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

                                    FORM 20-F

(Mark One)

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

                                       OR

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

For the fiscal year ended      December 31, 2005

                                       OR

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

      For the transition period from ________________ to _________________

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

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

For the transition period from
                               ------------------------------------------------
Commission file number            001-16601
                               ------------------------------------------------

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

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

                                     Bermuda
--------------------------------------------------------------------------------
                 (Jurisdiction of incorporation or 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.

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

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

                                      None
--------------------------------------------------------------------------------
                                (Title of class)

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

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

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

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

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

Indicate by check mark if the  registrant is a well-known  seasoned  issuer,  as
defined in Rule 405 of the Securities Act.
                                                      Yes   [X]      No [_]


If this report is an annual or transition report,  indicate by check mark if the
registrant  is not required to file  reports  pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934.
                                                      Yes   [_]      No [X]


Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the  preceding 12 months (or for such  shorter  period that the  registrant  was
required  to file  such  reports),  and  (2) has  been  subject  to such  filing
requirements for the past 90 days.
                                                      Yes   [X]      No [_]


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

Large accelerated filer [X]   Accelerated filer [_]  Non-accelerated filer [_]



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

                                                      Item 17 [_]   Item 18 [X]


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

                                                      Yes   [_]      No [X]
<PAGE>

               (APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
                     PROCEEDINGS DURING THE PAST FIVE YEARS)

Indicate  by check mark  whether  the  registrant  has filed all  documents  and
reports  required  to be filed by  Sections  12,  13 or 15(d) of the  Securities
Exchange Act of 1934 subsequent to the  distribution of securities  under a plan
confirmed by a court.
                                                      Yes   [_]      No [_]
<PAGE>



                          INDEX TO REPORT ON FORM 20-F


                                                                           PAGE
PART I
Item 1.    Identity of Directors, Senior Management and Advisers ............1
Item 2.    Offer Statistics and Expected Timetable ..........................1
Item 3.    Key Information...................................................1
Item 4.    Information on the Company........................................10
Item 4A.   Unresolved Staff Comments.........................................28
Item 5.    Operating and Financial Review and Prospects......................29
Item 6.    Directors, Senior Management and Employees........................47
Item 7.    Major Shareholders and Related Party Transactions.................49
Item 8.    Financial Information.............................................50
Item 9.    The Offer and Listing.............................................52
Item 10.   Additional Information............................................53
Item 11.   Quantitative and Qualitative Disclosures about Market Risk........64
Item 12.   Description of Securities other than Equity Securities............65

PART II
Item 13.   Defaults, Dividend Arrearages and
           Delinquencies.....................................................66
Item 14.   Material Modifications to the Rights of Security
           Holders and Use of Proceeds.......................................66
Item 15.   Controls and Procedures...........................................66
Item 16A.  Audit Committee Financial Expert..................................66
Item 16B.  Code of Ethics....................................................66
Item 16C.  Principal Accountant Fees.........................................66
Item 16D.  Exemptions from the Listing Standards for Audit Committees........67
Item 16E.  Purchases of Equity Securities by the Issuer and
           Affiliated Purchasers.............................................67
PART III

Item 17.   Financial Statements..............................................68
Item 18.   Financial Statements..............................................68
Item 19.   Exhibits..........................................................68


<PAGE>


            CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

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

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

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

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

ITEM 1.  IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS

Not Applicable

ITEM 2.  OFFER STATISTICS AND EXPECTED TIMETABLE

Not Applicable

ITEM 3.     KEY INFORMATION

Please note:  Throughout  this report,  the "Company,"  "we," "us" and "our" all
refer to Frontline Ltd. and its subsidiaries. We use the term deadweight ton, or
dwt, in describing the size of vessels.  Dwt,  expressed in metric tons, each of
which is equivalent to 1,000  kilograms,  refers to the maximum  weight of cargo
and supplies that a vessel can carry. Unless otherwise indicated, all references
to "USD,""US$" and "$" in this report are to, and amounts are presented in, U.S.
dollars.

A. SELECTED FINANCIAL DATA

The  selected  income  statement  data of the Company with respect to the fiscal
years ended December 31, 2005, 2004 and 2003 and the selected balance sheet data
of the Company with respect to the fiscal years ended December 31, 2005 and 2004
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,  2002 and 2001 and the  selected  balance  sheet  data with
respect to the fiscal years ended  December  31,  2003,  2002 and 2001 have been
derived  from  consolidated  financial  statements  of the Company not  included
herein.  The  following  table should also be read in  conjunction  with Item 5.
"Operating and Financial  Review and  Prospects" and the Company's  Consolidated
Financial  Statements and Notes thereto  included  herein.  The income statement
data  for the  years  ended  December  31,  2004,  2003,  2002 and 2001 has been
restated  to  reflect  discontinued  operations  as a result  of the sale of the
Company's  last  remaining  dry bulk carrier in 2005.  This  restatement  has no
effect on the Company's net income.
<table>
                                                    Fiscal Year Ended December 31,
                                          2005        2004       2003        2002        2001
<S>                                     <C>         <C>        <C>         <C>         <C>
(in thousands of $, except Ordinary Shares, per Ordinary Share data and ratios)
Income Statement Data:
Total operating revenues (1)            1,513,833   1,853,570  1,159,439     543,637     714,611
Total operating expenses (1)              717,174     737,532    683,798     450,371     375,758
Net operating income                      872,740   1,135,612    481,267      92,038     374,473
Net income from continuing                766,389     970,936    439,518      11,188     327,667
operations before income taxes,
minority interest and cumulative
effect of change in accounting
principle
Net income from continuing                598,054     905,763    439,515      11,210     327,223
operations before cumulative effect
of change in accounting principle
Discontinued operations (2)                 8,785     117,619      3,612     (5,967)      23,960
Cumulative effect of change in
accounting principle (3)                        -           -   (33,767)    (14,142)      31,545
Net income (loss)                         606,839   1,023,382    409,360     (8,899)     382,728
Earnings  from continuing operations
before cumulative effect of change
in accounting principle per Ordinary
Share
- basic                                     $7.99      $12.21      $5.87       $0.15       $4.27
- diluted                                   $7.99      $12.21      $5.86       $0.15       $4.26
Net income (loss) per Ordinary Share
- basic                                     $8.11      $13.79      $5.47     $(0.12)       $4.99
- diluted                                   $8.11      $13.79      $5.45     $(0.12)       $4.98
Cash dividends declared per share           $6.60      $17.10      $4.55       $0.25       $1.50


Balance Sheet Data (at end of year):
Cash and cash equivalents                 100,533     105,702    124,189      92,078     178,176
Newbuildings and vessel purchase           15,927      24,231      8,370      27,405     102,781
options
Vessels and equipment, net              2,584,847   2,254,361  2,165,239   2,373,329   2,196,959
Vessels under capital lease, net          672,608     718,842    765,126     264,902     317,208
Investments in associated companies        10,169      22,955    173,329     119,329     109,898
Total assets                            4,567,839   4,338,760  4,463,535   3,034,743   3,033,774
Short-term debt and current portion
of long-term debt                         240,191     151,614    191,131     167,807     227,597
Current portion of obligations under
capital lease                              25,142      21,498     20,138      13,164      17,127

Long-term debt                          2,199,538   1,990,131  2,091,286   1,277,665   1,164,354
Obligations under capital lease           706,279     732,153    753,823     259,527     283,663
Share capital                             187,063     187,063    184,120     191,166     191,019
Stockholders' equity                      715,166     917,968  1,255,417   1,226,973   1,252,401
Ordinary Shares outstanding            74,825,169  74,825,169  73,647,930 76,466,566  76,407,566
Weighted average ordinary shares
outstanding                            74,825,169  74,192,939  74,901,900 76,456,340  76,714,000

Cash Flow Data
Cash provided by (used in) operating      979,774     905,987    523,280     143,805     477,607
activities
Cash provided by (used in) investing
activities                              (344,737)     178,490  (269,058)   (224,673)   (103,782)

Cash provided by (used in) financing
activities                              (640,206)  (1,102,964) (233,303)     (5,230)   (299,163)


Other Financial Data
Equity to assets ratio (percentage)         15.7%       21.2%      28.1%       40.4%       41.3%
(4)
Debt to equity ratio (5)                      4.4         3.2        2.4         1.4         1.4
Price earnings ratio (6)                      4.7         3.2        4.7         neg         2.1
Net voyage revenues                       815,019   1,192,910    766,205     354,356     551,524
</table>

Our  vessels  are  operated  under  time  charters,  bareboat  charters,  voyage
charters,  pool  arrangements and contracts of affreightment  ("COAs").  Under a
time charter,  the charterer pays  substantially  all of the vessel voyage costs
which  are  primarily  fuel and  port  charges.  Under a  bareboat  charter  the
charterer pays substantially all of the vessel voyage and operating costs. Under
a voyage  charter,  the  vessel  owner  pays  such  costs.  Under  contracts  of
affreightment,  the  owner  carries  an agreed  upon  quantity  of cargo  over a
specified  route and time  period.  Accordingly,  charter  income  from a voyage
charter  would be greater than that from an equally  profitable  time charter to
take account of the owner's  payment of vessel voyage costs,  and charter income
from a bareboat charter would be lower than that from an equally profitable time
charter,  to take account of the charterer's  payment of vessel operating costs.
In order to compare vessels  trading under  different  types of charters,  it is
standard  industry  practice to measure the revenue  performance  of a vessel in
terms of average daily time charter equivalent  earnings,  or TCEs. For bareboat
charters this is calculated by dividing the sum of bareboat charter revenues and
an estimate of operating costs that we would pay under a comparable time charter
by the number of days on charter.  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.  Other companies may calculate TCE
using a different method. 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>
                                             2005         2004       2003       2002        2001
<S>                                     <C>          <C>        <C>        <C>          <C>
(in thousands of $)
Voyage revenues                         1,152,240    1,554,519  1,089,583    489,286     639,807
Voyage expenses and commission           (337,221)    (361,609)  (323,378)  (134,930)    (88,283)
                                       ----------- ------------ ---------- ---------- -----------
Net voyage revenues                       815,019    1,192,910    766,205    354,356     551,524
                                       =========== ============ ========== ========== ===========
</table>
Notes:
1.  Previously we have reported net operating  revenues in our income  statement
    data.  Effective December 31, 2003 we have reclassified  voyage expenses and
    commission as a component of total  operating  expenses and now report total
    operating revenues and total operating expenses.
2.  During the years ended December 31, 2005, 2004 and 2002 the Company disposed
    of  portions  of  its  dry-bulk  operations  which  have  been  recorded  as
    discontinued  operations in the years ended December 31, 2005,  2004,  2003,
    2002 and 2001. These operations were acquired in 2000.
3.  In 2003,  the Company  adopted FIN 46R  Consolidation  of Variable  Interest
    Entities and  recorded a charge of $33.7  million as a result of this change
    in accounting  principle.  On January 1, 2002,  the Company  adopted FAS 142
    Goodwill and Other Intangible Assets and subsequently  wrote off goodwill of
    $14.1  million.  In 2001,  the  Company  changed its  accounting  policy for
    drydockings to an "expense as incurred" method which resulted in a credit of
    $31.5 million.
4.  Equity to assets ratio is calculated as total  stockholders'  equity divided
    by total assets.  5. Debt to equity ratio is  calculated  as total  interest
    bearing current and long-term liabilities, including
    obligations under capital leases, divided by stockholders' equity.
6.  Price  earnings  ratio is calculated  using the closing year end share price
    divided by basic Earnings per Share.


B. CAPITALISATION 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

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

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

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

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

The factors that influence the supply of tanker capacity include:

          o    the number of newbuilding deliveries;
          o    the scrapping rate of older vessels;
          o    vessel casualties;
          o    price of steel;
          o    the number of vessels that are out of service; and
          o    changes  in   environmental   and  other   regulations  that  may
               effectively  cause reductions in the carrying capacity of vessels
               or early obsolescence of tonnage.

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

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

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

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

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

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

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

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

Our revenues experience seasonal variations that may affect our income

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

As at December 31, 2005,  we charter 50 vessels from Ship Finance  International
Limited at fixed rates on long-term charters. In addition, we charter 13 vessels
under medium term charters from third parties. We are obliged to make fixed rate
hire  payments  even  though our income may  decrease  to levels that make these
charters unprofitable.

The long term time charters to us from Ship Finance International Limited, which
we refer to as Ship Finance,  extend for various periods depending on the age of
the vessels, ranging from approximately six to 22 years. With certain exceptions
as  discussed  below  in  Item  4.  "Information  on  the  Company  History  and
Development  of the Company - Spin-off of Ship  Finance"  the daily base charter
rates,  which are payable by us range from  $25,575 in 2004 to $24,175 from 2011
and beyond for very  large  crude  carriers,  or VLCCs,  and  $21,100 in 2004 to
$19,700  from 2011 and beyond for  Suezmaxes.  The medium  term  charters  to us
extend from four to 10 years. Daily base charter rates payable by us under these
charters range from $20,350-$22,281 in 2006 to $22,310 in 2015 for Suezmaxes and
from $27,880-$30,915 in 2006 to $29,140-$30,915 in 2015 for VLCCs.

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

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

The fair market value of vessels may increase and decrease  depending on but not
limited to the following factors:

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

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

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

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

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

Our tanker fleet includes 22 non-double  hull tankers.  The United  States,  the
European Union and the International Maritime Organization, or the IMO, have all
imposed limits or prohibitions on the use of these types of tankers in specified
markets after certain  target  dates,  depending on certain  factors such as the
size of the vessel  and the type of cargo.  In the case of our  non-double  hull
tankers,  these  phase out dates  range from 2010 to 2015.  In 2005,  the Marine
Environmental  Protection  Committee  of the IMO has amended  the  International
Convention  for the  Prevention of Pollution  from Ships to accelerate the phase
out of certain categories of single hull tankers, including the types of vessels
in our fleet, from 2015 to 2010 unless the relevant flag states extend the date.
This change  could  result in a number of our vessels  being  unable to trade in
many  markets  after 2010.  The phase out of single hull  tankers may  therefore
reduce the demand for single hull tankers,  and force the remaining  single hull
tankers into employment on less desirable trading routes and increase the number
of tankers  trading on those  routes.  As a result,  single hull  tankers may be
chartered less frequently and at lower rates.  Moreover,  additional regulations
may be adopted in the future  that  could  further  adversely  affect the useful
lives of our non-double hull tankers,  as well as our ability to generate income
from them.

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

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

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

The operation of tankers and  transportation of crude and petroleum products and
the other businesses in which we operate are extremely competitive.  Through our
operating  subsidiaries we compete with other oil tanker owners (including major
oil companies as well as independent companies), and, to a lesser extent, owners
of other size vessels. The tanker market is highly fragmented. As of June, 2006,
we are the largest single tanker operator,  controlling  approximately  10.2% of
the world's VLCC and Suezmax  tanker fleet  measured by capacity.  This includes
approximately   one  percentage   point  related  to  vessels  under  commercial
management.  Although we currently operate approximately 10.2% of the world VLCC
and 10.4% of the world Suezmax  tanker fleet,  this market share does not enable
us to  enforce  any  degree of  pricing  discipline  in the  markets in which we
compete. It is possible that our competitive position will erode in the future.

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

As of June  2006,  27 of our  vessels  are  contractually  committed  to time or
bareboat charters,  with the contracts expiring in 2006 for three vessels and on
dates  between  2007 and 2010 for the  other 24  vessels.  Although  these  time
charters generally provide reliable revenues, they also limit the portion of our
fleet available for spot market voyages during an upswing in the tanker industry
cycle, when spot market voyages might be more profitable.

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

Rising fuel prices may adversely affect our profits

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


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

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

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

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

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

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

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

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

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

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

At December 31, 2005 we had total interest  bearing debt outstanding of $2,439.7
million,  of which $1,450.6  million is floating rate debt. We use interest rate
swaps to manage  interest rate risk. As at December 31, 2005,  our interest rate
swap arrangements effectively fix the Company's interest rate exposure on $618.3
million  of  floating  rate  debt.   Our  maximum   exposure  to  interest  rate
fluctuations  is $832.3  million at December  31, 2005.  If interest  rates rise
significantly, our results of operations could be adversely affected.

Fluctuations in the Yen could affect our earnings

The majority of our transactions, assets and liabilities are denominated in U.S.
dollars,  our  functional  currency.   As  at  December  31,  2005  one  of  our
subsidiaries  (2004: two of our subsidiaries) had charter contracts  denominated
in Yen. At  December  31, 2005 we had (Y)35.7  million  (2004:  (Y)2.9  billion)
receivable in relation to long term Yen  denominated  charter  contracts.  These
charter  contracts  ended in January  2006.  At December 31, 2005 we had forward
foreign  exchange  contracts  in the  amount of (Y)8.8  million  (2004:  (Y)15.9
million both loans and forward foreign  exchange  contracts).  A movement of one
Yen in the JPY/USD  exchange rate would  increase or decrease net income by $0.6
million as at December 31, 2005.


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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

We expect that we and each of our  subsidiaries  will qualify for this statutory
tax exemption and we will take this  position for United States  federal  income
tax return reporting purposes.  However,  there are factual circumstances beyond
our control  that could cause us to lose the benefit of this tax  exemption  and
thereby  become subject to United States federal income tax on our United States
source income. Therefore, we can give no assurances on our tax--exempt status or
that of any of our subsidiaries.

If we or our subsidiaries are not entitled to this statutory tax exemption under
Section 883 for any taxable  year, we or our  subsidiaries  would be subject for
those years to a 4% United States  federal  income tax on United States  sources
shipping income. The imposition of this taxation could have an adverse effect on
our business.

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

We will become subject to Section 404 of the  Sarbanes-Oxley  Act of 2002, which
will  require us to include in our annual  report on Form 20-F our  management's
report on, and assessment of the  effectiveness  of, our internal  controls over
financial reporting.  In addition,  our independent registered public accounting
firm will be required to attest to and report on management's  assessment of the
effectiveness  of  our  internal  controls  over  financial   reporting.   These
requirements  will first  apply to our annual  report for the fiscal year ending
December  31,  2006.  If we fail to achieve  and  maintain  the  adequacy of our
internal  controls over financial  reporting,  we will not be in compliance with
all of the  requirements  imposed by Section  404.  Any  failure to comply  with
Section 404 could result in an adverse reaction in the financial marketplace due
to a loss of investor confidence in the reliability of our financial statements,
which ultimately could harm our business and could negatively  impact the market
price of our common stock.  We believe the total cost of our initial  compliance
and the  future  ongoing  costs of  complying  with  these  requirements  may be
substantial.


ITEM 4.  INFORMATION ON THE COMPANY

A. HISTORY AND DEVELOPMENT OF THE COMPANY

The Company

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

We are  engaged  primarily  in  the  ownership  and  operation  of oil  tankers,
including oil/bulk/ore, or OBO carriers. We operate tankers of two sizes: VLCCs,
which are between  200,000 and 320,000  dwt,  and  Suezmaxes,  which are vessels
between  120,000 and  170,000  dwt. In  addition,  we own two 1,700  twenty-foot
equivalent units, or TEU,  containerships.  We operate through  subsidiaries and
partnerships  located in the Bahamas,  Bermuda,  the Cayman Islands, the Isle of
Man,  Liberia,  Norway,  Marshall  Islands,  Cyprus and  Singapore.  We are also
involved  in the  charter,  purchase  and sale of vessels.  Since 1996,  we have
emerged as a leading  tanker company within the VLCC and Suezmax size sectors of
the market.

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

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

Acquisitions and Disposals

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

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

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

As discussed  below,  the  consolidation  as of December 31, 2003 of Independent
Tankers Corporation,  which we refer to as ITC, and Golden Fountain Corporation,
resulted in the addition of seven VLCCs and four Suezmax tankers to our fleet.

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

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

We entered  into a number of  acquisitions  and  disposals  in 2005 as discussed
below:

     o    In January 2005 we acquired the VLCCs Front Century and Front Champion
          which were previously  chartered in by us under operating leases for a
          total  purchase  price of $141.9  million  pursuant to the exercise of
          purchase  options.  In March 2005, we acquired the VLCC Golden Victory
          for $76.9 million pursuant to the exercise of its purchase option.

     o    In January 2005 we,  through  Ship  Finance,  exercised  our option to
          acquire the VLCC Oscilla and the vessel was  delivered to us in April,
          2005 and renamed Front Scilla.  The purchase price paid to acquire the
          vessel  was  approximately  $21.6  million  which  was  equal  to  the
          outstanding  mortgage debt under four loan agreements  between lenders
          and the vessel's owning company.

     o    In January 2005 we sold the Suezmax Front  Fighter for $68.25  million
          and the vessel was delivered to its new owners in March 2005.

     o    In May 2005 we sold the three  Suezmaxes,  Front Lillo,  Front Emperor
          and Front Spirit,  for a total  consideration of $92.0 million.  These
          vessels were delivered to their new owners in June 2005.

     o    In May 2005 we entered into an agreement with parties  affiliated with
          Hemen Holding Ltd.,  which we refer to as Hemen, to acquire two vessel
          owning companies, each owning one 2005 built containership for a total
          consideration  of $98.6  million.  The Sea Alfa was  delivered  in May
          2005,  and the Sea Beta was  delivered in September  2005.  Hemen is a
          Cyprus holding company  indirectly  controlled by Mr. John Fredriksen,
          who is our Chairman and Chief Executive Officer.

     o    In June 2005 we entered into an agreement with parties affiliated with
          Hemen to acquire  two vessel  owning  companies,  each owning one 2004
          built VLCC, for a total consideration of $184.0 million. These vessels
          were  delivered in June,  2005 and named Front Energy and Front Force,
          respectively.

     o    In August  2005,  we sold the drybulk  vessel Cos Hero for proceeds of
          $20.7 million.

     o    In August 2005, we sold the Suezmax Front Hunter for $71.0 million.

     o    In December 2005 we acquired the  interests  held by the joint venture
          partners  in the  vessel  Front  Tobago at a  purchase  price of $35.6
          million.

We have also entered into a number of acquisitions and disposals to date in 2006
as discussed below:

     o    In January  2006,  we sold the vessel Navix Astral to the charterer of
          the  vessel  for (Y) 4.7  billion  (approximately  $40.5  million)  in
          accordance with the latter's option to buy the vessel.

     o    In February  2006,  we ordered  two 297,000 dwt VLCCs for  delivery in
          2009 with an option for  another  two VLCCs for  delivery  in 2009 and
          2010, respectively.

     o    In February 2006, we sold the VLCC Golden Stream for $53.1 million.

     o    In March 2006,  we announced  the  acquisition  of the Aframax  vessel
          "Gerrita"  (built  1990) at a cost of $35.9  million.  The  vessel was
          renamed Front Puffin.

     o    In June 2006,  we sold the options for two VLCC's for delivery in 2009
          and 2010, repectively.

     o    In June 2006, we ordered an additional  two VLCCs for delivery in 2010
          with an option for another  two VLCCs for  delivery  between  2010 and
          2011

Spin-Off of Ship Finance

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

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

During 2005, there have been a number of new leasing  transactions  entered into
between Frontline and Ship Finance and in some cases existing lease arrangements
have been cancelled due to the sale of vessels as described  below. All of these
transactions eliminate on consolidation.

     o    In January 2005,  Frontline sold two vessels,  the VLCCs Front Century
          and Front Champion, to Ship Finance and chartered them back under long
          term  charters to its wholly owned  subsidiary  Frontline  Shipping II
          Limited  which we  refer  to as  Frontline  Shipping  II.  We refer to
          Frontline  Shipping and Frontline  Shipping II as the Charterers.  The
          vessels were sold to Ship Finance for a total of $196.0  million,  and
          chartered back on 199 and 204 month charters, respectively,  following
          the structure in place for other vessels chartered from Ship Finance.

     o    In  January  2005,  the  charter  of the Front  Fighter  to  Frontline
          Shipping was cancelled as a result of the sale of the vessel.

     o    In April  2005,  Ship  Finance  chartered  the VLCC  Front  Scilla  to
          Frontline  on a fixed rate time  charter  following  the  structure in
          place for other vessels chartered from Ship Finance.

     o    In March 2005,  Frontline sold the VLCC Golden Victory to Ship Finance
          for $98.0  million,  and  chartered  it back on a 204  month  charter,
          following the structure in place for other vessels chartered from Ship
          Finance.

     o    In May 2005, the charters of the three Suezmaxes,  Front Lillo,  Front
          Emperor and Front Spirit to  Frontline  Shipping  were  cancelled as a
          result of the sale of the vessels.  In May 2005,  Frontline sold three
          vessels, the Suezmaxes, Front Traveller, Front Transporter,  and Front
          Target, for an aggregate amount of $92.0 million,  to Ship Finance and
          chartered  them back under long term  charters on similar terms as the
          three cancelled charters.

     o    In April 2005, Ship Finance chartered the VLCCs Front Energy and Front
          Force to Frontline on fixed rate time charters following the structure
          in place for other vessels chartered from Ship Finance.

     o    In August 2005, the charter of the Front Hunter to Frontline  Shipping
          was  cancelled  as a result of the sale of the  vessel  and  Frontline
          received compensation of $3.8 million for terminating the charter.

The long term time  charters to us extend for various  periods  depending on the
age of the vessels,  ranging from  approximately  seven to 23 years. Five of the
vessels  that Ship Finance  acquired are on current long term time  charters and
one vessel was on current long term  bareboat at December  31, 2005.  The latter
vessel,  Navix Astral, has since been sold. With certain  exceptions,  the daily
base charter rates,  which are payable by Frontline  Shipping monthly in advance
for a maximum of 360 days per year (361 days per leap year), are as follows:


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

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

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

For the  VLCC  Front  Tobago  and  the  three  Suezmaxes,  Front  Target,  Front
Transporter and Front Traveller,  the terms are similar to those listed above as
these vessels represent  replacement leases for vessels included in the original
fleet which have since been sold.

In addition,  the base charter rate for Ship Finance's  non-double  hull vessels
will  decline to $7,500 per day on each  vessels  anniversary  date in 2010.  At
which time we will have the option to terminate the charters for those vessels.

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


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

Front Champion.....   $31,340         $31,140           $30,640      $28,464
Front Century......   $31,501         $31,301           $30,801      $28,625
Golden Victory.....   $33,793         $33,793           $33,793      $33,793
Front Energy          $30,014         $30,014           $30,014      $30,014
Front Force           $29,853         $29,853           $29,853      $29,853

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

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

Under the terms of charter  ancillary  agreements,  beginning  with the 11-month
period from  February  1, 2004 and for each  calendar  year after that,  we have
agreed to pay Ship Finance a profit sharing  payment equal to 20% of the charter
revenues for the  applicable  period,  calculated  on a time charter  equivalent
basis,  realised  by us from  use of its  fleet  in  excess  of the  daily  base
charterhire.  The profit sharing payment is due two months after the end of each
calendar  year.  The  non-double  hulled  vessels  are not to be included in the
calculation of profit sharing after they have reached their  anniversary date in
2010.

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

On January 28, 2005 and February 23, 2005 our Board approved  further  spin-offs
of the shares in Ship  Finance.  On  February  18,  2005,  each  shareholder  of
Frontline  received one share of Ship Finance for every four shares of ours held
and on March 24, 2005 each  shareholder of Frontline  received one share of Ship
Finance  for every ten shares of ours held.  Following  these  transactions  our
shareholding in Ship Finance was approximately  16.2% at December 31, 2005. Ship
Finance  remains  consolidated  under the provisions of FASB  interpretation  46
Consolidation of Variable Interest Entities.

On February 17,  2006,  our Board  approved a further  spin-off of the shares in
Ship Finance.  On March 20, 2006,  each  shareholder  of Frontline  received one
share of Ship  Finance  for  every  ten  shares of ours  held.  Following  these
transactions  our shareholding in Ship Finance was  approximately  11.1% at June
19, 2006.

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

Spin-Off of Golden Ocean Group Limited

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

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

Acquisition of Independent Tankers Corporation

In May 1998,  we acquired  ITC from a third party in an arms length  transaction
for a price of $9.5  million.  Our  investment in ITC was  subsequently  sold to
Hemen, a related party,  for $9.5 million with effect from July 1, 1998. On July
1, 2003,  we  purchased  a call  option for $10.0  million to acquire all of the
shares  of ITC from  Hemen for a total  consideration  of $4.0  million  plus 4%
interest  per  year.  Hemen  is  indirectly  controlled  by our  Chairman,  John
Fredriksen.  In December  2003 the Company  implemented  the  provisions of FASB
Interpretation  46,  Consolidation of Variable  Interest Entities ("FIN 46") and
consequently  was required to consolidate ITC. On May 27, 2004 we exercised this
purchase  option and  acquired all of the shares of ITC. ITC operates a total of
six  VLCCs  and  four  Suezmax  tankers,  which  are on  long-term  charters  to
subsidiaries  of BP Plc and Chevron  Corporation,  which we refer to as Chevron.
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 eight to twelve years. ITC is financed by
Term and Serial Notes.  These Notes mature between 2006 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 6.48% and 8.52%.


B. BUSINESS OVERVIEW

Our tanker fleet, which we believe is one of the largest in the world,  consists
of 30 VLCCs and 28 Suezmax  tankers,  of which eight are Suezmax  OBOs,  and one
Aframax  tanker.  In  addition  we have two  1,700 TEU  containerships.  We also
charter in ten modern VLCCs and three modern Suezmax tankers from third parties.
We have six VLCC  newbuildings  on  order,  and five  2,800  TEU  containerships
newbuildings on order. In addition,  we have commercial  management of a further
five VLCCs, three Suezmaxes and six Aframax tankers.

As of June 2006, the fleet that we operate has a total tonnage of  approximately
20.3 million dwt, including the 2.5 million dwt under commercial management. Our
tanker  vessels  have an average  age of 9.0 years  compared  with an  estimated
industry  average of over 9.0 years. We believe that our vessels comply with the
most stringent of generally applicable environmental regulations for tankers.

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

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

The  tanker   industry   is  highly   cyclical,   experiencing   volatility   in
profitability,  vessel  values and freight  rates.  Freight  rates are  strongly
influenced   by  the   supply  of  tanker   vessels   and  the  demand  for  oil
transportation.  Refer to Item 5 "Operating and Financial  Review and Prospects"
for a discussion of the tanker market in 2005.

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

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

Strategy

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

     o    Our charter and management  agreements  with Ship Finance  including a
          $274  million  cash  deposit we are  required to reserve to secure the
          charters by Frontline Shipping and Frontline Shipping II.

     o    Our charter and management agreements with nine German KGs.

     o    The ownership of ITC.

     o    The ownership of our remaining directly owned vessels.

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

At the end of 2005,  we  established  a new  business  unit to develop  Floating
Production  Storage and Offloading,  or FPSO, units. We plan to become a leading
FPSO contractor by utilising our large fleet of vessels  suitable for conversion
into FPSOs.  The single hull tankers in our existing fleet are considered as the
main  candidates  for  these  conversions.  In  March  2006 we  entered  into an
agreement  with AED Oil  Limited  for the supply of a FPSO for the Puffin  field
development  in Australia.  The Aframax  vessel Front Puffin is being  converted
into a FPSO for this project and is planned to be in operation from May 2007.

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 a modern and homogeneous fleets of tankers;
     o    achieving high utilisation of our vessels;
     o    achieving competitive financing arrangements;
     o    achieving  a  satisfactory   mix  of  term   charters,   contracts  of
          affreightment and spot voyages; and
     o    developing and maintaining  relationships with major oil companies and
          industrial charterers.

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

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

Although  there has been a trend to  consolidation  over the past 15 years,  the
tanker  market  remains  highly  fragmented.  We  estimate,  based on  available
industry data that we currently own or operate  approximately 10.2% of the world
VLCC fleet and 10.4% of the world Suezmax  tanker fleet.  It is our intention to
use the strong  financial  position  that we believe our strategy and  governing
principles will create,  to continue the  consolidation of the tanker market. We
plan to make  acquisitions  with the proceeds of equity and debt  issuances  and
bank debt and by  issuing  shares as  consideration  for vessel  purchases,  and
believe that such  acquisitions  will help us to consolidate  the tanker market.
Our role in the  consolidation  of the tanker market may include the acquisition
of new  vessels  and  secondhand  vessels  and we may also  engage  in  business
acquisitions and strategic transactions such as marketing joint ventures. In the
ordinary  course  of our  business,  we engage in the  evaluation  of  potential
candidates for acquisitions and strategic transactions.  While we are constantly
evaluating  opportunities  for acquisitions  and growth,  at this time we do not
have any planned acquisitions.

Following the spin-off of Ship Finance,  we are 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.  During 2005
and 2006 we have  substantially  increased the  percentage of vessels  chartered
out.  Currently 27 vessels in our fleet are chartered out under time or bareboat
charters.  Consolidation of the tanker market will remain an important objective
for us.

Seasonality

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

Customers

Our  customers  include  major  oil  companies,   petroleum   products  traders,
government  agencies and various other entities.  During the year ended December
31,  2005,  one  customers  accounted  for  more  than  10% of our  consolidated
operating revenues.  During the year ended December 31, 2004, two customers each
accounted for more than 10% of our consolidated operating income.

Competition

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

Risk of Loss and Insurance

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

Frontline  Management is responsible  for arranging the insurance of our vessels
in line with standard industry  practice.  In accordance with that practice,  we
maintain  marine hull and machinery and war risks  insurance,  which include the
risk of  actual  or  constructive  total  loss,  and  protection  and  indemnity
insurance  with  mutual  assurance  associations.  From  time to  time we  carry
insurance  covering the loss of hire resulting from marine casualties in respect
of some of our  vessels.  Currently,  the amount of coverage for  liability  for
pollution, spillage and leakage available to us on commercially reasonable terms
through  protection and indemnity  associations and providers of excess coverage
is $1 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

Government  regulation  significantly affects the ownership and operation of our
vessels.  The various types of  governmental  regulation that affect our vessels
include  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 that 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  emphasises  operational
safety,  quality maintenance,  continuous training of our crews and officers and
compliance with United States and international and other national 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, harbor master or equivalent,  classification  societies, flag state
administration  or country of registry,  and charterers,  particularly  terminal
operators and major oil companies  which conduct  frequent  vessel  inspections.
Each of these entities may have unique requirements that we must comply with.

International Maritime Organisation

The International Maritime  Organisation,  or the IMO (the United Nations agency
for  maritime  safety and the  prevention  of marine  pollution  by ships),  has
adopted the International Convention for the Prevention of Marine Pollution from
Ships,  1973,  as modified by the Protocol of 1978 relating  thereto,  which has
been updated through various amendments,  or the "MARPOL Convention.  The MARPOL
Convention relates to environmental standards including oil leakage or spilling,
garbage  management,  as well as the handling  and disposal of noxious  liquids,
harmful substances in packaged forms,  sewage and air emissions.  In March 1992,
the IMO adopted  regulations  that set forth pollution  prevention  requirements
applicable to tankers,  which became effective in July 1993. These  regulations,
which  have  been  adopted  by more  than  150  nations,  including  many of the
jurisdictions in which our tankers operate, provide, in part, that:

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

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

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

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

     o    all tankers are subject to enhanced inspections.


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

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

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

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

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

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

a)  Category  1 (Pre-  PL/SBT)  oil  tankers - any tanker of 20,000 dwt or above
    carrying crude oil, fuel oil,  heavy diesel oil or lubricating  oil as cargo
    or of 30,000 dwt or above carrying other types of oil.
b)  Category 2 (PL/SBT) oil tankers - any tanker of 20,000 dwt or above carrying
    crude oil,  fuel oil,  heavy  diesel oil or  lubricating  oil as cargo or of
    30,000 dwt or above carrying other types of oil.
c)  Category  3 oil  tankers - any  tanker of  between  5,000 dwt and 20,000 dwt
    carrying crude oil, fuel oil,  heavy diesel oil or lubricating  oil as cargo
    or of less than 30,000 dwt carrying other types of oil.

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


Baseline Phase Out Scheme

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



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

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

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

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

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

     o    Wing tanks  having a width  which does not meet that  required  by the
          International Bulk Chemical Code for type 2 cargo tank location.

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

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

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

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

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

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

Front Birch          Suezmax         DS       1991       2010           2015
Front Comor          Suezmax         SH       1993       2010           2015
Front Granite        Suezmax         SH       1991       2010           2015
Front Horizon        Suezmax         SH       1988       2010           2013
Front Maple          Suezmax         DS       1991       2010           2015
Front Sunda          Suezmax         SH       1992       2010           2015
Front Target         Suezmax         SH       1990       2010           2015
Front Transporter    Suezmax         SH       1989       2010           2014
Front Traveller      Suezmax         SH       1990       2010           2015
Marble               Suezmax         SH       1992       2010           2015
Front Voyager        Suezmax         SH       1992       2010           2015
Front Puffin         Aframax         SH       1990       2010           2015
Edinburgh            VLCC            DS       1993       2010           2015
Front Ace            VLCC            SH       1993       2010           2015
Front Duchess        VLCC            SH       1993       2010           2015
Front Duke           VLCC            SH       1992       2010           2015
Front Highness       VLCC            SH       1991       2010           2015
Front Lady           VLCC            SH       1991       2010           2015
Front Lord           VLCC            SH       1991       2010           2015
Front Sabang         VLCC            SH       1990       2010           2015
Front Tobago         VLCC            SH       1993       2010           2015
Front Vanadis        VLCC            SH       1990       2010           2015


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

Under MARPOL Regulation 13H, HGO means any of the following:

     o    crude oils having a density at 15(0)C higher than 900 kg/m3;

     o    fuel oils having  either a density at 15(0)C higher than 900 kg/ m3 or
          a kinematic viscosity at 50(0)C higher than 180 mm2/s;

     o    bitumen, tar and their emulsions.

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

The IMO has also negotiated international  conventions that impose liability for
oil pollution in international  waters and a signatory's  territorial waters. In
September 1997, the IMO adopted Annex VI to the International Convention for the
Prevention of Pollution from Ships to address air pollution from ships. Annex VI
was ratified in May 2004, and became effective in May 2005. Annex VI sets limits
on sulfur oxide and nitrogen  oxide  emissions  from ship exhausts and prohibits
deliberate   emissions   of  ozone   depleting   substances,   such  as  halons,
chlorofluorocarbons,  emissions  of  volatile  compounds  from  cargo  tanks and
prohibition  of shipboard  incineration  of specific  substances.  Annex VI also
includes a global cap on the sulfur  content of fuel oil and allows for  special
areas to be established  with more stringent  controls on sulfur  emissions.  We
believe that we are in  substantial  compliance  with the Annex VI  regulations.
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 vessels.

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

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 the 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 tanker's  denial of access to, or  detention  in, some ports.  Both the United
States  Coast  Guard and EU  authorities  have  indicated  that  vessels  not in
compliance  with the ISM Code will be  prohibited  from  trading in U.S.  and EU
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.


United  States  Oil  Pollution  Act  of  1990  and  Comprehensive  Environmental
Response, Compensation and Liability Act of 1980

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

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

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

OPA limits the  liability  of  responsible  parties to the greater of $1,200 per
gross ton or $10.0  million per tanker that is over 3,000 gross tons (subject to
possible adjustment for inflation).  Under a recently proposed legislation,  OPA
liability  limits will be increased,  when such  legislation is enacted,  to the
greater of $1,900 per gross ton or $16.0  million  per tanker that is over 3,000
gross  tons  per  (subject  to  possible  adjustment  for  inflation).  The  act
specifically  permits  individual  states to impose their own liability  regimes
with regard to oil pollution  incidents  occurring within their boundaries,  and
some states have enacted  legislation  providing  for  unlimited  liability  for
discharge of  pollutants  within their waters.  In some cases,  states that have
enacted this type of legislation  have not yet issued  implementing  regulations
defining tanker owners' responsibilities under these laws.

CERCLA,  which  applies to owners and  operators of tankers,  contains a similar
liability  regime and provides  for cleanup and removal of hazardous  substances
and for  natural  resource  damages.  Liability  under  CERCLA is limited to the
greater of $300 per gross ton or $5.0 million.  These limits of liability do not
apply,  however,  where the incident is caused by violation of applicable United
States  federal  safety,  construction  or  operating  regulations,  or  by  the
responsible  party's gross negligence or wilful misconduct.  These limits do not
apply if the  responsible  party  fails or refuses to report the  incident or to
co-operate and assist in connection with the substance removal  activities.  OPA
and CERCLA  each  preserve  the right to recover  damages  under  existing  law,
including maritime tort law.

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

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

Under OPA,  oil tankers  without  double  hulls will not be permitted to come to
United States ports or trade in the United  States waters by 2015.  Based on the
current phase-out  requirement,  our 18 single hull tankers will not be eligible
to carry oil as cargo within the 200-mile United States exclusive  economic zone
starting in 2010,  except that these  tankers and our three double sided tankers
may trade in United States waters until 2015 if their  operations are limited to
discharging  their  cargoes  at the  Louisiana  Offshore  Oil Port  ("LOOP")  or
unloading with the aid of another vessel, a process referred to as "lightering,"
within authorised lightering zones more than 60 miles off-shore.

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

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

     o    describe crew training and drills; and

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

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

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

Other U.S. Environmental Requirements

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

        The Clean  Water Act,  or the CWA,  prohibits  the  discharge  of oil or
hazardous  substances into navigable  waters and imposes strict liability in the
form of  penalties  for  any  unauthorized  discharges.  The  CWA  also  imposes
substantial liability for the costs of removal,  remediation and damages.  State
laws for the control of water pollution also provide varying civil, criminal and
administrative  penalties  in the case of a discharge  of petroleum or hazardous
materials into state waters.  The CWA complements  the remedies  available under
the more recent OPA and CERCLA,  discussed above.  Under current  regulations of
the EPA,  vessels are not  required to obtain CWA permits for the  discharge  of
ballast water in U.S. ports. However, as a result of a recent U.S. federal court
decision,  vessel owners and operators may be required to obtain CWA permits for
the discharge of ballast  water,  or they will face  penalties for failing to do
so. Although the EPA is likely to appeal this decision,  we do not know how this
matter  is  likely  to be  resolved  and we  cannot  assure  you that any  costs
associated with compliance with the CWA's  permitting  requirements  will not be
material to our results of operations.

        The  National  Invasive  Species  Act,  or NISA,  was enacted in 1996 in
response to growing reports of harmful  organisms being released into U.S. ports
through  ballast water taken on by ships in foreign  ports.  NISA  established a
ballast water  management  program for ships entering U.S.  waters.  Under NISA,
mid-ocean  ballast water exchange is voluntary,  except for ships heading to the
Great  Lakes,  Hudson Bay, or vessels  engaged in the foreign  export of Alaskan
North Slope crude oil. However, NISA's exporting and record-keeping requirements
are  mandatory  for vessels  bound for any port in the United  States.  Although
ballast  water  exchange  is the  primary  means of  compliance  with the  act's
guidelines,  compliance  can also be achieved  through the  retention of ballast
water onboard the ship, or the use of environmentally  sound alternative ballast
water  management  methods  approved by the U.S.  Coast Guard.  If the mid-ocean
ballast  exchange is made mandatory  throughout  the United States,  or if water
treatment requirements or options are instituted,  the costs of compliance could
increase for ocean carriers.

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

        Several of our vessels  currently carry cargoes to U.S. waters regularly
and we believe  that all of our vessels are  suitable to meet OPA and other U.S.
environmental  requirements  and that  they  would  also  qualify  for  trade if
chartered to serve U.S. ports.


European Union Tanker Restrictions

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

International Conventions on Civil Liability for Oil Pollution Damage

Although the United States is not a party to these  Conventions,  many countries
ratified and followed the liability system adopted by the IMO and originally 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. This  international  oil pollution regime was modified in
1992 by two  Protocols.  The  amended  Conventions  are known as the 1992  Civil
Liability Convention and the 1992 Fund Convention.  The 1992 Conventions entered
into  force  on May 30,  1996.  Due to a  number  of  denunciations  of the 1971
Convention this Convention ceased to be in force on May 24, 2004. A large number
of States have also  denounced the 1969 Civil  Liability  Convention and as more
States do so its importance is  increasingly  diminishing.  Under the 1992 Civil
Liability  Convention,  a vessel's  registered  owner is strictly liable for oil
pollution damage caused in the territory, territorial seas or exclusive economic
zone of a  contracting  state by  discharge  of  persistent  oil from a  tanker,
subject to certain complete defences. The 1992 Fund established by the 1992 Fund
Convention pays  compensation to those suffering oil pollution damage in a State
party to the 1992 Fund Convention who did not obtain full compensation under the
1992 Civil Liability  Convention.  This would normally apply where the shipowner
has a defence under the 1992 Civil  Liability  Convention or the damage  exceeds
the shipowner's liability under that Convention.  Under an amendment that became
effective on November 1, 2003,  liability  limits under the 1992 Civil Liability
Convention  were  increased by over 50%.  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 SDR 4,510,000 (approximately $6.7 million) plus SDR
631  (approximately  $932) for each additional gross ton over 5,000. For vessels
of over  140,000  gross  tons,  liability  will  be  limited  to SDR  89,770,000
(approximately $132,7 million).  Also with effect from the same date the maximum
amount payable by the 1992 Fund  increased  from SDR 135 million  (approximately
$199.5  million) to SDR 203million  (approximately  $300 million).  The right to
limit liability is forfeited under the 1992 Civil Liability  Convention if it is
proved that the pollution  damage resulted from the shipowner's  personal act or
omission, committed with the intent to cause such damage, or recklessly and with
knowledge that such damage would probably result. Vessels trading to States that
are parties to the 1992 Civil  Liability  Convention  must  provide  evidence of
insurance  covering the  liability  of the owner.  On March 2005 a third tier of
compensation  was  established  by  means of a  Supplementary  Fund.  This  Fund
provides  additional   compensation  to  that  available  under  the  1992  Fund
Convention for pollution damage in States that are members of the  Supplementary
Fund. The amount  available is SDR 750 million  (approximately  $1,083  million)
including the costs payable under the 1992 Civil  Liability  Convention  and the
1992  Fund  Convention,   SDR  203  million  (approximately  $300  million).  In
jurisdictions  where the 1992 Civil  Liability  Convention has not been adopted,
various  legislative  schemes  govern or common law  applies,  and  liability is
imposed  either  on the  basis  of  fault  or in a  manner  similar  to the 1992
Convention.  We believe that our P&I insurance covers  liabilities  either under
the  international oil pollution schemes or under local regimes like for example
the US Oil Pollution Act 1990.

The unit of account in the 1992  Conventions is the Special  Drawing Right (SDR)
as defined by the International Monetary Fund. In this document the SDR has been
converted  into US dollars at the rate of exchange  applicable on May 2, 2006 of
SDR 1 = USD 1.477760.

Vessel Security Regulations

Since the terrorist  attacks of September 11, 2001, there have been a variety of
initiatives  intended to enhance  vessel  security.  On November 25,  2002,  the
Maritime  Transportation  Security  Act of 2002,  MTSA,  came  into  effect.  To
implement  certain  portions of the MTSA, in July 2003,  the United States Coast
Guard  issued  regulations  requiring  the  implementation  of certain  security
requirements  aboard vessels  operating in waters subject to the jurisdiction of
the United States.  Similarly, in December 2002, amendments to the International
Convention for the Safety of Life at Sea, or SOLAS, created a new chapter of the
convention  dealing  specifically with maritime  security.  The new chapter came
into effect in July 2004 and imposes various  detailed  security  obligations on
vessels and port  authorities,  most of which are contained in the newly created
International Ship and Port Facilities Security Code, or ISPS. Among the various
requirements are:

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

     o    on-board installation of ship security alert systems;

     o    the development of vessel security plans; and

     o    compliance with flag state security certification requirements.

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

C. ORGANISATIONAL STRUCTURE

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

D. PROPERTY, PLANT AND EQUIPMENT

The Company's Vessels

We operate a modern  fleet of  tankers  and the  following  table sets forth the
fleet that we operate as of May 31, 2006 (including contracted  newbuildings not
yet delivered):

                                   Approximate                       Type of
Vessel                     Built   Dwt.         Construction  Flag   Employment
------                     -----   ----         ------------  ----   ----------

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

VLCCs
-----
Antares Voyager            1998    310,000      Double-hull   BA    Bareboat
                                                                    charter
Phoenix Voyager            1999    308,500      Double-hull   BA    Bareboat
                                                                    charter
Hull NE037 (Newbuilding)   2006    298,500      Double-hull   n/a   n/a
Hull NE041 (Newbuilding)   2006    298,500      Double-hull   n/a   n/a
Hull 2396 (Newbuilding)    2009    297,000      Double-hull   n/a   n/a
Hull 2397 (Newbuilding)    2009    297,000      Double-hull   n/a   n/a
Hull 2398 (Newbuilding)    2010    297,000      Double-hull   n/a   n/a
Hull 2399 (Newbuilding)    2010    297,000      Double-hull   n/a   n/a

Suezmax Tankers
---------------
Front Horizon              1988    151,000      Single-hull   MI    Spot market
Marble                     1992    150,000      Single-hull   BA    Time charter
Front Voyager              1992    155,000      Single-hull   BA    Bareboat
                                                                    charter
Cygnus Voyager             1993    157,000      Double-hull   BA    Bareboat
                                                                    charter
Altair Voyager             1993    136,000      Double-hull   BA    Bareboat
                                                                    charter
Sirius Voyager             1994    156,000      Double-hull   BA    Bareboat
                                                                    charter

Aframax Tankers
---------------
Front Puffin               1990    112,000      Single-hull   Malta Spot market

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

VLCCs
-----
Front Sabang               1990    286,000      Single-hull   SG    Time charter
Front Vanadis              1990    286,000      Single-hull   SG    Spot market
Front Highness             1991    284,000      Single-hull   SG    Time charter
Front Lady                 1991    284,000      Single-hull   SG    Time charter
Front Lord                 1991    284,000      Single-hull   SG    Time charter
Front Duke                 1992    284,000      Single-hull   SG    Time charter
Front Duchess              1993    284,000      Single-hull   SG    Time charter
Front Tobago               1993    261,000      Single-hull   LIB   Spot market
Front Edinburgh            1993    302,000      Double-side   LIB   Spot market
Front Ace                  1993    276,000      Single-hull   LIB   Time charter
Front Vanguard             1998    300,000      Double-hull   MI    Spot market
Front Century              1998    311,000      Double-hull   MI    Spot market
Front Champion             1998    311,000      Double-hull   BA    Spot market
Front Vista                1998    300,000      Double-hull   MI    Spot market
Front Comanche             1999    300,000      Double-hull   FRA   Time charter
Golden Victory             1999    305,000      Double-hull   MI    Time charter
Front Circassia            1999    306,000      Double-hull   MI    Spot market
Front Opalia               1999    302,000      Double-hull   IoM   Spot market
Ocana                      1999    300,000      Double-hull   IoM   Bareboat
                                                                    charter
Front Scilla               2000    303,000      Double-hull   MI    Spot market
Ariake tbn Olivia          2001    299,000      Double-hull   BA    Bareboat
                                                                    charter
Front Serenade             2002    299,000      Double-hull   LIB   Bareboat
                                                                    charter
Otina                      2002    298,000      Double-hull   IoM   Bareboat
                                                                    charter
Front Stratus tbn Ondina   2002    299,000      Double-hull   LIB   Bareboat
                                                                    charter
Front Falcon               2002    309,000      Double-hull   BA    Spot market
Front Page                 2002    299,000      Double-hull   LIB   Bareboat
                                                                    charter
Front Energy               2004    305,000      Double-hull   CYP   Spot market
Front Force                2004    305,000      Double-hull   CYP   Spot market

Suezmax OBO Carriers
--------------------
Front Breaker              1991    169,000      Double-hull   MI    Time charter
Front Climber              1991    169,000      Double-hull   SG    Time charter
Front Driver               1991    169,000      Double-hull   MI    Time charter
Front Guider               1991    169,000      Double-hull   SG    Time charter
Front Leader               1991    169,000      Double-hull   SG    Time charter
Front Rider                1992    170,000      Double-hull   SG    Time charter
Front Striver              1992    169,000      Double-hull   SG    Time charter
Front Viewer               1992    169,000      Double-hull   SG    Time charter

Suezmax Tankers
---------------
Front Transporter          1989    150,000      Single-hull   MI    Spot market
Front Target               1990    150,000      Single-hull   MI    Spot market
Front Traveller            1990    150,000      Single-hull   MI    Spot market
Front Birch                1991    150,000      Double-side   MI    Spot market
Front Maple                1991    150,000      Double-side   MI    Spot market
Front Granite              1991    150,000      Single-hull   MI    Spot market
Front Sunda                1992    150,000      Single-hull   MI    Spot market
Front Comor                1993    150,000      Single-hull   MI    Time charter
Front Pride                1993    150,000      Double-hull   NIS   Spot market
Front Glory                1995    150,000      Double-hull   NIS   Time charter
Front Splendour            1995    150,000      Double-hull   NIS   Spot market
Front Ardenne              1997    153,000      Double-hull   NIS   Spot market
Front Brabant              1998    153,000      Double-hull   NIS   Spot market
Mindanao                   1998    159,000      Double-hull   SG    Spot market

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

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

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

Suezmax Tankers
---------------
Front Warrior              1998    153,000      Double-hull   BA    Spot market
Front Melody               2001    150,500      Double-hull   LIB   Spot market
Front Symphony             2001    150,500      Double-hull   LIB   Spot market

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

Key to Flags:
BA - Bahamas,  IoM - Isle of Man, LIB - Liberia,  NIS - Norwegian  International
Ship  Register,  SG -  Singapore,  FRA - France,  MI - Marshall  Islands,  CYP -
Cyprus.

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

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


ITEM 4A.  UNRESOLVED STAFF COMMENTS

None.


ITEM 5.  OPERATING AND FINANCIAL REVIEW AND PROSPECTS

Overview

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

Our  principal  focus and expertise is the  transportation  of crude oil and oil
product cargoes for major  integrated oil companies and other  customers.  As at
December 31, 2005, our tanker fleet consisted of 30 VLCCs,  six VLCC newbuilding
contracts  and 28  Suezmax  tankers,  of which  eight are  Suezmax  OBOs and one
Aframax  tanker.  We also charter in ten modern  VLCCs and three modern  Suezmax
tankers from third parties. A full fleet list is provided in Item 4 "Information
on the Company" showing the vessels that we currently own and charter in.

Fleet Changes

Refer to Item 4 for  discussion  on  acquisitions  and  disposals of vessels.  A
summary of our fleet  changes for the years ended  December 31,  2005,  2004 and
2003 is as follows:

                                                005        2004        2003
VLCCs
At start of period                               38          36          28
Acquisitions                                      4           3           2
Disposals                                         -           1           1
Consolidated  from  December  31,  2003
due to adoption of FIN 46                         -           -           7
---------------------------------------------------------------------------
At end of period                                 42          38          36
---------------------------------------------------------------------------

VLCCs owned by equity investees
At start of period                                1           7          11
Acquisitions                                      -           -           -
Disposals                                         1           6           3
Consolidated  from  December  31,  2003
due to adoption of FIN 46                         -           -           1
---------------------------------------------------------------------------
At end of period                                  -           1           7
---------------------------------------------------------------------------

Suezmax
At start of period                               28          23          21
Acquisitions                                      -           5           -
Disposals                                         5           -           2
Consolidated  from  December  31,  2003
due to adoption of  FIN 46                        -           -           4
---------------------------------------------------------------------------
At end of period                                 23          28          23
---------------------------------------------------------------------------

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

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

Total fleet
At start of period                               76          77          71
Acquisitions                                      4           8           2
Disposals                                         7           9           6
Consolidated  from  December  31,  2003
due to adoption of FIN 46                         -           -          10
---------------------------------------------------------------------------
At end of period                                 73          76          77
---------------------------------------------------------------------------

Summary of Fleet Employment

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

                               As at December 31,
                             2005                 2004              2003
                        No.           %       No.        %      No.        %
VLCCs
Spot or pool             28         67%        25      66%       23      64%
Time charter              9         21%         2       5%        3       8%
Bareboat                  5         12%        11      29%       10      28%
charter
-----------------------------------------------------------------------------
Total                    42        100%        38     100%       36     100%
-----------------------------------------------------------------------------

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

Suezmax
Spot or pool             22         96%        24      86%       18      78%
Time charter              1          4%         -        -        1       4%
Bareboat                  -           -         4      14%        4      18%
charter
----------------------------------------------------------------------------
Total                    23        100%        28     100%       23     100%
----------------------------------------------------------------------------

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

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

Total fleet
Spot or pool             50         68%        50      66%       48      62%
Time charter             18         25%        10      13%       14      18%
Bareboat                  5          7%        16      21%       15      20%
charter
----------------------------------------------------------------------------
Total                    73        100%        76     100%       77     100%
----------------------------------------------------------------------------

Market Overview

For the third year in a row the tanker market was very profitable,  even if 2005
could not compete with 2004. The extreme volatility witnessed in rates over 2004
was to a smaller  extent the case for 2005,  though still were testing at times.
The TCE for a modern VLCC differed  between lows of $24,000 per day and highs of
$130,000 per day in 2005 and  Suezmaxes  ranged  between lows of $23,000 per day
and highs of $107,000 per day in 2005 according to industry sources.

The  International  Energy Agency (IEA)  reported in their May issue,  world oil
demand in 2005 of 83.59 million  barrels per day (mbd),  an increase of 1.05 mbd
from 2004. The Middle East, China and North America contributed with 55% of this
increase which indicate their strong economic growth.

Lack of spare oil  production  capacity  drove crude oil prices to about $70 per
barrel  towards the end of the year and dampened the extremely  strong growth in
oil  consumption  of close to 4.0% in 2004 to 1.3% in 2005 according to the IEA.
China  continued  its rapid  economic  growth  with full  force in 2005 with GDP
increasing  9.9% however  their growth in oil demand was down from 15.4% in 2004
to 2.4% in 2005. The hurricanes  Katrina and Rita which hit the US Gulf Coast in
August and September  were each among the top five most  powerful  storms of all
time and  lead to  damages  to  production  platforms  which  caused  additional
ton-miles for the last quarter of 2005. It is estimated that hurricanes cut down
approximately 0.4 mbd in US production as an average over the year. Geopolitical
tension in Nigeria,  Venezuela,  Iraq,  Iran and other parts of the Middle East,
which was given a lot of press  attention,  seems to have had limited  effect on
their  production as the OPEC members in total  increased  production by 3.2% in
2005 compared to total world supply which increased 1.3%.

The world VLCC fleet  increased  4.7% in 2005 from 444  vessels to 465  vessels.
Only one VLCC was scrapped during the year while eight were  converted.  A total
of 30 were  delivered  during the year. The total order book for VLCCs was at 92
vessels at the end of 2005, of which 35 were ordered  during the year.  The size
of the world Suezmax fleet  increased by 7% in 2005 from 315 vessels to 337. Two
Suezmaxes  were  scrapped  while 24 were  delivered.  The  total  orderbook  for
Suezmaxes was at 63 at the end of the year,  of which seven were ordered  during
the year.  The total  orderbooks  for VLCCs and  Suezmaxes  equates to 19.8% and
18.7%, respectively, of the existing fleet.

Even  though  spot market  rates have  declined  during the first four months of
2006,  the company  believes the outlook for the  remainder of 2006 is positive.
The continued growth in oil consumption combined with relatively few deliveries,
combined with an increasing  amount of conversions  for other  purposes,  should
lead to a positive demand environment for tankers.

Accounting Changes

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

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

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

     o    Nine of the vessels we leased as at December  31, 2005 are leased from
          special purpose lessor  entities which were  established and are owned
          by independent  third parties who provide  financing  through debt and
          equity participation.  Each entity owns one vessel, which is leased to
          us, and has no other activities.  Prior to the adoption of FIN 46R, we
          did not consolidate these special purpose lessor entities. At December
          31, 2005,  one of these leases is accounted for as an operating  lease
          and eight of these  leases are  accounted  for as capital  leases.  We
          determined  that due to the  existence of certain put and call options
          over  the  leased  vessels,   these  entities  are  variable  interest
          entities.  The determination of the primary  beneficiary of a variable
          interest entity requires knowledge of the participations in the equity
          of that entity by individual  and related  equity  holders.  Our lease
          agreements  with the  leasing  entities  do not  give us any  right to
          obtain  this  information  and we have  been  unable  to  obtain  this
          information by other means. Accordingly we are unable to determine the
          primary  beneficiary of these leasing entities.  At December 31, 2005,
          the original cost to the lessor of the assets under such  arrangements
          was  $618.5  million.   At  December  31,  2005,  our  residual  value
          guarantees  associated with these leases,  which represent the maximum
          exposure to loss, are $84.5 million.

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

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

Discontinued Operations

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

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


Critical Accounting Policies and Estimates

The  preparation  of our  financial  statements in  accordance  with  accounting
principles generally accepted in the United States requires that management make
estimates  and  assumptions   affecting  the  reported  amounts  of  assets  and
liabilities  and disclosure of contingent  assets and liabilities at the date of
the  financial  statements  and the  reported  amounts of revenues  and expenses
during the reporting period.

Management believes that the following accounting policies are the most critical
to aid in fully  understanding and evaluating our reported  financial results as
they require a higher degree of judgement in their  application  resulting  from
the need to make  estimates  about the  effect of  matters  that are  inherently
uncertain.  See Note 2 to our audited Consolidated Financial Statements included
herein for details of all of our material accounting policies.

Revenue Recognition
Revenues are generated from freight billings,  time charter and bareboat charter
hires.  Time charter and bareboat charter revenues are recorded over the term of
the charter as service is  provided.  Under a voyage  charter the  revenues  and
associated voyage costs are 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"  which are  included in
voyage  revenues in our  statements  of  operations.  Certain  pools require the
participants to pay and account for voyage  expenses,  and distribute gross pool
revenues to the  participants  such that the  participants'  resulting  net pool
revenues  are equal to net pool  revenues  calculated  according  to the  agreed
formula.  We account for gross pool  revenues  allocated by these pools as "pool
revenues" which are included in voyage revenues in our statements of operations.

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

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

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

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

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

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

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

     o    Leases

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

Factors Affecting Our Results

The principal factors affected our results of operations and financial  position
include:

     o    the earnings of our vessels in the charter market;

     o    vessel operating expenses;

     o    administrative expenses;

     o    depreciation;

     o    interest expense;

     o    minority interest


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

As at December  31,  2005,  2004 and 2003,  50, 50 and 48  respectively,  of our
vessels  operated  in  the  voyage  charter  market.  The  tanker  industry  has
historically  been highly cyclical,  experiencing  volatility in  profitability,
vessel values and freight rates.  In  particular,  freight and charter rates are
strongly  influenced  by the  supply of tanker  vessels  and the  demand for oil
transportation services.

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

Administrative  expenses are composed of general  corporate  overhead  expenses,
including personnel costs, property costs, legal and professional fees and other
general  administrative  expenses.  Personnel costs include, among other things,
salaries, pension costs, fringe benefits, travel costs and health insurance.

Depreciation,  or the periodic  cost charged to our income for the  reduction in
usefulness and long-term value of our vessels,  is also related to the number of
vessels we own. 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 capitalised in the cost of
the  newbuilding.  Interest  expense may also change  with  prevailing  interest
rates,  although  the effect of these  changes may be reduced by  interest  rate
swaps or other derivative instruments.

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

Inflation

Although  inflation has had a moderate impact on our vessel  operating  expenses
and  corporate  overheads  management  does  not  consider  inflation  to  be  a
significant  risk to  direct  costs  in the  current  and  foreseeable  economic
environment. 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, 2005 compared with the year ended December 31, 2004

Total operating revenues and voyage expenses and commission

                                   Year ended December 31,          Change
(in thousands of $)                      2005         2004            $       %
Voyage charter revenues             1,152,240    1,554,519    (402,279)    (26)
Time charter revenues                 205,837      108,246       97,591      90
Bareboat charter revenues             142,562      176,381     (33,819)    (19)
Finance lease interest income           9,584       10,794      (1,210)    (11)
Other income                            3,610        3,630         (20)     (1)
-------------------------------------------------------------------------------
Total Operating Revenues            1,513,833    1,853,570    (339,737)    (18)
-------------------------------------------------------------------------------

Total  operating  revenues  decreased  by 18% in 2005  compared  with 2004 which
primarily  reflects weaker  earnings in the spot market.  The decrease in voyage
charter  revenues  primarily  reflects the strategic change in the employment of
five VLCCs from the spot market to time charters  along with a general  downward
trend in the market  compared to the unusually  high market in 2004 as discussed
above.  Voyage  charter  revenues  include  pool  revenues.  Certain  pools  are
responsible  for paying voyage  expenses and distribute net pool revenues to the
participants  while other pools require the  participants to pay and account for
voyage expenses,  and distribute  gross pool revenues to the  participants  such
that  the  participants'  resulting  net  pool  revenues  are  equal to net pool
revenues  calculated  according to the agreed  formula.  An analysis of our pool
revenues included in voyage revenues is as follows:

(in thousands of $)                                    2005          2004
Pool earnings allocated on gross basis              118,236        78,429
Pool earnings allocated on net basis                 35,505       117,179
-------------------------------------------------------------------------
Total pool earnings                                 153,741       195,608
-------------------------------------------------------------------------

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

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

Our  vessels  are  operated  under  time  charters,  bareboat  charters,  voyage
charters,  pool  arrangements and contracts of affreightment  ("COAs").  Under a
time charter,  the charterer pays  substantially all of the vessel voyage costs.
Under a bareboat  charter the  charterer  pays  substantially  all of the vessel
voyage and operating costs.  Under a voyage charter,  the vessel owner pays such
costs.  Vessel  voyage costs are primarily  fuel and port charges.  Accordingly,
charter  income from a voyage charter would be greater than that from an equally
profitable  time charter to take account of the owner's payment of vessel voyage
costs. In order to compare vessels trading under different types of charters, it
is standard industry practice to measure the revenue  performance of a vessel in
terms of average daily time charter  equivalent  earnings,  or TCEs.  For voyage
charters,  this is calculated  by dividing net voyage  revenues by the number of
days on charter.  Days spent  off-hire are excluded from this  calculation.  For
comparability,  TCEs for bareboat  charters  include an allowance  for estimated
operating costs that would be paid by us under an  equivalently  profitable time
charter.  In 2005 we  include  an  allowance  of  $6,500  per day for  estimated
operating costs (2004 - $6,500 per day).

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

(in $ per day)            2005      2004      2003      2002         2001
VLCC                    57,400    78,000    42,300    22,500       40,800
Suezmax                 40,300    57,900    33,900    18,400       30,700
Suezmax OBO             34,900    27,900    31,900    17,700       28,900
Containerships          26,100         -         -         -            -

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.

                             2005       2004        2003        2002       2001
Voyage revenues         1,152,240  1,554,519   1,089,583     489,286    639,807
Voyage expenses and     (337,221)  (361,609)   (323,378)   (134,930)   (88,283)
commission
                        ---------- ---------- ----------- ----------- ----------
Net voyage revenues       815,019  1,192,910     766,205     354,356    551,524
                        ========== ========== =========== =========== ==========


Ship operating expenses

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

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

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


Charterhire expenses

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

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

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

Administrative expenses


                        Year ended December 31,           Change
(in thousands of $)           2005         2004            $            %
Administrative expenses     21,181       25,739       (4,558)         (18)

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

Depreciation

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

The increase in depreciation is primarily attributable to:

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

In 2004, Golden Fountain was fully consolidated under FIN 46 and $3.3 million in
depreciation  was included in the charge for that year.  As discussed in Note 15
of the financial statements included herein, the vessel Golden Fountain was sold
late 2004 and as such, we have not recorded any depreciation in 2005.

Interest income

                        Year ended December 31,           Change
(in thousands of $)           2005         2004            $            %
Interest income             41,040       31,595        9,445           30

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

Interest expense

                        Year ended December 31,           Change
(in thousands of $)           2005         2004            $            %
Interest expense           215,995      205,458       10,537            5

Interest expense has increased primarily due to:

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

Share of results of associated companies

                        Year ended December 31,           Change
(in thousands of $)           2005         2004            $            %
Share of results of
  associated companies       3,691       10,553       (6,862)         (65)

As of December 31, 2005, we account for three  investees under the equity method
as discussed in Note 15 of the  financial  statements  included  herein.  One of
those investees,  Golden Fountain Corporation,  sold its vessel in December 2004
and was  effectively  dormant  in 2005.  Our  share  of  results  of  associated
companies  has  decreased  primarily  due to a reduction  in the  remaining  two
investees' earnings for the year.

Foreign currency exchange gains and losses

                        Year ended December 31,           Change
(in thousands of $)           2005         2004            $            %
Foreign currency exchange
  gains (losses)            18,829      (4,932)       23,761          482

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

Other financial items, net
<table>
                                             Year ended December 31,           Change
(in thousands of $)                                2005         2004            $            %
<S>                                              <C>        <C>            <C>           <C>
Mark to market  adjustments  for  financial      16,068        9,000        7,068           79
derivatives
Gains  and  losses  from  freight   forward     (1,569)     (14,844)       13,275           89
agreements
Other                                            31,585        9,410       22,175          236
----------------------------------------------------------------------------------------------
                                                 46,084        3,566       42,518        1,192
----------------------------------------------------------------------------------------------
</table>
The movement in net other financial items is primarily attributable to:

     o    Increase in mark to market  adjustments for interest rate swaps due to
          the increase in the forward rate curve
     o    Lower losses on primarily speculative freight forward agreements based
          on the Baltic Capesize Index
     o    Realised  gain on  sales of  marketable  securities  of $16.3  million
          compared to $7.1 million in 2004
     o    Compensation for failed acquisition totalling $6.5 million recorded in
          2005
     o    Gains totalling $3.2 million recorded in Ship Finance arising from the
          repurchase of senior notes

As of  December  31,  2005,  we were party to  interest  rate swaps with a total
notional  principal of $618.3 million compared to a total notional  principal of
$631.4 million in 2004.

Minority interest

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

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

Total operating revenues and Voyage expenses and commission

                                 Year ended December 31,    Change
(in thousands of $)                    2004         2003         $        %
Voyage charter revenues           1,554,519    1,089,583   464,936       43
Time charter revenues               108,246       40,759    67,487      166
Bareboat charter revenues           176,381       25,986   150,395      579
Finance lease interest income        10,794            -    10,794      100
Other income                          3,630        3,111       519       17
---------------------------------------------------------------------------
Total Operating Revenues         1,853,570   1,159,439     694,131      60
---------------------------------------------------------------------------

The increase in voyage charter revenues  primarily  reflects the strength in the
freight market in 2004 as discussed above.  Voyage charter revenues include pool
revenues. An analysis of the Company's pool revenues included in voyage revenues
is as follows:

(in thousands of $)                                            2004        2003
Pool earnings allocated on gross basis                       78,429      45,749
Pool earnings allocated on net basis                        117,179      65,799
-------------------------------------------------------------------------------
Total pool earnings                                         195,608     111,548
-------------------------------------------------------------------------------

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

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

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

Ship operating expenses

                        Year ended December 31,       Change
(in thousands of $)           2004        2003            $       %
Suezmax OBO                 15,350       15,962        (612)       4
Suezmax                     43,523       41,242        2,281       6
VLCC                        71,512       58,119       13,393      23
---------------------------------------------------------------------
                           130,385      115,323       15,062      13
---------------------------------------------------------------------

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

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

Charterhire expenses

                                  Year ended December 31,      Change
(in thousands of $)                     2004         2003            $       %
Charterhire expenses                  39,302       80,539     (41,237)     (51)
-------------------------------------------------------------------------------

Number of vessels chartered in and                             2004        2003
accounted for as operating leases:
      VLCC                                                       3            7
      Suezmax                                                    1            1
-------------------------------------------------------------------------------
                                                                 4            8
-------------------------------------------------------------------------------

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

Administrative expenses

                        Year ended December 31,       Change
(in thousands of $)           2004        2003            $       %
Administrative expenses     25,739      20,998        4,741      23

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

Depreciation

                        Year ended December 31,       Change
(in thousands of $)           2004        2003            $       %
Depreciation               180,497     143,560       36,937      26

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

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

Interest income

                        Year ended December 31,       Change
(in thousands of $)           2004        2003            $       %
Interest income             31,595       9,185       22,410     244

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

ITC generated  $23.4  million in interest  income in 2004:  the group  maintains
large average cash  restricted  cash deposits which are restricted for the lease
payments on four VLCCs.  Interest income from associated companies has decreased
by $5.2 million as a result of a restructuring of our investment as discussed in
Note 15 of the financial statements included herein. Offsetting this decrease is
an increase in bank interest  income which reflects both an increase in interest
rates and an increase in average cash balances held.

Interest expense

                        Year ended December 31,       Change
(in thousands of $)           2004        2003            $       %
Interest expense           205,458      74,184      131,274     177

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

Interest expense incurred by ITC is approximately  $65.8 million and interest of
Ship Finance 8.5% Senior Notes has  increased by $45.1  million.  Swap  interest
expense has increased by $10.1 million in 2004 as a result of us having  entered
into eleven new  interest  rate swap  agreements  in the first  quarter of 2004.
Capital  lease  interest has  increased by $6.6 million in 2004 as a result of a
full year's capital lease interest on leases entered into part way through 2003.

In February 2004,  Ship Finance  entered into a senior  secured credit  facility
with  a  syndicate  of  banks  as  discussed  below.  In  connection  with  this
refinancing we wrote off of previously recorded deferred charges resulting in an
increase in interest expense of $7.3 million.

Share of results of associated companies

                                          Year ended December 31,  Change
(in thousands of $)                             2004       2003         $    %
Share of results of associated companies      10,553     33,533   (22,980) (69)

Our share of results of associated  companies has decreased primarily due to the
termination  of six joint  ventures  with OSG and the  consolidation  of another
joint venture under FIN 46 effective December 31, 2003. As of December 31, 2004,
we account for two investees  under the equity method as discussed in Note 15 of
the financial statements included herein.

Foreign currency exchange gains and losses

                                          Year ended December 31,  Change
(in thousands of $)                             2004       2003         $    %
Foreign currency exchange losses               4,932     10,583    (5,651) (53)

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

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

Other financial items, net
<table>
                                             Year ended December 31,    Change
(in thousands of $)                                2004         2003          $       %
<S>                                            <C>          <C>          <C>       <C>
Mark to market adjustments for financial
derivatives                                       9,000       28,180     (19,180)    (68)
Gains and losses from freight forward
agreements                                      (14,844)     (32,964)     18,120      55
Other                                             9,410        5,084       4,326      85
----------------------------------------------------------------------------------------
                                                  3,566          300       3,266   1,088
----------------------------------------------------------------------------------------
</table>

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

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

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

Minority interest

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

Discontinued operations

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

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

 As at December  31,  2004,  the Company  held  23,918,832  Golden  Ocean shares
 representing  10.7% of the shares  outstanding  which have been  classified  as
 marketable securities. These shares were subsequently sold in February 2005.

Liquidity and Capital Resources

Liquidity

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

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

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

At December  31, 2005 we estimated  cash  breakeven  average  daily TCE rates of
$22,036 for our Suezmax  tankers and $27,604 for our VLCCs.  These are the daily
rates our  vessels  must  earn to cover  payment  of  budgeted  operating  costs
(including corporate overheads), estimated interest and scheduled loan principal
repayments.  These  rates do not take into  account  loan bullet  repayments  at
maturity, which we expect to refinance with new loans.

Our  long-term  liquidity  requirements  include  funding the equity  portion of
investments in new or replacement vessels,  repayment of long-term debt balances
including our $457.1 million 8.5% Senior Notes due 2013 and funding any payments
we may be  required  to make due to lessor put  options  on  certain  vessels we
charter in.  During 2005 we bought back and  cancelled  8.5% Senior Notes with a
principal  amount of $73.2 million.  Sources of funding our long-term  liquidity
requirements  include  new loans or  equity  issues,  vessel  sales and sale and
leaseback arrangements.

As of December  31, 2005,  2004 and 2003,  we had cash and cash  equivalents  of
$100.5 million,  $105.7million and $124.2 million,  respectively. As of December
31, 2005,  2004 and 2003, we had  restricted  cash  balances of $636.8  million,
$592.6 million and $891.9  million,  respectively.  Our restricted cash balances
contribute to our total short and medium term liquidity as they are used to fund
payment of certain loans and lease payments which would otherwise be paid out of
our cash balances. The large decrease in restricted cash balances as at December
31,  2004 is due to two  factors.  In 2003,  a cash  deposit of $565.5  million,
representing  net proceeds from our offering of $580.0 million 8.5% Senior Notes
due 2013, was retained by the trustee of the Notes pending our  satisfaction  of
certain covenants. We satisfied those covenants during the first quarter of 2004
and the cash deposit was  released to us. To offset this  release of  restricted
funds, there was a new restricted deposit of $250.0 million established in 2004.
These amounts serve to support our obligations to make  charterhire  payments to
Ship Finance, and are subject to adjustment based on the number of charters that
we are a  party  to.  We are  entitled  to use  these  funds  only  (1) to  make
charterhire payments (including profit sharing payments) to Ship Finance and (2)
for reasonable working capital purposes to meet short term voyage expenses.

We consolidated  the assets and liabilities of ITC with effect from December 31,
2003 and  acquired ITC in May 2004.  At December  31, 2005 ITC's assets  include
$328.9 million (2004:  $325.9 million) of restricted cash deposits which is held
for  the  benefit  of  the  holders  of  the  Notes  issued  on  behalf  of  ITC
subsidiaries. This restricted cash also includes deposits which can only be used
to meet liabilities under the lease agreements.

During the year ended  December 31, 2005 we paid total cash  dividends of $909.6
million.  In the first quarter of 2006, we declared a cash dividend of $1.50 per
share representing a total cash payment of $112.2 million.

Borrowing activities

In February 2004, we, through Ship Finance, entered into a senior secured credit
facility with a syndicate of banks with a principal  amount of $1,058.0  million
and a six year term.  The proceeds were used in part to fund the  acquisition of
our vessels and to refinance existing debt on all of its vessels.  This facility
bore interest at Libor plus 1.25% and was repayable between 2004 and 2010 with a
final  bullet of $499.7  million  payable on  maturity.  In  February  2005,  we
refinanced  this existing  $1,058  million  secured  credit  facility with a new
$1,131.4  million  secured credit  facility.  The new facility bears interest at
LIBOR  plus a margin  of 0.7%,  is  repayable  over a term of six  years and has
similar  security  terms to the repaid  facility.  At  December  31,  2005,  the
outstanding amount on this facility was $997.9 million. This facility contains a
minimum value  covenant,  which requires that the aggregate value of our vessels
exceed 140% of the  outstanding  amount of the  facility.  The new facility also
contains  covenants that require us to maintain  certain  minimum levels of free
cash, working capital and equity ratios.

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

In June 2005, we entered into a combined $350 million  senior and junior secured
term loan  facility  with a  syndicate  of banks.  At  December  31,  2005,  the
outstanding  amount on this  facility  was $338.7  million.  The proceeds of the
facility were used to fund the acquisition of five new VLCCs. The facility bears
interest  at LIBOR plus a margin of 0.65% for the  senior  loan and LIBOR plus a
margin of 1.00% for the junior loan, is repayable over a term of seven years and
has similar security terms as the $1,131.4 million  facility.  This new facility
contains a minimum value  covenant,  which requires that the aggregate  value of
our vessels exceed 140% of the outstanding amount of the senior loan and, for as
long as any amount is outstanding under the Junior loan, 125% of the outstanding
loan. The facility also contains  covenants that require us to maintain  certain
minimum levels of free cash, working capital and equity ratios.

In 2005 we bought back and cancelled Ship Finance 8.5% Senior Notes with a total
principal  amount of $73.2  million.  In April 2006 we entered  into a Bond Swap
Line with a bank in which the bank buys Ship Finance 8.5% Senior  Notes,  and we
compensate the bank for their funding cost plus a margin, we keep the upside and
guarantee  for the  downside in the  transaction.  During April and May 2006 the
bank acquired 8.5% Senior Notes with a total principal amount of $51.5 million.

We were in compliance with all loan covenants at December 31, 2005.

Acquisitions and Disposals

Ship Finance
In 2004,  we  distributed  49.2% of the  common  shares of Ship  Finance  to our
ordinary  shareholders.  On January  28,  2005 and  February  22, 2005 our Board
approved further spin-offs of the shares in Ship Finance.  On February 18, 2005,
each of our  shareholders  of received  one share of Ship Finance for every four
shares of ours held and on March 24, 2005 each of our shareholders  received one
share of Ship  Finance  for  every  ten  shares of ours  held.  Following  these
transactions  our  shareholding  in Ship  Finance  was  approximately  16.2%  at
December 31, 2005.

On February 17,  2006,  our Board  approved a further  spin-off of the shares in
Ship Finance. On March 20, 2006, each of our shareholders  received one share of
Ship Finance for every ten shares of ours held. Following these transactions our
shareholding  in Ship Finance was  approximately  11.1% at June 23 2006.  All of
these share distributions have had no effect on our liquidity.

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

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

Independent Tankers Corporation
On July 1, 2003,  we purchased a call option for $10.0 million to acquire all of
the shares of ITC from Hemen for a total  consideration  of $4.0 million plus 4%
interest per year. On May 27, 2004 we exercised  this  purchase  option and paid
$14.1 million.

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

Vessel Acquisitions and Disposals
In the year ended  December  31, 2005 we acquired  and sold  vessels and vessel
owning entities as discussed below: :

     o    On January 17, 2005 we, through Ship Finance,  exercised our option to
          acquire the VLCC  Oscilla and the vessel was  delivered to us on April
          4,  2005.   The  purchase   price  paid  to  acquire  the  vessel  was
          approximately $21.6 million which is equal to the outstanding mortgage
          debt under  four loan  agreements  between  lenders  and the  vessel's
          owning company.

     o    In  January  2005,  we  acquired  the VLCCs  Front  Century  and Front
          Champion  which were  previously  chartered  in by us under  operating
          leases for a total purchase  price of $141.9  million  pursuant to the
          exercise of purchase  options.  In March  2005,  we acquired  the VLCC
          Golden  Victory  for $76.9  million  pursuant  to the  exercise of its
          purchase option. The vessel was previously chartered in by us under an
          operating lease

     o    In January 2005, we sold the Suezmax Front Fighter for $68.25  million
          and the vessel was delivered to its new owners in March 2005.

     o    In May 2005, we sold the three Suezmaxes,  Front Lillo,  Front Emperor
          and Front Spirit,  for a total  consideration of $92.0 million.  These
          vessels were delivered to their new owners in June 2005.

     o    In May 2005, we entered into an agreement with parties affiliated with
          Hemen to acquire  two vessel  owning  companies,  each owning one 2005
          built containership for a total consideration of $98.6 million.

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

     o    In August 2005, we sold the Suezmax Front Hunter for $71.0 million.

     o    In November  2005,  the  bareboat  charterer  of the VLCC Navix Astral
          exercised  an option to purchase  the vessel for  approximately  $40.6
          million. The vessel was delivered to its new owner in January 2006.

     o    In December  2005, we acquired the interests held by the joint venture
          partners  in the  vessel  Front  Tobago at a  purchase  price of $35.6
          million.

     o    In 2005, we paid $nil in newbuilding instalments


We have also entered into a number of sale and purchase  transactions to date in
2006:

     o    In  March  2006,  we  acquired  the  Aframax  vessel  "Gerrita"  for a
          consideration of $35.9 million

     o    In March 2006, we sold the VLCC Golden Stream.  The sale yielded a net
          cash flow of $41.0 million and a profit of $11.0 million.

     o    In  February  2006,  the  Company  ordered  two  297,000 dwt VLCCs for
          delivery in 2009 with an option for another two VLCCs for  delivery in
          2009 and 2010, respectively.

     o    In April 2006,  we,  through Ship  Finance,  entered into an agreement
          with  Horizon  Lines  Inc.  in which we will  acquire  five  2,824 TEU
          containerships   being  built  at  Hyundai  Mipo  yard  in  Korea  for
          consideration  of  approximately  $280  million.  The vessels  will be
          delivered over a course of five months commencing early 2007, and will
          be chartered  back to Horizon under 12 year  bareboat  charters with a
          three year  renewal  option on the part of Horizon  Lines.  The latter
          will also have options to buy the vessels after 5, 8, 12 and 15 years

     o    In June 2006, the Company sold the options for two VLCC's for delivery
          in 2009 and 2010, repectively.

     o    In June 2006, the Company ordered an additional two VLCCs for delivery
          in 2010 with an option  for  another  two VLCCs for  delivery  between
          2010 and 2011

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

Equity

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

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

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

In November and December 2004, Ship Finance repurchased and cancelled a total of
625,000  shares at an  average  cost of $23.61  per  share.  Total  cash used to
repurchase these shares was $14.8 million.

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

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

Derivative Activities

We use financial  instruments to reduce the risk associated with fluctuations in
interest  rates.  We have a portfolio of interest  rate swaps that swap floating
rate interest to fixed rate, which from a financial  perspective  hedge interest
rate exposure.  We do not hold or issue  instruments  for speculative or trading
purposes.   As  at  December  31,  2005  our  interest  rate  swap  arrangements
effectively  fix our interest rate  exposure on $618.3  million of floating rate
debt.  These  interest  rate swap  agreements  expire  between  January 2006 and
February 2009.

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

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

Tabular disclosure of contractual obligations

At  December  31  2005,  we  had  the  following  contractual   obligations  and
commitments:
<table>
                                                         Payment due by period
                                   Less than 1
                                          year 1 - 3 years  3 - 5 years   After 5 years    Total
                                  ------------ ------------ ------------ ------------- ----------
<S>                                   <C>          <C>          <C>         <C>        <C>
(In thousands of $)
Senior  notes (8,5%)                        -            -            -       457,080    457,080
Serial note (7.62%)                     2,530                         -             -      2,530
Serial note (6.48% to 6.855%)          22,300       24,500        6,300                   53,100
Term note (7.84% to 8.04%)                  -        7,105       18,715       340,380    366,200
Term note (8.52%)                       9,526       21,884       21,884        54,709    108,003
Other long-term debt                  205,835      268,961      254,038       723,983  1,452,816
Operating lease obligations             6,712       13,733       11,974         8,649     41,068
Capital lease obligations              80,876      165,014      384,915       429,074  1,059,879
Newbuilding commitments               142,650                                            142,650
                                  ------------ ------------ ------------ ------------- ----------
Total contractual cash                470,429      501,197      697,826     2,013,874  3,683,326
obligations                       ------------ ------------ ------------ ------------- ----------
</table>

At December  31 2005,  we leased  nine  vessels  that were sold by us at various
times during the period from November 1998 to December  2003, and leased back on
charters  that  range for  periods  of eight to  twelve  and a half  years  with
lessors' options to extend the charters for periods that range up to five years.
One of these vessels is accounted  for as operating  leases and eight as capital
leases.  We have fixed price purchase options at certain specified dates and the
lessors have options to put these twelve  vessels to us at the end of each lease
term.

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

Off balance sheet financing

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

Safe harbor

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

ITEM 6.  DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES

A. DIRECTORS AND SENIOR MANAGEMENT

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

Name                 Age     Position

John Fredriksen       61     Chairman, Chief Executive Officer, President and
                             Director
Tor Olav Troim        43     Vice-President and Director
Kate Blankenship      41     Director and Audit Committee Chairman
Frixos Savvides       54     Director and Audit committee member
Inger M. Klemp        43     Chief Financial Officer of Frontline Management
Oscar Spieler         45     Chief Executive Officer of Frontline Management

John  Fredriksen has been the Chairman of the Board,  Chief  Executive  Officer,
President  and a  director  of  the  Company  since  November  3,  1997.  He was
previously  the  Chairman  and Chief  Executive  Officer of Old  Frontline.  Mr.
Fredriksen has served for over nine years as a director of Seatankers Management
Co.  Ltd, or  Seatankers,  a ship  operating  company  and an  affiliate  of the
Company's principal  shareholder.  Mr. Fredriksen indirectly controls Hemen. Mr.
Fredriksen is a director of and indirectly controls Golar LNG Limited, a Bermuda
company listed on the Oslo Stock Exchange and the NASDAQ National Market and has
been a director of Golden Ocean, a Bermuda  company on the Oslo Stock  Exchange,
since November 2004. Mr. Fredriksen has served as a director and the chairman of
SeaDrill Limited, a Bermuda company listed on the Oslo Stock Exchange, since May
2005.

Tor Olav Troim has been  Vice-President  and a  director  of the  Company  since
November 3, 1997. He previously served as Deputy Chairman of Frontline from July
4, 1997,  and was a director of Old  Frontline  from July 1, 1996.  Until April,
2000 Mr. Troim was the Chief  Executive  Officer of Frontline  Management  AS, a
company which  supports the Company in the  implementation  of decisions made by
the Board of Directors.  Mr. Troim 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  Kapital ASA a Norwegian  Oslo Stock  Exchange  listed  company and Golden
Ocean Group Limited,  a Bermuda company listed on the Oslo Stock  Exchange.  Mr.
Troim has been  President  and Chief  Executive  Officer of Ship  Finance  since
October 15, 2003.  Mr. Troim has served as a director of Golar LNG Limited since
May 2001, and has served as a director of SeaDrill Limited since May 2005. Prior
to his service with  Frontline,  from January  1992, Mr Troim served as Managing
Director  and a member  of the Board of  Directors  of DNO AS, a  Norwegian  oil
company.

Kate Blankenship has been a director since August, 2003. Mrs. Blankenship joined
the Company in 1994 and served as the  Company's  Chief  Accounting  Officer and
Company  Secretary  until October 2005. Mrs.  Blankenship  joined the Company in
1994.  She is a member of the Institute of Chartered  Accountants in England and
Wales.  Mrs.  Blankenship  has been Chief  Financial  Officer  of  Knightsbridge
Tankers Ltd since April 2000 and Secretary of Knightsbridge since December 2000.
Mrs.  Blankenship  has been a Director of Ship Finance  since  October 15, 2003.
Mrs.  Blankenship has served as a director of Golar LNG Limited since July, 2003
and Golden Ocean since November 2004. Mrs.  Blankenship has served as a director
of SeaDrill Limited since May 2005.

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

Inger M. Klemp has served as Chief  Financial  Officer of  Frontline  Management
since June 1, 2006. Mrs. Klemp has served as Vice President  Finance from August
2001  until  May 31,  2006.  From  1992 to 2001 Mrs.  Klemp  served  in  various
positions in Color Group ASA, a Norwegian  cruise ferry  operator.  From 1989 to
1992 Mrs.  Klemp  served as  Assistant  Vice  President in Nordea Bank Norge ASA
(previously Christiania Bank).

Oscar  Spieler has served as Chief  Executive  Officer of  Frontline  Management
since  October 2003,  and prior to that time as Technical  Director of Frontline
Management  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, 2005, we paid to our directors and executive
officers  (five  persons)  aggregate  cash  compensation  of  $1,216,837  and an
aggregate amount of $95,498 for pension and retirement benefits.

We did not grant any  options to acquire  Ordinary  Shares of  Frontline  to the
Directors and officers during 2005.

C. BOARD PRACTICES

In accordance with our Bye-laws the number of Directors shall be such number not
less than two as our  shareholders by Ordinary  Resolution may from time to time
determine  and each  Director  shall hold office  until the next annual  general
meeting  following his election or until his successor is elected.  We currently
have four Directors.

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

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

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

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

D. EMPLOYEES

As of December 31, 2005, Frontline and its subsidiaries  employed  approximately
42 people in their  respective  offices in Bermuda and Oslo.  We  contract  with
independent ship managers to manage and operate our vessels.

E. SHARE OWNERSHIP

The beneficial interests of our Directors and officers in the Ordinary Shares of
Frontline as of June 19, 2006, were as follows:
                                                                      % of
                               Ordinary Shares of          Ordinary Shares
Director or Officer                    $2.50 each              Outstanding
-------------------               ---------------            -------------
John Fredriksen*                       26,079,053                   34.85%
Tor Olav Troim                            194,994                       **
Kate Blankenship                            2,000                       **
Frixos Savvides                                 -                       **
Inger M. Klemp                             16,000                       **
Oscar Spieler                              10,000                       **

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

As of June 1, 2006,  none of our  Directors  and  officers  holds any options to
acquire  Frontline's  Ordinary  Shares and there are no authorised  and unissued
Ordinary  Shares  reserved  for issue  pursuant to  subscription  under  options
granted under share option plans. We maintained a Bermuda  Employee Share Option
Plan and a United  Kingdom  Employee  Share Option Plan.  These plans expired in
2004 and have not been replaced.


ITEM 7.  MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS

A. MAJOR SHAREHOLDERS

Frontline is  indirectly  controlled  by another  corporation  (see below).  The
following table presents certain information  regarding the current ownership of
our Ordinary Shares with respect to (i) each person who we know to own more than
five percent of our  outstanding  Ordinary  Shares;  and (ii) all  directors and
officers as a group as of June 1, 2006.

                                                              Ordinary Shares
Owner                                                        Amount         %

Hemen Holding Ltd. and associated companies (1)             26,079,053  34.85%
All Directors and Officers as a group (five persons)(2)     26,302,047  35.15%

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

In June 2005 and June  2004,  Hemen and  associated  companies  held  34.85% and
47.45% of the Company's Ordinary Shares, respectively.

As at May 31, 2006,  31,365,473 of our Ordinary  Shares were held by 152 holders
of record in the United States.

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

B. RELATED PARTY TRANSACTIONS

In the years ended  December 31, 2005,  2004 and 2003,  we provided  services to
Seatankers.  These  services  comprise  management  support  and  administrative
services.

In the years ended  December 31, 2005,  2004 and 2003,  we provided  services to
Golar LNG Limited,  or Golar. The services provided include management  support,
corporate and administrative services.

In the years ended December 31, 2005 and December 31, 2004, we provided  certain
administrative services under the terms of an administrative management contract
with Golden Ocean.

In the year ended  December 31, 2005,  we provided  certain  administrative  and
accounting services to Aktiv Kapital First Investment Ltd and Bryggegata AS.

We lease office premises in Oslo from Bryggegata AS. Rental expense in the years
ended December 31, 2005, 2004, and 2003 were $0.7 million.

In the year ended December 31, 2005,  SeaDrill  provided certain  administrative
services  under  the terms of an  administrative  management  contract  with us.
Administration expenses in the year ended December 31, 2005 were $0.02 million.

In the years ended December 31, 2005 and December 31, 2004, we provided  certain
administrative services under the terms of an administrative management contract
with Golden Ocean.  In the year ended  December 31, 2005,  Golden Ocean provided
vessel  management  services  under the terms of a management  contract with us.
Vessel management  expense in the year ended December 31, 2005 was $0.1 million.

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

Golar, Aktiv Kapital, SeaDrill, Bryggegata AS and Seatankers are each indirectly
controlled by John Fredriksen.

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

    Net amounts earned from related parties    Year ended December 31,
    (in thousands of $)                         2005    2004   2003
    Seatankers                                   265      49    108
    Golar                                        255     495    261
    Golden Ocean                                 362       8      -
    Aktiv Kapital                                 10       -      -
    Bryggegata AS                                  8       -      -
    SeaDrill                                    (24)       -      -


    Balances with related parties (receivable/(payable))    As of December 31,
    (in thousands of $)                                      2005        2004
    Seatankers                                              1,397         907
    Golar                                                     644       (186)
    Golden Ocean                                          (2,182)     (1,854)
    SeaDrill                                                   55           -


C. INTERESTS OF EXPERTS AND COUNSEL

Not Applicable


ITEM 8.  FINANCIAL INFORMATION

A. CONSOLIDATED STATEMENTS AND OTHER FINANCIAL INFORMATION

See Item 18.

Legal Proceedings

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

Dividend Policy

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

Payment Date                             Amount per Share

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

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

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


On February 17, 2006 the Board declared a dividend of $1.50 per share to be paid
on or about March 6, 2006.  On May 26,  2006,  the Board  declared a dividend of
$1.50 per share to be paid on or about June 26, 2006.

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

B. SIGNIFICANT CHANGES

During 2004, we distributed approximately 48.3% of our shares in Ship Finance to
our shareholders  and at December 31, 2004 held 50.8% of Ship Finance.  See Item
4. "Information on the Company--History and Development of the Company--Spin-Off
of Ship  Finance." In February and March 2005, we have spun off a further 35% of
our shares in Ship  Finance to our  shareholders  and at  December  31 2005 held
16.2% of Ship Finance.  In February  2006, a further 5% interest in Ship Finance
was spun off and we hold approximately 11.1% of the shares in Ship Finance as at
June 21, 2006.
<PAGE>



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

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


                              NYSE                 OSE               NASDAQ
                       High     Low        High        Low       High      Low
Fiscal year ended
December 31
2005                  $57.97   $35.89   NOK355.00   NOK230.00
2004                  $62.33   $24.36   NOK367.81   NOK158.06      -        -
2003                  $27.69    $8.93   NOK185.00    NOK61.00      -        -
2002                  $13.05    $3.19   NOK108.50    NOK25.90      -        -
2001                  $15.45    $6.55   NOK215.50    NOK59.50   $24.50  $11.563


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, 2005
First quarter                   $57.97   $40.65      NOK355.00       NOK254.00
Second quarter                  $51.25   $36.10      NOK326.50       NOK232.50
Third quarter                   $47.10   $40.63      NOK305.50       NOK261.50
Fourth quarter                  $44.70   $35.89      NOK300.00       NOK230.00


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



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 2006                        $33.58   $30.10      NOK207.00       NOK178.50
April 2006                      $35.05   $28.80      NOK229.00       NOK189.00
March 2006                      $39.23   $32.70      NOK265.50       NOK214.00
February 2006                   $40.03   $37.05      NOK269.50       NOK246.00
January 2006                    $41.29   $37.00      NOK275.00       NOK245.00
December 2005                   $43.37   $37.48      NOK289.50       NOK254.50


ITEM 10.  ADDITIONAL INFORMATION

A. SHARE CAPITAL

Not Applicable

B. MEMORANDUM AND ARTICLES OF ASSOCIATION

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

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

The  purposes  and  powers of the  Company  are set forth in Items 6(1) and 7(a)
through (h) of our Memorandum of Association  and in the Second  Schedule of the
Bermuda  Companies Act of 1981 which is attached as an exhibit to our Memorandum
of Association. These purposes include exploring, drilling, moving, transporting
and  refining  petroleum  and  hydro-carbon  products,  including  oil  and  oil
products;  the  acquisition,  ownership,  chartering,  selling,  management  and
operation of ships and aircraft;  the entering into of any guarantee,  contract,
indemnity or  suretyship  and to assure,  support,  secure,  with or without the
consideration  or benefit,  the  performance of any obligations of any person or
persons; and the borrowing and raising of money in any currency or currencies to
secure or discharge any debt or obligation in any manner.

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

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

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

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

The Company's Bye-laws provide that no director,  alternate  director,  officer,
person or member of a committee, if any, resident representative,  or his heirs,
executors or administrators, which we refer to collectively as an indemnitee, is
liable for the acts, receipts, neglects, or defaults of any other such person or
any person involved in our formation,  or for any loss or expense incurred by us
through the insufficiency or deficiency of title to any property acquired by us,
or for the  insufficiency  of deficiency of any security in or upon which any of
our  monies  shall be  invested,  or for any  loss or  damage  arising  from the
bankruptcy,  insolvency,  or  tortuous  act of any person  with whom any monies,
securities,  or effects  shall be deposited,  or for any loss  occasioned by any
error of judgment, omission, default, or oversight on his part, or for any other
loss,  damage or  misfortune  whatever  which  shall  happen in  relation to the
execution  of his duties,  or supposed  duties,  to us or  otherwise in relation
thereto.  Each indemnitee will be indemnified and held harmless out of our funds
to the fullest extent  permitted by Bermuda law against all  liabilities,  loss,
damage or expense (including but not limited to liabilities under contract, tort
and statute or any applicable foreign law or regulation and all reasonable legal
and other costs and expenses  properly  payable)  incurred or suffered by him as
such  director,  alternate  director,  officer,  person or  committee  member or
resident representative (or in his reasonable belief that he is acting as any of
the above).  In  addition,  each  indemnitee  shall be  indemnified  against all
liabilities incurred in defending any proceedings, whether civil or criminal, in
which judgment is given in such indemnitee's favor, or in which he is acquitted.
The Company is  authorised  to purchase  insurance to cover any liability it may
incur under the indemnification provisions of its Bye-laws.

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

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

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

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

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

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

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

C. MATERIAL CONTRACTS

Spin Off of Ship Finance

Fleet Purchase Agreement

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

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

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

Charter  Service  Reserve.  We made initial capital  contributions  to Frontline
Shipping and Frontline Shipping II in the amount of $250 million and $21 million
in cash respectively.  Due to sales and acquisitions, the current capitalisation
in the  Charterers  is $218.2  million  and $56.2  million  respectively.  These
amounts serve to support our  obligations to make  charterhire  payments to Ship
Finance,  and are subject to adjustment  based on the number of charters that we
are a party to. The Charterers are entitled to use the charter  service  reserve
only (1) to make charter payments to Ship Finance and (2) for reasonable working
capital to meet short term  voyage  expenses.  The  Charterers  are  required to
provide Ship Finance with monthly certifications of the balances of and activity
in the charter service reserve.

Material  Covenants.  Pursuant to the terms of the charter ancillary  agreement,
the Charterers  have agreed not to pay dividends or other  distributions  to its
shareholders  or  loan,  repay  or make  any  other  payment  in  respect  their
indebtedness  or of any of their  affiliates  (other  than Ship  Finance  or its
wholly owned  subsidiaries),  unless (1) the  Charterers  are then in compliance
with its obligations  under the charter ancillary  agreements,  (2) after giving
effect to the dividend or other distribution, (A) they remain in compliance with
such obligations, (B) the balance of the charter service reserves equal at least
$218.2  million in the case of Frontline  Shipping and $56.2 million in the case
of Frontline  Shipping II (which  threshold  will be reduced by $5.3 million and
$7.0  million in the case of  Frontline  Shipping  and  Frontline  Shipping  II,
respectively,  upon the  termination  of other  than by reason  of a default  by
Frontline  Shipping or  Frontline  Shipping II which we refer to as the "Minimum
Reserve", and (C) they certify to Ship Finance that they reasonably believe that
the  charter  service  reserves  will be equal to or  greater  than the  Minimum
Reserve  level  for at  least  30  days  after  the  date of  that  dividend  or
distribution,  taking  into  consideration  their  reasonably  expected  payment
obligations  during  such  30-day  period,  (3) any  charter  payments  deferred
pursuant to the deferral provisions described below have been fully paid to Ship
Finance  and (4) any profit  sharing  payments  deferred  pursuant to the profit
sharing payments  provisions  described below have been fully paid. In addition,
the Charterers  have agreed to certain other  restrictive  covenants,  including
restrictions on their ability to, without the consent of Ship Finance:

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

     o    violate its organisational documents;

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

     o    Frontline Shipping and Frontline Shipping II fails at any time to hold
          at least $55  million or $12.4  million in cash and cash  equivalents,
          respectively.

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

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

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

     o    pursue any other available rights or remedies.


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


Frontline  Management  is also  obligated  under the  management  agreements  to
maintain insurance for each of Ship Finance's vessels, including marine hull and
machinery  insurance,  protection and indemnity insurance  (including  pollution
risks and crew  insurances)  and war risk insurance.  Frontline  Management will
also reimburse  Ship Finance for all lost charter  revenue caused by our vessels
being off hire for more than five days per year on a fleet-wide basis or failing
to  achieve  the  performance  standards  set forth in the  charters.  Under the
management  agreements,  Ship Finance pays  Frontline  Management a fixed fee of
$6,500  per day per  vessel  for all of the above  services,  for as long as the
relevant charter is in place. If Frontline  Shipping exercises its right under a
charter to bareboat  charter the related  vessel to a third  party,  the related
management  agreement provides that Ship Finance's  obligation to pay the $6,500
fixed fee to Frontline Management will be suspended for so long as the vessel is
bareboat chartered. Both Ship Finance and Frontline Management have the right to
terminate  any of the  management  agreements  if the relevant  charter has been
terminated  and in addition  Ship Finance has the right to terminate  any of the
management agreements upon 90 days prior written notice to Frontline Management.

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

Administrative Services Agreement
Ship  Finance  and  its  vessel  owning   subsidiaries   have  entered  into  an
administrative   services  agreement  with  Frontline   Management  under  which
Frontline  Management  provides  administrative  support  services  such  as the
maintenance  of  our  corporate  books  and  records,   payroll  services,   the
preparation of tax returns and financial  statements,  assistance with corporate
and  regulatory  compliance  matters  not  related  to our  vessels,  legal  and
accounting  services,  assistance  in  complying  with  United  States and other
relevant securities laws, obtaining  non-vessel related insurance,  if any, cash
management  and  bookkeeping  services,  development  and monitoring of internal
audit controls,  disclosure controls and information technology,  furnishing any
reports  or  financial  information  that  might be  requested  by us and  other
non-vessel  related  administrative  services.  Under this  agreement  Frontline
Management also provides Ship Finance with office space in Bermuda. Ship Finance
and its vessel  owning  subsidiaries  pay  Frontline  Management  a fixed fee of
$20,000  each per year for its  services  under  the  agreement,  and  reimburse
Frontline Management for reasonable third party costs,  including directors fees
and  expenses,  shareholder  communications  and public  relations,  registrars,
audit,  legal fees and listing costs, if Frontline  Management  advances them on
their behalf.

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

Spin Off of Golden Ocean Group Limited

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

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

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

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

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

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

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

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


D. EXCHANGE CONTROLS

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

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

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


E. TAXATION

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

United States Taxation

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

Taxation of the Company's Shipping Income: In General

The  Company  anticipates  that it will  derive  substantially  all of its gross
income from the use and operation of vessels in international  commerce and that
this income will  principally  consist of freights  from the  transportation  of
cargoes,  hire or lease  from time or voyage  charters  and the  performance  of
services  directly  related  thereto,  which the Company  refers to as "shipping
income."

Shipping income that is attributable to transportation  that begins or ends, but
that does not both begin and end, in the United  States will be considered to be
50% derived from sources within the United States.  Shipping income attributable
to  transportation  that  both  begins  and ends in the  United  States  will be
considered to be 100% derived from sources within the United States. The Company
does not engage in transportation that gives rise to 100% U.S. source income.

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

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


Application of Code Section 883

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

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

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

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

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

The  U.S.   Treasury   Department  has  recognised   Bermuda,   the  country  of
incorporation  of the Company and  certain of its  subsidiaries,  as a qualified
foreign  country.  In addition,  the U.S.  Treasury  Department  has  recognised
Liberia, the Bahamas,  Malta and the Isle of Man, the countries of incorporation
of  certain of the  Company's  subsidiaries,  as  qualified  foreign  countries.
Accordingly,  the Company and its vessel owning subsidiaries satisfy the country
of organisation requirement.

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

For the 2005 tax year, the Company satisfied the Publicly-Traded  Test since, on
more than half the days of the taxable year,  the Company's  stock was primarily
and regularly traded on the New York Stock Exchange.

Final regulations interpreting Section 883 were promulgated by the U.S. Treasury
Department  in  August  2003,   which  the  Company  refers  to  as  the  "final
regulations." The final regulations became effective for calendar year taxpayers
such as the Company and its subsidiaries beginning with the calendar year 2005.

Taxation in Absence of Internal Revenue Code Section 883 Exemption

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

Gain on Sale of Vessels.

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


Taxation of U.S. Holders

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

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

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

Distributions

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

Dividends paid on our common stock to a U.S. Holder who is an individual,  trust
or estate (a "U.S.  Individual  Holder") will generally be treated as "qualified
dividend income" that is taxable to such U.S. Individual Holders at preferential
tax rates (through 2010) provided that (1) the common stock is readily  tradable
on an established  securities  market in the United States (such as the New York
Stock  Exchange);  (2) we are not a passive foreign  investment  company for the
taxable  year during  which the  dividend is paid or the  immediately  preceding
taxable year (which we do not believe we are, have been or will be); and (3) the
U.S.  Individual  Holder has owned the common stock for more than 60 days in the
121-day  period  beginning  60 days  before the date on which the  common  stock
becomes ex-dividend.

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

Sale, Exchange or other Disposition of Common Stock

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

Passive Foreign Investment Company Status and Significant Tax Consequences

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

     o    at least 75% of our gross  income for such  taxable  year  consists of
          passive  income (e.g.,  dividends,  interest,  capital gains and rents
          derived other than in the active conduct of a rental business), or

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

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

Based on our current operations and future  projections,  we do not believe that
we are,  nor do we expect to become,  a PFIC with  respect to any taxable  year.
Although  there is no legal  authority  directly  on point,  our belief is based
principally on the position  that, for purposes of determining  whether we are a
PFIC,  the  gross  income  we  derive  or are  deemed  to  derive  from the time
chartering and voyage  chartering  activities of our  wholly-owned  subsidiaries
should constitute services income,  rather than rental income.  Correspondingly,
we believe that such income does not constitute  passive income,  and the assets
that we or our wholly-owned  subsidiaries own and operate in connection with the
production of such income, in particular, the vessels, do not constitute passive
assets for purposes of  determining  whether we are a PFIC.  We believe there is
substantial legal authority  supporting our position  consisting of case law and
Internal  Revenue  Service  pronouncements  concerning the  characterisation  of
income  derived from time  charters and voyage  charters as services  income for
other tax purposes.  However, in the absence of any legal authority specifically
relating  to the  statutory  provisions  governing  passive  foreign  investment
companies,  the  Internal  Revenue  Service or a court could  disagree  with our
position. In addition,  although we intend to conduct our affairs in a manner to
avoid being  classified  as a PFIC with respect to any taxable  year,  we cannot
assure you that the nature of our operations will not change in the future.

As  discussed  more  fully  below,  if we were to be  treated  as a PFIC for any
taxable  year,  a U.S.  Holder  would be subject  to  different  taxation  rules
depending  on  whether  the  U.S.  Holder  makes  an  election  to treat us as a
"Qualified Electing Fund," which election we refer to as a "QEF election." As an
alternative  to making a QEF  election,  a U.S.  Holder should be able to make a
"mark-to-market" election with respect to our common stock, as discussed below.

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

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

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

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

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

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

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

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

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

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

Backup Withholding and Information Reporting

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

     o    fail to provide an accurate taxpayer identification number;

     o    are notified by the Internal  Revenue  Service that you have failed to
          report all interest or dividends  required to be shown on your federal
          income tax returns; or

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

If you sell your  common  shares  to or  through a U.S.  office or  broker,  the
payment  of the  proceeds  is  subject  to  both  U.S.  backup  withholding  and
information reporting unless you establish an exemption. If you sell your common
shares through a non-U.S. office of a non-U.S. broker and the sales proceeds are
paid to you outside  the United  States then  information  reporting  and backup
withholding generally will not apply to that payment.  However, U.S. information
reporting requirements,  but not backup withholding,  will apply to a payment of
sales  proceeds,  including a payment made to you outside the United States,  if
you sell your common stock through a non-U.S.  office of a broker that is a U.S.
person or has some other contacts with the United States.
Backup  withholding is not an additional tax. Rather, you generally may obtain a
refund of any amounts withheld under backup  withholding  rules that exceed your
income tax  liability  by filing a refund claim with the U.S.  Internal  Revenue
Service.

Bermuda Taxation

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

Liberian Taxation

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

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

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

F. DIVIDENDS AND PAYING AGENTS

Not Applicable

G. STATEMENT BY EXPERTS

Not Applicable

H. DOCUMENTS ON DISPLAY

We are subject to the informational  requirements of the Securities Exchange Act
of 1934, as amended. In accordance with these requirements,  we file reports and
other information with the Securities and Exchange Commission.  These materials,
including this annual report and the accompanying exhibits, may be inspected and
copied at the public  reference  facilities  maintained by the  Commission 100 F
Street,  N.E., Room 1580 Washington,  D.C. 20549. You may obtain  information on
the operation of the public reference room by calling 1 (800) SEC-0330,  and you
may obtain  copies at  prescribed  rates from the  public  reference  facilities
maintained by the Commission at its principal office in Washington,  D.C. 20549.
The SEC maintains a website  (http://www.sec.gov.)  that contains reports, proxy
and information statements and other information regarding registrants that file
electronically  with the SEC. In addition,  documents referred to in this annual
report may be  inspected  at our  principal  executive  offices at  Par-la-Ville
Place, 14 Par-la-Ville Road, Hamilton, Bermuda HM 08.


I. SUBSIDIARY INFORMATION

Not Applicable


ITEM 11.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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

Our  exposure to interest  rate risk  relates  primarily to our debt and related
interest  rate swaps.  The majority of this  exposure  derives from our floating
rate debt, which totalled $1,450.6 million at December 31, 2005 (2004:  $1,039.8
million).  We have  entered into  interest  rate swap  agreements  to manage its
exposure to interest rate changes by swapping floating interest rates with fixed
interest  rates.  At December  31, 2005,  we had 15 swaps with a total  notional
principal of $618.3  million (2004 - fourteen  swaps with notional  principal of
$631.4  million).  The swap agreements  mature between January 2006 and February
2009,  and we estimate that we would  receive  $18.3 million to terminate  these
agreements as of December 31, 2005 (2004 - pay $2.3  million).  Our net exposure
to interest  rate  fluctuations  is $832.3  million at December  31, 2005 (2004:
$408.5million).  Our net exposure is based on our total  floating rate debt less
the notional  principal of our floating to fixed  interest rate swaps. A one per
cent change in interest  rates would  increase or decrease  interest  expense by
$8.3 million per year as of December 31, 2005 (2004: $4.1 million).

The fair market  value of our fixed rate debt was $997.8  million as of December
31,  2005  (2004:  $1,161.3  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 $56.8 and $62.5 million  respectively (2004:  decrease by $63.9
and increase by $70.2 million).

We are exposed to market risk in relation to our forward freight  agreements and
futures contracts.  Fluctuations in underlying freight market indices upon which
our forward  agreements are based have a consequent effect on our cash flows and
consolidated  statements  of  operations.  As at December 31, 2005,  the nominal
principal amount of our forward freight contracts, futures contracts and options
contracts was $12.0 million  (December 31, 2004: $48.2 million).  We use a Value
at Risk approach to estimate the risk in the freight derivatives position. Given
a 95% confidence level and one day holding period,  the VaR on the open position
as per December 31, 2005 was $1.1 million (December 31, 2004: $2.0 million).

The majority of our transactions, assets and liabilities are denominated in U.S.
dollars,  our  functional  currency.  Certain  of  our  subsidiaries  report  in
Sterling,  Swedish kronor or Norwegian  kroner and risks of two kinds arise as a
result: a transaction  risk, that is, the risk that currency  fluctuations  will
have an effect on the value of our cash flows; and a translation  risk, which is
the impact of currency fluctuations in the translation of foreign operations and
foreign  assets  and  liabilities  into  U.S.  dollars  in the our  consolidated
financial  statements.  Certain of our subsidiaries and associated  companies in
which we have investments have charter contracts  denominated in Yen. There is a
risk that currency  fluctuations will have a negative effect on the value of our
cashflows.  At December 31, 2005, we had no Yen denominated  debt (2004 - (Y)1.3
billion).  At December 31, 2005 we had (Y)35.7 million receivable in relation to
long term Yen denominated charter contracts (2004 - (Y)2.3 billion).

At December  31, 2005 we had five Yen  denominated  forward  currency  contracts
which were  entered  into for  speculative  purposes.  The fair  values of these
forward currency  contracts are recognised as assets or liabilities with changes
in fair value  recognised in the  consolidated  statements of operations.  These
contracts  have  a  notional   principal  of  (Y)8.8   billion   (equivalent  to
approximately $74.2 million). The contracts mature in January and February 2006,
and we estimate that we would pay $0.2 million to terminate  these  contracts at
December  31,  2005.  A one Yen  movement  in the  JPY/USD  exchange  rate would
increase or  decrease  net income by $0.6  million in total,  in relation to the
aforementioned, foreign currency contracts and future charter hire receivable.

ITEM 12.  DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES

Not Applicable
<PAGE>



                                     PART II

ITEM 13.  DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES

None

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

None

ITEM 15.  CONTROLS AND PROCEDURES

As of December 31, 2005, we carried out an evaluation  of the  effectiveness  of
the design and operation of our disclosure  controls and procedures  pursuant to
Exchange Act Rule 13a-14.  Based upon that evaluation,  the principal  executive
officer and principal  financial officer concluded that our disclosure  controls
and  procedures  are effective in alerting  them timely to material  information
relating to us required to be included in our periodic SEC filings.

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

ITEM 16 A.  AUDIT COMMITTEE FINANCIAL EXPERT

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

ITEM 16 B.  CODE OF ETHICS.

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

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


ITEM 16 C.  PRINCIPAL ACCOUNTANT FEES AND SERVICES

Our principal  accountant for 2005 and 2004 was  PricewaterhouseCoopers  AS. The
following table sets forth for the two most recent fiscal years the fees paid or
accrued for audit and services provided by PricewaterhouseCoopers AS.

    (in thousands of $)
                                                      2005          2004

    Audit Fees (a)                                   2,315         2,833
    Audit-Related Fees (b)                                             -
    Tax Fees (c)                                         4            23
    All Other Fees (d)                                                 -
    Total                                            2,319         2,856


(a)     Audit Fees
Audit fees represent  professional services rendered for the audit of our annual
financial  statements  and  services  provided by the  principal  accountant  in
connection with statutory and regulatory filings or engagements.

(b)  Audit -Related Fees
Audit-related  fees consisted of assurance and related services  rendered by the
principal  accountant  related to the  performance of the audit or review of our
financial statements which have not been reported under Audit Fees above.

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

(d)  All Other Fees
All other fees include  services other than audit fees,  audit-related  fees and
tax fees set forth above.

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

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

Not applicable


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

Not applicable
<PAGE>



PART III

ITEM 17.  FINANCIAL STATEMENTS

Not applicable

ITEM 18.  FINANCIAL STATEMENTS

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

Consolidated Financial Statements of Frontline Ltd

Index to Consolidated Financial Statements of Frontline Ltd     F-1
Report of Independent Registered Public Accounting Firm         F-2
Report of Independent Registered Public Accounting Firm         F-3
Consolidated Statements of Operations for the years ended       F-4
December 31, 2005, 2004 and 2003
Consolidated Balance Sheets as of December 31, 2005 and 2004    F-5
Consolidated Statements of Cash Flows for the years ended       F-6
December 31, 2005, 2004 and 2003
Consolidated Statements of Changes in Stockholders' Equity      F-7
for the years ended December 31, 2005, 2004 and 2003
Notes to Consolidated Financial Statements                      F-8


ITEM 19.  EXHIBITS

Number         Description of Exhibit

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

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

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

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

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

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

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

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

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

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

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

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

8.1            Subsidiaries of the Company.

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

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

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

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

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

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

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

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

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

31.1           Certification of the Principal Executive Officer

31.2           Certification of the Principal Executive Officer

31.3           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 Executive Officer

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

* Incorporated herein by reference.

                                   SIGNATURES

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

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

Date     June 30, 2006                   By     /s/ Inger M. Klemp
                                                -----------------------
                                                  Inger M. Klemp
                                                  Chief Financial Officer
<PAGE>

Index to Consolidated Financial Statements of Frontline Ltd

Report of Independent Registered Public Accounting Firm                 F-2
Report of Independent Registered Public Accounting Firm                 F-3
Consolidated   Statements  of  Operations   for  the  years  ended      F-4
December 31, 2005, 2004 and 2003
Consolidated Balance Sheets as of December 31, 2005 and 2004            F-5
Consolidated   Statements  of  Cash  Flows  for  the  years  ended      F-6
December 31, 2005, 2004 and 2003
Consolidated  Statements  of Changes in  Stockholders'  Equity for      F-7
the years ended December 31, 2005, 2004 and 2003
Notes to Consolidated Financial Statements                              F-8
<PAGE>

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

To the Board of Directors
and Stockholders of Frontline Ltd

In our  opinion,  based on our  audits  and the  report of other  auditors,  the
accompanying consolidated balance sheets and the related consolidated statements
of operations,  of cash flows and of the changes in stockholders' equity present
fairly, in all material  respects,  the financial  position of Frontline Ltd and
its  subsidiaries  at  December  31,  2005 and 2004,  and the  results  of their
operations  and their cash flows for each of the three years in the period ended
December 31, 2005 in conformity with accounting principles generally accepted in
the United States of America.  These financial statements are the responsibility
of the  Company's  management.  Our  responsibility  is to express an opinion on
these financial  statements based on our audits.  We did not audit the financial
statements  of  Independent   Tankers   Corporation   ("ITC"),   a  wholly-owned
subsidiary,  which statements  reflect total assets of $860.0 and $892.0 million
as of December 31, 2005 and 2004, respectively,  and total revenues of $56.2 and
$56.2  million for each of the two years in the period ended  December 31, 2005.
Those  statements  were audited by other  auditors whose report thereon has been
furnished to us, and our opinion expressed herein,  insofar as it relates to the
amounts  included for ITC, is based solely on the report of the other  auditors.
We conducted our audits of these  statements in accordance with the standards of
the Public Company Accounting  Oversight Board (United States).  Those standards
require that we plan and perform the audit to obtain reasonable  assurance about
whether the financial  statements  are free of material  misstatement.  An audit
includes  examining,  on a test  basis,  evidence  supporting  the  amounts  and
disclosures in the financial  statements,  assessing the  accounting  principles
used and  significant  estimates made by management,  and evaluating the overall
financial  statement  presentation.   We  believe  that  our  audits  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 AS
Oslo, Norway
June 30, 2006

<PAGE>


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


To the Board of Directors
Independent Tankers Corporation

We have audited the  accompanying  consolidated  balance  sheets of  Independent
Tankers   Corporation  as  of  December  31,  2005  and  2004  and  the  related
consolidated  statements of operations and retained earnings, and cash flows for
the  years  then  ended.  These  consolidated   financial   statements  are  the
responsibility of the Company's management.  Our responsibility is to express an
opinion on these financial statements based on our audit.

We conducted  our audit in accordance  with the standards of the Public  Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements  are free of material  misstatement.  The Company is not  required to
have,  nor were we  engaged to perform  an audit of its  internal  control  over
financial reporting.  Our audit included  consideration of internal control over
financial  reporting  as  a  basis  for  designing  audit  procedures  that  are
appropriate  in the  circumstances,  but not for the  purpose of  expressing  an
opinion on the  effectiveness  of the Company's  internal control over financial
reporting.  Accordingly,  we express  no such  opinion.  An audit also  includes
examining,  on a test basis,  evidence supporting the amounts and disclosures in
the  financial   statements,   assessing  the  accounting  principles  used  and
significant  estimates  made by  management,  as well as evaluating  the overall
financial  statement  presentation.   We  believe  that  our  audit  provides  a
reasonable basis for our opinion.

In our opinion, the consolidated  financial statements referred to above present
fairly, in all material respects,  the financial position of Independent Tankers
Corporation at December 31, 2005 and 2004, and the results of its operations and
cash flows for the years then ended in  conformity  with  accounting  principles
generally accepted in the United States of America.


New York, New York


June 22, 2006
<PAGE>



Frontline Ltd.
Consolidated  Statements  of Operations  for the years ended  December 31, 2005,
2004 and 2003 (in thousands of $, except per share data)
<table>
                                                               2005         2004          2003
<S>                                                       <C>          <C>           <C>
Operating revenues
     Time charter revenues                                  205,837      108,246        40,759
     Bareboat charter revenues                              142,562      176,381        25,986
     Voyage charter revenues                              1,152,240    1,554,519     1,089,583
     Finance lease interest income                            9,584       10,794             -
     Other income                                             3,610        3,630         3,111
---- ------------------------------------------------- ------------- ------------ -------------
     Total operating revenues                             1,513,833    1,853,570     1,159,439
------------------------------------------------------ ------------- ------------ -------------
Gain (loss) on sale of assets                                76,081       19,574         5,626
Operating expenses
     Voyage expenses and commission                         337,221      361,609       323,378
     Ship operating expenses                                148,702      130,385       115,323
     Charterhire expenses                                    11,711       39,302        80,539
     Administrative expenses                                 21,181       25,739        20,998
     Depreciation and amortisation                          198,359      180,497       143,560
---- ------------------------------------------------- ------------- ------------ -------------
     Total operating expenses                               717,174      737,532       683,798
------------------------------------------------------ ------------- ------------ -------------
Net operating income                                        872,740    1,135,612       481,267
------------------------------------------------------ ------------- ------------ -------------
Other income (expenses)
     Interest income                                         41,040       31,595         9,185
     Interest expense                                     (215,995)    (205,458)      (74,184)
     Share in results from associated companies               3,691       10,553        33,533
     Foreign currency exchange gain (loss)                   18,829      (4,932)      (10,583)
     Other financial items, net                              46,084        3,566           300
---- ------------------------------------------------- ------------- ------------ -------------
     Net other expenses                                   (106,351)    (164,676)      (41,749)
------------------------------------------------------ ------------- ------------ -------------
Net income from continuing  operations  before income       766,389      970,936       439,518
taxes,  minority  interest and  cumulative  effect of
change in accounting principle
Minority interest                                         (169,459)     (64,995)             -
Income taxes                                                     19        (178)           (3)
Gain on issuance of shares by associate                       1,105            -             -
------------------------------------------------------ ------------- ------------ -------------
Net  income   from   continuing   operations   before       598,054      905,763       439,515
cumulative effect of change in accounting principle
Discontinued operations                                       8,785      117,619         3,612
Cumulative effect of change in accounting principle               -            -      (33,767)
------------------------------------------------------ ------------- ------------ -------------
Net income                                                  606,839    1,023,382       409,360
====================================================== ============= ============ =============

Earnings per share:
Basic earnings per share from  continuing  operations         $7.99       $12.21         $5.87
before  cumulative  effect of  change  in  accounting
principle
Diluted    earnings   per   share   from   continuing         $7.99       $12.21         $5.86
operations  before  cumulative  effect  of  change in
accounting principle

Basic earnings per share before  cumulative effect of         $8.11       $13.79         $5.92
change in accounting principle
Diluted earnings per share before  cumulative  effect         $8.11       $13.79         $5.90
of change in accounting principle

Basic earnings per share                                      $8.11       $13.79         $5.47
Diluted earnings per share                                    $8.11       $13.79         $5.45
==================================================== ============= ============ ==============
</table>
See accompanying Notes that are an integral part of these Consolidated Financial
Statements


Frontline Ltd.
Consolidated Balance Sheets as of December 31, 2005 and 2004
(in thousands of $)
<table>
                                                                  2005          2004
<S>                                                          <C>           <C>
ASSETS
Current Assets
     Cash and cash equivalents                                 100,533       105,702
     Restricted cash                                           636,790       592,607
     Marketable securities                                     144,156        78,327
     Trade accounts receivable                                  72,719       141,301
     Other receivables                                          20,053        13,787
     Inventories                                                44,984        32,017
     Voyages in progress                                        94,479       148,900
     Prepaid expenses and accrued income                         9,328        11,872
     Net investment in finance lease, current portion           11,861        13,488
     Derivative instruments receivable amounts                  24,695        14,490
     Other current assets                                          568        16,903
----------------------------------------------------------------------- -------------
Total current assets                                         1,160,166     1,169,394
Newbuildings and vessel purchase options                        15,927        24,231
Vessels and equipment, net                                   2,584,847     2,254,361
Vessels and equipment under capital lease, net                 672,608       718,842
Investment in associated companies                              10,169        22,955
Net investment in finance lease, long term portion              96,057       107,664
Deferred charges                                                18,664        28,219
Other long-term assets                                           9,401        13,094
----------------------------------------------------------------------- -------------
Total assets                                                 4,567,839     4,338,760
==== ================================================================== =============

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
     Short-term debt and current portion of long-term debt     240,191       151,614
     Current portion of obligations under capital leases        25,142        21,498
     Trade accounts payable                                      9,382         8,268
     Accrued expenses                                           87,336        80,694
     Deferred charter revenue                                    7,071         4,382
     Derivative instruments liabilities                          3,521         6,431
     Other current liabilities                                  83,856        72,976
----------------------------------------------------------------------- -------------
Total current liabilities                                      456,499       345,863
Long-term liabilities
     Long-term debt                                          2,199,538     1,990,131
     Obligations under capital leases                          706,279       732,153
     Deferred gains on sales of vessels                         18,102        20,028
     Other long-term liabilities                                 1,505         3,887
----------------------------------------------------------------------- -------------
Total liabilities                                            3,381,923     3,092,062
Commitments and contingencies                                        -             -
Minority interest                                              470,750       328,730

Stockholders' equity
     Share capital                                             187,063       187,063
     Contributed surplus                                       534,787       568,127
     Accumulated other comprehensive income (loss)             (6,684)         5,414
     Retained earnings                                               -       157,364
----------------------------------------------------------------------- -------------
Total stockholders' equity                                     715,166       917,968
----------------------------------------------------------------------- -------------
Total liabilities and stockholders' equity                   4,567,839     4,338,760
======================================================================= =============
</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, 2005,
2004 and 2003
(in thousands of $)                                               2005         2004       2003
<S>                                                         <C>         <C>          <C>
Net income                                                     606,839    1,023,382    409,360
Adjustments to reconcile net income to net cash provided
by operating activities:
     Depreciation and amortisation                             198,875      183,711    146,907
     Amortisation of deferred charges                           16,961       10,372      2,862
     (Gain)   loss   from   sale  of   assets   (including   (109,657)    (126,230)    (5,626)
     marketable securities)
     Share in results from associated companies                (3,692)     (10,552)   (33,533)
     Unrealised foreign exchange loss                          (2,222)          390     17,955
     Change in accounting principle                                  -            -     33,767
     Adjustment of derivatives to market value                (12,335)     (15,675)   (28,180)
     Minority interest                                         169,459       64,995          -
     Other, net                                                (3,286)      (3,337)      1,311
Changes in operating assets and liabilities, net of effect
of acquisitions:
     Trade accounts receivable                                  64,981     (93,497)    (7,495)
     Other receivables                                         (6,493)        1,193    (8,647)
     Inventories                                              (12,967)      (5,966)      3,489
     Voyages in progress                                        54,421     (88,619)    (9,853)
     Prepaid expenses and accrued income                         2,474      (3,584)    (2,837)
     Trade accounts payable                                      1,114        1,353      (417)
     Accrued expenses                                            6,832       11,986    (3,281)
     Deferred charter revenue                                    2,689        (927)      2,727
     Other, net                                                  5,781     (43,008)      4,771
----------------------------------------------------------- ----------- ------------ ----------
Net cash provided by operating activities                      979,774      905,987    523,280
----------------------------------------------------------- ----------- ------------ ----------
Investing activities
     Maturity (placement) of restricted cash                  (44,183)      299,280  (559,430)
     Additions to newbuildings, vessels and equipment        (558,163)    (126,947)   (66,589)
     Purchase of option                                              -            -   (10,042)
     Proceeds from sale of vessels and equipment               250,339       59,787    427,305
     Acquisition of subsidiaries  and  businesses,  net of           -     (18,858)    (2,363)
     cash
     Investments in associated companies                       (2,612)     (37,424)   (91,611)
     Dividends received from associated companies               20,911        3,800     11,581
     Purchase of minority interest                            (33,083)     (14,713)          -
     Proceeds  from  sale  of  investments  in  associated           -       11,181      7,343
     companies
     Receipts  from  investments  in  finance  leases  and      20,540       17,482          -
     loans receivable
     Purchases and sales of other assets, net                 (15,286)     (15,098)     14,748
     Proceeds from sale of newbuilding contracts                16,800            -          -
----------------------------------------------------------- ----------- ------------ ----------
Net cash provided by (used in) investing activities          (344,737)      178,490  (269,058)
----------------------------------------------------------- ----------- ------------ ----------
Financing activities
     Proceeds from long-term debt                            1,660,503    1,724,014    627,300
     Repayments of long-term debt                           (1,361,500) (1,814,269)  (465,313)
     Payment of obligations under capital leases              (22,230)     (20,310)   (13,134)
     Debt fees paid                                            (7,405)     (16,359)   (18,492)
     Cash dividends paid                                     (909,574)  (1,038,315)  (338,033)
     Repurchase of shares and warrants                               -        (631)   (28,562)
     Proceeds from issuance of equity                                -       62,906      2,931
----------------------------------------------------------- ----------- ------------ ----------
Net cash used in financing activities                        (640,206)  (1,102,964)  (233,303)
----------------------------------------------------------- ----------- ------------ ----------
Net  increase  (decrease)  in cash  and  cash  equivalents     (5,169)     (18,487)     20,919
before change in accounting principle
Cash effect of change in accounting principle                        -            -     11,192
----------------------------------------------------------- ----------- ------------ ----------
Net  increase  (decrease)  in cash  and  cash  equivalents     (5,169)     (18,487)     32,111
after change in accounting principle
Cash and cash equivalents at beginning of year                 105,702      124,189     92,078
Cash and cash equivalents at end of year                       100,533      105,702    124,189
=========================================================== =========== ============ ==========
Supplemental disclosure of cash flow information:
Interest paid                                                  235,020      188,517     73,206
Income taxes paid                                                   46          114          3
=========================================================== =========== ============ ==========
</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, 2005, 2004 and 2003
(in thousands of $, except number of shares)

                                                                   2005        2004        2003
<S>                                                          <C>         <C>         <C>
NUMBER OF SHARES OUTSTANDING
     Balance at beginning of year                            74,825,169  73,647,930  76,466,566
     Shares issued                                                    -   1,197,436     251,364
     Shares bought back                                               -    (20,197)  (3.070.000)
----------------------------------------------------------- ----------- ----------- -----------
     Balance at end of year                                  74,825,169  74,825,169  73,647,930
----------------------------------------------------------- ----------- ----------- -----------

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

CONTRIBUTED SURPLUS
     Balance at beginning of year                               568,127     513,859     552,241
     Shares issued                                                    -      42,802       3,774
     Shares bought back and warrants exercised or expired             -       (581)    (42,156)
     Excess of cash  proceeds  over book  value on issue of           -       9,050           -
     shares by subsidiary
     Contribution from related party                             85,364           -           -
     Distribution from contributed surplus                    (203,642)           -           -
     Minority share of contributed surplus                            -           -           -
     Minority  interest in deemed equity  contributions and
     deemed dividends                                            84,938       2,997           -
----------------------------------------------------------- ----------- ----------- -----------
     Balance at end of year                                     534,787     568,127     513,859
----------------------------------------------------------- ----------- ----------- -----------

ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)
     Balance at beginning of year                                 5,414     (6,953)     (9,498)
     Other comprehensive income                                (12,098)      12,367       2,545
----------------------------------------------------------- ----------- ----------- -----------
     Balance at end of year                                     (6,684)       5,414     (6,953)
----------------------------------------------------------- ----------- ----------- -----------

RETAINED EARNINGS
     Balance at beginning of year                               157,364     564,391     493,064
     Net income                                                 606,839   1,023,382     409,360
     Cash dividends                                           (552,322)  (1,040,093)  (338,033)
     Stock dividends                                          (211,881)   (390,316)           -
----------------------------------------------------------- ----------- ----------- -----------
     Balance at end of year                                          -     157,364     564,391
----------------------------------------------------------- ----------- ----------- -----------

------------------------------------------------------------ ----------- ----------- -----------
TOTAL STOCKHOLDERS' EQUITY                                      715,166     917,968   1,255,417
============================================================ =========== =========== ===========

COMPREHENSIVE INCOME (LOSS)
     Net income (loss)                                          606,839   1,023,382     409,360
     Unrealised gains (loss) from marketable securities        (11,877)      10,441           4
     Unrealised  gains  from cash flow  hedging  derivative           -       2,471       1,591
     instruments
     Foreign currency translation and other                       (221)       (545)         950
----------------------------------------------------------- ----------- ----------- -----------
     Other comprehensive income                                (12,098)      12,367       2,545

------------------------------------------------------------ ----------- ----------- -----------
Comprehensive income                                            594,741   1,035,749     411,905
============================================================ =========== =========== ===========
</table>
See accompanying Notes that are an integral part of these Consolidated Financial
Statements 1.
<PAGE>


1.   GENERAL

     Frontline Ltd. (the "Company" or  "Frontline")  is a Bermuda based shipping
     company  engaged  primarily in the  ownership and operation of oil tankers,
     including  oil/bulk/ore  ("OBO") carriers.  The Company operates tankers of
     two sizes:  very large crude carriers  ("VLCCs")  which are between 200,000
     and 320,000  deadweight  tons  ("dwt"),  and  Suezmaxes,  which are vessels
     between 120,000 and 170,000 dwt. In addition, The Company owns and operates
     two  containerships  which are approximately  1,800 twenty-foot  equivalent
     units ("TEU").  The Company  operates  primarily  through  subsidiaries and
     partnerships  located in Bermuda,  Isle of Man,  Liberia,  Norway,  Panama,
     Singapore,  Cayman  Islands,  the Bahamas  and Cyprus.  The Company is also
     involved in the charter, purchase and sale of vessels.

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

     In October 2003, the Company established Ship Finance International Limited
     ("Ship Finance") in Bermuda. Through transactions executed in January 2004,
     the Company  transferred  to Ship  Finance  ownership  of 46  vessel-owning
     entities each owning one vessel and its  corresponding  financing,  and one
     entity  owning an option to acquire a VLCC.  The  Company  then  leased the
     vessels  back on  long-term  charters.  The  assets  and  liabilities  were
     transferred  to, and recorded by Ship Finance,  at the  historical net book
     value of each  asset  at  December  31,  2003.  In May  2004  the  Board of
     Frontline  declared a share  dividend of 25% of the issued share capital of
     Ship Finance to Frontline's shareholders. Frontline's shareholders received
     one share in Ship Finance for every four  Frontline  shares  held.  Further
     share dividends have been declared as follows:

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

    As of December  31,  2005,  the  Company's  remaining  shareholding  in Ship
    Finance  was  16.2%.  The  Company  has  accounted  for the spin off of Ship
    Finance at historical  cost.  Ship Finance shares are traded on the New York
    Stock  Exchange  under the ticker symbol SFL.  Under the  provisions of FASB
    Interpretation  No. 46 (revised  December  2003)  Consolidation  of Variable
    Interest  Entities,  an Interpretation of ARB No. 51 ("FIN 46") Ship Finance
    remains consolidated as a wholly owned subsidiary (See Note 26).

    In  November  2004,  the Company  established  Golden  Ocean  Group  Limited
    ("Golden  Ocean") as a wholly owned subsidiary in Bermuda for the purpose of
    transferring,  by way of contribution,  certain dry bulk shipping interests.
    Three Frontline subsidiaries and cash equal to the difference between $22.45
    million  and the  historical  net  book  value  of  those  subsidiaries  was
    transferred to Golden Ocean on December 1, 2004. On the same date, the Board
    of  Frontline  resolved  to  distribute  its  shares in Golden  Ocean to its
    shareholders  in  proportion to their  ownership in  Frontline.  Frontline's
    shareholders received three shares in Golden Ocean for every Frontline share
    held.  Certain of the  Company's  U.S.  shareholders  were excluded from the
    distribution  and  received a cash  payment in lieu of shares equal to $0.60
    per Golden Ocean share,  which represents the average price per share of the
    Golden  Ocean  shares  during  their  first five days of trading on the Oslo
    Stock  Exchange  where Golden  Ocean was listed on December  15,  2004.  The
    Company does not have any  significant  continuing  involvement in these dry
    bulk  operations and as a result,  the financial  results from the Company's
    dry bulk  operations  transferred  to Golden Ocean have been reported  under
    "discontinued  operations"  for 2004 and 2003. The Company has accounted for
    the spin off of Golden  Ocean at fair value and has recorded a gain of $99.5
    million in the year ended  December 31, 2004 which is included in the result
    from discontinued operations in the statement of operations (See Note 29).

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.

    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, or where (c)
    the  voting  rights  of  some  investors  are  not   proportional  to  their
    obligations  to absorb the  expected  losses of the entity,  their rights to
    receive  the  expected   residual  returns  of  the  entity,   or  both  and
    substantially all of the entity's activities either involve or are conducted
    on behalf of an investor that has disproportionately few voting rights. FASB
    Interpretation  46 ("FIN  46")  requires a  variable  interest  entity to be
    consolidated  if any of its  interest  holders are entitled to a majority of
    the  entity's  residual  return or are exposed to a majority of its expected
    losses.

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

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

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

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

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

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

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

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

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

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

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

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

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

    Revenue and expense recognition
    Revenues and expenses are  recognised  on the accruals  basis.  Revenues are
    generated from freight  billings,  time charter and bareboat  charter hires.
    The  operating  results of voyages in progress  are  estimated  and recorded
    pro-rata on a per day basis in the  consolidated  statements of  operations.
    Probable  losses on voyages are provided for in full at the time such losses
    can be estimated.  Time charter and bareboat  charter  revenues are recorded
    over the term of the charter as 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  expense  principles  stated  above are
    applied  in  determining  the pool's net pool  revenues.  Certain  pools are
    responsible  for paying voyage  expenses and distribute net pool revenues to
    the participants.  Certain pools require the participants to pay and account
    for voyage expenses,  and distribute gross pool revenues to the participants
    such that the  participants'  resulting  net pool  revenues are equal to net
    pool  revenues  calculated  according  to the agreed  formula.  The  Company
    accounts for gross pool revenues allocated by these pools as "pool revenues"
    which are included in voyage revenues in its statements of operations. Refer
    to Note 30 for further analysis of pool revenues.

    Drydocking
    Normal vessel repair and maintenance  costs are expensed when incurred.  The
    Company recognises the cost of a drydocking at the time the drydocking takes
    place, that is, it applies the "expense as incurred" method.  The expense as
    incurred  method is considered by management to be an appropriate  method of
    recognising  dry-docking  costs as it eliminates the uncertainty  associated
    with estimating the cost and timing of future dry dockings.

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

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

    In 2001, the Company established a facility for a Stock Indexed Total Return
    Swap Programme,  or Equity Swap, 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.  The  Company  recorded a gain of $22.1  million in its
    consolidated statement of operations for the year ended December 31, 2003 in
    respect of the change in fair value of the Equity Swap.

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

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

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

     Foreign currencies
     The  Company's  functional  currency is the U.S.  dollar as the majority of
     revenues  are  received in U.S.  dollars  and a majority  of the  Company's
     expenditures are made in U.S. dollars.  The Company's reporting currency is
     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 Accounting for
    Stock Issued to Employees ("APB 25") 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 2005,  2004 and 2003,  the Company has recorded  compensation  expense of
    $nil,  $4.2  million  and $5.6  million,  respectively  in  connection  with
    employee share options. The Company's share option scheme terminated in 2004
    as discussed in Note 23.

    Had the compensation  costs for these plans been determined  consistent with
    the fair value method  recommended in SFAS 123  Accounting  for  Stock-Based
    Compensation,  the  Company's  net income and  earnings per share would have
    been reduced to the following pro forma amounts in 2005, 2004 and 2003:

<table>
(in thousands, except per share data)                            2005       2004      2003
Net income (loss)
<S>                                                           <C>      <C>         <C>
     As reported                                              606,839  1,023,382   409,360
     Add: Compensation expenses as reported                         -      4,231     5,574
     Compensation   expense  determined  under  fair  value         -    (2,756)   (1,011)
     based method for all awards
------------------------------------------------------------------------------------------
     Adjusted  net income  (loss),  fair value based method   606,839  1,024,857   413,923
     for all awards
------------------------------------------------------------------------------------------

Basic earnings (loss) per share
     As reported                                                 7.99     $13.79     $5.47
     SFAS 123 adjusted                                           7.99     $13.81     $5.53

Diluted earnings (loss) per share
     As reported                                                 8.11     $13.79     $5.45
     SFAS 123 adjusted                                           8.11     $13.81     $5.51
</table>

     Earnings per share
     Basic  earnings per share  ("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 7).

     Issuance of shares by a  subsidiary/  associate  The Company  recognises  a
     profit when its  subsidiary or associate  issues its stock to third parties
     at a price per share in excess  of its  carrying  amount if such  profit is
     realisable. If such profit is not realisable, it is recorded as an increase
     to paid in capital.

3.   CHANGE IN ACCOUNTING PRINCIPLE

     In December 2003, FIN 46 was adopted by the Company.  Prior to the adoption
     of  FIN  46  Frontline  accounted  for  its  interest  in  Golden  Fountain
     Corporation  using the equity method.  The Company  determined  that Golden
     Fountain  Corporation was a variable interest entity and that Frontline was
     the primary  beneficiary.  Accordingly the Company  consolidated the assets
     and liabilities of Golden Fountain Corporation effective December 31, 2003.
     The effect of consolidation  of Golden Fountain  Corporation as of December
     31, 2003 was to  increase  total  assets by $7.8  million,  increase  total
     liabilities  by $16.4  million  and to record  the  cumulative  effect of a
     change in accounting principle of $8.5 million. Golden Fountain Corporation
     sold its vessel on December 17, 2004 which  resulted in an accounting  gain
     of $19.7 million.  The sale of the vessel and subsequent  extinguishment of
     debt was considered a triggering event and the Company assessed that it was
     no longer  the  primary  beneficiary  and has  resumed  accounting  for its
     investment in Golden Fountain Corporation using the equity method.

     On July 1, 2003,  the Company  purchased a call option for $10.0 million to
     acquire all of the shares of Independent  Tankers  Corporation ("ITC") from
     Hemen Holding Ltd ("Hemen"),  a related party, for a total consideration of
     $4.0 million  plus 4% interest per year.  ITC operates a total of six VLCCs
     and four Suezmax tankers,  which are on long-term  charters to subsidiaries
     of BP  Plc  and  Chevron  Corporation.  Prior  to  the  adoption  of FIN 46
     Frontline did not  consolidate  ITC. The Company  determined that ITC was a
     variable  interest  entity and that Frontline was the primary  beneficiary.
     Accordingly  the Company  consolidated  the assets and  liabilities  of ITC
     effective  December  31,  2003.  The effect of  consolidation  of ITC as of
     December 31, 2003 was to increase total assets by $910.5 million,  increase
     total  liabilities by $935.7 million and to record the cumulative effect of
     a change in  accounting  principle  of $25.2  million.  On May 27, 2004 the
     Company exercised its option to acquire all of the shares of ITC - refer to
     Note 25.

4.   RECENTLY ISSUED ACCOUNTING STANDARDS

     In  December  2004,  the FASB  issued  Statement  of  Financial  Accounting
     Standards No. 123 - Revised,  Share-Based  Payment ("SFAS 123R"). SFAS 123R
     revises SFAS 123 Accounting for Stock-Based  Compensation  ("SFAS 123") and
     supersedes  Accounting Principles Board Opinion No. 25 Accounting for Stock
     issued to Employees  ("APB 25") and requires  companies to expense the fair
     value  of  employee   stock   options   and  other  forms  of   stock-based
     compensation.  SFAS  123R  adopts a similar  approach  to SFAS 123 and sets
     forth  criteria  that must be met in order  for an award to fall  under the
     scope of the  Standard.  SFAS 123R  requires  companies to fair value stock
     based  compensation  awards and cease using the intrinsic  value method off
     accounting  allowed  under  APB 25. In March  2005,  the SEC  issued  Staff
     Accounting  Bulletin SAB 107 ("SAB 107"), which explains the staffs view on
     the application of SFAS 123R.  SFAS 123R is effective for public  companies
     for  annual  reporting  periods  beginning  on or after June 15,  2005.  As
     discussed in more detail in Note 23, and all option  plans  expired in 2004
     and as such, the Company does believe that adoption of SFAS 123(R) will not
     have a material impact on its financial statements.

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

     In May 2005, the FAS issued Statement of Financial Accounting Standards 154
     Accounting Changes and Error Corrections,  a replacement of APB Opinion No.
     20 and FAS 3 ("SFAS 154").  SFAS 154 replaces APB Opinion No. 20 Accounting
     Changes  and  FAS 3  Reporting  Accounting  Changes  in  Interim  Financial
     Statements.   Previously,   most  changes  in  accounting   principle  were
     recognised  by  including  the  cumulative  effect of  changing  to the new
     accounting  principle in net income for the period of the change.  SFAS 154
     requires  retrospective  application of a change in accounting principle to
     prior  periods  unless  it  is   impracticable   to  determine  either  the
     period-specific  effects  or the  cumulative  effect  of the  change to any
     period. When it is impracticable to determine the  period-specific  effects
     of an  accounting  change,  SFAS  154  requires  that  the  new  accounting
     principle  be applied to the balances of assets and  liabilities  as of the
     beginning of the earliest  period for which  retrospective  application  is
     practicable  and that a  corresponding  adjustment  be made to the  opening
     balance of retained earnings ( or other appropriate components of equity or
     net  assets)  for that  period  rather  than  being  reported  in an income
     statement.   SFAS  154  is  applicable  for  all  accounting   changes  and
     corrections of errors  occurring in fiscal years  beginning  after December
     15, 2005.  The Company  does not expect  adoption of SFAS 154 on January 1,
     2006 to have a significant impact on its financial statements.

5.   SEGMENT INFORMATION

     The Company has three reportable  segments:  tankers, oil bulk ore carriers
     ("OBOs"), and dry bulk carriers.

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

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

     Information about the Company's  reportable  segments as of and for each of
     the years ended December 31, 2005, 2004 and 2003 is as follows:
<table>
    (in thousands of $)                            Tankers        OBOs   Dry Bulk       Total
    2005
    <S>                                          <C>         <C>        <C>         <C>
    Total operating revenues                     1,395,826     105,167          -   1,500,993
    Voyage expenses                                332,395       4,568          -     336,963
    Ship operating expenses                        129,865      17,658          -     147,523
    Depreciation and amortisation                  175,491      20,688          -     196,179
    Interest income                                 24,663          32          -      24,695
    Interest expense                               202,285      12,738          -     215,023
    Share in results from associated companies       3,200           -          -       3,200
    Net income                                     654,773      49,544      7,153     711,470
    Discontinued operations                              -           -      8,785       8,785
    Vessels and equipment, net                   2,243,221     241,265          -   2,484,486
    Vessels under capital lease                    672,608           -          -     672,608
    Investment in associated companies               2,182           -          -       2,182
    Total assets                                 3,642,703     246,167         16   3,888,886
    Expenditure for vessels                        558,163           -          -     558,163

    (in thousands of $)                            Tankers        OBOs   Dry Bulk       Total
    2004
    Total operating revenues                     1,765,525      84,114          -    1,849,639
    Voyage expenses                                358,863       2,746          -      361,609
    Ship operating expenses                        114,984      15,350         51      130,385
    Depreciation and amortisation                  159,478      20,745          -      180,223
    Interest income                                 22,142          16          -       22,158
    Interest expense                               190,303      13,275          -      203,578
    Share in results from associated companies       9,063           -          -        9,063
    Net income                                     942,329      31,883    117,570    1,091,782
    Discontinued operations                              -           -    117,619      117,619
    Vessels and equipment, net                   1,975,447     261,953     15,698    2,253,098
    Vessels under capital lease                    718,842           -          -      718,842
    Investment in associated companies              15,288           -          -       15,288
    Total assets                                 3,575,626     265,949     33,067    3,874,642
    Expenditure for vessels                        126,947           -          -      126,947

    (in thousands of $)                            Tankers        OBOs   Dry Bulk       Total
    2003
    Total operating revenues                     1,039,569     116,213          -    1,155,782
    Voyage expenses                                299,953      23,424          -      323,377
    Ship operating expenses                         99,384      15,962       (23)      115,323
    Depreciation and amortisation                  122,607      20,688       (17)      143,278
    Interest income                                    215          12          -          227
    Interest expense                                65,057       3,638          -       68,695
    Share in results from associated companies      33,533           -          -       33,533
    Net income                                     384,335      52,728      (329)      436,734
    Discontinued operations                              -           -      3,610        3,610
    Vessels and equipment, net                   1,813,907     282,698     67,735    2,164,340
    Vessels under capital lease                    765,126           -          -      765,126
    Investment in associated companies             173,329           -          -      173,329
    Total assets                                 3,406,472     292,017     72,551    3,771,040
    Expenditure for vessels                         66,589                      -       66,589
</table>
<table>
    Reconciliations  of  reportable  segments   information  to  the  Company's
    consolidated totals follows:
    <S>                                                      <C>         <C>        <C>
    (in thousands of $)                                           2005       2004        2003
    Total operating revenues
    Total operating revenues for reportable segments         1,500,993  1,849,639   1,155,782
    Other operating revenues                                    12,840      3,931       3,657
    Total consolidated  operating revenues                   1,513,833  1,853,570   1,159,439
    Interest income
    Total interest income for reportable segments               24,695     22,158         227
    Interest income  attributable to corporate holding and      16,345      9,437       8,958
    management companies
    ------------------------------------------------------- ----------- ---------- -----------
    Total consolidated interest income                          41,040     31,595       9,185
    ------------------------------------------------------- ----------- ---------- -----------
    Interest expense
    Total interest expense for reportable segments             215,023    203,578      68,695
    Interest  expense  attributable  to corporate  holding         972      1,880       5,489
    and management companies
    ------------------------------------------------------- ----------- ---------- -----------
    Total consolidated interest expense                        215,995    205,458      74,184
    ------------------------------------------------------- ----------- ---------- -----------
    Depreciation
    Total depreciation for reportable segments                 196,179    180,223     143,278
    Depreciation not attributed to segments                      2,180        274         282
    ------------------------------------------------------- ----------- ---------- -----------
    Total consolidated depreciation                            198,359    180,497     143,560
    ------------------------------------------------------- ----------- ---------- -----------
    Net income
    Net income for reportable segments                         711,470  1,091,782     436,734
    Minority interest                                        (169,459)   (57,602)           -
    Net  income  attributable  to  corporate  holding  and      64,828   (10,798)    (27,374)
    management companies
    ------------------------------------------------------- ----------- ---------- -----------
    Total net income                                           606,839  1,023,382     409,360
    ------------------------------------------------------- ----------- ---------- -----------
    Vessels and equipment, net
    Vessels and equipment, net for reportable segments       2,484,486  2,253,098   2,164,340
    Vessels and equipment not attributed to segments           100,361      1,263         899
    ------------------------------------------------------- ----------- ---------- -----------
    Total consolidated vessels and equipment, net            2,584,847  2,254,361   2,165,239
    ------------------------------------------------------- ----------- ---------- -----------
    Assets
    Total assets for reportable segments                     3,888,886  3,874,642   3,771,040
    Cash  and cash  equivalents  attributable  to  holding     378,674    333,507     630,633
    company
    Marketable   securities  held  by  corporate   holding     144,156     78,327          44
    company
    Other assets  attributable  to  corporate  holding and     156,123     52,284      61,818
    management companies
    ------------------------------------------------------- ----------- ---------- -----------
    Total consolidated assets                                4,567,839  4,338,760   4,463,535
    ------------------------------------------------------- ----------- ---------- -----------
</table>
    During the year ended December 31, 2005,  the Company  reported total income
    from  one  customer  which  represent  over  10% of  consolidated  operating
    revenues.  These revenues are reported under the tanker segment.  During the
    year ended  December  31, 2004 the company  reported  total  income from two
    customers which  represented  over 10% of consolidated  operating  revenues.
    During the year ended 31 December 2003, no single customer accounted for 10%
    or more of consolidated operating revenues.

6.   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 charge for the year comprises:
    (in thousands of $)                          2005       2004        2003
    Current tax                                    19      (178)         (3)
    Deferred tax                                    -          -           -
    -------------------------------------------------------------------------
                                                   19      (178)         (3)
    =========================================================================

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

    (in thousands of $)                              2005        2004
    Deferred tax liability - non current            (249)       (175)
    Tax loss carry forwards                        15,326      18,426
    Valuation allowance                          (15,077)    (18,251)
    -----------------------------------------------------------------
    -----------------------------------------------------------------
    Net deferred tax asset (liability)                  -           -
    =================================================================

     As of December  31,  2005,  2004 and 2003,  the  Company  had  $54,734,808,
     $65,806,000   and   $60,129,000  of  net  operating  loss  carry  forwards,
     respectively.  Tax loss carry  forwards can be utilised only against future
     taxable income of the respective  subsidiary.  Our subsidiary  Frontline AB
     accounts for a total of $48,128,654  gross (net $13,476,023) as at December
     31,  2005  and  our  subsidiary  FRTLInvest  AB  accounts  for a  total  of
     $6,606,154  gross (net  $1,859,723)  as of  December  31,  2005.  These net
     operating  losses do not have an expiration  date.  Carried  forward losses
     accounted for by subsidiaries  that have been placed in liquidation  during
     the year have been excluded.  The Company's deferred tax assets are reduced
     by a valuation  allowance  when, in the opinion of  management,  it is more
     likely than not that some  portion or all of the  deferred  tax assets will
     not  be  realised  in  the  future.   Since  2002,  the  Company's  Swedish
     subsidiaries  have remained  dormant,  and as a  consequence  not generated
     taxable  profits against which the historical tax losses could be utilised.
     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  utilise  the  tax  carry   forwards.
     Accordingly the Company recorded a full valuation allowance at December 31,
     2005 and 2004.

7.   EARNINGS PER SHARE

     The  computation  of basic EPS is based on the weighted  average  number of
     shares  outstanding during the year. The computation of diluted EPS assumes
     the foregoing  and the exercise of stock  options using the treasury  stock
     method (see Note 23).

     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>
    (in thousands of $)                                           2005       2004        2003
    <S>                                                        <C>        <C>         <C>
    Net  income  from  continuing   operations  after  tax     598,054    905,763     439,515
    before  cumulative  effect  of  change  in  accounting
    principle
    Discontinued operations                                      8,785    117,619       3,612
    Cumulative effect of change in accounting principle              -          -    (33,767)
    ------------------------------------------------------- ----------- ---------- -----------
    Net income (loss) available to stockholders                606,839  1,023,382     409,360
    ======================================================= =========== ========== ===========
</table>
     The  components of the  denominator  for the  calculation  of basic EPS and
     diluted EPS are as follows:
<table>
    (in thousands of $)                                           2005       2004        2003
    <S>                                                        <C>        <C>         <C>
    Basic earnings per share:
    Weighted average number of ordinary shares outstanding      74,825     74,192      74,902
    ======================================================= =========== ========== ===========

    Diluted earnings per share:
    Weighted average number of ordinary shares outstanding      74,825     74,192      74,902
    Warrants and stock options                                       -          -         158
    ------------------------------------------------------- ----------- ---------- -----------
                                                                74,825     74,192      75,060
    ======================================================= =========== ========== ===========
</table>
    Basic EPS and diluted EPS for discontinued  operations and basic EPS for the
    cumulative effect of change in accounting principle are as follows:

                                                   2005        2004       2003
    Basic and diluted earnings per share for      $0.12       $1.59      $0.05
    discontinued operations

    Basic earnings per share for cumulative       $0.00       $0.00    $(0.45)
    effect of change in accounting principle

     In the years  ended  December  31,  2005,  2004 and 2003,  no options  were
     anti-dilutive.


8.   LEASES

     At December  31, 2005 the Company  leased in thirteen  vessels on long-term
     time charters and bareboat charters from third parties. One of those leases
     is  classified  as  operating  leases  and twelve as  capital  leases.  The
     Company's  long-term leases of vessels  generally  contain optional renewal
     periods and purchase and put options.

     Rental expense

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

    (in thousands of $)
    Year ending December 31,
    2006                                                               6,712
    2007                                                               6,845
    2008                                                               6,888
    2009                                                               6,845
    2010                                                               5,129
    2011 and later                                                     8,649
    -------------------------------------------------------------------------
    Total minimum lease payments                                      41,068
    =========================================================================

     Total rental expense for operating leases was $11,711,000,  $46,854,000 and
     $81,835,000  for  the  years  ended  December  31,  2005,  2004  and  2003,
     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>
                                                          Extended
                                             Extended     Lease                   Lessor's
                                Expiry of    Lease        Periods     Companys    Put
                                Mandatory    Periods      at          Purchase    Option
                                Lease        at Lessor's  Company's   Option      Exercise
    Vessel Type                 Period       Option       Option      Periods     Date
    <S>                         <C>          <C>         <C>          <C>         <C>
    Front Warrior (Suezmax)     2007         2008-2011   2010-2011    2007- 2011  2011
</table>

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

    A liability  for put options on vessels  leased under leases  classified  as
    operating  leases is recorded at such time that  market  conditions  make it
    likely that a put option will be exercised on the exercise date. A liability
    is  recognised  based on the amount,  if any, by which the put option  price
    exceeds the fair market value of the related vessel. At December 31, 2005 no
    such liability had arisen.

    Nine of the thirteen  vessels  leased by the company are leased from special
    purpose lessor entities which were  established and are owned by independent
    third parties who provide financing  through debt and equity  participation.
    Each  entity  owns one vessel,  which is leased to the  Company,  and has no
    other  activities.  Prior to the adoption of FIN 46R, these special  purpose
    entities  were  not  consolidated  by  Frontline.  One of  these  leases  is
    accounted  for as operating  leases and eight of these leases are  accounted
    for as capital leases. The Company 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 the Company has been unable to obtain this  information  by
    other  means.  Accordingly  the Company is unable to  determine  the primary
    beneficiary  of these leasing  entities.  At December 31, 2005, the original
    cost to the lessor of the assets under such arrangements was $856.5 million.
    At December  31, 2005 and 2004,  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,
    2005:


                                                      Year ended December 31,
                                                       2005      2004     2003
    Incurrence of obligations under capital leases        -         -  218,844
    Repayments of principal obligations under        22,205    19,686   13,135
    capital leases
    Interest expense for capital leases              36,850    38,436   29,431
    Charterhire expense for operating leases          5,211    31,839   32,195


     At December  31, 2005 the Company  leased out twenty four of its vessels to
     third parties on time and bareboat  charters with initial  periods  ranging
     between two and ten years.  All of those leases are classified as operating
     leases.

     Rental income
     The minimum  future  revenues to be received on time and bareboat  charters
     which  are  accounted  for as  operating  leases  and  other  contractually
     committed income as of December 31, 2005 are as follows:
<table>

        (in thousands of yen and $)          Yen revenues              Dollar         Total
                                                                       revenues
                                             (in yen) ($ equivalent)
    <S>                                      <C>               <C>        <C>         <C>
    2006                                     35,700            303        269,562     269,865
    2007                                          -              -        192,184     192,184
    2008                                          -              -        141,151     141,151
    2009                                          -              -         92,020      92,020
    2010                                          -              -         37,386      37,386
    2011 and later                                -              -          4,879       4,879
    ---------------------------------- ------------- -------------- -------------- -----------
    Total minimum lease revenues             35,700            303        737,182     737,485
    ================================== ============= ============== ============== ===========
</table>

    The cost and accumulated depreciation of the vessels leased to a third party
    at December 31, 2005 were approximately $2,012.8 million and $729.0 million,
    respectively,  and at  December  31, 2004 were  $1,844.2  million and $568.2
    million, respectively.

    Minimum  future  revenues  disclosed  above  include three leases which were
    contracted  prior to December 31, 2005 and commenced  subsequent to December
    31, 2005.

9.   MARKETABLE SECURITIES

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

    (in thousands of $)                                     2005        2004
    Cost                                                 145,606      67,901
    Gross unrealised gain (loss)                         (1,450)      10,426
    ------------------------------------------------------------- -----------
    Fair value                                           144,156      78,327
    ============================================================= ===========

    The net unrealised gain on marketable  securities,  including a component of
    foreign currency translation,  included in comprehensive income decreased by
    $11.9  million  for the year ended  December  31, 2005 while the Company had
    recorded an unrealised gain of $10.4 million for the year ended December 31,
    2004.

    (in thousands of $)                            2005        2004       2003
    Proceeds from sale of available-for-sale
    securities                                  152,814      57,450     12,689
    Realised gain (including amounts
    classified in discontinued operations)       28,035       7,151        402

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

10.  TRADE ACCOUNTS RECEIVABLE

     Trade  accounts  receivable  are presented  net of allowances  for doubtful
     accounts amounting to $7,465,000 and $2,972,000 for each of the years ended
     December 31, 2005 and 2004 respectively.

11.  OTHER RECEIVABLES

    (in thousands of $)                                         2005      2004
    Agent receivables                                           4,998    4,086
    Due from related parties                                    2,549      953
    Claims receivables                                          4,657    4,550
    Other receivables                                           7,849    4,198
    ------------------------------------------------------------------ --------
                                                               20,053   13,787
    ================================================================== ========

     Other  receivables  are presented net of allowances  for doubtful  accounts
     amounting to $nil for each of the years ended December 31, 2005 and 2004.

12.  NEWBUILDINGS AND VESSEL PURCHASE OPTIONS

    (in thousands of $)                                          2005     2004
    Newbuildings                                               15,927   15,861
    Vessel purchase options                                         -    8,370
    ------------------------------------------------------------------ --------
                                                               15,927   24,231
    ================================================================== ========

     The carrying value of newbuildings  represents the accumulated costs to the
     balance  sheet  date  which  the  Company  has  paid  by  way  of  purchase
     instalments,  and other capital expenditures together with capitalised loan
     interest.  There were no  newbuilding  deliveries  during 2005 or 2004. See
     Note 27 for contractual commitments regarding newbuildings.

     In January  2005,  the Company  exercised  its option to purchase  the VLCC
     Oscilla  and the vessel was  delivered  to the  Company in April 2005 for a
     purchase price of $21.6 million and the vessel was renamed to Front Scilla.
     The purchase  price paid was equal to the  outstanding  mortgage debt under
     four loan agreements between the lenders and the vessel's owning company.

     The fair value assigned to this option and obligation  when it was acquired
     in 2000 was $8.4  million.  The value of the option was  calculated  at the
     time of purchase as the difference between the fair value of the vessel and
     the mortgage debt outstanding.

     Oscilla was owned and operated by an unrelated special purpose entity until
     the Company  exercised  its option and took delivery of the vessel on April
     4, 2005.  This entity that owned the  Oscilla,  which was leased to a third
     party,  had no other  activities.  Prior to the  adoption of FIN 46R,  this
     special purpose entity was not  consolidated by Frontline.  The Company has
     determined that the entity that owned Oscilla is a variable interest entity
     and that Frontline was the primary  beneficiary in prior years. The Company
     have been unable to obtain the accounting  information necessary to be able
     to consolidate the entity that owned Oscilla.  If the Company had exercised
     its option at  December  31,  2004,  the cost to the Company of the Oscilla
     would have been  approximately  $28.5  million and the maximum  exposure to
     loss was $15.4 million.

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

    (in thousands of $)                        Year ended December 31,
                                              2004          2003          2002
    Loan advances made                           -             -         1,489
    Loan repayments received                 1,972         2,262           181
    Interest income                            989         1,247         1,147


13.     VESSELS AND EQUIPMENT, NET

    (in thousands of $)                                        2005      2004
    Cost                                                  3,620,847  3,232,498
    Accumulated depreciation                            (1,036,000)  (978,137)
    --------------------------------------------------- ------------ ---------
    Net book value at end of year                         2,584,847  2,254,361
    =================================================== ============ =========

     Included in the above amounts as at December 31, 2005 and 2004 is equipment
     with a net book  value of $2.6  million  and  $1.3  million,  respectively.
     Depreciation  expense for vessels and equipment was $198.8 million,  $137.0
     million and $122.8 million for the years ended December 31, 2005,  2004 and
     2003, respectively, including amounts recorded in discontinued operations.

     In November 2005, the bareboat charterer of the Navix Astral declared their
     intent to exercise a purchase option with the vessel being delivered to her
     new owner in January  2006.  An  impairment  loss of $1.9  million has been
     included in the  statement of  operations  for the year ended  December 31,
     2005 in respect of this vessel.

14.  VESSELS UNDER CAPITAL LEASE, NET

    (in thousands of $)                                     2005        2004
    Cost                                                 835,746     835,746
    Accumulated depreciation                           (163,138)   (116,904)
    ------------------------------------------------------------- -----------
    Net book value at end of year                        672,608     718,842
    ============================================================= ===========

     Depreciation  expense for vessels under  capital  lease was $46.2  million,
     $46.3 million and  $24.0million for the years ended December 31, 2005, 2004
     and 2003, respectively.

     The outstanding obligations under capital leases are payable as follows:

    (in thousands of $)
    Year ending December 31,
    2006                                                           80,876
    2007                                                           82,038
    2008                                                           82,976
    2009                                                          157,569
    2010                                                          227,346
    2011 and later                                                429,074
    ----------------------------------------------------------------------
    Minimum lease payments                                      1,059,879
    Less: imputed interest                                      (328,458)
    ----------------------------------------------------------------------
    Present value of obligations under capital leases             731,421
    ======================================================================

     At December 31 2005,  the Company held twelve  vessels under capital leases
     (2004 - twelve). These leases are for terms that range from eight to twenty
     four  years.  Four of these  vessels  were sold by the  Company in 2003 and
     leased back for a period of nine years with lessor's  options to extend the
     charters  for a further  two years  followed  by a further  two years.  The
     Company  has  purchase  options  over  eight of these  vessels  at  certain
     specified  dates and the  lessor has  options  to put these  vessels to the
     Company  at the end of the  lease  term.  Gains  arising  from the sale and
     leaseback  transactions have been deferred and are being amortised over the
     lease terms.

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

<table>
                                           Extended     Extended
                              Expiry of    Lease        Lease        Company's   Lessor's
                              Mandatory    Periods at   Periods at   Purchase    Put Option
                              Lease        Lessor's     Company's    Option      Exercise
     Vessel Type              Period       Option       Option       Periods     Date
    <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,
    2005 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.

15.  INVESTMENT IN ASSOCIATED COMPANIES

     At  December  31,  2005,  the Company has the  following  participation  in
     investments that are recorded using the equity method:

                                                              2005        2004
    International Maritime Exchange ASA                     24.49%      26.56%
    Front Tobago Shipping Corporation                       40.00%      40.00%
    Golden Fountain Corporation                             50.00%           -

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

    (in thousands of $)                                       2005        2004
    Current Assets                                          23,875      32,741
    Non Current Assets                                       8,848      29,004
    Current Liabilities                                      2,405       1,978
    Non Current Liabilities                                      -        (62)

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

    (in thousands of $)                      2005         2004         2003
    Net operating revenues                 17,793       41,693      108,489
    Net operating income                   18,348       33,923       91,732
    Net income                             20,000       31,116       54,768

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

    At  December  31,  2003  the  Company  determined  that it was  the  primary
    beneficiary  of  Golden  Fountain  Corporation  under  FIN 46 and  therefore
    consolidated  the entity at that date.  As  discussed  in Note 3 above,  the
    Company has resumed equity  accounting for its investment in Golden Fountain
    in 2005.

    In 2004, the Company's  investment in  International  Maritime  Exchange ASA
    ("IMAREX")  increased  to 26.56%.  Accordingly,  the Company has changed its
    accounting  treatment  of the  investment  from a cost  basis to the  equity
    method. The Company is recording its share of income from IMAREX one quarter
    in arrears.  The closing  share price for IMAREX as of December  31, 2005 on
    the Oslo Stock Exchange was NOK 68.50 resulting in an aggregate value of the
    Company's investment based on the quoted market price of approximately $17.3
    million.

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

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

16.  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. On April
    1, 2005,  Chevron gave the Company  irrevocable  notice of its  intention to
    terminate the bareboat charter of the vessel Virgo Voyager on April 1, 2006.
    Chevron will pay the Owner a termination fee of $5,050,000.  Chevron has the
    right to terminate each remaining  charter on any of four termination  dates
    which, for each vessel, occur at two-year intervals.  Chevron is required to
    provide  non-binding  notice of its  intent to  exercise  an option at least
    twelve months prior to the  termination  date.  Irrevocable  notice that the
    initial  termination  option will be exercised  must be received nine months
    prior to the date and for each option subsequent to the initial  termination
    option,  irrevocable  notice  must be  received  seven  months  prior to the
    termination  date.  Chevron is  required  to pay the  following  termination
    payments on or prior to the remaining termination dates as follows:

    Approximate termination payments (in thousands of $)
    Optional Termination Date                    Sirius      Altair     Cygnus
                                                 Voyager    Voyager     Voyager
    April 1, 2006                                           11,110
    April 1, 2007                                11,120                  9,910
    April 1, 2008                                           10,030
    April 1, 2009                                 9,970                  8,890
    April 1, 2010                                            8,940
    April 1, 2011                                                        7,880

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

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

    (in thousands of $)                                       2005        2004
    Total minimum lease payments to be received            153,693     177,046
    Less : Unearned income                                (45,775)    (55,894)
    --------------------------------------------------------------- -----------
    Net investment in finance leases                       107,918     121,152
    =============================================================== ===========

    Lease payments under the charter  agreement for each of the five  succeeding
    years are as follows:  $19.3 million in 2006,  $16.6 million in 2007,  $15.8
    million in 2008, $14.9 million in 2009 and $14.2 million on 2010.

17.  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 $)                                       2005        2004
    Debt arrangement fees                                    35,625      55,424
    Accumulated amortisation                               (16,961)    (27,205)
    ---------------------------------------------------------------- -----------
                                                             18,664      28,219
    ================================================================ ===========


18.  OTHER LONG-TERM ASSETS

    (in thousands of $)                                        2005        2004
    Long-term debt receivable                                     -       7,051
    Other                                                     9,401       6,043
    ---------------------------------------------------------------- -----------
                                                              9,401      13,094
    ================================================================ ===========


19.  ACCRUED EXPENSES

    (in thousands of $)                                        2005        2004
    Voyage expenses                                          25,404      18,182
    Ship operating expenses                                  14,528      16,745
    Administrative expenses                                   3,550       4,592
    Interest expense                                         41,081      40,455
    Taxes                                                       200         304
    Other                                                     2,573         416
    ---------------------------------------------------------------- -----------
                                                             87,336      80,694
    ================================================================ ===========


20.  OTHER CURRENT LIABILITIES

    (in thousands of $)                                        2005        2004
    Dividends payable                                             -      32,157
    Forward contract payable                                 70,851      36,321
    Accrued charterhire                                         674         895
    Related party payables                                    2,587       2,040
    Other                                                     9,744       1,563
    ---------------------------------------------------------------- -----------
                                                             83,856      72,976
    ================================================================ ===========



    Other current liabilities of $9,744 and $1,563 in 2005 and 2004 respectively
    consists of miscellaneous current liabilities.

21.  DEBT

    (in thousands of $)                                         2005        2004
    US Dollar  denominated  floating  rate debt (LIBOR +  1,450,574   1,026,771
    0.70%
    to 1.25%) due through 2011
    Yen denominated floating rate debt (LIBOR + 1.25%)            -      13,060
    due through 2007
    Fixed rate debt 0% due through 2005                           -       2,000
    8.5% Senior Notes                                       457,080     530,270
    Serial Note (7.6% to 7.62%) due through 2006              2,530      10,270
    Serial Notes (6.47% to 6.855%) due through 2010          53,100      75,900
    Term Note (8.52%) due through 2015                      108,003     114,545
    Term Notes (7.84% to 8.04%) due through 2019            366,200     366,200
                                                          2,437,487   2,139,016
    Credit facilities                                         2,242       2,729
    Total debt                                            2,439,729   2,141,745
    Less:  short-term  and current  portion of            (240,191)   (151,614)
    long-term debt                                       2,199,538   1,990,131

    The outstanding debt as of December 31, 2005 is repayable as follows:

    (in thousands of $)
    Year ending December 31,
    2006                                                          242,722
    2007                                                          169,191
    2008                                                          166,214
    2009                                                          156,591
    2010                                                          145,691
    2011 and later                                              1,559,320
    ----------------------------------------------------------------------
                                                                2,439,729
    ======================================================================


     The weighted  average  interest rate for the floating rate debt denominated
     in US dollars  was 4.31 per cent as of  December  31, 2005 (2004 - 3.91 per
     cent).  The  weighted  average  interest  rate for the  floating  rate debt
     denominated  in Yen was 1.34 per cent as of December  31, 2005 (2004 - 1.38
     per cent). These rates take into consideration related interest rate swaps.

     8.5% Senior Notes due 2013

     On December 15, 2003,  Ship  Finance  issued $580 million of senior  notes.
     Interest on the notes accrues at the rate of 8.50% per annum and is payable
     in cash  semi-annually in arrears on June 15 and December 15, commencing on
     June 15, 2004. As at December 31, 2005 the outstanding  amount of Notes was
     $457.1 million (December 31, 2004 - $530.3 million).

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

     $1,131 million term loan facility
     In February  2005,  the Company  entered into a $1,131.4  million term loan
     facility  with a syndicate of banks.  The proceeds  from the facility  were
     used to  repay  the  $1,058.0  million  syndicated  senior  secured  credit
     facility and for general corporate purposes. Obligations under the facility
     are secured by the Company's  assets and equity  interests of vessel owning
     subsidiaries.  In  addition,  each of the vessel  owning  subsidiaries  has
     guaranteed its performance under the facility.  The facility bears interest
     at LIBOR plus a margin of 0.7%.  The facility is  repayable  over a term of
     six years.

     The loan facility  subjects the Company to a number of  restrictions on our
     business and financial  maintenance  covenants,  including  restrictions on
     creating  liens on the  vessels,  limitations  on its  ability to amend its
     charters,  management, and administrative agreements, minimum liquidity and
     working capital requirements, and collateral maintenance limitations.

     Further,  the  loan  facility  restricts  the  Company's  ability  to  make
     distributions  unless  the (i)  charter  service  reserve  and Free Cash as
     defined  exceed  $100  million  and (ii) the  Company  satisfies  financial
     covenants contained in the loan facility at the distribution date.

     $350.0  million  syndicated  combined  senior  and  junior  secured  credit
     facility In June 2005,  the Company  entered  into a combined  $350 million
     senior and junior secured term loan facility with a syndicate of banks. The
     proceeds  from the facility were used to fund the  acquisition  of five new
     VLCCs.  Obligations  under the facility are secured by the Company's assets
     and  equity  interests  of the  five new  vessel  owning  subsidiaries.  In
     addition,  each of the new vessel owning  subsidiaries  has  guaranteed its
     performance under the facility. The facility bears interest at LIBOR plus a
     margin of 0.65% for the  senior  loan and LIBOR  plus a margin of 1.00% for
     the junior loan and may be prepaid on a pro-rata basis without penalty. The
     facility is repayable over a term of seven years.

     The loan facility  subjects the Company to a number of  restrictions on our
     business and financial  maintenance  covenants,  including  restrictions on
     creating  liens on the  vessels,  limitations  on its  ability to amend its
     charters,  management, and administrative agreements, minimum liquidity and
     working capital requirements, and collateral maintenance limitations.

     Further,  the  loan  facility  restricts  the  Company's  ability  to  make
     distributions  unless the (i) charter  service reserve and our Free Cash as
     defined exceed $35 million and (ii) the Company satisfy financial covenants
     contained in the loan facility on the distribution date.

     $65 million term loan facility
     In August 2004,  the Company  entered into a $65 million  secured term loan
     facility with a syndicate of banks.  The facility  bears  interest at LIBOR
     plus a margin of 1.00%. The facility must be repaid by October 31, 2009.

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

     The facility was repaid in March 2006.

     $20 million term loan facility
     In October 2004, the Company  entered into a $20 million  secured term loan
     facility.  The facility bears interest at LIBOR plus a margin of 0.75%. The
     facility must be repaid by November 1, 2009.

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

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

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

     $69 million loan facility
     In December  2005,  the Company  entered into a $69.0 million loan facility
     with DnB NOR Bank ASA. The facility  bears interest at LIBOR plus 120 basis
     points secured by certain  marketable  securities  and cash  deposits.  The
     current facility must be repaid by January 26, 2006.

     Term and Serial Notes
     ITC is the  holding  company  for three  separate  structures  involved  in
     financing and leasing transactions. Two of these structures have Term Notes
     and  Serial  Notes   maturing   between  2006  and  2019.   The  Notes  are
     collateralised by first preferred mortgages on the vessels owned by the ITC
     subsidiaries.  As of December 31, 2005 the effective  interest rate for the
     Term and Serial Notes was 7.90%

     The 7.84% First Preferred  Mortgage Term Notes due 2010 and the 8.04% First
     Preferred  Mortgage  Term  Notes due 2019 are each  subject  to  redemption
     through the operation of mandatory  sinking funds according to the schedule
     of sinking  fund  redemption  payments  set forth  below.  The sinking fund
     redemption  price  is 100% of the  principal  amount  of Term  Notes  being
     redeemed,  together with accrued and unpaid  interest to the date fixed for
     redemption.

    (in thousands of $)
    Year ending December 31,
    2006                                                                -
    2007                                                            1,340
    2008                                                            5,765
    2009                                                            7,600
    2010                                                           11,115
    2011 and later                                                340,380
    ----------------------------------------------------------------------
    Total future lease payments                                   366,200
    ======================================================================

     Term and Serial Loans
     Principal is repayable on the 8.52% Term loans due 2015 in accordance  with
     a twelve-year  sinking fund schedule.  The tables below provide the revised
     scheduled  sinking  fund  redemption  amounts and final  principal  payment
     following  termination  of the  related  charters  on each of the  optional
     termination dates.

<table>
                Charter      Charter     Charter      Charter     Charter     Charter     Charter
                not          terminated  terminated   terminated  terminated  terminated  terminated
Scheduled       terminated   2006        2007         2008        2009        2010        2011
payment date    $'000        $'000       $'000        $'000       $'000       $'000       $'000
<S>              <C>          <C>         <C>          <C>        <C>         <C>        <c>
2006              9,526       3,187       6,339        3,187      6,339       3,187       2,984
2007             10,942       2,270       6,339        4,603      6,339       4,603       2,984
2008             10,942       2,460       3,390        4,603      6,339       4,603       2,984
2009             10,942       2,670       3,680        2,180      6,339       4,603       2,984
2010             10,942       2,900       3,990        2,360      3,240       4,603       2,984
2011, and
later            54,709      31,122      39,656       27,676     34,798      23,010      14,922
--------------- -------- ----------- ----------- ------------ ---------- ----------- -----------
                108,003      44,609      63,394       44,609     63,394      44,609      29,842
=============== ======== =========== =========== ============ ========== =========== ===========
</table>
     22.  SHARE CAPITAL

     Authorised share capital:

    (in thousands of $)                                       2005        2004
    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)                 2005        2004
    74,825,169 ordinary shares of $2.50 each
    (2004: 74,825,169)                                     187,063     187,063

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

    As at December 31, 2005,  none of the unissued  share capital of the Company
    is under  option  or is  conditionally  or  unconditionally  to be put under
    option.

    The number of shares  issued in  connection  with the  exercise  of employee
share options are as follows:

                                                 2005       2004        2003
    Shares issued under share option schemes        -    297,436     251,364
    ================================================== ========== ===========

     In 2004,  the  Company  issued a total of  900,000  ordinary  shares in two
     private placements to institutional investors as follows:

     o    in July 2004,  600,000 ordinary shares were issued at a purchase price
          of NOK 246 per share,  which was the equivalent of $35.84 per share at
          the time of the sale.

     o    in October  2004,  the Company  issued  300,000  ordinary  shares at a
          purchase  price of NOK 352 per  share,  which  was the  equivalent  of
          $52.33 per share at the time of the sale.

     On April 5, 2004, a Special General  Meeting of the Company's  shareholders
     approved the compulsory repurchase of all registered shareholdings of 49 or
     less of the Company's ordinary shares. Consequently,  on April 6, 2004, the
     Company  compulsorily  repurchased and cancelled  20,197 ordinary shares at
     the closing market price of the ordinary  shares on April 5, 2004 which was
     $31.22 per ordinary share.

     In  July  2004,  Ship  Finance  issued   1,600,000   common  shares  to  an
     institutional  investor at $15.75 per share. The Company recorded an amount
     of $9.1  million  in  additional  paid in capital as a result of this share
     issue.

     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.

23.  SHARE OPTION PLANS

     The Company had in place a Bermuda Share Option Plan (the  "Bermuda  Plan")
     and a United  Kingdom  Share Option Plan (the "U.K.  Plan"),  both of which
     expired  in 2004.  Both  share  option  plans  have been  accounted  for as
     variable plans. Under the terms of the plans, the exercise price set on the
     grant of share  options  could  not be less  than the  average  of the fair
     market value of the underlying shares for the three dealing days before the
     date of grant.  The number of shares  granted  under the plans could not in
     any ten year period  exceed 7% of the issued share  capital of the Company.
     No  consideration  was  payable  for the grant of an option.  In 2004,  the
     Bermuda Plan was amended to provide that all  outstanding  options that had
     not vested became immediately exercisable.

     The following  summarises  the share options  transactions  relating to the
     Bermuda Plan:


    (in thousands except per share data)              Shares    Weighted
                                                                average
                                                                exercise
                                                                   price
    Options outstanding at December 31, 2002            547      $11.24
        Granted                                           -           -
        Exercised                                     (250)       $6.86
        Cancelled                                         -           -
    -------------------------------------------------------- -----------
    Options outstanding at December 31, 2003            297       $8.49
        Granted                                           -           -
        Exercised                                     (297)       $5.91
        Cancelled                                         -           -
    -------------------------------------------------------- -----------
    Options outstanding at December 31, 2004              -           -
    Granted                                               -           -
    Exercised                                             -           -
    Cancelled                                             -           -
    -------------------------------------------------------- -----------
    Options outstanding at December 31, 2005              -           -
    -------------------------------------------------------- -----------

    Options exercisable at:
    December 31, 2003                                    94       $9.14
    December 31, 2004                                     -           -
    December 31, 2005                                     -           -

     At  December  31,  2005,  2004 and 2003  there  were no  options  remaining
     outstanding under the U.K. Plan.

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

24.  FINANCIAL INSTRUMENTS

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

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


     Principal
    (in thousands of $)    Inception Date   Maturity Date   Fixed Interest Rate
    $50,000                January 2001     January 2006                5.64%
    $50,000                February 2004    February 2009               3.49%
    $100,000               February 2004    February 2009               3.49%
    $50,000                February 2004    February 2009               3.49%
    $50,000                February 2004    February 2009               3.35%
    $50,000                February 2004    February 2009               3.35%
    $50,000                February 2004    February 2009               3.35%
    $50,000                February 2004    February 2009               3.37%
    $25,000                February 2004    February 2009               3.32%
    $25,000                February 2004    February 2009               3.32%
    $25,000                February 2004    February 2009               3.33%
    $25,000                February 2004    February 2009               3.32%
    $30,958                March 1998       March 2006                  6.04%
    $37,299                September 1998   September 2008              6.24%


    As at December 31, 2005 and 2004, the notional  principal amounts subject to
    such swap agreements were $618.3 million and $631.4 million, respectively.

    Foreign currency risk
    The  majority of the  Company's  transactions,  assets and  liabilities  are
    denominated in U.S. dollars, the functional currency of the Company. Certain
    of  the  Company's  subsidiaries  report  in  Sterling,  Swedish  kronor  or
    Norwegian  kroner and risks of two kinds  arise as a result:  a  transaction
    risk,  that is,  the risk that  currency  fluctuations  will have a negative
    effect on the value of the Company's cash flows; and a translation risk, the
    impact of  adverse  currency  fluctuations  in the  translation  of  foreign
    operations  and foreign  assets and  liabilities  into U.S.  dollars for the
    Company's  consolidated  financial  statements.  The Company has not entered
    into derivative contracts for either transaction or translation risk.

    As at December 31, 2005,  one of the  Company's  subsidiaries  has a charter
    contract denominated in Yen with contracted payments as set forth in Note 8.
    There is a risk that currency  fluctuations  will have a negative  effect on
    the value of the Company's cashflows.

    From time to time the Company may enter into forward currency  contracts for
    speculative  purposes.  At December  31,  2005 the Company had five  forward
    currency  contracts  outstanding with a notional principal of (Y)8.8 billion
    expiring  January and February 2006 with exchange  rates ranging from 117.42
    to 119.35.

    Accordingly, such risk may have an adverse effect on the Company's financial
    condition and results of operations.

    Forward freight contracts

    The Company may enter into  forward  freight  contracts,  futures and option
    contracts  in order to manage its  exposure to the risk of  movements in the
    spot market for certain trade routes for speculative  purposes.  Market risk
    exists to the extent that spot market fluctuations have a negative effect on
    the Company's cash flows and  consolidated  statements of operations.  As at
    December 31, 2005 and 2004, the notional  principal  amounts subject to such
    forward freight  contracts,  futures and option contracts were $12.0 million
    and $48.2 million, respectively.

    Fair Values
    The  carrying  value and  estimated  fair value of the  Company's  financial
    instruments at December 31, 2005 and 2004 are as follows:

<table>
                                                    2005                   2004
                                                         Carrying   Fair        Carrying
    (in thousands of $)                    Fair Value    Value      Value       Value
    <S>                                    <C>    <C>    <C>        <C>         <C>
    Non-Derivatives:
    Cash and cash equivalents                100,533       100,533    105,702     105,702
    Restricted cash                          636,790       636,790    592,607     592,607
    Marketable securities                    144,156       144,156     78,327      78,327
    Floating rate debt and credit          1,452,816     1,452,816  1,042,560   1,042,560
    facilities
    Fixed rate debt 0% due through 2005            -             -      1,843       2,000
    8.5% Senior notes                        457,080       425,999    546,178     530,270
    Serial Note (7.62%) due 2006               2,530         2,530     10,448      10,270
    Serial Notes (6.48% to 6.855%)            54,639        53,100     78,350      75,900
    due through 2010
    8.52% Term Note, due through 2015        120,963       108,003    131,297     114,545
    Term Notes (7.84% to 8.04%)              393,705       366,200    393,187     366,200
    due through 2019

    Derivatives:
    Interest rate swap transactions           19,563        19,563      7,737       7,737
    receivable
    Interest rate swap transactions          (1,241)       (1,241)    (5,482)     (5,482)
    payable
    Forward freight contracts                  3,021         3,021      6,753       6,753
    Forward currency contracts                 (169)         (169)      (949)       (949)
</table>

    The carrying value of cash and cash equivalents, which are highly liquid, is
    a reasonable estimate of fair value.

    The  estimated  fair value of  marketable  securities is based on the quoted
    market price of these or similar instruments when available.

    The estimated  fair value for floating rate  long-term debt is considered to
    be equal to the carrying value since it bears variable interest rates, which
    are reset on a  quarterly  basis.  The  estimated  fair value for fixed rate
    long-term  senior notes is based on the quoted market  price.  The estimated
    fair value for the remaining  fixed rate long-term  loans and notes is based
    on the quoted market price of these or similar instruments when available.

    The fair value of interest  rate swaps is  estimated  by taking into account
    the cost of  entering  into  interest  rate  swaps to offset  the  Company's
    outstanding swaps.

    The fair value of forward freight contracts is the estimated amount that the
    Company would  receive or pay to terminate  the  agreements at the reporting
    date.

    Concentrations of risk
    There is a  concentration  of  credit  risk  with  respect  to cash and cash
    equivalents to the extent that  substantially all of the amounts are carried
    with Skandinaviska  Enskilda Banken, BNP Paribas, Den norske Bank and Nordea
    Bank  Norge.  There is a  concentration  of  credit  risk  with  respect  to
    restricted  cash to the extent  that  substantially  all of the  amounts are
    carried with Pacific Life,  The Bank of New York,  HSBC Midland,  CIBC World
    Markets and JP Morgan  Chase.  However,  the Company  believes  this risk is
    remote as these banks are high credit quality financial institutions.

    The majority of the vessels' gross earnings are receivable in U.S.  dollars.
    During the year ended  December 31, 2005,  one customer  accounted  for more
    than 10% of our consolidated  operating revenues. In 2004 two customers each
    accounted for more than 10% of the Company's consolidated operating revenues
    while in 2003, no customer accounted for 10 % or more of operating revenues.

25.  RELATED PARTY TRANSACTIONS

    In July 2003,  the  Company  purchased  a call  option to acquire all of the
    shares of ITC from Hemen for a total  consideration  of $4.0 million plus 4%
    interest per year. Hemen is indirectly  controlled by John Fredriksen who is
    the  Company's  Chairman and Chief  Executive  Officer.  On May 27, 2004 the
    Company  exercised  this option.  The total purchase price paid to Hemen for
    ITC was $14.1  million  which  comprised a payment of $10.0  million for the
    purchase  option and a payment of $4.1 million to exercise the option.  This
    purchase price  represents the initial arms length price paid by the Company
    in May 1998  plus an  interest  component  calculated  from that  date.  The
    Company  initially  recorded the $10.0 million paid in 2003 on the Company's
    balance sheet as an asset at cost. In December 2003 the Company  implemented
    the provisions of FIN 46 and  consequently  was required to consolidate ITC.
    The  consolidation of ITC resulted in the Company  recording a $25.2 million
    expense as the  cumulative  effect of a change in  accounting  principle  in
    accordance  with the  guidance  of FIN 46.  The  Company  accounted  for the
    exercise  payment in 2004 as an addition to the total purchase price for ITC
    and  specifically  as an addition  to the  recorded  cost of the  underlying
    long-term  assets,  being the vessels  owned by ITC. The results of ITC have
    been reflected in the consolidated results of the Company.

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

    In June 2004, the Company  participated in a bidding process to acquire from
    the  Indonesian  state oil  enterprise's  shipping  division,  PT  Pertamina
    (Persero) two VLCCs that were under construction by Hyundai Heavy Industries
    Co. Ltd. The Company was successful in this process and nominated two single
    purpose  companies,  Windstar  Marine Inc.  ("Windstar")  and Speed Shipping
    Corp.  ("Speed"),  to acquire the vessels  for total  consideration  of $184
    million.  Windstar and Speed are controlled by Hemen. Hemen took delivery of
    these  vessels  in July and  September,  2004.  In June 2005,  Ship  Finance
    purchased  the  vessels  from  Hemen  for a total  consideration  of  $184.6
    million.  This  transaction  has been recorded at fair value of $270 million
    and an equity  contribution  from Hemen of $85.4  million has been  recorded
    within contributed surplus.

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

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

    The assets and  liabilities  contributed  by Frontline are recorded at their
    historical net book values as recorded in Frontline's consolidated financial
    statements.  Golden Ocean was  spun-off on December 15, 2004 to  Frontline's
    shareholders. See Note 29.

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

    In the years ended  December 31,  2005,  2004 and 2003,  Frontline  provided
    services  to  Seatankers  Ltd   ("Seatankers").   These  services   comprise
    management support and administrative.

    In the years ended  December 31,  2005,  2004 and 2003,  Frontline  provided
    services  to Golar LNG  Limited  ("Golar").  The  Company  provided  similar
    services to Northern  Offshore Ltd ("Northern  Offshore") in the years ended
    December  31,  2004 and  2003.  The  services  provided  include  management
    support,  corporate and administrative services. The Company has also rented
    office  space  to  Northern  Oil ASA  ("Northern  Oil") in the  years  ended
    December 31, 2003 and 2004.

    In the years  ended  December  31, 2005 and  December  31,  2004,  Frontline
    provided   certain   administrative   services   under   the   terms  of  an
    administrative management contract with Golden Ocean.

    In  the  year  ended   December  31,  2005,   Frontline   provided   certain
    administrative and accounting services to Aktiv Kapital First Investment Ltd
    and Bryggegata AS.

    The Company  leases  office  premises  in Oslo from  Bryggegata  AS.  Rental
    expense in the years  ended  December  31,  2005,  2004,  and 2003 were $0.7
    million.

    In  the  year  ended   December  31,   2005,   SeaDrill   provided   certain
    administrative  services  under  the terms of an  administrative  management
    contract with Frontline.  Administration  expense in the year ended December
    31, 2005 was $0.02 million.

    In the years  ended  December  31, 2005 and  December  31,  2004,  Frontline
    provided   certain   administrative   services   under   the   terms  of  an
    administrative  management  contract  with Golden  Ocean.  In the year ended
    December 31, 2005,  Golden Ocean provided vessel  management  services under
    the terms of a management contract with Frontline. Vessel management expense
    in the year ended December 31, 2005 was $0.1 million.

    Golar,  Northern Offshore,  Northern Oil, Osprey,  Aktiv Kapital,  SeaDrill,
    Bryggegata AS, Golden Ocean and Seatankers are each indirectly controlled by
    John Fredriksen.

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

    Net amounts earned from related parties              Year ended December 31,
    (in thousands of $)                                   2005   2004    2003
    Seatankers                                             265     49     108
    Osprey                                                   -      -      52
    Golar                                                  255    495     261
    Northern Offshore                                        -     25     134
    Northern Oil                                             6     92      98
    Golden Ocean                                           362      8       -
    Aktiv Kapital                                           10      -       -
    Bryggegata AS                                            8      -       -
    Sea Drill                                             (24)      -       -


    Balances with related parties (receivable/(payable))  As of December 31,
    (in thousands of $)                                     2005        2004
    Seatankers                                             1,397         907
    Golar                                                    644       (186)
    Northern Offshore                                         48          46
    Golden Ocean                                         (2,182)     (1,854)
    Sea Drill                                                 55           -


26.  MINORITY INTEREST AND NON-CASH DIVIDENDS

     The Company accounts for pro-rata  distributions to owners in a spin-off at
     the  book  value  of  shares  distributed  and  accounts  for non  pro-rata
     distributions  to  owners  in a  spin-off  at  the  fair  value  of  shares
     distributed.

     A summary of pro-rata  partial spin offs of Ship Finance by the Company are
     as follows:
                                           Distribution Ratio
                        % Frontline        (Ship Finance/           Value of
    Distribution          holding          Frontline shares         dividend
    Date                  Distributed      held)                    $ millions

    June 16, 2004        25.0%                1/4                   $142.5
    September 24, 2004   9.9%                 1/10                  $59.8
    December 15, 2004    13.3%                2/15                  $85.7
    February 18, 2005    25.0%                1/4                   $154.9
    March 24, 2005       10.0%                1/10                  $57.0

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

    On December 13, 2004 the Company  completed the non pro-rata spin off of its
    subsidiary  Golden  Ocean and  distributed  76.0% of Golden  Ocean's  common
    shares  to the  Company's  shareholders  with  each  qualifying  shareholder
    receiving  three  shares  in Golden  Ocean  for every one share  held in the
    Company. Non qualifying shareholders received a cash equivalent of $1.80 per
    Frontline  share  held.  The  value  of  the  non-cash   dividend  has  been
    established  as  $102.3  million,  representing  76.0% of the fair  value of
    Golden  Ocean on the date of  distribution.  Fair value was  established  by
    using the average price of Golden Ocean's shares over the first five trading
    days after the shares were listed on the Oslo Stock Exchange.

    As of December  31,  2005 the Company  still  consolidates  Ship  Finance in
    accordance with the provisions of FIN 46R.


27.  COMMITMENTS AND CONTINGENCIES

    Assets Pledged

                                                              2005        2004
    Ship mortgages                                       2,393,984   2,253,098
    Restricted bank deposits                               636,790     592,607
    --------------------------------------------------------------- -----------
                                                         3,030,774   2,845,705
    =============================================================== ===========

    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.

    At December  31,  2005,  the Company had nine  vessels that were sold by the
    Company at various  times during the period from  November  1998 to December
    31,  2003,  and leased back on  charters  that range for periods of eight to
    twelve  and a half years with  options  on the  lessors'  side to extend the
    charters  for periods that range up to five years.  Eight of these  charters
    are accounted for as capital leases and one is accounted for as an operating
    lease. The Company has purchase  options at certain  specified dates and the
    lessor has options to put the vessels on the Company at the end of the lease
    terms for all of these nine vessels. The total amount that the Company would
    be required to pay under these put  options  with  respect to the  operating
    lease is $9.0 million.

    At December 31, 2005 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.  Notice  has  been  received  on the  termination  of one of these
    charters.  Details of Chevron's optional  termination dates for the charters
    are contained in Note 15.

    At December 31, 2005 the Company had two contracts for the  construction  of
    two VLCC newbuildings, scheduled for delivery in 2006. At December 31, 2005,
    the Company is committed to make further instalments of $142.7 million.

28.  SUPPLEMENTAL INFORMATION

    Non-cash investing and financing activities included the following:

    (in thousands of $)                              2005        2004     2003
    Sales of vessels:
    Proceeds received in the form of shares            -          -      14,160

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

    Exchange of interests in associated
    companies:
    Additions to investments in associated             -     96,072       9,902
    companies
    Disposals of investments in associated             -   (96,072)     (9,902)
    companies

    Acquisition of subsidiaries and businesses:
    Assets acquired                                    -          -      75,949
    Liabilities assumed and incurred                   -          -      53,470

    Exercise of employee share options:
    Non-cash proceeds recorded for issuance of         -      7,585       2,685
    shares

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

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

    Purchase of vessels
    Additions to vessels purchased from related   85,363
    party
    Equity contribution from related party      (85,363)


29.  DISCONTINUED OPERATIONS

    During the years ended December 31, 2005 and 2004,  the Company  disposed of
    portions of its dry bulk  operations.  In 2005, the Company's last remaining
    dry bulk  vessel  was  sold  and in 2004,  dry  bulks  were  disposed  of in
    connection with the spin off of Golden Ocean. The portions  disposed of have
    been recorded as discontinued operations in accordance with the requirements
    of FAS 144 as the  operations  and cash  flows of the  operations  have been
    eliminated  from the  ongoing  operations  of the Company as a result of the
    disposal.  The Company will not have any significant  continuing involvement
    in these dry bulk  operations in the future.  As a result,  the statement of
    operations for the years ended December 31, 2004 and 2003 have been restated
    to  report  the  results  of the dry bulk  interests  disposed  of under the
    caption  "discontinued  operations".  These  activities have previously been
    reported in the dry bulk carriers segment (See Note 5).

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

    (in thousands of $)                                 2005       2004    2003
    Carrying amount of assets disposed of             12,875     72,592       -
    Carrying amount of debt or lease retired          11,246     48,950       -

    Amounts recorded in discontinued operations:
    Operating revenues                                 1,324     32,594  17,454
    Net income before cumulative effect of change in   8,785    117,619   3,612
    accounting principle
    Gain on disposal                                   5,533     99,505       -

    The gain on disposal of $99.5  million in 2004  comprises  of $84.6  million
    from the distribution of 170,558,775  shares of Golden Ocean  (equivalent of
    76.0% of  outstanding  shares) and $14.9 million from the sale of 30 million
    shares (equivalent of 13.4% of outstanding shares) which were sold on behalf
    of certain of the  Company's  U.S.  shareholders  who were excluded from the
    distribution of shares as discussed in Note 1.

    The fair value of the spin off of Golden  Ocean was  determined  to be $0.60
    per Golden Ocean share  (equivalent  to NOK 3.71) by reference to the quoted
    share price of Golden Ocean on the Oslo Stock Exchange. In each of the first
    five days of  trading  on the Oslo  Stock  Exchange,  the  Company  sold six
    million  Golden  Ocean  shares  in order to fund  the  cash  portion  of the
    distribution.

    The  Company  has used NOK 3.71  (US$0.60)  as the per share  fair  value in
    calculating  the gain on the  distribution  of shares  and  cash.  The $84.6
    million gain on the  distribution  of shares and cash has been calculated as
    the  difference  between the fair value of the shares  distributed of $102.3
    million and their book value of $17.7 million. The $14.9 million gain on the
    sale of shares is calculated as the difference  between the sale proceeds of
    $18.0 million and the book value of the shares of $3.1 million.

    As at December 31, 2004,  the Company  held  23,918,832  Golden Ocean shares
    representing  10.6% of the shares  outstanding.  These were  reported  under
    Marketable  Securities  (see Note 9) and in February  2005, the Company sold
    these  shares for a net gain of $12.8  million,  of which $11.8  million has
    been  classified as  discontinued  operations  representing  the  difference
    between  the cost of the shares sold and the fair value of the shares at the
    date of the spin off of Golden Ocean.

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

30.  POOL REVENUES

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

                                                   2005       2004        2003
    Pool earnings allocated on gross basis      118,236     78,430      45,749
    Pool earnings allocated on net basis         35,505    117,179      65,799
    ---------------------------------------------------- ---------- -----------
    Total pool earnings                         153,741    195,609     111,548
    ==================================================== ========== ===========

31.  GAIN ON ISSUANCE OF SHARES BY ASSOCIATE

    As  discussed  in Note 15, the  Company has a 24.49%  investment  in IMAREX.
    IMAREX is an authorised  marketplace for the trading of freight  derivatives
    in the global oil and dry cargo  shipping  markets  and was  established  in
    early 2000.

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

32.  SUBSEQUENT EVENTS

    In January  2006,  the Company  sold the vessel Navix Astral to its bareboat
    charterer  pursuant to a charterer's  purchase  option that was exercised in
    November 2005.

    On February  17, 2006,  the  Company's  Board of  Directors  declared a cash
    dividend of $1.50 per share which was paid on March 20, 2006.

    On  February  17,  2006,  the  Company's  Board of  Directors  declared  the
    distribution of  approximately 5% of its holding of Ship Finance shares with
    the distribution being made on March 20, 2006.

    In February 2006, the Company  ordered two 297,000 dwt VLCCs for delivery in
    2009 with an option for another two VLCCs for delivery in 2009 and 2010.  In
    June the Company declared and sold these two newbuilding options.

    In February  2006,  the Company  entered  into a total return bond swap line
    with Fortis Bank for a term of twelve months.  This swap will facilitate the
    buyback of Ship Finance's 8.5% senior notes in the amount of $50 million.

     In March 2006,  the Company sold the vessel  Golden  Stream to an unrelated
     third party.

     In March  2006,  the Company  acquired  the vessel  Gerrita  which has been
     renamed Front Puffin.

    In April 2006, the Company entered into an agreement with Horizon Lines Inc.
    (NYSE:HRZ)   in  which   the   Company   will   acquire   five   newbuilding
    containerships,  each with a carrying  capacity of 2,824 TEUs being built at
    Hyundai Mipo Yard in Korea

    On April 1, 2006, the Suezmax Virgo Voyager was  redelivered by its existing
    long term  bareboat  charterer  pursuant  to a  termination  option that was
    exercised in April 2005 and a termination  fee of $5.05 million was received
    by the Company.

    On May 26, 2006,  the  Company's  Board of Directors  declared a dividend of
    $1.50 per share to be paid on or about June 26, 2006.

    In June 2006 the Company  ordered an  additional  two VLCCs for  delivery in
    2010 with an option for  another  two VLCCs for  delivery  between  2010 and
    2011.


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