UNITED STATES

                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, DC. 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, 2006

                                       OR

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

      For the transition period from _________________ to _________________

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

Date of event requiring this shell company report
                                                 -------------------------------

For the transition period from
                              --------------------------------------------------

Commission file number        001-16601
                              --------------------------------------------------

                                  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 organization)

       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.

                                      None
--------------------------------------------------------------------------------
                                (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 if the registrant is a well-known seasoned issuer, as
defined in Rule 405 of the Securities Act.

                                 Yes |X| No |_|

If this report is an annual or transition report, indicate by check mark if the
registrant is not required to file reports pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934.

                                 Yes |_| No |X|

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

                                 Yes |X| No |_|

Indicate by check mark whether the registrant is a large accelerated filer, an
accelerated filer, or a non-accelerated filer. See definition of "accelerated
filer and large accelerated filer" in Rule 12b-2 of the Exchange Act. (Check
one):

Large accelerated filer |X|   Accelerated filer |_|    Non-accelerated filer |_|

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

                             Item 17 | | Item 18 |X|

If this is an annual report, indicate by check mark whether the registrant is a
shell company (as defined in Rule 12b-2 of the Exchange Act).

                                 Yes |_| No |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....................................   13
Item 4A.     Unresolved Staff Comments.....................................   31
Item 5.      Operating and Financial Review and Prospects..................   31
Item 6.      Directors, Senior Management and Employees....................   51
Item 7.      Major Shareholders and Related Party Transactions.............   53
Item 8.      Financial Information.........................................   55
Item 9.      The Offer and Listing.........................................   56
Item 10.     Additional Information........................................   57
Item 11.     Quantitative and Qualitative Disclosures about Market Risk....   71
Item 12.     Description of Securities other than Equity Securities........   71

PART II
-------
Item 13.     Defaults, Dividend Arrearages and Delinquencies...............   72
Item 14.     Material Modifications to the Rights of Security Holders
             and Use of Proceeds...........................................   72
Item 15.     Controls and Procedures.......................................   72
Item 16.     Reserved......................................................   73
Item 16A.    Audit Committee Financial Expert..............................   73
Item 16B.    Code of Ethics................................................   73
Item 16C.    Principal Accountant Fees and Services........................   73
Item 16D.    Exemptions from the Listing Standards for Audit Committees....   74
Item 16E.    Purchases of Equity Securities by the Issuer
             and Affiliated Purchasers.....................................   74

PART III
--------
Item 17.     Financial Statements..........................................   75
Item 18.     Financial Statements..........................................   75
Item 19.     Exhibits......................................................   75
<PAGE>

            CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

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

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 report 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. When used in this
report, the words "believe," "anticipate," "intend," "estimate," "forecast,"
"project," "plan," "potential," "will," "may," "should," "expect" and similar
expressions identify forward-looking statements.

The forward-looking statements in this report are based upon various
assumptions, many of which are based, in turn, upon further assumptions,
including without limitation, 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
and in the documents incorporated by reference 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, political
events or acts by terrorists, 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

Throughout this report, the "Company," "we," "us" and "our" all refer to
Frontline Ltd. and its subsidiaries. We use the term deadweight ton, or dwt, in
describing the size of vessels. Dwt, expressed in metric tons, each of which is
equivalent to 1,000 kilograms, refers to the maximum weight of cargo and
supplies that a vessel can carry. The Company operates 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 also operate oil/bulk/ore or OBO carriers which can be used to
carry oil or dry cargo on any voyage. Unless otherwise indicated, all references
to "USD,""US$" and "$" in this report are U.S. dollars.

A. SELECTED FINANCIAL DATA

The selected income statement data of the Company with respect to the fiscal
years ended December 31, 2006, 2005 and 2004 and the selected balance sheet data
of the Company with respect to the fiscal years ended December 31, 2006 and 2005
have been derived from the Company's Consolidated Financial Statements included
in Item 18 of this annual report, prepared in accordance with United States
generally accepted accounting principles. The selected income statement data
with respect to the fiscal years ended December 31, 2003 and 2002 and the
selected balance sheet data with respect to the fiscal years ended December 31,
2004, 2003 and 2002 have been derived from consolidated financial statements of
the Company not included herein. The income statement data for the years ended
December 31, 2004, 2003 and 2002 has been restated to reflect discontinued
operations as a result of the sale of the Company's last remaining drybulk
carrier in 2005. The income statement and balance sheet data as at and for the
years ended December 31, 2005, 2004 and 2003 has been restated to change from
consolidation accounting to equity method accounting for four subsidiaries
acquired in 2003. During 2006, the Company revisited its analysis of the
accounting for these subsidiaries and determined that it was not the primary
beneficiary of these entities under FASB Interpretation No. 46 (revised December
2003) Consolidation of Variable Interest Entities, an Interpretation of ARB No.
51 and therefore has accounted for these subsidiaries using the equity method.
As the consolidation and equity accounting models result in the same net income,
there has been no change in opening equity or earnings per share data as a
result of this restatement. The following table should 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.

<PAGE>

<TABLE>
<CAPTION>

                                                                  Fiscal year ended December 31,
                                                  2006           2005           2004          2003              2002
                                                              (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)                   1,583,863      1,504,516      1,842,923      1,159,439         543,637
Total operating expenses(1)                      856,939        717,054        737,389        683,515         450,371
Net operating income                             822,579        863,543      1,125,108        480,984          92,038
Net income from continuing operations
before income taxes, minority interest and
cumulative effect of change in accounting
principle                                        674,844        766,389        970,936        439,518          11,188
Net income from continuing operations
before cumulative effect of
change in accounting principle                   516,000        598,054        905,763        439,515          11,210
Discontinued operations (2)                            -          8,785        117,619          3,612          (5,967)
Cumulative effect of change in accounting
principle (3)                                          -              -              -        (33,767)        (14,142)
Net income (loss)                                516,000        606,839      1,023,382        409,360          (8,899)
Earnings from continuing operations
before cumulative effect of change in
accounting principle per ordinary share
- basic                                            $6.90          $7.99         $12.21          $5.87           $0.15
- diluted                                          $6.90          $7.99         $12.21          $5.86           $0.15
Net income (loss) per ordinary share
- basic                                            $6.90          $8.11         $13.79          $5.47          $(0.12)
- diluted                                          $6.90          $8.11         $13.79          $5.45          $(0.12)
Cash dividends declared per share                  $7.00         $10.10         $13.60          $4.55           $0.25

Balance Sheet Data (at end of year):
Cash and cash equivalents                        197,181         92,782         96,879        112,000          92,078
Newbuildings and vessel purchase options         166,851         15,927         24,231          8,370          27,405
Vessels and equipment, net                     2,446,278      2,584,847      2,254,361      2,165,239       2,373,329
Vessels under capital lease, net                 626,374        672,608        718,842        765,126         264,902
Investments in associated companies               17,825         15,783         28,881        179,416         119,329
Total assets                                   4,589,937      4,454,817      4,211,160      4,319,345       3,034,743
Short-term debt and current portion of
long-term debt                                   281,409        228,135        137,332        174,826         167,807
Current portion of obligations under
capital lease                                     28,857         25,142         21,498         20,138          13,164
Long-term debt                                 2,181,885      2,101,061      1,879,598      1,966,471       1,277,665
Obligations under capital lease                  723,073        706,279        732,153        753,823         259,527
Share capital                                    187,063        187,063        187,063        184,120         191,166
Stockholders' equity                             668,560        715,166        917,968      1,255,417       1,226,973
Ordinary shares outstanding                   74,825,169     74,825,169     74,825,169     73,647,930      76,466,566
Weighted average ordinary shares
outstanding                                   74,825,169     74,825,169     74,192,939     74,901,900      76,456,340

Other Financial Data:
Equity to assets ratio (percentage) (4)             14.6%          16.1%          21.8%          29.1%           40.4%
Debt to equity ratio (5)                             4.8            4.3            3.2            2.3             1.4
Price earnings ratio (6)                             4.6            4.7            3.2            4.7             neg
Time charter equivalent revenue (7)            1,172,566      1,163,418      1,477,537        832,950         406,068
</TABLE>
<PAGE>

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, 2005, 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, 2005, 2004, 2003
     and 2002. 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.

4.   Equity to assets ratio is calculated as total stockholders' equity divided
     by total assets.

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

6.   Price earnings ratio is calculated using the closing year end share price
     divided by basic earnings per share.

7.   A reconciliation of time charter equivalent revenues to total operating
     revenues as reflected in the consolidated statements of operations is as
     follows:

<TABLE>
<CAPTION>
                                      2006          2005          2004         2003           2002
                                  ------------------------------------------------------------------
(in thousands of $)
<S>                                <C>           <C>           <C>           <C>            <C>
Total operating revenues           1,583,863     1,504,516     1,842,923     1,159,439       543,637
Less:
Other revenue                        (14,721)       (3,877)       (3,777)       (3,111)       (2,639)
Voyage expense                      (396,576)     (337,221)     (361,609)     (323,378)     (134,930)
                                  ------------------------------------------------------------------
Time charter equivalent revenue    1,172,566     1,163,418     1,477,537       832,950       406,068
                                  ------------------------------------------------------------------
</TABLE>

Our vessels are operated under time charters, bareboat charters, voyage
charters, pool arrangements and contracts of affreightment, or COAs. Under a
time charter, the charterer pays substantially all of the vessel voyage costs
which are primarily fuel and port charges. 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. Under contracts of
affreightment, the owner carries an agreed upon quantity of cargo over a
specified route and time period. 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, and charter income
from a bareboat charter would be lower than that from an equally profitable time
charter, to take account of the charterer's payment of vessel operating 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 time charter equivalent revenue, or TCE. Total TCE is the sum of time
charter, voyage charter and bareboat charter revenues, less voyage expenses.
Total TCE, which is not covered by generally accepted accounting principles, or
GAAP, provides more meaningful information to us than total operating revenues,
the most directly comparable GAAP measure. Average daily TCEs are also widely
used by investors and analysts in the tanker shipping industry for comparing
financial performance between companies and to industry averages. In order to
calculate the daily TCE figures disclosed in ITEM 5, TCEs for bareboat charters
include an allowance for estimated operating costs that would be paid by us
under an equivalently profitable time charter. Other companies may calculate TCE
using a different method.

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 summarizes some of the risks that may materially affect our business,
financial condition or results of operations.

                          Risks Related to Our Industry

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 and
bareboat 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    changes in oil production and refining capacity;
     o    environmental and other regulatory developments;
     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    vessel casualties;
     o    price of steel;
     o    potential conversion of vessels to alternative use;
     o    the number of vessels that are out of service; and
     o    changes in environmental and other regulations that may effectively
          cause reductions in the carrying capacity of vessels or early
          obsolescence of tonnage.

The international tanker industry has experienced historically high charter
rates and vessel values in the recent past and there can be no assurance that
these historically high charter rates and vessel values will be sustained

Charter rates in the tanker industry are volatile. We anticipate that future
demand for our vessels, and in turn our future charter rates, will be dependent
upon continued economic growth in the world's economy as well as seasonal and
regional changes in demand and changes in the capacity of the world's fleet. We
believe that these charter rates are the result of continued economic growth in
the world economy that exceeds growth in global vessel capacity. There can be no
assurance that economic growth will not stagnate or decline leading to a
decrease in vessel values and charter rates. A decline in charter rates could
have a material adverse effect on our business, financial condition, results of
operation and ability to pay dividends.

Any decrease in shipments of crude oil may adversely affect our financial
performance

The demand for our oil tankers derives primarily from demand for Arabian Gulf
and West African crude oil, along with crude oil from the former Soviet Union,
or the FSU, which, in turn, primarily depends on the economies of the world's
industrial countries and competition from alternative energy sources. A wide
range of economic, social and other factors can significantly affect the
strength of the world's industrial economies and their demand for crude oil from
the mentioned geographical areas. One such factor is the price of worldwide
crude oil. The world's oil markets have experienced high levels of volatility in
the last 25 years. If oil prices were to rise dramatically, the economies of the
world's industrial countries may experience a significant downturn.

Any decrease in shipments of crude oil from the above mentioned geographical
areas would have a material adverse effect on our financial performance. Among
the factors which could lead to such a decrease are:

     o    increased crude oil production from other areas;
     o    increased refining capacity in the Arabian Gulf, West Africa or the
          FSU;
     o    increased use of existing and future crude oil pipelines in the
          Arabian Gulf, West Africa and FSU;
     o    a decision by Arabian Gulf, West African and FSU oil-producing nations
          to increase their crude oil prices or to further decrease or limit
          their crude oil production;
     o    armed conflict in the Arabian Gulf and West Africa and political or
          other factors; and
     o    the development and the relative costs of nuclear power, natural gas,
          coal and other alternative sources of energy.

An increase in the supply of vessel capacity without an increase in demand for
vessel capacity would likely cause charter rates and vessel values to decline,
which could have a material adverse effect on our results of operations and
financial condition

The supply of vessels generally increases with deliveries of new vessels and
decreases with the scrapping of older vessels, conversion of vessels to other
uses, such as floating production and storage facilities, and loss of tonnage as
a result of casualties. Currently there is significant new building activity
with respect to virtually all sizes and classes of vessels. If the amount of
tonnage delivered exceeds the number of vessels being scrapped, vessel capacity
will increase. If the supply of vessel capacity increases and the demand for
vessel capacity does not, the charter rates paid for our vessels as well as the
value of our vessels could materially decline. Such a decline in charter rates
and vessel values would likely have a material adverse effect on our revenues
and profitability.

Risks involved with operating ocean-going vessels could affect our business and
reputation, which could have a material adverse effect on our results of
operations and financial condition

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.

Maritime claimants could arrest our tankers, which could have a material adverse
effect on our results of operations and financial condition

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,
which could have a material adverse effect on our results of operations and
financial condition

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.

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.

                          Risks Related to Our Business

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

A significant portion 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
minimizing, 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, 2006, we charter 45 vessels from Ship Finance International
Limited at fixed rates on long-term charters. In addition, we charter 14 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 from Ship Finance International Limited, which
we refer to as Ship Finance, extend for various periods depending on the age of
the vessels, ranging from approximately five to 21 years. With certain
exceptions as discussed below in Item 10C. "Material Contracts- Charter
Ancillary Agreement" the daily base charter rates, which are payable by us range
from $25,575 in 2006 to $24,175 from 2011 and beyond for very large crude
carriers, or VLCCs, and $21,100 in 2006 to $19,700 from 2011 and beyond for
Suezmaxes. The third party medium term charters to us extend from five to nine
years. Daily base charter rates payable by us under these charters range from
$20,995 to $25,615 in 2007 to $22,310 in 2015 for Suezmaxes and from
$29,580 to $31,200 in 2007 to $29,140 to $30,915 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 but not
limited to 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    shipyard capacity;
     o    governmental or other regulations;
     o    age of vessels;
     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 shareholders' 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 nine 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, depending on certain factors such as the
size of the vessel and the type of cargo. In the case of our non-double hull
tankers, these phase out dates range from 2010 to 2015. In 2005, the Marine
Environmental Protection Committee of the IMO has amended the International
Convention for the Prevention of Pollution from Ships to accelerate the phase
out of certain categories of single hull tankers, including the types of vessels
in our fleet, from 2015 to 2010 unless the relevant flag states extend the date.
This change could result in a number of our vessels being unable to trade in
many markets after 2010. The phase out of single hull tankers may therefore
reduce the demand for single hull tankers, and force the remaining single hull
tankers into employment on less desirable trading routes and increase the number
of tankers trading on those routes. As a result, single hull tankers may be
chartered less frequently and at lower rates. Moreover, additional regulations
may be adopted in the future that could further adversely affect the useful
lives of our non-double hull tankers, as well as our ability to generate income
from them.

Safety, environmental and other governmental and other requirements expose us to
liability, and compliance with current and future regulations could require
significant additional expenditures, which could have a material adverse affect
on our business and financial results

Our operations are affected by extensive and changing international, national,
state and local laws, regulations, treaties, conventions and standards in force
in international waters, the jurisdictions in which our tankers and other
vessels operate and the country or countries in which such vessels are
registered, including those governing the management and disposal of hazardous
substances and wastes, the cleanup of oil spills and other contamination, air
emissions, and water discharges and ballast water management. 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. In complying with current and future
environmental requirements, vessel owners and operators may also incur
significant additional costs in meeting new maintenance and inspection
requirements, in developing contingency arrangements for potential spills and in
obtaining insurance coverage. Government regulation of vessels, particularly in
the areas of safety and environmental requirements, can be expected to become
stricter in the future and require us to incur significant capital expenditures
on our vessels to keep them in compliance, or even to scrap or sell certain
vessels altogether.

Many of these requirements are designed to reduce the risk of oil spills and
other pollution, and our compliance with these requirements can be costly. These
requirements can also affect the resale value or useful lives of our vessels,
require a reduction in cargo-capacity, ship modifications or operational changes
or restrictions, lead to decreased availability of insurance coverage for
environmental matters or result in the denial of access to certain
jurisdictional waters or ports, or detention in, certain ports.

Under local, national and foreign laws, as well as international treaties and
conventions, we could incur material liabilities, including cleanup obligations,
natural resource damages and third-party claims for personal injury or property
damages, in the event that there is a release of petroleum or other hazardous
substances from our vessels or otherwise in connection with our current or
historic operations. We could also incur substantial penalties, fines and other
civil or criminal sanctions, including in certain instances seizure or detention
of our vessels, as a result of violations of or liabilities under environmental
laws, regulations and other requirements.

For example, OPA affects all vessel owners shipping oil to, from or within the
United States. OPA allows for potentially unlimited liability without regard to
fault for owners, operators and bareboat charterers of vessels for oil pollution
in United States waters. Similarly, the International Convention on Civil
Liability for Oil Pollution Damage, 1969, as amended, which has been adopted by
most countries outside of the United States., imposes liability for oil
pollution in international waters. OPA expressly permits individual states to
impose their own liability regimes with regard to hazardous materials and oil
pollution incidents occurring within their boundaries. Coastal states in the
United States have enacted pollution prevention liability and response laws,
many providing for unlimited liability.

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 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. It is possible
that our competitive position will erode in the future.

Our revenues may be adversely affected if we do not successfully employ our
tankers

As of May 31, 2007, 31 of our vessels are contractually committed to time or
bareboat charters, with the contracts expiring in 2007 for two vessels, on dates
between 2008 and 2013 for 20 vessels and on dates beyond 2013 for the remaining
9 vessels. In addition, we have six vessels contractually committed to time
charters based on spot market rates rather than fixed income. Although time
charters generally provide reliable revenues, they also limit the portion of our
fleet available for spot market voyages during an upswing in the tanker industry
cycle, when spot market voyages might be more profitable.

The spot charter market is highly competitive, and spot market voyage charter
rates may fluctuate dramatically based on tanker and oil supply and demand and
other factors. We cannot assure you that future spot market voyage charters will
be available at rates that will allow us to operate our tankers profitably.

Rising fuel prices may adversely affect our profits

Fuel is a significant, if not the largest, operating expense for many of our
shipping operations when our vessels are not under period charter. The price and
supply of fuel is unpredictable and fluctuates based on events outside our
control, including geopolitical developments, supply and demand for oil and gas,
actions by OPEC and other oil and gas producers, war and unrest in oil producing
countries and regions, regional production patterns and environmental concerns.
As a result, an increase in the price of fuel may adversely affect our
profitability. Further, fuel may become much more expensive in the future, which
may reduce the profitability and competitiveness of our business versus other
forms of transportation, such as truck or rail.

Our vessels may suffer damage and we may face unexpected drydocking costs, which
could affect our cash flow and financial condition

If our vessels suffer damage, they may need to be repaired at a drydocking
facility. The costs of drydock repairs are unpredictable and can be substantial.
We may have to pay drydocking costs that our insurance does not cover. The
inactivity of these vessels while they are being repaired and repositioned, as
well as the actual cost of these repairs, would decrease our earnings. In
addition, space at drydocking facilities is sometimes limited and not all
drydocking facilities are conveniently located. We may be unable to find space
at a suitable drydocking facility or we may be forced to move to a drydocking
facility that is not conveniently located to our vessels' positions. The loss of
earnings while our vessels are forced to wait for space or to relocate to
drydocking facilities that are farther away from the routes on which our vessels
trade would decrease our earnings.

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.

Increased inspection procedures and tighter import and export controls could
increase costs and disrupt our business

International shipping is subject to various security and customs inspection and
related procedures in countries of origin and destination. Inspection procedures
can result in the seizure of contents of our vessels, delays in the loading,
offloading or delivery and the levying of customs duties, fines or other
penalties against us.

It is possible that changes to inspection procedures could impose additional
financial and legal obligations on us. Furthermore, changes to inspection
procedures could also impose additional costs and obligations on our customers
and may, in certain cases, render the shipment of certain types of cargo
uneconomical or impractical. Any such changes or developments may have a
material adverse effect on our business, financial condition, results of
operations and ability to pay dividends.

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. In addition, if the lenders accelerate the
debt outstanding under one facility in default, it could result in a default on
our other facilities.

An increase in interest rates could adversely affect our financial performance

At December 31, 2006 we had total interest bearing debt outstanding of $2,463.3
million, of which $1,602.9 million is floating rate debt. We use interest rate
swaps to manage interest rate risk. As at December 31, 2006, our interest rate
swap arrangements effectively fix the Company's interest rate exposure on $738.7
million of floating rate debt. Our maximum exposure to interest rate
fluctuations is $864.2 million at December 31, 2006. If interest rates rise
significantly, our results of operations could be adversely affected.

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.

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 include
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.

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.

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 United States Internal Revenue Code of 1986, or the Code, 50% of the
gross shipping income of a vessel owning or chartering corporation, such as
ourselves and our subsidiaries, that is attributable to transportation that
begins or ends, but that does not both begin and end, in the United States, is
characterized as United States source shipping income and such income is subject
to a 4% United States federal income tax without allowance for deduction, unless
that corporation qualifies for exemption under Section 883 of the Code.

We expect that we and each of our subsidiaries will qualify for this statutory
tax exemption and we will take this position for United States federal income
tax return reporting purposes. However, there are factual circumstances beyond
our control that could cause us to lose the benefit of this tax exemption and
thereby become subject to United States federal income tax on our United States
source income. Therefore, 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 under
Section 883 for any taxable year, we or our subsidiaries would be subject for
those years to a 4% United States federal income tax on United States sources
shipping income. The imposition of this taxation could have an adverse effect on
our business.

Our Liberian subsidiaries may not be exempt from Liberian taxation, which would
materially reduce our Liberian subsidiaries', and consequently our, net income
and cash flow by the amount of the applicable tax.

The Republic of Liberia enacted an income tax law generally effective as of
January 1, 2001, ("the New Act"), which repealed, in its entirety, the prior
income tax law in effect since 1977, pursuant to which our Liberian
subsidiaries, as non-resident domestic corporations, were wholly exempt from
Liberian tax.

In 2004, the Liberian Ministry of Finance issued regulations, ("the New
Regulations"), pursuant to which a non-resident domestic corporation engaged in
international shipping, such as our Liberian subsidiaries, will not be subject
to tax under the New Act retroactive to January 1, 2001. In addition, the
Liberian Ministry of Justice issued an opinion that the New Regulations were a
valid exercise of the regulatory authority of the Ministry of Finance.
Therefore, assuming that the New Regulations are valid, our Liberian
subsidiaries will be wholly exempt from tax as under prior law.

If our Liberian subsidiaries were subject to Liberian income tax under the New
Act, our Liberian subsidiaries would be subject to tax at a rate of 35% on their
worldwide income. As a result, their, and subsequently our, net income and cash
flow would be materially reduced by the amount of the applicable tax. In
addition, we, as a shareholder of the Liberian subsidiaries, would be subject to
Liberian withholding tax on dividends paid by the Liberian subsidiaries at rates
ranging from 15% to 20%.

                       Risks Related to Our Ordinary Shares

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 States, you
may not be able to bring suit against us, or enforce a judgement obtained
against us in the United States

Our executive offices, 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.

Investor confidence and the market price of our common stock may be adversely
impacted if we are unable to comply with Section 404 of the Sarbanes-Oxley Act
of 2002

We are subject to Section 404 of the Sarbanes-Oxley Act of 2002, which requires
us to include in our annual report on Form 20-F our management's report on, and
assessment of the effectiveness of, our internal controls over financial
reporting. In addition, our independent registered public accounting firm is
required to attest to and report on management's assessment of the effectiveness
of our internal controls over financial reporting. These requirements first
apply to this annual report. If we fail to achieve and maintain the adequacy of
our internal controls over financial reporting, we will not be in compliance
with all of the requirements imposed by Section 404. Any failure to comply with
Section 404 could result in an adverse reaction in the financial marketplace due
to a loss of investor confidence in the reliability of our financial statements,
which ultimately could harm our business and could negatively impact the market
price of our common stock. We believe that future ongoing costs of complying
with these requirements may be substantial.

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: VLCCs,
which are between 200,000 and 320,000 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, Marshall Islands, Cyprus, the United Kingdom, Malta, Hong
Kong 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.

Vessel Acquisitions, Disposals and Other Significant Transactions

In February 2004, through a reorganization of joint ventures, we exchanged our
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. The vessel Golden Fountain was sold for gross proceeds of $61.0
million, realizing a gain of $19.7 million. The spin-off of our wholly owned
subsidiary Golden Ocean Group Limited, which we refer to as Golden Ocean,
resulted in the disposal of two dry bulk carriers in 2004.

In 2005, we acquired seven VLCC tankers for a total cost of $460.0 million and
two containerships for a total cost of $98.6 million. We sold five Suezmax
tankers for total proceeds of $231.3 million. We also sold one VLCC for total
proceeds of $40.5 million. We also sold our last dry bulk carrier the Cos Hero
for total proceeds of $20.7 million.

We entered into the following acquisitions and dispositions in 2006:

     o    In February and March 2006, we entered into shipbuilding contracts
          with the Jiangnan Shipyard for the construction and acquisition of
          four VLCC newbuilding vessels. In June 2006, we sold two of these
          newbuilding contracts for a net gain of $9.8 million. Subsequent to
          this sale, we entered into two further shipbuilding contracts with the
          Jiangnan Shipyard for the construction and acquisition of two VLCC
          newbuildings and an option for an additional two VLCC newbuildings.

     o    In September 2006, we exercised two options for VLCC newbuilding
          contracts with Jiangnan Shipyard and simultaneously sold these
          newbuilding contracts to a third party for a net gain of $6.2 million.

     o    In March 2006, we acquired the Aframax tanker "Gerrita" (renamed
          "Front Puffin") for a purchase price of $35.9 million. This vessel was
          converted to a Floating, Production, Storage and Offloading vessel, or
          FPSO. It was sold as part of the spin off of the Sea Production group
          (see below).

     o    In March 2006, we sold the VLCC Golden Stream for gross sale proceeds
          of $53.1 million.

     o    In June 2006, a subsidiary of Ship Finance bought a jack up rig for a
          cost of $210.0 million.

     o    In September 2006, we sold the VLCC Front Beijing, which we had taken
          delivery of in July, for gross sale proceeds of $141.5 million.

     o    In September 2006, a subsidiary of Ship Finance purchased a Panamax
          vessel, Front Shadow, for a cost of $28.4 million.

     o    In September 2006, a subsidiary of Ship Finance announced the sale of
          the VLCC Front Tobago to a third party for gross proceeds of $45.0
          million. Frontline received a compensation payment from Ship Finance
          on termination of the charter.

     o    In September 2006, we took delivery of the VLCC Front Shanghai at a
          cost of approximately $81.0 million.

     o    In July 2006, we entered into shipbuilding contracts with Jiangsu
          Rongsheng Heavy Industries Group Co Ltd, or Rongsheng, in China for
          the delivery of two 156,000 dwt Suezmax newbuildings and
          simultaneously entered into options for four further similar Suezmax
          newbuilding contracts.

     o    In August 2006, we exercised options for four 156,000 dwt Suezmax
          newbuilding contracts at Rongsheng and sold two of these Suezmax
          newbuilding contracts to Ship Finance.

We have also entered into a number of acquisitions and dispositions in 2007:

     o    In January 2007, Ship Finance sold its single hull Suezmax tanker
          Front Transporter to an unrelated third party for a gross sales price
          of $38.0 million. We received a compensation payment of $14.8 million
          from Ship Finance on termination of the charter. The vessel was
          delivered to her new owner in March 2007.

     o    In March 2007, the single hull VLCC Front Vanadis was sold to an
          unrelated third party and delivery took place in May 2007. Upon
          delivery, the long term charter party between Frontline and Ship
          Finance was terminated, and Frontline received a compensation payment
          in the amount of $13.2 million for the early termination of the
          charter party, which will be recorded in the second quarter of 2007.

     o    In June 2007, we announced the sale of the single hull Suezmax tanker
          Front Horizon for net sale proceeds of $28.0 million. Delivery to the
          buyers is expected to be in the period July to August 2007. The buyer
          of the vessel is a joint venture in which our Chairman, John
          Fredriksen has an indirect interest in one of the joint venture
          partners. The vessel will stop active trading and is intended to be
          used for other purposes.

     o    In March and April 2007, we exercised options with Rongsheng for four
          Suezmax newbuilding contracts.

At the end of May 2007, we had newbuilding contracts for four VLCCs and eight
Suezmaxes with expected deliveries in the period from the third quarter of 2008
through the fourth quarter of 2010. We paid $68.9 million in newbuilding
instalments for these contracts in 2006, $27.9 million for these contracts in
2007 and we have future commitments of $885 million.

Establishment of Sealift Ltd

In January 2007, we established a separate entity to develop our heavy lift
activity named Sealift Ltd, or Sealift. Sealift completed a private placement of
$180.0 million in equity and its shares have been listed on the Norwegian
over-the-counter (OTC) market since January 2007. We invested $60.0 million in
the company and following the initial private placement in January we became a
33% shareholder. Sealift acquired four single-hull Suezmax vessels from
Frontline for $100 million each which Frontline has the obligation to convert
from Suezmax vessels to heavy lift vessels. Our current remaining commitment for
these conversions is $118.8 million. Sealift also acquired two Suezmax vessels
from Frontline for $38 million each and option contracts with a shipyard to
convert these two additional Suezmax vessels into heavy lift vessels. The total
consideration for all six vessels acquired by Sealift is $476 million, of which
$396 million has been received in cash and $80 million will be settled by way of
non-interest bearing Seller's Credit. Forty million of the Seller's Credit is
payable on delivery of each of the final two converted vessels. Five of the
vessels sold to Sealift were first acquired from Ship Finance. One converted
heavy lift vessel was delivered in May 2007. The agreed delivery dates for the
three remaining converted heavy lift vessels are from September 2007 to May
2008. If Frontline's delivery of a converted vessel to Sealift is delayed more
than six months beyond the agreed delivery date for the vessel, Sealift has the
option to cancel its purchase of the vessel. The expected profit of $155 million
from the sale of vessels to Sealift is likely to be recognized over the course
of the conversions and is dependant on the cost of the conversions. Two of these
vessels are currently chartered back to Frontline until conversion commences on
a bareboat rate of $15,000 per day and two of the vessels on a bareboat rate of
$12,500 per day.

In May 2007, Sealift completed the combination of its businesses with the
Dockwise group of companies. Frontline is the second largest shareholder in the
combined group with an ownership interest of 17.1%.

Spin-Off of Ship Finance

In October 2003, we formed Ship Finance as our wholly-owned subsidiary for the
purpose of acquiring certain of our shipping assets. In December 2003, Ship
Finance issued $580.0 million of 8.5% Senior Notes due 2013, which we refer to
as the Notes. In the first quarter of 2004, Ship Finance used the proceeds of
the Notes, 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 vessels 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.

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

In January 2005 and February 2005 our Board of Directors approved further spin
offs of the shares of Ship Finance. In February 2005, each shareholder of
Frontline received one share of Ship Finance for every four shares of ours held
and in March 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 was approximately 16.2% at December 31, 2005.

In February 2006, our Board approved a further spin off of the shares of Ship
Finance. In March 2006, each shareholder of Frontline received one share of Ship
Finance for every twenty shares of ours held. Following these transactions our
shareholding in Ship Finance was approximately 11.1% at December 31, 2006 and
Ship Finance remained consolidated under the provisions of FASB Interpretation
46(R) "Consolidation of Variable Interest Entities".

In February 2007, our Board approved a further spin off of our remaining
interest in the shares of Ship Finance and this occurred in March 2007. After
this spin off we still hold 73,383 shares in Ship Finance, which represents
0.01% of Ship Finance's total shares. As a result of this spin off, we no longer
consolidate Ship Finance as of March 31, 2007.

Establishment and Spin-Off of Sea Production Ltd

In February 2007, the Company's wholly owned subsidiary, Frontline Floating
Production Ltd ("FFP"), sold its assets to Sea Production. The assets of FFP
included a 70% investment in Puffin Ltd, the entity who ultimately owns the
vessel Front Puffin. Sea Production was incorporated in 2007 as a wholly owned
subsidiary of the Company. Also in February 2007, Sea Production raised $180.0
million in equity in a private placement. The shares have been listed on the
Norwegian OTC market. We held 28.33% of the shares in Sea Production following
the private placement. We recorded a gain on the issuance of these shares of
$39.8 million in the first quarter of 2007. In June 2007, we sold our entire
holding in Sea Production in line with our strategy to remain a pure crude oil
transportation company and our previously announced strategy to either sell or
spin off the Sea Production shares. We expect to record a gain of approximately
$32 million in the second quarter of 2007 as a result of this sale.

Spin-Off of Golden Ocean Group Limited

In November 2004, we established 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 has
not retained any significant continuing involvement in these dry bulk
operations.

At the time of the spin off of Golden Ocean, we granted Golden Ocean options to
acquire newbuilding contracts for two Panamax vessels. In 2005 Golden Ocean
exercised these options to acquire from us the shares in two single purpose
companies each owning a newbuilding contract for a Panamax vessel. These options
were exercised at a total price of $16.8 million.

Acquisition of Independent Tankers Corporation

On July 1, 2003, we purchased a call option for $10.0 million to acquire all of
the shares of Independent Tankers Corporation, or ITC from Hemen Holdings Inc.,
or Hemen for a total consideration of $4.0 million plus 4% interest per year.
Hemen is indirectly controlled by our Chairman, John Fredriksen. 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 Chevron Corporation, or Chevron. In 2006,
the Front Voyager was redelivered from Chevron and is on bareboat charter to
Frontline. The initial fixed terms of the charters range from eight to 10 years.
After the initial fixed term the charterers have options to extend the charters
of the vessels for further periods of between eight to twelve years. ITC is
financed by Term and Serial Notes. These notes mature between 2006 and 2021 and
are secured by ITC's vessels and long-term charters. Interest is payable on the
Notes at fixed rates which range between 6.5% and 8.52%.

B. BUSINESS OVERVIEW

At May 31, 2007 we operate a tanker fleet consisting of 81 vessels, which we
believe is one of the largest and most modern in the world. The fleet consists
of 40 VLCCs which are either owned or chartered in, 21 Suezmax tankers which are
either owned or chartered in, 8 Suezmax OBOs which are chartered in, and 8
VLCCs, 3 Suezmax tankers and 1 Aframax tanker under our commercial management.
We also have four VLCC newbuildings and eight Suezmax newbuildings on order.

As of May 31, 2007, the fleet that we operate has a total tonnage of
approximately 19.35 million dwt, including the 2.8 million dwt under commercial
management. Our tanker vessels have an average age of approximately 10 years
compared with an estimated industry average of approximately 9.3 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.
Currently, our eight Suezmax OBOs are configured to carry dry bulk cargo and are
fixed on long term charters.

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
single hull Suezmax tanker (Front Voyager) 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 2007.

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,
Liberian, Panamanian, Cypriot, Singaporean, Norwegian, Isle of Man, Marshall
Islands, Hong Kong or Maltese flag.

Frontline has a strategy of extensive outsourcing. Ship management, crewing and
accounting services are provided by a number of independent and competing
suppliers. 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. Independent ship managers provide crewing for our vessels. Currently,
our vessels are crewed with Russian, Ukrainian, Croatian, Romanian, Indian and
Filipino officers and crews, or combinations of these nationalities. Accounting
services for each of our shipowning subsidiaries are also provided by the ship
managers.

Strategy

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 scrap values and vessel operating expenses resulting from, among
other things, changes in the supply of and demand for tanker capacity. We may
adjust our exposure through time charters, bareboat charters, sale and
leasebacks, straight sales and purchases of vessels and acquisitions.

We are currently a significant shareholder in Sealift and our intention is to
sell or dividend the shares in line with our overall strategy of focusing on the
oil tanker business.

Our business strategy is primarily based upon the following principles:

     o    emphasizing 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    continuing to achieve competitive operational costs;
     o    operating a modern and homogeneous fleet of tankers;
     o    achieving high utilization of our vessels;
     o    achieving competitive financing arrangements;
     o    achieving a satisfactory mix of term charters, contracts of
          affreightment 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 continue to evaluate opportunities in the time charter market. On the basis
of the strength of the drybulk market, two three year charters, one four year
charter and two five year charters were recently concluded for Front Breaker and
Front Driver at a gross time charter rate of $52,360 per day, for Front Rider at
a gross time charter rate of $50,000 per day and for Front Climber and Front
Leader a gross time charter rate of $40,000 per day. The charters commence in
the period June 2007 to January 2008. After this, all of our eight OBO carriers
are now on long term charters at an average rate of about $39,000 in 2007 and
about $43,000 in 2008. As of June 15, 2007 approximately 39% of our remaining
operating days for 2007 are on fixed time charter.

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.

We currently have four VLCC and eight Suezmax newbuildings on order, all
favorably priced compared to current newbuilding prices. We order new tonnage to
renew our fleet in line with our opportunistic investment approach. Our order
book confirms our position as a leading operator of quality Suezmax and VLCC
tonnage.

We seek to pay quarterly dividends to our shareholders. The amount of dividends
will be guided by present earnings, market prospects, current capital
expenditure programs as well as investment opportunities.

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 9.4% of the world
VLCC fleet and 9.4% of the world Suezmax tanker fleet. It is our intention to
use our strong operational cash flow together with our available financing to
continue the consolidation of the tanker market. We always look
opportunistically for attractive investments and acquisitions and will finance
such investments through a combination of debt and equity. Our role in the
consolidation of the tanker market may include the acquisition of new vessels
and second-hand 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.

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 the year ended December
31, 2006, one customer (2005: one customer) 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. Charters are to a large
extent brokered through international independent brokerage houses that
specialize in finding the optimal ship for any particular cargo based on the
aforementioned criteria. Brokers may be appointed by the cargo shipper or the
ship owner.

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. OPA, which
imposes virtually unlimited liability upon owners, operators and demise
charterers of any vessel trading in the United States exclusive economic zone
for certain oil pollution accidents in the United States, has made liability
insurance more expensive for ship owners and operators trading in the United
States market.

Frontline Management is responsible for arranging 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 include 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 $1.0 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.

Environmental Regulation and Other Regulations

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

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

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

International Maritime Organization

The International Maritime Organization, or IMO (the United Nations agency for
maritime safety and the prevention of pollution by ships), has adopted the
International Convention for the Prevention of Marine Pollution from Ships,
1973, as modified by the Protocol of 1978 relating thereto, which has been
updated through various amendments, or the MARPOL Convention. The MARPOL
Convention implements environmental standards including oil leakage or spilling,
garbage management, as well as the handling and disposal of noxious liquids,
harmful substances in packaged forms, sewage and air emissions. These
regulations, which have been implemented in many jurisdictions in which our
vessels operate, provide, in part, that:

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

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

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

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

     o    all tankers will be subject to enhanced inspections.

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

     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.

Our vessels are also subject to regulatory requirements, including the phase-out
of single hull tankers, imposed by the IMO. Effective September 2002, the IMO
accelerated its existing timetable for the phase-out of single hull oil tankers.
At that time, these regulations required the phase-out of most single hull oil
tankers by 2015 or earlier, depending on the age of the tanker and whether it
has segregated ballast tanks.

Under the regulations, the flag state may allow for some newer single hull ships
registered in its country that conform to certain technical specifications to
continue operating until the 25th anniversary of their delivery. Any port state,
however, may deny entry of those single hull tankers that are allowed to operate
until their 25th anniversary to ports or offshore terminals. These regulations
have been adopted by over 150 nations, including many of the jurisdictions in
which our tankers operate.

As a result of the oil spill in November 2002 relating to the loss of the MT
Prestige, which was owned by a company not affiliated with us, in December 2003,
the Marine Environmental Protection Committee of the IMO, or MEPC, adopted an
amendment to the MARPOL Convention, which became effective in April 2005. The
amendment revised an existing regulation 13G accelerating the phase-out of
single hull oil tankers and adopted a new regulation 13H on the prevention of
oil pollution from oil tankers when carrying heavy grade oil. Under the revised
regulation, single hull oil tankers were required to be phased out no later than
April 5, 2005 or the anniversary of the date of delivery of the ship on the date
or in the year specified in the following table:

<TABLE>
<CAPTION>
------------------------------------------------------- -------------------------------------------------------
Category of Oil Tankers                                 Date or Year for Phase Out
------------------------------------------------------- -------------------------------------------------------
<S>                                                     <C>
Category 1 - oil tankers of 20,000 dwt and above
carrying crude oil, fuel oil, heavy diesel oil or       April 5, 2005 for ships delivered on April 5, 1982 or
lubricating oil as cargo, and of 30,000 dwt and         earlier; or
above carrying other oils, which do not comply with     2005 for ships delivered after April 5, 1982
the requirements for protectively located segregated
ballast tanks
------------------------------------------------------- -------------------------------------------------------
Category 2 - oil tankers of 20,000 dwt and above
carrying crude oil, fuel oil, heavy diesel oil or       April 5, 2005 for ships delivered on April 5, 1977 or
lubricating oil as cargo, and of 30,000 dwt and         earlier
above carrying other oils, which do comply with the     2005 for ships delivered after April 5, 1977
protectively located segregatedballast tank             but before January 1, 1978
requirements                                            2006 for ships delivered in 1978 and 1979
                                                        2007 for ships delivered in 1980 and 1981
and                                                     2008 for ships delivered in 1982
                                                        2009 for ships delivered in 1983
Category 3 - oil tankers of 5,000 dwt and above but     2010 for ships delivered in 1984 or later
less than the tonnage specified for Category 1 and 2
tankers.
------------------------------------------------------- -------------------------------------------------------
</TABLE>

Under the revised regulations, a flag state may permit continued operation of
certain Category 2 or 3 tankers beyond their phase date in accordance with the
above schedule. Under regulation 13G, the flag state may allow for some newer
single hull oil tankers registered in its country that conform to certain
technical specifications to continue operating until the earlier of the
anniversary of the date of delivery of the vessel in 2015 or the 25th
anniversary of their delivery. Under regulation 13G and 13H, as described below,
certain Category 2 and 3 tankers fitted only with double bottoms or double sides
may be allowed by the flag state to continue operations until their 25th
anniversary of delivery. Any port state, however, may deny entry of those single
hull oil tankers that are allowed to operate under any of the flag state
exemptions.

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

<TABLE>
<CAPTION>
                                   Vessel        Year
Vessel Name          Vessel type   Category(s)   Built   IMO phase out   Flag state exemption
------------------   -----------   -----------   -----   -------------   --------------------
<S>                  <C>           <C>           <C>     <C>             <C>
Front Birch(**)      Suezmax       DS             1991            2010                   2016
Front Horizon(*)     Suezmax       SH             1988            2010                   2013
         1991            2010                   2016
Front Voyager        Suezmax       SH
Front Voyager        Suezmax       SH             1992            2010                   2015
Edinburgh(**)        VLCC          DS             1993            2010                   2018
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
</TABLE>

(*) Vessel sold in June 2007 with expected delivery in July or August 2007.
(**) Vessel owned through Ship Finance and not consolidated after March 31,
2007.

Under regulation 13H, the double sided tankers will be allowed to continue
operations until their 25th anniversary.

In October 2004, the MEPC adopted a unified interpretation of regulation 13G
that clarified the delivery date for converted tankers. Under the
interpretation, where an oil tanker has undergone a major conversion that has
resulted in the replacement of the fore-body, including the entire cargo
carrying section, the major conversion completion date shall be deemed to be the
date of delivery of the ship, provided that:

     o    the oil tanker conversion was completed before July 6, 1996;

     o    the conversion included the replacement of the entire cargo section
          and fore-body and the tanker complies with all the relevant provisions
          of MARPOL Convention applicable at the date of completion of the major
          conversion; and

     o    the original delivery date of the oil tanker will apply when
          considering the 15 years of age threshold relating to the first
          technical specifications survey to be completed in accordance with
          MARPOL Convention.

In December 2003, the MEPC adopted a new regulation 13H on the prevention of oil
pollution from oil tankers when carrying heavy grade oil, or HGO, which includes
most of the grades of marine fuel. The new regulation bans the carriage of HGO
in single hull oil tankers of 5,000 dwt and above after April 5, 2005, and in
single hull oil tankers of 600 dwt and above but less than 5,000 dwt, no later
than the anniversary of their delivery in 2008.

Under regulation 13H, HGO means any of the following:

     o    crude oils having a density at 15(0)C higher than 900 kg/m(3);

     o    fuel oils having either a density at 15(0)C higher than 900 kg/m(3) or
          a kinematic viscosity at 50(0)C higher than 180 mm(2)/s; or

     o    bitumen, tar and their emulsions.

Under the regulation 13H, the flag state may allow continued operation of oil
tankers of 5,000 dwt and above, carrying crude oil with a density at 15(0)C
higher than 900 kg/m3 but lower than 945 kg/m3, that conform to certain
technical specifications and, in the opinion of the such flag state, the ship is
fit to continue such operation, having regard to the size, age, operational area
and structural conditions of the ship and provided that the continued operation
shall not go beyond the date on which the ship reaches 25 years after the date
of its delivery. The flag state may also allow continued operation of a single
hull oil tanker of 600 dwt and above but less than 5,000 dwt, carrying HGO as
cargo, if, in the opinion of the such flag state, the ship is fit to continue
such operation, having regard to the size, age, operational area and structural
conditions of the ship, provided that the operation shall not go beyond the date
on which the ship reaches 25 years after the date of its delivery.

The flag state may also exempt an oil tanker of 600 dwt and above carrying HGO
as cargo if the ship is either engaged in voyages exclusively within an area
under the its jurisdiction, or is engaged in voyages exclusively within an area
under the jurisdiction of another party, provided the party within whose
jurisdiction the ship will be operating agrees. The same applies to vessels
operating as floating storage units of HGO.

Any port state, however, can deny entry of single hull tankers carrying HGO
which have been allowed to continue operation under the exemptions mentioned
above, into the ports or offshore terminals under its jurisdiction, or deny
ship-to-ship transfer of HGO in areas under its jurisdiction except when this is
necessary for the purpose of securing the safety of a ship or saving life at
sea.

Revised Annex I to the MARPOL Convention entered into force in January 2007.
Revised Annex I incorporates various amendments adopted since the MARPOL
Convention entered into force in 1983, including the amendments to regulation
13G (regulation 20 in the revised Annex) and Regulation 13H (Regulation 21 in
the revised Annex). Revised Annex I also imposes construction requirements for
oil tankers delivered on or after January 1, 2010. A further amendment to
revised Annex I includes an amendment to the definition of heavy grade oil that
will broaden the scope of Regulation 21.

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 became effective May 19, 2005. Annex VI
sets limits on sulphur oxide and nitrogen oxide emissions from ship exhausts and
prohibits deliberate emissions of ozone depleting substances, such as
chlorofluorocarbons. Annex VI also includes a global cap on the sulphur content
of fuel oil and allows for special areas to be established with more stringent
controls on sulphur emissions. We believe that all our vessels are currently
compliant in all material respects with these regulations. Additional or new
conventions, laws and regulations may be adopted that could adversely affect our
business, cash flows, results of operations and financial condition.

The IMO has also adopted the International Convention for the Safety of Life at
Sea, or SOLAS Convention, and the International Convention on Load Lines, 1966,
or LL Convention, which impose a variety of standards to regulate design and
operational features of ships. SOLAS Convention and LL Convention standards are
revised periodically. We believe that all our vessels are in substantial
compliance with SOLAS Convention and LL Convention standards. Under Chapter IX
of SOLAS, the requirements contained in the International Safety Management Code
for the Safe Operation of Ships and for Pollution Prevention, or ISM Code,
promulgated by the IMO, also affect our operations. The ISM Code requires the
party with operational control of a vessel to develop an extensive safety
management system that includes, among other things, the adoption of a safety
and environmental protection policy setting forth instructions and procedures
for operating its vessels safely and describing procedures for responding to
emergencies. We intend to rely upon the safety management system that the
appointed ship managers have developed.

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

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

The IMO has negotiated international conventions that impose liability for oil
pollution in international waters and a signatory's territorial waters.
Additional or new conventions, laws and regulations may be adopted which could
limit our ability to do business and which could have a material adverse effect
on our business and results of operations. The IMO adopted an International
Convention for the Control and Management of Ships' Ballast Water and Sediments,
or the BWM Convention, in February 2004. The BWM Convention's implementing
regulations call for a phased introduction of mandatory ballast water exchange
requirements (beginning in 2009), to be replaced in time with mandatory
concentration limits. The BWM Convention will not enter into force until 12
months after it has been adopted by 30 states, the combined merchant fleets of
which represent not less than 35% of the gross tonnage of the world's merchant
shipping.

The flag state, as defined by the United Nations Convention on Law of the Sea,
has overall responsibility for the implementation and enforcement of
international maritime regulations for all ships granted the right to fly its
flag. The "Shipping Industry Guidelines on Flag State Performance" evaluates
flag states based on factors such as sufficiency of infrastructure, ratification
of international maritime treaties, implementation and enforcement of
international maritime regulations, supervision of surveys, casualty
investigations and participation at IMO meetings. Our vessels are flagged in the
Marshall Islands. Marshall Islands-flagged vessels generally receive a good
assessment in the shipping industry.

Although the United States is not a party to these conventions, many countries
have ratified and follow the liability plan adopted by the IMO and set out in
the International Convention on Civil Liability for Oil Pollution Damage of
1969, as amended in 2000, or the CLC. Under this convention and depending on
whether the country in which the damage results is a party to the 1992 Protocol
to the CLC, a vessel's registered owner is strictly liable for pollution damage
caused in the territorial waters of a contracting state by discharge of
persistent oil, subject to certain complete defenses. The limits on liability
outlined in the 1992 Protocol use the International Monetary Fund currency unit
of Special Drawing Rights, or SDR. Under an amendment to the 1992 Protocol that
became effective on November 1, 2003, for vessels of 5,000 to 140,000 gross tons
(a unit of measurement for the total enclosed spaces within a vessel), liability
will be limited to approximately 4.51 million SDR plus 631 SDR for each
additional gross ton over 5,000. For vessels of over 140,000 gross tons,
liability will be limited to 89.77 million SDR. The exchange rate between SDRs
and U.S. dollars was 0.669487 SDR per U.S. dollar on February 6, 2007. As the
convention calculates liability in terms of a basket of currencies, these
figures are based on currency exchange rates on March 13, 2007. The right to
limit liability is forfeited under the International Convention on Civil
Liability for Oil Pollution Damage where the spill is caused by the owner's
actual fault and under the 1992 Protocol where the spill is caused by the
owner's intentional or reckless conduct. Vessels trading to states that are
parties to these conventions must provide evidence of insurance covering the
liability of the owner. In jurisdictions where the International Convention on
Civil Liability for Oil Pollution Damage has not been adopted, various
legislative schemes or common law govern, and liability is imposed either on the
basis of fault or in a manner similar to that convention. We believe that our
P&I insurance will cover the liability under the plan adopted by the IMO.

United States Requirements

In 1990, the United States Congress enacted OPA to establish an extensive
regulatory and liability regime for environmental protection and cleanup of oil
spills. OPA affects all owners and operators whose vessels trade with the United
States or its territories or possessions, or whose vessels operate in the waters
of the United States, which include the U.S. territorial sea and the 200
nautical mile exclusive economic zone around the United States. The
Comprehensive Environmental Response, Compensation and Liability Act, or CERCLA,
imposes liability for cleanup and natural resource damage from the release of
hazardous substances (other than oil) whether on land or at sea. Both OPA and
CERCLA impact our operations.

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

     o    natural resource damages and related assessment costs;

     o    real and personal property damages;

     o    net loss of taxes, royalties, rents, profits or earnings capacity; and

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

OPA previously limited the liability of responsible parties to the greater of
$1,200 per gross ton or $10.0 million per tanker that is over 3,000 gross tons
(subject to possible adjustment for inflation). Amendments to OPA signed into
law in July 2006 increased these limits on the liability of responsible parties
to the greater of $1,900 per gross ton or $16.0 million per double hull tanker
that is over 3,000 gross tons. The act specifically permits individual states to
impose their own liability regimes with regard to oil pollution incidents
occurring within their boundaries, and some states have enacted legislation
providing for unlimited liability for discharge of pollutants within their
waters. In some cases, states which have enacted this type of legislation have
not yet issued implementing regulations defining tanker owners' responsibilities
under these laws. CERCLA, which applies to owners and operators of vessels,
contains a similar liability regime and provides for cleanup, removal and
natural resource damages. Liability under CERCLA is limited to the greater of
$300 per gross ton or $5.0 million.

These limits of liability do not apply, however, where the incident is caused by
violation of applicable U.S. federal safety, construction or operating
regulations, or by the responsible party's gross negligence or wilful
misconduct. These limits do not apply if the responsible party fails or refuses
to report the incident or to cooperate and assist in connection with the
substance removal activities. OPA and CERCLA each preserve the right to recover
damages under existing law, including maritime tort law. We believe that we are
in substantial compliance with OPA, CERCLA and all applicable state regulations
in the ports where our vessels call.

OPA requires owners and operators of vessels to establish and maintain with the
U.S. Coast Guard evidence of financial responsibility sufficient to meet the
limit of their potential strict liability under the act. The U.S. Coast Guard
has enacted regulations requiring evidence of financial responsibility in the
amount of $1,500 per gross ton for tankers, coupling the former OPA limitation
on liability of $1,200 per gross ton with the CERCLA liability limit of $300 per
gross ton. The U.S. Coast Guard has indicated that it expects to adopt
regulations requiring evidence of financial responsibility in amounts that
reflect the higher limits of liability imposed by the July 2006 amendments to
OPA, as described above. Under the regulations, evidence of financial
responsibility may be demonstrated by insurance, surety bond, self-insurance or
guaranty. Under OPA regulations, an owner or operator of more than one tanker is
required to demonstrate evidence of financial responsibility for the entire
fleet in an amount equal only to the financial responsibility requirement of the
tanker having the greatest maximum strict liability under OPA and CERCLA. We
have provided such evidence and received certificates of financial
responsibility from the U.S. Coast Guard for each of our vessels required to
have one.

We insure each of our vessels with pollution liability insurance in the maximum
commercially available amount of $1.0 billion. A catastrophic spill could exceed
the insurance coverage available, which could have a material adverse effect on
our business.

Under OPA, with certain limited exceptions, all newly-built or converted vessels
operating in U.S. waters must be built with double hulls, and existing vessels
that do not comply with the double hull requirement will be prohibited from
trading in U.S. waters over a 20-year period (1995-2015) based on size, age and
place of discharge, unless retrofitted with double hulls. Notwithstanding the
prohibition to trade schedule, the act currently permits existing single hull
and double-sided tankers to operate until the year 2015 if their operations
within U.S. waters are limited to discharging at the LOOP or off-loading by
lightering within authorized lightering zones more than 60 miles off-shore.
Lightering is the process by which vessels at sea off-load their cargo to
smaller vessels for ultimate delivery to the discharge port.

Owners or operators of tankers operating in the waters of the United States must
file vessel response plans with the U.S. Coast Guard, and their tankers are
required to operate in compliance with their U.S. Coast Guard approved plans.
These response plans must, among other things:

     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.

We have obtained vessel response plans approved by Coast Guard for our vessels
operating in the waters of the United States. In addition, the U.S. Coast Guard
has announced it intends to propose similar regulations requiring certain
vessels to prepare response plans for the release of hazardous substances.

In addition, the United States Clean Water Act prohibits the discharge of oil or
hazardous substances in United States navigable waters and imposes strict
liability in the form of penalties for unauthorized discharges. The Clean Water
Act also imposes substantial liability for the costs of removal, remediation and
damages and complements the remedies available under OPA and CERCLA, discussed
above. The United States Environmental Protection Agency, or EPA, has exempted
the discharge of ballast water and other substances incidental to the normal
operation of vessels in U.S. ports from Clean Water Act permitting requirements.
However, on March 31, 2005, a U.S. District Court ruled that the EPA exceeded
its authority in creating an exemption for ballast water. On September 18, 2006,
the court issued an order invalidating the exemption in EPA's regulations for
all discharges incidental to the normal operation of a vessel as of September
30, 2008, and directing the EPA to develop a system for regulating all
discharges from vessels by that date. The EPA filed a notice of appeal of this
decision and, if the EPA's appeals are successful and exemption is repealed, our
vessels may be subject to Clean Water Act permit requirements that could include
ballast water treatment obligations that could increase the cost of operating in
the United States. For example, this could require the installation of equipment
on our vessels to treat ballast water before it is discharged or the
implementation of other port facility disposal arrangements or procedures at
potentially substantial cost, and/or otherwise restrict our vessels from
entering U.S. waters.

Other Regulations

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

In addition, most U.S. states that border a navigable waterway have enacted
environmental pollution laws that impose strict liability on a person for
removal costs and damages resulting from a discharge of oil or a release of a
hazardous substance. These laws may be more stringent than U.S. federal law.

The U.S. Clean Air Act of 1970, as amended by the Clean Air Act Amendments of
1977 and 1990, or the CAA, requires the U.S. Environmental Protection Agency, or
EPA, to promulgate standards applicable to emissions of volatile organic
compounds and other air contaminants. Our vessels are subject to vapor control
and recovery requirements for certain cargoes when loading, unloading,
ballasting, cleaning and conducting other operations in regulated port areas.
Our vessels that operate in such port areas with restricted cargoes are equipped
with vapor recovery systems that satisfy these requirements. The CAA also
requires states to draft State Implementation Plans, or SIPs, designed to attain
national health-based air quality standards in primarily major metropolitan
and/or industrial areas. Several SIPs regulate emissions resulting from vessel
loading and unloading operations by requiring the installation of vapor control
equipment. As indicated above, our vessels operating in covered port areas are
already equipped with vapor recovery systems that satisfy these requirements.
Although a risk exists that new regulations could require significant capital
expenditures and otherwise increase our costs, based on the regulations that
have been proposed to date, we believe that no material capital expenditures
beyond those currently contemplated and no material increase in costs are likely
to be required.

The U.S. National Invasive Species Act, or NISA, was enacted in 1996 in response
to growing reports of harmful organisms being released into U.S. ports through
ballast water taken on by ships in foreign ports. The United States Coast Guard
adopted regulations under NISA in July 2004 that impose mandatory ballast water
management practices for all vessels equipped with ballast water tanks entering
U.S. waters. These requirements can be met by performing mid-ocean ballast
exchange, by retaining ballast water on board the ship, or by using
environmentally sound alternative ballast water management methods approved by
the United States Coast Guard. Mid-ocean ballast exchange is the primary method
for compliance with the United States Coast Guard regulations, since holding
ballast water can prevent ships from performing cargo operations upon arrival in
the United States, and alternative methods are still under development. Vessels
that are unable to conduct mid-ocean ballast exchange due to voyage or safety
concerns may discharge minimum amounts of ballast water (in areas other than the
Great Lakes and the Hudson River), provided that they comply with recordkeeping
requirements and document the reasons they could not follow the required ballast
water management requirements. The United States Coast Guard is developing a
proposal to establish ballast water discharge standards, which could set maximum
acceptable discharge limits for various invasive species, and/or lead to
requirements for active treatment of ballast water.

Our operations occasionally generate and require the transportation, treatment
and disposal of both hazardous and non-hazardous solid wastes that are subject
to the requirements of the U.S. Resource Conservation and Recovery Act, or RCRA,
or comparable state, local or foreign requirements. In addition, from time to
time we arrange for the disposal of hazardous waste or hazardous substances at
offsite disposal facilities. If such materials are improperly disposed of by
third parties, we may still be held liable for clean up costs under applicable
laws.

Vessel Security Regulations

Since the terrorist attacks of September 11, 2001, there have been a variety of
initiatives intended to enhance vessel security. On November 25, 2002, the U.S.
Maritime Transportation Security Act of 2002, or MTSA, came into effect. To
implement certain portions of the MTSA, in July 2003, the U.S. Coast Guard
issued regulations requiring the implementation of certain security requirements
aboard vessels operating in waters subject to the jurisdiction of the United
States. Similarly, in December 2002, amendments to SOLAS created a new chapter
of the convention dealing specifically with maritime security. The new chapter
became effective in July 2004 and imposes various detailed security obligations
on vessels and port authorities, most of which are contained in the
International Ship and Port Facilities Security Code, or the ISPS Code. The ISPS
Code is designed to protect ports and international shipping against terrorism.
After July 1, 2004, to trade internationally, a vessel must attain an
International Ship Security Certificate from a recognized security organization
approved by the vessel's flag state. Among the various requirements are:

     o    on-board installation of automatic identification systems to provide a
          means for the automatic transmission of safety-related information
          from among similarly equipped ships and shore stations, including
          information on a ship's identity, position, course, speed and
          navigational status;

     o    on-board installation of ship security alert systems, which do not
          sound on the vessel but only alerts the authorities on shore;

     o    the development of vessel security plans;

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

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

     o    compliance with flag state security certification requirements.

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

Inspection by Classification Societies

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

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

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

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

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

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

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

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

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

The following table sets forth the fleet that we operate as of May 31, 2007
(including contracted newbuildings not yet delivered):

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

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

VLCCs
-----
Antares Voyager              1998            310,000   Double-hull    BA     Bareboat charter
Phoenix Voyager              1999            308,500   Double-hull    BA     Bareboat charter
Hull 2396 (Newbuilding)      2009            297,000   Double-hull    n/a    n/a
Hull 2397 (Newbuilding)      2009            297,000   Double-hull    n/a    n/a
Hull 2419 (Newbuilding)      2010            297,000   Double-hull    n/a    n/a
Hull 2420 (Newbuilding)      2010            297,000   Double-hull    n/a    n/a
Front Shanghai               2006            298,500   Double-hull    HK     Spot market

Suezmax Tankers
---------------
Hull 1017 (Newbuilding)      2008            156,000   Double-hull    n/a    n/a
Hull 1018 (Newbuilding)      2009            156,000   Double-hull    n/a    n/a
Hull 1019 (Newbuilding)      2008            156,000   Double-hull    n/a    n/a
Hull 1026 (Newbuilding)      2009            156,000   Double-hull    n/a    n/a
Hull 1056 (Newbuilding)      2010            156,000   Double-hull    n/a    n/a
Hull 1057 (Newbuilding)      2010            156,000   Double-hull    n/a    n/a
Hull 1060 (Newbuilding)      2010            156,000   Double-hull    n/a    n/a
Hull 1061 (Newbuilding)      2010            156,000   Double-hull    n/a    n/a
Front Horizon(*)             1988            149,500   Single-hull    MI     Spot market
Front Voyager                1992            155,000   Single-hull    BA     Spot market
Cygnus Voyager               1993            157,000   Double-hull    BA     Bareboat charter
Altair Voyager               1993            136,000   Double-hull    BA     Bareboat charter
Sirius Voyager               1994            156,000   Double-hull    BA     Bareboat charter

Tonnage chartered in from Ship Finance
--------------------------------------

VLCCs
-----
Front Sabang                 1990            286,000   Single-hull    SG     Time charter
Front Highness               1991            284,000   Single-hull    SG     Time charter
Front Lady                   1991            284,000   Single-hull    SG     Time charter
Front Lord                   1991            284,000   Single-hull    SG     Time charter
Front Duke                   1992            284,000   Single-hull    SG     Time charter
Front Duchess                1993            284,000   Single-hull    SG     Time charter
Edinburgh                    1993            302,000   Double-side    LIB    Spot market
Front Ace                    1993            276,000   Single-hull    LIB    Time charter
Front 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     Time charter
Front Vista                  1998            300,000   Double-hull    MI     Spot market
Front Comanche               1999            300,000   Double-hull    FRA    Time charter
Golden Victory               1999            300,000   Double-hull    MI     Time charter
Front Circassia              1999            306,000   Double-hull    MI     Spot market
Front Opalia                 1999            302,000   Double-hull    MI     Spot market
Ocana (Ex Front Commerce)    1999            300,000   Double-hull    IoM    Bareboat charter
Front Scilla                 2000            303,000   Double-hull    MI     Spot market
Oliva (Ex Ariake)            2001            299,000   Double-hull    IoM    Bareboat charter
Front Serenade               2002            299,000   Double-hull    LIB    Time charter
Otina (Ex Hakata)            2002            298,000   Double-hull    IoM    Bareboat charter
Ondina (Ex Front Stratus)    2002            299,000   Double-hull    LIB    Bareboat charter
Front Falcon                 2002            309,000   Double-hull    BA     Spot market
Front Page                   2002            299,000   Double-hull    LIB    Time charter
Front Energy                 2004            305,000   Double-hull    CYP    Spot market
Front Force                  2004            305,000   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 Birch                  1991            150,000   Double-side    MI     Spot market
Front Maple                  1991            150,000   Double-side    MI     Spot market
Front Pride                  1993            150,000   Double-hull    NIS    Spot market
Front Glory                  1995            150,000   Double-hull    NIS    Time charter
Front Splendour              1995            150,000   Double-hull    NIS    Spot market
Front Ardenne                1997            150,000   Double-hull    NIS    Spot market
Front Brabant                1998            150,000   Double-hull    NIS    Spot market
Mindanao                     1998            150,000   Double-hull    SG     Spot market

Containerships
--------------
Sea Alfa                     2005         1,700 TEU(1) n/a            CYP    Time charter
Sea Beta                     2005         1,700 TEU    n/a            CYP    Time charter

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
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 Tina                   2000            299,000   Double-hull    LIB    Spot market
Front Commodore              2000            299,000   Double-hull    LIB    Time charter
Front Eagle                  2002            309,000   Double-hull    BA     Spot market
Cosgreat Lake                2002            298,833   Double-hull    PAN    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
Front Traveller              1990            150,000   Single-hull    MI     Spot market
Front Granite                1991            150,000   Single-hull    MI     Spot market
Front Comor                  1993            150,000   Single-hull    MI     Time charter
Marble                       1992            150,000   Single-hull    MI     Spot market
Front Target                 1990            150,000   Single-hull    MI     Spot market
</TABLE>

(*) Vessel sold in June 2007 with expected delivery in July or August 2007.

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

(1) Measured in "twenty-foot equivalent units" (TEU)

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 AS leases office space, at market
rates, in Oslo, Norway from Bryggegata AS, a company indirectly affiliated
with Hemen, our principal shareholder.

ITEM 4A. UNRESOLVED STAFF COMMENTS

None.

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, 2006, our tanker fleet consisted of 30 VLCCs, four VLCC newbuilding
contracts and 28 Suezmax tankers, of which eight are Suezmax OBOs, six Suezmax
newbuilding contracts and one Aframax tanker. We also charter in eleven modern
VLCCs and three modern Suezmax tankers from third parties. A full fleet list is
provided in Item 4.D. "Information on the Company" showing the vessels that we
currently own and charter in.

<PAGE>

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, 2006, 2005 and
2004 is as follows:

----------------------------------------------------
                                  2006   2005   2004
----------------------------------------------------
VLCCs
At start of period                  43     38     36
Acquisitions                         2      5      3
Dispositions                         4      -      1
----------------------------------------------------
At end of period                    41     43     38
----------------------------------------------------

VLCCs owned by equity investees
At start of period                   -      1      7
Acquisitions                         -      -      -
Dispositions                         -      1      6
----------------------------------------------------
At end of period                     -      -      1
----------------------------------------------------

Suezmax
At start of period                  23     28     23
Acquisitions                         -      -      5
Dispositions                         -      5      -
----------------------------------------------------
At end of period                    23     23     28
----------------------------------------------------

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

Aframax
At start of period                   -      -      -
Acquisitions                         1      -      -
Dispositions                         -      -      -
----------------------------------------------------
At end of period                     1      -      -
----------------------------------------------------

Drybulk
At start of period                   -      1      3
Dispositions                         -      1      2
----------------------------------------------------
At end of period                     -      -      1
----------------------------------------------------

Total fleet
At start of period                  74     76     77
Acquisitions                         3      5      8
Dispositions                         4      7      9
----------------------------------------------------
At end of period                    73     74     76
----------------------------------------------------

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,
                                     2006          2005           2004
                                  No.     %      No.     %      No.     %
---------------------------------------------------------------------------
VLCCs
Spot or pool                        18     44%     29     67%     25     66%
Time charter                        13     32%      9     21%      2      5%
Bareboat charter                    10     24%      5     12%     11     29%
---------------------------------------------------------------------------
Total                               41    100%     43    100%     38    100%
---------------------------------------------------------------------------

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

Suezmax
Spot or pool                        16     70%     22     96%     24     86%
Time charter                         3     13%      1      4%      -      -
Bareboat charter                     3     13%      -      -       4     14%
Under Conversion                     1      4%      -      -       -      -
---------------------------------------------------------------------------
Total                               23    100%     23    100%     28    100%
---------------------------------------------------------------------------

Aframax
Under Conversion                     1    100%      -      -       -      -
---------------------------------------------------------------------------
Total                                1    100%      -      -       -      -
---------------------------------------------------------------------------

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

Drybulk
Time charter                         -      -       -      -       -      -
Bareboat charter                     -      -       -      -       1    100%
---------------------------------------------------------------------------
Total                                -      -       -      -       1    100%
---------------------------------------------------------------------------

Total fleet
Spot or pool                        34     47%     51     69%     50     66%
Time charter                        24     32%     18     24%     10     13%
Bareboat charter                    13     18%      5      7%     16     21%
Under Conversion                     2      3%      -      -       -      -
---------------------------------------------------------------------------
Total                               73    100%     74    100%     76    100%
---------------------------------------------------------------------------

Market Overview and Trend Information

The tanker market continued to strengthen in 2006 and it was the demand side
which had the greatest influence on rates and the seasonal pattern for the
Suezmax and VLCC segments were quite similar though the Suezmaxes witnessed more
volatility. The year started at a TCE of approximately $81,000 per day for the
VLCCs and about $70,000 per day for the Suezmaxes. Rates then followed the
traditional seasonal pattern by softening to about $33,000 per day for the VLCCs
and about $25,000 per day for the Suezmaxes around the middle of April 2006.
From this point, the rates began to firm against market predictions at the time
and rose to about $89,000 per day for the VLCCs and about $75,000 per day for
the Suezmaxes by the end of August. The fear of another active hurricane season
in the US Gulf, geopolitical uncertainty and increased risk of supply
disruptions gave strong incentives to build oil reserves throughout the summer.
On land storage capacity was in some regions filled to capacity, driven by
extraordinarily strong future rates compared to market rates, resulting in the
wide use of tankers for storage purposes.

The reserve build up triggered a sharp drop in crude prices, from $76 per barrel
in early August to $56 per barrel in early October. This led to the market
weakening and rates fell to about $45,000 per day for the VLCCs and about
$30,000 per day for the Suezmaxes by the middle of December 2006. Depending on
the source of information, the average TCE for the year was about $63,000 per
day for a double hulled VLCC and about $50,000 per day for a double hulled
Suezmax.


There is a trend that oil majors discriminate single hull tonnage when
transporting persistent oils and therefore also avoid inspecting single hull
ships on the same basis. Oil traders with crude or fuel oil cargoes often
require double hull tonnage in order to have full flexibility with regards to
cargo delivery. Hence, single hull ships appear no longer able to trade to their
full capacity compared to the double hull vessels which implies a further gap in
the already existing 'two tier market' between the double and the single
vessels.

Bunkers followed the movements in the oil market closely in 2006 with Fujairah's
highest bunker quote for the year set early May at $359 per metric ton, or mt,
with the low set at the end of November at $258/mt. The average bunker price in
2006 was calculated to about of $309/mt.

In order to prevent an uncontrolled price dive, OPEC cut production by 1.2
million barrels per day from November 2006. It was reported by the International
Energy Agency, or IEA, that average OPEC Oil production, including Iraq but not
Angola, was approximately 29.7 million barrels per day during 2006, a 0.02
million barrel per day decrease from 2005. Even if OPEC crude production was
unchanged from 2005 to 2006 there was a noticeable shift in production from
Nigeria and Venezuela to the Middle East. On January 1, 2007, Angola became the
twelfth member of OPEC and it will be interesting to see if the inclusion of
Angola will strengthen the capability of OPEC in fulfilling its objectives and
help to further stabilize the market.

OPEC producers are expected to add a net 2.6 million barrels per day, or mb/d,
to installed crude capacity in 2007 and 2008 according to IEA. Capacity is
expected to reach 34.8 mb/d by the end of 2007, compared with 33.9 mb/d at the
end of 2006. Growth could accelerate in 2008, with capacity reaching 36.5 mb/d
by the end of the year. Capacity growth is expected to be heavily skewed towards
Angola and Saudi Arabia, together accounting for half of the net increase.

The Middle East Gulf exports dropped in the first half of 2007 but are expected
to rebound in the second half. The long haul trade route West Africa-Asia is
expected to be stable in 2007.

The IEA further estimates that the average world oil demand was 84.5 million
barrels per day in 2006, a 1% increase from 2005. For 2007 a 1.8% or 1.55
million barrels per day growth is forecasted in world oil demand with North
America, China and the Middle East as the main drivers.

The International Monetary Fund, or IMF, expect global growth to moderate to
4.9% in 2007 and 2008, approximately half a percentage point lower than in 2006
according to their World Economic Outlook report released April 2007. In the
United States, growth is expected to come down to 2.2% this year, from 3.3% in
2006. Growth is also expected to ease in Europe, while in Japan it is expected
that the expansion continue at about the same pace as in 2006. Emerging markets
and developing countries are expected to continue to grow strongly, albeit at a
some what slower pace than in 2006. China's growth is projected to remain rapid
in 2007 and 2008, albeit a little below the torrid pace in 2006, while India's
economy should also continue to grow rapidly.

The total Suezmax fleet increased by 7.5% in 2006 to 346 vessels according to
industry sources, who also state that a total of 25 new vessels were delivered
to owners during 2006 while 77 new orders were made. The majority of these are
set to be delivered in 2009. The total order book amounted to 123 vessels at the
end of the year which represented approximately 35% of the existing fleet.

The total VLCC fleet increased by 3.2% in 2006 to 479 vessels with a total of 18
new vessels delivered to owners during 2006 while 79 new orders were made. The
total order book amounted to 161 vessels at the end of the year which
represented approximately 34% of the existing fleet.

We believe it is likely that more tankers will be either converted or scrapped
compared to recent years. We expect approximately 30 VLCCs and about 25
Suezmaxes to be delivered from shipyards during 2007.

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 a cumulative effect of a change in accounting principle
of $33.7 million effective December 31, 2003 as discussed below.

     o    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 a cumulative change in accounting principle of
          $8.5 million. Golden Fountain Corporation sold its vessel in December
          17, 2004.

     o    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, with the exception of certain
          subsidiaries which have been accounted for using the equity method.
          The consolidation of ITC as of December 31, 2003 had a cumulative
          effect of a change in accounting principle of $25.2 million.

     o    Nine of the vessels we leased as at December 31, 2006 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, 2006, one of these leases is accounted for as an operating lease
          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, 2006,
          the original cost to the lessor of the assets under such arrangements
          was $618.5 million. At December 31, 2006, our residual value
          guarantees associated with these leases, which represent the maximum
          exposure to loss, are $84.5 million.

     o    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, we did not consolidate this special
          purpose entity. We determined that the entity that owns Oscilla is a
          variable interest entity and that we were the primary beneficiary. At
          December 31, 2004 through to 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 IMO 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.

Following the dividend of most of our remaining interest in Ship Finance on
March 22, 2007, we re-evaluated the basis of our consolidation of Ship Finance
under FIN 46(R) and determined that consolidation of Ship Finance and its
subsidiaries was no longer appropriate and that the vessels chartered in from
Ship Finance should be accounted for as assets held under finance leases.

Restatement of Prior Years

During 2006, we reassessed our accounting treatment of certain subsidiaries in
the ITC Group under FIN 46(R) and determined that we are not the primary
beneficiary of the variable interest entities CalPetro Tankers (Bahamas I)
Limited, CalPetro Tankers (Bahamas II) Limited, CalPetro Tankers (Bahamas III)
Limited and CalPetro Tankers (IOM) Limited for the years ended December 31, 2004
and December 31, 2005. In prior years these entities were fully consolidated but
as a result of the reassessment they are now being accounted for under the
equity method. As a result of this reassessment we have retroactively restated
our financial statements for the years ended December 31, 2004 and 2005. The
impact of the restatement is detailed fully in note 3 of the financial
statements included in Item 18. Because the equity accounting and consolidation
models result in the same net income, the restatement has not resulted in a
change in net assets, however, there have been several reclassifications in the
balance sheets and statements of operations.

In April 2006, Chevron terminated its bareboat charter with CalPetro Tankers
(Bahamas III) Limited. Under FIN 46(R) this is considered a triggering event and
we began to consolidate the variable interest entity from that date.

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 2005, we disposed of our last remaining dry bulk carrier which has been
accounted for as discontinued operations as we do not plan on having any
continued involvement in dry bulk operations. Discontinued operations also
includes a portion of the gain on sale of shares of Golden Ocean in February
2005 representing the difference between the cost of the shares sold and the
fair value of the shares at the date of the spin off of Golden Ocean.

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.

Management believes that the following accounting policies are the most critical
in fully understanding and evaluating our reported financial results as they
require a higher degree of judgement in their application resulting from the
need to make estimates about the effect of matters that are inherently
uncertain. 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 recognized rateably over the estimated duration of
the voyage, which is measured from completion of discharge to completion of
discharge. The operating results of voyages in progress at a reporting date are
estimated and recognized 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" which are included in
voyage 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" which are included in voyage 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 or expectations of the impact of current
rules change.

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
three 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 which affect our results of operations and financial
position include:

     o    the earnings of our vessels in the charter market;
     o    vessel operating expenses;
     o    administrative expenses;
     o    depreciation;
     o    interest expense;
     o    minority interest

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

As at December 31, 2006, 2005 and 2004, 34, 51 and 50, 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.

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.

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 or lease. 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.

All of our charter and management arrangements with Ship Finance are eliminated
on consolidation. However, due to the spin-off of our holdings of Ship Finance
shares, we record as an expense the share of total consolidated income
attributable to the minority interest.

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 other than potentially in relation to insurance costs and crew
costs. It is anticipated that insurance costs, which have risen considerably
over the last three years, may well continue to rise over the next few years.
Oil transportation is a specialized area and the number of vessels is
increasing. There will therefore be an increased demand for qualified crew and
this has and will continue to put inflationary pressure on crew costs. However,
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.

Year ended December 31, 2006 compared with the year ended December 31, 2005

Total operating revenues and voyage expenses and commission

------------------------------------------------------------------------------
                                Year ended December 31,           Change
(in thousands of $)                2006        2005           $            %
------------------------------------------------------------------------------
Voyage charter revenues         1,114,531   1,152,240     (37,709)          (3)
Time charter revenues             364,956     205,837     159,119           77
Bareboat charter revenues          89,655     142,562     (52,907)         (37)
Finance lease interest income       9,411           -       9,411          100
Other income                        5,310       3,877       1,433           37
------------------------------------------------------------------------------
Total operating revenues        1,583,863   1,504,516      79,347            5
------------------------------------------------------------------------------

Total operating revenues were relatively stable between 2005 and 2006 due to
similar market conditions. During 2006 there was a change in fleet employment
from the spot market to the time charter market in order to reduse exposure to
the spot market, especially in the case of non-double hull vessels. The change
in fleet employment has resulted in an increase in total time charter revenues
and a decrease in voyage charter revenues. See the table above "Summary of Fleet
Employment" for more details of our fleet employment during 2006.  Bareboat
charter revenues declined due to the redelivery from bareboat charters of four
vessels in the first and second quarters of 2006.

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 our pool revenues
included in voyage revenues is as follows:

----------------------------------------------------------
(in thousands of $)                         2006      2005
----------------------------------------------------------
Pool earnings allocated on gross basis   131,099   128,726
Pool earnings allocated on net basis           -    25,015
----------------------------------------------------------
Total pool earnings                      131,099   153,741
----------------------------------------------------------

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 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 2006 we include an allowance of $6,500
per day for estimated operating costs (2005 and 2004-$6,500 per day).

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

(in $ per day)     2006     2005     2004     2003     2002
-----------------------------------------------------------
VLCC             57,800   57,400   78,000   42,300   22,500
Suezmax          37,800   40,300   57,900   33,900   18,400
Suezmax OBO      31,700   34,900   27,900   31,900   17,700
Containerships   22,700   26,100        -        -        -

Ship operating expenses

                       Year ended December 31,         Change
(in thousands of $)       2006        2005          $           %
-------------------------------------------------------------------
Suezmax OBO              32,111      17,658      14,453          82
Suezmax                  63,068      53,935       9,133          17
VLCC                    100,113      75,931      24,182          32
Containerships            4,085       1,178       2,907         247
-------------------------------------------------------------------
                        199,377     148,702      50,675          34
-------------------------------------------------------------------

Ship operating expenses are the direct costs associated with running a vessel
and include crew costs, vessel supplies, repairs and maintenance, drydockings,
lubricating oils and insurance. Overall, ship operating expenses have increased
in 2006 compared with 2005 due to fleet changes and increased drydockings.

Major movements between 2006 and 2005 are as follows:

     o    An increase in drydockings during the year from 10 vessels in 2005 to
          19 vessels in 2006. This resulted in an operating expense increase of
          $27.8 million.
     o    Costs associated with the newly acquired Aframax vessel Front Puffin
          were $2.1 million before we started the conversion of this vessel to
          an FPSO vessel.
     o    Increased commercial management fees of $3.4 million in relation to
          certain charters beginning in 2006.
     o    General increase of $15.9 million due to vessels acquired and
          delivered from bareboat during 2006.
     o    Vessel sales did not result in a significant decline in ship operating
          expenses due to vessels sold during the year being primarily bareboat
          vessels.

Charterhire expenses

                        Year ended December 31,         Change
(in thousands of $)         2006        2005         $           %
---------------------------------------------------------------------
Charterhire expenses      24,923      11,711      13,212         113
---------------------------------------------------------------------

Number of vessels chartered in and accounted
for as operating leases:                     2006                     2005
----------------------------------------------------------------------------
      VLCC                                      1                        -
      Suezmax                                   1                        1
----------------------------------------------------------------------------
                                                2                        1
----------------------------------------------------------------------------

The increase in charterhire expense in 2006 is due to two vessels under
operating lease in 2006 compared to one vessel under operating lease in 2005.

Administrative expenses

                          Year ended December 31,        Change
(in thousands of $)          2006        2005          $           %
-----------------------------------------------------------------------
Administrative expenses      32,214      21,061      11,153          53

The increase in administrative expenses in 2006 compared to 2005 is primarily
due to the following items:

     o    $6.0 million due to increased salary costs as the result of an
          increase in total employees and performance related bonuses,
     o    $3.4 million due to an increase in professional fees in relation to
          corporate transactions and Sarbanes-Oxley section 404 compliance,
     o    $0.3 million due to increased rent costs, and
     o    $0.7 million due to increased travel costs.

Interest income

                        Year ended December 31,      Change
(in thousands of $)       2006       2005           $         %
--------------------   ---------   ---------   ---------   ---------
Interest income           47,733      40,867       6,866          17

Interest income has increased primarily as a result of an increase in interest
earned on bank deposits due to a combination of increased interest rates and an
increase in average cash balances held.

Interest expense

                        Year ended December 31,     Change
(in thousands of $)       2006        2005          $          %
--------------------   ---------   ---------   ---------   ---------
Interest expense         206,144     206,058          86           -

Interest expense increased in 2006 compared to 2005 due to rising LIBOR rates on
a relatively stable average debt balance. This was partially offset by
favourable movements in Ship Finance's interest rate swaps and lower
amortization of deferred charges. In 2005, we had high amortization of deferred
charges due to write offs as a result of repayment of debt on vessels sold
during the year and the repurchase of Ship Finance 8.5% Senior Notes.

Equity earnings of unconsolidated subsidiaries and associated companies

<TABLE>
<CAPTION>
                                           Year ended December 31,         Change
(in thousands of $)                           2006        2005           $          %
----------------------------------------   ---------   ---------   ---------    ---------
<S>                                        <C>         <C>         <C>          <C>
Share of results of associated companies       1,118       3,379      (2,261)         (67)
</TABLE>

As of December 31, 2006, we account for seven investees (2005: seven) under the
equity method. There was an overall decrease in share of results in associated
companies because of decreased earnings from Tobago, as, after the sale of this
vessel to Ship Finance, we began consolidation of this vessel. Also, we began
consolidation of CalPetro Tankers (Bahamas III) Limited in 2006, which resulted
in a further decrease. These decreases were partially offset by earnings from
the new investee, Front Shadow.

Foreign currency exchange gains

                                  Year ended December 31,        Change
(in thousands of $)                  2006        2005         $           %
-------------------------------   ---------   ---------   ---------    --------
Foreign currency exchange gains       1,056      18,829     (17,773)        (94)

Our foreign currency exchange gains are principally due to forward currency
exchange contracts which are denominated in Yen. As of December 31, 2005 we were
party to five Yen denominated forward currency exchange contracts with a
notional principal of (Y) 8.7 billion. In the year ended December 31, 2005, we
recorded realized gains of $16.7 million in relation to these forward currency
exchange contracts. The gains were due to the weakening of the Yen against the
US Dollar. All of our Yen denominated forward currency exchange contracts
expired during the fourth quarter of 2006. The gain on these contracts during
2006 was much lower than 2005 due to less movement in the Yen against the US
dollar.

Other

<TABLE>
<CAPTION>
                                                       Year ended December 31,            Change
(in thousands of $)                                       2006         2005           $            %
----------------------------------------------------   ---------    ---------    ---------    ---------
<S>                                                    <C>          <C>          <C>          <C>
Mark to market adjustments for financial
derivatives                                               (2,735)      16,068      (18,803)        (117)
Gains and losses from freight forward agreements          (8,162)      (1,569)      (6,593)        (420)
Dividends received                                        13,317        1,540       11,777          765
Realized gain on sale of securities                        9,782       28,035      (18,253)         (65)
Other financial items, net                                (3,700)       1,755       (5,455)        (311)
</TABLE>

The unfavourable movement in market to market adjustments relates primarily to
interest rate swaps held by Ship Finance and is due to new interest rate swaps
fixing interest at a higher rate in 2006.

Dividend income in 2006 was primarily dividends received on the shares of
General Maritime Corporation, or General Maritime, that we held.

The 2005 gain on sale of securities represents the gain on sale of Golden Ocean
and General Maritime shares described below. The 2006 gain on sale of securities
represents the gain on sale of the remainder of our holding in General Maritime
shares.

Minority interest

Minority interest represents minority investors' interests in the net income of
Ship Finance. As of December 31, 2006 minority investors owned 88.9% (2005:
83.83%) of the shares of Ship Finance.

Year ended December 31, 2005 compared with the year ended December 31, 2004

Total operating revenues and voyage expenses and commission

                            Year ended December 31,         Change
(in thousands of $)           2005        2004           $          %
-------------------------   ---------   ---------   ---------    ---------
Voyage charter revenues     1,152,240   1,554,519    (402,279)         (26)
Time charter revenues         205,837     108,246      97,591           90
Bareboat charter revenues     142,562     176,381     (33,819)         (19)
Other income                    3,877       3,777         100            3
-------------------------   ---------   ---------   ---------    ---------
Total operating revenues    1,504,516   1,842,923    (338,407)         (18)
-------------------------   ---------   ---------   ---------    ---------

Total operating revenues decreased by 18% in 2005 compared with 2004 which
primarily reflects weaker earnings in the spot market. The decrease in voyage
charter revenues primarily reflects the strategic change in the employment of
five VLCCs from the spot market to time charters along with a general downward
trend in the market compared to the unusually high market in 2004. An analysis
of our pool revenues included in voyage revenues is as follows:

(in thousands of $)                           2005                        2004
-------------------------------------------------------------------------------
Pool earnings allocated on gross basis     128,726                      78,430
Pool earnings allocated on net basis        25,015                     117,179
-------------------------------------------------------------------------------
Total pool earnings                        153,741                     195,609
-------------------------------------------------------------------------------

The increase in time charter revenues mainly reflects the change in employment
of five of our VLCCs to time charters during 2005. These time charters provide
us with a guaranteed minimum charter rate along with a 50:50 profit sharing of
average earnings above agreed thresholds.

Bareboat charter revenues in 2004 include $17.0 million in relation to two VLCCs
which were employed in the spot market part way through 2004. In 2004, we placed
four wholly owned VLCCs on bareboat charters which provide for a flat bareboat
rate along with a profit share based on market rates. Total earnings for these
vessels were $79.0 million in 2005 compared to $96.1 million in 2004 with the
decrease reflecting a decrease in market rates compared to 2004.

Ship operating expenses

                       Year ended December 31,          Change
(in thousands of $)       2005        2004         $           %
--------------------   ---------   ---------   ---------   ---------
Suezmax OBO               17,658      15,350       2,308          15
Suezmax                   53,935      43,523      10,412          24
VLCC                      75,931      71,512       4,419           6
Containerships             1,178           -       1,178         100
--------------------   ---------   ---------   ---------   ---------
                         148,702     130,385      18,317          14
--------------------   ---------   ---------   ---------   ---------

Ship operating expenses have increased primarily as a result of fleet changes
and drydockings in the year. Major movements are as follows:

     o    An increase in drydockings during the year from seven vessels in 2004
          to ten in 2005
     o    Inclusion of a full year's operating costs for five Suezmaxes
          purchased during 2004 resulting in an increase in costs totalling
          $10.9 million
     o    Increase of $4.7 million due to acquisition of four VLCCs during 2005
     o    Increase of $1.2 million due to acquisition of two containerships
          during 2005
     o    Reduction of costs totalling $2.1 million due to sale of the vessel
          Golden Fountain late in 2004
     o    Reduction of costs of $4.7 million due to the sale of five Suezmaxes
          during the year

Charterhire expenses

                        Year ended December 31,     Change
(in thousands of $)       2005        2004         $           %
--------------------   ---------   ---------   ---------   ---------
Charterhire expenses      11,711      39,302     (27,591)        (70)
--------------------   ---------   ---------   ---------   ---------

Number of vessels chartered in and accounted
for as operating leases:       2005                     2004
----------------------------------------------------------------
      VLCC                       -                        3
      Suezmax                    1                        1
----------------------------------------------------------------
                                 1                        4
----------------------------------------------------------------

Charterhire expenses have decreased primarily as a result of our purchase in the
first quarter of the year of three VLCCs which were previously chartered in and
accounted for as operating leases.

Administrative expenses

                           Year ended December 31,        Change
(in thousands of $)          2005        2004          $           %
-----------------------   ---------   ---------   ---------    ---------
Administrative expenses      21,061      25,596      (4,535)         (18)

The decrease in administrative expenses in 2005 is mainly attributable to 2004
including charges relating to employee stock options of $5.5 million which have
not been incurred in 2005 as our employee stock option plans terminated in June
2004.

Depreciation

                        Year ended December 31,     Change
(in thousands of $)       2005        2004          $          %
--------------------   ---------   ---------   ---------   ---------
Depreciation             198,359     180,497      17,862          10

The increase in depreciation is primarily attributable to:

     o    Reduction of $5.9 million due to sale of five vessels in the year
     o    Additional depreciation of $15.6 million due to purchase of nine
          vessels in the year
     o    Increase of $8.9 million due to full year's depreciation for vessels
          purchased during 2004

In 2004, Golden Fountain was fully consolidated under FIN 46 and $3.3 million in
depreciation was included in the charge for that year. As discussed in Note 17
of the financial statements included herein, the vessel Golden Fountain was sold
late 2004 and as such, we have not recorded any depreciation in 2005.

Interest income

                       Year ended December 31,       Change
(in thousands of $)       2005        2004        $           %
--------------------   ---------   ---------   ---------   ---------
Interest income           40,867      31,403       9,464          30

Interest income has increased primarily as a result of an increase in interest
earned on bank deposits due to a combination of increased interest rates and an
increase in average cash balances held.

Interest expense

                       Year ended December 31,         Change
(in thousands of $)         2005        2004   $           %
--------------------   ---------   ---------   ---------   ---------
Interest expense         206,058     194,378      11,680           6

Interest expense has increased primarily due to:

     o    Increase in loan interest of $25.2 million due to combination of
          increase in LIBOR and a larger debt balance
     o    Decrease in swap interest of $10.7 million due to the increase in
          LIBOR
     o    Decrease in interest on Ship Finance 8.5% Senior Notes of $5.6 million
          as a result of the repurchase of $73.2 million of the Notes
     o    Increase in amortization of deferred charges of $6.6 million primarily
          due to write offs as a result of repayment of debt on vessels sold
          during the year and the repurchase of Ship Finance 8.5% Senior Notes

Equity earnings of unconsolidated subsidiaries and associated companies

<TABLE>
<CAPTION>
                                           Year ended December 31,        Change
(in thousands of $)                           2005        2004          $          %
----------------------------------------   ---------   ---------   ---------    ---------
<S>                                        <C>         <C>         <C>          <C>
Share of results of associated companies       3,379      10,425      (7,046)         (68)
</TABLE>

As of December 31, 2005, we account for seven investees under the equity method
(2004: six investees). One of those investees, Golden Fountain Corporation, sold
its vessel in December 2004 and was effectively dormant in 2005. Our share of
results of associated companies has decreased primarily due to an overall
reduction in investee earnings for the year.

Foreign currency exchange gains and losses

<TABLE>
<CAPTION>
                                           Year ended December 31,         Change
(in thousands of $)                           2005        2004         $           %
----------------------------------------   ---------   ---------    ---------   ---------
<S>                                        <C>         <C>          <C>         <C>
Foreign currency exchange gains (losses)      18,829      (4,932)      23,761         482
</TABLE>

Our foreign currency exchange gains are principally due to forward currency
exchange contracts which are denominated in Yen. As of December 31, 2005 and
2004, we were party to five Yen denominated forward currency exchange contracts
with a notional principal of (Y) 8.7 billion and (Y) 14.6 billion respectively.
In the year ended December 31, 2005, we recorded realized gains of $16.7 million
in relation to these forward currency exchange contracts compared to realised
losses of $8.4 million in 2004. The gains recorded can be attributed to the
weakening of the Yen against the US Dollar from 103.1 at December 31, 2004 to
117.9 at December 31, 2005.

Other

<TABLE>
<CAPTION>
                                                       Year ended December 31,           Change
(in thousands of $)                                       2005         2004          $            %
----------------------------------------------------   ---------    ---------    ---------    ---------
<S>                                                    <C>          <C>          <C>          <C>
Mark to market adjustments for financial derivatives      16,068        9,000        7,068           79
Gains and losses from freight forward agreements          (1,569)     (14,844)      13,275           89
Dividends received                                         1,540           21        1,519            -
Realized gain on sale of securities                       28,035        7,151       20,884            -
Other financial items, net                                 1,755        1,981         (226)         (11)
</TABLE>

The increase in mark to market adjustments for interest rate swaps is due to the
increase in the forward rate curve. As of December 31, 2005, we were party to
interest rate swaps with a total notional principal of $618.3 million compared
to a total notional principal of $631.4 million in 2004.

The freight forward agreements are primarily speculative and are based on the
Baltic Capesize Index. Lower losses are due to favourable movements in 2005.

Gain on sale of securities relates to the sale of General Maritime and Golden
Ocean shares in 2005 and General Martime and Knightsbridge Tankers shares in
2004.

Minority interest

Minority interest represents minority investors' interests in the net income of
Ship Finance. As of December 31, 2005, minority investors owned 83.83% of the
shares 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 2005 and 2004. Of the $117.6 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 10.7% of the shares outstanding which have been classified as
marketable securities. These shares were subsequently sold in February 2005.

In 2005, we disposed of our last remaining dry bulk carrier which has been
accounted for as discontinued operations as we do not plan on having any
continued involvement in dry bulk operations. In 2005, discontinued operations
also includes a portion of the gain on sale of shares of Golden Ocean in
February 2005 representing the difference between the cost of the shares and the
fair value of the shares on the date of the spin off of Golden Ocean.

Recent accounting pronouncements

In March 2006, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 156 Accounting for Servicing of
Financial Assets - an amendment to FAS 140 ("FAS 156"). FAS 156 requires that
all separately recognized servicing rights be initially measured at fair value
if practicable. The statement also permits an entity to choose between two
measurement methods for each class of separately recognized servicing assets and
liabilities. FAS 156 is effective for fiscal years beginning after September 15,
2006. The adoption of FAS 156 on January 1, 2007 did not have an impact on the
Company's financial statements.

In June 2006, the FASB issued Interpretation No. 48 Accounting for Uncertainty
in Income Taxes - an interpretation of FAS 109 ("FIN 48"). FIN 48 clarifies the
application of FAS 109 by defining the criterion that an individual tax position
must meet for any part of the benefit of that position to be recognized in an
entity's financial statements and also provides guidance on measurement,
de-recognition, classification, interest and penalties and disclosure. FIN 48 is
effective for fiscal years beginning after December 15, 2006. The adoption of
FIN 48 on January 1, 2007 did not have an impact on the Company's financial
statements.

In September 2006, the FASB issued Statement of Financial Accounting Standards
No. 157 Fair Value Measurements ("FAS 157"). FAS 157 defines fair value,
establishes a framework for measuring fair value in generally accepted
accounting principles and expands disclosures about fair value measurements. FAS
157 applies under most other accounting pronouncements that require or permit
fair value measurements and does not require any new fair value measurements.
FAS 157 is effective for fiscal years beginning after November 15, 2007. The
Company has not yet determined the effect of adoption of FAS 157 on its
financial statements.

In September 2006, the FASB issued Statement of Financial Accounting Standards
No. 158 Employers' Accounting for Defined Benefit Pension and Other Post
Retirement Plans - an amendment of FAS 87, 88, 106, and 132R ("FAS 158"). FAS
158 requires that the funded status of defined benefit post retirement plans be
recognized in the statement of financial position and changes in the funded
status be reflected in comprehensive income. FAS 158 also requires the benefit
obligations to be measured as of the same date of the financial statements and
requires additional disclosures related to the effects of delayed recognition of
gains or losses, prior service costs or credits and transition assets or
obligation on net periodic benefit cost. FAS 158 is effective for fiscal years
ending after December 15, 2006 for employers without publicly traded securities.
The adoption of FAS 158 on January 1, 2007 did not have an impact on the
Company's financial statements.

In September 2006, the United States Securities and Exchange Commission ("SEC")
issued SAB No. 108 Considering the Effects of Prior Year Misstatements When
Quantifying Misstatements in Current Year Financial Statements, which provides
interpretative guidance on how registrants should quantify financial statement
misstatements. Under SAB 108 registrants are required to consider both a
"rollover" method, which focuses primarily on the income statement impact of
misstatements, and the "iron curtain" method, which focuses primarily on the
balance sheet impact of misstatements. The effects of prior year uncorrected
errors include the potential accumulation of improper amounts that may result in
material misstatement on the balance sheet or the reversal of prior period
errors in the current period that result in a material misstatement of the
current period income statement amounts. Adjustments to current or prior period
financial statements would be required in the event that after application of
various approaches for assessing materiality of a misstatement in a current
period financial statements and consideration of all relevant quantitative and
qualitative factors, a misstatement is determined to be material. We adopted the
provisions of SAB 108 as of December 31, 2006 and this did not have a material
effect on the Company's results of operations or financial position.

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
maximize 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 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, 2006 we estimated cash breakeven average daily TCE rates of
approximately $22,400 for our Suezmax tankers and approximately $29,700 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 Ship Finance's $449.1 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 2006, Ship Finance bought back and cancelled 8.5%
Senior Notes with a principal amount of $8.0 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, 2006, 2005 and 2004, we had cash and cash equivalents of
$197.1 million, $92.8 million and $96.9 million, respectively. As of December
31, 2006, 2005 and 2004, we had restricted cash balances of $677.5 million,
$636.8 million and $592.6 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. $269.1 million of our restricted cash as of December 31, 2006
serves to support our obligations to make charterhire payments to Ship Finance,
and is 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.

We currently have four VLCC and eight Suezmax vessels under construction. We
paid $68.9 million in newbuilding instalments in 2006 in respect of these
newbuilding contracts and have paid $27.9 million so far in 2007. The remaining
instalments of approximately $885 million will be financed through a combination
of bank loans, other financing sources and existing liquidity. In addition to
the newbuilding commitment, we also have commitments with respect to the
delivery of three heavy lift vessels to Sealift. The remaining heavy lift
conversion commitments as of the end of June are $118.8 million and are likely
to be financed from the proceeds from the sale of the vessels to Sealift.

We consolidated the assets and liabilities of ITC effective December 31, 2003,
with the exception of certain subsidiaries which have been accounted for using
the equity method. We acquired ITC in May 2004. At December 31, 2006 ITC's
assets include $390.9 million (2005: $328.9 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.

During the year ended December 31, 2006 we paid total cash dividends of $654.5
million. In the first quarter of 2007, we declared a cash dividend of $2.05 per
share for the fourth quarter of 2006 representing a total cash payment of $153.4
million.

Borrowing activities

In August 2004, we entered into a $65 million secured term loan facility with a
syndicate of banks. The facility bore interest at LIBOR plus a margin of 1.00%.
The facility was repaid in March 2006.

In October 2004, we entered into a $20 million secured term loan facility. The
proceeds were used to finance the acquisition of a 1992 built Suezmax tanker.
The facility bore interest at LIBOR plus a margin of 0.75%. The loan was repaid
in full in February 2007.

In January 2005, we entered into a $20 million secured term loan facility. The
proceeds were used to finance the acquisition of a 1988 built Suezmax tanker.
The facility bears interest at LIBOR plus a margin of 0.80%. The facility must
be repaid by January 31, 2010. The facility contains a minimum value covenant
and covenants that require the Company to maintain a minimum level of free cash
and positive working capital.

In December 2005, we entered into a $69.0 million loan facility with DnB NOR
Bank ASA. The facility bore interest at LIBOR plus 120 basis points secured by
certain marketable securities and cash deposits. The facility was repaid in full
in August 2006.

In June 2006, we entered into an $80 million secured term loan facility. The
proceeds were used to finance the acquisition of a 2006 built VLCC tanker. The
facility bears interest at LIBOR plus a margin of 0.50%. The facility was due
June 26, 2007, and has now been refinanced on the same terms and conditions with
maturity in June 2008. The facility contains a minimum value covenant and
covenants that require the Company to maintain a minimum level of free cash and
positive working capital.

In September 2006, we entered into a $24 million secured term loan facility. The
proceeds were used to finance the acquisition of a 1990 built Aframax tanker.
The facility bore interest at LIBOR plus a margin of 0.90%. The facility was
repaid in April 2007.

In 2006, Ship Finance repurchased and cancelled 8.5%, senior notes with a total
principal amount of $8.0 million. In February 2006, Ship Finance entered into a
total return bond swap line with a bank in which the bank buys their senior
notes, and they compensate the bank for its funding cost plus a margin. Through
this arrangement, Ship Finance is able to realize profits, but guarantee against
losses for the bank. During 2006 the bank acquired senior notes with a total
principal amount of $52.0 million under this bond swap line. As at December 31,
2006, Ship Finance had $449.1 million outstanding on its issue in 2003 of $580.0
million 8.5% Senior Notes due 2013.

In February 2005, Ship Finance refinanced their existing $1,058.0 million
secured credit facility with a new $1,131.4 million secured credit facility.
This facility bears interest at LIBOR plus a margin of 0.70% per annum, is
repayable over a term of six years and has similar security terms to the repaid
facility. In September 2006, Ship Finance signed an agreement whereby the
existing debt facility which had been partially repaid, was increased by $219.7
million to the original outstanding amount of $1,131.4 million. The increase is
available on a revolving basis. At December 31, 2006, the outstanding amount on
this facility was $953.3 million. This facility contains a minimum value
covenant, which requires that the aggregate value of Ship Finance vessels
secured as collateral exceed 140% of the outstanding amount of the facility. The
new facility also contains covenants that require Ship Finance to maintain
certain minimum levels of free cash, working capital and equity ratios.

In June 2005, Ship Finance entered into a combined $350.0 million senior and
junior secured term loan facility with a syndicate of banks. At December 31,
2006, the outstanding amount on this facility was $316.1 million. The proceeds
of the facility were used to partly fund the acquisition of five VLCCs. The
facility bears interest at LIBOR plus a margin of 0.65% per annum for the senior
loan and LIBOR plus a margin of 1.00% per annum for the junior loan. The
facility is repayable over a term of seven years has similar security terms as
the $1,131.4 million facility. This facility contains a minimum value covenant,
which requires that the aggregate value of Ship Finance vessels exceed 140% of
the outstanding amount of the senior loan and, for as long as any amount is
outstanding under the junior loan, 125% of the total outstanding loan. The
facility also contains covenants that require Ship Finance to maintain certain
minimum levels of free cash, working capital and equity ratios.

In April 2006, five vessel owning subsidiaries of Ship Finance entered into a
$210 million secured term loan facility with a syndicate of banks. The facility
is non recourse to Ship Finance, as the holding company does not guarantee this
debt. The proceeds of the facility were used to partly fund the acquisition of
five newbuilding container vessels in connection with Ship Finance's long-term
bareboat charters to Horizon Lines. At December 31, 2006, the outstanding amount
under this facility was $41.6 million relating to the first vessel, which was
delivered during the fourth quarter 2006. The second vessel was delivered during
the first quarter of 2007, and the remaining three vessels were delivered during
the second quarter of 2007. The facility bears interest at LIBOR plus a margin
of 1.40% per annum, is repayable over a term of 12 years and is secured by the
vessel owning subsidiaries' assets. The facility contains a minimum value
covenant, which requires that the aggregate value of Ship Finance vessels exceed
120% of the outstanding loan if there is a default under any of the charters.
The vessel owning subsidiaries have entered into 12 year interest rate swaps
with a combined notional principal amount of $207.9 million at rates of
approximately 5.65% per annum.

In June 2006, Ship Finance's subsidiary, Rig Finance, entered into a $165
million secured term loan facility with a syndicate of banks. The proceeds of
the facility were used to partly fund the acquisition of a newbuilding jack-up
drilling rig. At December 31, 2006, the outstanding amount under this facility
was $155.1 million. The facility bears interest of LIBOR plus a margin of 1.15%
per annum as long as the rig is employed under an initial sub-charter to a third
party, but in no event longer than the first 36 months, and LIBOR plus a margin
of 1.20% per annum thereafter. The facility contains a minimum value covenant,
which requires that the value of the rig exceed 120% of the outstanding loan
during the period up to six months prior to expiry of the initial sub-charter to
the third party, and 140 % thereafter. The facility is repayable over six years
and is secured by the rig owning subsidiary's assets. The lenders have limited
recourse to Ship Finance as the holding company only guarantees $10 million of
this debt. The facility contains covenants that require Ship Finance to maintain
certain minimum levels of free cash, working capital and equity ratios.

In June 2006, Ship Finance entered into a $25 million secured revolving credit
facility. The proceeds of the facility were used to partly fund a VLCC acquired
in January 2006. The facility was repaid in full in December 2006, when the
vessel was sold to an unrelated third party.

In September 2006, Ship Finance's subsidiary Front Shadow entered into a $22.7
million secured term loan facility. The proceeds of the facility were used to
partly fund the acquisition of a 1997 built Panamax dry bulk carrier. At
December 31, 2006, the outstanding amount under this facility was $22.7 million.
Front Shadow is accounted for using the equity method. The facility bears
interest of LIBOR plus a margin of 0.59% per annum. The facility contains a
minimum value covenant, which requires that the value of the vessel exceed 110%
of the outstanding loan during the first four years, and 125% thereafter. The
facility is repayable over ten years and is secured by the vessel owning
subsidiary's assets. The lenders have limited recourse to Ship Finance as the
holding company guarantees $2.1 million of this debt.

We were in compliance with all loan covenants at December 31, 2006.

Acquisitions and Disposals

Ship Finance
------------

In 2004, we distributed 48.2% of the common shares of Ship Finance to our
ordinary shareholders. On January 28, 2005 and February 22, 2005 our Board
approved further spin-offs of the shares in Ship Finance. On February 18, 2005,
each of our shareholders received one share of Ship Finance for every four
shares of ours held and on March 24, 2005 each of our shareholders received one
share of Ship Finance for every ten shares of ours held. Following these
transactions our shareholding in Ship Finance was approximately 16.2% at
December 31, 2005.

On February 17, 2006, our Board approved a further spin-off of the shares in
Ship Finance. On March 20, 2006, each of our shareholders received one share of
Ship Finance for every twenty shares of ours held. Following this transaction
our shareholding in Ship Finance was approximately 11.1% at December 31, 2006.

On February 27, 2007, our Board approved a final spin-off of our remaining
shares in Ship Finance. On March 22, 2007, each of our shareholders received
three shares of Ship Finance for every twenty-eight shares of ours held. All of
these share distributions have had no effect on our liquidity.

Golden Ocean
------------

In the fourth quarter of 2004, the Company 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.

In 2005, Golden Ocean exercised its options to acquire from us the shares in two
single purpose companies each owing a newbuilding contract for a Panamax vessel.
These options were at a price equal to our costs, including instalments paid to
date, plus our funding expenses. These options were exercised at a total price
of $16.8 million.

Independent Tankers Corporation
-------------------------------

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. On May 27, 2004 we exercised this purchase option and paid
$14.1 million.

Chevron redelivered the Suezmax vessel Front Voyager to us in April 2006 and
pursuant to the terms of the charter paid us a termination fee in the amount of
$5.05 million.

General Maritime
----------------

As at January 1, 2005 we held a total of 1,584,700 shares in General Maritime
Corporation, or Genmar. During 2005 we acquired a total of 5,209,000 Genmar
shares and sold 2,933,700 Genmar shares and as at December 31, 2005 held
3,860,000 Genmar shares which was equivalent to 9.98% of their total shares
outstanding.

In August 2006, we sold our entire holding of 3,860,000 shares in Genmar for $40
per share.

Tsakos Shipping and Trading SA
------------------------------

In March 2007, we sold our entire holding of 32,000 shares in Tsakos for
approximately $1.5 million.

Sealift
-------

In January 2007, we subscribed for 30 million shares issued by Sealift in a
private placement at a cost of $60 million. In May 2007, Sealift completed the
combination of its businesses with the Dockwise group of companies. As part of
the transaction, Sealift completed another private placement of 19.9 million
shares and Frontline subscribed for five million of these additional shares.
Sealift also issued 94.1 million shares to the former Dockwise shareholders.
After completion of this transaction Frontline owns 17.1% of Sealift.

Sea Production
--------------

In February 2007, we subscribed for approximately 28% of the equity issued in a
private placement by Sea Production at a cost of $51 million. In June 2007, we
sold our entire holding of 25,500,000 shares in Sea Production for a net price
of NOK 15.75 per share, equivalent to approximately $67 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 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 $23.61 per share. Total cash used to
repurchase these shares was $14.8 million.

During 2005, Ship Finance repurchased and cancelled a further 1,757,100 common
shares. The shares were repurchased at an average price of $18.81 for a total
amount of $33.1 million.

In January 2006, Ship Finance repurchased and cancelled a further 400,000 common
shares. The shares were repurchased at an average price of $18.03 for a total
amount of $7.2 million, which resulted in an increase in Frontline's
shareholding from 16.2% to 16.3%.

Derivative Activities

Ship Finance uses financial instruments to reduce the risk associated with
fluctuations in interest rates. Ship Finance has 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 currently hold or issue
instruments for speculative or trading purposes. As at December 31, 2006 Ship
Finance's interest rate swap arrangements effectively fix interest rate exposure
on $738.7 million of floating rate debt. These interest rate swap agreements
expire between August 2008 and May 2019.

Tabular disclosure of contractual obligations

At December 31 2006, we had the following contractual obligations and
commitments:

<TABLE>
<CAPTION>
                                                  Payment due by period

                               Less than 1 year   1 - 3 years   3 - 5 years   After 5 years     Total
----------------------------   ----------------   -----------   -----------   -------------   ---------
<S>                            <C>                <C>           <C>           <C>             <C>
(In thousands of $)
Senior notes (8.5%)                           -             -             -         449,080     449,080
Serial notes (6.5% to 6.68%)             13,700        15,900         1,200               -      30,800
Term notes (7.84% to 8.04%)               1,340        13,365        27,750         323,745     366,200
Term notes (8.52%)                          570         1,290         1,520           9,364      12,744
Other long-term debt                    265,799       294,523       733,387         310,761   1,604,470
Operating lease obligations               7,950        15,683        12,211           7,430      43,274
Capital lease obligations               127,253       240,545       367,736         288,683   1,024,217
Newbuilding commitments                 235,435       403,595       125,520               -     764,550
----------------------------   ----------------   -----------   -----------   -------------   ---------
Total                                   652,047       984,901     1,269,324       1,389,063   4,295,335
----------------------------   ----------------   -----------   -----------   -------------   ---------
</TABLE>

The newbuilding commitments as per December 31, 2006 consists of four VLCC's and
four Suezmax vessels. We have since declared options for further four Suezmax
vessels.

At December 31 2006, we leased nine vessels that were sold by us at various
times during the period from December 1999 to December 2003, and leased back on
charters for periods of eight years with lessors' options to extend the charters
for periods that range up to five years. One of these vessels is accounted for
as an operating lease and eight as capital leases. We have fixed price purchase
options at certain specified dates and the lessors have options to put these
nine vessels to us at the end of each lease term.

Additionally, our 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".

Forward-looking information discussed in this Item 5 includes assumptions,
expectations, projections, intentions and beliefs about future events. These
statements are intended as "forward-looking statements." We caution that
assumptions, expectations, projections, intentions and beliefs about future
events may and often do vary from actual results and the differences can be
material. Please see "Cautionary Statement Regarding Forward-Looking Statements"
in this Report.

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       62    Chairman, Chief Executive Officer, President and
                            Director
Tor Olav Troim        44    Vice-President and Director
Kate Blankenship      42    Director and Audit Committee Chairman
Frixos Savvides       55    Director and Audit Committee member
Bjorn Sjaastad        49    Chief Executive Officer of Frontline Management AS
Inger M. Klemp        44    Chief Financial Officer of Frontline Management AS

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, or SeaTankers, a ship operating company and an affiliate of the
Company's principal shareholder. Mr. Fredriksen indirectly controls Hemen. 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, a Bermuda company on the Oslo Stock Exchange,
since November 2004. Mr. Fredriksen has served as a director and the chairman of
Seadrill Limited, a Bermuda company listed on the Oslo Stock Exchange, since May
2005.

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 graduated as M.Sc Naval Architect from the
University of Trondheim, Norway in 1985. His careers include Portfolio Manager
Equity in Storebrand ASA (1987-1990) and Chief Executive Officer for the
Norwegian Oil Company DNO AS (1992-1995). Since 1995, Mr. Troim has been a
director of SeaTankers Management in Cyprus. In this capacity, he has acted as
Chief Executive Officer for the public companies Knightsbridge Tankers Limited
and Golar LNG Limited (NASDAQ). Mr. Troim was also Chief Executive Officer of
Seadrill Ltd. until the recent takeover and integration of Smedvig ASA. Mr Troim
is currently Vice Chairman of these three companies and in addition is a
director and Chairman of Ship Finance International Limited (NYSE) and a member
of the Boards in the public companies Golden Ocean Group Limited (OSE), Aktiv
Kapital ASA (OSE) and Marine Harvest ASA (OSE).

Kate Blankenship has been a director since August, 2003. Mrs. Blankenship joined
the Company in 1994 and served as the Company's Chief Accounting Officer and
Company Secretary until October 2005. Mrs. Blankenship has been Chief Financial
Officer of Knightsbridge Tankers Ltd since April 2000 and Secretary of
Knightsbridge from December 2000 to March 2007. Mrs. Blankenship has been
a Director of Ship Finance since October 2003. Mrs. Blankenship has served as a
director of Golar LNG Limited since July 2003 and Golden Ocean since November
2004. Mrs. Blankenship has served as a director of Seadrill Limited since May
2005. She is a member of the Institute of Chartered Accountants in England and
Wales.

Frixos Savvides a Chartered Accountant, is a Fellow of the Institute of
Chartered Accountants of England and Wales. He was the founder of the audit firm
PKF Savvides and Partners in Cyprus and held the position of Managing Partner
until 1999 when he became Minister of Health of the Republic of Cyprus. He held
this office until 2003. Mr. Savvides is currently a senior independent business
consultant, and holds several Board positions including his recent appointment
as Vice Chairman of Cyprus Airways. Frixos Savvides was appointed to the Board
of Directors of Frontline July 31, 2005.

Bjorn Sjaastad has served as Chief Executive Officer of Frontline Management AS
since October 2006. From 2004 to 2006 Mr. Sjaastad ran his own consultancy
business. From 1990 to 2004, Mr. Sjaastad was the Chief Executive Officer of
Odfjell ASA, a Norwegian based, stock listed, international chemical tanker
operator. From 1981 to 1989 Mr. Sjaastad served as a lending officer of DnB NOR
ASA (previously Bergen Bank AS), heading up the banks shipping and offshore
department in Bergen. Mr. Sjaastad has, over the years, been a member of the
boards of a range of companies and has also been the President of the Norwegian
Shipowners Association. Please see Item 8.A. "Consolidated Statements and Other
Financial Items - Legal Proceedings" for a description of proceedings involving
Mr. Sjaastad not involving us.

Inger M. Klemp has served as Chief Financial Officer of Frontline Management AS
since June 1, 2006. Mrs. Klemp has served as Vice President Finance from August
2001 until she was promoted in May 2006. Mrs. Klemp graduated as MSc in Business
and Economics from the Norwegian School of Management (BI) in 1986. Mrs. Klemp
served as Assistant Director Finance in Color Group ASA from 1998 to 2001 and as
Group Financial Manager in Color Line ASA from 1992 to 1998, a Norwegian based
cruise operator which was stock listed up to October 1999. From 1989 to 1992
Mrs. Klemp served as Assistant Vice President in Nordea Bank Norge ASA handling
structuring and syndication of loan facilities in the international banking
market. From 1986 to 1989, Mrs. Klemp served as a lending officer of Fokus Bank
ASA.

B. COMPENSATION

During the year ended December 31, 2006, we paid to our directors and executive
officers (six persons) aggregate cash compensation of $1,648,012 and an
aggregate amount of $135,585 for pension and retirement benefits.

C. BOARD PRACTICES

In accordance with our Bye-laws the number of Directors shall be such number not
less than two as our shareholders 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. We currently
have four Directors.

We currently have an audit committee, which is responsible for overseeing the
quality and integrity of our financial statements and its accounting, auditing
and financial reporting practices, our compliance with legal and regulatory
requirements, the independent auditor's qualifications, independence and
performance and our internal audit function. Our audit committee consists of two
members, Mr. Savvides and Mrs Blankenship.

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.

Our officers 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 us and any of our Directors providing for
benefits upon termination of their employment or service.

As a foreign private issuer we are exempt from certain requirements of the New
York Stock Exchange that are applicable to U.S. listed companies. For a listing
and further discussion of how our corporate governance practices differ from
those required of U.S. companies listed on the New York Stock Exchange, please
visit the corporate governance section of our website at www.frontline.bm.

D. EMPLOYEES

As of December 31, 2006, Frontline and its subsidiaries employed approximately
48 people in their respective offices in Bermuda, London, Oslo and Singapore. 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 13, 2007, were as follows:

                                               % 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   **
Frixos Savvides                            -   **
Inger M. Klemp                        16,000   **
Bjorn Sjaastad                             -   **

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

As of May 31, 2007, Bjorn Sjaastad holds 100,000 options to acquire ordinary
shares in the Company. The options were granted under the Frontline Ltd Share
Option Scheme, which was approved by the board on November 16, 2006. The options
begin to vest in November 2007 and expire in November 2011. The exercise price
of the options is NOK 238.50 and is reduced by the amount of dividends paid.
None of our other Directors and officers or employees holds any options to
acquire Frontline's Ordinary Shares. In the past we maintained a Bermuda
Employee Share Option Plan and a United Kingdom Employee Share Option Plan,
however, these plans expired at the end of 2004.

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 13, 2007.

                                                             Ordinary Shares
Owner                                                      Amount           %

Hemen Holding Ltd. and associated companies (1)           26,079,053      34.85%
All Directors and Officers as a group (six persons) (2)   26,292,047      35.14%

(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.

In June 2007 and June 2006, Hemen and associated companies held 34.85% of the
Company's Ordinary Shares.

As at May 15, 2007, 45,005,708 of our Ordinary Shares were held by 288 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

In June 2006, Rig Finance, a subsidiary of Ship Finance, purchased the jack up
rig SeaDrill 3 from SeaDrill Invest I Ltd, or SeaDrill Invest, an affiliated
company, for $210 million. The rig was immediately chartered back to SeaDrill
Invest for a period of 15 years. The charter party is fully guaranteed by
Seadrill Limited, the ultimate parent company of SeaDrill Invest. SeaDrill
Invest has been granted fixed price purchase options after 3, 5, 7, 10, 12 and
15 years.
..
In June 2006, Front Shadow Inc. ("Front Shadow") a subsidiary of Ship Finance,
entered into an agreement to acquire a Panamax vessel, Rain Shadow, for $28.4
million from Golden Ocean. The vessel was chartered back to Golden Ocean for a
period of 10 years. As part of the agreement, Golden Ocean has provided an
interest free and non-amortizing seller credit of $2.6 million. Golden Ocean has
been granted fixed purchase options after 3, 5, 7 and 10 years. At the end of
the charter, the Front Shadow also has an option to sell the vessel back to
Golden Ocean at an agreed fixed price of $10.4 million. Front Shadow is equity
accounted by Ship Finance following the application of FIN 46(R).

A summary of amounts earned and balances with related parties is as follows:

 Net amounts earned from (paid to)  related parties     Year ended December 31,
(in thousands of $)                                    2006      2005      2004
--------------------------------------------------   ------    ------    ------
Seatankers Ltd                                          432       265        49
Golar LNG Limited                                       180       255       495
Golden Ocean Group Limited                              597       362         8
Northern Offshore Ltd                                     -         -        25
Norse Energy Group ASA (formerly Northern Oil ASA)        -         6        92
Aktiv Kapital First Investment Ltd                        -        10         -
Bryggegata AS                                        (1,021)     (692)        -
Individual related to John Frediksen                     12         -         -
Seadrill Limited                                        545       (24)        -
CalPetro Tankers (Bahamas I) Limited                     40        38        37
CalPetro Tankers (Bahamas II) Limited                    40        38        37
CalPetro Tankers (Bahamas III) Limited                    -        38        37
CalPetro Tankers (IOM) Limited                           40        38        37

Balances with related
parties (receivable/(payable))           As of December 31,
(in thousands of $)                        2006      2005
--------------------------------------   ------    ------
Seatankers Ltd                              275     1,397
Golar LNG Limited                          (553)      644
Northern Offshore Ltd                        49        48
Golden Ocean Group Limited                  942    (2,182)
Seadrill Limited                             30        55
CalPetro Tankers (Bahamas I) Limited         10        10
CalPetro Tankers (Bahamas II) Limited        10        10
CalPetro Tankers (Bahamas III) Limited        -        10
CalPetro Tankers (IOM) Limited               10        10

Golar, Northern Offshore, Norse Energy Group, Aktiv Kapital, Seadrill,
Bryggegata AS, Golden Ocean, Crystal Sea Marine and Seatankers are each subject
to the significant influence or control of John Fredriksen.

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.

In his capacity as President and Chief Executive Officer of Odfjell ASA, an
operator of chemical tankers, Mr. Sjaastad entered into an agreement with the US
Department of Justice in September 2003 pursuant to which he pled guilty to one
count of violating the Sherman Act. This plea was part of a global agreement
with the US Department of Justice involving Odfjell ASA and Odfjell Seachem AS.
The matter did not involve Frontline Ltd or its affiliates.

Dividend Policy

Since May 2003, our policy has been to pay regular, targeted dividends. 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 2004, 2005 and 2006.

Payment Date                  Amount per Share
------------                  ----------------

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

2005
March 18, 2005                      $3.50
June 24, 2005                       $3.10
September 20, 2005                  $2.00
December 13, 2005                   $1.50

2006
March 20, 2006                      $1.50
June 26, 2006                       $1.50
September 18, 2006                  $1.50
December 21, 2006                   $2.50

On February 27, 2007 the Board declared a cash dividend of $2.05 per share for
the fourth quarter of 2006 that was paid on March 22, 2007. On May 30, 2007 the
Board declared a cash dividend of $1.50 per share for the first quarter of 2007
that was paid June 22, 2007.

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--History and Development of the Company--Spin-Off
of Ship Finance." In February and March 2005, we have spun off a further 35% of
our shares in Ship Finance to our shareholders and at December 31 2005 held
16.2% of Ship Finance. In February 2006, a further 5% interest in Ship Finance
was spun off and we held approximately 11.1% of the shares in Ship Finance as at
December 31, 2006. These shares were distributed to shareholders on March 22,
2007 following which we hold a minimal number of shares in Ship Finance. As a
result of this spin-off, we no longer consolidate Ship Finance as of March 31,
2007. The most significant impacts on the financial statements of the
deconsolidation of Ship Finance are as follows:

     o    At December 31, 2006 Ship Finance owned vessels with a book value of
          $2.2 billion in the Frontline consolidated financial statements, of
          which $1.9 billion were on charter to Frontline. The vessels chartered
          in by Frontline will be presented in the balance sheet as vessels and
          equipment under capital lease rather than vessels and equipment after
          deconsolidation. Frontline will also record a corresponding obligation
          under capital lease of approximately $2.2 billion in the balance sheet
          and finance lease interest expense in the income statement when it
          adopts the lease accounting presentation for these vessels. The
          increase in obligation under capital lease is offset by a debt
          reduction of $1.9 billion for debt relating to Ship Finance.

     o    Minority interests of $534 million relating to Ship Finance at
          December 31, 2006 will no longer be presented in our accounts.

     o    Net working capital of approximately $68 million at December 31, 2006
          relating to Ship Finance will no longer be presented in our accounts.

ITEM 9. THE OFFER AND LISTING

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 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.

                                           NYSE                 OSE
                                       High     Low       High         Low
-----------------------------------   ------   ------   ---------   ---------
Fiscal year ended December 31
2006                                  $44.65   $28.80   NOK280.00   NOK184.00
2005                                  $57.97   $35.89   NOK355.00   NOK230.00
2004                                  $62.33   $24.36   NOK367.81   NOK158.06
2003                                  $27.69    $8.93   NOK185.00   NOK61.00
2002                                  $13.05    $3.19   NOK108.50   NOK25.90

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, 2006
First quarter                         $41.29   $32.70   NOK270.50   NOK218.00
Second quarter                        $38.25   $28.80   NOK237.50   NOK184.00
Third quarter                         $44.65   $36.32   NOK280.00   NOK228.50
Fourth quarter                        $39.76   $31.63   NOK254.50   NOK196.75

                                           NYSE                 OSE
                                       High     Low       High         Low
-----------------------------------   ------   ------   ---------   ---------
Fiscal year ended December 31, 2005
First quarter                         $57.97   $40.65   NOK355.00   NOK254.00
Second quarter                        $51.25   $36.10   NOK326.50   NOK232.50
Third quarter                         $47.10   $40.63   NOK305.50   NOK261.50
Fourth quarter                        $44.70   $35.89   NOK300.00   NOK230.00

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 2007                              $46.95   $37.78   NOK281.00   NOK232.00
April 2007                            $38.50   $34.26   NOK226.00   NOK207.50
March 2007                            $35.80   $29.35   NOK219.50   NOK185.25
February 2007                         $36.55   $33.17   NOK209.00   NOK222.25
January 2007                          $33.28   $30.00   NOK211.00   NOK192.25
December 2006                         $36.08   $31.63   NOK218.50   NOK196.75

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. At the 2006 Annual General Meeting of the
Company the shareholders voted to amend the Company's Bye-Law 110. The purpose
of this amendment was to provide for a change to the requirements for the form
and signatories to the seal of the Company. These amended Bye-Laws of the
Company as adopted by shareholders on December 1, 2006 are filed as Exhibit 1.2
to 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 authorised 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

Ship Finance

Charter Ancillary Agreement
---------------------------
Frontline has entered into charter ancillary agreements with Ship Finance, its
vessel owning subsidiaries that own the vessels and our wholly owned and
consolidated subsidiaries Frontline Shipping Limited ("Frontline Shipping") and
Frontline Shipping II Limited ("Frontline Shipping II"), which remain in effect
until the last long term charter with Ship Finance terminates in accordance with
its terms. Throughout this section Frontline Shipping and Frontline Shipping II
are collectively referred to as ("the Charterers"). Frontline has guaranteed the
Charterers' obligations under the charters, except for the Charterers'
obligations to pay charterhire. Frontline has guaranteed the Charterers'
obligations under the charter ancillary agreements.

Charter Terms
-------------
The long term time charters to us extend for various periods depending on the
age of the vessels, ranging from approximately six to 20 years. Two of the
vessels that Ship Finance acquired are on current long term time charters at
December 31, 2006. 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 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 on each vessels anniversary date in 2010. At
which time we will have the option to terminate the charters for those vessels.

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
Front Energy          $30,014        $30,014        $30,014           $30,014
Front Force           $29,853        $29,853        $29,853           $29,853

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 on each vessels anniversary date in 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.

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.
Due to sales and acquisitions, the current capitalization in the Charterers is
$197.0 million and $35.0 million 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 Covenant
-----------------

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 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 $197 million in the case
of Frontline Shipping and $35 million in the case of Frontline Shipping II
(which threshold will be reduced by $5.3 million and $7.0 million in the case of
Frontline Shipping and Frontline Shipping II, respectively, upon the termination
of other than by reason of a default by Frontline Shipping or Frontline Shipping
II 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
have been fully paid to Ship Finance and (4) any profit sharing payments
deferred 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 organisational documents in a manner that would adversely
          affect Ship Finance;

     o    violate its organisational documents;

     o    engage in businesses other than the operation and chartering of Ship
          Finance vessels; (not applicable for Frontline Shipping II)

     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 is 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 and Frontline Shipping II are 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 and Frontline Shipping II are 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
and Frontline Shipping II reasonably believe 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 and Frontline Shipping II 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 agreements provides that the obligations of the Charterers
to Ship Finance under the charters and the charter ancillary agreements 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    Frontline Shipping and Frontline Shipping II fails at any time to hold
          at least $55 million or $7.5 million in cash and cash equivalents,
          respectively.

On 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
outsources many of these services to third party providers.

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 and in addition Ship Finance has the right to terminate any of the
management agreements upon 90 days prior written notice to Frontline Management.

Frontline has guaranteed to Ship Finance Frontline Management's performance
under these management agreements.

Administrative Services Agreement
---------------------------------

Ship Finance and its vessel owning subsidiaries entered into an administrative
services agreement with Frontline Management in 2004 under which Frontline
Management provides administrative support services such as the maintenance of
Ship Finance's corporate books and records, payroll services, the preparation of
tax returns and financial statements, assistance with corporate and regulatory
compliance matters not related to the 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 Ship Finance 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. These agreements
were terminated at the end of December 2006 and are in the process of being
renegotiated since we are now providing less administrative services to Ship
Finance.

Frontline guaranteed to Ship Finance Frontline Management's performance under
this administrative services agreement.

Golden Ocean

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 carrier 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 of $1,000 per month per vessel terminates when the
fixing commission of 0.625% of gross freight revenue enters into effect for a
vessel. 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.

Sealift

Purchase of Vessels and Option Agreements
-----------------------------------------

During January 2007, we agreed with Ship Finance that we should acquire five
single purpose companies from them, each being the owner of one single hull
Suezmax tanker vessel. All of the five vessels were subject to long term
charters to our subsidiaries, Frontline Shipping Ltd. and Frontline Shipping II
Ltd. Four of the vessels were furthermore parties to conversion contracts with
Cosco Shipyard Group Co. Ltd. ("Cosco") setting out the terms and conditions
subject to which Cosco would convert their respective vessels to specially
designed heavy lift vessels. In addition to the acquisition of the five
companies we agreed with Ship Finance that we would acquire their rights and
obligations under an option agreement with Cosco pursuant to which Ship Finance
had a right to conclude conversion contracts for a further two vessels (the
"Option Agreement").

Purchase Agreement with Sealift
-------------------------------

In January 2007, we also agreed with Sealift that they would purchase six single
purpose companies from us, each being the owner of one single hull Suezmax
tanker vessel together with our rights and obligations under the Option
Agreement. Five of the companies to be sold were the same companies we had
agreed to purchase from Ship Finance while the sixth was an existing subsidiary
owning one single hull Suezmax tanker vessel. The long term charters with
Frontline Shipping Ltd. and Frontline Shipping II Ltd. were agreed to be
replaced with bareboat charters with our subsidiary Key Chartering Inc.,
covering the period until each vessel was delivered to Cosco for conversion. The
terms of the agreement included an obligation on us to take responsibility for
the completion of the conversion of the four vessels subject to the conversion
contracts with Cosco. This responsibility would include both the financing and
payment of the work to be performed by Cosco and the supervision thereof
throughout the conversion period.

Sealift's Financing
-------------------

Completion of the purchase agreement between Sealift and us was subject to
Sealift being able to obtain the required financing. This was done by way of the
taking up by Sealift of a senior bank loan of $240 million, a bond issue by
Sealift of $110 million and a private placement of shares in Sealift raising in
total $180 million. We agreed to subscribe for one third of the shares in
Sealift issued at a cost of $60 million. The transaction between Sealift and
ourselves closed in March, 2007, whereafter we became a minority shareholder in
Sealift.

Subsequent Events
-----------------

Sealift subsequently made an agreement to purchase all of the shares in Delphi
Acquisition Holding (which was the owner of Dockwise Transport B.V., an
established operator in the heavy lift market). This was financed by another
share issue which diluted our ownership share in Sealift to 17.1%.

Sea Production

On February 14, 2007 our subsidiary Frontline Floating Production Ltd. ("FFP")
entered into an agreement for the sale and purchase of assets with Sea
Production whereby FFP agreed to sell to Sea Production; (i) 70% of its shares
in Puffin Ltd., the company indirectly holding the ownership of the vessel
"Front Puffin" under conversion to an FPSO, (ii) our outstanding intercompany
loans relating to the purchase and conversion of "Front Puffin", and (iii) all
the shares of Sea Production Management AS, a Norwegian subsidiary where the
floating production organization and expertise are employed. Also on February
14, 2007 Sea Production entered into a share purchase agreement with KSI
Production Ltd. to acquire the remaining 30% of the shares of Puffin Ltd.

On February 15, 2007 Sea Production entered into two share purchase agreements
with Greenwich Holdings Limited to acquire all the shares of Langford Shipping
Company Limited and Melrose Shipping Company Limited respectively. Langford
Shipping Company owned the Aframax tanker "Sea Cat", and Melrose Shipping
Company the vessel "Sea Jaguar", also an Aframax tanker. Also on February 15
2007, Sea Production entered into a share purchase agreement with Seadrill Ltd.
to acquire all the shares of Wisdom Shipping (S) Pte. Ltd., the owner of the
FPSO "Crystal Ocean".

Sea Production financed these acquisitions and the future conversion costs of
Front Puffin through a $180 million equity issue, a $130 million bond issue and
a $105 million bank facility. We agreed to subscribe for 28.33% of the shares in
Sea Production in the equity offering at an aggregate cost of $51 million. The
acquisition of the shares and assets, the equity issue and the bond issue where
completed simultaneously on February 15, 2007. We have subsequently sold all our
shares in Sea Production in market transactions and have currently no financial
interest in the company.

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.

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.

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 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 if:

     (i)  It is organised in a qualified foreign country which is one that
          grants an equivalent exemption from tax to corporations organised 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 recognized Bermuda, the country of
incorporation of the Company and certain of its subsidiaries, as a qualified
foreign country. In addition, the U.S. Treasury Department has recognized
Liberia, Panama, the Isle of Man, Singapore and Cyprus, the countries of
incorporation of certain of the Company's 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 2006 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.

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 Company's U.S. source shipping income, would be
subject to a 4% tax imposed by Section 887 of the Code on a gross basis, without
the benefit of deductions. Since under the sourcing rules described above, no
more than 50% of the Company's shipping income 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% under the 4% gross basis tax
regime.

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 United States federal income tax
considerations relevant to an investment decision by a U.S. Holder, as defined
below, with respect to the 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 United States 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 consult your own tax advisor on this issue.

Distributions

Subject to the discussion of passive foreign investment companies below, any
distributions made by us with respect to our common stock to a U.S. Holder will
generally constitute dividends, which may be taxable as ordinary income or
"qualified dividend income" as described in more detail below, to the extent of
our current or accumulated earnings and profits, as determined under United
States federal income tax principles. Distributions in excess of our earnings
and profits will be treated first as a non-taxable 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 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.

Legislation has been recently introduced in the U.S. Congress which, if enacted
in its present form, would preclude our dividends from qualifying for such
preferential rates prospectively from the date of the enactment. 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 recognize 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 passive foreign investment
company, or a PFIC, for United States federal income tax purposes. In general,
we will be treated as a PFIC with respect to a 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 United
States 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 realised
on the sale, exchange or other disposition of our common stock would be treated
as ordinary income, and any loss realised 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% 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
realised on the sale, exchange or other disposition of our common stock. Under
these special rules:

     o    the excess distribution or gain would be allocated rateably 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 pension or profit sharing 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 ordinary 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
ordinary 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 U.S. Internal Revenue
Service.

Bermuda 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 Common Shares. Bermuda has undertaken
not to impose any such Bermuda taxes on U.S. Shareholders of Common Shares prior
to the year 2016 except in so far as such tax applies to persons ordinarily
resident in Bermuda.

Liberian Taxation

The Republic of Liberia enacted a new income tax act effective as of January 1,
2001 (the "New Act"). In contrast to the income tax law previously in effect
since 1977 (the "Prior Law"), which the New Act repealed in its entirety, the
New Act does not distinguish between the taxation of a non-resident Liberian
corporation, such as our Liberian subsidiaries, which conduct no business in
Liberia and were wholly exempted from tax under the Prior Law, and the taxation
of ordinary resident Liberian corporations.

In 2004, the Liberian Ministry of Finance issued regulations pursuant to which a
non-resident domestic corporation engaged in international shipping, such as our
Liberian subsidiaries, will not be subject to tax under the New Act retroactive
to January 1, 2001 (the "New Regulations"). In addition, the Liberian Ministry
of Justice issued an opinion that the New Regulations were a valid exercise of
the regulatory authority of the Ministry of Finance. Therefore, assuming that
the New Regulations are valid, our Liberian subsidiaries will be wholly exempt
from Liberian income tax as under the Prior Law.

If our Liberian subsidiaries were subject to Liberian income tax under the New
Act, our Liberian subsidiaries would be subject to tax at a rate of 35% on their
worldwide income. As a result, their, and subsequently our, net income and cash
flow would be materially reduced by the amount of the applicable tax. In
addition, we, as shareholder of the Liberian subsidiaries, would be subject to
Liberian withholding tax on dividends paid by the Liberian subsidiaries at rates
ranging from 15% to 20%.

F. DIVIDENDS AND PAYING AGENTS

Not Applicable

G. STATEMENT BY EXPERTS

Not Applicable

H. DOCUMENTS ON DISPLAY

We are subject to the informational requirements of the Securities Exchange Act
of 1934, as amended. In accordance with these requirements, we file reports and
other information with the Securities and Exchange Commission. These materials,
including this annual report and the accompanying exhibits, may be inspected and
copied at the public reference facilities maintained by the Commission 100 F
Street, N.E., Room 1580 Washington, D.C. 20549. You may obtain information on
the operation of the public reference room by calling 1 (800) SEC-0330, and you
may obtain copies at prescribed rates from the public reference facilities
maintained by 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 our principal executive offices at Par-la-Ville
Place, 14 Par-la-Ville Road, Hamilton, Bermuda HM 08.

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 may enter into forward freight agreements and
futures for trading purposes in order to manage our exposure to the risk of
movements in the spot market for certain trade routes and, to some extent, for
speculative purposes but currently we have not entered into any such agreements.
We may also enter into other derivative instruments from time to time for
speculative purposes but currently we have not entered into any such agreement.

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 $1,602.9 million at December 31, 2006 (2005: $1,450.6
million). Ship Finance has 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, 2006, Ship Finance had 18 swaps with a
total notional principal of $738.7 million (2005 - 15 swaps with notional
principal of $618.3 million). The swap agreements mature between August 2008 and
May 2019, and Ship Finance estimate that they would receive $9.1 million to
terminate these agreements as of December 31, 2006 (2005 - receive $18.3
million). Our net exposure to interest rate fluctuations is $864.2 million at
December 31, 2006 (2005: $832.3 million). 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 $8.6 million per year as of December 31, 2006 (2005: $8.3
million). All of the interest rate swap agreements relate to Ship Finance.

The fair market value of our fixed rate debt was $877.2 million as of December
31, 2006 (2005: $874.3 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 $48.4 million and $52.5 million respectively (2005: decrease by
$56.8 million and increase by $62.5 million).

We are exposed to market risk in relation to our forward freight agreements and
futures contracts, if we have any. 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,
2006, the nominal principal amount of our forward freight contracts, futures
contracts and options contracts was $nil (2005: $12.0 million). We use a Value
at Risk approach to estimate the risk in the freight derivatives position. Given
a 95% confidence level and one day holding period, the VaR on the open position
as per December 31, 2006 was $nil (2005: $1.1 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 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 our consolidated financial
statements. At December 31, 2006 we had (Y)nil receivable in relation to long
term Yen denominated charter contracts (2005 - (Y)35.7 billion).

At December 31, 2005 we had five Yen denominated forward currency contracts
entered into for speculative purposes, with a notional principal of (Y)8.8
billion (equivalent to approximately $74.2 million). These contracts were all
terminated during 2006, so as per December 31, 2006 we had no Yen denominated
forward currency contracts.

ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES

Not Applicable

<PAGE>

                                     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

a) Disclosure Controls and Procedures

Management assessed the effectiveness of the design and operation of the
Company's disclosure controls and procedures pursuant to Rule 13a-15(e) of the
Securities Exchange Act of 1934, as of the end of the period covered by this
annual report as of December 31, 2006. Based upon that evaluation, the Principal
Executive Officer and Principal Financial Officer concluded that the Company's
disclosure controls and procedures are effective as of the evaluation date.

b) Management's annual report on internal controls over financial reporting

Our management is responsible for establishing and maintaining adequate internal
control over financial reporting as defined in Rules 13a-15(f) promulgated under
the Securities Exchange Act of 1934.

Internal control over financial reporting is defined in Rule 13a-15(f) or
15d-15(f) promulgated under the Securities Exchange Act of 1934 as a process
designed by, or under the supervision of, the Company's principal executive and
principal financial officers and effected by the Company's board of directors,
management and other personnel, to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements
for external purposes in accordance with generally accepted accounting
principles and includes those policies and procedures that:

     o    Pertain to the maintenance of records that, in reasonable detail,
          accurately and fairly reflect the transactions and dispositions of the
          assets of the Company;

     o    Provide reasonable assurance that transactions are recorded as
          necessary to permit preparation of financial statements in accordance
          with generally accepted accounting principles, and that our receipts
          and expenditures are being made only in accordance with authorizations
          of Company's management and directors; and

     o    Provide reasonable assurance regarding prevention or timely detection
          of unauthorized acquisition, use or disposition of our assets that
          could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting
may not prevent or detect misstatements. Also, projections of any evaluation of
effectiveness to future periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree or compliance
with the policies or procedures may deteriorate.

Management conducted the evaluation of the effectiveness of the internal
controls over financial reporting using the control criteria framework issued by
the Committee of Sponsoring Organizations of the Treadway Commission (COSO)
published in its report entitled Internal Control-Integrated Framework.

Our management with the participation of our Principal Executive Officer and
Principal Financial Officer assessed the effectiveness of the design and
operation of the Company's internal controls over financial reporting pursuant
to Rule 13a-15 of the Securities Exchange Act of 1934, as of December 31, 2006.
Based upon that evaluation, the Principal Executive Officer and Principal
Financial Officer concluded that the Company's internal controls over financial
reporting are effective as of December 31, 2006.

Management's assessment of the effectiveness of the Company's internal control
over financial reporting as of December 31, 2006 has been audited by
PricewaterhouseCoopers AS, an independent registered public accounting firm, as
stated in their report.

c) Changes in internal control over financial reporting

There were no changes in our internal controls over financial reporting that
occurred during the period covered by this annual report that have materially
effected or are reasonably likely to materially affect, the Company's internal
control over financial reporting

ITEM 16. RESERVED

ITEM 16 A. AUDIT COMMITTEE FINANCIAL EXPERT

Our Board of Directors has determined that the Company's Audit Committee has one
Audit Committee Financial Expert. Mr. Frixos Savvides is an independent Director
and is the Audit Committee Financial Expert.

ITEM 16 B. CODE OF ETHICS

We have adopted a Code of Ethics that applies to all entities controlled by us
and all employees, directors, officers and agents 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

We have posted a copy of our Code of Ethics on our website at www.frontline.bm.
We will provide any person, free of charge, a copy of its Code of Ethics upon
written request to our registered office.

ITEM 16 C.  PRINCIPAL ACCOUNTANT FEES AND SERVICES

Our principal accountant for 2006 and 2005 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 PricewaterhouseCoopers AS.

(in thousands of $)
                              2006          2005

Audit Fees (a)               2,934         2,315
Audit-Related Fees (b)           -             -
Tax Fees (c)                     -             4
All Other Fees (d)               -             -
Total                        2,934         2,319

(a) Audit Fees
Audit fees represent professional services rendered for the audit of our 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 our
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.

Our 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 2006 were approved by
the Board pursuant to the pre-approval policy.

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

Not applicable

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

Not applicable

<PAGE>

                                    PART III

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-38 are filed as part of this annual report:

Consolidated Financial Statements of Frontline Ltd

Index to Consolidated Financial Statements of Frontline Ltd                  F-1
Report of Independent Registered Public Accounting Firm                      F-2
Report of Independent Registered Public Accounting Firm                      F-3
Consolidated Statements of Operations for the years ended
December 31, 2006, 2005 and 2004                                             F-4
Consolidated Balance Sheets as of December 31, 2006 and 2005                 F-5
Consolidated Statements of Cash Flows for the years ended
December 31, 2006, 2005 and 2004                                             F-6
Consolidated Statements of Changes in Stockholders' Equity
for the years ended December 31,
2006, 2005 and 2004                                                          F-8
Notes to Consolidated Financial Statements                                   F-9

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").

1.2       Amended and Restated Bye-Laws of the Company as adopted by
          shareholders on December 1, 2006.

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

2.5*      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.

4.5*      Fleet Purchase Agreement between Frontline Ltd and Ship Finance
          International Limited dated December 11, 2003 incorporated by
          reference to Exhibit 10.1 of the Company's Annual Report on Form 20-F
          for the fiscal year ended December 31, 2004.

4.6*      Charter Ancillary Agreement between Frontline Ltd and Ship Finance
          International Limited dated January 1, 2004 incorporated by reference
          to Exhibit 10.2 of the Company's Annual Report on Form 20-F for the
          fiscal year ended December 31, 2004.

4.7*      Addendum to Charter Ancillary Agreement between Frontline Ltd and Ship
          Finance International Limited dated June 15, 2004 incorporated by
          reference to Exhibit 10.3 of the Company's Annual Report on From 20-F
          for the fiscal year ended December 31, 2004.

4.8*      Form of Performance Guarantee issued by the Company incorporated by
          reference to Exhibit 10.4 of the Company's Annual Report on From 20-F
          for the fiscal year ended December 31, 2004.

4.9*      Form of Time Charter incorporated by reference to Exhibit 10.5 of the
          Company's Annual Report on Form 20-F for the fiscal year ended
          December 31, 2004.

4.10*     Form of Vessel Management Agreements incorporated by reference to
          Exhibit 10.6 of the Company's Annual Report on Form 20-F for the
          fiscal year ended December 31, 2004.

4.11*      Administrative Services Agreement incorporated by reference to
          Exhibit 10.7 of the Company's Annual Report on Form 20-F for the
          fiscal year ended December 31, 2004.

4.12*     Contribution Agreement between Frontline Ltd and Golden Ocean Group
          Limited dated November 29, 2004 incorporated by reference to Exhibit
          10.8 of the Company's Annual Report on From 20-F for the fiscal year
          ended December 31, 2004.

4.13      Merger Agreement, Dockwise and Sealift dated April 27, 2007.

4.14      Shareholder's Agreement Relating to Sealift Ltd dated April 27, 2007.

4.15      Second Supplemental Purchase Agreement dated April 27, 2007.

4.16      Frontline Ltd Share Option Scheme dated November 16, 2006

8.1       Subsidiaries of the Company.

11.1*     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.

12.1      Certification of the Principal Executive Officer.

12.2      Certification of the Principal Executive Officer.

12.3      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 Executive Officer.

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

* Incorporated herein by reference.

                                   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       July 2,  2007                   By /s/ Inger M. Klemp
    ---------------------------------         -------------------------------
                                              Chief Financial 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-4
Consolidated Statements of Operations for the years ended
December 31, 2006, 2005 and 2004                                             F-5
Consolidated Balance Sheets as of December 31, 2006 and 2005                 F-6
Consolidated Statements of Cash Flows for the years ended
December 31, 2006, 2005 and 2004                                             F-7
Consolidated Statements of Changes in Stockholders' Equity for
the years ended December 31, 2006, 2005 and 2004                             F-8
Notes to Consolidated Financial Statements                                   F-9

<PAGE>

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Shareholders of Frontline Ltd

We have completed an integrated audit of Frontline Ltd's 2006 consolidated
financial statements and of its internal control over financial reporting as of
December 31, 2006 and audits of its 2005 and 2004 consolidated financial
statements in accordance with the standards of the Public Company Accounting
Oversight Board (United States). Our opinions, based on our audits and the
report of other auditors, are presented below.

Consolidated financial statements

In our opinion, based on our audits and the report of other auditors, the
accompanying consolidated balance sheets and the related consolidated statements
of operation, of cash flows and of the changes in stockholders' equity present
fairly, in all material respects, the financial position of Frontline Ltd and
its subsidiaries at December 31, 2006 and December 31, 2005, and the results of
their operations and their cash flows for each of the three years in the period
ended December 31, 2006 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
combined financial statements of Independent Tankers Corporation, Buckingham
Shipping PLC, Caernarforn Shipping PLC, Holyrood Shipping PLC, Sandringham
Shipping Plc, Golden State Petro (IOM I-A) PLC, Golden State Petro (IOM I-B) PLC
and, from April 1, 2006, CalPetro Tankers (Bahamas III) Limited, wholly-owned
subsidiaries, which statements reflect total assets of $797.4 million and $747.0
million (as restated) as of December 31, 2006 and December 31, 2005,
respectively, and total revenues of $58.1 million, $56.2 million (as restated)
and $56.2 million (as restated) for each of the years ended December 31, 2006,
2005 and 2004, respectively. 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 Independent Tankers
Corporation, Buckingham Shipping PLC, Caernarforn Shipping PLC, Holyrood
Shipping PLC, Sandringham Shipping Plc, Golden State Petro (IOM I-A) PLC, Golden
State Petro (IOM I-B) PLC and, from April 1, 2006, CalPetro Tankers (Bahamas
III) Limited, 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 of financial
statements 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 3, the Company has restated its consolidated financial
statements as of December 31, 2005 and for the years ended December 31, 2005 and
2004.

Internal control over financial reporting
-----------------------------------------

Also, in our opinion, based on our audit, management's assessment, included in
Management's Report on Internal Control Over Financial Reporting appearing under
item 15(b) of Frontline Ltd's 2006 Annual Report on Form 20-F, that the Company
maintained effective internal control over financial reporting as of December
31, 2006 based on criteria established in Internal Control - Integrated
Framework issued by the Committee of Sponsoring Organizations of the Treadway
Commission (COSO), is fairly stated, in all material respects, based on those
criteria. Furthermore, in our opinion, based on our audit, the Company
maintained, in all material respects, effective internal control over financial
reporting as of December 31, 2006, based on criteria established in Internal
Control - Integrated Framework issued by the COSO. The Company's management is
responsible for maintaining effective internal control over financial reporting
and for its assessment of the effectiveness of internal control over financial
reporting. Our responsibility is to express opinions on management's assessment
and on the effectiveness of the Company's internal control over financial
reporting based on our audit. We conducted our audit of internal control over
financial reporting 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 effective
internal control over financial reporting was maintained in all material
respects. An audit of internal control over financial reporting includes
obtaining an understanding of internal control over financial reporting,
evaluating management's assessment, testing and evaluating the design and
operating effectiveness of internal control, and performing such other
procedures as we consider necessary in the circumstances. We believe that our
audit provides a reasonable basis for our opinions.

A company's internal control over financial reporting is a process designed to
provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance
with generally accepted accounting principles. A company's internal control over
financial reporting includes those policies and procedures that (i) pertain to
the maintenance of records that, in reasonable detail, accurately and fairly
reflect the transactions and dispositions of the assets of the company; (ii)
provide reasonable assurance that transactions are recorded as necessary to
permit preparation of financial statements in accordance with generally accepted
accounting principles, and that receipts and expenditures of the company are
being made only in accordance with authorizations of management and directors of
the company; and (iii) provide reasonable assurance regarding prevention or
timely detection of unauthorized acquisition, use, or disposition of the
company's assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting
may not prevent or detect misstatements. Also, projections of any evaluation of
effectiveness to future periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree of compliance
with the policies or procedures may deteriorate.


PricewaterhouseCoopers AS
Oslo, Norway
July 2, 2007
<PAGE>

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

To the Board of Directors
Independent Tankers Corporation

We have audited the accompanying combined balance sheets of Independent Tankers
Corporation ("ITC") (a Cayman Islands Company and wholly owned subsidiary of
Frontline Ltd.), Buckingham Shipping PLC, Caernarforn Shipping PLC, Holyrood
Shipping PLC, Sandringham Shipping Plc, Golden State Petro (IOM I-A) PLC, Golden
State Petro (IOM I-B) PLC and CalPetro Tankers (Bahamas III) Limited
(collectively the "Company") as of December 31, 2006 and 2005 and the related
combined statements of operations, and cash flows and changes in stockholders'
equity for each of the three years in the period ended December 31, 2006. These
combined 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 audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. The Company is not required to
have, nor were we engaged to perform an audit of its internal control over
financial reporting. Our audits included consideration of internal control over
financial reporting as a basis for designing audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Company's internal control over financial
reporting. Accordingly, we express no such opinion. An audit also includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, the combined financial statements referred to above present
fairly, in all material respects, the financial position of Independent Tankers
Corporation and Affiliates as of December 31, 2006 and 2005 and the results of
their operations and their cash flows for each of the three years in the period
ended December 31, 2006, in conformity with accounting principles generally
accepted in the United States of America.

As discussed in Note 2, ITC has restated its financial statements as of December
31, 2005 and for the years ended December 31, 2005 and 2004 due to an error in
the initial application of FIN 46R. ITC incorrectly believed it was the primary
beneficiary for the Windsor Petroleum Group, the Golden State Group and the
CalPetro Group of entities. During 2006, management revisited their analysis and
determined that ITC was not the primary beneficiary of any of the entities, but
that Frontline Ltd. was the primary beneficiary for the Windsor Petroleum Group
and the Golden State Group, but not the CalPetro Group. Accordingly, the
consolidated financial statements of ITC have been restated to present financial
statements of ITC combined with the Windsor Petroleum Group and the Golden State
Group of entities. The effect of the restatement was to decrease total assets to
$747 million from $860 million as of December 31, 2005 and there was no effect
on total revenues for the years ended December 31, 2005 and 2004.

/s/ Grant Thornton LLP


New York, New York
July 2, 2007
<PAGE>

<TABLE>
Frontline Ltd.
Consolidated Statements of Operations for the years ended December 31, 2006,
2005 and 2004 (in thousands of $, except per share data)
<CAPTION>
                                                                         2006          2005          2004
                                                                                 (restated)    (restated)
<S>                                                                 <C>           <C>           <C>
Operating revenues
   Time charter revenues                                              364,956       205,837       108,246
   Bareboat charter revenues                                           89,655       142,562       176,381
   Voyage charter revenues                                          1,114,531     1,152,240     1,554,519
   Finance lease interest income                                        9,411            --            --
   Other income                                                         5,310         3,877         3,777
----------------------------------------------------------------------------------------------------------
   Total operating revenues                                         1,583,863     1,504,516     1,842,923
----------------------------------------------------------------------------------------------------------
Gain on sale of assets                                                 95,655        76,081        19,574
Operating expenses
   Voyage expenses and commission                                     396,576       337,221       361,609
   Ship operating expenses                                            199,377       148,702       130,385
   Charterhire expenses                                                24,923        11,711        39,302
   Administrative expenses                                             32,214        21,061        25,596
   Depreciation and amortisation                                      203,849       198,359       180,497
----------------------------------------------------------------------------------------------------------
   Total operating expenses                                           856,939       717,054       737,389
----------------------------------------------------------------------------------------------------------
Net operating income                                                  822,579       863,543     1,125,108
----------------------------------------------------------------------------------------------------------
Other income (expenses)
   Interest income                                                     47,733        40,867        31,403
   Interest expense                                                  (206,144)     (206,058)     (194,378)
   Equity earnings of unconsolidated subsidiaries and
   associated companies                                                 1,118         3,379        10,425
   Foreign currency exchange gain (loss)                                1,056        18,829        (4,932)
   Mark to market of derivatives                                      (10,897)       14,499        (5,843)
   Gain on sale of securities                                           9,782        28,035         7,151
   Dividends received                                                  13,317         1,540            21
   Other financial items, net                                          (3,700)        1,755         1,981
----------------------------------------------------------------------------------------------------------
   Net other expenses                                                (147,735)      (97,154)     (154,172)
----------------------------------------------------------------------------------------------------------
Net income from continuing operations before income
taxes, minority interest                                              674,844       766,389       970,936
   Minority interest                                                 (158,682)     (169,459)      (64,995)
   Income tax (expense) benefit                                          (162)           19          (178)
   Gain on issuance of shares by associate                                 --         1,105            --
----------------------------------------------------------------------------------------------------------
Net income from continuing operations                                 516,000       598,054       905,763
   Discontinued operations                                                 --         8,785       117,619
----------------------------------------------------------------------------------------------------------
Net income                                                            516,000       606,839     1,023,382
==========================================================================================================

Earnings per share:
Basic and diluted earnings per share from continuing operations         $6.90         $7.99        $12.21

Basic and diluted earnings per share for discontinued operations           --         $0.12         $1.58

Basic and diluted earnings per share                                    $6.90         $8.11        $13.79

Weighted average shares outstanding, basic and diluted                 74,825        74,825        74,192

Cash dividends per share declared                                       $7.00        $10.10        $13.60
==========================================================================================================
</TABLE>

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

<TABLE>
Frontline Ltd.
Consolidated Balance Sheets as of December 31, 2006 and 2005
(in thousands of $)
<CAPTION>
                                                                 2006          2005
                                                                         (restated)
<S>                                                         <C>           <C>
ASSETS
Current Assets
   Cash and cash equivalents                                  197,181        92,782
   Restricted cash                                            677,533       636,790
   Marketable securities                                        1,469       144,156
   Trade accounts receivable                                   59,728        72,719
   Other receivables                                           39,018        20,024
   Inventories                                                 43,791        44,984
   Voyages in progress                                         43,412        94,479
   Prepaid expenses and accrued income                         11,900         7,043
   Net investment in finance lease, current portion            23,608            --
   Derivative instruments receivable amounts, short term        2,931         5,132
   Other current assets                                        11,571           568
------------------------------------------------------------------------------------
Total current assets                                        1,112,142     1,118,677
Newbuildings                                                  166,851        15,927
Vessels and equipment, net                                  2,446,278     2,584,847
Vessels and equipment under capital lease, net                626,374       672,608
Investment in unconsolidated subsidiaries and
associated companies                                           17,825        15,783
Net investment in finance lease, long term portion            175,141            --
Deferred charges                                               16,937        18,011
Derivative instruments receivable amounts, long term           17,807        19,563
Other long-term assets                                         10,582         9,401
------------------------------------------------------------------------------------
Total assets                                                4,589,937     4,454,817
====================================================================================

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
   Short-term debt and current portion of long-term debt      281,409       228,135
   Current portion of obligations under capital leases         28,857        25,142
   Trade accounts payable                                      17,573         9,382
   Accrued expenses                                            90,316        84,847
   Deferred charter revenue                                    15,783         7,071
   Derivative instruments liabilities, short term                  --           214
   Other current liabilities                                    9,978        83,856
------------------------------------------------------------------------------------
Total current liabilities                                     443,916       438,647
Long-term liabilities
   Long-term debt                                           2,181,885     2,101,061
   Obligations under capital leases                           723,073       706,279
   Deferred gains on sales of vessels                          21,732        18,102
   Derivative instruments liabilities, long term                8,743         3,307
   Other long-term liabilities                                    906         1,505
------------------------------------------------------------------------------------
Total liabilities                                           2,936,339     3,268,901
Commitments and contingencies
Minority interest                                             541,122       470,750

Stockholders' equity
   Share capital (74,825,169 shares outstanding,
   par value $2.50)                                           187,063       187,063
   Contributed surplus                                        485,922       534,787
   Accumulated other comprehensive loss                        (4,425)       (6,684)
   Retained earnings                                               --            --
Total stockholders' equity                                    668,560       715,166
------------------------------------------------------------------------------------
Total liabilities and stockholders' equity                  4,589,937     4,454,817
====================================================================================
</TABLE>

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, 2006, 2005 and 2004
(in thousands of $)
<CAPTION>
                                                                     2006          2005          2004
                                                                             (restated)    (restated)
<S>                                                              <C>           <C>           <C>
Net income                                                        516,000       606,839     1,023,382
Adjustments to reconcile net income to net cash
provided by operating activities:
   Depreciation and amortisation                                  203,849       198,875       183,711
   Amortisation of deferred charges                                 3,346        16,705        10,116
   Gain from sale of assets (including marketable
   securities)                                                   (105,439)     (109,657)     (126,197)
   Equity earnings of unconsolidated subsidiaries and
   associated companies                                            (1,118)       (3,380)      (10,424)
   Unrealised foreign exchange loss                                    75        (2,222)          390
   Adjustment of derivatives to market value                        9,348       (12,335)      (15,675)
   Minority interest                                              158,682       169,459        64,995
   Other, net                                                      (5,326)       (3,030)       (3,337)
Changes in operating assets and liabilities, net of
effect of acquisitions:
   Trade accounts receivable                                       12,991        64,981       (93,497)
   Other receivables                                              (13,464)       (6,493)        1,222
   Inventories                                                      1,193       (12,967)       (5,966)
   Voyages in progress                                             51,067        54,421       (88,619)
   Prepaid expenses and accrued income                             (4,231)        2,144        (3,953)
   Trade accounts payable                                           8,191         1,114         1,353
   Accrued expenses                                                 4,777         7,126        12,274
   Deferred charter revenue                                         8,179         2,689          (927)
   Other, net                                                     (16,564)        5,781       (43,008)
------------------------------------------------------------------------------------------------------
Net cash provided by operating activities                         831,556       980,050       905,840
------------------------------------------------------------------------------------------------------
Investing activities
   Maturity (placement) of restricted cash                         13,730       (44,183)      301,743
   Additions to newbuildings, vessels and equipment              (569,819)     (558,163)     (126,947)
   Proceeds from sale of vessels and equipment                    275,190       250,339        59,787
   Insurance proceeds from loss of vessels and equipment           12,173            --            --
   Acquisition of subsidiaries and businesses, net of cash             --            --       (18,858)
   Investments in associated companies                             (3,431)       (2,610)      (37,424)
   Dividends received from associated companies                     1,318        20,911         3,800
   Purchase of minority interest                                   (7,198)      (33,083)      (14,713)
   Proceeds from sale of investments in associated companies           --            --        11,181
   Receipts from finance leases and loans receivable               12,562         7,051         2,227
   Purchases of other assets                                      (71,067)     (168,038)      (90,571)
   Proceeds from sale of other assets                             154,409       152,752        75,473
   Proceeds from issuance of shares in subsidiary                   7,800            --        24,696
   Proceeds from sale of newbuilding contracts                      9,769        16,800            --
------------------------------------------------------------------------------------------------------
Net cash (used in) provided by investing activities              (164,564)     (358,224)      190,394
------------------------------------------------------------------------------------------------------
Financing activities
   Proceeds from long-term debt                                   539,748     1,660,503     1,724,014
   Repayments of long-term debt                                  (420,925)   (1,347,217)   (1,797,964)
   Payment of obligations under capital leases                    (24,706)      (22,230)      (20,310)
   Debt fees paid                                                  (2,230)       (7,405)      (16,359)
   Cash dividends paid                                           (654,480)     (909,574)   (1,038,315)
   Repurchase of shares and warrants                                   --            --          (631)
   Proceeds from issuance of equity                                    --            --        38,210
                                                                 ----------    ----------   ----------
Net cash used in financing activities                            (562,593)     (625,923)   (1,111,355)
------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash and cash equivalents              104,399        (4,097)      (15,121)
------------------------------------------------------------------------------------------------------
Cash and cash equivalents at beginning of year                     92,782        96,879       112,000
Cash and cash equivalents at end of year                          197,181        92,782        96,879
======================================================================================================
Supplemental disclosure of cash flow information:
Interest paid                                                     207,610       225,053       177,342
Income taxes paid                                                      62            46           114
</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, 2006, 2005 and 2004 (in thousands of $, except number of shares)
<CAPTION>
                                                                 2006           2005           2004
<S>                                                        <C>            <C>            <C>
NUMBER OF SHARES OUTSTANDING
   Balance at beginning of year                            74,825,169     74,825,169     73,647,930
   Shares issued                                                   --             --      1,197,436
   Shares bought back                                              --             --        (20,197)
----------------------------------------------------------------------------------------------------
   Balance at end of year                                  74,825,169     74,825,169     74,825,169
----------------------------------------------------------------------------------------------------

SHARE CAPITAL
   Balance at beginning of year                               187,063        187,063        184,120
   Shares issued                                                   --             --          2,994
   Shares bought back and cancelled                                --             --            (51)
----------------------------------------------------------------------------------------------------
   Balance at end of year                                     187,063        187,063        187,063
----------------------------------------------------------------------------------------------------

CONTRIBUTED SURPLUS
   Balance at beginning of year                               534,787        568,127        513,859
   Shares issued                                                   --             --         42,802
   Shares bought back and warrants exercised or expired            --             --           (581)
   Excess of cash proceeds over book value on issue of
   shares by subsidiary                                            --             --          9,050
   Contribution from related party                                 --         85,364             --
   Cash dividends                                             (35,634)      (203,643)            --
   Minority interest in deemed equity contributions
   and deemed dividends                                       (13,231)        84,939          2,997
----------------------------------------------------------------------------------------------------
   Balance at end of year                                     485,922        534,787        568,127
----------------------------------------------------------------------------------------------------

ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)
   Balance at beginning of year                                (6,684)         5,414         (6,953)
   Other comprehensive income (loss)                            2,259        (12,098)        12,367
----------------------------------------------------------------------------------------------------
   Balance at end of year                                      (4,425)        (6,684)         5,414
----------------------------------------------------------------------------------------------------

RETAINED EARNINGS
   Balance at beginning of year                                    --        157,364        564,391
   Net income                                                 516,000        606,839      1,023,382
   Cash dividends                                            (488,158)      (552,322)    (1,040,093)
   Stock dividends                                            (27,842)      (211,881)      (390,316)
----------------------------------------------------------------------------------------------------
   Balance at end of year                                          --             --        157,364
----------------------------------------------------------------------------------------------------

----------------------------------------------------------------------------------------------------
TOTAL STOCKHOLDERS' EQUITY                                    668,560        715,166        917,968
===================================================================================================

COMPREHENSIVE INCOME (LOSS)
   Net income                                                 516,000        606,839      1,023,382
   Unrealised gains (loss) from marketable securities           1,721        (11,877)        10,441
   Unrealised gains from cash flow hedging derivative
   instruments                                                     --             --          2,471
   Foreign currency translation and other                         538           (221)          (545)
----------------------------------------------------------------------------------------------------
   Other comprehensive income                                   2,259        (12,098)        12,367

----------------------------------------------------------------------------------------------------
Comprehensive income                                          518,259        594,741      1,035,749
===================================================================================================
</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. In addition, the Company owns and operates
     three containerships which range from 1,700 to 2,824 twenty-foot equivalent
     units ("TEU"). The Company operates primarily through subsidiaries and
     partnerships located in Bermuda, Isle of Man, Liberia, Norway, Panama,
     Singapore, Cayman Islands, Malta, the Bahamas and Cyprus. 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 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 have been declared as follows:

     ---------------------------------------------------------------------------
                                                                     % of
                                                                     Frontline
                                                                     holding
     Declaration Date                   Distribution Date            distributed
     ---------------------------------------------------------------------------
     August 2004                        September 2004               10.0
     November 2004                      December 2004                13.2
     January 2005                       February 2005                25.0
     February 2005                      March 2005                   10.0
     February 2006                      March 2006                    5.1

     As of December 31, 2006, the Company's remaining shareholding in Ship
     Finance was 11.1%. 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. Under the provisions of FASB
     Interpretation No. 46 (revised December 2003) Consolidation of Variable
     Interest Entities, an Interpretation of ARB No. 51 ("FIN 46(R)") Ship
     Finance remains consolidated into Frontline.

     As of December 31, 2006, Ship Finance had total assets of $2,553.7 million
     and net assets of $600.5 million. A total of $2,427.1 million of the assets
     of Ship Finance, which have been recorded as owned vessels in the Company's
     consolidated financial statements, are pledged as security for Ship
     Finance's debt obligations. The Company has not guaranteed the obligations
     of Ship Finance.

     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 represented the average price per share
     of the Golden Ocean shares during their first five days of trading on the
     Oslo Stock Exchange where Golden Ocean was listed on December 15, 2004. The
     Company does 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. The Company accounted for the spin off
     of Golden Ocean at fair value and recorded a gain of $99.5 million in the
     year ended December 31, 2004 which is included in the result from
     discontinued operations in the statement of operations.

     As discussed in Note 3, the Company began consolidating the variable
     interest entity CalPetro Tankers (Bahamas III) Limited ("Bahamas III") as
     of April 1, 2006. Bahamas III has total assets of $18.8 million and net
     assets of $2.6 million and its sole asset, which is recorded as an owned
     vessel in the Company's consolidated financial statements, is pledged as
     security for the debt obligations of Bahamas III. The Company has not
     guaranteed the obligations of Bahamas III.

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 the primary beneficiary. All intercompany
     balances and transactions have been eliminated on consolidation.

     A variable interest entity ("VIE") is a legal entity where either (a)
     equity interest holders as a group 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, or where (c) the voting rights of some investors are not
     proportional to their obligations to absorb the expected losses of the
     entity, their rights to receive the expected residual returns of the
     entity, or both and substantially all of the entity's activities either
     involve or are conducted on behalf of an investor that has
     disproportionately few voting rights. FIN 46(R) 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.

     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.

     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. This unearned income is amortised 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.

     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 the 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, a 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. The
     Company assesses 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.

     Discount on loans

     Discount on issue of certain of the Company's long-term debt, is being
     amortised over the respective periods to maturity of the debt.

     Trade accounts receivable

     Trade and other receivables are presented net of allowances for doubtful
     balances. If amounts become uncollectible, they are charged to the income
     statement when that determination is made.

     Revenue and expense recognition

     Revenues and expenses are recognised on the accruals 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 a service is provided. The Company uses a
     discharge-to-discharge basis in determining percentage of completion for
     all spot voyages and voyages servicing contracts of affreightment whereby
     it recognises revenue rateably from when product is discharged (unloaded)
     at the end of one voyage to when it is discharged after the next voyage.
     The Company does not begin recognising revenue until a charter has been
     agreed to by a customer and the Company, even if the vessel has discharged
     its cargo and is sailing to the anticipated load port on its next voyage.
     Amounts receivable or payable arising from profit sharing arrangements are
     accrued based on amounts earned as of 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 expense 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. 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" which are included in voyage revenues in its statements of
     operations.

     Drydocking

     Normal vessel repair and maintenance costs are expensed 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.

     Derivatives

     The Company may enter 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. The fair
     values of the interest rate swap contracts are recognised as assets or
     liabilities with changes in fair values recognised in the consolidated
     statements of operations.

     The Company may enter 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.

     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. These contracts were all
     terminated during 2006 and there were no Yen denominated forward currency
     contracts outstanding at December 31, 2006.

     Financial Instruments

     In determining the 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
     also U.S. dollars. Most of the Company's subsidiaries have U.S. dollars as
     their functional currency. 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

     On January 1, 2006, the Company adopted SFAS 123(R) Share-Based Payment
     ("FAS 123R"). Under FAS 123R, the Company is required to expense the fair
     value of stock options issued to employees over the period the options
     vest.

     Earnings per share

     Basic earnings per share ("EPS") is computed based on the income 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.

     Issuance of shares by a subsidiary/ associate

     The Company recognises a profit when its subsidiary or associate issues 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 contributed surplus.

3.   RESTATEMENT OF PRIOR YEARS

     As discussed in note 27, the Company acquired the Independent Tankers
     Corporation ("ITC Group") from a related party in 2004. The Company has
     restated its Consolidated Financial Statements as of December 31, 2005 and
     for the years ended December 31, 2005 and 2004 as a result of the
     correction of an error in its initial application of FIN 46R. The Company
     had incorrectly concluded that it was the primary beneficiary of the
     variable interest entities CalPetro Tankers (Bahamas I) Limited, CalPetro
     Tankers (Bahamas II) Limited, CalPetro Tankers (Bahamas III) Limited and
     CalPetro Tankers (IOM) Limited for the years ended December 31, 2004 and
     December 31, 2005 and as a result, these entities were fully consolidated.
     During 2006, the Company revisited this analysis and determined that it was
     not the primary beneficiary of these entities and therefore has accounted
     for these investments under the equity method.

     As discussed in Note 17, in April 2006, CalPetro Tankers (Bahamas III)
     Limited cancelled its bareboat contract with Chevron Transport Corporation
     ("Chevron"). Under FIN 46(R) this is considered a triggering event and the
     Company began to consolidate the variable interest entity into its accounts
     from that date.

     The tables below illustrate the effect of the restatement on the Company's
     prior year Consolidated Statements of Operations and Consolidated
     Statements of Cashflows for the years ended December 31, 2005 and 2004, and
     the Consolidated Balance Sheet as of December 31, 2005. As the
     consolidation and equity accounting models result in the same net income,
     there has been no change in opening equity or earnings per share data as a
     result of this restatement.

     <TABLE>
     <CAPTION>
     ----------------------------------------------------------------------------------------------
     (in thousands of $)                                           2005    Adjustment          2005
                                                         (as previously                  (restated)
                                                              reported)
     ----------------------------------------------------------------------------------------------
     <S>                                                      <C>            <C>          <C>
     Finance lease interest income                                9,584        (9,584)           --
     Other income                                                 3,610           267         3,877
     Administrative expenses                                     21,181          (120)       21,061
     Interest income                                             41,040          (173)       40,867
     Interest expense                                           215,995        (9,937)      206,058
     Equity earnings of unconsolidated subsidiaries and
     associated companies                                         3,691          (312)        3,379
     Other financial items, net                                   2,010          (255)        1,755
     Net income                                                 606,839            --       606,839
     Cash and cash equivalents                                  100,533        (7,751)       92,782
     Other receivables                                           20,053           (29)       20,024
     Prepaid expenses and accrued income                          9,328        (2,285)        7,043
     Net investment in finance lease, current portion            11,861       (11,861)           --
     Investment in unconsolidated subsidiaries and
     associated companies                                        10,169         5,614        15,783
     Net investment in finance lease, long term portion          96,057       (96,057)           --
     Deferred charges                                            18,664          (653)       18,011
     Total assets                                             4,567,839      (113,022)    4,454,817
     Short-term debt and current portion of long-term debt      240,191       (12,056)      228,135
     Accrued expenses                                            87,336        (2,489)       84,847
     Long-term debt                                           2,199,538       (98,477)    2,101,061
     Total liabilities                                        3,381,923      (113,022)    3,268,901
     Net cash provided by operating activities                  979,774           276       980,050
     Net cash used in investing activities                      344,737        13,487       358,224
     Net cash used in financing activities                      640,206       (14,283)      625,923
     Cash and cash equivalents at beginning of year             105,702        (8,823)       96,879
     Cash and cash equivalents at end of year                   100,533        (7,751)       92,782
     </TABLE>
<PAGE>

     <TABLE>
     <CAPTION>
     ---------------------------------------------------------------------------------------
     (in thousands of $)                                       2004   Adjustment        2004
                                                     (as previously               (restated)
                                                          reported)
     ---------------------------------------------------------------------------------------
     <S>                                                  <C>           <C>        <C>
     Finance lease interest income                           10,794     (10,794)          --
     Other income                                             3,630         147        3,777
     Administrative expenses                                 25,739        (143)      25,596
     Interest income                                         31,595        (192)      31,403
     Interest expense                                       205,458     (11,080)     194,378
     Equity earnings of unconsolidated subsidiaries and
     associated companies                                    10,553        (128)      10,425
     Other financial items, net                               2,237        (256)       1,981
     Net income                                           1,023,382          --    1,023,382
     Net cash provided by operating activities              905,987        (147)     905,840
     Net cash used in investing activities                  178,490      11,904      190,394
     Net cash used in financing activities                1,102,964       8,391    1,111,355
     Cash and cash equivalents at beginning of year         124,189     (12,189)     112,000
     Cash and cash equivalents at end of year               105,702      (8,823)      96,879

     </TABLE>

4.   RECENTLY ADOPTED ACCOUNTING STANDARDS

     Effective January 1, 2006, the Company adopted FAS No. 123R Share-Based
     Payment ("FAS 123R") using the modified prospective transition method.
     Under the modified prospective method the Company recognises compensation
     cost beginning with the effective date based on the requirements of FAS
     123R for all share-based payments granted after the effective date. Prior
     period results have not been restated.

     In 2006, the Company recorded compensation expense of $2.2 million in
     relation to share-based payments, which was calculated in accordance with
     FAS 123R. The compensation expense related to share-based payments granted
     under the Ship Finance International Limited share option scheme. In 2005
     the Company did not record any compensation expense as no options were
     granted or outstanding during 2005.

     Under the modified prospective method, the Company continued to account for
     2004 compensation expense in accordance with Accounting Principles Board
     Opinion No. 25 Accounting for Stock Issued to Employees ("APB 25"), where
     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, the Company recorded compensation expense of $4.2 million in
     connection with employee share options. Had the compensation costs for 2004
     been determined consistent with the fair value method required in FAS 123R,
     the Company's net income and earnings per share would have been increased
     to the following pro forma amounts in 2004:

     ---------------------------------------------------------------------------
     (in thousands, except per share data)                                 2004
     ---------------------------------------------------------------------------
     Net income (loss)
        As reported                                                   1,023,382
        Add: Compensation expenses as reported                            4,231
        Compensation expense determined under fair value
        based method for all awards                                     (2,756)
     ---------------------------------------------------------------------------
        Adjusted net income, fair value based method
        for all awards                                                1,024,857
     ---------------------------------------------------------------------------

     Basic earnings per share
        As reported                                                      $13.79
        FAS 123R adjusted                                                $13.81

     Diluted earnings per share
        As reported                                                      $13.79
        FAS 123R adjusted                                                $13.81

5.   RECENTLY ISSUED ACCOUNTING STANDARDS

     In March 2006, the Financial Accounting Standards Board ("FASB") issued
     Statement of Financial Accounting Standards No. 156 Accounting for
     Servicing of Financial Assets - an amendment to FAS 140 ("FAS 156"). FAS
     156 requires all separately recognised servicing rights be initially
     measured at fair value if practicable. The statement also permits an entity
     to choose between two measurement methods for each class of separately
     recognised servicing assets and liabilities. FAS 156 is effective for
     fiscal years beginning after September 15, 2006. The adoption of FAS 156 on
     January 1, 2007 did not have an impact on the Company's financial
     statements.

     In July 2006, the FASB issued Interpretation No. 48 Accounting for
     Uncertainty in Income Taxes - an interpretation of FAS 109 ("FIN 48"). FIN
     48 clarifies the application of FAS 109 by defining the criterion that an
     individual tax position must meet for any part of the benefit of that
     position to be recognised in an entity's financial statements and also
     provides guidance on measurement, de-recognition, classification, interest
     and penalties and disclosure. FIN 48 is effective for fiscal years
     beginning after December 15, 2006. The adoption of FIN 48 on January 1,
     2007 did not have an impact on the Company's financial statements.

     In September 2006, the FASB issued Statement of Financial Accounting
     Standards No. 157 Fair Value Measurements ("FAS 157"). FAS 157 defines fair
     value, establishes a framework for measuring fair value in generally
     accepted accounting principles and expands disclosures about fair value
     measurements. FAS 157 applies under most other accounting pronouncements
     that require or permit fair value measurements and does not require any new
     fair value measurements. FAS 157 is effective for fiscal years beginning
     after November 15, 2007. The Company has not yet determined the effect of
     adoption of FAS 157 on its financial statements.

     In September 2006, the FASB issued Statement of Financial Accounting
     Standards No. 158 Employers' Accounting for Defined Benefit Pension and
     Other Post Retirement Plans - an amendment of FAS 87, 88, 106, and 132R
     ("FAS 158"). FAS 158 requires that the funded status of defined benefit
     post retirement plans be recognised in the statement of financial position
     and changes in the funded status be reflected in comprehensive income. FAS
     158 also requires the benefit obligations to be measured as of the same
     date of the financial statements and requires additional disclosures
     related to the effects of delayed recognition of gains or losses, prior
     service costs or credits and transition assets or obligation on net
     periodic benefit cost. FAS 158 is effective for fiscal years ending after
     December 15, 2006 for employers with publicly traded securities. The
     adoption of FAS 158 on January 1, 2007 did not have an impact on the
     Company's financial statements.

     In September 2006, the SEC issued SAB No. 108 Considering the Effects of
     Prior Year Misstatements When Quantifying Misstatements in Current Year
     Financial Statements ("SAB 108"), which provides interpretative guidance on
     how registrants should quantify financial statement misstatements. Under
     SAB 108 registrants are required to consider both a "rollover" method,
     which focuses primarily on the income statement impact of misstatements,
     and the "iron curtain" method, which focuses primarily on the balance sheet
     impact of misstatements. The effects of prior year uncorrected errors
     include the potential accumulation of improper amounts that may result in
     material misstatement on the balance sheet or the reversal of prior period
     errors in the current period that result in a material misstatement of the
     current period income statement amounts. Adjustments to current or prior
     period financial statements would be required in the event that after
     application of various approaches for assessing materiality of a
     misstatement in a current period financial statements and consideration of
     all relevant quantitative and qualitative factors, a misstatement is
     determined to be material. The Company adopted the provisions of SAB 108 as
     of December 31, 2006. The adoption of SAB 108 did not have an effect on the
     Company's results of operations or financial position.

6.   SEGMENT INFORMATION

     The Company has two reportable segments: the tanker segment and the "all
     other" segment. The tanker segment derives its revenues from the
     transportation of crude oil with its fleet of VLCC and Suezmax vessels.
     Revenues and expenses not belonging to the tanker segment comprise
     primarily corporate head office administration expenses, operation of the
     company's OBO and containership fleets, and FPSO and Heavylift conversion
     projects and have been reported under the All Other segment.

     Segment results are evaluated based on income from vessel operations before
     general and administrative expenses, which is net of total operating
     revenues and voyage 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.

     In the prior year the Company presented OBO and drybulk operations as
     separate segments. As of 2005, all drybulk operations are now discontinued
     and as such, segmental disclosure is no longer appropriate. The OBO segment
     is not a reportable segment as it does not meet the quantitative thresholds
     used to determine reportable segments - voluntary disclosure of this
     segment was given in prior years but has not been disclosed in the current
     year. Segment information for the years ended December 31, 2005 and 2004
     has been restated to reflect current year presentation.

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

     Information about the Company's reportable segments and a reconciliation to
     the consolidated totals as of and for each of the years ended December 31,
     2006, 2005 and 2004 is as follows:

     <TABLE>
     <CAPTION>
     ----------------------------------------------------------------------------------
     (in thousands of $)                             Tankers    All Other         Total
     ----------------------------------------------------------------------------------
     2006
     <S>                                           <C>          <C>           <C>
     Total operating revenues                      1,459,606      124,257     1,583,863
     Voyage expenses                                 392,328        4,248       396,576
     Ship operating expenses                         165,363       34,014       199,377
     Depreciation and amortisation                   178,542       25,307       203,849
     Interest income                                  25,533       22,200        47,733
     Interest expense                                186,744       19,400       206,144
     Share in results from associated companies          592          526         1,118
     Net income (loss)                               640,930     (124,930)      516,000
     Vessels and equipment, net                    2,071,685      374,593     2,446,278
     Vessels under capital lease                     626,374           --       626,374
     Investment in associated companies                5,881       11,944        17,825
     Total assets                                  3,365,617    1,224,320     4,589,937
     Expenditure for vessels                         213,867      355,952       569,819

     <CAPTION>
     -------------------------------------------------------------------------------
     (in thousands of $)                            Tankers   All Other        Total
     -------------------------------------------------------------------------------
     2005
     <S>                                          <C>           <C>        <C>
     Total operating revenues                     1,386,509     118,007    1,504,516
     Voyage expenses                                332,395       4,826      337,221
     Ship operating expenses                        129,865      18,837      148,702
     Depreciation and amortisation                  175,491      22,868      198,359
     Interest income                                 24,490      16,377       40,867
     Interest expense                               192,348      13,710      206,058
     Share in results from associated companies       2,888         491        3,379
     Net income (loss)                              654,773     (47,934)     606,839
     Discontinued operations                             --       8,785        8,785
     Vessels and equipment, net                   2,243,221     341,626    2,584,847
     Vessels under capital lease                    672,608          --      672,608
     Investment in associated companies               7,796       7,987       15,783
     Total assets                                 3,529,681     925,136    4,454,817
     Expenditure for vessels                        558,163          --      558,163

<CAPTION>
     ------------------------------------------------------------------------------
     (in thousands of $)                            Tankers   All Other       Total
     ------------------------------------------------------------------------------
     2004
     <S>                                          <C>           <C>       <C>
     Total operating revenues                     1,754,878      88,045   1,842,923
     Voyage expenses                                358,863       2,746     361,609
     Ship operating expenses                        114,984      15,401     130,385
     Depreciation and amortisation                  159,478      21,019     180,497
     Interest income                                 21,950       9,453      31,403
     Interest expense                               179,223      15,155     194,378
     Share in results from associated companies       8,935       1,490      10,425
     Net income                                     942,329      81,053   1,023,382
     Discontinued operations                             --     117,619     117,619
     Vessels and equipment, net                   1,975,447     278,914   2,254,361
     Vessels under capital lease                    718,842          --     718,842
     Investment in associated companies              21,214       7,667      28,881
     Total assets                                 3,448,027     763,134   4,211,161
     Expenditure for vessels                        126,947          --     126,947
     </TABLE>

     All other is comprised of items as follows:

     <TABLE>
     <CAPTION>
     ---------------------------------------------------------------------------------------
     (in thousands of $)                                    2006          2005          2004
     ---------------------------------------------------------------------------------------
     <S>                                               <C>            <C>            <C>
     Other operating revenues
     Vessel operating revenue                            109,077       113,713        84,114
     Finance lease interest income                         9,410            --            --
     Other operating revenues                              5,770         4,294         3,931
     ---------------------------------------------------------------------------------------
     Total other operating revenues                      124,257       118,007        88,045
     ---------------------------------------------------------------------------------------
     Other net income
     Net income from vessels                              39,645        62,008       149,453
     Minority interest                                  (158,682)     (169,459)      (57,602)
     Net income (loss) attributable to corporate
     holding and management companies                     (5,893)       59,517       (10,798)
     ---------------------------------------------------------------------------------------
     Total other net income                             (124,930)      (47,934)       81,053
     ---------------------------------------------------------------------------------------
     Other assets
     Vessels, equipment and newbuildings                 470,470       339,007       277,651
     Cash and cash equivalents attributable to
     holding company                                     445,245       378,674       333,507
     Marketable securities held by corporate
     holding company                                       1,469       144,156        78,327
     Investment in finance leases attributable to
     other segments                                      198,749            --            --
     Other assets attributable to corporate holding
     and management companies                            108,387        63,299        73,649
     ---------------------------------------------------------------------------------------
     Total  other assets                               1,224,320       925,136       763,134
     ---------------------------------------------------------------------------------------
     </TABLE>

     During the year ended December 31, 2006, the Company reported total income
     from one customer which represented approximately 13% of consolidated
     operating revenues (2005: one customer, 2004: two customers). These
     revenues are reported under the tanker segment.

7.   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 Singapore, Norway and the United
     Kingdom are subject to taxation in their respective jurisdictions. The tax
     paid by subsidiaries of the Company that are subject to taxation is not
     material.

8.   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.

     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:

     ---------------------------------------------------------------------------
     (in thousands of $)                          2006         2005         2004
     ---------------------------------------------------------------------------
     Net income from continuing operations     516,000      598,054      905,763
     Discontinued operations                        --        8,785      117,619
     ---------------------------------------------------------------------------
     Net income available to stockholders      516,000      606,839    1,023,382
     ===========================================================================

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

     ---------------------------------------------------------------------------
     (in thousands)                                       2006     2005     2004
     ---------------------------------------------------------------------------
     Basic and diluted earnings per share:
     Weighted average number of ordinary shares
     outstanding                                        74,825   74,825   74,192
     ===========================================================================

     All of the 100,000 stock options issued by Frontline during 2006 were
     anti-dilutive. In the years ended December 31, 2005 and 2004 no options
     were anti-dilutive.

9.   LEASES

     As of December 31, 2006 the Company leased in thirteen vessels on long-term
     time charters and bareboat charters from third parties. One of those leases
     is classified as an operating lease 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:

     ---------------------------------------------------------------------------
     (in thousands of $)
     Year ending December 31,
     ---------------------------------------------------------------------------
     2007                                                                  7,950
     2008                                                                  7,863
     2009                                                                  7,820
     2010                                                                  6,105
     2011                                                                  6,106
     2012 and later                                                        7,430
     ---------------------------------------------------------------------------
     Total minimum lease payments                                         43,274
     ===========================================================================

     Total rental expense for operating leases was $24.9 million, $11.7 million
     and $39.3 million for the years ended December 31, 2006, 2005 and 2004,
     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 Type               Expiry of     Extended     Extended   Company's     Lessor's
                               Mandatory        Lease        Lease    Purchase   Put Option
                                   Lease   Periods at   Periods at      Option     Exercise
                                  Period     Lessor's    Company's     Periods         Date
                                               Option       Option
     --------------------------------------------------------------------------------------
     <S>                            <C>     <C>          <C>        <C>                <C>
     Front Warrior (Suezmax)        2007    2008-2011    2010-2011  2007- 2011         2011
     </TABLE>

     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, 2006 no such liability had arisen.

     Nine of the thirteen 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 46(R), these special purpose
     entities were not consolidated by Frontline. One of these leases is
     accounted for as operating leases and eight of these leases are accounted
     for as capital leases. The Company has 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 the Company has been unable to obtain this information
     by other means. Accordingly the Company is unable to determine the primary
     beneficiary of these leasing entities. At December 31, 2006, the original
     cost to the lessor of the assets under such arrangements was $618.5
     million. At December 31, 2006 and 2005, the Company's residual value
     guarantees associated with these leases, which represent the maximum
     exposure to loss, are $84.5 million.

     The following table discloses information about the Company's activity with
     these non-consolidated lessor entities in the three year period ended
     December 31, 2006:

     <TABLE>
     <CAPTION>
     -----------------------------------------------------------------------------------------
                                                                Year ended December 31,
                                                                  2006     2005           2004
     -----------------------------------------------------------------------------------------
     <S>                                                        <C>      <C>            <C>
     Repayments of principal obligations under capital leases   25,142   22,205         19,686
     Interest expense for capital leases                        34,867   36,850         38,436
     Charterhire expense for operating leases                    5,402    5,211         31,839
     </TABLE>

     As of December 31, 2006 the Company leased out thirty four of its vessels
     to third parties on time and bareboat charters with initial periods ranging
     between three months and five and a half years. All of those leases are
     classified as operating 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, 2006 are as follows:

     ---------------------------------------------------------------------------
     (in thousands of $)                                               Total

     ---------------------------------------------------------------------------
     2007                                                                301,335
     2008                                                                214,174
     2009                                                                128,151
     2010                                                                 42,156
     2011                                                                 4,879
     2012 and later                                                           --
     ---------------------------------------------------------------------------
     Total minimum lease revenues                                        690,695
     ===========================================================================

     The cost and accumulated depreciation of the vessels leased to third
     parties as of December 31, 2006 were approximately $2,167.4 million and
     $849.3 million, respectively, and as of December 31, 2005 were
     approximately $2,012.8 million and $729.0 million, respectively.

10.  MARKETABLE SECURITIES

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

     ---------------------------------------------------------------------------
     (in thousands of $)                                    2006           2005
     ---------------------------------------------------------------------------
     Cost                                                  1,198        145,606
     Net unrealised gain (loss)                              271         (1,450)
     ---------------------------------------------------------------------------
     Fair value                                            1,469        144,156
     ===========================================================================

     The net unrealised gain (loss) on marketable securities, including a
     component of foreign currency translation, included in comprehensive income
     decreased by $1.7 million for the year ended December 31, 2006 (2005 -
     decrease in net unrealised gain of $11.9 million).

     <TABLE>
     <CAPTION>
     ---------------------------------------------------------------------------------
     (in thousands of $)                                      2006      2005      2004
     ---------------------------------------------------------------------------------
     <S>                                                   <C>       <C>        <C>
     Proceeds from sale of available-for-sale securities   154,409   152,814    57,450
     Realised gain (including amounts classified in
     discontinued operations)                                9,782    28,035     7,151
     =================================================================================
     </TABLE>

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

11.  TRADE ACCOUNTS RECEIVABLE

     Trade accounts receivable are presented net of allowances for doubtful
     accounts relating to demurrage claims amounting to $3.0 million and $7.5
     million as of December 31, 2006 and 2005 respectively.

12.  OTHER RECEIVABLES

     ---------------------------------------------------------------------------
     (in thousands of $)                                       2006         2005
     ---------------------------------------------------------------------------
     Agent receivables                                        7,039        4,998
     Due from related parties                                 1,683        2,549
     Claims receivables                                       8,458        4,657
     Receivable from sale of assets                          13,372           --
     Other receivables                                        8,466        7,820
     ---------------------------------------------------------------------------
                                                             39,018       20,024
     ===========================================================================

     Other receivables are presented net of allowances for doubtful accounts
     amounting to $nil as of December 31, 2006 and 2005.

13.  OTHER CURRENT ASSETS

     ---------------------------------------------------------------------------
     (in thousands of $)                                       2006         2005
     ---------------------------------------------------------------------------
     Security deposits on newbuildings                       11,222           --
     Other                                                      349          568
     ---------------------------------------------------------------------------
     Other current assets                                    11,571          568
     ===========================================================================

     Security deposits on newbuildings relate to deposits paid plus related
     interest accrued by Ship Finance in relation to containership newbuildings.

14.  NEWBUILDINGS

     ---------------------------------------------------------------------------
     (in thousands of $)                                  2006              2005
     ---------------------------------------------------------------------------
     Newbuildings                                      166,851            15,927
     ===========================================================================

     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. Interest capitalised in the cost of newbuildings amounted to $3.6
     million in 2006 (2005 and 2004: $nil). The two newbuilding contracts held
     in 2005 were completed and delivered in 2006. There were six newbuilding
     contracts representing costs of $71.0 million and two conversion projects
     representing costs of $95.9 million as at December 31, 2006. The conversion
     projects are for the conversion of an Aframax tanker into a Floating
     Production Storage Offshore ("FPSO") vessel and the conversion of a single
     hull Suezmax tanker into a heavy lift vessel.

     The cost for the conversion projects includes $55.3 million which has been
     transferred from vessels and equipment as the vessels are undergoing
     conversion and are considered to be newbuildings until conversion is
     complete.

15.  VESSELS AND EQUIPMENT, NET

     ---------------------------------------------------------------------------
     (in thousands of $)                                   2006            2005
     ---------------------------------------------------------------------------
     Cost                                             3,567,607       3,620,847
     Accumulated depreciation                        (1,121,329)     (1,036,000)
     ---------------------------------------------------------------------------
     Net book value at end of year                    2,446,278       2,584,847
     ===========================================================================

     Included in the above amounts as of December 31, 2006 and 2005 is equipment
     with a net book value of $3.5 million and $2.6 million, respectively.
     Depreciation expense for vessels and equipment was $157.6 million, $198.8
     million and $137.0 million for the years ended December 31, 2006, 2005 and
     2004, respectively, including amounts recorded in discontinued operations.

     In November 2005, the bareboat charterer of the Navix Astral declared their
     intent to exercise a purchase option with the vessel being delivered to her
     new owner in January 2006. An impairment loss of $1.9 million was included
     in the Statement of Operations for the year ended December 31, 2005 in
     respect of this vessel. The net sale proceeds were denominated in Yen and
     due to fluctuations in the value of the Yen, the actual realised loss on
     the sale of the Navix Astral was $0.8 million.

16.  VESSELS UNDER CAPITAL LEASE, NET

     ---------------------------------------------------------------------------
     (in thousands of $)                                    2006           2005
     ---------------------------------------------------------------------------
     Cost                                                835,746        835,746
     Accumulated depreciation                           (209,372)      (163,138)
     ---------------------------------------------------------------------------
     Net book value at end of year                       626,374        672,608
     ===========================================================================

     Depreciation expense for vessels under capital lease was $46.2 million,
     $46.2 million and $46.3 million for the years ended December 31, 2006, 2005
     and 2004, respectively.

     The outstanding obligations under capital leases are payable as follows:

     ---------------------------------------------------------------------------
     (in thousands of $)
     Year ending December 31,
     ---------------------------------------------------------------------------
     2007                                                               127,253
     2008                                                                82,976
     2009                                                               157,569
     2010                                                               227,345
     2011                                                               140,391
     2012 and later                                                     288,683
     ---------------------------------------------------------------------------
     Minimum lease payments                                           1,024,217
     Less: imputed interest                                            (272,287)
     ---------------------------------------------------------------------------
     Present value of obligations under capital leases                  751,930
     ===========================================================================

     As of December 31, 2006, the Company held twelve vessels under capital
     leases (2005 - twelve). These leases are for terms that range from eight to
     twenty four 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 Type                   Expiry of     Extended     Extended      Company's   Lessor's Put
                                   Mandatory        Lease        Lease       Purchase         Option
                                Lease Period   Periods at   Periods at         Option       Exercise
                                                 Lessor's    Company's        Periods           Date
                                                   Option       Option
     -----------------------------------------------------------------------------------------------
     <S>                                <C>     <C>          <C>         <C>                    <C>
     Front Crown (VLCC)                 2009    2010-2014    2013-2014   2009 to 2014           2014
     Front Chief (VLCC)                 2009    2010-2014    2013-2014   2009 to 2014           2014
     Front Commander (VLCC)             2009    2010-2014    2013-2014   2009 to 2014           2014
     Front Eagle (VLCC)                 2010    2011-2015    2014-2015   2010 to 2015           2015
     Front Melody (Suezmax)             2011    2012-2015    2014-2015   2011 to 2015           2015
     Front Symphony (Suezmax)           2011    2012-2015    2014-2015   2011 to 2015           2015
     Front Tina  (VLCC)                 2011    2012-2015    2014-2015   2011 to 2015           2015
     Front Commodore (VLCC)             2011    2012-2015    2014-2015   2011 to 2015           2015
     British Pioneer (VLCC)             2024         none     Note (2)       Note (1)           none
     British Progress (VLCC)            2025         none     Note (2)       Note (1)           none
     British Purpose (VLCC)             2025         none     Note (2)       Note (1)           none
     British Pride (VLCC)               2025         none     Note (2)       Note (1)           none
     </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. As of
     December 31, 2006 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.

17.  EQUITY METHOD INVESTMENTS

     As of December 31, 2006, the Company has the following participation in
     investments that are recorded using the equity method:

     ---------------------------------------------------------------------------
                                                                  2006      2005
     ---------------------------------------------------------------------------
     International Maritime Exchange ASA                        24.49%    24.49%
     Front Tobago Shipping Corporation                          40.00%    40.00%
     Golden Fountain Corporation                                50.00%    50.00%
     Front Shadow Inc                                          100.00%       --
     CalPetro Tankers (Bahamas I) Limited                      100.00%   100.00%
     CalPetro Tankers (Bahamas II) Limited                     100.00%   100.00%
     CalPetro Tankers (Bahamas III) Limited                        --    100.00%
     CalPetro Tankers (IOM) Limited                            100.00%   100.00%

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

     ---------------------------------------------------------------------------
     (in thousands of $)                                    2006            2005
     ---------------------------------------------------------------------------
     Current assets                                       71,320          45,772
     Non current assets                                  139,983         105,559
     Current liabilities                                  27,267          16,922
     Non current liabilities                              99,247          98,477

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

     ---------------------------------------------------------------------------
     (in thousands of $)                            2006        2005        2004
     ---------------------------------------------------------------------------
     Net operating revenues                       28,876      27,377      52,486
     Net operating income                         10,461      27,545      44,427
     Net income                                    3,691      20,312      31,244

     Dividends totalling $1.3 million were received from equity method investees
     in the year ended December 31, 2006.

     As of December 31, 2003 the Company determined that it was the primary
     beneficiary of Golden Fountain Corporation under FIN 46(R) and therefore
     consolidated the entity at that date. Golden Fountain sold its vessel on
     December 17, 2004 which resulted in an accounting gain of $19.7 million.
     The sale of the vessel and subsequent extinguishment of debt was considered
     a triggering event and the Company assessed that it was no longer the
     primary beneficiary and resumed accounting for its investment in Golden
     Fountain Corporation using the equity method in 2005.

     In 2004, the Company's investment in International Maritime Exchange ASA
     ("IMAREX") increased to 26.56%. Accordingly, the Company changed its
     accounting treatment of the investment from a cost basis to the equity
     method. The Company's shareholding was subsequently reduced to 24.49% as a
     result of an issuance of shares by IMAREX which the Company did not
     participate in. The Company is recording its share of income from IMAREX
     one quarter in arrears. The closing share price for IMAREX as of December
     31, 2006 on the Oslo Stock Exchange was NOK 88.00 resulting in an aggregate
     value of the Company's investment based on the quoted market price of
     approximately $24.2 million.

     In December 2004, the vessel and all related balances in relation to the
     operation of Front Tobago were 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 a 40% investment in Front Tobago
     Shipping Corporation.

     In December 2005, Front Tobago Shipping Corporation sold the vessel Front
     Tobago to the Company for approximately $35.6 million and subsequently
     realised a gain on sale of $9.6 million. The Company's share of income from
     associates in 2005 excluded its share of this gain on sale as it was
     applied against the cost of the Front Tobago.

     Front Shadow is a wholly owned subsidiary of Ship Finance and was
     incorporated during 2006 for the purpose of holding a single capital asset
     and leasing that asset to a related party. Front Shadow owns a Panamax
     vessel. Ship Finance has provided a guarantee in the amount of $2.1 million
     for the debt of Front Shadow. The net assets of Front Shadow are $0.3
     million million, therefore, Ship Finance's maximum exposure to loss for
     this entity is $2.4 million. The entity is being equity accounted for as it
     has been determined that it is a VIE and that Ship Finance is not the
     primary beneficiary under FIN 46(R).

     As discussed in note 3, the Company has determined that under FIN 46(R), it
     is not the primary beneficiary of the VIEs CalPetro Tankers (Bahamas I)
     Limited, CalPetro Tankers (Bahamas II) Limited and CalPetro Tankers (IOM)
     Limited and as such, these entities are being equity accounted for.

     As discussed in note 3, the Company has determined that under FIN 46(R), it
     is not the primary beneficiary of the VIEs CalPetro Tankers (Bahamas I)
     Limited, CalPetro Tankers (Bahamas II) Limited and CalPetro Tankers (IOM)
     Limited and as such, these entities are being equity accounted for. These
     companies were incorporated in 1994 for the purpose of acquiring three oil
     tankers from Chevron Transport Corporation ("Chevron") and concurrently
     charter these vessels back to Chevron on long term charter agreements. The
     companies were acquired by Independent Tankers Corporation which in turn is
     a wholly owned subsidiary of the Company. In April 2006, Chevron cancelled
     its bareboat contract with CalPetro Tankers (Bahamas III) Limited. Under
     FIN 46(R) this is considered a trigger event and the Company began
     consolidating the VIE into its accounts from that date. The Company does
     not guarantee the debt of these entities and the net assets of the three
     entities that are not consolidated total $4.1 million.

18.  INVESTMENT IN FINANCE LEASES

     Ship Finance's jack-up drilling rig is chartered on a long term fixed rate
     bareboat charter to Seadrill III Ltd. The terms of the charter provide the
     charterer with various call options throughout the charter period, which
     expires in 2021.

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

     ---------------------------------------------------------------------------
     (in thousands of $)                                            2006   2005
     ---------------------------------------------------------------------------
     Total minimum lease payments to be received                 297,277     --
     Estimated residual values of leased property
     (unguaranteed)                                               60,000     --
     Less: Unearned income                                      (158,528)    --
     ---------------------------------------------------------------------------
     Net investment in finance leases                            198,749     --
     ==========================================================================

     Lease payments under the charter agreement for each of the five succeeding
     years are as follows: $41.1 million in 2007, $41.2 million in 2008, $29.9
     million in 2009, $18.8 million in 2010 and $18.8 million in 2011.

19.  DEFERRED CHARGES

     Deferred charges represent debt arrangement fees that are capitalised. 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. The deferred charges are comprised of the following amounts:

     ---------------------------------------------------------------------------
     (in thousands of $)                                      2006         2005
     ---------------------------------------------------------------------------
     Debt arrangement fees                                  24,102       32,224
     Accumulated amortisation                               (7,165)     (14,213)
     ---------------------------------------------------------------------------
                                                            16,937       18,011
     ===========================================================================

20.  ACCRUED EXPENSES

     ---------------------------------------------------------------------------
     (in thousands of $)                                     2006           2005
     ---------------------------------------------------------------------------
     Voyage expenses                                       22,064         25,404
     Ship operating expenses                               22,748         14,528
     Administrative expenses                                6,618          3,409
     Interest expense                                      37,627         38,733
     Taxes                                                    317            200
     Other                                                    942          2,573
     ---------------------------------------------------------------------------
                                                           90,316         84,847
     ===========================================================================

21.  OTHER CURRENT LIABILITIES

     ---------------------------------------------------------------------------
     (in thousands of $)                                     2006           2005
     ---------------------------------------------------------------------------
     Forward contract payable                                  --         70,851
     Accrued charterhire                                       --            674
     Related party payables                                   941          2,587
     Other                                                  9,037          9,744
     ---------------------------------------------------------------------------
                                                            9,978         83,856
     ===========================================================================

22.  DEBT

     ---------------------------------------------------------------------------
     (in thousands of $)                                     2006          2005
     ---------------------------------------------------------------------------
     US Dollar denominated floating rate debt
     (LIBOR + 0.50% to 1.25%) due through 2011          1,602,920     1,450,574
     8.5% Senior Notes due 2013                           449,080       457,080
     Serial Notes (6.5% to 6.68%) due through 2010         30,800        53,100
     Term Loans (8.52%) due 2015                           12,744            --
     Term Notes (7.84% to 8.04%) due through 2021         366,200       366,200
     ---------------------------------------------------------------------------
                                                        2,461,744     2,326,954
     Credit facilities                                      1,550         2,242
     ---------------------------------------------------------------------------
     Total debt                                         2,463,294     2,329,196
     Less: short-term and current portion of
           long-term debt                                (281,409)     (228,135)
     ---------------------------------------------------------------------------
                                                        2,181,885     2,101,061
     ===========================================================================

     The outstanding debt as of December 31, 2006 is repayable as follows:

     ---------------------------------------------------------------------------
     (in thousands of $)
     Year ending December 31,
     ---------------------------------------------------------------------------
     2007                                                                279,859
     2008                                                                168,512
     2009                                                                156,566
     2010                                                                142,945
     2011                                                                620,911
     2012 and later                                                    1,092,951
     ---------------------------------------------------------------------------
                                                                       2,461,744
     ===========================================================================

     The weighted average interest rate for the floating rate debt denominated
     in US dollars was 5.39 percent as of December 31, 2006 (2005 - 4.31
     percent). The weighted average interest rate for the floating rate debt
     denominated in Yen was 1.34 percent as of December 31, 2005. There is no
     Yen denominated debt outstanding as of December 31, 2006. These rates take
     into consideration related interest rate swaps.

     US DOLLAR DENOMINATED FLOATING RATE DEBT

     $1,058 million senior secured credit facility

     In February 2005, Ship Finance refinanced its existing $1,058.0 million
     senior secured credit facility with a new $1,131.4 million
     secured credit facility discussed in more detail below.

     $1,131 million secured term loan facility

     In February 2005, Ship Finance entered into a $1,131.4 million term loan
     facility with a syndicate of banks. The proceeds from the facility were
     used to repay the $1,058.0 million syndicated senior secured credit
     facility and for general corporate purposes. The facility bears interest at
     LIBOR plus a margin of 0.7% per annum. The facility is repayable over a
     term of six years.

     In September 2006, Ship Finance signed an agreement whereby the existing
     debt facility, which had been partially repaid, was increased by $219.7
     million to the original amount of $1,131.4 million. The increase is
     available on a revolving basis.

     $350 million combined senior and junior secured term loan facility

     In June 2005, the Company entered into a combined $350 million senior and
     junior secured term loan facility with a syndicate of banks. The proceeds
     from the facility were used to fund the acquisition of five VLCCs. The
     facility bears interest at LIBOR plus a margin of 0.65% per annum for the
     senior loan and LIBOR plus a margin of 1.00% per annum for the junior loan.
     The facility is repayable over a term of seven years.

     $65 million term loan facility

     In August 2004, the Company entered into a $65 million secured term loan
     facility with a syndicate of banks. The facility bore interest at LIBOR
     plus a margin of 1.00%. The facility was repaid in March 2006.

     $20 million term loan facility

     In October 2004, the Company entered into a $20 million secured term loan
     facility. The facility bore interest at LIBOR plus a margin of 0.75%. The
     loan was repaid in full in February 2007.

     $20 million term loan facility

     In January 2005, the Company entered into a $20 million secured term loan
     facility. The facility bears interest at LIBOR plus a margin of 0.80%. The
     facility must be repaid by January 31, 2010.

     The facility contains a minimum value covenant and covenants that require
     the Company to maintain a minimum level of free cash and positive working
     capital.

     $69 million loan facility

     In December 2005, the Company entered into a $69.0 million loan facility
     with DnB NOR Bank ASA. The facility bore interest at LIBOR plus 120 basis
     points secured by certain marketable securities and cash deposits. The
     facility was repaid in full in August 2006.

     $210 million secured term loan facility

     In April 2006, five vessel owning subsidiaries of Ship Finance entered into
     a $210 million secured term loan facility with a syndicate of banks to
     partly fund the acquisition of five new container vessels. The facility
     bears interest at LIBOR plus a margin of 1.4% per annum and the facility is
     repayable over a term of 12 years.

     $80 million term loan facility

     In June 2006, the Company entered into a $80 million secured term loan
     facility. The facility bears interest at LIBOR plus a margin of 0.50%. The
     facility was due June 26, 2007 and has now been refinanced on the same
     terms and conditions with maturity in June 2008.

     $165 million secured term loan facility

     In June 2006, Ship Finance's subsidiary Rig Finance Limited ("Rig Finance")
     entered into a $165 million secured term loan facility with a syndicate of
     banks. The proceeds of the facility were used to partly fund the
     acquisition of the jack up drilling rig West Ceres. The facility currently
     bears interest at LIBOR plus a margin of 1.15% per annum and is repayable
     over a term of six years.

     $24 million term loan facility

     In September 2006, the Company entered into a $24 million secured term loan
     facility. The facility bore interest at LIBOR plus a margin of 0.90%. The
     facility was repaid in April 2007.

     Agreements related to Ship Finance's long-term debt provide limitations on
     the amount of total borrowings and secured debt, and acceleration of
     payment under certain circumstances, including failure to satisfy certain
     financial covenants.

     8.5% SENIOR NOTES DUE 2013

     On December 15, 2003, Ship Finance issued $580 million of senior notes.
     Interest on the notes is payable in cash semi-annually in arrears on June
     15 and December 15. The notes are not redeemable prior to December 15, 2008
     except in certain circumstances. After that date, Ship Finance may redeem
     notes at redemption prices which reduce from 104.25 per cent in 2008 to 100
     per cent in 2011 and thereafter.

     In February 2006, Ship Finance entered into a total return bond swap line
     with a bank for a term of 12 months. The bond swap line has been extended
     for a period up to August 2009. As of December 31, 2006, Ship Finance held
     bonds with a principal amount of $52 million under this agreement. In
     February 2007, Ship Finance entered into an additional bond swap line with
     a second bank for a term of 12 months.

     In 2006 and 2005, Ship Finance bought back and cancelled notes with a
     principal amount of $8.0 million and $73.2 million, respectively. As of
     December 31, 2006, the outstanding amount of Notes was $449.1 million
     (December 31, 2005 - $457.1 million).

     TERM AND SERIAL NOTES

     ITC is the holding company for three separate structures involved in
     financing and leasing transactions. One of these structures has Serial
     Notes maturing between 2007 and 2010 and two of these structures have Term
     Notes maturing between 2015 and 2021. The Notes are collateralised by first
     preferred mortgages on the vessels owned by the ITC subsidiaries. As of
     December 31, 2006 the effective interest rate for the Term and Serial Notes
     was 7.90% (2005 - 7.90%).

     The 8.52% First Preferred Mortgage Notes due 2015, the 7.84% First
     Preferred Mortgage Term Notes due 2018 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.

     ---------------------------------------------------------------------------
     (in thousands of $)
     Year ending December 31,
     ---------------------------------------------------------------------------
     2007                                                                  1,340
     2008                                                                  5,765
     2009                                                                  7,600
     2010                                                                 11,115
     2011                                                                 16,635
     2012 and later                                                      323,745
     ---------------------------------------------------------------------------
                                                                         366,200
     ===========================================================================

     Term Loans

     Principal is repayable on the 8.52% Term Loans due 2015 in accordance with
     a remaining nine-year sinking fund schedule. Of the four entities reporting
     these term loans, only one entity, CalPetro Tankers (Bahamas III) Limited
     ("Bahamas III") is consolidated as the remaining three entities are
     accounted for under the equity method under FIN 46(R) as it has been
     determined that the Company is not the primary beneficiary of these
     entities. As discussed above, Bahamas III's intial charter with Chevron was
     terminated on April 1, 2006 and as such, the revised sinking fund
     redemption amounts and final principal payment is as follows:

     ---------------------------------------------------------------------------
     Scheduled
     payment                                                              Amount
     date                                                                  $'000
     ---------------------------------------------------------------------------
     2007                                                                    570
     2008                                                                    620
     2009                                                                    670
     2010                                                                    730
     2011                                                                    790
     2012, and later                                                       9,364
     ---------------------------------------------------------------------------
                                                                          12,744
     ===========================================================================

     Assets pledged
     ---------------------------------------------------------------------------
     (in thousands of $)                                  2006              2005
     ---------------------------------------------------------------------------
     Ship mortgages                                  2,494,526         2,393,984
     ===========================================================================

23.  SHARE CAPITAL

     Authorised share capital:

     ---------------------------------------------------------------------------
     (in thousands of $, except share data)                       2006      2005
     ---------------------------------------------------------------------------
     125,000,000 ordinary shares of $2.50 each                 312,500   312,500

     Issued and fully paid share capital:

     ---------------------------------------------------------------------------
     (in thousands of $, except share data)                       2006      2005
     ---------------------------------------------------------------------------
     74,825,169 ordinary shares of $2.50 each
     (2005: 74,825,169)                                        187,063   187,063

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

24.  ACCUMULATED OTHER COMPREHENSIVE INCOME

     The activity in Accumulated Other Comprehensive Income may be summarised as
     follows:

     <TABLE>
     <CAPTION>
     --------------------------------------------------------------------------------------
                                      Unrealised    Gains (losses)  Translation      Total
                                      investment     on derivative  adjustments
                                  gains (losses)       instruments    and other
     --------------------------------------------------------------------------------------
     <S>                                 <C>                <C>          <C>       <C>
     Balance at December 31, 2003            (14)           (2,471)      (4,468)    (6,953)
     Change in 2004                       10,441             2,471         (545)    12,367
     --------------------------------------------------------------------------------------
     Balance at December 31, 2004         10,427                --       (5,013)     5,414
     Change in 2005                      (11,877)               --         (221)   (12,098)
     --------------------------------------------------------------------------------------
     Balance at December 31, 2005         (1,450)               --       (5,234)    (6,684)
     Change in 2006                        1,721                --          538      2,259
     --------------------------------------------------------------------------------------
     Balance at December 31, 2006            271                --       (4,696)    (4,425)
     ======================================================================================
     </TABLE>

25.  SHARE OPTION PLANS

     Frontline Ltd Share Option Scheme

     In November 2006, the board of directors approved the Frontline Ltd Share
     Option Scheme (the "Frontline Scheme"). The Frontline Scheme permits the
     board of directors, at its discretion, to grant options to employees of the
     Company or its subsidiaries. The Frontline Scheme will expire in November
     2016. The subscription price for all options granted under the scheme will
     be reduced by the amount of all dividends declared by the company per share
     in the period from the date of grant until the date the option is
     exercised, provided the subscription price never shall be reduced below the
     par value of the share. Options granted under the scheme will vest at a
     date determined by the board at the date of the grant. The options granted
     under the plan to date vest over a period of one to three years. There is
     no maximum number of shares authorised for awards of equity share options
     and authorised, unissued shares of Frontline Ltd will be used to satisfy
     exercised options.

     The fair value of each option award is estimated on the date of the grant
     using a Black Scholes option valuation model with the following
     assumptions: risk-free interest rate of 4.74%, volatility of 44%, a
     dividend yield of 0% and a weighted average expected option term of 3.5
     years. The risk-free interest rate was estimated using the interest rate on
     3 year US treasury zero coupon issues. The volatility was estimated using
     historical share price data. The dividend yield has been estimated at 0% as
     the exercise price is reduced by all dividends declared by the company from
     the date of grant to the exercise date. It is assumed that all options
     granted under the plan will vest.

     The following summarises share option transactions related to the Frontline
     Scheme:

     ---------------------------------------------------------------------------
     (in thousands except per share data)               Shares    Exercise Price
     ---------------------------------------------------------------------------
     Options outstanding at December 31, 2005               --                --
        Granted                                            100        NOK 238.50
        Exercised                                           --                --
        Cancelled                                           --                --
        Vested                                              --                --
     ---------------------------------------------------------------------------
     Options outstanding at December 31, 2006              100        NOK 238.50
     ===========================================================================

     The weighted average grant-date fair value of options granted during 2006
     is $15.23.

     As of December 31, 2006, there was $1.5 million in unrecognised
     compensation cost related to non-vested options granted under the Frontline
     Scheme. The compensation expense will be recognized over a period of three
     years in accordance with vesting conditions.

     Ship Finance International Limited Share Option Scheme

     In November 2006, the board of directors of Ship Finance approved the Ship
     Finance International Limited Share Option Scheme (the "Ship Finance
     Scheme"). The Ship Finance Scheme permits the board of directors, at its
     discretion, to grant options to employees of Ship Finance or its
     subsidiaries. The Ship Finance Scheme will expire in November 2016. The
     subscription price for all options granted under the scheme will be reduced
     by the amount of all dividends declared by the company per share in the
     period from the date of grant until the date the option is exercised,
     provided the subscription price never shall be reduced below the par value
     of the share. Options granted under the scheme will vest at a date
     determined by the board at the date of the grant. The options granted under
     the plan to date vest over a period of one to three years. There is no
     maximum number of shares authorised for awards of equity share options and
     authorised, unissued shares of Ship Finance will be used to satisfy
     exercised options.

     The fair value of each option award is estimated on the date of the grant
     using a Black Scholes option valuation model with the following
     assumptions: risk-free interest rate of 4.74%, volatility of 31%, a
     dividend yield of 0% and a weighted average expected option term of 3.5
     years. The risk-free interest rate was estimated using the interest rate on
     3 year US treasury zero coupon issues. The volatility was estimated using
     historical share price data. The dividend yield has been estimated at 0% as
     the exercise price is reduced by all dividends declared by the company from
     the date of grant to the exercise date. It is assumed that all options
     granted under the plan will vest.

     The following summarises share option transactions related to the Ship
     Finance Scheme:

     ---------------------------------------------------------------------------
     (in thousands except per share data)                Shares   Exercise Price
     ---------------------------------------------------------------------------
     Options outstanding at December 31, 2005                --               --
        Granted                                             150           $22.85
        Exercised                                            --               --
        Cancelled                                            --               --
        Vested                                               --               --
     ---------------------------------------------------------------------------
     Options outstanding at December 31, 2006               150           $22.85
     ===========================================================================

     The weighted average grant-date fair value of options granted during 2006
     is $6.67.

     As of December 31, 2006, there was $0.95 million in unrecognised
     compensation cost related to non-vested options granted under the Ship
     Finance Scheme. The compensation expense will be recognized over a period
     of three years in accordance with vesting conditions.

     Share-based bonus

     The employment contract for one employee of Ship Finance contains a
     share-based bonus provision. Under the terms of the contract, the share
     based bonus is payable annually based on the share-price movement of Ship
     Finance, plus dividend declarations, multiplied by a notional share holding
     of 200,000 shares. The share-based bonus fair value of $1.7 million as of
     December 31, 2006 was recorded as a liability.

     Bermuda and United Kingdom 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 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, 2003                     297      $8.49
        Granted                                                    --         --
        Exercised                                                (297)     $5.91
        Cancelled                                                  --         --
     ---------------------------------------------------------------------------
     Options outstanding at December 31, 2004                      --         --
     ===========================================================================

     As of December 31, 2006, 2005 and 2004 there were no options remaining
     outstanding under the U.K. Plan or the Bermuda Plan.

     There were no options granted in the years ended December 31, 2005 and
     2004.

26.  FINANCIAL INSTRUMENTS

     Interest rate risk management

     Interest rate swaps

     In certain situations, the Company may enter into financial instruments to
     reduce the risk associated with fluctuations in interest rates. Ship
     Finance 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 Credit Agricole
     Indosuez, Deutsche Schiffsbank, DnB NOR ASA, Skandinaviska Enskilda Banken
     AB, Fortis Bank, Scotia Bank, Nordea Bank Norge ASA, Citibank, HSH
     Nordbank, HBOS, and NIBC. 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. Ship Finance has entered into the following
     interest rate swap transactions involving the payment of fixed rates in
     exchange for LIBOR:

     ---------------------------------------------------------------------------
     Principal (in thousands of $)     Inception Date   Maturity Date      Fixed
                                                                        Interest
                                                                            Rate
     ---------------------------------------------------------------------------
     $50,000                            February 2004   February 2009      3.49%
     $100,000                           February 2004   February 2009      3.49%
     $50,000                            February 2004   February 2009      3.35%
     $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      3.37%
     $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%
     $41,588                               April 2006   November 2018      5.64%
     $41,588                               April 2006      March 2019      5.64%
     $41,588                               April 2006      April 2019      5.64%
     $41,588                               April 2006        May 2019      5.64%
     $41,588                               April 2006        May 2019      5.64%
     $14,849                            February 2004     August 2008      6.24%
     $15,919                            February 2004     August 2008      6.24%

     As of December 31, 2006 and 2005, the notional principal amounts subject to
     such swap agreements were $738.7 million and $618.3 million, respectively.

     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.

     From time to time the Company may enter into forward currency contracts for
     speculative purposes. As of December 31, 2005 the Company had five forward
     currency contracts outstanding with a notional principal of (Y)8.8 billion
     expiring January and February 2006 with exchange rates ranging from 117.42
     to 119.35. As of December 31, 2006 there were no such contracts
     outstanding.

     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, futures and option
     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
     of December 31, 2006 and 2005, the notional principal amounts subject to
     such forward freight contracts, futures and option contracts were $nil and
     $12.0 million, respectively.

     Fair Values

     The carrying value and estimated fair value of the Company's financial
     instruments as of December 31, 2006 and 2005 are as follows:

     <TABLE>
     <CAPTION>
     -----------------------------------------------------------------------------------------------------
                                                                2006                        2005
                                                                     Carrying                    Carrying
     (in thousands of $)                             Fair Value         Value    Fair Value         Value
     -----------------------------------------------------------------------------------------------------
     <S>                                              <C>           <C>           <C>           <C>
     Non-Derivatives:
     Cash and cash equivalents                          197,181       197,181        92,782        92,782
     Restricted cash                                    677,533       677,533       636,790       636,790
     Marketable securities                                1,469         1,469       144,156       144,156
     Floating rate debt and credit facilities         1,604,470     1,604,470     1,452,816     1,452,816
     8.5% Senior notes                                  448,799       449,080       425,999       457,080
     Serial Notes (6.5% to 6.68%) due through 2010       31,307        30,800        54,639        53,100
     8.52% Term Loan, due 2015                           13,588        12,744            --            --
     Term Notes (7.84% to 8.04%) due through 2019       383,492       366,200       393,705       366,200

     Derivatives:
     Interest rate swap transactions receivable          17,807        17,807        19,563        19,563
     Interest rate swap transactions payable             (8,743)       (8,743)       (1,241)       (1,241)
     Forward freight contracts                               --            --         3,021         3,021
     Forward currency contracts                              --            --          (169)         (169)
     Bond swaps                                           2,931         2,931            --            --
     </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.

     In February 2006, Ship Finance entered into a total return bond swap line
     with Fortis Bank for a term of twelve months. This swap facilitated the
     repurchase of Ship Finance's 8.5% Senior Notes in the amount of $50.0
     million. The fair value of the bond swap is estimated by taking into
     account the cost of entering into the bond swap to offset Ship Finance's
     outstanding bond swap.

     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, The Bank of New York 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
     Skandinaviske Enskilda Banken, Nordea 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, 2006, one customer accounted for more
     than 10% of our consolidated operating revenues (2005: one customer, 2004:
     two customers).

27.  RELATED PARTY TRANSACTIONS

     In July 2003, the Company purchased a call option to acquire all of the
     shares of ITC from Hemen Holding Ltd ("Hemen") for a total consideration of
     $4.0 million plus 4% interest per year. Hemen is indirectly controlled by
     John Fredriksen who is the Company's Chairman and Chief Executive Officer.
     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(R) and consequently was
     required to consolidate ITC, with the exception of certain ITC subsidiaries
     which have been accounted for using the equity method as discussed in note
     3. 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(R). 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.

     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 (Y)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 June
     2005, Ship Finance purchased the vessels from Hemen for a total
     consideration of $184.6 million. This transaction has been recorded at fair
     value of $270 million and an equity contribution from Hemen of $85.4
     million has been recorded within contributed surplus.

     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.

     In 2005 Golden Ocean exercised its options to acquire from the Company the
     shares in two single purpose companies each owing a newbuilding contract
     for a Panamax vessel. These options were at a price equal to the Company's
     costs, including instalments paid to date, plus the Company's funding
     expenses. These options were exercised during 2005 at a total price of
     $16.8 million.

     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 Sea
     Alfa was delivered in May 2005, and the Sea Beta was delivered in September
     2005.

     In June 2006, Ship Finance purchased the jack up rig Seadrill 3 from
     SeaDrill Invest I Ltd ("SeaDrill Invest"), an affiliated company, for $210
     million. The rig was immediately chartered back to SeaDrill Invest for a
     period of 15 years. The charter party is fully guaranteed by Seadrill
     Limited, the ultimate parent company of SeaDrill Invest. SeaDrill Invest
     has been granted fixed price purchase options after 3, 5, 7, 10, 12 and 15
     years. This transaction was enacted through the Company's 100% owned
     subsidiary Rig Finance.

     In June 2006, Ship Finance entered into an agreement to acquire a Panamax
     vessel, Rain Shadow, for $28.4 million from Golden Ocean. The vessel was
     chartered back to Golden Ocean for a period of 10 years. As part of the
     agreement, Golden Ocean has provided an interest free and non-amortising
     seller credit of $2.6 million. Golden Ocean has been granted fixed purchase
     options after 3, 5, 7 and 10 years. At the end of the charter, the Company
     also has an option to sell the vessel back to Golden Ocean at an agreed
     fixed price of $10.4 million. This transaction was enacted through the
     Company's 100% owned subsidiary Front Shadow Inc. As a result of this
     transaction, under FIN 46(R), Front Shadow Inc is now equity accounted by
     the Company.

     A summary of amounts earned and balances with related parties is as
     follows:

     ---------------------------------------------------------------------------
     Net amounts earned from related parties             Year ended December 31,
     (in thousands of $)                                  2006     2005     2004
     ---------------------------------------------------------------------------
     Seatankers Ltd                                        432      265       49
     Golar LNG Limited                                     180      255      495
     Northern Offshore Ltd                                  --       --       25
     Norse Energy Group ASA (formerly Northern Oil ASA)     --        6       92
     Golden Ocean Group Limited                            597      362        8
     Individual related to John Fredriksen                  12       --       --
     Aktiv Kapital First Investment Ltd                     --       10       --
     Bryggegata AS                                      (1,021)    (692)      --
     Seadrill Limited                                      545      (24)      --
     CalPetro Tankers (Bahamas I) Limited                   40       38       37
     CalPetro Tankers (Bahamas II) Limited                  40       38       37
     CalPetro Tankers (Bahamas III) Limited                 --       38       37
     CalPetro Tankers (IOM) Limited                         40       38       37

     Net amounts earned from related parties comprise office rental income and
     management, technical advisory, corporate and administrative service income
     and expenses.

     ---------------------------------------------------------------------------
     Receivables (payables) with related parties              As of December 31,
     (in thousands of $)                                      2006         2005
     ---------------------------------------------------------------------------
     Seatankers  Ltd                                            275       1,397
     Golar LNG Limited                                         (553)        644
     Northern Offshore Ltd                                       49          48
     Golden Ocean Group Limited                                 942      (2,182)
     Seadrill Limited                                            30          55
     CalPetro Tankers (Bahamas I) Limited                        10          10
     CalPetro Tankers (Bahamas II) Limited                       10          10
     CalPetro Tankers (Bahamas III) Limited                      --          10
     CalPetro Tankers (IOM) Limited                              10          10

     Receivables and payables with related parties comprise unpaid management,
     technical advisory, administrative service and rental charges. In addition,
     certain payables and receivables arise when the company pays an invoice on
     behalf of a related party and vice versa.

     Golar, Northern Offshore, Norse Energy (formerly Northern Oil), Aktiv
     Kapital, Seadrill, Bryggegata AS, Golden Ocean and Seatankers are each
     subject to the significant influence or indirect control of John
     Fredriksen. CalPetro Tankers (Bahamas I), CalPetro Tankers (Bahamas II),
     CalPetro Tankers (Bahamas III) and CalPetro Tankers (IOM) were all equity
     accounted until March 30, 2006 when we began consolidation of CalPetro
     Tankers (Bahamas III).

28.  MINORITY INTEREST AND DIVIDEND DISTRIBUTION TO SHAREHOLDERS

     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.

     A summary of pro-rata partial spin offs of Ship Finance by the Company are
     as follows:

     ---------------------------------------------------------------------------
     Distribution       % Frontline       Distribution Ratio   Value of dividend
     Date                   holding           (Ship Finance/          $ millions
                        Distributed   Frontline shares held)
     ---------------------------------------------------------------------------
     June 16, 2004            25.0%                      1/4            $142.5
     September 24, 2004        9.9%                     1/10             $59.8
     December 15, 2004        13.3%                     2/15             $85.7
     February 18, 2005        25.0%                      1/4            $154.9
     March 24, 2005           10.0%                     1/10             $57.0
     March 20, 2006           5.14%                     1/20             $27.8

     The value of the non-cash dividend is valued based on the book value of
     Ship Finance at 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.

     As of December 31, 2006 the Company owned 11.1% of the shares in Ship
     Finance and consolidated Ship Finance in accordance with the provisions of
     FIN 46(R).

     In November 2006, 30% of shares in Puffin Ltd, a subsidiary of the company,
     were issued to a third party for $7.8 million as part of the proposed spin
     off of the Company's FPSO (Floating Production, Storage and Offloading)
     operations.

29.  COMMITMENTS AND CONTINGENCIES

     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.

     As of December 31, 2006, the Company had nine 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 one is accounted for as an
     operating lease. 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 nine vessels. The total amount that
     the Company would be required to pay under these put options with respect
     to the operating lease is $9.0 million.

     As of December 31, 2006 Chevron Transport Corporation charters three
     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. The Company has not received notice of Chevron's intent to
     terminate any of these charters.

     As of December 31, 2006, the Company had eight contracts for the
     construction of four VLCC newbuildings scheduled for delivery in 2009 and
     2010 and four Suezmax newbuildings scheduled for delivery in 2008. As of
     December 31, 2006, the Company was committed to make further instalments of
     $626.7 million.

     As of December 31, 2006, the Company had a contract for the conversion of
     the Aframax vessel Front Puffin to a FPSO (Floating Production Storage
     Offloading) vessel with the delivery of the converted vessel in June, 2007.
     As of December 31, 2006, the Company was committed to make further
     instalments of $72.8 million.

     As of December 31, 2006, the Company had contracts for the conversion of
     the single hull Suezmax vessels Front Sunda and Front Target into heavy
     lift vessels. As of December 31, 2006, the Company was committed to make
     further instalments of $64.9 million.

     In June 2006, Ship Finance guaranteed a $165 million term loan facility for
     its wholly owned subsidiary Rig Finance Ltd to finance a portion of the
     acquisition costs of the jack up rig SeaDrill 3. Ship Finance's maximum
     liability under this guarantee is limited to $10.0 million.

     In September 2006, Ship Finance guaranteed a $22.7 million term loan
     facility for its wholly owned subsidiary Front Shadow Inc to assist in
     financing the purchase of the vessel Front Shadow. Ship Finance's maximum
     liability under this guarantee is $2.1 million plus any outstanding
     interest.

     The Company is 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. The Company believes that the resolution of such claims will
     not have a material adverse effect on the Company's operations or financial
     condition.

30.  SUPPLEMENTAL INFORMATION

     Non-cash investing and financing activities includes the following:

     <TABLE>
     <CAPTION>
     -----------------------------------------------------------------------------------------------
     (in thousands of $)                                               2006        2005        2004
     -----------------------------------------------------------------------------------------------
     <S>                                                            <C>         <C>         <C>
     Exchange of interests in associated companies:
     Additions to investments in associated companies                    --          --      96,072
     Disposals of investments in associated companies                    --          --     (96,072)

     Exercise of employee share options:
     Non-cash proceeds recorded for issuance of shares                   --          --       7,585

     Stock dividends:
     Spin-off of Golden Ocean                                            --          --     102,335
     Spin-off of Ship Finance                                        27,841     211,881     287,995

     Purchase of marketable securities:
     Forward contract                                                    --      70,850      25,084

     Vessels:
     Reclassification of vessel under conversion to newbuildings    (55,317)         --          --
     Vessel addition on termination of capital lease                 13,502          --          --
     Additions to vessels purchased from related party                   --      85,363          --
     Equity contribution from related party                              --     (85,363)         --
     </TABLE>

     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 the Company 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 recognised a gain of $0.2 million.

31.  DISCONTINUED OPERATIONS

     During the years ended December 31, 2005 and 2004, the Company disposed of
     portions of its dry bulk operations. In 2005, the Company's last remaining
     dry bulk vessel was sold and in 2004, 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 Accounting for the Impairment or Disposal of
     Long-Lived Assets ("FAS 144") 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. The Company will not have any significant
     continuing involvement in these dry bulk operations in the future.

     The following table presents the information required by FAS 144 in respect
     of discontinued operations:

     ---------------------------------------------------------------------------
     (in thousands of $)                                          2005      2004
     ---------------------------------------------------------------------------
     Carrying amount of assets disposed of                      12,875    72,592
     Carrying amount of debt or lease retired                   11,246    48,950

     Amounts recorded in discontinued operations:
     Operating revenues                                          1,324    32,594
     Net income before cumulative effect of change in
     accounting principle                                        8,785   117,619
     Gain on disposal                                            5,533    99,505

     The gain on disposal of $99.5 million in 2004 comprises of $84.6 million
     from 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.

     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 used NOK 3.71 (S$0.60) as the per share 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 was 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 was calculated as the difference between the sale
     proceeds of $18.0 million and the book value of the shares of $3.1 million.

     As of December 31, 2004, the Company held 23,918,832 Golden Ocean shares
     representing 10.6% of the shares outstanding. These were reported under
     Marketable Securities and in February 2005, the Company sold these shares
     for a net gain of $12.8 million, of which $11.8 million was classified as
     discontinued operations representing the difference between the cost of the
     shares sold and the fair value of the shares at the date of the spin off of
     Golden Ocean.

     In 2005 the Company recognised an expense in discontinued operations of
     $10.2 million in connection with its guarantee of profit sharing payments
     for the vessel Channel Alliance.

32.  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:

     ---------------------------------------------------------------------------
                                                        2006      2005      2004
     ---------------------------------------------------------------------------
     Pool earnings allocated on gross basis          131,099   128,726    78,430
     Pool earnings allocated on net basis                 --    25,015   117,179
     ---------------------------------------------------------------------------
     Total pool earnings                             131,099   153,741   195,609
     ===========================================================================

33.  GAIN ON ISSUANCE OF SHARES BY ASSOCIATE

     The Company has a 24.49% investment in IMAREX. IMAREX is an authorised
     marketplace for the trading of freight derivatives in the global oil and
     dry cargo shipping markets and was established in early 2000.

     On March 31, 2005, IMAREX announced that it had successfully concluded a
     share issue prior to its listing on the Oslo Stock Exchange. A total of
     432,098 shares were sold for a price of NOK 81 per share (par value NOK 1)
     raising a total of NOK 35 million. The Company did not participate in this
     share issue and as a result, its holding changed from 26.56% to 24.84%. On
     July 14, 2005, IMAREX issued 98,750 shares pursuant to their employee share
     option scheme and as a result, in 2005, the Company's holding changed to
     24.49%. A gain of $1.1 million was recorded in the statement of operations
     as a result of these share issues by IMAREX.

34.  SUBSEQUENT EVENTS

     In January 2007, Ship Finance announced the sale of the vessel Front
     Transporter to an unrelated third party for gross proceeds of $38 million.
     The vessel was delivered to her new owner in March 2007.

     In January 2007, Ship Finance announced that it had entered into an
     agreement with Seadrill Limited to acquire the newbuilding jack-up rig West
     Prospero for an agreed purchase price of $210 million with expected
     delivery in July 2007. Upon delivery, the rig will be bareboat chartered
     back to Seadrill for 15 years.

     In January 2007, the Board of Directors of the Company's then wholly owned
     subsidiary Sealift Ltd ("Sealift") approved for up to 5% of Sealift's
     authorised share capital to be made available for the issuance of stock
     options to employees, directors and officers of Sealift.

     In February 2007, the Company's Board of Directors declared a cash dividend
     of $2.05 per share, which was paid on March 22, 2007.

     In February 2007, Ship Finance announced the acquisition of two newbuilding
     Capesize dry bulk vessels from Golden Ocean for a purchase price of $160
     million with delivery expected to be in the fourth quarter of 2008 and the
     first quarter of 2009. Upon delivery, the vessels will commence a 15 year
     bareboat charter back to Golden Ocean.

     In February 2007, the Board of Directors of the Company's then wholly owned
     subsidiary Sea Production Ltd ("Sea Production") approved for up to nine
     million shares of Sea Production to be made available for the issuance of
     stock options to present and future employees and directors and officers of
     Sea Production and its subsidiaries.

     In February 2007, the Company's Board of Directors declared the
     distribution of its remaining holding in Ship Finance Shares. The
     distribution of three shares in Ship Finance for every 28 shares held in
     Frontline was made on March 22, 2007. As a result of the distribution the
     Company will deconsolidate Ship Finance as of the distribution date as it
     currently holds 73,383 shares which represents 0.01% of Ship Finance's
     total shares..

     In February 2007, the Company's 100% owned subsidiary, Frontline Floating
     Production Ltd ("FFP"), sold its assets to Sea Production. The assets of
     FFP included a 70% investment in Puffin Ltd, the entity who ultimately owns
     the vessel Front Puffin. Sea Production was incorporated in 2007 as a 100%
     owned subsidiary of the Company. In February 2007 Sea Production completed
     a private placement of its equity. After the private placement the Company
     owned 28% of the equity of Sea Production. In June 2007, the Company sold
     its entire remaining shareholding in Sea Production for a net price of NOK
     15.75 per share (approximately $67 million).

     In February 2007, the Board of Directors of Ship Finance approved the
     granting of the option for 10,000 shares in Ship Finance to an employee at
     a strike price of $25.34.

     In January 2007, the Company incorporated Sealift Ltd. ("Sealift") and sold
     six subsidiaries to Sealift. Sealift's total investment before conversion
     of vessel five and six is approximately $476 million, adjusted for working
     capital. Concurrently, Sealift raised $180 million in a private placement.
     Subsequent to the private placement, the Company held 33.33 percent of the
     shares in Sealift. As part of the sale agreement, Frontline has undertaken
     to convert four of the vessels owned by Sealift subsidiaries into heavy
     lift vessels. In May 2007, in line with the strategy previously advised,
     Sealift successfully completed the combination of its businesses with the
     Dockwise group of companies. Frontline is the second largest shareholder in
     the combined entity with an ownership of 17.1%. The first heavy lift vessel
     was delivered May 30, 2007 and the estimated delivery dates for the
     remaining three units will be in the period from September 2007 through
     second quarter 2008. Two of the vessels have been chartered back to the
     Company on a bareboat rate of $15,000 per day per vessel from the end of
     March 2007 until the conversion takes place and two of the vessels have
     been chartered back to the Company on a bareboat rate of $12,500 per day
     from early May 2007 until March 2008 and May 2008, respectively.

     In March 2007, the single hull VLCC Front Vanadis was sold to an unrelated
     third party and delivery took place in May 2007. Upon delivery, the long
     term charter party between Frontline and Ship Finance was terminated, and
     Frontline received a compensation payment in the amount of $13.2 million
     for the early termination of the charter party, which will be recorded in
     the second quarter of 2007.

     In March 2007, Ship Finance announced the acquisition of three newbuilding
     seismic vessels for a price of $210 million from an unrelated third party.
     The vessels are expected to be delivered in January, April and July 2008.
     Upon delivery, the vessels will commence 12 year contracts back to the
     seller.

     In March and April 2007, the Company exercised its four remaining options
     for 156,000 dwt Suezmax newbuilding contracts which are scheduled for
     delivery between April and December 2010, respectively.

     In May 2007, the Company's Board of Directors declared a cash dividend of
     $1.50 per share, to be paid on or around June 22, 2007.

     In June 2007, the Company announced that it had agreed to sell the Front
     Horizon for $28 million with delivery to her new owners expected in July or
     August 2007.