UNITED
STATES


SECURITIES AND EXCHANGE
COMMISSION


WASHINGTON,
D.C. 20549





FORM
20-F


(Mark
One)





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


OR





x
            ANNUAL
      REPORT PURSUANT TO SECTION 13 OR 15(d)OF
      THE SECURITIES EXCHANGE ACT OF 1934
              For
      the fiscal year
      ended          December
      31, 2009




OR





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


OR





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





Date of event requiring this
      shell company report _______________________________








Commission
      file number
            033-79220-03





CalPetro
      Tankers (Bahamas III) Limited(Exact
      name of Registrant as specified in its charter)(Translation
      of Registrant's name into English)The
      Bahamas(Jurisdiction
      of incorporation or organization)Mareva
      House, 4 George Street, PO Box N-3937, Nassau, The
  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                                            Nox





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 as issued by the
              International
      Accounting Standards Board o
            Other
      o





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





Item
17 o                                           Item
18 o







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





Yes o                                            No
x














INDEX
      TO REPORT ON FORM 20-F
            Page





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











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 III) Limited (the "Company") desires to take advantage of the
safe harbor provisions of the Private Securities Litigation Reform Act of 1995
and is including this cautionary statement in connection with this safe harbor
legislation. This document and any other written or oral statements made by us
or on our behalf may include forward-looking statements, which reflect our
current views with respect to future events and financial performance. The words
"believe," "anticipate," "intends," "estimate," "forecast," "project," "plan,"
"potential," "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 worldwide 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 III) 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 III) 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, 2009, 2008 and 2007, and the selected balance sheet
data with respect to the fiscal years ended December 31, 2009 and 2008, 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, 2006 and 2005, and the selected balance sheet
data with respect to the fiscal year ended December 31, 2007, 2006 and 2005,
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 31,2009
            
            
            2008
            
            
            2007
            
            
            2006
            
            
            2005(in
      thousands of $, except share data)Statement
      of operations data:Total
      operating revenues
            
            
            2,863
            
            
            
            2,894
            
            
            
            3,093
            
            
            
            2,255
            
            
            
            1,381Net
      income (loss)
            
            
            1,580
            
            
            
            1,985
            
            
            
            2,385
            
            
            
            1,335
            
            
            
            (41)Per
      share data:Dividends
      per share
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -Balance
      sheet data:Total
      assets
            
            
            19,704
            
            
            
            18,575
            
            
            
            16,658
            
            
            
            18,789
            
            
            
            16,861Current
      portion of long-term debt
            
            
            730
            
            
            
            444
            
            
            
            -
            
            
            
            570
            
            
            
            2,530Long-term
      debt
            
            
            10,154
            
            
            
            10,884
            
            
            
            11,328
            
            
            
            12,174
            
            
            
            12,744Stockholder's
      equity
            
            
            8,526
            
            
            
            6,946
            
            
            
            4,961
            
            
            
            2,576
            
            
            
            1,241Number
      of shares
            
            
            100
            
            
            
            100
            
            
            
            100
            
            
            
            100
            
            
            
            100





B.  
Capitalization and Indebtedness





Not
applicable.





C.  
Reasons for the offer and use of proceeds





Not
applicable.





1


D.  
Risk Factors





We are
not currently engaged in leasing a vessel. On January 5, 2010, Front Voyager
Inc. gave notice of termination of the bareboat charter to take effect on April
1, 2010. A Memorandum of Agreement, dated March 15, 2010, has been signed
regarding the sale of our vessel for $8.3 million and delivery to the buyer
occurred on April 8, 2010. Following the sale of our vessel and the scheduled
repayment of principal in the amount of $730,000 on April 1, 2010, the full
amount outstanding on the Term Loan of $10.154 million was repaid in full on
April 13, 2010, and a make whole premium of $2.1 million was also paid at that
time for early redemption of the debt.




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





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.





The
buyer or another claimant may make a claim against us in respect of the Front
Voyager, which may adversely affect our financial condition





Under the
terms of the purchase agreement for the Front Voyager, we as the seller warrant
that the Vessel at the time of physical and legal delivery is free from all
encumbrances, mortgages, and maritime liens or any other debts, taxes and
financial liabilities/obligations whatsoever. Should any claims, which have
accrued prior to the time of delivery, be made against the Vessel, we have
undertaken to unconditionally indemnify the buyers against all consequences of
such claims. If the buyers or another claimant seek indemnification under this
provision, prosecution or defense of the claim may adversely affect our
financial position.





After
the sale of the Front Voyager, we have no further income producing
assets





The Front
Voyager was the only income producing asset that we owned.  After the
sale of this vessel, we have no further ongoing business and no assets that
would create income in the future.





Item
4.    INFORMATION ON THE COMPANY





A.    History
and Development of the Company





CalPetro
Tankers (Bahamas III) Limited was incorporated in The Bahamas on May 13, 1994
together with two other companies: CalPetro Tankers (Bahamas I) Limited and
CalPetro Tankers (Bahamas II). In addition CalPetro Tankers (IOM) Limited was
incorporated in the Isle of Man. Together these companies are referred to as the
Owners. Each of the Owners was organized as a special purpose company 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 I) Limited, CalPetro Tankers (Bahamas II)
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.






2





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 $27,640,000 of the Serial Loans and $12,744,000 of the Term Loans and
acquired our Vessel as described below. We will engage in no business other than
the ownership and chartering of our Vessel, which has been sold, and activities
resulting from or incidental to such ownership and chartering.





After its
delivery to us, the Vessel was chartered to Chevron. On April 21, 2005, we
received irrevocable notice from Chevron regarding the termination of its
bareboat charter of the Vessel on April 1, 2006 pursuant to that charter's
terms. On April 1, 2006, the Vessel was redelivered to us and immediately
delivered to Front Voyager Inc. (the "Charterer"), a wholly-owned subsidiary of
Frontline, for an initial two year period (the "Initial Period") under the
Charter which provided for the prepayment of the charterhire in the amount of
$5.05 million for the two years ended April 1, 2008 and contained annual options
to extend the charter after April 1, 2008 up to April 1, 2015. On March 25,
2009, the Charterer exercised its option to extend the charter for the second
one year optional period beginning April 1, 2009. On January 5, 2010, the
Charterer gave notice that it would terminate the charter and paid a termination
fee of $4.9 million on April 1, 2010 in accordance with the bareboat charter. A
Memorandum of Agreement, dated March 15, 2010, has been signed regarding the
sale of our vessel for $8.3 million and delivery to the buyer occurred on April
8, 2010. Following the sale of the Front Voyager and the scheduled principal
repayment of $730,000 on the Term Loan on April 1, 2010, the full amount
outstanding on the Term Loan of $10.154 million was repaid in full on April 13,
2010. In addition, a make whole premium of $2.1 million was paid at that
time for early redemption of the debt.





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





B.  
Business Overview





Our
Vessel, which was sold on March 23, 2010 and delivered to the buyer on April 8,
2010, was a 155,000 dwt Suezmax oil tanker, which was originally 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. After
the sale of our Vessel, we will continue our existence but will not actively
engage in any business other than in connection with ongoing corporate
affairs.





Front
Voyager Inc., is principally engaged in the marine transportation of oil
products. Front Voyager Inc.'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.





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. The Manager
will not receive a per vessel fee, management fee or technical advisor fee for
our Vessel for any period after the Vessel was sold





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.







3




D.  
Property, Plants and Equipment




Other
than our Vessel described above, we do not have any property. A Memorandum of
Agreement, dated March 15, 2010, has been signed regarding the sale of our
vessel and delivery to the buyer occurred on April 8, 2010.




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.





Market
Overview and Trend Information





According
to Industry sources, the average TCE rate for a modern Suezmax was $27,000/day
throughout the year; ranging from a high of $57,000/day in the beginning of
January to a low of $7,000/day in mid-August. The average TCE rate for the first
quarter was $42,600/day compared to $24,000/day, $14,000/day and $27,500/day for
the remaining quarters respectively.





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





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





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





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





The IEA
further estimates that the average world oil demand was 84.9 million barrels per
day in 2009, which represents a decrease of 1.5% or 1.3 million barrels per day
from 2008. For 2010, the world oil demand is estimated at 86.6 million barrels
per day, representing an increase of 2% or 1.7 million barrels per day from
2009.





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






4





The
bunker (vessel fuel oil) market followed movements in the oil market closely in
2009. The average bunker price in Philadelphia was approximately $378/mt, which
represents a decrease of $133/mt from 2008. The prices ranged from a low of
$221/mt at the beginning of January to a high of $491.5/mt at the beginning of
December.





According
to the 'World Economic Outlook
- Update' published by The International Monetary Fund, or "IMF", in
January 2010, World Output, or GDP, decreased 0.8% in 2009, which was a
substantial downward shift compared to the 2009 3% growth estimate as reported
in October 2008. For 2010 and 2011, however, the IMF forecasts World GDP growth
of 4.2% and 4.3%, respectively.





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





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





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





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





The total
Suezmax fleet increased by approximately 13% in 2009 to 393 vessels. Throughout
the year, a total of 46 new vessels were delivered to owners and 24 new orders
were placed. The total order book consisted of 134 vessels at the end of the
year, which represented approximately 34% of the existing fleet.





Throughout
2010, it is estimated that 62 Suezmaxes will enter the market, including 24 in
the first quarter. This substantial amount of new tonnage will be cushioned, to
some extent, by the expected phase-out program of single hull vessels which, at
the end of 2009, consisted of 33 Suezmaxes. Finally, to help mitigate the future
influx of vessels, we expect further changes to orders such as cancellations,
delays and deferrals.





Operating
results





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





Total
Revenues





(in
      thousands of $)
            
            2009
            
            
            2008
            
            
            %
      ChangeCharter
      revenue
            
            
            2,863
            
            
            
            2,894
            
            
            
            (1
            )%





Charterhire
revenue is recognized over the expected length of the charter and accounted for
as a four year operating lease. On April 1, 2009, Front Voyager Inc. exercised
its option to extend the Charter for an additional year to 1 April
2010.





Expenses





(in
      thousands of $)
            
            2009
            
            
            2008
            
            
            %
      ChangeInterest
      expense
            
            
            937
            
            
            
            965
            
            
            
            (3
            )%Amortization
      of deferred charges
            
            
            4
            
            
            
            8
            
            
            
            (50
            )%





Interest
expense has fallen in line with expectations, with interest expense falling in
line with the amount outstanding under our loans each year. The Company
amortizes the  deferred charges  over the life of the Term Loans using
the straight line method.








5


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





Total
Revenues





(in
      thousands of $)
            
            2008
            
            
            2007
            
            
            %
      ChangeCharter
      revenue
            
            
            2,894
            
            
            
            3,093
            
            
            
            (6
            )%





Charterhire
revenue is recognized over the expected length of the charter. The decrease in
charter revenue in 2008 is mainly due to an adjustment included in 2007
following a reassessment of the charter term and the determination that we
should account for the charter as a four year operating lease and not a two year
operating lease.





Expenses





(in
      thousands of $)
            
            2008
            
            
            2007
            
            
            %
      ChangeInterest
      expense
            
            
            965
            
            
            
            995
            
            
            
            (3
            )%Amortization
      of deferred charges
            
            
            8
            
            
            
            8
            
            
            
            -





Interest
expense has fallen in line with expectations, with interest expense falling in
line with the amount outstanding under our loans each year. The Company
amortizes the  deferred charges  over the life of the Term Loans using
the straight line method.





Liquidity
and Capital Resources





As of
December 31, 2009, revenues from the Charter were sufficient to pay our
obligations under the Term Loans.


On
January 5, 2010, the Charterer gave notice that it would terminate the charter
and paid a termination fee of $4.9 million on April 1, 2010 in accordance with
the bareboat charter. The Vessel was delivered to us on April 1,
2010.  A Memorandum of Agreement, dated March 15, 2010, has been
signed regarding the sale of our vessel for $8.3 million. The full amount
outstanding on the Term Loan of $10.154 million was repaid in full on April 13,
2010, and a make whole premium of $2.1 million was also paid at that time for
early redemption of the debt.





Off-balance
Sheet Arrangements





None.





Tabular
disclosure of contractual obligations





As at
December 31, 2009, 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%)
            
            
            730
            
            
            
            1,640
            
            
            
            1,940
            
            
            
            6,574
            
            
            
            10,884Interest
      payable
            
            
            896
            
            
            
            1,593
            
            
            
            1,289
            
            
            
            280
            
            
            
            4,058Total
      contractual obligations
            
            
            1,626
            
            
            
            3,233
            
            
            
            3,229
            
            
            
            6,854
            
            
            
            14,942





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





Following
the sale of the Front Voyager and the scheduled repayment of principal in the
amount of $730,000 on April 1, 2010, the full amount outstanding on the Term
Loan of $10.154 million was repaid in full on April 13, 2010, and a make whole
premium of $2.1 million was also paid at that time for early redemption of the
debt.





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 policies include:







6




Revenue
Recognition





Revenue
is generated from bareboat charter hire and is recorded over the term of the
charter as service is provided.





Vessel,
Depreciation and Impairment





The
Vessel is depreciated based on cost less estimated residual value over the
lesser of the period to the year 2015 or the useful life of the vessel. If the
estimated economic useful life is incorrect, or circumstances change and the
estimated economic useful life has to be revised, an impairment loss could
result in future periods and/or annual depreciation expense could be increased.
Our Vessel is reviewed for impairment whenever events or changes in
circumstances indicate that their carrying amount may not be recoverable.
Factors we consider important that could affect recoverability and trigger
impairment include significant underperformance relative to expected operating
results, new regulations that change the estimated useful economic lives of our
Vessel and significant negative industry or economic trends. In assessing the
recoverability of the Vessels' carrying amounts when an indicator of impairment
is present, we must make assumptions regarding estimated future cash flows.
These assumptions include assumptions about the spot market rates for Vessels,
the revenues the Vessel could earn under time charter, voyage charter or
bareboat charter, the operating costs of our Vessel and the estimated economic
useful life of our Vessel. In making these assumptions, the Company refers to
historical trends and performance as well as any known future factors. If our
review indicates impairment, an impairment charge is recognized based on the
difference between carrying value and fair value. Fair value is typically
established using an average of three independent valuations.





On July
1, 2009, the Company effected a change in the estimated scrap rate for its
vessel from $378 per lightweight ton to $281 per lightweight ton. The resulting
change in salvage value has been applied prospectively and increased
depreciation by $0.2 million for the year ended December 31, 2009. This change
also resulted in a decrease in net income of $0.2 million for the year ended
December 31, 2009. The Company's assumptions used in the determination of
estimated salvage value took into account then current scrap prices, the
historic pattern of scrap rates over the ten years ended December 31, 2008,
estimated changes in future market demand for scrap steel and estimated future
demand for vessels. Management believed that $281 per lightweight ton is a
reasonable estimate of future scrap prices, taking into consideration the
cyclicality of the nature of future demand for scrap steel. Although management
believes that the assumptions used to determine the scrap rate are reasonable
and appropriate, such assumptions are highly subjective, in part, because of the
cyclicality of the nature of future demand for scrap steel.





Recent
accounting pronouncements





In April
2009, the FASB issued FSP FAS 107-1 and APB 28-1 Guidance on Interim Fair Value
Disclosures, (codified in ASC 825), which expands the fair value
disclosures required for all financial instruments within the scope of this
topic to interim periods for publicly traded entities. Entities must disclose
the method(s) and significant assumption(s) used to estimate the fair value of
financial instruments in financial statements on an interim basis and to
highlight any changes in the methods and significant assumptions from prior
periods. The guidance is effective for interim and annual periods ending after
June 15, 2009 and adoption of this FSP did not have a material effect on our
financial statements.





In May
2009, the FASB issued Statement No. 165 Subsequent Events, ("FAS 165"),(codified in ASC 855).This Statement provides guidance on management's assessment of subsequent
events. The guidance clarifies that management must evaluate, as of each
reporting period, events or transactions that occur after the balance sheet date
"through the date that the financial statements are issued or are available to
be issued." Management must perform its assessment for both interim and annual
financial reporting periods. The new guidance is effective prospectively for
interim and annual periods ending after June 15, 2009. Adoption of the Statement
did not have a material effect on the Company's financial statements. In
February 2010, the FASB amended the subsequent events guidance issued in May
2009 to remove the requirement for SEC filers to disclose a date through which
subsequent events have been evaluated in both issued and revised financial
statements. The amendment is effective upon issuance. The adoption of this
guidance did not have a material effect on our financial
statements.





In
June 2009, the FASB issued Statement No. 168, Statement on Codification and
Hierarchy of Generally Accepted Accounting Principles, ('FAS 168'),
(codified in ASC 105).The Statement is a replacement for FAS 162. The GAAP hierarchy has been
modified to include only two levels of GAAP; authoritative and nonauthoritative.
The Statement is effective for financial statements issued for interim and
annual periods ending after September 15, 2009. The adoption of this Statement
did not have a material effect on the Company's financial
statements.





7





Item
6.    DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES





A.    
Directors and Senior Management





Name
            Age
            PositionTor
      Olav Trøim
            47
            Director
      and PresidentKate
      Blankenship
            45
            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. He was
formerly an Equity Portfolio Manager with Storebrand ASA (1987-1990), and Chief
Executive Officer for the Norwegian Oil Company DNO AS (1992-1995). 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 Energy 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 from 1994 until 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, Golden Ocean Group Limited since November 2004 and Golar LNG Energy
Limited since June 2009. 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, 2009, 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."





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
April 29, 2010, except as set forth below, the Company is not aware of any
beneficial owner of more than 5% of its Common Stock.






8





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,
as successor to 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.





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", our Vessel was chartered to
Front Voyager Inc., a wholly owned subsidiary of Frontline, until April 1, 2010.
Frontline is our Manager and ultimate parent company. This charter terminated on
April 1, 2010.





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 advisors 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. The Manager will not receive a per vessel management fee or
technical advisor fee for our Vessel for any period after our Vessel was
sold.





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 fees payable for the years ended and as of December
31, 2009, 2008 and 2007 are as follows:





(in
      thousands of $)
            
            2009
            
            
            2008
            
            
            2007Management
      fee expenses
            
            
            45
            
            
            
            43
            
            
            
            41Management
      fee payable
            
            
            11
            
            
            
            21
            
            
            
            10







Item
8.    FINANCIAL INFORMATION





A.
Consolidated Statements and Other Financial Information





See Item
18 "Financial Statements" below.







9




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 know 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. 23063B 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 forfeited 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





In
connection with the sale of the Vessel and the subsequent redemption of its
allocable portion of the Term Notes and the Term Loan, the Company entered into
an amendment to the Management and Remarketing Agreement between the Company and
the Manager and to the Collateral Trust Agreement and agreements to terminate
(i) its assignment of charter dated as of March 31, 2006 between the Company and
CPTC; (ii) the assignment of earnings and insurances as of April 1, 1995 between
the Company and CPTC; (iii) the assignment from the Company to CPTC, dated as of
April 1, 1995, of the vessel purchase agreement dated as of April 1, 1995
between the Company and Chevron Transport Corporation; (iv) the debenture dated
as of April 1, 1995 between the Company and CPTC; (v) the Bahamian statutory
mortgage on the Vessel, dated as of June 28, 2001; (vi) the deed of covenants
dated as of June 28, 2001 between the Company and CPTC to accompany the
statutory mortgage and (vii) the term loan agreement dated as of April 1, 1995
between the Company and CPTC.







10


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 The Bahamas but an exchange of information treaty on tax
issues is in effect.





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, NE., 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 registered office at Mareva House, 4 George Street, PO Box N-3937,
Nassau, The 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, 2009 is as
follows:





The Term
Loan bears 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 6-year sinking fund schedule.







11




When the
Charter was terminated on April 1, 2006, the scheduled mandatory sinking fund
payments on the Term Loans was revised so that the allocated principal amount of
the Term Loan for the Vessel will be redeemed on the remaining sinking fund
redemption dates on a schedule that approximates level debt service with an
additional principal payment on the maturity date of $5.5 million.





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





Scheduled
      payment date
            
            $'000April
      1, 2010
            
            
            730April
      1, 2011
            
            
            790April
      1, 2012
            
            
            850April
      1, 2013
            
            
            930April
      1, 2014
            
            
            1,010April
      1, 2015
            
            
            6,57410,884





Following
the sale of the Front Voyager and the scheduled repayment of principal in the
amount of $730,000 on April 1, 2010, the full amount outstanding on the Term
Loan of $10.154 million was repaid in full on April 13, 2010, and a make whole
premium of $2.1 million was also paid at that time for early redemption of the
debt.




(b)
Qualitative information about 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.





Item
12.    DESCRIPTION OF SECURITIES OTHER THAN EQUITY
SECURITIES





Not
applicable.





12





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, 2009, 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, 2009. Based upon
that evaluation, the principal executive officer and principal financial officer
concluded that the Company's internal controls over financial reporting are
effective as of December 31, 2009.





13




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 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 a code of ethics would have
no applicability to us and we have not adopted a code of ethics.





Item
16C.    PRINCIPAL ACCOUNTANT FEES AND SERVICES





Our
principal accountant for 2009 and 2008 was PricewaterhouseCoopers AS. The
following table sets forth for the two most recent fiscal years the fees paid or
accrued for audit and services provided by PricewaterhouseCoopers
AS.





(in
      thousands of $)
            
            2009
            
            
            2008Audit
      fees (a)
            
            
            40
            
            
            
            25Audit
      related fees (b)
            
            
            -
            
            
            
            -Tax
      fees (c)
            
            
            -
            
            
            
            -All
      other fees (d)
            
            
            -
            
            
            
            -Total
            
            
            40
            
            
            
            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.


14




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.





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
report of Grant Thornton on the financial statements of the Company as of
December 31, 2007 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 audit of the Company's financial statements for the year
ended December 31, 2007 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.


15


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.




PageReport
      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
            F-3December
      31, 2009, 2008 and 2007Balance
      Sheets as of December 31, 2009 and 2008
            F-4Statements
      of Cash Flows for the Years Ended December 31, 2009, 2008 and
      2007
            F-5Notes
      to the Financial Statements
            F-6





16





Item
19.    EXHIBITS





1.1*
            Certificate
      of Incorporation and Memorandum of Association of CalPetro Tankers
      (Bahamas III) 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 III) 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.





17





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.
      33-79220.2.7*
            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. 33-79220.2.8*
            Form
      of Assignment of Management Agreement from [CalPetro Tankers (Bahamas I)
      Limited] [CalPetro Tankers (Bahamas II) Limited] [CalPetro Tankers (IOM)
      Limited] [CalPetro Tankers (Bahamas III) Limited], incorporated by
      reference to Exhibit 4.11 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.





18




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. 33-79220.4.4*
              Bareboat
      Charter between Calpetro Tankers (Bahamas III) Limited and Front Voyager
      Inc. dated March 31, 2006.4.5*
              Assignment
      of Charter between Calpetro Tankers (Bahamas III) Limited and Front
      Voyager Inc. dated March 31, 2006.4.6
              Amendment
      No. 2 to Management and Remarketing Agreement between CalPetro Tankers
      (Bahamas III) Limited and Frontline dated as of April 8,
2010.4.7
              Amendment
      No. 2 to the Collateral Trust Agreement among CalPetro Tankers (Bahamas I)
      Limited, CalPetro Tankers (Bahamas II) Limited, CalPetro Tankers (Bahamas
      III) Limited, CalPetro Tankers (IOM) Limited, The Bank of New York Mellon
      Trust Company, N.A., as indenture trustee, The Bank of New York Trust
      Company, N.A., as collateral trustee and California Petroleum Transport
      Corporation, dated as of April 1, 2010.4.8
              Termination
      of Assignment of Charter between CalPetro Tankers (Bahamas III) Limited
      and California Petroleum Transport Corporation dated as of April 8,
      2010.4.9
              Termination
      of Statutory Mortgage between CalPetro Tankers (Bahamas III) Limited and
      The Bank of New York Mellon Trust Company, N.A., dated as of April 8,
      20104.10
              Termination
      of Deed of Covenants between CalPetro Tankers (Bahamas III) Limited and
      California Petroleum Transport Corporation dated as of April 8,
      2010.4.11
              Termination
      of Term Loan Agreement between CalPetro Tankers (Bahamas III) Limited and
      California Petroleum Transport Corporation dated as of April 8,
      2010.4.12
              Termination
      of Debenture between CalPetro Tankers (Bahamas III) Limited and California
      Petroleum Transport Corporation dated as of April 8, 2010.4.13
              Termination
      of Assignment of Earnings and Insurances between CalPetro Tankers (Bahamas
      III) Limited and California Petroleum Transport Corporation dated as of
      April 8, 2010.4.14
              Termination
      of Assignment of Purchase Agreement between CalPetro Tankers (Bahamas III)
      Limited and California Petroleum Transport Corporation dated as of April
      8, 2010.10.1*
              Powers
      of Attorney for directors and certain officers of CalPetro Tankers
      (Bahamas II) 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
  19


12.1
            Certification
      of the Principal Executive Officer pursuant to Rule 13a-14(a) and Rule
      15d-14(a) of the Securities Exchange Act, as amended.12.2
            Certification
      of the Principal Financial Officer pursuant to Rule 13a-14(a) and Rule
      15d-14(a) of the Securities Exchange Act, as amended.13.1
            Certification
      of the Principal Executive Officer pursuant to 18 USC 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 USC Section 1350, as
      adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
      2002.





*
Incorporated by reference to the filing indicated.


20





Report of
Independent Registered Public Accounting Firm





To
the Board of Directors and Shareholder


CalPetro
Tankers (Bahamas III) Limited








We have
audited the accompanying balance sheet of CalPetro Tankers (Bahamas III) Limited
(the "Company") as of December 31, 2009 and December 31, 2008, and the related
statements of operations and retained earnings, and cash flows for each of the
years then ended. 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. The financial statements of the
Company as of December 31, 2007 and for the year then ended were audited by
other auditors whose report dated June 20, 2008 expressed an unqualified opinion
on those statements.





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





In our
opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of CalPetro Tankers (Bahamas III)
 Limited as of December 31, 2009 and December 31, 2008 and the results of
its operations and retained earnings and cash flows for each of the two years
ended, in conformity with accounting principles generally accepted in the United
States of America.








/s/
PricewaterhouseCoopers AS





PricewaterhouseCoopers
AS


Oslo,
Norway


April 29,
2010


F-1





Report
of Independent Registered Public Accounting Firm











To the
Board of Directors


CalPetro
Tankers (Bahamas III) Limited





We have
audited the accompanying statements of operations and retained earnings, and
cash flows of CalPetro Tankers (Bahamas III) Limited for the year ended December
31, 2007. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audit.





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





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














/s/ Grant
Thornton LLP




Grant
Thornton LLP


New York,
New York


June 20,
2008





F-2


Calpetro
Tankers (Bahamas III) Limited


Statements
of Operations and Retained Earnings for the years ended December 31, 2009, 2008
and 2007


(in
thousands of $)








2009
            
            
            2008
            
            
            2007Operating
      revenuesCharter
      revenue
            
            
            2,863
            
            
            
            2,894
            
            
            
            3,093Total
      operating revenues
            
            
            2,863
            
            
            
            2,894
            
            
            
            3,093Operating
      expensesAdministrative
      expenses
            
            
            (136
            )
            
            
            (115
            )
            
            
            (133
            )Depreciation
            
            
            (241
            )
            
            
            (59
            )
            
            
            (59
            )Total
      operating expenses
            
            
            (377
            )
            
            
            (174
            )
            
            
            (192
            )Net
      operating income
            
            
            2,486
            
            
            
            2,720
            
            
            
            2,901Other
      income (expenses)Interest
      income
            
            
            35
            
            
            
            238
            
            
            
            487Interest
      expense
            
            
            (937
            )
            
            
            (965
            )
            
            
            (995
            )Amortization
      of deferred charges
            
            
            (4
            )
            
            
            (8
            )
            
            
            (8
            )Net
      other expenses
            
            
            (906
            )
            
            
            (735
            )
            
            
            (516
            )Net
      income
            
            
            1,580
            
            
            
            1,985
            
            
            
            2,385Retained
      earnings at the start of year
            
            
            6,946
            
            
            
            4,961
            
            
            
            2,576Retained
      earnings at the end of year
            
            
            8,526
            
            
            
            6,946
            
            
            
            4,961








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





F-3


CalPetro
Tankers (Bahamas III) Limited


Balance
Sheets as of December 31, 2009 and 2008





(in
thousands of $)











2009
            2008ASSETSCurrent
      AssetsRestricted
      cash
            
            
            9,311
            8,963Other
      current assets
            
            
            2,325
            1,299Total
      current assets
            
            
            11,636
            10,262Vessel
            
            
            8,049
            8,290Deferred
      charges
            
            
            19
            23Total
      assets
            
            
            19,704
            18,575LIABILITIES
      AND STOCKHOLDER'S EQUITYCurrent
      liabilitiesCurrent
      portion of long-term debt
            
            
            730
            444Accrued
      interest
            
            
            232
            242Other
      current liabilities
            
            
            62
            59Total
      current liabilities
            
            
            1,024
            745Long-term
      debt
            
            
            10,154
            10,884Total
      liabilities
            
            
            11,178
            11,629Stockholder's
      equityUnclassified
      stock: 100 shares of $1 par value
            
            
            -
            -Retained
      earnings
            
            
            8,526
            6,946Total
      stockholder's equity
            
            
            8,526
            6,946Total
      liabilities and stockholder's equity
            
            
            19,704
            18,575








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


F-4


Calpetro
Tankers (Bahamas III) Limited


Statements
of Cash Flows for the years ended December 31, 2009, 2008 and 2007


(in
thousands of $)








2009
            
            
            2008
            
            
            2007Net
      income
            
            
            1,580
            
            
            
            1,985
            
            
            
            2,385Adjustments
      to reconcile net income to net cash
              provided
      by (used in) operating activities:Depreciation
            
            
            241
            
            
            
            59
            
            
            
            59Amortization
      of deferred charges
            
            
            4
            
            
            
            8
            
            
            
            8Changes
      in operating assets and liabilities:Interest
      receivable
            
            
            15
            
            
            
            18
            
            
            
            (34
            )Other
      current assets
            
            
            (1,041
            )
            
            
            (1,283
            )
            
            
            45Accrued
      interest payable
            
            
            -
            
            
            
            -
            
            
            
            (29
            )Other
      current liabilities
            
            
            (7
            )
            
            
            (5
            )
            
            
            21Deferred
      charter revenue
            
            
            -
            
            
            
            (63
            )
            
            
            (3,093
            )Net
      cash provided by (used in) operating activities
            
            
            792
            
            
            
            719
            
            
            
            (638
            )Investing
      activities(Placement)
      maturity of restricted cash
            
            
            (348
            )
            
            
            (719
            )
            
            
            2,054Net
      cash (used in) provided by investing activities
            
            
            (348
            )
            
            
            (719
            )
            
            
            2,054Financing
      activitiesRepayments
      of debt
            
            
            (444
            )
            
            
            -
            
            
            
            (1,416
            )Net
      cash used in financing activities
            
            
            (444
            )
            
            
            -
            
            
            
            (1,416
            )Net
      increase (decrease) in cash and cash equivalents
            
            
            -
            
            
            
            -
            
            
            
            -Cash
      and cash equivalents at beginning of year
            
            
            -
            
            
            
            -
            
            
            
            -Cash
      and cash equivalents at end of year
            
            
            -
            
            
            
            -
            
            
            
            -Supplemental
      disclosure of cash flow information:Interest
      paid
            
            
            946
            
            
            
            965
            
            
            
            1,025







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


F-5


CalPetro
Tankers (Bahamas III) Limited


Notes
to the Financial Statements





1.
   DESCRIPTION OF BUSINESS





CalPetro
Tankers (Bahamas III) Limited (the "Company") was incorporated in The Bahamas on
May 13, 1994 with two other entities: CalPetro Tankers (Bahamas I) Limited and
CalPetro Tankers (Bahamas II) 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. On April 21, 2005, pursuant to the bareboat charter
dated April 5, 1995 between the Company and Chevron, the Company received
irrevocable notice from Chevron regarding the termination of the bareboat
charter of its Vessel Front Voyager, on April 1, 2006. Under the terms of the
bareboat charter between Chevron and the Company, Chevron paid a termination fee
of $5,050,000. As manager to the Company, Frontline Ltd ("Frontline") was
obligated to find an acceptable replacement charter as defined by the indenture
governing the issue of the Notes that were issued on behalf of the Company and
three affiliated companies. Pursuant to a bareboat charter agreement between the
Company and Front Voyager Inc, a wholly owned subsidiary of Frontline, Front
Voyager Inc (the "Charterer") agreed to charter the Front Voyager as of April 1,
2006 for an initial two-year period (the "Initial Period") with a further seven
annual optional periods. The charterhire payable for the Initial Period was
$5,050,000. This was prepaid in full on March 31, 2006. On March 25, 2009, the
Charterer exercised its option to extend the charter for the second one year
optional period beginning April 1, 2009 at a cost of $1.8 million.  On
January 5, 2010, the Charterer gave notice that it would terminate the charter
and paid a termination fee of $4.9 million on April 1, 2010 in accordance with
the bareboat charter. A Memorandum of Agreement, dated March 15, 2010, has been
signed regarding the sale of our vessel for $8.3 million and delivery to the
buyer occurred on April 8, 2010.





The
Company along with CalPetro Tankers (Bahamas I) Limited, CalPetro Tankers
(Bahamas II) 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 wholly-owned by Independent Tankers
Corporation Limited ("ITCL"). ITCL was established in February 2008 and it is
82.47% owned by 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 was allocated $27,640,000 of the Serial Loans and
$12,744,000 of the Term Loans and acquired its Vessel, the Front Voyager. The
Company engaged in no business other than the ownership and chartering of our
Vessel and activities resulting from or incidental to such ownership and
chartering.





F-6


CalPetro
Tankers (Bahamas III) Limited


Notes
to the Financial Statements (continued)








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.





Vessel


The cost
of the vessel less estimated residual value is depreciated on a straight-line
basis over the vessel's estimated remaining economic useful life, which is
2015.





Vessel
residual values


On July
1, 2009, the Company effected a change in estimate related to the estimated
scrap rate for its vessel. The scrap rate was amended from  $378 per
lightweight tonne to $281per lightweight tonne. The resulting change in salvage
values has been applied prospectively and increased depreciation by $0.2 million
for the year ended December 31, 2009. This change also resulted in a decrease in
net income of approximately $0.2 million.





Impairment
of long-lived assets


The
carrying value of long-lived assets that are held and used by the Company are
reviewed whenever events or changes in circumstances indicate that the carrying
amount of an asset may no longer be recoverable.  The Company assesses
recoverability of the carrying value of the asset by estimating the future net
cash flows expected to result from the asset, including eventual disposal. If
the future net undiscounted cash flows are less than the carrying value of the
asset, an impairment loss is recorded equal to the differences between the
asset's carrying value and fair value less estimated costs to sell.





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 The Bahamas but an exchange of information treaty on tax
issues is in effect.





Reporting
and functional currency


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





Revenue
and expense recognition


Revenues
and expenses are recognized on the accrual basis. Revenue is substantially
generated from bareboat charter hires and is recorded over the term of the
charter as service is provided. Interest payable on the Term Notes is accrued on
a daily basis.








F-7


CalPetro
Tankers (Bahamas III) Limited
 Notes
to the Financial Statements (continued)
 
 
 2.
   ACCOUNTING POLICIES (continued)





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 April
2009, the FASB issued FSP FAS 107-1 and APB 28-1 Guidance on Interim Fair Value
Disclosures, (codified in ASC 825), which expands the fair value
disclosures required for all financial instruments within the scope of this
topic to interim periods for publicly traded entities. Entities must disclose
the method(s) and significant assumption used to estimate the fair value of
financial instruments in financial statements on an interim basis and to
highlight any changes in the methods and significant assumptions from prior
periods. The guidance is effective for interim and annual periods ending after
June 15, 2009 and adoption of this FSP did not have a material effect on our
financial statements.





In May
2009, the FASB issued Statement No. 165 Subsequent Events, ("FAS 165"),(codified in ASC 855).This Statement provides guidance on management's assessment of subsequent
events. The guidance clarifies that management must evaluate, as of each
reporting period, events or transactions that occur after the balance sheet date
"through the date that the financial statements are issued or are available to
be issued." Management must perform its assessment for both interim and annual
financial reporting periods. The new guidance is effective prospectively for
interim and annual periods ending after June 15, 2009. Adoption of the Statement
did not have a material effect on the Company's financial statements. In
February 2010, the FASB amended the subsequent events guidance issued in May
2009 to remove the requirement for SEC filers to disclose a date through which
subsequent events have been evaluated in both issued and revised financial
statements. The amendment is effective upon issuance. The adoption of this
guidance did not have a material effect on our financial
statements.





In June
2009, the FASB issued Statement No. 168, Statement on Codification and
Hierarchy of Generally Accepted Accounting Principles, ('FAS 168'),
(codified in ASC 105).The Statement is a replacement for FAS 162. The GAAP hierarchy has been
modified to include only two levels of GAAP; authoritative and nonauthoritative.
The Statement is effective for financial statements issued for interim and
annual periods ending after September 15, 2009. The adoption of this Statement
did not 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 (as successor to 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 the Owners.





5.  
OTHER CURRENT ASSETS





(in
      thousands of $)
            
            2009
            
            
            2008Charter
      revenue accrued
            
            
            2,324
            
            
            
            1,283Interest
      receivable
            
            
            1
            
            
            
            162,325
            
            
            
            1,299





F-8


CalPetro
Tankers (Bahamas III) Limited


Notes
to the Financial Statements (continued)








6.
VESSEL


(in
      thousands of $)
              
              2009
              
              
              2008Reinstatement
      of vessel
              
              
              8,452
              
              
              
              8,452Accumulated
      depreciation
              
              
              (403
              )
              
              
              (162
              )Net
      book value at end of year
              
              
              8,049
              
              
              
              8,290
 Depreciation
expense was $0.2 million, $0.06 million and $0.06 million for the years ended
December 31, 2009, 2008 and 2007, respectively. The reinstatement of the vessel
is equal to the net investment in the capital lease at the date the termination
was made effective by Chevron less the termination fee received from
Chevron.





7.
   DEFERRED CHARGES





(in
      thousands of $)
            
            2009
            
            
            2008Debt
      arrangement fees
            
            
            384
            
            
            
            384Accumulated
      amortization
            
            
            (365
            )
            
            
            (361
            )19
            
            
            
            23





8.
   DEBT





(in
      thousands of $)
            
            2009
            
            
            20088.52%
      Term Loan due 2015
            
            
            10,884
            
            
            
            11,328Less:
      current portion
            
            
            (730
            )
            
            
            (444
            )10,154
            
            
            
            10,884





The Term
Loans bear interest at a rate of 8.52% per annum. Interest is payable
semi-annually on April 1 and October 1. Principal is repayable on the Term Loans
in accordance with a six 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,
2009, the Company was in compliance with these covenants.





When the
Initial Charter was terminated on April 1, 2006, the scheduled mandatory sinking
fund payments on the Term Loans were revised so that the allocated principal
amount of the Term Loans for the Vessel will be redeemed on the remaining
sinking fund redemption dates on a schedule that approximates level debt service
with an additional principal payment on the maturity date of $5.05
million.





The table
below provides the revised scheduled sinking fund redemption amounts and final
principal payment of the Allocated Principal Amount of the Term Loans following
termination of the related Initial Charter on April 1, 2006;








F-9


CalPetro
Tankers (Bahamas III) Limited


Notes
to the Financial Statements (continued)





8.
   DEBT (continued)





Year
      Ending December 31(in
      thousands of $)2010
            
            
            7302011
            
            
            7902012
            
            
            8502013
            
            
            9302014
            
            
            1,0102015
            
            
            6,574Total
      debt
            
            
            10,884





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.





9.
   SHARE CAPITAL





Authorized
share capital:


2009
            
            
            20081,000
      shares of $1 par value
            
            
            1,000
            
            
            
            1,000





Issued
and outstanding share capital:


2009
            
            
            2008100
      common shares of $1 par value
            
            
            100
            
            
            
            100





10.
   FINANCIAL INSTRUMENTS





Fair
values


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





2009
            
            
            2009
            
            
            2008
            
            
            2008(in
      thousands of $)
            
            Carrying
      Value
            
            
            Fair
              Value
            
            
            Carrying
              Value
            
            
            Fair
              ValueRestricted
      cash
            
            
            9,311
            
            
            
            9,311
            
            
            
            8,963
            
            
            
            8,9638.52%
      Term Loans due 2015
            
            
            10,884
            
            
            
            11,037
            
            
            
            11,328
            
            
            
            12,979





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





As at
December 31, 2009, the Company's only source of funds for the repayment of the
principal and interest on the Loans were charterhire payments from Front Voyager
Inc. and the proceeds from the sale of the Vessel.





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.







F-10








CalPetro
Tankers (Bahamas III) Limited


Notes
to the Financial Statements (continued)





11.
   RELATED PARTY TRANSACTIONS





Charterhire
revenue





The
Company entered into a two year bareboat charter agreement with Front Voyager
Inc. on April 1, 2006. Under this agreement, charterhire of $5.05 million was
prepaid in 2006 and on April 1, 2008 the charter was extended for a further year
with charterhire of $1.5 million being prepaid for the period to April 1, 2009.
On March 25, 2009, the Charterer exercised its option to extend the charter for
the second one year optional period beginning April 1, 2009 at a cost of $1.8
million. The following table outlines the revenue and payments related to this
agreement during the year:





(in
      thousands of $)
            
            2009
            
            
            2008Accrued
      income – January 1
            
            
            1,283
            
            
            
            (63)Charterhire
      paid during the year
            
            
            (1,822)
            
            
            
            (1,548)Charterhire
      revenue recognized in year
            
            
            2,863
            
            
            
            2,894Accrued
      income – December 31
            
            
            2,324
            
            
            
            1,283





On
January 5, 2010, the Charterer gave notice that it would terminate the charter
and paid a termination fee of $4.9 million on April 1, 2010 in accordance with
the bareboat charter.





Charterhire
revenue is being recognized over the expected life of the Charter.





Management
Fee





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, 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 each 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 will increase by 4%. In addition, the Technical Advisor is
entitled to be reimbursed for the fees, costs and expenses of conducting
periodic inspections of the Vessels.





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 fees payable for the years ended and as of December
31, 2009, 2008, and 2007 are as follows:





(in
      thousands of $)
            
            2009
            
            
            2008
            
            
            2007Management
      fee expenses
            
            
            45
            
            
            
            43
            
            
            
            41Management
      fee payable
            
            
            11
            
            
            
            21
            
            
            
            10








F-11





CalPetro
Tankers (Bahamas III) Limited


Notes
to the Financial Statements (continued)





12.
   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 Front Voyager Inc. Charter relating to the Vessel has been
collaterally assigned pursuant to the Assignment of Front Voyager Inc. Charter
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.





13.
   SUBSEQUENT EVENTS





On
January 5, 2010, the Charterer gave notice that it would terminate the charter
and paid a termination fee of $4.9 million on April 1, 2010 in accordance with
the bareboat charter. This termination fee will result in income of $1.8 million
being recorded by the Company in the three months ended March 31, 2010 as the
Company has been recording operating lease income up to December 31, 2009 based
on an estimated termination fee of $3.1 million. A Memorandum of Agreement,
dated March 15, 2010, has been signed regarding the sale of our vessel for $8.3
million and delivery to the buyer occurred on April 8, 2010. The Company expects
to record a gain on disposal of approximately $0.1 million. Following the sale
of the Front Voyager and the scheduled repayment of principal in the amount of
$730,000 on April 1, 2010, the full amount outstanding on the Term Loan of
$10,154,000 was repaid in full on April 13, 2010, and a make whole premium of
$2.1 million was also paid at that time for early redemption of the debt. After
the sale of our Vessel, we will continue our existence but will not actively
engage in any business other than in connection with ongoing corporate
affairs.








F-12





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 III) Limited











/s/ Kate
Blankenship


Kate
Blankenship


Director
and Secretary














Date:
April 29, 2010