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

                                   FORM 20-F/A

(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, 2003
                          ------------------------------------------------------
                                       OR
[_]                 TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934

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

Commission file number                     0-22704
                      ----------------------------------------------------------

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

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

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

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

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

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

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

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

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

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

                   73,647,930 Ordinary Shares, $2.50 Par Value
--------------------------------------------------------------------------------

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

                Yes   [X]                       No [_]

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

             Item 17 [_]                 Item 18  [X]
<PAGE>

                          INDEX TO REPORT ON FORM 20-F

PART I                                                                      PAGE

ITEM 1.  IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS................1

ITEM 2.  OFFER STATISTICS AND EXPECTED TIMETABLE............................. 1

ITEM 3.  KEY INFORMATION..................................................... 1

ITEM 4.  INFORMATION ON THE COMPANY.......................................... 8

ITEM 5.  OPERATING AND FINANCIAL REVIEW AND PROSPECTS........................23

ITEM 6.  DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES..........................37

ITEM 7.  MAJOR SHAREHOLDERS AND RELATED PARTY
         TRANSACTIONS........................................................39

ITEM 8.  FINANCIAL INFORMATION...............................................40

ITEM 9.  THE OFFER AND LISTING...............................................41

ITEM 10. ADDITIONAL INFORMATION..............................................42

ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES
         ABOUT MARKET RISK...................................................44

ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN
         EQUITY SECURITIES...................................................45

                                     PART II

ITEM 13.  DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES.....................46

ITEM 14.  MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS
          AND USE OF PROCEEDS.................................................46

ITEM 15.  CONTROLS AND PROCEDURES.............................................46

ITEM 16A. AUDIT COMMITTEE FINANCIAL EXPERT....................................46

ITEM 16B. CODE OF ETHICS......................................................46

ITEM 16C. PRINCIPAL ACCOUNTANT FEES...........................................46

ITEM 16D. EXEMPTIONS FOM THE LISTING STANDARDS FOR
          AUDIT COMMITTEES....................................................47

                                    PART III

ITEM 17.  FINANCIAL STATEMENTS................................................47

ITEM 18.  FINANCIAL STATEMENTS................................................48

ITEM 19.  EXHIBITS............................................................49
<PAGE>

            CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

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

Frontline  Ltd.,  or the Company,  desires to take  advantage of the safe harbor
provisions  of the  Private  Securities  Litigation  Reform  Act of 1995  and is
including  this  cautionary  statement  in  connection  with  this  safe  harbor
legislation.  This document and any other written or oral  statements made by us
or on our behalf may  include  forward-looking  statements,  which  reflect  our
current views with respect to future events and financial performance. The words
"believe,"  "anticipate,"  "intends," "estimate," "forecast," "project," "plan,"
"potential,"  "will," "may," "should," "expect" and similar expressions identify
forward-looking statements.

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

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

                                     PART I

ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS

Not Applicable

ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE

Not Applicable

ITEM 3. KEY INFORMATION

A. SELECTED FINANCIAL DATA

The  selected  income  statement  data of the Company with respect to the fiscal
years ended December 31, 2003, 2002 and 2001 and the selected balance sheet data
of the Company with respect to the fiscal years ended December 31, 2003 and 2002
have been derived from the Company's  Consolidated Financial Statements included
herein  and should be read in  conjunction  with such  statements  and the notes
thereto.  The selected  income  statement  data with respect to the fiscal years
ended  December  31,  2000 and 1999 and the  selected  balance  sheet  data with
respect to the fiscal  years ended  December  31,  2001,  2000 and 1999 has been
derived  from  consolidated  financial  statements  of the Company not  included
herein.  The  following  table should also be read in  conjunction  with Item 5.
"Operating and Financial  Review and  Prospects" and the Company's  Consolidated
Financial Statements and Notes thereto included herein.

<TABLE>
<CAPTION>
                                                                       Fiscal Year Ended December 31,
                                                            -------------------------------------------------------
                                                               2003         2002      2001      2000       1999

(in thousand of $, except Ordinary Shares,  per Ordinary Share data and ratios)
<S>                                                         <C>          <C>        <C>        <C>        <C>
Income Statement Data:
Total operating revenues(1)                                 $1,173,783   $ 551,595  $716,478   $692,717   $ 367,876
Total operating expenses(1)                                 $  687,007   $ 454,691  $376,678   $322,328   $ 344,307
Net operating income (loss)                                 $  492,402   $  95,676  $375,420   $374,269   $(12,210)
Net income (loss) from continuing operations before
    income taxes and minority interest                      $  443,130   $   7,150  $330,551   $305,951   $(91,150)
Net income (loss) from continuing operations before
    cumulative effect of change in accounting principle     $  443,127   $   7,172  $330,107   $305,910   $(86,896)
Discontinued operations(2)                                  $        -   $ (1,929)  $ 21,076   $  7,957   $       -
Cumulative effect of change in accounting principle         $ (33,767)   $(14,142)  $ 31,545   $      -   $       -
Net (loss) income                                           $  409,360   $ (8,899)  $382,728   $313,867   $(86,896)

Earnings (loss) from continuing operations before
    cumulative effect of change in accounting principle
    per Ordinary Share
 - basic                                                    $     5.92   $    0.09  $   4.30   $   4.17   $  (1.76)
 - diluted                                                  $     5.90   $    0.09  $   4.29   $   4.16   $  (1.76)
Earnings (loss) per Ordinary Share
 - basic                                                    $     5.47   $  (0.12)  $   4.99   $   4.28   $  (1.76)
 - diluted                                                  $     5.45   $  (0.12)  $   4.98   $   4.27   $  (1.76)
Cash dividends paid per Ordinary Share                      $     4.55   $    0.25  $   1.50   $      -   $       -

</TABLE>

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

(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 revenues and now report total
     operating revenues and total operating expenses.

(2) During the year ended  December  31, 2002 the Company  sold a portion of its
    dry-bulk operations which have been  recorded as discontinued  operations in
    2002, 2001 and 2000. These operations were acquired in 2000.
<PAGE>

<TABLE>
Balance Sheet Data (at end of year):
<S>                                                         <C>           <C>          <C>           <C>          <C>
Cash and cash equivalents                                   $   124,189   $    92,078  $   178,176   $   103,514  $    65,467
Newbuildings and vessel purchase options                    $     8,370   $    27,405  $   102,781   $    36,326  $    32,777
Vessels and equipment, net                                  $ 2,165,239   $ 2,373,329  $ 2,196,959   $ 2,254,921  $ 1,523,112
Vessels under capital lease, net                            $   765,126   $   264,902  $   317,208   $   108,387  $         -
Investments in associated companies                         $   173,329   $   119,329  $   109,898   $    27,361  $    16,274
Total assets                                                $ 4,463,535   $ 3,034,743  $ 3,033,774   $ 2,780,988  $ 1,726,793
Short-term debt and current portion of long-term debt       $   191,131   $   167,807  $   227,597   $   212,767  $   116,814
Current portion of obligations under capital lease          $    20,138   $    13,164  $    17,127   $     7,888  $         -
Long-term debt                                              $ 2,091,286   $ 1,277,665  $ 1,164,354   $ 1,331,372  $   962,880
Obligations under capital lease                             $   753,823   $   259,527  $   283,663   $   101,875  $         -
Share capital                                               $   184,120   $   191,166  $   191,019   $   195,172  $   152,405
Stockholders' equity                                        $ 1,255,417   $ 1,226,973  $ 1,252,401   $ 1,029,490  $   557,300
Ordinary Shares outstanding                                  73,647,930    76,466,566   76,407,566    78,068,811   60,961,860
Weighted average ordinary shares outstanding                 74,901,900    76,456,340   76,714,000    73,390,654   49,467,490

Cash Flow Data
Cash provided by operating activities                       $   523,280   $   142,025  $   477,607   $ (508,938)  $   175,532
Cash provided by (used in) financing activities             $ (233,303)   $   (5,230)  $ (299,163)   $  275,403   $ (230,585)
Cash provided by (used in) investing activities             $ (269,058)   $  (222,893) $ (103,782)   $ (508,938)  $  175,532
Other Financial Data
Equity to assets ratio (percentage)(3)                            28.1%         40.5%        41.3%        37.0%         32.3%
Debt to equity ratio(4)                                             2.4           1.4          1.4          1.6           1.9
Price earnings ratio(5)                                             4.3           neg          2.1          3.3           neg
Net voyage revenues                                         $   765,985   $   354,212  $   551,515   $  559,601   $   223,334
</TABLE>

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

                                     2003      2002      2001     2000      1999
Voyage revenues                 1,089,583   489,286   639,807  656,917   339,996
Voyage expenses and commission  (323,598) (135,074)  (88,292) (97,316) (116,662)
                                ------------------------------------------------
Net voyage revenues               765,985   354,212   551,515  559,601   223,334
                                ================================================

----------------
(3)  Equity to assets ratio is calculated as total stockholders'  equity divided
     by total assets.

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

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

B. CAPITALIZATION AND INDEBTEDNESS

Not Applicable

C. REASONS FOR THE OFFER AND USE OF PROCEEDS

Not Applicable

D. RISK FACTORS

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

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

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

The factors  affecting  the supply and demand for oil tankers are outside of our
control, and the nature, timing and degree of changes in industry conditions are
unpredictable. The factors that influence demand for tanker capacity include:

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

The factors that influence the supply of tanker capacity include:

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

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

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

Our revenues experience seasonal variations that may affect our income

We operate  our tankers in markets  that have  historically  exhibited  seasonal
variations in demand and, therefore, charter rates. Tanker markets are typically
stronger in the winter  months in the northern  hemisphere  due to increased oil
consumption.  In addition,  unpredictable  weather patterns in the winter months
tend to disrupt vessel scheduling. 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.

We charter 46 vessels from our subsidiary Ship Finance  International Limited at
fixed  rates on  long-term  charters.  We are  obliged  to make  fixed rate hire
payments to Ship Finance even though our income may decrease to levels that make
these charters unprofitable.

The long term time  charters to us extend for various  periods  depending on the
age of the vessels,  ranging from approximately  seven to 22 years. With certain
exceptions,  the  daily  base  charter  rates,  which are  payable  by us 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

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

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

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

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

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

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

Our tanker fleet includes 19 non-double  hull tankers.  The United  States,  the
European Union and the International Maritime Organization, or the IMO, have all
imposed limits or prohibitions on the use of these types of tankers in specified
markets after certain  target dates,  which range from 2010 to 2015. The sinking
of the single hull m.t.  Prestige  offshore  Spain in  November  2002 has led to
proposals by the European  Union and the IMO to accelerate  the  prohibition  to
trade of all  non-double  hull  tankers,  with certain  limited  exceptions.  In
December 2003, the Marine Environmental  Protection Committee of the IMO adopted
a proposed  amendment to the  International  Convention  for the  Prevention  of
Pollution  from Ships to  accelerate  the phase out of single hull  tankers from
2015 to 2010  unless the  relevant  flag  states  extend the date to 2015.  This
proposed  amendment  will take  effect in April  2005  unless  objected  to by a
sufficient  number of states.  We do not know whether any of our vessels will be
subject to this accelerated phase-out,  but this change could result in a number
of our vessels  being unable to trade in many markets  after 2010.  As a result,
the estimated useful lives of fourteen of the Company's wholly owned vessels and
two vessels owned by associated  companies were reduced in the fourth quarter of
2003. A change in accounting  estimate was  recognised to reflect this decision,
resulting in an increase in depreciation expense and consequently decreasing net
income by $1.3 million and basic and diluted  earnings  per share by $0.02,  for
2003.  Moreover,  the IMO may still adopt  regulations  in the future that could
adversely  affect the useful lives of our non-double hull tankers as well as its
ability to generate income from them.

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

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

Competition

The operation of tankers and  transportation of crude and petroleum products and
the other businesses in which we operate are extremely competitive.  Through our
operating  subsidiaries  we compete  with other oil tanker and dry bulk  carrier
owners (including major oil companies as well as independent companies), and, to
a lesser  extent,  owners of other size vessels.  Our market share  currently is
insufficient to enforce any degree of pricing discipline in the markets in which
we  compete.  It is possible  that our  competitive  position  will erode in the
future.

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

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

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

At  December  31,  2003 we had total  long-term  debt  outstanding  of  $2,282.4
million,  of which  $1,095.1  million is floating  rate debt.  The Company  uses
interest  rate swaps to manage  interest  rate risk. As at December 31, 2003 the
Company's interest rate swap arrangements effectively fix the Company's interest
rate exposure on $140.5 million of floating rate debt.  Our maximum  exposure to
interest rate  fluctuations  is $954.6 million at December 31, 2003. If interest
rates rise significantly, that could materially and adversely affect our results
of operations.

Fluctuations in the Yen could affect our earnings

Certain of our vessels have  charters and  financing  arrangements  that require
payments of principal and interest or charter hire in Yen. As we have not hedged
our Yen exposure against the Dollar, a change in the exchange rate for Yen could
have an adverse impact on our financial condition and results of operations.

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 Tr0im, 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.  Tr0im,  for any
extended period of time could have an adverse effect on our business and results
of operations.

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

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

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

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

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

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

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

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

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

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

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

Governments  could  requisition our vessels during a period of war or emergency,
resulting in loss of earnings

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

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

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

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

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

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

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

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

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

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

Under the United States Internal Revenue Code of 1986, or the Code, a portion of
the gross shipping income of a vessel owning or chartering corporation,  such as
ourselves and our  subsidiaries,  may be subject to a 4% United  States  federal
income  tax  on 50% of  the  gross  shipping  income  that  is  attributable  to
transportation that begins or ends, but that does not both begin and end, in the
U.S.,  unless that  corporation is entitled to a special tax exemption under the
Code  which  applies  to the  international  shipping  income  derived  by  some
non-United States corporations.  We believe that we and each of our subsidiaries
qualify for this statutory tax exemption for the year ended December 31, 2003.

However,  due to the absence of final Treasury  regulations or other  definitive
authority  concerning  some  aspects of this tax  exemption  under the  relevant
provisions of the Code and to the factual nature of the issues involved,  we can
give no assurances on our tax-exempt status or that of any of our subsidiaries.

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

ITEM 4. INFORMATION ON THE COMPANY

A. HISTORY AND DEVELOPMENT OF THE COMPANY

The Company

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

We are  engaged  primarily  in  the  ownership  and  operation  of oil  tankers,
including  oil/bulk/ore,  or OBO carriers. We operate tankers of two sizes: very
large crude carriers, or VLCCs, which are between 200,000 and 320,000 deadweight
tons, or dwt, and Suezmaxes,  which are vessels between 120,000 and 170,000 dwt.
In addition,  we have three dry bulk carriers.  We operate through  subsidiaries
and  partnerships  located in Bermuda,  Isle of Man,  Liberia,  Norway,  Panama,
Singapore,  Sweden,  Cayman Islands,  the United States and the Bahamas.  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  Frontline Ltd., or Old Frontline,  in
Bermuda.  Old Frontline was incorporated  under the laws of Bermuda on April 29,
1997  for the  purpose  of  succeeding  to the  business  of  Frontline  AB and,
commencing in June 1997, the shares in Frontline AB were exchanged for shares in
Old Frontline.  The ordinary shares of Old Frontline were  thereafter  listed on
the Oslo Stock Exchange and delisted from the Stockholm Stock Exchange.

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.  In the  business  combination,  which  left LOF as the
surviving company, Old Frontline's  shareholders  exchanged Old Frontline shares
for LOF shares and LOF was  subsequently  renamed  Frontline Ltd. 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.

In July 2001 the Company  gave notice of  termination  of the ADR program to the
Bank of New York as  Depositary.  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.
With this listing,  Frontline became one of the few companies to list its shares
directly on three international securities exchanges.

In December 2003, our subsidiary Ship Finance  International Limited issued $580
million  of 8.5%  Senior  Notes due 2013.  In the first  quarter  of 2004,  Ship
Finance has used the proceeds of the Notes issue, together with a refinancing of
existing  debt,  to fund the  acquisition  from us of a fleet  of 47  crude  oil
tankers (including one purchase option for a VLCC) and we have chartered each of
the ships back for most of their  remaining  lives.  We also  entered into fixed
rate  management and  administrative  services  agreements  with Ship Finance to
provide for the operation and  maintenance  of these vessels and  administrative
support  services.  The charters and the management  agreements  were each given
economic effect as of January 1, 2004. These  transactions are discussed further
below in "Spin-Off of Ship Finance International Limited and Future Strategy".

Ship  Finance  International  Limited's  shares are listed on the New York Stock
Exchange as of June 17, 2004 under ticker symbol "SFL".

B. BUSINESS OVERVIEW

We are a world leader in the international seaborne transportation of crude oil.
Our tanker  fleet,  which is one of the  largest  and most  modern in the world,
consists of 25 wholly owned, and 2 part-owned VLCCs and 28 wholly owned, Suezmax
tankers,  of which 8 are Suezmax OBOs.  In addition,  we have three wholly owned
dry bulk carriers,  being two Capesize and one Handymax size  carriers.  We also
charter in thirteen modern VLCCs and three modern Suezmax  tankers.  At June 15,
2004 we also have a purchase option to acquire a further VLCC.

In 2003, we took delivery of one  wholly-owned  double-hulled  VLCC  newbuilding
which was subsequently  sold prior to the end of 2003 and we sold two 2001 built
Suezmax  tankers.  In  addition,  in 2003 we sold and leased back two 2000 built
VLCCs and two 2001 built Suezmax tankers. In 2003 we disposed of our 50 per cent
interests in two VLCCs and increased our investment in five VLCCs from 33.33 per
cent to 50.1 per cent.  In 2003 we also  acquired the remaining 50 per cent of a
VLCC from a joint venture partner thereby obtaining 100 per cent ownership.

In  December  2003,  we  agreed  with  our  joint  venture   partner,   Overseas
Shipholding,  Group,  Inc  ("OSG"),  to  swap  interests  in six  joint  venture
companies, which each own a VLCC. In February 2004, these agreements resulted in
us exchanging our interest in the vessels Dundee,  Sakura I and Tanabe for OSG's
interest in the vessels  Edinburgh,  Ariake and Hakata,  thereby  increasing our
interests in these vessels to 100% each.

In May, 2004 we exercised our option to acquire all of the shares of Independent
Tankers  Corporation  ("ITC")  from  Hemen  Holding  Ltd, a related  party.  ITC
operates  a fleet  of six  VLCCs  and  four  Suezmax  tankers  which  are all on
long-term charters to BP and Chevron.

As of  June  15,  2004  the  fleet  that  we  operate  has a  total  tonnage  of
approximately  17.1 million  dwt, and our tanker  vessels have an average age of
7.8 years  compared  with an estimated  industry  average of over 8.6 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 products 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.  Historically,  the  tanker  industry  has  been  highly  cyclical,  with
attendant volatility in profitability and asset values resulting from changes in
the supply of and demand for tanker capacity.  Our OBO carriers are specifically
designed  to carry oil or dry cargo and may be used to  transport  either oil or
dry  cargo on any  voyage.  When  freight  rates  in both the oil and dry  cargo
markets are  equivalent OBO carriers are operated most  profitably  transporting
oil on one leg of the  voyage  and dry cargo on the  other leg of a voyage.  The
supply of tanker and OBO  capacity  is  influenced  by the number of new vessels
built, the number of older vessels  scrapped,  converted,  laid up and lost, the
efficiency  of the  world  tanker  or OBO  fleet  and  government  and  industry
regulation of maritime transportation  practices.  The demand for tanker and OBO
capacity is influenced by global and regional economic conditions, increases and
decreases  in  industrial  production  and  demand  for crude oil and  petroleum
products,  the  proportion  of world oil output  supplied by middle  eastern and
other producers,  political  changes and armed conflicts  (including wars in the
Middle  East) and changes in seaborne  and other  transportation  patterns.  The
demand for OBO capacity is, in addition,  influenced  by increases and decreases
in the  production  and demand for raw  materials  such as iron ore and coal. In
particular,  demand for our tankers and our services in  transporting  crude oil
and  petroleum  products  and dry  cargoes  has been  dependent  upon  world and
regional  markets.  Any decrease in  shipments of crude oil or raw  materials in
world   markets  could  have  a  material   adverse   effect  on  our  earnings.
Historically,  these  markets  have been  volatile  as a result of,  among other
things, general economic conditions, prices, environmental concerns, weather and
competition from alternative  energy sources.  Because many factors  influencing
the supply of and demand for tankers and OBO  carriers  are  unpredictable,  the
nature,   timing  and  degree  of  changes  in  industry   conditions  are  also
unpredictable.

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

The  tanker   industry   is  highly   cyclical,   experiencing   volatility   in
profitability,  vessel  values and freight  rates.  Freight  rates are  strongly
influenced   by  the   supply  of  tanker   vessels   and  the  demand  for  oil
transportation.

2003  was a  good  year  for  the  tanker  market  as  freight  rates  increased
dramatically  compared to 2002,  mainly due to limited  fleet  growth and strong
growth in the demand for oil, and implicitly for oil tankers.

According  to the  International  Energy  Agency,  world oil demand  grew by 1.7
million  barrels per day (mb/d)  compared to 2002 with total world demand rising
to 78.7 mb/d. The main driver of this growth was strong economic growth in China
resulting in record import levels.

The world supply of oil  increased by 2.8 mb/d  compared with 2002 to a total of
79.4 mb/d in 2003.  Repercussions of the oil workers' strike in Venezuela led to
low  inventories  in the United States and the  necessary oil to replenish  them
came to a large  extent from the Middle East.  At the moment  Venezuela is still
producing  some 0.5 mb/d less than  before the strike.  This  resulted in strong
demand for VLCCs,  and a very healthy  market for most of the year. In addition,
strong  growth  in the  demand  for oil in  China  gave  the  market  additional
strength.  The war in Iraq  reduced  output from that  country to 0.3-0.4  mb/d.
However, during the fall season output continued to climb and averaged about 2.0
mb/d in the 4th quarter of 2003.

The size of the world tanker fleet  increased by 2.5% in 2003.  The VLCC segment
of the market was unchanged,  but Suezmax and smaller tankers increased by 4.5%.
A total of 19.9 million  deadweight  tons (mill dwt) of tankers were scrapped in
2003, including 27 VLCC's and 13 Suezmaxes. A total of 49.3 mill dwt , including
51 VLCC's and 55 Suezmaxes, were added to orderbooks in the same period.

The total  orderbook for tankers stood at 75.3 mill dwt at the end of 2003. This
represents 24.6% of the current tanker fleet,  compared to about 19% at the same
time in 2002.

The outlook for the tanker market for the remainder of 2004 is positive since it
seems that continued growth in oil consumption will ensure a positive demand for
tankers.  The freight forward market for the second half of 2004, as of June 15,
2004, stands at $75,000 per day for VLCC tankers.

The Company's  three remaining dry bulk vessels are fixed on medium to long-term
bareboat or time charters, which expire in 2005 and 2014.

Our business strategy is primarily based upon the following principles:

o    emphasising  operational  safety  and  quality  maintenance  for all of our
     vessels;
o    complying with all current and proposed environmental regulations;
o    outsourcing technical operations and crewing;
o    controlling operational costs of vessels;
o    operating one of the most modern and  homogeneous  fleets of tankers in the
     world;
o    achieving high utilisation of our vessels;
o    achieving competitive financing arrangements; 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, meaning that they are not carrying cargo until they are rechartered. It
is the time element  associated with these ballast legs that we seek to minimise
by  efficiently  chartering  our OBO carriers  and tankers.  We seek to maximise
earnings in employing  vessels in the spot market,  under time charters or under
Contracts of Affreightment, or COAs.

In December 1999, the Company joined with five other  shipowners to form Tankers
International  LLC,  or  Tankers  to  pool  the  commercial   operation  of  the
participating   companies'  modern  VLCC  fleets.  Revenues  allocated  to  each
shipowner who  participates in Tankers are calculated on the basis of the pool's
total earnings and the tonnage committed into Tankers by the shipowner.  In July
2002 we withdrew from Tankers and the  commercial  operations of our other VLCCs
has been brought back under our direct management.

Since  1998  Frontline  and  OMI  Corporation,  a major  international  shipping
company, have combined Suezmax tanker fleets for commercial purposes and created
Alliance  Chartering  LLC, or Alliance.  Alliance  currently  markets 44 Suezmax
tankers,  the majority of which are employed in the Atlantic  Basin.  Alliance's
control of this large  modern fleet of  Suezmaxes  has enabled it to  strengthen
relationships with a number of customers.  These arrangements may allow Alliance
the opportunity to increase its Suezmax fleet utilisation through backhauls when
cargo is available (that is,  transporting  cargo on the return trip when a ship
would normally be empty) which would improve vessel  earnings.  Alliance  mainly
employs  vessels in the spot  market,  although it also from time to time enters
into  COAs  and  time  charters.   Revenues  allocated  to  each  shipowner  who
participates  in  Alliance  are based on the actual  earnings  from the  vessels
contributed to Alliance by the shipowner.

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, or Frontline  Management,  and  Frontline  Management
(Bermuda) Limited, both wholly-owned  subsidiaries of the Company, 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 vessel  owned by the Company is  registered  under the Bahamas,
French, Hong Kong, Liberian, Philippines, Singaporean, Norwegian, Isle of Man or
Panamanian flag.

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

o    Our vessels are managed by independent ship management companies.  Pursuant
     to management agreements, each of the independent ship management companies
     provides operations, ship maintenance, crewing, technical support, shipyard
     supervision  and  related  services  to  Frontline.  A central  part of our
     strategy is to benchmark operational performance and cost level amongst our
     ship managers.
o    Independent ship managers provide crewing for our vessels.  Currently,  our
     vessels are crewed with Russian,  Ukranian,  Croatian,  Baltic,  Indian and
     Filipino officers and crews, or combinations of these nationalities.
o    Accounting services for each of our shipowning subsidiaries are provided by
     the ship managers.

Spin-Off of Ship Finance International Limited and Future Strategy

Ship Finance  International  Limited ("Ship Finance"),  initially a wholly-owned
subsidiary of the Company,  was  incorporated in Bermuda in October 2003 for the
purpose of acquiring  certain of our shipping  assets.  In December  2003,  Ship
Finance  issued $580 million of 8.5% Senior Notes due 2013. In the first quarter
of 2004, Ship Finance has used the proceeds of the Notes issue,  together with a
refinancing of existing debt, to fund the  acquisition  from us of a fleet of 47
crude  oil  tankers  (including  one  purchase  option  for a VLCC)  and we have
chartered  each of the ships  back for most of their  remaining  lives.  We also
entered into fixed rate management and administrative  services  agreements with
Ship  Finance to provide for the  operation  and  maintenance  of the  Company's
vessels and  administrative  support  services.  The charters and the management
agreements were each given economic effect as of January 1, 2004.

The long term time  charters to us extend for various  periods  depending on the
age of the vessels,  ranging from  approximately  seven to 22 years. Nine of the
vessels that Ship Finance  acquired are on existing  long term time charters and
three  vessels are on existing  long term  bareboat  charters.  Ship Finance has
agreed  with us that it will  treat all of these  vessels  as being  under  time
charters to us, on the same terms and effective on the same date as the other 34
vessels for all  economic  purposes.  With  certain  exceptions,  the daily base
charter  rates,  which are payable to us 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

Under the terms of a charter  ancillary  agreement,  beginning with the 11-month
period from  February  1, 2004 and for each  calendar  year after that,  we have
agreed to pay Ship Finance a profit sharing  payment equal to 20% of the charter
revenues for the applicable  period,  calculated on a TCE basis,  realised by us
from use of our fleet in excess of  average  rates of  $25,575  per day for each
VLCC and $21,100 per day for each Suezmax tanker.

On May 28, 2004, we announced the  distribution of 25% of Ship Finance's  common
shares to our common  shareholders in a partial spin off. On June 16, 2004, each
Frontline  shareholder  of record on June 7,  2004,  received  one share in Ship
Finance  for  every  four  Frontline  shares  held.  The  record  date  for  the
distribution was June 7, 2004, and the  distribution  date was June 16, 2004. On
June 17, 2004, the Ship Finance common shares commenced  trading on the New York
Stock Exchange under the ticker symbol "SFL".

Following the spin off of 25% of Ship Finance,  our operations will be comprised
of four main components as follows:

     o    Our charter and management  agreements  with Ship Finance  including a
          $250  million  cash  deposit we are  required to reserve to secure the
          charters.
     o    The ownership of 75 per cent of Ship Finance.
     o    The ownership of ITC.
     o    The  ownership of our  remaining  vessels  which include our three dry
          bulk  carriers,  nine  VLCCs and three  Suezmaxes  chartered  in under
          long-term  leases,  two joint venture owned VLCCs and one wholly-owned
          non-recourse financed VLCC.

It is the Frontline Board's  intention that during 2004,  Frontline shall divest
all its shares in Ship  Finance  either  through a straight  sale,  a  corporate
transaction or through further distributions to Frontline's shareholders.

Our strategy is to become,  over time, a world leading  chartering  company with
flexibility  to adjust our exposure to the tanker  market  depending on cyclical
conditions.  In addition, we will, when financing arrangements permit,  consider
divesting  the "non Ship  Finance"  vessels.  This may be done  through sale and
leaseback or straight sales of the vessels.

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

Importance of Fleet Size

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.

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.

Customers

Our  customers  include  major  oil  companies,   petroleum   products  traders,
government  agencies and various other entities.  During each of the years ended
December 31, 2003, 2002 and 2001, no single  customer  accounted for 10 per cent
or more of our consolidated freight 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
the  Company,  also  operate  their own vessels and use such vessels not only to
transport  their own crude oil but also to  transport  crude oil for third party
charterers in direct  competition with  independent  owners and operators in the
tanker  charter  market.  Competition  for charters is intense and is based upon
price,  location,  size, age,  condition and acceptability of the vessel and its
manager.  Competition is also affected by the availability of other size vessels
to compete in the trades in which the Company engages.

Risk of Loss and Insurance

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

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

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

Inspection by a Classification Society

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

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

Environmental and Other Regulations

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

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

Environmental Regulation--IMO

The United Nation's  International  Maritime  Organization,  or IMO, has adopted
regulations that set forth pollution prevention  requirements for tankers. These
regulations,  which have been  implemented  in many  jurisdictions  in which our
tankers 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, which means
          that they are loaded in such a way that if the hull is breached, 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.

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.

The IMO recently  adopted  regulations that require the phase-out of most single
hull tankers by 2015 or earlier,  depending on the age of the vessel and whether
or not it complies with requirements for protectively located segregated ballast
tanks.  Under these new  regulations,  which became effective in September 2002,
the maximum  permissible  age for tankers  after 2007 will be 25 years.  The new
regulations also provide for increased inspection and verification requirements.
However,  as a result of the oil spill in November  2002 relating to the loss of
the m.t.  Prestige,  which  was owned by a company  not  affiliated  with us, in
December 2003 the Marine Environmental Protection Committee of the IMO adopted a
proposed  amendment  to the  International  Convention  for  the  Prevention  of
Pollution  from Ships to  accelerate  the phase out of single hull  tankers from
2015 to 2010  unless the  relevant  flag  states  extend the date to 2015.  This
proposed  amendment will come into effect in April 2005 unless  objected to by a
sufficient  number of member  states.  We do not know whether any of our vessels
will be subject to this accelerated phase-out, but this could result in a number
of our vessels being unable to trade in many markets after 2010.  Moreover,  the
IMO may still adopt  regulations in the future that could  adversely  affect the
remaining  useful  lives of our single  hull  tankers as well as our  ability to
generate income from them. Our tanker fleet includes 19 non-double hull tankers.

The IMO has also negotiated international  conventions that impose liability for
oil pollution in international  waters and a signatory's  territorial waters. In
September 1997, the IMO adopted Annex VI to the International Convention for the
Prevention of Pollution from Ships to address air pollution from ships. Annex VI
is expected to be ratified  during  2004,  and will become  effective  12 months
after  ratification.  Annex VI,  when it becomes  effective,  will set limits on
sulfur  oxide and  nitrogen  oxide  emissions  from ship  exhausts  and prohibit
deliberate emissions of ozone depleting substances, such as chlorofluorocarbons.
Annex VI also includes a global cap on the sulfur content of fuel oil and allows
for  special  areas to be  established  with more  stringent  controls on sulfur
emissions.  We are  formulating  a plan to comply with the Annex VI  regulations
once they come into effect.  Compliance with these regulations could require the
installation  of expensive  emission  control  systems and could have an adverse
financial impact on the operation of our vessels. Additional or new conventions,
laws and regulations  may be adopted that could adversely  affect our ability to
manage our ships.

The IMO's  International  Safety  Management Code, or ISM Code, also affects our
operations. The ISM Code requires the party with operational control of a vessel
to develop a 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  will  rely  upon  the  safety
management system that we and our third party technical managers have developed.

The  ISM  Code  requires  that  vessel  operators  obtain  a  safety  management
certificate for each vessel they operate.  This certificate evidences compliance
by a vessel's  management  with ISM Code  requirements  for a safety  management
system. No vessel can obtain a certificate unless its manager has been awarded a
Document of  Compliance,  issued by each flag state,  under the ISM Code. All of
our vessels and their operators have received ISM certification. We are required
to renew  these  documents  of  compliance  and safety  management  certificates
annually.

Non-compliance  with the ISM Code and  other IMO  regulations  may  subject  the
vessel  owner  or a  bareboat  charterer  to  increased  liability,  may lead to
decreases in available insurance coverage for affected vessels and may result in
a tankers denial of access to, or detention in, some ports.  Both 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 continues to review and introduce new  regulations.  It is impossible to
predict what additional  regulations,  if any, may be passed by the IMO and what
effect, if any, such regulations might have on the operation of oil tankers.

Environmental Regulation--OPA/CERCLA

The U.S. Oil Pollution Act of 1990, or OPA,  established 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 U.S.  or its
territories or possessions,  or whose vessels operate in the waters of the U.S.,
which  include the U.S.  territorial  waters and the two hundred  nautical  mile
exclusive  economic zone of the U.S. The Comprehensive  Environmental  Response,
Compensation  and Liability Act, or CERCLA,  which also impacts our  operations,
applies to the  discharge  of hazardous  substances  (other than oil) whether on
land or at sea.

Under OPA,  vessel  owners,  operators and bareboat or "demise"  charterers  are
"responsible parties" who are liable regardless of fault,  individually and as a
group, for all containment  costs,  clean-up costs and for other damages arising
from oil spills  from their  vessels.  These other  damages may include  natural
resources  damages and related  assessment  costs,  real and  personal  property
damages, loss of subsistence use of natural resources, the loss of taxes, rents,
royalties,  profits and earnings  capacity  resulting  from an oil spill and the
cost of public services  necessitated by an oil spill.  OPA limits a responsible
party's  liability  to the  greater of $1,200 per gross ton or $10  million  per
vessel  over  3,000  gross  tons,  subject  to  adjustment  for  inflation.  OPA
specifically  permits  individual  states to impose their own liability  regimes
with regard to oil pollution  incidents  occurring within their boundaries,  and
some states have enacted  legislation  providing  for  unlimited  liability  for
discharge of  pollutants  within their waters.  In some cases,  states that have
enacted this type of legislation  have not yet issued  implementing  regulations
defining tanker owners' responsibilities under these laws.

CERCLA,  which applies to owners and operators of vessels,  contains a liability
regime  similar to OPA and provides for  cleanup,  removal and natural  resource
damages.  Liability under CERCLA is limited to the greater of $300 per gross ton
or $5  million.  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 co-operate  and assist in  connection  with
the  substance  removal  activities.  OPA and CERCLA each  preserve the right to
recover damages under existing law, including maritime tort law. We believe that
we are in  substantial  compliance  with OPA,  CERCLA and all  applicable  state
regulations in the ports where our vessels will 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 aggregate  potential strict  liability under OPA and CERCLA.  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
OPA  limitation  on liability of $1,200 per gross ton with the CERCLA  liability
limit of $300 per  gross  ton.  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
must 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  liability  under  OPA/CERCLA.  We have  provided
requisite guarantees and have received certificates of financial  responsibility
from the U.S. Coast Guard for each of our tankers required to have one.

Under  OPA,  with  limited  exceptions,  all newly  built or  converted  tankers
operating in U.S. waters must be built with double-hulls.  Existing vessels that
do not comply with the double-hull requirement must be phased out over a 20-year
period  beginning  in 1995  based on size,  age and place of  discharge,  unless
retrofitted  with  double-hulls.   Notwithstanding  the  phase-out  period,  OPA
currently permits existing single-hull tankers to operate until the year 2015 if
their operations  within U.S. waters are limited to discharging at the Louisiana
Offshore  Oil  Port or  unloading  with the aid of  another  vessel,  a  process
referred to as  "lightering,"  within  authorized  lightering zones more than 60
miles off-shore.

OPA also amended the Federal Water  Pollution  Control Act to require  owners or
operators  of tankers  operating  in the waters of the United  States  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.

Vessel  response  plans for our  tankers  operating  in the waters of the United
States have been approved by the U.S. Coast Guard.  In addition,  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.  We
are responsible for ensuring our vessels comply with any additional regulations.

Environmental Regulation--Other

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
and the  Convention  for the  Establishment  of an  International  Fund  for Oil
Pollution of 1971. Under these conventions, and depending on whether the country
in which the damage results is a party to the 1992 Protocol to the International
Convention on Civil Liability for Oil Pollution  Damage,  a vessel's  registered
owner is strictly liable for pollution  damage caused in the territorial  waters
of a  contracting  state by  discharge  of  persistent  oil,  subject to certain
complete defenses. Under an amendment that became effective November 1, 2003 for
vessels of 5,000 to  140,000  gross  tons (a unit of  measurement  for the total
enclosed  spaces within a vessel),  liability  will be limited to  approximately
$6.7 million plus $938 for each additional  gross ton over 5,000. For vessels of
over  140,000  gross tons,  liability  will be limited to  approximately  $133.4
million.  The current  maximum amount is  approximately  $81.2  million.  As the
convention  calculates  liability  in  terms of a basket  of  currencies,  these
figures are based on currency  exchange  rates on January 2, 2004.  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 governs,  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 covers the liability under the plan adopted by the IMO.

In July 2003, in response to the m.t.  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  is  considering  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
Commission  with greater  authority and control over  classification  societies,
including  the ability to seek to suspend or revoke the  authority  of negligent
societies.  The sinking of the m.t. Prestige and resulting oil spill in November
2002 has lead to the  adoption  of other  environmental  regulations  by certain
European Union nations,  which could adversely affect the remaining useful lives
of all of our tankers and our ability to generate income from them. For example,
Italy announced a ban of single-hull  crude oil tankers over 5,000 dwt from most
Italian ports,  effective April 2001. Spain has announced a similar prohibition.
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 laws
that impose strict  liability for clean-up  costs and damages  resulting  from a
discharge  of oil or a release of a hazardous  substance.  As  permitted by OPA,
these state laws may provide for unlimited  liability  for oil spills  occurring
within their boundaries.

Vessel Security Regulations

Since the terrorist  attacks of September 11, 2001, there have been a variety of
initiatives  intended to enhance  vessel  security.  On November 25,  2002,  the
Maritime  Transportation  Security  Act of 2002  (MTSA)  came  into  effect.  To
implement  certain  portions  of the MTSA,  in July 2003,  the 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 the International Convention
for the Safety of Life at Sea (SOLAS)  created a new  chapter of the  convention
dealing specifically with maritime security.  The new chapter is scheduled to go
into effect in July 2004 and will impose various detailed  security  obligations
on  vessels  and port  authorities,  most of which  are  contained  in the newly
created  International Ship and Port Facilities  Security (ISPS) Code. Among the
various requirements are:

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

     o    on-board installation of ship security alert systems;

     o    the development of vessel security plans; and

     o    compliance with flag state security certification requirements.

The U.S. Coast Guard regulations,  intended to align with international maritime
security standards,  exempt non-U.S.  tankers from MTSA vessel security measures
provided such vessels have on board, by July 1, 2004, a valid International Ship
Security  Certificate (ISSC) that attests to the vessel's  compliance with SOLAS
security  requirements and the ISPS Code. The Manager will implement the various
security measures addressed by the MTSA, SOLAS and the ISPS Code and ensure that
our tankers attain compliance with all applicable  security  requirements within
the prescribed  time periods.  We do not believe these  additional  requirements
will have a material financial impact on our operations.
<PAGE>

C. ORGANIZATIONAL STRUCTURE

Our vessels are all owned by, or chartered to, separate subsidiaries, associated
companies or joint  ventures.  The  following  table sets out the details of our
significant subsidiaries and equity interests as of June 21, 2004:

<TABLE>
<CAPTION>
Name                                                                   Country of   Ownership
                                                  Vessel/Activity   Incorporation   Percentage
<S>                                     <C>                           <C>                   <C>
CalPetro Tankers (Bahamas I) Ltd                   Cygnus Voyager         Bahamas         100%
CalPetro Tankers (Bahamas II) Ltd                  Altair Voyager         Bahamas         100%
CalPetro Tankers (Bahamas III) Ltd                  Virgo Voyager         Bahamas         100%
Granite Shipping Co. Ltd.                           Front Granite         Bahamas         100%

Frontline Management (Bermuda) Ltd             Management company         Bermuda         100%
ICB Shipping (Bermuda) Limited                 Management company         Bermuda         100%
Mosvold Shipping Limited                          Holding company         Bermuda         100%
Ship Finance International Limited                Holding company         Bermuda          75%

Buckingham Shipping Plc                           British Pioneer     Isle of Man         100%
Caernarfon Shipping Plc                          British Progress     Isle of Man         100%
CalPetro Tankers (IOM) Ltd                         Sirius Voyager     Isle of Man         100%
Golden Current Limited                                     Opalia     Isle of Man         100%
Golden State Petro (IOM 1-A) PLC                  Antares Voyager     Isle of Man         100%
Golden State Petro (IOM 1-B) PLC                  Phoenix Voyager     Isle of Man         100%
Holyrood Shipping Plc                               British Pride     Isle of Man         100%
Oscilla Shipping Ltd                       Option to acquire VLCC     Isle of Man         100%
Sandringham Shipping Plc                          British Purpose     Isle of Man         100%

Ariake Transport Corporation                               Ariake         Liberia         100%
Bonfield Shipping Ltd.                               Front Driver         Liberia         100%
Edinburgh Navigation SA                                 Edinburgh         Liberia         100%
Fourways Marine Limited                              Front Spirit         Liberia         100%
Front Ardenne Inc.                                  Front Ardenne         Liberia         100%
Front Brabant Inc.                                  Front Brabant         Liberia         100%
Front Eagle Corporation                               Front Eagle         Liberia         100%
Front Falcon Inc                                     Front Falcon         Liberia         100%
Front Glory Shipping Inc.                             Front Glory         Liberia         100%
Front Pride Shipping Inc.                             Front Pride         Liberia         100%
Front Saga Inc                                         Front Page         Liberia         100%
Front Serenade Inc.                                Front Serenade         Liberia         100%
Front Splendour Shipping Inc.                     Front Splendour         Liberia         100%
Front Stratus Inc.                                  Front Stratus         Liberia         100%
Front Tobago Inc.                                    Front Tobago         Liberia          40%
Golden Aquarian Corporation                              Cos Hero         Liberia         100%
Golden Bayshore Shipping Corporation                 Navix Astral         Liberia         100%
Golden Channel Corporation                        Front Commodore         Liberia         100%
Golden Estuary Corporation                         Front Comanche         Liberia         100%
Golden Fjord Corporation                Ocana (ex Front Commerce)         Liberia         100%
Golden Fountain Corporation                       Golden Fountain         Liberia          50%
Golden Hilton Shipping Corporation              Channel Navigator         Liberia         100%
Golden President Shipping Corporation            Channel Alliance         Liberia         100%
Golden Seaway Corporation                            New Vanguard         Liberia         100%
Golden Sound Corporation                                New Vista         Liberia         100%
Golden Strait Corporation                          Golden Victory         Liberia         100%
Golden Stream Corporation                           Golden Stream         Liberia         100%
Golden Tide Corporation                 Omalia (ex New Circassia)         Liberia         100%
Hitachi Hull # 4983 Corporation                 Otina (ex Hakata)         Liberia         100%
Katong Investments Ltd.                             Front Breaker         Liberia         100%
Kea Navigation Ltd                                   Front Melody         Liberia         100%
Langkawi Shipping Ltd.                                Front Birch         Liberia         100%
Millcroft Maritime SA                              Front Champion         Liberia         100%
Otina Inc.                                             Front Tina         Liberia         100%
Optimal Shipping SA                                Front Symphony         Liberia         100%
Pablo Navigation SA                                   Front Chief         Liberia         100%
Patrio Shipping Ltd.                                 Front Hunter         Liberia         100%
Rakis Maritime SA                                   Front Fighter         Liberia         100%
Ryan Shipping Corporation                           Front Warrior         Liberia         100%
Saffron Rose Shipping Limited                         Front Crown         Liberia         100%
Sea Ace Corporation                                     Front Ace         Liberia         100%
Sibu Shipping Ltd.                                    Front Maple         Liberia         100%
South West Tankers Inc                                Front Sunda         Liberia         100%
Tidebrook Maritime Corporation                    Front Commander         Liberia         100%
Ultimate Shipping Ltd.                              Front Century         Liberia         100%
West Tankers Inc.                                     Front Comor         Liberia         100%

Frontline Management AS                        Management company          Norway         100%

Puerto Reinosa Shipping Co SA                         Front Lillo          Panama         100%

Aspinall Pte Ltd.                                    Front Viewer       Singapore         100%
Blizana Pte Ltd.                                      Front Rider       Singapore         100%
Bolzano Pte Ltd.                                         Mindanao       Singapore         100%
Cirebon Shipping Pte Ltd.                           Front Vanadis       Singapore         100%
Fox Maritime Pte Ltd.                                Front Sabang       Singapore         100%
Front Dua Pte Ltd.                                  Front Duchess       Singapore         100%
Front Empat Pte Ltd.                               Front Highness       Singapore         100%
Front Enam Pte Ltd.                                    Front Lord       Singapore         100%
Front Lapan Pte Ltd.                               Front Climber        Singapore         100%
Front Lima Pte Ltd.                                   Front Lady        Singapore         100%
Front Tiga Pte Ltd.                                    Front Duke       Singapore         100%
Front Tujuh Pte Ltd.                                Front Emperor       Singapore         100%
Front Sembilan Pte Ltd.                              Front Leader       Singapore         100%
Rettie Pte Ltd.                                     Front Striver       Singapore         100%
Transcorp Pte Ltd.                                   Front Guider       Singapore         100%
</TABLE>

D. PROPERTY, PLANT AND EQUIPMENT

The Company's Vessels

We operate a substantially  modern fleet of tankers and the following table sets
forth the fleet that we operate:
<PAGE>

<TABLE>
TANKER FLEET
Owned Tonnage
                                    Approximate                                  Type of
                                    -----------                                  -------
Vessel                      Built          Dwt.   Construction   Flag         Employment
------                      -----          ----   ------------   ----         ----------
<S>                          <C>        <C>        <C>           <C>    <C>
VLCCs
-----
Front Sabang                 1990       286,000    Single-hull     SG        Spot market
Front Vanadis                1990       286,000    Single-hull     SG        Spot market
Front Highness               1991       284,000    Single-hull     SG        Spot market
Front Lady                   1991       284,000    Single-hull     SG        Spot market
Front Lord                   1991       284,000    Single-hull     SG        Spot market
Front Duke                   1992       284,000    Single-hull     SG        Spot market
Front Duchess                1993       284,000    Single-hull     SG        Spot market
Front Tobago (40%)           1993       261,000    Single-hull    LIB       Tankers Pool
Front Edinburgh              1993       302,000    Double-side    LIB        Spot market
Front Ace                    1993       275,000    Single-hull    LIB        Spot market
Golden Fountain (50%)        1995       302,000    Single-hull    PAN        Spot market
Golden Stream                1995       276,000    Single-hull    PAN        Spot market
Navix Astral                 1996       276,000    Single-hull    PAN   Bareboat charter
New Vanguard                 1998       300,000    Double-hull     HK   Bareboat charter
New Vista                    1998       300,000    Double-hull     HK   Bareboat charter
Antares Voyager              1998       308,500    Double-hull     BA   Bareboat charter
Phoenix Voyager              1999       308,500    Double-hull     BA   Bareboat charter
Omalia (ex New Circassia)    1999       306,000    Double-hull    IoM   Bareboat charter
Opalia                       1999       302,000    Double-hull    IoM   Bareboat charter
Front Comanche               1999       300,000    Double-hull    FRA       Time charter
Ocana (ex Front Commerce)    1999       300,000    Double-hull    IoM   Bareboat charter
Ariake                       2001       299,000    Double-hull     BA        Spot market
Front Serenade               2002       299,000    Double-hull    LIB        Spot market
Otina (ex Hakata)            2002       296,000    Double-hull    IoM   Bareboat charter
Front Stratus                2002       299,000    Double-hull    LIB        Spot market
Front Falcon                 2002       308,000    Double-hull     BA        Spot market
Front Page                   2002       299,000    Double-hull    LIB        Spot market

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    NIS       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

Suezmaxes
---------
Front Lillo                  1991       147,000    Single-hull     MI        Spot market
Front Birch                  1991       152,000    Double-side     MI        Spot market
Front Maple                  1991       152,000    Double-side     MI        Spot market
Front Granite                1991       142,000    Single-hull    NIS        Spot market
Front Emperor                1992       147,000    Single-hull     SG        Spot market
Front Sunda                  1992       142,000    Single-hull    NIS        Spot market
Virgo Voyager                1992       150,000    Single-hull     BA   Bareboat charter
Cygnus Voyager               1993       150,000    Double-hull     BA   Bareboat charter
Altair Voyager               1993       130,000    Double-hull     BA   Bareboat charter
Front Spirit                 1993       147,000    Single-hull     MI        Spot market
Front Comor                  1993       142,000    Single-hull    NIS        Spot market
Front Pride                  1993       150,000    Double-hull    NIS        Spot market
Sirius Voyager               1994       150,000    Double-hull     BA   Bareboat charter
Front Glory                  1995       150,000    Double-hull    NIS        Spot market
Front Splendour              1995       150,000    Double-hull    NIS        Spot market
Front Ardenne                1997       153,000    Double-hull    NIS        Spot market
Front Brabant                1998       153,000    Double-hull    NIS        Spot market
Mindanao                     1998       158,000    Double-hull     SG        Spot market
Front Fighter                1998       153,000    Double-hull    NIS        Spot market
Front Hunter                 1998       153,000    Double-hull    NIS        Spot market
</TABLE>

<TABLE>
Chartered In Tonnage
<CAPTION>
                                    Approximate                                  Type of
                                    -----------                                  -------
Vessel                      Built           Dwt   Construction   Flag         Employment
------                      -----           ---   ------------   ----         ----------
<S>                          <C>        <C>        <C>           <C>    <C>
VLCCs
-----
Front Century                1998       311,000    Double-hull     BA        Spot market
Front Champion               1998       311,000    Double-hull     BA        Spot market
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
Golden Victory               1999       305,000    Double-hull    PAN        Spot market
British Pioneer              1999       307,000    Double-hull    IoM   Bareboat charter
Front Tina                   2000       298,000    Double-hull    LIB        Spot market
Front Commodore              2000       299,000    Double-hull    LIB       Time charter
British Pride                2000       307,000    Double-hull    IoM   Bareboat charter
British Progress             2000       307,000    Double-hull    IoM   Bareboat charter
British Purpose              2000       307,000    Double-hull    IoM   Bareboat charter
Front Eagle                  2002       309,000    Double-hull     BA        Spot market

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

Our chartered in fleet is contracted to us under leasing arrangements with fixed
terms of between eight and twenty four years. Lessors have options to require us
to extend 12 of these  leases by up to an  additional 5 years from expiry of the
fixed term. We have fixed price  purchase  options to buy 12 of these vessels at
certain future dates and the lessors have fixed price options to put 12 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  end-user  of the
vessel.

DRY BULK FLEET
Owned Tonnage
                            Approximate                                  Type of
                            -----------                                  -------
Vessel              Built          Dwt.   Construction   Flag         Employment
------              -----          ----   ------------   ----         ----------

Capesize
--------
Channel Alliance     1996       172,000    Single-hull    PHI       Time Charter
Channel Navigator    1997       172,000    Single-hull    PHI       Time Charter

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

Key to Flags:
BA - Bahamas, HK - Hong Kong, IoM - Isle of Man, LIB - Liberia,  NIS - Norwegian
International Ship Register,  PAN - Panama,  PHI - Philippines,  SG - Singapore,
FRA - France, MI - Marshall Islands.

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

ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS

Overview

The following  discussion  should be read in  conjunction  with Item 3 "Selected
Financial Data" and the Company's audited Consolidated  Financial Statements and
Notes thereto included herein.

The Company's  principal focus and expertise is the  transportation of crude oil
and oil products cargoes for major integrated oil companies and other customers.
The Company's  tanker fleet,  which is one of the largest and most modern in the
world,  consists of 25 wholly owned VLCCs,  two part owned VLCCs,  one option to
acquire a VLCC and 28 wholly owned Suezmax tankers, of which 8 are Suezmax OBOs.
In addition, the Company owns three dry bulk carriers. The Company also charters
in 13 modern  VLCCs and 3 modern  Suezmax  tankers on  long-term  charters.  The
Company  also has a purchase  option to acquire a further  VLCC  tanker.  A full
fleet list is provided in Item 4 "Information on the Company"

Fleet Changes

In 2001, the Company took delivery of two wholly-owned  newbuilding  double-hull
Suezmax tankers for total  delivered cost of $108.2 million,  and joint ventures
in which the Company had a 33.3 % interest  took  delivery of three  newbuilding
double-hull  VLCCs for total delivered cost of $240.7 million.  The Company also
acquired four  double-hull  VLCCs  through the exercise of purchase  options for
total delivered cost of $293.1 million. In addition the Company acquired two mid
1970s built VLCCs for $21.4 million that were  subsequently sold for proceeds of
$21.2  million  and three  contracts  for  newbuilding  double-hull  VLCCs to be
delivered in 2002 and 2003 for $53.0 million

In 2001,  the  Company  also sold two  1993-built  VLCCs for  proceeds of $104.0
million  realising  gains of $14.8 million and a 2000 built  Suezmax  tanker for
proceeds of $64.0 million realising a gain of $19.4 million

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

In 2003,  the Company  acquired two Suezmax  tankers for $6.7 million which were
previously 40% and 35% owned,  These vessels were subsequently sold for proceeds
of $8.1 million  realising gains of $1.2 million.  A further two Suezmax tankers
were  sold in 2003  for  proceeds  of  $100.3  million  realising  gains of $7.1
million.  The Company also took delivery of a newbuilding  double-hull  VLCC for
delivered  cost of $79.2 million which was  subsequently  sold for $76.0 million
realising a loss of $2.7 million and acquired the remaining 50% of a double-hull
VLCC which was already 50% owned for $9.5 million.  Through a reorganisation  of
interests in joint ventures the Company disposed of 50% interests in 2 VLCCs and
increased interests in a further 4 double-hull VLCCs from 33.3% to 50.1% through
a combination of sale,  acquisition and exchange of interest  transactions.  Our
net cash  investment  in these  transactions  was $3.3  million  and we recorded
impairment losses of $5.2 million.

In February 2004 through a further  reorganistion  of joint ventures the Company
exchanged  its 50.1%  interests in 3 double-hull  VLCCs for the remaining  49.9%
interests in 3 double-hull  VLCCs of which the Company  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.

Acquisition of Independent Tankers Corporation

In May 2004,  the  Company  exercised  its option to  acquire  all of the issued
shares of Independent Tankers Corporation.  Through this transaction the Company
acquired a fleet of six modern double-hull VLCCs and four Suezmax tankers, three
of which are double-hull. The Company consolidated the assets and liabilities of
ITC with effect from  December  31, 2003 as a result of  implementation  of FASB
Interpretation  46,  Consolidation of Variable  Interest  Entities (as described
below in "Accounting Changes").

All of ITC's  vessels are on long-tem  bareboat  charters to Chevron and BP. The
initial fixed terms of the charters range from 8 to 10 years.  After the initial
fixed term the charterers have options to extend the charters of the vessels for
further periods of between 8 to 12 years.

ITC is financed by Term and Serial  Notes.  These Notes mature  between 2004 and
2021 and are  secured on ITC's  vessels  and  long-term  charters.  Interest  is
payable on the Notes at fixed rates which range between 6.42% and 8.52%.

Spin-Off of Ship Finance International Limited and Future Strategy

In December 2003, our wholly owned subsidiary,  Ship Finance issued $580 million
of 8.5% Senior Notes.  In the first  quarter of 2004,  Ship Finance has used the
proceeds of the Notes issue,  together with a refinancing  of existing  debt, to
fund the acquisition  from us of a fleet of 47 crude oil tankers  (including one
purchase  option  for a VLCC) and we have  chartered  each of the ships back for
most of their  remaining  lives.  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.

Under the terms of a charter  ancillary  agreement,  beginning with the 11-month
period from  February  1, 2004 and for each  calendar  year after that,  we have
agreed to pay Ship Finance a profit sharing  payment equal to 20% of the charter
revenues for the applicable  period,  calculated on a TCE basis,  realised by us
from use of their  fleet in excess of average  rates of $25,575 per day for each
VLCC and $21,100 per day for each Suezmax tanker.

These  arrangements  are  described  in  detail  in Item 4  "Information  on the
Company"

On May 28, 2004, we announced the  distribution of 25 % of Ship Finance's common
shares to our common shareholders in a partial spin off.

Following the spin off of 25 % of Ship Finance, our operations will be comprised
of four main components as follows:

     o    Our charter and management  agreements  with Ship Finance  including a
          $250  million  cash  deposit we are  required to reserve to secure the
          charters.
     o    The ownership of 75 % of Ship Finance.
     o    The ownership of ITC.
     o    The  ownership of our  remaining  vessels  which include our three dry
          bulk  carriers,  nine  VLCCs and three  Suezmaxes  chartered  in under
          long-term  leases,  two joint venture owned VLCCs and one wholly-owned
          non-recourse financed VLCC.

It is the Frontline Board's  intention that during 2004,  Frontline shall divest
all its shares in Ship  Finance  either  through a straight  sale,  a  corporate
transaction or through further distributions to Frontline's shareholders.

Our strategy is to become,  over time, a world leading  chartering  company with
flexibility  to adjust our exposure to the tanker  market  depending on cyclical
conditions.  In  addition,  we will,  when the  financing  arrangements  permit,
consider divesting the "non Ship Finance" vessels. This may be done through sale
and leaseback or straight sales of the vessels.

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

Market Overview

2003  was a  good  year  for  the  tanker  market  as  freight  rates  increased
dramatically  compared to 2002,  mainly due to limited  fleet  growth and strong
growth in the demand for oil, and implicitly for oil tankers.

According  to the  International  Energy  Agency,  world oil demand  grew by 1.7
million  barrels per day (mb/d)  compared to 2002 with total world demand rising
to 78.7 mb/d. The main driver of this growth was strong economic growth in China
resulting in record import levels.

The world supply of oil  increased by 2.8 mb/d  compared with 2002 to a total of
79.4 mb/d in 2003.  Repercussions of the oil workers' strike in Venezuela led to
low  inventories  in the United States and the  necessary oil to replenish  them
came to a large  extent from the Middle East.  At the moment  Venezuela is still
producing  some 0.5 mb/d less than  before the strike.  This  resulted in strong
demand for VLCCs,  and a very healthy  market for most of the year. In addition,
strong  growth  in the  demand  for oil in  China  gave  the  market  additional
strength.  The war in Iraq  reduced  output from that  country to 0.3-0.4  mb/d.
However, during the fall season output continued to climb and averaged about 2.0
mb/d in the 4th quarter of 2003.

The size of the world tanker fleet  increased by 2.5% in 2003.  The VLCC segment
of the market was unchanged,  but Suezmax and smaller tankers increased by 4.5%.
A total of 19.9 million  deadweight  tons (mill dwt) of tankers were scrapped in
2003, including 27 VLCC's and 13 Suezmaxes. A total of 49.3 mill dwt , including
51 VLCC's and 55 Suezmaxes, were added to orderbooks in the same period.

The total  orderbook for tankers stood at 75.3 mill dwt at the end of 2003. This
represents 24.6% of the current tanker fleet,  compared to about 19% at the same
time in 2002.

The outlook for the tanker market for the remainder of 2004 is positive since it
seems that continued growth in oil consumption will ensure a positive demand for
tankers.  The freight forward market for the second half of 2004, as of June 15,
2004, stands at $75,000 per day for VLCC tankers.

Effective  December 31, 2003, we have presented our income statement using total
operating  revenues and total  operating  expenses.  The  Company's  vessels are
operated  under  time  charters,   bareboat   charters,   voyage  charters  pool
arrangements  and COAs. Under a time charter,  the charterer pays  substantially
all of the vessel voyage  costs.  Under a bareboat  charter the  charterer  pays
substantially  all of the vessel  voyage  and  operating  costs.  Under a voyage
charter,  the vessel owner pays such costs.  Vessel  voyage costs are  primarily
fuel and port charges.  Accordingly,  charter income from a voyage charter would
be greater than that from an equally  profitable time charter to take account of
the owner's  payment of vessel voyage costs. In order to compare vessels trading
under different types of charters,  it is standard  industry practice to measure
the  revenue  performance  of a vessel in terms of average  daily  time  charter
equivalent  earnings,  or TCEs.  For  voyage  charters,  this is  calculated  by
dividing  net  voyage  revenues  by the  number of days on  charter.  Days spent
off-hire are excluded from this  calculation.  Net voyage  revenues,  a non-GAAP
measure,  provides more meaningful  information to us than voyage revenues,  the
most directly comparable GAAP measure.  Net voyage revenues are also widely used
by  investors  and  analysts  in the  tanker  shipping  industry  for  comparing
financial performance between companies and to industry averages.  The following
table reconciles our net voyage revenues to voyage revenues.

<TABLE>
<CAPTION>
                                       2003          2002          2001          2000          1999
<S>                               <C>             <C>           <C>           <C>           <C>
Voyage revenues                   1,089,583       489,286       639,807       656,917       339,996
Voyage expenses and commission     (323,598)     (135,074)      (88,292)      (97,316)     (116,662)
                                 ------------------------------------------------------------------
Net voyage revenues                 765,985       354,212       551,515       559,601       223,334
                                 ==================================================================
</TABLE>

The following table sets out the daily TCEs earned by the Company's tanker fleet
over the last five years:

                                2003       2002       2001       2000       1999
(in $ per day)
VLCC                          42,300     22,500     40,800     46,300     20,000
Suezmax                       33,900     18,400     30,700     35,500     16,700
Suezmax OBO                   31,900     17,700     28,900     33,300     16,800

The  Company's  fleet of dry bulk  carriers are all fixed on medium to long-term
bareboat or time charters.  These arrangements  provide sufficient cash flows to
cover the debt service on this fleet.

Accounting Changes

In December 2003 the Company  implemented the provisions of FASB  Interpretation
46,  Consolidation  of Variable  Interest  Entities  ("FIN  46").  The effect of
implementation of FIN 46 by the Company was to require  consolidation of certain
entities in which the Company held interests but which had not  previously  been
consolidated. This resulted in the Company recording an increase in total assets
of $918.3  million,  an increase in total  liabilities of $952.1 million and the
cumulative effect of a change in accounting principle of $33.8 million effective
December 31, 2003 as discussed below.

The  Company  owns 50% of the  issued  shares  of and has made  loans to  Golden
Fountain Corporation, owner of a VLCC. Prior to the adoption of FIN 46 Frontline
accounted  for its  interest  in Golden  Fountain  Corporation  using the equity
method.  We have  determined  that  Golden  Fountain  Corporation  is a variable
interest  entity and that Frontline is the primary  beneficiary.  Accordingly we
have  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 is to increase total assets by $7.8 million,
increase total  liabilities by $16.4 million and to record the cumulative effect
of a change in accounting principle of $8.5 million.

On July 1, 2003, the Company's  subsidiary  Golden Ocean Group Ltd,  purchased a
call  option to acquire  all of the shares of  Independent  Tankers  Corporation
("ITC") from Hemen Holding Ltd, a related party,  for a total  consideration  of
$4.0 million  plus 4 % interest per year.  ITC operates a total of six VLCCs and
four Suezmax tankers, which are on long-term charters to BP and Chevron.  Golden
Ocean paid $10.0 million for the option, which expires on July 1, 2010. Prior to
the adoption of FIN 46 Frontline  did not  consolidate  ITC. We have  determined
that ITC is a  variable  interest  entity  and  that  Frontline  is the  primary
beneficiary.  Accordingly we have consolidated the assets and liabilities of ITC
effective  December 31, 2003. The effect of  consolidation of ITC as of December
31,  2003  is to  increase  total  assets  by  $910.5  million,  increase  total
liabilities by $935.7 million and to record the cumulative effect of a change in
accounting principle of $25.2 million.

The company  leases twelve vessels from special  purpose  lessor  entities which
were  established  and are  owned  by  independent  third  parties  who  provide
financing  through debt and equity  participation.  Prior to the adoption of FIN
46R these special purpose entities were not  consolidated by Frontline.  Four of
these leases are accounted for as operating leases and eight of these leases are
accounted for as capital leases. We have determined that due to the existence of
certain  put and call  options  over the  leased  vessels,  these  entities  are
variable interest  entities.  The determination of the primary  beneficiary of a
variable interest entity requires  knowledge of the participations in the equity
of that entity by individual and related equity  holders.  Our lease  agreements
with the leasing  entities  do not give us any right to obtain this  information
and after  exhaustive  efforts 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, 2003, the original cost to the lessor of
the assets under such arrangements was approximately $856.5 million. At December
31, 2003, the company's residual value guarantees  associated with these leases,
which represent the maximum exposure to loss, are $132.3 million.

The Company has both an obligation and an option to purchase the VLCC Oscilla on
expiry of a five-year time charter,  which  commenced in March 2000.  Oscilla is
owned and operated by an unrelated special purpose entity. Prior to the adoption
of FIN 46R this special  purpose entity was not  consolidated  by Frontline.  We
have determined that the entity that owns Oscilla is a variable  interest entity
and that  Frontline  is the  primary  beneficiary.  At the  current  date  after
exhaustive  efforts  we have been  unable to obtain the  accounting  information
necessary to be able to consolidate the entity that owns Oscilla. If the Company
has  exercised  its option at December 31, 2003,  the cost to the Company of the
Oscilla would have been approximately  $42.3 million and the maximum exposure to
loss was $17.4 million.

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

In 2001, the Company  changed its accounting  policy for  drydockings.  Prior to
2001, provisions for future drydockings were accrued and charged to expense on a
pro-rata basis over the period to the next scheduled drydockings.  Since January
1, 2001 the  Company has  recognised  the cost of a  drydocking  at the time the
drydocking takes place, that is it applies the "expense as incurred" method. The
expense as incurred  method is  considered  by  management to be a more reliable
method  of  recognising  drydocking  costs  as  it  eliminates  the  uncertainty
associated  with  estimating  the cost and  timing  of future  drydockings.  The
cumulative effect of this change in accounting  principle is shown separately in
the  consolidated  statements of operations for the year ended December 31, 2001
and  resulted  in a credit to income of $31.5  million in 2001.  The  cumulative
effect  of this  change as of  January  1,  2001 on the  Company's  consolidated
balance sheet was to reduce total  liabilities  by $32.3  million.  Assuming the
"expense  as  incurred"  method had been  applied  retroactively,  the pro forma
income before cumulative  effect of change in accounting  principle for 2000 and
1999 would have been  increased by $6.3 million and $7.0  million,  or $0.09 and
$0.14 per basic and diluted share, respectively.

In June 2001,  the FASB  approved SFAS No. 142,  "Goodwill and Other  Intangible
Assets" ("SFAS 142"). SFAS 142 applies to all acquired intangible assets whether
acquired  singly,  as part of a group,  or in a business  combination.  SFAS 142
superseded APB Opinion No. 17, "Intangible Assets".  This statement is effective
for fiscal years  beginning  after  December 15,  2001.  SFAS 142 requires  that
goodwill and indefinite lived intangible  assets will no longer be amortized but
will be reviewed annually for impairment.  Intangible assets that are not deemed
to have an  indefinite  life will  continue to be  amortised  over their  useful
lives.  At December  31,  2001,  the Company had  unamortised  goodwill of $14.1
million.  The Company adopted SFAS 142 effective January 1, 2002 and recorded an
impairment  charge of $14.1  million for the  unamortised  goodwill on that date
that is shown  separately  in the  consolidated  statement  of  operations  as a
cumulative effect of change in accounting  principle.  The valuation of the fair
value of the reporting unit used to assess the  recoverability of goodwill was a
combination of independent third party valuations and the quoted market price.

As of January 1, 2001,  the Company  adopted  Statement of Financial  Accounting
Standard ("SFAS") No. 133,  "Accounting for Derivatives and Hedging  Activities"
("SFAS 133").  Certain hedge  relationships met the hedge criteria prior to SFAS
133,  but do not meet the  criteria  for hedge  accounting  under SFAS 133.  The
Company  adopted  SFAS 133 in the first  quarter  of  fiscal  year 2001 and upon
initial adoption  recognised the fair value of its derivatives as assets of $0.4
million and  liabilities of $0.6 million.  A gain of $0.3 million was recognised
in income and a charge of $0.5 million made to other  comprehensive  income.  On
January 1, 2002, the Company discontinued hedge accounting for two interest rate
swaps previously  accounted for as cash flow hedges.  This resulted in a balance
of $4.1 million being frozen in  accumulated  other  comprehensive  income as at
that date and this will be reclassified to the income statement over the life of
the underlying instrument.

Critical Accounting Policies and Estimates

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

Revenue Recognition

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

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

Vessels and Depreciation

The cost of the Company's  vessels is depreciated on a straight-line  basis over
the vessels'  remaining economic useful lives.  Management  estimates the useful
life of the Company's  vessels to be 25 years.  This is a common life expectancy
applied  in the  shipping  industry.  With  effect  from  April  2001,  the  IMO
implemented new regulations  that result 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 2017,  whichever  comes first.  As a result,  the
estimated  useful  lives of six of the  Company's  vessels  were  reduced in the
fourth quarter of 2001. In December 2003,  the Marine  Environmental  Protection
Committee  of  the  IMO  adopted  a  proposed  amendment  to  the  International
Convention  for the  Prevention of Pollution  from Ships to accelerate the phase
out of single hull  tankers  from 2015 to 2010 unless the  relevant  flag states
extend the date to 2015. This proposed  amendment will take effect in April 2005
unless objected to by a sufficient  number of states.  As a result,  the Company
has  re-evaluated  the  estimated  useful  lives of its single hull  vessels and
determined this to be the earlier of 25 years or the vessel's  anniversary  date
in 2015, resulting in the reduction of the estimated useful lives of fourteen of
the Company's vessels 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.  The  Company  will  continue  to monitor  the
situation and revise the estimated  useful lives of its non-double  hull vessels
as appropriate when new regulations are implemented.

The vessels held and used by the Company 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,  the Company  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  the  Company  refers  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.  FASB  Interpretation  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,  the  Company  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.

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

Leases

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

Factors  Affecting Our  Historical  Results and Our Future  Results Prior to Our
Spin-Off of Ship Finance

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

     o    the earnings of our vessels in the charter market;

     o    vessel expenses;

     o    administrative expenses;

     o    depreciation;

     o    interest expense; and

     o    foreign exchange.

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

A bareboat  charter is a contract for the use of a vessel for a specified period
of time where the charterer  pays  substantially  all of the vessel voyage costs
and operating  costs. A time charter is a contract for the use of a vessel for a
specific period of time during which the charterer pays substantially all of the
vessel  voyage costs but the vessel  owner pays the  operating  costs.  A voyage
charter is a contract for the use of a vessel for a specific voyage in which the
vessel owner pays  substantially  all of the vessel  voyage costs and  operating
costs.  Revenues and voyage expenses of vessels operating in pool  arrangements,
are pooled and net operating  revenues,  calculated on a time charter equivalent
basis, are allocated to the pool participants  according to an agreed formula. A
contract of  affreightment is a form of voyage charter in which the owner agrees
to carry a specific type and quantity of cargo in two or more  shipments over an
agreed period of time.  Accordingly,  charter income from a voyage charter would
be greater than that from an equally  profitable time charter to take account of
the owner's  payment of vessel voyage costs. In order to compare vessels trading
under different types of charters,  it is standard  industry practice to measure
the  revenue  performance  of a vessel in terms of average  daily  time  charter
equivalent  earnings,  or TCEs.  For  voyage  charters,  this is  calculated  by
dividing  net  voyage  revenues  by the  number of days on  charter.  Days spent
off-hire are excluded from this calculation.

As at December  31,  2003,  2002 and 2001,  51, 53 and 29  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.

The  Company's  fleet of dry bulk  carriers are all fixed on medium to long-term
bareboat or time charters.  These arrangements  provide sufficient cash flows to
cover the debt service on this fleet.

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

Administrative  expenses are composed of general  corporate  overhead  expenses,
including personnel costs, property costs, legal and professional fees and other
general  administrative  expenses.  Personnel costs include, among other things,
salaries,  pension costs, fringe benefits, travel costs and health insurance. In
2002 and  2001,  administrative  expenses  also  included  administrative  costs
associated  with  Frontline's  participation  in Tankers  International  LLC, or
Tankers,  a pooling  arrangement  for the  commercial  operation of the VLCCs of
Frontline  and five other VLCC  operators,  entered  into in  December  of 1999.
Frontline  withdrew  from the pool in July of 2002 and these costs ceased in the
second half of 2002.

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

Interest  expense relates to vessel specific debt facilities and corporate debt.
Interest expense depends on our overall  borrowing levels and may  significantly
increase when we acquire  vessels or on the delivery of  newbuildings.  Interest
incurred during the  construction of a newbuilding is capitalized in the cost of
the  newbuilding.  Interest  expense may also change  with  prevailing  interest
rates,  although  the effect of these  changes may be reduced by  interest  rate
swaps or other derivative instruments.  As at December 31, 2003, 48% of our debt
was floating rate debt. We may enter into interest rate swap  arrangements if we
believe it is  advantageous  to do so. As at December 31,  2003,  certain of our
subsidiaries  had Yen  denominated  debt and charters  denominated in Yen, which
expose us to exchange  rate risk.  As at December 31, 2003 and 2002,  we had Yen
denominated   debt  in   subsidiaries  of  (Y)9.6  billion  and  (Y)5.1  billion
respectively.

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

Factors Affecting Our Future Results After Our Spin Off of Ship Finance

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

     o    the earnings of our vessels;

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

     o    charter payments we make to Ship Finance;

     o    profit sharing payments we make to Ship Finance;

     o    vessel operating costs of vessels we manage for Ship Finance;

     o    administrative expenses and;

     o    depreciation

Initially  after our spin-off of Ship Finance,  our future  revenues will derive
primarily from our operation of the 47 vessels that we charter from Ship Finance
under long term  charters,  described  above  under  "Spin-Off  of Ship  Finance
International  Limited and Future  Strategy."  In addition,  beginning  with the
final 11-month period in 2004 and for each calendar year thereafter, we will pay
Ship  Finance  profit  sharing  payment if our  earnings  from use of vessels we
charter from Ship Finance exceed certain amounts.

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

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

The accounting impact of our spin-off of Ship Finance will depend in part on the
method  through  which it is effected,  that is whether the spin-off is achieved
through a straight sale, a corporate  transaction  or through a distribution  to
Frontline's shareholders.  Given the level of contractual arrangements that will
exist  between  Frontline  and Ship  Finance,  management  are in the process of
considering  the  accounting  treatment  of a  spin-off  transaction,  including
whether the financial results and position of Ship Finance can be deconsolidated
from Frontline.

Inflation

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

Results of Operations

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

Total operating revenues increased by 113 % to $1,173.8 million in 2003 compared
with $551.6  million in 2002. Net voyage  revenues  increased by 116 % to $766.0
million in 2003 compared with $354.2  million in 2002.  Voyage  charter  revenue
represents  93 % of our total  operating  revenues in 2003 and as a result,  the
Company's  revenues are  significantly  affected by the  prevailing  spot market
rates in which the vessels operate. Traditionally,  spot market rates are highly
volatile and are determined by market forces such as worldwide  demand,  changes
in the  production  of crude oil,  changes in seaborne and other  transportation
patterns  including  changes in the  distances  that  cargoes  are  transported,
environmental  concerns and regulations  and  competition  from other sources of
energy.  As  discussed  in the market  overview  above,  the 2003 tanker  market
experienced  significantly stronger charter rates. The annual average daily TCEs
earned by the Company's  VLCCs,  Suezmax  tankers,  and Suezmax OBO carriers for
2003 year were $42,300,  $33,900 and $31,900 respectively compared with $22,500,
$18,400 and $17,700, respectively in 2002.

Ship operating expenses, which include drydocking costs, increased 8 % to $117.6
million from $109.3 million in 2002. This increase  reflects the increase in the
size of the fleet due to fleet additions in 2002. Average daily operating costs,
including  drydockings,  of the Company's VLCCs, Suezmax tankers and Suezmax OBO
carriers  were  $6,300,  $5,500 and $5,500  respectively  compared  with $6,300,
$5,600 and $5,700  respectively  in 2002. In 2003,  11 of our vessels  drydocked
compared with 15 in 2002.

Charterhire  expenses  increased to $81.0  million in 2003 from $60.6 million in
2002,  principally  due to the inclusion a full year's  expense in 2003 for four
vessels on charter  from BP Shipping  Ltd.,  the  shipping arm of BP Plc - these
charters commenced in July 2002 and were terminated in December 2003 and January
2004.

Administrative  expenses  increased  40% to $17.9  million  in 2003  from  $12.8
million in 2002.  Administrative  expenses are reported  net of  management  fee
income  of $3.8  million  and $3.6  million  for 2003  and  2002,  respectively.
Included in fee income was $0.6 million and $0.8 million  received  from related
parties for 2003 and 2002 respectively.  The increase in administrative expenses
is  primarily  as a result of the Company  recording  a non-cash  charge of $5.5
million in connection with employee stock options  compared with $0.5 million in
2002.

Depreciation and amortisation increased 7% to $146.9 million in 2003 from $136.9
million  in  2002.  The  increase  relates  to the  inclusion  of a full  year's
depreciation on five new vessels acquired in 2002.

Net interest  expense (being interest  expense net of interest  income) for 2003
was $65.9  million,  an increase  of 13%  compared  with $58.3  million in 2002.
Interest income  decreased to $9.1m in 2003 from $13.0 million in 2002 mainly as
a result of a decrease in interest  income from loans to  associated  companies.
Interest expense  increased to $75.1 million from $71.3 million in 2002 with the
increase  primarily relating to an increase in capital lease interest expense as
a result of the sale and  leaseback  of four  vessels in the year.  Additionally
interest  costs of $2.1  million  were  incurred due to the issuance in December
2003 of $580 million 8.5% Senior Notes by Ship Finance International  Limited, a
wholly-owned subsidiary of the Company.

The Company's share in results of associated  companies increased to earnings of
$33.5  million from a loss of $10.7  million in 2002.  This increase is due to a
combination  of the strength of tanker  earnings in 2003  compared with 2002 and
foreign  currency  exchange losses  recognised in associated  companies with Yen
denominated  long-term debt. In 2003, the Company recorded an impairment  charge
of $5.2  million  related  to the  other-than-temporary  decline in value of its
investments in Golden Lagoon Corporation and Ichiban Transport Corporation. This
impairment  charge was triggered by signing  agreements on June 25, 2003 for the
sale of our  investments  for  proceeds  which  were less than the book value of
those investments.

The Company incurred  foreign currency  exchange losses of $17.1 million in 2003
compared with losses of $10.9 million in 2002, as a result of the  strengthening
of the Yen against  the US Dollar  from 118.54 at December  31, 2002 to 107.1 at
December  31, 2003.  At December 31, 2003,  the Company had Yen debt of Yen 16.8
billion, compared with Yen 13.1 billion at December 31, 2002.

Other  financial items changed from an expense of $8.6 million in 2002 to income
of $0.3 million in 2003. In both years, other financial items consists primarily
of market value adjustments on derivative  instruments  including  interest rate
swaps and freight future agreements. In September 2001 the Company established a
facility for a Stock  Indexed  Total  Return Swap  Programme or Equity Swap Line
with the Bank of Nova Scotia,  or BNS, whereby the latter acquired shares in the
Company,  and the Company  carried the risk of  fluctuations in the share price.
The Company  terminated  this Equity  Swap Line on June 17,  2003  resulting  in
3,070,000  shares being  repurchased  at an average cost of $8.98 per share at a
time when the market  share  price was $16.31 As a result the  Company  recorded
income of $22 million in 2003  compared to a charge of $4.0 million in 2002.  We
incurred losses on freight future  contracts  amounting to $33.0 million in 2003
($0.5  million in 2002).  This  increase  substantially  relates to  speculative
freight forward  agreements based on the Baltic Capesize Index. In addition,  in
2003, the Company  recorded income of $6.1 million  relating to the market value
adjustment  on the Company's  interest  rate swaps  compared to a charge of $3.0
million in 2002.

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

Year ended December 31, 2002 compared with the year ended December 31, 2001

Total operating  revenues decreased by 23 per cent to $551.1 million from $716.5
million. Total net voyage revenues decreased by 36 per cent to $354.2 million in
2002 compared with $551.5 million in 2001. In 2002, the Company took delivery of
five wholly-owned  double-hulled  VLCCs and two double-hulled VLCCs in which the
Company has a 33.33 per cent  interest.  In addition,  the Company sold five dry
bulk  carriers  and sold its 50 per cent  interest in two joint  ventures,  each
owning a dry bulk  carrier.  However,  the  decrease in net  operating  revenues
primarily  reflects the significantly  weaker tanker market experienced in 2002.
The annual average daily TCEs earned by the Company's  VLCCs,  Suezmax  tankers,
and Suezmax  OBO  carriers  for 2002 year were  $22,500,  $18,400  and  $17,700,
respectively, compared with $40,800, $30,700 and $28,900, respectively in 2001.

Ship operating expenses,  which include drydocking costs, decreased six per cent
to $109.3  million from $116.3  million in 2001.  This decrease is a result of a
cost saving  exercise in 2002.  The average  daily  operating  costs,  including
drydockings,  of the Company's  VLCCs,  Suezmax tankers and Suezmax OBO carriers
was $6,300,  $5,600 and $5,700  respectively  compared  with $6,300,  $5,700 and
$9,000 in 2001. In 2001, 12 of our vessels drydocked compared with 15 in 2002.

Charterhire  expenses  increased to $60.6  million in 2002 from $41.9 million in
2001,  principally  due to the  inclusion in the second half of the year of four
additional  vessels on short-term  charters from BP Shipping  Ltd., the shipping
arm of BP Plc.

Administrative  expenses  decreased  two per cent to $12.8  million in 2002 from
$13.0 million in 2001. Administrative expenses are reported net of fee income of
$3.6 million and $3.2 million for 2002 and 2001,  respectively.  Included in fee
income was $0.8 million and $0.5 million  received from related parties for 2002
and 2001, respectively.  In 2001, the Company recorded a non-cash charge of $1.2
million in connection  with employee  stock  options.  In 2002,  this charge was
reduced to $0.5 million. Offsetting this reduction were increased administrative
expenses due to an increase in the number of employees.

Depreciation and amortisation  increased 17 per cent from $117.2 million in 2001
to $136.9 million in 2002. The increase  relates to the  acquisition of five new
vessels in 2002 and the impact for a full year of the  reduced  expected  useful
life  for six of the  Company's  vessels  following  the  implementation  of IMO
regulations in 2001.

Net  interest  expense  for 2002 was $58.3  million,  a decrease  of 24 per cent
compared  with $77.0  million in 2001.  Interest  income was  unchanged at $13.0
million for both 2001and 2002.  Interest expense decreased from $90.0 million in
2001 to $71.3  million in 2002.  At December  31, 2002 the Company had  $1,424.9
million of floating rate debt and the decrease in the interest  expense reflects
the benefit of lower interest rates throughout 2002.

The share in result of  associated  companies  decreased  from earnings of $22.3
million in 2001 to a loss of $10.7  million in 2002.  Certain of the  associated
companies in which the Company has investments,  have Yen denominated  long-term
debt.  In 2002 the loss is due to a  combination  of lower  revenues and the Yen
strengthened  against the U.S.  Dollar  with the  resulting  unrealised  foreign
exchange loss included within the share in results of associated companies.

The Company incurred a foreign  currency  exchange loss of $10.9 million in 2002
compared with a gain of $15.5 million in 2001, as a result of the  strengthening
of the Yen against  the US Dollar from 131.14 at December  31, 2001 to 118.54 at
December 31, 2002. At December 31, 2002, the Company has Yen debt (including Yen
denominated capital leases) of Yen 13.1 billion,  compared with Yen 25.7 billion
at December 31, 2001.

The charge for other financial items increased from $5.7 million in 2001 to $8.6
million in 2002. In both years,  other  financial  items  consists  primarily of
market value adjustment on derivatives following the adoption of SFAS No. 133 on
January 1, 2001.  In  September  2001 the  Company  established  a twelve  month
facility for a Stock  Indexed  Total  Return Swap  Programme or Equity Swap Line
with the Bank of Nova Scotia,  or BNS, whereby the latter acquires shares in the
Company,  and the Company carries the risk of fluctuations in the share price of
those acquired  shares.  In 2001 the mark to market valuation of the Equity Swap
Line resulted in a credit to income of $4.4 million. This was offset by a charge
of $9.8  million in  connection  with the market value  adjustments  on interest
rates swaps. In 2002 the Company  incurred a $4.0 million charge relating to the
market value  adjustment  on the  Company's  Equity Swap Line and a $3.0 million
charge relating to the market value adjustments for interest rate swaps.

Net  income  from  continuing  operations  before  income  taxes and  before the
cumulative  effect of change in  accounting  principle  was $7.2 million in 2002
compared with $330.6 million in 2001. In 2002, the Company sold a portion of its
dry bulk  operations and these  disposals have been recorded as a charge of $1.9
million for discontinued operations.

The  Company  adopted  FAS 142  effective  January  1,  2002 and  recognised  an
impairment  loss on goodwill of $14.1  million that is shown  separately  in the
consolidated  statement  of  operations  as a  cumulative  effect  of  change in
accounting principle. Net income for 2002 before the cumulative effect of change
in accounting principle was $5.2 million and earnings per share were $0.07.

Liquidity and Capital Resources

Liquidity:

The  Company  operates  in a capital  intensive  industry  and has  historically
financed  its  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.

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

Short-term  liquidity  requirements of the Company 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, 2003 we estimated  cash  breakeven  average  daily TCE rates of
$15,900 for our Suezmax  tankers and $21,400 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.

Long-term  liquidity  requirements  of the  Company  include  funding the equity
portion of  investments in new or  replacement  vessels,  repayment of long-term
debt balances  including our $580 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. 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,  2003,  2002  and  2001,  the  Company  had  cash  and cash
equivalents of $124.2 million,  $92.1 million and $178.2 million,  respectively.
As of December 31, 2003, 2002 and 2001, the Company had restricted cash balances
of $891.9 million, $8.2 million and $11.1 million  respectively.  Our restricted
cash balances  contribute  to our total short and medium term  liquidity as they
are used to fund  payment  of  certain  loans and  lease  payments  which  would
otherwise be paid out of our cash  balances.  The large  increase in  restricted
cash  balances as at December 31, 2003 is due to two factors.  A cash deposit of
$565.5  million,  representing  net proceeds from our offering of $580.0 million
8.5% Senior Notes due 2013, was retained by the Trustee pending our satisfaction
of certain  covenants.  We satisfied those covenants during the first quarter of
2004 and the cash  deposit was  released to us. We  consolidated  the assets and
liabilities of Independent Tankers Corporation ("ITC") with effect from December
31, 2003. ITC's assets included $323.8 million of restricted cash deposits.  Use
of these deposits is restricted to lease payments for 4 chartered in VLCCs.

In the first quarter of 2004 we established a new  restricted  deposit of $250.0
million.  We are  required  to  maintain  this  minimum  deposit  as part of our
commitment to secure payment of lease  obligations  to Ship Finance.  Use of the
deposit is  restricted  to making lease  payments to Ship Finance  under certain
circumstances  which may arise if our earnings from use of Ship Finance's  fleet
are  lower  than the  charter  rates we have  agreed  to pay for Ship  Finance's
vessels.

Borrowing activities:

In December 2003, our wholly-owned subsidiary Ship Finance issued $580.0 million
principal  amount of 8.5% Senior Notes due 2013. Our  newly-acquired  subsidiary
ITC had $604.7 million  outstanding Note liabilities at December 31, 2003. ITC's
Notes  mature  between  2004 and 2021 and incur fixed rates of interest  between
6.42% and  8.52%.  Our  ability to issue  further  Notes in future  will  depend
substantially on the  availability and pricing of capital for shipping  industry
projects.

In January and February 2004 our wholly-owned subsidiary Ship Finance refinanced
substantially  all  of  its  secured  bank  debt  with  a new  $1,058.0  million
syndicated  senior secured credit  facility.  This facility bears interest Libor
plus 1.25% and is repayable  between 2004 and 2010 with a final bullet of $499.7
million payable on maturity.  In common with other secured loans,  this facility
contains a minimum value  covenant  which  requires that the aggregate  value of
Ship Finance's vessels exceed 140% of the outstanding amount of the facility.

Frontline does not guarantee any of Ship Finance's debt facilities.

Covenants  contained in our secured loan  agreements may restrict our ability to
obtain new secured  facilities in future.  We were in  compliance  with all loan
covenants at December 31, 2003.

Acquisitions and Disposals:

In the year ended  December 31, 2003 we took delivery of a VLCC. We paid a total
amount of $66.6 million in 2003 for this vessel which was partly financed with a
new loan of $47.3 million.

We reorganised our joint venture  interests  during 2003 by disposing of two 50%
interests  in VLCCs and  increasing  our  interests  in four VLCCs from 33.3% to
50.1%.  Our total  investment  in joint  ventures was $91.6 million in the year,
partly offset by dividends and sale proceeds of $18.9 million.

A  further  reorganistion  occurred  in the first  quarter  of 2004  whereby  we
exchanged  interests with our joint venture partner.  As a result we disposed of
our 50.1% interests in 3 VLCCs and increased our interests in 3 VLCCs from 50.1%
to 100%. We received net cash proceds of $2.3 million in this exchange.

In the year ended  December  31, 2003 we sold 3 VLCCs and 6 Suezmax  tankers for
aggregate  cash  proceeds of $427.3  million plus 2 million  common share of OMI
Corporation  which  had a value of $7.08  per  share at the time of sale.  These
sales include 2 Suezmax tankers and 2 VLCCs which were subsequently  leased back
by the Company on long-term  charters.  We used $234.6 million of these proceeds
to retire debt secured on the vessels,  thereby  increasing  total  liquidity by
$192.7 million. We subsequently sold all of the OMI shares for cash, realising a
profit of $0.6 million.

Equity:

In June 2003, the company  exercised it call option on Frontline  shares held by
the Bank of Nova Scotia  under an Equity Swap Line  facility.  This  transaction
involved the Company acquiring  3,070,000 shares at a cost of $8.97 per share at
a time  when the  market  price per share  was  $16.31 As a result  the  Company
recorded a gain of $22.5 million. These shares were immediately cancelled.

During 2003 the Company  received  $2.9  million  proceeds  from the issuance of
shares in connection  with the exercise of employee share  options.  At December
31, 2003 there were 295,436 unexercised employee stock options. These all became
exercisable by June 2004 and were  exercised.  The Company's Board currently has
no plan to issue further employee stock options.

Derivative Activities:

The  Company  uses  financial  instruments  to reduce the risk  associated  with
fluctuations  in interest  rates.  The Company has a portfolio of interest  rate
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.  As at December 31, 2003 the
Company's interest rate swap arrangements effectively fix the Company's interest
rate exposure on $140.5 million of floating rate debt.  These interest rate swap
agreements expire between January 2006 and August 2008.

In connection  with its new $1,058.0  million  syndicated  senior secured credit
facility,  Ship  Finance  entered  into new  5-year  interest  rate swaps with a
combined  principal amount of $500.0 million in the first quarter of 2004. These
swaps are at rates between 3.3% and 3.5%.

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

Tabular disclosure of contractual obligations:

At December 31 2003, the Company 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 $
$580 million 8.5% notes (1)                     --             --            --           580,000     580,000
Term notes (7.84% to 8.52%) (2)                3,355         16,068        28,989         435,688     484,100
Serial notes (6.42% to 7.62%) (2)             34,450         55,370        24,500           6,300     120,620
Other long-term debt                         153,326        461,750       230,778         251,843   1,097,697
Operating lease obligations                   33,210         67,585        67,814          63,325     231,934
Capital lease obligations                     80,260        161,236       165,014         813,988   1,220,498

                                    -------------------------------------------------------------------------
Total contractual cash obligations           304,601        762,009       517,095       2,151,144   3,734,849
                                    -------------------------------------------------------------------------
</TABLE>

(1)  In December,  2003,  Ship  Finance  International  Limited,  a wholly owned
     subsidiary of Frontline  Ltd.,  issued $580 million 8.5% senior notes which
     mature in 2013.

(2)  These are term and serial notes  included as a result of the  consolidation
     of ITC at December 31, 2003.  The term notes mature  between 2006 and 2021,
     while the serial notes have maturity dates between 2004 and 2010.

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

Additionally,  the Company's newly acquired  subsidiary ITC leases 4 VLCCs on 24
year  charters  which began on  delivery of the vessels in 1999 and 2000.  These
leases  are  classified  as  capital  leases  and  the  liabilities   have  been
consolidated with effect from December 31, 2003.

Off balance sheet financing:

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 disclosed
above in "Tabular disclosure of contractual obligations"

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

At December  31, 2003 joint  ventures  which the Company  accounts for using the
equity  method had secured bank debt  totalling  $87.2  million.  Frontline  was
guarantor to $37.7 million of this debt.
<PAGE>

ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES

A. DIRECTORS AND SENIOR MANAGEMENT

Information concerning each director and executive officer of the Company is set
forth below.

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

John Fredriksen     60     Chairman, Chief Executive Officer, President and
                           Director
Tor Olav Tr0im      41     Vice-President and Director
Kate Blankenship    39     Chief Accounting Officer, Company Secretary and
                           Director
Tom E. Jebsen       46     Chief Financial Officer of Frontline Management
Oscar Spieler       43     Chief Executive Officer of Frontline Management

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

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  eight  years  as a  director  of  Seatankers
Management Co. Ltd. ("Seatankers"), a ship operating company and an affiliate of
the Company's principal  shareholder.  Mr. Fredriksen  indirectly controls Hemen
Holding Ltd, a Cyprus company who is our principal  shareholder.  Mr. Fredriksen
is a director of and indirectly  controls Golar LNG Limited,  a Bermuda  company
listed on the Oslo Stock Exchange and the Nasdaq National Market.

Tor Olav Tr0im 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. Tr0im 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. Tr0im also serves as a consultant to Seatankers and
since May 2000, has been a director and  Vice-Chairman of Knightsbridge  Tankers
Ltd, a Bermuda company listed on the Nasdaq National Market. He is a director of
Aktiv  Inkasso ASA and  Northern Oil ASA,  both  Norwegian  Oslo Stock  Exchange
listed  companies and Northern  Offshore  Ltd., a Bermuda  company listed on the
Oslo Stock Exchange.  Mr. Tr0im is President and Chief Executive Officer of Ship
Finance  International  since  October  15,  2003.  Prior  to his  service  with
Frontline, from January 1992, Mr. Tr0im served as Managing Director and a member
of the Board of  Directors  of DNO AS, a Norwegian  oil  company.  Mr. Tr0im has
served as a director of Golar LNG Limited since May 2001.

Kate  Blankenship is Chief  Accounting  Officer and Secretary of the Company and
has been a director since August,  2003. Mrs.  Blankenship joined the Company in
1994. Prior to joining the Company,  she was a Manager with KPMG Peat Marwick in
Bermuda.  She is a member of the Institute of Chartered  Accountants  in England
and Wales.  Mrs.  Blankenship has been Chief Financial  Officer of Knightsbridge
Tankers Ltd since April 2000 and Secretary of Knightsbridge since December 2000.
Mrs. Blankenship is Director and Secretary of Ship Finance International Limited
since  October 15, 2003.  Mrs.Blankenship  has served as a director of Golar LNG
Limited since July, 2003.

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

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

B. COMPENSATION

During the year ended  December 31, 2003,  the Company paid to its directors and
executive  officers (five persons) aggregate cash compensation of $1,018,755 and
an aggregate amount of $61,360 for pension and retirement benefits.

The Company did not grant any options to acquire  Ordinary Shares of the Company
to the Directors and officers during 2003.

C. BOARD PRACTICES

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

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

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

The Company does not currently have an audit committee.

D. EMPLOYEES

As of December 31, 2003, the Company and its subsidiaries employed approximately
40 people in their respective offices in Bermuda and Oslo. The Company contracts
with independent ship managers to manage and operate its vessels.

E. SHARE OWNERSHIP

The beneficial interests of our Directors and officers in the Ordinary Shares of
the Company as of June 4, 2004, were as follows:

                                                                   Percentage of
                                            Ordinary Shares of   Ordinary Shares
Director or Officer                                 $2.50 each       Outstanding
-------------------                         ------------------   ---------------
John Fredriksen*                                    35,079,053            47.45%
Tor Olav Tr0im                                         194,934                **
Kate Blankenship                                        10,000                **
Tom E. Jebsen                                           39,557                **
Oscar Spieler                                           19,000                **

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

As of June 4, 2004 none of the Company's Directors and officers hold any options
to acquire Ordinary Shares of the Company.

As of June 4,  2004,  there  are no  authorised  and  unissued  Ordinary  Shares
reserved for issue  pursuant to  subscription  under  options  granted under the
Company's share option plans.

The Company maintained a Bermuda Employee Share Option Plan and a United Kingdom
Employee Share Option Plan. These plans have expired as at June 4, 2004 and have
currently not been replaced.

ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS

A. MAJOR SHAREHOLDERS

The Company is indirectly  controlled by another  corporation  (see below).  The
following table presents certain information  regarding the current ownership of
the Ordinary  Shares with respect to (i) each person who is known by the Company
to own more than five per cent of the Company's outstanding Ordinary Shares; and
(ii) all directors and officers as a group as of June 4, 2004.

                                                              Ordinary Shares
                                                              ---------------
Owner                                                          Amount   Per cent
-----                                                      ----------   --------

Hemen Holding Ltd. and associated companies (1)            35,079,053     47.45%
All Directors and Officers as a group (five persons) (2)   35,342,544     47.81%

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

At both June 2003 and June 2002 Hemen Holding Ltd. and associated companies held
47.74% and 45.22% of the Company's Ordinary Shares, respectively.

The  Company's  major   shareholders  have  the  same  voting  rights  as  other
shareholders of the Company.

As at May 31, 2004,  5,527,107 of the Company's Ordinary Shares were held by 103
holders of record in the United States.

No  corporation  or  foreign  government  owns  more  than 50% of the  Company's
outstanding Ordinary Shares.

The Company is not aware of any  arrangements,  the  operation of which may at a
subsequent date result in a change in control of the Company.

B. RELATED PARTY TRANSACTIONS

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

On December 5, 2000, a subsidiary  of  Frontline  made a short-term  loan of $20
million to World  Shipholding  Ltd.. This loan was repaid in full on February 6,
2001.  Fees and  interest  totalling  $234,680  were  recorded  in  2001.  World
Shipholding  Ltd. is indirectly  controlled by John  Fredriksen who is Frontline
Ltd's Chairman and a major stockholder in the Company.

In February 2001, the Company  acquired  newbuilding  contracts from  Seatankers
Management  Co. Ltd for the  construction  and purchase of three VLCC tankers at
the Hitachi  shipyard in Japan.  These  contracts were acquired for the original
contract  price of $72 million each plus $0.5 million per contract.  These three
newbuildings were delivered in 2002. Seatankers Management Co. Ltd is indirectly
controlled  by John  Fredriksen  who is  Frontline  Ltd's  Chairman  and a major
stockholder.

In the years ended December 31, 2003, 2002 and 2001, Frontline provided services
to Seatankers Ltd. These services comprise management support and administrative
services including  administration of a newbuilding project known as the Uljanik
Project.  In the years ended December 31, 2003, 2002 and 2001 the Company earned
management fees of $107,995, $253,762 and $277,855, respectively from Seatankers
Ltd. As at December  31, 2003,  2002 and 2001  amounts of $17,880,  $141,359 and
$314,923  respectively were due from Seatankers Ltd in respect of these fees and
for the reimbursement of costs incurred on behalf of Seatankers Ltd.  Seatankers
Ltd. is indirectly controlled by John Fredriksen who is Frontline Ltd's Chairman
and a major stockholder in the Company.

In the years ended December 31, 2003 and 2002 Frontline has provided  management
support and  administrative  services to Osprey Maritime Ltd ("Osprey").  In the
years ended  December 31, 2003 and 2002 the Company  earned  management  fees of
$51,600 and $42,000  respectively  from Osprey. As at December 31, 2003 and 2002
amounts of $18,719 and $18,000  respectively  were due from Osprey in respect of
these fees and for the  reimbursement of costs incurred on behalf of Osprey.  At
December 31, 2002, an amount of $103,838 was due to Osprey in respect of Tankers
pool  distributions  due to Osprey that were received by the Company.  Osprey is
indirectly  controlled by John  Fredriksen who is Frontline Ltd's Chairman and a
major stockholder in the Company.

In the years ended  December 31,  2003,  2002 and 2001,  Frontline  has provided
services  to  Golar  LNG  Limited  ("Golar").   The  services  provided  include
management support,  corporate and administrative  services.  In the years ended
December  31,  2003,  2002 and  2001,  the  Company  earned  management  fees of
$261,000,  $391,153 and $258,960,  respectively  from Golar.  As at December 31,
2003, 2002 and 2001, amounts of $79,335,  $86,343 and $547,966 respectively were
due from  Golar in  respect  of these  fees and for the  reimbursement  of costs
incurred on behalf of Golar.  Golar is indirectly  controlled by John Fredriksen
who is Frontline Ltd's Chairman and a major stockholder in the Company.

In the year ended December 31, 2003 and 2002  Frontline has provided  management
support and  administrative  services to Northern Offshore Ltd, ("NOF"),  In the
years ended 31  December  2003 and 2002 the Company  earned  management  fees of
$134,016  and $173,724  respectively  from NOF. As at December 31, 2003 and 2002
amounts of $2,422 and $31,071 respectively were due from NOF in respect of these
fees and for the  reimbursement  of costs  incurred  on  behalf  of NOF.  NOF is
indirectly  controlled by John  Fredriksen who is Frontline Ltd's Chairman and a
major stockholder in the Company.

C. INTERESTS OF EXPERTS AND COUNSEL

Not Applicable

ITEM 8. FINANCIAL INFORMATION

A. CONSOLIDATED STATEMENTS AND OTHER FINANCIAL INFORMATION

See Item 18.

Legal Proceedings

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

Dividend Policy

In May 2003,  the Company  announced  that it was seeking to adopt a policy that
provided a more predictable minimum dividend stream and has consequently adopted
a dividend policy whereby the Company seeks to have a minimum quarterly dividend
of $0.25 per share,  equivalent to $1.00 per share per annum. Prior to May 2003,
the Company had not paid  regular  quarterly or annual  dividends  pursuant to a
specific policy since 1997 and it had been the Company's policy to pay dividends
only when  considered  appropriate  by the  Company's  Board of  Directors.  The
Company has paid the following dividends in 2001, 2002 and 2003.

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

2001
----
May 21, 2001                                  June 7, 2001                 $1.00
August 23, 2001                          September 5, 2001                 $0.40
November 22, 2001                         December 5, 2001                 $0.10

2002
----
March 13, 2002                              March 20, 2002                 $0.20
May 31, 2002                                 June 12, 2002                 $0.05

2003
----
March 10, 2003                              March 24, 2003                 $0.15
May 20, 2003                                  June 6, 2003                 $1.00
June 23, 2003                                 July 7, 2003                 $1.00
August 18, 2003                          September 2, 2003                 $1.10
November 28, 2003                        December 12, 2003                 $1.30

On  February  29,  2004 the  Company  announced  a dividend  of $4.50 per share,
representing a $0.25  ordinary  dividend and a $4.25 special  dividend,  payable
March 29,  2004.  On May 28, 2004 the Company  announced a dividend of $5.00 per
share,  representing  a $0.25  ordinary  dividend and a $4.75 special  dividend,
payable June 16, 2004.

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

B. SIGNIFICANT CHANGES

Ship Finance,  a wholly-owned  subsidiary of the Company,  was  incorporated  in
Bermuda in October  2003 for the purpose of  acquiring  certain of the  shipping
assets of the Company.  In December  2003,  Ship Finance  issued $580 million of
8.5% Senior Notes.  In the first quarter of 2004, Ship Finance used the proceeds
of the Notes issue,  together with a refinancing  of existing  debt, to fund the
acquisition of a fleet of 47 crude oil tankers  (including  one purchase  option
for a VLCC) from the  Company  and has  chartered  each of the ships back to the
Company for most of their remaining lives.  Ship Finance also entered into fixed
rate  management  and  administrative  services  agreements  with the Company to
provide  for  the  operation  and  maintenance  of  the  Company's  vessels  and
administrative  support  services.  In  May  2004,  the  Company  announced  the
distribution  of 25 per cent of Ship  Finance's  common  shares  to  Frontline's
ordinary shareholders in a partial spin off. Each Frontline shareholder received
one share in Ship  Finance for every four  Frontline  shares  held.  The Company
further announced that it is the Board's intention that during 2004, the Company
shall divest all its shares in Ship Finance  either  through a straight  sale, a
corporate  transaction,  or through further dividend distribution to Frontline's
shareholders.  In conjunction  with the spin-off of Ship Finance,  the Company's
strategy will be focussed on becoming a world-leading  chartering  company.  See
Item 4.  Information  on the  Company - Spin-Off of Ship  Finance  International
Limited and Future Strategy.

ITEM 9. THE OFFER AND LISTING

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

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

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

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

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

<TABLE>
<CAPTION>
                                      NYSE                OSE                  NASDAQ
                                --------------   --------------------   -----------------
                                  High     Low        High        Low      High       Low
<S>                             <C>      <C>     <C>         <C>        <C>       <C>
Fiscal year ended December 31
2003                            $27.69   $8.93   NOK185.00   NOK61.00        --        --
2002                            $13.05   $3.19   NOK108.50   NOK25.90        --        --
2001                            $15.45   $6.55   NOK215.50   NOK59.50    $24.50   $11.563
2000                                --      --   NOK164.00   NOK37.00   $18.250    $3.938
1999                                --      --    NOK45.00   NOK16.00    $4.250    $3.000
</TABLE>

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, 2003
First quarter                            $12.54    $8.93    NOK87.50    NOK61.00
Second quarter                           $16.85   $10.00   NOK117.00    NOK73.00
Third quarter                            $19.89   $13.40   NOK146.50    NOK95.50
Fourth quarter                           $27.69   $15.47   NOK185.00   NOK108.50

Fiscal year ended December 31, 2002
First quarter                            $12.50    $9.05   NOK108.50    NOK81.50
Second quarter                           $13.05    $8.79   NOK108.50    NOK64.00
Third quarter                             $9.76    $3.19    NOK73.50    NOK25.90
Fourth quarter                            $9.41    $4.06    NOK69.00    NOK28.50

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

                                               NYSE                 OSE
                                         ---------------   ---------------------
                                           High      Low        High         Low
May 2004                                 $35.37   $24.36   NOK237.00   NOK172.00
April 2004                               $31.10   $25.25   NOK216.50   NOK173.50
March 2004                               $35.89   $25.10   NOK249.50   NOK175.50
February 2004                            $32.45   $28.75   NOK225.00   NOK201.50
January 2004                             $31.30   $25.50   NOK214.00   NOK165.50
December 2003                            $27.69   $20.65   NOK185.00   NOK139.00

ITEM 10. ADDITIONAL INFORMATION

A. SHARE CAPITAL

Not Applicable

B. MEMORANDUM AND ARTICLES OF ASSOCIATION

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

On April 5, 2004,  the  Company  adopted  revised  Bye-laws.  These  Amended and
Restated Bye-Laws of the Company as adopted by shareholders on April 5, 2004 are
filed as Exhibit 1.4 to this Annual Report.

The  action  necessary  to change  the  rights of  holders  of the stock and the
conditions   governing  the  manner  in  which  annual   general   meetings  and
extraordinary meetings if shareholders are invoked,  including the conditions of
admission, are described in the Company's Bye-laws.

The  Company's  Bye-laws  contain  certain  restrictions  with  respect  to  the
registration of shares which are summarised below:

(i)  The Board may decline to register  the  transfer of any share held  through
     the  Verdipapirsentralen,  or VPS, the computerised  central share registry
     maintained in Oslo,  Norway,  for bodies  corporate whose shares are listed
     for  trading on the OSE,  if the  registration  of such  transfer  would be
     likely, in the opinion of the Board, to result in fifty per cent or more of
     the aggregate  issued share capital of the Company or shares of the Company
     to which are attached  fifty per cent or more of the votes  attached to all
     outstanding  shares  of  the  Company  being  held  or  owned  directly  or
     indirectly, (including, without limitation, through the VPS) by a person or
     persons resident for tax purposes in Norway (or such other  jurisdiction as
     the Board may nominate from time to time).

(ii) If fifty per cent or more of the  aggregate  issued  share  capital  of the
     Company or shares to which are attached fifty per cent or more of the votes
     attached to all  outstanding  shares of the Company are found to be held or
     owned directly or indirectly  (including,  without limitation,  through the
     VPS) by a person or persons  resident  for tax  purposes in Norway (or such
     other jurisdiction as the Board may nominate from time to time), other than
     the  Registrar  in respect of those  shares  registered  in its name in the
     Register as nominee of persons whose interests in such shares are reflected
     in the VPS, the Board shall make an announcement to such effect through the
     OSE,  and the Board and the  Registrar  shall  thereafter  be entitled  and
     required to dispose of such  number of shares of the  Company or  interests
     therein held or owned by such persons as will result in the  percentage  of
     the  aggregate  issued  share  capital  of the  Company  held or  owned  as
     aforesaid being less than fifty per cent.

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

None

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  thereunder  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 thereunder. Issues and transfers of
Ordinary  Shares  involving  any person  regarded  as  resident  in Bermuda  for
exchange  control  purposes  require  specific prior approval under the Exchange
Control Act of 1972.

The owners of Ordinary  Shares who are ordinarily  resident  outside Bermuda are
not subject to any  restrictions  on their rights to hold or vote their  shares.
Because the Company has been designated as a non-resident  for Bermuda  exchange
control purposes,  there are no restrictions on its ability to transfer funds in
and out of Bermuda or to pay  dividends  to U.S.  residents  who are  holders of
Ordinary Shares, other than in respect of local Bermuda currency.

As an "exempted company", the Company is exempt from Bermuda laws which restrict
the percentage of share capital that may be held by non-Bermudians.

E. TAXATION

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

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

F. DIVIDENDS AND PAYING AGENTS

Not Applicable

G. STATEMENT BY EXPERTS

Not Applicable

H. DOCUMENTS ON DISPLAY

The  Company is  subject to the  informational  requirements  of the  Securities
Exchange Act of 1934, as amended.  In  accordance  with these  requirements  the
Company files reports and other  information  with the  Securities  and Exchange
Commission.  These materials,  including this annual report and the accompanying
exhibits,  may be  inspected  and  copied  at the  public  reference  facilities
maintained by the Commission at 450 Fifth Street,  N.W., Room 1024,  Washington,
D.C. 20549. You may obtain  information on the operation of the public reference
room by calling 1 (800) SEC-0330,  and you may obtain copies at prescribed rates
from the Public  Reference  Section of the Commission at its principal office in
Washington,  D.C. 20549. The SEC maintains a website  (http://www.sec.gov.) that
contains  reports,  proxy  and  information  statements  and  other  information
regarding  registrants  that  file  electronically  with the SEC.  In  addition,
documents  referred to in this annual  report may be inspected at the  Company's
headquarters at Par-la-Ville Place, 14 Par-la-Ville Road, Hamilton, Bermuda.

I. SUBSIDIARY INFORMATION

Not Applicable

ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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

Our  exposure to interest  rate risk  relates  primarily to our debt and related
interest  rate swaps.  The majority of this  exposure  derives from our floating
rate debt, which totalled $1,095.1 million at December 31, 2003 (2002:  $1,424.9
million).  The Company 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,  2003,  we had three swaps with a total
notional principal of $140.5 million (2002 - eight swaps with notional principal
of $352.7 million).  The swap agreements  mature between January 2006 and August
2008, and we estimate that we would have to pay $9.1 million to terminate  these
agreements  as of December 31, 2003 (2002 - $4.1  million).  Our net exposure to
interest  rate  fluctuations  is $954.6  million at  December  31,  2003  (2002:
$1,072.2  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
$9.5 million per year as of December 31, 2003 (2002: $10.7 million).

The fair market value of our fixed rate debt was $1,194.9 million as of December
31, 2003 (2002:  $13.3 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 $72.1 and $79.4 million respectively (2002: $0.1 million).

We are exposed to market risk in relation to our forward freight  agreements and
futures contracts.  Fluctuations in underlying freight market indices upon which
our forward  agreements are based has a consequent  effect on the Company's cash
flows and  consolidated  statements of operations.  As at December 31, 2003, the
notional  principal  amounts  of  our  forward  freight  contracts  and  futures
contracts was $31.3 million.  A ten per cent change in underlying freight market
indices would increase or decrease net income by $6.9 million as of December 31,
2003 (2002: $3.4 million).

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 an effect on the value of the
Company's cash flows;  and a translation  risk,  which is the impact of currency
fluctuations  in the  translation  of foreign  operations and foreign assets and
liabilities   into  U.S.  dollars  in  the  Company's   consolidated   financial
statements.  Certain of the Company's subsidiaries,  and associated companies in
which the Company  has  investments,  have Yen  denominated  long-term  debt and
charter contracts denominated in Yen. There is a risk that currency fluctuations
will have a negative effect on the value of the Company's cashflows. At December
31, 2003, the Company had Yen  denominated  long-term  debt,  including  capital
leases,  of (Y)16.8 billion and its share of Yen  denominated  long-term debt in
associate  companies  was nil  (2002  -  (Y)13.1  billion  and  (Y)7.2  billion,
respectively).  At  December  31,  2003 the Company was not party to any forward
currency  exchange  contracts  which  would  have  an  effect  on the  Company's
financial condition and results of operations.

ITEM 12. DESCRIPTION OF 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)  Evaluation of disclosure controls and procedures.

     As of December  31,  2003,  the Company  carried out an  evaluation  of the
     effectiveness  of the  design and  operation  of the  Company's  disclosure
     controls and  procedures  pursuant to Exchange Act Rule 13a-14.  Based upon
     that evaluation,  the principal  executive officers and principal financial
     officers  concluded that the Company's  disclosure  controls and procedures
     are effective in alerting them timely to material  information  relating to
     the Company required to be included in the Company's periodic SEC filings.

(b)  Not Applicable

(c)  Not Applicable

(d)  Changes in internal controls over financial reporting

     There have been no changes in internal  controls over  financial  reporting
     (identified  in connection  with  management's  evaluation of such internal
     controls over financial reporting) that occurred during the year covered by
     this annual report that has materially affected, or is reasonably likely to
     materially   affect,   the  Company's   internal  controls  over  financial
     reporting.

ITEM 16 A. AUDIT COMMITTEE FINANCIAL EXPERT

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

ITEM 16 B. CODE OF ETHICS.

The Company has adopted a Code of Ethics,  filed as Exhibit  14.1 to this Annual
Report that applies to all employees.

ITEM 16 C. PRINCIPAL ACCOUNTANT FEES AND SERVICES

(a)  Audit Fees

The  following  table sets forth,  for the two most  recent  fiscal  years,  the
aggregate  fees  billed for  professional  services  rendered  by the  principal
accountant  for the  audit of the  Company's  annual  financial  statements  and
services  provided by the principal  accountant in connection with statutory and
regulatory filings or engagements for the two most recent fiscal years.

     Fiscal year ended December 31, 2003                     $ 1,585,759
     Fiscal year ended December 31, 2002                     $ 1,158,004

(b)  Audit -Related Fees

For the  fiscal  years  ended  December  31,  2003 and 2002,  there have been no
assurance and related services rendered by the principal  accountant  related to
the  performance  of the audit or review of the Company's  financial  statements
which have not been reported under Audit Fees above.

(c)  Tax Fees

The  following  table sets forth,  for the two most  recent  fiscal  years,  the
aggregate  fees  billed for  professional  services  rendered  by the  principal
accountant for tax compliance, tax advice and tax planning.

     Fiscal year ended December 31, 2003                     $ 33,504
     Fiscal year ended December 31, 2002                     $ 65,626

(d)  All Other Fees

The  following  table sets forth,  for the two most  recent  fiscal  years,  the
aggregate  fees  billed for  professional  services  rendered  by the  principal
accountant for services other than audit fees,  audit-related  fees and tax fees
set forth above.

     Fiscal year ended December 31, 2003                     $ nil
     Fiscal year ended December 31, 2002                     $ nil

(e)  Audit Committee's Pre-Approval Policies and Procedures

The  Company's  Board  of  Directors  has  adopted  pre-approval   policies  and
procedures  in compliance  with  paragraph (c) (7)(i) of Rule 2-01 of Regulation
S-X that require the Board to approve the appointment of the independent auditor
of the Company  before such auditor is engaged and approve each of the audit and
non-audit  related services to be provided by such auditor under such engagement
by the Company.  All  services  provided by the  principal  auditor in 2003 were
approved by the Board pursuant to the pre-approval policy.

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

Not applicable

ITEM 17. FINANCIAL STATEMENTS

Not Applicable
<PAGE>

ITEM 18. FINANCIAL STATEMENTS

The  following  financial  statements  listed  below  and set forth on pages F-1
through F- 33 are filed as part of this annual report:

Financial Statements for Frontline Ltd.

Index to Consolidated Financial Statements                                   F-1

Report of Independent Registered Public Accounting Firm                      F-2

Report of Independent Registered Public Accounting Firm                      F-3

Report of Independent Auditors                                               F-4

Report of Independent Registered Public Accounting Firm                      F-5

Consolidated Statements of Operations for the years ended
December 31, 2003, 2002 and 2001                                             F-6

Consolidated Balance Sheets as of
December 31, 2003 and 2002                                                   F-7

Consolidated Statements of Cash Flows for the years ended
December 31, 2003, 2002 and 2001                                             F-8

Consolidated Statements of Changes in Stockholders' Equity for
the years ended December 31, 2003, 2002 and 2001                             F-9

Notes to Consolidated Financial Statements                                  F-10
<PAGE>

ITEM 19. EXHIBITS

Number         Description of Exhibit

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

1.4*           Amended  and  Restated  Bye-Laws  of the  Company  as  adopted by
               shareholders  on April 5,  2004,  incorporated  by  reference  to
               Exhibit 1.4 of the Company's  Annual Report filed on form 20-F on
               June 30, 2004.

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 thereunder, 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  thereunder,  including form of ADR,
               incorporated  by reference to Exhibit 2 of the  Company's  Annual
               Report on Form 20-F,  filed on June 13,  2001 for the fiscal year
               ended December 31, 2000.

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

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

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

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

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

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

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

8.1*           Subsidiaries  of the Company  incorporated by referene to Exhibit
               8.1 of the Company's Annual Report filed on Form 20-F on June 30,
               2004.

14.1*          Code of Ethics incorporated by referene to Exhibit
               14.1 of the  Company's  Annual  Report filed on Form 20-F on June
               30, 2004.

31.1           Certification of the Principal Executive Officer

31.2           Certification of the Principal Financial Officer

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

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

* Incorporated herein by reference.
<PAGE>

                                   SIGNATURES

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

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

Date October 8, 2004                    By /s/ Kate Blankenship
                                           -------------------------------------
                                               Kate Blankenship
                                        Company Secretary and Chief Accounting
                                        Officer
<PAGE>

Index to Consolidated Financial Statements of Frontline Ltd

Report of Independent Registered Public Accounting Firm                      F-2

Report of Independent Registered Public Accounting Firm                      F-3

Report of Independent Auditors                                               F-4

Report of Independent Registered Public Accounting Firm                      F-5

Consolidated Statements of Operations for the years ended
December 31, 2003, 2002 and 2001                                             F-6

Consolidated Balance Sheets as of
December 31, 2003 and 2002                                                   F-7

Consolidated Statements of Cash Flows for the years ended
December 31, 2003, 2002 and 2001                                             F-8

Consolidated Statements of Changes in Stockholders' Equity
for the years ended December 31, 2003, 2002 and 2001                         F-9

Notes to Consolidated Financial Statements                                  F-10
<PAGE>

Report of Independent Registered Public Accounting Firm

To the Board of Directors
and Stockholders of Frontline Ltd.

In our opinion,  the  accompanying  consolidated  balance  sheet and the related
consolidated  statements  of  operations,  of  cash  flows  and  of  changes  in
stockholders'  equity present fairly,  in all material  respects,  the financial
position of  Frontline  Ltd. and its  subsidiaries  at December 31, 2003 and the
results  of their  operations  and their  cash  flows for the year then ended in
conformity with accounting principles generally accepted in the United States of
America.  These  financial  statements are the  responsibility  of the Company's
management.  Our  responsibility  is to express  an  opinion on these  financial
statements  based on our audit.  We conducted  our audit of these  statements in
accordance with the standards of the Public Company  Accounting  Oversight Board
(United States).  Those standards  require that we plan and perform the audit to
obtain reasonable  assurance about whether the financial  statements are free of
material  misstatement.  An audit includes examining,  on a test basis, evidence
supporting the amounts and  disclosures in the financial  statements,  assessing
the accounting principles used and significant estimates made by management, and
evaluating the overall  financial  statement  presentation.  We believe that our
audit provide a reasonable basis for our opinion.

As  discussed in Note 3 to the  financial  statements  the Company  adopted FASB
Interpretation No. 46 Revised on December 31, 2003.

PricewaterhouseCoopers DA
Oslo, Norway
June 24, 2004
<PAGE>

Report of Independent Registered Public Accounting Firm

To the Board of Directors
and Stockholders of Frontline Ltd.

In our  opinion,  based on our  audit  and the  report  of other  auditors,  the
accompanying  consolidated balance sheet and the related consolidated statements
of  operations,  of cash flows and of changes in  stockholders'  equity  present
fairly, in all material  respects,  the financial position of Frontline Ltd. and
its  subsidiaries  at December 31, 2002 and the results of their  operations and
their  cash  flows  for the  year  then  ended  in  conformity  with  accounting
principles  generally accepted in the United States of America.  These financial
statements   are  the   responsibility   of  the   Company's   management;   our
responsibility  is to express an opinion on these financial  statements based on
our audit.  We did not audit the  financial  statements  of Golden  Ocean  Group
Limited,  a wholly-owned  subsidiary,  which statements  reflect total assets of
$87.9 million at December 31, 2002 and total  revenues of  approximately  $22.3,
million for the year ended December 31, 2002. The financial statements of Golden
Ocean Group Limited were audited by other auditors whose report thereon has been
furnished to us, and our opinion expressed herein,  insofar as it relates to the
amounts  included for Golden Ocean Group Limited,  is based solely on the report
of the other auditors.  We conducted our audit of these statements in accordance
with the  standards of the Public  Company  Accounting  Oversight  Board (United
States).  Those  standards  require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the  amounts  and  disclosures  in  the  financial  statements,   assessing  the
accounting  principles  used and significant  estimates made by management,  and
evaluating the overall  financial  statement  presentation.  We believe that our
audit  and the  report of other  auditors  provide  a  reasonable  basis for our
opinion.

As discussed in Note 2 to the financial statements the Company adopted Statement
of Financial  Accounting  Standard  No. 142 on January 1, 2002.  As discussed in
Note 27 to the financial statements,  the Company adopted Statement of Financial
Accounting Standard No. 144 on January 1, 2002.

PricewaterhouseCoopers
Hamilton, Bermuda
June 24, 2003, except for Note 27 for which the date is July 14, 2003
<PAGE>

Golden Ocean Group Limited
Report of Independent Auditors

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

We have audited the  accompanying  consolidated  balance  sheets of Golden Ocean
Group Limited and  subsidiaries as of December 31, 2002 and 2001 and the related
consolidated statements of operations,  changes in stockholders' equity and cash
flows for the years ended December 31, 2002 and 2001 and the period from October
10, 2000 to December 31, 2000. These consolidated  financial  statements are the
responsibility of the Company's management.  Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.

We conducted our 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.  An audit includes examining, on a
test basis,  evidence  supporting  the amounts and  disclosures in the financial
statements.  An audit also includes assessing the accounting principles used and
significant  estimates  made by  management,  as well as evaluating  the overall
financial  statement  presentation.   We  believe  that  our  audits  provide  a
reasonable basis for our opinion.

In our opinion, the consolidated  financial statements referred to above present
fairly, in all material respects,  the consolidated financial position of Golden
Ocean Group Limited and  subsidiaries  as of December 31, 2002 and 2001, and the
consolidated  results  of their  operations  and their  cash flows for the years
ended  December  31,  2002 and 2001 and the  period  from  October  10,  2000 to
December  31,  2000,  in  conformity  with U.S.  generally  accepted  accounting
principles.

As discussed in note 20 to the financial statements, the Company ceased accruing
drydock costs with effect from January 1, 2001

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

Report of Independent Registered Public Accounting Firm

To the Board of Directors
and Stockholders of Frontline Ltd.

In our  opinion,  based on our  audit  and the  report  of other  auditors,  the
accompanying consolidated statements of operations, of cash flows and of changes
in stockholders' equity present fairly, in all material respects, the results of
operations  Frontline Ltd and its subsidiaries and their cash flows for the year
ended  December 31, 2001 in  conformity  with  accounting  principles  generally
accepted in the United States of America.  These  financial  statements  are the
responsibility of the Company's management;  our responsibility is to express an
opinion on these financial  statements  based on our audit. We did not audit the
financial  statements of Golden Ocean Group Limited, a wholly-owned  subsidiary,
which statements  reflect total revenues of approximately  $82.1 million for the
period ended December 31, 2001.  The financial  statements of Golden Ocean Group
Limited were audited by other  auditors whose report thereon have been furnished
to us, and our opinion  expressed  herein,  insofar as it relates to the amounts
included  for Golden Ocean Group  Limited,  is based solely on the report of the
other  auditors.  We conducted our audit of these  statements in accordance with
the standards of the Public Company Accounting  Oversight Board (United States).
Those standards  require that we plan and perform the audit to obtain reasonable
assurance   about  whether  the  financial   statements  are  free  of  material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the  amounts  and  disclosures  in  the  financial  statements,   assessing  the
accounting  principles  used and significant  estimates made by management,  and
evaluating the overall  financial  statement  presentation.  We believe that our
audit  and the  report of other  auditors  provide  a  reasonable  basis for our
opinion.

As  discussed  in Note 2 to the  financial  statements,  on  January 1, 2001 the
Company  changed  its method of  accounting  for  drydocking  costs and  adopted
Financial Accounting Standard no. 133.

PricewaterhouseCoopers DA
Oslo, Norway
June 28, 2002, except for Note 27 for which the date is July 14, 2003
<PAGE>

<TABLE>
Frontline Ltd.
Consolidated Statements of Operations for the years ended
December 31, 2003, 2002 and 2001
(in thousands of $, except per share data)
<CAPTION>
                                                                   2003          2002          2001
<S>                                                          <C>           <C>           <C>
Operating revenues
     Time charter revenues                                       56,270        30,385        44,655
     Bareboat charter revenues                                   27,930        31,924        32,016
     Voyage charter revenues                                  1,089,583       489,286       639,807
---------------------------------------------------------------------------------------------------
     Total operating revenues                                 1,173,783       551,595       716,478
---------------------------------------------------------------------------------------------------
Gain (loss) on sale of assets                                     5,626        (1,228)       35,620
Operating expenses
     Voyage expenses and commission                             323,598       135,074        88,292
     Ship operating expenses                                    117,604       109,286       116,291
     Charterhire expenses                                        81,009        60,634        41,858
     Administrative expenses                                     17,889        12,806        13,012
     Depreciation and amortisation                              146,907       136,891       117,225
---------------------------------------------------------------------------------------------------
     Total operating expenses                                   687,007       454,691       376,678
---------------------------------------------------------------------------------------------------
Net operating income                                            492,402        95,676       375,420
---------------------------------------------------------------------------------------------------
Other income (expenses)
     Interest income                                              9,185        13,042        12,951
     Interest expense                                           (75,097)      (71,311)      (89,952)
     Share in results from associated companies                  33,533       (10,711)       22,317
     Foreign currency exchange gain (loss)                      (17,193)      (10,932)       15,524
     Other financial items, net                                     300        (8,614)       (5,709)
---------------------------------------------------------------------------------------------------
     Net other expenses                                         (49,272)      (88,526)      (44,869)
---------------------------------------------------------------------------------------------------
Net income from continuing operations before income taxes       443,130         7,150       330,551
Income taxes                                                         (3)          (22)          444
---------------------------------------------------------------------------------------------------
Net income from continuing operations before
cumulative effect of change in accounting principle             443,127         7,172       330,107
---------------------------------------------------------------------------------------------------
Discontinued operations                                              --        (1,929)       21,076
---------------------------------------------------------------------------------------------------
Cumulative effect of change in accounting principle             (33,767)      (14,142)       31,545
---------------------------------------------------------------------------------------------------
Net (loss) income                                               409,360        (8,899)      382,728
===================================================================================================

Earnings (loss) per share:
Basic earnings per share from continuing operations
before cumulative effect of change in accounting principle        $5.92         $0.09         $4.30

Diluted earnings per share from continuing operations
before cumulative effect of change in accounting principle        $5.90         $0.09         $4.29

Basic earnings per share before cumulative
effect of change in accounting principle                          $5.92         $0.07         $4.57

Diluted earnings per share before cumulative
effect of change in accounting principle                          $5.90         $0.07         $4.56

Basic earnings (loss) per share                                   $5.47        $(0.12)        $4.99
Diluted earnings (loss) per share                                 $5.45        $(0.12)        $4.98
===================================================================================================
</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, 2003 and 2002
(in thousands of $)
<CAPTION>
                                                                   2003          2002
<S>                                                          <C>           <C>
ASSETS
Current Assets
     Cash and cash equivalents                                  124,189        92,078
     Restricted cash                                            891,887         8,220
     Marketable securities                                           44            42
     Trade accounts receivable                                   48,165        37,091
     Other receivables                                           19,459        10,898
     Inventories                                                 26,148        28,723
     Voyages in progress                                         60,282        49,221
     Prepaid expenses and accrued income                         12,241         6,342
     Net investment in finance lease, current portion            15,511            --
     Derivative instruments receivable amounts                       78           390
-------------------------------------------------------------------------------------
     Total current assets                                     1,198,004       233,005
Newbuildings and vessel purchase options                          8,370        27,405
Vessels and equipment, net                                    2,165,239     2,373,239
Vessels and equipment under capital lease, net                  765,126       264,902
Investment in associated companies                              173,329       119,329
Net investment in finance lease, long term portion              120,894            --
Deferred charges                                                 22,454         5,659
Other long-term assets                                           10,119        11,204
-------------------------------------------------------------------------------------
     Total assets                                             4,463,535     3,034,743
=====================================================================================

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
     Short-term debt and current portion of long-term debt      191,131       167,807
     Current portion of obligations under capital leases         20,138        13,164
     Trade accounts payable                                       7,289         7,717
     Accrued expenses                                            76,910        40,324
     Deferred charter revenue                                     5,309         1,067
     Mark to market valuation of derivatives                      9,217        17,442
     Other current liabilities                                   11,318        12,300
-------------------------------------------------------------------------------------
     Total current liabilities                                  321,312       259,821
Long-term liabilities
     Long-term debt                                           2,091,286     1,277,665
     Obligations under capital leases                           753,823       259,527
     Deferred gains on sales of vessels                          21,964         7,138
     Other long-term liabilities                                 19,733         3,619
-------------------------------------------------------------------------------------
     Total liabilities                                        3,208,118     1,807,770
Commitments and contingencies                                        --            --

Stockholders' equity
     Share capital                                              184,120       191,166
     Additional paid in capital                                 513,859       552,241
     Accumulated other comprehensive loss                        (6,953)       (9,498)
     Retained earnings                                          564,391       493,064
-------------------------------------------------------------------------------------
     Total stockholders' equity                               1,255,417     1,226,973
-------------------------------------------------------------------------------------
     Total liabilities and stockholders' equity               4,463,535     3,034,743
=====================================================================================
</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, 2003, 2002 and 2001
(in thousands of $)
<CAPTION>
                                                               2003        2002        2001
<S>                                                        <C>         <C>         <C>
Operating activities
Net income (loss)                                           409,360      (8,899)    382,728
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
     Depreciation and amortisation                          146,907     139,855     121,725
     Amortisation of deferred charges                         2,862       2,299       2,233
     (Gain) loss from sale of assets                         (5,626)      4,337     (35,620)
     Share in results from associated companies             (33,533)     10,711     (22,321)
     Unrealised foreign exchange loss  (gain)                17,955      14,176     (29,148)
     Change in accounting principle                          33,767      14,142     (32,339)
     Adjustment of derivatives to market value              (28,180)      7,495       5,404
     Other, net                                               1,311       1,968      (2,297)
     Changes in operating assets and liabilities,
     net of effect of acquisitions:
     Trade accounts receivable                               (7,495)     18,066      40,612
     Other receivables                                       (8,647)     (6,118)     25,921
     Inventories                                              3,489     (17,413)       (120)
     Voyages in progress                                     (9,853)    (40,928)     13,966
     Prepaid expenses and accrued income                     (2,837)     (2,951)      4,979
     Trade accounts payable                                    (417)        723       1,290
     Accrued expenses                                        (3,281)      4,781      (5,234)
     Deferred charter revenue                                 2,727        (500)     (1,010)
     Other, net                                               4,771         281       6,838
-------------------------------------------------------------------------------------------
     Net cash provided by operating activities              523,280     142,025     477,607
-------------------------------------------------------------------------------------------
Investing activities
     Maturity (placement) of restricted cash               (559,430)      2,881       1,479
     Additions to newbuildings, vessels and equipment       (66,589)   (376,844)   (386,130)
     Purchase of option                                     (10,042)         --          --
     Proceeds from sale of vessels and equipment            427,305     177,902     400,111
     Acquisition of subsidiaries and businesses, net
     of cash acquired                                        (2,363)         --     (64,656)
     Investments in associated companies                    (91,611)    (21,790)    (60,003)
     Dividends received from associated companies            11,581       1,780       2,314
     Purchase of minority interest                               --      (6,822)         --
     Proceeds from sale of investments in associated
     companies                                                7,343          --          --
     Purchases and sales of other assets, net                14,748          --       3,103
-------------------------------------------------------------------------------------------
     Net cash provided by (used in) investing activities   (269,058)   (222,893)   (103,782)
-------------------------------------------------------------------------------------------
Financing activities
     Proceeds from long-term debt                           627,300     383,828     324,890
     Repayments of long-term debt                          (465,313)   (341,959)   (460,725)
     Payment of obligations under capital leases            (13,134)    (24,671)    (10,337)
     Debt fees paid                                         (18,492)     (3,534)     (1,459)
     Cash dividends paid                                   (338,033)    (19,117)   (115,206)
     Repurchase of shares and warrants                      (28,562)         --     (44,814)
     Proceeds from issuance of equity                         2,931         223       8,488
-------------------------------------------------------------------------------------------
     Net cash (used in) provided by financing activities   (233,303)     (5,230)   (299,163)
-------------------------------------------------------------------------------------------
Net increase (decrease) in cash and cash equivalents
before change in accounting principle                        20,919     (86,098)     74,662
Cash effect of change in accounting principle                11,192          --          --
Net increase (decrease) in cash and cash equivalents
after change in accounting principle                         32,111     (86,098)     74,662
Cash and cash equivalents at beginning of year               92,078     178,176     103,514
Cash and cash equivalents at end of year                    124,189      92,078     178,176
===========================================================================================
Supplemental disclosure of cash flow information:
     Interest paid, net of capitalised interest              73,206      73,161      96,202
     Income taxes paid                                            3       2,203          11
===========================================================================================
</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, 2003, 2002 and 2001
(in thousands of $, except number of shares)
<CAPTION>
                                                              2003           2002           2001
<S>                                                   <C>             <C>            <C>
NUMBER OF SHARES OUTSTANDING
Balance at beginning of year                            76,466,566     76,407,566     78,068,811
Shares issued                                              251,364         59,000        546,055
Shares bought back                                      (3,070,000)            --     (2,207,300)
------------------------------------------------------------------------------------------------
Balance at end of year                                  73,647,930     76,466,566     76,407,566
------------------------------------------------------------------------------------------------

SHARE CAPITAL
Balance at beginning of year                               191,166        191,019        195,172
Shares issued                                                  629            147          1,365
Shares bought back and cancelled                            (7,675)            --         (5,518)
------------------------------------------------------------------------------------------------
Balance at end of year                                     184,120        191,166        191,019
------------------------------------------------------------------------------------------------

ADDITIONAL PAID IN CAPITAL
Balance at beginning of year                               552,241        552,166        576,677
Shares issued                                                3,774             75          7,123
Shares bought back and warrants exercised or expired       (42,156)            --        (31,634)
------------------------------------------------------------------------------------------------
Balance at end of year                                     513,859        552,241        552,166
------------------------------------------------------------------------------------------------

WARRANTS AND OPTIONS
Balance at beginning of year                                    --             --          7,662
Options and warrants exercised or expired                       --             --         (7,662)
------------------------------------------------------------------------------------------------
Balance at end of year                                          --             --             --
------------------------------------------------------------------------------------------------

ACCUMULATED OTHER COMPREHENSIVE LOSS
Balance at beginning of year                                (9,498)       (11,864)        (3,579)
Other comprehensive income (loss)                            2,545          2,366         (8,285)
------------------------------------------------------------------------------------------------
Balance at end of year                                      (6,953)        (9,498)       (11,864)
------------------------------------------------------------------------------------------------

RETAINED EARNINGS
Balance at beginning of year                               493,064        521,080        253,558
Net income (loss)                                          409,360         (8,899)       382,728
Dividends paid                                            (338,033)       (19,117)      (115,206)
------------------------------------------------------------------------------------------------
Balance at end of year                                     564,391        493,064        521,080
------------------------------------------------------------------------------------------------
Total Stockholders' Equity                               1,255,417      1,226,973      1,252,401
------------------------------------------------------------------------------------------------

COMPREHENSIVE INCOME (LOSS)
Net income (loss)                                          409,360         (8,899)       382,728
Unrealised gains (losses) from marketable securities
and cash flow hedging derivative instruments                 1,595          1,553         (8,255)
Foreign currency translation and other                         950            813            (30)
------------------------------------------------------------------------------------------------
Other comprehensive income (loss)                            2,545          2,366         (8,285)
------------------------------------------------------------------------------------------------
Comprehensive income (loss)                                411,905         (6,533)       374,443
------------------------------------------------------------------------------------------------
</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 three dry
     bulk carriers. The Company operates through subsidiaries and partnerships
     located in Bermuda, Isle of Man, Liberia, Norway, Panama, Singapore,
     Sweden, Cayman Islands and the Bahamas. The Company is also involved in the
     charter, purchase and sale of vessels.

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

     In October 2003 Frontline established a new subsidiary, Ship Finance
     International Limited ("SFIL"), in Bermuda. Through transactions executed
     in January 2004, Frontline transferred to SFIL ownership of 46
     vessel-owning entities each owning one vessel and its corresponding
     financing, and one entity owning an option to acquire a VLCC. Frontline
     then leased the vessels back on long-term charters. The assets and
     liabilities were transferred to, and recorded by SFIL, 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
     SFIL to Frontline's shareholders. Frontline's shareholders received one
     share in SFIL for every four Frontline shares held. SFIL shares are traded
     on the New York Stock Exchange under the ticker symbol SFL.

2.   ACCOUNTING POLICIES

     Basis of accounting

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

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

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

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

     Cash and cash equivalents

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

     Restricted cash

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

     Marketable Securities

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

     Inventories

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

     Vessels and equipment

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

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

     Vessels and equipment under capital lease

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

     Newbuildings and vessel purchase options

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

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

     Impairment of long-lived assets

     The carrying value of long-lived assets that are held and used by the
     Company are reviewed whenever events or changes in circumstances indicate
     that the carrying amount of an asset may no longer be appropriate. We
     assess recoverability of the carrying value of the asset by estimating the
     future net cash flows expected to result from the asset, including eventual
     disposition. If the future net cash flows are less than the carrying value
     of the asset, an impairment loss is recorded equal to the difference
     between the asset<180>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 unamortized
     portion of the related deferred charges is charged against income in the
     period in which the loan is repaid.

     Revenue and expense recognition

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

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

     Drydocking provisions

     Normal vessel repair and maintenance costs are charged to expense when
     incurred.

     In 2001, the Company changed its accounting policy for drydockings. Prior
     to 2001, provisions for future drydockings were accrued and charged to
     expense on a pro-rata basis over the period to the next scheduled
     drydockings. Effective January 1, 2001 the Company recognises the cost of a
     drydocking at the time the drydocking takes place, that is, it applies the
     "expense as incurred" method. The expense as incurred method is considered
     by management to be a more reliable method of recognising drydocking costs
     as it eliminates the uncertainty associated with estimating the cost and
     timing of future drydockings. The cumulative effect of this change in
     accounting principle is shown separately in the consolidated statements of
     operations for the year ended December 31, 2001 and resulted in a credit to
     income of $31.5 million in 2001. The cumulative effect of this change as of
     January 1, 2001 on the Company's consolidated balance sheet was to reduce
     total liabilities by $32.3 million.

     Goodwill

     Goodwill represents the excess of the purchase price over the fair value of
     assets acquired in business acquisitions accounted for under the purchase
     method. Goodwill is presented net of accumulated amortisation and until
     December 31, 2001 was being amortised over a period of approximately 17
     years. As of January 1, 2002, the Company adopted SFAS No. 142, "Goodwill
     and Other Intangible Assets" ("SFAS 142") and recorded an impairment charge
     of $14.1 million for the unamortised goodwill on that date. This is shown
     separately in the 2002 consolidated statement of operations as a cumulative
     effect of change in accounting principle. The valuation of the reporting
     unit used to assess the recoverability of goodwill, was based on a
     combination of independent third party valuations and the quoted market
     price of the Company's shares. Supplemental comparative disclosure as if
     this accounting change had been retroactively applied is as follows:

     ---------------------------------------------------------------------------
     (in thousands of $, except per share data)                             2001

     ---------------------------------------------------------------------------
     Net income (loss)
         As reported                                                     382,728
         Goodwill amortisation                                               764
         Adjusted net income (loss)                                      383,492

     Basic earnings (loss) per share
         As reported                                                       $4.99
         Goodwill amortisation                                             $0.01
         Adjusted basic earnings (loss) per share                          $5.00

     Diluted earnings (loss) per share
         As reported                                                       $4.98
         Goodwill amortisation                                             $0.01
         Adjusted diluted earnings (loss) per share                        $4.99

     As at December 31, 2003 and 2002 no goodwill was recorded in our
     consolidated financial statements.

     Derivatives

     The Company enters into interest rate swap transactions to hedge a portion
     of its exposure to floating interest rates. These transactions involve the
     conversion of floating rates into fixed rates over the life of the
     transactions without an exchange of underlying principal. Hedge accounting
     may be used to account for these swaps provided certain hedging criteria
     are met. As of January 1, 2001, the Company adopted Statement of Financial
     Accounting Standard ("SFAS") No. 133, "Accounting for Derivatives and
     Hedging Activities" ("SFAS 133"). Certain hedge relationships met the hedge
     criteria prior to adoption of SFAS 133, but do not meet the criteria for
     hedge accounting under SFAS 133. Upon initial adoption of SFAS 133 the
     Company recorded certain transition adjustments resulting in recognising
     the fair value of its derivatives as assets of $0.4 million and liabilities
     of $0.6 million. A gain of $0.3 million was recognised in income and a
     charge of $0.5 million recognised in other comprehensive income. On January
     1, 2002, the Company discontinued hedge accounting for two interest rate
     swaps previously counted for as cash flow hedges. This resulted in a
     balance of $4.1 million being frozen in accumulated other comprehensive
     income as at that date and this amount is reclassified into the income
     statement over the lives of the underlying debt instruments.

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

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

     In 2001 the Company established a facility for a Stock Indexed Total Return
     Swap Programme or Equity Swap Line (See Note 20) whereby the counterparty
     acquired shares in the Company, and the Company carried the risk of
     fluctuations in the share price of those acquired shares. The fair value of
     the Equity Swap was recognised as an asset or liability with the change in
     fair values recognised in the consolidated statements of operations. This
     facility was terminated in 2003. We recorded a gain of $22.1 million in our
     consolidated statement of operations for the year ended December 31, 2003
     in respect of the change in fair value of the Equity Swap (2002 - loss of
     $4.0 million, 2001 - gain of $4.4 million).

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

     Financial Instruments

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

     Foreign currencies

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

     Transactions in foreign currencies during the year are translated into U.S.
     dollars at the rates of exchange in effect at the date of the transaction.
     Foreign currency monetary assets and liabilities are translated using rates
     of exchange at the balance sheet date. Foreign currency non-monetary assets
     and liabilities are translated using historical rates of exchange. Foreign
     currency transaction gains or losses are included in the consolidated
     statements of operations.

     Stock-based compensation

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

     In 2003, 2002 and 2001, the Company has recorded compensation expense of
     $5.6 million, $0.5 million and $1.2 million, respectively in connection
     with employee share options.

     Had the compensation costs for these plans been determined consistent with
     the fair value method recommended in SFAS 123, the Company's net income and
     earnings per share would have been reduced to the following pro forma
     amounts in 2003, 2002 and 2001:

<TABLE>
<CAPTION>
     -----------------------------------------------------------------------------------------
     (in thousands, except per share data)                          2003       2002       2001

     -----------------------------------------------------------------------------------------
<S>                                                              <C>        <C>        <C>
     Net income (loss)
          As reported                                            409,360     (8,899)   382,728
          Add: Compensation expenses as reported                   5,574        481      1,184
          Compensation expense determined under fair value
          based method for all awards                             (1,011)    (1,711)    (1,314)
          Adjusted net income (loss), fair value based
          method for all awards                                  413,923    (10,129)   382,598

     Basic earnings (loss) per share
          As reported                                              $5.47     $(0.12)     $4.99
          SFAS 123 adjusted                                        $5.53     $(0.13)     $4.99

     Diluted earnings (loss) per share
          As reported                                              $5.45     $(0.12)     $4.98
          SFAS 123 adjusted                                        $5.51     $(0.13)     $4.98
</TABLE>

     Earnings per share

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

3.   RECENTLY ISSUED ACCOUNTING STANDARDS

     In January 2003, the FASB issued Interpretation 46, Consolidation of
     Variable Interest Entities. In general, a variable interest entity is a
     corporation, partnership, trust, or any other legal structure where (a) the
     equity holders lack voting rights consistent with a residual equity
     interest (b) equity capital is insufficient to permit the entity to fund
     its expected losses or (c) the equity holders lack the right to receive
     residual returns or the obligation to bear the entity's expected losses..
     Interpretation 46 requires a variable interest entity to be consolidated by
     a company if that company is exposed to a majority of the risk of loss from
     the variable interest entity's activities or entitled to receive a majority
     of the entity's residual returns or both. The consolidation requirements of
     Interpretation 46 apply immediately to variable interest entities created
     after January 31, 2003. The consolidation requirements apply to entities
     considered to be special purpose entities as of December 31, 2003 and to
     non-special purpose entities as at March 31, 2004. Certain of the
     disclosure requirements apply in all financial statements issued after
     January 31, 2003, regardless of when the variable interest entity was
     established.

     In December 2003, the FASB published a revision to FIN 46 to clarify some
     of the provisions of the interpretation and defer to the effective date of
     implementation for certain entities.

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

     The following table discloses information about our activity with these
     non-consolidated lessor entities in the three year period ended December
     31, 2003:-

<TABLE>
<CAPTION>
                                                                  Year ended December 31,
                                                                ---------------------------
                                                                   2003      2002      2001
<S>                                                             <C>        <C>      <C>
     Incurrence of obligations under capital leases             218,844    68,167   214,159
     Repayments of principal obligations under capital leases    13,135     9,634        --
     Interest expense for capital leases                         29,431    15,395     1,319
     Charterhire expense for operating leases                    32,195    30,785    35,759
</TABLE>

     The Company has both an obligation and an option to purchase the VLCC
     Oscilla on expiry of a five-year time charter, which commenced in March
     2000. Oscilla is owned and operated by an unrelated special purpose entity.
     This entity owns the Oscilla, which is leased to a third party, and has no
     other activities. Prior to the adoption of FIN 46R this special purpose
     entity was not consolidated by Frontline. We have determined that the
     entity that owns Oscilla is a variable interest entity and that Frontline
     is the primary beneficiary. At the current date we have been unable to
     obtain the accounting information necessary to be able to consolidate the
     entity that owns Oscilla. If the Company has exercised its option at
     December 31, 2003, the cost to the Company of the Oscilla would have been
     approximately $42.3 million and the maximum exposure to loss was $17.4
     million.

     The following table discloses information about the Company's activity with
     this non-consolidated entity in the three year period ended December 31,
     2003:-

                                                  Year ended December 31,
                                                ---------------------------
                                                 2003       2002       2001

     Loan advances made                            --      1,489         --
     Loan repayments received                   2,262        181      3,372
     Interest income                            1,247      1,147      1,357

     The Company owns 50% of the issued shares of and has made loans to Golden
     Fountain Corporation, owner of a VLCC. Prior to the adoption of FIN 46
     Frontline accounted for its interest in Golden Fountain Corporation using
     the equity method. We have determined that Golden Fountain Corporation is a
     variable interest entity and that Frontline is the primary beneficiary.
     Accordingly we have 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 is to
     increase total assets by $7.8 million, increase total liabilities by $16.4
     million and to record the cumulative effect of a change in accounting
     principle of $8.5 million.

     On July 1, 2003, the Company's subsidiary Golden Ocean Group Ltd, purchased
     a call option to acquire all of the shares of Independent Tankers
     Corporation ("ITC") from Hemen Holding Ltd, a related party, for a total
     consideration of $4.0 million plus 4 per cent interest per year. ITC
     operates a total of six VLCCs and four Suezmax tankers, which are on
     long-term charters to BP and Chevron. Golden Ocean paid $10.0 million for
     the option, which expires on July 1, 2010. Prior to the adoption of FIN 46
     Frontline did not consolidate ITC. We have determined that ITC is a
     variable interest entity and that Frontline is the primary beneficiary.
     Accordingly we have consolidated the assets and liabilities of ITC
     effective December 31, 2003. The effect of consolidation of ITC as of
     December 31, 2003 is to increase total assets by $910.5 million, increase
     total liabilities by $935.7 million and to record the cumulative effect of
     a change in accounting principle of $25.2 million.

     The following table summarises the effects of adoption of FIN 46 on the
     Company's balance sheet as at December 31, 2003:
<PAGE>

<TABLE>
<CAPTION>
                                                                      Prior to    Consolidation    Consolidation         After
                                                                      adoption        of Golden           of ITC      adoption
                                                                     of FIN 46    Fountain Corp                      of FIN 46
<S>                                                                 <C>              <C>              <C>         <C>
ASSETS
Current Assets
     Cash and cash equivalents                                         112,996            1,466            9,727       124,189
     Restricted cash                                                   568,080                           323,807       891,887
     Marketable securities                                                  44                                              44
     Trade accounts receivable                                          45,145            3,020                         48,165
     Other receivables                                                  19,701             (242)                        19,459
     Inventories                                                        26,072               76                         26,148
     Voyages in progress                                                60,282                                          60,282
     Prepaid expenses and accrued income                                 9,194               65            2,982        12,241
     Net investment in finance lease, current portion                       --                            15,511        15,511
     Derivative instruments receivable amounts                              78                                              78
------------------------------------------------------------------------------------------------------------------------------
     Total current assets                                              841,592            4,385          352,027     1,198,004
Newbuildings and vessel purchase options                                18,412                           (10,042)        8,370
Vessels and equipment, net                                           1,981,558           42,664          141,017     2,165,239
Vessels and equipment under capital lease, net                         459,695                           305,431       765,126
Investment in associated companies                                     212,574          (39,245)                       173,329
Net investment in finance lease, long term portion                          --                           120,894       120,894
Deferred charges                                                        21,288                             1,166        22,454
Other long-term assets                                                  10,119                                          10,119
     Total assets                                                    3,545,238            7,804          910,493     4,463,535
==============================================================================================================================

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
     Short-term debt and current portion of long-term debt             153,326                            37,805       191,131
     Current portion of obligations under capital leases                20,138                                          20,138
     Trade accounts payable                                              7,289                                           7,289
     Accrued expenses                                                   42,689              304           33,917        76,910
     Deferred charter revenue                                            3,795                             1,514         5,309
     Mark to market valuation of derivatives                             9,217                                           9,217
     Other current liabilities                                          11,318                                          11,318
------------------------------------------------------------------------------------------------------------------------------
     Total current liabilities                                         247,772              304           73,236       321,312
Long-term liabilities
     Long-term debt                                                  1,524,371                           566,915     2,091,286
     Obligations under capital leases                                  458,263                           295,560       753,823
     Other long-term liabilities                                        25,648           16,049                         41,697
------------------------------------------------------------------------------------------------------------------------------
     Total liabilities                                               2,256,054           16,353          935,711     3,208,118
Commitments and contingencies                                               --                                              --

Stockholders' equity
     Share capital                                                     184,120                                         184,120
     Additional paid in capital                                        513,859                                         513,859
     Accumulated other comprehensive loss                               (6,953)                                         (6,953)
     Retained earnings                                                 598,158           (8,549)         (25,218)      564,391
------------------------------------------------------------------------------------------------------------------------------
     Total stockholders' equity                                      1,289,184           (8,549)         (25,218)    1,255,417
------------------------------------------------------------------------------------------------------------------------------
     Total liabilities and stockholders' equity                      3,545,238            7,804          910,493     4,463,535
==============================================================================================================================
</TABLE>

4.   SEGMENT INFORMATION

     The Company has two reportable segments: tankers, including oil bulk ore
     carriers, and dry bulk carriers. Prior to the acquisition of Golden Ocean
     in 2000, the Company had one reportable segment. Segment results are
     evaluated based on income from vessel operations before general and
     administrative expenses. The accounting policies used in the reportable
     segments are the same as those followed in the preparation of the Company's
     consolidated financial statements.

     Information about the Company's reportable segments as of and for each of
     the years ended December 31, 2003, 2002 and 2001 follows:

<TABLE>
<CAPTION>
     (in thousands of $ )                                        Dry Bulk
                                                       Tankers    Carriers        Total
                                                     ---------      ------    ---------
<S>                                                  <C>            <C>       <C>
     2003
     ----
     Total operating revenues                        1,155,782      17,455    1,173,237
     Voyage expenses                                   323,378         221      323,599
     Ship operating expenses                           115,345       2,259      117,604
     Depreciation and amortisation                     143,295       3,331      146,626
     Interest income                                       227          --          227
     Interest expense                                   68,695         913       69,608
     Share in results from associated companies         33,533          --       33,533
     Net income                                        437,062        (328)     436,734
     Discontinued operations                                --          --           --
     Vessels and equipment, net                      2,096,605      67,735    2,164,340
     Vessels under capital lease                       765,126          --      756,126
     Investment in associated companies                173,329          --      173,329
     Total assets                                    3,698,488      72,551    3,771,039
     Expenditure for vessels                            66,589          --       66,589
<CAPTION>
     (in thousands of $ )                                        Dry Bulk
                                                       Tankers    Carriers        Total
                                                     ---------      ------    ---------
<S>                                                  <C>            <C>       <C>
     2002
     ----
     Total operating revenues                          540,742      10,597      551,339
     Voyage expenses                                   135,073          --      135,073
     Ship operating expenses                           106,255       3,031      109,286
     Depreciation and amortisation                     133,486       3,331      136,817
     Interest income                                       371          --          371
     Interest expense                                   63,436         940       64,376
     Share in results from associated companies          9,855         856       10,711
     Net income                                          7,868     (19,995)     (12,127)
     Discontinued operations                                --       1,929        1,929
     Vessels and equipment, net                      2,300,875      71,065    2,371,940
     Vessels under capital lease                       264,902          --      264,902
     Investment in associated companies                119,328          --      119,328
     Total assets                                    2,852,029      73,975    2,926,004
     Expenditure for vessels                           376,844          --      376,844
<CAPTION>
     (in thousands of $ )                                        Dry Bulk
                                                       Tankers    Carriers        Total
                                                     ---------      ------    ---------
<S>                                                  <C>            <C>       <C>
     2001
     ----
     Total operating revenues                          703,245      13,233      716,478
     Voyage expenses                                    88,284           9       88,292
     Ship operating expenses                           113,812       2,477      116,289
     Depreciation and amortisation                     112,200       3,331      115,531
     Interest income                                     8,433          --        8,433
     Interest expense                                   83,859       1,141       85,000
     Share in results from associated companies         17,494       3,519       21,013
     Net income                                        257,755      40,545      298,300
     Discontinued operations                                --      21,074       21,074
     Vessels and equipment, net                      2,121,356      74,396    2,195,752
     Vessels under capital lease                       213,320     103,887      317,207
     Investment in associated companies                102,683       4,459      107,142
     Total assets                                    2,776,814     185,751    2,962,565
     Expenditure for vessels                           396,841          --      396,841
</TABLE>

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

<TABLE>
<CAPTION>
     (in thousands of $)                                        2003          2002          2001
<S>                                                       <C>           <C>           <C>
     Total operating revenues
     Total operating revenues for reportable segments      1,173,237       551,339       716,478
     Other operating revenues                                    546           256            --
                                                       -----------------------------------------
     Total consolidated operating revenues                 1,173,783       551,595       716,478
                                                       -----------------------------------------
     Interest income
     Total interest income for reportable segments               227           371         8,433
     Interest income attributable to corporate
     holding and management companies                          8,958        12,671         4,518
                                                       -----------------------------------------
     Total consolidated interest income                        9,185        13,042        12,951
                                                       -----------------------------------------
     Interest expense
     Total interest expense for reportable segments           69,608        64,376        85,000
     Interest expense attributable to corporate
     holding and management companies                          5,489         6,935         4,952
                                                       -----------------------------------------
     Total consolidated interest expense                      75,097        71,311        89,952
                                                       -----------------------------------------
     Depreciation
     Total depreciation for reportable segments              146,626       136,817       115,531
     Depreciation not attributed to segments                     281            74         1,694
                                                       -----------------------------------------
     Total consolidated depreciation                         146,907       136,891       117,225
                                                       -----------------------------------------
     Net income
     Net income for reportable segments                      436,734       (12,127)      298,300
     Net income attributable to corporate holding
     and management companies                                (27,374)        3,228        84,428
                                                       -----------------------------------------
                                                             409,360        (8,899)      382,728
                                                       -----------------------------------------
     Vessels and equipment, net
     Vessels and equipment, net for reportable segments    2,164,340     2,371,940     2,195,752
     Vessels and equipment not attributed to segments            899         1,299         1,210
                                                       -----------------------------------------
     Total consolidated vessels and equipment, net         2,165,239     2,373,239     2,196,962
                                                       -----------------------------------------
     Assets
     Total assets for reportable segments                  3,771,039     2,926,004     2,962,565
     Cash and cash equivalents attributable to
     holding company                                         630,633        62,663            --
     Other assets attributable to corporate holding
     and management companies                                 61,863        46,076        71,209
                                                       -----------------------------------------
     Total consolidated assets                             4,463,535     3,034,743     3,033,774
                                                       -----------------------------------------

     ============================================================================================
</TABLE>

5.   TAXATION

     Bermuda

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

     United States

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

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

     Other Jurisdictions

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

     The tax charge for the year comprises:

     (in thousands of $)                            2003        2002        2001
     Current tax                                      (3)        (22)        444
     Deferred tax                                     --          --          --
     ---------------------------------------------------------------------------
                                                      (3)        (22)        444
     ===========================================================================

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

     (in thousands of $)                                   2003            2002
     Deferred tax liability - non current                  (197)           (156)
     Tax loss carryforwards                              16,836           5,828
     Valuation allowance                                (16,639)         (5,672)
     ---------------------------------------------------------------------------
     Net deferred tax asset (liability)                      --              --
     ===========================================================================

As of December 31, 2003, 2002 and 2001, the Company had $60,129,000, $20,815,000
and $39,610,000 of net operating loss carryforwards, respectively. In 2003, 2002
and 2001, tax loss  carryforwards have been utilised to offset taxable income in
Sweden.  Tax loss  carryforwards  can be utilised  only against  future  taxable
income of the respective subsidiary.  Our subsidiary Frontline AB accounts for a
total of $52,571,000 as at December 31, 2003 and our subsidiary Frontline Invest
AB  accounts  for a total of  $7,217,000  as of  December  31,  2003.  These net
operating  losses do not have an expiration  date.  The  Company's  deferred tax
assets are reduced by a valuation  allowance when, in the opinion of management,
it is more likely than not that some  portion or all of the  deferred tax assets
will not be realised in the future. In 2002, the Company's Swedish  subsidiaries
have remained  dormant,  and as a  consequence  not  generated  taxable  profits
against which the  historical  tax losses could be utilized.  At this time,  the
Company does not intend to engage in any business activities that would generate
taxable  income within those  Swedish  entities that would enable the Company to
utilize the tax carryforwards. Accordingly the Company recorded a full valuation
allowance at December 31, 2002 and 2003.

6.   EARNINGS PER SHARE

     The  computation  of basic EPS is based on the weighted  average  number of
     shares  outstanding during the year. The computation of diluted EPS assumes
     the  foregoing  and the exercise of stock  options and  warrants  using the
     treasury stock method (see Note 21).

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

<TABLE>
<CAPTION>
     --------------------------------------------------------------------------------------
     (in thousands of $)                                       2003        2002        2001

     --------------------------------------------------------------------------------------
<S>                                                         <C>         <C>         <C>
     Net income from continuing operations after tax
     before cumulative effect of change in accounting       443,127       7,172     330,107
     principle
     Discontinued operations                                     --      (1,929)     21,076
     Cumulative effect of change in accounting principle    (33,767)    (14,142)     31,545
     --------------------------------------------------------------------------------------
     Net income (loss) available to stockholders            409,360      (8,899)    382,728
     ======================================================================================
</TABLE>

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

<TABLE>
<CAPTION>
     ---------------------------------------------------------------------------------
     (in thousands )                                            2003     2002     2001
     ---------------------------------------------------------------------------------
<S>                                                           <C>      <C>      <C>
     Basic earnings per share:
     Weighted average number of ordinary shares outstanding   74,902   76,456   76,714
     =================================================================================

     Diluted earnings per share:
     Weighted average number of ordinary shares outstanding   74,902   76,456   76,714
     Warrants and stock options                                  158       52      181
     ---------------------------------------------------------------------------------
                                                              75,060   76,508   76,895
     =================================================================================
</TABLE>

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

     Basic and diluted earnings per share for
     discontinued operations                           --    $(0.02)  $0.27

     Basic earnings per share for cumulative
     effect of change in accounting principle       $(0.45)  $(0.19)  $0.42

     In the years  ended  December  31,  2003,  2002 and 2001 nil,  420,300  and
     174,800 options  respectively were  anti-dilutive in the year and have been
     excluded from the calculation of the diluted earnings per share.

7.   LEASES

     At December  31, 2003 the Company  leased in sixteen  vessels on  long-term
     time  charters  and bareboat  charters  from third  parties.  Four of those
     leases are classified as operating leases and twelve as capital leases. The
     Company's  long-term leases of vessels  generally  contain optional renewal
     periods and purchase options.

     Rental expense

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

     ---------------------------------------------------------------------------
     Year ending December 31,
     (in thousands of $)
     ---------------------------------------------------------------------------
     2004                                                                 33,210
     2005                                                                 33,815
     2006                                                                 33,770
     2007                                                                 33,901
     2008                                                                 33,913
     2009 and later                                                       63,325
     ---------------------------------------------------------------------------
     Total minimum lease payments                                        231,934
     ===========================================================================

     Total rental expense for operating leases was $81,835,000,  $61,429,000 and
     $42,376,000  for  the  years  ended  December  31,  2003,  2002  and  2001,
     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>
                                                                                       Lessor's
                          Expiry of   Extended        Extended        Company's        Option Period
                          Mandatory   Lease Periods   Lease Periods   Option Periods   to Put the
                          Period      at Lessor's     at Company's    to Purchase      Vessel to
Vessel (Type)             of Lease    Option          Option          the Vessel       the Company
-------------             --------    ------          ------          ----------       -----------
<S>                            <C>        <C>             <C>           <C>                     <C>
Front Warrior (Suezmax)        2007       2008-2011       2010-2011     2007 to 2011            2011
Front Champion (VLCC)          2006       2007-2010       2009-2013     2004 to 2013            2010
Front Century (VLCC)           2006       2007-2010       2009-2013     2004 to 2013            2010
Golden Victory (VLCC)          2007       2008-2014       2012-2014     2004 to 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, 2003 no such liability had arisen.

     At December  31, 2003 the Company  leased out twenty seven of its vessel to
     third parties on time and bareboat  charters with initial  periods  ranging
     between  six  months  and ten  years.  Twenty  three  of those  leases  are
     classified as operating leases and four as capital leases.

     Rental income

     The minimum  future  revenues to be received on time and bareboat  charters
     which  are  accounted  for as  operating  leases  and  other  contractually
     committed income as of December 31, 2003 are as follows:

<TABLE>
<CAPTION>
     --------------------------------------------------------------------------------------------------
     Year ending December 31,               Yen revenues            Dollar revenues          Total
     (in thousands of (Y) and $)     (in (Y))     ($ equivalent)
     --------------------------------------------------------------------------------------------------
<S>                                 <C>                   <C>               <C>                <C>
     2004                             995,520              9,295            165,242            174,537
     2005                             992,800              9,270            132,484            141,754
     2006                             385,900              3,603             99,128            102,731
     2007                             226,300              2,113             68,643             70,756
     2008                             226,920              2,119             44,646             46,765
     2009 and later                 1,139,560             10,640             46,952             57,592
     --------------------------------------------------------------------------------------------------
     Total minimum lease revenues   3,967,000             37,040            557,095            594,135
     ==================================================================================================
</TABLE>

     The cost and  accumulated  depreciation  of the  vessels  leased to a third
     party at December 31, 2003 were  approximately  $1,580.5 million and $416.4
     million,  respectively,  and at December 31, 2002 were approximately $432.7
     million and $37.2 million, respectively.

8.   MARKETABLE SECURITIES

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

     ---------------------------------------------------------------------------
     (in thousands of $)                                     2003          2002
     ---------------------------------------------------------------------------
     Cost                                                      59            51
     Gross unrealised loss                                    (15)           (9)
     ---------------------------------------------------------------------------
     Fair value                                                44            42
     ===========================================================================

     The net unrealised loss on marketable securities,  including a component of
     foreign currency translation, included in comprehensive income increased by
     $6,000  for the year  ended  December  31,  2003  (2002 -  increase  in net
     unrealised loss of $6,000).

     ---------------------------------------------------------------------------
     (in thousands of $ )                                   2003   2002     2001
     ---------------------------------------------------------------------------
     Proceeds from sale of available-for-sale securities  12,689     --    3,101
     Realised gain (loss)                                    402   (984)     717
     ===========================================================================

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

9.   TRADE ACCOUNTS RECEIVABLE

     Trade  accounts  receivable  are presented  net of allowances  for doubtful
     accounts  amounting to $1,486,000  and $800,000 for each of the years ended
     December 31, 2003 and 2002, respectively.

10.  OTHER RECEIVABLES

     ---------------------------------------------------------------------------
     (in thousands of $)                                    2003            2002
     ---------------------------------------------------------------------------
     Agent receivables                                     5,623           5,773
     Due from related parties                               (464)            179
     Other receivables                                    14,300           4,946
     ---------------------------------------------------------------------------
                                                          19,459          10,898
     ===========================================================================

     Other  receivables  are presented net of allowances  for doubtful  accounts
     amounting to $nil for each of the years ended December 31, 2003 and 2002.

11.  NEWBUILDINGS AND VESSEL PURCHASE OPTIONS

     ---------------------------------------------------------------------------
     (in thousands of $)                                     2003           2002
     ---------------------------------------------------------------------------
     Newbuildings                                              --         19,035
     Vessel purchase options                                8,370          8,370
     ---------------------------------------------------------------------------
                                                            8,370         27,405
     ===========================================================================

     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
     $290,000 and  $1,902,000 in 2003 and 2002,  respectively.  The Company took
     delivery of one newbuilding during 2003.

     The  Company  has both an  obligation  and an option to  purchase  the VLCC
     Oscilla on expiry of a five-year  time  charter,  which  commenced in March
     2000.  The purchase price is equal to the  outstanding  mortgage debt under
     four loan agreements between lenders and the vessel's owning company. As at
     December 31, 2003 the  outstanding  mortgage debt of the  Oscilla's  owning
     company  amounted  to  $35,990,067  plus   (Y)674,645,262   (equivalent  to
     $6,299,209).   (2002  -  $43,013,215  plus  (Y)759,454,316  (equivalent  to
     $6,406,735).  Included  in this  amount  at  December  31,  2003 is debt of
     $9,023,091 due to the Company (2002 - $10,191,000). The fair value assigned
     to this option and obligation is  $8,370,000.  Fair value was calculated at
     the time of purchase as the difference between the fair value of the vessel
     and the mortgage debt outstanding.

12.  VESSELS AND EQUIPMENT, NET

     ---------------------------------------------------------------------------
     (in thousands of $)                                   2003            2002
     ---------------------------------------------------------------------------
     Cost                                             2,997,286       3,079,916
     Accumulated depreciation                          (832,047)       (706,676)
     ---------------------------------------------------------------------------
     Net book value at end of year                    2,165,239       2,373,239
     ===========================================================================

     Included in the above amounts as at December 31, 2003 and 2002 is equipment
     with a net book value of $899,000 and $1,459,000 respectively. Depreciation
     expense for vessels and equipment was $122.8  million,  $139.9  million and
     $115.6  million  for the years  ended  December  31,  2003,  2002 and 2001,
     respectively, including amounts recorded in discontinued operations.

13.  VESSELS UNDER CAPITAL LEASE, NET

     At December 31 2003,  the Company held twelve  vessels under capital leases
     (2002 - four).  These  leases are for terms that range from eight to twenty
     four  years.  Four of these  vessels  were sold by the  Company in 2003 and
     leased back for a period of nine years with lessor's  options to extend the
     charters  for a further  two years  followed  by a further  two years.  The
     Company  has  purchase  options  over  eight of these  vessels  at  certain
     specified  dates and the  lessor has  options  to put these  vessels to the
     Company at the end of the lease term.

     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>
                                                                                       Lessor's
                          Expiry of   Extended        Extended        Company's        Option Period
                          Mandatory   Lease Periods   Lease Periods   Option Periods   to Put the
                          Period      at Lessor's     at Company's    to Purchase      Vessel to
Vessel (Type)             of Lease    Option          Option          the Vessel       the Company
-------------             --------    ------          ------          ----------       -----------
<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.  At
     December 31, 2003 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.

     ---------------------------------------------------------------------------
     (in thousands of $)                                    2003           2002
     ---------------------------------------------------------------------------
     Cost                                                853,169        282,325
     Accumulated depreciation                            (88,043)       (17,423)
     ---------------------------------------------------------------------------
     Net book value at end of year                       765,126        264,902
     ===========================================================================

     Depreciation  expense for vessels under  capital  lease was $24.0  million,
     $16.6 million and $5.3 million for the years ended December 31, 2003,  2002
     and 2001, respectively.

     The outstanding obligations under capital leases are payable as follows:

     ---------------------------------------------------------------------------
     Year ending December 31,
     (in thousands of $)
     ---------------------------------------------------------------------------
     2004                                                                80,260
     2005                                                                80,360
     2006                                                                80,876
     2007                                                                82,039
     2008                                                                82,976
     2009 and later                                                     813,988
     ---------------------------------------------------------------------------
     Minimum lease payments                                           1,220,499
     ---------------------------------------------------------------------------
     Less imputed interest                                             (446,538)
     ---------------------------------------------------------------------------
     Present value of obligations under capital leases                  773,961
     ===========================================================================

14.  INVESTMENT IN ASSOCIATED COMPANIES

     At  December  31,  2003,  the Company has the  following  participation  in
     investments that are recorded using the equity method:

                                                                      Percentage
     Front Tobago Inc                                                     40.00%
     Alliance Chartering LLC                                              50.00%
     Dundee Navigation SA                                                 50.10%
     Edinburgh Navigation SA                                              50.10%
     Ariake Transport Corporation                                         50.10%
     Sakura Transport Corporation                                         50.10%
     Tokyo Transport Corporation                                          50.10%
     Hitachi Hull No 4983 Ltd.                                            50.10%

     With the exception of Alliance  Chartering LLC, the equity method investees
     are  engaged in the  ownership  and  operation  of oil  tankers or dry bulk
     carriers.

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

     ---------------------------------------------------------------------------
     (in thousands of $)                                    2003            2002
     ---------------------------------------------------------------------------
     Current assets                                       38,057          62,724
     Noncurrent assets                                   417,653         730,940
     Current liabilities                                 115,323         120,454
     Non current liabilities                             205,087         647,755

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

     ---------------------------------------------------------------------------
     (in thousands of $ )                        2003         2002          2001
     ---------------------------------------------------------------------------
     Net operating revenues                   108,489       82,641        82,286
     Net operating income                      91,732       25,740        42,637
     Net income (loss)                         54,768      (16,149)       45,432

     In the year ended  December 31, 2003,  the Company  recorded an  impairment
     charge of $5.2 million related to the other-than-temporary decline in value
     of its  investments  in Golden  Lagoon  Corporation  and Ichiban  Transport
     Corporation.  This impairment charge was triggered by signing agreements on
     June  25,  2003  to  restructure  the  Company's   investments  in  certain
     associated  companies.  These  agreements  provided  for  the  sale  of the
     Company's  investments in Golden Lagoon  Corporation and Ichiban  Transport
     Corporation  and  the  increase  in the  Company's  investments  in  Ariake
     Transport  Corporation,   Sakura  Transport  Corporation,  Tokyo  Transport
     Corporation  and  Hitachi  Hull No 4983 Ltd from  33.33% to  50.10%.  These
     transactions  were  completed in July 2003 through a  combination  of sale,
     acquisition and exchange of interest  transactions which were accounted for
     using the book values of assets exchanged.

     The company held 33.3% of the shares of Ichiban  Transport  Corporation and
     50% of the shares of Golden Lagoon  Corporation  until July 2003 when these
     investments  were sold.  The statement of operations  includes 33.3% of the
     earnings of Ichiban Transport Corporation and 50% of the earnings of Golden
     Lagoon Corporation until the date of sale.

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

     The Company has  determined  that it is the primary  beneficiary  of Golden
     Fountain Corporation under FIN 46 and has therefore consolidated the entity
     as of December 31, 2003.
<PAGE>

15.  INVESTMENT IN FINANCE LEASES

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

     Approximate Termination Payments (in thousands of $)

<TABLE>
<CAPTION>
     Optional Termination Date   Sirius Voyager   Altair Voyager   Cygnus Voyager   Virgo Voyager
     --------------------        --------------   --------------   --------------   -------------
<S>                                      <C>              <C>              <C>              <C>
     April 1, 2003                       13,400
     April 1, 2004                                        12,200
     April 1, 2005                       12,260                            10,930
     April 1, 2006                                        11,110                            5,050
     April 1, 2007                       11,120                            9,910
     April 1, 2008                                        10,030                            4,570
     April 1, 2009                       9,970                             8,890
     April 1, 2010                                        8,940                             4,080
     April 1, 2011                                                         7,880
</TABLE>

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

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

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

     Lease payments under the charter  agreement for each of the five succeeding
     years are as follows:  $26.6 million in 2004,  $23.4 million in 2005, $20.6
     million in 2006, $19.1 million in 2007 and $18.2 million in 2008.

16.  DEFERRED CHARGES

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

     ---------------------------------------------------------------------------
     (in thousands of $)                                   2003            2002
     ---------------------------------------------------------------------------
     Debt arrangement fees                               39,411          17,436
     Accumulated amortisation                           (16,957)        (11,777)
     ---------------------------------------------------------------------------
                                                         22,454           5,659
     ===========================================================================

17.  OTHER LONG-TERM ASSETS

     ---------------------------------------------------------------------------
     (in thousands of $)                                     2003           2002
     ---------------------------------------------------------------------------
     Long-term debt receivable                              9,023         10,191
     Other                                                  1,096          1,013
     ---------------------------------------------------------------------------
                                                           10,119         11,204
     ===========================================================================

18.  ACCRUED EXPENSES

     ---------------------------------------------------------------------------
     (in thousands of $)                                     2003           2002
     ---------------------------------------------------------------------------
     Voyage expenses                                       11,520          3,258
     Ship operating expenses                                9,391         27,501
     Administrative expenses                                5,668          3,948
     Interest expense                                      38,490          5,483
     Taxes                                                    188            134
     Other                                                 11,653             --
     ---------------------------------------------------------------------------
                                                           76,910         40,324
     ===========================================================================

19.  DEBT

<TABLE>
<CAPTION>
     ---------------------------------------------------------------------------------
     (in thousands of $)                                            2003          2002
     ---------------------------------------------------------------------------------
<S>                                                           <C>           <C>
     US Dollar denominated floating rate debt
     (LIBOR + 0.70% to 2.75%) due through 2011                   937,936     1,314,183
     Yen denominated floating rate debt
     (LIBOR + 1.125% to 1.313%) due through 2011                 157,210       110,718
     Fixed rate debt 0% due through 2005                           2,000         2,000
     Fixed rate debt 8.00% due through 2005                           --        11,250
     8.5% Senior notes                                           580,000            --
     Serial notes (6.42% to 7.62%)                               120,620            --
     Term notes (7.84% to 8.52%)                                 484,100            --
     ---------------------------------------------------------------------------------
                                                               2,281,867     1,438,151
     Credit facilities                                               550         7,321
     ---------------------------------------------------------------------------------
     Total debt                                                2,282,417     1,445,472
     Less: short-term and current portion of long-term debt     (191,131)     (167,807)
     ---------------------------------------------------------------------------------
                                                               2,091,286     1,277,665
     =================================================================================
</TABLE>

     The outstanding debt as of December 31, 2003 is repayable as follows:

     ---------------------------------------------------------------------------
     Year ending December 31,
     (in thousands of $)
     ---------------------------------------------------------------------------
     2004                                                                191,131
     2005                                                                281,792
     2006                                                                251,396
     2007                                                                157,067
     2008                                                                127,200
     2009 and later                                                    1,273,831
     ---------------------------------------------------------------------------
     Total debt                                                        2,282,417
     ===========================================================================

     The weighted  average  interest rate for the floating rate debt denominated
     in US dollars  was 3.08 per cent as of  December  31, 2003 (2002 - 3.93 per
     cent).  The  weighted  average  interest  rate for the  floating  rate debt
     denominated  in Yen was 1.33 per cent as of December  31, 2003 (2002 - 1.27
     per cent). These rates take into consideration related interest rate swaps.

     Certain of the fixed rate debt,  floating rate debt,  term notes and serial
     notes are  collateralised  by ship mortgages and, in the case of some debt,
     pledges of shares by each  guarantor  subsidiary.  The  Company's  existing
     financing  agreements  impose  operation and financing  restrictions on the
     Company which may significantly limit or prohibit,  among other things, the
     Company's  ability to incur  additional  indebtedness,  create liens,  sell
     capital shares of subsidiaries, make certain investments, engage in mergers
     and acquisitions, purchase and sell vessels, enter into time or consecutive
     voyage  charters or pay  dividends  without the consent of our lenders.  In
     addition, our lenders may accelerate the maturity of indebtedness under our
     financing  agreements  and  foreclose  upon  the  collateral  securing  the
     indebtedness  upon the occurrence of certain  events of default,  including
     our failure to comply with any of the covenants  contained in our financing
     agreements.   Various  debt  agreements  of  the  Company  contain  certain
     covenants which require  compliance  with certain  financial  ratios.  Such
     ratios include equity ratio covenants,  minimum value clauses,  and minimum
     free cash  restrictions.  As of  December  31,  2003 and 2002,  the Company
     complied with all the debt covenants of its various debt agreements.

20.  SHARE CAPITAL

     Authorised share capital:

     ---------------------------------------------------------------------------
     (in thousands of $)                                        2003        2002
     ---------------------------------------------------------------------------
     125,000,000 ordinary shares of $2.50 each               312,500     312,500
     ===========================================================================

     Issued and fully paid share capital:

     ---------------------------------------------------------------------------
     (in thousands of $, except share numbers)                  2003        2002
     ---------------------------------------------------------------------------
     73,647,930 ordinary shares of $2.50 each                184,120     191,166
     (2002 - 76,466,566)
     ===========================================================================

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

     Of the  authorised  and  unissued  ordinary  shares at December  31,  2003,
     295,436 are  reserved  for issue  pursuant to  subscription  under  options
     granted  under the Company's  share option plans.  As at December 31, 2003,
     except for the shares which would be issued on the exercise of the options,
     no  unissued   share   capital  of  the  Company  is  under  option  or  is
     conditionally or  unconditionally  to be put under option. In 2003 and 2002
     the Company  issued 251,364 and 59,000 shares  respectively,  in connection
     with the exercise of employee share options.

     In 2001 the Company  bought back and  cancelled a total of 2,207,300 of its
     Ordinary Shares, respectively, in a number of separate market transactions.
     These share buybacks were made within a Board of Directors authority to buy
     back up to 7,500,000 ordinary shares.

     In September  2001 the Company  established  a twelve month  facility for a
     Stock Indexed Total Return Swap Programme or Equity Swap Line with the Bank
     of Nova Scotia ("BNS"),  whereby the latter acquired shares in the Company,
     and the  Company  carried  the risk of  fluctuations  in the share price of
     those acquired shares.  BNS was compensated at their cost of funding plus a
     margin.  In 2002,  the term of the  Equity  Swap  Line was  extended  until
     February  2004. At December 31, 2002 and 2001,  BNS had acquired a total of
     2,695,000 and 2,100,000 Frontline shares under the Programme, respectively.
     In June  2003,  the  Equity  Swap  Line  was  terminated  and  the  Company
     consequently acquired and cancelled 3,070,000 of its Ordinary Shares.

     A number of the Company's bank loans contain a clause that permit  dividend
     payments  subject to the  Company  meeting  certain  equity  ratio and cash
     covenants immediately after such dividends being paid.

     On December 6, 1996, the Company's Board of Directors adopted a Shareholder
     Rights  Plan  (the  "Plan").  The  Company  adopted  the  Plan  to  protect
     shareholders against unsolicited attempts to acquire control of the Company
     that do not offer an adequate  price to all  shareholders  or are otherwise
     not in the best  interests of the Company and its  shareholders.  Under the
     Plan,  each  shareholder  of record on December 20, 1996 received one right
     for each Ordinary  Share held,  and each  registered  holder of outstanding
     warrants  received  one right for each  Ordinary  Share for which  they are
     entitled to subscribe.  Each right entitles the holder to purchase from the
     Company  one-quarter of an Ordinary  Share at an initial  purchase price of
     $1.50. The rights will become exercisable and will detach from the Ordinary
     Shares  a  specified  period  of time  after  any  person  has  become  the
     beneficial owner of 20 per cent or more of the Company's Ordinary Shares.

     If any person  becomes the  beneficial  owner of 20 per cent or more of the
     Company's Ordinary Shares,  each right will entitle the holder,  other than
     the acquiring  person,  to purchase for the purchase price,  that number of
     Ordinary Shares having a market value of eight times the purchase price.

     If,  following  an  acquisition  of 20 per  cent or  more of the  Company's
     Ordinary Shares, the Company is involved in certain  amalgamations or other
     business  combinations or sells or transfers more than 50% of its assets or
     earning  power,  each right will  entitle  the holder to  purchase  for the
     purchase price ordinary shares of the other party to the transaction having
     a market value of up to eight times the purchase price.

     The  Company  may  redeem  the rights at a price of $0.001 per right at any
     time  prior to a  specified  period of time  after a person  has become the
     beneficial owner of 20 per cent or more of its Ordinary Shares.  The rights
     will expire on December 31, 2006, unless earlier exchanged or redeemed.

     In connection  with the  Company's  one-for-ten  reverse  stock split,  the
     rights were adjusted  pursuant to the Plan, so that there are currently ten
     rights attached to each outstanding Ordinary Share.

21.  WARRANTS AND SHARE OPTION PLANS

     Pursuant to the terms of the Amalgamation  Agreement,  warrants to purchase
     2,600,000  shares in the Company were granted on the date of  Amalgamation.
     These warrants were recorded at an estimated fair value at November 1, 1997
     using the Black-Scholes  option pricing model.  These warrants entitled the
     holder to  subscribe  for one  ordinary  share in the Company at a price of
     $15.91 and were  exercisable  at any time up to May 11, 2001. In the period
     from  January 1, 2001 to May 11, 2001 a total of  2,591,732  warrants  were
     exercised  and on May 11,  2001 any  warrants  that had not been  exercised
     expired.

     The Company has in place a Bermuda Share Option Plan (the  "Bermuda  Plan")
     and a United Kingdom Share Option Plan (the "U.K. Plan"). Both share option
     plans are  accounted for as variable  plans.  Under the terms of the plans,
     the exercise  price set on the grant of share  options may 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 may not in any ten year  period  exceed 7 per cent of the  issued
     share capital of the Company.  No consideration is payable for the grant of
     an option.  In 2001,  the  Bermuda  Plan was  amended  to provide  that the
     exercise  price set on the  grant  can  subsequently  be  adjusted  so that
     dividends  paid after the date of grant will be deducted  from the exercise
     price.

     Under the Bermuda Plan,  options may be granted to any director or eligible
     employee  of the  Company or  subsidiary.  Options  are  exercisable  for a
     maximum period of nine years  following the first  anniversary  date of the
     grant.

     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, 2000                 319          $5.50
             Granted                                          194         $11.76
             Exercised                                       (130)         $3.49
             Cancelled                                        (23)        $11.76
     Options outstanding at December 31, 2001                 360          $7.71
            Granted                                           252         $11.90
            Exercised                                         (59)         $4.47
            Cancelled                                          (6)        $11.90
     Options outstanding at December 31, 2002                 547         $11.24
            Granted                                            --             --
            Exercised                                        (252)         $6.86
            Cancelled                                          --             --
     ---------------------------------------------------------------------------
     Options outstanding at December 31, 2003                 295          $8.49
     ===========================================================================

     Options exercisable at:
     December 31, 2001a                                       190          $4.07
     ===========================================================================
     December 31, 2002a                                       187          $8.09
     ===========================================================================
     December 31, 2003a                                        94          $9.14
     ===========================================================================

     Under the U.K.  Plan,  options may be granted to any full-time  director or
     employee of the Company or subsidiary.  Options are only exercisable during
     the  period of seven  years  following  the third  anniversary  date of the
     grant.

     At  December  31,  2003,  2002 and 2001  there  were no  options  remaining
     outstanding under the U.K. Plan.

     There were no options  granted in the year ended  December  31,  2003.  The
     weighted  average fair value of options  granted  under the Bermuda Plan in
     the  year  ended   December   31,  2002  and  2001  was  $6.80  and  $6.79,
     respectively.  The fair value of each option grant is estimated on the date
     of grant using the  Black-Scholes  option pricing model using the following
     weighted average assumptions:

     ---------------------------------------------------------------------------
                                                                  2002      2001
     ---------------------------------------------------------------------------
     Risk free interest rate                                      2.8%      4.9%
     Expected life                                             5 years   5 years
     Expected volatility                                           64%       60%
     Expected dividend yield                                        0%        0%

     The options outstanding under the Bermuda Plan as at December 31, 2003 have
     exercise prices of $2.50 (7,500 options) $7.30 (177,336 options) and $10.80
     (110,600  options).  The  exercise  prices  are  reduced  by any  dividends
     declared after the date of grant.  The options that were not exercisable at
     December 31, 2003, vested over a period from January 2004 to June 2004. The
     options  outstanding  under the Bermuda Plan as at December 31, 2003 have a
     weighted average contractual life of 4.98 years.

22.  FINANCIAL INSTRUMENTS

     Interest rate risk management

     In certain situations,  the Company may enter into financial instruments to
     reduce the risk associated with fluctuations in interest rates. The Company
     has a portfolio of swaps that swap  floating  rate  interest to fixed rate,
     which from a  financial  perspective  hedge  interest  rate  exposure.  The
     Company  does not hold or issue  instruments  for  speculative  or  trading
     purposes.  The  counterparties  to such  contracts  are J.P.  Morgan Chase,
     Credit Agricole Indosuez,  Deutsche Schiffsbank and Den norske Bank. Credit
     risk  exists to the extent  that the  counterparties  are unable to perform
     under the contracts.

     The Company  manages its debt portfolio with interest rate swap  agreements
     in U.S.  dollars  to  achieve  an  overall  desired  position  of fixed and
     floating  interest  rates.  The  Company  has  entered  into the  following
     interest  rate swap  transactions  involving  the payment of fixed rates in
     exchange for LIBOR:

     ---------------------------------------------------------------------------
     Principal                                 Inception      Maturity     Fixed
                                                    Date          Date  Interest
     ---------------------------------------------------------------------------
     (in thousands of $)                                                    Rate
     $50,000                                January 2001  January 2006    5.635%
     $49,338 reducing monthly to $29,793      March 1998    March 2006    7.288%
     $53,352 reducing monthly to $17,527  September 1998   August 2008    7.490%

     As at December 31, 2003,  the notional  principal  amounts  subject to such
     swap agreements was $140,460,000 (2002 - $352,690,000).

     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.  Certain  of the  Company's
     subsidiaries  have Yen denominated  long-term debt which as of December 31,
     2003 stood at Yen 16,830,409,959  and charter contracts  denominated in Yen
     with  contracted  payments  as set  forth in Note 7.  There is a risk  that
     currency  fluctuations  will  have a  negative  effect  on the value of the
     Company's cashflows.  The Company has not entered into derivative contracts
     for either transaction or translation risk. Accordingly, such risk may have
     an adverse  effect on the  Company's  financial  condition  and  results of
     operations.

     Forward freight contracts

     The Company may enter into forward freight  contracts and futures contracts
     in order to manage its exposure to the risk of movements in the spot market
     for certain trade routes. Market risk exists to the extent that spot market
     fluctuations  have a  negative  effect  on the  Company's  cash  flows  and
     consolidated statements of operations.

     As at December 31, 2003,  the notional  principal  amounts  subject to such
     forward  freight  contracts and futures  contracts was  $49,862,649  (2002:
     $31,264,000).

     Fair Values

     The carrying  value and  estimated  fair value of the  Company's  financial
     instruments at December 31, 2003 and 2002 are as follows:

<TABLE>
<CAPTION>
     -------------------------------------------------------------------------------------------
                                                      2003         2003         2002        2002
     (in thousands of $)                              Fair     Carrying         Fair    Carrying
                                                     Value        Value        Value       Value
     -------------------------------------------------------------------------------------------
<S>                                              <C>          <C>          <C>         <C>
     Non-Derivatives:
     Cash and cash equivalents                     124,189      124,189       92,078      92,078
     Restricted cash                               891,887      891,887        8,220       8,220
     Marketable securities                              44           44          262         262
     Floating rate debt and credit facilities    1,095,696    1,095,696    1,424,901   1,424,901
     Fixed rate debt 0% due through 2005             1,843        2,000        2,000       2,000
     Fixed rate debt 8.00% due through 2005             --           --       11,250      11,250
     8.5% Senior notes                             580,000      580,000           --          --
     Serial notes (6.42% to 7.62%)                 127,378      120,620           --          --
     Term notes (7.84% to 8.52%)                   485,631      484,100           --          --
     Derivatives:
     Interest rate swap transactions                (9,216)      (9,216)     (16,894)    (16,894)
     Equity swap Line                                   --           --          390         390
     Forward freight contracts                          78           78         (548)       (548)
</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 debt is considered to be equal to the carrying value due to
     its company specific nature and the lack of a market in such debt.

     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 the Equity Swap Line (see Note 20) is based on the quoted
     market price of the Company's  shares held by the Bank of Nova Scotia minus
     the acquisition cost of those shares.

     The fair value of forward  freight  contracts  is  estimated by taking into
     account the cost of entering into forward  freight  contracts to offset the
     Company's outstanding contracts.

     Concentrations of risk

     There is a  concentration  of  credit  risk with  respect  to cash and cash
     equivalents to the extent that substantially all of the amounts are carried
     with Skandinaviska Enskilda Banken, BNP Paribas, Den norske Bank and Nordea
     Bank  Norge.  There is a  concentration  of  credit  risk with  respect  to
     restricted  cash to the extent  that  substantially  all of the amounts are
     carried with the Pacific Life and in escrow with Wilmington Trust. 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.
     In 2003,  2002 and 2001,  no customer  accounted for 10 per cent or more of
     freight revenues.

23.  RELATED PARTY TRANSACTIONS

     On December 5, 2000, a subsidiary  of Frontline  made a short-term  loan of
     $20  million  to World  Shipholding  Ltd..  This loan was repaid in full on
     February 6, 2001.  Fees and interest  totalling  $234,680  were recorded in
     2001. World  Shipholding  Ltd. is indirectly  controlled by John Fredriksen
     who is Frontline Ltd's Chairman and a major stockholder in the Company.

     In  February  2001,  the  Company  acquired   newbuilding   contracts  from
     Seatankers  Management Co. Ltd for the  construction  and purchase of three
     VLCC  tankers  at the  Hitachi  shipyard  in Japan.  These  contracts  were
     acquired  for the  original  contract  price of $72 million  each plus $0.5
     million per  contract.  These three  newbuildings  were  delivered in 2002.
     Seatankers  Management Co. Ltd is indirectly  controlled by John Fredriksen
     who is Frontline Ltd's Chairman and a major stockholder.

     In the years ended  December 31, 2003,  2002 and 2001,  Frontline  provided
     services to Seatankers Ltd. These services comprise  management support and
     administrative  services including  administration of a newbuilding project
     known as the Uljanik  Project.  In the years ended December 31, 2003,  2002
     and 2001 the Company  earned  management  fees of  $107,995,  $253,762  and
     $277,855,  respectively  from Seatankers Ltd. As at December 31, 2003, 2002
     and 2001 amounts of $17,880,  $141,359 and $314,923  respectively  were due
     from Seatankers Ltd in respect of these fees and for the  reimbursement  of
     costs incurred on behalf of Seatankers  Ltd.  Seatankers Ltd. is indirectly
     controlled by John  Fredriksen who is Frontline  Ltd's Chairman and a major
     stockholder  in  the  Company.  The  Company  recognizes  these  fees  as a
     reduction in our total administrative expenses.

     In the years  ended  December  31,  2003 and 2002  Frontline  has  provided
     management  support  and  administrative  services to Osprey  Maritime  Ltd
     ("Osprey").  In the years  ended  December  31,  2003 and 2002 the  Company
     earned management fees of $51,600 and $42,000  respectively from Osprey. As
     at December 31, 2003 and 2002  amounts of $18,719 and $18,000  respectively
     were due from Osprey in respect of these fees and for the  reimbursement of
     costs  incurred on behalf of Osprey.  At December  31,  2002,  an amount of
     $103,838 was due to Osprey in respect of Tankers pool  distributions due to
     Osprey that were received by the Company.  Osprey is indirectly  controlled
     by John Fredriksen who is Frontline Ltd's Chairman and a major  stockholder
     in the  Company.  The Company  recognizes  these fees as a reduction in our
     total administrative expenses.

     In the years ended December 31, 2003, 2002 and 2001, Frontline has provided
     services to Golar LNG Limited  ("Golar").  The  services  provided  include
     management  support,  corporate and administrative  services.  In the years
     ended December 31, 2003, 2002 and 2001, the Company earned  management fees
     of $261,000, $391,153 and $258,960, respectively from Golar. As at December
     31,  2003,  2002  and  2001,  amounts  of  $79,335,  $86,343  and  $547,966
     respectively  were due  from  Golar in  respect  of these  fees and for the
     reimbursement  of costs  incurred on behalf of Golar.  Golar is  indirectly
     controlled by John  Fredriksen who is Frontline  Ltd's Chairman and a major
     stockholder  in  the  Company.  The  Company  recognizes  these  fees  as a
     reduction in our total administrative expenses.

     In the  year  ended  December  31,  2003 and 2002  Frontline  has  provided
     management  support and  administrative  services to Northern Offshore Ltd,
     ("NOF"),  In the years ended 31 December  2003 and 2002 the Company  earned
     management  fees of  $134,016  and  $173,724  respectively  from NOF. As at
     December 31, 2003 and 2002 amounts of $2,422 and $31,071  respectively were
     due from NOF in respect of these  fees and for the  reimbursement  of costs
     incurred on behalf of NOF. NOF is indirectly  controlled by John Fredriksen
     who is Frontline Ltd's Chairman and a major stockholder in the Company. The
     Company  recognizes  these fees as a reduction in our total  administrative
     expenses.

24.  ACQUISITIONS OF BUSINESSES

     In April  2001,  the  Company  announced  an offer for all of the shares of
     Mosvold Shipping Limited  ("Mosvold"),  a Bermuda company whose shares were
     listed on the Oslo Stock Exchange. Through a combination of shares acquired
     and  acceptances of the offer, as at May 31 2001,  Frontline  controlled 97
     per cent of the shares of Mosvold.  The  remaining 3 per cent of the shares
     of Mosvold were acquired during 2001 through a compulsory acquisition.  The
     total  acquisition  price  paid  was  approximately   $70.0  million.   The
     difference between the purchase price and the net assets acquired, has been
     assigned to the identifiable long-term assets of Mosvold.

     The  following  table  reflects  unaudited  pro-forma  combined  results of
     operations of the Company on the basis that the  acquisition of Mosvold had
     taken place at January 1, 2001:

     ---------------------------------------------------------------------------
     (in thousands of $, except per share data)                             2001
                                                                     (unaudited)
     ---------------------------------------------------------------------------
     Net operating revenues                                              655,527
     Net income                                                          384,453
     Basic earnings per share                                              $5.01
     Diluted earnings per share                                            $5.00

25.  COMMITMENTS AND CONTINGENCIES

     Assets Pledged

     ---------------------------------------------------------------------------
     (in thousands of $)                                    2003            2002
     ---------------------------------------------------------------------------
     Ship mortgages                                    2,164,340       2,238,905
     Restricted bank deposits                            891,887           8,220
     ---------------------------------------------------------------------------
                                                       3,056,227       2,247,125
     ===========================================================================

     Other Contractual Commitments

     The Company insures the legal  liability risks for its shipping  activities
     with  Assuranceforeningen  SKULD,  Assuranceforeningen  Gard  Gjensidig and
     Britannia Steam Ship Insurance  Association  Limited, all mutual protection
     and indemnity associations.  As a member of these mutual associations,  the
     Company  is  subject  to calls  payable  to the  associations  based on the
     Company's  claims  record in  addition  to the claims  records of all other
     members of the  associations.  A contingent  liability exists to the extent
     that the claims records of the members of the associations in the aggregate
     show  significant  deterioration,  which result in additional  calls on the
     members.

     Certain  of  the  Company's   subsidiaries   have  contractual   rights  to
     participate  in the  profits of the  vessels  New  Vanguard,  New Vista and
     Channel  Alliance.  Revenues  arising  from  these  arrangements  have been
     accrued to the balance sheet date.

     The charterers of three of the Company's vessels have contractual rights to
     participate in the profits on sale of those vessels. In the case of the Cos
     Hero,  the  charterer is entitled to 50 per cent of the profit  realised on
     any qualifying  sale. The Cos Hero may only be sold if the profit from sale
     will  exceed $3.0  million.  Profit is defined as sale  proceeds  less debt
     outstanding in the relevant profit share agreements. If the New Vanguard or
     New Vista are sold,  the charterer is entitled to claim up to $1 million to
     cover losses incurred on subcharters of the vessel. Any remaining profit is
     to be split 60:40 in favour of the owner.

     The  charterer of the  Company's  vessel,  Navix  Astral,  holds a purchase
     option  denominated  in yen to purchase  the vessel.  The  purchase  option
     reduces on a sliding scale over the term of the related charter and is at a
     strike  price  that is in excess of the  related  debt on the  vessel.  The
     option is  exercisable at any time after the end of the seventh year of the
     charter.

     At December 31, 2003,  the Company had twelve vessels that were sold by the
     Company at various  times during the period from  November 1998 to December
     31,  2003,  and leased back on charters  that range for periods of eight to
     twelve  and a half years with  options on the  lessors'  side to extend the
     charters for periods that range up to five years.  Eight of these  charters
     are accounted for as capital leases and four are accounted for as operating
     leases. The Company has purchase options at certain specified dates and the
     lessor  has  options to put the  vessels  on the  Company at the end of the
     lease  terms for all of these  twelve  vessels.  The total  amount that the
     Company  would be required to pay under these put options  with  respect to
     the operating leases is $56.8 million.

     At December 31, 2003 Chevron Transport Corporation charters four vessels on
     long-term  bareboat  charters  recorded as investments  in finance  leases.
     Chevron  holds  options  to  purchase  each  vessel for $1 on April 1, 2015
     provided  no earlier  optional  termination  of the  bareboat  charter  has
     occurred.  Details of Chevron's optional termination dates for the charters
     are contained in Note 15.

26.  SUPPLEMENTAL INFORMATION

     Non-cash investing and financing activities included the following:

<TABLE>
<CAPTION>
     -----------------------------------------------------------------------------------
     (in thousands of $)                                      2003       2002      2001
     -----------------------------------------------------------------------------------
<S>                                                       <C>         <C>        <C>
     Sales of vessels:
     Proceeds received in the form of shares                14,160         --        --

     Sale and leaseback of vessels:
     Additions to vessels under capital leases, net        218,844     68,167        --
     Incurrence of obligations under capital leases       (218,844)   (68,167)       --

     Exchange of interests in associated companies:
     Additions to investments in associated companies        9,902         --        --
     Disposals of investments in associated companies       (9,902)        --        --

     Acquisition of subsidiaries and businesses:
     Assets acquired, including goodwill                    75,949         --    83,403
     Liabilities assumed and incurred                       53,470         --    14,033
     Minority interest recorded                                 --         --     1,152

     Exercise of employee share options:
     Non-cash proceeds recorded for issuance of shares:      2,685         --        --
</TABLE>

27.  DISCONTINUED OPERATIONS

     During the year ended  December 31, 2002, the Company sold a portion of its
     dry bulk  operations.  The portion sold has been  recorded as  discontinued
     operations  in  accordance  with the  requirements  of FAS 144  adopted  on
     January 1, 2002.  These activities have previously been reported in the dry
     bulk carriers segment (See Note 4).

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

     ---------------------------------------------------------------------------
     (in thousands of $)                                2003      2002      2001
     ---------------------------------------------------------------------------
     Carrying amount of assets disposed of                --    95,548        --
     Carrying amount of debt or lease retired             --    70,215        --

     Amounts recorded in discontinued operations
        Net operating revenues                            --    12,505    19,159
        Net income (loss) before cumulative effect
           of change in accounting principle              --    (1,929)   20,280
        Gain (loss) on disposal                           --    (3,109)       --

     ===========================================================================

28.  SUBSEQUENT EVENTS

     In December 2003, Frontline agreed with its partner,  Overseas Shipholding,
     Group, Inc ("OSG"), to swap interests in six joint venture companies, which
     each own a VLCC.  These  agreements  resulted in Frontline  exchanging  its
     interest in the vessels  Dundee,  Sakura I and Tanabe for OSG's interest in
     the vessels Edinburgh,  Ariake and Hakata,  thereby increasing its interest
     in these vessels to 100.0% each.  The exchanges of interests were completed
     on February  24, 2004.  Frontline  received a net cash  settlement  of $2.3
     million in the exchange  transaction to reflect the difference in values of
     the assets  exchanged.  These  transactions were recorded as a non-monetary
     exchange of productive  assets.  The Company  recorded the increases of its
     investments at the book value of its investments given up in the exchanges.
     A gain on $0.2  million was  recognised  in  connection  with the  exchange
     insofar as it related to the cash element received in the transaction.

     On February 17, 2004 the Company's  subsidiary  Ship Finance  International
     Ltd  entered  into  a  senior  secured  credit  facility  agreement  with a
     syndicate of banks with principal  amount $1,058.0  million.  This facility
     bears interest at LIBOR plus 1.25% payable  quarterly in arrears and may be
     prepaid without penalty. The principal  amortization schedule in respect of
     our senior secured credit  facility,  assuming that it is fully drawn upon,
     will be as follows:

                   Year                                   Amount
                                                          (dollars in millions)
                                                          ---------------------

                   2004                                    $93.7
                   2005                                    93.7
                   2006                                    93.7
                   2007                                    93.7
                   2008                                    93.7
                   2009                                    89.8
                   At maturity in 2010                     499.7

     On February  29,  2004,  the Board  declared a dividend of $4.50 per share,
     which was paid on March 29, 2004.

     On May 25, 2004, the Company's wholly owned  subsidiary SFIL,  commenced an
     offer (the  "Exchange  Offer") to exchange  all of its  outstanding  8 1/2%
     senior notes due December 15, 2013, that were issued in a private placement
     on December 18, 2003, for an equal principal  amount of 8 1/2% senior notes
     due December 15, 2013,  that are  registered  under the  Securities  Act of
     1933, as amended (the  "Exchange  Notes").  The terms of the Exchange Notes
     are identical to those of the currently  outstanding  notes except that the
     Exchange Notes are registered under the Securities Act of 1933 and will not
     be subject to restrictions on transfer. The Exchange Offer and the right to
     withdraw  any  outstanding  notes that have been  tendered in the  Exchange
     Offer are  scheduled  to expire on July 26, 2004,  unless  extended by Ship
     Finance International.

     On May 26,  2004,  SFIL,  filed a  registration  statement  to register its
     common shares under the Securities  Exchange Act of 1934. The  registration
     statement  became effective on June 1, 2004 and SFIL's common shares became
     eligible  for  listing on the New York  Stock  Exchange.  The  shares  were
     initially listed on June 17, 2004.

     On May 27, 2004 the Company's  subsidiary  Golden Ocean Group Ltd exercised
     its option to acquire all of the shares of Independent  Tankers Corporation
     ("ITC") from Hemen Holdings Ltd, a related  party.  ITC operates a fleet of
     six VLCCs and four Suezmax  tankers which are all on long-term  charters to
     BP and  Chevron.  Golden Ocean Group Ltd paid Hemen $4.1 million to acquire
     the  shares and had  previously  paid Hemen  $10.0  million to acquire  the
     option in 2003. ITC's most recent financial  statements are dated March 31,
     2004 and they show that ITC has assets of $907.8 million and liabilities of
     $916.0 million.  Frontline has  consolidated  the assets and liabilities of
     ITC effective  December 31, 2003 as disclosed in Note 3,  "Recently  Issued
     Accounting Standards".

     On May 28, 2004,  the Company  announced a partial  spin-off of SFIL.  Each
     Frontline  shareholder  received  one SFIL share for every  four  Frontline
     shares held. The shares were  distributed to  Frontline's  shareholders  on
     June 16, 2004 and began  trading on the New York Stock  Exchange  under the
     ticker symbol SFL.

     On May 28, 2004,  the Company  declared a dividend of $5.00 per share which
     was paid on June 16, 2004.