 30 million shares
(equivalent of 13.4% of outstanding shares) which were sold on behalf of certain
of the Company's U.S. shareholders who were excluded from the distribution of
shares as discussed in Note 1.

The fair value of the spin off of Golden Ocean was determined to be $0.60 per
Golden Ocean share (equivalent to NOK 3.71) by reference to the quoted share
price of Golden Ocean on the Oslo Stock Exchange. In each of the first five days
of trading on the Oslo Stock Exchange, the Company sold six million Golden Ocean
shares in order to fund the cash portion of the distribution.

The Company has used NOK 3.71 (US$0.60) as the fair value in calculating the
gain on the distribution of shares and cash. The $84.6 million gain on the
distribution of shares and cash has been calculated as the difference between
the fair value of the shares distributed of $102.3 million and their book value
of $17.7 million. The $14.9 million gain on the sale of shares is calculated as
the difference between the sale proceeds of $18.0 million and the book value of
the shares of $3.1 million.

As at December 31, 2004, the Company held 23,918,832 Golden Ocean shares
representing 10.6% of the shares outstanding. This is reported under Marketable
Securities (see Note 8) and the shares were subsequently sold in 2005 ( see Note
30).

29.  POOL REVENUES

Voyage charter revenues include pool revenues. Certain pools are responsible for
paying voyage expenses and distribute net pool revenues to the participants
while other pools require the participants to pay and account for voyage
expenses, and distribute gross pool revenues to the participants such that the
participants' resulting net pool revenues are equal to net pool revenues
calculated according to the agreed formula. An analysis of the Company's pool
revenues included within voyage revenues is as follows:

--------------------------------------------------------------------------------
(in thousands of $)                                 2004        2003        2002
--------------------------------------------------------------------------------
Pool earnings allocated on gross basis            78,430      45,749      27,914
Pool earnings allocated on net basis             117,179      65,799     120,188
--------------------------------------------------------------------------------
Total pool earnings                              195,609     111,548     148,102
================================================================================

30.  SUBSEQUENT EVENTS

On January 28, 2005 and February 23, 2005 the Board of Frontline approved stock
dividends by means of further spin-offs of the shares in its subsidiary Ship
Finance. On February 18, 2005, each shareholder of Frontline received one share
of Ship Finance for every four shares of Frontline and on March 24, 2005 each
shareholder of Frontline received one share of Ship Finance for every ten shares
of Frontline held. Following these transactions Frontline's shareholding in Ship
Finance is approximately 15.8%.

On February 23, 2005, the Board of Frontline declared a dividend of $3.50 per
share that was paid on March 18, 2005.

In January 2005, the Company acquired the VLCCs Front Century and Front Champion
for a total price of $141.9 million pursuant to the exercise of purchase
options. The vessels were previously chartered in by the Company under operating
leases. The vessels were immediately sold to Ship Finance for a total of $196.0
million, and chartered back on 199 and 204 month charters, respectively,
following the structure in place for other vessels chartered from Ship Finance.

In January 2005, Ship Finance announced the sale of the Suezmax Front Fighter
for $68.25 million. The vessel was delivered to its new owners in March, 2005.
The Company's charter of the Front Fighter from Ship Finance will be cancelled
as a result of this sale.

In January 2005, Ship Finance exercised its option to acquire the VLCC Oscilla
from an unrelated third party. The vessel was delivered in April 2005 and
renamed Front Scilla.

On February 2, 2005 the Company sold 23,918,832 shares in Golden Ocean
(equivalent to 10.66% of the total shares) through market transactions. The
shares were sold at an average price of NOK 4.20 (equivalent to $0.69).

In February 2005, Ship Finance refinanced its existing secured credit facility
with a new $1,131.0 million secured credit facility. The new facility bears
interest at LIBOR plus a margin of 0.7%, is repayable over a term of 6 years and
has similar security terms to the repaid facility.

In March 2005, the Company acquired the VLCC Golden Victory for $75.0 million
pursuant to the exercise of its purchase option. The vessel was previously
chartered in by the Company under an operating lease. The vessel owning company
was immediately be sold to Ship Finance for $98.0 million, and chartered back on
a 204 month charter, following the structure in place for other vessels
chartered from Ship Finance.

On March 22, 2005, the Company entered into an agreement to sell the remaining
dry bulk vessel Cos Hero. The vessel is expected to be delivered to its new
owners in August 2005.

On March 28, 2005, Chevron gave non-binding notice of its intent to exercise its
first termination option on the single hull vessel Virgo Voyager. Irrevocable
notice was received on April 21, 2005 and the vessel will be redelivered on or
about April 1, 2006.

In May 2005, Ship Finance announced the sale of the three Suezmax tankers, Front
Lillo, Front Emperor and Front Spirit for a total consideration of $92.0
million. The vessels are expected to be delivered to their new owners by July
2005. Concurrently, Ship Finance also agreed to buy a further three vessels from
Frontline, namely Front Traveller, Front Transporter, and Front Target, for an
aggregate amount of $92.0 million. The time charter and management arrangements
between Ship Finance and Frontline have been cancelled for the three sold
vessels and will be replaced with new agreements on similar terms for the
vessels acquired.

     In May 2005 Ship Finance entered into an agreement with parties affiliated
with Hemen to acquire two vessel owning companies, each owning one 2005 built
containership for a total consideration of $98.6 million. The first vessel, the
Sea Alpha, was delivered in May 2005, and the Sea Beta will be delivered from
the ship yard in September 2005. The Sea Alpha is currently trading on a medium
term time charter to an unrelated third party.

Ship Finance entered into an agreement in June 2005 with parties affiliated with
Hemen to acquire two vessel owning companies, each owning one 2004 built VLCC,
for a total consideration of $184 million.

     In June 2005, the Company announced that it had agreed to purchase 65.8% of
the outstanding shares in Bershav Holding AS and 21.9% of the outstanding shares
in Bergshav Shipholding AS for $50.0 million. The shares represent 60.2% of the
outstanding shares in Bergshav Shipholding AS but represent only 21.9% of the
voting rights The acquisition is conditional on the remaining shareholders not
exercising their pre-emption rights.
<PAGE>

Index to Consolidated Financial Statements of Independent Tankers Corporation

Report of Independent Registered Public Accounting Firm                     F-41
Consolidated Statements of Operations for the years ended December 31,
2004 and  2003                                                              F-42
Consolidated Balance Sheets as of December 31, 2004 and 2003                F-43
Consolidated Statements of Cash Flows for the years ended December 31,
2004 and 2003                                                               F-44
Consolidated Statements of Changes in Stockholders' Equity for the
years ended December 31, 2004 and 2003                                      F-45
Notes to Consolidated Financial Statements                                  F-46
<PAGE>

Report of Registered Public Accounting Firm
-------------------------------------------

To the Board of Directors
Independent Tankers Corporation

We have audited the accompanying consolidated balance sheets of Independent
Tankers Corporation as of December 31, 2004 and 2003 and the related
consolidated statements of operations and retained earnings, and cash flows for
the years then ended. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.

We conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. We were not engaged to perform an
audit of the Company's internal control over financial reporting. An audit
includes consideration of internal control over financial reporting as a basis
for designing audit procedures that are appropriate in the circumstances, but
not for the purpose of expressing an opinion on the effectiveness of the
Company's internal control over financial reporting. Accordingly, we express no
such opinion. An audit also includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes, assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provides a reasonable basis
for our opinion.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Independent Tankers
Corporation at December 31, 2004 and 2003, and the results of its operations and
its cash flows for the years then ended in conformity with accounting principles
generally accepted in the United States of America.


Grant Thornton LLP

New York, New York
June 21, 2005
<PAGE>

Independent Tankers Corporation
Consolidated Statements of Operations for the years ended December 31, 2004 and
2003
(in thousands of $, except per share data)

                                                          2004             2003

Operating revenues
  Bareboat charter revenues                             56,202           56,202
--------------------------------------------------------------------------------
  Total operating revenues                              56,202           56,202
--------------------------------------------------------------------------------
Operating expenses
  Administrative expenses                                  756              717
  Depreciation and amortisation                         20,431           20,532
--------------------------------------------------------------------------------
  Total operating expenses                              21,187           21,249
--------------------------------------------------------------------------------
Net operating income                                    35,015           34,953
--------------------------------------------------------------------------------
Other income (expenses)
  Interest income                                       34,732           36,046
  Interest expense                                     (65,506)         (68,281)
  Other                                                    255              305
--------------------------------------------------------------------------------
  Net other expenses                                   (30,519)         (31,930)
--------------------------------------------------------------------------------
Net income                                               4,496            3,023
================================================================================

See accompanying Notes that are an integral part of these Consolidated Financial
Statements
<PAGE>

Independent Tankers Corporation
Consolidated Balance Sheets as of December 31, 2004 and 2003
(in thousands of $)

                                                               2004        2003
ASSETS
Current Assets
  Cash and cash equivalents                                   8,824       9,727
  Restricted cash                                           325,877     323,807
  Interest receivable and accrued income                      2,614       2,982
  Net investment in finance lease, current portion           13,487      15,511
--------------------------------------------------------------------------------
  Total current assets                                      350,802     352,027
Vessels, net                                                134,609     141,017
Vessels under capital lease, net                            292,359     305,431
Net investment in finance lease, long term portion          107,663     120,894
Deferred charges                                              6,560       7,512
--------------------------------------------------------------------------------
  Total assets                                              891,993     926,881
================================================================================

LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities
  Short-term debt and current portion of long-term debt      37,082      37,805
  Accrued expenses                                           32,962      33,916
  Other current liabilities                                   1,514       1,514
--------------------------------------------------------------------------------
  Total current liabilities                                  71,558      73,235
Long-term liabilities
  Long-term debt                                            529,833     566,915
  Obligations under capital leases                          294,935     295,560
--------------------------------------------------------------------------------
  Total liabilities                                         896,326     935,710

Stockholders' deficit
  Share capital                                                   1           1
  Additional paid in capital                                  8,636       8,636
  Accumulated deficit                                       (12,970)    (17,466)
--------------------------------------------------------------------------------
  Total stockholders' deficit                                (4,333)     (8,829)
--------------------------------------------------------------------------------
  Total liabilities and stockholders' deficit               891,993     926,881
================================================================================

See accompanying Notes that are an integral part of these Consolidated Financial
Statements
<PAGE>

Independent Tankers Corporation
Consolidated Statements of Cash Flows for the years ended December 31, 2004 and
2003

(in thousands of $)                                             2004       2003

Operating activities
Net income                                                     4,496      3,023
Adjustments to reconcile net income to net cash
provided by operating activities:
  Depreciation and amortisation                               20,431     20,483
  Recognition of unearned income                                (256)      (256)
  Changes in operating assets and liabilities,
  net of effect of acquisitions:
  Interest receivable and accrued income                         368        495
  Accrued expenses                                              (954)      (880)
--------------------------------------------------------------------------------
  Net cash provided by operating activities                   24,085     22,865
--------------------------------------------------------------------------------
Investing activities
  Placement of restricted cash                                (2,069)    (1,249)
  Repayment of investments in finance leases                  15,511     17,312
--------------------------------------------------------------------------------
  Net cash used in investing activities                       13,442     16,063
--------------------------------------------------------------------------------
Financing activities
  Repayments of long-term debt                               (37,805)   (38,260)
  Payment of obligations under capital leases                   (625)    (1,352)
--------------------------------------------------------------------------------
  Net cash (used in) provided by financing activities        (38,430)   (39,612)
--------------------------------------------------------------------------------
Net decrease in cash and cash equivalents                       (903)      (684)
Cash and cash equivalents at beginning of year                 9,727     10,411
Cash and cash equivalents at end of year                       8,824      9,727
================================================================================
Supplemental disclosure of cash flow information:
  Interest paid                                               51,389     46,140
================================================================================

See accompanying Notes that are an integral part of these Consolidated Financial
Statements
<PAGE>

Independent Tankers Corporation
Consolidated Statements of Changes in Stockholders' Equity for the year ended
December 31, 2004 and 2003
(in thousands of $, except number of shares)

                                                          2004             2003
NUMBER OF SHARES OUTSTANDING
Balance at beginning of year                             1,000            1,000
Shares issued                                               --               --
--------------------------------------------------------------------------------
Balance at end of year                                   1,000            1,000
--------------------------------------------------------------------------------

SHARE CAPITAL
Balance at beginning of year                                 1                1
Shares issued                                               --               --
--------------------------------------------------------------------------------
Balance at end of year                                       1                1
--------------------------------------------------------------------------------

ADDITIONAL PAID IN CAPITAL
Balance at beginning of year                             8,636            8,636
Shares issued                                               --               --
--------------------------------------------------------------------------------
Balance at end of year                                   8,636            8,636
--------------------------------------------------------------------------------

RETAINED EARNINGS
Balance at beginning of year                           (17,466)         (20,489)
Net income                                               4,496            3,023
--------------------------------------------------------------------------------
Balance at end of year                                 (12,970)         (17,466)
--------------------------------------------------------------------------------
Total Stockholders' Equity                              (4,333)          (8,829)
--------------------------------------------------------------------------------

See accompanying Notes that are an integral part of these Consolidated Financial
Statements
<PAGE>

Independent Tankers Corporation
Notes to Consolidated Financial Statements

1.   GENERAL

     Independent Tankers Corporation ("ITC" or the "Company") is a Cayman
     Islands company engaged in the ownership, chartering and operation of oil
     tankers . The Company is a wholly-owned subsidiary of Frontline Ltd
     ("Frontline"), a publicly listed Bermuda company and operates through
     subsidiaries located in the Isle of Man and the Bahamas. The Company
     operates tankers of two sizes: very large crude carriers ("VLCCs") which
     are between 200,000 and 320,000 deadweight tons ("dwt"), and Suezmaxes,
     which are vessels between 130,000 and 150,000 dwt. The Company was
     incorporated on April 8, 1998 for the purpose of acquiring three separate
     entities involved in financing and leasing transactions:

     The Windsor Petroleum Group of Companies

     In 1997, Windsor Petroleum Transport Corporation ("WPTC"), a subsidiary of
     the Company, issued $239,100,000 7.84% First Preferred Mortgage Term Notes
     and $111,700,000 Serial First Preferred Mortgage Notes (together the
     "Windsor Notes") as agent for four Isle of Man public limited companies
     (the "Windsor Companies"). The proceeds from the from the offering and sale
     of the Windsor Notes have been used by the Windsor Companies in relation to
     the leasing and chartering of four very large crude carriers built in 1999
     and 2000 ("Windsor VLCCs"). A portion of the initial proceeds from the
     Windsor Notes was placed on deposit (the "Head Lease Support Deposits") and
     the balance of the proceeds were invested in a restricted investment, being
     a guaranteed investment contract.

     The Windsor Companies have each entered into a lease (the "Head Leases") in
     respect of one of the Windsor VLCCs, pursuant to lease agreements with
     lessors which hold title to the Windsor VLCCs. The Windsor Companies'
     obligations under the Head Leases are secured by letters of credit. The
     Windsor Companies have in turn chartered out the Windsor VLCCs on bareboat
     charters.

     The Golden State Group of Companies

     In 1996, Golden State Petroleum Transport Corporation, a subsidiary of the
     Company, issued $127,100,000 8.04% First Preferred Mortgage Term Notes and
     $51,700,000 Serial First Preferred Mortgage Notes (together the "Golden
     State Notes"), as agent for two Isle of Man public limited companies (the
     "Golden State Companies"). The proceeds from the offering and sale of the
     Golden State Notes were used by the Golden State Companies to fund the
     construction of two VLCCs (the "Golden State VLCCs") that were delivered to
     the Golden State Companies in 1998 and 1999. On delivery, the Golden State
     VLCCs were chartered out on bareboat charters each with an initial term of
     eighteen years with the charterer having an option to terminate the
     charters on the eighth anniversary of the respective delivery date of each
     Golden State VLCC.

     The California Petroleum Group of Companies

     In 1995, California Petroleum Transport Corporation, a Delaware
     corporation, issued as full recourse obligations $117,900,000 8.52% First
     Preferred Mortgage Notes Due 2015 and $167,500,000 Serial First Preferred
     Mortgage Notes (together the "California Petroleum Notes"), as agent for
     one Isle of Man limited companies and three Bahamian limited companies (the
     "California Petroleum Companies"). The proceeds from the sale of the
     California Petroleum Notes were applied by way of long-term loans to the
     California Petroleum Companies to fund the acquisition of four suezmax
     tankers. On acquisition, these suezmaxes were chartered out on long-term
     bareboat charters expiring in 2015 subject to optional termination dates
     prior to that date. On April 1, 2005 Bahamas III received irrevocable
     notice from Chevron to terminate the bareboat charter on April 1, 2006, See
     Note 16.
<PAGE>

2.   ACCOUNTING POLICIES

     Basis of presentation

     The consolidated financial statements are prepared in accordance with
     accounting principles generally accepted in the United States. The
     consolidated financial statements include the assets, liabilities, revenues
     and expenses of the Company and its subsidiaries. All intercompany balances
     and transactions have been eliminated on consolidation.

     The preparation of financial statements in accordance with generally
     accepted accounting principles requires that management make estimates and
     assumptions affecting the reported amounts of assets and liabilities and
     disclosure of contingent assets and liabilities at the date of the
     financial statements and the reported amounts of revenues and expenses
     during the reporting period. Actual results could differ from those
     estimates.

     Cash and cash equivalents

     The Company considers all highly liquid investments with a maturity date of
     three months or less when purchased to be cash equivalents.

     Restricted cash

     Restricted cash consists of bank deposits which may only be used to settle
     certain pre-arranged loan or lease payments, minimum deposits, and
     management fees which must be maintained in accordance with contractual
     arrangements.

     Vessels

     The cost of the vessels less estimated residual value is depreciated on a
     straight-line basis over the vessels' estimated remaining economic useful
     lives. The estimated economic useful life of the Company's vessels is 25
     years.

     Vessel under capital lease

     The Company charters in certain vessels under agreements that are
     classified as capital leases. Depreciation of vessels under capital lease
     is included within depreciation expense in the Statement of Operations.
     Vessels under capital lease are depreciated on a straight-line basis over
     the vessels' estimated remaining economic useful lives.

     Impairment of long-lived assets

     The carrying value of long-lived assets that are held and used by the
     Company are reviewed whenever events or changes in circumstances indicate
     that the carrying amount of an asset may no longer be appropriate. We
     assess recoverability of the carrying value of the asset by estimating the
     future net cash flows expected to result from the asset, including eventual
     disposition. If the future net cash flows are less than the carrying value
     of the asset, an impairment loss is recorded equal to the difference
     between the asset's carrying value and fair value. In addition, long-lived
     assets to be disposed of are reported at the lower of carrying amount and
     fair value less estimated costs to sell.

     Investment in finance leases

     The Company charters out certain vessels under agreements that are
     classified as direct financing leases. The minimum payments under the
     charter agreements are recorded as the gross investment in the finance
     lease. The difference between the gross investment in the finance lease and
     the cost of the vessel is recorded as unearned income. Throughout the term
     of the charter agreement, the Company records as revenue interest income
     and unearned income, which is amortized to income over the life of the
     charter agreement to produce a constant periodic rate of return on the net
     investment in the finance lease.
<PAGE>

     Deferred Charges

     Deferred charges comprise expenses incurred in connection with the
     structuring of the financing transactions and issuance of debt. Such
     expenses are being amortized over the life of the debt using the effective
     interest method.

     Discount on loans

     Discount on issue of certain of the Company's long-term debt, is being
     amortized over the respective periods to maturity of the debt as described
     in Note 10.

     Revenue and expense recognition

     Revenue and expenses are recognized on the accrual basis. Revenues are
     substantially generated from bareboat charter hires and are recorded over
     the term of the charter as service is provided. Interest receivable on the
     Serial Loans and on the Term Loans is accrued on a daily basis. Interest
     payable on the Serial Mortgage Notes and on the Term Mortgage Notes is
     accrued on a daily basis.

     Financial instruments

     In determining fair value of its financial instruments, the Company uses a
     variety of methods and assumptions that are based on market conditions and
     risks existing at each balance sheet date. For the majority of financial
     instruments including long-term debt, standard market conventions and
     techniques are used to determine fair value. All methods of assessing fair
     value result in a general approximation of value, and such value may never
     actually be realized.

3.   ADOPTION OF NEW ACCOUNTING STANDARDS

     In December 2004, the FASB issued Statement of Financial Accounting
     Standards 153 Exchanges of Nonmonetary Assets, an amendment of APB Opinion
     No. 29 ("SFAS 153"). APB Opinion No. 29 Accounting for Nonmonetary
     Transactions ("APB 29") provides that accounting for nonmonetary
     transactions should be measured based on the fair value of the assets
     exchanged but allows certain exceptions to this principle. SFAS 153 amends
     APB 29 to eliminate the exception for nonmonetary exchanges of similar
     productive assets and replaces it with a general exception for exchanges of
     nonmonetary assets that don't have commercial substance. A nonmonetary
     exchange has commercial substance if the future cash flows of the entity
     are expected to change significantly as a result of the exchange. SFAS 153
     is effective for nonmonetary asset exchanges occurring in fiscal periods
     beginning after June 15, 2005 and shall be applied prospectively. As such,
     adoption of SFAS 153 will not have an effect on the Company's results.

4.   TAXATION

     Cayman Islands

     Under Cayman Islands Tax Concessions Law (1995 Revision) Section 6, the
     Company is not required to pay taxes on either income, gains or
     appreciations. The company has received written assurance from the Govenor
     in Council in the Cayman Islands that the Company will be exempt until the
     year 2018.

     Other jurisdictions

     Certain of the Company's subsidiaries are incorporated in the Bahamas and
     Isle of Man. Under these jurisdictions the Company is not liable to pay
     taxes. Certain of the Company's subsidiaries are exempt from United States
     Federal, state and local income taxes on its international shipping income
     and has been granted exemptions from the statutory 20% tax on profits
     required to be assessed against Isle of Man companies.
<PAGE>

     Certain entities are exempt from US corporate income tax on US source
     income from their international shipping operations if (i) their countries
     of incorporation exempt shipping operations of US persons from income tax
     (the "Incorporation Test") and (ii) they meet the "Ultimate Owner Test". A
     company meets the Ultimate Owner Test if more than 50% of the value of its
     stock is owned directly or indirectly pursuant to specified constructive
     stock ownership rules by individuals who are residents of a foreign country
     that exempts US persons from tax on shipping earnings.

     Certain of the Company's subsidiaries meets the Incorporation Test because
     they are incorporated in the Isle of Man, which provides the required
     exemption to US persons involved in shipping operations pursuant to an
     exchange of diplomatic notes with the United States, and they believe more
     than 50% of the value of its outstanding stock is indirectly owned by
     individuals who are residents of countries which provide the required
     exemption to US persons involved in shipping operations. The issue of
     residence is, however, inherently factual and cannot be determined with
     certainty.

     Based on the foregoing, the Company expects all of its income from these
     subsidiaries to remain exempt from United States Federal, state and local
     income taxes. Accordingly, no provision for taxes has been made in these
     financial statements.

5.   LEASES

At December 31, 2004 the Company leased in four vessels, the Windsor VLCCs, on
long-term bareboat charters from third parties. All four of those leases are
classified as capital leases.

At December 31, 2004 the Company leased out its ten vessels to third parties on
bareboat charters with initial periods ranging between 9 and 20 years. Six of
those leases are classified as operating leases, the four Windsor VLCCs and two
Golden State VLCCs. The Windsor VLCCs are chartered to British Petroleum ("BP")
under long-term bareboat charters which expire 20 years from delivery of each
vessel. BP may terminate the charters after 9, 9.5, 10 and 10.5 years
respectively for each of the four vessels. The Golden State VLCCs are chartered
out on bareboat charters each with an initial term of eighteen years with the
charterer having an option to terminate the charters on the eighth anniversary
of the respective delivery date of each Golden State VLCC. The remaining four
CalPetro Suezmaxes are classified as direct finance leases (Note 9). The
CalPetro Suezmaxes are chartered to Chevron under long-term bareboat charters
which expire 20 years from delivery of each vessel. Chevron has the option of
terminating each charter on optional termination dates.

The minimum future revenues to be received on bareboat charters which are
accounted for as operating leases as of December 31, 2004 are as follows:

--------------------------------------------------------------------------------
Year ending December 31,
                              (in thousands of $)
--------------------------------------------------------------------------------
2005                                                                      56,202
2006                                                                      55,522
2007                                                                      38,366
2008                                                                      36,347
2009                                                                      27,310
2010 and later                                                            19,642
--------------------------------------------------------------------------------
Total minimum lease payments                                             233,389
================================================================================

The cost and accumulated depreciation of the vessels leased to third parties at
December 31, 2004 were approximately $352 million and $60 million, respectively.

6.   RESTRICTED CASH

Restricted cash includes accounts which were established in the name and under
the control of the respective trustees of the Windor Notes, the Golden State
Notes and the California Petroleum Notes (together the "Notes"), for the benefit
of the holders of the Notes.

Restricted cash also includes the Head Lease Support Deposits. The funds in
these accounts together with interest earned thereon can be used only to meet
the Company's liability under the Head Lease agreements.

7.   VESSELS, NET

--------------------------------------------------------------------------------
(in thousands of $)                                      2004              2004
--------------------------------------------------------------------------------
Cost                                                  172,783           172,783
Accumulated depreciation                              (38,174)          (31,766)
--------------------------------------------------------------------------------
Net book value at end of year                         134,609           141,017
================================================================================

Depreciation expense for vessels was $6.4 million for the years ended December
31, 2004 and 2003.

8.   VESSELS UNDER CAPITAL LEASE, NET

At December 31 2004, the Company held four vessels under capital leases. These
leases are for terms that range from 12 to 14 years.

--------------------------------------------------------------------------------
(in thousands of $)                                      2004              2004
--------------------------------------------------------------------------------
Cost                                                  352,000           352,000
Accumulated depreciation                              (59,641)          (46,569)
--------------------------------------------------------------------------------
Net book value at end of year                         292,359           305,431
================================================================================

Depreciation expense for vessels under capital lease was $13.1 million for the
years ended December 31, 2004 and 2003.

On the delivery date of the four vessels, an evaluation of the carrying value of
the Vessel was performed. This resulted in a write down of $46,867,764 to a
carrying value of $352,000,000 in the years ended December 31, 1999 and 2000.

The Head Leases are intended to provide the Company with certain of the benefits
of economic ownership of the Windsor VLCCs. Among other things, these benefits
include the right to charter the Windsor VLCCs and the right to receive the
residual value of the Windsor VLCCs upon any termination of the Head Leases and
sale of the Windsor VLCCs in certain circumstances.

The Head Leases are limited recourse to the Company. The Company's obligations
under the Head Leases are secured by, amongst other things, letters of credit
(the "Letter of Credit"). Pursuant to the Head Lease agreements, the Company
makes lease payments from the the Head Lease Support Deposits. The Company's
obligations under the Head Leases are limited to the funds initially deposited
in the Head Lease Support Deposits from the proceeds of the Windsor Notes and
the equity contribution, any additional funds transferred in from resticted cash
and interest earned on the Head Lease Support Deposits.

The following table discloses information about the terms of the Company's
leases of vessels contracted in which are accounted for as capital leases:-

Vessel             Expiration    Extended    Extended    Company's    Lessor's
(Type)                 of          Lease      Lease      Purchase    Put Option
                   Mandatory    Periods at   Periods      Option       Periods
                     Lease       Lessor's       at        Periods
                     Period       Option     Company's
                                               Option

British Pioneer          2024         none    Note (2)    Note (1)        none
(VLCC)
British Progress         2025         none    Note (2)    Note (1)        none
(VLCC)
British Purpose          2025         none    Note (2)    Note (1)        none
(VLCC)
British Pride            2025         none    Note (2)    Note (1)        none
(VLCC)

Note 1. The Company does not have options to purchase the vessel but it has
first refusal if the vessel's owner offers the vessel for sale.

Note 2. The Company has the right to terminate the lease at any time but only
with permission of the charterer.

The outstanding obligations under capital leases, which are made from the Head
Lease Support Deposits, are payable as follows:

--------------------------------------------------------------------------------
Year ending December 31,
(in thousands of $)

--------------------------------------------------------------------------------
2005                                                                     20,223
2006                                                                     19,765
2007                                                                     19,447
2008                                                                     19,189
2009                                                                     93,995
2010 and later                                                          243,808
--------------------------------------------------------------------------------
Minimum lease payments                                                  416,427
--------------------------------------------------------------------------------
Less imputed interest                                                  (121,492)
--------------------------------------------------------------------------------
Present value of obligations under capital leases                       294,935
================================================================================

9.   INVESTMENT IN FINANCE LEASES

The Company charters its four Suezmax vessels on long term charters to Chevron
Transport Corporation ("Chevron"). Each charter has a term expiring on April 1,
2015 subject to Chevron's right to terminate on certain specified dates. Chevron
has the right to terminate each charter on any of four, in the case of the
double-hulled vessels, or three, in the case of the single-hulled vessel,
termination dates which, for each vessel, occur at two-year intervals as
disclosed below. Chevron is required to provide non-binding notice of its intent
to exercise an option at least twelve months prior to the termination date.
Irrevocable notice that the initial termination option will be exercised must be
received nine months prior to the date and for each option subsequent to the
initial termination option, irrevocable notice must be received seven months
prior to the termination date. Chevron is required to pay the following
termination payments on or prior to the termination date:

--------------------------------------------------------------------------------
Approximate Termination Payments (in thousands of $)

Optional Termination Date             Sirius    Altair    Cygnus   Virgo Voyager
                                     Voyager   Voyager   Voyager
--------------------------------------------------------------------------------
April 1, 2005                         12,260              10,930
April 1, 2006                                   11,110                     5,050
April 1, 2007                         11,120               9,910
April 1, 2008                                   10,030                     4,570
April 1, 2009                          9,970               8,890
April 1, 2010                                    8,940                     4,080
April 1, 2011                                              7,880

The Charterer holds options to purchase each vessel for $1 on April 1, 2015
provided no earlier optional termination of the bareboat charter has occurred.

The following schedule lists the components of the net investment in finance
lease:

--------------------------------------------------------------------------------
(in thousands of $)                                          2004          2003
--------------------------------------------------------------------------------
Total minimum lease payments to be received               177,046       203,674
Less: Unearned income                                     (55,896)      (67,268)
--------------------------------------------------------------------------------
Net investment in finance leases                          121,150       136,406
================================================================================

Lease payments under the charter agreements for each of the five succeeding
years at December 31, 2004 are as follows: $23.4 million in 2005, $20.6 million
in 2006, $19.1 million in 2007 and $18.2 million in 2008 and $17.3 million in
2009.

10.  DEFERRED CHARGES

Deferred charges are comprised of expenses incurred in connection with the
structuring of the transaction and issuance of the Notes. Such expenses are
being amortized over the life of the debt using the effective interest method.
The deferred charges are comprised of the following amounts:

--------------------------------------------------------------------------------
(in thousands of $)                                      2004              2003
--------------------------------------------------------------------------------
Debt arrangement fees                                  15,137            15,137
Accumulated amortisation                               (8,577)           (7,626)
--------------------------------------------------------------------------------
                                                        6,560             7,511
================================================================================

11.  DEBT

--------------------------------------------------------------------------------
(in thousands of $)                                            2004        2003
--------------------------------------------------------------------------------

Serial loans due through 2006 (7.6% to 7.62%)
due through 2006                                             10,270      23,220
Serial First  Preferred  Mortgage Notes
(6.8% to 6.855%) and (6.7% to 6.855%) due
through 2006                                                 16,300      24,600
Serial First Preferred Mortgage Notes (6.47% to 6.68%)
and (6.42% to 6.68%) due through 2010                        59,600      72,800
8.52% Term loans due 2015                                   114,545     117,900
7.84% First Preferred Mortgage Term Notes due 2010          239,100     239,100
8.04% First Preferred Mortgage Term Notes due 2019          127,100     127,100
--------------------------------------------------------------------------------
Total debt                                                  566,915     604,720
Less: short-term portion of long-term debt                  (37,082)    (37,082)
--------------------------------------------------------------------------------
                                                            529,833     566,915
================================================================================

The outstanding debt as of December 31, 2004 is repayable as follows:

--------------------------------------------------------------------------------
Year ending December 31,
                              (in thousands of $)
--------------------------------------------------------------------------------

2005                                                                      37,082
2006                                                                      34,356
2007                                                                      24,642
2008                                                                      21,742
2009                                                                      16,042
2010 and later                                                           433,051
--------------------------------------------------------------------------------
Total debt                                                               566,915
================================================================================

As of December 31, 2004 and 2003 the effective interest rate for the Serial
Notes and Term Notes Company was 7.85% and 7.80%.

The California Petroleum Notes are collateralized by first preference mortgages
on the Company's suezmaxes in favour of California Petroleum Transport
Corporation. The Golden State Notes are collateralized by first preference
mortgages on the Golden State VLCCs.

The Indentures includes certain covenants that, among other things, prohibit
WPTC and each of its Companies from (i) incurring any indebtedness other than
the Term Notes, the Serial Notes and Additional Notes, its obligations to the UK
Lessor, its obligation to the Head Lease Support Bank and its obligation to the
Initial Charterer, (ii) making any investments (other than the restricted
investments previously described herein), loans or advances (other than
purchasing a third party loan and any other indebtedness to the UK Lessor, the
Head Lease Support Bank, the UK Lessor guarantor or the Initial Charterer
related to the Head Lease) or (iii) creating any liens other than to secure its
obligations to purchase a third party loan and its obligations under the Notes
and other relevant documents related to the Notes and leasing transactions.

The 7.84% First Preferred Mortgage Term Notes due 2010 and the 8.04% First
Preferred Mortgage Term Notes due 2019 are each subject to redemption through
the operation of mandatory sinking funds according to the schedule of sinking
fund redemption payments set forth below. The sinking fund redemption price is
100% of the principal amount of Term Notes being redeemed, together with accrued
and unpaid interest to the date fixed for redemption..

--------------------------------------------------------------------------------
Year ending December 31,
                               (in thousands of $)
--------------------------------------------------------------------------------

2005                                                                          --
2006                                                                          --
2007                                                                       1,340
2008                                                                       5,765
2009                                                                       7,600
2010 and later                                                           351,495
--------------------------------------------------------------------------------
Total debt                                                               366,200
================================================================================

Principal is repayable on the 8.52% Term loans due 2015 in accordance with a
twelve-year sinking fund schedule. The tables below provide the revised
scheduled sinking fund redemption amounts and final principal payment following
termination of the related charters on each of the optional termination dates.

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------
Scheduled         Charter not   Charter       Charter      Charter      Charter      Charter      Charter
payment date      terminated    terminated    terminated   terminated   terminated   terminated   terminated
                  $'000         2005          2006         2007         2008         2009         2010
                                $'000         $'000        $'000        $'000        $'000        $'000
------------------------------------------------------------------------------------------------------------
<S>                   <C>           <C>           <C>          <C>         <C>           <C>          <C>
2005                    6,542        3,355         3,187        3,355       3,187         3,355        3,187
2006                    9,526        3,330         3,187        6,339       3,187         6,339        3,187
2007                   10,942        3,610         2,270        6,339       4,603         6,339        4,603
2008                   10,942        3,920         2,460        3,390       4,603         6,339        4,603
2009                   10,942        4,260         2,670        3,680       2,180         6,339        4,603
2010, and later        65,651       48,274        34,022       43,646      30,236        38,038       27,613
------------------------------------------------------------------------------------------------------------
                      114,545       66,749        47,796       66,749      47,796        66,749       47,796
============================================================================================================
</TABLE>

12.  SHARE CAPITAL

Authorised share capital:

--------------------------------------------------------------------------------
                                                             2004          2003
--------------------------------------------------------------------------------
10,000 shares of $1.00 each                                10,000        10,000
================================================================================

Issued and fully paid share capital:

--------------------------------------------------------------------------------
                                                            2004            2003
--------------------------------------------------------------------------------
1,000 shares of $1.00 each                                 1,000           1,000
================================================================================

13.  FINANCIAL INSTRUMENTS

Fair Values

The carrying value and estimated fair value of the Company's financial
instruments at December 31, 2004 and 2003 are as follows:

Fair Values

The carrying value and estimated fair value of the Company's financial
instruments at December 31, 2004 and 2003 are as follows:

<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------
(in thousands of $)                                            2004       2004       2003     2003

                                                               Fair   Carrying      Fair  Carrying
                                                              Value      Value     Value     Value
--------------------------------------------------------------------------------------------------
<C>                                                          <C>       <C>       <C>       <C>
Non-Derivatives:
Cash and cash equivalents                                      8,824     8,824     9,727     9,727
Restricted cash                                              325,877   325,877   323,807   323,807
Serial loans due through 2006 (7.6% to 7.62%)
due through 2006                                              10,448    10,270    24,224    23,220
Serial First Preferred Mortgage Notes (6.8% to 6.855%) and
(6.7% to 6.855%) due through 2006                             16,545    16,300    25,639    24,600
Serial First Preferred Mortgage Notes (6.47% to 6.68%) and
(6.42% to 6.68%) due through 2010                             61,805    59,600    77,513    72,800
8.52% Term loans due 2015                                    131,297   114,545   131,839   117,900
7.84% First Preferred Mortgage Term Notes due 2010           254,171   239,100   230,134   239,100
8.04% First Preferred Mortgage Term Notes due 2019           139,016   127,100   123,658   127,100
</TABLE>

The methods and assumptions used in estimating the fair values of financial
instruments are as follows:

The carrying value of cash and cash equivalents, which are highly liquid, is a
reasonable estimate of fair value.

Restricted cash that has been deposited in guaranteed investment contracts are
considered to be investments held to maturity and as such are stated at cost
plus accrued interest, which approximates fair value.

Restricted cash that is represented by Head Lease Support Deposits is carried at
cost plus accrued interest. As of December 31, 2004 and 2003 cost approximated
fair value.

The estimated fair value for floating rate long-term debt is considered to be
equal to the carrying value since it bears variable interest rates, which are
reset on a quarterly basis. The estimated fair value for fixed rate long-term
debt is considered to be equal to the carrying value due to its company specific
nature and the lack of a market in such debt.

Concentrations of risk

There is a concentration of credit risk with respect to restricted cash to the
extent that substantially all of the amounts are carried with Pacific Life, HSBC
Midland, CIBC World Markets and JP Morgan Chase Bank. However, the Company
believes this risk is remote as these banks are high credit quality financial
institutions.

All of the vessels' gross earnings are receivable in U.S. dollars. In 2004 and
2003 three customer each accounted for 10 per cent or more of freight revenues.
The Company has no sources for the payment of principal (including sinking fund
payments and mandatory redemption payments) and the interest on the Notes except
for the restricted cash, the charter hire payments from the charterers,
investment income earned on the restricted cash and the proceeds if any from any
sale of vessels. Accordingly, the Company's ability to pay debt service on the
Notes is wholly dependent upon its financial condition, results of operations
and cash flows from the charterers and any subsequent charters if the current
charterers elect to terminate.

14.  COMMITMENTS AND CONTINGENCIES

Assets Pledged

--------------------------------------------------------------------------------
(in thousands of $)                                       2004              2003
--------------------------------------------------------------------------------
Ship mortgages                                         134,609           141,017
Restricted bank deposits                               325,877           323,807
--------------------------------------------------------------------------------
                                                       460,486           464,824
================================================================================

15.  RELATED PARTY TRANSACTIONS

In the years ended December 31, 2004 and 2003 Frontline has provided management
services to the Company pursuant to management agreements with certain
subsidiaries of the Company. In the year endeds December 31, 2004 and 2003, the
Company incurred management fees of $546,619 and $540,797 to Frontline and as at
December 31, 2004 and 2003, an amount of $216,178 and $214,754, was due to
Frontline in respect of these fees. The Company recognizes these fees in
administrative expenses.

16.  SUBSEQUENT EVENTS

On March 28, 2005, CalPetro Bahamas III received non-binding notice of Chevron's
intention to exercise its first termination option on the single hull vessel
Virgo Voyager.

On April 21, 2005, pursuant to Clause 2 (a) (ii) of the bareboat charter dated
April 5, 1995 between CalPetro Tankers (Bahamas III) Limited ( the "Owner") and
Chevron Transport Corporation Ltd ("Chevron"), the Owner received irrevocable
notice from Chevron regarding the termination of the bareboat charter of the
vessel Virgo Voyager on April 1, 2006.

Frontline Ltd will attempt to arrange for an acceptable replacement charter.
Should an acceptable replacement charter be unavailable, the Manager will
solicit bids for the sale of the vessel and if there are no bids that provide
net proceeds that, together with the termination payment, at least equal the
allocated principal amount of the Registrant's term mortgage notes plus any
interest accrued, the Manager will forward to the appointed Indenture Trustee
copies of all bids for the recharter of the vessel. Unless instructed by all the
holders of the Term Mortgage Notes to accept a sale bid that is below the
required minimum bid, the Manager will attempt to recharter the vessel on such
terms as it deems appropriate provided that

      (i)   such charter is at arms length;

      (ii)  such charter shall have a termination date no later than April 1,
            2015; and

      (iii) the charterhire payable is sufficient to make the mandatory sinking
            fund payments together will all related interest, recurring fees and
            taxes for the vessel and the cost of insurance not maintained by the
            charterer, management fees and technical advisor's fees and the fees
            of the designated representative, the indenture trustee and the
            collateral trustee as defined in the prospectus for the Registrant's
            8.52% First Preferred Mortgage Notes due 2015.