UNITED
STATES


SECURITIES AND EXCHANGE
COMMISSION


Washington,
DC. 20549







FORM
20-F







(Mark
One)







o
            REGISTRATION
      STATEMENT PURSUANT TO SECTION 12(b) OR (g)OF
      THE SECURITIES EXCHANGE ACT OF 1934ORx
            ANNUAL
      REPORT PURSUANT TO SECTION 13 OR 15(d)OF
      THE SECURITIES EXCHANGE ACT OF 1934For
      the fiscal year ended December 31,
      2009ORo
            TRANSITION
      REPORT PURSUANT TO SECTION 13 OR 15(d)OF
      THE SECURITIES EXCHANGE ACT OF 1934ORo
            SHELL
      COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THESECURITIES
      EXCHANGE ACT OF 1934Date of event requiring this
      shell company report _______________________________





For the
transition period from _________________ to _________________





Commission
      file number
            000-29106





Knightsbridge
      Tankers Limited(Exact
      name of Registrant as specified in its charter)(Translation
      of Registrant's name into English)Bermuda(Jurisdiction
      of incorporation or organization)Par-la-Ville
      Place, 14 Par-la-Ville Road, Hamilton, HM 08, Bermuda(Address
      of principal executive offices)Georgina
      Sousa, Telephone: (1) 441 295 6935, Facsimile: (1) 441 295 3494,
              Par-la-Ville
      Place, 14 Par-la-Ville Road, Hamilton, HM 08, Bermuda(Name,
      Telephone, E-mail and/or Facsimile number and Address of Company Contact
      Person)











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





Title
      of each class
            
            Name
      of each exchange on which registeredCommon  Shares,
      $0.01 Par Value
            
            NASDAQ
      Global Select Market





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




None(Title
      of Class)





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





Common
      Shares, $0.01 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.





17,100,000
Common Shares, $0.01 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
      o
            
            No
      x





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
      x
            
            No
      o




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





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





Yes
      x
            
            No
      o




Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this
chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such files).





Yes 
      o
            
            No
      o





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  o
            
            Accelerated
      filer  x
            
            Non-accelerated
      filer  o





Indicate
by check mark which basis of accounting the registrant has used to prepare the
financial statements included in this filing:





U.S.
      GAAP x
            
            International
      Financial Reporting Standards as issued by the International Accounting
      Standards Board o
            
            Other
      o




If
"Other" has been checked in response to the previous question, indicate by check
mark which financial statement item the
registrant has elected to follow:





Item
      17 o
            
            Item
      18 o




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
      o
            
            No
      x





INDEX
TO REPORT ON FORM 20-F








PAGEPART
      IItem
      1.
            Identity
      of Directors, Senior Management and Advisers
            1Item
      2.
            Offer
      Statistics and Expected Timetable
            1Item
      3.
            Key
      Information
            1Item
      4.
            Information
      on the Company
            15Item
      4A.
            Unresolved
      Staff Comments
            20Item
      5.
            Operating
      and Financial Review and Prospects
            20Item
      6.
            Directors,
      Senior Management and Employees
            27Item
      7.
            Major
      Shareholders and Related Party Transactions
            30Item
      8.
            Financial
      Information
            30Item
      9.
            The
      Offer and Listing
            31Item
      10.
            Additional
      Information
            32Item
      11.
            Quantitative
      and Qualitative Disclosures about Market Risk
            38Item
      12.
            Description
      of Securities other than Equity Securities
            38PART
      IIItem
      13.
            Defaults,
      Dividend Arrearages and Delinquencies
            39Item
      14.
            Material
      Modifications to the Rights of Security Holders and Use of
      Proceeds
            39Item
      15.
            Controls
      and Procedures
            39Item
      16A.
            Audit
      Committee Financial Expert
            40Item
      16B.
            Code
      of Ethics
            40Item
      16C.
            Principal
      Accountant Fees and Services
            40Item
      16D.
            Exemptions
      from the Listing Standards for Audit Committees
            40Item
      16E.
            Purchase
      of Equity Securities by the Issuer and Affiliated
    Purchasers
            40Item
      16F.
            Change
      in Registrant's Certifying Accountant
            40Item
      16G.
            Corporate
      Governance
            41PART
      IIIItem
      17.
            Financial
      Statements
            42Item
      18.
            Financial
      Statements
            42Item
      19.
            Exhibits
            42











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.




Knightsbridge
Tankers Limited and its subsidiaries, 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, changes in world wide oil production and 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 or
Commission.





PART
I





ITEM
1.  IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS





Not
applicable.





ITEM
2.  OFFER STATISTICS AND EXPECTED TIMETABLE





Not
applicable.





ITEM
3.  KEY INFORMATION





Throughout
this report, the "Company," "we," "us" and "our" all refer to Knightsbridge
Tankers Limited 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 statement of operations data of the Company with respect to the fiscal
years ended December 31, 2009, 2008 and 2007, and the selected balance sheet
data of the Company with respect to the fiscal years ended December 31, 2009 and
2008, respectively, 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 statement of operations data with
respect to the fiscal years ended December 31, 2006 and 2005, and the selected
balance sheet data with respect to the fiscal years ended December 31, 2007,
2006 and 2005 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 Company's accounts are maintained in U.S. dollars.




Fiscal
      year ended December 31,2009
              
              
              2008
              
              
              2007
              
              
              2006
              
              
              2005(in
      thousands of $, except shares, per share data and ratios)Statement
      of Operations Data:Total
      operating revenues
              
              
              67,339
              
              
              
              82,914
              
              
              
              88,160
              
              
              
              105,728
              
              
              
              100,179Total
      operating expenses
              
              
              43,583
              
              
              
              33,796
              
              
              
              46,913
              
              
              
              54,463
              
              
              
              51,778Net
      operating income
              
              
              23,756
              
              
              
              49,118
              
              
              
              90,366
              
              
              
              51,265
              
              
              
              48,401Net
      income
              
              
              21,680
              
              
              
              48,054
              
              
              
              84,836
              
              
              
              45,717
              
              
              
              43,967Earnings
      per common share-
      basic and diluted
              
              
              1.27
              
              
              
              2.81
              
              
              
              4.96
              
              
              
              2.67
              
              
              
              2.57Cash
      dividend declared per share
              
              
              0.25
              
              
              
              2.75
              
              
              
              2.50
              
              
              
              3.60
              
              
              
              4.55Balance
      Sheet Data (at end of year):Cash
      and cash equivalents
              
              
              7,964
              
              
              
              77,998
              
              
              
              82,143
              
              
              
              8,538
              
              
              
              12,634Restricted
      cash
              
              
              10,000
              
              
              
              10,000
              
              
              
              10,000
              
              
              
              10,000
              
              
              
              10,000Newbuildings
              
              
              -
              
              
              
              51,305
              
              
              
              33,459
              
              
              
              -
              
              
              
              -Vessels,
      net
              
              
              344,399
              
              
              
              187,360
              
              
              
              201,072
              
              
              
              267,949
              
              
              
              285,070Total
      assets
              
              
              374,946
              
              
              
              331,685
              
              
              
              342,166
              
              
              
              301,499
              
              
              
              323,159Current
      portion of long-term debt
              
              
              13,960
              
              
              
              42,560
              
              
              
              8,960
              
              
              
              11,211
              
              
              
              11,200Long-term
      debt
              
              
              106,520
              
              
              
              60,480
              
              
              
              103,040
              
              
              
              98,000
              
              
              
              109,200Share
      capital
              
              
              171
              
              
              
              171
              
              
              
              171
              
              
              
              171
              
              
              
              171Stockholders'
      equity
              
              
              239,710
              
              
              
              222,305
              
              
              
              221,276
              
              
              
              179,190
              
              
              
              195,033Common
      shares outstanding
              
              
              17,100,000
              
              
              
              17,100,000
              
              
              
              17,100,000
              
              
              
              17,100,000
              
              
              
              17,100,000Other
      Financial Data:Equity
      to assets ratio (percentage) (1)
              
              
              63.9
              %
              
              
              67.0
              %
              
              
              64.7
              %
              
              
              59.4
              %
              
              
              60.4
              %Debt
      to equity ratio (2)
              
              
              0.5
              
              
              
              0.5
              
              
              
              0.5
              
              
              
              0.6
              
              
              
              0.6Price
      earnings ratio (3)
              
              
              10.4
              
              
              
              5.2
              
              
              
              4.9
              
              
              
              8.9
              
              
              
              9.4Time
      charter equivalent revenue (4)
              
              
              58,751
              
              
              
              78,902
              
              
              
              75,288
              
              
              
              85,713
              
              
              
              83,720




1


(1)
            Equity
      to assets ratio is calculated as total stockholders' equity divided by
      total assets.


(2)
            Debt
      to equity ratio is calculated as total interest bearing current and
      long-term liabilities, including obligations under capital leases, divided
      by stockholders' equity.


(3)
            Price
      earnings ratio is calculated using the year end share price divided by
      basic earnings per share.


(4)
            A
      reconciliation of time charter equivalent revenues to total operating
      revenues as reflected in the consolidated statements of operation is as
      follows:





2009
            
            
            2008
            
            
            2007
            
            
            2006
            
            
            2005(in
      thousands of $)Total
      operating revenues
            
            
            67,339
            
            
            
            82,914
            
            
            
            88,160
            
            
            
            105,728
            
            
            
            100,179Less:
      Voyage expense
            
            
            (8,588
            )
            
            
            (4,012
            )
            
            
            (12,872
            )
            
            
            (20,015
            )
            
            
            (16,459
            )Time
      charter equivalent revenue
            
            
            58,751
            
            
            
            78,902
            
            
            
            75,288
            
            
            
            85,713
            
            
            
            83,720





Our
vessels may operate under time charters, bareboat charters, voyage charters,
pool arrangements and contracts of affreightment, or COAs. Under a time charter,
the charterer pays substantially all of the vessel voyage costs which are
primarily fuel and port charges. Under a bareboat charter, the charterer pays
substantially all of the vessel voyage and operating costs. Under a voyage
charter, the vessel owner pays such costs. Under contracts of affreightment, the
owner carries an agreed upon quantity of cargo over a specified route and time
period. In order to compare vessels trading under different types of charters,
it is standard industry practice to measure the revenue performance of a vessel
in terms of time charter equivalent revenue, or TCE. Total TCE is the sum of
time charter, voyage charter and bareboat charter revenues, less voyage
expenses. Total TCE, which is not covered by U.S. generally accepted accounting
principles, or GAAP, provides more meaningful information to us than total
operating revenues, the most directly comparable GAAP measure. Average daily
TCEs are also widely used by investors and analysts in the shipping industry for
comparing financial performance between companies and to industry averages.
Other companies may calculate TCE using a different method.





B.  CAPITALIZATION
AND INDEBTEDNESS





Not
applicable.





C.  REASONS
FOR THE OFFER AND USE OF PROCEEDS





Not
applicable.





D.
RISK FACTORS





We are
engaged in the seaborne transportation of crude oil and dry bulk cargoes. We own
and operate, through our subsidiaries, a fleet of six vessels, consisting of
four double hull Very Large Crude Carrier oil tankers, or VLCCs, and two
Capesize dry bulk carriers. The following summarizes some of the risks that may
materially affect our business, financial condition or results of
operations.





Risks
Related to Our Industry





Tankers





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. When the tanker market is depressed 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:





●
            demand
      for oil and oil products;




●
            global
      and regional economic and political
conditions;




●
            changes
      in oil production and refining
capacity;




2







●
            environmental
      and other regulatory developments;




●
            the
      distance oil and oil products are to be moved by sea;
  and




●
            changes
      in seaborne and other transportation
patterns.




The
factors that influence the supply of tanker capacity include:





●
            the
      number of newbuilding deliveries;




●
            the
      scrapping rate of older vessels;




●
            port
      or canal congestion;




●
            vessel
      casualties;




●
            price
      of steel;




●
            potential
      conversion of vessels to alternative
use;




●
            the
      number of vessels that are out of service;
and




●
            changes
      in environmental and other regulations that may effectively cause
      reductions in the carrying capacity of vessels or early obsolescence of
      tonnage.




Historically,
the tanker markets have been volatile as a result of the many conditions and
factors that can affect the price, supply and demand for tanker capacity. The
current global economic crisis may reduce demand for transportation of oil over
longer distances and supply of tankers to carry that oil, which may materially
affect our revenues, profitability and cash flows.





The
international tanker industry has experienced volatile charter rates and vessel
values and there can be no assurance that these charter rates and vessel values
will return to their previous high values





Charter
rates in the tanker industry are volatile. We anticipate that future demand for
our vessels, and in turn our future charter rates, will be dependent upon
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 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 further decrease in
vessel values and charter rates. A further decline in vessel values and charter
rates could have an 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, 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. In July 2008, oil prices rose to a high of
approximately $143 per barrel before decreasing to approximately $38 per barrel
by the end of December 2008, and rising to approximately $75 per barrel in
mid-February 2010.





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:





●
            increased
      crude oil production from other
areas;




●
            increased
      refining capacity in the Arabian Gulf or West
  Africa;




●
            increased
      use of existing and future crude oil pipelines in the Arabian Gulf or West
      Africa;




●
            a
      decision by Arabian Gulf or West African oil-producing nations to increase
      their crude oil prices or to further decrease or limit their crude oil
      production;




●
            armed
      conflict in the Arabian Gulf and West Africa and political or other
      factors; and




3







●
            the
      development and the relative costs of nuclear power, natural gas, coal and
      other alternative sources of
energy.




An
over-supply of tanker capacity may lead to reductions in charter rates, vessel
values and profitability





Currently,
shipyards are booked to produce a large number of new tankers. If the capacity
of new vessels delivered exceeds the capacity of tankers being scrapped and
converted to non-trading tankers, tanker capacity will increase. If the supply
of tanker capacity increases and the demand for tanker capacity does not
increase correspondingly, charter rates could materially decline. A reduction in
charter rates and the value of our vessels may have a material adverse effect on
our results of operations, our ability to pay dividends and our compliance with
loan covenants.





Dry
Bulk





Charter hire rates for dry bulk
vessels may decrease in the future, which may adversely affect our
earnings





The dry
bulk shipping industry is cyclical with attendant volatility in charterhire
rates and profitability. The degree of charter hire rate volatility among
different types of dry bulk vessels has varied widely, and charterhire rates for
dry bulk vessels have declined significantly from historically high levels.
Fluctuations in charter rates result from changes in the supply and demand for
vessel capacity and changes in the supply and demand for the major commodities
carried by water internationally. Because the factors affecting the supply and
demand for vessels are outside of our control and are unpredictable, the nature,
timing, direction and degree of changes in industry conditions are also
unpredictable.





Factors
that influence demand for vessel capacity include:





●
            supply
      and demand for energy resources, commodities, semi-finished and finished
      consumer and industrial products;




●
            changes
      in the exploration or production of energy resources, commodities,
      semi-finished and finished consumer and industrial
    products;




●
            the
      location of regional and global exploration, production and manufacturing
      facilities;




●
            the
      location of consuming regions for energy resources, commodities,
      semi-finished and finished consumer and industrial
    products;




●
            the
      globalization of production and
manufacturing;




●
            global
      and regional economic and political conditions, including armed conflicts
      and terrorist activities; embargoes and
strikes;




●
            developments
      in international trade;




●
            changes
      in seaborne and other transportation patterns, including the distance
      cargo is transported by sea;




●
            environmental
      and other regulatory developments;




●
            currency
      exchange rates; and




●
            weather.




Factors
that influence the supply of vessel capacity include:





●
            number
      of newbuilding deliveries;




●
            scrapping
      of older vessels;




●
            vessel
      casualties; and




●
            number
      of vessels that are out of service.




Demand
for our dry bulk vessels is dependent upon economic growth in the world's
economies, seasonal and regional changes in demand, changes in the capacity of
the global dry bulk fleet and the sources and supply of dry bulk cargo
transported by sea. Given the large number of new dry bulk carriers currently on
order with shipyards, the capacity of the global dry bulk carrier fleet seems
likely to increase and economic growth may not resume in areas that have
experienced a recession or continue in other areas. Adverse economic, political,
social or other developments could have a material adverse effect on our
business and operating results.


4





A
continued downturn in the dry bulk carrier charter market may have an adverse
effect on our earnings and our ability to comply with our loan
covenants





The
Baltic Exchange Capesize Index, or CS4TC, a daily equally weighted average of
the four main Capesize routes declined from a high of approximately $222,800 per
day in May 2008 to a low of approximately $2,400 per day in November 2008, which
represents a decline of 99%. From November 2008, it rose to approximately
$52,700 per day in October 2009, which emphasizes the volatility of this market.
The general decline in the dry bulk carrier charter market has resulted in lower
charter rates for vessels exposed to the spot market and time charters linked to
the CS4TC. Our ability to obtain renewal charters upon the expiration of our
current charters or charters for new vessels that we may acquire in the future
will be directly impacted by prevailing charter rates.





Dry bulk
carrier values have also declined both as a result of a slowdown in the
availability of global credit and the significant deterioration in charter
rates. Charter rates and vessel values have been affected in part by the lack of
availability of credit to finance both vessel purchases and purchases of
commodities carried by sea, resulting in a decline in cargo shipments, and the
excess supply of iron ore in China which resulted in falling iron ore prices and
increased stockpiles in Chinese ports. There can be no assurance as to how long
charter rates and vessel values will remain at their currently low levels or
whether the recent improvement will continue. Charter rates may remain at low
levels for some time which will adversely affect our revenue and profitability
and could affect compliance with the covenants in our loan
agreements.





In
addition, because the market value of our vessels may fluctuate significantly,
we may incur losses when we sell vessels, which may adversely affect our
earnings. If we sell vessels at a time when vessel prices have fallen and before
we have recorded an impairment adjustment to our financial statements, the sale
may be at less than the vessel's carrying amount in our financial statements,
resulting in a loss and a reduction in earnings.





An over-supply of dry bulk carrier
capacity may prolong or further depress the current low charter rates and, in
turn, adversely affect our profitability





The
market supply of dry bulk carriers has been increasing, and the number of dry
bulk carriers on order is near historic highs. Dry bulk newbuildings were
delivered in significant numbers starting at the beginning of 2006 and continue
to be delivered in significant numbers. As of September 30, 2009, Capesize
newbuilding orders had been placed for an aggregate of more than 77% of the
current global Capesize fleet, with deliveries expected during the next 36
months. According to market sources approximately 60% is contracted at
established yards, while the other 40% is contracted at yards that are less
established and whose viability may be uncertain. Due to lack of financing many
analysts expect significant cancellations and/ or slippage of newbuilding
orders. While vessel supply will continue to be affected by the delivery of new
vessels and the removal of vessels from the global fleet, either through
scrapping or accidental losses, an over-supply of dry bulk carrier capacity,
particularly in conjunction with the currently low level of demand, could
exacerbate the recent decrease in charter rates or prolong the period during
which low charter rates prevail. If the current low charter rate environment
persists, or a further reduction occurs, during a period when the current
charters for our dry bulk carriers expire or are terminated, we may only be able
to recharter those vessels at reduced rates or we may not be able to charter our
vessels at all.





Shipping
Generally





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





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





●
            a
      marine disaster;




●
            piracy;




●
            environmental
      accidents;




●
            cargo
      and property losses or damage; and




●
            business
      interruptions caused by mechanical failure, human error, war, terrorism,
      piracy, political action in various countries, labor  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.


5





World
events could affect our results of operations and financial
condition





Terrorist
attacks in New York on September 11, 2001, in London on July 7, 2005 and in
Mumbai on November 26, 2008 and the continuing response of the United States and
others to these attacks, as well as the threat of future terrorist attacks in
the United States or elsewhere, continues to cause uncertainty in the world's
financial markets and may affect our business, operating results and financial
condition. The continuing presence of United States and other armed forces in
Iraq and Afghanistan may lead to additional acts of terrorism and armed conflict
around the world, which may contribute to further economic instability in the
global financial markets. These uncertainties could also adversely affect our
ability to obtain additional financing on terms acceptable to us or at all. In
the past, political conflicts have also resulted in attacks on vessels, mining
of waterways and other efforts to disrupt international shipping, particularly
in the Arabian Gulf region. Acts of terrorism and piracy have also affected
vessels trading in regions such as the South China Sea and the Gulf of Aden off
the coast of Somalia. Any of these occurrences could have a material adverse
impact on our operating results, revenues and costs.





Terrorist
attacks on vessels, such as the October 2002 attack on the M.V. Limburg, a very large
crude carrier not related to us, may in the future also negatively affect our
operations and financial condition and directly impact our vessels or our
customers. Future terrorist attacks could result in increased volatility and
turmoil of the financial markets in the United States and globally. Any of these
occurrences could have a material adverse impact on our revenues and
costs.





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





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





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





Our
operations are affected by extensive and changing international, national, state
and local laws, regulations, treaties, conventions and standards in force in
international waters, the jurisdictions in which our tankers and other vessels
operate and the country or countries in which such vessels are registered,
including those governing the management and disposal of hazardous substances
and wastes, the cleanup of oil spills and other contamination, air emissions,
and water discharges and ballast water management. These regulations include the
United States Oil Pollution Act of 1990, or OPA, the United States Clean Air Act
and United States Clean Water Act, the United States Marine Transportation
Security Act of 2002, the International Convention on Civil Liability for Oil
Pollution Damage of 1969, as amended, or CLC, the International Convention for
the Prevention of Pollution from Ships, of 1975, the International Convention
for the Safety of Life at Sea of 1974, or SOLAS, the International Convention on
Load Lines of 1966 or LL Convention, and implementing regulations adopted by the
International Maritime Organization, or the IMO (the United Nations agency for
maritime safety and the prevention of pollution by vessels), the European Union,
or the EU, and other international, national and local regulatory
bodies.





In
addition, vessel classification societies also impose significant safety and
other requirements on our vessels. In complying with current and future
environmental requirements, vessel owners and operators such as ourselves may
also incur significant additional costs in meeting new maintenance and
inspection requirements, in developing contingency arrangements for potential
spills and in obtaining insurance coverage. Government regulation of vessels,
particularly in the areas of safety and environmental requirements, can be
expected to become stricter in the future and require us to incur significant
capital expenditures on our vessels to keep them in compliance, or even to scrap
or sell certain vessels altogether. For example, various jurisdictions,
including the United States, are considering or have enacted legislation
imposing more stringent requirements on air emissions and ballast water
discharges from vessels.





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


6





Under
local, national and foreign laws, as well as international treaties and
conventions, we could incur material liabilities, including cleanup obligations,
natural resource damages and third-party claims for personal injury or property
damages, in the event that there is a release of petroleum or other hazardous
substances from our vessels or otherwise in connection with our current or
historic operations. We could also incur substantial penalties, fines and other
civil or criminal sanctions, including in certain instances seizure or detention
of our vessels, as a result of violations of or liabilities under environmental
laws, regulations and other requirements. For example, OPA affects all vessel
owners shipping oil to, from or within the United States. OPA allows for
potentially unlimited liability without regard to fault for owners, operators
and bareboat charterers of vessels for oil pollution in United States waters.
Similarly, the CLC, which has been adopted by most countries outside of the
United States, imposes liability for oil pollution in international waters. OPA
expressly permits individual states to impose their own liability regimes with
regard to hazardous materials and oil pollution incidents occurring within their
boundaries. Coastal states in the United States have enacted pollution
prevention liability and response laws, many providing for unlimited
liability.





OPA also
provides for the scheduled phase-out of all non-double-hull tankers that carry
oil in bulk in United States waters. The IMO and the EU have adopted separate
phase-out schedules applicable to single-hull tankers operating in international
and EU waters, respectively. These regulations could reduce the demand for
single-hull tankers, force the remaining single-hull vessels into less desirable
trading routes, increase the number of vessels trading in routes open to
single-hull vessels and could increase demands for further restrictions in the
remaining jurisdictions that permit the operation of these vessels. As a result,
single-hull vessels are likely to be chartered less frequently and at lower
rates.





In recent
years, the IMO and EU have both accelerated their existing non-double-hull
phase-out schedules in response to highly publicized oil spills and other
shipping incidents involving companies unrelated to us. Future accidents may be
expected in the industry, and such accidents or other events may be expected to
result in the adoption of even stricter laws and regulations, which could limit
our operations or our ability to do business and which could have a material
adverse effect on our business and financial results.





Maritime
claimants could arrest one or more of our vessels, 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 a vessel for
unsatisfied debts, claims or damages. In many jurisdictions a claimant may seek
to obtain security for its claim 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 large sums of money to have the
arrest or attachment 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 attempt to assert "sister ship" liability against one vessel in our fleet
for claims relating to another of our vessels.





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





A
government could requisition for title or seize one of more of our vessels.
Requisition for title occurs when a government takes control of a vessel and
becomes her owner. Also, a government could requisition one or more of 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. This
amount could be materially less than the charterhire that would have been
payable otherwise. In addition, we would bear all risk of loss or damage to a
vessel under requisition for hire. Government requisition of one or more of our
vessels would negatively impact our revenues and therefore impact our ability to
service our debt.





Our
vessels may call on ports located in countries that are subject to restrictions
imposed by the United States government, which could adversely affect investor
perceptions





From time
to time, vessels in our fleet may call on ports located in countries subject to
sanctions and embargoes imposed by the United States government and countries
identified by the United States government as state sponsors of terrorism.
Although these sanctions and embargoes do not prevent our vessels from making
calls to ports in these countries, potential investors could view such port
calls negatively, which could adversely affect our reputation and the market for
our shares. Investor perception of the value of our shares may be adversely
affected by the consequences of war, the effects of terrorism, civil unrest and
governmental actions in these and surrounding countries.





Disruptions
in world financial markets and the resulting governmental action in the United
States and in other parts of the world could have a material adverse impact on
our results of operations, financial condition and cash flows, and could cause
the market price of our ordinary shares to decline





Over the
last year, global financial markets have experienced extraordinary disruption
and volatility following adverse changes in the global credit markets. The
credit markets in the United States have experienced significant contraction,
deleveraging and reduced liquidity, and governments around the world have taken
highly significant measures in response to such events, and may implement other
significant responses in the future.


7





Securities
and futures markets and the credit markets are subject to comprehensive
statutes, regulations and other requirements. The Commission, other regulators,
self-regulatory organizations and exchanges have enacted temporary emergency
regulations and may take other extraordinary actions in the event of market
emergencies and may effect permanent changes in law or interpretations of
existing laws. Recently, a number of financial institutions have experienced
serious financial difficulties and, in some cases, have entered into bankruptcy
proceedings or are in regulatory enforcement actions. These difficulties have
resulted, in part, from declining markets for assets held by such institutions,
particularly the reduction in the value of their mortgage and asset-backed
securities portfolios. These difficulties have been compounded by a general
decline in the willingness by banks and other financial institutions to extend
credit. These difficulties may adversely affect the financial institutions that
provide our credit facilities and may impair their ability to continue to
perform under their financing obligations to us, which could have an impact on
our ability to fund current and future obligations.





We face
risks attendant to changes in economic environments, changes in interest rates
and instability in securities markets around the world, among other factors.
Major market disruptions and the current adverse changes in market conditions
and regulatory climate in the United States and worldwide may adversely affect
our business or impair our ability to borrow amounts under our credit facilities
or any future financial arrangements. We cannot predict how long the current
market conditions will last. However, these recent and developing economic and
governmental factors, including proposals to reform the financial system, may
have a material adverse effect on our results of operations, financial condition
or cash flows and could cause the price of our shares to decline significantly
or impair our ability to make distributions to our shareholders.





Risks
Related to Our Business





A
drop in spot charter rates may provide an incentive for some charterers to
default on their charters




When we
enter into a time charter, charter rates under that charter are fixed for the
term of the charter. If the spot charter rates or short-term time charter rates
in the tanker or dry bulk shipping industry, as applicable, become significantly
lower than the time charter equivalent rates that some of our charterers are
obligated to pay us under our existing charters, the charterers may have
incentive to default under that charter or attempt to renegotiate the charter.
If our charterers fail to pay their obligations, we would have to attempt to
re-charter our vessels at lower charter rates, which would affect our ability to
comply with our loan covenants and operate our vessels profitably. If we are not
able to comply with our loan covenants and our lenders choose to accelerate our
indebtedness and foreclose their liens, we could be required to sell vessels in
our fleet and our ability to continue to conduct our business would be
impaired.




The
operation of dry bulk carriers and tankers each involve certain unique
operational risks




The
operation of dry bulk carriers has certain unique operational risks. With a dry
bulk carrier, the cargo itself and its interaction with the ship can be a risk
factor.  By their nature, dry bulk cargoes are often heavy, dense,
easily shifted, and react badly to water exposure. In addition, dry bulk
carriers are often subjected to battering treatment during unloading operations
with grabs, jackhammers (to pry encrusted cargoes out of the hold), and small
bulldozers. This treatment may cause damage to the dry bulk carrier. Dry bulk
carriers damaged due to treatment during unloading procedures may be more
susceptible to a breach to the sea.  Hull breaches in dry bulk
carriers may lead to the flooding of their holds. If a dry bulk carrier suffers
flooding in its forward holds, the bulk cargo may become so dense and
waterlogged that its pressure may buckle the dry bulk carrier's bulkheads
leading to the loss of the dry bulk carrier.




The
operation of tankers has unique operational risks associated with the
transportation of oil. An oil spill may cause significant environmental damage,
and a catastrophic spill could exceed the insurance coverage available. Compared
to other types of vessels, tankers are exposed to a higher risk of damage and
loss by fire, whether ignited by a terrorist attack, collision, or other cause,
due to the high flammability and high volume of the oil transported in
tankers.




If we are
unable to adequately maintain or safeguard our vessels we may be unable to
prevent these events. Any of these circumstances or events could negatively
impact our business, financial condition, results of operations. In addition,
the loss of any of our vessels could harm our reputation as a safe and reliable
vessel owner and operator.




Purchasing
and operating previously owned, or secondhand, vessels may result in increased
drydocking costs and vessels off-hire, which could adversely affect our
earnings




Even
following a physical inspection of secondhand vessels prior to purchase, we do
not have the same knowledge about their condition and cost of any required (or
anticipated) repairs that we would have had if these vessels had been built for
and operated exclusively by us.  Accordingly, we may not discover
defects or other problems with such vessels prior to purchase. Defects or
problems discovered after purchase may be expensive to repair, and if not
detected, may result in accidents or other incidents for which we may become
liable to third parties. We may not receive the benefit of warranties on
secondhand vessels. Increased drydocking costs or vessels off-hire may adversely
affect our earnings.




8







The
volatility in both dry bulk and tanker charter rates, and vessel values, may
affect our ability to comply with various covenants in our loan
agreements




Our loan
agreements for our borrowings, which are secured by liens on our vessels,
contain various financial covenants. Among those covenants are requirements that
relate to our financial position, operating performance and
liquidity.  For example, there are financial covenants that require us
to maintain (i) a minimum value adjusted equity that is based, in part, upon the
market value of the vessels securing the loans, (ii) minimum levels of free
cash, and (iii) a positive working capital.  The market value of dry
bulk and tanker vessels is sensitive, among other things, to changes in the dry
bulk and tanker charter markets, respectively, with vessel values deteriorating
in times when dry bulk and tanker charter rates, as applicable, are falling and
improving when charter rates are anticipated to rise. Such conditions may result
in our not being in compliance with these loan covenants. In such a situation,
unless our lenders were willing to provide waivers of covenant compliance or
modifications to our covenants, or would be willing to refinance our
indebtedness, we may have to sell vessels in our fleet and/or seek to raise
additional capital in the equity markets in order to comply with our loan
covenants. Furthermore, if the value of our vessels deteriorates significantly,
we may have to record an impairment adjustment in our financial statements,
which would adversely affect our financial results and further hinder our
ability to raise capital.




If we are
not in compliance with our covenants and are not able to obtain covenant waivers
or modifications, our lenders could require us to post additional collateral,
enhance our equity and liquidity, increase our interest payments or pay down our
indebtedness to a level where we are in compliance with our loan covenants, sell
vessels in our fleet, or they could accelerate our indebtedness, which would
impair our ability to continue to conduct our business. In such an event, our
auditors may give either an unqualified opinion with an explanatory paragraph
relating to the disclosure in the notes to our financial statements as to the
substantial doubt of our ability to continue as a going concern, or a qualified,
adverse or disclaimer of opinion, which could lead to additional defaults under
our loan agreements. If our indebtedness is accelerated, we might not be able to
refinance our debt or obtain additional financing and could lose our vessels if
our lenders foreclose their liens. In addition, if we find it necessary to sell
our vessels at a time when vessel prices are low, we will recognize losses and a
reduction in our earnings, which could affect our ability to raise additional
capital necessary for us to comply with our loan agreements.




Our
ability to obtain additional debt financing may be dependent on the performance
of our then existing charters and the creditworthiness of our
charterers




The
actual or perceived credit quality of our charterers, and any defaults by them,
may materially affect our ability to obtain the additional capital resources
required to purchase additional vessels or may significantly increase our costs
of obtaining such capital.  Our inability to obtain additional
financing at anticipated costs or at all may materially affect our results of
operation and our ability to implement our business strategy.




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.





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:





●
            general
      economic and market conditions affecting the
      shipping  industry;




●
            competition
      from other shipping companies;




●
            types
      and sizes of vessels;




●
            other
      modes of transportation;




●
            cost
      of newbuildings;




●
            shipyard
      capacity;




9







●
            governmental
      or other regulations;




●
            age
      of vessels;




●
            prevailing
      level of charter rates; and




●
            technological
      advances.




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





We
may be unable to successfully compete with other vessel operators for charters,
which would adversely affect our results of operations and financial
position





The
operation of tankers and dry bulk vessels and transportation of crude and
petroleum products and dry bulk cargoes is extremely competitive. Through our
operating subsidiaries we compete with other vessel owners (including major oil
companies as well as independent companies), and, to a lesser extent, owners of
other size vessels. The tanker and dry bulk markets are highly fragmented. It is
possible that we could not obtain suitable employment for our vessels, which
would adversely affect our results of operations and financial
position.





We
receive a portion of our charterhire revenue from a limited number of customers
including Frontline





We will
derive a significant portion of our revenues from charters with Frontline Ltd,
or Frontline, a publicly-traded shipping company, which is the parent of our
Manager, for two of our six vessels.  If we were to lose one or both
of our charters with Frontline, or any of our other customers, we may be unable
to find a suitable replacement charter for the related vessel on terms as
favorable to us as under our current charters. The loss of any of our customers
could have a material adverse effect on our revenues and results of
operations.





Our
time charters may limit our ability to benefit from any improvement in charter
rates, and at the same time, our revenues may be adversely affected if we do not
successfully employ our vessels on the expiration of our charters





Currently,
five of our six vessels are contractually committed to time charters, with the
remaining terms of these charters expiring on dates between 2010 and 2014. Our
sixth vessel, a tanker, is currently operating in the spot market. Although our
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. By the same
token, we cannot assure you that we will be able to successfully employ our
vessels in the future or renew our existing charters at rates sufficient to
allow us to operate our business profitably or meet our obligations. A decline
in charter or spot rates or a failure to successfully charter our vessels could
have a material adverse effect on our business, financial condition, results of
operation and ability to pay dividends.





We
cannot assure you that we will be able to refinance indebtedness incurred under
our current credit facilities





We cannot
assure you that we will be able to refinance our indebtedness on terms that are
acceptable to us or at all. If we are not able to refinance our indebtedness, we
will have to dedicate a greater portion of our cash flow from operations to pay
the principal and interest of this indebtedness. We cannot assure you that we
will be able to generate cash flow in amounts that are sufficient for these
purposes. If we are not able to satisfy these obligations, we may have to
undertake alternative financing plans or sell our assets. In addition, debt
service payments under our credit facilities may limit funds otherwise available
for working capital, capital expenditures, payment of dividends and other
purposes. If we are unable to meet our debt obligations, or if we otherwise
default under our credit facilities, our lenders could declare the debt,
together with accrued interest and fees, to be immediately due and payable and
foreclose on our fleet, which could result in the acceleration of other
indebtedness that we may have at such time and the commencement of similar
foreclosure proceedings by other lenders.





As
we expand our fleet, we may not be able to recruit suitable employees and crew
for our vessels which may limit our growth and cause our financial performance
to suffer





We have
recently expanded our fleet from four to six vessels and diversified from a pure
tanker fleet to a fleet of which one-third are dry bulk carriers. We may not be
able to continue to hire suitable employees as we expand our fleet and
diversify.  If we are unable to recruit suitable employees and crews,
we may not be able to provide our services to customers, our growth may be
limited and our financial performance may suffer.


10





We
are subject to certain risks with respect to our counterparties on contracts,
and failure of such counterparties to meet their obligations could cause us to
suffer losses or otherwise adversely affect our business





We have
entered into various contracts, including charterparties with our customers and
our credit facilities. These agreements subject us to counterparty risks. The
ability of each of our counterparties to perform its obligations under a
contract with us will depend on a number of factors that are beyond our control
and may include, among other things, general economic conditions, the condition
of the maritime and offshore industries, the overall financial condition of the
counterparty, charter rates received for specific types of vessels, and various
expenses. Should a counterparty fail to honor its obligations under agreements
with us, we could sustain significant losses which could have a material adverse
effect on our business, financial condition, results of operations and cash
flows.





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





The
carrying values of our vessels are reviewed whenever events or changes in
circumstances indicate that the carrying amount of the vessel may no longer be
recoverable. We assess recoverability of the carrying value by estimating the
future net cash flows expected to result from the vessel, including eventual
disposal If the future net undiscounted cash flows and the estimated fair market
value of the vessel are less than the carrying value an impairment loss is
recorded equal to the difference between the vessel's carrying value and fair
value. Any impairment charges incurred as a result of declines in charter rates
and other market deterioration could negatively affect our business, financial
condition, operating results or the trading price of our Ordinary
Shares.





Fuel
or bunker prices, may adversely affect our profits





For
vessels on voyage charters, fuel oil, or bunkers, is a significant, if not the
largest, expense. Changes in the price of fuel may adversely affect our
profitability to the extent we have vessels on voyage charters. 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.
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.





Operational
risks and damage to our vessels could adversely impact our
performance





If our
vessels suffer damage due to inherent operational risks, we may experience
unexpected drydocking costs and delays or total loss of our vessels, which may
adversely affect our revenues and business and financial condition.




Our
vessels and their cargoes will be at risk of being damaged or lost because of
events such as marine disasters, bad weather, business interruptions caused by
mechanical failures, grounding, fire, explosions and collisions, human error,
war, terrorism, piracy and other circumstances or events. These hazards may
result in death or injury to persons, loss of revenues or property,
environmental damage, higher insurance rates, damage to our customer
relationships, delay or rerouting.




In
addition, the operation of tankers has unique operational risks associated with
the transportation of oil. An oil spill may cause significant environmental
damage, and the costs associated with a catastrophic spill could exceed the
insurance coverage available to us.  Compared to other types of
vessels, tankers are exposed to a higher risk of damage and loss by fire,
whether ignited by a terrorist attack, collision, or other cause, due to the
high flammability and high volume of the oil transported in
tankers.




If our
vessels suffer damage, they may need to be repaired at a drydocking facility.
The costs of drydock repairs are unpredictable and may be substantial. We may
have to pay drydocking costs that our insurance does not cover in full. The loss
of earnings while these vessels are being repaired and repositioned, as well as
the actual cost of these repairs, may adversely affect our business and
financial condition. In addition, space at 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 our vessels may be
forced to travel to a drydocking facility that is not conveniently located to
our vessels' positions. The loss of earnings while these vessels are forced to
wait for space or to travel to more distant drydocking facilities may adversely
affect our business and financial condition. Further, the total loss of any of
our vessels could harm our reputation as a safe and reliable vessel owner and
operator.  If we are unable to adequately maintain or safeguard our
vessels, we may be unable to prevent any such damage, costs or loss which could
negatively impact our business, financial condition, results of operations and
ability to pay dividends.




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.




11







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 an adverse effect on our business,
financial condition and results of operations.





Risks
Related to Our Company





Incurrence
of expenses or liabilities may reduce or eliminate distributions





Our
policy is to make distributions to shareholders based on earnings and cash flow.
The amount and timing of dividends will depend on our earnings, financial
condition, cash position, Bermuda law affecting the payment of distributions and
other factors. However, we could incur other expenses or contingent liabilities
that would reduce or eliminate the cash available for distribution by us as
dividends. Our loan agreements require the bank's written consent prior to a
dividend payment.  In addition, the declaration and payment of
dividends is subject at all times to the discretion of our Board of Directors,
or Board.  We cannot assure you that we will pay
dividends.





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





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





We
may not be able to finance our future capital commitments





We cannot
guarantee that we will be able to obtain additional financing at all or on terms
acceptable to us. If adequate funds are not available, we may have to reduce
expenditures for investments in new and existing projects, which could hinder
our growth and prevent us from realizing potential revenues from prior
investments which will have a negative impact on our cash flows and results of
operations.





If
the volatility in LIBOR resumes, it could affect our profitability, earnings and
cash flow





The
London Interbank Offered Rate, or LIBOR, has shown high volatility in 2008 and
2009, with the spread between LIBOR and the prime lending rate widening
significantly at times. These conditions are the result of the recent
disruptions in the international credit markets. Because the interest rates
borne by our outstanding indebtedness fluctuate with changes in LIBOR, if this
volatility were to continue, it would affect the amount of interest payable on
our debt, which in turn, could have an adverse effect on our profitability,
earnings and cash flow.





If
we do not set aside funds and are unable to borrow or raise funds for vessel
replacement at the end of a vessel's useful life our revenue will decline, which
would adversely affect our business, results of operations, financial condition
and ability to pay dividends





If we do
not set aside funds and are unable to borrow or raise funds for vessel
replacement, we will be unable to replace the vessels in our fleet upon the
expiration of their remaining useful lives. Our cash flows and income are
dependent on the revenues earned by the chartering of our vessels. If we are
unable to replace the vessels in our fleet upon the expiration of their useful
lives, our business, results of operations, financial condition and ability to
pay dividends would be adversely affected. Any funds set aside for vessel
replacement will not be available for dividends.





We
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.


12





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.





Because
we are a foreign corporation, you may not have the same rights that a
shareholder in a United States corporation may have





We are a
Bermuda company. 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
shareholders. 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.





United
States tax authorities could treat the Company as a "passive foreign investment
company," which could have adverse United States federal income tax consequences
to United States holders





A foreign
corporation will be treated as a "passive foreign investment company," or PFIC,
for United States federal income tax purposes if either (1) at least 75% of its
gross income for any taxable year consists of certain types of "passive income"
or (2) at least 50% of the average value of the corporation's assets produce or
are held for the production of those types of "passive income."  For
purposes of these tests, "passive income" includes dividends, interest, and
gains from the sale or exchange of investment property and rents and royalties
other than rents and royalties which are received from unrelated parties in
connection with the active conduct of a trade or business.  For
purposes of these tests, income derived from the performance of services does
not constitute "passive income."  United States shareholders of a PFIC
are subject to a disadvantageous United States federal income tax regime with
respect to the income derived by the PFIC, the distributions they receive from
the PFIC and the gain, if any, they derive from the sale or other disposition of
their shares in the PFIC.





Prior to
its 2004 taxable year, the Company was treated as a PFIC. As a result of a
change in its operations, the Company should not be a PFIC with respect to any
taxable year beginning with its 2004 taxable year. In the opinion of Seward
& Kissel LLP, based upon the Company's operations as described herein, its
income from time charters should not be treated as passive income for purposes
of determining whether it is a passive foreign investment company. Accordingly,
the Company's income from its time chartering activities should not constitute
"passive income," and the assets that the Company owns and operates in
connection with the production of that income should not constitute passive
assets.





There is
substantial legal authority supporting this position consisting of case law and
United States Internal Revenue Service, or IRS, pronouncements concerning the
characterization of income derived from time charters and voyage charters as
services income for other tax purposes. However, it should be noted that there
is also authority which characterizes time charter income as rental income
rather than services income for other tax purposes. Accordingly, no assurance
can be given that the IRS or a court of law will accept this position, and there
is a risk that the IRS or a court of law could determine that the Company is a
PFIC.  Moreover, no assurance can be given that the Company would not
constitute a PFIC for any future taxable year if the nature and extent of the
Company's operations changed.





If the
IRS were to find that the Company is a PFIC for any taxable year, United States
shareholders of the Company who held shares during such taxable year would face
adverse United States federal income tax consequences.  Under the PFIC
rules, unless those shareholders make an election available under the Code
(which election could itself have adverse consequences for such shareholders, as
discussed below under "Taxation Considerations – United States Federal Income
Taxation – United States Federal Income Taxation of United States Holders "),
such shareholders would be liable to pay United States federal income tax at the
then prevailing income tax rates on ordinary income plus interest upon excess
distributions and upon any gain from the disposition of their common shares, as
if the excess distribution or gain had been recognized ratably over the
shareholder's holding period of the common shares.  See "Taxation
Considerations – United States Federal Income Taxation – United States Federal
Income Taxation of United States Holders" for a more comprehensive discussion of
the United States federal income tax consequences to United States shareholders
if the Company is treated as a PFIC.


13





The
Company may have to pay tax on United States source income, which would reduce
its earnings





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 the
Company and its subsidiaries, that is attributable to transportation that begins
or ends, but that does not both begin and end, in the United States may be
subject to a 4% United States federal income tax without allowance for
deduction, unless that corporation qualifies for exemption from tax under
section 883 of the Code and the applicable Treasury Regulations recently
promulgated thereunder.





In the
opinion of Seward & Kissel LLP, the Company and its subsidiaries should
qualify for this statutory tax exemption. The Company will take this position
for United States federal income tax return reporting purposes. However, there
are factual circumstances beyond the Company's control that could cause it to
lose the benefit of this tax exemption and thereby become subject to United
States federal income tax on its United States source income. For example, the
Company would no longer qualify for exemption under Code section 883 for a
particular taxable year if shareholders with a five percent or greater interest
in the Company's stock owned, in the aggregate, 50% or more of the outstanding
shares of the Company's common stock for more than half the days during the
taxable year.  Due to the factual nature of the issues involved, there
can be no assurances on the tax-exempt status of the Company or any of its
subsidiaries.





If the
Company or its subsidiaries were not entitled to exemption under Section 883 for
any taxable year, they could be subject for those years to 4% United States
federal income tax on the shipping income these companies derive during the year
which is attributable to the transport of cargoes to or from the United States.
The imposition of this taxation would have a negative effect on the Company's
business and would result in decreased earnings available for distribution to
the Company's shareholders.





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





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





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





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





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





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





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





We are
subject to Section 404 of the Sarbanes-Oxley Act of 2002, which requires us to
include in our Annual Report on Form 20-F our management's report on, and
assessment of the effectiveness of, our internal controls over financial
reporting. In addition, our independent registered public accounting firm is
required to attest to and report on management's assessment of the effectiveness
of our internal controls over financial reporting. If we fail to 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.


14





ITEM
4.  INFORMATION ON THE COMPANY





A.  HISTORY
AND DEVELOPMENT OF THE COMPANY





Knightsbridge
Tankers Limited was incorporated in Bermuda on September 18, 1996. The Company's
registered and principal executive offices are located at Par-la-Ville Place, 14
Par-la-Ville Road, Hamilton, HM 08, Bermuda, and its telephone number is +1
(441) 295-6935. References herein to the Company or to "we" or "us" include the
Company and all of its subsidiaries, unless otherwise indicated. The Company was
incorporated for the purpose of the acquisition, disposition, ownership, leasing
and chartering of, through wholly-owned subsidiaries, five very large crude oil
carriers. The Company used the net proceeds of its initial public offering and
bank debt to fund the purchase of these vessels. Upon their purchase from their
previous owners on February 27, 1997 until March 2004, the Company chartered its
vessels to Shell International on long-term bareboat charters. The term of each
of these charters was a minimum of seven years, with options for Shell
International to extend the period for each vessel's charter. Shell
International did not extend the bareboat charters for any of the
vessels.  Consequently, the charters expired for all five vessels, in
accordance with their terms, during March 2004 and the vessels were redelivered
to the Company.





Following
the redelivery of its original vessels, we entered into a five year time charter
for one of our vessels, which expired in March 2009, while two of our vessels
were time chartered for a period of three years, which expired in May 2007. We
then entered into four and five year time charter agreements with Frontline Ltd.
(NYSE: FRO; OSE: FRO), a Bermuda based publicly listed tanker owner and
operator, which is the parent of our Manager as described below to replace the
charters which expired in May 2007. Our remaining two vessels had been trading
on the spot market and from April 2005, participated in a pooling arrangement
with Frontline. During March 2007, the pooling arrangement with Frontline was
terminated, and we commenced a three year time charter for one of the vessels,
leaving one vessel trading in the spot market. That vessel was sold in December
2007. We currently own and operate six vessels, five of which are employed on
time charters. One vessel, which has been operating in the spot market, will be
operating under a 30-month bareboat charter contract from late March
2010.





In May
2007, we entered into agreements for the construction of two Capesize dry bulk
carriers, each with a cargo-carrying capacity of approximately 170,000 dwt, with
Daehan Shipbuilding Co Ltd in the Republic of Korea. Both of the vessels
commenced five-year time charters following their delivery to us in August and
October 2009.





B.  BUSINESS
OVERVIEW





Our
primary business activity is currently the international seaborne transportation
of crude oil and dry bulk cargoes. Our current fleet consists of four
double-hull VLCCs, one of which was built in 1996 and three of which were built
in 1995, and two Capesize dry bulk carriers that were delivered to us in 2009.
Each of our vessels is owned by a subsidiary and has been flagged in the
Marshall Islands.  In addition to the VLCCs, the Company charters two
Capesize dry bulk carriers Our total carrying capacity is 1.53 million dwt. The
following chart provides information on the deployment of our vessels as of
December 31, 2009:





Vessel
      Name
            Type
            Employment
            Expiration
      DateCamden
      (1)
            VLCC
            Spot
            n/aMayfair
            VLCC
            Time
      charter
            April
      2010Hampstead
            VLCC
            Time
      charter
            May
      2012Kensington
            VLCC
            Time
      charter
            May
      2011Battersea
      (2)
            Capesize
            Time
      charter
            August
      2014Belgravia
      (3)
            Capesize
            Time
      charter
            October
      2014





(1)  We
have entered into a 30-month bareboat charter contract for this vessel, which is
scheduled to commence late March 2010.


(2)  This
vessel was delivered to us in August 2009.


(3)  This
vessel was delivered to us in October 2009.





Our
principal executive offices are located in Hamilton, Bermuda.





Strategy





Our
business strategy is to operate a diversified fleet of VLCCs and Capesize dry
bulk carriers with flexibility to adjust our exposure to the tanker and dry bulk
markets depending on existing factors such as charter rates, newbuilding costs,
vessel resale and scrap values and vessel operating expenses resulting from,
among other things, changes in the supply of and demand for tanker and dry bulk
capacity. We may adjust our exposure through time charters, bareboat charters,
sale and leasebacks, sales and purchases of vessels, newbuilding contracts and
acquisitions.





Our goal
is to generate competitive returns for our shareholders. In February 2010, our
Board, determined to resume the payment of quarterly dividend distributions and
declared a dividend of $0.30 per share with respect to the fourth quarter of
2009. We did not declare a dividend with respect to the first, second or third
quarter of 2009 and we cannot guarantee that we will pay a dividend in any
future quarters. The level of any future dividend will be guided by present
earnings, market prospects, current capital expenditure programs as well as
investment opportunities.


15




Management
Structure





Our Board
decided, at the incorporation of the Company, to contract the day-to-day
management services of the Company and its subsidiaries, rather than to
establish a proprietary management organization. This policy was based on the
availability of such services in the market on terms which we consider more cost
efficient to us than the alternative. The Board has not seen any reason to
change this policy since it was formulated. All of the management services
contracted in by the Company and its subsidiaries are subject to the Board's or,
as the case may be, the board of the relevant subsidiary's, sole right to
determine the overall objectives and policies of the Company and its
subsidiaries. Further, all matters of material importance to or of an
extraordinary nature in respect of our business are decided by the
Board.





General
Management Agreement





We are
provided with general administrative services by ICB Shipping (Bermuda) Limited,
or the Manager, on the terms set forth in a management agreement dated February
12, 1997, as subsequently amended by an amendment no. 1 thereto dated March 1,
2004, or the Management Agreement. The Manager is a wholly owned subsidiary of
Frontline. The Manager subcontracts all the services delivered to the Company
and its subsidiaries to Frontline Management (Bermuda) Limited, another wholly
owned subsidiary of Frontline. The fee payable to the Manager pursuant to the
terms of the Management Agreement is $1.15 million per annum plus a commission
of 1.25% on gross freight revenues and 1% of proceeds on the sale of vessels. We
are responsible for paying all administrative expenses incurred from third
parties such as audit, legal and other professional fees, registration fees and
directors' and officers' fees and expenses. The Board believes that the fee
level (and other terms of the Management Agreement) are substantially similar to
those that can be obtained in the market. The Company may terminate the
Management Agreement at any time upon 30 days notice to the Manager provided
such termination has been approved by the affirmative vote of shareholders
holding at least 66 2/3 per cent of the Company's outstanding common shares in a
shareholders meeting. The Company may, furthermore, terminate the Management
Agreement subject to five business day's prior written notice to the Manager in
the event:





●
            of
      a material breach of the terms thereof by the Manager occurs and remains
      unremedied for 30 days;




●
            any
      material consent, authorization, license, approval or similar requirement
      for the Manager's activities as such is modified, terminated, revoked or
      expires;




●
            the
      Manager becomes subject to an insolvency
event;




●
            it
      becomes unlawful for the Manager to perform the services to be provided
      there under; or




●
            the
      Manager ceases to be a wholly owned subsidiary of
    Frontline.




The
Manager may terminate the Management Agreement upon 10 business days notice in
the event the Company undergoes "a change of control" (which shall mean the
election of a director to the Board who is not recommended by the then current
Board). The Management Agreement terminates automatically in 2012 unless earlier
terminated as per above. The Board believes that, in the case of any termination
of the Management Agreement, we can obtain an appropriate alternative
arrangement for our management requirements although there can be no assurance
that such alternative arrangement would not cause the Company to incur
additional expenses.





Technical
Management of Vessels





Technical
management of our vessels is provided by ship mangers subcontracted by the
Manager to oversee the technical elements of running the vessels.





Commercial
Management of Capesize Vessels





KTL
Belgravia I Inc. and KTL Belgravia II Inc., our dry bulk owning subsidiaries and
Golden Ocean Management AS, or the Commercial Manager, have negotiated the terms
of a commercial management agreement in respect of our dry bulk carriers. These
services commenced on delivery of the dry bulk carriers and, subject to the
overall authority of the boards of the two subsidiaries, include the authority
to charter out the carriers. The remuneration of the Commercial Manager is 1.25
% of all gross freights earned by the vessels. The agreement can be terminated
by either party subject to one month's written notice. The Commercial Manager is
a wholly owned subsidiary of Golden Ocean Group Limited., a Bermuda company
listed on the Oslo Stock Exchange. Golden Ocean Group Limited is related to
Frontline.


16





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, tanker companies, dry bulk carriers,
petroleum products traders, government agencies and various other entities.
During the year ended December 31, 2009, two customers accounted for 66% of our
consolidated operating revenues.




Competition




The
market for international seaborne crude oil and dry bulk 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 ship-owner fleets. In
addition, many owners and operators in each of the tanker and dry bulk
industries 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 tankers owned or controlled by us, also operate their own
vessels and use those vessels not only to transport their own crude oil but also
to transport crude oil for third party end-users 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 we engage.
Charters are to a large extent brokered through international independent
brokerage houses that specialize in finding the optimal ship for any particular
cargo based on the aforementioned criteria. Brokers may be appointed by the
cargo shipper or the ship owner.




Environmental
and Other Regulations





Government
regulations and laws significantly affect the ownership and operation of our
vessels. We are subject to international conventions, national, state and local
laws and regulations in force in the countries in which our vessels may operate
or are registered and compliance with such laws, regulations and other
requirements may entail significant expense.





Our
vessels are subject to both scheduled and unscheduled inspections by a variety
of government, quasi-governmental and private organizations including the local
port authorities, national authorities, harbor masters or equivalent,
classification societies, flag state administrations (countries of registry) and
charterers. Our failure to maintain permits, licenses, certificates or other
approvals required by some of these entities could require us to incur
substantial costs or temporarily suspend operation of one or more of our
vessels.





We
believe that the heightened levels of environmental and quality concerns among
insurance underwriters, regulators and charterers have led to greater inspection
and safety requirements on all vessels and may accelerate the scrapping of older
vessels throughout the industry. Increasing environmental concerns have created
a demand for vessels that conform to stricter environmental
standards.  We believe that the operation of our vessels is in
substantial compliance with applicable environmental laws and regulations and
that our vessels have all material permits, licenses, certificates or other
authorizations necessary for the conduct of our operations; however, because
such laws and regulations are frequently changed and may impose increasingly
stricter requirements, we cannot predict the ultimate cost of complying with
these requirements, or the impact of these requirements on the resale value or
useful lives of our vessels. In addition, additional legislation or regulation
applicable to the operation of our vessels that may be implemented in the future
could negatively affect our profitability.





International
Maritime Organization





The
International Maritime Organization, the United Nations agency for maritime
safety and the prevention of pollution by ships or the IMO, has adopted several
international conventions that regulate the international shipping industry,
including the International Convention on Civil Liability for Oil Pollution
Damage, the International Convention on Civil Liability for Bunker Oil Pollution
Damage, and the International Convention for the Prevention of Pollution from
Ships, or the MARPOL Convention. The MARPOL Convention establishes environmental
standards relating to oil leakage or spilling, garbage management, sewage, air
emissions, handling and disposal of noxious liquids and the handling of ,
harmful substances in packaged form.


17





The
operation of our vessels is also affected by the requirements contained in the
International Safety Management Code for the Safe Operation of Ships and for
Pollution Prevention, or ISM Code, promulgated by the IMO under the
International Convention for the Safety of Life at Sea, or SOLAS. The ISM Code
requires the party with operational control of a vessel to develop an extensive
safety management system that includes, among other things, the adoption of a
safety and environmental protection policy setting forth instructions and
procedures for operating its vessels safely and describing procedures for
responding to emergencies. We intend to rely upon the safety management system
that our appointed ship managers have developed.




Noncompliance
with the ISM Code or with other IMO regulations may subject a shipowner or
bareboat charterer to increased liability, may lead to decreases in available
insurance coverage for affected vessels and may result in the denial of access
to, or detention in, some ports including United States and European Union
ports.





United
States





The
U.S. Oil Pollution Act of 1990 and the Comprehensive Environmental Response,
Compensation and Liability Act





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





Under
OPA, vessel owners, operators and bareboat charterers are responsible parties
who are jointly, severally and strictly liable (unless the spill results solely
from the act or omission of a third party, an act of God or an act of war) for
all containment and clean-up costs and other damages arising from oil spills
from their vessels.OPA limits the liability of responsible parties with respect
to tankers over 3,000 gross tons to the greater of $3,000 per gross tons or
$22.0 million per single hull tanker, and $1,900 per gross ton or $16.0 million
per double hull tanker, respectively, and permits individual states to impose
their own liability regimes with regard to oil pollution incidents occurring
within their boundaries. Some states have enacted legislation providing for
unlimited liability for discharge of pollutants within their waters, however, in
some cases, states which have enacted this type of legislation have not yet
issued implementing regulations defining tanker owners' responsibilities under
these laws. CERCLA, which applies to owners and operators of vessels, contains a
similar liability regime and provides for cleanup, removal and natural resource
damages. Liability under CERCLA is limited to the greater of $300 per gross ton
or $5.0 million for vessels carrying a hazardous substance as cargo and the
greater of $300 per gross ton or $0.5 million for any other vessel.





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





OPA also
requires owners and operators of vessels to establish and maintain with the U.S.
Coast Guard evidence of financial responsibility sufficient to meet the limit of
their potential strict liability under the act. Under the regulations, evidence
of financial responsibility may be demonstrated by insurance, surety bond,
self-insurance or guaranty. Under OPA regulations, an owner or operator of more
than one tanker is required to demonstrate evidence of financial responsibility
for the entire fleet in an amount equal only to the financial responsibility
requirement of the tanker having the greatest maximum strict liability under OPA
and CERCLA. We have provided such evidence and received certificates of
financial responsibility from the U.S. Coast Guard for each of our vessels
required to have one.





Other
U.S. Environmental Initiatives





The U.S.
Clean Water Act, or CWA, prohibits the discharge of oil, hazardous substances,
and ballast water  in U.S. navigable waters unless authorized by a
duly-issued permit or exemption, and imposes strict liability in the form of
penalties for any unauthorized discharges. The CWA also imposes substantial
liability for the costs of removal, remediation and damages and complements the
remedies available under OPA and CERCLA. Furthermore, most U.S. states that
border a navigable waterway have enacted environmental pollution laws that
impose strict liability on a person for removal costs and damages resulting from
a discharge of oil or a release of a hazardous substance. These laws may be more
stringent than U.S. federal law.





18





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 EPA to promulgate standards applicable to
emissions of volatile organic compounds and other air contaminants. Our vessels
are subject to vapor control and recovery requirements for certain cargoes when
loading, unloading, ballasting, cleaning and conducting other operations in
regulated port areas. Our vessels that operate in such port areas with
restricted cargoes are equipped with vapor recovery systems that satisfy these
requirements. The CAA also





European
Union





The
European Union has adopted legislation that would: (1) ban manifestly
sub-standard vessels (defined as those over 15 years old that have been detained
by port authorities at least twice in a six month period) from European waters
and create an obligation of port states to inspect vessels posing a high risk to
maritime safety or the marine environment; and (2) provide the European Union
with greater authority and control over classification societies, including the
ability to seek to suspend or revoke the authority of negligent societies. In
addition, European Union regulations enacted in 2003 now prohibit all single
hull tankers from entering into its ports or offshore terminals.





Greenhouse
Gas Regulation





The IMO
is evaluating mandatory measures to reduce greenhouse gas emissions from
international shipping, which may include market-based instruments or a carbon
tax. Any passage of climate control legislation or other regulatory initiatives
by the IMO, EU, the U.S. or other countries where we operate that restrict
emissions of greenhouse gases could require us to make significant financial
expenditures that we cannot predict with certainty at this time.





Vessel
Security Regulations





Since the
terrorist attacks of September 11, 2001, there have been a variety of
initiatives intended to enhance vessel security including the U.S. Maritime
Transportation Security Act of 2002, or MTSA, amendments to SOLAS and a
requirement that any vessel trading internationally obtain an International Ship
Security Certificate from a recognized security organization approved by the
vessel's flag state. We believe that our fleet is currently in compliance with
applicable security requirements.





Inspection
by Classification Societies





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





Most
insurance underwriters make it a condition for insurance coverage that a vessel
be certified as "in-class" by a classification society which is a member of the
International Association of Classification Societies. All our vessels are
certified as being "in-class" by a recognized classification
society.





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 labor strikes. In addition, the operation of any ocean-going
vessel is subject to the inherent possibility of catastrophic marine disaster,
including oil spills and other environmental mishaps, and the liabilities
arising from owning and operating vessels in international
trade.  OPA, which imposes virtually unlimited liability upon owners,
operators and demise charterers of any vessel trading in the United States
exclusive economic zone for certain oil pollution accidents in the United
States, has made liability insurance more expensive for ship owners and
operators trading in the United States market.





Our
Manager 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. We carry insurance covering the loss of hire resulting
from marine casualties or hull and marine particular damages on our
vessels. Currently, the amount of coverage for liability for pollution, spillage
and leakage available to us on commercially reasonable terms through protection
and indemnity associations and providers of excess coverage is $1.0 billion per
vessel per occurrence. Protection and indemnity associations are mutual marine
indemnity associations formed by shipowners to provide protection from large
financial loss to one member by contribution towards that loss by all
members.





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


19








C.  ORGANIZATIONAL
STRUCTURE





See
Exhibit 8.1 for a list of our significant subsidiaries.





D.  PROPERTY,
PLANT AND EQUIPMENT





We
operate a modern fleet of four tankers and two Capesize dry bulk carriers. The
name, dwt, flag and date of original delivery from the Builder's yard are set
forth below.





Vessel
      name
            Type
            Approx.
      dwt
            Flag
            Year
      BuiltCamden
            VLCC
            298,000
            Marshall
      Islands
            1995Mayfair
            VLCC
            298,000
            Marshall
      Islands
            1995Kensington
            VLCC
            298,000
            Marshall
      Islands
            1995Hampstead
            VLCC
            298,000
            Marshall
      Islands
            1996Belgravia
            Capesize
            170,500
            Marshall
      Islands
            2009Battersea
            Capesize
            170,500
            Marshall
      Islands
            2009





Our VLCCs
are of double hull construction designed for enhanced safety and
reliability.





Other
than its interests in the vessels, the Company has no interest in any other
property.





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" and the Company's audited Consolidated Financial Statements and
Notes thereto included herein.





In
February 1997, the Company's five wholly-owned subsidiaries each purchased one
VLCC. From their purchase in February 1997 until March 2004, the Company
chartered the VLCCs to Shell International on long-term bareboat charters. The
charters expired for all five VLCCs, in accordance with their terms, in March
2004 and the VLCCs were redelivered to the Company and subsequently chartered
out on time and spot markets.





In May
2007, the Company entered into agreements for the construction of two Capesize
dry bulk carriers, each with a cargo-carrying capacity of approximately 170,000
dwt, with Daehan Shipbuilding Co Ltd in the Republic of Korea. Both of the
vessels commenced five-year time charters following their delivery to us in
August and October 2009.





One of
the Company's VLCCs is currently operating in the spot market. The remaining
five vessels are currently operating under the following time charter
agreements:





Time
      Charter Terms
            Length
      of Charter
            Expiration
      dateHampstead
            $37,750
      per day plus profit share*
            5
      year
            May
      2012Kensington
            $37,750
      per day plus profit share*
            4
      year
            May
      2011Mayfair
            $45,000
      per day
            3
      year
            April
      2010Battersea
            $40,000
      per day
            5
      year
            August
      2014Belgravia
            $52,670
      per day
            5
      year
            October
      2014





* Profit
share is calculated and settled on a quarterly basis for earnings in excess of
$37,750 per vessel per day calculated by reference to the Baltic International
Trading Route (BITR) Index.





We have
entered into a 30-month bareboat charter contract, which is scheduled to
commence late March 2010, for the VLCC currently operating in the spot
market.





20





Market
Overview and Trend Information





According
to industry sources, the average TCE rate for a modern VLCC in the first quarter
of 2009 was $55,400/day, ranging between $83,000/day in January to $36,500/day
at the end of March. For the second, third and fourth quarter, the average TCE
rate was $27,700/day, $23,400/day and $39,500/day, respectively. For the full
year, the average TCE rate was $36,500/day.





The
tanker market began the year rather strongly, as the world economic downturn did
not have a significant effect on tanker rates. The demand for oil remained high
and the supply of tonnage remained tight. In addition, primarily due to
"contango" in the oil markets, some 45 to 50 VLCCs on average throughout this
period were employed in storage of oil.  This, in conjunction with
weak fleet growth for 2008 and the first quarter of 2009, positioned owners for
increased rates. However, significant factors, such as projections of reduced
global oil demand and a high and steady influx of new tonnage, inevitably tended
to have a countervailing negative impact.





Transport
distances fell sharply in the first half of the year but recovered substantially
throughout the second half due to China's large crude oil importing program and
build up of reserves. Industry sources estimate that 2009 experienced a
reduction of 4.3% in total tanker ton-mile demand compared with 2008. In
contrast, the fourth quarter remained relatively steady (-0.1%) year-on-year.
Storage was at the level of the first half of the year, but oil demand decreased
and newbuilding deliveries began to increase in frequency. Removals from the
fleet were below expectations, but fleet growth should slow down as the 2010
phase out deadline for single hull vessels approaches. Delays in the Turkish
straits increased towards the end of the year with approximately 6 to 7 days
waiting time through the Bosporus and Dardanelles through much of November and
all of December. Port strikes in Fos and Lavera also contributed to a tightening
tonnage supply.





Global
oil demand remains the most important driver for ton-mile demand, and as oil
demand decreased by 1.5% in 2009, ton-miles subsequently dropped by about 4.3%.
However, the average transportation distance is increasing year-on-year as China
and India are enhancing their West Africa and Central and South American crude
programs. Furthermore, expected increased trade volume between the Persian Gulf
and the U.S. should also help boost the 2010 ton-mile demand, which industry
sources currently estimate at approximately 7% larger than in 2009.





The dry
bulk shipping market opened 2009 in a highly depressed state. After the all-time
high of $234,000 per day for spot earnings for a capsize vessel in June 2008,
the spot market declined by more than 99% in just six
months.  However, the dramatic fall of the costs of transportation and
of commodity prices in general served as incentives for the rapidly growing
Chinese economy to secure raw materials at considerably lower delivered cost
than that which had been experienced in recent years.





Global
steel production fell by 110 million mt during 2009 while China's steel
production rose by 67 million mt. China's iron ore imports increased by 187
million mt, or 41%.  In addition, the dry bulk market was unexpectedly
bolstered by strong Chinese coal imports. China is the biggest coal producer in
the world and has traditionally been a net exporter, but, in 2009, China
suddenly became a substantial net importer.





The
supply of new dry bulk vessels entering the market remains a concern. Due to
delays and cancellations, actual deliveries fell about 40% short of
expectations. As a consequence, the utilization of the dry bulk fleet from the
second quarter onward exceeded 90%, and spot earnings as well as the period time
charter market outperformed expectations.





The
average spot rate for a Capesize bulker in 2009 was $42,650 per day,
representing a 60% decrease from 2008, though still high from a historic
perspective.





According
to the February 2010 report from the International Energy Agency, or "IEA",
average OPEC production is estimated at 28.7 million barrels per day in 2009.
The expected 2010 OPEC production output figure has not yet been published by
the IEA.  However, the IEA estimates a production figure of 29.1
million barrels per day for January 2010, which is equivalent to their
production output in January 2009.





The IEA
further estimates that the average world oil demand was 84.9 million barrels per
day in 2009, which represents a decrease of 1.5% or 1.3 million barrels per day
from 2008. For 2010, the world oil demand is estimated at 86.5 million barrels
per day, representing an increase of 1.8% or 1.6 million barrels per day from
2009.





Throughout
2009, the oil majors continued to discriminate against single hull tankers. An
increasing number of port and flag states also announced their reluctance to
accept such vessels beginning in January 2010. Subsequently, the market for
these vessels has started to diminish, leaving only a few areas in East Asia
where they are still allowed to trade.





The
bunker (vessel fuel oil) market followed movements in the oil market closely in
2009. The average bunker price in Fujairah was approximately $370/mt, which
represents a decrease of $137/mt from 2008. The prices ranged from a low of
$226/mt in the middle of March to a high of $485/mt at the end of
December.


21





According
to the 'World Economic Outlook
- Update' published by The International Monetary Fund, or "IMF", in
January 2010, World Output, or GDP, decreased 0.8% in 2009, which was a
substantial downward shift compared to the 2009 3% growth estimate as reported
in October 2008. For 2010 and 2011, however, the IMF forecasts World GDP growth
of 3.9% and 4.3%, respectively.





Furthermore,
the IMF reported a U.S. GDP decrease of 2.5% for 2009, down from the 2008
increase of 0.4%. It is, however, estimated that U.S. GDP will increase by 2.7%
in 2010.





While the
Euro area (Germany, France, Italy and Spain) and Japan both experienced a
decrease in GDP throughout 2009 of 3.9% and 5.3%, respectively, they are also
expected to report GDP growth for both 2010 and 2011.





The
emerging and developing economies increased their GDP by 2% for 2009, which
represents a decrease from their 2008 growth of 6%. Current estimates, however,
estimate a healthier economy in the next four years with a predicted growth rate
of approximately 6% for 2010 and 2011, according to the IMF.





China
reported figures consistent with expectations. After an unprecedented domestic
industry build-up, China's GDP increased by 8.7% throughout 2009. While this
represents a small decrease in growth relative to the 9.6% growth experienced in
2008, the IMF has forecast GDP growth of about 10% for 2010 and
2011.





The total
VLCC fleet increased by approximately 8% in 2009 to 529 vessels. Throughout the
year, a total of 54 new vessels were delivered to owners and 12 new orders were
placed. The total order book consisted of 178 vessels at the end of the year,
representing approximately 34% of the existing fleet.





Throughout
2010, it is estimated that 67 VLCCs will enter the market, including 20 in the
first quarter. This substantial amount of new tonnage will be cushioned, to some
extent, by the expected phase-out program of single hull vessels which, at the
end of 2009, consisted of 84 VLCCs. Finally, to help mitigate the future influx
of vessels, we expect further changes to orders such as cancellations, delays
and deferrals.





Critical
Accounting Policies and Estimates





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




Management
believes that the following accounting policies are the most critical in fully
understanding and evaluating our reported financial results as they require a
higher degree of judgment 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
and expense recognition




Revenues
are generated from freight billings and time charter hires. Time charter
revenues are recorded over the term of the charter as service is provided. Under
a voyage charter the revenues and associated voyage costs are recognized ratably
over the estimated duration of the voyage, which is measured from completion of
discharge to completion of discharge. Voyage revenues and expenses are
recognized ratably over the estimated length of each voyage and, therefore, are
allocated between reporting periods based on the relative transit time in each
period. The impact of recognizing voyage expenses ratably over the length of
each voyage is not materially different on a quarterly and annual basis from a
method of recognizing such costs as incurred. Probable losses on voyages are
accrued in full at the time such losses can be estimated. Amounts receivable
from profit sharing arrangements are accrued based on the time charter
equivalent rates achieved through vessel deployment over the preceding quarter
in the market for certain key routes and are not contingent on the performance
of the Company. This amount is calculated and accounted for on a quarterly basis
and is received on a quarterly basis. Each quarterly settlement is final and
does not get carried forward to the next quarter. There is no consideration of
future performance in the recording of profit sharing revenue.





Vessels
and depreciation




Vessels
are stated at cost less accumulated deprecation. Depreciation is calculated
based on cost less estimated residual value, using the straight-line method,
over the useful life of each vessel. The useful life of each vessel is deemed to
be 25 years.





The
carrying value of each of the Company's vessels represents its original cost at
the time it was delivered or purchased less depreciation calculated using an
estimated useful life of 25 years from the date such vessel was originally
delivered from the shipyard. Effective July 1, 2009, the Company effected a
change in estimate related to the estimated scrap rate for its four VLCCs from
$149 per lightweight ton to $281 per lightweight ton. The resulting increase in
salvage value reduced depreciation by


22


approximately
$1.0 million for the year ended December 31, 2009. The Company's assumptions
used in the determination of estimated salvage value took into account then
current scrap prices, the historic pattern of scrap rates over the ten years
ended December 31, 2008, estimated changes in future market demand for scrap
steel and estimated future demand for vessels. Management believes that $281 per
lightweight ton is a reasonable estimate of future scrap prices, taking into
consideration the cyclicality of the nature of future demand for scrap steel.
Although management believes that the assumptions used to determine the scrap
rate are reasonable and appropriate, such assumptions are highly subjective, in
part, because of the cyclicality of the nature of future demand for scrap
steel.





Impairment
of long-lived assets





Long-lived
assets that are held and used by the Company are reviewed for impairment
whenever events or changes in circumstances indicate that the carrying amount of
an asset may not be recoverable. If such a review indicates impairment, an
impairment charge is recognized based on the difference between carrying value
and fair value. Fair value is typically established using an average of three
independent valuations. In addition, long-lived assets to be disposed of by sale
are reported at the lower of their carrying amount or fair value less estimated
costs to sell.





Factors
Affecting Our Results





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





●
            the
      earnings of our vessels in the charter
market;




●
            the
      earnings from the sale of assets;




●
            vessel
      operating expenses;




●
            administrative
      expenses;




●
            depreciation;
      and




●
            interest
      expense.




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. We bear the operating costs for our vessels which operate under
time charter.





Administrative
expenses are composed of general corporate overhead expenses, including audit
fees, directors' fees and expenses, registrar fees, investor relations and
publication expenses, legal and professional fees and other general
administrative expenses.





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.





Interest
expense depends on our overall borrowing levels and will change with prevailing
interest rates, although the effect of these changes may be reduced by interest
rate swaps or other derivative instruments. At December 31, 2009, all of our
debt was floating rate debt. We may enter into interest rate swap arrangements
if we believe it is advantageous to do so.





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. It is
anticipated that insurance costs, which have risen over the last three years,
may well continue to rise moderately over the next few years. Oil
transportation is a specialized area and the number of vessels is increasing.
There will therefore be an increased demand for qualified crew and this has and
will continue to put inflationary pressure on crew costs. However, in a shipping
downturn, costs subject to inflation can usually be controlled because shipping
companies typically monitor costs to preserve liquidity and encourage suppliers
and service providers to lower rates and prices in the event of a
downturn.




23







Year
ended December 31, 2009 compared with year ended December 31, 2008





Operating
revenues


(in thousands of
      $)
            
            
            2009
            
            
            
            2008
            
            
            
            ChangeTime
      charter revenues
            
            
            54,892
            
            
            
            74,837
            
            
            
            (26.7%
            )Voyage
      charter revenues
            
            
            12,447
            
            
            
            8,077
            
            
            
            54.1%Total
      operating revenues
            
            
            67,339
            
            
            
            82,914
            
            
            
            (18.8%
            )





Time
charter revenues decreased in the year ended December 31, 2009 compared to the
year ended December 31, 2008 primarily due to a decrease in profit share
payments of $18.9 million received from the time charters for the Hampstead and
Kensington due to the weaker spot market and a decrease in time charter earnings
from the Camden of $9.1 million, which was operated in the spot market after its
five year time charter ended March 2009, offset by time charter earnings from
the Battersea and Belgravia, which commenced five year time charters upon
delivery to the Company in August and October 2009, respectively.





Voyage
charter revenues in the year ended December 31, 2009 relate to the Camden, which
operated in the spot market from March 2009 whereas voyage charter revenues in
the year ended December 31, 2008 relate to the Chelsea, which was sold in
December 2007 and delivered in February 2008.





Operating
expenses





(in
      thousands of $)
            
            2009
            
            
            2008
            
            
            ChangeVoyage
      expenses and commission
            
            
            8,588
            
            
            
            4,012
            
            
            
            114.1
            %Ship
      operating expenses
            
            
            18,829
            
            
            
            14,535
            
            
            
            29.5
            %Administrative
      expenses
            
            
            1,823
            
            
            
            1,538
            
            
            
            18.5
            %Depreciation
            
            
            14,343
            
            
            
            13,711
            
            
            
            4.6
            %Total
      operating expenses
            
            
            43,583
            
            
            
            33,796
            
            
            
            29.0
            %





The
increase in voyage expenses in the year ended December 31, 2009 compared to the
year ended December 31, 2008 is primarily due to the Camden, which traded in the
spot market from March 2009 compared to the Chelsea, which traded in the spot
market for six weeks at the beginning of 2008 before delivery to its new
owners.





Ship
operating expenses increased in the year ended December 31, 2009 compared to the
year ended December 31, 2008 primarily due to an increase in crew expenses,
repairs and maintenance and spares on our VLCCs and operating costs for the
Battersea and Belgravia. There were no drydocking costs during 2009 (2008:
nil).





Depreciation
increased in the year ended December 31, 2009 compared to the year ended
December 31, 2008 primarily due to the Battersea and Belgravia offset by the
effect of an increase in estimated residual values of our four VLCCs, effective
July 1, 2009, which reduced depreciation on those vessels by $1.0 million in the
final two quarters of 2009.





Other
income (expenses)





(in
      thousands of $)
            
            2009
            
            
            2008
            
            
            ChangeInterest
      income
            
            
            123
            
            
            
            2,336
            
            
            
            (94.7%
            )Interest
      expense
            
            
            (1,895
            )
            
            
            (3,216
            )
            
            
            (41.1%
            )Other
      financial items
            
            
            (304
            )
            
            
            (184
            )
            
            
            65.2%Net
      other expenses
            
            
            (2,076
            )
            
            
            (1,064
            )
            
            
            95.1%





Interest
income decreased in the year ended December 31, 2009 compared to the year ended
December 31, 2008 primarily due to a decrease in interest rates and a decrease
in cash due to the funding of our newbuilding program.





Interest
expense decreased in the year ended December 31, 2009 compared to the year ended
December 31, 2008 primarily due a decrease in interest rates.





The
increase in other financial items in the year ended December 31, 2009 compared
to the year ended December 31, 2008 is primarily due to fees paid on the
repayment of predelivery loans for the Battersea and Belgravia and an increase
in the amortization of deferred charges resulting from charges capitalized in
the third quarter of 2009 relating to a new $60 million loan.


24





Results
of Operations





Year
ended December 31, 2008 compared with year ended December 31, 2007





Operating
revenues





(in
      thousands of $)
            
            2008
            
            
            2007
            
            
            
            ChangeTime
      charter revenues
            
            
            74,837
            
            
            
            53,814
            
            
            
            39.1
            %Voyage
      charter revenues
            
            
            8,077
            
            
            
            34,346
            
            
            
            (76.5
            )%Total
      operating revenues
            
            
            82,914
            
            
            
            88,160
            
            
            
            (6.0
            )%





The
increase in time charter revenues is due to the full year impact of three
vessels, which entered into new time charter agreements during 2007. The rate
for Hampstead and Kensington increased by $7,750 per day from June 2007. In
addition, the profit share for the two vessels was much higher compared to 2007,
due to increases in the spot market related index which is used to calculate
profit share allocations. The rate for the Camden increased by $14,000 per day
from April 2007.





Due to
the sale of the only vessel trading in the spot market, there has been a sharp
fall in voyage charter revenues. Although the vessel was sold in December 2007,
the revenue has been recognized ratably over the length of the last voyage. The
voyage ended in February 2008 and the vessel was promptly delivered to its new
owners.





Operating
expenses





(in
      thousands of $)
            
            2008
            
            
            2007
            
            
            ChangeVoyage
      expenses and commission
            
            
            4,012
            
            
            
            12,872
            
            
            
            (68.8
            )%Ship
      operating expenses
            
            
            14,535
            
            
            
            15,544
            
            
            
            (6.5
            )%Administrative
      expenses
            
            
            1,538
            
            
            
            1,481
            
            
            
            3.9
            %Depreciation
            
            
            13,711
            
            
            
            17,016
            
            
            
            (19.4
            )%Total
      operating expenses
            
            
            33,796
            
            
            
            46,913
            
            
            
            (28.0
            )%





50.0%
(2007: 91.9%) of voyage expenses and commissions relates to the vessels that
operated in the spot market.  The decrease in voyage expenses and
commissions in 2008 is due primarily to the sale of one vessel and the delivery
to its new owner in February 2008.





Ship
operating expenses fell by 6.5% during 2008, primarily due the sale of one
vessel and the delivery to its new owner in February 2008 offset by an increase
in crew costs. There were no dry docking costs during 2008 (2007:
nil).





The
decrease in depreciation is due to having one less vessel in the
fleet.





Gain
on sale of assets





(in
      thousands of $)
            
            2008
            
            
            2007
            
            
            ChangeGain
      on sale of assets
            
            
            -
            
            
            
            49,119
            
            
            
            -





No assets
were sold during the year. The gain on sale of assets in 2007 relates to the
sale of the VLCC Chelsea in December 2007.





Interest
income and expenses





(in
      thousands of $)
            
            2008
            
            
            2007
            
            
            ChangeInterest
      income
            
            
            2,336
            
            
            
            1,026
            
            
            
            127.7
            %Interest
      expense
            
            
            (3,216
            )
            
            
            (6,373
            )
            
            
            (49.5
            )%Net
      interest expense
            
            
            (880
            )
            
            
            (5,347
            )
            
            
            (83.5
            )%





The
increase in interest income during 2008 is primarily due to larger amounts
invested for longer periods resulting from the sale of the VLCC Chelsea in
December 2007 for net proceeds of $99.0 million.





Interest
expense consists of interest paid in relation to the $140.0 million loan
facility. The decrease in interest expense in 2008 is due to the lower average
debt outstanding, which is largely a result of a $20.2 million repayment in
December 2007 following the sale of a vessel, and lower interest rates during
the year. The average three month LIBOR rate during the year was 3.52% (2007:
5.32%). The interest expense of $1.4 million on the newbuilding financing has
been capitalized (2007: $1.0 million).


25





Recently
Issued Accounting Standards





In May
2009, the Financial Accounting Standards Board ("FASB") established principles
and requirements for disclosure of events that occur after the balance sheet
date but before financial statements are issued or are available to be issued.
This guidance was updated in February 2010 and is effective for interim and
annual periods ending after June 15, 2009. The adoption of this standard did not
have a material impact on our financial statements.





In June
2009, the FASB issued ASC 105-10. ASC 105-10 stipulates that the FASB Accounting
Standards Codification is the source of authoritative U.S. GAAP recognized by
the FASB to be applied by nongovernmental entities. ASC 105-10 is effective for
financial statements issued for interim and annual periods ending after
September 15, 2009. The implementation of this standard did not have a material
impact on our financial statements.





Liquidity
and Capital Resources





The
Company operates in a capital intensive industry and has historically financed
its purchase of vessels through a combination of 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.  Periodic adjustments to the supply of and
demand for oil tankers cause the industry to be cyclical in nature.





The
Company's funding and treasury activities are conducted within corporate
policies to maximize investment returns while maintaining appropriate liquidity
for the Company's requirements. Cash and cash equivalents are held primarily in
United States dollars.





Short-term
liquidity requirements of the Company relate to servicing our debt, payment of
operating costs, 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 are
generally received monthly or bi-weekly in advance while revenues from voyage
charters are received upon completion of the voyage.





We
estimated the cash breakeven average daily TCE rate in February 2010 for our
VLCCs and Capesize vessels to be $19,300 and $16,900, respectively. This
represents the daily rate 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 balloon repayments at maturity, which we expect to refinance with
new loans. We believe our working capital is sufficient for the Company's
present requirements; however, we may not be able to refinance our current
borrowings or enter into future borrowings at an interest rate or on terms that
are acceptable to us or at all.  See "Risk Factors - We cannot assure
you that we will be able to refinance indebtedness incurred under our current
credit facilities."





Medium
and long-term liquidity requirements of the Company include funding the
replacement of vessels through the acquisition of second hand vessels or
newbuilding vessels and the repayment of long-term debt balances. The Company's
sources of capital have been the proceeds of its initial public offering, bank
loans, proceeds from the sale of vessels and charterhire income. The Company
expects that charterhire paid from time charters or voyage charter income in the
spot market will be sufficient sources of income for the Company to continue to
pay ordinary recurring expenses including installments due on outstanding
borrowings. However, there can be no assurance that the Company will be able to
pay or refinance its borrowings when the debt becomes due, or that it will not
incur extraordinary expenses.





As of
December 31, 2009, 2008, and 2007, the Company had cash and cash equivalents of
$8.0 million, $78.0 million and $82.1 million, respectively. As of December 31,
2009, 2008, and 2007, the Company had restricted cash of $10.0
million.  The restricted cash balance is a result of a minimum
liquidity balance which we are required to maintain at all times in conjunction
with the $140.0 million loan facility with the Royal Bank of Scotland. The cash
position at the end of 2009 is significantly lower than 2008 due to payments
relating to the newbuilding program.





During
the year ended December 31, 2009, we paid total cash dividends of $4.3
million.





Borrowing
activities





In March
2004, we refinanced our prior debt facility with a $140.0 million credit
facility, or the $140 million loan. The original repayment schedule was
twenty-eight quarterly installments of $2.8 million and a final settlement of
$61.6 million. Following a $20.1 million repayment in December 2007, we are
obligated to repay the $140 million loan in 14 quarterly installments of $2.2
million and a final installment of $49.3 million.  The $140 million
loan requires payment of interest on the outstanding principal balance,
quarterly in arrears at the annual rate of LIBOR plus a margin.  We
have not entered into any interest rate swap agreements in respect to the
variable rate on the $140 million loan. The original credit facility did not
have principal installments and was due for repayment in its entirety in August
2004. At the time of entering into the credit facility, the Company entered into
an interest rate swap agreement that provided for a fixed rate payment of 6.74%
on notional principal of $125.4 million, which matured in August
2004.


26





During
2007, we obtained an extension of the $140 million loan with two tranches of
$16.8 million each, subject to the same covenants as the $140 million loan, in
order to fund the first installments on the two Capesize newbuildings. These
tranches were repaid upon delivery of the Capesize vessels, which took place in
August and October 2009.





In August
2009, we entered into a four-year term loan facility consisting of two tranches
of $30.0 million each, or the $60M Loan. In August 2009, we drew down $30.0
million to fund the final installment due on delivery of the first Capesize
newbuilding and the repayment of the first tranche of the predelivery loan. In
October 2009, we drew down the second tranche of $30.0 million to fund the final
installment due on delivery of the second Capesize newbuilding and the repayment
of the second tranche of the predelivery loan. The loans are secured by, among
other things, a mortgage on the Capesize vessels and an assignment of any
charters in respect of those vessels.





The $60M
Loan bears interest at LIBOR plus a margin and contains a minimum market value
covenant on the Capesize vessels and covenants requiring us to maintain a
certain minimum level of cash and positive working capital.





Although
the Company's activities are conducted worldwide, the international shipping
industry's functional currency is the United States Dollar and virtually all of
the Company's operating revenues and most of its anticipated cash expenses are
expected to be denominated in United States Dollars. Accordingly, the Company's
operating revenues are not expected to be adversely affected by movements in
currency exchange rates or the imposition of currency controls in the
jurisdictions in which the vessels operate.





Off-balance
sheet arrangements





None.





Tabular
disclosure of contractual obligations





At
December 31 2009, the Company had the following contractual
obligations:





Payment
      due by periodTotal
            
            
            Less
      than one year
            
            
            1-3
      years
            
            
            3-5
      years
            
            
            More
      than 5 years(In
      thousands of $)Debt
      (1)
            
            
            120,480
            
            
            
            13,960
            
            
            
            106,520
            
            
            
            -
            
            
            
            -Total
      contractual cash obligations
            
            
            120,480
            
            
            
            13,960
            
            
            
            106,520
            
            
            
            -
            
            
            
            -





(1) All
of the Company's loan facilities are at floating interest rates based on LIBOR
plus a margin and the Company has not entered into any interest rate swaps. The
amounts included above do not include interest payments.





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





Set forth
below are the names and positions of the directors and executive officers of the
Company.





The
Company





Name
            
            Age
            
            PositionOla
      Lorentzon
            
            60
            
            Director
      and ChairmanDouglas
      C. Wolcott
            
            78
            
            Director
      and Audit Committee memberDavid
      M. White
            
            69
            
            Director
      and Audit Committee ChairmanHans
      Petter Aas
            
            64
            
            DirectorInger
      M. Klemp
            
            47
            
            Chief
      Financial OfficerGeorgina
      Sousa
            
            60
            
            Company
      Secretary





27





Pursuant
to the Management Agreement with the Company, the Manager provides management
and advisory services to the Company.  Set forth below are the names
and positions of the directors, executive officers and officers of the
Manager.





Name
            
            Age
            
            PositionInger
      M. Klemp
            
            47
            
            Director
      and PresidentKate
      Blankenship
            
            45
            
            DirectorGraham
      Baker
            
            50
            
            Director





Directors
of both the Company and the Manager are elected annually, and each director
elected holds office until a successor is elected.  Officers of both
the Company and the Manager are elected from time to time by vote of the
respective board of directors and hold office until a successor is
elected.  Certain biographical information with respect to each
director and executive officer of the Company and the Manager is set forth
below.





Ola Lorentzon has been a
director of the Company since September 18, 1996 and Chairman since May 26,
2000.  Mr. Lorentzon is also a director of Erik Thun AB, Crew Chart
Ship Management AB, Sea Bird Exploration Ltd and is the Chairman Stockholm
Chartering AB.  Mr. Lorentzon was the Managing Director of Frontline
Management AS, a subsidiary of Frontline, from April 2000 until September
2003.





Douglas C. Wolcotthas been a
director of the Company since September 18, 1996.  Mr. Wolcott has
also served as President of Chevron Shipping Corporation until
1994.  Mr. Wolcott previously served as Deputy Chairman and director
of the United Kingdom Protection and Indemnity Club and as a director of London
& Overseas Freighters Limited.  He is currently a director of the
American Bureau of Shipping.





David M. White has been a
director of the Company since September 18, 1996.  Mr. White was
Chairman of Dan White Investment Limited which is now closed.  Mr.
White has also served as a director of NatWest Equity Primary Markets Limited
from January 1992 to March 1996, and was previously a director of both NatWest
Markets Corporate Finance Limited and NatWest Markets Securities Limited until
December 1991.





Hans Petter Aas has been a
Director of the Company since September 2008. Mr. Aas has been a Director of
Ship Finance International Limited since August 2008 and Chairman since January
2009. Mr. Aas has a long career as banker in the international shipping and
offshore market, and retired from his position as Global Head of the Shipping,
Offshore and Logistics Division of DnB NOR Bank ASA ("DnB NOR") in August 2008.
He joined DnB NOR (then Bergen Bank) in 1989, and has previously worked for the
Petroleum Division of the Norwegian Ministry of Industry and the Ministry of
Energy, as well as for VestaInsurance and Nevi Finance.





Inger M. Klemp has served as
Chief Financial Officer of the Company since September 2007. Mrs. Klemp has
served as Chief Financial Officer of Frontline Management AS and has been a
director of the Manager since June 1, 2006. Mrs. Klemp has served as a director
of Independent Tankers Corporation Limited since February 2008. Mrs. Klemp
served as Vice President Finance of Frontline Management AS from August 2001
until she was promoted in May 2006. Mrs. Klemp graduated as MSc in Business and
Economics from the Norwegian School of Management (BI) in 1986. Mrs. Klemp
served as Assistant Director Finance in Color Group ASA from 1998 to 2001 and as
Group Financial Manager in Color Line ASA from 1992 to 1998, a Norwegian based
cruise operator which was stock exchange listed until October 1999. From 1989 to
1992 Mrs. Klemp served as Assistant Vice President in Nordea Bank Norge ASA
handling structuring and syndication of loan facilities in the international
banking market. From 1986 to 1989, Mrs. Klemp served as a lending officer of
Fokus Bank ASA.





Kate Blankenship was Chief
Financial Officer of the Company from April 2000 to September 2007 and served as
Secretary of the Company from December 2000 to March 2007. Mrs. Blankenship has
been a director of the Manager since March 2000. Mrs. Blankenship served as the
Chief Accounting Officer and Secretary of Frontline between 1994 and October
2005. Mrs. Blankenship also serves as a director of Golar LNG Limited, Ship
Finance International Limited, Seadrill Limited, Golden Ocean Group Limited and
Independent Tankers Corporation Limited. She is a member of the Institute of
Chartered Accountants in England and Wales.





Graham Bakerhas been a
director of the Manager since December 6, 2006. Mr. Baker is Chief Accounting
Officer of Frontline having joined the company in July 2006. Mr. Baker has
worked in various senior financial roles and most recently was the Head of Group
Reporting at NTL Inc., a large NASDAQ listed company and before that the
European Chief Financial Officer of DVI Inc., a NYSE listed group. He is a
member of the Institute of Chartered Accountants in England and Wales and the
Association of Corporate Treasurers.





Georgina E. Sousa has served
as Secretary of the Company since March 15, 2007 and has been employed by
Frontline since February 2007.  Prior to joining Frontline, Mrs. Sousa
was Vice-President-Corporate Services of Consolidated Services Limited, a
Bermuda management company having joined that firm in 1993 as Manager of
Corporate Administration.  From 1976 to 1982 she was employed by the
Bermuda law firm of Appleby, Spurling & Kempe as a Company Secretary and
from 1982 to 1993 she was employed by the Bermuda law firm of Cox &
Wilkinson as Senior Company Secretary.


28








B.  COMPENSATION





The
Company incurred directors' fees of $340,000 in 2009. No separate compensation
was paid to the Company's officers.





C.  BOARD
PRACTICES





As
provided in the Company's bye-laws, each director shall hold office until the
next Annual General Meeting following his election or until his successor is
elected.  The officers of the Company are elected by the Board 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.





The
Company has established an audit committee comprised of Messrs. White and
Wolcott, independent directors of the Company. The audit committee is
responsible for assisting the Board with its oversight responsibilities
regarding the integrity of our financial statements, our compliance with legal
and regulatory requirements, our independent registered public accounting firm's
qualifications and independence, and the performance of our internal audit
functions.





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





Board
practices and exemptions from the NASDAQ corporate governance rules





We have
certified to NASDAQ that our corporate governance practices are in compliance
with, and are not prohibited by, the laws of Bermuda. Therefore, we are exempt
from many of NASDAQ's corporate governance practices other than the requirements
regarding the disclosure of a going concern audit opinion, submission of a
listing agreement, notification of material non-compliance with NASDAQ corporate
governance practices and the establishment and composition of an audit committee
and a formal written audit committee charter. The practices that we follow in
lieu of NASDAQ's corporate governance rules are as follows:





●
            Our
      Board is currently comprised by a majority of independent
      directors.  Under Bermuda law, we are not required to have a
      majority of independent directors and cannot assure you that we will
      continue to do so.




●
            In
      lieu of holding regular meetings at which only independent directors are
      present, our entire Board may hold regular meetings as is consistent with
      Bermuda law.




●
            In
      lieu of an audit committee comprised of three independent directors, our
      audit committee has two members, which is consistent with Bermuda
      law.  Both members of the audit committee currently meet
      NASDAQ's requirement of
independence.




●
            In
      lieu of a nomination committee comprised of independent directors, our
      Board is responsible for identifying and recommending potential candidates
      to become board members and recommending directors for appointment to
      board committees. There is nothing to prohibit shareholders identifying
      and recommending potential candidates to become board members, but
      pursuant to the bye-laws, directors are elected by the shareholders in
      duly convened annual or special general
  meetings.




●
            In
      lieu of a compensation committee comprised of independent directors, our
      Board is responsible for establishing the executive officers' compensation
      and benefits. Under Bermuda law, compensation of the executive officers is
      not required to be determined by an independent
  committee.




●
            In
      lieu of obtaining an independent review of related party transactions for
      conflicts of interests, consistent with Bermuda law requirements, our
      bye-laws do not prohibit any director from being a party to, or otherwise
      interested in, any transaction or arrangement with the Company or in which
      the Company is otherwise interested, provided that the director makes
      proper disclosure of same as required by the bye-laws and Bermuda
      law.




●
            Prior
      to the issuance of securities, we are required to obtain the consent of
      the Bermuda Monetary Authority as required by law. We have obtained
      blanket consent from the Bermuda Monetary Authority for the issue and
      transfer of the Company's securities provided that such securities remain
      listed.




●
            Pursuant
      to NASDAQ corporate governance rules and as a foreign private issuer, we
      are not required to solicit proxies or provide proxy statements to NASDAQ.
      Bermuda law does not require that we solicit proxies or provide proxy
      statements to NASDAQ. Consistent with Bermuda law and as provided in our
      bye-laws, we are also required to notify our shareholders of meetings no
      less than five days before the meeting.  Our bye-laws also
      provide that shareholders may designate a proxy to act on their
      behalf.




Other
than as noted above, we are in full compliance with all other applicable NASDAQ
corporate governance standards.


29








D.  EMPLOYEES





We have
not had any employees since inception as the Manager is responsible for the
management and administration of the Company.





E.  SHARE
OWNERSHIP





As of
March 17, 2010, none of the directors or officers of the Company owned any
common shares of the Company.





ITEM
7.  MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS





A.  MAJOR
SHAREHOLDERS





The
following table presents certain information as of March 17,
2010 regarding the ownership of our shares of common stock with respect to each
shareholder, who we know to beneficially own more than five percent of our
outstanding shares of common stock.





Beneficial
      Owner
            Amount
      of Common Shares
            Percentage
      OwnershipOceanic
      Investment Management Ltd. (1)
            953,303
            5.57%





(1)
Information derived from the Schedule 13G of Oceanic Investment Management Ltd.
which wasfiled
with the Commission on June 18, 2009.





The
Company is not directly or indirectly controlled by another corporation, by a
foreign government or by any other natural or legal person. We are not aware of
any arrangements, the operation of which may at a subsequent date result in a
change in control of the Company.





B.  RELATED
PARTY TRANSACTIONS





None.





C.  INTERESTS
OF EXPERTS AND COUNSEL





Not
applicable.





ITEM
8. FINANCIAL INFORMATION





A.  CONSOLIDATED
STATEMENTS AND OTHER FINANCIAL INFORMATION





See Item
18.





Legal
Proceedings





To the
best of our knowledge, there are no legal or arbitration proceedings existing or
pending which have had or may have significant effects on our financial position
or profitability and no such proceedings are pending or known to be
contemplated.





Dividend
Policy





The
Company's policy is to make distributions to shareholders based on the Company's
earnings and cash flow. As of the first quarter of 2010, the Board has resumed
the declaration of a dividend. The amount and timing of dividends will depend on
the Company's earnings, financial condition, cash position, Bermuda law
affecting the payment of distributions and other factors. There will be no
guaranteed minimum hire and the Company may not be able to make distributions in
quarters where the earnings are low and where cash flow is insufficient. The
Company's financing may also restrict distributions in certain circumstances.
The declaration and payment of dividends will be subject at all times to the
discretion of our Board.


30





In 2009,
2008 and 2007, the Company paid the following distributions to
shareholders.





Record
      Date
            Payment
      Date
            Amount
      per share2009February
      18, 2009
            March
      4, 2009
            
            $
            0.252008February
      26, 2008
            March
      7, 2008
            
            $
            0.75May
      27, 2008
            June
      9, 2008
            
            $
            0.75August
      22, 2008
            September
      9, 2008
            
            $
            0.75December
      9, 2008
            December
      22, 2008
            
            $
            0.502007February
      26, 2007
            March  9,
      2007
            
            $
            0.80May
      26, 2007
            June
      11, 2007
            
            $
            0.60August
      23, 2007
            September
      7, 2007
            
            $
            0.60November
      23, 2007
            December
      7, 2007
            
            $
            0.50





On
February 9, 2010, the Board declared a cash dividend of $0.30 per share for the
fourth quarter of 2009 that was paid on March 4, 2010.





B.  SIGNIFICANT
CHANGES





Not
applicable.





ITEM
9.  THE OFFER AND LISTING





The
following table sets forth, for the five most recent fiscal years during which
the Company's Common Shares were traded on the NASDAQ Global Select Market, the
annual high and low prices for the Common Shares as reported by the NASDAQ
Global Select Market.





Fiscal year ended December
      31,
            
            High
            
            
            Low2009
            
            $
            17.16
            
            
            $
            11.002008
            
            $
            35.00
            
            
            $
            10.012007
            
            $
            34.00
            
            
            $
            23.012006
            
            $
            30.78
            
            
            $
            20.422005
            
            $
            47.50
            
            
            $
            23.76





The
following table sets forth, for the two most recent fiscal years, the high and
low prices for the Common Shares as reported by the Nasdaq Global Select
Market.





Fiscal
      year ended December 31, 2009
            
            High
            
            
            LowFirst
      quarter
            
            $
            17.16
            
            
            $
            11.00Second
      quarter
            
            $
            16.95
            
            
            $
            12.34Third
      quarter
            
            $
            16.20
            
            
            $
            12.70Fourth
      quarter
            
            $
            13.72
            
            
            $
            12.06Fiscal year ended December 31,
      2008
            
            High
            
            
            LowFirst
      quarter
            
            $
            28.79
            
            
            $
            20.25Second
      quarter
            
            $
            35.00
            
            
            $
            26.00Third
      quarter
            
            $
            33.83
            
            
            $
            23.30Fourth
      quarter
            
            $
            26.47
            
            
            $
            10.01





The
following table sets forth, for the most recent six months, the high and low
prices for the Common Shares as reported by the Nasdaq Global Select
Market.





Month
            
            High
            
            
            LowFebruary
      2010
            
            $
            15.84
            
            
            $
            13.49January
      2010
            
            $
            15.84
            
            
            $
            13.36December
      2009
            
            $
            13.72
            
            
            $
            12.90November
      2009
            
            $
            13.49
            
            
            $
            12.06October
      2009
            
            $
            13.50
            
            
            $
            12.55September
      2009
            
            $
            13.67
            
            
            $
            12.78





31





The
Company's shares of common stock have been quoted on the NASDAQ Global Select
Market under the symbol "VLCCF" since its initial public offering in February
1997.




ITEM
10.  ADDITIONAL INFORMATION





A.  SHARE
CAPITAL





Not
applicable.





B.  MEMORANDUM
AND ARTICLES OF ASSOCIATION





Incorporated
by reference to "Description of Capital Stock" in the prospectus contained in
the Company's Registration Statement on Form F-1, filed December 13, 1996 (File
No. 333-6170).





At the
2005 Annual General Meeting of the Company the shareholders voted to amend the
Company's bye-laws 83 and 85 by removing the restrictions that limited the
Company's business activities.  The changes to the bye-laws removed
restrictions on the Company's activities such as rechartering the VLCCs,
refinancing or replacing the credit facility, acting in connection with the
management agreement, offering Common Shares and listing them, enforcing its
rights in connection with the Charters, the Credit Facility, the UK Finance
Leases, the management agreement and other agreements into which the Company and
its subsidiaries entered at the time of its initial public offering, and
leasing, selling or otherwise disposing of a VLCC (or VLCC owning subsidiaries)
on termination of the Charters or subsequent charters. The amended bye-laws of
the Company as adopted on June 27, 2005, have been filed as Exhibit 4.2 to the
Company's Annual Report on Form 20-F for the fiscal year ended December 31,
2005, filed with Securities and Exchange Commission on June 15, 2006, and are
hereby incorporated by reference into this Annual Report.





On
September 25, 2009, at the 2009 Annual General Meeting of the Company the
shareholders approved an increase of the Company's authorized common shares, par
value $0.01, from 20,000,000 to 35,000,000. The Company currently has issued and
outstanding 17,100,000 common shares.





C.  MATERIAL
CONTRACTS





In May
2007, the Company announced that it had agreed to purchase two newbuilding
contracts, each for a Capesize dry bulk carrier of approximately 170,000 dwt.
The vessels were built at Daehan Shipbuilding Co. Ltd. in the Republic of Korea.
The first Capesize newbuilding from Daehan, the MV Battersea, was delivered on
August 26, 2009 and the second, the MV Belgravia, was delivered on October 29,
2009.  Both carriers have commenced five year time charters. The
newbuilding contracts have been acquired from Golden Ocean Group Limited, a
company which has ordered a series of sister ships at the same yard. The
contract price for the two vessels is $81 million per vessel and the Company has
paid a 1% commission to GOGL. GOGL is listed on the Oslo Stock Exchange and is
an affiliate of Frontline, the parent company of the Manager. The supervision of
the vessels' construction was carried out by Frontline Management (Bermuda) Ltd.
a subsidiary of Frontline, and the commercial operation was contracted to Golden
Ocean Management AS, a subsidiary of GOGL that operates the GOGL
fleet.





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 residing outside Bermuda
for exchange control purposes may be effected without specific consent under the
Exchange Control Act of 1972 and regulations thereunder and the issuance of
ordinary shares to persons regarded as residing outside Bermuda for exchange
control purposes may be effected without specific consent under the Exchange
Control Act of 1972 and regulations thereunder. Issues and transfers of ordinary
shares involving any person regarded as residing in Bermuda for exchange control
purposes requires specific prior approval under the Exchange Control Act of
1972.




The
owners of ordinary shares who ordinarily reside 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.




32







E.  TAXATION





United
States Taxation





The
following discussion is based upon the provisions of the United States Internal
Revenue Code of 1986, as amended or the "Code", existing and proposed United
States 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 the Company
does 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,
charterhire 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 is not
permitted by law to engage in transportation that gives rise to 100% United
States source income.





Shipping
income attributable to transportation exclusively between non-United States
ports will be considered to be 100% derived from sources outside the United
States. Shipping income derived from sources outside the United States will not
be subject to 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 United States ports.
Unless exempt from United States federal income taxation under Section 883 of
the Code, or Section 883, the Company will be subject to United States 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 Section 883





Under the
relevant provisions of Section 883, the Company will be exempt from United
States federal income taxation on its United States source shipping income
if:





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





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





●
            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




●
            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 organization requirement and the Publicly-Traded Test, which the
      Company refers to as the "50% Ownership
Test."




The
United States Treasury Department has recognized Bermuda, the country of
incorporation of the Company, as a qualified foreign country. In addition, the
U.S. Treasury Department has recognized Liberia, the country of incorporation of
certain of the Company's vessel-owning subsidiaries, as a qualified foreign
country.  Accordingly, the Company and its vessel owning subsidiaries
satisfy the country of organization requirement.





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





For the
2009 taxable year, the Company satisfied the Publicly-Traded Test since, on more
than half the days of the taxable year, the Company's Ordinary Shares were
primarily and regularly traded on the NASDAQ.


33





Taxation
in Absence of Section 883 Exemption





To the
extent the benefits of Section 883 are unavailable with respect to any item of
United States source income, the Company's United States 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, which the Company refers to as the "4%
gross basis tax regime". Since under the sourcing rules described above, no more
than 50% of the Company's shipping income would be treated as being derived from
United States sources, the maximum effective rate of United States 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 the Company qualifies for exemption under Section 883, the Company
will not be subject to United States federal income taxation with respect to
gain realized 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 the Company will
be considered to occur outside of the United States.





Taxation
of United States Holders





The
following is a discussion of the material United States federal income tax
considerations relevant to an investment decision by a United States Holder, as
defined below, with respect to the Ordinary Shares.  This discussion
does not purport to deal with the tax consequences of owning Ordinary Shares to
all categories of investors, some of which, such as dealers in securities,
tax-exempt organizations, investors whose functional currency is not the United
States dollar and investors that own, actually or under applicable constructive
ownership rules, 10% or more of the Company's common shares 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
Ordinary Shares.





As used
herein, the term "United States Holder" means a beneficial owner of Ordinary
Shares that (i) is a United States citizen or resident, a United States
corporation or other United States entity taxable as a corporation, an estate,
the income of which is subject to United States 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 United States persons have the authority to control all substantial
decisions of the trust and (ii) owns the Ordinary Shares as a capital asset,
generally, for investment purposes.





If a
partnership holds Ordinary Shares, 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 Ordinary
Shares, you are encouraged to consult your own tax advisor regarding the United
States federal income tax consequences of owning an interest in a partnership
that holds Ordinary Shares.





Distributions





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





Dividends
paid on Ordinary Shares to a United States Holder which is an individual, trust
or estate (a "United States Non-Corporate Holder") will generally be treated as
"qualified dividend income" that is taxable to such shareholders at preferential
United States federal income tax rates (currently through 2010) provided that
(1) Ordinary Shares are readily tradable on an established securities market in
the United States (such as the NASDAQ Global Select Market on which the Ordinary
Shares are listed); (2) the Company is not a passive foreign investment company
for the taxable year during which the dividend is paid or the immediately
preceding taxable year (which the Company does not believe it is, has been since
the beginning of its 2004 taxable year, or will be); and (3) the United States
Non-Corporate Holder has owned the Ordinary Shares for more than 60 days in the
121-day period beginning 60 days before the date on which the Ordinary Shares
become ex-dividend.





Legislation
has been previously introduced in the United States Congress which, if enacted
in its present form, would preclude the dividends paid by the Company from
qualifying for such preferential rates prospectively from the date of the
enactment. Any dividends paid by the Company which are not eligible for these
preferential rates will be taxed as ordinary income to a United States
Holder.


34


Sale,
Exchange or other Disposition of Common Stock





Assuming
the Company does not constitute a passive foreign investment company for any
taxable year, a United States Holder generally will recognize taxable gain or
loss upon a sale, exchange or other disposition of the Company's Ordinary Shares
in an amount equal to the difference between the amount realized by the United
States Holder from such sale, exchange or other disposition and the United
States Holder's tax basis in the Ordinary Shares.  Such gain or loss
will be treated as long-term capital gain or loss if the United States Holder's
holding period in the Ordinary Shares is greater than one year at the time of
the sale, exchange or other disposition.  A United States 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 United States 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, the Company will be treated as a PFIC with respect to a United States
Holder if, for any taxable year in which such holder held the Company's Ordinary
Shares, either;





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




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




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





The
Company was a PFIC for United States federal income tax purposes through its
2003 taxable year. The Company has not been a PFIC beginning with its 2004
taxable year.  United States Holders who held the Company's Ordinary
Shares prior to the 2004 taxable year are encouraged to consult their tax
advisors regarding the proper tax treatment of any dispositions of Ordinary
Shares and any distributions by the Company.




Based on
the Company's current operations and future projections, the Company does not
believe that it is or that it was since the beginning of its 2004 taxable year,
nor does it expect to become, a PFIC with respect to any taxable
year.  Although there is no legal authority directly on point, the
Company's belief is based principally on the position that, for purposes of
determining whether the Company is a PFIC, the gross income the Company derives
or is deemed to derive from the time chartering and voyage chartering activities
should constitute services income, rather than rental
income.  Correspondingly, the Company believes that such income does
not constitute passive income, and the assets that the Company or its
wholly-owned subsidiaries own and operate in connection with the production of
such income, in particular, the vessels, do not constitute assets that produce,
or are held for the production of, passive income for purposes of determining
whether the Company is a PFIC.





Although
there is no direct legal authority under the PFIC rules, the Company believes
there is substantial legal authority supporting its position consisting of case
law and United States Internal Revenue Service, or the IRS, pronouncements
concerning the characterization of income derived from time charters and voyage
charters as services income for other tax purposes.  However, there is
also authority which characterizes time charter income as rental income rather
than services income for other tax purposes. Accordingly, in the absence of any
legal authority specifically relating to the Code provisions governing PFICs,
the IRS or a court could disagree with our position.  In addition,
although the Company intends to conduct its affairs in such a manner as to avoid
being classified as a PFIC with respect to any taxable year, there can be no
assurance that the nature of its operations will not change in the
future.





As
discussed more fully below, if the Company were to be treated as a PFIC for any
taxable year, a United States Holder would be subject to different taxation
rules depending on whether the United States Holder makes an election to treat
the Company as a "Qualified Electing Fund," which the Company refers to as a
"QEF election." As an alternative to making a QEF election, a United
States  Holder should be able to elect to mark-to-market the Company's
Ordinary Shares, which the Company refers to as a "Mark-to-Market Election" as
discussed below.





Taxation
of United States Holders Making a Timely QEF Election





If a
United States  Holder makes a timely QEF election, which United
States  Holder is referred to by the Company as an "Electing United
States Holder," the Electing United States Holder must report each year for
United States  federal income tax purposes its pro rata share of the
Company's ordinary earnings and its net capital gain, if any, for the Company's
taxable year that ends with or within the taxable year of
the ElectingUnited StatesHolder, regardless of
whether or not distributions were received from the Company by the ElectingUnited StatesHolder. The ElectingUnited StatesHolder's adjusted tax basis in the
Ordinary Shares 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 Ordinary Shares and will not be taxed again once
distributed.  An ElectingUnited StatesHolder would generally recognize
capital gain or loss on the sale, exchange or other disposition of the Ordinary
Shares.A United States
Holder will be eligible to make a QEF Election with respect to its Ordinary
Shares only if the Company provides the United States Holder with annual tax
information relating to the Company. There can be no assurance that the Company
will provide such tax information on an annual basis.




35







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





Alternatively,
if the Company were to be treated as a PFIC for any taxable year and, as
anticipated, the Ordinary Shares are treated as "marketable stock," a United
States  Holder would be allowed to make a Mark-to-Market election with
respect to the Company's Ordinary Shares.  If that election is made,
the United States Holder generally would include as ordinary income in each
taxable year the excess, if any, of the fair market value of the Ordinary Shares
at the end of the taxable year over such holder's adjusted tax basis in the
Ordinary Shares.  The United States Holder would also be permitted an
ordinary loss in respect of the excess, if any, of the United States Holder's
adjusted tax basis in the Ordinary Shares 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
United States Holder's tax basis in his Ordinary Shares would be adjusted to
reflect any such income or loss amount.  Gain realized on the sale,
exchange or other disposition of the Ordinary shares would be treated as
ordinary income, and any loss realized on the sale, exchange or other
disposition of the Ordinary Shares 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 United States Holder.





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





Finally,
if the Company were to be treated as a PFIC for any taxable year, a United
States  Holder who does not make either a QEF election or a
Mark-to-Market election for that year, whom is referred to as a "Non-Electing
United States 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 United States Holder on the Ordinary Shares in a taxable year in
excess of 125% of the average annual distributions received by the Non-Electing
United States Holder in the three preceding taxable years, or, if shorter, the
Non-Electing United States Holder's holding period for the Ordinary Shares), and
(2) any gain realized on the sale, exchange or other disposition of the Ordinary
Shares.  Under these special rules:





●
            the
      excess distribution or gain would be allocated ratably over the
      Non-Electing United States Holders' aggregate holding period for the
      Ordinary Shares;




●
            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




●
            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 tax
      payer for that year, and an interest charge for the deemed tax deferral
      benefit would be imposed with respect to the resulting tax attributable to
      each such other taxable year.




These
penalties would not apply to a pension or profit sharing trust or other
tax-exempt organization that did not borrow funds or otherwise utilize leverage
in connection with its acquisition of the Ordinary Shares.  If a
Non-Electing United States Holder who is an individual dies while owning the
Ordinary Shares, the successor of such deceased Non-Electing United States
Holder 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 a holder of Ordinary Shares will be subject to information
reporting requirements.  Such payments will also be subject to "backup
withholding" if paid to a non-corporate United States Holder who:





●
            fails
      to provide an accurate tax payer identification
  number;




●
            is
      notified by the IRS that he has failed to report all interest or dividends
      required to be shown on his United States federal income tax returns;
      or




●
            in
      certain circumstances, fails to comply with applicable certification
      requirements.




If a
holder sells his Ordinary Shares to or through a United States office or broker,
the payment of the proceeds is subject to both United States information
reporting and backup unless the holder establishes an exemption.  If a
holders sells his Ordinary Shares through a
non-United States office of a non-United States broker and the sales proceeds
are paid to the holder outside the United States then information reporting and
backup withholding generally will not apply to that payment.  However,
United States  information reporting requirements, but not backup
withholding, will apply to a payment of sales proceeds, including a payment made
to a holder outside the United States, if the holder sells his Ordinary Shares
through a non- United States  office of a broker that is a United
States  person or has some other contacts with the United
States.


36





Backup
withholding is not an additional tax.  Rather, a tax payer generally
may obtain a refund of any amounts withheld under backup withholding rules that
exceed then tax payer's income tax liability by filing a refund claim with the
IRS.





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 holders of Ordinary Shares. Bermuda has undertaken
not to impose any such Bermuda taxes on holders of Ordinary Shares prior to 2016
except in so far as such tax applies to  persons  ordinarily
resident in Bermuda. The Company is not eligible for the benefits of any tax
treaty between the United States and Bermuda.





Liberian
Taxation





The
Republic of Liberia enacted a new income tax act effective as of January 1,
2001, or the New Act.  In contrast to the income tax law previously in
effect since 1977, or 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 the Company's 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 the
Company's Liberian subsidiaries, will not be subject to tax under the New Act
retroactive to January 1, 2001, or 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, the
Company's Liberian subsidiaries will be wholly exempt from Liberian income tax
as under the Prior Law.





If the
Company's Liberian subsidiaries were subject to Liberian income tax under the
New Act, the Company's Liberian subsidiaries would be subject to tax at a rate
of 35% on their worldwide income.  As a result, their, and
subsequently the Company's, net income and cash flow would be materially reduced
by the amount of the applicable tax.  In addition, the Company, 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 Commission maintains a website
(http://www.sec.gov.) that contains reports, proxy and information statements
and other information regarding registrants that file electronically with the
Commission. 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.


37





ITEM
11.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK





The
Company is exposed to market risk from changes in interest rates primarily
resulting from the floating rate of the Company's borrowings.  The
Company does not currently utilize interest rate swaps to manage such interest
rate risk.  The Company has not entered into any financial instruments
for speculative or trading purposes.





The
Company's borrowings as of December 31, 2009 of $120.5 million (December 31,
2008: $103.0 million) bear interest at LIBOR plus a margin. A 1% change in
interest rates would increase or decrease interest expense by $1.2 million per
year as of December 31, 2009. The fair value of the loan facility at December
31, 2009 was equal to the carrying amount of the facility at the same
date.





ITEM
12.  DESCRIPTION OF SECURITIES OTHER THAN EQUITY
SECURITIES





Not
applicable.





38





PART
II





ITEM
13.  DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES





None.





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





None.





ITEM
15.  CONTROLS AND PROCEDURES





a)   Disclosure
Controls and Procedures




Management
assessed the effectiveness of the design and operation of the Company's
disclosure controls and procedures pursuant to Rule 13a-15(e) of the Securities
Exchange Act of 1934, as of the end of the period covered by this annual report
as of December 31, 2009. Based upon that evaluation, the principal executive
officer and principal financial officer concluded that the Company's disclosure
controls and procedures are effective as of the evaluation date.




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




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




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




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




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




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




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




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




Our
management with the participation of our principal executive officer and
principal financial officer assessed the effectiveness of the design and
operation of the Company's internal controls over financial reporting pursuant
to Rule 13a-15 of the Securities Exchange Act of 1934, as of December 31, 2009.
Based upon that evaluation, the principal executive officer and principal
financial officer concluded that the Company's internal controls over financial
reporting are effective as of December 31, 2009.




The
effectiveness of the Company's internal control over financial reporting as of
December 31, 2009 has been audited by MSPC Certified Public Accountants and
Advisors, a Professional Corporation, ("MSPC"), an independent registered public
accounting firm, as stated in their report which appears herein.




c)   Changes
in internal control over financial reporting




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


39





ITEM
16A. AUDIT COMMITTEE FINANCIAL EXPERT





The Board
has determined that the Company's audit committee has one audit committee
financial expert. Mr. David White is an independent director and is the audit
committee financial expert.





ITEM
16B. CODE OF ETHICS





The
Company has adopted a code of ethics that applies to all entities controlled by
the Company and all employees, directors, officers and agents of the Company,
including representatives and agents of the Company's Manager. The code of
ethics has previously been filed as Exhibit 11.1 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 2, 2004, and is hereby incorporated
by reference into this annual report.





The
Company has posted a copy of its code of ethics on its website at
www.knightsbridgetankers.com. The Company will provide any person, free of
charge, a copy of its code of ethics upon written request to the Company's
registered office.





ITEM
16C. PRINCIPAL ACCOUNTANT FEES AND SERVICES





Our
independent registered public accounting firm for 2009 and 2008 was MSPC. The
following table sets forth for the two most recent fiscal years the fees paid or
accrued for audit and services provided by MSPC.





(in
      $)
            
            2009
            
            
            2008Audit
      Fees (a)
            
            
            241,950
            
            
            
            220,000Audit-Related
      Fees (b)
            
            
            -
            
            
            
            -Tax
      Fees (c)
            
            
            -
            
            
            
            -All
      Other Fees (d)
            
            
            -
            
            
            
            3,738Total
            
            
            241,950
            
            
            
            223,738





(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
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 2009 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.  PURCHASE OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED
PURCHASERS





None.





ITEM
16F. CHANGE IN REGISTRANT'S CERTIFYING ACCOUNTANT





Not
applicable.


40





ITEM
16G. CORPORATE GOVERNANCE





Pursuant
to the NASDAQ listing standards available to foreign private issuers, we are not
required to comply with all of the corporate governance practices followed by
U.S. companies under the NASDAQ listing standards.  The significant
differences between our corporate governance practices and the NASDAQ standards
applicable to listed U.S. companies are set forth below.




Executive Sessions.NASDAQ
requires that non-management directors meet regularly in executive sessions
without management.  As permitted under Bermuda law and our byelaws,
our non-management directors do not regularly hold executive sessions without
management and we do not expect them to do so in the future.




Audit
Committee.  NASDAQ requires, among other things, that a listed
U.S company have an audit committee with a minimum of three independent
members.  As permitted under Bermuda law and our byelaws, our audit
committee consists of two members which currently meets the NASDAQ independence
requirements.




Nominating/Corporate Governance
Committee.  NASDAQ requires that a listed U.S. company have a
nominating/corporate governance committee composed solely of independent
directors.  As permitted under Bermuda law and our byelaws, we do not
currently have a nominating or corporate governance committee.  Our
Board is responsible for identifying and recommending potential candidates to
become board members and recommending directors for appointment to board
committees.




Compensation
Committee.  NASDAQ requires that a listed U.S. company have a
compensation committee composed solely of independent directors.  As
permitted under Bermuda law and our byelaws, compensation of executive officers
is not required to be determined by a committee composed of independent
members.




Related Party
Transactions.  NASDAQ requires that a listed U.S. company
conduct appropriate review and oversight of all related party transactions for
potential conflict of interest situations on an ongoing basis by the company's
audit committee or another independent body of the board of
directors.  As permitted under Bermuda law and our byelaws, our
directors are not prohibited from being a party to, or otherwise interested in,
any transaction or arrangement with us or in which we are otherwise interested,
provided that the director makes proper disclosure of same as required by our
byelaws and Bermuda law.




Proxy
Materials.  NASDAQ requires that a listed U.S. company solicit
proxies and provide proxy statements for all shareholder meetings. Such company
must also provide copies of its proxy solicitation to NASDAQ.  As
permitted under Bermuda law and our byelaws, we do not currently solicit proxies
or provide proxy materials to NASDAQ.  Our byelaws also require that
we notify our shareholders of meetings no less than 5 days before the
meeting.




41


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-12 are filed as part of this annual report:





Consolidated
Financial Statements of Knightsbridge Tankers Limited





Index
      to Consolidated Financial Statements of Knightsbridge Tankers
      Limited
            
            F-1Report
      of Independent Registered Public Accounting Firm
            
            F-2Consolidated
      Statements of Operations for the years ended December 31, 2009, 2008 and
      2007
            
            F-3Consolidated
      Balance Sheets as of December 31, 2009 and 2008
            
            F-4Consolidated
      Statements of Cash Flows for the years ended December 31, 2009, 2008 and
      2007
            
            F-5Consolidated
      Statements of Changes in Stockholders' Equity for the years
      ended
            
            F-6December
      31, 2009, 2008 and 2007Notes
      to Consolidated Financial Statements
            
            F-7





ITEM
19.  EXHIBITS





Number
            
            Description
      of Exhibit1.1
            
            Memorandum
      of Association of the Company. *1.2
            
            Amended
      Bye-Laws of the Company. **4.1
            
            Form
      of Shipbuilding Contract.8.1
            
            Significant
      Subsidiaries at March 17, 201011.1
            
            Code
      of Ethics.***12.1
            
            Certification
      of the Principal Executive Officer pursuant to Rule 13a-14(a) and Rule
      15d-14(a) of the Securities Exchange Act, as amended.12.2
            
            Certification
      of the Principal Financial Officer pursuant to Rule 13a-14(a) and Rule
      15d-14(a) of the Securities Exchange Act, as amended.13.1
            
            Principal
      Executive Officer Certifications pursuant to 18 U.S.C. Section 1350 as
      adopted, pursuant to Section 906 of the Sarbanes-Oxley Act of
      2002.13.2
            
            Principal
      Financial Officer Certifications pursuant to 18 U.S.C. Section 1350 as
      adopted, pursuant to Section 906 of the Sarbanes-Oxley Act of
      2002.23.1
            
            Consent
      of MSPC Certified Public Accountants and Advisors, a Professional
      Corporation to the incorporation by reference of its audit report into the
      Company's Registration Statement on Form F-3, File No.
      333-164007.*
            
            Incorporated
      by reference to Exhibit No. 4.1 in the Company's Registration Statement on
      Form F-1, filed December 13, 1996.**
            
            Incorporated
      by reference to Exhibit No. 4.2 in the Company's Annual report on Form
      20-F for the fiscal year ended December 31, 2005.***
            
            Incorporated
      by reference to the same Exhibit No. of the Company's Annual Report on
      Form 20-F for the fiscal year ended December 31,
  2003.


42


SIGNATURES





The
registrant hereby certifies that it meets all of the requirements for filing on
Form 20-F and has duly caused and authorized the undersigned to sign this annual
report on its behalf.





KNIGHTSBRIDGE
TANKERS LIMITED











/s/ Inger M.
Klemp


Inger M.
Klemp


Chief
Financial Officer


Dated:  March
17, 2010











43




Index
to Consolidated Financial Statements of Knightsbridge Tankers
Limited







Report
      of Independent Registered Public Accounting Firm
            
            F-2Consolidated
      Statements of Operations for the years ended December 31, 2009, 2008 and
      2007
            
            F-3Consolidated
      Balance Sheets as of December 31, 2009 and 2008
            
            F-4Consolidated
      Statements of Cash Flows for the years ended December 31, 2009, 2008 and
      2007
            
            F-5Consolidated
      Statements of Changes in Stockholders' Equity for the years ended December
      31, 2009, 2008 and 2007
            
            F-6Notes
      to Consolidated Financial Statements
            
            F-7











REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM





To the
Board of Directors and Stockholders


Knightsbridge
Tankers Limited





We have
audited the accompanying consolidated balance sheets of Knightsbridge Tankers
Limited and subsidiaries (the "Company") as of December 31, 2009 and 2008, and
the related consolidated statements of operations, changes in stockholders'
equity, and cash flows for each of the years in the three-year period ended
December 31, 2009.  We also have audited the Company's internal
control over financial reporting as of December 31, 2009, based on criteria
established in Internal
Control—Integrated Framework  issued by the Committee of
Sponsoring Organizations of the Treadway Commission.  The Company's
management is responsible for these consolidated financial statements, for
maintaining effective internal control over financial reporting, and for its
assessment of the effectiveness of internal control over financial reporting,
included in the accompanying Management's annual report on internal controls
over financial reporting.  Our responsibility is to express an opinion
on these consolidated financial statements and an opinion on the Company's
internal control over financial reporting based on our audits.





We
conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States).  Those standards require
that we plan and perform the audits to obtain reasonable assurance about whether
the consolidated financial statements are free of material misstatement and
whether effective internal control over financial reporting was maintained in
all material respects.  Our audits of the consolidated financial
statements included examining, on a test basis, evidence supporting the amounts
and disclosures in the consolidated financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall consolidated financial statement
presentation.  Our audit of internal control over financial reporting
included obtaining an understanding of internal control over financial
reporting, assessing the risk that a material weakness exists, and testing and
evaluating the design and operating effectiveness of internal control based on
the assessed risk.  Our audits also included performing such other
procedures as we considered necessary in the circumstances.  We
believe that our audits provide a reasonable basis for our
opinions.





A
company's internal control over financial reporting is a process designed to
provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance
with generally accepted accounting principles.  A company's internal
control over financial reporting includes those policies and procedures that (1)
pertain to the maintenance of records that, in reasonable detail, accurately and
fairly reflect the transactions and dispositions of the assets of the company;
(2) provide reasonable assurance that transactions are recorded as necessary to
permit preparation of financial statements in accordance with generally accepted
accounting principles, and that receipts and expenditures of the company are
being made only in accordance with authorizations of management and directors of
the company; and (3) provide reasonable assurance regarding prevention or timely
detection of unauthorized acquisition, use, or disposition of the company's
assets that could have a material effect on the financial
statements.





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





In our
opinion, the consolidated financial statements referred to above present fairly,
in all material respects, the financial position of Knightsbridge Tankers
Limited and subsidiaries as of December 31, 2009 and 2008, and the results of
their operations and their cash flows for each of the years in the three-year
period ended December 31, 2009, in conformity with accounting principles
generally accepted in the United States of America.  Also in our
opinion, the Company maintained, in all material respects, effective internal
control over financial reporting as of December 31, 2009, based on criteria
established in Internal
Control—Integrated Framework  issued by the Committee of
Sponsoring Organizations of the Treadway Commission.








/S/  MSPC


Certified
Public Accountants and Advisors


A
Professional Corporation


New York,
New York


March 17,
2010








F-2


Knightsbridge
Tankers Limited


Consolidated
Statements of Operations for the years ended


December
31, 2009, 2008 and 2007


(in
thousands of $, except per share data)




2009
              
              
              2008
              
              
              2007Operating
      revenuesTime
      charter revenues
              
              
              54,892
              
              
              
              74,837
              
              
              
              53,814Voyage
      charter revenues
              
              
              12,447
              
              
              
              8,077
              
              
              
              34,346Total
      operating revenues
              
              
              67,339
              
              
              
              82,914
              
              
              
              88,160Gain
      on sale of assets
              
              
              -
              
              
              
              -
              
              
              
              49,119Operating
      expensesVoyage
      expenses and commission
              
              
              8,588
              
              
              
              4,012
              
              
              
              12,872Ship
      operating expenses
              
              
              18,829
              
              
              
              14,535
              
              
              
              15,544Administrative
      expenses
              
              
              1,823
              
              
              
              1,538
              
              
              
              1,481Depreciation
              
              
              14,343
              
              
              
              13,711
              
              
              
              17,016Total
      operating expenses
              
              
              43,583
              
              
              
              33,796
              
              
              
              46,913Net
      operating income
              
              
              23,756
              
              
              
              49,118
              
              
              
              90,366Other
      income (expenses)Interest
      income
              
              
              123
              
              
              
              2,336
              
              
              
              1,026Interest
      expense
              
              
              (1,895
              )
              
              
              (3,216
              )
              
              
              (6,373
              )Other
      financial items
              
              
              (304
              )
              
              
              (184
              )
              
              
              (183
              )Net
      other expenses
              
              
              (2,076
              )
              
              
              (1,064
              )
              
              
              (5,530
              )Net
      income
              
              
              21,680
              
              
              
              48,054
              
              
              
              84,836Per
      share information:Earnings
      per share: basic and diluted
              
              $
              1.27
              
              
              $
              2.81
              
              
              $
              4.96Cash
      dividends per share declared
              
              $
              0.25
              
              
              $
              2.75
              
              
              $
              2.50





The
accompanying notes are an integral part of these consolidated financial
statements.

















F-3


Knightsbridge
Tankers Limited


Consolidated
Balance Sheets as of December 31, 2009 and 2008


(in
thousands of $)





2009
            
            
            2008ASSETSCurrent
      assetsCash
      and cash equivalents
            
            
            7,964
            
            
            
            77,998Restricted
      cash
            
            
            10,000
            
            
            
            10,000Trade
      accounts receivable, net
            
            
            4,437
            
            
            
            2,745Other
      receivables
            
            
            662
            
            
            
            446Inventories
            
            
            3,167
            
            
            
            1,222Voyage
      in progress
            
            
            2,679
            
            
            
            -Prepaid
      expenses and accrued income
            
            
            418
            
            
            
            475Total
      current assets
            
            
            29,327
            
            
            
            92,886Vessels,
      net
            
            
            344,399
            
            
            
            187,360Newbuildings
            
            
            -
            
            
            
            51,305Deferred
      charges
            
            
            1,220
            
            
            
            134Total
      assets
            
            
            374,946
            
            
            
            331,685LIABILITIES
      AND STOCKHOLDERS' EQUITYCurrent
      liabilitiesCurrent
      portion of long-term debt
            
            
            13,960
            
            
            
            42,560Trade
      accounts payable
            
            
            3,664
            
            
            
            1,820Accrued
      expenses
            
            
            6,841
            
            
            
            2,111Other
      current liabilities
            
            
            4,251
            
            
            
            2,409Total
      current liabilities
            
            
            28,716
            
            
            
            48,900Long-term
      liabilitiesLong-term
      debt
            
            
            106,520
            
            
            
            60,480Total
      liabilities
            
            
            135,236
            
            
            
            109,380Stockholders'
      equityShare
      capital
            
            
            171
            
            
            
            171Contributed
      capital surplus
            
            
            179,019
            
            
            
            179,019Retained
      earnings
            
            
            60,520
            
            
            
            43,115Total
      stockholders' equity
            
            
            239,710
            
            
            
            222,305Total
      liabilities and stockholders' equity
            
            
            374,946
            
            
            
            331,685




The
accompanying notes are an integral part of these consolidated financial
statements.


F-4


Knightsbridge
Tankers Limited


Consolidated
Statements of Cash Flows for the years ended


December
31, 2009, 2008 and 2007


(in
thousands of $)




2009
            
            
            2008
            
            
            2007Net
      income
            
            
            21,680
            
            
            
            48,054
            
            
            
            84,836Adjustments
      to reconcile net income to net cashprovided
      by operating activities:Depreciation
            
            
            14,344
            
            
            
            13,712
            
            
            
            17,016Amortization
      of deferred charges
            
            
            188
            
            
            
            148
            
            
            
            148Gain
      on sale of assets
            
            
            -
            
            
            
            -
            
            
            
            (49,119
            )Changes
      in operating assets and liabilities:Trade
      accounts receivable, net
            
            
            (1,692
            )
            
            
            2,097
            
            
            
            3,330Other
      receivables
            
            
            (215
            )
            
            
            5,389
            
            
            
            (5,170
            )Inventories
            
            
            (1,945
            )
            
            
            2,702
            
            
            
            (1,302
            )Voyages
      in progress
            
            
            (2,679
            )
            
            
            -
            
            
            
            2,273Prepaid
      expenses and accrued income
            
            
            59
            
            
            
            133
            
            
            
            20Trade
      accounts payable
            
            
            (1,761
            )
            
            
            1,201
            
            
            
            (7,112
            )Accrued
      expenses
            
            
            4,741
            
            
            
            (3,749
            )
            
            
            2,789Other
      current liabilities
            
            
            1,842
            
            
            
            -
            
            
            
            477Net
      cash provided by operating activities
            
            
            34,562
            
            
            
            69,687
            
            
            
            48,186Investing
      activitiesAdditions
      to newbuildings
            
            
            (116,475
            )
            
            
            (17,847
            )
            
            
            (33,459
            )Proceeds
      from sale of asset
            
            
            -
            
            
            
            -
            
            
            
            98,980Net
      cash (used in) provided by investing activities
            
            
            (116,475
            )
            
            
            (17,847
            )
            
            
            65,521Financing
      activitiesProceeds
      from long-term debt and credit facilities
            
            
            60,000
            
            
            
            -
            
            
            
            33,600Repayments
      of long-term debt and credit facilities
            
            
            (42,560
            )
            
            
            (8,960
            )
            
            
            (30,811
            )Debt
      fees paid
            
            
            (1,286
            )
            
            
            -
            
            
            
            (141
            )Dividends
      paid
            
            
            (4,275
            )
            
            
            (47,025
            )
            
            
            (42,750
            )Net
      cash provided by (used in) financing activities
            
            
            11,879
            
            
            
            (55,985
            )
            
            
            (40,102
            )Net
      (decrease) increase in cash and cash equivalents
            
            
            (70,034
            )
            
            
            (4,145
            )
            
            
            73,605Cash
      and cash equivalents at beginning of year
            
            
            77,998
            
            
            
            82,143
            
            
            
            8,538Cash
      and cash equivalents at end of year
            
            
            7,964
            
            
            
            77,998
            
            
            
            82,143Supplemental
      disclosure of cash flow information:Interest
      paid, net of capitalized interest
            
            
            1,364
            
            
            
            3,219
            
            
            
            6,416














The
accompanying notes are an integral part of these consolidated financial
statements.


F-5


Knightsbridge
Tankers Limited


Consolidated
Statements of Changes in Stockholders' Equity for the years ended


December
31, 2009, 2008 and 2007


(in
thousands of $, except number of shares)





2009
            
            
            2008
            
            
            2007NUMBER
      OF SHARES OUTSTANDINGBalance
      at beginning and end of year
            
            
            17,100,000
            
            
            
            17,100,000
            
            
            
            17,100,000SHARE
      CAPITALBalance
      at beginning and end of year
            
            
            171
            
            
            
            171
            
            
            
            171CONTRIBUTED
      CAPITAL SURPLUSBalance
      at beginning and end of year
            
            
            179,019
            
            
            
            179,019
            
            
            
            179,019RETAINED
      EARNINGSBalance
      at beginning of year
            
            
            43,115
            
            
            
            42,086
            
            
            
            -Net
      income
            
            
            21,680
            
            
            
            48,054
            
            
            
            84,836Dividends
      paid
            
            
            (4,275
            )
            
            
            (47,025
            )
            
            
            (42,750
            )Balance
      at end of year
            
            
            60,520
            
            
            
            43,115
            
            
            
            42,086Total
      Stockholders' Equity
            
            
            239,710
            
            
            
            222,305
            
            
            
            221,276





The
accompanying notes are an integral part of these consolidated financial
statements.


F-6


Knightsbridge
Tankers Limited


Notes
to Consolidated Financial Statements








1.
            DESCRIPTION
      OF BUSINESS





Knightsbridge
Tankers Limited (the "Company") was incorporated in Bermuda in September, 1996.
The Company was originally founded for the purpose of the acquisition,
disposition, ownership, leasing and chartering of five very large crude oil
carriers, or VLCCs and certain related activities. The Company has subsequently
expanded its scope of activities and has taken delivery of two Capesize
newbuilding dry bulk vessels of approximately 170,000 dwt in August 2009 and
October 2009, respectively. The Company's shares are listed on the NASDAQ Global
Select Market.





The
business of the Company is managed by ICB Shipping (Bermuda) Limited (the
"Manager"), an indirect wholly-owned subsidiary of Frontline Ltd.





In
December 2007, one vessel was sold with delivery taking place during February
2008. Two VLCCs are on time charters that commenced in 2007 with initial terms
of four and five years respectively, each earning a rate of $37,750 per day plus
a market-based profit sharing payment computed as 50% of the difference between
the related spot market index rate and the base rate. One VLCC is on a three
year time charter earning a rate of $45,000 per day that is due to expire in
2010. The remaining VLCC has been operating in the spot market following the
expiry of its time charter in March 2009. The Company's two Capesize newbuilding
dry bulk carriers commenced five year time charters upon their deliveries in
August 2009 and October 2009 earning rates of $40,000 and $52,670 per day gross
less 1.25% broker commission.




2.
            SUMMARY
      OF SIGNIFICANT ACCOUNTING POLICIES





Basis
of presentation


The
consolidated financial statements are prepared in accordance with accounting
principles generally accepted in the United States of America. The consolidated
financial statements include the assets and liabilities of Knightsbridge Tankers
Limited and its wholly-owned subsidiaries. All intercompany balances and
transactions have been eliminated upon consolidation.





The
preparation of financial statements in accordance with generally accepted
accounting principles requires that management make estimates and assumptions
affecting the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.





Effective
July 1, 2009, the Company effected a change in estimate related to the estimated
scrap rate for its VLCC vessels from $149 per lightweight ton to $281 per
lightweight ton. The resulting increase in salvage value has been applied
prospectively and reduced depreciation by $1.0 million for the year ended
December 31, 2009. This change also resulted in an increase in net income of
$1.0 million and an increase of $0.06 in earnings per share for the year ended
December 31, 2009.





The
Company evaluated events and transactions occurring after the balance sheet date
and through the day the financials statements were filed.





Reporting
currency


The
Company's functional currency is the United States dollar as all revenues are
received in United States dollars and a majority of the Company's expenditures
are made in United States dollars. The Company and its subsidiaries report in
United States dollars.





Transactions
in foreign currencies during the year are translated into United States 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.





Revenue
and expense recognition


Revenues
are generated from freight billings and time charter hires. Time charter
revenues are recorded over the term of the charter as service is provided. Under
a voyage charter the revenues and associated voyage costs are recognized ratably
over the estimated duration of the voyage, which is measured from completion of
discharge to completion of discharge. Voyage revenues and expenses are
recognized ratably over the estimated length of each voyage and, therefore, are
allocated between reporting periods based on the relative transit time in each
period. The impact of recognizing voyage expenses ratably over the length of
each voyage is not materially different on a quarterly and annual basis from a
method of recognizing such costs as incurred. Probable losses on voyages are
accrued in full at the time such losses can be estimated. Amounts receivable
from profit sharing arrangements are accrued based on the time charter
equivalent rates achieved through vessel deployment over the preceding quarter
in the market for certain key routes and are not contingent on the performance
of the Company. This amount is calculated and
accounted for on a quarterly basis and is received on a quarterly basis. Each
quarterly settlement is final and does not get carried forward to the next
quarter. There is no consideration of future performance in the recording of
profit sharing revenue.


F-7





Leases


The
current charters for the Company's six vessels are classified as operating
leases by the Company.





Cash
and cash equivalents


All
demand and time deposits and highly liquid, low risk investments with maturities
of three months or less at the date of purchase are considered equivalent to
cash.





Restricted
cash


Restricted
cash consists of bank deposits maintained in accordance with contractual loan
arrangements.





Trade
accounts receivable


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





Inventories


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





Newbuildings


The
carrying value of the vessels under construction, or newbuildings, represents
the accumulated costs through the balance sheet date including capitalized loan
interest and associated finance costs. No charge for depreciation is made until
a vessel is put into operation.





Vessel
purchase expenditures are capitalized at the time vessel purchase contracts are
acquired or entered into. The Company reviews expected future cash flows, which
would result from each contract on a contract by contract basis to determine
whether the carrying value is recoverable. If the expected future cash flows are
less than the carrying value of the contract plus further costs to delivery,
impairment is recorded to write down the carrying value to the recoverable
amount. Capitalized amounts are transferred to cost of vessels, upon delivery of
a vessel to the Company.





Vessels
and depreciation


Vessels
are stated at cost less accumulated deprecation. Depreciation is calculated
based on cost less estimated residual value, using the straight-line method,
over the useful life of each vessel. The useful life of each vessel is deemed to
be 25 years.





On July
1, 2009, the Company effected a change in estimate related to the estimated
scrap rate for its four VLCCs. The scrap rate was amended from an average of
$149 per lightweight ton to $281 per lightweight ton. The resulting change in
salvage value has been applied prospectively and reduced depreciation by
approximately $1.0 million for the six months and year ended December 31, 2009.
This change also resulted in an increase in net income of approximately $1.0
million for the six months and year ended December 31, 2009.





Deferred
charges


Loan
costs, including debt arrangement fees, are capitalized and amortized on a
straight-line basis over the term of the loan. Amortization of loan costs is
included in interest expense.  If the loan is repaid early, any
unamortized portion of the related deferred charges is charged against income in
the period in which the loan is repaid.





Earnings
per share


Earnings
per share are based on the weighted average number of common shares outstanding
for the period presented. For all periods presented, the Company had no
potentially dilutive securities outstanding and therefore basic and diluted
earnings per share are the same.





Impairment
of long-lived assets


Long-lived
assets that are held and used by the Company are reviewed for impairment
whenever events or changes in circumstances indicate that the carrying amount of
an asset may not be recoverable. If such a review indicates impairment, an
impairment charge is recognized based on the difference between carrying value
and fair value. Fair value is typically established using an average of three
independent valuations. In addition, long-lived assets to be disposed of by sale
are reported at the lower of their carrying amount or fair value less estimated
costs to sell.





Distributions
to shareholders


Distributions
to shareholders are applied first to retained earnings. When retained earnings
are not sufficient, distributions are applied to the contributed capital surplus
account.


F-8





Drydocking


Normal
vessel repair and maintenance costs are expensed when incurred. The Company
recognizes the cost of a drydocking at the time the drydocking takes place, that
is, it applies the "expense as incurred" method.





3.
            NEWLY ISSUED ACCOUNTING
      STANDARDS





In May
2009, the Financial Accounting Standards Board ("FASB") established principles
and requirements for disclosure of events that occur after the balance sheet
date but before financial statements are issued or are available to be issued.
This guidance was updated in February 2010 and is effective immediately. The
adoption of this standard did not have a material impact on our financial
statements.





In June
2009, the FASB issued ASC 105-10. ASC 105-10 stipulates that the FASB Accounting
Standards Codification is the source of authoritative U.S. GAAP recognized by
the FASB to be applied by nongovernmental entities. ASC 105-10 is effective for
financial statements issued for interim and annual periods ending after
September 15, 2009. The implementation of this standard did not have a material
impact on our financial statements.





4.
            TAXATION





The
Company is incorporated in 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. Based upon review of applicable laws and
regulations, and after consultation with counsel, the Company does not believe
it is subject to material income taxes in any jurisdiction.





5.
            SEGMENT
      INFORMATION





The
Company and the chief operating decision maker ("CODM") measure performance
based on the Company's overall return to shareholders based on consolidated net
income. The CODM does not review a measure of operating result at a lower level
than the consolidated group. Consequently, the Company has only one reportable
segment: tankers.  The tankers segment includes crude oil tanker
vessels and dry bulk vessels. Both types of vessel are managed as part of this
one segment.




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




With the
introduction of two Capsize vessels in 2009, the company has been operating in
two markets, the wet market whereby crude oil is transported and the dry market
whereby dry cargo is transported. An analysis of revenues from these services is
as follows:





(in
      thousands of $)
            
            2009
            
            
            2008
            
            
            2007Total
      operating revenues – wet market
            
            
            58,860
            
            
            
            82,914
            
            
            
            88,160Total
      operating revenues – dry market
            
            
            8,479
            
            
            
            -
            
            
            
            -








6.
            LEASES





The
minimum future revenues to be received on time charters which are accounted for
as operating leases as of December 31, 2009 are as follows:





Year
      ending December 31,(in
      thousands of $)2010
            
            
            70,6102011
            
            
            61,2262012
            
            
            44,6172013
            
            
            33,8242014
            
            
            25,426Thereafter
            
            
            -Total
      minimum lease revenues
            
            
            235,703





The cost
and accumulated depreciation of vessels leased to third parties at December 31,
2009 was $523.7 million and $179.3 million, respectively, and at December 31,
2008 were $352.3 million and $164.9 million, respectively.


F-9








7.
            TRADE
      ACCOUNTS RECEIVABLE, NET





Trade
accounts receivable are presented net of allowance for doubtful accounts
amounting to $0.2 million (2008: $0.2 million).








8.
            NEWBUILDINGS





(in
      thousands of $)
            
            2009
            
            
            2008Newbuildings
            
            
            -
            
            
            
            51,305





The
carrying value of newbuildings represents accumulated costs paid in purchase
installments, other capital expenditures and capitalized loan
interest.  Interest capitalized in the cost of newbuildings during the
year totaled $0.5 million. (2008: $1.4 million).








9.
            VESSELS





(in
      thousands of $)
            
            2009
            
            
            2008Cost
            
            
            523,689
            
            
            
            352,308Accumulated
      depreciation
            
            
            (179,291
            )
            
            
            (164,948
            )Net
      book value at end of year
            
            
            344,398
            
            
            
            187,360





During
2009, $88.7 million and $82.7 million were removed from newbuildings and added
to the cost of vessels upon the delivery of the first and second Capesize
newbuildings, respectively. $17.3 million and $34.0 million of these amounts
were recorded in newbuildings at December 31, 2008.





Depreciation
expense was $14.3 million, $13.7 million and $17.0 million for the years ended
December 31, 2009, 2008 and 2007, respectively.








10.
            DEFERRED
      CHARGES





(in thousands of
      $)
            
            2009
            
            
            2008Capitalized
      financing fees and expenses
            
            
            1,655
            
            
            
            523Accumulated
      amortization
            
            
            (435
            )
            
            
            (389
            )Net
      book value at end of year
            
            
            1,220
            
            
            
            134





Debt
arrangement fees of $1.3 million were capitalized during the year. In addition,
fully amortized costs of $0.1 million were removed from cost and accumulated
amortization.








11.
            ACCRUED
      EXPENSES





(in
      thousands of $)
            
            2009
            
            
            2008Voyage
      expenses
            
            
            2,889
            
            
            
            417Ship
      operating expenses
            
            
            1,304
            
            
            
            1,369Administrative
      expenses
            
            
            2,293
            
            
            
            313Interest
      expense
            
            
            355
            
            
            
            126,841
            
            
            
            2,111








12.
            OTHER
      CURRENT LIABILITIES





(in
      thousands of $)
            
            2009
            
            
            2008Deferred
      income
            
            
            1,457
            
            
            
            2,409Newbuilding
      accrual
            
            
            2,794
            
            
            
            -4,251
            
            
            
            2,409





F-10





13.
            DEBT





(in
      thousands of $)
            
            2009
            
            
            2008US
      dollar denominated floating rate debt-$140
      Million Loan
            
            
            60,480
            
            
            
            69,440-Predelivery
      Loan
            
            
            -
            
            
            
            33,600-$60
      Million Loan
            
            
            60,000
            
            
            
            -Total
      debt
            
            
            120,480
            
            
            
            103,040Less:
      Current portion
            
            
            (13,960
            )
            
            
            (42,560
            )106,520
            
            
            
            60,480





The
average interest rate for the floating rate debt was 2.41% for the year ended
December 31, 2009 and 4.3% for the year ended December 31, 2008.





$140
Million Loan


In March
2004, the Company refinanced a prior debt facility with a $140.0 million credit
facility in the form of five tranches of $28.0 million, each in respect to a
vessel in the fleet at the time (including all VLCC vessels in the current
fleet). One tranche was repaid upon the sale of the related vessel in 2007. The
credit facility is secured by, among other things, a mortgage on each VLCC and
an assignment of any charter in respect to that VLCC. The repayment terms of the
facility is seven years so that the facility is due to be repaid in
2011.





The
credit facility bears interest at LIBOR plus a margin and contains a minimum
market value covenant on the vessels and a covenant requiring us to maintain a
certain minimum level of cash.





Predelivery
Loan


In May
2007, the Company entered into an extension of the credit facility and drew two
tranches of $16.8 million each to fund installment payments on two newbuilding
contracts. The facility was secured on the same basis as the original loan and
was subject to the same covenants as the original loan. The tranches were repaid
on delivery of the Capesize vessels to the Company, in August and October
2009.





$60
Million Loan


In August
2009, the Company entered into a four year term loan facility agreement
consisting of two tranches of $30.0 million each.  In August 2009, the
Company drew down $30.0 million to fund the final installment due on delivery of
the first Capesize newbuilding and the repayment of the first tranche of the
Predelivery Loan. In October 2009, the Company drew down the second tranche of
$30.0 million under the term loan to fund the final installment due on delivery
of the second Capesize newbuilding and the repayment of the second tranche of
the Predelivery Loan. The loans are secured by, among other things, a mortgage
on the Capesize vessels and an assignment of any charters in respect to those
vessels.





The $60
Million Loan bears interest at LIBOR plus a margin and contains a minimum market
value covenant on the Capesize vessels and covenants requiring us to maintain a
certain minimum level of cash and positive working capital.





The
outstanding debt as of December 31, 2009 is repayable as follows:





Year
      ending December 31,(in
      thousands of $)2010
            
            
            13,9602011
            
            
            56,5202012
            
            
            5,0002013
            
            
            45,000Thereafter
            
            
            -Total
      debt
            
            
            120,480








14.
            SHARE
      CAPITAL





The
authorized share capital consists of 35,000,000 (2008: 20,000,000) ordinary
shares of $0.01 each. The increase in the authorized share capital was approved
at the Company's Annual General Meeting on September 25, 2009. The issued and
fully paid share capital consists of:





(in
      thousands of $)
            
            2009
            
            
            200817,100,000
      ordinary shares of $0.01 each
            
            
            171
            
            
            
            171





F-11








15.
            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 does not
hold or issue instruments for speculative or trading purposes. As at December
31, 2009, the Company is not party to any interest rate swaps to hedge interest
rate exposure.





Foreign
currency risk


The
majority of the Company's transactions, assets and liabilities are denominated
in United States dollars, the functional currency of the Company. There is no
significant risk that currency fluctuations will have a negative effect of the
value of the Company's cash flows.





Fair
values


The
carrying value and estimated fair value of the Company's financial instruments
at December 31, 2009 and 2008 are as follows:





2009
            
            
            2009
            
            
            2008
            
            
            2008(in
      thousands of $)
            
            Fair
              Value
            
            
            Carrying
      Value
            
            
            Fair
              Value
            
            
            Carrying
              ValueCash
      and cash equivalents
            
            
            7,964
            
            
            
            7,964
            
            
            
            77,998
            
            
            
            77,998Restricted
      cash
            
            
            10,000
            
            
            
            10,000
            
            
            
            10,000
            
            
            
            10,000Floating
      rate debt
            
            
            120,480
            
            
            
            120,480
            
            
            
            103,040
            
            
            
            103,040





The
carrying value of cash and cash equivalents, and restricted cash, is a
reasonable estimate of fair value.





The
estimated fair value for floating rate long-term debt is considered to be equal
to the carrying value since it bears variable interest rates, which are reset on
a quarterly basis.





Concentrations
of risk


There is
a concentration of credit risk with respect to cash and cash equivalents to the
extent that substantially all of the amounts are carried with Skandinaviska
Enskilda Banken, The Royal Bank of Scotland plc, DnB NOR and Nordea Bank Norge
ASA. The Company does not require collateral or other security to support
financial instruments subject to credit risk.





In 2009,
two customers accounted for $45.0 million, or 67% of gross revenue, whilst in
2008 three customers accounted for $74.8 million or 91% of gross revenue. In
2007, four customers accounted for $81.0 million or 92% of gross revenues.
Customers with revenues of more than 10% of the total revenue earned in 2009 are
listed below.





Revenue
              (in
      thousands of $)
            
            
            Percentage
              of
      revenueFrontline
      Ltd
            
            
            28,563
            
            
            
            43
            %Great
      Elephant Corporation
            
            
            16,425
            
            
            
            24
            %44,988
            
            
            
            67
            %








16.
            MANAGEMENT
      OF COMPANY





On
February 12, 1997, the Company entered into a management agreement with the
Manager under which the Manager provided certain administrative, management and
advisory services to the Company for an amount of $750,000 per year. Effective
February 2004, the Company entered into an amendment to the agreement with the
Manager. The management fee has been amended to $630,000 per year, in addition
to a commission of 1.25 per cent on gross freight revenues. Pursuant to the
terms of the amendment, the Company is now responsible for paying its own
administrative expenses. In February 2006, the management fee was increased to
$1,150,000 per annum.





17.
            SUBSEQUENT
      EVENTS





In
January 2010, the Company entered into a 30 month bareboat contract for the MT
Camden with commencement late March 2010 at a rate, which is deemed by the
Company to be equivalent to at least $32,000 per day on a time charter
basis.





In
February 2010, the Board declared a dividend of $0.30 per share which was paid
on March 4, 2010.


F-12