UNITED
      STATESSECURITIES
      AND EXCHANGE COMMISSIONWashington,
      DC. 20549FORM
20-F




(Mark
One)




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







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





For
      the fiscal year ended
                    December 31,
2008




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


For
      the transition period from


ORo
                    SHELL
      COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THESECURITIES
      EXCHANGE ACT OF 1934  Date
      of event requiring this shell company report





Commission
      file number
            033-79220-01





CALPETRO
      TANKERS (BAHAMAS I) LIMITED(Exact
      name of Registrant as specified in its charter)(Translation
      of Registrant's name into English)Bahamas(Jurisdiction
      of incorporation or organization)Mareva
      House, 4 George Street, PO Box N-3937, Nassau Bahamas(Address
      of principal executive offices)Georgina
      Sousa, Telephone: (1) 441 295 6935 Facsimile: (1) 441 295
      3494,
                  Par-la-Ville
      Place, 14 Par-la-Ville Road, Hamilton, HM 08, Bermuda(Name,
      Telephone, E-mail and/or Facsimile number and Address of Company Contact
      Person)











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







Title
      of each class
            
            Name
      of each exchange on which registeredNone
            
            Not
      applicable





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




None(Title
      of Class)


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




None(Title
      of Class)Indicate
      the number of outstanding shares of each of the issuer's classes of
      capital or common stock as of the close of the period covered by the
      annual report.





Unclassified
common shares: 100 shares par value of $1 per share




Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in
Rule 405 of the Securities Act.




Yes
o No x




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




Yes
o No x




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




Yes
x No o





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




Yes
o No o





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




Large
      accelerated filer o
            Accelerated
      filer o
            Non-accelerated
      filer x




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





U.S.
      GAAP x
            International
      Financial Reporting Standards  o
            Other
      o




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




YesoNoo





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


Yes
o  No
x















INDEX
TO REPORT ON FORM 20-F





PagePART
      IItem
      1.
            Identity
      of Directors, Senior Management and Advisers
            1Item
      2.
            Offer
      Statistics and Expected Timetable
            1Item
      3.
            Key
      Information
            1Item
      4.
            Information
      on the Company
            7Item
      4A.
            Unresolved
      Staff Comments
            19Item
      5.
            Operating
      and Financial Review and Prospects
            19Item
      6.
            Directors,
      Senior Management and Employees
            23Item
      7.
            Major
      Shareholders and Related Party Transactions
            24Item
      8.
            Financial
      Information
            26Item
      9.
            The
      Offer and Listing
            26Item
      10.
            Additional
      Information
            26Item
      11.
            Quantitative
      and Qualitative Disclosures about Market Risk
            27Item
      12.
            Description
      of Securities Other than Equity Securities
            28PART
      IIItem
      13.
            Defaults,
      Dividend Arrearages and Delinquencies
            29Item
      14.
            Material
      Modifications to the Rights of Security Holders and Use of
      Proceeds
            29Item
      15(T).
            Controls
      and Procedures
            29Item
      16.
            Reserved
            30Item
      16A.
            Audit
      Committee Financial Expert
            30Item
      16B.
            Code
      of Ethics
            30Item
      16C.
            Principal
      Accountant Fees and Services
            30Item
      16D.
            Exemptions
      from the Listing Rules for Audit Committees
            31Item
      16E.
            Purchases
      of Equity Securities by the Issuer and Affiliated
    Purchasers
            31Item
      16F.
            Change
      in Registrant's Certifying Accountant
            31Item
      16G.
            Corporate
      Governance
            31PART
      IIIItem
      17.
            Financial
      Statements
            32Item
      18.
            Financial
      Statements
            32Item
      19.
            Exhibits
            33














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.




CalPetro
Tankers (Bahamas I) 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," "anticipate," "intends," "estimate," "forecast," "project," "plan,"
"potential," "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,
fluctuations in currencies and interest rates, general market conditions,
including fluctuations in charterhire rates and vessel values, changes in demand
in the tanker market, changes in world wide oil production and consumption
and  storage, changes in the company's operating expenses, 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 CalPetro Tankers (Bahamas I) Limited with
the Securities and Exchange Commission, or Commission.



















PART
I







Item
1.  IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS





Not
applicable.




Item
2.  OFFER STATISTICS AND EXPECTED TIMETABLE





Not
applicable.




Item
3.   KEY INFORMATION





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





A.           Selected
Financial Data





The
selected statement of operations data of the Company with respect to the fiscal
years ended December 31, 2008, 2007 and 2006, and the selected balance sheet
data with respect to the fiscal years ended December 31, 2008 and 2007, have
been derived from the Company's audited financial statements included herein and
should be read in conjunction with such statements and the notes thereto. The
selected statement of operations and retained earnings data with respect to the
fiscal years ended December 31, 2005 and 2004, and the selected balance sheet
data with respect to the fiscal years ended December 31, 2006, 2005 and 2004,
have been derived from audited 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 audited
financial statements and notes thereto included herein. The Company's accounts
are maintained in U.S. dollars.




Fiscal
      Years ended December 31,2008
                
                
                2007
                
                
                2006
                
                
                2005
                
                
                2004(in
      thousands of $, except share data)Statement
      of operations dataTotal
      operating revenues
                
                
                2,101
                
                
                
                2,352
                
                
                
                2,691
                
                
                
                2,982
                
                
                
                3,269Net
      loss
                
                
                (74
                )
                
                
                (93
                )
                
                
                (23
                )
                
                
                (75
                )
                
                
                (31
                )Per
      share data:Dividends
      per share
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -Balance
      sheet data:Total
      assets
                
                
                25,312
                
                
                
                28,806
                
                
                
                32,313
                
                
                
                35,749
                
                
                
                39,254Current
      portion of long-term debt
                
                
                3,355
                
                
                
                3,355
                
                
                
                3,355
                
                
                
                3,355
                
                
                
                3,355Long-term
      debt
                
                
                20,132
                
                
                
                23,487
                
                
                
                26,842
                
                
                
                30,197
                
                
                
                33,552Stockholder's
      equity
                
                
                1,266
                
                
                
                1,340
                
                
                
                1,433
                
                
                
                1,456
                
                
                
                1,531Number
      of shares
                
                
                100
                
                
                
                100
                
                
                
                100
                
                
                
                100
                
                
                
                100





B.           Capitalization
and Indebtedness





Not
applicable.







1





C.           Reasons
for the offer and use of proceeds





Not
applicable.





D.           Risk
Factors





We
are currently engaged in leasing a vessel that is involved in the transportation
of crude oil and oil products. Our vessel the Cygnus Voyager, or our Vessel, is
currently operated under a bareboat charter, or Initial Charter, to Chevron
Transport Corporation, which we refer to as Chevron. The term of the Initial
Charter expires on April 1, 2015. Chevron's final option to terminate the
Charter on April 1, 2009 has now passed as no notice had been given twelve
months prior to the option date as required by the Initial Charter. On April 1,
2015, Chevron has the option to purchase our Vessel for $1 provided the Initial
Charter is still in place.




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





The cyclical
nature of the tanker industry may lead to volatile changes in charter rates,
which may adversely affect our earnings when the Initial
Charter expires if Chevron does not exercise its purchase
option





Historically,
the tanker industry has been highly cyclical, with volatility in profitability
and asset values resulting from changes in the supply of, and demand for, tanker
capacity. If the tanker market is depressed, in the future our earnings and
available cash flow may decrease. Our ability to re-charter our Vessel on the
expiration of the Initial Charter, (if Chevron does not exercise its purchase
option), and the charter rates payable under any renewal or replacement charter,
will depend upon, among other things, economic conditions in the tanker market.
Fluctuations in charter rates and vessel values result from changes in the
supply and demand for tanker capacity and changes in the supply and demand for
oil and oil products.





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





·
            demand
      for oil and oil products;


·
            global
      and regional economic and political
conditions;


·
            changes
      in oil production and refining
capacity;


·
            environmental
      and other regulatory developments;


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


·
            changes
      in seaborne and other transportation
patterns.





The
factors that influence the supply of tanker capacity include:


·
              the
      number of newbuilding
deliveries;
 ·
              the
      scrapping rate of older
vessels;
 ·
              port
      or canal congestion;
 ·
              vessel
      casualties;
 ·
              price
      of steel;
 ·
              potential
      conversion of vessels to alternative
use;
 ·
              the
      number of vessels that are out of service;
  and ·
                changes
      in environmental and other regulations that may effectively cause
      reductions in the carrying capacity of vessels or early obsolescence of
      tonnage.


Any
decrease in shipments of crude oil may adversely affect our financial
performanceat
the end of the Initial Charter if Chevron does not exercise its purchase
option





The
demand for oil tankers derives primarily from demand for Arabian Gulf and West
African crude oil, along with crude oil from the Former Soviet Union, or the
FSU, which, in turn, primarily depends on the economies of the world's
industrial countries and competition from alternative energy sources. A wide
range of economic, social and other factors can significantly affect the
strength of the world's industrial economies and their demand for crude
oil


2


from
the mentioned geographical areas. One such factor is the price of worldwide
crude oil. The world's oil markets have experienced high levels of volatility in
the last 25 years. In July 2008, oil
prices rose to a high of approximately $143 per barrel before decreasing to
approximately $38 per barrel by the end of December 2008.





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




·
            increased
      crude oil production from other
areas;


·
            increased
      refining capacity in the Arabian Gulf, West Africa or the
    FSU;


·
            increased
      use of existing and future crude oil pipelines in the Arabian Gulf, West
      Africa and FSU;


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


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


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





An
over-supply of tanker capacity may lead to reductions in charter rates, vessel
values, and profitability when the Initial Charter expires if Chevron does not
exercise its purchase option





The
market supply of tankers is affected by a number of factors such as demand for
energy resources, oil, and petroleum products, as well as strong overall
economic growth in parts of the world economy including Asia. If the capacity of
new ships delivered exceeds the capacity of tankers being scrapped and lost,
tanker capacity will increase. If the supply of tanker capacity increases and
the demand for tanker capacity does not increase correspondingly, charter rates
could materially decline. A reduction in charter rates may have a material
adverse effect on our results of operations when the Initial Charter expires if
Chevron does not exercise its purchase option.





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





Over
the last year, global financial markets have experienced extraordinary
disruption and volatility following adverse changes in the global credit
markets. The credit markets in the United States have experienced significant
contraction, deleveraging and reduced liquidity, and governments around the
world have taken highly significant measures in response to such events,
including the enactment of the Emergency Economic Stabilization Act of 2008 in
the United States, and may implement other significant responses in the
future.





Securities
and futures markets and the credit markets are subject to comprehensive
statutes, regulations and other requirements. The Securities and Exchange
Commission, other regulators, self-regulatory organizations and exchanges have
enacted temporary emergency regulations and may take other extraordinary actions
in the event of market emergencies and may effect permanent changes in law or
interpretations of existing laws. Recently, a number of financial institutions
have experienced serious financial difficulties and, in some cases, have entered
into bankruptcy proceedings or are in regulatory enforcement actions. These
difficulties have resulted, in part, from declining markets for assets held by
such institutions, particularly the reduction in the value of their mortgage and
asset-backed securities portfolios. These difficulties have been compounded by a
general decline in the willingness by banks and other financial institutions to
extend credit.





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





We
operate in the highly competitive international tanker market which could affect
our position when the Initial Charter expires if Chevron does not exercise its
purchase option





The
operation of tanker vessels and transportation of crude and petroleum products
is an extremely competitive business. 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 us.
Competition for the


3


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 the Initial Charter with Chevron we are not
exposed to the risk associated with this competition. At the end of the Initial
Charter if Chevron does not exercise its purchase option, we will have to
compete with other tanker owners, including major oil companies as well as
independent tanker companies for charters. 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 Suezmax
oil tanker.





Safety,
environmental and other governmental requirements expose us to liability, and
compliance with current and future regulations could require significant
additional expenditures, which could have a material adverse affect on our
business and financial results at the end of the Initial Charter if Chevron does
not exercise its purchase option





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





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





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




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




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




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 Vessel. Although
Chevron is responsible for all operational matters and bears all these expenses
during the term of the




4


Initial
Charter, these expenses could have an adverse effect on our business operations
at any time after the expiration of the Initial Charter or in the event Chevron
fails to make a necessary payment.




We
may not have adequate insurance at the end of the Initial Charter if Chevron
does not exercise its purchase option





There
are a number of risks associated with the operation of oceangoing vessels,
including mechanical failure, collision, human error, war, terrorism, property
loss, cargo loss or damage and business interruption due to political
circumstances in foreign countries, hostilities and labor strikes. Any of these
events may result in loss of revenues, increased costs and decreased cash flows.
In addition, following the terrorist attack in New York City on September 11,
2001, and the military response of the United States, the likelihood of future
acts of terrorism may increase, and our Vessel may face higher risks of attack.
Future hostilities or other political instability, as shown by the attack on the
Limburg in Yemen in
October 2002, could affect our trade patterns and adversely affect our
operations and our revenues, cash flows and profitability. 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 Initial Charter, Chevron bears all risks associated with the operation of
our Vessel including the total loss of our Vessel. However, we cannot assure
holders of the Notes that we will adequately insure against all risks at the end
of the Initial Charter if Chevron does not exercise its purchase option. We may
not be able to obtain adequate insurance coverage at reasonable rates for our
Vessel in the future and the insurers may not pay particular claims. For
example, a catastrophic spill could exceed our insurance coverage and have a
material adverse effect on our financial condition. In addition, we may not be
able to procure adequate insurance coverage at commercially reasonable rates in
the future and we cannot guarantee that any particular claim will be paid. In
the past, new and stricter environmental regulations have led to higher costs
for insurance covering environmental damage or pollution, and new regulations
could lead to similar increases or even make this type of insurance unavailable.
Furthermore, even if insurance coverage is adequate to cover our losses, we may
not be able to timely obtain a replacement ship in the event of a loss. We may
also be subject to calls, or premiums, in amounts based not only on our own
claim records but also the claim records of all other members of the protection
and indemnity associations through which we receive indemnity insurance coverage
for tort liability. Our payment of these calls could result in significant
expenses to us that could reduce our cash flows and place strains on our
liquidity and capital resources.





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





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




We
are highly dependent on Chevron and Chevron Corporation





We
are highly dependent on the performance by Chevron of its obligations under the
Initial Charter and by its guarantor, Chevron Corporation, of its obligations
under its guarantee. A failure by Chevron and Chevron Corporation to perform
their obligations under the Initial Charter could result in our inability to
service the Term Loans, defined below. If the Notes holders had to enforce
the mortgages securing the Notes, defined below, they may not be able to recover
the principal and interest owed to them.




5


We
may not be able to pay down our debt in the future, which could result in the
loss of our Vessel





Currently,
we must dedicate a large portion of our cash flow from operations to satisfy our
debt service obligations. Our ability to pay interest on, and other amounts due
in respect of, our Term Loan, defined below, will depend on our future operating
performance, prevailing economic conditions and financial, business and other
factors, many of which are beyond our control. There can be no assurance that
our cash flow and capital resources will be sufficient for payment of our
indebtedness in the future. If we are unable to service our indebtedness or
obtain additional financing, as needed, this could have a material adverse
effect on the holders of the Term Loans.




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




A
government could requisition for title or seize our Vessel. Requisition for
title occurs when a government takes control of a vessel and becomes her owner.
Also, a government could requisition our Vessel for hire. Requisition for hire
occurs when a government takes control of a vessel and effectively becomes her
charterer at dictated charter rates. Generally, requisitions occur during a
period of war or emergency. This amount could be materially less than the
charterhire that would have been payable otherwise. In addition, we would bear
all risk of loss or damage to a vessel under requisition for hire. Government
requisition of our Vessel would negatively impact our revenues and therefore
impact our ability to service our debt.




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





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




Our
Vessel may call on ports located in countries that are subject to restrictions
imposed by the United States government




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




The
Notes may not be as liquid as other securities with established trading markets,
which may affect the value of the Notes and your ability to trade
them





The
Notes, defined below, are not listed on any national securities exchange and
have no established trading market. Consequently, the Notes could trade at
prices that may be higher or lower than their principal amount or purchase
price, depending on many factors, including prevailing interest rates, the
market for similar notes and warrants, and our financial performance. The
placement agents for the Notes currently make a market for them, but are not
obligated to do so and may discontinue their market making activity at any time.
In addition, their market making activity is subject to the limits imposed by
the Securities Act of 1933, as amended and the Securities Exchange Act of 1934,
as amended. We cannot assure you that an active trading market will exist for
the Notes or that any market for the Notes will be liquid.




6


Substantial
leverage and debt service could affect our ability to grow and service our debt
obligations





We
are highly leveraged. As of December 31, 2008, we had $23.5 million in total
indebtedness outstanding and stockholders' equity of $1.3 million. The degree to
which we are leveraged could have important consequences for the holders of the
Notes, including:




●
            we may have trouble withstanding
      competitive pressures and responding to changing business
      conditions;




●
            we may be more vulnerable than
      others in the event of a downturn in general economic conditions or in our
      business; and




●
            we may be more highly leveraged
      than other tanker owners with which we compete, which may put us at a
      competitive disadvantage.




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




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




We
have a limited business purpose which limits our flexibility





Our
activity is limited to engaging in the acquisition, disposition, ownership, and
chartering of a Suezmax oil tanker. During the terms of our Initial Charter with
Chevron, we expect that the only source of operating revenue from which we may
pay principal and interest on the Term Loans will be from such
charter.




Item
4. INFORMATION ON THE COMPANY





A.           History
and Development of the Company





CalPetro
Tankers (Bahamas I) Limited, was incorporated in the Bahamas on May 13, 1994
together with two other companies: CalPetro Tankers (Bahamas II) Limited and
CalPetro Tankers (Bahamas III) Limited, each of which was incorporated in
the Bahamas. In addition, CalPetro Tankers (IOM) Limited was incorporated in the
Isle of Man. These entities, or the Owners, were organized as special purpose
companies for the purpose of acquiring one of four oil tankers from Chevron
which were concurrently chartered on long-term charter agreements back to
Chevron.





We,
along with CalPetro Tankers (Bahamas II) Limited, CalPetro Tankers (Bahamas III)
Limited and CalPetro Tankers (IOM) Limited are wholly-owned by California
Tankers Investments Limited, a company organized under the laws of the Bahamas,
which is in turn a wholly-owned subsidiary of CalPetro Holdings Limited, an Isle
of Man company. CalPetro Holdings Limited is a wholly-owned subsidiary of
Independent Tankers Corporation, or ITC, a Cayman Islands company. ITC is itself
wholly-owned by Independent Tankers Corporation Limited, or ITCL. ITCL was
established in February 2008 and it is 82.47% owned by Frontline Ltd., or
Frontline, a Bermuda company whose shares are listed on the New York Stock
Exchange, London Stock Exchange and Oslo Stock Exchange.





California
Petroleum Transport Corporation, or California Petroleum or CPTC, a Delaware
corporation which we refer to as acting as agent on behalf of the Owners, issued
as full recourse obligations $167,500,000 Serial First Preferred Mortgage Notes,
or the Serial Notes, and $117,900,000 8.52% First Preferred Mortgage Notes due
in 2015, which we refer to as the Term Notes and together with the Serial Notes
as the Notes. The Serial Notes were fully repaid April 1, 2006. The proceeds
from the sale of the Notes were applied by way of long-term loans, being Serial
Loans in respect of the Serial First Preferred Mortgage Notes and Term Loans in
respect of the First Preferred Mortgage Notes due in 2015, to the Owners to fund
the acquisition of the oil tankers from Chevron. We were allocated $41,410,000
of the Serial Loans and $40,262,000 of the Term Loans and acquired our Vessel as
described below. We engage in no business other than the ownership and
chartering of our Vessel and activities resulting from or incidental to such
ownership and chartering.





Our
principal executive offices are located at Mareva House, 4 George Street, PO Box
N-3937, Nassau, Bahamas.




7







B.           Business
Overview





Our
Vessel, is a 150,000 dwt Suezmax oil tanker, which was acquired from Chevron.
Suezmax tankers are medium-sized vessels ranging from approximately 120,000 to
200,000 dwt, and of the maximum length, breadth and draft requirements to be
capable of passing fully loaded through the Suez Canal.




Our
Vessel is initially chartered to Chevron for a term expiring on April 1, 2015,
subject to Chevron's right to terminate the Initial Charter on April 1, 2009.
For this optional termination date, a non-binding notice of the intention to
exercise the option to terminate the Initial Charter would have to be given at
least 12 months in advance, with irrevocable notice being given 7 months prior
to the termination date. Chevron would have been required to pay us a
termination payment, or the Termination Payment, of $9.97 million on or prior to
the termination date. In accordance with terms of the Charter, no notice was
received within the 12 month period, so Chevron is prevented from invoking its
right to terminate on April 1, 2009. Therefore, the charter continues to April
1, 2015. Chevron also has the option to purchase our Vessel for $1 on April 1,
2015 provided the Initial Charter is still in place.





Chevron
is principally engaged in the marine transportation of oil and refined petroleum
products. Chevron's primary transportation routes are from the Middle East,
Indonesia, Mexico, West Africa and the North Sea to ports in the United States,
Europe, the United Kingdom and Asia. Chevron has advised us that it expects to
use our Vessel worldwide as permitted under the Initial Charter. The obligations
of Chevron under the Initial Charter are guaranteed by Chevron Corporation, a
major international oil company, pursuant to a guarantee, or the Chevron
Guarantee. Chevron is an indirect, wholly-owned subsidiary of Chevron
Corporation.





Our
Vessel is a double hull oil carrier and is presently registered under the
Bahamas flag. Our Vessel was constructed under the supervision of Chevron and
designed to Chevron's specifications to enhance safety and reduce operating and
maintenance costs, including such features as high performance rudders, extra
steel (minimal use of high tensile steels), additional fire safety equipment,
redundant power generation equipment, extra coating and electrolytic corrosion
monitoring and protection systems, additional crew quarters to facilitate added
manning and a double hull design patented by one of Chevron Corporation's
subsidiaries. The builder of our Vessel was Ishikawajima-Harima Heavy Industries
Co., Ltd.





Management





On March 31, 1999, Frontline became our
manager and technical advisor pursuant to an assignment of our management
agreement, or the Management Agreement.Under the Management Agreement,
Frontline provides administrative, ship management and advisory services to the
Company as manager, or Manager. Pursuant to the Management Agreement, the
Manager receives an annual fee of $13,625 for each Vessel, along with an
additional annual fee of $3,000 covering all four Vessels. The technical
advisor's fee consists of an annual fee of $10,000 for each Vessel, payable
semi-annually in arrears. Both the management fee and the technical advisor's
fee, which together we refer to as the Management Fee, is payable semi-annually
in arrears for the period until the third anniversary of the closing of the
issue of the Notes, then increasing by four percent on each subsequent
anniversary of the closing of the issue of the Notes.





Environmental
and Other Regulations





Government
regulations and laws significantly affect the ownership and operation of our
tanker. We are subject to international conventions, national, state and local
laws and regulations in force in the countries in which our Vessel may operate
or is registered. Compliance with such laws, regulations and other requirements
entails significant expense, including vessel modifications and implementation
of certain operating procedures.




Our
Vessel is subject to both scheduled and unscheduled inspections by a variety of
government, quasi-governmental and private entities each of which may have
unique requirements. These organizations include the local port authorities,
national authorities, harbor masters or equivalent, classification societies,
flag state administrations (countries of registry) and charterers, particularly
terminal operators and oil companies. Some of these entities require us to
obtain permits, licenses and certificates for the operation of our tanker. Our
failure to maintain necessary permits, certificates or approvals could require
us to incur substantial costs or temporarily suspend operation of our
Vessel.




8


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




International
Maritime Organization




The
International Maritime Organization, or IMO (the United Nations agency for
maritime safety and the prevention of pollution by ships), has adopted the
International Convention for the Prevention of Marine Pollution from Ships,
1973, as modified by the Protocol of 1978 relating thereto, which has been
updated through various amendments, or the MARPOL Convention. The MARPOL
Convention implements environmental standards including oil leakage or spilling,
garbage management, as well as the handling and disposal of noxious liquids,
harmful substances in packaged forms, sewage and air emissions. Under IMO
regulations, in order to trade in ports of IMO member nations, a newbuild tanker
of 5,000 dwt or above 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:





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




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




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




Since
the enactment of these regulations, the IMO has accelerated the timetable for
the phase-out of single hull oil tankers.




In
December 2003, the Marine Environmental Protection Committee of the IMO, or
MEPC, adopted an amendment to the MARPOL Convention, which became effective in
April 2005. The amendment revised an existing regulation 13G accelerating the
phase-out of single hull oil tankers and adopted a new regulation 13H on the
prevention of oil pollution from oil tankers when carrying heavy grade oil.
Under the revised regulation, single hull oil tankers were required to be phased
out no later than April 5, 2005 or the anniversary of the date of delivery of
the ship on the date or in the year specified in the following
table:




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





9





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




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




·
            the
      oil tanker conversion was completed before July 6,
  1996:




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




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




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




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




·
              crude oils having a density at15єC
      higher than 900 kg/m3;
  ·
              fuel oils
      having either a density at 15єC higher than 900 kg/m3 or a
      kinematic viscosity at 50oC higher than 180 mm2/s;
  or
  ·
              bitumen,
      tar and their emulsions.


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





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





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


10





Revised
Annex I to the MARPOL Convention entered into force in January 2007. Revised
Annex I incorporates various amendments adopted since the MARPOL Convention
entered into force in 1983, including the amendments to regulation 13G
(regulation 20 in the revised Annex) and regulation 13H (regulation 21 in the
revised Annex). Revised Annex I also imposes construction requirements for oil
tankers delivered on or after January 1, 2010. A further amendment to revised
Annex I includes an amendment to the definition of heavy grade oil that will
broaden the scope of regulation 21. On August 1, 2007, regulation 12A (an
amendment to Annex I) came into force requiring oil fuel tanks to be located
inside the double hull in all ships with an aggregate oil fuel capacity of 600
cubic meters and above, which are delivered on or after August 1, 2010 including
ships for which the building contract is entered into on or after August 1,
2007, or, in the absence of a contract, for which the keel is laid on or after
February 1, 2008.





Because
our Vessel is of double hull construction, it is not subject to the current
phase-out regulations of the IMO.





Air
Emissions





In
September 1997, the IMO adopted Annex VI to the MARPOL Convention,
Regulations for the Prevention of Pollution from Ships, to address air pollution
from ships. Effective May 2005, Annex VI sets limits on sulfur oxide and
nitrogen oxide emissions from all commercial vessel exhausts and prohibits
deliberate emissions of ozone depleting substances (such as halons and
chlorofluorocarbons), emissions of volatile compounds from cargo tanks, and the
shipboard incineration of specific substances. Annex VI also includes a global
cap on the sulfur content of fuel oil and allows for special areas to be
established with more stringent controls on sulfur emissions. We believe that
our Vessel is compliant in all material respects with current Annex VI
regulations. Additional or new conventions, laws and regulations may be adopted
that could require the installation of expensive emission control systems and
could adversely affect our business, results of operations, cash flows and
financial condition. In October 2008, the IMO adopted amendments to Annex VI
regarding nitrogen oxide and sulfur oxide emissions standards that will enter
into force on July 1, 2010. The amended Annex VI would reduce air pollution from
vessels by, among other things, (i) implementing a progressive reduction of
sulfur oxide emissions from ships, with the global sulfur oxide emission cap
reduced initially from 4.50% to 3.50% beginning January 1, 2012 and then reduced
progressively to 0.50% by January 1, 2020, subject to a feasibility review to be
completed no later than 2018: and (ii) establishing new tiers of stringent
nitrogen oxide emissions standards for new marine engines, depending on their
date of installation. Once these amendments become effective, we may incur costs
to comply with these revised standards. The United States ratified the Annex VI
amendments in October 2008, thereby rendering U.S. air emissions standards
equivalent to IMO requirements. The directive 2005/33/EU effective from January
1, 2010 ban the use of fuel oils containing more than 0.1% sulphur by mass by
any merchant vessel whilst at berth in any EU country. This will incur extra
cost and some minor modification of fuel supply system and machinery. Initial
investigation has verified that compliance can be achieved by modest investment,
purchase of LS fuel and alteration of operating procedures.




Safety
Requirements





The
IMO has also adopted the SOLAS Convention, and the International Convention on
Load Lines, 1966, or LL Convention, which impose a variety of standards to
regulate design and operational features of ships. SOLAS Convention and LL
Convention standards are revised periodically. We believe that our Vessel is in
material  compliance with SOLAS Convention and LL Convention
standards.





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




The
ISM Code requires that vessel operators obtain a safety management certificate
for each vessel they operate. This certificate evidences compliance by a
vessel's management with the ISM Code requirements for a safety management
system. No vessel can obtain a safety management certificate unless its manager
has been awarded a document of compliance, issued by each flag state, under the
ISM Code. Our appointed ship managers have obtained documents of compliance for
their offices and safety management certificates for our Vessel where the
certificates are required by the IMO. The document of compliance ("DOC") and
ship management certificate ("SMC") are renewed every five years but DOC is
subject to audit verification annually and the SMC every 2.5
years.


11




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




The
IMO has negotiated international conventions that impose liability for oil
pollution in international waters and a signatory's territorial waters.
Additional or new conventions, laws and regulations may be adopted which could
limit our ability to do business and which could have a material adverse effect
on our business and results of operations.




Ballast
Water Requirements




The
IMO adopted an International Convention for the Control and Management of Ships'
Ballast Water and Sediments, or the BWM Convention, in February 2004. The BWM
Convention implemented regulations calling for a phased introduction of
mandatory ballast water exchange requirements (beginning in 2009) to be replaced
in time with mandatory concentration limits. The BWM Convention will not enter
into force until 12 months after it has been adopted by 30 states, the combined
merchant fleets of which represent not less than 35% of the gross tonnage of the
world's merchant shipping tonnage. To date there has not been sufficient
adoption of this standard for it to take force.





The
flag state, as defined by the United Nations Convention on Law of the Sea, has
overall responsibility for the implementation and enforcement of international
maritime regulations for all ships granted the right to fly its flag.
The


"Shipping
Industry Guidelines on Flag State Performance" evaluates flag states based on
factors such as sufficiency of


infrastructure,
ratification of international maritime treaties, implementation and enforcement
of international maritime regulations, supervision of surveys, casualty
investigations and participation at IMO meetings.





Anti-Fouling
Requirements





In
2001, the IMO adopted the International Convention on the Control of Harmful
Anti-fouling Systems on Ships, or the Anti-fouling Convention. The Anti-fouling
Convention prohibits the use of organotin compound coatings to prevent the
attachment of mollusks and other sea life to the hulls of vessels after
September 1, 2003. The exteriors of vessels constructed prior to January 1, 2003
that have not been in dry-dock must, as of September 17, 2008, either not
contain the prohibited compounds or have coatings applied to the vessel exterior
that act as a barrier to the leaching of the prohibited compounds. Vessels of
over 400 gross tons engaged in international voyages must obtain an
International Anti-fouling System Certificate and undergo a survey before the
vessel is put into service or when the antifouling systems are altered or
replaced. We are in compliance with the Anti-fouling Convention.





Oil
Pollution Liability





Although
the United States is not a party to these conventions, many countries have
ratified and follow the liability plan adopted by the IMO and set out in the
International Convention on Civil Liability for Oil Pollution Damage of 1969, as
amended in 2000, or the CLC. Under this convention and depending on whether the
country in which the damage results is a party to the 1992 Protocol to the CLC,
a vessel's registered owner is strictly liable for pollution damage caused in
the territorial waters of a contracting state by discharge of persistent oil,
subject to certain complete defenses. The limits on liability outlined in the
1992 Protocol use the International Monetary Fund currency unit of Special
Drawing Rights, or SDR. Under an amendment to the 1992 Protocol that became
effective on November 1, 2003, for vessels of 5,000 to 140,000 gross tons
(a unit of measurement for the total enclosed spaces within a vessel), liability
will be limited to approximately 4.51 million SDR plus 631 SDR for each
additional gross ton over 5,000. For vessels of over 140,000 gross tons,
liability will be limited to 89.77 million SDR. The exchange rate between SDRs
and U.S. dollars was 0.632000 SDR per U.S. dollar on April 7, 2009. The right to
limit liability is forfeited under the International Convention on Civil
Liability for Oil Pollution Damage where the spill is caused by the owner's
actual fault, and under the 1992 Protocol, where the spill is caused by the
owner's intentional or reckless conduct. Vessels trading to states that are
parties to these conventions must provide evidence of insurance covering the
liability of the owner. In jurisdictions where the International Convention on
Civil Liability for Oil Pollution Damage has not been adopted, various
legislative schemes or common laws govern, and liability is imposed either on
the basis of fault or in a manner similar to that convention. We believe that
our P&I insurance will cover the liability under the plan adopted by the
IMO.


12








The
IMO adopted the International Convention on Civil Liability for Bunker Oil
Pollution Damage, or the Bunker Convention, to impose strict liability on ship
owners for pollution damage in jurisdictional waters of ratifying states caused
by discharges of bunker fuel. The Bunker Convention, which became effective on
November 21, 2008, requires registered owners of ships over 1,000 gross tons to
maintain insurance for pollution damage in an amount equal to the limits of
liability under the applicable national or international limitation regime (but
not exceeding the amount calculated in accordance with the Convention on
Limitation of Liability for Maritime Claims of 1976, as amended). With respect
to non-ratifying states, liability for spills or releases of oil carried as fuel
in ship's bunkers typically is determined by the national or other domestic laws
in the jurisdiction where the events or damages occur.




IMO
regulations also require owners and operators of vessels to adopt Ship Oil
Pollution Emergency Plans, or SOPEPs. Periodic training and drills for response
personnel and for vessels and their crews are required.




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 our operations.




United
States Requirements





In
1990, the United States Congress enacted the U.S. Oil Pollution Act of1990, or OPA, to establish an
extensive regulatory and liability regime for environmental protection and
cleanup of oil spills. OPA affects all owners and operators whose vessels trade
with the United States or its territories or possessions, or whose vessels
operate in the waters of the United States, which include the U.S. territorial
sea and the 200 nautical mile exclusive economic zone around the United States.
The Comprehensive Environmental Response, Compensation and Liability Act, or
CERCLA, imposes liability for cleanup and natural resource damage from the
release of hazardous substances (other than oil) whether on land or at sea. Both
OPA and CERCLA impact our operations.




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




●
            natural resource damages and
      related assessment costs;




●
            real and personal property
      damages;




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




●
            net cost of public services
      necessitated by a spill response, such as protection from fire, safety or
      health hazards; and




●
            loss of subsistence use of
      natural resources.




OPA
previously limited the liability of responsible parties to the greater of $1,200
per gross ton or $10.0 million per tanker that is over 3,000 gross tons (subject
to possible adjustment for inflation). Amendments to OPA signed into law in July
2006 increased these limits on the liability of responsible parties with respect
to tankers over 3,000 gross tons to the greater of $3,000 per gross ton or $22.0
million per single hull tanker, and $1,900 per gross ton or $16.0 million per
double hull tanker, respectively. The act specifically permits individual states
to impose their own liability regimes with regard to oil pollution incidents
occurring within their boundaries, and some states have enacted legislation
providing for unlimited liability for discharge of pollutants within their
waters. In some cases, states which have enacted this type of legislation have
not yet issued implementing regulations defining tanker owners' responsibilities
under these laws. CERCLA, which applies to owners and operators of vessels,
contains a similar liability regime and provides for cleanup, removal and
natural resource damages. Liability under CERCLA is limited to the greater of
$300 per gross ton or $5.0 million for vessels carrying a hazardous substance as
cargo and the greater of $300 per gross ton or $0.5 million for any other
vessel.




These
limits of liability do not apply, however, where the incident is caused by
violation of applicable U.S. federal safety, construction or operating
regulations, or by the responsible party's gross negligence or willful
misconduct.




13


These
limits also do not apply if the responsible party fails or refuses to report the
incident or to cooperate and assist in connection with the substance removal
activities. OPA and CERCLA each preserve the right to recover damages under
existing law, including maritime tort law. We believe that we are in substantial
compliance with OPA, CERCLA and all applicable state regulations in the ports
where our Vessel calls.




OPA
also requires owners and operators of vessels to establish and maintain with the
U.S. Coast Guard evidence of financial responsibility sufficient to meet the
limit of their potential strict liability under the act. On October 17, 2008,
the U.S. Coast Guard regulatory requirements under OPA and CERCLA were amended
to require evidence of financial responsibility in amounts that reflect the
higher limits of liability imposed by the July 2006 amendments to OPA, as
described above. The increased amounts became effective on January 15, 2009.
U.S. Coast Guard regulations currently require evidence of financial
responsibility in the amount of $3,300 per gross ton for a single hull tanker or
$2,200 per gross ton for a double hull tanker, coupling the OPA limitation on
liability of $3,000 per gross ton for a single hull tanker, or $1,900 per gross
ton for a double hull tanker, respectively, with the CERCLA liability limit of
$300 per gross ton. Under the regulations, evidence of financial responsibility
may be demonstrated by insurance, surety bond, self-insurance or guaranty. Under
OPA regulations, an owner or operator of more than one tanker is required to
demonstrate evidence of financial responsibility for the entire fleet in an
amount equal only to the financial responsibility requirement of the tanker
having the greatest maximum strict liability under OPA and CERCLA. We have
provided such evidence and received certificates of financial responsibility
from the U.S. Coast Guard for our Vessel as required.





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




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




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




●
            describe crew training and
      drills; and




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




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




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





The
U.S. Environmental Protection Agency, or EPA, historically exempted the
discharge of ballast water and other substances incidental to the normal
operation of vessels in U.S. waters from CWA permitting requirements. However,
on March 31, 2005, a U.S. District Court ruled that the EPA exceeded its
authority in creating an exemption for ballast water. On September 18, 2006, the
court issued an order invalidating the exemption in the EPA's regulations for
all discharges incidental to the normal operation of a vessel as of September
30, 2008, and directed the EPA to develop a system for regulating all discharges
from vessels by that date. The District Court's decision was affirmed by the
Ninth Circuit Court of Appeals on July 23, 2008.


14








In
response to the invalidation and removal of the EPA's vessel exemption by the
Ninth Circuit, the EPA has enacted rules governing the regulation of ballast
water discharges and other discharges incidental to the normal operation of
vessels within U.S. waters. Under the new rules, which took effect February 6,
2009, commercial vessels 79 feet in length or longer (other than commercial
fishing vessels), which we refer to as Regulated Vessels, are required to obtain
a CWA permit regulating and authorizing such normal discharges. This permit,
which the EPA has designated as our Vessel General Permit for Discharges
Incidental to the Normal Operation of Vessels, or VGP, incorporates the current
U.S. Coast Guard requirements for ballast water management as well as
supplemental ballast water requirements, and includes limits applicable to 26
specific discharge streams, such as deck runoff, bilge water and gray
water.





For
each discharge type, among other things, the VGP establishes effluent limits
pertaining to the constituents found in the effluent, including best management
practices, or BMPs, designed to decrease the amount of constituents entering the
waste stream. Unlike land-based discharges, which are deemed acceptable by
meeting certain EPA-imposed numerical effluent limits, each of the 26 VGP
discharge limits is deemed to be met when a Regulated Vessel carries out the
BMPs pertinent to that specific discharge stream. The VGP imposes additional
requirements on certain Regulated Vessel types, including tankers, that emit
discharges unique to those vessels. Administrative provisions, such as
inspection, monitoring, recordkeeping and reporting requirements are also
included for all Regulated Vessels.





On
August 31, 2008, the District Court ordered that the date for implementation of
the VGP be postponed from September 30, 2008 until December 19, 2008. This date
was further postponed until February 6, 2009 by the District Court. Although the
VGP became effective on February 6, 2009, the VGP application procedure, known
as the Notice of Intent, or NOI, has yet to be finalized. Accordingly, Regulated
Vessels will effectively be covered under the VGP from February 6, 2009 until
June 19, 2009, at which time the "eNOI" electronic filing interface will become
operational. Thereafter, owners and operators of Regulated Vessels must file
their NOIs prior to September 19, 2009, or the Deadline. Any Regulated Vessel
that does not file an NOI by the Deadline will, as of that date, no longer be
covered by the VGP and will not be allowed to discharge into U.S. navigable
waters until it has obtained a VGP. Any Regulated Vessel that was delivered on
or before the Deadline will receive final VGP permit coverage on the date that
the EPA receives such Regulated Vessel's complete NOI. Regulated Vessels
delivered after the Deadline will not receive VGP permit coverage until 30 days
after their NOI submission. Our Vessel is a Regulated Vessel, and we intend to
submit a NOI as soon after June 19, 2009 as practicable.





Owners
and operators of vessels visiting U.S. waters will be required to comply with
this VGP program or face penalties. This could require the installation of
equipment on our Vessel to treat ballast water before it is discharged or the
implementation of other port facility disposal arrangements or procedures at
potentially substantial cost, and/or otherwise restrict our Vessel from entering
U.S. waters. In addition, pursuant to Section 401 of the CWA which requires each
state to certify federal discharge permits such as the VGP, certain states have
enacted additional discharge standards as conditions to their certification of
the VGP. These local standards bring the VGP into compliance with more stringent
state requirements, such as those further restricting ballast water discharges
and preventing the introduction of non-indigenous species considered to be
invasive. The VGP and its state-specific regulations and any similar
restrictions enacted in the future will increase the costs of operating in the
relevant waters.





The
U.S. Clean Air Act of 1970, as amended by the Clean Air Act Amendments of 1977
and 1990, or the CAA, requires the EPA to promulgate standards applicable to
emissions of volatile organic compounds and other air contaminants. Our Vessel
is subject to vapor control and recovery requirements for certain cargoes when
loading, unloading, ballasting, cleaning and conducting other operations in
regulated port areas. Our Vessel that operates in such port areas with
restricted cargoes is equipped with vapor recovery systems that satisfy these
requirements. The CAA also requires states to draft State Implementation Plans,
or SIPs, designed to attain national health-based air quality standards in
primarily major metropolitan and/or industrial areas. Several SIPs regulate
emissions resulting from vessel loading and unloading operations by requiring
the installation of vapor control equipment. As indicated above, our Vessel
operating in covered port areas is already equipped with vapor recovery systems
that satisfy these existing requirements. As referenced
above, the amended Annex VI to the IMO's MARPOL Convention, which addresses air
pollution from ships, was ratified by the United States on October 9, 2008 and
entered into force domestically on January 8, 2009. Previously, the state of
California had adoptedstringent air emissions requirements for
ocean-going vessels that were held by
a federal court in February 2008 to be preempted by the federal Clean Air Act
and thus invalidated. In response, on July 24, 2008, the California Air
Resources Board of the State of California, or CARB, then adopted clean-fuel regulations applicable
to all vessels sailing within 24 miles of the California coastline whose
itineraries call for them to enter any California ports, terminal facilities, or
internal or estuarine


15


waters. The new
CARB regulations,while avoiding explicit regulation of emissions, require such
vessels to use low sulfur marine fuels rather than bunker fuel. By July 1, 2009,
such vessels are required to switch either to marine gas oil with a sulfur
content of no more than 1.5% or marine diesel oil with a sulfur content of no
more than 0.5%. By 2012, only marine gas oil and marine diesel oil fuels with
0.1% sulfur will be allowed.California is also requesting EPA to grant
it a waiver under the Clean Air Act to enforce the California vessel emission
standards that were invalidated. More legal challenges are expected to follow.
If EPA grants the California waiver request or if CARB prevails and the new fuel
content regulations go into effect as scheduled on July 1, 2009, our vessel
would be subject to the CARB requirements if they were to travel
within such waters. The new California regulations would require significant
expenditures on low-sulfur fuel and would increase our operating
costs.Finally, although the more stringent CARB regime was
technically superseded when the United States ratified and implemented the
amended Annex VI, the United States and Canada jointly requested IMO on March
27, 2009 to designate the area extending 200 miles from their territorial sea
baseline adjacent to the Atlantic/Gulf and Pacific coasts and the eight main
Hawaiian Islands as Emissions Control Areas under the Annex VI amendments. If
approved by IMO, more stringent emissions standards similar to the new CARB
regulations would apply in the Emissions Control Areas that would cause us to
incur further costs.





The
U.S. National Invasive Species Act, or NISA, was enacted in 1996 in response to
growing reports of harmful organisms being released into U.S. ports through
ballast water taken on by vessels in foreign ports. The U.S. Coast Guard adopted
regulations under NISA in July 2004 that impose mandatory ballast water
management practices for all vessels equipped with ballast water tanks entering
U.S. waters. These requirements can be met by performing mid-ocean ballast
exchange, by retaining ballast water on board the vessel, or by using
environmentally sound alternative ballast water management methods approved by
the U.S. Coast Guard. (However, mid-ocean ballast exchange is mandatory for
ships heading to the Great Lakes or Hudson Bay, or vessels engaged in the
foreign export of Alaskan North Slope crude oil). Mid-ocean ballast exchange is
the primary method for compliance with the U.S. Coast Guard regulations, since
holding ballast water can prevent vessels from performing cargo operations upon
arrival in the United States, and alternative methods are still under
development. Vessels that are unable to conduct mid-ocean ballast exchange due
to voyage or safety concerns may discharge minimum amounts of ballast water (in
areas other than the Great Lakes and the Hudson River), provided that they
comply with recordkeeping requirements and document the reasons they could not
follow the required ballast water management requirements. The U.S. Coast Guard
is developing a proposal to establish ballast water discharge standards, which
could set maximum acceptable discharge limits for various invasive species,
and/or lead to requirements for active treatment of ballast water. In April 2008
the U.S. House of Representatives passed a bill that amends NISA by prohibiting
the discharge of ballast water unless it has been treated with specified methods
or acceptable alternatives. Similar bills have been introduced in the U.S.
Senate, but we cannot predict which bill, if any, will be enacted into law. In
the absence of federal standards, states have enacted legislation or regulations
to address invasive species through ballast water and hull cleaning management
and permitting requirements. For instance, the state of California has recently
enacted legislation extending its ballast water management program to regulate
the management of "hull fouling" organisms attached to vessels and adopted
regulations limiting the number of organisms in ballast water discharges.
Michigan's ballast water management legislation mandating the use of various
techniques for ballast water treatment was upheld by the federal courts. Other
states may proceed with the enactment of similar requirements that could
increase the costs of operating in state waters.





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





Other
Regulations





European
Union Tanker Regulations





In
July 2003, in response to the MT Prestige oil spill in
November 2002, the European Union adopted legislation, which was amended in
October 2003, that prohibits all single hull tankers from entering into its
ports or offshore terminals by 2010 or earlier, depending on their age. The
European Union has also already banned all single hull tankers carrying heavy
grades of oil from entering or leaving its ports or offshore terminals or
anchoring in areas under its jurisdiction. Commencing in 2005, certain single
hull tankers above 15 years of age will also be restricted from entering or
leaving European Union ports or offshore terminals and anchoring in areas under
European Union jurisdiction. The European Union has also adopted legislation
that would: (1) ban manifestly sub-standard vessels




16


(defined
as those over 15 years old that have been detained by port authorities at
least twice in a six month period) from European waters and create an obligation
of port states to inspect vessels posing a high risk to maritime safety or the
marine environment; and (2) provide the European Union with greater
authority and control over classification societies, including the ability to
seek to suspend or revoke the authority of negligent societies. The sinking of
the MT Prestige and
resulting oil spill in November 2002 has led to the adoption of other
environmental regulations by certain European Union nations, which could
adversely affect the remaining useful life of our Vessel and our ability to
generate income from it. It is impossible to predict what legislation or
additional regulations, if any, may be promulgated by the European Union or any
other country or authority.




In 2005, the European Union adopted a
directive on ship-source pollution, imposing criminal sanctions for intentional,
reckless or negligent pollution discharges by ships. The directive could result
in criminal liability for pollution from vessels in waters of European countries
that adopt implementing legislation. Criminal liability for pollution may result
in substantial penalties or fines and increased civil liability
claims.





Greenhouse
Gas Regulation





In
February 2005, the Kyoto Protocol to the United Nations Framework Convention on
Climate Change, or the Kyoto Protocol, entered into force. Pursuant to the Kyoto
Protocol, adopting countries are required to implement national programs to
reduce emissions of certain gases, generally referred to as greenhouse gases,
which are suspected of contributing to global warming. Currently, the emissions
of greenhouse gases from international shipping are not subject to the Kyoto
Protocol. However, the European Union has indicated that it intends to propose
an expansion of the existing European Union emissions trading scheme to include
emissions of greenhouse gases from vessels. In the United States, the Attorneys
General from 16 states and a coalition of environmental groups in April 2008
filed a petition for a writ of mandamus, or petition, with the DC Circuit Court
of Appeals, or the DC Circuit, to request an order requiring  the EPA
to regulate greenhouse gas emissions from ocean-going vessels under the Clean
Air Act. Although the DC Circuit denied the petition in June 2008, EPA then
published an Advanced Notice of Proposed Rulemaking soliciting comments on
whether greenhouse gas emissions should be regulated under the Clean Air Act.
Climate change initiatives will also be considered by the U.S. Congress in this
session. Any future passage of climate control legislation or other regulatory
initiatives by the IMO, European Union or individual countries where we operate
that restrict emissions of greenhouse gases could entail financial impacts on
our operations that we cannot predict with certainty at this time.





Vessel
Security Regulations





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




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




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




●
            the development of vessel
      security plans;




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






17







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




●
            compliance with flag state
      security certification
requirements.




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




Inspection
by Classification Societies





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




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




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




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




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




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


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




18




Our
Vessel is periodically drydocked. If any defects are found, the classification
surveyor will issue a recommendation which must be rectified by the ship owner
within prescribed time limits.





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





Risk
of Loss and Insurance





The
operation of any ocean-going vessel carries an inherent risk of catastrophic
marine disasters, environmental mishaps, cargo and property losses or damage and
business interruptions caused by adverse weather and ocean conditions,
mechanical failures, human error, political action in various countries, war,
terrorism, piracy, labor strikes and other circumstances or events. Pursuant to
the Initial Charter, our Vessel may be operated through out the world in any
lawful trade for which our Vessel is suitable, including carrying oil and its
products. In the past, political conflicts in many regions, particularly in the
Arabian Gulf, have included attacks on tankers, mining of waterways and other
efforts to disrupt shipping in the area. Vessels trading in such regions have
also been subject to acts of terrorism and piracy. In addition, the carriage of
petroleum products is subject to the risk of spillage and leakage. Any such
event may result in increased costs or the loss of revenues or assets, including
our Vessel.




Under
the Initial Charter, Chevron is entitled to self-insure against marine and war
risks relating to our Vessel and against protections and indemnity risks
relating to our Vessel during the term of the Initial Charter and, accordingly,
purchasers of the Notes cannot rely on the existence of third-party insurance.
There can be no assurance that all risks will be adequately insured against,
that any particular loss will be covered or that we will be able to procure
adequate insurance coverage at commercially reasonable rates in the
future. In particular, stricter environmental regulations may result in
increased costs for, or the lack of availability or, insurance against the risks
of environmental damage or pollution.




Chevron
will, pursuant to the Initial Charter, indemnify us from damages arising from a
failure to maintain any financial responsibility requirements whether relating
to oil or other pollution damage. Chevron will also indemnify us to the extent
losses, damages or expenses are incurred by us relating to oil or other
pollution damage as a result of the operation of our Vessel by
Chevron.




C.           Organizational
Structure





As
described above, and also in Item 7 "Major Shareholders and Related Party
Transactions", we are a wholly-owned subsidiary of California Tankers
Investments Limited, a company organized under the laws of the Bahamas, which is
a wholly-owned subsidiary of CalPetro Holdings Limited. CalPetro Holdings
Limited is a wholly-owned subsidiary of ITC. ITC is a wholly-owned subsidiary of
ITCL and 82.47% of the common shares of ITCL are owned by
Frontline.





D.           Property,
Plants and Equipment




Other
than our Vessel described above, we do not have any property.




Item
4A. UNRESOLVED STAFF COMMENTS





None.





Item
5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS





Overview





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




Our
Vessel has been chartered to Chevron under a bareboat charter which
provides:




a)
            charterhire payments sufficient
      to pay, so long as the Initial Charter is in
  effect:


i.           the
obligations under the loans for acquiring our Vessel,


19





ii.           management fees and technical advisor's
fees,


iii.           recurring fees and taxes,
and


iv.           any other costs and expenses incidental
to the ownership and chartering of our Vessel;





b)
            termination payments sufficient
      to make sinking fund and interest payments on the Term Loans, to the
      extent allocable to our Vessel for which the related Initial Charter has
      been terminated, for at least two years following any such termination,
      during which time our Vessel may be sold or re-chartered;
      and




c)
              that
      our Vessel will be maintained in accordance with the good commercial
      maintenance practices required by the Initial Charter and to arrange for
      vessel management and remarketing services to be available in case the
      Initial Charter is terminated by Chevron, or our Vessel is for any other
      reason returned to our possession and
use.


Our
Vessel is initially chartered to Chevron for a term expiring on April 1, 2015,
subject to Chevron's right to terminate the Initial Charter on April 1, 2009. No
notice was received within the 12 month period, so Chevron is prevented from
invoking its right to terminate on April 1, 2009, therefore, the charter
continues to April 1, 2015.




Market Overview and Trend
Information





Time
Charter Equivalent, or TCE, earnings for Suezmaxes were at their peak in the
second quarter of 2008 when they reached a high of approximately $92,000 per day
and despite the volatility experienced in the tanker market more or less
throughout the year, the first, third and fourth quarters also managed to
deliver more than satisfactory results. Rates increased from approximately
$40,000 per day in the beginning of the first quarter to approximately $85,000
per day before entering the second quarter. Although the current financial
crisis had started to become a reality for most industries in the fourth
quarter, Suezmax owners remained largely untouched and thus managed to deliver
results only comparable with the strong year of 2004. Average earnings for
double hull Suezmaxes in 2008 was in excess of $70,000 per day according to
industry sources.





In
the first half of 2008, the tanker market benefited from the following
factors:




●
              The
      National Iranian Tanker Company tied up an estimated 12 to 14 VLCCs for
      storage as there was low demand for Iranian crude
    oil;
  ●
                  Strong
      demand from the Chinese in connection with the 2008 Olympic
      Games;


●
                Number
      of port strikes during 2008, including in France, contributed to a tighter
      tonnage list;
  ●
                    Total
      ton-mile growth for the US, China, Japan and Korea was, according to
      industry sources, approximately 7.3%, increasing from just below 14,000
      miles in the first quarter of 2007 to approximately 15,000 miles in the
      first quarter of 2008.


During
the second half of 2008, the decreased production of crude oil by OPEC was one
of the major factors impacting the tanker market. The oil price in 2008 averaged at
$98.70 per barrel, peaking at a record high of $143 per barrel on July 11 and a
low of approximately $38 per barrel by the end of December. As crude oil prices
and world demand for petroleum products decreased throughout the second half of
2008, OPEC production was reduced.





Average
OPEC production is estimated at 31.24 million barrels per day in 2008 according
to IEA's April 2009 report. The expected 2009 OPEC production output figure has
not yet been published by the IEA, however, they reported a first quarter 2009
OPEC production of 28.33 million barrels per day, which is a decrease of
approximately four million barrels per day year-on-year.





The
IEA further estimates that average world oil demand was 85.8 million barrels per
day in 2008, a 0.3% decrease from 2007. For 2009, a decrease in world oil demand
of 2.8% or 2.4 million barrels per day is forecasted.





The
tanker market benefited from "contango" in the oil price during 2008. This is a
market condition where the future oil price is higher than the current price. At
the end of October 2008, the spread between the current and future oil price
widened making it profitable for oil companies and traders to store crude oil.
Consequently the demand for storage services increased, predominantly in the
Atlantic basin but also in the Arabian Gulf. The spot market at
that


20


time
was approximately $50,000 per day. Since then, approximately 40 ships were
chartered either for straight storage or voyages followed by storage, with rates
ranging from $55,000 to $85,000 per day.





Throughout
2008, there was a continued trend among oil companies to discriminate against
single hull tankers due to their decreasing territory allowance and increasing
probability of inspection.





Bunkers
followed the movements in the oil market closely in 2008. The lowest bunker
price in Fujairah was quoted at the end of December at $206.50 per metric ton
while the highest was quoted in mid-July at $756.5 per metric ton. The average
bunker price in 2008 was approximately $508 per metric ton.





According to figures released in April
2009 by The International Monetary Fund, or IMF, the World Trade Volume had a
3.3% increase in 2008. However, the IMF forecast that the World Trade Volume
will see a decline of 11% in 2009.Furthermore, world GDP increased by
3.2% in 2008 and is forecast to decline by 1.3% throughout 2009. In 2008, the
U.S had a 1.1% growth in the GDP, which is estimated to decline by 2.8%
throughout 2009. China's 2008 GDP increased by 9% year-on-year, and is forecast
to have a 6.5% increase in 2009. Negative growth is expected in Europe and Japan
while emerging markets and developing countries will experience a continued
decrease in their growth figures.




In
2008, the total Suezmax fleet increased by 3.7% to 351 vessels. 13 new vessels
were delivered to owners and 36 new orders were made. The total orderbook
amounted to 168 vessels at the end of the year, which represented approximately
48% of the existing fleet.





Throughout
2009, it is estimated that 72 new Suezmaxes will enter the market including 18
in the first quarter. This substantial amount of new tonnage will be cushioned,
to some extent, by the expected phase out program of single hull vessels.
Further cancellations and delays in deliveries of newbuildings are also
expected.





Operating
results





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





Total
Revenues





(in
      thousands of $)
                    
                    2008
                    
                    
                    2007
                    
                    
                    ChangeFinance
      lease interest income
                    
                    
                    2,101
                    
                    
                    
                    2,352
                    
                    
                    
                    (11
                    )%





Revenue
comes in the form of charterhire from Chevron which is then allocated between
capital and interest. Interest income has fallen in line with expectations. As
the value of the finance lease falls on an annual basis, so does the interest
allocated to the finance lease.




Expenses





(in
      thousands of $)
                    
                    2008
                    
                    
                    2007
                    
                    
                    ChangeInterest
      expense
                    
                    
                    2,073
                    
                    
                    
                    2,358
                    
                    
                    
                    (12
                    )%Amortization
      of deferred charges
                    
                    
                    21
                    
                    
                    
                    21
                    
                    
                    
                    -





Interest
expense has decreased in line with expectations, with interest expense falling
in line with the principal loan outstanding each year. The Company amortizes the
deferred charges over the life of the Term Loans.




Year
ended December 31, 2007 compared with the year ended December 31,
2006




Total
Revenues







(in
      thousands of $)
                    
                    2007
                    
                    
                    2006
                    
                    
                    ChangeFinance
      lease interest income
                    
                    
                    2,352
                    
                    
                    
                    2,691
                    
                    
                    
                    (13
                    )%





21





Revenue
comes in the form of charterhire from Chevron which is then allocated between
capital and interest. Interest income has fallen in line with expectations. As
the value of the finance lease falls on an annual basis, so does the interest
allocated to the finance lease.




Expenses





(in
      thousands of $)
                    
                    2007
                    
                    
                    2006
                    
                    
                    ChangeInterest
      expense
                    
                    
                    2,358
                    
                    
                    
                    2,644
                    
                    
                    
                    (11
                    )%Amortization
      of deferred charges
                    
                    
                    21
                    
                    
                    
                    26
                    
                    
                    
                    (19
                    )%





Interest
expense has decreased in line with expectations, with interest expense falling
in line with the principal loan outstanding each year. The Company amortizes the
deferred charges over the life of the Term Loans.




Liquidity
and Capital Resources





As
of December 31, 2008, revenues from the Initial Charter were sufficient to pay
our obligations under the Term Loans. Chevron's option to terminate the Initial
Charter on the last specified termination date, April 1, 2009, has now passed,
therefore the charter will run until April 1, 2015.




Off-balance Sheet
Arrangements





None.





Tabular
disclosure of Contractual
Obligations





As
at December 31, 2008, we had the following contractual obligations and
commitments:





Payments
      due by period(in
      thousands of $)
                    
                    Less
      than 1 year
                    
                    
                    1-3
      years
                    
                    
                    3-5
      years
                    
                    
                    More
      than 5 years
                    
                    
                    TotalTerm
      Loans (8.52%)
                    
                    
                    3,355
                    
                    
                    
                    6,710
                    
                    
                    
                    6,710
                    
                    
                    
                    6,712
                    
                    
                    
                    23,487Interest
      payable
                    
                    
                    1,858
                    
                    
                    
                    2,859
                    
                    
                    
                    1,715
                    
                    
                    
                    572
                    
                    
                    
                    7,004Total
      contractual obligations
                    
                    
                    5,213
                    
                    
                    
                    9,569
                    
                    
                    
                    8,425
                    
                    
                    
                    7,284
                    
                    
                    
                    30,491





Interest
is payable on the Term Loans at a fixed rate of 8.52% until
maturity.





Critical
Accounting Policies





Our
principal accounting policies are described in Note 2 to the financial
statements, which are included in Item 18-Financial Statements of this Annual
Report. The most critical accounting is financing lease and revenue
recognition. As the lease has been classified as a finance lease, the minimum
lease payments (net of amounts representing estimated executory costs including
profit thereon) plus the unguaranteed residual value are recorded as the gross
investment in the lease. The difference between the gross investment in the
lease and the sum of the present values of the two components of the gross
investment is recorded as unearned income which is amortized to income over the
lease term as finance lease interest income to produce a constant periodic rate
of return on the net investment in the lease.







Recent
accounting pronouncements





In
September 2006, the Financial Accounting Standards Board ('FASB') issued
Financial Accounting Standard No. 157, Fair Value Measurements, ('FAS
157'),and is effective for fiscal years beginning after November 15,
2007.This
statement defines fair value, establishes a framework for measuring fair value
in generally accepted accounting


22


principles,
and expands disclosures about fair value measurements. The statement establishes
a fair value hierarchy that distinguishes between market participant assumptions
developed based on market data obtained from sources independent of the reported
entity and the reported entities own assumptions about market participant
assumptions developed based on the best information available in the
circumstances. In February 2008, the FASB issued a staff position that delays
the effective date of FAS 157 for certain nonfinancial assets and liabilities to
fiscal years beginning on or after November 15, 2008. The Company's adoption of
FAS 157 did not have a material effect on the financial statements. Adoption of
the delayed provisions of FAS 157 is not expected to have a material effect on
the Company's financial statements.





In
February 2007, the FASB issued Statement of Financial Accounting Standard
No. 159, The Fair Value
Option for Financial Assets and Financial Liabilities Including an Amendment of
FASB Statement No. 115 ("FAS 159"). FAS 159 allows entities to
choose to measure many financial instruments and certain other items at fair
value, with unrealized gains and losses related to these financial instruments
being reported in earnings at each subsequent reporting date. FAS 159 is
effective for fiscal years beginning after November 15, 2007. The Company's
adoption of this statement did not have a material effect on the financial
statements.





In
December 2007, the FASB issued Statements No. 141(R), Business Combinations,('FAS
141(R)'), and No. 160 Noncontrolling Interests in
Consolidated Financial Statements,('FAS 160'). Together these statements
can affect the way companies account for future business combinations and
noncontrolling interests. FAS 141(R) requires, amongst other changes,
recognition of subsequent changes in the fair value of contingent consideration
in the Statement of Operations rather than against Goodwill, and transaction
costs to be recognized immediately in the Statement of Operations. FAS 160
clarifies the classification of non controlling interests (i.e. minority owners'
interests in subsidiaries) in consolidated balance sheets and the accounting for
and reporting of transactions between the reporting entity and holders of such
non controlling interests. In particular the minority owners' interest in
subsidiaries should be presented in the consolidated balance sheet within
equity, but separate from the parent's equity. Similarly the amount of net
income attributable to the parent and to the minority interest be clearly
identified and presented on the consolidated statement of income. Both FAS
141(R) and FAS 160 are effective for transactions completed in fiscal years
beginning after December 15, 2008. Adoption of FAS 141(R) and FAS 160 by the
Company in the financial statements beginning January 1, 2009 is not expected to
have a material effect on the Company's financial statements.





In
March 2008, the FASB issued Statement of Financial Accounting Standard
No. 161, Disclosures
about Derivative Instruments and Hedging Activities ('FAS 161'). This
standard amends and expands the disclosure requirements of FASB Statement 133,
Accounting for Derivative
Instruments and Hedging Activities, and is effective for fiscal years
beginning after November 15, 2008. FAS 161 requires enhanced disclosures that
better convey the purpose of an entity's derivative and hedging activities in
terms of the risk it intends to manage. In addition to other disclosure
requirements, the statement requires disclosure of the reasons for holding or
issuing derivative instruments in the context of its overall risk exposure. The
Company's adoption of FAS 161 is not expected to have a material effect on the
Company's financial statements.





In
May 2008, the FASB issued Statement of Financial Accounting Standard
No. 162, The Hierarchy of
Generally Accepted Accounting Principles,('FAS 162'). This Statement
identifies the sources of accounting principles and the framework for selecting
the principles to be used in the preparation of financial statements in
conformity with generally accepted accounting principles in the United States.
Adoption of FAS 162 is not expected to have a material effect on the Company's
financial statements.





Item
6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES





A.           Directors
and Senior Management





Name
            Age
            PositionTor
      Olav Trøim
            46
            Director
      and PresidentKate
      Blankenship
            44
            Director
      and Secretary


Tor Olav Trøim has been a
director of the Company since October 31, 2001. Mr. Trøim graduated as M.Sc
Naval Architect from the University of Trondheim, Norway in 1985. His careers
include Portfolio Manager Equity in Storebrand ASA (1987-1990), and Chief
Executive Officer for the Norwegian Oil Company DNO AS (1992-1995).




23


Since
1995 Mr. Trøim has been a director of Seatankers Management in Cyprus. Mr. Trøim
serves as a director of ITCL, Seadrill Limited, Golden Ocean Group Limited,
Golar LNG Limited, Aktiv Kapital ASA, Marine Harvest Group and as an alternate
director of Frontline Ltd.




Kate Blankenship has been a
director of the Company since October 31, 2001. Mrs. Blankenship has been a
director of the Manager since March 2000. Mrs. Blankenship served as the Chief
Accounting Officer and Secretary of Frontline between 1994 and October 2005.
Mrs. Blankenship served as Chief Financial Officer of Knightsbridge Tankers
Limited from April 2000 to September 2007 and Secretary of Knightsbridge from
December 2000 to March 2007. Mrs. Blankenship has been a director of Ship
Finance International Limited since October 2003. Mrs. Blankenship has
served as a director of ITCL since February 2008, Golar LNG Limited since July
2003 and Golden Ocean Group Limited since November 2004. Mrs. Blankenship has
served as a director of Seadrill Limited since May 2005. She is a member of the
Institute of Chartered Accountants in England and Wales.




B.           Compensation





During
the year ended December 31, 2008, we paid no compensation to our directors and
officers.




C.           Board
Practices





The
directors have no fixed date of expiry of their term of office. The details of
their service are shown above. The directors have no entitlement to any benefits
on termination of their office.




We
have neither an audit nor a remuneration committee.




D.           Employees





We
do not have any employees involved in the management of our Vessel.




Frontline
is our Manager as described below in Item 7 "Major Shareholders and Related
Party Transactions – Related Party Transactions".




E.           Share
Ownership





The
directors of the Company have no share ownership in the Company and do not have
any arrangement that involves the issue or grant of securities of the
Company.





Item
7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS





A.           
Major Shareholders





As
of May 20, 2009, except as set forth below, the Company is not aware of any
beneficial owner of more than 5% of its Common Stock.





Class
      of Shares
                    Name
      and address of Beneficial Owners
                    Number
      of Shares
                    Percent
      of ClassUnclassified
      Common Shares
                    California Tankers
      Investment Limited (1)
                    100
                    100%





1
            The
      issued and outstanding shares of the Company are owned by California
      Tankers Investment Limited. All of the issued and outstanding shares of
      California Tankers Investment Limited are owned by CalPetro Holdings
      Limited. All of the issued and outstanding shares of CalPetro Holdings
      Limited are owned by Independent Tankers Corporation. All of the issued
      and outstanding shares of Independent Tankers Corporation are owned by
      Independent Tankers Corporation Limited, which is 82.47% owned by
      Frontline Ltd.





All
the issued and outstanding shares of our capital stock have been pledged by us
to California Petroleum Transport Corporation, or CPTC, pursuant to the stock
pledge agreement between us and CPTC, and are being held by the Bank of New
York, formerly the Chase Manhattan Trust Company of California and JP Morgan
Chase, or the Collateral Trustee, as part of the collateral for the
Notes. ITC has full voting control over us subject to the rights of the
Collateral Trustee.




24







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





B.           Related Party
Transactions





As
discussed in Item 4 "Information on the Company", Frontline, the ultimate
parent, is our Manager. Under the Management Agreement, Frontline is entitled to
a management fee and a technical advisor's fee.




Under
the terms of the Management Agreement, the management fee consists of an annual
fee of $13,625 for each Vessel, along with an additional annual fee of $3,000
covering all four Vessels. The technical advisor's fee consists of an annual fee
of $10,000 for each vessel, payable semi-annually in arrears. Both the
management fee and the technical advisor's fee, which we jointly refer to as the
Management Fee, is payable semi-annually in arrears for the period until the
third anniversary of the closing of the Notes issue then increasing by four
percent on each subsequent anniversary of the closing of the issue of the
Notes.




In
addition, the technical advisor is entitled to be reimbursed for the fees, costs
and expenses of conducting periodic inspections of our Vessels.




Pursuant
to a designated representative agreement, CalPetro Holdings Limited was
appointed to represent California Petroleum as its designated representative to
act on its behalf with respect to certain administrative matters such as the
filing of periodic reports and financial statements with the Commission. The fee
payable to such designated representative during the initial three year period
described above was $15,000 per annum with a four percent increase on each
subsequent anniversary of the closing of the issue of the Notes.




Management
fee expenses and management fee payable for the years ended and as of December
31, 2008, 2007 and 2006 are as follows:




(in
      thousands of $)
                      
                      
                      2008
                      
                      
                      2007
                      
                      
                      2006Management
      fee expenses
                      
                      
                      43
                      
                      
                      
                      41
                      
                      
                      
                      40Management
      fee payable
                      
                      
                      21
                      
                      
                      
                      10
                      
                      
                      
                      10





25


Item
8. FINANCIAL INFORMATION





A.          Consolidated
Statements and Other Financial Information





See
Item 18 "Financial Statements"below.





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 does not pay dividends.





B.         Significant
Changes





None.





Item
9. THE OFFER AND LISTING





Not
applicable.





Item
10. ADDITIONAL INFORMATION





A.
            Share
    Capital





Not
applicable.




B.     
   Memorandum and Articles of Association





The
Company is No. 23065B in the Bahamian register.







All
shares issued are unclassified; there is no authorization in force to issue
other classes of shares. Consequently all shares have equal entitlement to
voting rights, dividends, profit shares and other rights and duties. Should any
dividend be declared and not claimed the directors may, after a period of three
years, resolve that such dividends are forfeit for the benefit of the Company.
There are no provisions for changes to the rights of stockholders contained in
the articles, except that by resolution of the directors the authorized capital
may be increased and that the Company may divide or combine shares within the
same class.




Directors
may be interested in Company transactions but such interest should be disclosed
to the other directors prior to agreement by the board or Company meeting as
appropriate. The director concerned may not vote on the transaction. The
directors have discretionary powers to borrow on behalf of the Company subject
to the limits as set out in the Memorandum of Association. There are no stated
age limits for directors and directors need not be stockholders. They do not
retire by rotation.




Company
meetings may be convened by the directors or held on request of members holding
50% of the voting shares. Members, their properly appointed proxies and
corporate members' representatives are entitled to attend.




There
are no limits to ownership of Company securities or to the exercise of voting
rights. Disclosure of ownership is governed by Bahamian law and any laws
operative in the jurisdictions pertaining to the owners of the securities. The
directors of the Company may, without giving a reason, decline to register a
transfer of shares.




C.
            Material
      Contracts





The
Company has no material contracts apart from those pertaining to its normal
business.




26







D.
            Exchange
      Controls





The
Company was registered under the International Business Companies Act, 1989 of
the Commonwealth of the Bahamas, or the IBC Act,  in May 1994. As a
result of such registration the Company is exempt from the provisions of the
Exchange Control Regulations Act of the Bahamas. Interests in the
Registered Securities may be freely transferred among non-residents of the
Bahamas under Bahamian Law.




There
are no restrictions upon the payment of foreign (non-Bahamian) currency
dividends, interest or other payments in respect of the Registered
Securities.




The
Company is not permitted to deal in the currency of the Bahamas except in an
external Bahamian dollar account which can be funded only with foreign currency
funds or funds the Company has permission to convert.




None
of the Company's Articles of Association, Memorandum of Association or any other
document, nor any Bahamian law nor, to the knowledge of the Company, any foreign
law, imposes limitations on the right of non-residents or foreign owners to hold
the Company's shares of common stock.




E.      
   Taxation




No
Bahamian income or withholding taxes are imposed on the payment by the Company
of any principal or interest to any holder of Notes who is either an individual
citizen or resident of the United States or an entity formed under the laws of
the United States. There is no income tax treaty currently in effect between the
United States and Bahamas.




F.
            Dividends and Paying
      Agents





Not
applicable.





G.
            Statement by
      Experts





Not
applicable.





H.
            Documents on
      Display





We
are subject to the informational requirements of the Securities Exchange Act of
1934, as amended. In accordance with these requirements, we file reports and
other information with the Commission. These materials, including this annual
report and the accompanying exhibits, may be inspected and copied at the public
reference facilities maintained by the SEC at 100 F Street, N.E., Room 1580,
Washington, D.C. 20549. You may obtain information on the operation of the
public reference room by calling 1 (800) SEC-0330. The Commission maintains
a website (http://www.sec.gov.) that contains reports, proxy and information
statements and other information regarding registrants that file electronically
with the Commission. In addition, documents referred to in this annual report
may be inspected at the our principal executive offices at Mareva House, 4
George Street, PO Box N-3937, Nassau, Bahamas or at the offices of our Manager
at Par-la-Ville Place, 14 Par-la-Ville Road, Hamilton, Bermuda HM
08.




I.
            Subsidiary
      Information





Not
applicable.




Item
11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK





(a)         Quantitative
information about market risk





Quantitative
information about market risk instruments at December 31, 2008 is as
follows:




The
Term Loans bear interest at a rate of 8.52% per annum. Interest is payable on
April 1 and October 1 of each year. Principal is repayable on the Term Loans in
accordance with a remaining 10-year sinking fund schedule.




The
table below provides the scheduled sinking fund redemption amounts and final
principal payment of the allocated principal amount of the Term
Loans.




27







Scheduled
      payment date
                        
                        Initial
                          Charter
                          not
      terminated
                          $'000April
      1, 2009
                        
                        
                        3,355April
      1, 2010
                        
                        
                        3,355April
      1, 2011
                        
                        
                        3,355April
      1, 2012
                        
                        
                        3,355April
      1, 2013
                        
                        
                        3,355April
      1, 2014
                        
                        
                        3,355April
      1, 2015
                        
                        
                        3,35723,487





(b)           Qualitative
information about market risk





We
were organized for the purpose of acquiring and chartering our Vessel, which is
currently on a bareboat charter until 2015 subject to certain termination
options. We have no sources for the payment of the principal of, and the
interest on, the Notes except for the Restricted Cash accounts held by the
Trustee. Accordingly, our ability to pay debt service on the Notes is wholly
dependent upon our financial condition, results of operation and cash flows from
our Vessel's operation. As such, we believe that we are not exposed to any
material market risk.





There
is a concentration of credit risk with respect to Restricted Cash to the extent
that all of the amounts are invested with The Bank of New York
Mellon.





There
is a concentration of credit risk due to the fact that the sole source of
charter income is Chevron Transport Corporation. The Company does not consider
this is a significant risk.





Item
12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES





Not
applicable.









28





PART
II





Item
13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES





None.




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





None.





Item
15(T). CONTROLS AND PROCEDURES





(a)           Disclosure
controls and procedures





Management
assessed the effectiveness of the design and operation of the Company's
disclosure controls and procedures pursuant to Rule 13a-15(e) of the Securities
Exchange Act of 1934, as of December 31, 2008, the end of the period covered by
this annual report. Based upon that evaluation, the principal executive officer
and principal financial officer concluded that the Company's disclosure controls
and procedures are effective as of the evaluation date.




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




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




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




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




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




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




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




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




Our
management with the participation of our principal executive officer and
principal financial officer assessed the effectiveness of the design and
operation of the Company's internal controls over financial reporting pursuant
to Rule 13a-15 of the Securities Exchange Act of 1934, as of December 31,
2008. Based upon that evaluation, the principal executive officer and principal
financial officer concluded that the Company's internal controls over financial
reporting are effective as of December 31, 2008.




29










This
annual report does not include an attestation report of the Company's current
registered public accounting firm regarding internal control over financial
reporting. Management's report was not subject to attestation by the Company's
current registered public accounting firm pursuant to temporary rules of the SEC
that permit the Company to provide only management's report in this annual
report.




(c)
            Changes in internal controls over
      financial reporting





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




Item
16. RESERVED





Item
16A. AUDIT COMMITTEE FINANCIAL EXPERT





Our
equity is neither listed nor publicly traded. The equity is held by one
beneficial holder. Our obligations toward our bondholders are set out in
detail in covenants contained in the Indenture for their Notes. Accordingly our
board of directors has
determined that the role played by an audit committee would have no
applicability to us and we do not have any audit committee. The functions
of the audit committee are performed by the full board of
directors.





Item
16B. CODE OF ETHICS





Our equity is
neither listed nor publicly traded. The equity is held by one beneficial holderOur obligations toward our
bondholders are set out in detail in covenants contained in the Indenture for
their Notes. Accordingly our board of directorshas determined that
the role played by a code of ethics would have no applicability tous and we have not adopted a code of
ethics.





Item
16C. PRINCIPAL ACCOUNTANT FEES AND SERVICES





Our
principal accountant for 2008 was PricewaterhouseCoopers AS and for 2007 was
Grant Thornton LLP, New York. The following table sets forth for the two
most recent fiscal years the fees paid or accrued for audit and services
provided by PricewaterhouseCoopers AS and Grant Thornton LLP. Fees in the 2008
column relate to services provided by PricewaterhouseCoopers AS and fees in the
2007 column relate to services provided by Grant Thornton LLP.




(in
      thousands of $)
                                
                                2008
                                
                                
                                2007Audit
      fees (a)
                                
                                
                                25
                                
                                
                                
                                25Audit
      related fees (b)
                                
                                
                                -
                                
                                
                                
                                -Tax
      fees (c)
                                
                                
                                -
                                
                                
                                
                                -All
      other fees (d)
                                
                                
                                -
                                
                                
                                
                                -Total
                                
                                
                                25
                                
                                
                                
                                25





a)       Audit
Fees


Audit
fees represent professional services rendered for the audit of the Company's
annual financial statements and services provided by the principal accountant in
connection with statutory and regulatory filings or engagements.





b)
            Audit Related
      Fees


Audit-related
fees consist of assurance and related services rendered by the principal
accountant related to the performance of the audit or review of the Company's
financial statements which have not been reported under Audit Fees
above.





c)
            Tax
  Fees


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


30





d)
            All Other
    Fees


All
other fees include services other than audit fees, audit-related fees and tax
fees set forth above.





The
Company's board of directors has assigned responsibility for the engagement of
the auditors to the Company's manager.





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





Please
refer to Item 16A above.





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





None.





Item
16F.  CHANGE IN REGISTRANT'S CERTIFYING ACCOUNTANT





On
August 13, 2008, the Company's board of directors, or the Board, approved the
engagement of PricewaterhouseCoopers AS, or PricewaterhouseCoopers, as the
Company's independent registered public accounting firm for the year ending
December 31, 2008. The Board determined not to renew the engagement of Grant
Thornton LLP, or Grant Thornton, the Company's independent registered public
accounting firm for the year ending December 31, 2007. The Board determined to
engage PricewaterhouseCoopers in order to realize economies and efficiencies,
since PricewaterhouseCoopers acts as the independent registered public
accounting firm for Frontline Ltd., the ultimate parent of the Company, and
other companies connected with the Company.





The
reports of Grant Thornton on the financial statements of the Company as of
December 31, 2007 and 2006 did not contain an adverse opinion or disclaimer of
opinion and were not qualified or modified as to uncertainty, audit scope or
accounting principles.





In
connection with the audits of the Company's financial statements for each of the
two fiscal years ended December 31, 2007 and 2006, and through the period ended
August 13, 2008, there were no disagreements with Grant Thornton on any matters
of accounting principles or practices, financial statement disclosure, or
auditing scope and procedures which, if not resolved to the satisfaction of
Grant Thornton, would have caused Grant Thornton to make reference to the matter
of such disagreements in their reports.





The
Company has provided Grant Thornton with a copy of this report.





The
Company engaged PricewaterhouseCoopers as its new independent registered public
accounting firm as of August 13, 2008. During the Company's two most recent
fiscal years neither the Company nor anyone on its behalf has consulted with
PricewaterhouseCoopers regarding either (i) the application of accounting
principles to a specified transaction, either completed or proposed; or the type
of audit opinion that might be rendered on the Company's financial statements,
and neither a written report was provided to the Company nor oral advice was
provided by PricewaterhouseCoopers that was an important factor considered by
the Company in reaching a decision as to any accounting, auditing or financial
reporting issue; or (ii) any matter that was the subject of a disagreement, as
that term is defined in Item 304(a)(1)(iv) of Regulation S-K and the related
instructions to Item 304 of Regulation S-K, or a reportable
event, as that term is defined in Item 304(a)(1)(v) of Regulation
S-K.





Item
16G.  CORPORATE GOVERNANCE





Not
applicable.


31





PART
III


Item
17.  FINANCIAL STATEMENTS





Not
applicable.





Item
18.  FINANCIAL STATEMENTS





The
following financial statements and notes, together with the reports of
PricewaterhouseCoopers AS and Grant Thornton LLP thereon are filed as part of
this annual report:




Page





Report
      of Independent Registered Public Accounting Firm – PricewaterhouseCoopers
      AS
            F-1Report
      of Independent Registered Public Accounting Firm – Grant Thornton
      LLP
            F-2Statements
      of Operations and Retained Earnings for the Years Ended
              December
      31, 2008, 2007 and 2006
            F-3Balance
      Sheets as of  December 31, 2008 and 2007
            F-4Statements
      of Cash Flows for the Years Ended
              December
      31, 2008, 2007 and 2006
            F-5Notes
      to the Financial Statements
            F-6





32





Item
19. EXHIBITS





1.1*
            Certificate
      of Incorporation and Memorandum of Association of CalPetro Tankers
      (Bahamas I) Limited, incorporated by reference to Exhibit 3.3 in the
      Registration Statement of CalPetro Tankers (Bahamas I) Limited, CalPetro
      Tankers (Bahamas II) Limited, CalPetro Tankers (Bahamas III) Limited, and
      CalPetro Tankers (IOM) Limited filed November 9, 1994 on Forms S-3, S-1
      and F-1, Registration No. 33-79220.1.2*
            Articles
      of Association of CalPetro Tankers (Bahamas I) Limited, incorporated by
      reference to Exhibit 3.4 in the Registration Statement of CalPetro Tankers
      (Bahamas I) Limited, CalPetro Tankers (Bahamas II) Limited, CalPetro
      Tankers (Bahamas III) Limited, and CalPetro Tankers (IOM) Limited filed
      November 9, 1994 on Forms S-3, S-1 and F-1, Registration No.
      33-79220.2.1*
            Form
      of Term Indenture between California Petroleum Transport Corporation and
      Chemical Trust Company of California, as Indenture Trustee, incorporated
      by reference to Exhibit 4.1 in the Registration Statement of CalPetro
      Tankers (Bahamas I) Limited, CalPetro Tankers (Bahamas II) Limited,
      CalPetro Tankers (Bahamas III) Limited, and CalPetro Tankers (IOM) Limited
      filed November 9, 1994 on Forms S-3, S-1 and F-1, Registration No.
      33-79220.2.2*
            Form
      of Term Mortgage Notes, incorporated by reference to Exhibit 4.2 in the
      Registration Statement of CalPetro Tankers (Bahamas I) Limited, CalPetro
      Tankers (Bahamas II) Limited, CalPetro Tankers (Bahamas III) Limited, and
      CalPetro Tankers (IOM) Limited filed November 9, 1994 on Forms S-3, S-1
      and F-1, Registration No. 33-79220.2.3*
            Form
      of Bahamian Statutory Ship Mortgage and Deed of Covenants by [CalPetro
      Tankers (Bahamas I) Limited], [CalPetro Tankers (Bahamas II) Limited] to
      California Petroleum Transport Corporation (including the form of
      assignment of such Mortgage to Chemical Trust Company of California, as
      Collateral Trustee, by California Petroleum Transport Corporation),
      incorporated by reference to Exhibit 4.4 in the Registration Statement of
      CalPetro Tankers (Bahamas I) Limited, CalPetro Tankers (Bahamas II)
      Limited, CalPetro Tankers (Bahamas III) Limited, and CalPetro Tankers
      (IOM) Limited filed November 9, 1994 on Forms S-3, S-1 and F-1,
      Registration No. 33-79220.2.4*
            Form
      of Assignment of Initial Charter Guarantee by [CalPetro Tankers (Bahamas
      I) Limited] [CalPetro Tankers (Bahamas II) Limited] [CalPetro Tankers
      (IOM) Limited] [CalPetro Tankers (Bahamas III) Limited] to California
      Petroleum Transport Corporation (including the form of Collateral
      Assignment of such Initial Charter Guarantee to Chemical Trust Company of
      California, as Collateral Trustee, by California Petroleum Transport
      Corporation), incorporated by reference to Exhibit 4.7 in the Registration
      Statement of CalPetro Tankers (Bahamas I) Limited, CalPetro Tankers
      (Bahamas II) Limited, CalPetro Tankers (Bahamas III) Limited, and CalPetro
      Tankers (IOM) Limited filed November 9, 1994 on Forms S-3, S-1 and F-1,
      Registration No. 33-79220.2.5*
            Form
      of Assignment of Earnings and Insurances from [CalPetro Tankers (Bahamas
      I) Limited] [CalPetro Tankers (Bahamas II) Limited] [CalPetro Tankers
      (IOM) Limited] [CalPetro Tankers (Bahamas III) Limited] to California
      Petroleum Transport Corporation, incorporated by reference to Exhibit 4.8
      in the Registration Statement of CalPetro Tankers (Bahamas I) Limited,
      CalPetro Tankers (Bahamas II) Limited, CalPetro Tankers (Bahamas III)
      Limited, and CalPetro Tankers (IOM) Limited filed November 9, 1994 on
      Forms S-3, S-1 and F-1, Registration No. 33-79220.2.6*
            Form
      of Assignment of Initial Charter from [CalPetro Tankers (Bahamas I)
      Limited] [CalPetro Tankers (Bahamas II) Limited] [CalPetro Tankers (IOM)
      Limited[ [CalPetro Tankers (Bahamas III) Limited] to California Petroleum
      Transport Corporation (including the form of Collateral Assignment of such
      Initial Charter to Chemical Trust Company of California, as Collateral
      Trustee, by California Petroleum Transport Corporation), incorporated by
      reference to Exhibit 4.9 in the Registration Statement of CalPetro Tankers
      (Bahamas I) Limited, CalPetro Tankers (Bahamas II) Limited, CalPetro
      Tankers (Bahamas III) Limited, and CalPetro Tankers (IOM) Limited filed
      November 9, 1994 on Forms S-3, S-1 and F-1, Registration No.
      33-79220.


33





2.7*
            Form
      of Management Agreement between P.D. Gram & Co., A.S., and [CalPetro
      Tankers (Bahamas I) Limited] [CalPetro Tankers (Bahamas II) Limited]
      [CalPetro Tankers (IOM) Limited] [CalPetro Tankers (Bahamas III) Limited],
      incorporated by reference to Exhibit 4.10 in the Registration Statement of
      CalPetro Tankers (Bahamas I) Limited, CalPetro Tankers (Bahamas II)
      Limited, CalPetro Tankers (Bahamas III) Limited, and CalPetro Tankers
      (IOM) Limited filed November 9, 1994 on Forms S-3, S-1 and F-1,
      Registration No. 33-79220.2.10*
            Form
      of Term Loan Agreement between California Petroleum Transport Corporation
      and [CalPetro Tankers (Bahamas I) Limited] [CalPetro Tankers (Bahamas II)
      Limited] [CalPetro Tankers (IOM) Limited] [CalPetro Tankers (Bahamas III)
      Limited], incorporated by reference to Exhibit 4.13 in the Registration
      Statement of CalPetro Tankers (Bahamas I) Limited, CalPetro Tankers
      (Bahamas II) Limited, CalPetro Tankers (Bahamas III) Limited, and CalPetro
      Tankers (IOM) Limited filed November 9, 1994 on Forms S-3, S-1 and F-1,
      Registration No. 33-79220.2.11*
            Form
      of Collateral Agreement between California Petroleum Transport Corporation
      [CalPetro Tankers (Bahamas I) Limited] [CalPetro Tankers (Bahamas II)
      Limited] [CalPetro Tankers (IOM) Limited] [CalPetro Tankers (Bahamas III)
      Limited], the Indenture Trustee under the Serial Indenture, the Indenture
      Trustee under the Term Indenture and Chemical Trust Company of California,
      as Collateral Trustee, incorporated by reference to Exhibit 4.14 in the
      Registration Statement of CalPetro Tankers (Bahamas I) Limited, CalPetro
      Tankers (Bahamas II) Limited, CalPetro Tankers (Bahamas III) Limited, and
      CalPetro Tankers (IOM) Limited filed November 9, 1994 on Forms S-3, S-1
      and F-1, Registration No. 33-79220.2.12*
            Form
      of Issue of One Debenture from [CalPetro Tankers (Bahamas I) Limited]
      [CalPetro Tankers (Bahamas II) Limited] [CalPetro Tankers (IOM) Limited]
      [CalPetro Tankers (Bahamas III) Limited] to California Petroleum Transport
      Corporation, incorporated by reference to Exhibit 4.15 in the Registration
      Statement of CalPetro Tankers (Bahamas I) Limited, CalPetro Tankers
      (Bahamas II) Limited, CalPetro Tankers (Bahamas III) Limited, and CalPetro
      Tankers (IOM) Limited filed November 9, 1994 on Forms S-3, S-1 and F-1,
      Registration No. 33-79220.4.1*
            Form
      of Initial Charter Guarantee by Chevron Corporation, incorporated by
      reference to Exhibit 10.1 in the Registration Statement of CalPetro
      Tankers (Bahamas I) Limited, CalPetro Tankers (Bahamas II) Limited,
      CalPetro Tankers (Bahamas III) Limited, and CalPetro Tankers (IOM) Limited
      filed November 9, 1994 on Forms S-3, S-1 and F-1, Registration No.
      33-79220.4.2*
            Form
      of Bareboat Initial Charter between [CalPetro Tankers (Bahamas I) Limited]
      [CalPetro Tankers (Bahamas II) Limited] [CalPetro Tankers (IOM) Limited]
      [CalPetro Tankers (Bahamas III) Limited] and Chevron Transport
      Corporation, incorporated by reference to Exhibit 10.2 in the Registration
      Statement of CalPetro Tankers (Bahamas I) Limited, CalPetro Tankers
      (Bahamas II) Limited, CalPetro Tankers (Bahamas III) Limited, and CalPetro
      Tankers (IOM) Limited filed November 9, 1994 on Forms S-3, S-1 and F-1,
      Registration No. 33-79220.4.3*
            Form
      of Vessel Purchase Agreement between [CalPetro Tankers (Bahamas I)
      Limited] [CalPetro Tankers (Bahamas II) Limited] [CalPetro Tankers (IOM)
      Limited] [CalPetro Tankers (Bahamas III) Limited] and Chevron Transport
      Corporation (including the form of Assignment of such Vessel Purchase
      Agreement to California Petroleum Transport), incorporated by reference to
      Exhibit 10.3 in the Registration Statement of CalPetro Tankers (Bahamas I)
      Limited, CalPetro Tankers (Bahamas II) Limited, CalPetro Tankers (Bahamas
      III) Limited, and CalPetro Tankers (IOM) Limited filed November 9, 1994 on
      Forms S-3, S-1 and F-1, Registration No. 33-79220.10.1*
            Powers
      of Attorney for directors and certain officers of CalPetro Tankers
      (Bahamas I) Limited, incorporated by reference to Exhibit 24.1 in the
      Registration Statement of CalPetro Tankers (Bahamas I) Limited, CalPetro
      Tankers (Bahamas II) Limited, CalPetro Tankers (Bahamas III) Limited, and
      CalPetro Tankers (IOM) Limited filed November 9, 1994 on Forms S-3, S-1
      and F-1, Registration No. 33-79220.12.1
            Certification
      of the Principal Executive Officer pursuant to Rule 13a-14(a) and Rule
      15d-14(a) of the Securities Exchange Act, as
  amended.


34





12.2
            Certification
      of the Principal Financial Officer pursuant to Rule 13a-14(a) and Rule
      15d-14(a) of the Securities Exchange Act, as amended.13.1
            Certification
      of the Principal Executive Officer pursuant to 18 U.S.C. Section 1350, as
      adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
      2002.





13.2
            Certification
      of the Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as
      adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
      2002.


*
Incorporated by reference to the filing indicated.








35


Report
of Independent Registered Public Accounting Firm







To
the Board of Directors and Shareholder


CalPetro
Tankers (Bahamas I) Limited








We
have audited the accompanying balance sheet of CalPetro Tankers (Bahamas I)
Limited (the "Company") as of December 31, 2008 and the related statements
of operations and retained earnings, and cash flows for the year ended December
31, 2008. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audit. The financial statements of the Company as of
December 31, 2007 and for the two years then ended were audited by other
auditors whose report dated June 20, 2008 expressed an unqualified opinion on
those statements.





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







In
our opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of CalPetro Tankers (Bahamas I) Limited as of
December 31, 2008 and the results of its operations and cash flows for the
year ended December 31, 2008, in conformity with accounting principles generally
accepted in the United States of America.





/s/
PricewaterhouseCoopers AS





PricewaterhouseCoopers
AS


Oslo,
Norway


May
20, 2009




F-1





Report
of Independent Registered Public Accounting Firm








To
the Board of Directors


CalPetro
Tankers (Bahamas I) Limited





We
have audited the accompanying balance sheet of CalPetro Tankers (Bahamas I)
Limited (the "Company") as of December 31, 2007 and the related statements
of operations and retained earnings, and cash flows for the years ended December
31, 2007 and 2006. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.




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




In
our opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of CalPetro Tankers (Bahamas I)
Limited as of December 31, 2007 and the results of its operations and cash
flows for  the years ended December 31, 2007 and 2006, in conformity
with accounting principles generally accepted in the United States of
America.











/s/
Grant Thornton LLP




New
York, New York


June
20, 2008


F-2


CalPetro
Tankers (Bahamas I) Limited


Statements
of Operations and Retained Earnings for the years ended December 31, 2008, 2007
and 2006


(in
thousands of $)










2008
                                                              
                                                              2007
                                                              
                                                              2006Operating
      revenuesFinance
      lease interest income
                                                              
                                                              
                                                              2,101
                                                              
                                                              
                                                              
                                                              2,352
                                                              
                                                              
                                                              
                                                              2,691Total
      operating revenues
                                                              
                                                              
                                                              2,101
                                                              
                                                              
                                                              
                                                              2,352
                                                              
                                                              
                                                              
                                                              2,691Operating
      expensesGeneral
      and administrative expenses
                                                              
                                                              
                                                              (115
                                                              )
                                                              
                                                              
                                                              (122
                                                              )
                                                              
                                                              
                                                              (108
                                                              )Total
      operating expenses
                                                              
                                                              
                                                              (115
                                                              )
                                                              
                                                              
                                                              (122
                                                              )
                                                              
                                                              
                                                              (108
                                                              )Net
      operating income
                                                              
                                                              
                                                              1,986
                                                              
                                                              
                                                              
                                                              2,230
                                                              
                                                              
                                                              
                                                              2,583Other
      income (expenses)Interest
      income
                                                              
                                                              
                                                              34
                                                              
                                                              
                                                              
                                                              56
                                                              
                                                              
                                                              
                                                              64Interest
      expense
                                                              
                                                              
                                                              (2,073
                                                              )
                                                              
                                                              
                                                              (2,358
                                                              )
                                                              
                                                              
                                                              (2,644
                                                              )Amortization
      of deferred charges
                                                              
                                                              
                                                              (21
                                                              )
                                                              
                                                              
                                                              (21
                                                              )
                                                              
                                                              
                                                              (26
                                                              )Net
      other expenses
                                                              
                                                              
                                                              (2,060
                                                              )
                                                              
                                                              
                                                              (2,
      323
                                                              )
                                                              
                                                              
                                                              (2,606
                                                              )Net
      loss
                                                              
                                                              
                                                              (74
                                                              )
                                                              
                                                              
                                                              (93
                                                              )
                                                              
                                                              
                                                              (23
                                                              )Retained
      earnings at the start of the year
                                                              
                                                              
                                                              1,340
                                                              
                                                              
                                                              
                                                              1,433
                                                              
                                                              
                                                              
                                                              1,456Retained
      earnings at the end of the year
                                                              
                                                              
                                                              1,266
                                                              
                                                              
                                                              
                                                              1,340
                                                              
                                                              
                                                              
                                                              1,433










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







F-3





CalPetro
Tankers (Bahamas I) Limited


Balance
Sheets as of December 31, 2008 and 2007


(in
thousands of $)





2008
                                                            
                                                            
                                                            2007ASSETSCurrent
      assets:Restricted
      cash
                                                            
                                                            
                                                            2,173
                                                            
                                                            
                                                            
                                                            2,180Current
      portion of net investment in finance lease
                                                            
                                                            
                                                            3,453
                                                            
                                                            
                                                            
                                                            3,450Interest
      receivable
                                                            
                                                            
                                                            473
                                                            
                                                            
                                                            
                                                            546Other
      current assets
                                                            
                                                            
                                                            3
                                                            
                                                            
                                                            
                                                            9Total
      current assets
                                                            
                                                            
                                                            6,102
                                                            
                                                            
                                                            
                                                            6,185Net
      investment in finance lease, less current portion
                                                            
                                                            
                                                            19,090
                                                            
                                                            
                                                            
                                                            22,479Deferred
      charges
                                                            
                                                            
                                                            120
                                                            
                                                            
                                                            
                                                            142Total
      assets
                                                            
                                                            
                                                            25,312
                                                            
                                                            
                                                            
                                                            28,806LIABILITIES
      AND STOCKHOLDER'S EQUITYCurrent
      liabilities:Accrued
      interest
                                                            
                                                            
                                                            500
                                                            
                                                            
                                                            
                                                            572Current
      portion of long-term debt
                                                            
                                                            
                                                            3,355
                                                            
                                                            
                                                            
                                                            3,355Other
      current liabilities
                                                            
                                                            
                                                            59
                                                            
                                                            
                                                            
                                                            52Total
      current liabilities
                                                            
                                                            
                                                            3,914
                                                            
                                                            
                                                            
                                                            3,979Long-term
      debt
                                                            
                                                            
                                                            20,132
                                                            
                                                            
                                                            
                                                            23,487Total
      liabilities
                                                            
                                                            
                                                            24,046
                                                            
                                                            
                                                            
                                                            27,466Stockholder's
      equity:Unclassified
      stock: 100 shares of $1 par value
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            -Retained
      earnings
                                                            
                                                            
                                                            1,266
                                                            
                                                            
                                                            
                                                            1,340Total
      stockholder's equity
                                                            
                                                            
                                                            1,266
                                                            
                                                            
                                                            
                                                            1,340Total
      liabilities and stockholder's equity
                                                            
                                                            
                                                            25,312
                                                            
                                                            
                                                            
                                                            28,806










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










F-4








CalPetro
Tankers (Bahamas I) Limited


Statements
of Cash Flows for the years ended December 31, 2008, 2007 and 2006


(in
thousands of $)









2008
                                                            
                                                            2007
                                                            
                                                            2006Net
      loss
                                                            
                                                            
                                                            (74
                                                            )
                                                            
                                                            
                                                            (93
                                                            )
                                                            
                                                            
                                                            (23
                                                            )Adjustments
      to reconcile net loss to net cash (used in) provided by operating
      activities:Amortization
      of deferred charges
                                                            
                                                            
                                                            21
                                                            
                                                            
                                                            
                                                            21
                                                            
                                                            
                                                            
                                                            26Changes
      in assets and liabilities:Interest
      receivable
                                                            
                                                            
                                                            73
                                                            
                                                            
                                                            
                                                            72
                                                            
                                                            
                                                            
                                                            72Other
      current assets
                                                            
                                                            
                                                            7
                                                            
                                                            
                                                            
                                                            (1
                                                            )
                                                            
                                                            
                                                            (2
                                                            )Accrued
      interest payable
                                                            
                                                            
                                                            (72
                                                            )
                                                            
                                                            
                                                            (71
                                                            )
                                                            
                                                            
                                                            (72
                                                            )Other
      current liabilities
                                                            
                                                            
                                                            7
                                                            
                                                            
                                                            
                                                            11
                                                            
                                                            
                                                            
                                                            14Net
      cash (used in) provided by operating activities
                                                            
                                                            
                                                            (38
                                                            )
                                                            
                                                            
                                                            (61
                                                            )
                                                            
                                                            
                                                            15Investing
      activities:Finance
      lease payments received
                                                            
                                                            
                                                            3,386
                                                            
                                                            
                                                            
                                                            3,420
                                                            
                                                            
                                                            
                                                            3,367Maturity
      (placement) of restricted cash
                                                            
                                                            
                                                            7
                                                            
                                                            
                                                            
                                                            (4
                                                            )
                                                            
                                                            
                                                            (27
                                                            )Net
      cash provided by investing activities
                                                            
                                                            
                                                            3,393
                                                            
                                                            
                                                            
                                                            3,416
                                                            
                                                            
                                                            
                                                            3,340Financing
      activities:Repayments
      of term loan
                                                            
                                                            
                                                            (3,355
                                                            )
                                                            
                                                            
                                                            (3,355
                                                            )
                                                            
                                                            
                                                            (3,355
                                                            )Net
      cash used in financing activities
                                                            
                                                            
                                                            (3,355
                                                            )
                                                            
                                                            
                                                            (3,355
                                                            )
                                                            
                                                            
                                                            (3,355
                                                            )Net
      increase in cash and cash equivalents
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            -Cash
      and cash equivalents at start of the year
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            -Cash
      and cash equivalents at end of the year
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            -Supplemental
      disclosure of cash flow information:Interest
      paid
                                                            
                                                            
                                                            2,144
                                                            
                                                            
                                                            
                                                            2,430
                                                            
                                                            
                                                            
                                                            2,176











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







F-5
 CalPetro Tankers ( Bahamas I) Limited
 Notes to the Financial Statements


1.           DESCRIPTION
OF BUSINESS





CalPetro
Tankers (Bahamas I) Limited (the "Company") was incorporated in the Bahamas on
May 13, 1994 with two other entities: CalPetro Tankers (Bahamas II) Limited and
CalPetro Tankers (Bahamas III) Limited. In addition, CalPetro Tankers (IOM)
Limited was incorporated in the Isle of Man. These entities (the "Owners")
were organized as special purpose companies for the purpose of acquiring one of
four oil tankers (each a "Vessel", together the "Vessels") from Chevron
Transport Corporation ("Chevron") which were concurrently chartered on long-term
charter agreements back to Chevron.





The
Company along with CalPetro Tankers (Bahamas II) Limited, CalPetro Tankers
(Bahamas III) Limited, and CalPetro Tankers (IOM) Limited are wholly-owned by
California Tankers Investments Limited , a company organized under the laws of
the Bahamas, which is in turn a wholly-owned subsidiary of CalPetro Holdings
Limited, an Isle of Man company. CalPetro Holdings Limited is a wholly-owned
subsidiary of Independent Tankers Corporation ("ITC"), a Cayman Islands company.
ITC is itself is wholly-owned by Independent Tankers Corporation Limited
("ITCL"). ITCL was established in February 2008 and it is 82.47% owned
by  Frontline Ltd., ("Frontline"), a Bermuda company whose shares are
listed on the New York Stock Exchange, London Stock Exchange and Oslo Stock
Exchange.





California
Petroleum Transport Corporation ("California Petroleum" or "CPTC"), a Delaware
corporation, acting as agent on behalf of the Owners, issued as full recourse
obligations $167,500,000 Serial First Preferred Mortgage Notes (the "Serial
Notes") and $117,900,000 8.52% First Preferred Mortgage Notes due 2015 (the
"Term Notes")  (together the "Notes"). The Serial Notes were fully
repaid April 1, 2006. The proceeds from the sale of the Notes were applied by
way of long-term loans, being Serial Loans in respect of the Serial First
Preferred Mortgage Notes and Term Loans in respect of the First Preferred
Mortgage Notes due 2015, to the Owners to fund the acquisition of their Vessels
from Chevron. The Company allocated $41,410,000 of the Serial Loans and
$40,262,000 of the Term Loans and acquired its Vessel, the Cygnus Voyager. The
Company engages in no business other than the ownership and Initial Chartering
of its Vessel and activities resulting from or incidental to such ownership and
chartering.





The
Company's only source of funds with respect to the Term Loans is payments from
Chevron. The Company does not have any other source of funds for payment of
the Term Loans.





2.           ACCOUNTING
POLICIES





Basis
of Presentation


The
financial statements have been prepared in accordance with accounting principles
generally accepted in the United States of America (GAAP). 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.





Financing
lease and revenue recognition


The
long-term charter agreement between the Company and Chevron transfers to Chevron
all the risks and rewards associated with ownership, other than legal title, and
contains a bargain purchase option. As such, it is classified as a direct
financing lease in accordance with Statement of Financial Accounting Standards
No. 13.





Accordingly,
the present value of the minimum payments under the charter agreement is
recorded as the gross investment in the finance lease. The difference between
the gross investment in the finance lease and the cost of the Vessel is recorded
as unearned income which is amortized to income over the life of the charter
agreement to produce a constant periodic rate of return on the net investment in
the finance lease.





F-6
 CalPetro Tankers ( Bahamas I) Limited
 Notes to the Financial Statements


Interest
payable recognition


Interest
payable on the Term Loans is accrued on a daily basis.




Deferred
charges


Deferred
charges comprise expenses incurred in connection with the structuring of the
financing transactions and issuance of debt. Such expenses are being amortized
over the life of the debt on a straight line basis, which is not materially
different to the effective interest rate method.





Taxation


No
Bahamian income or withholding taxes are imposed on the payment by the Company
of any principal or interest to any holder of Notes who is either an individual
citizen or resident of the United States or an entity formed under the laws of
the United States. There is no income tax treaty currently in effect between the
United States and Bahamas.





Reporting
and functional currency


The
reporting currency is United States dollars. The functional currency is United
States dollars.




Financial
Instruments


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





3.           RECENTLY
ISSUED ACCOUNTING PRONOUNCEMENTS




In
September 2006, the Financial Accounting Standards Board ("FASB") issued
Financial Accounting Standard No. 157, Fair Value Measurements, ("FAS 157"),and is effective for
fiscal years beginning after November 15, 2007.This statement defines
fair value, establishes a framework for measuring fair value in generally
accepted accounting principles, and expands disclosures about fair value
measurements. The statement establishes a fair value hierarchy that
distinguishes between market participant assumptions developed based on market
data obtained from sources independent of the reported entity and the reported
entities own assumptions about market participant assumptions developed based on
the best information available in the circumstances. In February 2008, the FASB
issued a staff position that delays the effective date of FAS 157 for certain
nonfinancial assets and liabilities to fiscal years beginning on or after
November 15, 2008. The Company's adoption of FAS 157 did not have a material
effect on the financial statements. Adoption of the delayed provisions of FAS
157 is not expected to have a material effect on the Company's financial
statements.




In
February 2007, the FASB issued Statement of Financial Accounting Standard
No. 159, The Fair Value
Option for Financial Assets and Financial Liabilities Including an Amendment of
FASB Statement No. 115 ("FAS 159"). FAS 159 allows entities to
choose to measure many financial instruments and certain other items at fair
value, with unrealized gains and losses related to these financial instruments
being reported in earnings at each subsequent reporting date. FAS 159 is
effective for fiscal years beginning after November 15, 2007. The Company's
adoption of this statement did not have a material effect on the financial
statements.




In
December 2007, the FASB issued Statements No. 141(R), Business Combinations,("FAS
141(R)"), and No. 160 Noncontrolling Interests in
Consolidated Financial Statements,("FAS 160"). Together these statements
can affect the way companies account for future business combinations and
noncontrolling interests. FAS 141(R) requires, amongst other changes,
recognition of subsequent changes in the fair value of contingent consideration
in the Statement of Operations rather than against Goodwill, and transaction
costs to be recognized immediately in the Statement of Operations. FAS 160
clarifies the classification of non controlling interests (i.e. minority owners'
interests in subsidiaries) in consolidated balance sheets and the accounting for
and reporting of transactions between the reporting entity and holders of such
non controlling interests. In particular the minority owners' interest in
subsidiaries should be presented in the consolidated balance sheet within
equity, but separate from the parent's equity. Similarly the amount of net
income attributable to the parent and to the minority interest be clearly
identified and presented on the consolidated statement of income. Both FAS
141(R) and FAS 160 are effective for transactions completed in fiscal years
beginning after December 15, 2008. Adoption of FAS 141(R) and FAS 160 by the
Company in the financial statements beginning January 1, 2009 is not expected to
have a material effect on the Company's financial statements.




F-7
 CalPetro Tankers ( Bahamas I) Limited
 Notes to the Financial Statements







In
March 2008, the FASB issued Statement of Financial Accounting Standard
No. 161, Disclosures
about Derivative Instruments and Hedging Activities ("FAS 161"). This
standard amends and expands the disclosure requirements of FASB Statement 133,
Accounting for Derivative
Instruments and Hedging Activities, and is effective for fiscal years
beginning after November 15, 2008. FAS 161 requires enhanced disclosures that
better convey the purpose of an entity's derivative and hedging activities in
terms of the risk it intends to manage. In addition to other disclosure
requirements, the statement requires disclosure of the reasons for holding or
issuing derivative instruments in the context of its overall risk exposure. The
Company's adoption of FAS 161 is not expected to have a material effect on the
Company's financial statements.




In
May 2008, the FASB issued Statement of Financial Accounting Standard
No. 162, The Hierarchy of
Generally Accepted Accounting Principles,("FAS 162"). This Statement
identifies the sources of accounting principles and the framework for selecting
the principles to be used in the preparation of financial statements in
conformity with generally accepted accounting principles in the United States.
Adoption of FAS 162 is not expected to have a material effect on the Company's
financial statements.







4.           RESTRICTED
CASH





The
restricted cash accounts were established and are maintained by The Bank of New
York Mellon (formerly the Chase Manhattan Trust Company of California and
JPMorgan Chase) as the collateral trustee who maintains the accounts as
collateral agent for the equal and ratable benefit of the holders of the Term
Notes. Charterhire payments are deposited into a revenue account and these funds
can only be used to fund the principal and interest due on the Term Notes and
any operating costs in relation to operating the Owners.




5.           FINANCE
LEASE





The
Company has chartered its Vessel on a long term bareboat charter (the "Initial
Charter") to Chevron Transport Corporation ("Chevron") which has a term expiring
on April 1, 2015 subject to Chevron's right to terminate the Initial Charter on
certain specified dates. Chevron did not elect to terminate the Initial Charter
on any of the specified dates, the last being April 1, 2009. A notice period of
at least 12 months would have been required in order to exercise this option.
Chevron has the option to purchase the Vessel for $1 on April 1,
2015.




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





(in
      thousands of $)
                                              
                                              2008
                                              
                                              
                                              2007Total
      minimum lease payments to be received
                                              
                                              
                                              29,200
                                              
                                              
                                              
                                              34,759Less:
      unearned income
                                              
                                              
                                              (6,657
                                              )
                                              
                                              
                                              (8,830
                                              )Net
      investment in finance lease
                                              
                                              
                                              22,543
                                              
                                              
                                              
                                              25,929Less
      current portion
                                              
                                              
                                              (3,453
                                              )
                                              
                                              
                                              (3,450
                                              )19,090
                                              
                                              
                                              
                                              22,479





Lease
revenues under the charter agreement for each of the succeeding years are as
follows:





(in
      thousands of $)Year
      ending December 31,2009
                            
                            
                            5,2732010
                            
                            
                            4,9872011
                            
                            
                            4,7012012
                            
                            
                            4,4152013
                            
                            
                            4,1292014
      and later
                            
                            
                            5,695Total
      minimum lease revenues
                            
                            
                            29,200





F-8
 CalPetro Tankers ( Bahamas I) Limited
 Notes to the Financial Statements





6.           DEFERRED
CHARGES





(in
      thousands of $)
                                    
                                    2008
                                    
                                    
                                    2007Debt
      arrangement fees
                                    
                                    
                                    1,005
                                    
                                    
                                    
                                    1,005Accumulated
      amortization
                                    
                                    
                                    (885
                                    )
                                    
                                    
                                    (863
                                    )120
                                    
                                    
                                    
                                    142





7.           DEBT




(in
      thousands of $)
                      
                      
                      2008
                      
                      
                      
                      20078.52%
      Term Loans due 2015
                      
                      
                      23,487
                      
                      
                      
                      26,842Less:
      current portion
                      
                      
                      (3,355
                      )
                      
                      
                      (3,355
                      )20,132
                      
                      
                      
                      23,487





The
outstanding debt as of December 31, 2008 is repayable as follows:





Year
      ending December 31(in
      thousands of $)2009
                        
                        
                        3,3552010
                        
                        
                        3,3552011
                        
                        
                        3,3552012
                        
                        
                        3,3552013
                        
                        
                        3,3552014
      and later
                        
                        
                        6,712Total
      debt
                        
                        
                        23,487





The
Term Loans bear interest at a rate of 8.52% per annum. Interest is payable
semi-annually on April 1 and October 1 each year. Principal is repayable on the
Term Loans in accordance with a remaining seven year sinking fund schedule. The
Term Loans notes include certain covenants such as restriction on the payment of
dividends and making additional loans or advances to affiliates. At December 31,
2008 the Company was in compliance with these covenants.





The
Company is jointly and severally liable with the other Owners for all the Owners
obligations and liabilities in relation to the Term Loans but only to the extent
of the proceeds received by California Petroleum Transport Corporation from
California Petroleum Transport Corporation's right, title and interest in and to
the collateral.





8.           SHARE CAPITAL





(in
      $)
                        
                        2008
                        
                        
                        2007Authorized
      share capital:1,000
      shares of $1 each
                        
                        
                        1,000
                        
                        
                        
                        1,000Issued
      and outstanding share capital:100
      shares of $1 each
                        
                        
                        100
                        
                        
                        
                        100





F-9
 CalPetro Tankers ( Bahamas I) Limited
 Notes to the Financial Statements








9.           FINANCIAL
INSTRUMENTS





Fair
values


The
carrying value and estimated fair value of the Company's financial instruments
at December 31, 2008 and 2007 are as follows:





(in
      thousands of $)
                  
                  2008
                    Carrying
      value
                  
                  
                  2008
                    Fair
                    value
                  
                  
                  2007
                    Carrying
      value
                  
                  
                  2007
                    Fair
                    valueRestricted
      cash
                  
                  
                  2,173
                  
                  
                  
                  2,173
                  
                  
                  
                  2,180
                  
                  
                  
                  2,1808.52%
      Term Loans due 2015
                  
                  
                  23,487
                  
                  
                  
                  26,909
                  
                  
                  
                  26,842
                  
                  
                  
                  28,836





The
methods and assumptions used in estimating the fair values of financial
instruments are as follows:




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




The
estimated fair value for fixed rate debt, being the Term Loans, is based on
quoted market prices.





Concentrations
of risk





The
Company's only source of funds for the repayment of the principal and interest
on the Term Loans are from charterhire payments from Chevron, investment income
and the proceeds, if any, from the sale of the Vessel. Accordingly, the
Company's ability to service its obligations on the Term Loans is wholly
dependent upon the financial condition, results of operations and cash flows
from Chevron.





There
is a concentration of credit risk with respect to Restricted Cash to the extent
that all of the amounts are invested with The Bank of New York
Mellon.





There
is a concentration of credit risk due to the fact that the sole source of
charter income is Chevron Transport Corporation. The Company does not consider
this a significant risk.





10.           RELATED PARTY
TRANSACTIONS





Pursuant
to a management agreement, Frontline is the Company's Manager and Technical
Advisor. Under the management agreement, Frontline is entitled to a Management
Fee and a Technical Advisor's Fee.




Under
the terms of the management agreement, the Management Fee consists of a fee of
$13,625 initially per annum for the Vessel, along with a fee of $3,000 covering
all four Vessels in the California Petroleum Group, payable semi-annually in
arrears for the period until the third anniversary of the closing of the Notes
issue then increasing by four percent on each subsequent anniversary of the
closing of the issue of the Notes.




The
Technical Advisor's Fee was initially $10,000 per annum for the Vessel, payable
semi-annually in arrears, during the initial first three year period as
described above. On each subsequent anniversary of the closing of the issue of
the Notes, the fee increases by four percent. In addition, the Technical Advisor
is entitled to be reimbursed for the fees, costs and expenses of conducting
periodic inspections of the Vessel.




Pursuant
to a Designated Representative Agreement, CalPetro Holdings Limited (the
"Designated Representative") was appointed to represent California Petroleum as
its Designated Representative to act on its behalf with respect to certain
administrative matters such as the filing of periodic reports and financial
statements with the Securities and Exchange Commission. The fee payable to the
Designated Representative (the "Designated Representative Fee") during the
initial three year period described above was $15,000 per annum with a four
percent increase on each subsequent anniversary of the closing of the issue of
the Notes.




Management
fee expenses and management fee payable for the year ended and as of December
31, 2008, 2007, and 2006 are as follows:




F-10
 CalPetro Tankers ( Bahamas I) Limited
 Notes to the Financial Statements







(in
      thousands of $)
                      
                      
                      2008
                      
                      
                      2007
                      
                      
                      2006Management
      fee expenses
                      
                      
                      43
                      
                      
                      
                      41
                      
                      
                      
                      40Management
      fee payable
                      
                      
                      21
                      
                      
                      
                      10
                      
                      
                      
                      10




11.           COLLATERAL
ARRANGEMENTS





The
Term Loans are collateralized by a first preference mortgage on the Vessel to
California Petroleum Transport Corporation. The earnings and insurance relating
to the Vessel have been collaterally assigned pursuant to an Assignment of
Earnings and Insurance to California Petroleum Transport Corporation, which in
turn has assigned such Assignment of Earnings and Insurance to the Collateral
Trustee. The Initial Charter and Chevron Guarantee relating to the Vessel have
been collaterally assigned pursuant to the Assignment of Initial Charter and
Assignment of Initial Charter Guarantee to California Petroleum Transport
Corporation, which in turn has assigned such Assignment to the Collateral
Trustee. The Capital Stock of the Company has been pledged to California
Petroleum Transport Corporation pursuant to the Stock Pledge
Agreement.




As
at December 31, 2008, Chevron holds an option to purchase the Vessel for $1 on
April 1, 2015 provided the Initial Charter is still in place.




F-11


SIGNATURES





Subject
to the requirements of Section 13 or 15(d) of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.








CalPetro
Tankers (Bahamas I) Limited











/s/ Kate
Blankenship


Kate
Blankenship


Director
and Secretary











Date:
May 20, 2009