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

                                    FORM 20-F

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

                                       OR
[X]               ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934
                   for the fiscal year ended December 31, 2002

                                       OR
[ ]                   TRANSITION  REPORT  PURSUANT TO SECTION
                     13 OR 15(d) OF THE SECURITIES EXCHANGE
                                   ACT OF 1934
                   For the transition period from ____ to ____

                         Commission file number 0-29106
                          KNIGHTSBRIDGE TANKERS LIMITED
             (Exact name of Registrant as specified in its charter)
                               ISLANDS OF BERMUDA
                 (Jurisdiction of incorporation or organization)
                               Par-la-Ville Place

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

Securities  registered or to be registered pursuant to section 12(b) of the Act:
None Securities  registered or to be registered pursuant to section 12(g) of the
Act.
                         Common Shares, $0.01 Par Value
                                (Title of class)

Securities for which there is a reporting  obligation  pursuant to Section 15(d)
of the Act:  None  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 whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the  preceding 12 months (or for such  shorter  period that the  registrant  was
required  to file  such  reports),  and  (2) has  been  subject  to such  filing
requirements for the past 90 days.

                  Yes     X               No
                        -----                 -----

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

                  Item 17                 Item 18    X
                          -----                    -----

<PAGE>
                                TABLE OF CONTENTS

                                     PART I

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

Item 2.       Offer Statistics and Expected Timetable                        1

Item 3.       Key Information                                                1

Item 4.       Information on the Company                                     6

Item 5.       Operating and Financial Review and Prospects                  16

Item 6.       Directors, Senior Management and Employees                    21

Item 7.       Major Shareholders and Related Party Transactions             24

Item 8.       Financial Information                                         24

Item 9.       The Offer and Listing                                         26

Item 10.      Additional Information                                        27

Item 11.      Quantitative and Qualitative Disclosures about Market Risk    28

Item 12.      Description of Securities Other Than Equity Securities        29

                                     PART II

Item 13.      Defaults, Dividend Arrearages and Delinquencies               30

Item 14.      Material Modifications to the Rights of Security
              Holders and Use of Proceeds                                   30

Item 15.      Controls and Procedures                                       30

Item 16.      Reserved

                                    PART III

Item 17.      Financial Statements                                          31

Item 18.      Financial Statements                                          31

Item 19.      Exhibits

<PAGE>

            CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

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

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

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

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

<PAGE>

                                     PART I

ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISORS

Not Applicable


ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE

Not Applicable


ITEM 3. KEY INFORMATION

A. SELECTED FINANCIAL DATA

The selected consolidated income statement data of Knightsbridge Tankers Limited
and its  subsidiaries  (the  "Company")  with  respect to the fiscal years ended
December 31, 2002,  2001, and 2000 and the selected  consolidated  balance sheet
data of the Company with respect to the fiscal years ended December 31, 2002 and
2001 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  consolidated income statement data with respect to
the fiscal years ended December 31, 1999 and 1998 and the selected  consolidated
balance  sheet data with  respect to the fiscal  years ended  December 31, 2000,
1999 and 1998 has been derived from  consolidated  financial  statements  of the
Company  not  included  herein.  The  following  table  should  also  be read in
conjunction  with Item 5 "Operating and Financial  Review and Prospects" and the
Company's Consolidated Financial Statements and Notes thereto included herein.

<TABLE>
<CAPTION>
                                                                      Year Ended December 31

                                            2002           2001           2000          1999            1998

(in US$, except share data)
<S>                                   <C>            <C>            <C>           <C>             <C>
INCOME STATEMENT DATA:
Charter hire
  revenues                            $  40,275,925  $  61,534,355  $  76,335,975  $  40,275,925  $ 45,039,385
Net operating income                  $  21,877,636  $  43,140,556  $  57,935,758  $  21,842,043  $ 26,605,385
Net income                            $  12,550,786  $  33,915,432  $  48,723,745  $  12,572,476  $ 17,385,820
Earnings per share
 - basic and diluted                  $        0.73  $        1.98  $        2.85  $        0.74  $       1.02
Cash dividends per share              $        1.81  $        4.24  $        2.66  $        1.80  $       2.36
BALANCE SHEET DATA
  (at December 31):
Cash and cash
  equivalents                         $     226,215  $     278,268  $     247,370  $      70,695  $    315,223
Vessels under capital
  lease, net                          $ 337,001,052  $ 354,593,912  $ 372,186,772  $ 389,779,632  $ 407,372,491
Total assets                          $ 347,824,729  $ 366,204,004  $ 404,739,841  $ 403,265,501  $ 428,293,722
Long-term debt
  (including current
  portion)                            $ 125,397,399  $ 125,397,399  $ 125,397,399  $ 127,078,937  $ 133,805,088
Shareholders' equity                  $ 208,639,114  $ 229,077,216  $ 277,218,288  $ 273,980,543  $ 292,188,066
Common Shares                         $     171,000  $     171,000  $     171,000  $     171,000  $     171,000
Common shares
  outstanding                            17,100,000     17,100,000     17,100,000     17,100,000     17,100,000
</TABLE>

B.   CAPITALIZATION AND INDEBTEDNESS

Not Applicable

C.   REASONS FOR THE OFFER AND USE OF PROCEEDS

Not Applicable

D.   RISK FACTORS

Please note: In this section,  "we", "us" and "our" all refer to the Company and
its subsidiaries.

Industry Specific Risk Factors

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

If the tanker industry, which has been cyclical, is depressed in the future when
our vessels' charters expire or when we want to sell a vessel,  our earnings and
available  cash flow may  decrease.  Our ability to recharter our vessels on the
expiration  or  termination  of their  current  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 tanker  vessels are outside of
our control, and the nature, timing and degree of changes in industry conditions
are  unpredictable.  The  factors  that  influence  demand for  tanker  capacity
include:

     o    demand for oil and oil products;

     o    global and regional economic conditions;

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

     o    changes in seaborne and other transportation patterns

The factors that influence the supply of tanker capacity include:

     o    the number of newbuilding deliveries;

     o    the scrapping rate of older vessels; and

     o    the number of vessels that are out of service.

Our  vessels  are  currently   operated   under   bareboat   charters  to  Shell
International  Petroleum  Company  Limited.  We receive a set minimum  base rate
charter hire and variable  additional  hire under these bareboat  charters.  The
amount of  additional  hire is  determined  quarterly  with  reference  to three
round-trip  traditional  trade  routes and  therefore  is  subject to  variation
depending on general tanker market conditions. We cannot assure you that we will
receive additional hire for any quarter.

Any  decrease  in  shipments  of crude oil from the Arabian  Gulf may  adversely
affect our financial performance

The  demand for our very large  crude  carrier,  or VLCC,  oil  tankers  derives
primarily  from demand for Arabian  Gulf 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 Arabian  Gulf crude oil. One such factor is the
price of  worldwide  crude oil. The world's oil markets  have  experienced  high
levels  of  volatility  in the  last  25  years.  If oil  prices  were  to  rise
dramatically, the economies of the world's industrial countries may experience a
significant downturn.

Any  decrease  in  shipments  of crude oil from the  Arabian  Gulf  would have a
material  adverse  effect on our  financial  performance  at any time  after the
expiration or termination of our current charters with Shell  International  (or
earlier if a decrease  adversely  affects VLCC  charterhire  rates for shipments
from the Arabian  Gulf.)  Among the factors  which could lead to such a decrease
are:

     o    increased crude oil production from non-Arabian Gulf areas;

     o    increased refining capacity in the Arabian Gulf area;

     o    increased  use of  existing  and  future  crude oil  pipelines  in the
          Arabian Gulf area;

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

     o    armed conflict in the Arabian Gulf and political or other factors; and

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

The value of our  vessels  may  fluctuate  and also  depends  on  whether  Shell
International renews its charters which could result in a lower share price

Tanker values have generally  experienced high volatility.  Investors can expect
the fair market value of our VLCC oil tankers to fluctuate, depending on general
economic and market  conditions  affecting the tanker  industry and  competition
from other shipping  companies,  types and sizes of vessels,  and other modes of
transportation.  In addition,  as vessels grow older,  they generally decline in
value.  These factors will affect the value of our vessels at the termination of
their  charters or earlier at the time of their sale.  It is very  possible that
the value of our vessels  could be well below both their  implied value based on
the trading  price for our shares and their  present  market  value  without the
Shell International charters.  While the trading price for our shares depends on
many factors,  the failure of Shell  International  to renew the charters  could
result in a lower  market price for our shares.  Based on the closing  price for
our common shares on April 30, 2003, taking into account our total  indebtedness
of $125.4 million,  and assuming no other factors,  such as liquidity  premiums,
our cash position,  or expectations of future performance,  the implied value of
each of our vessels with the Shell International  charter was $66.9 million. The
market value of a similar vessel,  without charter,  may be significantly  lower
than the implied value of our vessels.

Company Specific Risk Factors

Because  our  charters  expire in 2004,  unless  extended  at the  option of the
charterer,  we may incur  additional  expenses and not be able to recharter  our
vessels profitably

Each of our charters with Shell International  expires approximately seven years
after the date of  delivery  of each  vessel to us,  which  could be as early as
February 2004,  unless extended at the option of the charterer for an additional
period of approximately  seven years, on eight months' prior written notice. The
charterer  has the sole  discretion to exercise that option under one or more of
the charters.  We cannot predict whether the charterer will exercise that option
under one or more of the charters.  The charterer  will not owe any fiduciary or
other  duty to us or our  shareholders  in  deciding  whether  to  exercise  the
extension option, and the charterer's  decision may be contrary to our interests
or those of our shareholders.

We  cannot  predict  at this time any of the  factors  that the  charterer  will
consider in deciding whether to exercise any of its extension  options under the
charters. It is likely,  however, that the charterer would consider a variety of
factors,  which may  include  whether a vessel is  surplus  or  suitable  to the
charterer's requirements and whether competitive charterhire rates are available
to the charterer in the open market at that time.

In the event Shell  International does not extend our current charters,  we will
present to our  shareholders  a  recommendation  by our Board of Directors as to
whether it believes  that the sale of our vessels is in our  shareholders'  best
interests  or whether  an  alternative  plan,  such as  attempting  to arrange a
replacement charter, might be of greater benefit to us. Replacement charters may
include shorter term time charters and employing the vessels on the spot charter
market (which is subject to greater  fluctuation  than the time charter market).
Any  replacement  charters  may bring us lower  charter  rates and would  likely
require us to incur greater expenses which may reduce the amounts available,  if
any, to pay distributions to shareholders.

We operate in the highly  competitive  international  tanker  market which could
affect our position if Shell International does not renew our charters

The  operation  of tanker  vessels  and  transportation  of crude and  petroleum
products and the other businesses in which we operate are extremely competitive.
Competition  arises  primarily  from other tanker  owners,  including  major oil
companies  as  well  as  independent   tanker  companies,   some  of  whom  have
substantially  greater resources than we do.  Competition for the transportation
of oil and oil  products  can be intense and depends on price,  location,  size,
age,  condition  and the  acceptability  of the tanker and its  operators to the
charterers. During the term of our existing charters with Shell International we
are not exposed to the risk associated with this competition.  In the event that
Shell International does not renew the charters in 2004, we will have to compete
with other tanker owners,  including  major oil companies as well as independent
tanker  companies for charterers.  Due in part to the fragmented  tanker market,
competitors with greater resources could enter and operate larger fleets through
acquisitions  or  consolidations  and may be able to  offer  better  prices  and
fleets,  which could result in our  achieving  lower  revenues from our VLCC oil
tankers.

Compliance  with  environmental  laws or  regulations  may adversely  affect our
earnings and  financial  conditions  if Shell  International  does not renew its
charters

Regulations in the various states and other  jurisdictions  in which our vessels
trade affect our business.  Extensive and changing  environmental laws and other
regulations,  compliance with which may entail significant  expenses,  including
expenses for ship modifications and changes in operating procedures,  affect the
operation of our vessels.  Although Shell  International  is responsible for all
operational  matters and bears all these expenses during the term of our current
charters, these expenses could have an adverse effect on our business operations
at any time after the  expiration  or  termination  of a charter or in the event
Shell International fails to make a necessary payment.

We may not have  adequate  insurance  in the  event  existing  charters  are not
renewed

There  are a  number  of risks  associated  with the  operation  of  ocean-going
vessels, including mechanical failure,  collision,  property loss, cargo loss or
damage and  business  interruption  due to  political  circumstances  in foreign
countries,  hostilities  and labor  strikes.  In addition,  the operation of any
vessel is subject to the inherent possibility of marine disaster,  including oil
spills and other environmental  mishaps, and the liabilities arising from owning
and operating vessels in international trade. Under the existing charters, Shell
International  bears all risks  associated  with the  operation  of our  vessels
including  any total  loss of one or more  vessels.  However,  we cannot  assure
investors  that we will  adequately  insure  against  all risks in the event our
existing  charters are not renewed at the expiration of their terms.  We may not
be able to obtain adequate  insurance coverage at reasonable rates for our fleet
in the future and the insurers may not pay particular claims.

We are highly dependent on Shell International and its guarantors

We are highly  dependent on the due  performance by Shell  International  of its
obligations  under the charters and by its guarantors,  Shell Petroleum N.V. and
The Shell Petroleum Company Limited, of their obligations under their respective
guarantees.  Any failure by Shell  International  or the  guarantors  to perform
their  obligations  could result in  enforcement  by our lenders of their rights
including  foreclosing  on the  mortgages  over the vessels and the  outstanding
capital stock of our subsidiaries,  all of which are pledged to the lenders, and
all of the subsidiaries' rights in the charters,  and the consequent  forfeiture
of our  vessels.  Our  shareholders  do not  have  any  recourse  against  Shell
International or its guarantors.

Our  ability to  recharter  or sell the vessels if Shell  International  and its
guarantors  default would be subject to the rights of the lenders and the rights
of the lessor under finance  leases to which we are a party for our vessels.  In
addition,  if Shell  International  were to default on its  obligations  under a
charter or not  exercise  its charter  extension  option,  we may be required to
change  the  flagging  or  registration  of the  related  vessel  and may  incur
additional costs, including maintenance and crew costs.

Incurrence of expenses or liabilities may reduce or eliminate distributions

We have made  distributions  quarterly since April 1997, in an aggregate  amount
equal  to the  charterhire  received  from  Shell  International  less  our cash
expenses  and  less  any  reserves   required  in  respect  of  any   contingent
liabilities.  It is possible  that we could incur other  expenses or  contingent
liabilities  that would reduce or eliminate the cash available for  distribution
by us as dividends. In particular, toward the end of the term of the charters in
2004,  we are  likely  to have  additional  expenses  and may have to set  aside
amounts for future  payments  of interest  and  principal.  Our loan  agreements
prohibit the  declaration  and payment of  dividends if we are in default  under
them. In addition,  the  declaration  and payment of dividends is subject at all
times to the  discretion  of our  Board.  We cannot  assure you that we will pay
dividends in the amounts anticipated or at all.

If we cannot  refinance  our loans,  we may have to sell our vessels,  which may
leave no additional funds for distributions to shareholders

Whether or not Shell  International  renews our charters,  our outstanding  loan
facility  will mature in August 2004,  seven years and six months after the date
of  delivery  of the  related  vessel,  and we will be  obligated  to  repay  or
refinance the related loan at that time.  There is no assurance  that we will be
able to repay or refinance those loans. In addition, even if Shell International
renews  the  charters  for one or  more of our  vessels,  but we are  unable  to
refinance  the related loan facility on  acceptable  terms,  we may be forced to
attempt to sell the vessels  subject to the  charters.  Depending  on the market
value for our vessels at the time,  it is possible  that there could be no funds
left to distribute to our shareholders.

We have a limited business purpose which limits our flexibility

Our  bye-laws  limit our business to engaging in the  acquisition,  disposition,
ownership, leasing and chartering of our five VLCC oil tankers. During the terms
of our  charters  with Shell  International  we expect  that the only  source of
operating  revenue  from  which  we may pay  distributions  will  be from  these
charters.

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 our vessels.  Requisition for
title occurs when a government  takes control of a vessel and becomes her owner.
Also, a government could requisition our vessels for hire.  Requisition for hire
occurs when a government  takes control of a vessel and effectively  becomes her
charterer at dictated charter rates. If a vessel is requisitioned  for hire from
a  pre-existing   charterer  beyond  the  scheduled   termination   date,  Shell
International  will be obligated to pay to us only those amounts  received by it
as charterhire from the requisitioning entity, less operating costs. 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 the vessel
after the charter would otherwise have terminated.


ITEM 4. INFORMATION ON THE COMPANY

A.   HISTORY AND DEVELOPMENT OF THE COMPANY

Knightsbridge  Tankers  Limited (the  "Company") 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) 295-0182.  The Company was incorporated for
the purpose of the acquisition,  disposition,  ownership, leasing and chartering
of, through  wholly-owned  subsidiaries  (the  "Subsidiaries"),  five very large
crude oil carriers  ("VLCCs") (the "Vessels"),  and certain related  activities.
The  Company  charters  the  Vessels to Shell  International  Petroleum  Company
Limited (the  "Charterer") on long-term "hell and high water" bareboat  charters
(the  "Charters").  The  obligations  of the Charterer  under these charters are
jointly and severally  guaranteed (the "Charter  Guarantees") by Shell Petroleum
N.V. and The Shell  Petroleum  Company Limited (the "Charter  Guarantors").  The
Charterer and the Charter  Guarantors are all companies of the Royal Dutch/Shell
Group of Companies. References herein to the Company include the Company and the
Subsidiaries, unless otherwise indicated.

The  business of the Company is limited by its Bye-Laws to the  consummation  of
the transactions  described above and related activities including the ownership
of the Subsidiaries engaged in the acquisition,  disposition, ownership, leasing
and chartering of the Vessels and engaging in activities necessary,  suitable or
convenient to accomplish, or in connection with or incidental to, the foregoing,
including  entering into the Credit  Facility (as defined below) and U.K finance
leases  and the  refinancing  thereof.  During  the terms of the  Charters,  the
Company expects that its only source of operating revenue from which the Company
may pay  distributions to shareholders on its common shares,  par value $.01 per
share,  (the "Common Shares") will be cash payments from the Subsidiaries to the
Company.  Also, during the terms of the Charters,  the Subsidiaries' only source
of  operating  revenue  will  be  charterhire  paid to the  Subsidiaries  by the
Charterer.  The Company's Bye-Laws may be amended only upon the affirmative vote
of 66-2/3% of the  outstanding  Common  Shares,  and,  insofar as the  Company's
purposes  or powers are  concerned  or insofar as the  interests  of the lenders
under the Credit Facility are prejudiced, with the approval of the lenders under
the Credit Facility.  In addition,  the Company and the Subsidiaries have agreed
with the  Charterer not to take certain acts which would subject them to general
jurisdiction of the U.S. courts.

In February 1997, upon the exercise by the  underwriters of their  overallotment
option,  the Company offered and sold to the public  16,100,000 Common Shares at
an initial  offering  price of $20 per share.  Simultaneously,  the Company sold
1,000,000 Common Shares at a price of $20 per share to ICB International Limited
("ICB  International"),  a  company  which  since  1999  has  been  an  indirect
wholly-owned  subsidiary of Frontline  Ltd.  ("Frontline"),  a Bermuda  publicly
traded oil tanker owning and  operating  company.  As of December 31, 2002,  ICB
International  owns  approximately  0.01 % of the outstanding Common Shares. ICB
Shipping  (Bermuda)  Limited  (the  "Manager"),  another  indirect  wholly-owned
subsidiary of Frontline, manages the business of the Company.

The Company used the net proceeds of the  offerings  described  above,  together
with  advances   totaling  $145.6  million  under  a  credit  facility  from  an
international  syndicate of lenders (the "Credit  Facility"),  primarily to fund
the purchase by the Subsidiaries of the Vessels.  Upon their purchase from their
previous  owners on February 27, 1997 (the  "Delivery  Date"),  the Vessels were
delivered by the Company to the Charterer  under the Charters.  The term of each
of the Charters is a minimum of seven years, with an option for the Charterer to
extend the period for each Vessel's  Charter for an additional  seven-year term,
to a maximum of 14 years per Charter. Under the Charters, the Charterer pays the
greater of a base rate of hire or a spot market  related  rate.  See B. Business
Overview below.

The Subsidiaries have each entered into conditional sale/leaseback  arrangements
(the "U.K. Finance Leases") with a subsidiary of National  Westminster Bank plc,
NatWest  Leasing and Asset  Finance Ltd. (the "U.K.  Lessor")  pursuant to which
each  Subsidiary has sold a Vessel to the U.K.  Lessor under a conditional  sale
agreement  (the  "CSA") and  concurrently  leased its Vessel  back from the U.K.
Lessor  for a term of 25 years.  By  virtue of  certain  benefits  under  United
Kingdom tax laws which will be passed to the Charterer,  the U.K. Finance Leases
enable the Charterer to achieve a reduction in its costs of hiring and using the
Vessels,   without  reducing  the  Base  Hire,   Additional  Hire,  if  any,  or
Supplemental   Hire  (as  these  terms  are  defined   herein)  payable  to  the
Subsidiaries.  During the term of the U.K.  Finance  Leases,  the  Vessels  will
remain on the  Company's  consolidated  balance sheet and each  Subsidiary  will
retain title to the related Vessel.

On the Delivery Date, the U.K.  Lessor paid to the  Subsidiaries an amount equal
to $439.8  million in the  aggregate and each  Subsidiary  delivered its related
Vessel to the Charterer as agent for the U.K. Lessor.  Each Subsidiary  procured
the opening of a letter of credit (each a "Letter of Credit" and,  collectively,
the  "Letters  of Credit")  by a major  commercial  bank (each an "LC Bank" and,
collectively, the "LC Banks") from which the U.K. Lessor will be paid rental and
other  payments  due  under  the U.K.  Finance  Leases.  The  Subsidiaries  also
established  letter of credit  reimbursement  accounts (each a "LC Account" and,
collectively,  the "LC  Accounts")  with the LC  Banks,  as  security  for their
respective  obligations  to  reimburse  the LC Banks for amounts  paid under the
Letters of Credit.  Interest on the LC Accounts will be added to such  security,
and, therefore, will not benefit the Company.

The U.K.  Lessor,  the Charterer and each  Subsidiary have entered into a direct
support  agreement (each a "Direct Support  Agreement"  and,  collectively,  the
"Direct  Support  Agreements")  containing  certain  indemnification  and  other
payment  obligations  of the  Charterer  in favor of the U.K.  Lessor.  The U.K.
Finance  Leases  are  structured  so that the LC Banks may not make  claims  for
reimbursement  against the  Subsidiaries  or the  Vessels  for  amounts  paid or
capable of being drawn under the Letters of Credit, other than claims in respect
of funds on deposit in the LC Accounts (including  interest thereon),  except in
the event that such funds are returned to the Subsidiaries or paid to a creditor
or a trustee or similar official and then only to the extent of such returned or
paid  funds.  In  addition,  the U.K.  Lessor may not make  claims  against  the
Subsidiaries  or the Vessels for amounts  otherwise  due under the U.K.  Finance
Leases and capable of being  drawn  under the  Letters of Credit,  except to the
extent that the Charterer has paid to a Subsidiary  under the Charters  separate
amounts denominated in Pounds Sterling ("Sterling Hire") for the sole purpose of
enabling the Subsidiaries to meet their obligations to the U.K. Lessor.

The U.K.  Lessor,  the  Charterer and each  Subsidiary  (with the consent of the
Charterer)  may not terminate the U.K.  Finance  Leases apart from under certain
conditions and upon such termination a termination sum (the  "Termination  Sum")
will be  payable  to the U.K.  Lessor.  One of  those  conditions  includes  the
termination  of  the  Charter  and  the  failure  to  substitute  an  acceptable
replacement charter. The recourse of the U.K. Lessor against the Subsidiaries or
the  Vessels for all or any  portion of the  Termination  Sum will be limited to
amounts  capable of being  drawn  under the Letters of Credit and to any amounts
paid in respect  thereof by the Charterer to the  Subsidiaries as Sterling Hire.
To the extent the  Termination  Sum  exceeds  the amount  capable of being drawn
under the Letters of Credit,  the  Charterer  will be  obligated to pay the U.K.
Lessor the  difference.  Also, upon  termination,  the U.K. Lessor will agree to
sell its interest in the related Vessel and to allow the relevant  Subsidiary to
control the  disposition  of such interest in the related  Vessel and to receive
the net proceeds of any sale thereof except in limited  circumstances.  However,
the Subsidiaries' rights will be subject to the rights of the agent on behalf of
the lenders under the Credit Facility,  as described below, who will be entitled
to control such disposition in certain circumstances.

The  Company  has  entered  into  the  Credit   Facility  with  a  syndicate  of
international  lenders,  pursuant  to which the  Company  on the  Delivery  Date
borrowed  $145.6  million  in the form of term  loans.  Of such  amount,  $125.4
million was in respect of five loans (the "Primary Loans"), each in respect of a
Vessel, and $20.2 million was in respect of five loans (the "Amortizing Loans"),
each in respect of a Vessel.  The  Primary  and  Amortizing  Loans were equal to
approximately   31.65%  of  the  purchase  price  of  the  Vessels,   which  was
$439,821,545  million in the aggregate.  Each Primary Loan will mature on August
27,  2004.  The  Amortizing  Loans  amortized  in equal  quarterly  installments
beginning on April 15, 1997 through  January 15, 2000,  when they were repaid in
full. Whether or not the term of any of the Charters is extended, the Company is
obligated  to repay the  borrowings  under the Credit  Facility on the  maturity
date. The Credit  Facility  provides for payment of interest on the  outstanding
principal  balance  of each of the  Primary  Loans and on the  Amortizing  Loans
quarterly,  in  arrears,  at a floating  interest  rate based on the rate in the
London interbank  eurocurrency market.  However, the Company has entered into an
interest rate swap  transaction (the "Swap") with Goldman Sachs Capital Markets,
L.P., an affiliate of Goldman, Sachs & Co. (the "Swap Counterparty"), so that it
has effectively  fixed its interest rate on the Primary Loans and the Amortizing
Loans at the rate of approximately 7.14% and 6.51%, respectively, per annum.

If a Subsidiary  sells or disposes of the related Vessel or the Company sells or
disposes of its  shareholding  in such  Subsidiary,  or the U.K. Lessor sells or
otherwise  disposes of its interest in a Vessel and rebates the proceeds thereof
to the  Subsidiary  the Company will be obligated to make a loan  prepayment  in
respect of the Credit  Facility which will be applied  against the Primary Loans
in a manner  depending  upon  whether the disposal  occurred  prior to, or on or
after February, 2004.

The Credit  Facility is secured by, among other things,  a pledge by the Company
of 100% of the issued  and  outstanding  capital  stock of the  Subsidiaries,  a
guarantee from each  Subsidiary,  a mortgage on each Vessel  (collectively,  the
"Mortgages"),  assignments  of the  Charters and the Charter  Guaranties  and an
assignment  of the U.K.  Lessor's  rights to take title to the  Vessels  and the
proceeds  from the sale or any  novation  thereof.  The Credit  Facility  is not
guaranteed  by the  Charterer  or the  Charter  Guarantors.  The  failure by the
Company to make payments due and payable under the Credit  Facility could result
in the  acceleration of all principal and interest on the Credit  Facility,  the
enforcement  by the  lenders  under the Credit  Facility  of their  rights  with
respect to the security therefor,  and the consequent  forfeiture by the Company
of one or more of the Vessels. The Credit Facility and the Swap also provide for
other customary events of default.

The Credit Facility  contains a number of covenants made by the Company and each
of the  Subsidiaries  that,  among  other  things,  restrict  the ability of the
Company to incur  additional  indebtedness,  pay  dividends if the Company is in
default, change the business conducted by the Company, create liens on assets or
dispose of assets. In addition,  upon termination of a Charter,  the Company and
the relevant Subsidiary will be subject to additional  covenants pursuant to the
Credit  Facility  pertaining  primarily to the  maintenance and operation of the
Vessels.

The Charter  Guarantors have entered into the separate joint and several Charter
Guaranties in favor of the Company and each Subsidiary.  Pursuant to the Charter
Guaranties,  the  Charter  Guarantors  on a joint and  several  basis  fully and
unconditionally guarantee the prompt payment and performance by the Charterer of
all its  obligations  under and in connection  with each Charter to the relevant
Subsidiary  and certain  indemnification  obligations  under the Charters to the
Company.  The Charter Guaranties do not confer any rights or remedies thereunder
on any  person,  other  than  the  Company  and  the  Subsidiaries,  and are not
guaranties  of the payment of dividends  or any other  amounts to the holders of
Common  Shares.  As the Charter  Guarantors are holding  companies,  the Charter
Guaranties are effectively  subordinated to the debt of their subsidiaries which
are operating companies.

B.   BUSINESS OVERVIEW

The Charterer is Shell  International  Petroleum Company Limited, a wholly-owned
subsidiary  of The  Shell  Petroleum  Company  Limited,  which,  in  turn,  is a
subsidiary of N.V. Koninklijke Nederlandsche Petroleum Maatschappij,  which owns
60% of its share capital, the remaining 40% being owned by The "Shell" Transport
and Trading Company, p.l.c.

The principal  activities  of the Charterer are to buy, sell and otherwise  deal
in, and to  transport,  crude oil,  petroleum  products  and coal and to provide
services to the  companies  of the Royal  Dutch/Shell  Group of  Companies.  The
Charterer  currently  charters  the  Vessels  from the  Subsidiaries  under  the
Existing Charters.

Pursuant to the Charters,  each Vessel is chartered for an initial term of seven
years  (ending in February  2004).  Each  Charter is subject to extension at the
option of the Charterer for an additional period of seven years plus, subject to
the notice requirement described below, at the option of the Charterer, up to 90
days plus up to 30 days  thereafter  upon at least eight months' prior notice of
such  extension,  which  notice  shall be  irrevocable.  The  obligation  of the
Charterer to pay charterhire for the Vessels commenced on the Delivery Date. The
Charterer is obligated to give written notice (which shall be irrevocable),  not
less than three months prior to the seventh or as  applicable,  the  fourteenth,
anniversary   of  the  Delivery   Date   (February   2004  and  February   2011,
respectively),  of the number of days, if any, by which the original term or the
extended term, respectively, of a Charter will extend beyond such anniversary.

Pursuant  to the  terms  of the  Charters,  the  Charterer's  obligation  to pay
charterhire  for the entire charter period is absolute,  whether there is a loss
or damage to a Vessel of any kind or whether  such Vessel or any part thereof is
rendered unfit for use or is requisitioned for hire or for title, and regardless
of any other reason whatsoever.  The Charter Guarantors have agreed to guarantee
all of the Charterer's obligations under each of the Charters.

A Subsidiary  has the right to assign the income it receives  under the relevant
Charter  without  the  Charterer's  consent;  however,  the  Subsidiary  may not
otherwise  assign its rights and  obligations  under such  Charter,  without the
prior written consent of the Charterer,  which consent shall not be unreasonably
withheld,  provided that for this purpose (i) a transfer of the legal  ownership
of the shares of a Subsidiary shall be deemed to be an assignment of such rights
and obligations by such  Subsidiary for which the  Charterer's  consent shall be
required, and (ii) without limitation,  it shall be reasonable for the Charterer
to withhold its consent to a transfer  and  assignment  by a  Subsidiary  of its
rights and  obligations  under the  relevant  Charter to a person or entity with
whom the Charterer does not wish, in good faith,  for policy or other reasons to
enter into a business relationship.

The  Charterer  may not  assign its  rights  and  obligations  under each of the
Charters  nor may it charter a Vessel by  demise,  to any  company  other than a
company of the Royal  Dutch/Shell  Group of Companies  without the prior written
consent of the relevant  Subsidiary,  which  consent  shall not be  unreasonably
withheld. The Charterer may otherwise charter a Vessel without the prior consent
of the relevant  Subsidiary,  provided that the Charterer remains responsible as
principal  (or  appoints  another  person to be  responsible  in its  stead) for
navigating  and managing such Vessel  throughout  the period of such Charter and
for  defraying  all  expenses in  connection  with such Vessel  throughout  such
period.  In any such case the  Charterer  will  remain  liable for  payment  and
performance of the Charterer's  obligations  under such Charter and the relevant
Charter Guaranty shall remain in effect with respect to such Charter.

Under each  Charter,  the  Charterer  is liable for all  expenses of  operating,
repairing  and  maintaining   the  related   Vessel,   other  than  the  initial
registration expenses of such Vessel, and bears all risk of loss of or damage to
such Vessel during the term of such Charter.  In addition,  a Subsidiary (i) has
no liability to the  Charterer  for  breaches of any of its  representations  or
warranties  made to the  Charterer  with  respect  to the  Vessel  owned by such
Subsidiary,  except to the extent of actual recoveries made by a Subsidiary from
third parties in relation thereto,  and (ii) is not liable to continue to supply
a Vessel or any part thereof if,  following  the delivery of such Vessel under a
Charter,  such Vessel or any part thereof is lost,  damaged  rendered  unfit for
use, confiscated, seized, requisitioned,  restrained or appropriated and, in any
such case or for any reason  whatsoever,  the charterhire  payable in respect of
such Vessel shall continue to be payable.

The  Charterer  is  obligated  under each  Charter  to  indemnify  the  relevant
Subsidiary and the Company in respect of events arising prior to and through the
term of the  Charters  with  respect to,  among  other  things (i) all costs and
expenses of  operating,  maintaining  and  replacing all parts in respect of the
Vessels  and (ii) all  liabilities,  claims  and  proceedings  claimed by anyone
arising in any manner out of, among other things, the operation or chartering of
the Vessels, including environmental liabilities, other than liabilities arising
out of the gross  negligence  or willful  misconduct  of such  Subsidiary or the
Company.  The  indemnities  provided in the Charters  continue in full force (in
respect of events  occurring  during the pendency of a Charter)  notwithstanding
termination  or  expiration  of such  Charter.  All  amounts  payable  under the
Charters by the Charterer, including indemnity payments, are required to be paid
free from and without deduction for certain taxes specified in the Charter.  The
Charterer  has the right at its  expense  to assume the  defense of  indemnified
claims.

During the term of each Charter, the Charterer is required, at its own cost, (a)
to maintain the related  Vessel,  as well as the  machinery,  cargo handling and
other equipment,  appurtenances and spare parts thereof,  in the same good state
of repair and efficient  operating  condition as other vessels owned or operated
by companies of the Royal Dutch/Shell Group of Companies, ordinary wear and tear
excepted,  and (b) to keep each Vessel with unexpired  classification  of Lloyds
Register of Shipping and with other required  certificates  (including,  without
limitation,  those required by the Vessel's  country of registry).  In addition,
the  Charterer  is  required  to  drydock  such  Vessel  and clean and paint its
underwater  parts whenever the same shall be necessary,  in accordance  with the
practices  applied to other  vessels owned or operated by companies of the Royal
Dutch/Shell  Group of Companies.  A Subsidiary shall have the right, at any time
on  reasonable  notice to the  Charterer and at such  Subsidiary's  expense,  to
inspect or survey the relevant  Vessel,  to ascertain  that such Vessel is being
properly  repaired and maintained,  provided that such inspection or survey will
not interfere with such Vessel's trading  requirements and such Subsidiary shall
be  required to rebate to  Charterer a sum  equivalent  to  charterhire  payable
during any period of drydocking caused solely by the subsidiary's inspection and
survey.

Pursuant to the Charters,  the Charterer is obliged to maintain marine (hull and
machinery),  war,  protection and indemnity and pollution risk insurance on each
Vessel in a manner consistent with insurance  arrangements currently in force in
relation  to  similar  vessels  owned or  operated  by  companies  of the  Royal
Dutch/Shell Group of Companies,  provided that the Charterer is entitled to self
insure with respect to marine (hull and machinery) and war risks.

The daily  charterhire  rate  payable  under each  Charter is  comprised  of two
primary  components:  (i)  the  Base  Rate,  which  is a fixed  minimum  rate of
charterhire  equal to $22,069 per Vessel per day, payable  quarterly in arrears,
and (ii) Additional Hire, which is additional  charterhire  (determined and paid
quarterly in arrears and may equal zero) that will equal the excess,  if any, of
a weighted  average of the daily time charter rates for three  round-trip  trade
routes  traditionally  served by VLCCs,  less an agreed amount of $10,500 during
the  initial  term  of  the  Charters,   and  $14,900  for  any  extended  term,
representing  daily  operating  costs  over  the  Base  Rate.  This  charterhire
computation  is  intended to enable the Company to receive the greater of (i) an
average of prevailing  spot charter rates for VLCCs trading on such routes after
deducting  daily  operating  costs of  $10,500  during the  initial  term of the
Charters, and $14,900 for any extended term and (ii) the Base Rate.

The  Charterer has also been  obligated to pay  Supplemental  Hire  quarterly in
arrears  until  January  15, 2000 in fixed  amounts  that were  calculated  with
reference to the swap fixed  interest  rate under the Credit  Facility and which
were  equivalent to amounts due under the  Amortizing  Loan.  Supplemental  Hire
therefore served the Company's business purpose of repaying the Amortizing Loan.
The Charterer was obligated to pay Supplemental Hire as set forth below:

       January 15, 1999            $1,819,615
       April 15, 1999               $1,789,599
       July 15, 1999                $1,763,484
       October 15, 1999            $1,736,769
       January 15, 2000            $1,709,153

The amount of Additional  Hire, if any, that is payable is calculated based on a
determination  of the  London  Tanker  Brokers  Panel (the  "Brokers  Panel") or
another  panel  of  brokers  mutually  acceptable  to the  Subsidiaries  and the
Charterer of the average  spot rates (the  "Average  Spot Rates") in  Worldscale
points over the three months  ending on the last day of the month  preceding the
relevant  charterhire  payment date (the "Hire  Payment  Date") on the following
three standard notional round voyage routes and cargo sizes for similar ships:

        (A) Arabian Gulf to Rotterdam with 280,000 tonnes of cargo;

        (B) Arabian Gulf to Singapore with 260,000 tonnes of cargo; and

        (C) Arabian Gulf to Japan with 260,000 tonnes of cargo.

The  determination  of  the  Brokers  Panel  shall  be  binding  upon  both  the
Subsidiaries  and the Charterer.  "Worldscale"  is an index commonly used in the
tanker industry for calculating freight rates in the spot charter market.

Industry Conditions

The oil tanker  industry has been highly  cyclical,  experiencing  volatility in
charterhire  rates and vessel values resulting from changes in the supply of and
the  demand  for crude oil and  tanker  capacity.  The  demand  for  tankers  is
influenced  by,  among  other  factors,  the demand  for crude  oil,  global and
regional economic  conditions,  developments in international  trade, changes in
seaborne and other transportation  patterns,  weather patterns,  oil production,
armed conflicts,  port  congestion,  canal closures,  embargoes and strikes.  In
addition,  the Company anticipates that the future demand for VLCCs, such as the
Vessels,  will also be dependent  upon continued  economic  growth in the United
States,  Continental  Europe and the Far East and competition from pipelines and
other  sizes  of  tankers.   Adverse  economic,   political,   social  or  other
developments  in any of  these  regions  could  have an  adverse  effect  on the
Company's  business and results of operations.  In addition,  even if demand for
crude oil grows in these areas,  demand for VLCCs may not  necessarily  grow and
may even  decline.  Demand for crude oil is affected  by,  among  other  things,
general economic conditions, commodity prices, environmental concerns, taxation,
weather  and  competition  from  alternatives  to oil.  Demand for the  seaborne
carriage of oil depends partly on the distance  between areas that produce crude
oil and areas that consume it and their demand for oil. The  incremental  supply
of tanker  capacity is a function of the  delivery of new vessels and the number
of older vessels scrapped,  in lay-up,  converted to other uses,  reactivated or
lost.  Such  supply may be  affected by  regulation  of maritime  transportation
practices by  governmental  and  international  authorities.  All of the factors
influencing  the supply of and demand for oil tankers are outside the control of
the Company, and the nature, timing and degree of changes in industry conditions
are unpredictable. Furthermore, the amount of Additional Hire will be determined
quarterly with reference to three  round-trip trade routes between the following
locations: (i) the Arabian Gulf and Rotterdam, The Netherlands, (ii) the Arabian
Gulf and Japan and (iii) the Arabian Gulf and Singapore.  Therefore,  the demand
for oil in the areas serviced by such routes could have a significant  effect on
the amount of  Additional  Hire that may be payable.  There can be no  assurance
that Additional Hire will be payable for any quarter.

VLCCs are specifically  designed for the transportation of crude oil and, due to
their size,  are used to transport  crude oil primarily from the Arabian Gulf to
the Far East, Northern Europe, the Caribbean and the Louisiana Offshore Oil Port
("LOOP").  While VLCCs are increasingly being used to carry crude oil from other
areas, any decrease in shipments of crude oil from the Arabian Gulf would have a
material  adverse  effect on the  Company  at any time after the  expiration  or
termination  of the  Charters  (or earlier if such  decrease  adversely  affects
charterhire rates for shipments from the Arabian Gulf).

Among the factors  which could lead to such a decrease are (i)  increased  crude
oil production from non-Arabian Gulf areas, (ii) increased  refining capacity in
the Arabian  Gulf area,  (iii)  increased  use of existing  and future crude oil
pipelines  in  the  Arabian   Gulf  area,   (iv)  a  decision  by  Arabian  Gulf
oil-producing  nations to increase their crude oil prices or to further decrease
or limit their crude oil  production,  (v) armed conflict in the Arabian Gulf or
along  VLCC  trading  routes,  (vi)  political  or other  factors  and (vii) the
development and the relative costs of nuclear power, natural gas, coal and other
alternative sources of energy.

VLCC demand is primarily a function of demand for Arabian Gulf crude oil,  which
in turn is  primarily  dependent  on the  economies  of the  world's  industrial
countries and  competition  from  alternative  energy  sources.  A wide range of
economic,  political,  social and other  factors  can  significantly  affect the
strength of the world's  industrial  economies and their demand for Arabian Gulf
crude oil. One such factor is the price of worldwide  crude oil. The world's oil
markets have  experienced high levels of volatility in the last 25 years. If oil
prices  were to rise  dramatically,  the  economies  of the  world's  industrial
countries  may  experience a  significant  downturn.  See Item 5.  Operating and
Financial Review and Prospects -- Operating Results -- The Tanker Market.

Vessel Values

Tanker values have generally experienced high volatility.  The fair market value
of oil tankers,  including the Vessels, can be expected to fluctuate,  depending
upon general  economic and market  conditions  affecting the tanker industry and
competition from other shipping companies, types and sizes of vessels, and other
modes of  transportation.  In  addition,  as  vessels  grow  older,  they may be
expected to decline in value. These factors will affect the value of the Vessels
at the termination of their respective  charters or earlier at the time of their
sale.

Since the mid-1970s,  during most periods there has been a substantial worldwide
oversupply of crude oil tankers,  including  VLCCs. In addition,  the market for
secondhand  VLCCs has generally been weak since the  mid-1970s.  Notwithstanding
the  aging of the  world  tanker  fleet and the  adoption  of new  environmental
regulations  which  will  result in a  phaseout  of many  single  hull  tankers,
significant deliveries of new VLCCs would adversely affect market conditions.

Loss and Liability Insurance

There  are a  number  of risks  associated  with the  operation  of  ocean-going
vessels, including mechanical failure,  collision,  property loss, cargo loss or
damage and  business  interruption  due to  political  circumstances  in foreign
countries,  hostilities  and labor  strikes.  In addition,  the operation of any
vessel is subject to the inherent possibility of marine disaster,  including oil
spills and other environmental  mishaps, and the liabilities arising from owning
and operating  vessels in  international  trade. The United States Oil Pollution
Act of 1990, or 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 and has also caused  insurers to
consider reducing available  liability coverage.  Pursuant to the Charters,  the
Charterer  will bear all risks  associated  with the  operation  of the Vessels,
including,  without  limitation,  any  total  loss of one or more  Vessels.  The
Charterer will also indemnify each  Subsidiary and the Company,  and the Charter
Guarantors have agreed to guarantee such obligation, for all liabilities arising
prior to and during the term of the Charters in connection  with the  chartering
and operation of the Vessels, including, under environmental protection laws and
regulations,  other than  liabilities  arising  out of the gross  negligence  or
willful misconduct of such Subsidiary or the Company.

The Charterer is entitled to self-insure the marine (hull and machinery) and war
risk on each Vessel.  In event of loss,  following  full payments of charterhire
under the Charter's "hell and high water" provisions, a lump sum payment will be
made to the relevant  Subsidiary on  expiration  of a Charter,  based upon three
independent shipbrokers' evaluations of fair market values of similar vessels at
the expiry of the Charter.

Protection and indemnity  insurance covers the legal liability of the Charterer,
the  Subsidiaries  and, as required,  their respective  associated  companies or
managers for their shipping  activities.  This includes the legal  liability and
other related  expenses of injury or death of crew,  passengers  and other third
parties,  loss or damage to cargo,  claims  arising from  collisions  with other
vessels,  damage to other  third-party  property,  pollution arising from oil or
other substances,  and salvage,  towing and other related costs, including wreck
removal.  The Company  expects that the  Charterer  will obtain  coverage to the
fullest  extent from time to time  available on normal terms from members of the
International Group of P&I Associations (currently  approximately $4.25 billion,
with the exception of oil pollution  liability,  which has been  available up to
$500 million per Vessel per accident  increasing  to $1.0 billion from  February
20,  2000).  The Company  believes  that the  Charterer  has entered each of the
Vessels into a P&I Association  that is a member of the  International  Group of
P&I Associations. As a member of a mutual association, the Charterer (and, under
certain  circumstances,  a  Subsidiary)  will be subject to calls payable to the
association  based on its claim records as well as the claim record of all other
members of the association.

Environmental and Other Regulations

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

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

Environmental Regulation--IMO

The United Nation's  International  Maritime  Organization,  or IMO, has adopted
regulations that set forth pollution prevention  requirements for tankers. These
regulations,  which have been  implemented  in many  jurisdictions  in which our
tankers operate, provide, in part, that:

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

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

          (2) they are capable of hydrostatically  balanced loading, which means
          that they are loaded in such a way that if the hull is breached, water
          flows into the tanker, displacing oil upwards instead of into the sea

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

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

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

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

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

The IMO recently  adopted  regulations that require the phase-out of most single
hull tankers by 2015 or earlier,  depending on the age of the vessel and whether
or not it complies with requirements for protectively located segregated ballast
tanks.  Under these new  regulations,  which became effective in September 2002,
the maximum  permissible  age for tankers  after 2007 will be 26 years.  The new
regulations also provide for increased inspection and verification requirements.

The IMO's  International  Safety  Management Code, or ISM Code, also affects our
operations. The ISM Code requires the party with operational control of a vessel
to develop a safety  management  system that includes,  among other things,  the
adoption  of  a  safety  and  environmental   protection  policy  setting  forth
instructions  and  procedures  for operating its vessels  safely and  describing
procedures for responding to emergencies.

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

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

The IMO continues to review and introduce new  regulations.  It is impossible to
predict what additional  regulations,  if any, may be passed by the IMO and what
effect, if any, such regulations might have on the operation of oil tankers.  As
a result of the oil spill in November  2002 from the loss of the m.t.  Prestige,
it is likely that more  stringent  maritime  safety rules will be imposed by the
IMO and other regulatory agencies in the future. The m.t. Prestige was a 26 year
old single hulled tanker owned and operated by a company that is not  affiliated
with us.

Environmental Regulation--OPA/CERCLA

The U.S. Oil Pollution Act of 1990, or OPA,  established an extensive regulatory
and liability regime for environmental protection and cleanup of oil spills. OPA
affects  all owners  and  operators  whose  vessels  trade with the U.S.  or its
territories or possessions,  or whose vessels operate in the waters of the U.S.,
which  include the U.S.  territorial  waters and the two hundred  nautical  mile
exclusive  economic zone of the U.S. The Comprehensive  Environmental  Response,
Compensation  and Liability Act, or CERCLA,  which also impacts our  operations,
applies to the discharge of hazardous substances whether on land or at sea.

Under OPA,  vessel  owners,  operators and bareboat or "demise"  charterers  are
"responsible parties" who are liable regardless of fault,  individually and as a
group, for all containment  costs,  clean-up costs and for other damages arising
from oil spills from their  vessels.  These other damages may include  injury to
natural  resources and real and personal  property,  loss of subsistence  use of
natural resources,  the loss of taxes,  rents,  royalties,  profits and earnings
capacity   resulting  from  an  oil  spill  and  the  cost  of  public  services
necessitated  by an oil spill.  These  "responsible  parties"  are not be liable
under OPA if the spill results solely from the act or omission of a third party,
an act of God or an act of war. OPA limits a  responsible  party's  liability to
the  greater of $1,200 per gross ton or $10  million per vessel over 3,000 gross
tons, subject to adjustment for inflation.

CERCLA,  which applies to owners and operators of vessels,  contains a liability
regime  similar to OPA and provides for  cleanup,  removal and natural  resource
damages.  Liability under CERCLA is limited to the greater of $300 per gross ton
or $5  million.  These  limits of  liability  do not apply,  however,  where the
incident is caused by violation of applicable U.S. federal safety,  construction
or operating  regulations,  or by the  responsible  party's gross  negligence or
wilful  misconduct.  These limits do not apply if the responsible party fails or
refuses to report the incident or to co-operate  and assist in  connection  with
the  substance  removal  activities.  OPA and CERCLA each  preserve the right to
recover damages under existing law, including maritime tort law. We believe that
we are in  substantial  compliance  with OPA,  CERCLA and all  applicable  state
regulations in the ports where our vessels will call.

OPA requires  owners and operators of vessels to establish and maintain with the
Coast Guard evidence of financial responsibility sufficient to meet the limit of
their  aggregate  potential  strict  liability  under OPA and CERCLA.  Under the
regulations,  evidence  of  financial  responsibility  may  be  demonstrated  by
insurance,  surety bond,  self-insurance or guaranty. Under OPA regulations,  an
owner or operator of more than one tanker must demonstrate evidence of financial
responsibility  for the entire  fleet in an amount  equal only to the  financial
responsibility  requirement of the tanker having the greatest maximum  liability
under OPA/CERCLA.  Owners or operators of tankers operating in the waters of the
U.S.  must also file  vessel  response  plans  with the Coast  Guard,  and their
tankers are required to operate in  compliance  with their Coast Guard  approved
plans.

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

Environmental Regulation--Other

Although the United States is not a party to these  conventions,  many countries
have  ratified and follow the  liability  plan adopted by the IMO and set out in
the International Convention on Civil Liability for Oil Pollution Damage of 1969
and the  Convention  for the  Establishment  of an  International  Fund  for Oil
Pollution of 1971. Under these conventions, and depending on whether the country
in which the damage results is a party to the 1992 Protocol to the International
Convention on Civil Liability for Oil Pollution  Damage,  a vessel's  registered
owner is strictly liable for pollution  damage caused in the territorial  waters
of a  contracting  state by  discharge  of  persistent  oil,  subject to certain
complete  defenses.  Under an amendment  that will come into effect  November 1,
2003 for vessels of 5,000 to 140,000 gross tons (a unit of  measurement  for the
total  enclosed   spaces  within  a  vessel),   liability  will  be  limited  to
approximately  $6.1 million plus $858 for each additional  gross ton over 5,000.
For  vessels  of  over  140,000  gross  tons,   liability  will  be  limited  to
approximately  $122.1 million. The current maximum amount is approximately $81.2
million.  The right to limit  liability  is  forfeited  under the  International
Convention on Civil Liability for Oil Pollution Damage where the spill is caused
by the  owner's  actual  fault and under  the 1992  Protocol  where the spill is
caused by the owner's  intentional or reckless conduct.  In jurisdictions  where
the International Convention on Civil Liability for Oil Pollution Damage has not
been adopted,  various legislative schemes or common law governs,  and liability
is  imposed  either  on the  basis  of  fault  or in a  manner  similar  to that
convention.  We believe that our P&I insurance  covers the  liability  under the
plan adopted by the IMO.

The European Union is  considering  legislation  that would:  (1) ban manifestly
sub-standard vessels (defined as those over 15 years old that have been detained
by port  authorities at least twice in a six month period) from European  waters
and create an obligation of port states to inspect vessels posing a high risk to
maritime safety or the marine  environment;  (2) provide the European Commission
with greater authority and control over classification societies,  including the
ability to seek to suspend or revoke the authority of negligent  societies;  and
(3)  accelerate  the phasing in of  double-hull  tankers on the same schedule as
that required  under OPA. The European  Union  adopted a legislative  resolution
confirming an accelerated  phase-out  schedule for  single-hull  tankers in line
with the schedule adopted by the IMO. Italy announced a ban of single-hull crude
oil tankers over 5,000 dwt from most Italian ports, effective April 2001.

In addition, most U.S. states that border a navigable waterway have enacted laws
that impose strict  liability for clean-up  costs and damages  resulting  from a
discharge  of oil or a release of a hazardous  substance.  As  permitted by OPA,
these state laws may provide for unlimited  liability  for oil spills  occurring
within their boundaries.

Sale of Vessels and Replacement Charters

At least five months  prior to the end of the term of a Charter  (including  the
extension thereof),  the Company is obligated pursuant to its Bye-Laws to call a
special  meeting  of  its   shareholders  for  the  purpose  of  presenting  the
shareholders with a proposal to cause the Company to sell the related Vessel (or
the  Subsidiary  owning  such  Vessel)  and  cause the  distribution  of the net
proceeds of such sale to the  shareholders to the extent permitted under Bermuda
law. The materials to be distributed  to  shareholders  in connection  with such
meeting  will  include a  recommendation  by the Board as to whether it believes
that the sale of the Vessel is in the best interest of the Company or whether an
alternative plan, such as attempting to arrange a replacement charter,  might be
of greater benefit to the Company. Replacement charters may include shorter term
time  charters and  employing  the Vessels on the spot charter  market (which is
subject  to  greater  fluctuation  than  the  time  charter  market).  Any  such
replacement  charters would likely require the Company to incur greater expenses
(which may reduce the  amounts  available  to pay  dividends  to  shareholders),
including  insurance,  maintenance,  crew labor costs, vessel registration costs
and, in the case of spot  charters,  bunker  (fuel oil) costs and port  charges.
Also, the Company's ability to recharter or sell the Vessels would be subject to
the rights of the lenders  under the Credit  Facility and the rights of the U.K.
Lessor under the U.K. Finance Lease Transactions. Any proposal to cause the sale
of a Vessel (or the Subsidiary  owning such Vessel) and he  distribution  of the
resulting net proceeds  (subject to any mandatory  prepayments  under the Credit
Facility)  will be adopted if approved by he holders of a majority of the Common
Shares voting at a duly  constituted  meeting of the holders  thereof at which a
quorum is present and voting.  If not directed by the Company's  shareholders to
cause the sale of the Vessel (or the Subsidiary owning such Vessel), the Company
will attempt to recharter the Vessel on an arm's-length basis upon such terms as
the Manager  recommends,  subject to approval by the Board,  or  implement  such
other  plan as the  Board  shall  approve.  Alternatively,  if  directed  by the
shareholders  to  sell  a  Vessel,  the  Manager,  pursuant  to  the  Management
Agreement,  shall  solicit bids for the sale of such Vessel  through one or more
independent  shipbrokers.  In  such  case,  the  Manager  will be  obligated  to
recommend  the  sale  of the  Vessel  to the  bidder  whose  bid is on the  most
favorable  terms to the Company.  Neither the Charterer,  the Guarantors nor any
other  company  of the  Royal  Dutch/Shell  Group of  Companies  shall  have any
preferential  rights with respect to any sale or  rechartering  of any Vessel in
such instance.

Whether or not all or any of the Charters are renewed, each of the Primary Loans
will mature in July 2004,  seven years and six months after the Delivery Date of
the related Vessel, and the Company will be obligated to repay or refinance such
borrowings at such time.  There is no assurance that the Company will be able to
repay or refinance such borrowings. In addition, as noted above, if the Charters
for one or  more of the  Vessels  are  renewed  and the  Company  is  unable  to
refinance  the related  Primary Loans on  acceptable  terms,  the Company may be
forced to attempt to sell the Vessels subject to the Charters.

There can be no  assurance as to the ability of the Manager to sell or recharter
a Vessel or as to the amount or timing of any payments to be received therefrom.

Any  sale  or any  alternative  plan  will  also  be  subject  to the  Company's
obligations under the U.K. Finance Lease Transactions.

C.  ORGANIZATIONAL STRUCTURE

The  Company  has  five  wholly-owned  subsidiaries,  that  each  own one of the
Vessels. The following table sets out the details of the Subsidiaries:

                               COUNTRY OF               OWNERSHIP        VESSEL
NAME                           INCORPORATION            INTEREST         OWNED

Cedarhurst Tankers LDC         Cayman Islands           100%             Magdala
Hewlett Tankers LDC            Cayman Islands           100%             Megara
Inwood Tankers LDC             Cayman Islands           100%             Murex
Lawrence Tankers LDC           Cayman Islands           100%             Macoma
Woodmere Tankers LDC           Cayman Islands           100%             Myrina

D.  PROPERTY, PLANT AND EQUIPMENT

Each Vessel is an  approximately  298,000  deadweight  tonne ("dwt") double hull
VLCC built by Daewoo Heavy  Industries,  Ltd. (the "Builder") at its shipyard in
Korea. The Vessels meet all material existing regulatory  requirements affecting
the Vessels and their operations.  The name, dwt, hull type and date of original
delivery from the Builder's yard are set forth below.

                    APPROXIMATE                            DATE OF DELIVERY FROM
VESSEL NAME         DWT                 HULL TYPE          BUILDER'S YARD

Murex               298,000             Double             June 2, 1995
Macoma              298,000             Double             August 1, 1995
Magdala             298,000             Double             September 28, 1995
Myrina              298,000             Double             November 15, 1995
Megara              298,000             Double             March 5, 1996

The Vessels are modern,  high-quality  double hull tankers designed for enhanced
safety and reliability  and for relatively low operating and maintenance  costs.
Design features include a cargo system designed for optimum port performance,  a
high grade  anti-corrosion  paint system and pipeline  materials which have been
specified  with a view to long service,  an efficient  power  generation  system
including shaft generator, additional firefighting and safety equipment over and
above minimum standards and improved structural design.

The Vessels are all registered in the Isle of Man.

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


ITEM 5.  OPERATING AND FINANCIAL REVIEW AND PROSPECTS

A.  OPERATING RESULTS

In February,  1997, the Company offered and sold to the public 16,100,000 Common
Shares at the initial public offering price of $20 per share. Simultaneously the
Company  sold  1,000,000  Common  Shares  at a  price  of $20 per  share  to ICB
International.

The Company's  five  subsidiaries  each  purchased one VLCC from their  previous
owner on  February  27,  1997  and  immediately  delivered  the  Vessels  to the
Charterer under five separate "hell and high water" bareboat charters, each with
a minimum  term of seven  years with an option for the  Charterer  to extend the
period for each  Vessel with  another  seven year  period.  The first seven year
period is until February 2004.

Under the Charters,  the  Charterer  pays the higher of a base rate of hire or a
spot market  related rate. The  charterhire is payable  quarterly in arrears and
the spot market rate of hire is assessed on a quarterly  basis.  In each quarter
where the spot market  related rate is lower than the base rate the  charterhire
payable is the base rate. In each quarter where the spot market  related rate is
higher than the base rate, the spot market related rate is payable.

The base rate is the  aggregate of a bareboat  charter  component of $22,069 per
vessel per day and an  operating  element of $10,500 per day (in the first seven
years) which result in a time charter equivalent rate of $32,569 per day.

The spot market  related rate is assessed  through a formula  agreed between the
Company  and the  Charterer  and based on market  awards  provided by the London
Tanker Broker Panel. The London Tanker Broker Panel is asked to provide for each
quarter the average spot rates for three  standard  notional  round  voyages for
ships similar to the Vessels:

i)   Arabian Gulf to Rotterdam with 280,000 tonnes of cargo;

ii)  Arabian Gulf to Singapore with 260,000 tonnes of cargo; and

iii) Arabian Gulf to Japan with 260,000 tonnes of cargo.

The relevant  spot rates are  weighted  with (i)  representing  50% and (ii) and
(iii) each representing 25% when the spot market related rate is determined.

The  calculated  spot market  related rates for each of the years ended December
31, 2002, 2001, and 2000 were:

                       2002             2001             2000

First Quarter      $  16,327         $  68,506        $  21,713
Second Quarter     $  13,057         $  42,949        $  38,684
Third Quarter      $   9,093         $  25,163        $  59,056
Fourth Quarter     $  31,347         $  33,360        $  78,145

The  strengthening  of the spot market rates that  commenced  in 2000  continued
during the first half of 2001 before  there was a  significant  weakening in the
spot  market that  continued  through  the first  three  quarters of 2002.  As a
consequence,  no Additional Hire was paid during this period. The fourth quarter
of 2002 saw strengthening market rates, however, the rebound was not significant
enough to result in the payment of Additional Hire.

The Tanker Market

After a very strong period in 2000 and first half of 2001, VLCC rates started to
decline as the global  economy slowed down and OPEC decided to cut production to
maintain oil prices in the OPEC band of US$22-28 per barrel.  The tanker  market
showed no  improvement in 2002 until the beginning of the fourth quarter where a
seasonal  increase  in  demand  and  requirement  for  restocking  enticed  OPEC
countries  to increase  production.  The strike in  Venezuela  in December  2002
resulted  in a loss  of  short-haul  oil to  the  United  States  and  the  lost
production needed to be replaced from more distant  suppliers.  This resulted in
steeply  rising tanker rates and at the end of 2002 VLCCs were fixed in the spot
market at close to US$100,000 per day in time charter equivalent  earnings.  The
strong market continued into the first quarter of 2003. Due to low freight rates
in the first three  quarters  modern VLCC's are estimated to have earned,  as an
average for 2002, approximately only US$22,000 per day compared to US$34,000 per
day in 2001.  The lengthy  period of slow  activity  led to the  scrapping of 35
VLCCs in 2002.

Critical Accounting Policies and Estimates

The  Company's  accounting  policies  are more fully  described in Note 2 of the
Notes to Consolidated Financial Statements.  As disclosed in Note 2 of the Notes
to Consolidated Financial Statements, the preparation of financial statements in
conformity with accounting principles generally accepted in the United States of
America  requires  management  to make  estimates and  assumptions  about future
events  that  affect  the  amounts  reported  in the  financial  statements  and
accompanying  notes.  Future events and their effects cannot be determined  with
absolute  certainty.  Therefore,  the  determination  of estimates  requires the
exercise  of  judgment.   Actual  results  inevitably  will  differ  from  those
estimates, and such differences may be material to the financial statements.

The most  significant  accounting  estimates  inherent in the preparation of the
Company's   financial   statements   include   estimates   associated  with  the
determination  of (i) the estimated useful lives of the Company's  vessels,  and
(ii) the estimated fair values of the Company's  interest rate swap  agreements.
Various  assumptions  and other  factors  underlie  the  determination  of these
significant estimates.

The process of determining significant estimates is fact specific and takes into
account factors such as historical experience, current and expected economic and
industry  conditions,  present and expected conditions in the financial markets,
and in some cases, the credit worthiness of counter parties to contracts held by
the Company.  The Company constantly  re-evaluates these significant factors and
makes adjustments where facts and circumstances  dictate.  Historically,  actual
results  have  not  significantly  deviated  from  those  determined  using  the
estimates described above.

YEAR ENDED DECEMBER 31, 2002 COMPARED TO YEAR
ENDED DECEMBER 31, 2001

Charterhire

In 2002,  charterhire  revenue totaled  $40,275,925,  a decrease of 35% compared
with  $61,534,335  in the year ended  December  31,  2001.  In 2001 the  Company
received total Additional Hire of $21,258,410, primarily relating to earnings in
the first  half of the year.  In the  second  half of 2001 the  market  began to
weaken and this continued into 2002 with no recovery until the fourth quarter of
2002. The  strengthening in the fourth quarter was not sufficient to require any
Additional  Hire  payment and  therefore no  Additional  Hire was paid in fiscal
2002.

Operating Expenses

Operating  expenses  increased  in 2002  due to an  increase  in  administrative
expenses.  This  was the  result  of an  increase  in the  premium  paid for the
Company's  directors' and officers'  liability  insurance.  The Company does not
incur and does not expect to incur significant  administrative  expenses,  apart
from premiums in respect of the Company's  directors'  and officers' and general
liability insurance,  which the Company prepays on an annual basis. There can be
no  assurance,  however,  that the Company will not have other cash  expenses or
contingent liabilities for which reserves will be required.

Interest Income and Expense

Interest  income  decreased  by $172,334 to $33,040 in 2002.  This  reflects the
lower cash in 2002 due to the lack of Additional Hire revenues in this period.

Interest  expense  decreased by 0.8% to  $8,938,483  in 2002 from  $9,008,839 in
2001.  Interest  expense relates  entirely to the Primary Loan in 2002 and 2001.
Amortization  of the  Credit  Facility  expense,  the  main  component  of other
financial  costs,  was $371,543 in 2002 and 2001.  In addition,  during 2002 and
2001,  the Company  incurred a fee to the agent bank for the Credit  Facility in
the amount of $50,000.  There can be no assurance that the Company will not have
other financial expenses for which reserves will be required.

YEAR ENDED DECEMBER 31, 2001 COMPARED TO YEAR
ENDED DECEMBER 31, 2000

Charterhire

In 2001,  charterhire  revenue totaled  $61,534,335,  a decrease of 19% compared
with  $76,335,975  in the year ended  December  31, 2000.  In 2000,  the Company
benefited from the  strengthening  in the tanker market and, in accordance  with
the terms of the Charters,  received Additional Hire. The Additional Hire, which
is calculated on a quarterly basis, totalled $21,258,410 for 2001, equivalent to
an average of $11,648  per day per vessel  compared  with  $35,949,705  in 2000,
equivalent to an average of $19,645 per day per vessel.

Operating Expenses

Operating  expenses  decreased  in 2001  due to a  reduction  in  administrative
expenses.  This was achieved  primarily  through a reduction in the premium paid
for the Company's directors' and officers' liability insurance.

Interest Income and Expense

Interest  income  increased  by $19,898 to $205,374 in 2001.  This  reflects the
higher  cash  balances  during  the  first  part of 2001  due to the  additional
revenues in this period.

Interest  expense  increased  by 0.8% to $9,008 839 in 2001 from  $8,933,869  in
2000.  Interest  expense relates  entirely to the Primary Loan in 2001 and 2000,
with  the  exception  of  $5,101  relating  to  the  Amortizing  Loan  in  2000.
Amortization  of the  Credit  Facility  expense,  the  main  component  of other
financial  costs,  was $371,543 in 2001 and 2000.  In addition,  during 2001 and
2000,  the Company  incurred a fee to the agent bank for the Credit  Facility in
the amount of $50,000.

Inflation

Management  does not  believe  that  inflation  will  significantly  affect  the
Company's  expenses over the term of the Charters.  However,  during the term of
the  Charters,  inflationary  pressures  could result in increased  spot charter
rates,  thereby resulting in an increase in Additional Hire being payable by the
Charterer.  On the other hand, in the event that inflation becomes a significant
factor in the world economy,  management  believes that  inflationary  pressures
could  materially and adversely  affect the market for crude oil and oil tankers
(including the Vessels) and result in increased vessel  operating  costs.  These
factors  may affect the  Charterer's  decision  as to whether to extend the term
with  respect  to one or more of the  Charters  and  may be  significant  to the
Company  in the  event  that the  Charterer  does not  exercise  such  rights of
extension.

The Company's  borrowings  under the Credit Facility bear interest at a floating
rate.  The Company has entered  into the Swap,  which  effectively  converts its
obligations  to a fixed  rate,  assuming  the  Swap  Counterparty  performs  its
obligations thereunder. In the event of a default by such Swap Counterparty, the
Company could face increased interest expense.

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 results following expiration of termination
of the  Charters  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.

B.  LIQUIDITY AND CAPITAL RESOURCES

Total  assets of the Company at December 31, 2002,  were  $347,824,729  compared
with  $366,204,004 at December 31, 2001. The Company's  shareholders'  equity at
December 31, 2002, was $208,639,114  compared with  $229,077,216 at December 31,
2001. This decrease in shareholders'  equity of $20,438,102 is due to net income
for 2002 of $12,550,786  less  distributions to the shareholders of $30,951,000.
In  addition,  with the  adoption of SFAS 133, the Company has recorded the fair
value of its interest rate swap agreement.  The interest rate swap is designated
as a cash flow hedge  against  future  variable-rate  interest  payments  on the
Company's  debt.  SFAS No.  133  requires  that all  derivative  instruments  be
recorded on the  balance  sheet at their fair  value.  The Company is  recording
changes in the fair value of the interest rate swap each period as an asset or a
liability,  as  appropriate,  with an  equal  adjustment  to  accumulated  other
comprehensive  income, which is a component of shareholders' equity. At December
31, 2002 the derivative  liability was  $11,590,392  compared with $9,552,504 at
December 31, 2001,  reflecting the  unfavorable  fair value of the interest rate
swap at that date.

Cash generated from operating activities in 2002 was $30,898,947 and $30,951,000
was distributed to shareholders.

The  Company's  sources of capital have been the proceeds of its initial  public
offering and the Credit Facility and the U.K.  Finance Lease.  While the Manager
is required to bear the  Company's  expenses  (other than certain  extraordinary
expenses,  insurance premiums for directors' and officers' liability and general
liability  insurance  and  principal  and  interest  on  account  of the  Credit
Facility),  the Manager has no additional  obligation to make additional capital
contributions  to the  Company.  The  Company has  sufficient  sources of income
through  the  payment of  charterhire  by the  Charterer  during the term of the
Charters to pay ordinary  recurring  expenses that are not borne by the Manager.
However,  there can be no  assurance  that the Company  will be able to repay or
refinance its borrowings  when the Primary Loan becomes due, or that it will not
incur extraordinary expenses.

Recently Issues Accounting Standards

In June 2001, the U.S.  Financial  Accounting  Standards  Board ("FASB")  issued
Statement  of  Financial   Accounting  Standards  ("SFAS")  No.  141,  "Business
Combinations"   which  requires  the  application  of  the  purchase  method  in
accounting  for  business  combinations  including  the  identification  of  the
acquiring enterprise for each transaction.  SFAS No. 141 applies to all business
combinations  initiated  after  June  30,  2001  and all  business  combinations
accounted for by the purchase method that are completed after June 30, 2001. The
adoption of SFAS No. 141 by the Company did not have any impact on the Company's
consolidated financial position or results of operations.

In June 2001,  the FASB  issued  SFAS No. 142,  "Goodwill  and Other  Intangible
Assets". SFAS No. 142 applies to all acquired intangible assets whether acquired
singly, as part of a group, or in a business  combination.  The adoption of SFAS
No.  142 by the  Company  on  January  1,  2002 did not have any  impact  on the
Company's consolidated financial position or results of operations.

In June 2001, the FASB issued SFAS No. 143, "Accounting for the Asset Retirement
Obligations".  Under SFAS No. 143, an entity shall recognize the fair value of a
liability  for an  asset  retirement  obligation  in the  period  in which it is
incurred if a  reasonable  estimate of fair value can be made.  If a  reasonable
estimate  of fair  value  cannot  be made in the  period  the  asset  retirement
obligation  is incurred,  the liability  shall be  recognized  when a reasonable
estimate of fair value can be made. Upon initial  recognition of a liability for
an asset retirement  obligation,  an entity shall capitalize an asset retirement
cost by increasing the carrying  amount of the related  long-lived  asset by the
same amount as the liability.  An entity shall subsequently  allocate that asset
retirement  cost to expense  using a  systematic  and  rational  method over its
useful  life.  SFAS No. 143  applies to legal  obligations  associated  with the
retirement  of a tangible  long-lived  asset that result  from the  acquisition,
construction,  or development and/or the normal operation of a long-lived asset,
with limited  exceptions.  SFAS No. 143 does not apply to obligations that arise
solely  from a plan to  dispose  of a  long-lived  asset,  nor  does it apply to
obligations that result from the improper operation of an asset. SFAS No. 143 is
effective for fiscal years beginning after December 15, 2002. Management has not
completed  their  evaluation  of the  impact  of SFAS No.  143 on the  Company's
results of operations or financial position. However, management does not expect
that the  adoption  of the SFAS No.  143 on January 1, 2003 will have a material
impact on the Company's consolidated financial position or results of operations
In October 2001, the FASB issued SFAS No. 144, "Accounting for the Impairment or
Disposal of Long-Lived  Assets".  The  objectives of SFAS No. 144 are to address
significant issues relating to the  implementation of SFAS No. 121,  "Accounting
for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed
Of", and to develop a single accounting model based on the framework established
in SFAS No. 121 for  long-lived  assets to be disposed of by sale.  SFAS No. 144
requires that  long-lived  assets that are to be disposed of by sale be measured
at the lower of book value or fair value less costs to sell.  Additionally,  the
standard expands the scope of discontinued  operations to include all components
of an entity  with  operations  that can be  distinguished  from the rest of the
entity and will be  eliminated  from the ongoing  operations  of the entity in a
disposal transaction.  The adoption of SFAS No. 144 by the Company on January 1,
2002 did not have any impact on the Company's consolidated financial position or
results of operations.

In April 2002, the FASB issued SFAS No. 145,  "Rescission of FASB Statements No.
4, 44, and 64,  Amendment of FASB Statement No. 13, and Technical  Corrections."
SFAS  No.  145  rescinds   SFAS  No.  4,   "Reporting   Gains  and  Losses  from
Extinguishment  of  Debt,"  and SFAS No.  64,  "Extinguishments  of Debt Made to
Satisfy  Sinking-Fund  Requirements."  SFAS No. 145 also  rescinds  SFAS No. 44,
"Accounting for Intangible  Assets of Motor  Carriers." SFAS No. 145 also amends
SFAS No. 13, "Accounting for Leases," to eliminate an inconsistency  between the
required accounting for sale-leaseback  transactions and the required accounting
for certain lease  modifications  that have economic effects that are similar to
sale-leaseback  transactions.  Lastly,  SFAS No. 145 also amends other  existing
authoritative  pronouncements  to make various  technical  corrections,  clarify
meanings,  or describe their  applicability  under changed  conditions.  Certain
provisions  of SFAS No. 145 became  effective  during  2002 but did not have any
impact  on  the  Company's   consolidated   financial  position  or  results  of
operations.  The remaining  provisions  become effective in 2003, but management
does not  expect  that  such  provisions  will  have a  material  impact  on the
Company's consolidated financial position or results of operations.

In June 2002,  the FASB issued SFAS No. 146,  "Accounting  for Costs  Associated
with Exit or Disposal  Activities." Under SFAS No. 146, the Company will measure
costs  associated with an exit or disposal  activity at fair value and recognize
costs in the period in which the  liability is incurred  rather than at the date
of a commitment to an exist or disposal  plan.  The Company is required to adopt
SFAS No. 146 for all exit and disposal  activities  initiated after December 31,
2002. Management does not expect that the adoption of the SFAS No. 146 will have
a material impact on the Company's consolidated financial position or results of
operations.

In November 2002, the FASB issued Interpretation 45, "Guarantor's Accounting and
Disclosure  Requirements  for  Guarantees,   Including  Indirect  Guarantees  of
Indebtedness of Others." Interpretation 45 elaborates on the existing disclosure
requirements  for most  guarantees,  including loan  guarantees  such as standby
letters  of  credit.  It also  clarifies  that at the  time a  company  issues a
guarantee,  the company must recognize an initial  liability for the fair value,
or market  value,  of the  obligations  it assumes  under the guarantee and must
disclose that  information in its interim and annual financial  statements.  The
provisions  related to recognizing a liability at inception of the guarantee for
the fair  value  of the  guarantor's  obligations  does  not  apply  to  product
warranties  or  to  guarantees   accounted  for  as  derivatives.   The  initial
recognition and initial  measurement  provisions apply on a prospective basis to
guarantees  issued or modified  after  December  31, 2002.  Management  does not
expect that the  adoption  of the  recognition  and  measurement  provisions  of
Interpretation  45 will have a  material  impact on the  Company's  consolidated
financial position or results of operations.

In January 2003, the FASB issued  Interpretation 46,  "Consolidation of Variable
Interest  Entities." In general,  a variable  interest  entity is a corporation,
partnership, trust, or any other legal structure used for business purposes that
either (a) does not have equity  investors  with voting rights or (b) has equity
investors that do not provide sufficient  financial  resources for the entity to
support its activities. Interpretation 46 requires a variable interest entity to
be  consolidated  by a company if that  company is subject to a majority  of the
risk of loss from the  variable  interest  entity's  activities  or  entitled to
receive a majority of the entity's  residual returns or both. The  consolidation
requirements  of  Interpretation  46  apply  immediately  to  variable  interest
entities created after January 31, 2003. The consolidation requirements apply to
older entities in the first fiscal year or interim period  beginning  after June
15, 2003. Management does not expect that the adoption of Interpretation 46 will
have a material  impact on the  Company's  consolidated  financial  position  or
results of operations.

C.   RESEARCH AND DEVELOPMENT, PATENTS AND LICENSES, ETC.

Not applicable

D.   TREND INFORMATION

The oil tanker  industry has been highly  cyclical,  experiencing  volatility in
charterhire  rates and vessel values resulting from changes in the supply of and
demand for crude oil and tanker capacity. See Item 4. Information on the Company
- Business Overview - Industry Conditions.

According to preliminary data from industry  sources,  which the Company has not
verified,  there was a  marginal  increase  in global  oil  demand in the fourth
quarter of 2002 compared  with 2001.  OPEC  production,  which has a significant
impact on demand for VLCCs,  declined  on a  quarterly  basis  through the first
three quarters of 2002 and average OPEC supply in this period fell below that of
2001.  With the strong  market  continuing  in the first  quarter of 2003,  OPEC
supply in the first half on 2003 is expected to be higher than the corresponding
period of 2002.


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           Position
----                     ---           ---------

Ola Lorentzon            53            Director and Chairman
Tor Olav Troim           40            Director, Chief Executive
                                          Officer and Vice-Chairman
Douglas C. Wolcott       71            Director
David M. White           61            Director
Timothy J. Counsell      44            Director
Kate Blankenship         38            Chief Financial Officer and Secretary

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

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

Kate Blankenship         38            Director, Chairman and Secretary
Tom E. Jebsen            45            Director and Vice-Chairman
Timothy J. Counsell      44            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 has also been Managing  Director of
Frontline  Management  AS, a  subsidiary  of  Frontline,  since April 2000.  Mr.
Lorentzon was a director of the United  Kingdom  Protection  and Indemnity  Club
until 2002.  Until 2000 Mr.  Lorentzon was a director of The Swedish  Protection
and  Indemnity  Club  (SAAF),  Swedish  Ships  Mortgage  Bank  and  The  Swedish
Shipowners' Association,  Deputy Chairman of the Liberian Shipowners Council and
a member of the International Association of Tanker Owners (Intertanko) Council.

Tor Olav Troim has been a director, Vice-Chairman and Chief Executive Officer of
the Company since May 26, 2000. Mr. Troim has been a director of Frontline since
July 1,  1996.  Mr.  Troim  also  serves  as a  director  of ICB  and  Frontline
Management AS, both subsidiaries of Frontline. He is a director of Aktiv Inkasso
ASA, Northern Oil ASA, both Norwegian Oslo Stock Exchange listed  companies.  He
is also a director of Northern Offshore Ltd. and Golar LNG Limited, both Bermuda
companies  listed  on  the  Oslo  Stock  Exchange.  Prior  to his  service  with
Frontline, from January 1992, Mr. Troim served as Managing Director and a member
of the board of Directors of DNO AS, a Norwegian oil company.

Douglas C. Wolcott has 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.

Timothy J.  Counsell has been a director of the Company since March 27, 1998 and
a director of the Manager since May 14, 1999.  Mr.  Counsell is a partner of the
law firm of Appleby Spurling & Kempe,  Bermudian  counsel to the Company and has
been with that firm since  1990.  Mr.  Counsell  is  currently  a director of BT
Shipping  Limited  and  of  Benor  Tankers  Ltd,   alternate  director  of  Bona
Shipholding Ltd and Resident Representative of Mosvold Shipping.

Kate Blankenship has been Chief Financial Officer of the Company since April 17,
2000 and Secretary of the Company since December 27, 2000. Mrs.  Blankenship has
been a director  and Chairman of the Manager  since March 2000 and  Secretary of
the Manager since December 28, 2000. Mrs.  Blankenship has been Chief Accounting
Officer and Secretary of Frontline since 1994. Prior to joining  Frontline,  she
was a  Manager  with  KPMG  Peat  Marwick  in  Bermuda.  She is a member  of the
Institute of Chartered Accountants in England and Wales.

Tom E. Jebsen has been a director of the Manager  since March 2000.  Mr.  Jebsen
has served as Chief Financial  Officer of Frontline  Management since June 1997.
From December 1995 until June 1997, Mr. Jebsen served as Chief Financial Officer
of  Tschudi & Eitzen  Shipping  ASA,  a  publicly  traded  Norwegian  shipowning
company. From 1991 to December 1995, Mr. Jebsen served as Vice President of Dyno
Industrier ASA, a publicly traded Norwegian explosives  producer.  Mr. Jebsen is
also a director of Asuranceforeningen Skuld, Unitas, a mutual hull and machinery
club and Hugin AS, an internet company.

Management Agreement

Under the Management  Agreement the Manager is required to manage the day-to-day
business of the Company subject,  always,  to the objectives and policies of the
Company  as  established  from time to time by the  Board.  All  decisions  of a
material  nature  concerning  the  business of the  Company are  reserved to the
Company's Board of Directors.  The Management  Agreement will terminate in 2012,
unless earlier terminated pursuant to the terms thereof, as discussed below.

For its services  under the Management  Agreement,  the Manager is entitled to a
Management Fee equal to $750,000 per annum. The Company believes that these fees
are substantially on the same terms that would be obtained from a non-affiliated
party.  The  Manager was not  affiliated  with the  Company,  the  Charterer  or
Guarantors at the time these fees were negotiated.

Pursuant to the  Management  Agreement,  the Manager is required to pay from the
Management  Fee,  on  behalf  of the  Company,  all of  the  Company's  expenses
including the Company's directors' fees and expenses;  provided,  however,  that
the Manager is not obligated to pay, and the Company is required to pay from its
own funds (i) all expenses,  including attorneys' fees and expenses, incurred on
behalf of the Company in connection with (A) the closing of the Company's public
offering  and all fees and expenses  related  thereto and to the  documents  and
agreements  described  herein,  including in connection with the Credit Facility
and the U.K.  Finance  Leases,  (B) any  litigation  commenced by or against the
Company  unless  arising  from  the  Manager's   gross   negligence  or  willful
misconduct,  and  (C)  any  investigation  by any  governmental,  regulatory  or
self-regulatory  authority involving the Company or the Offerings unless arising
from the Manager's gross negligence or willful misconduct, (ii) all premiums for
insurance of any nature,  including directors' and officers' liability insurance
and  general  liability  insurance,  (iii)  all  costs  in  connection  with the
administration  and the  registration  and  listing of the Common  Shares,  (iv)
principal and interest on the Credit  Facility,  (v) brokerage  commissions,  if
any, payable by the Company, (vi) all costs and expenses required to be incurred
or paid by the Company in connection with the redelivery of any Vessel following
the  expiration  or earlier  termination  of the  related  Charter,  (including,
without  limitation,  any  drydocking  fees and the cost of special  surveys and
appraisals)  and (vii) any amount due to be paid by the Company  pursuant to the
U.K. Finance Lease Transactions.

Notwithstanding the foregoing, the Manager will have no liability to the Company
under the Management  Agreement for errors of judgment or negligence  other than
its gross negligence or willful misconduct.

In the event the Charterer  shall notify a Subsidiary that it will not extend or
renew a Charter  for a Vessel,  the  Manager is  required  under the  Management
Agreement  to analyze the  alternatives  available to the Company for the use or
disposition of such Vessel, including the sale of such Vessel (or the Subsidiary
owning  such  Vessel) and the  distribution  of the  proceeds  to the  Company's
shareholders,  and to  report  to the  Board  with its  recommendations  and the
reasons for such  recommendations  at least five months before the expiration of
such Charter. If directed by the Company's shareholders to sell a Vessel (or the
Subsidiary owning such Vessel), the Manager is required upon the Board's request
to solicit  bids for the sale of such  Vessel  (or the  Subsidiary  owning  such
Vessel) for the  presentation  to the Board.  In such case,  the Manager will be
obligated  to  recommend  the sale of the Vessel to the bidder which has offered
the bid most economically favorable to the Company and the holders of the Common
Shares. The Manager will receive a commission equal to 1% of the net proceeds of
such sale unless  sold to the Manager or an  affiliate  of the  Manager.  If not
directed by the Company shareholders to sell the Vessel, the Manager is required
to attempt to recharter  the Vessel on an  arms-length  basis upon such terms as
the Manager deems appropriate, subject to the approval of the Board. The Manager
will receive a commission  equal to 1.25% of the gross freight  earned from such
rechartering (which is the standard industry  commission).  In either such case,
the Manager,  on behalf of the Company,  may utilize the services of brokers and
lawyers, and enter into such compensation arrangements with them, subject to the
Board's approval, as the Manager deems appropriate.

If, upon the expiration of a Charter,  the Company  undertakes  any  operational
responsibility  with  respect to the related  Vessel and requests the Manager to
perform any of such  responsibility  on the Company's  behalf,  the parties will
negotiate a new fee and expense arrangement.  If the parties are unable to reach
a new fee and expense  arrangement,  either party may terminate  the  Management
Agreement on 30 days' notice to the other party.

In addition to the  circumstance  set forth above, the Company may terminate the
Management  Agreement  at any time upon 30 days'  notice to the  Manager for any
reason,  provided  that any such  termination  shall  have  been  approved  by a
resolution  duly  adopted  by the  affirmative  vote of the  holders of at least
66-2/3% of the Company's  outstanding  Common Shares.  The Company may terminate
the  Management  Agreement at any time upon five  business  days' prior  written
notice to the Manager in the event of the Manager's material breach thereof, the
failure of the Manager to maintain adequate  authorization to perform its duties
thereunder,  the Manager's insolvency, in the event that it becomes unlawful for
the Manager to perform  its duties  thereunder  or if the  Manager  ceases to be
wholly-owned, directly or indirectly, by ICB or its successor as ultimate parent
of the Manager.  Frontline,  with its  acquisition of ICB, is ICB's successor as
ultimate  parent of the  Manager.  The  Manager  may  terminate  the  Management
Agreement  upon ten business  days' prior  written  notice to the Company in the
event that the Company  undergoes a "change of control" which is the election of
any director whose election was not recommended by the then current Board.  Upon
any termination of the Management Agreement, the Manager is required to promptly
wind up its services thereunder in such a manner as to minimize any interruption
to the Company's  business and submit a final  accounting of funds  received and
disbursed  under the  Management  Agreement  to the Company and any  undisbursed
funds of the Company in the  Manager's  possession  or control  will be promptly
paid by the Manager as directed by the Company. The Company believes that in the
case of any termination of the Management Agreement, the Company could obtain an
appropriate alternative arrangement for the management of the Company,  although
there can be no assurance that such alternative  arrangement would not cause the
Company to incur additional cash expenses.  In the case of a termination without
cause by the  Company  upon a  resolution  adopted by the holders of at least 66
2/3% of the Company's  Common  Shares (as described  above) or by the Manager in
the case of a "change  in  control,"  the  Company  shall pay to the  Manager an
amount equal to the present value  calculated at a discount rate of 5% per annum
of  all  fees  which  the  Manager  would  have  received  through  the  seventh
anniversary  of the  Delivery  Date  in the  absence  of such  termination,  and
following the seventh anniversary of the Delivery Date, the Company shall pay to
the Manager an amount equal to the present  value  calculated at a discount rate
of 5% per annum of all fees which the Manager  would have  received  through the
fifteenth anniversary of the Delivery Date in the absence of such termination.

B.   COMPENSATION

Pursuant to the Management  Agreement,  the Manager pays from the Management Fee
the annual directors' fees of the Company. For 2002, the directors received from
the Manager $82,000 in fees in the aggregate.  No separate compensation was paid
to the Company's  officers.  The Manager expects to pay the same directors' fees
for the year 2003 as was paid to directors for 2002.

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

The Company has  established an audit committee  comprised of Messrs.  White and
Wolcott, independent directors of the Company.

D.   EMPLOYEES

Neither the Company nor the Manager have had any employees since inception.

E.   SHARE OWNERSHIP

As of April 30, 2003, none of the directors or officers of the Company owned any
Common Shares.


ITEM 7.  MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS

A.   MAJOR SHAREHOLDERS

The Company is not directly or indirectly controlled by another corporation,  by
a foreign government or by any other natural or legal person.

The  Company  is not  aware of any  person  who owns more than 5 per cent of the
Company's outstanding Ordinary Shares as of April 30, 2003.

As of April 30, 2003, none of the directors or officers of the Company owned any
Common Shares of the Company.

B.   RELATED PARTY TRANSACTIONS

Not Applicable

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 the  Company's  knowledge,  there  are no  legal  or  arbitration
proceedings existing or pending which have had or may have,  significant effects
on the Company's financial position or profitability and no such proceedings are
pending or known to be contemplated by governmental authorities.

Dividend Policy

The Company  policy is to pay  quarterly  distributions  to holders of record of
Common Shares in each January,  April, July and October in amounts substantially
equal to the charterhire  received by the Company under the Charters,  less cash
expenses  and  less  any  reserves   required  in  respect  of  any   contingent
liabilities.  Currently,  the Company does not have any material  cash  expenses
other than (i) a management  fee of $750,000  per annum,  payable to the Manager
(the "Management Fee") (ii) certain directors' and officers' liability insurance
premiums in the current amount of $60,000 per annum, (iii) the agent bank annual
fee of $50,000 and (iv) payment of interest on the Primary  Loan.  Until January
15,  2000,  when the  Amortizing  Loans were  satisfied,  the Company  also paid
interest and  principal on the  Amortizing  Loans (which were  equivalent to the
amounts of Supplemental  Hire). Any lease payments under the U.K. Finance Leases
are  expected  to be paid  under  the  Letters  of Credit  or  otherwise  by the
Charterer, and therefore are not considered cash expenses of the Company and are
not  expected  to reduce  amounts  available  to the  Company for the payment of
distributions to shareholders.

Declaration  and  payment of any  dividend is subject to the  discretion  of the
Company's Board of Directors.  The declaration and payment of  distributions  to
shareholders  is  prohibited  if the  Company  is in  default  under the  Credit
Facility or if such  payment  would be or is  reasonably  likely to result in an
event of default  under the Credit  Facility.  Any payment of  distributions  to
shareholders  by the Company in any year may also be dependent upon the adoption
by the holders of a majority of the Common Shares  voting at the annual  meeting
of shareholders  of the Company of a resolution  effectuating a reduction in the
Company's  share  premium  and a credit  to the  Company's  contributed  capital
surplus  account.  The Company's  shareholders  adopted such a resolution at the
Company's  annual  general  meeting  in March,  1999.  The  timing and amount of
dividend  payments  will be dependent  upon the  Company's  earnings,  financial
condition,  cash  requirements and  availability,  the provisions of Bermuda law
affecting the payment of distributions to shareholders and other factors.

There  can be no  assurance  that the  Company  will not  have  other  expenses,
including  extraordinary  expenses,  which  could  include  costs of claims  and
related  litigation  expenses,  which  are not  covered  by the  indemnification
provisions  of the  Charters,  or that the  Company  will  not  have  contingent
liabilities for which reserves are required.  As an "exempted"  Bermuda company,
the Company does not expect to pay any income taxes in Bermuda. The Company also
does not expect to pay any income taxes in the Cayman Islands (the  jurisdiction
of organization  of the  Subsidiaries)  or the Isle of Man (the  jurisdiction in
which the Vessels are registered).

The Company has paid dividends on a quarterly basis commencing in April 1997, in
an aggregate  amount equal to the  charterhire  received from the charterer less
the  Company's  cash  expenses and less any reserves  required in respect of any
contingent  liabilities.  Such expenses  will consist  primarily of a management
fee, payments of principal and interest on loans, interest payments on loans and
the insurance premiums,  plus any other expenses and contingent  liabilities not
covered by the management  fee. The Company intends to continue to pay dividends
on a quarterly basis.  There can be no assurance that the Company will not incur
other expenses or contingent liabilities that would reduce or eliminate the cash
available for  distribution as dividends.  In particular,  toward the end of the
term of the charters,  the Company is likely to have additional expenses and may
have to set aside amounts for future payments of interest.

In  2002,  2001 and  2000,  the  Company  paid the  following  distributions  to
shareholders.

RECORD DATE                         PAYMENT DATE           AMOUNT PER SHARE

2002
January 25, 2002                   February 8, 2002                $0.46
April 25, 2002                          May 8, 2002                $0.45
July 25, 2002                        August 7, 2002                $0.45
October 25, 2002                   November 7, 2002                $0.45

2001
January 26, 2001                   February 9, 2001                 $1.68
April 27, 2001                         May 11, 2001                 $1.39
July 26, 2001                        August 9, 2001                 $0.72
October 25, 2001                   November 8, 2001                 $0.45

2000
January 28, 2000                  February 11, 2000                 $0.44
April 27, 2000                         May 12, 2000                 $0.44
July 24, 2000                        August 7, 2000                 $0.61
October 26, 2000                   November 8, 2000                 $1.17


Because the Primary Loan matures after the initial term of the Charters and must
be repaid or refinanced  at such time,  the Company may, in the last year of the
initial  term of a  Charter,  set aside  amounts  for  payment of  interest  and
principal which would be due on the related  Primary Loan following  termination
of such  Charter in the event the  Charterer  does not renew such Charter or the
Company cannot arrange to recharter or sell the Vessel as of the expiration date
of such Charter.  In addition,  the Company may have to set aside amounts in the
last year of the initial term of a Charter in  anticipation of costs that may be
incurred  in  connection  with the resale or  rechartering  of the Vessel in the
event the  Charterer  does not renew such  Charter.  These  amounts would not be
available for the payment of distributions to shareholders at such time.

It is  expected  that any cash  distributions  by the  Company  will  exceed the
Company's  earnings and profits for U.S. tax purposes,  with the result that for
each full year that the  Charters  are in place a portion of such  distributions
may be treated as a return of the "basis" of a U.S. holder's Common Shares.  The
Company is a passive foreign investment  company ("PFIC"),  and as a result U.S.
Holders must make a timely tax election  known as "QEF Election" with respect to
the Company in order to prevent certain tax penalties from applying to such U.S.
holder.  The  Company  intends to  provide  all  necessary  tax  information  to
shareholders  during  February  of each  year in order  that  they may make such
election.  For the year ended  December  31, 2002,  the Company  mailed such tax
information to its shareholders in February, 2003.

B.   SIGNIFICANT CHANGES

Not Applicable


ITEM 9.  THE OFFER AND LISTING

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

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

                                                HIGH                  LOW
FISCAL YEAR ENDED DECEMBER 31
2002                                          $18.850              $11.510
2001                                          $27.800              $14.320
2000                                          $25.250              $11.938
1999                                          $21.875              $11.500
1998                                          $30.750              $18.500

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

                                                HIGH                  LOW
FISCAL YEAR ENDED DECEMBER 31, 2002
First quarter                                 $18.700              $15.500
Second quarter                                $18.850              $14.360
Third quarter                                 $14.620              $11.770
Fourth quarter                                $15.490              $11.510
FISCAL YEAR ENDED DECEMBER 31, 2001
First quarter                                 $25.188              $20.000
Second quarter                                $27.800              $20.000
Third quarter                                 $22.690              $14.320
Fourth quarter                                $18.900              $15.000

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

                                                HIGH                  LOW

April 2003                                    $14.600              $12.240
March 2003                                    $14.410              $13.590
February 2003                                 $14.850              $13.590
January 2003                                  $17.560              $14.120
December 2002                                 $14.650              $15.490
November 2002                                 $14.790              $13.750

The Company's Common Shares have been quoted on the Nasdaq National 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).

C.   MATERIAL CONTRACTS

Not Applicable

D.   EXCHANGE CONTROLS

The Company  has been  designated  as a  non-resident  of Bermuda  for  exchange
control  purposes by the Bermuda  Monetary  Authority,  whose permission for the
issue of the Common Shares was obtained prior to the offering thereof.

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

Subject to the  foregoing,  there are no  limitations on the rights of owners of
the Common  Shares to hold or vote their  shares.  Because  the Company has been
designated as 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 United States residents who are holders of the Common Shares, other
than in respect of local Bermuda currency.

In accordance  with Bermuda law,  share  certificates  may be issued only in the
names of corporations or  individuals.  In the case of an applicant  acting in a
special capacity (for example, as an executor or trustee),  certificates may, at
the request of the  applicant,  record the  capacity in which the  applicant  is
acting.  Notwithstanding the recording of any such special capacity, the Company
is not bound to investigate or incur any responsibility in respect of the proper
administration of any such estate or trust.

The Company will take no notice of any trust  applicable to any of its shares or
other securities whether or not it had notice of such trust.

As an "exempted company", the Company is exempt from Bermuda laws which restrict
the  percentage of share capital that may be held by  non-Bermudians,  but as an
exempted   company,   the  Company  may  not  participate  in  certain  business
transactions  including:  (i) the  acquisition  or  holding  of land in  Bermuda
(except  that  required for its business and held by way of lease or tenancy for
terms of not more  than 21  years)  without  the  express  authorization  of the
Bermuda  legislature;  (ii) the taking of mortgages on land in Bermuda to secure
an amount in excess of $50,000 without the consent of the Minister of Finance of
Bermuda;  (iii) the  acquisition  of  securities  created  or issued  by, or any
interest in, any local company or business,  other than certain types of Bermuda
government  securities  or  securities of another  "exempted  company,  exempted
partnership  or  other  corporation  or  partnership  resident  in  Bermuda  but
incorporated abroad; or (iv) the carrying on of business of any kind in Bermuda,
except in so far as may be necessary for the carrying on of its business outside
Bermuda or under a license granted by the Minister of Finance of Bermuda.

There is a statutory  remedy under  Section 111 of the  Companies Act 1981 which
provides  that a shareholder  may seek redress in the Bermuda  courts as long as
such  shareholder can establish that the Company's  affairs are being conducted,
or have been conducted,  in a manner  oppressive or prejudicial to the interests
of some part of the  shareholders,  including such  shareholder.  However,  this
remedy has not yet been interpreted by the Bermuda courts.

The Bermuda  government  actively  encourages  foreign  investment in "exempted"
entities  like the  Company  that are based in  Bermuda  but do not  operate  in
competition  with local  business.  In addition to having no restrictions on the
degree of foreign  ownership,  the  Company  is subject  neither to taxes on its
income or dividends nor to any exchange controls in Bermuda. In addition,  there
is no capital  gains tax in  Bermuda,  and  profits  can be  accumulated  by the
Company, as required, without limitation.  There is no income tax treaty between
the United  States and Bermuda  pertaining  to the taxation of income other than
applicable to insurance enterprises.

E.   TAXATION

The Company is incorporated  in Bermuda.  Under current Bermuda law, the Company
is not subject to tax on income or capital gains, and no Bermuda withholding tax
will be imposed upon  payments of dividends by the Company to its  shareholders.
No Bermuda  tax is imposed on holders  with  respect to the sale or  exchange of
Common  Shares.  Furthermore,  the Company  has  received  from the  Minister of
Finance of Bermuda under the Exempted  Undertakings  Tax Protection Act 1966, as
amended,  an assurance  that, in the event that Bermuda  enacts any  legislation
imposing  any tax  computed  on profits or income,  including  any  dividend  or
capital gains  withholding tax, or computed on any capital asset,  appreciation,
or any tax in the  nature  of an  estate,  duty or  inheritance  tax,  then  the
imposition  of any such tax  shall  not be  applicable.  The  assurance  further
provides  that  such  taxes,  and  any  tax in the  nature  of  estate  duty  or
inheritance  tax,  shall  not  be  applicable  to  the  Company  or  any  of its
operations,  nor to the shares,  debentures or other obligations of the Company,
until March 2016.

There are no provisions of any  reciprocal  tax treaty  between  Bermuda and the
United States affecting withholding.

F.   DIVIDENDS AND PAYING AGENTS

Not Applicable

G.   STATEMENT BY EXPERTS

Not Applicable

H.   DOCUMENTS ON DISPLAY

The  Company is  subject to the  informational  requirements  of the  Securities
Exchange Act of 1934, as amended.  In accordance with these requirements 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 at 450 Fifth Street, N.W., Room 1024,  Washington,  D.C. 20549 and at
500 West  Madison  Street,  Suite 1400,  Northwestern  Atrium  Center,  Chicago,
Illinois  60661.  You may  obtain  information  on the  operation  of the public
reference  room by  calling  1 (800)  SEC-0330,  and you may  obtain  copies  at
prescribed  rates from the Public  Reference  Section of the  Commission  at its
principal  office  in  Washington,  D.C.  20549.  The SEC  maintains  a  website
(http://www.sec.gov.)  that contains reports,  proxy and information  statements
and other information  regarding  registrants that file  electronically with the
SEC. In addition,  documents  referred to in this annual report may be inspected
at the Company's  headquarters  at Par-la-Ville  Place,  14  Par-la-Ville  Road,
Hamilton, Bermuda.

I.   SUBSIDIARY INFORMATION

Not Applicable


ITEM 11.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
          RISK

The Company is exposed to market risk from changes in interest  rates  primarily
resulting from the floating rate of the Company's  borrowings.  The Company uses
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  under the Credit  Facility at  December  31, 2002 of
$125,397,399  bear interest at a floating rate which is reset quarterly based on
the underlying London interbank eurocurrency market.  Interest payments are made
quarterly,  and the Credit  Facility  expires August 27, 2004. The fair value of
the Credit  Facility at December 31, 2002 is equal to the carrying amount of the
facility at the same date.

The Company has entered  into an  interest  rate swap  transaction  to hedge the
interest rate variability on the Credit Facility. The swap has a notional amount
equal to the  outstanding  principal  under  the  Credit  Facility  and the swap
expires on the same date as that of the Credit  Facility.  At December 31, 2002,
the pay-fixed interest rate of the swap was 6.74% and the receive-variable  rate
was 2.22%. As a hedge against the Credit Facility, the swap effectively resulted
in a fixed  borrowing  rate to the Company of 7.11% for the year ended  December
31, 2002.  Periodic cash  settlements  under the swap agreement  occur quarterly
corresponding  with the interest  payments under the Credit  Facility.  The fair
value of the interest rate swap  agreement  was an  unfavorable  $11,590,392  at
December  31, 2002 (2001-  unfavourable  $9,552,504)  calculated  by taking into
account the cost of entering  into an interest  rate swap to offset the existing
swap.


ITEM 12.  DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES

Not Applicable

<PAGE>
                                     PART II

ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES

Not Applicable


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

Not Applicable


ITEM 15.  CONTROLS AND PROCEDURES

(a)  Evaluation of disclosure controls and procedures.

     Within the 90 days prior to the date of this  report,  the Company  carried
     out an evaluation,  under the supervision and with the participation of the
     Company's  manager ICB Shipping  Bermuda,  including  the  Company's  Chief
     Executive Officer and principal  financial officer, of the effectiveness of
     the  design  and  operation  of  the  Company's   disclosure  controls  and
     procedures   pursuant  to  Exchange  Act  Rule  13a-14.   Based  upon  that
     evaluation,  the Chief Executive  Officer and principal  financial  officer
     concluded  that  the  Company's  disclosure  controls  and  procedures  are
     effective in alerting them timely to material  information  relating to the
     Company required to be included in the Company's periodic SEC filings.

(b)  Changes in internal controls

     There have been no significant  changes in the Company's  internal controls
     or in other factors that could have  significantly  affected those controls
     subsequent to the date of the Company's most recent  evaluation of internal
     controls,  including  any  corrective  actions  with regard to  significant
     deficiencies and material weaknesses.


ITEM 16.  RESERVED


<PAGE>
                                    PART III

ITEM 17.  FINANCIAL STATEMENTS

Not Applicable


ITEM 18.  FINANCIAL STATEMENTS

The  following  financial  statements  listed  below  and set forth on pages F-1
through F-12 together with the independent auditors' report of Deloitte & Touche
AB thereon, are filed as part of this annual report:

Index to Financial Statements

                                                                         Page

Independent Auditors' Report                                              F-1

Consolidated Financial Statements:

Consolidated Balance Sheets as of                                         F-2
December 31, 2002 and 2001

Consolidated Statements of Operations                                     F-3
for the years ended December 31, 2002, 2001and 2000

Consolidated Statements of Comprehensive Income                           F-4
for the years ended December 31, 2002, 2001 and 2000

Consolidated Statements of Cash Flows                                     F-5
for the years ended December 31, 2002, 2001 and 2000

Consolidated Statements of Changes in                                     F-6
Shareholders' Equity for the years ended December 31, 2002,
  2001 and 2000

Notes to Consolidated Financial Statements                                 F-7

<PAGE>
INDEPENDENT AUDITORS' REPORT

To the Board of Directors of
Knightsbridge Tankers Limited

We have audited the  accompanying  consolidated  balance sheets of Knightsbridge
Tankers  Limited and  subsidiaries  (the  "Company") as of December 31, 2002 and
2001  and the  related  consolidated  statements  of  operations,  comprehensive
income,  cash flows and shareholders'  equity for each of the three years in the
period ended December 31, 2002. These consolidated  financial statements are the
responsibility of the Company's management.  Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.

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

In our opinion,  such consolidated  financial  statements present fairly, in all
material respects,  the consolidated financial position of Knightsbridge Tankers
Limited and  subsidiaries  as of  December  31, 2002 and 2001 and the results of
their  operations and their cash flows for each of the three years in the period
ended  December 31, 2002 in  conformity  with  accounting  principles  generally
accepted in the United States of America.

As discussed in Note 2 to the  consolidated  financial  statements,  in 2001 the
Company changed its method of accounting for derivative  instruments and hedging
activities  to conform to Statement of Financial  Accounting  Standards No. 133,
"Accounting for Derivative Instruments and Hedging Activities."



Deloitte & Touche AB
Stockholm, Sweden
May 7, 2003

<PAGE>
<TABLE>
<CAPTION>
                                         KNIGHTSBRIDGE TANKERS LIMITED
                                          CONSOLIDATED BALANCE SHEETS
                                       AS OF DECEMBER 31, 2002 AND 2001
                                               (in U.S. Dollars)

                                                               2002                      2001
ASSETS
<S>                                                      <C>                       <C>
Current assets
Cash and cash equivalents                                    226,215                   278,268
Charter hire receivable                                   10,151,740                10,515,600
Prepaid expenses                                              16,384                    15,342
                                                  ------------------         -----------------

Total current assets                                      10,394,339                10,809,210

Vessels under capital lease, net                         337,001,052               354,593,912
Capitalized financing fees and expenses, net                 429,338                   800,882
                                                  ------------------         -----------------

TOTAL ASSETS                                             347,824,729               366,204,004
                                                  ==================         ==================

LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities
Accrued expenses and other current liabilities             2,197,824                 2,176,885
                                                  ------------------         -----------------

Total current liabilities                                  2,197,824                 2,176,885

Credit facility                                          125,397,399               125,397,399
Interest rate swap agreement at fair value                11,590,392                 9,552,504
                                                  ------------------         -----------------

Total liabilities                                        139,185,615               137,126,788

Commitments and contingencies                                      -                         -

Shareholders' equity
Common shares, par value $0.01 per share:
Authorized and outstanding 17,100,000                        171,000                   171,000
Contributed capital surplus account                      220,058,506               238,458,720
Accumulated other comprehensive income (loss) -
  Net unrealized loss on derivative instrument           (11,590,392)               (9,552,504)
Retained earnings                                                  -                         -
                                                  ------------------         -----------------
Total shareholders' equity                               208,639,114               229,077,216
                                                  ------------------         -----------------

TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY                                     347,824,729               366,204,004
                                                  ==================         =================

                         See accompanying notes to consolidated financial statements.
</TABLE>

<PAGE>
<TABLE>
<CAPTION>
                                         KNIGHTSBRIDGE TANKERS LIMITED
                                     CONSOLIDATED STATEMENTS OF OPERATIONS
                             FOR THE YEARS ENDED DECEMBER 31, 2002, 2001 AND 2000
                                               (in U.S. Dollars)


                                             2002                2001                 2000
<S>                                   <C>                   <C>                  <C>
Charterhire revenue                   $  40,275,925         $  61,534,335        $  76,335,975
Operating expenses:
Depreciation of vessels under
  capital leases                         17,592,860            17,592,860           17,592,860
Management fee                              750,000               750,000              750,000
Administration expenses                      55,429                50,919               57,357
                                        ------------        -------------         ------------
Net operating income                     21,877,636            43,140,556           57,935,758


Interest income                              33,040               205,374              185,476
Interest expense                         (8,938,483)           (9,008,839)          (8,933,869)
Other financial expenses                   (421,407)             (421,659)            (463,620)
                                        ------------        -------------        -------------

Net income                            $  12,550,786         $  33,915,432        $  48,723,745
                                        ============        =============        =============

Earnings per common share
  - basic and diluted                         $0.73                 $1.98                $2.85

Weighted average number of
  shares outstanding                     17,100,000            17,100,000           17,100,000


                         See accompanying notes to consolidated financial statements.
</TABLE>

<PAGE>
<TABLE>
<CAPTION>
                                         KNIGHTSBRIDGE TANKERS LIMITED
                                CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
                             FOR THE YEARS ENDED DECEMBER 31, 2002, 2001 AND 2000
                                               (in U.S. Dollars)

                                            2002                 2001                 2000
<S>                                   <C>                   <C>                  <C>
Net income                            $  12,550,786         $  33,915,432        $  48,723,745

Other comprehensive income (loss):
Cumulative effect of change in
  accounting for
  derivative instruments
  and hedging activities                         -             (3,496,905)                   -
Net unrealized loss on derivative
  instrument during the year             (2,037,888)           (6,055,599)                   -

Total other comprehensive income (loss)  (2,037,888)           (9,552,504)                   -
                                      -------------         -------------        -------------
Comprehensive income                  $  10,512,898         $  24,362,928        $  48,723,745
                                      =============         =============        =============


                         See accompanying notes to consolidated financial statements.
</TABLE>

<PAGE>
<TABLE>
<CAPTION>
                                         KNIGHTSBRIDGE TANKERS LIMITED
                                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                             FOR THE YEARS ENDED DECEMBER 31, 2002, 2001 AND 2000
                                               (in U.S. Dollars)

                                            2002                 2001                 2000
<S>                                   <C>                   <C>                  <C>
Cash flows from operating activities

Net income                            $  12,550,786         $  33,915,432        $  48,723,745

Items to reconcile net income to net
  cash provided by operating
  activities:
Depreciation                             17,592,860            17,592,860           17,592,860
Amortization of capitalized financing
  fees and expenses                         371,544               371,544              371,543
Changes in operating assets
  and liabilities:
      Charter hire receivable
      and prepaid expenses                  362,818            20,602,331          (19,262,068)
      Accrued expenses and other
          current liabilities                20,939                52,731              (81,867)
                                       ------------         -------------        -------------
Net cash provided by
  operating activities                   30,898,947            72,534,898           47,344,213

Cash flows from financing activities

Repayments of loan                                -                   -             (1,681,538)
Distributions to shareholders           (30,951,000           (72,504,000)         (45,486,000)
                                       ------------         -------------        -------------
Net cash used in financing
  activities                            (30,951,000)          (72,504,000)         (47,167,538)

Net increase (decrease) in cash
  and cash equivalents                      (52,053)               30,898              176,675
Cash and cash equivalents at
  beginning of year                        278,268                247,370               70,695
                                       ------------         -------------        ------------

Cash and cash equivalents at
  end of year                         $     226,215         $     278,268        $    247,370
                                      =============         =============        =============

Supplemental cash flow information:

Interest paid                         $   8,917,488         $   8,955,981        $   9,065,736


                         See accompanying notes to consolidated financial statements.
</TABLE>

<PAGE>
<TABLE>
<CAPTION>
                                         KNIGHTSBRIDGE TANKERS LIMITED
                          CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
                             FOR THE YEARS ENDED DECEMBER 31, 2002, 2001 AND 2000
                                               (in U.S. Dollars)

                                            2002                 2001                 2000
<S>                                   <C>                   <C>                  <C>
SHARE CAPITAL
Balance at the beginning of the year  $     171,000         $     171,000        $     171,000
Shares issued                                     -                     -                    -
Shares bought back                                -                     -                    -
----------------------------------------------------------------------------------------------
Balance at the end of the year              171,000               171,000              171,000
----------------------------------------------------------------------------------------------

CONTRIBUTED CAPITAL SURPLUS ACCOUNT
Balance at the beginning of the year    238,458,720           273,809,543          273,809,543
Distributions to shareholders           (18,400,214)          (35,350,823)                   -
----------------------------------------------------------------------------------------------
Balance at the end of the year          220,058,506           238,458,720          273,809,543
----------------------------------------------------------------------------------------------

ACCUMULATED OTHER COMPREHENSIVE
   INCOME (LOSS)
Balance at the beginning of the year    (9,552,504)                     -                    -
Other comprehensive income (loss)       (2,037,888)            (9,552,504)                   -
----------------------------------------------------------------------------------------------
Balance at the end of the year         (11,590,392)            (9,552,504)                   -
----------------------------------------------------------------------------------------------

RETAINED EARNINGS
Balance at the beginning of the year              -             3,237,745                    -
Net income                               12,550,786            33,915,432           48,723,745
Distributions to shareholders          (12,550,786)           (37,153,177)         (45,486,000)
----------------------------------------------------------------------------------------------
Balance at the end of the year                    -                     -            3,237,745
----------------------------------------------------------------------------------------------
Total Stockholders' Equity            $ 208,639,114         $ 229,077,216        $ 277,218,288
----------------------------------------------------------------------------------------------

                     See accompanying notes to consolidated financial statements.
</TABLE>

<PAGE>
                          KNIGHTSBRIDGE TANKERS LIMITED
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
              FOR THE YEARS ENDED DECEMBER 31, 2002, 2001 AND 2000

1.   DESCRIPTION OF BUSINESS

General

Knightsbridge  Tankers  Limited (the  "Company") was  incorporated in Bermuda in
September,  1996, for the purpose of the  acquisition,  disposition,  ownership,
leasing and  chartering of five very large crude oil carriers  (the  "Vessels"),
and certain  related  activities.  The Vessels  are owned  through  wholly-owned
subsidiaries (the "Subsidiaries").

The  Company  charters  the  Vessels to Shell  International  Petroleum  Company
Limited (the  "Charterer") on long-term "hell and high water" bareboat  charters
(the  "Charters").  The  obligations  of the Charterer  under these charters are
jointly and severally guaranteed by Shell Petroleum N.V. and The Shell Petroleum
Company  Limited  (the  "Charter  Guarantors").  The  Charter  and  the  Charter
Guarantors are all companies of the Royal  Dutch/Shell  Group of Companies.  The
term of each of these  Charters is a minimum of seven years,  with an option for
the Charterer to extend the period for each  Vessel's  Charter for an additional
seven-year term, to a maximum of approximately 14 years per Charter. The initial
seven year term expires in February  2004.  The  Charterer is required to notify
Knightsbridge  by the end of June 2003 as to whether it intends to exercise  the
option to extend the charter period.


The daily  charterhire  rate  payable  under each  Charter is  comprised  of two
primary  components:  (i)  the  base  rate,  which  is a fixed  minimum  rate of
charterhire  equal to $22,069 per Vessel per day,  payable  quarterly in arrears
("Base  Rate"),  and  (ii)  additional  hire,  which is  additional  charterhire
(determined  and paid quarterly in arrears) that will equal the excess,  if any,
of a weighted average of the daily time charter rates for three round-trip trade
routes  traditionally  served by VLCCs,  less an agreed amount of $10,500 during
the  initial  term  of  the  Charters,   and  $14,900  for  any  extended  term,
representing daily operating costs over the Base Rate.

Ownership and management of the company

In February,  1997, the Company offered and sold to the public 16,100,000 common
shares,  par value  $0.01 per  share,  at an initial  offering  price of $20 per
share.  Simultaneously,  the Company sold 1,000,000  common shares at a price of
$20 per share to ICB  International  Limited  ("ICB  International"),  a company
which since 1999 has been an indirect wholly-owned subsidiary of Frontline Ltd.,
a Bermuda  publicly  traded  oil  tanker  owning and  operating  company.  As of
December  31,  2002,  ICB  International   owned   approximately  0.01%  of  the
outstanding Common Shares.

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

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.

Reporting currency

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

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

Revenue and expense recognition

Revenues  and  expenses  are  recognised  on the  accrual  basis.  Revenues  are
generated  from the Charters and such revenues are recorded over the term of the
Charters as service is provided.

Comprehensive income

Comprehensive income is defined as the change in the Company's equity during the
year from transactions and other events and circumstances from nonowner sources.
Comprehensive  income  of the  Company  includes  not only net  income  but also
unrealized  losses on derivative  instruments used in cash flow hedges of future
variable-rate  interest  payments on the Company's debt. Such items are reported
as  accumulated  other  comprehensive  income  (loss),  a separate  component of
shareholders' equity, until such time as the amounts are included in net income.

Leases

In  connection  with the  original  Vessels  purchase  transaction,  the Company
entered into a conditional sale/leaseback transaction with a third party banking
institution.  The lease  agreements  do not encumber or obligate  the  Company's
current  or future  cash  flows and has no  effect  on the  Company's  financial
position.  The leasebacks have been classified as capital leases by the Company.
Accordingly,  during the term of the  leases,  the  Vessels  will  remain on the
Company's  consolidated balance sheet and the relevant  subsidiaries will retain
title to the related Vessel.

The Company has  subleased  the Vessels to a third party in the form of bareboat
charters. Such Charters are classified as operating leases by the Company.

Cash and cash equivalents

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

Charter hire receivable

There is a concentration of credit risk in that all revenues are due solely from
the Charterer.

Derivative instruments and hedging activities

Interest rate swap agreements are contractual agreements between the Company and
other  parties  to  exchange  the net  difference  between a fixed and  variable
interest rate periodically over the life of the contract without the exchange of
the underlying  principal amount of the agreement.  The interest rate swaps were
executed as integral elements of the Company's original  financing  transactions
and risk  management  policies  to achieve  specific  interest  rate  management
objectives. At the time of obtaining its original financing, the Company entered
into  pay-fixed,  receive-floating  interest  rate swap  agreements to hedge its
exposure to future cash flow variability  resulting from variable interest rates
on the Company's debt. The Company has not entered into any derivative contracts
for speculative or trading purposes.

On  January  1, 2001 the  Company  adopted  Statement  of  Financial  Accounting
Standards ("SFAS") No. 133, "Accounting for Derivatives  Instruments and Hedging
Activities," as amended.  SFAS No. 133 requires that all derivative  instruments
be recorded on the balance sheet at their fair value.  Changes in the fair value
of each  derivative  is  recorded  each  period  in  current  earnings  or other
comprehensive income,  depending on whether the derivative is designated as part
of a hedge transaction and, if it is, the type of hedge transaction.

Upon the  adoption  of SFAS No. 133 the Company  recorded  the fair value of its
interest rate swap agreements  which were designated as cash flow hedges against
future  variable-rate  interest  payments  on the  Company's  debt.  The  amount
recorded as a transition derivative liability was $3,496,905 and an equal amount
was  recorded as  accumulated  other  comprehensive  income  (loss),  which is a
component  of  shareholders'  equity.  Subsequent  to  adopting  SFAS No. 133 on
January 1, 2001, the derivative  liability has been adjusted to its current fair
value with equal  adjustments to accumulated other  comprehensive  income (loss)
reflecting the  effectiveness  of the cash flow hedge.  The adoption of SFAS No.
133 had no impact upon the Company's  consolidated net income for the year ended
December 31, 2001.

Prior  to the  change  in  accounting  principle  referred  to in the  preceding
paragraph,  settlement hedge accounting was used by the Company whereby the fair
values of the  interest  rate swap  agreements  were not recorded on the balance
sheet.   As  the  swap   agreements   effectively   altered  the   interest-rate
characteristics  of the hedged debt, the interest rate differential  between the
swap  agreeements  and the underlying  hedged debt was accrued as interest rates
changed and recognized as an adjustment to interest expense.

Vessels and depreciation

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

Capitalized financing fees and expenses

Costs  relating to the Credit  Facility are  capitalized  and amortized over the
term of the Credit Facility which is seven years.

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 dilutive
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.  In  addition,  long-lived
assets to be  disposed of by sale are  reported at the lower of carrying  amount
and 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.

New accounting standards

In June 2001, the U.S.  Financial  Accounting  Standards  Board ("FASB")  issued
Statement  of  Financial   Accounting  Standards  ("SFAS")  No.  141,  "Business
Combinations"   which  requires  the  application  of  the  purchase  method  in
accounting  for  business  combinations  including  the  identification  of  the
acquiring enterprise for each transaction.  SFAS No. 141 applies to all business
combinations  initiated  after  June  30,  2001  and all  business  combinations
accounted for by the purchase method that are completed after June 30, 2001. The
adoption of SFAS No. 141 by the Company did not have any impact on the Company's
consolidated financial position or results of operations.

In June 2001,  the FASB  issued  SFAS No. 142,  "Goodwill  and Other  Intangible
Assets". SFAS No. 142 applies to all acquired intangible assets whether acquired
singly, as part of a group, or in a business  combination.  The adoption of SFAS
No.  142 by the  Company  on  January  1,  2002 did not have any  impact  on the
Company's consolidated financial position or results of operations.

In June 2001, the FASB issued SFAS No. 143, "Accounting for the Asset Retirement
Obligations".  Under SFAS No. 143, an entity shall recognize the fair value of a
liability  for an  asset  retirement  obligation  in the  period  in which it is
incurred if a  reasonable  estimate of fair value can be made.  If a  reasonable
estimate  of fair  value  cannot  be made in the  period  the  asset  retirement
obligation  is incurred,  the liability  shall be  recognized  when a reasonable
estimate of fair value can be made. Upon initial  recognition of a liability for
an asset retirement  obligation,  an entity shall capitalize an asset retirement
cost by increasing the carrying  amount of the related  long-lived  asset by the
same amount as the liability.  An entity shall subsequently  allocate that asset
retirement  cost to expense  using a  systematic  and  rational  method over its
useful  life.  SFAS No. 143  applies to legal  obligations  associated  with the
retirement  of a tangible  long-lived  asset that result  from the  acquisition,
construction,  or development and/or the normal operation of a long-lived asset,
with limited  exceptions.  SFAS No. 143 does not apply to obligations that arise
solely  from a plan to  dispose  of a  long-lived  asset,  nor  does it apply to
obligations that result from the improper operation of an asset. SFAS No. 143 is
effective for fiscal years beginning after December 15, 2002. Management has not
completed  their  evaluation  of the  impact  of SFAS No.  143 on the  Company's
results of operations or financial position. However, management does not expect
that the  adoption  of the SFAS No.  143 on January 1, 2003 will have a material
impact  on  the  Company's   consolidated   financial  position  or  results  of
operations.

In October 2001, the FASB issued SFAS No. 144, "Accounting for the Impairment or
Disposal of Long-Lived  Assets".  The  objectives of SFAS No. 144 are to address
significant issues relating to the  implementation of SFAS No. 121,  "Accounting
for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed
Of", and to develop a single accounting model based on the framework established
in SFAS No. 121 for  long-lived  assets to be disposed of by sale.  SFAS No. 144
requires that  long-lived  assets that are to be disposed of by sale be measured
at the lower of book value or fair value less costs to sell.  Additionally,  the
standard expands the scope of discontinued  operations to include all components
of an entity  with  operations  that can be  distinguished  from the rest of the
entity and will be  eliminated  from the ongoing  operations  of the entity in a
disposal transaction.  The adoption of SFAS No. 144 by the Company on January 1,
2002 did not have any impact on the Company's consolidated financial position or
results of operations.

In April 2002, the FASB issued SFAS No. 145,  "Rescission of FASB Statements No.
4, 44, and 64,  Amendment of FASB Statement No. 13, and Technical  Corrections."
SFAS  No.  145  rescinds   SFAS  No.  4,   "Reporting   Gains  and  Losses  from
Extinguishment  of  Debt,"  and SFAS No.  64,  "Extinguishments  of Debt Made to
Satisfy  Sinking-Fund  Requirements."  SFAS No. 145 also  rescinds  SFAS No. 44,
"Accounting for Intangible  Assets of Motor  Carriers." SFAS No. 145 also amends
SFAS No. 13, "Accounting for Leases," to eliminate an inconsistency  between the
required accounting for sale-leaseback  transactions and the required accounting
for certain lease  modifications  that have economic effects that are similar to
sale-leaseback  transactions.  Lastly,  SFAS No. 145 also amends other  existing
authoritative  pronouncements  to make various  technical  corrections,  clarify
meanings,  or describe their  applicability  under changed  conditions.  Certain
provisions  of SFAS No. 145 became  effective  during  2002 but did not have any
impact  on  the  Company's   consolidated   financial  position  or  results  of
operations.  The remaining  provisions  become effective in 2003, but management
does not  expect  that  such  provisions  will  have a  material  impact  on the
Company's consolidated financial position or results of operations.

In June 2002,  the FASB issued SFAS No. 146,  "Accounting  for Costs  Associated
with Exit or Disposal  Activities." Under SFAS No. 146, the Company will measure
costs  associated with an exit or disposal  activity at fair value and recognize
costs in the period in which the  liability is incurred  rather than at the date
of a commitment to an exist or disposal  plan.  The Company is required to adopt
SFAS No. 146 for all exit and disposal  activities  initiated after December 31,
2002. Management does not expect that the adoption of the SFAS No. 146 will have
a material impact on the Company's consolidated financial position or results of
operations.

In November 2002, the FASB issued Interpretation 45, "Guarantor's Accounting and
Disclosure  Requirements  for  Guarantees,   Including  Indirect  Guarantees  of
Indebtedness of Others." Interpretation 45 elaborates on the existing disclosure
requirements  for most  guarantees,  including loan  guarantees  such as standby
letters  of  credit.  It also  clarifies  that at the  time a  company  issues a
guarantee,  the company must recognize an initial  liability for the fair value,
or market  value,  of the  obligations  it assumes  under the guarantee and must
disclose that  information in its interim and annual financial  statements.  The
provisions  related to recognizing a liability at inception of the guarantee for
the fair  value  of the  guarantor's  obligations  does  not  apply  to  product
warranties  or  to  guarantees   accounted  for  as  derivatives.   The  initial
recognition and initial  measurement  provisions apply on a prospective basis to
guarantees  issued or modified  after  December  31, 2002.  Management  does not
expect that the  adoption  of the  recognition  and  measurement  provisions  of
Interpretation  45  will  have  a  material  impact  on  Company's  consolidated
financial position or results of operations.

In January 2003, the FASB issued  Interpretation 46,  "Consolidation of Variable
Interest  Entities." In general,  a variable  interest  entity is a corporation,
partnership, trust, or any other legal structure used for business purposes that
either (a) does not have equity  investors  with voting rights or (b) has equity
investors that do not provide sufficient  financial  resources for the entity to
support its activities. Interpretation 46 requires a variable interest entity to
be  consolidated  by a company if that  company is subject to a majority  of the
risk of loss from the  variable  interest  entity's  activities  or  entitled to
receive a majority of the entity's  residual returns or both. The  consolidation
requirements  of  Interpretation  46  apply  immediately  to  variable  interest
entities created after January 31, 2003. The consolidation requirements apply to
older entities in the first fiscal year or interim period  beginning  after June
15, 2003. Management does not expect that the adoption of Interpretation 46 will
have a material impact on Company's  consolidated  financial position or results
of operations.

3.   VESSELS UNDER CAPITAL LEASE

                                             2002                  2001
(in US Dollars)
Cost                                  $   439,821,545       $   439,821,545
Accumulated depreciation                 (102,820,493)          (85,227,633)
                                      ----------------      ---------------

Net book value at end of year         $   337,001,052       $   354,593,912
                                      ---------------       ---------------

4.   CAPITALIZED FINANCING FEES AND EXPENSES

Capitalized  financing fees and expenses are amortised on a straight-line  basis
over  the  life of the  Credit  Facility.  The  capitalized  financing  fees and
expenses are comprised of the following amounts:

                                             2002                  2001

(in US Dollars)
Capitalized financing fees and
  expenses                            $     2,600,804       $     2,600,804
Accumulated amortization                   (2,171,466)           (1,799,922)
                                      ---------------       ---------------

Net book value at end of year         $       429,338       $       800,882
                                      ---------------       ---------------

5.   CREDIT FACILITY AND RELATED INTEREST RATE SWAP AGREEMENT

The Company has entered into a Credit Facility with a syndicate of international
lenders,  pursuant to which the Company  borrowed  $145.6 million in the form of
two term loans (the "Loans",  or the "Primary Loan" and the "Amortizing  Loan").
Of such amount,  $125.4  million was in respect of the Primary  Loan,  and $20.2
million was in respect of the Amortizing Loan.

The Credit  Facility is secured by, among other things,  a pledge by the Company
of 100% of the issued  and  outstanding  capital  stock of the  Subsidiaries,  a
guarantee from each  Subsidiary,  a mortgage on each Vessel,  assignments of the
Charters  and the Charter  Guaranties  and an  assignment  of the rights to take
title to the Vessels and the proceeds from the sale or any novation thereof.

The  Credit  Facility  provides  for  payment  of  interest  on the  outstanding
principal  balance of the Loans quarterly,  in arrears,  at a floating  interest
rate based on the rate in the London interbank eurocurrency market.

During  2000,  the  final  portion  of  the  Amortizing  Loan  was  repaid.  The
outstanding  Credit  Facility of $125.4 million as of December 31, 2002 consists
of the  Primary  Loan and is  repayable  in its  entirely  in August  2004.  The
variable rate on the Primary Loan was 2.22% at December 31, 2002.

At the time of entering into the Credit  Facility,  the Company  entered into an
interest  rate swap  agreement  with Goldman  Sachs  Capital  Markets,  L.P., an
affiliate of Goldman,  Sachs & Co., to hedge the future  variable  rate interest
payments  on the  Primary  Loan.  The cash  flow  hedge  effectively  fixes  the
Company's  interest  rate  obligations  on  the  Primary  Loan  at the  rate  of
approximately 7.14% per annum.

The terms of the interest rate swap  agreement  outstanding at December 31, 2002
are as follows:

Notional amount   $125,397,399
Trade date                                          February 6, 1997
Effective date                                     February 27, 1997
Termination date  August 27, 2004
Pay-fixed rate                                                 6.74%
Receive-variable rate                                          2.22%

The  fair  value  of  the  interest  rate  swap  agreement  was  an  unfavorable
$11,590,392  at December 31, 2002 (2001 - $9,552,504)  calculated by taking into
account the cost of entering  into an interest  rate swap to offset the existing
swap.  The  Company's  accounting  policy  applied  to the  interest  rate  swap
agreement  changed  effective January 1, 2001 and is described in more detail in
Note 2. The  credit  risk  under  the swap  agreement  is not  considered  to be
significant due to the counterparty's high credit rating.

6.       LEASES

The minimum  future  revenues,  in the form of operating  lease  rentals,  to be
received on the Charters as of December 31, 2002 is as follows:

         Years ending December 31:

         2003                                             40,275,925
         2004                                              6,400,010
                                                         -----------
         Total minimum lease rental revenues             $46,675,935
                                                         -----------

7.   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.

8.   RELATED PARTY TRANSACTION

On February 12, 1997, the Company  entered into a management  agreement with ICB
under  which  ICB  provides  certain  administrative,  management  and  advisory
services  to the  Company for an amount of  $750,000  per year.  The  management
agreement will terminate in 2012 unless earlier termination is approved pursuant
to the terms of the agreement.

<PAGE>

ITEM 19.  EXHIBITS

Number    Description of Exhibit
------    ---------------------------------------------------

1         Underwriting   Agreement  among  Knightsbridge  Tankers  Limited  (the
          "Company"), Cedarhurst Tankers LDC ("Cedarhurst"), Hewlett Tankers LDC
          ("Hewlett"),  Inwood  Tankers  LDC  ("Inwood"),  Lawrence  Tankers LDC
          ("Lawrence")   and  Woodmere   Tankers  LDC   ("Woodmere")   (each  of
          Cedarhurst,  Hewlett, Inwood, Lawrence and Woodmere a "Subsidiary" and
          collectively the "Subsidiaries"), Lazard Freres & Co. LLC and Goldman,
          Sachs  & Co.,  as  representatives  for  the  U.S.  underwriters  (the
          "Representatives"), ICB Shipping (Bermuda) Limited (the "Manager") and
          ICB International Ltd. ("ICB International")**

3.1       Memorandum of Association of the Company (Exhibit 3.1)*

3.2       Bye-Laws of the Company (Exhibit 3.2)*

3.2.1     Execution  version of Bareboat Charter dated February 12, 1997 between
          Woodmere and Shell  International  Petroleum  Company Limited ("SIPC")
          relating to the M.T. Myrina.**

3.2.2     Execution  version of Bareboat Charter dated February 12, 1997 between
          Hewlett and SIPC relating to the M.T. Megara.**

3.2.3     Execution  version of Bareboat Charter dated February 12, 1997 between
          Inwood and SIPC relating to the M.T. Murex.**

3.2.4     Execution  version of Bareboat Charter dated February 12, 1997 between
          Lawrence and SIPC relating to the M.T. Macoma.**

3.2.5     Execution  version of Bareboat Charter dated February 12, 1997 between
          Cedarhurst and SIPC relating to the M.T. Magdala.**

3.3.1     Execution  version of Charter Guaranty dated February 12, 1997 made by
          Shell Petroleum N.V.  ("SPNV") and The Shell Petroleum Company Limited
          ("SPCo") (collectively the "Guarantors") in favor of Woodmere relating
          to the M.T. Myrina.**

3.3.2     Execution  version of Charter Guaranty dated February 12, 1997 made by
          the Guarantors in favor of Hewlett relating to the M.T. Megara.**

3.3.3     Execution  version of Charter Guaranty dated February 12, 1997 made by
          the Guarantors in favor of Inwood relating to the M.T. Murex.**

3.3.4     Execution  version of Charter Guaranty dated February 12, 1997 made by
          the Guarantors in favor of Lawrence relating to the M.T. Macoma.**

3.3.5     Execution  version of Charter Guaranty dated February 12, 1997 made by
          the Guarantors in favor of Cedarhurst relating to the M.T. Magdala.**

3.3.6     Execution  version of Pooling  Agreement dated February 27, 1997 among
          the  Subsidiaries  as  owners,  and Shell  International  Trading  and
          Shipping  Company  Limited  on  behalf  of  SIPC   (collectively   the
          "Charterers") relating to the fleet spares.**

3.4       Execution  version of Charter Guaranty dated February 12, 1997 made by
          the Guarantors in favor of the Company.**

3.5       Execution  version of  Management  Agreement  dated  February 12, 1997
          between the Manager and the Company  (incorporated  by reference  from
          Exhibit 10.5 of the Registration Statement).**

3.6.1     Memorandum of Agreement  dated  October 24, 1996 among Ocala  Shipping
          Limited  ("Ocala"),  the  Charterers  and Shell  Tankers  (UK) Limited
          ("STUK"),  as buyer,  relating  to the M.T.  Myrina  (incorporated  by
          reference from Exhibit 10.6 of the Registration Statement).**

3.6.2     Memorandum of Agreement dated October 24, 1996 among Kerbela  Shipping
          Corp.  ("Kerbela") the Charterers and STUK relating to the M.T. Megara
          (incorporated  by  reference  from  Exhibit  10.7 of the  Registration
          Statement).**

3.6.3     Memorandum of Agreement dated October 24, 1996 among Trevose  Shipping
          Corp. ("Trevose"),  the Charterers and STUK relating to the M.T. Murex
          (incorporated  by  reference  from  Exhibit  10.8 of the  Registration
          Statement).**

3.6.4     Memorandum  of  Agreement  dated  October  24,  1996 among  Tourmaline
          Shipping Limited  ("Tourmaline"),  the Charterers and STUK relating to
          the M.T.  Macoma  (incorporated  by reference from Exhibit 10.9 of the
          Registration Statement).**

3.6.5     Memorandum of Agreement dated October 24, 1996 among Fluid  Navigation
          Ltd.  ("Fluid"),  the Charterers and STUK relating to the M.T. Magdala
          (incorporated  by  reference  from Exhibit  10.10 of the  Registration
          Statement).**

3.7.1     Assignment  Agreement  dated  November  25,  1996  from STUK and Shell
          International  Trading & Shipping  Company  Limited to the Company and
          the  Subsidiaries  relating to the  relevant  Memorandum  of Agreement
          (incorporated  by  reference  from Exhibit  10.11 of the  Registration
          Statement).**

3.7.2     Assignment  of Rights dated  February 27, 1997 between Ocala as seller
          and Woodmere as buyer relating to the M.T. Myrina.**

3.7.3     Assignment of Rights dated February 27, 1997 between Kerbela as seller
          and Hewlett as buyer regarding the M.T. Megara.**

3.7.4     Assignment of Rights dated February 27, 1997 between Trevose as seller
          and Inwood as buyer regarding the M.T. Murex.**

3.7.5     Assignment  of Rights dated  February 27, 1997 between  Tourmalene  as
          seller and Lawrence as buyer regarding the M.T. Macoma.**

3.7.6     Assignment  of Rights dated  February 27, 1997 between Fluid as seller
          and Cedarhurst as buyer regarding the M.T. Magdala.**

3.8.1     Execution version of Letter Agreement dated February 6, 1997 among the
          Company,  SIPC, ICB  International,  the  Subsidiaries and the Manager
          (incorporated  by reference from Exhibit  10.12.1 of the  Registration
          Statement).**

3.8.2     Execution version of Letter Agreement dated February 6, 1997 among the
          Company,  the  Manager,  ICB  International,  SIPC and the  Guarantors
          (incorporated  by reference from Exhibit  10.12.2 of the  Registration
          Statement).**

3.9       U.K.  Finance Lease  Transaction  Offer Letter dated November 12, 1996
          made by National Westminster Bank Plc in favor of the Company and SIPC
          (incorporated  by  reference  from Exhibit  10.13 of the  Registration
          Statement).**

3.10.1    Conditional  Sale Agreement  dated  November 25, 1996 between  NatWest
          Leasing (GB) Limited ("NLL") and Woodmere  relating to the M.T. Myrina
          (incorporated  by  reference  from Exhibit  10.14 of the  Registration
          Statement).**

3.10.2    Conditional  Sale  Agreement  dated  November 25, 1996 between NLL and
          Hewlett  relating to the M.T. Megara  (incorporated  by reference from
          Exhibit 10.15 of the Registration Statement).**

3.10.3    Conditional  Sale  Agreement  dated  November 25, 1996 between NLL and
          Inwood  relating to the M.T.  Murex  (incorporated  by reference  from
          Exhibit 10.16 of the Registration Statement).**

3.10.4    Conditional  Sale  Agreement  dated  November 25, 1996 between NLL and
          Lawrence  relating to the M.T. Macoma  (incorporated by reference from
          Exhibit 10.17 of the Registration Statement).**

3.10.5    Conditional  Sale  Agreement  dated  November 25, 1996 between NLL and
          Cedarhurst  relating to the M.T.  Magdala  (incorporated  by reference
          from Exhibit 10.18 of the Registration Statement).**

3.11.1    Execution  version of Charterparty by way of Demise dated February 12,
          1997 between NLL as lessor and Woodmere as leasee relating to the M.T.
          Myrina.**

3.11.2    Execution  version of Charterparty by Way of Demise dated February 12,
          1997 between NLL as lessor and Hewlett as leasee  relating to the M.T.
          Megara.**

3.11.3    Execution  version of Charterparty by Way of Demise dated February 12,
          1997  between NLL as lessor and Inwood as leasee  relating to the M.T.
          Murex.**

3.11.3(a) Amendment  Agreement  to  the  Charterparty  by Way  of  Demise  dated
          February 27, 1997 among NLL, Inwood and SIPC.**

3.11.4    Execution  version of Charterparty by Way of Demise dated February 12,
          1997 between NLL as lessor and Lawrence as leasee relating to the M.T.
          Macoma.**

3.11.5    Execution  version of Charterparty by Way of Demise dated February 12,
          1997 between NLL as lessor and  Cedarhurst  as leasee  relating to the
          M.T. Magdala.**

3.12.1    Execution  version of Direct Support Agreement dated February 12, 1997
          among NLL as lessor, SIPC and Woodmere as leasee.**

3.12.2    Execution  version of Direct Support Agreement dated February 12, 1997
          among NLL as lessor, SIPC and Hewlett as leasee.**

3.12.3    Execution  version of Direct Support Agreement dated February 12, 1997
          among NLL as lessor, SIPC and Inwood as leasee.**

3.12.4    Execution  version of Direct Support Agreement dated February 12, 1997
          among NLL as lessor, SIPC and Lawrence as leasee.**

3.12.5    Execution  version of Direct Support Agreement dated February 12, 1997
          among NLL as lessor, SIPC and Cedarhurst as leasee.**

3.13      Execution  version of Lessor Direct  Agreement dated February 12, 1997
          among the Company as borrower,  the  Subsidiaries  as leasees,  NLL as
          lessor and GSI.**

3.13(a)   Amendment  Agreement to the Lessor Direct Agreement dated February 27,
          1997 among the Company as borrower,  the Subsidiaries as leasees,  NLL
          as lessor and Royal Bank of Scotland Plc ("RBS") as agent.**

3.14.1    Execution version of Lessor Mortgage and Assignment dated February 12,
          1997 from NLL as chargor to Woodmere as chargee.**

3.14.2    Execution version of Lessor Mortgage and Assignment dated February 12,
          1997 from NLL as chargor to Hewlett as chargee.**

3.14.3    Execution version of Lessor Mortgage and Assignment dated February 12,
          1997 from NLL as chargor to Inwood as chargee.**

3.14.4    Execution version of Lessor Mortgage and Assignment dated February 12,
          1997 from NLL as chargor to Lawrence as chargee.**

3.14.5    Execution version of Lessor Mortgage and Assignment dated February 12,
          1997 from NLL as chargor to Cedarhurst as chargee.**

3.15.1    Execution  version of  Deposit  Agreement  and  Deposit  Charge  dated
          February 12, 1997 between Woodmere as leasee and Midland Bank PLC as a
          letter of credit issuing bank ("Midland").**

3.15.2    Execution  version of  Deposit  Agreement  and  Deposit  Charge  dated
          February 12, 1997 between Hewlett as leasee and Midland.**

3.15.3    Execution  version of  Deposit  Agreement  and  Deposit  Charge  dated
          February  12, 1997  between  Inwood as leasee and Royal Bank of Canada
          Europe Limited as a letter of credit issuing bank ("RBC").**

3.15.4    Execution  version of  Deposit  Agreement  and  Deposit  Charge  dated
          February  12, 1997 between  Lawrence as leasee and National  Australia
          Bank Limited as a letter of credit issuing bank ("NAB").**

3.15.5    Execution  version of  Deposit  Agreement  and  Deposit  Charge  dated
          February 12, 1997 between Cedarhurst as leasee and NAB.**

3.16.1    Execution  version of Irrevocable  Standby Letter of Credit by Midland
          in favor of Woodmere as leasee.**

3.16.2    Execution  version of Irrevocable  Standby Letter of Credit by Midland
          in favor of Hewlett as leasee.**

3.16.3    Execution  version of  Irrevocable  Standby Letter of Credit by RBC in
          favor of Inwood as leasee.**

3.16.4    Execution  version of  Irrevocable  Standby Letter of Credit by NAB in
          favor of Lawrence as leasee.**

3.16.5    Execution  version of  Irrevocable  Standby Letter of Credit by NAB in
          favor of Cedarhurst as leasee.**

3.17.1    Execution  version of Reimbursement  Agreement dated February 12, 1997
          between Woodmere as leasee and Midland.**

3.17.2    Execution  version of Reimbursement  Agreement dated February 12, 1997
          between Hewlett as leasee and Midland.**

3.17.3    Execution  version of Reimbursement  Agreement dated February 12, 1997
          between Inwood as leasee and RBC.**

3.17.4    Execution  version of Reimbursement  Agreement dated February 12, 1997
          between Lawrence as leasee and NAB.**

3.17.5    Execution  version of Reimbursement  Agreement dated February 12, 1997
          between Cedarhurst as leasee and NAB.**

3.18.1    Execution version of Residual Obligation  Agreement dated February 12,
          1997  between  SIPC as obligor  and  Midland  relating  to Woodmere as
          lessee.**

3.18.2    Execution version of Residual Obligation  Agreement dated February 12,
          1997  between  SIPC as  obligor  and  Midland  relating  to Hewlett as
          lessee.**

3.18.3    Execution version of Residual Obligation  Agreement dated February 12,
          1997 between SIPC as obligor and RBC relating to Inwood as lessee.**

3.18.4    Execution version of Residual Obligation  Agreement dated February 12,
          1997 between SIPC as obligor and NAB relating to Lawrence as lessee.**

3.18.5    Execution version of Residual Obligation  Agreement dated February 12,
          1997  between  SIPC as  obligor  and NAB  relating  to  Cedarhurst  as
          lessee.**

3.19      Execution  version of Term Loan Facility  Agreement  dated February 6,
          1997 among the Company as borrower,  the  Subsidiaries  as guarantors,
          GSI as arranger and as agent,  Goldman Sachs Capital  Partners L.P. as
          bank  ("GSCP")  and  Goldman  Sachs  Capital   Markets  L.P.  as  swap
          counterparty ("GSCM").**

3.19(a)   Amendment Agreement to Term Loan Facility Agreement dated February 27,
          1997 among the Company as borrower,  the  Subsidiaries  as guarantors,
          GSI as arranger and retiring agent,  Goldman Sachs  International Bank
          as  bank  ("GSIB"),  GSCM as swap  counterparty  and RBS as  successor
          agent.**

3.19(b)   Side Letter to the Term Loan  Facility  Agreement  dated  February 27,
          1997 among the Company, the Subsidiaries, SIPC, NLL and GSI.**

3.20.1    Vessel  Mortgage  dated February 27, 1997 granted by Woodmere in favor
          of GSI relating to the M.T. Myrina.**

3.20.2    Vessel Mortgage dated February 27, 1997 granted by Hewlett in favor of
          GSI relating to the M.T. Megara.**

3.20.3    Vessel  Mortgage dated February 27, 1997 granted by Inwood in favor of
          GSI relating to the M.T. Murex.**

3.20.4    Vessel  Mortgage  dated February 27, 1997 granted by Lawrence in favor
          of GSI relating to the M.T. Macoma.**

3.20.5    Vessel Mortgage dated February 27, 1997 granted by Cedarhurst in favor
          of GSI relating to the M.T. Magdala.**

3.21.1    Execution  version of Floating  Charge dated February 12, 1997 between
          Woodmere as chargor and GSI as agent.**

3.21.2    Execution  version of Floating  Charge dated February 12, 1997 between
          Hewlett as chargor and GSI as agent.**

3.21.3    Execution  version of Floating  Charge dated February 12, 1997 between
          Inwood as chargor and GSI as agent.**

3.21.4    Execution  version of Floating  Charge dated February 12, 1997 between
          Lawrence as chargor and GSI as agent.**

3.21.5    Execution  version of Floating  Charge dated February 12, 1997 between
          Cedarhurst as chargor and GSI as agent.**

3.22      Execution  version of Floating  Charge dated February 12, 1997 between
          the Company as chargor and GSI as agent.**

3.23      Execution  version of  Mortgage  of Shares  dated  February  12,  1997
          between the Company as chargor and GSI as agent.**

3.24      Execution  version of  Borrower  Assignment  dated  February  12, 1997
          between the Company as assignor and GSI as agent.**

3.25.1    Execution version of Guarantor (Subsidiary)  Assignment dated February
          12, 1997 between Woodmere as assignor and GSI as agent.**

3.25.2    Execution version of Guarantor (Subsidiary)  Assignment dated February
          12, 1997 between Hewlett as assignor and GSI as agent.**

3.25.3    Execution version of Guarantor (Subsidiary)  Assignment dated February
          12, 1997 between Inwood as assignor and GSI as agent.**

3.25.4    Execution version of Guarantor (Subsidiary)  Assignment dated February
          12, 1997 between Lawrence as assignor and GSI as agent.**

3.25.5    Execution version of Guarantor (Subsidiary)  Assignment dated February
          12, 1997 between Cedarhurst as assignor and GSI as agent.**

3.26      Execution  version of ISDA  Master  Agreement  dated  February 6, 1997
          between GSCM and the Company.**

3.27      Execution  version of Intercreditor  Agreement dated February 12, 1997
          among  the  Company  as   borrower,   the   Subsidiaries   as  leasees
          (collectively  with the Company as  Obligors),  GSI as arranger and as
          agent, GSCP as bank and GSCM as swap bank and SIPC, SPCo, SPNV and the
          Manager, each as a subordinated creditor.**

3.27(a)   Amendment  Agreement  dated  February  27,  1997 to the  Intercreditor
          Agreement among the Company as borrower,  the  Subsidiaries as leasees
          (collectively with the Company as Obligors),  GSI as arranger,  RBS as
          agent,  GSIB as bank,  GSCM as swap bank and SIPC,  SPCo, SPNV and the
          Manager, each as a subordinated creditor.**

3.27(b)   Finance Party Accession/Designation  Agreement dated February 27, 1997
          among the Company and the  Subsidiaries  as obligors,  GSI as existing
          party and  arranger,  RBS as new party,  NLL as lessor,  GSIB as bank,
          GSCM as swap  bank and SIPC,  SPCo,  SPNV and the  Manager,  each as a
          subordinated creditor.**

3.28      Execution  version of  Multipartite  Agreement dated February 12, 1997
          among the Company as borrower, the Subsidiaries as guarantors, SIPC as
          charterer,  GSI as arranger  and agent,  GSCP as bank and GSCM as swap
          bank.**

3.29      Execution  version of Subordination  Agreement dated February 12, 1997
          among the Company, the Subsidiaries,  ICB International,  the Manager,
          the Guarantors, SIPC and Goldman, Sachs & Co. as representative of the
          U.S.  Underwriters,  and GSI as  representative  of the  International
          Underwriters.**

3.31      Execution version of Share Purchase  Agreement dated February 12, 1997
          between the Company and ICB  International  (incorporated by reference
          from Exhibit  10.37 of the  Company's  Registration  Statement on Form
          F-1, filed December 13, 1996 (File No. 333-6170).

99.1      Certification  pursuant  to Section 302 of the  Sarbanes-Oxley  Act of
          2002 of the Chief Executive Officer of the Company.

99.2      Certification pursuant to Section 302 of the  Sarbanes-Oxley  Act of
          2002 of the Chief Financial Officer of the Company.

99.3      Certification pursuant to Section 906 of the  Sarbanes-Oxley  Act of
          2002 of the Chief Executive Officer of the Company.

99.4      Certification pursuant to Section 906 of the  Sarbanes-Oxley  Act of
          2002 of the Chief Financial Officer of the Company.

*         Incorporated  by  reference  to  same  Exhibit  No.  in the  Company's
          Registration  Statement on Form F-1, filed December 13, 1996 (File No.
          333-6170)

**        Incorporated by reference to same Exhibit No. in the Company's  Report
          on Form 6-K, filed March 20, 1997 (File No. 0-29106)

<PAGE>
                                   SIGNATURES

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

KNIGHTSBRIDGE TANKERS LIMITED

By: /s/Kate Blankenship
-----------------------

Kate Blankenship
Chief Financial Officer

Dated:  May 12, 2003

01655.0002 #404917