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

                                    FORM 20-F

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

                                       OR

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


For the fiscal year ended                December 31, 2004
                         -------------------------------------------------------

                                       OR

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

For the transition period from
                              --------------------------------------------------


Commission file number
                      ----------------------------------------------------------


                       Ship Finance International Limited
--------------------------------------------------------------------------------
             (Exact name of Registrant as specified in its charter)


                       Ship Finance International Limited
--------------------------------------------------------------------------------
                 (Translation of Registrant's name into English)


                                     Bermuda
--------------------------------------------------------------------------------
                 (Jurisdiction of incorporation or organisation)


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


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

      Title of each class                          Name of each exchange
                                                    on which registered
Common Shares, $1.00 Par Value                    New York Stock Exchange
--------------------------------                --------------------------------

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


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


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


                         Common Shares, $1.00 Par Value
--------------------------------------------------------------------------------
                                (Title of class)

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

                    74,900,837 Common Shares, $1.00 Par Value
--------------------------------------------------------------------------------

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

                          Yes [X]            No [_]

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

                     Item 17  [_]          Item 18  [X]


<PAGE>


                          INDEX TO REPORT ON FORM 20-F

PART I                                                                     PAGE

ITEM 1.   IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS...............1

ITEM 2.   OFFER STATISTICS AND EXPECTED TIMETABLE.............................1

ITEM 3.   KEY INFORMATION.....................................................1

ITEM 4.   INFORMATION ON THE COMPANY..........................................9

ITEM 5.   OPERATING AND FINANCIAL REVIEW AND PROSPECTS........................24

ITEM 6.   DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES..........................45

ITEM 7.   MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS...................47

ITEM 8.   FINANCIAL INFORMATION...............................................48

ITEM 9.   THE OFFER AND LISTING...............................................49

ITEM 10.  ADDITIONAL INFORMATION..............................................49

ITEM 11.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK..........56

ITEM 12.  DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES..............57

                                     PART II

ITEM 13.  DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES.....................58

ITEM 14.  MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY
          HOLDERS AND USE OF PROCEEDS.........................................58

ITEM 15.  CONTROLS AND PROCEDURES.............................................58

ITEM 16A. AUDIT COMMITTEE FINANCIAL EXPERT....................................58

ITEM 16B. CODE OF ETHICS......................................................58

ITEM 16C. PRINCIPAL ACCOUNTANT FEES...........................................58

ITEM 16D. EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES..........59

                                    PART III

ITEM 17.  FINANCIAL STATEMENTS................................................59

ITEM 18.  FINANCIAL STATEMENTS................................................59

ITEM 19.  EXHIBITS............................................................61


<PAGE>

            CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

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

Ship Finance International Limited, or the Company, desires to take advantage of
the safe harbor  provisions of the Private  Securities  Litigation Reform Act of
1995 and is including  this  cautionary  statement in connection  with this safe
harbor legislation.  This 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,"  "will," "may," "should," "expect" and similar expressions identify
forward-looking statements.

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

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

<PAGE>

                                     PART I

ITEM 1.  IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS

         Not Applicable

ITEM 2.  OFFER STATISTICS AND EXPECTED TIMETABLE

         Not Applicable

ITEM 3.  KEY INFORMATION

A.   SELECTED FINANCIAL DATA

The selected income  statement data for the year ended December 31, 2004 and the
period from  October 10, 2003 (date of  incorporation)  to December 31, 2003 and
the selected balance sheet data as of December 31, 2004 and December 31, 2003 is
derived from our audited  financial  statements  included  herein.  The selected
combined income  statement data for the fiscal years ended December 31, 2003 and
2002, and the selected  combined balance sheet data as of December 31, 2003 have
been  derived  from  our  audited   predecessor   combined  carve-out  financial
statements  included herein. The selected combined income statement data for the
fiscal  years ended  December 31, 2001 and 2000 and  selected  combined  balance
sheet data with  respect to the fiscal years ended  December 31, 2002,  2001 and
2000 has been derived from our audited predecessor  combined carve-out financial
statements  not  included  herein.  The  following  table should also be read in
conjunction  with Item 5. "Operating and Financial Review and Prospects" and our
historical financial statements and the notes thereto included elsewhere herein.

<TABLE>
                                                                         Period from
                                                           Year Ended   October 10 to           Predecessor combined carve-out
                                                             December      December               Year Ended December 31,
                                                             31, 2004       31,2003    2003      2002        2001         2000
                                                             --------       -------    ----      ----        ----         ----
                                                                  (in thousands of dollars except common shares, per share, fleet
                                                                    and average daily time  charter equivalent earnings data)
<S>                                                         <C>          <C>          <C>        <C>         <C>          <C>
Income Statement Data:
Total operating revenues (1)                                  492,069          -      695,068     365,174      486,655     482,908
Net operating income                                          347,157          -      348,816      86,091      230,718     262,251
Net income                                                    262,659     (1,937)     334,812      18,024      212,010     212,144
Earnings per share, basic and diluted (2)                       $3.52          -        $4.53       $0.24        $2.87       $2.87
Cash dividends paid                                            78,905          -          n/a         n/a          n/a         n/a

Balance Sheet Data (at end of period):
Cash and cash equivalents                                      29,193          -       26,519      20,634       26,041      15,274
Vessels and equipment, net                                    236,305          -    1,863,504   1,904,146    1,696,528   1,572,844
Investment in finance leases (including current portion)    1,718,642          -            -           -            -           -
Total assets                                                2,152,937    582,192    2,156,348   2,123,607    1,951,353   1,784,676
Long term debt  (including current portion)                 1,478,894    580,000      991,610   1,106,847    1,000,537     971,852
Share capital (2)                                              74,901         12          n/a         n/a          n/a         n/a
Stockholders' equity (deficit)                                660,982     (1,925)     822,026     485,605      466,742     259,632
Common shares outstanding                                  74,900,837     12,000          n/a         n/a          n/a         n/a
Weighted average common shares outstanding (2)             74,610,946     12,000          n/a         n/a          n/a         n/a

Cash Flow Data:
Cash provided by operating activities                         178,528          -      415,523     115,658      307,167         n/a

Cash provided by (used in) investing activities                76,948   (565,500)     (51,632)   (261,779)    (271,850)        n/a

Cash provided by (used in) financing activities              (226,283)   565,500     (358,006)    140,714      (24,549)        n/a

Fleet Data:
Number of wholly owned vessels (end of period)                     46          -           43          42           38          35
Number of vessels owned in joint ventures (end of period)           -          -            6           9            7           2

Average Daily Time Charter Equivalent Earnings: (3)
VLCCs                                                         $35,482         n/a         n/a         n/a          n/a         n/a
Suezmaxes                                                     $26,313         n/a         n/a         n/a          n/a         n/a
Suezmax OBOs                                                  $26,313         n/a         n/a         n/a          n/a         n/a
</TABLE>
-----------------------------
n/a:  Not applicable

(1)  Operating  revenues  from January 1, 2004 include  finance  lease  interest
     income,  finance lease service  revenues,  profit sharing revenues from our
     profit sharing arrangement with Frontline Ltd. and charter revenues for the
     period  prior to our vessels  commencing  trading  under their  charters to
     Frontline.  They also include  charter  revenues for vessels  trading under
     long term charters to third parties  during the period.  All of the vessels
     that we have acquired  from  Frontline  are  chartered to  subsidiaries  of
     Frontline  under long term charters  which are  generally  accounted for as
     finance  leases.  We allocate $6,500 per day from each time charter payment
     as finance lease service  revenue.  The balance of each charter  payment is
     allocated between finance lease interest income and finance lease repayment
     in order to produce a constant  periodic  return on the  balance of our net
     investments in finance leases. Our arrangement with Frontline is that while
     our vessels are  completing  performance  of third party  charters,  we pay
     Frontline  all revenues we earn under third party  charters in exchange for
     Frontline  paying  us the  Frontline  charter  rates.  We  account  for the
     revenues received from these third party charters as time charter, bareboat
     or voyage  revenues  as  applicable,  and the  subsequent  payment of these
     amounts to Frontline as deemed  dividends  paid. We account for the charter
     revenues received from Frontline prior to the charters  becoming  effective
     for accounting purposes as deemed equity contributions received.

     The  following table analyzes our total operating revenues in 2004:

                                                            Year Ended
                                                         December 31, 2004
                                                      (in thousands of dollars)
                                                      -------------------------

     Time charter revenues ........................            86,741
     Bareboat charter revenues.....................            27,453
     Voyage charter revenues ......................            49,707
     Finance lease interest income ................           140,691
     Finance lease service revenues................            72,551
     Profit sharing revenues.......................           114,926

     Total operating revenues .....................          492,069

     The following  table  analyzes our cash inflows for the year ended December
     31, 2004 from the charters to Frontline  and how they are  accounted for in
     the balance sheet and statement of operations:

<TABLE>
                                                                                        Statement of
                                                            Total      Balance Sheet    Operations
                                                            -----      -------------    ----------
     <S>                                                  <C>            <C>             <C>
     Frontline charterhire payments accounted for as:             (in thousands of dollars)

     Finance lease interest income...............         140,691                           140,691
     Finance lease service revenues..............          72,551                            72,551
     Finance lease repayments....................          61,990         61,990
     Deemed equity contributions received........          97,118         97,118

     Total charterhire paid.......................        372,350        159,108            213,242
</TABLE>

     (2)  For all periods  presented  prior to June 16, 2004,  per share amounts
          are based on a denominator  of 73,925,837  common shares  outstanding,
          which is the number of issued  common shares  outstanding  on June 16,
          2004, the date that the Company's  shares were partially spun off. The
          Company's  shares were  listed on the New York Stock  Exchange on June
          17, 2004.

     (3)  Average Daily Time Charter Equivalent  Earnings represent time charter
          equivalent,  or TCE,  earnings of the basic  charterhire  payments and
          profit  sharing  payments  that  our  vessels  earned  under  our time
          charters  with  Frontline  for the  period  presented.  Subsequent  to
          January 1, 2004, our vessels operate under time and bareboat  charters
          to  subsidiaries  of  Frontline.  Prior to January 1, 2004 our vessels
          operated  under time charters,  bareboat  charters,  voyage,  or spot,
          charters,  pool  arrangements  and contracts of affreightment to third
          parties.

          In order to compare vessels trading under different types of charters,
          it is standard industry practice to measure the revenue performance of
          a vessel in terms of average daily time charter  equivalent  earnings,
          or TCEs. For voyage charters,  which are charters obtained in the spot
          market,  this is  calculated  by dividing  net voyage  revenues by the
          number of days on charter.  Days spent off hire are excluded from this
          calculation.  We  believe  that  net  voyage  revenues,  provide  more
          meaningful information to us than voyage revenues. Net voyage revenues
          are also widely used by investors and analysts in the tanker  shipping
          industry for comparing financial  performance between companies and to
          industry   averages.   Under  a  time  charter,   the  charterer  pays
          substantially  all of the vessel  voyage  costs and the  vessel  owner
          generally  pays the  operating  costs.  Under a bareboat  charter  the
          charterer  pays  substantially  all of the vessel voyage and operating
          costs. Under a voyage charter, the vessel owner pays the vessel voyage
          and operating  costs.  Vessel voyage costs are primarily fuel and port
          charges.  Accordingly,  charter  income from a voyage charter would be
          greater than that from an equally  profitable  time charter to provide
          for the  owner's  payment  of  vessel  voyage  costs.  A  contract  of
          affreightment is a form of voyage charter under which the vessel owner
          agrees to carry a specific  type and  quantity of cargo in two or more
          shipments over an agreed period of time. For  comparability,  TCEs for
          bareboat  charters include an allowance for estimated  operating costs
          that  would  be paid  by us  under  an  equivalently  profitable  time
          charter.  In 2004 we  included  an  allowance  of  $6,500  per day for
          estimated operating costs.

B.   CAPITALIZATION AND INDEBTEDNESS

     Not Applicable

C.   REASONS FOR THE OFFER AND USE OF PROCEEDS

     Not Applicable

D.   RISK FACTORS

We are  engaged  primarily  in  transporting  crude  oil and oil  products.  The
following  summarises some of the risks that may materially affect our business,
financial  condition or results of  operations.  Please note,  in this  section,
"we", "us" and "our" all refer to the Company and its subsidiaries.

We depend on  subsidiaries  of Frontline  Ltd for the majority of our  operating
cash flow and for our ability to pay dividends to our shareholders.

All of our vessels,  except one,  are  chartered  to either  Frontline  Shipping
Limited,  which we refer to as  Frontline  Shipping,  or  Frontline  Shipping II
Limited,  which  we  refer  to  as  Frontline  Shipping  II,  and  together  the
Charterers,  under long term time charters,  and the Charterers'  payments to us
are currently our principal  source of operating  cash flow.  The Charterers are
both wholly owned subsidiary of Frontline Ltd. (NYSE:FRO),  or Frontline,  which
is one of the  largest  owners and  operators  of large crude oil tankers in the
world. Neither of the Charterers has any business or sources of funds other than
those  related  to the  chartering  of our  fleet  to third  parties.  Frontline
Shipping  Limited was  initially  capitalized  by  Frontline  with $250  million
(currently  $244.7  million),   and  Frontline  Shipping  II  Limited  has  been
capitalized with  approximately $21 million.  This capital serves to support the
Charterers'  obligations to make charterhire  payments to us. Neither  Frontline
nor any of its affiliates  guarantees the payment of charterhire or is obligated
to contribute additional capital to either of the Charterers at any time.

Although there are  restrictions on the Charterers'  rights to use their cash to
pay  dividends  or make other  distributions,  at any given time in the  future,
their  available cash may be diminished or exhausted,  and the Charterers may be
unable to make charterhire  payments to us. If the Charterers are unable to make
charterhire  payments to us, our results of operations  and financial  condition
will be materially  adversely affected and we may not have cash available to pay
debt service or for distributions to shareholders.

Volatility in the tanker  charter  markets may cause the Charterers to be unable
to pay charterhire to us.

The  Charterers  subcharters  our  vessels  to end  users  under  long term time
charters,  on the spot charter market, or under contracts of affreightment under
which our vessels carry an agreed upon quantity of cargo over a specified  route
and time period. As a result, the Charterers are directly exposed to the risk of
volatility in tanker  charter  rates.  Tanker  charter  rates have  historically
fluctuated significantly based upon many factors, including:

          o    global and regional economic and political conditions;

          o    changes  in  production  of crude oil,  particularly  by OPEC and
               other key producers;

          o    developments in international trade;

          o    changes in seaborne and other transportation patterns,  including
               changes in the distances that cargoes are transported;

          o    environmental concerns and regulations;

          o    weather; and

          o    competition from alternative sources of energy.

Tanker charter rates also tend to be subject to seasonal variations, with demand
(and rates) normally higher in winter months.

The Charterers' successful operation of our vessels in the tanker charter market
will depend on,  among other  things,  its ability to obtain  profitable  tanker
charters.  We cannot assure you that future tanker charters will be available to
the  Charterers  at rates  sufficient  to enable  the  Charterers  to meet their
obligations to pay charterhire to us.

A  significant  portion of our common  shares are owned by Frontline and related
parties and we depend on officers and directors of Frontline for our management,
which may create conflicts of interest.

Frontline  currently owns 15.8% of our common  shares,  and Hemen Holding Ltd, a
company  controlled by John Fredriksen,  Frontline's  Chairman and CEO currently
owns 33.8% of our common  shares.  We do not have any  employees or officers who
are not employees or officers of Frontline.  Although we do have one independent
director,  all of our other  directors  are  directors or executive  officers of
Frontline.  These  directors owe fiduciary  duties to the  shareholders  of each
company and may have conflicts of interest in matters  involving or affecting us
and Frontline, including matters arising under our agreements with Frontline and
its affiliates.  In addition, due to their ownership of Frontline common shares,
some of these  individuals  may have  conflicts  of  interest  when  faced  with
decisions that could have different  implications for Frontline than they do for
us.  We  cannot  assure  you that any of these  conflicts  of  interest  will be
resolved in our favor.

The agreements  between us and Frontline and Frontline's  affiliates may be less
favorable than agreements that we could obtain from unaffiliated third parties.

The charters,  the management  agreements,  the charter ancillary agreements and
the other contractual  agreements we have with Frontline and its affiliates were
made in the context of an  affiliated  relationship  and were not  negotiated in
arms length transactions.  The negotiation of these agreements may have resulted
in prices and other terms that are less favorable to us than terms we might have
obtained  in arm's  length  negotiations  with  unaffiliated  third  parties for
similar services.

Frontline's  other  business  activities  may create  conflicts of interest with
Frontline.

While Frontline has agreed to cause the Charterers to use their  commercial best
efforts  to employ  our  vessels  on market  terms and not to give  preferential
treatment in the marketing of any other vessels owned or managed by Frontline or
its other affiliates,  it is possible that conflicts of interests in this regard
will  adversely  affect us.  Under our  charter  ancillary  agreements  with the
Charterers  and  Frontline,  we are entitled to receive  annual  profit  sharing
payments to the extent that the  average  TCE rates  realized by the  Charterers
exceed specified levels. Because Frontline also owns or manages other vessels in
addition to our fleet, which are not included in the profit sharing calculation,
conflicts of interest may arise  between us and  Frontline in the  allocation of
chartering  opportunities  that could limit our fleet's  earnings and reduce the
profit sharing payments or charterhire due under our charters.

If our  charters  or  management  agreements  terminate,  we could be exposed to
increased volatility in our business and financial results.

If any of our charters terminate, we may not be able to re-charter these vessels
on a long term basis with terms  similar to the terms of our  charters  with the
Charterers.  While the terms of our current  charters end between 2014 and 2025,
the Charterers  have the option to terminate the charters of our non-double hull
vessels in 2010.  One or more of the  charters  with  respect to our vessels may
also terminate in the event of a requisition for title or a loss of a vessel. In
addition,  under our vessel  management  agreements  with  Frontline  Management
(Bermuda) Limited, or Frontline Management,  Frontline Management is responsible
for all of the technical and  operational  management of our vessels for a fixed
management fee, and will indemnify us against certain losses of hire and various
other liabilities relating to the operation of the vessels. We may terminate our
management agreements with Frontline Management for any reason at any time on 90
days' notice.  In addition,  our current  management  agreements  with Frontline
Management  may be  terminated  if the relevant  charter is  terminated.  If our
management  agreements with Frontline Management were to terminate or we were to
acquire  additional  vessels in the future, we may not be able to obtain similar
fixed rate terms from an  independent  third  party.  We may acquire  additional
vessels  in the  future  and we cannot  assure you that we will be able to enter
into similar charters with the Charterers or a third party charterer, or that we
will be  able  to  enter  into  similar  management  agreements  with  Frontline
Management or a third party manager.

With  respect to any vessels we acquire  that are not subject to the charter and
management agreements with the Charterers and Frontline  Management,  we will be
directly  exposed to all of the  operational  and other  risks  associated  with
operating  our vessels as  described  in these risk  factors.  As a result,  our
future cash flow could be more  volatile and we could be exposed to increases in
our vessel  operating  expenses,  each of which could  materially  and adversely
affect our results of operations and business.

U.S. tax authorities could treat us as a "passive foreign  investment  company,"
which could have adverse U.S. federal income tax consequences to U.S. holders

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

Based on our proposed  method of operation,  we do not believe that we will be a
PFIC with respect to any taxable  year.  In this regard,  we intend to treat the
gross  income  we  derive  or are  deemed  to  derive  from our time  chartering
activities  as  services  income,  rather than rental  income.  Accordingly,  we
believe that our income from our time chartering  activities does not constitute
"passive  income," and the assets that we own and operate in connection with the
production of that income do not constitute passive assets.

There is, however, no direct legal authority under the PFIC rules addressing our
proposed  method of operation.  Accordingly,  no assurance can be given that the
U.S.  Internal  Revenue  Service,  or IRS,  or a court  of law will  accept  our
position,  and there is a risk  that the IRS or a court of law  could  determine
that we are a PFIC.  Moreover,  no  assurance  can be given  that we  would  not
constitute a PFIC for any future taxable year if there were to be changes in the
nature and extent of our operations.

If the IRS were to find  that we are or have been a PFIC for any  taxable  year,
our U.S.  shareholders would be subject to a disadvantageous U.S. federal income
tax regime with  respect to the income  derived by the PFIC,  the  distributions
they  receive from the PFIC and the gain,  if any,  they derive from the sale or
other   disposition   of  their   shares  in  the  PFIC.   See  "United   States
Taxation--Taxation  of U.S. Holders" for a more comprehensive  discussion of the
U.S. federal income tax consequences to U.S. shareholders if we are treated as a
PFIC.

We are highly leveraged and subject to restrictions in our financing  agreements
that impose constraints on our operating and financing flexibility.

We have  significant  indebtedness  outstanding  under our senior notes. We have
also entered into a secured loan facility that we used to refinance  some of our
existing indebtedness.  We may need to refinance some or all of our indebtedness
on maturity of our senior  notes but we cannot  assure you we will be able to do
so on terms that are  acceptable  to us or at all.  If we cannot  refinance  our
indebtedness,  we will have to dedicate some or all of our cash flow, and we may
be required to sell some of our assets,  to pay the  principal  and  interest on
this  indebtedness.  In such a case,  we may not be able to pay dividends to our
shareholders  and may not be able to grow our fleet as may otherwise be planned.
We may also incur additional debt in the future.

Our  loan  facility  and  the  indenture  for our  senior  notes  subject  us to
limitations on our business and future financing activities, including:

     o    limitations  on our incurrence of additional  indebtedness,  including
          our issuance of additional guarantees;

     o    limitations on our incurrence of liens;

     o    limitations   on  our  ability  to  pay   dividends   and  make  other
          distributions under certain circumstances; and

     o    limitations  on our  ability  to  renegotiate  or amend our  charters,
          management agreements and other material agreements.

Further,  our loan facility  contains  financial  covenants  that require us to,
among other things:

     o    provide  additional  security  under  the loan  facility  or prepay an
          amount of the loan  facility as  necessary to maintain the fair market
          value of our vessels  securing the loan facility at not less than 140%
          of the principal amount outstanding under the loan facility;

     o    maintain  available cash on a consolidated  basis of not less than $25
          million;

     o    maintain positive working capital on a consolidated basis; and

     o    maintain  a ratio of  shareholder  equity to total  assets of not less
          than 20%.

Under  the  terms of our loan  facility,  we may not make  distributions  to our
shareholders if we do not satisfy these covenants.  We cannot assure you that we
will be able to satisfy these covenants in the future.

Due to these  restrictions,  we may need to seek  permission from our lenders in
order to  engage  in some  corporate  actions.  Our  lenders'  interests  may be
different  from ours and we cannot  guarantee that we will be able to obtain our
lenders'  permission  when needed.  This may prevent us from taking actions that
are in our best interest.

Our debt service obligations require us to dedicate a substantial portion of our
cash flow from operations to required  payments on indebtedness  and could limit
our  ability to obtain  additional  financing,  make  capital  expenditures  and
acquisitions,  and carry out other general  corporate  activities in the future.
These  obligations  may also limit our  flexibility in planning for, or reacting
to,  changes in our  business  and the  shipping  industry  or detract  from our
ability to  successfully  withstand  a downturn  in our  business or the economy
generally.  This  may  place us at a  competitive  disadvantage  to  other  less
leveraged competitors.

Our  shareholders  must rely on us to enforce our rights  against  our  contract
counterparties.

Holders of our common shares and other  securities  will have no direct right to
enforce the  obligations of the  Charterers,  Frontline  Management or Frontline
under the charters and related agreements,  the Frontline  performance guarantee
or the management agreements with Frontline Management.  Accordingly,  if any of
those  counterparties  were to breach their obligations to us under any of these
agreements,  our  shareholders  would have to rely on us to pursue our  remedies
against  those  counterparties.  Because we depend on officers and  directors of
Frontline for our  management,  if such a breach were to occur,  our overlapping
officers and  directors  would face a direct  conflict of interest and we cannot
assure you that our rights would be protected to the same extent that they would
be if we had independent managers.

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

We have outstanding  approximately  $948.6 million in floating rate debt under a
senior secured credit facility as of December 31, 2004. Although we use interest
rate swaps to manage our interest  rate  exposure from a portion of our floating
rate debt, if interest rates rise,  interest  payments on our floating rate debt
that we have not swapped  into  effectively  fixed rates would  increase.  As of
December 31, 2004 we have entered into  interest  rate swaps to fix the interest
on $581.4 million of our outstanding indebtedness. An increase in interest rates
could cause us to incur  additional costs associated with our debt service which
may  materially  and  adversely  affect our results of  operations.  Our maximum
exposure to interest rate fluctuations is $376.2 million at December 31, 2004. A
one per cent change in  interest  rates  would  increase  or  decrease  interest
expense by $3.6 million per year as of December 31, 2004.

Because we are a new company with no separate operating history,  our historical
financial and operating  data for periods prior to January 1, 2004,  will not be
representative of our future results.

We were formed in October 2003 and commenced  operations in January 2004.  Prior
to commencing  operations we did not have any  operating  history  separate from
Frontline's. The predecessor combined carve-out financial statements included as
comparatives  in this annual report have been prepared on a carve-out  basis and
reflect the historical  business  activities of Frontline relating to our vessel
owning subsidiaries.  These predecessor  financial statements do not reflect the
results we would have  obtained  under our current fixed rate long term charters
and management  agreements and therefore are not a meaningful  representation of
our future results of operations.

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

Our fleet includes 18 non-double hull tankers.  The United States,  the European
Union and the International Maritime Organization,  or the IMO, have all imposed
limits or prohibitions on the use of these types of tankers in specified markets
after certain target dates, depending on certain factors such as the size of the
vessel and the type of cargo. In the case of our non-double hull tankers,  these
phase out dates  range  from 2010 to 2015.  As of April  15,  2005,  the  Marine
Environmental  Protection  Committee  of the IMO has amended  the  International
Convention  for the  Prevention of Pollution  from Ships to accelerate the phase
out of certain categories of single hull tankers, including the types of vessels
in our fleet, from 2015 to 2010 unless the relevant flag states extend the date.
This change  could  result in a number of our vessels  being  unable to trade in
many markets  after 2010.  The phase out of single hull tankers will also reduce
the demand for single hull tankers, force the remaining single hull tankers into
employment on less  desirable  trading routes and increase the number of tankers
trading on those  routes.  As a result,  single  hull  tankers  are likely to be
chartered less frequently and at lower rates.  Moreover,  additional regulations
may be adopted in the future  that  could  further  adversely  affect the useful
lives of our non-double hull tankers,  as well as our ability to generate income
from them.

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

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

However,  regulation  of  tankers,  particularly  in the  areas  of  safety  and
environmental  impact may change in the future and require  significant  capital
expenditures be incurred on our vessels to keep them in compliance.

We may incur  losses  when we sell  vessels,  which  may  adversely  affect  our
earnings.

The market value of our vessels,  which are at  historically  high levels,  will
change depending on a number of factors,  including  general economic and market
conditions  affecting  the  shipping  industry,   competition,  cost  of  vessel
construction,  governmental or other  regulations,  prevailing levels of charter
rates,  and  technological  changes.  During the period a vessel is subject to a
charter  with  the  Charterers,  we  will  not be  permitted  to sell it to take
advantage of increases in vessel values without the  Charterers'  agreement.  On
the other hand,  if the  Charterers  were to default  under the  charters due to
adverse conditions in the tanker market,  causing a termination of the charters,
it is likely that the fair market  value of vessels  would be  depressed in such
market conditions. If we were to sell a vessel at a time when vessel prices have
fallen, we could incur a loss and a reduction in earnings.

Our business has inherent operational risks, which may not be adequately covered
by insurance.

Our tankers and their  cargoes are at risk of being  damaged or lost  because of
events such as marine disasters, bad weather,  mechanical failures, human error,
war,  terrorism,   piracy  and  other  circumstances  or  events.  In  addition,
transporting  crude oil  across a wide  variety of  international  jurisdictions
creates a risk of  business  interruptions  due to  political  circumstances  in
foreign countries,  hostilities,  labor strikes and boycotts,  the potential for
changes in tax rates or policies, and the potential for government expropriation
of our vessels.  Any of these  events may result in loss of revenues,  increased
costs and  decreased  cash flows to the  Charterers,  which could  impair  their
ability to make payments to us under our charters.

In the event of a casualty to a vessel or other catastrophic event, we will rely
on our insurance to pay the insured value of the vessel or the damages incurred.
Under  the  management  agreements,  Frontline  Management  is  responsible  for
procuring  insurance  for our fleet  against  those  risks that we  believe  the
shipping industry commonly insures against. These insurances include marine hull
and machinery  insurance,  protection  and indemnity  insurance,  which includes
pollution  risks and crew  insurances  and war risk  insurance.  Currently,  the
amount of coverage for liability for pollution,  spillage and leakage  available
to  us  on  commercially  reasonable  terms  through  protection  and  indemnity
associations  and  providers  of excess  coverage  is $1 billion  per vessel per
occurrence.  We cannot assure you that we will be adequately insured against all
risks.  Frontline  Management  may  not be  able to  obtain  adequate  insurance
coverage  at  reasonable  rates for our fleet in the future.  Additionally,  our
insurers may refuse to pay particular  claims. Any significant loss or liability
for  which we are not  insured  could  have a  material  adverse  effect  on our
financial condition.

Maritime  claimants  could  arrest  our  tankers,   which  could  interrupt  the
Charterers' or our cash flow.

Crew members, suppliers of goods and services to a vessel, shippers of cargo and
other  parties  may be  entitled  to a maritime  lien  against  that  vessel for
unsatisfied debts,  claims or damages.  In many  jurisdictions,  a maritime lien
holder  may  enforce  its  lien  by  arresting  a  vessel  through   foreclosure
proceedings.  The  arrest  or  attachment  of one or more of our  vessels  could
interrupt the  Charterers'  or our cash flow and require us to pay a significant
amount of money to have the arrest lifted. In addition,  in some  jurisdictions,
such as South Africa,  under the "sister  ship" theory of liability,  a claimant
may arrest both the vessel which is subject to the claimant's  maritime lien and
any  "associated"  vessel,  which is any vessel owned or  controlled by the same
owner.  Claimants could try to assert "sister ship" liability against one vessel
in our fleet for claims relating to another vessel in our fleet.

As our fleet ages,  the risks  associated  with older  tankers  could  adversely
affect our operations.

In general,  the costs to maintain a tanker in good operating condition increase
as the tanker ages.  Due to  improvements  in engine  technology,  older tankers
typically are less fuel-efficient than more recently constructed tankers.  Cargo
insurance  rates  increase  with the age of a tanker,  making older tankers less
desirable to charterers.

Governmental regulations, safety or other equipment standards related to the age
of tankers may  require  expenditures  for  alterations  or the  addition of new
equipment  to our  tankers  to  comply  with  safety  or  environmental  laws or
regulations  that may be enacted in the future.  These laws or  regulations  may
also  restrict  the type of  activities  in which our  tanker  may engage or the
geographic regions in which they may operate. We cannot predict what alterations
or modifications our vessels may be required to undergo in the future or that as
our tankers age,  market  conditions  will justify any required  expenditures or
enable us to operate our tankers profitably during the remainder of their useful
lives.

There may be risks  associated  with the  purchase and  operation of  secondhand
vessels.

Our current business strategy includes additional growth through the acquisition
of  secondhand  vessels.  Although we will inspect  secondhand  vessels prior to
purchase,  this does not normally provide us with the same knowledge about their
condition that we would have had if such vessels had been built for and operated
exclusively by us.  Therefore,  our future operating results could be negatively
affected  if some of the vessels do not  perform as we expect.  Also,  we do not
receive the benefit of  warranties  from the  builders if the vessels we buy are
older than one year.

If Frontline were to become insolvent,  a bankruptcy court could pool our or the
Charterers'  assets and liabilities  with those of Frontline under the equitable
doctrine of substantive consolidation.

Under United  States  bankruptcy  law,  the  equitable  doctrine of  substantive
consolidation  can permit a bankruptcy  court to disregard the  separateness  of
related   entities  and  to  consolidate  and  pool  the  entities'  assets  and
liabilities  and treat them as though held and  incurred by one entity where the
interrelationship  among the entities warrants such  consolidation.  Substantive
consolidation  is an equitable  remedy in bankruptcy that results in the pooling
of assets and liabilities of a debtor with one or more of its debtor  affiliates
or,  in  rare  circumstances,   non-debtor  affiliates,   for  the  purposes  of
administering  claims and assets of  creditors as part of the  bankruptcy  case,
including treatment under a reorganization plan.

Not  all  jurisdictions   that  could  potentially  have  jurisdiction  over  an
insolvency  or  bankruptcy  case  involving  Frontline,  us,  and/or  any of our
respective  affiliates  recognize the substantive  consolidation  doctrine.  For
example,  we have been  advised by our Bermuda  counsel  that  Bermuda  does not
recognize this doctrine.  However,  if Frontline or its creditors were to assert
claims  of  substantive   consolidation  or  related  theories  in  a  Frontline
bankruptcy  proceeding  in  a  jurisdiction  that  recognizes  the  doctrine  of
substantive consolidation, such as the United States, the bankruptcy court could
make our  assets  or the  Charterers'  assets  available  to  satisfy  Frontline
obligations to its creditors. This could have a material adverse effect on us.

We are a holding  company,  and we depend on the ability of our  subsidiaries to
distribute funds to us in order to satisfy our financial and other obligations.

We are a holding company,  and have no significant  assets other than the equity
interests in our  subsidiaries.  Our  subsidiaries  own all of our vessels,  and
payments under our charter  agreements  with the Charterers  will be made to our
subsidiaries. As a result, our ability to make distributions to our shareholders
depends on the performance of our  subsidiaries  and their ability to distribute
funds to us. If we are unable to obtain funds from our subsidiaries, we will not
be able to pay dividends to our shareholders.

ITEM 4. INFORMATION ON THE COMPANY

A.   HISTORY AND DEVELOPMENT OF THE COMPANY

The Company

We are Ship Finance International Limited, a Bermuda based shipping company that
is engaged  primarily in the  ownership  and  operation of oil tankers.  We were
incorporated  in  Bermuda  on October  10,  2003  (Company  No.  EC-34296).  Our
registered and principal executive offices are located at Par-la-Ville Place, 14
Par-la-Ville  Road,  Hamilton,  HM 08, Bermuda,  and our telephone  number is +1
(441) 295-9500.

We are  engaged  primarily  in  the  ownership  and  operation  of oil  tankers,
including  oil/bulk/ore,  or OBO carriers. We operate tankers of two sizes: very
large crude carriers, or VLCCs, which are between 200,000 and 320,000 deadweight
tons, or dwt, and Suezmaxes,  which are vessels between 120,000 and 170,000 dwt.
We operate through  subsidiaries  and partnerships  located in Bermuda,  Isle of
Man, Liberia, Norway, Panama and Singapore. We are also involved in the charter,
purchase and sale of vessels.

We were formed as a wholly owned  subsidiary of  Frontline,  which is one of the
largest owners and operators of large crude oil tankers in the world. On May 28,
2004,  Frontline  announced the  distribution of 25% of our common shares to its
ordinary  shareholders  in a partial spin off. On June 16, 2004,  each Frontline
shareholder  of record on June 7, 2004,  received  one of our common  shares for
every four Frontline shares held. Our common shares commenced trading on the New
York Stock  Exchange  under the ticker symbol "SFL" on June 17, 2004.  Frontline
made two  further  dividends  of our  shares  to its  shareholders  in 2004:  On
September 24, 2004 every Frontline shareholder received one of our common shares
for every ten  Frontline  shares that they held and on  December  15, 2004 every
Frontline  shareholder  received two of our common shares for every 15 Frontline
shares that they held. At December 31, 2004,  Frontline's remaining shareholding
in us was approximately 50.8%.

On January 28, 2005 and February 23, 2005 Frontline  approved further  spin-offs
of its  holdings of our shares.  On  February  18,  2005,  each  shareholder  of
Frontline received one of our shares for every four shares of Frontline held and
on March 24, 2005 each  shareholder of Frontline  received one of our shares for
every ten shares of Frontline  held.  Following these  transactions  Frontline's
shareholding in us is approximately 15.8% at June 20, 2005.

Pursuant  to a fleet  purchase  agreement  entered  into in  December  2003,  we
purchased from  Frontline a fleet of 47 crude oil tankers,  comprising 23 VLCCs,
including  an option to acquire a VLCC,  each  having a  capacity  of 275,000 to
308,000  dwt,  and 24 Suezmax  tankers,  each  having a  capacity  of 142,000 to
169,000 dwt. We paid an aggregate purchase price of $950 million to acquire this
initial fleet. We also assumed senior secured  indebtedness  with respect to our
fleet in the  amount of  approximately  $1.158  billion,  which we  subsequently
refinanced  with the proceeds of our notes,  our $1.058 billion credit  facility
and a deemed  equity  contribution  of $525 million from  Frontline.  All of our
vessels, except one, are chartered to Frontline Shipping Limited or to Frontline
Shipping II Limited,  which we refer  collectively to as the  Charterers,  under
longer term time charters that have  remaining  terms that range from five to 23
year. The Charterers,  in turn, charter our vessels to third parties.  The daily
base charter  rates  payable to us under the charters have been fixed in advance
and will  decrease  as our vessels  age,  and the  Charterers  have the right to
terminate the charter for non double hull vessels after 2010.  The daily charter
rate that the  Charterers  pay to us is not  dependant  on the revenue that they
receive from  chartering  our vessels to third parties.  Frontline  Shipping was
initially capitalized with $250 million in cash provided by Frontline to support
its obligation to make payments to us under the charters.  Frontline Shipping II
has been capitalised with approximately $21.0 million in cash.

We have entered into  charter  ancillary  agreements  with the  Charterers,  our
vessel owning subsidiaries that own our vessels and Frontline,  which remains in
effect until the last long term charter with the relevant  Charterer  terminates
in  accordance  with  its  terms.   Frontline  has  guaranteed  the  Charterers'
obligations  under  the  charter  ancillary  agreements.  Under the terms of the
charter ancillary  agreements,  beginning with the final 11-month period in 2004
and for each calendar year after that,  the  Charterers  have agreed to pay us a
profit sharing  payment equal to 20% of the charter  revenues for the applicable
period,  calculated annually on a TCE basis,  realized by that Charterer for our
fleet in excess of the daily base charterhire. After 2010, all of our non-double
hull  vessels  will  be  excluded  from  the  annual  profit   sharing   payment
calculation.  For  purposes  of  calculating  bareboat  revenues on a TCE basis,
expenses are assumed to equal $6,500 per day.

We have also  entered into fixed rate  management  and  administrative  services
agreements  with  Frontline  Management,   to  provide  for  the  operation  and
maintenance of our initial fleet of vessels and administrative support services.
These  arrangements  are intended to provide us with stable cash flow and reduce
our  exposure  to  volatility  in the markets for  seaborne  oil  transportation
services.

We refer you to Item 10. - Material  Contracts  for  further  discussion  of the
agreements discussed above.

In 2005,  to date we have bought a further  three  vessels  from  Frontline  and
chartered  them back under  long term  charters  to  Frontline  Shipping  II. In
January  2005, we bought the Front  Century and Front  Champion,  for a total of
$196 million.  The vessels have been chartered back to Frontline Shipping II for
199 and 204 months  respectively at an initial rate of $31,368 per day declining
to $28,492 per day in 2019.  This  arrangement  also includes a 20% profit split
element. In March 2005, we bought the VLCC Golden Victory from Frontline for $98
million.  The vessel has been  chartered  back to Frontline  for 204 months at a
rate of $33,793 per day.

On January 17, 2005 the Company exercised its option to acquire the VLCC Oscilla
and the vessel was delivered to the Company on April 4, 2005. The purchase price
paid to acquire the vessel was approximately $16.5 million which is equal to the
outstanding  mortgage debt under four loan  agreements  between  lenders and the
vessel's owning company.  In addition,  the Company will make a payment of $14.6
million to Frontline to reflect the fact that the  original  purchase  price was
set assuming  delivery to Ship  Finance on January 1, 2004 whereas  delivery did
not occur  until  April 4, 2005.  On the same date the vessel  commenced a fixed
rate time  charter to  Frontline  with an initial  rate of $25,575 per day for a
fixed  period  of 210  months.  The  Company  also  entered  into a  fixed  rate
management  contract with Frontline  Management for $6,500 per day with the same
term as the related time charter.

In January 2005,  we sold the Suezmax  Front Fighter for $68.25  million and the
vessel was  delivered to its new owners in March 2005.  The charter of the Front
Fighter to Frontline Shipping has been cancelled as a result of this sale.

We have entered into an agreement in May 2005 with parties affiliated with Hemen
Holding Ltd., or Hemen, to acquire two vessel owning companies,  each owning one
2005 built containership,  for a total consideration of $98.6 million. The first
vessel,  the Sea  Alpha,  was  delivered  in May 2005,  and the Sea Beta will be
delivered  from the ship yard in  September  2005.  The Sea  Alpha is  currently
trading on a medium term timee charter to an unrelated third party.

In May 2005, we sold the three Suezmaxes,  Front Lillo,  Front Emperor and Front
Spirit, for a total consideration of $92.0 million. These vessels were delivered
to their new owners in June 2005.  In May 2005,  we also agreed to buy a further
three vessels from Frontline,  namely Front Traveller,  Front  Transporter,  and
Front Target,  for an aggregate  amount of $92.0  million.  The time charter and
management  arrangements  between Ship Finance and Frontline  Shipping have been
cancelled for the three sold vessels and will be replaced with new agreements on
similar terms for the vessels acquired.

We have entered into an  agreement  in June 2005 with  parties  affiliated  with
Hemen to acquire two vessel owning  companies,  each owning one 2004 built VLCC,
for a total  consideration  of $184  million.  The ships  were  bought  from the
Indonesian  state  oil  enterprise's  shipping  division,  Pertamina  in 2004 by
parties  affiliated  with Hemen. We will lease the vessels on long term charters
to Frontline Shipping II starting in the third quarter of 2005.

Our  tanker  fleet is one of the  largest  tanker  fleets in the  world,  with a
combined  deadweight  tonnage of 11.9 million dwt, and has an average age of 8.4
years for VLCCs,  12.4 year for Suezmaxes,  and 4.5 years for the newly acquired
tankers as of June 24, 2005. Eighteen of our VLCCs and 15 of our Suezmax tankers
are of double hull construction,  with the remainder being modern single hull or
double  side  vessels  built  since  1990.  Eight  of our  Suezmax  tankers  are
oil/bulk/ore carriers, or OBO carriers,  which can be configured to carry either
oil or dry cargo as market conditions warrant.

B.   BUSINESS OVERVIEW

Strategy

Our core  strategy is to create  shareholder  value by  deploying  our fleet and
growing our fleet, in each case in a manner designed to increase  operating cash
flows and permit attractive  dividend yields.  To accomplish this objective,  we
plan to:

     o    Enter into  contracts with base  charterhire  and  significant  upside
          potential. We charter our tankers under long term time charters. Under
          those time charters,  we receive base  charterhire plus profit sharing
          payments  equal to 20% of  revenues  earned by each of the  Charterers
          above such base charterhire. We have put this arrangement in place for
          our three newly  acquired  VLCCs and will enter  similar  arrangements
          with  respect to the five VLCCs that we have  agreed in  principle  to
          acquire.  Subject  to  market  conditions,  we  expect  to enter  into
          charters with profit sharing  arrangements  for other new vessels that
          we acquire.

     o    Grow our fleet.  Since we agreed to purchase our  original  fleet from
          Frontline in December  2003,  we have  exercised an option to purchase
          one VLCC,  purchased or agreed to  purchase five additional VLCCs and
          agreed  to  purchase  three  Suezmaxes  and  agreed  to  purchase  two
          containerships.   Our  growth  strategy  is  supported  by our  policy
          of  retaining  a  portion  of  our  cash flow to  support growth while
          paying  attractive   dividends   to our  shareholders.  Our  financial
          flexibility  should  also  allow  us to renew our fleet over  time and
          replace  our single hull  vessels with  modern  double hull vessels as
          they are retired.

     o    Diversify  our customer  base. As our existing  charters  expire or we
          acquire new vessels, which may include types of vessels other than oil
          tankers,  we intend to enter into charters with other parties in order
          to diversify  our customer  base within the tanker and other  shipping
          sectors.

Competitive Strengths

We believe  that our fleet,  together  with our  contractual  arrangements  with
Frontline  and  its  affiliates,  give us a  number  of  competitive  strengths,
including:

     o    one of the largest  and most  modern  VLCC and  Suezmax  fleets in the
          world;

     o    fixed rate,  long term  charters  intended  to reduce our  exposure to
          volatility in tanker rates;

     o    profit sharing potential when the Charterers'  earnings from deploying
          our vessels exceed certain levels;

     o    substantially fixed operating costs under our management agreements;

     o    a charter  counterparty with Frontline Shipping and Frontline Shipping
          II,   initially   capitalized  with  $250  million  and  $21  million,
          respectively to support their  obligation to make charter  payments to
          us; and

     o    vessels  managed by Frontline  Management,  one of the industry's most
          experienced operators of tankers.

Charter Arrangements

The Charterers

Each of the  Charterers  is a Bermuda  company and a wholly owned  subsidiary of
Frontline.  Frontline  Shipping was incorporated to charter our initial fleet of
47 tankers we agreed to acquire from  Frontline in December  2003  including the
vessel under the option that was exercised in January 2005.  Frontline  Shipping
II charters the three other tankers that we acquired since December 2003.  Under
its  constituent  documents,  Frontline  Shipping is not  permitted to engage in
other  businesses or activities and is required to have at least one independent
director  on its  board of  directors  whose  consent  is  required  to  approve
bankruptcy  actions  and  other  extraordinary  transactions.  Each  Charterer's
obligations to us under the  applicable  charters are secured by a lien over all
the  assets of that  Charterer  and a pledge  of the  equity  interests  of that
Charterer.  In  addition,   Frontline  Shipping  was  initially  capitalized  by
Frontline  with  $250  million  in  cash,  and  Frontline  Shipping  II has been
capitalized  with  approximately  $21 million in cash.  These  amounts  serve to
support the Charterers'  obligations to make charterhire payments to us, and are
subject  to  adjustment  based  on the  number  of  charters  with us that  each
Charterer is a party to. The Charterers are entitled to use these funds only (1)
to make charterhire  payments  (including profit sharing payments) to us and (2)
for reasonable working capital purposes to meet short term voyage expenses.

Time Charters

We have chartered the tankers we acquired from Frontline to the Charterers under
long term time charters,  which will extend for various periods depending on the
age of the vessels,  ranging from approximately  seven to 23 years. We refer you
to "Our Fleet" below for the relevant charter  termination dates for each of our
vessels.  Eleven of the vessels  that we acquired  are on current long term time
charters and three vessels are on current long term bareboat  charters.  We have
agreed  with the  Charterers  that it will  treat all of these  vessels as being
under time  charters  with us, on the same terms and effective on the same dates
as  with  the  other  32  vessels  for all  economic  purposes.  If the  current
underlying  charterer defaults,  the relevant Charterer will continue to perform
the economic  terms of the charters  with us. On redelivery of a vessel from its
underlying  charter,  that vessel will be deemed delivered under the Charterer's
charter with us for the rest of its term.  The daily base charter  rates payable
to us under the  charters  have been fixed in advance  and will  decrease as our
vessels age, and the Charterers  have the right to terminate a charter for a non
double  hull  vessel  after  2010.  The  Charterer  is not  obligated  to pay us
charterhire  for off hire  days in  excess  of five  off hire  days per year per
vessel,  calculated on a fleet-wide basis. However,  under the vessel management
agreements,  Frontline  Management  will  reimburse  us for any loss of  charter
revenue in excess of five off hire days per vessel,  calculated  on a fleet-wide
basis.

With the exceptions  described  below,  the daily base  charterhire  for vessels
chartered to Frontline Shipping,  which are payable to us monthly in advance for
a maximum of 360 days per year (361 days per leap year), are as follows:

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

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

The daily base  charterhire  for our vessels  that are  chartered  to  Frontline
Shipping II, which is also payable to us monthly in advance for a maximum of 360
days per year (361 days per leap year), is as follows:
<TABLE>
Vessel                       2005 to 2006     2007 to 2010      2011 to 2018    2019 and beyond
------                       ------------     ------------      ------------    ---------------
<S>                           <C>                <C>             <C>              <C>
Front Champion..........      $31,340            $31,140         $30,640          $28,464
Front Century...........      $31,501            $31,301         $30,801          $28,625
Golden Victory..........      $33,793            $33,793         $33,793          $33,793
</TABLE>

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

In addition,  the base charter rate for our non-double hull vessels will decline
to $7,500 per day after 2010, at which time the  Charterer  will have the option
to terminate the charters for those vessels. Each charter also provides that the
base charter rate will be reduced if the vessel does not achieve the performance
specifications  set  forth in the  charter.  The  related  management  agreement
provides  that  Frontline  Management  will  reimburse  us for any such  reduced
charter  payments.  The  Charterer has the right under a charter to direct us to
bareboat  charter the related  vessel to a third  party.  During the term of the
bareboat  charter,  the Charterer will continue to pay us the daily base charter
rate for the vessel,  less  $6,500 per day.  The  related  management  agreement
provides that our obligation to pay the $6,500 fixed fee to Frontline Management
will be suspended for so long as the vessel is bareboat chartered.

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

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

Frontline Performance Guarantee

Frontline has issued a performance  guarantee with respect to the charters,  the
charter ancillary  agreements,  the management agreements and the administrative
services  agreement.  Pursuant  to  the  performance  guarantee,  Frontline  has
guaranteed the following obligations of the Charterers and Frontline Management:

     o    the  performance  of the  obligations  of  the  Charterers  under  the
          charters with the  exception of payment of charter hire,  which is not
          guaranteed,

     o    the performance of the obligations of the Charterers under the charter
          ancillary agreement,

     o    the performance of the obligations of Frontline  Management  under the
          management agreements, provided, however, that Frontline's obligations
          with respect to  indemnification  for environmental  matters shall not
          extend beyond the  protection  and indemnity  insurance  coverage with
          respect to any vessel required by us under the management  agreements,
          and

     o    the performance of the obligations of Frontline  Management  under the
          administrative services agreement.

Frontline's  performance  guarantee shall remain in effect until all obligations
of the  Charterers or Frontline  Management,  as the case may be, that have been
guaranteed by Frontline under the performance  guarantee have been performed and
paid in full.

Frontline Ltd.,  Frontline  Shipping Limited and Frontline Shipping II Limited -
Charter Ancillary Agreements. We and our vessel owning subsidiaries have entered
into charter  ancillary  agreements  with  Frontline,  Frontline  Shipping,  and
Frontline Shipping II which provides, among other things, for:

     o    the maintenance of the charter service reserve by the Charterers,

     o    profit sharing  payments by the Charterers to us when charter revenues
          for our fleet exceed the daily base charterhire

     o    the deferral of charter  payments to us by the  Charterers  during any
          period  when cash and cash  equivalents  held by the  Charterers  fall
          below a predetermined  amount.  The charter  ancillary  agreement also
          imposes certain restrictive covenants on the Charter, including, among
          others, a covenant not to pay dividends or make other distributions to
          its shareholders,  incur additional indebtedness,  loan, repay or make
          any other  payment  in  respect of its  indebtedness,  undertake  some
          corporate  transactions,  or amend its charter,  unless, in each case,
          certain conditions are met.

The Charterers'  obligations to us under the charters and the charter  ancillary
agreements  are  secured  by a lien over its  assets  and a pledge of the equity
interests  in  the  Charterers.  In  addition,   Frontline  has  guaranteed  the
Charterers'  obligations under the charter ancillary  agreement  pursuant to the
performance  guarantee.  Subject to a 30-day cure period, and in addition to any
other available rights or remedies we may have, upon the occurrence of any event
of default under the charter ancillary  agreement we may terminate any or all of
the charters and foreclose on any or all of our security  interests  provided by
the agreement.

Frontline  Management-Vessel  Management  Agreements.  Each of our vessel owning
subsidiaries  has entered  into fixed rate  vessel  management  agreements  with
Frontline Management,  pursuant to which Frontline Management is responsible for
the technical  management of their respective  vessels. We expect that Frontline
Management will outsource many of these services to third party  providers.  The
management  agreements also require Frontline  Management to maintain  insurance
for each of the vessels.  Under the  management  agreements,  each of our vessel
owning  subsidiary  pays Frontline  Management a fixed fee of $6,500 per day per
vessel for as long as the relevant charter is in place.

Frontline  Management-Administrative  Services  Agreement.  We and  each  of our
vessel  owning  subsidiaries  have  entered  into  an  administrative   services
agreement with Frontline Management. Under the terms of the agreement, Frontline
Management  provides  us and our  vessel  owning  subsidiaries  with  all of our
non-vessel  related  administrative  support  services  and with office space in
Bermuda. We and our vessel owning  subsidiaries each pay Frontline  Management a
fixed fee of $20,000 per year for its  services  under the  agreement,  and will
reimburse Frontline Management for reasonable  additional third party costs that
it incurs on our behalf.

Frontline  Ltd.-Performance  Guarantee.   Frontline  has  issued  a  performance
guarantee  with  respect  to  the  charters,  the  management  agreements,   the
administrative  services agreement,  and the charter ancillary agreement.  Under
the terms of this guarantee, Frontline has guaranteed:

     o    the  Charterers'  performance  of its  obligations  under the charters
          other than the payment of charter hire,

     o    the  Charterers'  performance  of its  obligations  under the  charter
          ancillary agreement,

     o    Frontline  Management's  performance  of  its  obligations  under  the
          management agreements (however, Frontline's indemnification obligation
          for  environmental  matters  will  not  exceed  the  coverage  of  the
          applicable protection and indemnity insurance), and

     o    Frontline Management's  obligations under the administrative  services
          agreement.

The performance  guarantee will remain in effect until all of the obligations of
the  Charterers  and  Frontline   Management  that  are  guaranteed   under  the
performance guarantee have been performed.

Our Fleet

We operate a substantially  modern fleet of tankers and the following table sets
forth the fleet that we operate as of June 24, 2005:
<TABLE>
                                                                                              Charter
Vessel                        Built     Approximate Dwt.     Construction     Flag        Termination Date
------                        -----     ----------------     ------------     ----        ----------------
<S>                            <C>          <C>               <C>             <C>           <C>
VLCCs
Front Sabang                   1990         286,000           Single-hull       SG          (2014) (1)
Front Vanadis                  1990         286,000           Single-hull       SG          (2014) (1)
Front Highness                 1991         284,000           Single-hull       SG          (2014) (1)
Front Lady                     1991         284,000           Single-hull       SG          (2014) (1)
Front Lord                     1991         284,000           Single-hull       SG          (2014) (1)
Front Duke                     1992         284,000           Single-hull       SG          (2014) (1)
Front Duchess                  1993         284,000           Single-hull       SG          (2014) (1)
Front Edinburgh                1993         302,000           Double-side       LIB         (2014) (1)
Front Ace                      1993         275,000           Single-hull       LIB         (2014) (1)
Navix Astral                   1996         276,000           Single-hull       PAN         (2014) (1)
Front Century                  1988         311,000           Double-hull       MI           2021
Front Champion                 1988         311,000           Double-hull       BA           2022
New Vanguard                   1998         300,000           Double-hull       MI           2021
New Vista                      1998         300,000           Double-hull       MI           2021
Omala (ex New Circassia)       1999         306,000           Double-hull       IoM          2022
Opalia                         1999         302,000           Double-hull       IoM          2022
Front Comanche                 1999         300,000           Double-hull       FRA          2022
Golden Victory                 1999         305,000           Double-hull       MI           2022
Ocana (ex Front Commerce)      1999         300,000           Double-hull       IoM          2022
Front Scilla (ex Oscilla)      2000         302,000           Double-hull       MI           2023
Ariake                         2001         299,000           Double-hull       BA           2024
Front Serenade                 2002         299,000           Double-hull       LIB          2025
Otina (ex Hakata)              2002         296,000           Double-hull       IoM          2025
Front Stratus                  2002         299,000           Double-hull       LIB          2025
Front Falcon                   2002         308,000           Double-hull       BA           2025
Front Page                     2002         299,000           Double-hull       LIB          2025
Sea Energy                     2004         306,000           Double-hull       CYP                (3)
Sea Force                      2004         306,000           Double-hull       CYP                (3)

Suezmax OBO Carriers
Front Breaker                  1991         169,000           Double-hull       MI           2015
Front Climber                  1991         169,000           Double-hull       SG           2015
Front Driver                   1991         169,000           Double-hull       NIS          2015
Front Guider                   1991         169,000           Double-hull       SG           2015
Front Leader                   1991         169,000           Double-hull       SG           2015
Front Rider                    1992         169,000           Double-hull       SG           2016
Front Striver                  1992         169,000           Double-hull       SG           2016
Front Viewer                   1992         169,000           Double-hull       SG           2016

Suezmaxes
Front Transporter              1989         150,000           Single-hull       MI                 (3)
Front Target                   1990         150,000           Single-hull       MI                 (3)
Front Traveller                1990         153,000           Single-hull       MI                 (3)
Front Birch                    1991         152,000           Double-side       MI          (2015) (1)
Front Maple                    1991         152,000           Double-side       MI          (2015) (1)
Front Granite                  1991         142,000           Single-hull       NIS         (2014) (1)
Front Sunda                    1992         142,000           Single-hull       NIS         (2014) (1)
Front Comor                    1993         142,000           Single-hull       NIS         (2014) (1)
Front Pride                    1993         150,000           Double-hull       NIS          2017
Front Glory                    1995         150,000           Double-hull       NIS          2018
Front Splendour                1995         150,000           Double-hull       NIS          2018
Front Ardenne                  1997         153,000           Double-hull       NIS          2020
Front Brabant                  1998         153,000           Double-hull       NIS          2021
Mindanao                       1998         158,000           Double-hull       SG           2021
Front Hunter                   1998         153,000           Double-hull       NIS          2021

Containerships
Sea Alpha                      2005        1,700 Teu (2)        n/a             CYP          2007
Sea Beta (Newbuilding)         2005        1,700 Teu            n/a             CYP               (3)(4)
</TABLE>

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

     (1)  Charter subject to termination at the Charterer's option after 2010.

     (2)  Measured in "twenty-foot equivalent units" (Teu).

     (3)  Charterparty not established as at June 24, 2005.

     (4)  Estimated delivery September 2005.

Other than our  interests  in the  vessels  described  above,  we do not own any
material physical properties.

Importance of Fleet Size

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

Seasonality

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

Customers

Frontline,  through its subsidiaries,  is our principal customer and accordingly
nearly 100% of our operating revenues are derived from them.

Competition

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

Risk of Loss and Insurance

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

Frontline  Management  is  responsible  for  arranging  for the insurance of our
vessels  in line  with  standard  industry  practice.  In  accordance  with that
practice,  we maintain marine hull and machinery and war risks insurance,  which
includes  the risk of actual or  constructive  total loss,  and  protection  and
indemnity  insurance with mutual  assurance  associations.  From time to time we
carry  insurance  covering the loss of hire resulting from marine  casualties in
respect of some of our vessels.  Currently, the amount of coverage for liability
for pollution,  spillage and leakage available to us on commercially  reasonable
terms  through  protection  and indemnity  associations  and providers of excess
coverage  is $1 billion  per vessel per  occurrence.  Protection  and  indemnity
associations  are mutual marine indemnity  associations  formed by shipowners to
provide  protection  from large  financial  loss to one  member by  contribution
towards that loss by all members.

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

Inspection by a Classification Society

Every  commercial  vessel's hull and machinery is "classed" by a  classification
society  authorised  by its  country of  registry.  The  classification  society
certifies that the vessel has been built and  maintained in accordance  with the
rules of such  classification  society and complies  with  applicable  rules and
regulations  of the  country of  registry  of the  vessel and the  international
conventions  to which  that  country  is a  member.  Our  vessels  have all been
certified as "in class."

Each vessel is inspected by a surveyor of the classification society every year,
every two and a half years and every four to five years. Should any defects be
found, the classification surveyor will issue a "recommendation" for appropriate
repairs which have to be made by the shipowner within the time limit prescribed.

Environmental and Other Regulations

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

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

Environmental and Other Regulations

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

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

International Maritime Organisation

In 1992, the International  Maritime  Organization,  or IMO ( the United Nations
agency for maritime  safety and the  prevention  of marine  pollution by ships),
adopted  MARPOL  73/78   regulations   that  set  forth   pollution   prevention
requirements  applicable to tankers. These regulations,  which have been adopted
by more  than 150  nations,  including  many of the  jurisdictions  in which our
tankers operate,  provide,  in part, that:

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

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

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

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

     o    all tankers are subject to enhanced inspections.

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

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

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

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

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

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

a)   Category 1 (Pre-  PL/SBT)  oil  tankers - any tanker of 20,000 dwt or above
     carrying crude oil, fuel oil, heavy diesel oil or lubricating  oil as cargo
     or of 30,000 dwt or above carrying other types of oil .

b)   Category  2  (PL/SBT)  oil  tankers - any  tanker  of  20,000  dwt or above
     carrying crude oil, fuel oil, heavy diesel oil or lubricating  oil as cargo
     or of 30,000 dwt or above carrying other types of oil.

c)   Category 3 oil  tankers - any  tanker of  between  5,000 dwt and 20,000 dwt
     carrying crude oil, fuel oil, heavy diesel oil or lubricating  oil as cargo
     or less than 30,000 dwt carrying other types of oil .

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

Baseline Phase Out Scheme

Phase Out Date                            Year of Delivery
                       Category 1            Category 2              Category 3
                       ----------            ----------              ----------
5 April 2005         before 5 April 82              before 5 April 1977
   + 2005           after 5 April 1982    After 5 April 77 but before 1 Jan 1978
   + 2006                                             1978* and 1979*
   + 2007                                             1980* and 1981*
   + 2008                                                  1982*
   + 2009                                                  1983*
   + 2010                                             1984* or later

                    + by Anniversary of Delivery Date In Year
                                * subject to CAS

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

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

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

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

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

o    Wing tanks  having a width which does not meet that  required by IBC Code -
     Type 2.

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

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

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

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

The following table  summarizes the impact of such  regulations on the Company's
single hull and double sided tankers:
<TABLE>
                                                Vessel       Year      IMO phase out            OPA 90
Vessel Name                   Vessel type     Category(s)    Built     No exemption      Flag state exemption
-----------                   -----------     -----------    -----     ------------      --------------------
<S>                           <C>              <C>           <C>        <C>                   <C>
Front Birch                   Suezmax          SH            1991       2010                  2015
Front Comor                   Suezmax          SH            1993       2010                  2015
Front Granite                 Suezmax          SH            1991       2010                  2015
Front Maple                   Suezmax          SH            1991       2010                  2015
Front Sunda                   Suezmax          SH            1992       2010                  2015
Front Target                  Suezmax          SH            1990       2010                  2015
Front Transporter             Suezmax          SH            1989       2010                  2014
Front Traveller               Suezmax          SH            1990       2010                  2015
Edinburgh                     VLCC             SH            1993       2010                  2015
Front Ace                     VLCC             SH            1993       2010                  2015
Front Duchess                 VLCC             SH            1993       2010                  2015
Front Duke                    VLCC             SH            1992       2010                  2015
Front Highness                VLCC             SH            1991       2010                  2015
Front Lady                    VLCC             SH            1991       2010                  2015
Front Lord                    VLCC             SH            1991       2010                  2015
Front Sabang                  VLCC             SH            1990       2010                  2015
Front Vanadis                 VLCC             SH            1990       2010                  2015
Navic Astral                  VLCC             SH            1996       2010                  2015
</TABLE>

MARPOL  Regulation 13H was also introduced,  banning the carriage of heavy grade
oils in single  hull  tankers of more than 5,000 dwt after  April 5, 2005.  This
regulation  will affect heavy crude oil from Latin America as well as heavy fuel
oil,  bitumen,  tar and  related  products.  Flag  states,  however,  may permit
Category 2 tankers to continue to carry heavy grade oil beyond 2005,  subject to
satisfactory CAS results.

The IMO has also negotiated international  conventions that impose liability for
oil pollution in international  waters and a signatory's  territorial waters. In
September 1997, the IMO adopted Annex VI to the International Convention for the
Prevention of Pollution from Ships to address air pollution from ships. Annex VI
was ratified in May 2004,  and became  effective in May 2005.  Annex VI, when it
becomes effective,  will set limits on sulfur oxide and nitrogen oxide emissions
from  ship  exhausts  and  prohibit  deliberate  emissions  of  ozone  depleting
substances, such as halons, chlorofluorocarbons, emissions of volatile compounds
from  cargo  tanks  and  prohibition  of  shipboard   incineration  of  specific
substances.  Annex VI also  includes a global cap on the sulfur  content of fuel
oil and allows for special areas to be established with more stringent  controls
on sulfur emissions.  We believe that we are in substantial  compliance with the
Annex VI  regulations  .Compliance  with these  regulations  could  require  the
installation  of expensive  emission  control  systems and could have an adverse
financial impact on the operation of our vessels.

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

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

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

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

     o    natural resources damages and related assessment costs;

     o    real and personal property damages;

     o    net loss of  taxes,  rents,  royalties,  rents,  fees and  other  lost
          revenues;

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

     o    loss of subsistence use of natural resources.

OPA limits the  liability  of  responsible  parties to the greater of $1,200 per
gross ton or $10 million  per tanker  that is over 3,000 gross tons  (subject to
possible  adjustment for inflation).  The act  specifically  permits  individual
states to impose  their  own  liability  regimes  with  regard to oil  pollution
incidents  occurring  within  their  boundaries,  and some states  have  enacted
legislation providing for unlimited liability for discharge of pollutants within
their waters.  In some cases,  states that have enacted this type of legislation
have  not  yet  issued   implementing   regulations   defining   tanker  owners'
responsibilities under these laws. CERCLA, which applies to owners and operators
of tankers,  contains a similar  liability  regime and  provides for cleanup and
removal of hazardous  substances  and for natural  resource  damages.  Liability
under CERCLA is limited to the greater of $300 per gross ton or $5 million.

These limits of liability do not apply, however, where the incident is caused by
violation of applicable United States federal safety,  construction or operating
regulations,   or  by  the  responsible   party's  gross  negligence  or  wilful
misconduct.  These limits do not apply if the responsible party fails or refuses
to report  the  incident  or to  co-operate  and assist in  connection  with the
substance removal activities.  OPA and CERCLA each preserve the right to recover
damages under existing law, including maritime tort law.

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

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

Under OPA,  oil tankers  without  double  hulls will not be permitted to come to
United States ports or trade in the United  States waters by 2015.  Based on the
current phase-out  requirement,  our 24 single hull tankers will not be eligible
to carry oil as cargo within the 200-mile United States exclusive  economic zone
starting in 2010,  except that these  tankers and our three double sided tankers
may trade in United States waters until 2015 if their  operations  within United
States.  waters  are  limited to  discharging  their  cargoes  at the  Louisiana
Offshore  Oil Port  ("LOOP")  or  unloading  with the aid of another  vessel,  a
process referred to as  "lightering,"  within  authorized  lightering zones more
than 60 miles off-shore.

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

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

     o    describe crew training and drills; and

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

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

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

European Union Tanker Restrictions

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

International Conventions on Civil Liability for Oil Pollution Damage

Although the United States is not a party thereto,  many countries have ratified
and  follow  the  liability  scheme  adopted  by  the  IMO  and  set  out in the
International  Convention on Civil Liability for Oil Pollution Damage,  1969, as
amended,   or  the  CLC,  and  the  Convention  for  the   Establishment  of  an
International  Fund  for  Oil  Pollution  of  1971,  as  amended.   Under  these
conventions, a vessel's registered owner is strictly liable for pollution damage
caused  on the  territorial  waters  of a  contracting  state  by  discharge  of
persistent oil, subject to certain complete defenses. Many of the countries that
have  ratified  the CLC have  increased  the  liability  limits  through  a 1992
Protocol to the CLC. The liability  limits in the  countries  that have ratified
this Protocol are currently approximately $4.0 million plus approximately $566.0
per gross registered tonne above 5,000 gross tonnes with an approximate  maximum
of $80.5  million  per vessel,  with the exact  amount tied to a unit of account
which varies  according to a basket of currencies.  The right to limit liability
is forfeited under the CLC where the spill is caused by the owner's actual fault
or  privity  and,  under  the 1992  Protocol,  where  the spill is caused by the
owner's  intentional or reckless conduct.  Vessels trading to contracting states
must provide evidence of insurance  covering the limited liability of the owner.
In jurisdictions where the CLC has not been adopted, various legislative schemes
or common law govern,  and liability is imposed  either on the basis of fault or
in a manner similar to the CLC.

Vessel Security Regulations

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

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

     o    on-board installation of ship security alert systems;

     o    the development of vessel security plans; and

     o    compliance with flag state security certification requirements.

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

C.   ORGANIZATIONAL STRUCTURE

See Exhibit 8.1 for a list of our significant subsidiaries.

D.   PROPERTY, PLANT AND EQUIPMENT

Other than its  interests  in the  vessels  described  above,  we do not own any
material physical properties.

ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS

The  following  discussion  should  be  read in  conjunction  with  our  audited
consolidated  financial  statements and notes thereto and  predecessor  combined
carve-out  financial   statements  included  herein.  This  discussion  includes
forward-looking  statements based on assumptions about our future business.  Our
actual   results   could  differ   materially   from  those   contained  in  the
forward-looking statements.

Overview

We were  incorporated  in  Bermuda  on  October  10,  2003,  for the  purpose of
acquiring  certain of the shipping assets of Frontline.  Frontline is a publicly
listed Bermuda based  shipping  company  engaged  primarily in the ownership and
operation of oil tankers, including OBO carriers.  Frontline operates tankers of
two sizes:  VLCCs and Suezmaxes.  Frontline is a holding  company which operates
through  subsidiaries  and  joint  ventures  located  in  Bermuda,  Isle of Man,
Liberia, Norway, Panama, Singapore, the Bahamas and Sweden.

On December 11, 2003,  we entered into a purchase  agreement  with  Frontline to
purchase   certain  of   Frontline's   wholly  owned  VLCC  and  Suezmax  owning
subsidiaries,  plus a purchase option to acquire a further VLCC,  which we refer
to  collectively  as the Vessel  Interests.  On December 18, 2003 we issued $580
million  aggregate  principal  amount of 8.5% senior notes due 2013 in a private
offering to qualified  institutional  buyers.  The proceeds from the offering of
our senior notes,  together with a deemed equity  contribution of  approximately
$525 million from Frontline, were used to complete the acquisition of the Vessel
Interests. We also assumed senior secured indebtedness with respect to our fleet
in  the  amount  of  approximately   $1,158.0  million,  which  we  subsequently
refinanced  with the  proceeds  of our notes  and our  $1,058.0  million  credit
facility.  On January 1, 2004 we completed the purchase of the Vessel  Interests
we agreed to purchase from  Frontline on December 11, 2003. As a result of these
transactions we acquired a fleet of 24 Suezmax tankers,  22 VLCCs, and an option
to acquire an additional VLCC with a combined carrying capacity of approximately
10.5 million dwt and a combined  book value at January 1, 2004 of  approximately
$2,048.4 million.

On January 1, 2004,  we entered  into time  charter  agreements  with  Frontline
Shipping to charter  the 46 vessels for  substantially  the  remainder  of their
useful lives at fixed rates.  Frontline  Shipping was initially  capitalized  by
Frontline  with $250  million  to support  its  obligation  to make  charterhire
payments to us. In  addition,  on January 1, 2004,  we entered  into  management
agreements with Frontline  Management to manage the 46 vessels for substantially
the remainder of their useful lives at fixed rates.

On January 17, 2005 we  exercised  our option to acquire the VLCC  Oscilla.  The
vessel was delivered to us on April 4, 2005,  renamed Front Scilla and chartered
to Frontline  Shipping  under  substantially  the same terms as our other VLCCs.
Between  January and March 2005 we purchased  three further  double hulled VLCCs
from   Frontline,   which  were   chartered  to  Frontline   Shipping  II  under
substantially the same terms as our other VLCCs, except with respect to the base
charter  rates.  In March 2005, we sold the Suezmax tanker Front Fighter and the
time charter of Front Fighter to Frontline Shipping and management agreement for
the vessel were both concurrently cancelled.

We have entered into an agreement in May 2005 with parties affiliated with Hemen
to acquire two vessel owning companies, each owning one 2005 built containership
for a total  consideration of $98.6 million.  The Sea Alpha was delivered in May
2005,  and the Sea Beta will be delivered  from the shipyard in September  2005.
The Sea Alpha is currently trading on a medium term time charter to an unrelated
third party.

In May 2005, we sold the three Suezmaxes,  Front Lillo,  Front Emperor and Front
Spirit, for a total consideration of $92.0 million. These vessels were delivered
to their new owners in June 2005.  In May 2005,  we also agreed to buy a further
three vessels from Frontline,  namely Front Traveller,  Front  Transporter,  and
Front Target,  for an aggregate  amount of $92.0  million.  The time charter and
management  arrangements  between Ship Finance and Frontline  Shipping have been
cancelled for the three sold vessels and will be replaced with new agreements on
similar terms for the vessels acquired.

We have entered into an  agreement  in June 2005 with  parties  affiliated  with
Hemen to acquire two vessel owning  companies,  each owning one 2004 built VLCC,
for a total  consideration  of $184  million.  We will lease the vessels on long
term charters to Frontline Shipping II starting in the third quarter of 2005.

Following these purchases and disposals we have a fleet of 52 vessels as of June
24, 2005.

As a result of the  purchase of our fleet and our time  charter  and  management
agreements with Frontline,  our consolidated financial statements  significantly
differ  as of and for the  year  ended  December  31,  2004  compared  with  our
predecessor  combined  carve-out  financial  statements  as of and for the years
ended December 31, 2003 and 2002. These differences  primarily relate to the way
we  account  for  vessels  and   revenues  as  a  result  of  the  time  charter
arrangements,  but also  include the way we account for  operating  expenses and
administrative  expenses.  The  following  discussion  identifies  the principal
factors that affect our predecessor  combined carve-out financial statements and
our 2004 and future results.

Overview - Predecessor

For the years  ended  December  31,  2003 and  2002,  the  predecessor  combined
carve-out  financial  statements  presented  herein  have been carved out of the
consolidated financial statements of Frontline. Our financial position,  results
of operations and cash flows reflected in our combined financial  statements are
not  indicative  of  those  that  would  have  been  achieved  had  we  operated
autonomously  for all periods  presented.  Our  predecessor  combined  carve-out
financial  statements  assume  that our  business  was  operated  as a  separate
corporate entity prior to its inception. Prior to the date of our incorporation,
our business was operated as part of the  shipping  business of  Frontline.  Our
predecessor  combined  carve-out  financial  statements  have been  prepared  to
reflect the combination of the Vessel Interests.

As at December 31, 2003, the Vessel  Interests were comprised of 19 wholly owned
VLCCs,  24 wholly  owned  Suezmax  tankers,  one  option  to  acquire a VLCC and
interests in six associated companies that each owned a VLCC. As at December 31,
2002, the Vessel  interests  were comprised of 18 wholly owned VLCCs,  24 wholly
owned  Suezmax  tankers,  one  option to acquire a VLCC and  interests  in seven
associated companies that each owned a VLCC.

Where Frontline's assets, liabilities,  revenues and expenses relate to specific
Vessel Interests, these have been identified and carved out for inclusion in our
predecessor  combined  carve-out  financial  statements.   Frontline's  shipping
interests  and other  assets,  liabilities,  revenues and  expenses  that do not
relate to the Vessel  Interests  have been  identified  and not  included in our
combined  financial  statements.  The  preparation  of  our  combined  financial
statements  requires  allocation of certain assets and  liabilities and expenses
where  these items are not  identifiable  as related to one  specific  activity.
Administrative  overheads  of  Frontline  that  cannot be  related to a specific
vessel  have been  allocated  pro rata  based on the  number of  vessels  in the
Company compared with the number in Frontline's total fleet. We have deemed that
the  related  allocations  are  reasonable  to present our  financial  position,
results of  operations,  and cash flows.  We also believe the various  allocated
amounts would not materially differ from those that would have been achieved had
we  operated on a  stand-alone  basis for all periods  presented.  However,  our
financial  position,  results of operations and cash flows are not indicative of
those that would have been achieved had we operated autonomously for all periods
presented in our predecessor  combined carve-out financial  statements as we may
have made  different  operational  and  investment  decisions as an  independent
Company. Furthermore, the predecessor combined carve-out financial statements do
not reflect the results we would have achieved under our current fixed rate long
term charters and management  agreements and therefore are not indicative of our
current or future results of operations.

The  majority of our  assets,  liabilities,  revenues  and  expenses  are vessel
specific  and  are  included  in  the  vessel  owning  subsidiaries'   financial
statements.  However, in addition,  the following  significant  allocations have
been made:

Long term debt: An allocation of corporate debt of Frontline has been made. This
debt has been  allocated as it relates  specifically  to a vessel over which the
Company had a purchase option (which was subsequently exercised). The associated
interest expense has also been allocated to our predecessor  combined  carve-out
financial statements.

Interest  rate swaps:  For the  purposes of our combined  financial  statements,
interest rate swaps specific to carved out debt have been included. In addition,
non-debt  specific interest rate swaps have been included on the basis that such
swaps were  intended to cover the floating  rate debt that has been  included in
our predecessor  carve-out  combined  statements.  The associated mark to market
adjustments  arising  on the swaps has also been  allocated  to our  predecessor
combined  carve-out  financial  statements  and is included  in other  financial
items, net.

Administrative  expenses:  Frontline's  overheads relate primarily to management
organizations in Bermuda and Oslo that manage the business. These overhead costs
include  salaries and other  employee  related  costs,  office rents,  legal and
professional  fees and other general  administrative  expenses.  Other  employee
related costs  includes  costs  recognized in relation to  Frontline's  employee
share option plan.  We have  allocated  overhead pro rata based on the number of
vessels in the Company compared with the number in Frontline's total fleet.

No allocation of interest  income has been made and interest  income reported in
our combined  financial  statements  represents  interest  income  earned by the
vessel owning subsidiaries and interest earned on loans to joint ventures.

Factors Affecting Our 2004 and Future Results

Principal factors that have affected our 2004 results and are expected to affect
our future results of operations and financial  position include: o the earnings
of our vessels under time charters to the Charterers;

     o    the amount we receive under the profit sharing  arrangements  with the
          Charterers;

     o    the earnings and expenses  related to any  additional  vessels that we
          acquire;

     o    vessel management fees;

     o    administrative expenses; and

     o    interest expense.

Vessel Earnings

Our revenues since January 1, 2004 derive  primarily  from our long term,  fixed
rate time charters with the Charterers. All of the vessels that we have acquired
from Frontline,  including the vessels we have acquired since December 2003, are
chartered  to the  Charterers  under  long  term  charters  that  are  generally
accounted  for as  finance  leases.  We  allocate  $6,500 per day from each time
charter  payment as finance lease service  revenue.  The balance of each charter
payment is allocated  between  finance lease  interest  income and finance lease
repayment in order to produce a constant  periodic  return on the balance of our
net  investments  in finance  leases.  As the balance of our net  investments in
finance  leases  decreases,  we will  allocate  less of each charter  payment as
finance lease interest income and more as finance lease  repayments.  Certain of
our  vessels  were on  charter  to third  parties as at January 1, 2004 when our
charter   arrangements  with  Frontline  became  economically   effective.   Our
arrangement with Frontline is that while our vessels are completing  performance
of third party charters, we pay Frontline all revenues we earn under third party
charters  in  exchange  for  Frontline  paying  us  the  agreed  upon  Frontline
charterhire.  We  account  for the  revenues  received  from these  third  party
charters as time charter,  bareboat or voyage revenues,  as applicable,  and the
subsequent  payment of these amounts to Frontline as deemed  dividends  paid. We
account for the charter revenues received from Frontline  Shipping Limited prior
to the charters  becoming  effective for accounting  purposes,  as deemed equity
contributions received.

In addition,  for the final  11-month  period in 2004 and for each calendar year
thereafter,  the Charterers will pay us a profit sharing payment if our vessels'
earnings  exceed  certain  amounts.  Operating  revenues  from  January 1, 2004,
therefore include finance lease interest income, finance lease service revenues,
profit sharing revenues and include charter revenues for the period prior to our
vessels commencing trading under their charters to Frontline.

We recognize profit sharing revenue for a particular vessel when its earnings on
a TCE basis  exceed the maximum  amount of base  charterhire  that the vessel is
scheduled  to earn for the entire  year.  In 2004,  this  occurred in the second
quarter of the year.  We  therefore  generally  do not expect to  recognize  any
profit sharing revenue in the first quarter of any year. In addition,  we expect
stronger  demand for vessels and  increased  oil trading  activity in the winter
months in the Northern  hemisphere to affect the amount and timing of our profit
sharing revenue.

Expenses

Our  expenses  consist  primarily  of  vessel  management  fees,  administrative
expenses  and interest  expense.  With respect to vessel  management  fees,  our
vessel owning  subsidiaries  have entered into fixed rate management  agreements
with Frontline  Management  under which Frontline  Management is responsible for
all  technical  management  of the  vessels.  Each of  these  subsidiaries  pays
Frontline  Management  a fixed fee of $6,500  per day per  vessel for all of the
above services.  We reported voyage expenses in 2004,  derived from voyages that
were in progress on January 1, 2004.  As of January 1, 2005,  all of our vessels
were  employed  under  time or  bareboat  charters.  We do not  expect to report
further significant voyage expenses.

We have  entered  into  an  administrative  services  agreement  with  Frontline
Management  under which  Frontline  Management  provides us with  administrative
support  services.  We and each of our vessel owning  subsidiaries pay Frontline
Management a fixed fee of $20,000 per year for its services under the agreement,
and agree to reimburse Frontline Management for reasonable third party costs, if
any, advanced on our behalf by Frontline.

Other than the interest  expense  associated  with our notes,  the amount of our
interest  expense  will be  dependent  on our overall  borrowing  levels and may
significantly   increase  when  we  acquire   vessels  or  on  the  delivery  of
newbuildings.  Interest  incurred  during the  construction  of a newbuilding is
capitalized  in the cost of the  newbuilding.  Interest  expense may also change
with  prevailing  interest  rates,  although the effect of these  changes may be
reduced by interest  rate swaps or other  derivative  instruments  that we enter
into. At December 31, 2004 we had a $1,058.0  million  secured  six-year  credit
facility  with a syndicate  of  financial  institutions.  This  credit  facility
provided us with a portion of the capital  required to complete the  acquisition
of the Vessel  Interests and to refinance  related  secured  indebtedness.  This
credit  facility  bore  interest  at LIBOR  plus  1.25%.  We were also  party to
interest  rate swaps which fixed the interest on $581.4  million of our floating
rate  borrowings at an average rate of 3.8%  (exclusive of margin).  In February
2005, we refinanced  our existing  secured  credit  facility with a new $1,131.0
million secured credit facility. The new facility bears interest at LIBOR plus a
margin of 0.7% and is repayable over a term of six years.  The related  interest
rate swaps remain unchanged.

Factors Affecting Our Predecessor Results

The principal factors that have affected our predecessor  historical  results of
operations and financial  position include: o the earnings of our vessels in the
charter market;

     o    vessel expenses;

     o    administrative expenses;

     o    depreciation;

     o    interest expense; and

     o    foreign exchange.

Vessel Earnings

Prior to January 1, 2004, we derived our earnings from bareboat  charters,  time
charters, voyage charters and contracts of affreightment.

A bareboat  charter is a contract for the use of a vessel for a specified period
of time where the charterer  pays  substantially  all of the vessel voyage costs
and operating  costs. A time charter is a contract for the use of a vessel for a
specific period of time during which the charterer pays substantially all of the
vessel  voyage costs but the vessel  owner pays the  operating  costs.  A voyage
charter is a contract for the use of a vessel for a specific voyage in which the
vessel owner pays  substantially  all of the vessel  voyage costs and  operating
costs.  A contract  of  affreightment  is a form of voyage  charter in which the
owner  agrees  to carry a  specific  type and  quantity  of cargo in two or more
shipments   over  an  agreed  period  of  time.   Accordingly,   for  equivalent
profitability,  charter income under a voyage charter would be greater than that
under a time charter to take account of the owner's payment of the vessel voyage
costs. In order to compare vessels trading under different types of charters, it
is standard industry practice to measure the revenue  performance of a vessel in
terms of average daily TCEs. For voyage charters, this is calculated by dividing
net voyage  revenues by the number of days on  charter.  Days spent off hire are
excluded  from  this  calculation.  Off hire days are days a vessel is unable to
perform its service for which it is  immediately  required under a time charter.
Off hire days  include days spent on repairs,  dry docking and surveys,  whether
scheduled or unscheduled.

As at  December  31,  2003 and 2002,  29 and 35,  respectively,  of our  vessels
operated in the voyage charter market. The tanker industry has historically been
highly cyclical,  experiencing  volatility in  profitability,  vessel values and
freight rates. In particular,  freight and charter rates are strongly influenced
by the supply of tanker vessels and the demand for oil transportation  services.
The following table sets forth the average daily TCEs earned by our tanker fleet
in 2003 and 2002:

                                            2003                         2002
                                            ----                         ----
                                                     (dollars per day)

VLCC..........................             40,400                       22,200
Suezmax.......................             33,500                       18,400
Suezmax OBO...................             32,000                       17,700

Expenses

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

Administrative  expenses are composed of general  corporate  overhead  expenses,
including personnel costs, property costs, legal and professional fees and other
general  administrative  expenses.  Personnel costs include, among other things,
salaries,  pension costs, fringe benefits, travel costs and health insurance. In
2002, administrative expenses also included administrative costs associated with
Frontline's  participation in Tankers  International LLC, a pooling  arrangement
for the  commercial  operation  of the VLCCs of  Frontline  and five  other VLCC
operators, entered into in December of 1999. Frontline withdrew from the pool in
July of 2002 and these costs ceased in the second half of 2002.

Depreciation,  or the periodic  cost charged to our income for the  reduction in
usefulness and long term value of our vessels,  is also related to the number of
vessels we own. We  depreciate  the cost of our  vessels,  less their  estimated
residual value,  over their estimated  useful life on a straight-line  basis. No
charge is made for  depreciation  of vessels under  construction  until they are
delivered.  Interest  expense in our combined  financial  statements  relates to
vessel specific debt facilities of our  subsidiaries  and to corporate debt that
has been allocated to us. Interest expense depends on the same factors set forth
above as to our interest  expense.  At December  31,  2003,  all of our debt was
floating rate debt.

Foreign Exchange

As at December 31, 2003,  certain of our  subsidiaries  had Yen denominated debt
and charters  denominated  in Yen, which exposed us to exchange rate risk. As at
December 31, 2003, we had Yen denominated debt in subsidiaries of (Y)9.6 billion
($89.8 million).

Critical Accounting Policies and Estimates

The preparation of our consolidated  financial statements and combined financial
statements in accordance with accounting  principles  generally  accepted in the
United States requires  management to make estimates and  assumptions  affecting
the reported  amounts of assets and  liabilities  and  disclosure  of contingent
assets and liabilities at the date of our financial  statements and the reported
amounts of revenues and expenses during the reporting period. The following is a
discussion of the accounting  policies we apply that are considered to involve a
higher degree of judgment in their  application.  See Note 2 to our consolidated
financial statements and predecessor combined carve-out financial statements for
details of all of our material accounting policies.

In  preparing  our  consolidated   financial  statements,   we  follow  critical
accounting  policies that are  different in some respect from those  followed in
the preparation of our predecessor  financial  statements.  Each set of critical
accounting policies is discussed separately below.

We use the following critical  accounting policies in preparing our consolidated
financial statements.

Revenue Recognition

Revenues  are  generated  from time charter and  bareboat  charterhires  and are
recorded  over the term of the charter as service is  provided.  Voyage  charter
revenues  have been  included  for the period  prior to our  vessels  commencing
trading under their charters to Frontline.  Under a voyage charter, the revenues
and associated voyage costs are recognized  ratably over the estimated  duration
of the voyage.

Profit  sharing  revenues are recorded when earned and  realizable.  We consider
profit  sharing  revenues  to be earned  and  realizable  to the  extent  that a
vessel's  underlying  earnings on a time  charter  equivalent  basis  exceed the
maximum amount of base charterhire the vessel could earn during the period. This
threshold  is  calculated  as the  number of days in the profit  sharing  period
multiplied by the daily profit sharing  threshold  rates.  These threshold rates
represent the base  charterhire  rates  specified in the individual time charter
agreements.

Vessels and Depreciation

The cost of vessels less  estimated  residual value is depreciated on a straight
line basis over the vessels'  estimated  remaining  economic  useful lives.  The
estimated  economic useful life of our  double-hull  vessels is 25 years and for
single hull vessels is either 25 years or the vessels' anniversary date in 2115,
whichever comes first. This is a common life expectancy  applied in the shipping
industry.

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.  We will continue to monitor the situation and revise
the estimated  useful lives of those vessels as appropriate when new regulations
are implemented.

Leases

Leases of our vessels where we are the lessor are  classified as either  finance
leases or operating leases based on an assessment of the terms of the lease. For
the leases  which have been  classified  as finance  leases,  the minimum  lease
payments (net of amounts representing estimated executory costs including profit
thereon)  plus  the  unguaranteed  residual  value  are  recorded  as the  gross
investment  in the lease.  The  difference  between the gross  investment in the
lease  and the sum of the  present  values  of the two  components  of the gross
investment is recorded as unearned  income which is amortized to income over the
lease term as finance lease interest income to produce a constant  periodic rate
of return on the net investment in the lease.

Classification  of a lease  involves the use of estimates or  assumptions  about
fair  values of leased  vessels  and  expected  future  values  of  vessels.  We
generally  base our estimates of fair value on the average of three  independent
broker  valuations  of a vessel.  Our  estimates  of expected  future  values of
vessels  are based on current  fair  values  amortized  in  accordance  with our
standard depreciation policy for owned vessels.

Deemed Dividends

Our charter  arrangements  with Frontline  became  effective on January 1, 2004.
Certain  of our  vessels  were on fixed  term  charters  to third  parties as at
January 1, 2004 and the remainder  were on spot voyages.  As each of our vessels
completes its original  charter in place on January 1, 2004,  the finance leases
with  Frontline  become  effective for accounting  purposes.  We account for the
revenues  received from these third party charters as time charter,  bareboat or
voyage  revenues as applicable  and the  subsequent  payment of these amounts to
Frontline as deemed dividends paid. We account for the charter revenues received
from Frontline  Shipping  Limited prior to the charters  becoming  effective for
accounting purposes, as deemed equity contributions received. This treatment has
been applied due to the related party nature of the charter arrangements.

Deemed Equity Contributions

We have accounted for the difference between the historical cost of the vessels,
originally  transferred  to us by  Frontline  on January 1, 2004 at  Frontline's
historical  carrying  value,  and the net  investment in the lease as a deferred
deemed  equity  contribution.   This  deferred  deemed  equity  contribution  is
presented as a reduction in the net  investment in finance leases in the balance
sheet.  This results from the related party nature of both the original transfer
of the vessel and the  subsequent  finance  lease.  The deferred  deemed  equity
contribution  is amortized as a credit to  contributed  surplus over the life of
the new lease arrangement as lease payments are applied to the principal balance
of the lease receivable.

Impairment of Long-lived Assets

Our  vessels  are  reviewed  for  impairment   whenever  events  or  changes  in
circumstances  indicate that their carrying  amount may not be  recoverable.  In
assessing the  recoverability  of the vessels'  carrying  amounts,  we must make
assumptions  regarding  estimated future cash flows.  These assumptions  include
assumptions  about the spot market  rates for  vessels,  the revenues the vessel
could earn under time charter, voyage charter or bareboat charter, the operating
costs of our  vessels,  the  estimated  economic  useful life of our vessels and
their scrap value. In making these  assumptions,  we refer to historical  trends
and  performance  as well as any  known  future  factors.  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 vessels and
significant  negative  industry  or  economic  trends.  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.  Although management believes that the
assumptions  and  estimates  used to  evaluate  impairment  are  reasonable  and
appropriate, such assumptions and estimates are highly subjective.

Variable Interest Entities

A  variable  interest  entity is a legal  entity  that  lacks  either (a) equity
interest  holders  as a group  that lack the  characteristics  of a  controlling
financial  interest,  including:  decision making ability and an interest in the
entity's  residual risks and rewards or (b) the equity holders have not provided
sufficient  equity  investment  to permit the entity to finance  its  activities
without additional  subordinated  financial support.  FASB Interpretation 46 (R)
requires a variable  interest  entity to be  consolidated if any of its interest
holders  are  entitled  to a majority  of the  entity's  residual  return or are
exposed to a majority of its  expected  losses.  In applying the  provisions  of
Interpretation  46 (R), we must make  assumptions in respect of, but not limited
to, the  sufficiency of the equity  investment in the underlying  entity.  These
assumptions include  assumptions about the future revenues,  operating costs and
estimated economic useful lives of assets of the underlying entity.

We  initially  applied the  provisions  of  Interpretation  46(R) to all special
purpose  entities and other entities  created after January 31, 2003 on December
31, 2003.  In accordance  with the  requirements  of  Interpretation  46(R),  we
initially  applied its  provisions  to entities  that are not  considered  to be
special  purpose  entities that were created before January 31, 2003 as of March
31, 2004.

The effect of  implementation  of FIN 46(R) was to require  consolidation of one
entity  in  which  we  held an  interest  but  which  had  not  previously  been
consolidated.  We had an  option to  purchase  the VLCC  Oscilla  on expiry of a
five-year  time charter,  which  commenced in March 2000.  Oscilla was owned and
operated by an unrelated  special purpose  entity.  Prior to the adoption of FIN
46(R) we did not consolidate  this special  purpose  entity.  We have determined
that the entity that owns Oscilla is a variable  interest entity and that we are
the primary  beneficiary.  At December 31, 2004 through to January 2005, when we
exercised our option to acquire the vessel,  after exhaustive  efforts,  we were
unable to obtain the accounting  information necessary to be able to consolidate
the entity that owned  Oscilla.  If we had  exercised the option at December 31,
2004,  the cost of the Oscilla would have been  approximately  $28.5 million and
our maximum exposure to loss was $8.4 million.  The application of FIN 46(R) has
not had a material impact on our results of operations or financial position. We
have taken delivery of the vessel in April 2005.

The following critical  accounting  policies were used in the preparation of the
predecessor combined carve-out financial statements.

Carve out of the Financial Statements of Frontline

For the years  ended  December  31,  2003 and  2002,  our  predecessor  combined
carve-out  financial  statements  presented  herein  have been carved out of the
financial statements of Frontline.

Where  Frontline's  assets,  liabilities,  revenues and  expenses  relate to the
specific  Vessel  Interests,  these  have been  identified  and  carved  out for
inclusion in our combined financial  statements.  Frontline's shipping interests
and other assets,  liabilities,  revenues and expenses that do not relate to the
Vessel Interests have been identified and not included in our combined financial
statements.  The preparation of our combined financial  statements  requires the
allocation of certain assets and  liabilities and expenses where these items are
not identifiable as related to one specific activity.  Administrative  overheads
of  Frontline  that cannot be related to a specific  vessel have been  allocated
based on the  number of  vessels  in the  Company  compared  with the  number in
Frontline's  total  fleet.  Management  has deemed the related  allocations  are
reasonable to present our financial  position,  results of operations,  and cash
flows.  Management  believes the various  allocated amounts would not materially
differ from those that would have been achieved had we operated on a stand-alone
basis for all periods presented in our predecessor  combined carve-out financial
statements. Our financial position, results of operations and cash flows are not
indicative of those that would have been  achieved had we operated  autonomously
for all years presented as we may have made different operational and investment
decisions as a company independent of Frontline.

Revenue Recognition

Revenues are generated from voyage charters,  contracts of  affreightment,  time
charter and bareboat  charterhires.  Time charter and bareboat  charter revenues
are recorded over the term of the charter as service is provided. Under a voyage
charter the revenues and associated voyage costs are recognized ratably over the
estimated  duration of the voyage.  The operating results of voyages in progress
at a reporting  date are estimated and  recognized  pro-rata on a per day basis.
Probable  losses on voyages are provided for in full at the time such losses can
be  estimated.  Amounts  receivable  or  payable  arising  from  profit  sharing
arrangements  are accrued based on the estimated  results of the voyage recorded
as at the reporting date.

The  operating  revenues  and voyage  expenses of the vessels  operating  in the
Tankers pool, and certain other pool arrangements,  are pooled and net operating
revenues,  calculated  on a TCE basis,  are  allocated to the pool  participants
according to an agreed formula.  The same revenue and expenses principles stated
above are applied in determining the pool's net operating revenues.

Vessels and Depreciation

The cost of vessels less  estimated  residual value is depreciated on a straight
line basis over the vessels'  estimated  remaining  economic  useful lives.  The
estimated  economic useful life of our  double-hull  vessels is 25 years and for
single hull vessels is either 25 years or the vessels' anniversary date in 2115,
whichever comes first. This is a common life expectancy  applied in the shipping
industry.  Effective in April 2001, the IMO  implemented  new  regulations  that
result in the accelerated phase out of certain non-double hull vessels.

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.  We will continue to monitor the situation and revise
the estimated  useful lives of its non-double  hull vessels as appropriate  when
new regulations are implemented.

Impairment of Long-lived Assets

Our  vessels  are  reviewed  for  impairment   whenever  events  or  changes  in
circumstances  indicate that their carrying  amount may not be  recoverable.  In
assessing the  recoverability  of the vessels'  carrying  amounts,  we must make
assumptions  regarding  estimated future cash flows.  These assumptions  include
assumptions  about the spot market  rates for  vessels,  the revenues the vessel
could earn under time charter, voyage charter or bareboat charter, the operating
costs of our  vessels,  the  estimated  economic  useful life of our vessels and
their scrap value. In making these  assumptions,  we refer to historical  trends
and  performance  as well as any  known  future  factors.  Factors  we  consider
important  that could  effect  recoverability  and  trigger  impairment  include
significant   underperformance  relative  to  expected  operating  results,  new
regulations  that change the estimated  useful economic lives of our vessels and
significant  negative  industry  or  economic  trends.  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.  Although management believes that the
assumptions  and  estimates  used to  evaluate  impairment  are  reasonable  and
appropriate, such assumptions and estimates are highly subjective.

Leases

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

Variable Interest Entities

The  application  of this  accounting  policy is discussed in the above critical
accounting policies for our consolidated financial statements.

Accounting Changes

The  accounting  changes as set forth below relate to the  predecessor  combined
carve-out  financial  statements included herein. The changes are not applicable
to our consolidated  financial statements for the period ended December 2003 and
the year ended December 31, 2004 of the Company.

In  December  2003 we  implemented  the  provisions  of FIN 46R.  The  effect of
implementation of FIN 46R was to require consolidation of one entity in which we
held an  interest  but which had not  previously  been  consolidated.  We had an
option to purchase the VLCC Oscilla on expiry of a five-year time charter, which
commenced in March 2000.  Oscilla was owned and operated by an unrelated special
purpose  entity.  Prior to the  adoption of FIN 46 we did not  consolidate  this
special  purpose  entity.  We have determined that the entity that owned Oscilla
was a variable  interest  entity and that we were the  primary  beneficiary.  At
December  31, 2004  through to January  2005,  when we  exercised  our option to
acquire  the  vessel,  after  exhaustive  efforts,  we were unable to obtain the
accounting information necessary to be able to consolidate the entity that owned
Oscilla.  If we had exercised  the option at December 31, 2004,  the cost of the
Oscilla would have been  approximately  $28.5 million.  Our maximum  exposure to
loss, measured by the purchase price we paid for the option, was $8.4 million.

With effect from December 2003, the IMO implemented new regulations  that result
in the  accelerated  phase-out of single hull  vessels.  As a result of this, we
have  re-evaluated  the  estimated  useful life of our single  hull  vessels and
determined this to be either 25 years or the vessel's  anniversary  date in 2015
whichever  comes first.  As a result,  the  estimated  useful lives of 13 of our
wholly owned  vessels  were  reduced in the fourth  quarter of 2003. A change in
accounting  estimate was  recognized to reflect this  decision,  resulting in an
increase in depreciation expense and consequently  decreasing net income by $1.1
million and basic and diluted earnings per share by $0.01, for 2003.

In June 2001,  the FASB  approved SFAS No. 142,  "Goodwill and Other  Intangible
Assets" ("SFAS 142"). SFAS 142 applies to all acquired intangible assets whether
acquired  singly,  as part of a group,  or in a business  combination.  SFAS 142
superseded APB Opinion No. 17, "Intangible Assets".  This statement is effective
for fiscal years  beginning  after  December 15,  2001.  SFAS 142 requires  that
goodwill and indefinite lived intangible  assets will no longer be amortized but
will be reviewed annually for impairment.  Intangible assets that are not deemed
to have an  indefinite  life will  continue to be  amortized  over their  useful
lives.  At December 31, 2001, we had unamortised  goodwill of $14.1 million.  We
adopted SFAS 142 effective  January 1, 2002 and recorded an impairment charge of
$14.1 million for the unamortised goodwill on that date that is shown separately
in the consolidated  statement of operations as a cumulative effect of change in
accounting principle. The valuation of the fair value of the reporting unit used
to assess the  recoverability of goodwill was a combination of independent third
party valuations and the quoted market price.

As of January 1, 2001,  we adopted  Statement of Financial  Accounting  Standard
("SFAS") No. 133,  "Accounting for Derivatives  and Hedging  Activities"  ("SFAS
133"). Certain hedge relationships met the hedge criteria prior to SFAS 133, but
do not meet the  criteria  for hedge  accounting  under SFAS 133.  On January 1,
2002, we discontinued  hedge  accounting for two interest rate swaps  previously
accounted  for as cash flow hedges.  This  resulted in a balance of $4.9 million
being frozen in accumulated other comprehensive  income as at that date and this
was being  reclassified to the income  statement over the life of the underlying
instrument.  The  underlying  loans were  repaid in 2004 and the then  remaining
balance  in  accumulated  other   comprehensive   income  of  $2.5  million  was
reclassified into earnings.

Market Overview

The tanker market  experienced a record year in 2004 as freight rates  increased
dramatically  compared to 2003,  mainly due to limited  fleet  growth and strong
growth in the demand for oil and,  consequently,  for oil tankers.  In the first
quarter of 2004,  the spot  market  from the Middle  East to the Far East stayed
above TCE  $57,000 per day while in the fourth  quarter  the spot market  showed
significantly stronger earnings with average rates around TCE $90,000 per day.

According to the International Energy Agency, world oil demand in 2004 was 82.44
million  barrels  per day (mbd),  an  increase  of 2.65 mbd over 2003.  The main
driver for this  growth was the strong  economic  growth in China and the United
States resulting in record import levels.

The world supply of oil increased by 3.39 mbd in 2003 to a total of 83.03 mbd in
2004. The rapid economic growth in China led to a large growth in imports of oil
into China during the year. In addition,  Hurricane  Ivan,  which hit the United
States Gulf Coast in 2005,  led to the shut down of oil  production  in the area
which had to be replaced by additional  imports.  This resulted in strong demand
for VLCCs, and a very healthy market for most of the year. The continuing unrest
in Iraq limited the output from that country to  approximately  1.9 mbd compared
with a  pre-war  level of  approximately  2.2 mbd.  However,  the  shortfall  in
production  from Iraq was  replaced by increased  production  in the rest of the
OPEC countries.

The size of the world VLCC fleet  increased  by 2.5% in 2004 from 433 vessels to
452  vessels.  A total of 11 VLCC's  were  scrapped  during the year and 30 were
delivered.  The total  orderbook  for VLCCs was at 84  vessels at the end of the
year (86 as of May 1st), of which 43 were ordered  during the year.  The size of
the world Suezmax fleet increased by 5% in 2004 from 295 vessels to 310. A total
of 11 Suezmaxes  were scrapped and 26 were  delivered.  The total  orderbook for
Suezmaxes was at 76 at the end of the year, of which 30 were ordered  during the
year (79 as of May 1st). The total  orderbooks  for VLCCs and Suezmaxes  equaled
19.1% and 24.5%, respectively, of the existing fleet.

While spot market rates have  declined  during the second  quarter of 2005,  the
Company  believes  that the outlook for the tanker  market for the  remainder of
2005 is positive due to the continued  growth in oil  consumption,  which should
lead to a positive demand environment for tankers.

Seasonality

We operate  our tankers in markets  that have  historically  exhibited  seasonal
variations in demand and, therefore, charter rates. Tanker markets are typically
stronger in the winter  months in the northern  hemisphere  due to increased oil
consumption.  In addition,  unpredictable  weather patterns in the winter months
tend to disrupt vessel scheduling. The oil price volatility resulting from these
factors has historically led to increased oil trading  activities and demand for
vessels.  The change in demand for vessels may affect the charter rates that the
Charterer  receives for our vessels.  Seasonality may also affect the amount and
timing of our profit sharing revenues.

Inflation

Although inflation has had a moderate impact on our corporate  overheads,  we do
not consider  inflation to be a significant  risk to direct costs in the current
and foreseeable economic environment. In addition, in a shipping downturn, costs
subject to  inflation  can  usually be  controlled  because  shipping  companies
typically  monitor  costs to preserve  liquidity  and  encourage  suppliers  and
service providers to lower rates and prices in the event of a downturn.

Results of Operations

Year ended December 31, 2004 compared with  predecessor  combined  carve-out for
year ended December 31, 2003

Operating revenues

     (in thousands of $)                                     2004         2003
                                                             ----         ----

     Time charter revenues .........................        86,741       40,759
     Bareboat charter revenues......................        27,453       25,986

     Voyage charter revenues .......................        49,707      628,323
     Finance lease interest income .................       140,691            -
     Finance lease service revenues.................        72,551            -
     Profit sharing revenues........................       114,926            -
     Total operating revenues ......................       492,069      695,068

Total  operating  revenues  decreased  29% in the year ended  December 31, 2004.
Operating revenues in 2004 include finance lease interest income,  finance lease
service  revenues,  profit sharing revenues from our profit sharing  arrangement
with  Frontline  and  charter  revenues  for the  period  prior  to our  vessels
commencing trading under their charters to Frontline after January 1, 2004. They
also include  charter  revenues for vessels  trading under long term charters to
third  parties  during the period.  The decrease in  operating  revenues in 2004
primarily reflects the change in employment of our vessels.  In the period since
we acquired our fleet of vessels from  Frontline,  20 of our 24 Suezmax  tankers
and 20 of our 22 VLCC tankers had commenced employment with Frontline under long
term charters that are accounted for as finance  leases in 2004. At December 31,
2004 all but six of our vessels had completed  their  charters to third parties.
We expect the remaining  vessels on charter to third  parties to complete  these
arrangements between January 1, 2006 and December 31, 2007. After these charters
are  completed we expect that all of our revenues from our current fleet will be
derived from finance leases and our profit sharing  arrangement  with Frontline.
In 2003, the combined  predecessor  carve-out financial  statements reflect that
the majority of vessels were trading in the spot market.

The  following  table  analyzes  our cash  flows in 2004  from the  charters  to
Frontline and how they are accounted for:

                                                            (in thousands of $)
     Frontline charterhire payments accounted for as:

     Finance lease interest income  ..............               $140,691
     Finance lease service revenues...............                 72,551
     Finance lease repayments.....................                 61,990
     Deemed equity contributions received.........                 97,118

     Total charterhire paid.......................               $372,350

We  allocate  $6,500 per day from each time  charter  payment  as finance  lease
service  revenue.  The  balance of each  charter  payment is  allocated  between
finance lease interest  income and finance lease repayment in order to produce a
constant  periodic  return on the  balance  of our net  investments  in  finance
leases.  Accordingly  as the balance of our net  investments  in finance  leases
decreases,  we will  allocate  less of each  charter  payment as  finance  lease
interest income and more as finance lease  repayments.  At December 31, 2004 the
average implicit interest rate for our finance leases was 8.9%.

Certain of our vessels  were on charter to third  parties as at January 1, 2004.
Our charter  arrangements  with Frontline  Shipping Limited became  economically
effective on January 1, 2004. Our arrangement with Frontline Shipping Limited is
that while our vessels are completing  performance of third party  charters,  we
pay  Frontline  all revenues we earn under third party  charters in exchange for
Frontline Shipping Limited paying us the Frontline charterhire rates. We account
for the  revenues  received  from these  third party  charters as time  charter,
bareboat or voyage  revenues as applicable and the  subsequent  payment of these
amounts to  Frontline  as deemed  dividends  paid.  We account  for the  charter
revenues received from Frontline Shipping Limited prior to the charters becoming
effective for accounting purposes, as deemed equity contributions  received. For
the year ended December 31, 2004 we paid deemed dividends in the amount of $59.0
million to Frontline Shipping Limited.

For the final  11-month  period in 2004 and for each  calendar  year after that,
each of the Charterers  has agreed to pay us a profit  sharing  payment equal to
20% of the charter revenues for the applicable period,  calculated annually on a
TCE basis,  realized by that  Charterer  for our fleet in excess of the weighted
average rate of the base charterhire, which for the year ended December 31, 2004
were $25,575 per day for each VLCC and $21,100 per day for each Suezmax  tanker.
For the year ended  December 31, 2004 we earned total profit share revenues from
Frontline Shipping Limited in the amount of $114.9 million.

Voyage expenses

Voyage  expenses of $10.0 million in 2004 are derived from voyages which were in
progress at January 1, 2004.  Voyage  expenses  have  decreased  93% from $148.5
million  for the year ended  December  31,  2003,  as all of our vessels are now
employed  under time or bareboat  charters.  We do not expect to report  further
significant voyage expenses.

Ship operating expenses

Ship operating expenses have increased 18% from $82.0 million for the year ended
December  31,  2003 to  $96.5  million  for the year  ended  December  31,  2004
primarily  due to the  change in vessel  management  contracts.  Ship  operating
expenses in 2004 are primarily  comprised of our payments to Frontline of $6,500
per day under the management  contracts for our vessels.  They also include ship
operating  expenses  for those  vessels that were on voyages at January 1, 2004.
The  management  fees are  payable  on each of our  vessels  except  those  that
Frontline has elected to bareboat charter from us. At December 31, 2004, five of
our  vessels  were  bareboat  chartered.  For the year ended  December  31, 2003
operating expenses were based on actual costs incurred.

Administrative expenses

Administrative  expenses  in 2004  comprise a fee of $20,000  per vessel  owning
subsidiary  plus  $20,000  paid  by us to  Frontline  under  the  terms  of  our
administrative service agreement.  Fees payable under this agreement amounted to
$960,000 in the year ended December 31, 2004. Frontline provides  administrative
services under this agreement,  which include accounting,  corporate secretarial
and investor support. Additionally, we pay expenses that are not covered by this
agreement   which  include  audit  and  legal  fees,   listing  fees  and  other
professional  charges.  Administrative  expenses  reported  in  our  predecessor
combined  carve-out  financial  statements  consist  of an  allocation  of total
administrative expenses reported by Frontline.

Depreciation expense

Depreciation  expenses for the year ended  December  31, 2004 was $34.6  million
compared to $106.0  million for the year ended  December 31, 2003.  Depreciation
expenses  relate to the vessels on charters to third  parties that are accounted
for as operating  leases.  The reduction in 2004 is due to the fact that most of
our  fleet is now  employed  under  long term  charters  to  Frontline  that are
accounted for as capital leases. In 2003 we recorded  depreciation on our entire
wholly-owned  fleet of 42 vessels  whereas in 2004 we recorded  depreciation  on
only six vessels throughout the period. Additionally we recorded depreciation on
vessels during the period before they commenced  employment with Frontline under
long term charter. We expect that our total depreciation charge will continue to
decrease as vessels complete their charters to third parties.

Interest income

Interest  income has  decreased by $3.2 million for the year ended  December 31,
2004. The decrease is a result of the decrease in interest  income from loans to
associated   companies.   Our  investment  in  these  associated  companies  was
terminated in the first quarter of 2004.

Interest expense

                                              2004           2003        Change
                                              ----           ----        ------

     Interest on floating rate loans        26,723         30,258           12%
     Interest on 8.5% Senior Notes          47,180              -            -
     Swap interest                          12,545          3,831          227%
     Amortization of deferred charges        9,485          1,088          772%
                                            95,933         35,177          173%

At  December  31,  2004,  we had total  debt  outstanding  of  $1,478.9  million
comprised of $530.3 million aggregate  principal amount of 8.5% Senior Notes and
$948.6  million under a floating rate secured credit  facility.  At December 31,
2003 we had total debt outstanding of $991.6 million,  all of which was floating
rate.  Interest costs  increased in 2004  principally due to the issuance of the
senior  notes.  At  December  31,  2004,  we were  party to  interest  rate swap
contracts which  effectively fix our interest rate on $581.4 million of floating
rate debt at an average  rate of 3.8%.  At  December  31,  2003 we were party to
interest rate swap contracts with a notional principal amount of $152.7 million.
Swap  interest  has  increased  due to the  increase in  contracts  and notional
principal amounts outstanding at December 31, 2004.

Amortization of deferred charges increased by $8.3 million in 2004 compared with
2003 due to  additions  that were  incurred in  relation to the  issuance of the
senior  notes,  the draw down of the $1,058.0  million  credit  facility and the
write-off of $4.3 million of deferred charges related to refinanced facilities.

Other financial items and foreign exchange gains and losses

In 2004 and 2003,  other financial  items primarily  consisted of mark to market
valuation  changes on our interest rate swap  contracts of $9.3 million and $5.6
million, respectively.

Foreign exchange losses have decreased from 2003 due to the repayment of our Yen
denominated  debt.  At  December  31,  2004 we have no Yen  denominated  debt as
compared to Yen  denominated  debt of (Y)9.6 billion ($89.8 million) at December
31, 2003.

Results of Operations - Predecessor

Year ended December 31, 2003 compared with the year ended December 31, 2002

Operating revenues

Total operating  revenues increased by 90% to $695.1 million in 2003 from $365.2
million in 2002. Time charter  equivalent  revenues  increased by 102% to $546.5
million in 2003 compared with $271.2  million in 2002. In 2002, we took delivery
of four wholly owned  double hull VLCCs,  which are included for the entire 2003
period.  However,  this increase  primarily  reflects the strong earnings in the
tanker  market in the 2003 period.  The average  daily TCEs earned by our VLCCs,
Suezmax  tankers,  and Suezmax OBO  carriers in 2003 were  $40,400,  $33,500 and
$32,000, respectively, compared with $22,200, $18,400 and $17,700, respectively,
in 2002.  This  increase  in  average  daily  TCEs is in line  with the  overall
increase in operating revenues that we experienced during 2003.

Spot voyage  charters  represented  88% and 85% of our TCE  revenues in 2003 and
2002 respectively.  Accordingly, our revenues were significantly affected by the
prevailing   spot  rates  in  the   markets  in  which  the   vessels   operate.
Traditionally,  spot market  rates are highly  volatile  and are  determined  by
market forces such as worldwide demand,  changes in the production of crude oil,
changes in seaborne and other  transportation  patterns including changes in the
distances that cargoes are transported,  environmental  concerns and regulations
and competition  from  alternative  sources of energy.  Fiscal year 2003 started
with extremely  strong charter rates which were mainly driven by factors such as
the strike in Venezuela, which resulted in longer haul imports, a cold winter in
the  northern  hemisphere  resulting  in  increased  demand for  heating oil and
increased  consumption in the Far East,  especially China, all of which resulted
in spot market rates being  significantly  stronger than in 2002. Oil demand for
2003 experienced its strongest growth in the prior 15 years, with an increase of
approximately 3.5% for the 2003 calendar year.

Voyage expenses

Voyage expenses and  commissions  increased by 58% from $94.0 million in 2002 to
$148.5 million in 2003. This increase was primarily the result of the withdrawal
of Frontline from participation in the Tankers  International Pool in July 2002.
Under the pool  arrangement,  voyage costs and commission for vessels entered in
the pool were  borne by the pool.  After  Frontline's  withdrawal  from the pool
these  costs were borne by  Frontline.  The  increase  also  reflects  increased
commissions due to increased operating revenues.

Ship operating expenses

Vessel operating  expenses,  which include  drydocking  costs,  remained steady,
increasing  marginally  by 0.8% to $82.0  million in 2003 from $81.4  million in
2002. The average daily operating costs,  including  drydockings,  of our VLCCs,
Suezmax  tankers  and  Suezmax  OBO  carriers  were  $6,318,  $5,578  and $5,466
respectively,  compared with $7,211,  $5,972 and $5,711  respectively,  in 2002.
VLCC rates  reduced  primarily  as a result of a decrease in the number of VLCCs
drydocked in the year from four in 2002 to two in 2003.

Depreciation expense

Depreciation and amortization increased 10% to $106.0 million in 2003 from $96.8
million in 2002. The increase  primarily  related to a full year's  depreciation
being included in 2003 for the four vessels delivered in 2002. Effective October
1, 2003, we  re-evaluated  the estimated  useful life of our single hull vessels
and determined  this to be either 25 years or the vessel's  anniversary  date in
2015 whichever came first. As a result, the estimated useful life of thirteen of
our vessels was reduced resulting in an increase in depreciation expense of $1.1
million in the fourth quarter of 2003 ($4.4 million on an annualized basis).

Administrative  expenses increased 40% to $9.7 million in 2003 from $6.9 million
in 2002 primarily as a result of an increase in costs  recognized in relation to
Frontline's employee share option plan along with increased legal costs which we
incurred.

Net interest expense

Net interest expense for 2003 was $29.3 million, a decrease of 13% compared with
$33.6 million in 2002.  Interest income  decreased 31.1% to $5.9 million in 2003
from $8.5 million in 2002 mainly due to a decrease in interest income from loans
to associated companies.  This is as a result of reductions in our average total
interest  bearing  loans  to  associated  companies  in 2003.  Interest  expense
decreased to $35.1  million in 2003 from $42.1  million in 2002. At December 31,
2003,  we had  $991.6  million of  floating  rate debt and the  decrease  in the
interest expense reflects the benefit of lower interest rates in the 2003 period
along with reduced debt in the year.

Share of results of associated companies

The share in results of associated companies increased from a loss $10.1 million
in 2002  to  earnings  of  $22.1  million  in  2003.  The  increase  is due to a
combination  of the strength of tanker  earnings in 2003  compared with 2002 and
foreign  currency  exchange losses  recognized in associated  companies with Yen
denominated long term debt in 2002 that did not occur in 2003. In the year ended
December 31, 2003, we recorded an impairment  charge of $5.2 million  related to
the  other-than-temporary  decline in value of our  investments in Golden Lagoon
Corporation  and  Ichiban  Transport  Corporation.  This  impairment  charge was
triggered by signing agreements on June 25, 2003 for the sale of our investments
for proceeds which were less than book value of those investments.

Foreign currency exchange gain (loss)

We incurred a foreign  currency  exchange loss of $10.4 million in 2003 compared
with a loss of $5.6  million in 2002.  Foreign  exchange  gains and losses arise
primarily on the Yen denominated debt in certain subsidiaries.  In 2003, the Yen
strengthened  against the U.S.  dollar from (Y)118.54 per dollar at December 31,
2002 to (Y)107.1 per dollar at December 31, 2003.  At December 31, 2003,  we had
Yen denominated debt of (Y)9.6 billion, compared with (Y)5.1 billion at December
31, 2002.

Other financial items, net

Other  financial  items have  increased from a charge of $4.5 million in 2002 to
income of $3.6 million in 2003. In both years,  other  financial items consisted
primarily  of market  value  adjustment  on interest  rate swaps  following  the
adoption of SFAS No. 133 on January 1, 2001.

Liquidity and Capital Resources

We operate in a capital intensive  industry and have  historically  financed our
purchase  of  tankers  through  a  combination  of  debt  issuances,  an  equity
contribution  from Frontline and borrowings from commercial banks. Our liquidity
requirements  relate to  servicing  our debt,  funding  the  equity  portion  of
investments in vessels,  funding  working capital  requirements  and maintaining
cash reserves  against  fluctuations in operating cash flows.  Revenues from our
time charters and bareboat charters are received monthly in advance.  Management
fees are also payable monthly in advance.

Our funding and treasury  activities are conducted within corporate  policies to
maximize  investment  returns while  maintaining  appropriate  liquidity for our
requirements. Cash and cash equivalents are held primarily in U.S. dollars, with
minimal amounts held in Japanese Yen.

Our short-term  liquidity  requirements relate to servicing our debt and funding
working capital  requirements  (including required payments under our management
agreements  and  administrative  services  agreements).  Sources  of  short-term
liquidity   include  cash  balances,   restricted   cash  balances,   short-term
investments  and receipts from our charters.  We believe that our cash flow from
the charters will be sufficient to fund our anticipated debt service and working
capital requirements for the short and medium term.

Our long term  liquidity  requirements  include  funding  the equity  portion of
investments  in new or  replacement  vessels,  and  repayment  of long term debt
balances  including  those  relating to our 8.5%  Senior  Notes due 2013 and our
$1,131.4  million  secured credit  facility due 2011. To the extent we decide to
acquire additional vessels, we may consider  additional  borrowings,  and equity
and debt issuances.

We expect that we will require  additional  borrowings or issuances of equity in
the long term to meet these requirements.

As of December 31, 2004 and December 31, 2003, we had cash and cash  equivalents
(including  restricted  cash) of $34.6  million,  $565.5  million  (stand  alone
basis), and $26.5 million (predecessor combined carve out basis),  respectively.
At December  31,  2003 the $565.5  million  cash  balance on a stand alone basis
represented  the net proceeds from our issue of 8.5% senior notes due 2013.  The
Company  generated  cash from  operations  of $178.5  million  in the year ended
December 31, 2004.  In 2004 we used $536.8  million to acquire our vessel owning
subsidiaries from Frontline.

On January 1, 2004,  our charter  agreements  with  Frontline  Shipping  and the
management  agreements and  administrative  services  agreements  with Frontline
Management took economic effect.  Under these  agreements,  we are contracted to
make  payments  and  receive  amounts  that will  impact  our  future  liquidity
requirements.

During the year ended  December  31,  2004 we paid cash  dividends  of $1.05 per
common  share,  or a total of $78.9  million.  In the first  quarter of 2005, we
declared a cash dividend of $0.50 per share representing a total cash payment of
$37.5 million, which was paid on March 18, 2005.

Acquisitions and Disposals

We purchased our initial 46 vessel owning subsidiaries from Frontline on January
1, 2004 for a total purchase price of $1,061.8  million.  The purchase price was
calculated  as the book value of vessels owned by the  subsidiaries  of $2,048.4
million less related debt balances and other liabilities of $986.6 million which
we assumed.  The purchase was partly funded by an equity  contribution of $525.0
million from Frontline.  Additionally we purchased Frontline's option to acquire
an additional VLCC for $8.4 million. This price represents the book value of the
option as recorded previously in Frontline's accounts.

On January 17, 2005 the Company exercised its option to acquire the VLCC Oscilla
and the vessel was delivered to the Company on April 4, 2005. The purchase price
paid to acquire the vessel was  approximately  $16.5 million.  In addition,  the
Company  will make a payment of $14.6  million to  Frontline to reflect the fact
that the original  purchase  price was set assuming  delivery to Ship Finance on
January 1, 2004 whereas  delivery did not occur until April 4, 2005. On the same
date the vessel  commenced a fixed rate time charter to Frontline  Shipping with
an initial rate of $25,575 per day for a fixed period of 210 months. The Company
also entered into a fixed rate management contract with Frontline Management for
$6,500 per day with the same term as the related time charter.

In March 2005, we sold a Suezmax tanker, the Front Fighter to an unrelated third
party  for  $68.3  million.  The time  charter  to  Frontline  Shipping  and the
management agreement for the vessel were concurrently cancelled.

Between January and March 2005, we purchased three additional  double hull VLCCs
from Frontline for an aggregate purchase price of $294 million. The acquisitions
of these  vessels have been funded  partly by the proceeds  from the sale of the
Front  Fighter in March  2005,  partly  from  profit  sharing  payments  that we
received  from  Frontline in respect of the 11-month  period ended  December 31,
2004,  and partly from use of proceeds  from our new  secured  credit  facility.
These vessels have been time chartered back to Frontline Shipping II for periods
of between 17 and 18 years with  initial  charter  rates of between  $31,501 and
$33,793  declining to $28,464 and $28,625 over the terms of the charters.  Under
our  agreements,  the base  charterhire  will be  supplemented by profit sharing
payments  equal to 20% of  Frontline's  earnings  from the use of the  vessel in
excess of the agreed upon base charterhire. We have also entered into management
agreements  whereby Frontline  Management will manage the vessels for $6,500 per
day per vessel for the term of the related time charter.

We have entered into an agreement in May 2005 with parties affiliated with Hemen
to acquire two vessel owning companies, each owning one 2005 built containership
for a total  consideration of $98.6 million.  The Sea Alpha was delivered in May
2005, and the Sea Beta will be delivered from the ship yard in September 2005.

In May 2005, we sold the three Suezmaxes,  Front Lillo,  Front Emperor and Front
Spirit, for a total consideration of $92.0 million. These vessels were delivered
to their new owners in June 2005.  In May 2005,  we also agreed to buy a further
three vessels from Frontline,  namely Front Traveller,  Front  Transporter,  and
Front Target,  for an aggregate  amount of $92.0  million.  The time charter and
management  arrangements  between Ship Finance and Frontline  Shipping have been
cancelled for the three sold vessels and will be replaced with new agreements on
similar terms for the vessels acquired.

We have entered into an agreement in June 2005 with parties  affiliated to Hemen
to acquire two vessel  owning  companies,  each owning one 2004 built VLCC,  for
total  consideration  of $184  million.  We will lease the  vessels on long term
charters to Frontline Shipping II starting in the third quarter of 2005.

Borrowings

As of  December  31, 2004 and  December  31,  2003,  we had total long term debt
outstanding of $1,478.9 million,  $580.0 million (stand alone basis), and $991.6
million (predecessor combined carve-out basis) respectively.  As at December 31,
2004, this amount consisted of the outstanding amount of $530.3 million from our
issue of $580  million  8.5%  senior  notes  due  2013.  In  February  2004,  we
refinanced  the  existing  debt on the vessels we acquired  from  Frontline  and
entered into a new $1,058.0 million  syndicated  senior secured credit facility.
This facility  bore interest at LIBOR plus 1.25% and was repayable  between 2004
and 2010 with a final bullet of $499.7 million  payable on maturity.  We were in
compliance  with all loan  covenants at December 31, 2004. At December 31, 2004,
the  outstanding  amount on this  facility was $948.6  million.  At December 31,
2004,  LIBOR was 2.56% and we estimated  interest expense on this facility would
amount to $35.3 million in 2005 and amortization of related capitalized fees and
expenses would amount to $2.3 million per year.

In February 2005, we refinanced our secured credit  facility with a new $1,131.4
million secured credit facility. The new facility bears interest at LIBOR plus a
margin of 0.7%, is repayable  over a term of six years and has similar  security
terms to the  repaid  facility.  This new  facility  contains  a  minimum  value
covenant,  which requires that the aggregate value of our vessels exceed 140% of
the outstanding amount of the facility. The new facility also contains covenants
that require us to maintain certain minimum levels of free cash, working capital
and equity ratios.

In  connection  with the  $1,058.0  million  syndicated  senior  secured  credit
facility,  in the first  quarter of 2004 we entered into new five year  interest
rate swaps with a combined notional  principal amount of $500.0 million at rates
between 3.3% and 3.5%. We also have existing interest rate swap contracts with a
combined  notional  principal  amount of $81.4 million at rates between 6.0% and
6.5%.  The overall  effect of these swaps is to fix the interest  rate on $581.4
million of floating rate debt at 3.8% (exclusive of margin). Our net exposure to
interest rate  fluctuations  was $367.2  million at December 31, 2004,  compared
with $901.2 million at December 31, 2003. The refinancing of our credit facility
in February 2005 had no effect on these swap  arrangements.  Our net exposure is
based on our  total  floating  rate  debt  less the  notional  principal  of our
floating to fixed  interest rate swaps.  A one per cent change in interest rates
would  increase  or  decrease  interest  expense by $3.6  million per year as of
December  31,  2004.  The fair  market  value of our fixed  rate debt was $546.2
million as of December 31, 2004. If interest  rates were to increase or decrease
by one percent with all other variables remaining constant, we estimate that the
market value of our fixed rate debt would decrease or increase by  approximately
$33.8 million and $31.2 million respectively.

We use financial  instruments to reduce the risk associated with fluctuations in
interest rates.  We do not hold or issue  instruments for speculative or trading
purposes.

In the second  and third  quarters  of 2004 we bought  back and  cancelled  8.5%
senior notes with a total principal amount of $49.7 million.

Equity

We were  initially  capitalized  with 12,000  shares of $1.00 each and an equity
contribution  of  $525.0  million  by  Frontline.  On May 18,  2004 we issued an
additional  73,913,837  shares of $1.00 each to Frontline.  This transaction was
recorded as an  increase  in share  capital  and a  corresponding  reduction  in
contributed surplus at par value of the shares issued.

In July 2004, we issued 1,600,000 common shares to an institutional  investor at
a price of $15.75 per share for total proceeds of $25.2 million.

In November and December  2004,  we  repurchased  and cancelled  625,000  common
shares under a Board  authority to repurchase and cancel up to 2 million shares.
The shares were  repurchased at an average price of $23.54 for a total amount of
$14.7 million.

As each of our vessels completes the third-party  charters that were in place on
January 1, 2004, the finance leases with  Frontline,  entered into on January 1,
2004,  become  effective  for  accounting  purposes.  We have  accounted for the
difference between the historical cost of the vessel,  originally transferred to
us by Frontline on January 1, 2004 at Frontline's historical carrying value, and
the net investment in the lease as a deferred  deemed equity  contribution.  The
difference is presented as a reduction in the net  investment in finance  leases
in the balance  sheet.  This results  from the related  party nature of both the
original  transfer  of the  vessel and the  subsequent  sales  type  lease.  The
deferred  deemed  equity  contribution  is amortized as a credit to  contributed
surplus over the life of the new lease arrangement as lease payments are applied
to the principal balance of the lease receivable. In the year ended December 31,
2004 we accounted for $3.2 million of such deemed equity contributions.

Following these transactions, as of December 31, 2004, our issued and fully paid
share capital balance was $74.9 million and our contributed  surplus balance was
$463.3 million.

Contractual Commitments

At  December  31,  2004,  we  had  the  following  contractual  obligations  and
commitments:

<TABLE>

                                                                           Payment due by period
                                           Less than 1 year    1 - 3 years        3 - 5 years        After 5 years     Total
                                           ----------------    -----------        -----------        -------------     -----
                                                                             (in thousands of $)
<S>                                             <C>              <C>                <C>               <C>              <C>
$580 million 8.5% notes                              -                 -                  -             530,270          530,270
$1,058.0 million credit facility (1)            91,308           182,610            182,610             492,096          948,624
Total contractual cash obligations              91,308           182,610            182,610           1,022,366        1,478,894
</TABLE>

We refinanced  our $1,058.0  million  credit  facility in February 2005 with the
proceeds of a new $1,131.4  million  secured credit  facility which is repayable
over a term of six years. We have the following  contractual  obligations  under
the new facility:

<TABLE>

                                                                           Payment due by period
                                           Less than 1 year    1 - 3 years        3 - 5 years        After 5 years     Total
                                           ----------------    -----------        -----------        -------------     -----
                                                                             (in thousands of $)
<S>                                             <C>              <C>                <C>               <C>              <C>
$1,131.4 million credit facility                78,13            208,368            208,368             592,066        1,086,940
</TABLE>

Trend information

Our charters with the Charterers provide that daily rates decline over the terms
of the charters. With the exceptions described below, the daily base charterhire
for our fleet chartered to Frontline Shipping, which is payable to us monthly in
advance  for a  maximum  of 360 days per year (361  days per leap  year),  is as
follows:

Type of Vessel           2003 to 2006          2007 to 2010      2011 and beyond
--------------           ------------          ------------      ---------------

VLCC....................    $25,575               $25,175            $24,175
Suezmax.................    $21,100               $20,700            $19,700

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

Since December 31, 2004 we have acquired or agreed to acquire an additional nine
VLCCs and two  containerships.  We have also sold one  Suezmax  tanker and three
VLCCs. We expect the net increase in our fleet will increase our total revenues.

The daily base  charterhire  for our fleet  chartered to Frontline  Shipping II,
which is payable  to us  monthly  in advance  for a maximum of 360 days per year
(361 days per leap year), is as follows:
<TABLE>
Vessel                    2005 to 2006        2007 to 2010        2011 to 2018    2019 and beyond
------                    ------------        ------------        ------------    ---------------
<S>                         <C>                 <C>                  <C>            <C>
Front Champion.........     $31,340             $31,140              $30,640        $28,464
Front Century..........     $31,501             $31,301              $30,801        $28,625
Golden Victory.........     $33,793             $33,793              $33,793        $33,793
</TABLE>

We pay daily management fees, which are payable by us monthly in advance for 365
days per year (366 days in a leap year) for each of our vessels in the amount of
$6,500.

To partly  finance the increase in our fleet size we have increased our level of
indebtedness  by  approximately   $180.0  million.   We  expect  this  increased
indebtedness will increase our interest expense.

Our new secured  credit  facility which was drawn in February 2005 bears a lower
interest margin (0.7%) than our re-financed  facility (1.25%).  Accordingly,  we
expect our new facility will lower our average interest rate on our debt.

Since December 31, 2004 market rates for spot chartering tankers have decreased.
All of our  vessels are subject to long term  charters  that  provide for both a
fixed base  charterhire  and a profit  sharing  payment  that  applies  once the
applicable  Charterer  earns daily rates from our  vessels  that exceed  certain
levels.  If market rates for spot market  chartered  vessels decrease our profit
sharing revenues will decrease.

Off balance sheet arrangements

At December 31, 2004 we were not party to any arrangements  which are considered
to be off balance sheet arrangements.

Liquidity and Capital Resources - Predecessor

As of December  31,  2003 and 2002,  we had cash and cash  equivalents  of $26.5
million, and $20.6 million,  respectively.  We generated cash from operations of
$415.5  million in 2003 compared with $115.7  million in 2002 and $307.2 million
in 2001.  Net cash  used in  investing  activities  in 2003  was  $51.6  million
compared with net cash used in investing  activities  of $261.8  million in 2002
and $271.9 million in 2001. In 2003,  investing  activities related primarily to
$70  million  in funding  payments  to the  various  investments  in  associated
companies,  in  addition to $17  million  received as proceeds  from the sale of
investments in associated  companies.  In 2002, our investing activities related
to the acquisition of four VLCCs for an amount totaling $249.3 million. In 2001,
investing   activities   consisted   primarily   of  payments   for  three  VLCC
acquisitions, totaling $210.0 million.

Cash used in financing  activities was $358.0 million in 2003 compared with cash
provided  by  financing  activities  of $140.7  million in 2002 and cash used in
financing activities of $24.5 million in 2001. In 2003 there were $178.2 million
in principal  repayments on long term debt  compared to principal  repayments of
$126.7 million and $228.7 million  proceeds from long term debt in 2002. In 2001
there were proceeds from long term debt of $164.6 million and repayments of long
term debt of $129.2 million. In 2003 there was a net reduction of $178.8 million
in the amount due to  Frontline  compared  with an increase of $41.4  million in
2002 and a decrease of $59.5 million in 2001.

In July 2003 we disposed  of our  interests  in Golden  Lagoon  Corporation  and
Ichiban Transport Corporation for proceeds of $17 million.

In June  2003,  we  acquired  the  remaining  50% of the  shares in Golden  Tide
Corporation for $9.5 million.

In July 2002, we acquired a 33% interest in a joint  venture,  which  acquired a
2002-built VLCC for approximately $78.5 million. At the same time, $52.5 million
of bank financing was secured for the joint venture.

In 2002, we took delivery of four vessels: Front Serenade;  Front Stratus; Front
Page; and Front Falcon. In March 2002 we obtained bank financing for a total sum
of $150  million for the Front  Serenade,  Front  Stratus and Front  Falcon.  In
August 2002, we obtained bank financing for a total sum of $50 million for Front
Page.

We had total long term debt outstanding of $991.6 million at December 31, 2003
compared with $1,106.8 million at December 31, 2002. As of December 31, 2003,
all of our debt was floating rate debt. As of December 31, 2003, our interest
rate swap arrangements effectively fixed our interest rate exposure on $152.6
million of floating rate debt, compared with $327.7 million in 2002. The
interest rate swap agreements will expire between January 2006 and August 2008.

ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES

A.   DIRECTORS AND SENIOR MANAGEMENT

The following table sets forth information  regarding our executive officers and
directors and certain key officers of Frontline Management AS, which is a wholly
owned subsidiary of Frontline, who are responsible for overseeing the management
of our vessels. With the exception of Paul Leand who is independent,  all of our
current  executive  officers  and  directors  are officers  and/or  directors of
Frontline, Frontline Management and the Charterer.

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

Tor Olav Troim......  42      Chairman of the Board, Chief
                              Executive  Officer,  President
                              and Director of the Company

Paul Leand..........  38      Director of the Company

Kate Blankenship....  40      Chief Accounting Officer, Company
                              Secretary and Director of the Company
Tom E. Jebsen.......  47      Chief Financial Officer of the Company

Oscar Spieler.......  43      Chief Executive Officer of Frontline Management AS

Under  our  constituent  documents,  we  are  required  to  have  at  least  one
independent director on our board of directors whose consent will be required to
file for bankruptcy,  liquidate or dissolve,  merge or sell all or substantially
all of our assets.

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

Tor Olav Troim has been the  Chairman  of the Board,  Chief  Executive  Officer,
President  and a  Director  of the  Company  since  October  2003.  He has  been
Vice-President and a director of Frontline since November 3, 1997. He previously
served as Deputy  Chairman of Frontline  from July 4, 1997.  Since May 2000, Mr.
Troim has been a director  and  Vice-Chairman  of  Knightsbridge  Tankers Ltd, a
Bermuda company listed on the NASDAQ National Market.  He is a director of Aktiv
Inkasso ASA and Northern Oil ASA,  both  Norwegian  Oslo Stock  Exchange  listed
companies and Golden Ocean Group Limited,  a Bermuda  company listed on the Oslo
Stock  Exchange.  Prior to his service with  Frontline,  from January 1992,  Mr.
Troim served as Managing  Director and a member of the Board of Directors of DNO
AS, a Norwegian oil company.  Since May 2001, Mr. Troim has served as a director
of Golar LNG Limited,  a Bermuda  company  listed on the Oslo Stock Exchange and
the NASDAQ National Market.

Paul Leand Jr., who is not affiliated with  Frontline,  serves a Director of the
Company.  Mr. Leand is the Chief  Executive  Officer and Director of AMA Capital
Partners LLC, or AMA, an investment bank specializing in the maritime  industry.
From 1989 to 1998 Mr. Leand served at the First  National Bank of Maryland where
he managed the Bank's Railroad Division and its International Maritime Division.
He has worked  extensively in the U.S.  capital markets in connection with AMA's
restructuring  and mergers and  acquisitions  practices.  Mr.  Leand serves as a
member of American  Marine Credit LLC's Credit  Committee and served as a member
of the Investment Committee of AMA Shipping Fund I, a private equity fund formed
and managed by AMA.

Kate Blankenship is our Chief Accounting Officer, Company Secretary and a member
of our Board of Directors.  Mrs.  Blankenship  joined  Frontline in 1994. She is
Chief  Accounting  Officer and Company  Secretary  of  Frontline  and has been a
director of Frontline  since 2003.  Prior to joining  Frontline,  she worked for
KPMG Peat Marwick. She is a member of the Institute of Chartered  Accountants in
England  and  Wales.  Mrs.  Blankenship  has been  Chief  Financial  Officer  of
Knightsbridge  since April 2000 and Secretary of  Knightsbridge  since  December
2000. Mrs. Blankenship has been a director of Golar LNG Limited since 2003 and a
director and Secretary of Golden Ocean Group Limited since October 2004.

Tom E. Jebsen is our Chief  Financial  Officer.  Mr.  Jebsen has served as Chief
Financial Officer of Frontline Management AS since June 1997. From December 1995
until June  1997,  Mr.  Jebsen  served as Chief  Financial  Officer of Tschudi &
Eitzen Shipping ASA, a publicly traded Norwegian  shipowning company.  From 1991
to December 1995, Mr. Jebsen served as Vice President of Dyno  Industrier ASA, a
publicly traded Norwegian explosives producer.  Mr. Jebsen is also a director of
Assuranceforeningen Skuld and Hugin ASA, an internet company.

Oscar Spieler has served as Chief Executive  Officer of Frontline  Management AS
since  October 2003,  and prior to that time as Technical  Director of Frontline
Management AS since November  1999.  From 1995 until 1999, Mr. Spieler served as
Fleet Manager for Bergesen,  a major  Norwegian gas tanker and VLCC owner.  From
1986 to 1995, Mr. Spieler worked with the Norwegian  classification society DNV,
working both with shipping and offshore assets.

B.   COMPENSATION

With the exception of Mr. Leand,  we do not currently  compensate  our directors
and  officers  for their  services  to us Mr.  Leand  receives  an annual fee of
$40,000.  We do  reimburse  directors  for  reasonable  out of  pocket  expenses
incurred by them in connection with their service to us.

During the year ended  December 31, 2004, we paid to our directors and executive
officers (five persons)  aggregate cash compensation of $40,000 and an aggregate
amount of $nil for pension and retirement benefits.

C.   BOARD PRACTICES

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

We do no  currently  have any Board  committees,  nor are we  required  to under
Bermuda law. In lieu of an audit committee  comprised of independent  directors,
our Board of Directors is  responsible  for overseeing the quality and integrity
of the Company's financial statements and its accounting, auditing and financial
reporting  practices,   the  Company's  compliance  with  legal  and  regulatory
requirements,   the  independent  auditor's  qualifications,   independence  and
performance and the Company's internal audit function.

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

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

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

D.   EMPLOYEES

We do not  currently  have  any of  our  own  management  or  employees  because
Frontline  Management has assumed full managerial  responsibility  for our fleet
and our administrative services.

E. SHARE OWNERSHIP

The  beneficial  interests of our Directors and officers in our common shares as
of June 22, 2005, were as follows:

                                                                  Percentage of
                                             Common Shares        Common Shares
Director or Officer                          of $1.00 each          Outstanding
-------------------                          -------------          -----------

Tor Olav Troim                                 194,991                    *
Paul Leand                                           -                    -
Kate Blankenship                                 3,666                    *
Tom E. Jebsen                                   32,960                    *
Oscar Spieler                                   10,583                    *

* Less than one per cent

We do not have a share option plan and none of our  Directors  and officers hold
any options to acquire our common shares.

ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS

A.   MAJOR SHAREHOLDERS

The following table presents certain information regarding the current ownership
of our Common  Shares  with  respect to (i) each  person who we know to own more
than five percent of our outstanding  Common Shares;  and (ii) all directors and
officers as a group as of June 22, 2005.

                                                                Common Shares
Owner                                                        Amount    Percent
                                                             ------    -------
Neuberger Berman LLC                                       4,042,709      5.35%
Frontline Ltd.                                            11,834,332      15.8%
Hemen Holding Ltd. (1)                                    25,330,042     33.82%
All Directors and Officers as a group (five persons) (2)     242,200          *

(1)  Hemen  is a  Cyprus  holding  company  indirectly  controlled  by Mr.  John
     Fredriksen, who is Frontline's Chairman and Chief Executive Officer.

* Less than one per cent

The  Company's  major   shareholders  have  the  same  voting  rights  as  other
shareholders of the Company.

As at June 22,  2005,  856,746 of our Common  Shares were held by 160 holders of
record in the United States.

We are not aware of any arrangements, the operation of which may at a subsequent
date result in a change in control.

B.   RELATED PARTY TRANSACTIONS

We have  acquired  the  majority of our assets,  which at June 24, 2005  consist
primarily  of our fleet of 52  vessels,  from  Frontline.  The  majority  of our
operations are conducted through contractual  relationships between us and other
affiliates  of  Frontline.  In addition,  the majority of our directors are also
directors  of  Frontline.  We refer  you to Item 10. -  Material  Contracts  for
discussion of the material contractual  arrangements that we have with Frontline
and its affiliates.

We  acquired  our  initial  fleet  of 46  vessel  owning  subsidiaries  and  one
subsidiary  with an  option to  acquire  an  additional  vessel  from  Frontline
pursuant to a fleet purchase  agreement between us and Frontline that we entered
into in December  2003. We paid a total of $1,061.8  million to Frontline  being
the book value of assets  transferred by Frontline less amounts of debt assumed.
As part of this spin-off  transaction we also received an equity contribution of
$525.0  million from  Frontline.  We assumed senior  secured  indebtedness  with
respect to our fleet in the amount of approximately $1.158 billion.

We chartered all of the vessels that we acquired  pursuant to the fleet purchase
agreement, to Frontline under long-term leases, which were given economic effect
from January 1, 2004. In connection with these charters,  we have recognized the
inception of net  investments  in finance  leases of $1,876.5  million,  finance
lease interest income of $140.7 million, finance lease service revenues of $72.6
million,  repayments of net  investments  in finance leases of $62.0 million and
deemed  dividends  of $59.0  million in the year ended  December  31,  2004.  At
December  31,  2004 the  balance  of net  investments  in  finance  leases  with
Frontline  was $1,718.6  million of which $77.0  million  represents  short-term
maturities.

We pay  Frontline a  management  fee of $6,500 per day per vessel for all of our
vessels,  with the exception of four which are bareboat chartered,  resulting in
expenses of $96.4 million for the year ended December 31, 2004.

We pay  Frontline  an  administrative  management  fee of $20,000  per year plus
$20,000 per vessel per year.  Based on the fleet during 2004, we paid  Frontline
$960,000 in 2004 under this arrangement.

Frontline pay us profit sharing payments of 20% of their earnings from their use
of our fleet above  average  daily rates of $25,575 for a VLCC and $21,100 for a
Suezmax  for the 11 month  period  beginning  February  1,  2004  and each  year
thereafter.  During the year ended  December 31, 2004, we earned and  recognized
revenue of $114.9 million under this arrangement.

In 2005, to date we have bought a further seven vessels from Frontline, three of
which have been  chartered  back to them under long term  charters to  Frontline
Shipping II. The  remaining  vessels will be chartered  back to Frontline in the
third  quarter of 2005.  In January  2005, we bought the Front Century and Front
Champion,  for a total of $196 million.  The vessels have been chartered back to
Frontline Shipping II for 199 and 204 months  respectively at an initial rate of
$31,368 per day declining to $28,492 per day in 2019. This includes a 20% profit
split  element.  In March 2005, we bought the VLCC Golden Victory from Frontline
for $98 million.  The vessel has been chartered back to Frontline for 204 months
at a rate of  $33,793.  In June  2005  we  bought  the  Front  Traveller,  Front
Transporter  and Front Target for an aggregate of $92 million.  The vessels have
been  chartered  back to Frontline  Shipping II. Also in June 2005, we purchased
the Sea Energy,  Sea Force, Sea Alpha and Sea Beta from parties  affiliated with
Hemen for total  consideration  of $233.3 million.  The Sea Energy and Sea Force
will be chartered  back to Frontline  Shipping II in the third  quarter of 2005,
while the Sea Alpha has been chartered to an unrelated  third party for a period
of 48 months.  The  newbuilding  Sea Beta will be  delivered to us from the ship
yard in September 2005.

C.   INTERESTS OF EXPERTS AND COUNSEL

     Not Applicable

ITEM 8. FINANCIAL INFORMATION

A.   CONSOLIDATED STATEMENTS AND OTHER FINANCIAL INFORMATION

     See Item 18.

Legal Proceedings

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

Dividend Policy

The Board initially adopted a policy in May, 2004, following our public listing,
whereby  we would seek to have a normal  dividend  target of $0.25 per share per
quarter.  In August,  2004, the targeted  normal dividend was increased to $0.35
per share and in November  2004, the targeted  normal  dividend was increased to
$0.45 per share.  We have paid the  following  cash  dividends  since our public
listing in June 2004.

Payment Date                                                Amount per Share
------------                                                ----------------

2004
July 9, 2004                                                      $0.25
September 13, 2004                                                $0.35
December 7, 2004                                                  $0.45

2005
March 18, 2005                                                    $0.50
June 24, 2005                                                     $0.50

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

B.   SIGNIFICANT CHANGES

We were  incorporated in Bermuda in October 2003 as a wholly owned subsidiary of
Frontline for the purpose of acquiring  certain of our shipping  assets.  During
2004,  Frontline  distributed  approximately  48.3% of its  shares  in us to its
shareholders  and at December 31, 2004 held 50.8% in us. See Item 4. Information
on the Company. In February and March 2005, Frontline has spun off a further 35%
of  its  shares  in  us  to  its  shareholders  and  at  March  31,  2005  holds
approximately 15.8% of our shares.

ITEM 9. THE OFFER AND LISTING

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

The Company's Common Shares were listed on the New York Stock Exchange  ("NYSE")
on June 17, 2004 and commenced trading on that date under the symbol "SFL".

The  following  table sets  forth the  fiscal  years high and low prices for the
Common Shares on the NYSE since the date of listing.

                                                            High          Low
Fiscal year ended December 31 2004                         $26.16        $11.55

The following table sets forth, for each full financial quarter the high and low
prices of the Common Shares on the NYSE since the date of listing.

                                                            High          Low
Fiscal year ended December 31, 2004
Second quarter                                             $16.00        $11.55
Third quarter                                              $22.75        $14.30
Fourth quarter                                             $26.16        $18.64

The following table sets forth, for the most recent six months, the high and low
prices for the Common Shares on the NYSE.

                                                            High          Low

May 2005                                                   $19.68        $18.28
April 2005                                                 $20.61        $18.59
March 2005                                                 $22.21        $19.85
February 2005                                              $24.00        $21.00
January 2005                                               $22.76        $18.41
December 2004                                              $26.10        $20.00

ITEM 10. ADDITIONAL INFORMATION

A.   SHARE CAPITAL

     Not Applicable

B.   MEMORANDUM AND ARTICLES OF ASSOCIATION

The  Memorandum  of  Association  of the  Company has  previously  been filed as
Exhibit 3.1 to the Company's Registration Statement on Form F-4/A, (Registration
No.  333-115705)  filed with the Securities  and Exchange  Commission on May 25,
2004, and is hereby incorporated by reference into this Annual Report.

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

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

Our shareholder  have no pre-emptive,  subscription,  redemption,  conversion or
sinking fund rights. Shareholder are entitled to one vote for each share held of
record on all matters submitted to a vote of our shareholders. Shareholders have
no cumulative voting rights.  Shareholders are entitled to dividends if and when
they are declared by our Board of Directors,  subject to any preferred  dividend
right  of  holders  of  any  preference  shares.  Directors  to  be  elected  by
shareholder  require a plurality of votes cast at a meeting at which a quorum is
present.  For all other matters,  unless a different majority is required by law
or our bye-laws,  resolutions to be approved by shareholders require approval by
a majority of votes cast at a meeting at which a quorum is present.

Upon our liquidation, dissolution or winding up, shareholders will be entitled
to receive, ratably, our net assets available after the payment of all our debts
and liabilities and any preference amount owed to any preference shareholders.
The rights of shareholders, including the right to elect directors, are subject
to the rights of any series of preference shares we may issue in the future.

Under our bye-laws annual  meetings of  shareholders  will be held at a time and
place selected by our board of directors each calendar year. Special meetings of
shareholders  may be called by our  board of  directors  at any time and must be
called at the request of shareholders  holding at least 10% of our paid-up share
capital carrying the right to vote at general meetings.  Under our bye-laws five
days' notice of an annual  meeting or any special  meeting must be given to each
shareholder  entitled to vote at that  meeting.  Under  Bermuda  law  accidental
failure to give notice will not invalidate  proceedings at a meeting.  Our board
of directors may set a record date at any time before or after any date on which
such notice is dispatched.

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

Our  Bye-laws  do not  prohibit a director  from being a party to, or  otherwise
having an interest in, any  transaction  or  arrangement  with the Company or in
which the Company is otherwise  interested.  Our  Bye-laws  provide our board of
directors  the  authority to exercise all of the powers of the Company to borrow
money and to  mortgage or charge all or any part of our  property  and assets as
collateral security for any debt, liability or obligation. Our directors are not
required to retire  because of their age, and our  directors are not required to
be holders of our common shares.  Directors serve for one year terms,  and shall
serve until  re-elected  or until their  successors  are  appointed  at the next
annual general meeting.

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

C.   MATERIAL CONTRACTS

Fleet Purchase Agreement

On December 11, 2003 we entered into a fleet  purchase  agreement with Frontline
pursuant to which we acquired our initial fleet of 46 vessel owning subsidiaries
and one subsidiary  with an option to acquire an additional  vessel.  We paid an
aggregate  purchase price of $950 million,  excluding  working capital and other
intercompany   balances   retained  by  us.  We  also  assumed   senior  secured
indebtedness  with  respect to its fleet in the amount of  approximately  $1.158
billion.  The purchase price and the  refinancing of the existing senior secured
indebtedness  on those  vessels,  which was  completed in January of 2004,  were
financed  through a  combination  of the net proceeds  from our issuance of $580
million of 8 1/2% Senior Notes,  due 2013,  funds from a $1.058  billion  senior
secured credit facility and a deemed equity  contribution of $525.0 million from
Frontline.

Time Charters

We have chartered the vessels we acquired from Frontline to the Charterers under
long term time charters,  which will extend for various periods depending on the
age of the vessels, ranging from approximately seven to 23 years.

With the  exceptions  described  below,  the daily  base  charter  rates for our
charters with Frontline Shipping, which are payable to us monthly in advance for
a maximum of 360 days per year (361 days per leap year), are as follows:

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

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

The daily base  charterhire  for our vessels  that are  chartered  to  Frontline
Shipping II, which is also payable to us monthly in advance for a maximum of 360
days per year (361 days per leap year), is as follows:
<TABLE>
Vessel                      2005 to 2006        2007 to 2010         2011 to 2018       2019 and beyond
------                      ------------        ------------         ------------       ---------------
<S>                           <C>                 <C>                  <C>                <C>
Front Champion..........      $31,340             $31,140              $30,640            $28,464
Front Century...........      $31,501             $31,301              $30,801            $28,625
Golden Victory..........      $33,793             $33,793              $33,793            $33,793
</TABLE>

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

In addition,  the base charter rate for our non-double hull vessels will decline
to $7,500 per day after 2010,  at which time  Frontline  Shipping  will have the
option to terminate the charters for those  vessels.  Each charter also provides
that the base  charter  rate will be reduced if the vessel  does not achieve the
performance  specifications  set forth in the  charter.  The related  management
agreement  provides that  Frontline  Management  will  reimburse us for any such
reduced  charter  payments.  The  Charterers  have the right  under a charter to
direct us to bareboat  charter the related  vessel to a third party.  During the
term of the bareboat  charter,  the Charterers will continue to pay us the daily
base  charter rate for the vessel,  less $6,500 per day. The related  management
agreement  provides that our obligation to pay the $6,500 fixed fee to Frontline
Management will be suspended for so long as the vessel is bareboat chartered.

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

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

Charter Ancillary Agreement

We have entered into charter  ancillary  agreements with each of the Charterers,
our relevant vessel owning  subsidiaries  and Frontline.  The charter  ancillary
agreements remain in effect until the last long term charter with the Charterers
terminates  in  accordance   with  its  terms.   Frontline  has  guaranteed  the
Charterers'  obligations under the charter ancillary agreements,  except for the
Charterers' obligations to pay charterhire.

     Charter Service Reserve. Frontline has made an initial capital contribution
     to Frontline  Shipping in the amount of $250 million in cash and has made a
     capital contribution to Frontline Shipping II in the amount of $21 million.
     These  funds are being held as a charter  service  reserve to support  each
     Charterer's  obligation to make charter  payments to us under the charters.
     is The Charterer's are entitled to use the charter service reserve only (1)
     to make charter  payments to us and (2) for reasonable  working  capital to
     meet short term voyage expenses.  The Charterers are required to provide us
     with monthly  certifications of the balances of and activity in the charter
     service reserve.

     Material  Covenants.  Pursuant  to  the  terms  of  the  charter  ancillary
     agreement,  each  Charterer  has  agreed  not to  pay  dividends  or  other
     distributions  to its shareholders or loan, repay or make any other payment
     in respect of its  indebtedness or any of its affiliates  (other than us or
     our wholly owned  subsidiaries),  unless (1) the relevant Charterer is then
     in compliance with its obligations under the charter  ancillary  agreement,
     (2) after  giving  effect to the  dividend or other  distribution,  (A) the
     Charterer remains in compliance with such  obligations,  (B) the balance of
     the charter service reserve equals at least $250.0 million,  in the case of
     Frontline  Shipping,  or $21 million in the case of  Frontline  Shipping II
     (which  threshold  will be reduced by $5.3  million and $7.0 million in the
     case of Frontline Shipping and Frontline Shipping II, respectively, in each
     event that a charter to which the Charterer is a party is terminated  other
     than by  reason of a default  by the  Charterer),  which we refer to as the
     "Minimum Reserve",  and (C) it certifies to us that it reasonably  believes
     that the  charter  service  reserve  will be equal to or  greater  than the
     Minimum  Reserve level for at least 30 days after the date of that dividend
     or distribution, taking into consideration it's reasonably expected payment
     obligations  during  such  30-day  period,  (3) with  respect to  Frontline
     Shipping only, any charterhire  payments  deferred pursuant to the deferral
     provisions  described below have been fully paid to us and (4) with respect
     to Frontline  Shipping only, any profit sharing payments  deferred pursuant
     to the profit sharing  payment  provisions  described below have been fully
     paid to us.  In  addition,  each  Charterer  has  agreed to  certain  other
     restrictive  covenants,  including  restrictions on its ability to, without
     our consent:

     o    amend its  organizational  documents in a manner that would  adversely
          affect us;

     o    violate its organizational documents;

     o    engage in businesses  other than the  operation and  chartering of our
          vessels;

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

     o    sell all or  substantially  all of its  assets  or the  assets  of the
          relevant  Charterer and its  subsidiaries  taken as a whole,  or enter
          into any merger, consolidation or business combination transaction;

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

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

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

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

     In addition,  Frontline has agreed that it will cause the Charterers at all
     times to remain its wholly owned subsidiary.

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

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

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

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

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

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

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

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

     o    The relevant  Charterer fails at any time to hold at least $55 million
          in cash and cash equivalents.

     Upon the  occurrence  of any event of  default  under a  charter  ancillary
     agreement that  continues for 30 days after we give the relevant  Charterer
     notice of such default, we may elect to:

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

     o    foreclose on any or all of our security interests described above with
          respect to the relevant  Charterer;  and/or pursue any other available
          rights or remedies.

Vessel Management Agreements

Our vessel  owning  subsidiaries  that we acquired from  Frontline  entered into
fixed rate management  agreements with Frontline Management effective January 1,
2004. Under the management  agreements,  Frontline Management is responsible for
all technical management of the vessels, including crewing, maintenance, repair,
certain  capital  expenditures,   drydocking,  vessel  taxes  and  other  vessel
operating  expenses.  In addition,  if a structural  change or new  equipment is
required due to changes in  classification  society or regulatory  requirements,
Frontline  Management  will be  responsible  for making them,  unless  Frontline
Shipping does so under the charters.  Frontline  Management  outsources  many of
these services to third party providers.

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

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

Administrative Services Agreement

We have  entered  into  an  administrative  services  agreement  with  Frontline
Management and our vessel owning  subsidiaries  effective January 1, 2004. Under
this administrative  services agreement Frontline Management provides us and our
vessel owning  subsidiaries  with  administrative  support  services such as the
maintenance  of  our  corporate  books  and  records,   payroll  services,   the
preparation of tax returns and financial  statements,  assistance with corporate
and  regulatory  compliance  matters  not  related  to our  vessels,  legal  and
accounting  services,  assistance  in  complying  with  United  States and other
relevant securities laws, obtaining  non-vessel related insurance,  if any, cash
management  and  bookkeeping  services,  development  and monitoring of internal
audit controls,  disclosure controls and information technology,  furnishing any
reports  or  financial  information  that  might be  requested  by us and  other
non-vessel  related  administrative  services.  Under this  agreement  Frontline
Management also provides us and our vessel owning subsidiaries with office space
in Bermuda.  We and our vessel owning  subsidiaries  pay Frontline  Management a
fixed fee of $20,000 each per year for its  services  under the  agreement,  and
reimburse  Frontline  Management  for  reasonable  third party costs,  including
directors fees and expenses,  shareholder  communications  and public relations,
registrars,  audit,  legal  fees and  listing  costs,  if  Frontline  Management
advances them on our behalf.  Before any public equity  offering by us,  neither
party may terminate this agreement for a period of two years without cause,  but
after two years or after public equity  offering  either party may terminate the
agreement on 180 days' notice.

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

D.   EXCHANGE CONTROLS

We are classified by the Bermuda Monetary Authority as a non-resident of Bermuda
for exchange control purposes.

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

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

As an "exempted  company",  we are exempt from  Bermuda laws which  restrict the
percentage of share capital that may be held by non-Bermudians.

E.   TAXATION

United States Taxation

The  following  discussion  is based upon the  provisions  of the U.S.  Internal
Revenue Code of 1986,  as amended  (the  "Code"),  existing  and  proposed  U.S.
Treasury  Department  regulations,  administrative  rulings,  pronouncements and
judicial decisions,  all as of the date of this Annual Report.  Unless otherwise
noted,  references to the "Company"  include the  Company's  Subsidiaries.  This
discussion  assumes  that we do not  have an  office  or  other  fixed  place of
business in the U1nited States.

Taxation of the Company's Shipping Income: In General

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

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

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

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

Application of Code Section 883

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

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

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

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

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

The  U.S.   Treasury   Department  has  recognized   Bermuda,   the  country  of
incorporation  of the Company and  certain of its  subsidiaries,  as a qualified
foreign  country.  In addition,  the U.S.  Treasury  Department  has  recognized
Liberia,  Panama,  the Isle of Man,  Singapore  and  Cyprus,  the  countries  of
incorporation  of certain of the Company's  subsidiaries,  as qualified  foreign
countries.  Accordingly,  the Company and its vessel owning subsidiaries satisfy
the country of organization requirement.

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

For the 2004 tax year, the Company  satisfied the 50% Ownership  Test since,  on
more than half the days of the taxable  year,  more than 50% of the value of the
Company's  stock  was  owned  by  Frontline,  which  satisfies  the  country  of
organization requirement and the Publicly-Traded Test.

Final regulations interpreting Section 883 were promulgated by the U.S. Treasury
Department  in  August  2003,   which  the  Company  refers  to  as  the  "final
regulations."  While the final  regulations  only become  effective for calendar
year taxpayers such as ourselves  beginning with the calendar year 2005, we have
assumed for purposes of this  discussion  that these  regulations  are currently
applicable for 2004.

Taxation in Absence of Internal Revenue Code Section 883 Exemption

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

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

Taxation of U.S. Holders

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

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

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

Distributions

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

Dividends paid on our common stock to a U.S. Holder who is an individual,  trust
or estate (a "U.S.  Individual  Holder") will generally be treated as "qualified
dividend income" that is taxable to such U.S. Individual Holders at preferential
tax rates (through 2008) provided that (1) the common stock is readily  tradable
on an established  securities  market in the United States (such as the New York
Stock  Exchange);  (2) we are not a passive foreign  investment  company for the
taxable  year during  which the  dividend is paid or the  immediately  preceding
taxable year (which we do not believe we are, have been or will be); and (3) the
U.S.  Individual  Holder has owned the common stock for more than 60 days in the
121-day  period  beginning  60 days  before the date on which the  common  stock
becomes ex-dividend.

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

Sale, Exchange or other Disposition of Common Stock

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

Passive Foreign Investment Company Status and Significant Tax Consequences

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Backup Withholding and Information Reporting

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

     o    fail to provide an accurate taxpayer identification number;

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

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

If you sell your  common  shares  to or  through a U.S.  office or  broker,  the
payment  of the  proceeds  is  subject  to  both  U.S.  backup  withholding  and
information reporting unless you establish an exemption. If you sell your common
shares through a non-U.S. office of a non-U.S. broker and the sales proceeds are
paid to you outside  the United  States then  information  reporting  and backup
withholding generally will not apply to that payment.  However, U.S. information
reporting requirements,  but not backup withholding,  will apply to a payment of
sales  proceeds,  including a payment made to you outside the United States,  if
you sell your common stock through a non-U.S.  office of a broker that is a U.S.
person or has some other contacts with the United States.

Backup  withholding is not an additional tax. Rather, you generally may obtain a
refund of any amounts withheld under backup  withholding  rules that exceed your
income tax  liability  by filing a refund claim with the U.S.  Internal  Revenue
Service.

Bermuda Taxation

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

There is no income tax treaty  between the United States and Bermuda  pertaining
to the  taxation of income  except in the case of insurance  enterprises.  There
also is no estate tax treaty between the United States and Bermuda.

F.   DIVIDENDS AND PAYING AGENTS

     Not Applicable

G.   STATEMENT BY EXPERTS

     Not Applicable

H.   DOCUMENTS ON DISPLAY

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

I.   SUBSIDIARY INFORMATION

     Not Applicable

ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We are exposed to various  market risks,  including  interest  rates and foreign
currency fluctuations.  We use interest rate swaps to manage interest rate risk.
We may enter  into  derivative  instruments  from  time to time for  speculative
purposes.

Our  exposure to interest  rate risk  relates  primarily to our debt and related
interest  rate swaps.  The majority of this  exposure  derives from our floating
rate debt,  which  totalled  $948.6  million at December 31, 2004 (2003:  $991.6
million).  We have  entered into  interest  rate swap  agreements  to manage its
exposure to interest rate changes by swapping floating interest rates with fixed
interest  rates.  At  December  31,  2004,  we had  thirteen  swaps with a total
notional  principal of $581.4 million (2003 - two swaps with notional  principal
of $90.4 million).  The swap  agreements  mature between March 2006 and February
2009,  and we estimate  that we would  receive $3.6  million to terminate  these
agreements as of December 31, 2004 (2003 - pay $5.7  million).  Our net exposure
to interest  rate  fluctuations  is $367.2  million at December  31, 2004 (2003:
$901.2 million).  Our net exposure is based on our total floating rate debt less
the notional  principal of our floating to fixed  interest rate swaps. A one per
cent change in interest  rates would  increase or decrease  interest  expense by
$3.6 million per year as of December 31, 2004 (2003: $9.0 million).

The fair market  value of our fixed rate debt was $546.2  million as of December
31, 2004 (2003: $580.0 million).  If interest rates were to increase or decrease
by one percent with all other variables remaining constant, we estimate that the
market value of our fixed rate debt would decrease or increase by  approximately
$33.8 and $31.2 million  respectively  (2003:  decrease by $39.8 and increase by
$36.4 million).

The majority of our transactions, assets and liabilities are denominated in U.S.
dollars, our functional currency.  One of our subsidiaries,  has Yen denominated
long-term  debt and charter  contracts  denominated in Yen. There is a risk that
currency fluctuations will have a negative effect on the value of our cashflows.
At December 31, 2004, we had (Y)929 million  receivable in relation to long term
yen denominated charter contracts (2003 - (Y)1.7 billion). A one Yen movement in
the exchange rate would increase or decrease net income by $0.1 million.

ITEM 12. DESCRIPTION OF SECURITIES

     Not Applicable

<PAGE>

                                     PART II

ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES

None

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

None

ITEM 15. CONTROLS AND PROCEDURES

As of  December  31,  2004,  the  Company  carried  out  an  evaluation  of  the
effectiveness of the design and operation of the Company's  disclosure  controls
and procedures pursuant to Exchange Act Rule 13a-14. Based upon that evaluation,
the principal executive officers and principal financial officers concluded that
the Company's  disclosure controls and procedures are effective in alerting them
timely to material  information  relating to the Company required to be included
in the Company's periodic SEC filings.

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

ITEM 16 A. AUDIT COMMITTEE FINANCIAL EXPERT

The Company does not  currently  have a separate  audit  committee.  The Company
expects to have an audit  committee and an audit committee  financial  expert in
the year 2005.

ITEM 16 B. CODE OF ETHICS.

The Company has adopted a Code of Ethics,  filed as Exhibit  11.1 to this Annual
Report that applies to all employees.

ITEM 16 C. PRINCIPAL ACCOUNTANT FEES AND SERVICES

Our principal  accountant for 2004 was Moore Stephens,  P.C. The following table
sets forth for the  recent  fiscal  year the fees paid or accrued  for audit and
services provided by Moore Stephens, P.C.

     (in thousands of $)
                                                                   2004
                                                                   ----
     Audit Fees (a)                                                 250
     Audit-Related Fees (b)                                           -
     Tax Fees (c)                                                     -
     All Other Fees (d)                                               -
     Total                                                          250

(a)  Audit Fees

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

(b)  Audit -Related Fees

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

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

Not applicable

ITEM 17. FINANCIAL STATEMENTS

Not Applicable

ITEM 18. FINANCIAL STATEMENTS

The  following  financial  statements  listed  below  and set forth on pages F-1
through F-30 are filed as part of this annual report:

Financial Statements for Ship Finance International Limited.

Index to Consolidated Financial Statements                                 F-1

Report of Independent Registered Public Accounting Firm                    F-2

Report of Independent Registered Public Accounting Firm                    F-3

Report of Independent Registered Public Accounting Firm                    F-4

Report of Independent Registered Public Accounting Firm                    F-5

Consolidated Statements of Operations for the year ended
December 31, 2004 and the period from October 10, 2003
(inception) to December 31, 2003 and Predecessor Combined
Carve-out Statements of Operations for the years ended
December 31, 2003 and 2002                                                 F-6

Consolidated Balance Sheets as of December 31, 2004 and
2003 and Predecessor Combined Carve-out Balance Sheet
as of December 31, 2003                                                    F-7

Consolidated Statements of Cash Flows for the year ended
December 31, 2004 and the period from October 10, 2003
(inception) to December 31, 2003 and Predecessor Combined
Carve-out Statements of Cash Flows for the years ended
December 31, 2003 and 2002                                                 F-8

Consolidated Statement of Changes in Stockholders' Equity
for the year ended December 31, 2004 and the period from
October 10, 2003 (inception) to December 31, 2003 and
Predecessor Combined Carve-out Statements of Changes in
Stockholders' Equity for the years ended December 31
2003 and 2002                                                             F-10

Notes to Consolidated and Predecessor Combined Carve-out
Financial Statements                                                      F-12


<PAGE>


ITEM 19.  EXHIBITS

Number    Description of Exhibit


1.1*      Memorandum of Association of Ship Finance  International  Limited (the
          "Company")  incorporated  by reference to Exhibit 3.1 of the Company's
          Registration Statement, SEC File No. 333-115705, filed on May 21, 2004
          (the "Original Registration Statement").

1.4*      Amended and Restated Bye-laws of the Company incorporated by reference
          to Exhibit 3.2 of the Company's Original Registration Statement.

2.1*      Form of  Common  Stock  Certificate  of the  Company  incorporated  by
          reference  to  Exhibit  4.1 of  the  Company's  Original  Registration
          Statement.

4.1*      Indenture  relating to 8.5% Senior Notes due 2013,  dated December 18,
          2003  incorporated  by  reference  to  Exhibit  4.4 of  the  Company's
          Original Registration Statement.

4.2*      Form of $1.058 billion Credit  Facility  incorporated  by reference to
          Exhibit 10.1 of the Company's Original Registration Statement.

4.3*      Fleet  Purchase  Agreement  dated  December 11, 2003  incorporated  by
          reference  to  Exhibit  10.2 of the  Company's  Original  Registration
          Statement.

4.4*      Form of Performance Guarantee issued by Frontline Ltd. incorporated by
          reference  to  Exhibit  10.3 of the  Company's  Original  Registration
          Statement.

4.5*      Form of Time Charter  incorporated by reference to Exhibit 10.4 of the
          Company's Original Registration Statement.

4.6*      Form of Vessel  Management  Agreements  incorporated  by  reference to
          Exhibit 10.5 of the Company's Original Registration Statement.

4.7*      Form of Charter  Ancillary  Agreement  incorporated  by  reference  to
          Exhibit 10.6 of the Company's Original Registration Statement.

4.8*      Form of Administrative Services Agreement incorporated by reference to
          Exhibit 10.7 of the Company's Original Registration Statement.

8.1       Subsidiaries of the Company.

11.1      Code of Ethics

12.1      Certification of the Principal Executive Officer

12.2      Certification of the Principal Financial Officer

13.1      Certifications  under Section 906 of the Sarbanes-Oxley act of 2002 of
          the Principal Executive Officer

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

* Incorporated herein by reference.
<PAGE>

                                   SIGNATURES

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

                                             Ship Finance International Limited
                                             ----------------------------------
                                                       (Registrant)

Date  June 30, 2005                            By   /s/ Kate Blankenship
                                                    ----------------------------
                                                        Kate Blankenship
                                                    Company Secretary and
                                                  Chief Accounting Officer


<PAGE>



Ship Finance International Limited
Index to Consolidated and Predecessor Combined Carve-out Financial Statements

Report of Independent Registered Public Accounting Firm

Report of Independent Registered Public Accounting Firm

Report of Independent Registered Public Accounting Firm

Report of Independent Registered Public Accounting Firm

Consolidated  Statements of Operations  for the year ended December 31, 2004 and
the  period  from  October  10,  2003  (inception)  to  December  31,  2003  and
Predecessor  Combined  Carve-out  Statements of  Operations  for the years ended
December 31, 2003 and 2002

Consolidated  Balance  Sheets as of December  31, 2004 and 2003 and  Predecessor
Combined Carve-out Balance Sheet as of December 31, 2003

Consolidated  Statements of Cash Flows for the year ended  December 31, 2004 and
the  period  from  October  10,  2003  (inception)  to  December  31,  2003  and
Predecessor  Combined  Carve-out  Statements  of Cash Flows for the years  ended
December 31, 2003 and 2002

Consolidated  Statement  of Changes in  Stockholders'  Equity for the year ended
December 31, 2004 and the period from October 10, 2003  (inception)  to December
31,  2003  and  Predecessor   Combined   Carve-out   Statements  of  Changes  in
Stockholders' Equity for the years ended December 31, 2003 and 2002

Notes to Consolidated and Predecessor Combined Carve-out Financial Statements


<PAGE>


Ship Finance International Limited
Report of Independent Registered Public Accounting Firm


TO THE BOARD OF DIRECTORS AND STOCKHOLDERS OF SHIP FINANCE INTERNATIONAL LIMITED


We have  audited the  accompanying  consolidated  balance  sheet of Ship Finance
International  Limited and subsidiaries (the Company),  as of December 31, 2004,
and the related consolidated statements of operations,  changes in stockholders'
equity,  and cash flows for the year then ended.  These  consolidated  financial
statements   are  the   responsibility   of  the   Company's   management.   Our
responsibility  is  to  express  an  opinion  on  these  consolidated  financial
statements based on our 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
consolidated  financial statements are free of material  misstatement.  An audit
includes  examining,  on a test  basis,  evidence  supporting  the  amounts  and
disclosures in the  consolidated  financial  statements.  An audit also includes
assessing the  accounting  principles  used and  significant  estimates  made by
management,  as well as evaluating the overall consolidated  financial statement
presentation.  We believe  that our audit  provides a  reasonable  basis for our
opinion.

In our opinion, the consolidated  financial statements referred to above present
fairly,  in all  material  respects,  the  financial  position  of Ship  Finance
International  Limited and subsidiaries as of December 31, 2004, and the results
of their  operations and their cash flows for the year then ended, in conformity
with U.S. generally accepted accounting principles.




MOORE STEPHENS, P. C.
Certified Public Accountants.

New York, New York
March 31, 2005


<PAGE>


Ship Finance International Limited
Report of Independent Registered Public Accounting Firm


To the Board of Directors and Stockholders of Ship Finance International Limited

In our opinion,  the  accompanying  balance sheet and the related  statements of
operations,  cash flows and changes in stockholders'  equity present fairly,  in
all material  respects,  the  financial  position of Ship Finance  International
Limited (the Company) at December 31, 2003 and the results of its operations and
its cash flows for the period from October 10, 2003  (Inception) to December 31,
2003, in conformity with accounting  principles generally accepted in the United
States of America.  These  financial  statements are the  responsibility  of the
Company's  management;  our  responsibility  is to  express  an opinion on these
financial  statements  based  on our  audit.  We  conducted  our  audit of these
statements in accordance  with the  standards of the Public  Company  Accounting
Oversight  Board  (United  States).  Those  standards  require  that we plan and
perform the audit to obtain  reasonable  assurance  about  whether the financial
statements are free of material misstatement.  An audit includes examining, on a
test basis,  evidence  supporting  the amounts and  disclosures in the financial
statements,  assessing the accounting  principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.



PricewaterhouseCoopers DA
Oslo, Norway
February 6, 2004



<PAGE>


Ship Finance International Limited
Report of Independent Registered Public Accounting Firm


To the Board of Directors and Stockholders of Ship Finance International Limited

In our opinion,  the accompanying  predecessor  combined carve-out balance sheet
and the related predecessor  combined carve-out  statements of operations,  cash
flows and  changes in  stockholders'  equity  present  fairly,  in all  material
respects,   the  financial   position  of  the   predecessor   to  Ship  Finance
International  Limited and its  subsidiaries  (the Company) at December 31, 2003
and the results of their operations and their cash flows for the year then ended
in conformity with accounting principles generally accepted in the United States
of America.  These financial  statements are the responsibility of the Company's
management;  our  responsibility  is to express  an  opinion on these  financial
statements  based on our audit.  We conducted  our audit of these  statements in
accordance with the standards of the Public Company  Accounting  Oversight Board
(United States).  Those standards  require that we plan and perform the audit to
obtain reasonable  assurance about whether the financial  statements are free of
material  misstatement.  An audit includes examining,  on a test basis, evidence
supporting the amounts and  disclosures in the financial  statements,  assessing
the accounting principles used and significant estimates made by management, and
evaluating the overall  financial  statement  presentation.  We believe that our
audit provides a reasonable basis for our opinion.

As  discussed  in Note 2 to the  financial  statements,  on  January 1, 2002 the
Company adopted Statement of Financial Accounting Standard No. 142.

PricewaterhouseCoopers DA
Oslo, Norway
March 22, 2004




<PAGE>


Ship Finance International Limited
Report of Independent Registered Public Accounting Firm


To the Board of Directors and Stockholders of Ship Finance International Limited

In our opinion,  the accompanying  predecessor  combined carve-out statements of
operations,  cash flows and changes in stockholders'  equity present fairly,  in
all material  respects,  the results of their  operations of the  predecessor to
Ship Finance  International Limited and its subsidiaries (the Company) and their
cash flows for the year ended  December 31, 2002 in conformity  with  accounting
principles  generally accepted in the United States of America.  These financial
statements   are  the   responsibility   of  the   Company's   management;   our
responsibility  is to express an opinion on these financial  statements based on
our audit.  We conducted our audit of these  statements  in accordance  with the
standards of the Public  Company  Accounting  Oversight  Board (United  States).
Those standards  require that we plan and perform the audit to obtain reasonable
assurance   about  whether  the  financial   statements  are  free  of  material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the  amounts  and  disclosures  in  the  financial  statements,   assessing  the
accounting  principles  used and significant  estimates made by management,  and
evaluating the overall  financial  statement  presentation.  We believe that our
audit provides a reasonable basis for our opinion.

As  discussed  in Note 2 to the  financial  statements,  on  January 1, 2002 the
Company adopted Statement of Financial Accounting Standard No. 142.

PricewaterhouseCoopers
Hamilton, Bermuda
November 28, 2003


<PAGE>

<TABLE>
                                                 Ship Finance International Limited

                           Consolidated Statements of Operations for the year ended December 31, 2004 and
                                the period from October 10, 2003 (inception) to December 31, 2003 and
                             Predecessor Combined Carve-out Statements of Operations for the years ended
                                                     December 31, 2003 and 2002

                                             (in thousands of $, except per share data)
<CAPTION>


                                                                              Period from              Predecessor Combined
                                                                             October 10, 2003              Carve-out
                                                          Year ended         (inception) to       Year ended         Year ended
                                                       December 31, 2004    December 31, 2003   December 31,2003   December 31, 2002
                                                       -----------------    -----------------   ----------------   -----------------
<S>                                                          <C>                   <C>              <C>              <C>
Operating revenues
Time charter revenues                                         86,741                -                40,759           10,873
Bareboat charter revenues                                     27,453                -                25,986           30,121
Voyage charter revenues                                       49,707                -               628,323          324,180
Finance lease interest income                                140,691                -                     -                -
Finance lease service revenues                                72,551                -                     -                -
Profit sharing revenues                                      114,926                -                     -                -
------------------------------------------------------------------------------------------------------------------------------------
Total operating revenues                                     492,069                -               695,068          365,174
Operating expenses
Voyage expenses and commission                                 9,978                -               148,533           93,996
Ship operating expenses                                       96,505                -                81,989           81,369
Administrative expenses                                        3,812               14                 9,715            6,945
Depreciation                                                  34,617                -               106,015           96,773
------------------------------------------------------------------------------------------------------------------------------------
Total operating expenses                                     144,912               14               346,252          279,083
Net operating income                                         347,157              (14)              348,816           86,091
Other income/(expenses)
Interest income                                                2,567              199                 5,866            8,511
Interest expense                                             (95,933)          (2,122)              (35,117)         (42,126)
Share of results of associated companies                           -                -                22,098          (10,125)
Foreign currency exchange gain (loss)                             88                -               (10,442)          (5,644)
Other financial items, net                                     8,780                -                 3,591           (4,541)
------------------------------------------------------------------------------------------------------------------------------------
Net other income/(expenses)                                  (84,498)          (1,923)              (14,004)         (53,925)
------------------------------------------------------------------------------------------------------------------------------------
Net  income  before  cumulative  effect
of a change  in accounting principle                         262,659           (1,937)              334,812           32,166
Cumulative effect of a change in accounting principle              -                -                     -          (14,142)
------------------------------------------------------------------------------------------------------------------------------------
Net income                                                   262,659           (1,937)              334,812           18,024
====================================================================================================================================
Basic and diluted earnings per share                           $3.52                -                  $4.53           $0.24

The accompanying notes are an integral part of these consolidated and combined
carve-out financial statements.
</TABLE>

<PAGE>

<TABLE>

                                                 Ship Finance International Limited

                            Consolidated Balance Sheets as of December 31, 2004 and 2003 and Predecessor
                                      Combined Carve-out Balance Sheet as of December 31, 2003
                                                         (in thousands of $)
<CAPTION>

                                                                                                                     Predecessor
                                                                                                                  Combined Carve-out
                                                                   December 31, 2004      December 31, 2003      December 31, 2003
                                                                   -----------------      -----------------      -----------------
<S>                                                                 <C>                   <C>                    <C>
ASSETS
Current assets
  Cash and cash equivalents                                           29,193                     -                  26,519
  Restricted cash                                                      5,379               565,500                       -
  Trade accounts receivable                                              256                     -                  23,896
  Amount due from parent company                                       4,864                     -                       -
  Other receivables                                                      241                   211                   7,521
  Inventories                                                              -                     -                  16,248
  Voyages in progress                                                      -                     -                  34,916
  Prepaid expenses and accrued income                                114,926                     -                   2,234
  Investment in finance leases, current portion                       76,998                     -                       -
------------------------------------------------------------------------------------------------------------------------------------
  Total current assets                                               231,857               565,711                 111,064
Vessel purchase option                                                 8,370                     -                   8,370
Vessels and equipment, net                                           236,305                     -               1,863,504
Investment in finance leases                                       1,641,644                     -                       -
Investment in associated companies                                         -                     -                 160,082
Mark to market valuation of derivatives                                7,737                     -                       -
Deferred charges                                                      27,024                16,481                   4,304
Other long-term assets                                                     -                     -                   9,024
------------------------------------------------------------------------------------------------------------------------------------
  Total assets                                                     2,152,937               582,192               2,156,348
====================================================================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
  Short-term debt and current portion of long-term debt               91,308                     -                 141,522
  Trade accounts payable                                                 180                     -                   4,664
  Accrued expenses                                                     8,396                 4,015                  18,729
  Mark to market valuation of derivatives                                  -                     -                   9,217
  Amount due to parent company                                             -                   102                 299,166
  Other current liabilities                                              382                     -                  10,936
------------------------------------------------------------------------------------------------------------------------------------
  Total current liabilities                                          100,266                 4,117                 484,234
Long-term liabilities
  Long-term debt                                                   1,387,586               580,000                 850,088
  Mark to market valuation of derivatives                              4,103                     -                       -
------------------------------------------------------------------------------------------------------------------------------------
Total liabilities                                                  1,491,955               584,117               1,334,322
Commitments and contingent liabilities
Stockholders' equity
  Share capital                                                       74,901                    12                       -
  Contributed surplus                                                463,261                     -                       -
  Retained earnings (deficit)                                        122,820                (1,937)                      -
  Invested equity                                                          -                     -                 822,026
------------------------------------------------------------------------------------------------------------------------------------
  Total stockholders' equity                                         660,982                (1,925)                822,026
------------------------------------------------------------------------------------------------------------------------------------
  Total liabilities and stockholders' equity                       2,152,937               582,192               2,156,348
------------------------------------------------------------------------------------------------------------------------------------

The accompanying notes are an integral part of these consolidated and combined carve-out financial statements.
</TABLE>

<PAGE>

<TABLE>

                                                 Ship Finance International Limited

                           Consolidated Statements of Cash Flows for the year ended December 31, 2004 and
                                the period from October 10, 2003 (inception) to December 31, 2003 and
                             Predecessor Combined Carve-out Statements of Cash Flows for the years ended
                                                     December 31, 2003 and 2002

                                                        (in thousands of $)
<CAPTION>

                                                                              Period from              Predecessor Combined
                                                                             October 10, 2003              Carve-out
                                                          Year ended         (inception) to       Year ended         Year ended
                                                       December 31, 2004    December 31, 2003   December 31,2003   December 31, 2002
                                                       -----------------    -----------------   ----------------   -----------------
<S>                                                       <C>                   <C>                <C>              <C>
Operating activities
Net income (loss)                                            262,659           (1,937)             334,812           18,024
Adjustments  to reconcile  net income
   (loss) to net cash
provided by operating activities:
  Depreciation                                                34,617                -              106,015           96,773
  Amortisation of deferred charges                             9,485               69                1,019              814
  Share of results of associated companies                         -                -              (22,098)          10,125
  Interest income, capitalised                                     -                -               (4,489)          (7,077)
  Unrealised foreign exchange (gain) loss                       (164)               -               10,716            5,334
  Change in accounting principle                                   -                -                    -           14,142
  Adjustment of derivatives to market value                   (9,289)               -               (6,850)           2,511
  Other                                                       (1,146)               -                    -                -
  Release of accumulated  other comprehensive
   income to net income                                            -                -                1,609              839
  Changes in  operating  assets and  liabilities,
   net of effect of acquisitions
    Trade accounts receivable                                   (256)               -                 (343)           6,517
    Other receivables                                              -             (199)                (129)          (3,537)
    Inventories                                                    -                -                4,540          (10,718)
    Voyages in progress                                            -                -               (3,061)         (23,990)
    Prepaid expenses and accrued income                     (114,727)               -                 (285)             (72)
    Trade accounts payable                                       180                -                 (539)           1,115
    Accrued expenses                                           1,750            2,063               (9,092)           3,899
    Amount due from parent company                            (4,966)               4                    -                -
    Other current liabilities                                    385                -                3,698              959
------------------------------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities                    178,528                -              415,523          115,658

Investing activities
  Acquisition of  subsidiaries,  for $1,061,793
  net of an equity contribution by parent
    company  of $525,000                                    (536,793)               -                    -                -
  Additions to new  buildings and  vessel
   purchase options, vessels and equipment                    (8,370)               -                    -         (249,291)
  Repayments from investments in finance leases               61,990                -                    -                -
  Investments in associated companies                              -                -              (70,045)          (7,490)
  Proceeds from sales of investments in
    associated companies                                           -                -               17,245                -
  Net maturity (placement) of restricted cash                560,121         (565,500)                   -                -
  Short-term loan advances to parent company                 (55,254)               -                    -                -
  Short-term loan repayments from parent company              55,254                -                    -                -
  Net maturity (placement) of other loans receivable               -                -                1,168           (1,085)
  Repayment of other long-term liabilities                         -                -                    -           (3,913)
------------------------------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) investing activities           76,948         (565,500)             (51,632)        (261,779)

Financing activities
  Proceeds from issuance of shares                            24,696                -                    -                -
  Repurchases of shares                                      (14,713)               -                    -                -
  Proceeds from issuance of long-term debt                 1,017,100          580,000                    -          228,686
  Repayments of long-term debt                            (1,099,707)               -             (178,236)        (126,713)
  Debt fees paid                                             (15,760)         (14,500)                (985)          (2,683)
  Net advances from (repayments to) parent company                 -                -             (178,785)          41,424
  Cash dividends paid                                        (78,905)               -                    -                -
  Deemed dividends paid                                      (58,994)               -                    -                -
------------------------------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) financing activities         (226,283)         565,500             (358,006)         140,714
------------------------------------------------------------------------------------------------------------------------------------
Net change in cash and cash equivalents                       29,193                -                5,885           (5,407)
Cash and cash equivalents at start of the period                   -                -               20,634           26,041
------------------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of the period                29,193                -               26,519           20,634
====================================================================================================================================
Supplemental disclosure of cash flow information:
  Interest paid, net of capitalised interest                  81,992                -               31,543           43,036
====================================================================================================================================
Non-Cash Investing and Financing:

The accompanying notes are an integral part of these consolidated and combined carve-out financial statements.
</TABLE>

<PAGE>

<TABLE>

                                                 Ship Finance International Limited

                            Consolidated Statement of Changes in Stockholders' Equity for the year ended
                           December 31, 2004 and the period from October 10, 2003 (inception) to December
                                  31, 2003 and Predecessor Combined Carve-out Statements of Changes
                                in Stockholders' Equity for the years ended December 31 2003 and 2002

                                            (in thousands of $, except number of shares)
<CAPTION>


                                                                              Period from              Predecessor Combined
                                                                             October 10, 2003              Carve-out
                                                          Year ended         (inception) to       Year ended         Year ended
                                                       December 31, 2004    December 31, 2003   December 31,2003   December 31, 2002
                                                       -----------------    -----------------   ----------------   -----------------
<S>                                                       <C>                   <C>                <C>              <C>

Number of shares outstanding
At beginning of period                                          12,000                -               -                -
Shares issued from contributed surplus                      73,913,837           12,000               -                -
Shares issued for cash                                       1,600,000                -               -                -
Share repurchased and cancelled                               (625,000)               -               -                -
------------------------------------------------------------------------------------------------------------------------------------
At end of period                                            74,900,837           12,000               -                -
------------------------------------------------------------------------------------------------------------------------------------

Share capital
At beginning of period                                              12                -               -                -
Shares issued from contributed surplus                          73,914               12               -                -
Shares issued for cash                                           1,600                -               -                -
Share repurchased and cancelled                                   (625)               -               -                -
------------------------------------------------------------------------------------------------------------------------------------
At end of period                                                74,901               12               -                -
------------------------------------------------------------------------------------------------------------------------------------

Contributed surplus
Equity contribution from parent company                        525,000                -               -                -
Shares issued from contributed surplus                         (73,914)               -               -                -
Shares issued for cash                                          23,096                -               -                -
Share repurchased and cancelled                                (14,088)               -               -                -
Amortisation of deferred equity contributions                    3,167                -               -                -
------------------------------------------------------------------------------------------------------------------------------------
At end of period                                               463,261                -               -                -
------------------------------------------------------------------------------------------------------------------------------------

Retained earnings (deficit)
At beginning of period                                          (1,937)               -               -                -
Net income (loss)                                              262,659           (1,937)              -                -
Cash dividends paid                                            (78,905)               -               -                -
Deemed dividends paid                                          (58,997)               -               -                -
------------------------------------------------------------------------------------------------------------------------------------
At end of period                                               122,820           (1,937)              -                -
------------------------------------------------------------------------------------------------------------------------------------

Invested equity
At beginning of period                                               -                -         485,605          466,742
Net income                                                           -                -         334,812           18,024
Release of accumulated other comprehensive
  income to net  income                                              -                -           1,609              839
------------------------------------------------------------------------------------------------------------------------------------
At end of period                                                     -                -         822,026          485,605

Comprehensive income
Net income (loss)                                              262,659           (1,937)        334,812           18,024
Release of accumulated other comprehensive
  income to net  income                                              -                -           1,609              839
------------------------------------------------------------------------------------------------------------------------------------
Other comprehensive income                                           -                -           1,609              839
------------------------------------------------------------------------------------------------------------------------------------
Comprehensive income                                           262,659           (1,937)         336,421          18,863
------------------------------------------------------------------------------------------------------------------------------------

The accompanying notes are an integral part of these consolidated and combined carve-out financial statements.

</TABLE>

<PAGE>


                       SHIP FINANCE INTERNATIONAL LIMITED

                    Notes to the Consolidated and Predecessor
                    Combined Carve-out Financial Statements

1.   GENERAL INFORMATION

     Ship Finance  International  Limited ("Ship Finance" or the  "Company"),  a
     publicly  listed Bermuda  company,  was  incorporated in Bermuda in October
     2003 as a subsidiary  of Frontline  Ltd.  ("Frontline")  for the purpose of
     acquiring  certain of the shipping  assets of Frontline.  In December 2003,
     Ship Finance issued $580 million of 8.5% senior notes. In the first quarter
     of 2004, Ship Finance used the proceeds of the notes issue, together with a
     refinancing  of existing  debt,  to fund the  acquisition  of a fleet of 47
     crude oil tankers (including one purchase option for a VLCC) from Frontline
     and has  chartered  each of the ships back to  Frontline  for most of their
     remaining  lives.  The Company  operates  tankers of two sizes:  very large
     crude carriers  ("VLCCs") which are between 200,000 and 320,000  deadweight
     tons ("dwt"), and Suezmaxes,  which are vessels between 120,000 and 170,000
     dwt.   Ship  Finance  also   entered   into  fixed  rate   management   and
     administrative  services  agreements  with  Frontline  to  provide  for the
     operation  and  maintenance  of the  Company's  vessels and  administrative
     support  services.  The charters and the  management  agreements  were each
     given economic effect as of January 1, 2004 (See Note 18).

     The Company was incorporated as a wholly owned subsidiary of Frontline.  On
     June 16, 2004, Frontline distributed 25% of Ship Finance's common shares to
     Frontline's ordinary shareholders with each Frontline shareholder receiving
     one share in Ship Finance for every four Frontline shares held. On June 17,
     2004,  Ship Finance common shares  commenced  trading on the New York Stock
     Exchange under the ticker symbol "SFL". In 2004, Frontline made two further
     distributions  of its shares in Ship  Finance and at December 31, 2004 held
     50.8%  of the  Company  (see  Note 21  Subsequent  Events).

2.   ACCOUNTING POLICIES

     Basis of Accounting

     The  consolidated  financial  statements  are prepared in  accordance  with
     accounting   principles  generally  accepted  in  the  United  States.  The
     consolidated financial statements include the assets and liabilities of the
     Company and its  subsidiaries.  All intercompany  balances and transactions
     have been eliminated on consolidation.  As at December 31, 2003 the company
     did not have any subsidiaries.

     Investments  in  companies  over which the  Company  exercises  significant
     influence  but does not  consolidate  are  accounted  for using the  equity
     method.  The Company records its investments in equity-method  investees on
     the  consolidated  balance sheets as "Investments in associated  companies"
     and its share of the  investees'  earnings  or  losses in the  consolidated
     statements of operations as "Share in results from  associated  companies".
     The  excess,  if any, of  purchase  price over book value of the  Company's
     investments  in equity  method  investees  is included in the  accompanying
     consolidated balance sheets in "Investment in associated companies".

     The Company accounts for certain of the long-term  charters to Frontline as
     sales  type  leases  while  the  remaining  charters  are  currently  being
     accounted for as operating leases.  For those vessels on existing long-term
     charters to third  parties,  the  difference  between  amounts earned under
     those  charters and the amounts due to the Company by Frontline is remitted
     to  Frontline  and  accounted  for  as  a  deemed  dividend  which  reduces
     stockholders' equity.

     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.

     Predecessor combined carve-out financial information

     The predecessor  combined  carve-out  financial  statements are prepared in
     accordance  with  accounting  principles  generally  accepted in the United
     States. For the years ended December 31, 2003 and the 2002, the predecessor
     combined  carve-out  financial  statements  have  been  carved  out  of the
     consolidated  financial statements of Frontline and assume that the Company
     was operated as a separate  corporate  entity prior to its  inception.  The
     predecessor  combined  carve-out  financial  statements  were  prepared  in
     contemplation  of the fleet purchase  transaction  that occurred  effective
     January 1, 2004 and reflect the  Company's  acquisition  from  Frontline of
     certain  wholly  owned  VLCC and  Suezmax  owning  subsidiaries,  including
     certain  subsidiaries  acquired  through a  reorganization  of  Frontline's
     interests in certain  joint  ventures  plus a purchase  option to acquire a
     further VLCC (together the "Vessel Interests").

     Frontline is a shipping  company with activities that include the ownership
     and  operation  of oil tankers and dry bulk  carriers as well as leasing of
     vessels and  participation  in tanker  owning joint  venture  arrangements.
     Frontline  is also  involved in the  purchase  and sale of  vessels.  Where
     Frontline's  assets,  liabilities,  revenues  and  expenses  relate  to the
     specific  Vessel  Interests,  these have been identified and carved out for
     inclusion in these financial statements. Frontline's shipping interests and
     other assets, liabilities,  revenues and expenses that do not relate to the
     Vessel  Interests have been  identified and not included in these financial
     statements. The preparation of the carved out financial statements requires
     allocation of certain assets and liabilities and expenses where these items
     are not  identifiable as related to one specific  activity.  Administrative
     overheads of Frontline that cannot be related to a specific  vessel type of
     operations  have been allocated  pro-rata based on the number of vessels in
     the Company compared with the number in Frontline's total fleet. Management
     has deemed  that the  related  allocations  are  reasonable  to present the
     financial position,  results of operations,  and cash flows of the Company.
     Management  believes the various  allocated  amounts  would not  materially
     differ from those that would have been  achieved had Ship Finance  operated
     on a stand-alone basis for all periods  presented.  However,  the financial
     position,  results  of  operations  and cash flows of the  Company  are not
     necessarily  indicative  of those  that would  have been  achieved  had the
     Company operated  autonomously for all periods presented as the Company may
     have made  different  operational  and  investment  decisions  as a Company
     independent of Frontline.

     The majority of the Company's  assets,  liabilities,  revenues and expenses
     are vessel  specific  and are  included in the vessel  owning  subsidiaries
     financial  statements.  However,  in addition,  the  following  significant
     allocations have been made:

     Goodwill:  Goodwill  has arisen on certain of the  acquisitions  undertaken
     prior to December 31, 2002.  Goodwill has been allocated to Ship Finance on
     the basis that the vessels  obtained in these  acquisitions,  and which the
     goodwill is  considered  to relate to, are  included  in these  predecessor
     combined carve-out  financial  statements.  The associated  amortization of
     goodwill has also been  allocated to Ship Finance and  recognized  in these
     predecessor combined carve-out financial statements.

     Long term debt: An allocation of corporate  debt of Frontline has been made
     which totals  $8,608,000  and  $9,308,000 as of December 31, 2003 and 2002,
     respectively. This debt has been allocated as it relates specifically to an
     entity of which the Company has a purchase option. The associated  interest
     expense has also been  allocated to these  predecessor  combined  carve-out
     financial statements.

     Interest rate swaps: For the purposes of the predecessor combined carve-out
     financial statements,  interest rate swaps specific to carved out debt have
     been  included.  In addition,  non-debt  specific  interest rate swaps with
     notional  principal  amounts of $50,000,000 have been included on the basis
     that such swaps were intended to cover the floating rate debt that has been
     included in these predecessor combined carve-out statements. The associated
     mark to market adjustments  arising on the swaps has also been allocated to
     these predecessor  combined carve-out financial  statements and is included
     in other financial items, net.

     Administrative   expenses:   Frontline's   overheads  relate  primarily  to
     management  organizations  in Bermuda  and Oslo that  manage the  business.
     These  overhead costs include  salaries and other  employee  related costs,
     office rents, legal and professional fees and other general  administrative
     expenses. Other employee related costs include costs recognized in relation
     to Frontline's  employee share option plan. We have allocated  overhead pro
     rate based on the number of vessels in the Company compared with the number
     in Frontline's total fleet. The amount of such costs,  presented as part of
     administrative  expenses,  which was allocated from these organizations was
     $8,995,000,  and $5,364,000 for the years ended December 31, 2003 and 2002,
     respectively.

     No allocation of interest income has been made and interest income reported
     in the  predecessor  combined  carve-out  financial  statements  represents
     interest  income  earned by the vessel  owning  subsidiaries  and  interest
     earned on loans to joint ventures.

     Accounting policies used in preparing the consolidated financial statements

     Foreign currencies

     The  Company's  functional  currency is the U.S.  dollar as the majority of
     revenues  are  received in U.S.  dollars  and a majority  of the  Company's
     expenditures are made in U.S. dollars.  The Company's reporting currency is
     U.S. dollars.  Most of the Company's  subsidiaries  report in U.S. dollars.
     Transactions in foreign currencies during the year are translated into U.S.
     dollars at the rates of exchange in effect at the date of the  transaction.
     Foreign currency monetary assets and liabilities are translated using rates
     of exchange at the balance sheet date. Foreign currency non-monetary assets
     and liabilities are translated using historical rates of exchange.  Foreign
     currency  transaction  gains or losses  are  included  in the  consolidated
     statements of operations.

     Revenue and expense recognition

     Revenues and expenses are  recognized  on the accrual  basis.  Revenues are
     generated  from freight  billings,  time charter,  bareboat  charter hires,
     finance lease interest  income,  finance lease service  revenues and profit
     sharing  revenues.  Time charter and bareboat charter revenues are recorded
     over the term of the charter as service is provided.

     Finance lease service revenues represent services provided to the lessee to
     operate vessels and are recognized on a daily accrual basis.

     Profit  sharing  revenues  are  recorded  when earned and  realizable.  The
     Company  considers  profit sharing  revenues to be earned and realizable to
     the extent that a vessel's underlying earnings on a time charter equivalent
     basis exceed the profit sharing  threshold for the profit  sharing  period.
     This  threshold is calculated  as the number of days in the profit  sharing
     period  multiplied by the daily profit sharing  threshold rates. Our profit
     sharing revenues are 20% of a vessel's underlying earnings in excess of the
     threshold.

     Revenues and voyage expenses of the vessels  operating in pool arrangements
     are  pooled  and the  resulting  net pool  revenues,  calculated  on a time
     charter equivalent basis, are allocated to the pool participants  according
     to an agreed  formula.  Formulae  used to allocate net pool  revenues  vary
     among different pools but generally  allocate revenues to pool participants
     on the  basis of the  number  of days a vessel  operates  in the pool  with
     weighting  adjustments  made to reflect vessels'  differing  capacities and
     performance  capabilities.  The same revenue and expenses principles stated
     above are  applied in  determining  the pool's net pool  revenues.  Certain
     pools are  responsible  for paying voyage  expenses and distribute net pool
     revenues  to the  participants.  The  Company  accounts  for the  net  pool
     revenues  allocated by these pools as "pool  revenues" in its statements of
     operations.  Certain pools require the  participants to pay and account for
     voyage  expenses,  and distribute  gross pool revenues to the  participants
     such that the  participants'  resulting  net pool revenues are equal to net
     pool  revenues  calculated  according  to the agreed  formula.  The Company
     accounts  for  gross  pool  revenues  allocated  by  these  pools  as "pool
     revenues"  in its  statements  of  operations.  Refer to Note 3 for further
     analysis of pool revenues.

     Cash and cash equivalents

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

     Vessels and equipment

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

     In December  2003,  the  International  Maritime  Organization  adopted new
     regulations that will result in a more accelerated phase-out of single hull
     vessels. As a result of this, the Company re-evaluated the estimated useful
     life of its single hull vessels and  determined  this to be either 25 years
     or the vessel's anniversary date in 2015 whichever came first. As a result,
     the estimated useful life of thirteen of the Company's  vessels was reduced
     in the  fourth  quarter  of  2003.  A change  in  accounting  estimate  was
     recognized in the predecessor  combined carve-out  financial  statements to
     reflect this decision, resulting in an increase in depreciation expense and
     consequently decreasing net income by $1.1 million in 2003.

     Vessel purchase options

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

     Leases

     Leases of our  vessels  where we are the  lessor are  classified  as either
     finance  leases or operating  leases based on an assessment of the terms of
     the  lease.  Forty of the long  term  charters  with  Frontline  have  been
     classified  as a  finance  type  leases.  Accordingly,  the  minimum  lease
     payments (net of amounts  representing  estimate  executory costs including
     profit  thereon) plus the  unguaranteed  residual value are recorded as the
     gross investment in the lease. The difference  between the gross investment
     in the lease and the sum of the present values of the two components of the
     gross  investment  is recorded as unearned  income  which is  amortised  to
     income over the lease term as finance  lease  interest  income to produce a
     constant periodic rate of return on the net investment in the lease.

     Deemed Dividends

     The Company's  charter  arrangements  with  Frontline  became  effective on
     January  1,  2004.  Certain  of the  Company's  vessels  were on fixed term
     charters to third parties as at January 1, 2004 and the  remainder  were on
     spot  voyages.  As each of the vessels  completes  its original  charter in
     place on  January  1,  2004,  the  finance  leases  with  Frontline  become
     effective for accounting purposes. The Company's arrangement with Frontline
     is that  while  the  vessels  are  completing  performance  of third  party
     charters,  the Company pays Frontline all revenues earned under third party
     charters in exchange for Frontline paying the Company the Frontline charter
     rates. The revenues  received from these third party charters are accounted
     for as time  charter,  bareboat or voyage  revenues as  applicable  and the
     subsequent  payment of these amounts to Frontline as deemed dividends paid.
     The Company  accounts  for the charter  revenues  received  from  Frontline
     Shipping prior to the charters becoming effective for accounting  purposes,
     as deemed equity  contributions  received.  This treatment has been applied
     due to the related party nature of the charter arrangements.

     Deemed Equity Contributions

     The Company has accounted for the difference between the historical cost of
     the vessels,  originally transferred to the Company by Frontline on January
     1, 2004 at Frontline's historical carrying value, and the net investment in
     the lease as a deferred  deemed equity  contribution.  This deferred deemed
     equity  contribution  is presented as a reduction in the net  investment in
     finance  leases in the balance  sheet.  This results from the related party
     nature of both the  original  transfer  of the  vessel  and the  subsequent
     finance lease.  The deferred  deemed equity  contribution is amortized as a
     credit to contributed  surplus over the life of the new lease  arrangement,
     as lease  payments  are  applied  to the  principal  balance  of the  lease
     receivable.

     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 not  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  disposition.  If the  future  net cash  flows  are less  than the
     carrying  value of the asset,  an impairment  loss is recorded equal to the
     difference  between the asset's carrying value and fair value. In addition,
     long-lived  assets to be disposed of are  reported at the lower of carrying
     amount and fair value less estimated costs to sell.

     Deferred charges

     Loan costs,  including debt arrangement fees, are capitalized and amortized
     on a  straight-line  basis over the term of the relevant loan. The straight
     line basis of amortization  approximates  the effective  interest method in
     the  Company's  statement  of  operations.  Amortization  of loan  costs is
     included in interest expense.

     Financial Instruments

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

     Derivatives

     The Company enters into interest rate swap  transactions  from time to time
     to hedge a portion  of its  exposure  to  floating  interest  rates.  These
     transactions involve the conversion of floating rates into fixed rates over
     the life of the transactions without an exchange of underlying principal.

     SFAS 133, as amended by SFAS 137 "Accounting for Derivative Instruments and
     Hedging Activities-Deferral of the Effective Date of FASB Statement No.133"
     and SFAS 138  "Accounting  for Certain  Derivative  Instruments and Certain
     Hedging  Activities an amendment of FASB  Statement  No. 133",  requires an
     entity to recognize all  derivatives as either assets or liabilities on the
     balance sheet and measure these  instruments at fair value.  Changes in the
     fair value of derivatives  are recorded each period in current  earnings or
     other comprehensive income, depending on whether a derivative is designated
     as  part  of a  hedge  transaction  and,  if  it  is,  the  type  of  hedge
     transaction.  In order to  qualify  for hedge  accounting  under  SFAS 133,
     certain criteria and detailed documentation requirements must be met.

     Accounting  policies used in preparing the predecessor  combined-carve  out
     financial statements

     Foreign currencies

     The  Company's  functional  currency is the U.S.  dollar as the majority of
     revenues  are  received in U.S.  dollars  and a majority  of the  Company's
     expenditures are made in U.S. dollars.  The Company's reporting currency is
     U.S. dollars.  Most of the Company's  subsidiaries  report in U.S. dollars.
     Transactions in foreign currencies during the year are translated into U.S.
     dollars at the rates of exchange in effect at the date of the  transaction.
     Foreign currency monetary assets and liabilities are translated using rates
     of exchange at the balance sheet date. Foreign currency non-monetary assets
     and liabilities are translated using historical rates of exchange.  Foreign
     currency  transaction  gains or losses  are  included  in the  consolidated
     statements of operations.

     Revenue and expense recognition

     Revenues and expenses are  recognized  on the accrual  basis.  Revenues are
     generated from freight billings, contracts of affreightment,  time charter,
     and bareboat  charter hires.  The operating  results of voyages in progress
     are estimated and recorded pro-rata on a per day basis.  Probable losses on
     voyages are provided for in full at the time such losses can be  estimated.
     Time charter and bareboat  charter  revenues are recorded  over the term of
     the charter as service is provided.  Amounts  receivable or payable arising
     from profit sharing arrangements are accrued based on the estimated results
     of the voyage recorded as at the reporting date.

     Revenues and voyage expenses of the vessels  operating in pool arrangements
     are  pooled  and the  resulting  net pool  revenues,  calculated  on a time
     charter equivalent basis, are allocated to the pool participants  according
     to an agreed  formula.  Formulae  used to allocate net pool  revenues  vary
     among different pools but generally  allocate revenues to pool participants
     on the  basis of the  number  of days a vessel  operates  in the pool  with
     weighting  adjustments  made to reflect vessels'  differing  capacities and
     performance  capabilities.  The same revenue and expenses principles stated
     above are  applied in  determining  the pool's net pool  revenues.  Certain
     pools are  responsible  for paying voyage  expenses and distribute net pool
     revenues  to the  participants.  The  Company  accounts  for the  net  pool
     revenues  allocated by these pools as "pool  revenues" in its statements of
     operations.  Certain pools require the  participants to pay and account for
     voyage  expenses,  and distribute  gross pool revenues to the  participants
     such that the  participants'  resulting  net pool revenues are equal to net
     pool  revenues  calculated  according  to the agreed  formula.  The Company
     accounts  for  gross  pool  revenues  allocated  by  these  pools  as "pool
     revenues"  in its  statements  of  operations.  Refer to Note 4 for further
     analysis of pool revenues.

     Cash and cash equivalents

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

     Inventories

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

     Vessels and equipment

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

     In December  2003,  the  International  Maritime  Organization  adopted new
     regulations that will result in a more accelerated phase-out of single hull
     vessels. As a result of this, the Company re-evaluated the estimated useful
     life of its single hull vessels and  determined  this to be either 25 years
     or the vessel's anniversary date in 2015 whichever came first. As a result,
     the estimated useful life of thirteen of the Company's  vessels was reduced
     in the  fourth  quarter  of  2003.  A change  in  accounting  estimate  was
     recognized in the predecessor  combined carve-out  financial  statements to
     reflect this decision, resulting in an increase in depreciation expense and
     consequently decreasing net income by $1.1 million in 2003.

     Vessel purchase option

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

     Impairment of long-lived assets

     The  carrying  value  of  long-lived  assets  that are held and used by the
     Company are reviewed  whenever events or changes in circumstances  indicate
     that the  carrying  amount of an asset  may not  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  disposition.  If the  future  net cash  flows  are less  than the
     carrying  value of the asset,  an impairment  loss is recorded equal to the
     difference  between the asset's carrying value and fair value. In addition,
     long-lived  assets to be disposed of are  reported at the lower of carrying
     amount and fair value less estimated costs to sell.

     Deferred charges

     Loan costs,  including debt arrangement fees, are capitalized and amortized
     on a  straight-line  basis over the term of the relevant loan. The straight
     line basis of amortization  approximates  the effective  interest method in
     the  Company's  statement  of  operations.  Amortization  of loan  costs is
     included in interest expense.

     Financial Instruments

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

     Derivatives

     The Company enters into interest rate swap  transactions to hedge a portion
     of its exposure to floating interest rates. These transactions  involve the
     conversion  of  floating  rates  into  fixed  rates  over  the  life of the
     transactions without an exchange of underlying principal.  Hedge accounting
     may be used to account for these swaps provided  certain  hedging  criteria
     are met. On January 1, 2002, the Company  discontinued hedge accounting for
     two interest rate swaps previously  accounted for as cash flow hedges. This
     resulted in a balance of $4.9  million  being frozen in  accumulated  other
     comprehensive  income as at that date and this amount was reclassified into
     the  consolidated  statement of operations  over the remaining lives of the
     underlying debt  instruments.  The underlying loans were repaid in 2004 and
     the then remaining  balance in accumulated  other  comprehensive  income of
     $2.5 million was reclassified into earnings.

     SFAS 133, as amended by SFAS 137 "Accounting for Derivative Instruments and
     Hedging Activities-Deferral of the Effective Date of FASB Statement No.133"
     and SFAS 138  "Accounting  for Certain  Derivative  Instruments and Certain
     Hedging  Activities an amendment of FASB  Statement  No. 133",  requires an
     entity to recognize all  derivatives as either assets or liabilities on the
     balance sheet and measure these  instruments at fair value.  Changes in the
     fair value of derivatives  are recorded each period in current  earnings or
     other comprehensive income, depending on whether a derivative is designated
     as  part  of a  hedge  transaction  and,  if  it  is,  the  type  of  hedge
     transaction.  In order to  qualify  for hedge  accounting  under  SFAS 133,
     certain criteria and detailed documentation requirements must be met.

     Goodwill

     Goodwill represents the excess of the purchase price over the fair value of
     assets acquired in business  acquisitions  accounted for under the purchase
     method.  Goodwill is presented net of  accumulated  amortization  and until
     December 31, 2001 was being  amortized  over a period of  approximately  17
     years. As of January 1, 2002, the Company  adopted SFAS No. 142,  "Goodwill
     and Other Intangible Assets" ("SFAS 142") and recorded an impairment charge
     of $14.1  million for the  unamortised  goodwill on that date that is shown
     separately in the predecessor combined carve-out statement of operations as
     a cumulative effect of change in accounting principle. The valuation of the
     fair  value of the  reporting  unit used to assess  the  recoverability  of
     goodwill was a combination  of independent  third party  valuations and the
     quoted market price of the Company's shares.

     Drydocking provisions

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

3.   RECENTLY ISSUED ACCOUNTING STANDARDS

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

     In January  2003,  the FASB  issued  Interpretation  46,  Consolidation  of
     Variable   Interest   Entities.   In   December   2003,   the  FASB  issued
     Interpretation 46 Revised,  Consolidation of Variable Interest Entities. In
     general, a variable interest entity is a corporation,  partnership,  trust,
     or any other legal  structure  used for business  purposes  that either (a)
     does not  have  equity  investors  with  voting  rights  or (b) has  equity
     investors that do not provide sufficient financial resources for the entity
     to support its activities.  Interpretation  46 requires a variable interest
     entity to be combined by a company if that company is subject to a majority
     of the risk of loss  from the  variable  interest  entity's  activities  or
     entitled to receive a majority of the  entity's  residual  returns or both.
     The  consolidation  requirements  of  Interpretation  46 apply in the first
     fiscal year or interim  period  ending after  December 15, 2003 to variable
     interest  entities  created  after  January  31,  2003.  The  consolidation
     requirements  apply in the first fiscal year or interim period ending after
     December 15, 2003 for "Special Purpose Entities" created before January 31,
     2003.  The  consolidation  requirements  apply in the first  fiscal year or
     interim  period  ending  after  March 15, 2004 for other  entities  created
     before January 31, 2003.  Certain of the disclosure  requirements  apply in
     all financial statements issued after January 31, 2003,  regardless of when
     the   variable   interest   entity  was   established.   The   adoption  of
     Interpretation 46 did not result in the consolidation of any entities.

     The  Company has an option to  purchase  the VLCC  Oscilla on or before the
     expiry of a five-year time charter,  which commenced in March 2000. Oscilla
     is owned and  operated  by an  unrelated  entity,  Seacrest  Shipping  Ltd.
     ("Seacrest"). If the Company had exercised its option at December 31, 2003,
     the cost to the Company of the Oscilla would have been approximately  $42.3
     million and the maximum  exposure  to loss is $17.4  million,  representing
     amounts outstanding from Seacrest of $9.0 million and the carrying value of
     the option of $8.4  million.  At  December  31,  2003,  Seacrest  had total
     indebtedness  of $36.0 million  (including $9.0 million due to the Company)
     and JPY674.6 million (equivalent to $6.3 million) and the fair value of the
     vessel  Oscilla was $78.5  million.  Prior to the adoption of FIN 46R, this
     special purpose entity was not  consolidated  in the  predecessor  combined
     carve out financial  statements.  We have  determined  that the entity that
     owns  Oscilla is a  variable  interest  entity and that we are the  primary
     beneficiary. At December 31, 2004 through to January 2005 when we exercised
     our option to acquire the vessel,  after exhaustive efforts, we were unable
     to obtain the  accounting  information  necessary to be able to consolidate
     the entity that owned  Oscilla.  If we had exercised the option at December
     31,  2004,  the cost of the  Oscilla  would have been  approximately  $28.5
     million and our maximum  exposure to loss was $8.4  million.  We have taken
     delivery of the vessel in April 2005.

4.   POOL REVENUES

     Voyage charter revenues included in these financial statements include pool
     revenues.  Certain pools are  responsible  for paying  voyage  expenses and
     distribute net pool revenues to the participants  while other pools require
     the  participants  to pay and account for voyage  expenses,  and distribute
     gross  pool  revenues  to the  participants  such  that  the  participants'
     resulting  net pool  revenues  are  equal to net pool  revenues  calculated
     according to the agreed formula. An analysis of the Company's pool revenues
     included within voyage revenues is as follows:

<TABLE>
  (in thousands of $)                                                         Period from              Predecessor Combined
                                                                             October 10, 2003              Carve-out
                                                          Year ended         (inception) to       Year ended         Year ended
                                                       December 31, 2004    December 31, 2003   December 31,2003   December 31, 2002
                                                       -----------------    -----------------   ----------------   -----------------
<S>                                                       <C>                   <C>                <C>              <C>
     Pool earnings allocated on gross basis                4,040                     -                45,749         27,914
     Pool earnings allocated on net basis                  4,464                     -                37,775         64,507
     Total pool earnings                                   8,504                     -                83,524         92,421
</TABLE>

5.   TAXATION

     Bermuda

     Under  current  Bermuda  law,  the Company is not  required to pay taxes in
     Bermuda on either income or capital gains. The Company has received written
     assurance from the Minister of Finance in Bermuda that, in the event of any
     such taxes being imposed,  the Company will be exempted from taxation until
     the year 2016.

     United States

     The Company  does not accrue U.S.  income  taxes as, in the opinion of U.S.
     counsel,  the  Company is not engaged in a U.S.  trade or  business  and is
     exempted  from a gross  basis tax under  Section  883 of the U.S.  Internal
     Revenue Code.

     A reconciliation between the income tax expense resulting from applying the
     U.S. Federal  statutory income tax rate and the reported income tax expense
     has not been  presented  herein as it would not provide  additional  useful
     information  to users of the  financial  statements  as the  Company's  net
     income is subject to neither Bermuda nor U.S. tax.

    Other Jurisdictions

     Certain of the Company's subsidiaries in Singapore are subject to taxation.
     The tax paid by subsidiaries of the Company that are subject to taxation is
     not material.

6.   EARNINGS PER SHARE

     Basic EPS for all periods prior to June 16, 2004 has been computed based on
     the net income (loss)  available to common  stockholders  and the number of
     common shares  outstanding  on June 16, 2004, the date on which the Company
     was partially spun off from Frontline. Basic EPS for all periods subsequent
     to June 16, 2004 is computed  based on the net income  (loss)  available to
     common  stockholders and the number of common shares  outstanding.  For all
     periods presented there are no potentially dilutive securities.

     The  components of the numerator for the  calculation  of basic EPS for net
     income are as follows:

<TABLE>
  (in thousands of $)                                                       Period from              Predecessor Combined
                                                                           October 10, 2003              Carve-out
                                                        Year ended         (inception) to       Year ended         Year ended
                                                     December 31, 2004    December 31, 2003   December 31,2003   December 31, 2002
                                                     -----------------    -----------------   ----------------   -----------------
     <S>                                               <C>                   <C>                <C>              <C>
     Net income before  cumulative  effect of
     change in  accounting principle                    262,659               (1,937)             334,812         32,166
     Cumulative  effect  of change
     in accounting  principle                                 -                    -                    -        (14,142)

     Net income (loss) available to stockholders        262,659               (1,937)             334,812         18,024
</TABLE>

     The components of the  denominator  for the calculation of basic EPS are as
     follows:

<TABLE>

  (in thousands of $)                                                       Period from              Predecessor Combined
                                                                           October 10, 2003              Carve-out
                                                        Year ended         (inception) to       Year ended         Year ended
                                                     December 31, 2004    December 31, 2003   December 31,2003   December 31, 2002
                                                     -----------------    -----------------   ----------------   -----------------
     <S>                                             <C>                   <C>                <C>                <C>
     Weighted   average   number  of  common
     shares outstanding                                  74,611               73,925               73,925         73,925
</TABLE>

     Basic EPS for the cumulative  effect of change in accounting  principle are
     as follows:
<TABLE>

                                                                             Period from              Predecessor Combined
                                                                           October 10, 2003              Carve-out
                                                        Year ended         (inception) to       Year ended         Year ended
                                                     December 31, 2004    December 31, 2003   December 31,2003   December 31, 2002
                                                     -----------------    -----------------   ----------------   -----------------
     <S>                                             <C>                   <C>                <C>                 <C>
     Basic  loss per  share  for  cumulative
     effect of change in accounting principle                 -                    -                    -          $0.19
</TABLE>

7.   OPERATING LEASES

     Rental income

     The  minimum   future   revenues  to  be  received   under  the   Company's
     non-cancellable operating leases as of December 31, 2004 are as follows:
<TABLE>
     Year ending December 31,
     (in thousands)                                   Yen revenues                               Revenues           Total
                                                      (in (Y))           (in $ equivalent)        (in $)            (in $)
    <S>                                              <C>                      <C>                <C>              <C>
     2005                                             767,000                  7,435              54,334           61,769
     2006                                             162,000                  1,568              29,145           30,713
     2007                                                                                          1,540            1,540
                                                                                                 ------------------------
     Total minimum lease revenues                     929,000                    9,003            85,019           94,022
</TABLE>

     The cost and accumulated depreciation of vessels leased to third parties on
     operating leases at December 31, 2004 and 2003 were as follows:
<TABLE>
     (in thousands of $)                                                                              Predecessor
                                                                                                   combined carve-out
                                                      December 31, 2004     December 31, 2003       December 31, 2003
                                                      -----------------     -----------------       -----------------
     <S>                                               <C>                   <C>                      <C>
     Cost                                                   384,198               -                   834,754
     Accumulated depreciation                               147,893               -                   275,420
</TABLE>

8.   TRADE ACCOUNTS RECEIVABLE AND OTHER RECEIVABLES

     Trade accounts receivable

     Trade  accounts  receivable  are presented  net of allowances  for doubtful
     accounts amounting to $nil as of December 31, 2004 ($724,000 - December 31,
     2003).

     Other receivables

     Other  receivables  are presented net of allowances  for doubtful  accounts
     amounting to $nil as of December 31, 2004 ($nil - December 31, 2003).

9.   VESSEL PURCHASE OPTION

     The Company has an option from a third party to purchase  the VLCC  Oscilla
     on expiry of a five-year time charter,  which  commenced in March 2000. The
     purchase  price is equal to the  outstanding  mortgage debt under four loan
     agreements between lenders and the vessel's owning company.  As at December
     31, 2004 the  outstanding  mortgage  debt of the Oscilla's  owning  company
     amounted to $25.1 million plus (Y)330,259,045 (equivalent to $3.2 million).
     (2003 - $36.0 million plus  (Y)674,645,262  (equivalent to $6.3  million)).
     Included in this amount at December 31, 2004 is debt of $7.1 million due to
     Frontline  (2003  -$9.0  million).  The  Company  acquired  the option from
     Frontline in 2004 for $8.4 million as part of the Fleet Purchase Agreement.

10.  VESSELS AND EQUIPMENT OWNED, NET

<TABLE>
     (in thousands of $)                                                                              Predecessor
                                                                                                   combined carve-out
                                                      December 31, 2004     December 31, 2003       December 31, 2003
                                                      -----------------     -----------------       -----------------
     <S>                                               <C>                   <C>                      <C>
     Cost                                                385,436                 -                    2,632,331
     Accumulated depreciation                            149,131                 -                      768,827
     Net book value                                      236,305                 -                    1,863,504
</TABLE>

     Depreciation  expense  was $34.6  million,  nil,  $106.1  million and $96.8
     million for the year ended  December 31, 2004,  the period from October 10,
     2003 to December 31, 2003 and for the  predecessor  combined  carve-out for
     the years ending December 31, 2003 and 2002, respectively.

11.  INVESTMENTS IN FINANCE LEASES

     The Company's  vessels are  chartered on long term,  fixed rate charters to
     Frontline  which  extend for various  periods  depending  on the age of the
     vessels,  ranging from  approximately  seven to 23 years.  The terms of the
     charters do not provide  Frontline  with an option to terminate the charter
     before  the end of its term,  other  than  with  respect  to the  Company's
     non-double hull vessels after 2010.

     Forty  of these  charters  are  accounted  for as sales  type  leases.  The
     following  lists the components of the  investments in finance leases as of
     December 31, 2004:

     (in thousands of $)

     Total minimum lease payments to be received                    3,607,041
     Less: amounts representing  estimated executory
     costs including profit thereon,                                 (975,631)
     included in total minimum lease payments
     --------------------------------------------------------------------------
     Net minimum lease payments receivable                          2,631,410
     Estimated residual values of leased property
     (unguaranteed)                                                   426,492
     Less: unearned income                                         (1,243,392)
     --------------------------------------------------------------------------
                                                                    1,814,510

     Less: Deferred deemed equity contribution                        (99,035)
     Add: accumulated amortization of deferred
     deemed equity contribution                                         3,167
     --------------------------------------------------------------------------
                                                                    1,718,642

     Current portion                                                   76,998
     Long-term portion                                              1,641,644
     --------------------------------------------------------------------------
                                                                    1,718,642
     --------------------------------------------------------------------------

12.  INVESTMENT IN ASSOCIATED COMPANIES

     At  December  31,  2003,  Frontline  had  the  following  participation  in
     investments  that  were  recorded  in the  Company's  predecessor  combined
     carve-out financial statements using the equity method:

     Name                                 Vessel/      Country of    Ownership
                                         Activity     Incorporation  Percentage
                                         --------     -------------  ----------
     Ariake Transport Corporation....       Ariake       Liberia        50.1%
     Dundee Navigation SA............       Dundee       Liberia        50.1%
     Edinburgh Navigation SA.........    Edinburgh       Liberia        50.1%
     Hitachi Hull #4983 Corporation..       Hakata       Liberia        50.1%
     Sakura Transport Corporation....     Sakura I       Liberia        50.1%
     Tokyo Transport Corporation.....       Tanabe       Liberia        50.1%

     Summarized balance sheet information of these equity method investees is as
     follows:

     (in thousands of $)                                      December 2003
     -------------------                                      -------------

     Current assets........................................           29,617
     Non current assets....................................          387,322
     Current liabilities...................................        (106,984)
     Non current liabilities...............................        (201,347)

     Summarized  statement of  operations  information  of these  equity  method
     investees is as follows:

     (in thousands of $)                             2003            2002
     -------------------                             ----            ----

     Net operating revenues.                         93,872         61,159
     Net operating income...                         79,434         17,879
     Net income (loss)......                         45,039        (19,208)

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

     In the second quarter of 2003, the Company  recorded an impairment  loss in
     the amount of $2.4  million  related to its 50%  interest in Golden  Lagoon
     Corporation. In the third quarter, the Company entered into an agreement to
     sell this interest for an amount less than its carrying  value.  No gain or
     loss was subsequently recorded on the sale of this interest.

     In the third  quarter  of 2003,  Frontline  entered  into an  agreement  to
     exchange  its 33%  interest  in  Ichiban  Transport  Corporation  for a 17%
     interest in Tokyo Transport  Corporation and a 17% interest of Hitachi Hull
     4983  Ltd.  with a net  settlement  cost of $0.4  million.  At the  time of
     signing the exchange  agreement,  the Company  booked an impairment of $2.8
     million in respect of its investment in Ichiban Transport Corporation.  The
     exchange of  investments  in Ichiban,  Tanabe and Hakata was then accounted
     for at book value of the assets exchanged.

     Additionally,  during the third quarter of 2003,  Frontline entered into an
     agreement  regarding the acquisition of a 17% interest in Ariake  Transport
     Corporation  and a 17% interest in Sakura  Transport  Corporation  for fair
     market value cash consideration of $10.2 million. The Company accounted for
     the acquisition of these interests at historical cost.

     The Company  held 50% of the shares of Golden Tide  Corporation  during the
     year ended  December 31, 2002 and the six months  ended June 30, 2003.  The
     statement of  operations  includes 50% share of the earnings of Golden Tide
     Corporation  for the year ended  December 31, 2002 and the six months ended
     June 30, 2003. On June 30, 2003, the Company  acquired the remaining 50% of
     the shares of Golden Tide Corporation for $9.5 million,  being $2.4 million
     net of cash acquired, and has combined the assets,  principally the vessel,
     and  liabilities,  principally  the  long-term  debt,  from that date.  The
     statement of operations includes 100% of Golden Tide Corporation's earnings
     for the  period  from June 30,  2003 to  December  31,  2003.  13.  ACCRUED
     EXPENSES

<TABLE>
     (in thousands of $)                                                                              Predecessor
                                                                                                   combined carve-out
                                                      December 31, 2004     December 31, 2003       December 31, 2003
                                                      -----------------     -----------------       -----------------
     <S>                                                 <C>                   <C>                     <C>
     Ship operating expenses                                  70                      -                15,923
     Administrative expenses                               1,143                      -                   152
     Interest expense                                      7,183                  2,054                 2,654
     Debt fees                                                 -                  1,961                     -
                                                           8,396                  4,015                18,729
</TABLE>

14.  AMOUNT DUE TO PARENT COMPANY

     The amount  due to parent  company in the  predecessor  combined  carve-out
     financial statements represents  principally  intercompany balances between
     each of the  subsidiaries  and Frontline and the effect of the carve out of
     the Vessel  Interests  from  Frontline.  Frontline  operates a  centralized
     treasury  function and the majority of cash earned in subsidiaries is swept
     up into Frontline Ltd. and is accounted for through intercompany balances.

     For the purposes of the predecessor combined carve-out financial statements
     no interest expense has been imputed on the amount due to parent company.

15.  OTHER LONG TERM ASSETS

     Other  long-term  assets  represent  amounts due to the Company  from third
     party entities that own the vessel,  Oscilla,  over which the Company has a
     purchase option. (see Note 9).

16.  LONG-TERM DEBT

<TABLE>
     (in thousands of $)                                                                                        Predecessor
                                                                                                             combined carve-out
                                                                December 31, 2004     December 31, 2003       December 31, 2003
                                                                -----------------     -----------------       -----------------
     <S>                                                           <C>                   <C>                     <C>
     8.5% Senior Notes due 2013                                        530,270           580,000                        -
     US dollar denominated  floating rate debt
     (LIBOR plus 1.25%) due through 2011                               948,624                 -                  901,585
     Yen  denominated  floating  rate  debt
     (LIBOR  plus  1.125%  to  1.313%) due through 2011                      -                 -                   89,830
     Credit facilities                                                       -                 -                      195
                                                                     1,478,894           580,000                  991,610
     Less: short-term portion                                          (91,308)                -                 (141,522)
                                                                     1,387,586           580,000                  850,088
</TABLE>

     At December 31, 2004 LIBOR was 2.56% (December 31, 2003 - 1.15%).

     The outstanding debt as of December 31, 2004 is repayable as follows:

     Year ending December 31,
     (in thousands of $)

     2005                                                              91,308
     2006                                                              91,305
     2007                                                              91,305
     2008                                                              91,305
     2009                                                              91,305
     2010 and later                                                 1,022,366
     -------------------------------------------------------------------------
     Total debt                                                     1,478,894
     -------------------------------------------------------------------------

     The weighted average interest rate for floating rate debt denominated in US
     dollars was 3.97% and 3.07% as of December  31, 2004 and  December 31, 2003
     (predecessor combined carve-out basis) respectively.  These rates take into
     consideration the effect of related interest rate swaps.

     8.5% Senior Notes due 2013

     On December 15, 2003 the Company  issued $580 million of senior notes.  The
     notes are  governed  by an  Indenture  dated  December  15,  2003 among the
     Company and Wilmington Trust Company,  as trustee.  The Indenture  contains
     covenants that restrict the ability of the Company,  among other things, to
     incur additional  indebtedness,  to pay dividends or make  distributions of
     capital,  to enter into certain sale and  leaseback  transactions,  to sell
     assets or capital stock of its  subsidiaries or to enter into  transactions
     with affiliates.

     The notes are general unsecured, senior obligations of the Company and rank
     equally  in right of  payment  to any  future  senior  indebtedness  of the
     Company but are effectively subordinated to all future secured indebtedness
     of the Company,  to the extent of the value of the collateral securing such
     indebtedness.   The  notes  are  unconditionally  guaranteed  on  a  senior
     unsecured basis by each  subsidiary of the Company,  but the guarantees are
     effectively  subordinated to all present and future secured indebtedness of
     the  subsidiaries,  to the extent of the value of the  collateral  securing
     such  Indebtedness.  Interest on the notes is payable in cash semi-annually
     in arrears on June 15 and December 15,  commencing  on June 15, 2004 and is
     computed on the basis of a 360-day year comprised of twelve 30-day months.

     The notes are not  redeemable  prior to December 15, 2008 except in certain
     circumstances.  After that date the Company may redeem notes at  redemption
     prices which  reduce from  104.25% in 2008 to 100% in 2011 and  thereafter.
     Prior to December 15, 2006 the Company may redeem up to 35% of the original
     principal  amount  using the cash  proceeds  of an  initial  public  equity
     offering at a redemption price of 108.5%.

     In 2004,  the  Company  bought  back and  cancelled  notes with a principal
     amount of $49.7 million.

     $1,058.0 million syndicated senior secured credit facility

     On February 17, 2004,  the Company  entered  into a senior  secured  credit
     facility agreement with a syndicate of banks with principal amount $1,058.0
     million and a six year term.  The proceeds  from the facility  were used in
     part to fund the  acquisition of the Company's  fleet from Frontline and to
     refinance  existing debt on all of its vessels.  Obligations under the loan
     facility are secured by, amongst other things,  all of the Company's assets
     and the equity interests of vessel owning subsidiaries.  In addition,  each
     of the Company's vessel owning  subsidiaries has guaranteed its performance
     under the facility. The loan facility bears interest at the LIBOR rate plus
     1.25% per year and may be prepaid on a pro-rata basis without penalty.  The
     Company  has entered  into  interest  rate swaps to fix the  interest on at
     least $500.0 million of the  borrowings  under the facility for a period of
     at least five years.

     The loan facility  subjects us to a number of  restrictions on our business
     and financial  maintenance  covenants,  including  restrictions on creating
     liens on the  vessels,  limitations  on our ability to amend our  charters,
     management and  administrative  agreements,  minimum  liquidity and working
     capital requirements,  and collateral  maintenance  limitations.  Under the
     loan facility, we may incur additional indebtedness to fund acquisitions of
     additional vessels, provided that the additional indebtedness incurred does
     not exceed 70% of value of the vessel.  The loan facility also restricts us
     from issuing any guarantees other than guarantees issued in connection with
     our ordinary  course of commercial  activities,  or as  contemplated in the
     loan facility or the note indenture.  Further,  the loan facility restricts
     our ability to make  distributions  unless (i) the charter  service reserve
     and our available  working capital exceed,  in the aggregate,  $100 million
     and (ii) we satisfy  financial  covenants  contained  in the loan  facility
     relating to minimum liquidity, working capital and equity to debt ratios as
     of the date of the distribution as follows:-

     o    Minimum  Liquidity - Free and  available  Cash in respect of the Group
          shall be at least $25,000,000.

     o    Minimum Working Capital - Consolidated Working Capital on the last day
          of each Financial Quarter of the Borrower shall be no less than zero.

     o    Minimum  Equity  Ratio - The  Equity  Ratio  on the  last  day of each
          Financial Quarter of the Borrower shall be at least 20%.

     The undrawn  amount under this  facility was $41.0  million at December 31,
     2004 and the total amount outstanding was $948.6 million.

17.  SHARE CAPITAL AND CONTRIBUTED SURPLUS

     Authorised share capital is as follows:

     (in thousands of $)
     125,000,000 common shares of $1.00 par value each                125,000

     Issued and fully paid share capital is as follows:

     (in thousands of $)
     74,900,837 common shares of $1.00 par value each                  74,901

     The Company's ordinary shares are listed on the New York Stock Exchange.

     The Company was formed in October 2003 with an authorized  share capital of
     $12,000,  divided  into 12,000  common  shares of $1.00 par value each.  In
     connection  with the partial  spin-off  from  Frontline  in June 2004,  the
     authorized  share capital was increased to 125,000,000  common  shares,  of
     which 73,925,837 were issued and outstanding  immediately after the partial
     spin-off.  In July 2004,  the Company issued  1,600,000  common shares in a
     private  placement  for the price of $15.75  per  share.  In  November  and
     December 2004 the Company  repurchased  and cancelled  625,000 shares at an
     average cost of $23.54 share under a Board approved scheme to repurchase up
     to 2,000,000 shares.

     In connection  with the purchase of the Company's  fleet from  Frontline in
     January  2004,  Ship  Finance  received  an equity  contribution  of $525.0
     million.

     As each of the Company's vessels completes its original charter in place at
     January 1, 2004,  the sales type leases  with  Frontline,  entered  into on
     January 1, 2004, become effective for accounting purposes.  The Company has
     accounted for the  difference  between the  historical  cost of the vessel,
     originally  transferred  to the Company by  Frontline at January 1, 2004 at
     Frontline's  historical carrying value, and the net investment in the lease
     as a deferred deemed equity contribution.  The difference is presented as a
     reduction in the net  investment  in finance  leases in the balance  sheet.
     This results from the related party nature of both the original transfer of
     the vessel and the subsequent  sales type lease. The deferred deemed equity
     contribution  is  amortized  as a credit to equity over the life of the new
     lease arrangement as lease payments are applied to the principal balance of
     the lease receivable.  In the year ended December 31,, 2004 the Company has
     accounted for $3.2 million of such deemed equity contributions.

18.  RELATED PARTY TRANSACTIONS

     The Company acquired all of its vessels from its parent company, Frontline,
     in a spin-off transaction.  The Company paid a total of $1,061.8 million to
     Frontline  being the book value of assets  transferred  by  Frontline  less
     amounts of debt assumed.  As part of this spin-off  transaction the Company
     also received an equity contribution of $525.0 million from Frontline. [See
     Note 1]

     The  Company  charters  all of its  vessels to  Frontline  under  long-term
     leases,  which  were  given  economic  effect  from  January  1,  2004.  In
     connection with these charters, the Company has recognized the inception of
     net  investments  in finance  leases of  $1,876.5  million,  finance  lease
     interest income of $140.7 million,  finance lease service revenues of $72.6
     million,  repayments of net  investments in finance leases of $62.0 million
     and deemed  dividends of $59.0 million in the year ended December 31, 2004.
     At December 31, 2004 the balance of net  investments in finance leases with
     Frontline was $1,718.6 million of which $77.0 million represents short-term
     maturities.

     The Company pays  Frontline a  management  fee of $6,500 per day per vessel
     for all of its  vessels,  with the  exception  of five  which are  bareboat
     chartered,  resulting  in  expenses  of $96.4  million  for the year  ended
     December  31,  2004.  The  management  fees  have been  classified  as ship
     operating expenses.

     The Company pays Frontline an administrative  management fee of $20,000 per
     year plus $20,000 per vessel per year.  Based on the current  fleet we paid
     Frontline  $960,000  in 2004 under this  arrangement.  These fees have been
     classified as administrative expenses.

     Frontline  pay us profit  sharing  payments of 20% of their  earnings  from
     their use of the Company's fleet above average daily rates of $25,575 for a
     VLCC and $21,100 for a Suezmax for the 11 month period  beginning  February
     1, 2004 and each year thereafter.  During the year ended December 31, 2004,
     we earned and recognized revenue of $114.9 million under this arrangement.

     In  February  2001,  Frontline  acquired  newbuilding   contracts  for  the
     construction  and purchase of three VLCCs at the Hitachi  shipyard in Japan
     for  delivery  in 2002  from  Seatankers  Management  Co.  Ltd.,  a company
     affiliated with Hemen Holding Ltd ("Hemen"). Hemen is indirectly controlled
     by Mr. John  Fredriksen,  a director of  Frontline.  These  contracts  were
     acquired  for the  original  contract  price of $72 million  each plus $0.5
     million per contract.  These three  newbuildings were delivered in 2002 and
     are included in the predecessor  combined carve-out  financial  statements.

19.  FINANCIAL INSTRUMENTS

     Interest rate risk management

     In certain situations,  the Company may enter into financial instruments to
     reduce the risk associated with fluctuations in interest rates. The Company
     has a portfolio of swaps that swap  floating  rate  interest to fixed rate,
     which from a  financial  perspective  hedge  interest  rate  exposure.  The
     Company  does not hold or issue  instruments  for  speculative  or  trading
     purposes.  The  counterparties  to such  contracts  are J.P.  Morgan Chase,
     Nordea Bank  Norge,  Credit  Agricole  Indosuez,  Deutsche  Schiffsbank,HSH
     Nordbank,   Fortis  Bank,  Citibank,   Scotiabank,   Den  norske  Bank  and
     Skandinaviska  Enskilda  Banken.  Credit risk exists to the extent that the
     counterparties are unable to perform under the contracts,  but this risk is
     considered remote.

     The Company  manages its debt portfolio with interest rate swap  agreements
     in U.S.  dollars  to  achieve  an  overall  desired  position  of fixed and
     floating  interest  rates.  For the  purposes  of the carved  out  combined
     financial statements,  interest rate swaps specific to carved out debt have
     been  included.  In addition,  non debt  specific  interest rate swaps with
     notional  principal amounts of $50,000,000 have been included.  The Company
     has entered into the following  interest rate swap  transactions  involving
     the payment of fixed rates in exchange for LIBOR:

<TABLE>
     (in thousands of $)                             Inception date        Maturity date       Fixed interest rate
     -------------------                             --------------        -------------       -------------------
     <S>                                             <C>                   <C>                  <C>
     $50,000                                          Feb 2004            Feb 2009              3.49%
     $100,000                                         Feb 2004            Feb 2009              3.49%
     $50,000                                          Feb 2004            Feb 2009              3.35%
     $50,000                                          Feb 2004            Feb 2009              3.49%
     $50,000                                          Feb 2004            Feb 2009              3.35%
     $50,000                                          Feb 2004            Feb 2009              3.35%
     $50,000                                          Feb 2004            Feb 2009              3.37%
     $25,000                                          Feb 2004            Feb 2009              3.32%
     $25,000                                          Feb 2004            Feb 2009              3.32%
     $25,000                                          Feb 2004            Feb 2009              3.33%
     $25,000                                          Feb 2004            Feb 2009              3.32%
     $37,528 reducing monthly to $29,793              March 1998          March 2006            6.04%
     $43,833 reducing monthly to $17,527              September 1998      August 2008           6.49%
</TABLE>

     As at December 31, 2004,  the notional  principal  amounts  subject to such
     swap agreements was $581.4 million (2003 - $152.7 million).

     Forward freight contracts

     The Company may enter into forward freight  contracts and futures contracts
     in order to manage its exposure to the risk of movements in the spot market
     for certain trade routes and for  speculative or trading  purposes.  Market
     risk  exists to the extent that spot  market  fluctuations  have a negative
     effect  on  the  Company's  cash  flows  and  consolidated   statements  of
     operations.

     At December  31,  2004,  the  Company was not party to any forward  freight
     contracts or futures contracts.

     Foreign currency risk

     The majority of the  Company's  transactions,  assets and  liabilities  are
     denominated in U.S. dollars, the functional currency of the Company. One of
     the Company's  subsidiaries has a charter contract  denominated in Yen with
     contracted  payments as set forth in Note 7. There is a risk that  currency
     fluctuations will have a negative effect on the value of the Company's cash
     flows.  The Company  has not  entered  into  forward  contracts  for either
     transaction  or translation  risk,  which may have an adverse effect on the
     Company's financial condition and results of operations.

     Fair Values

     The carrying  value and  estimated  fair value of the  Company's  financial
     instruments at December 31, 2004 and 2003 are as follows:

<TABLE>
     (in thousands of $)                       2004                2004               2003                 2003
                                          Carrying value         Fair  value     Carrying value           Fair value
                                          --------------         ----  -----     --------------           ----------
     <S>                                        <C>               <C>                   <C>                  <C>
     Non-derivatives:
     Cash and cash equivalents                   29,193            29,193                26,519               26,519
     Floating rate debt                         948,621           948,621               141,522              141,522
     8.5% Senior Notes due 2013                 530,270           546,178               850,088              850,088
     Derivatives:
     Interest rate swap contracts -
     amounts receivable                           7,737             7,737                     -                    -
     Interest rate swap contracts -
     amounts payable                              4,103             4,103                 9,217                9,217
</TABLE>

     The carrying value of cash and cash  equivalents,  which are highly liquid,
     is a reasonable estimate of fair value.

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

     The fair value of interest  rate swaps is  estimated by taking into account
     the cost of  entering  into  interest  rate swaps to offset  the  Company's
     outstanding swaps.

     Concentrations of risk

     There is a  concentration  of  credit  risk with  respect  to cash and cash
     equivalents to the extent that substantially all of the amounts are carried
     with Skandinaviska  Enskilda Banken,  BNP Paribas,  Den norske Bank, Fortis
     Bank and Nordea Bank Norge.  However,  the  Company  believes  this risk is
     remote as these banks are high credit quality financial institutions.

     In 2003 and 2002, no customer  accounted for 10 per cent or more of freight
     revenues.  In 2004 all vessels' gross earnings were derived from chartering
     arrangements with Frontline.

20.  CONTINGENT LIABILITIES

      Assets Pledged
     (in thousands of $)

     Ship mortgages                                                        948
     -------------------------------------------------------------------------

     Other Contractual Commitments

     The Company insures the legal  liability risks for its shipping  activities
     with  Assuranceforeningen  SKULD,  Assuranceforeningen  Gard  Gjensidig and
     Britannia Steam Ship Insurance  Association  Limited, all mutual protection
     and indemnity associations.  As a member of these mutual associations,  the
     Company  is  subject  to calls  payable  to the  associations  based on the
     Company's  claims  record in  addition  to the claims  records of all other
     members of the  associations.  A contingent  liability exists to the extent
     that the claims records of the members of the associations in the aggregate
     show  significant  deterioration,  which result in additional  calls on the
     members.

     The  charterer  of the  vessel,  Navix  Astral,  holds  a  purchase  option
     denominated in yen to purchase the vessel. The purchase option reduces on a
     sliding scale over the term of the related charter and is at a strike price
     that  is in  excess  of the  related  debt on the  vessel.  The  option  is
     exercisable  at any time after the end of the seventh  year of the charter.

21.  SUBSEQUENT EVENTS - AUDITED

     On January 28, 2005 and  February  23,  2005,  Frontline  approved  further
     spin-offs  of its  shares in Ship  Finance.  On  February  18,  2005,  each
     shareholder  of Frontline  received one share of the Company for every four
     shares  of  Frontline  held and on  March  24,  2005  each  shareholder  of
     Frontline  received  one  share of the  Company  for  every  ten  shares of
     Frontline held.  Following these transactions  Frontline's  shareholding in
     the Company is approximately 15.8%.

     On  February  23,  2005,  the Board of Ship  Finance  declared  an ordinary
     dividend  of $0.45  per share and an  extraordinary  dividend  of $0.05 per
     share which was paid on March 18, 2005.

     In February 2005, the Company completed a refinancing of its senior secured
     bank credit  facility.  The new facility of $1,131.0 million bears interest
     at LIBOR plus a margin of 0.7%, is repayable over a term of 6 years and has
     similar security terms to the repaid facility.

     SUBSEQUENT EVENTS - AUDITED

     In January 2005,  the Company  bought two VLCCs from  Frontline,  the Front
     Century and Front Champion, for $196 million en bloc. The vessels have been
     chartered  back to  Frontline  for 199 and 204  months  respectively  at an
     initial rate of $31,368 per day declining to $28,492 per day in 2019.  This
     includes a 20% profit split element for earnings  achieved in excess of the
     aforementioned initial rates.

     In March 2005 the Company bought the VLCC Golden Victory from Frontline for
     $98 million. The vessel has been chartered back to Frontline for 204 months
     at a rate of $33,793 per day  declining.  This  includes a 20% profit split
     element for earnings achieved in excess of the rate.

     In January  2005,  the  Company  announced  the sale of the  Suezmax  Front
     Fighter for $68.25  million.  The vessel was delivered to its new owners in
     March,  2005.  The  charter  of the Front  Fighter  to  Frontline  has been
     cancelled as a result of this sale.

     On January 17, 2005 the  Company  exercised  its option to acquire the VLCC
     Oscilla and the vessel was  delivered to the Company on April 4, 2005.  The
     purchase price paid to acquire the vessel was  approximately  $16.5 million
     which is equal to the outstanding  mortgage debt under four loan agreements
     between lenders and the vessel's owning company.  In addition,  the Company
     will make a payment of $14.6  million to Frontline to reflect the fact that
     the original  purchase  price was set assuming  delivery to Ship Finance on
     January 1, 2004 whereas  delivery did not occur until April 4, 2005. On the
     same date the vessel  commenced a fixed rate time charter to Frontline with
     an initial  rate of $25,575 per day for a fixed  period of 210 months.  The
     Company also entered into a fixed rate  management  contract with Frontline
     for $6,500 per day with the same term as the related time charter.

     We have entered into an agreement in May 2005 with parties  affiliated with
     Hemen Holding Ltd. to acquire two vessel owning companies,  each owning one
     2005 built  containership for a total  consideration of $98.6 million.  The
     Sea Alpha was  delivered  in May 2005,  and the Sea Beta will be  delivered
     from the ship yard in September 2005. The Sea Alpha is currently trading on
     a medium term time charter to an unrelated third party.

     In May 2005,  the Company  sold the three  Suezmaxes,  Front  Lillo,  Front
     Emperor and Front Spirit, for a total consideration of $92.0 million. These
     vessels were  delivered to their new owners in June 2005. In May 2005,  the
     Company also agreed to buy a further three vessels from  Frontline,  namely
     Front  Traveller,  Front  Transporter,  and Front Target,  for an aggregate
     amount of $92.0  million.  The time  charter  and  management  arrangements
     between Ship Finance and Frontline  have been  cancelled for the three sold
     vessels and will be replaced  with new  agreements on similar terms for the
     vessels acquired.

     We have entered into an agreement in June 2005 with parties affiliated with
     Hemen to acquire two vessel  owning  companies,  each owning one 2004 built
     VLCCl, for total  consideration of $184 million.  We will lease the vessels
     on long term  charters  to  Frontline  Shipping  II  starting  in the third
     quarter of 2005.

     In June  2005,  the  Company  has sold the  Suezmax  Front  Hunter  for $71
     million. The vessel will be delivered to its new owners in August, 2005 and
     the charter of the Front Hunter to Frontline  will be cancelled as a result
     of this sale.




     23153.0001 #582442