<DOCUMENT>
<TYPE>F-1
<SEQUENCE>1
<FILENAME>d511657_f-1.txt
<TEXT>

   As filed with the Securities and Exchange Commission on September 27, 2004

                                                        Registration No. 333-[ ]

================================================================================

                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   -----------

                                    FORM F-1
                             REGISTRATION STATEMENT
                                      UNDER
                           THE SECURITIES ACT OF 1933
                                   -----------

                       SHIP FINANCE INTERNATIONAL LIMITED
             (Exact name of Registrant as specified in its charter)

     Bermuda                          4412                      Inapplicable
(State or other                (Primary Standard              (I.R.S. Employer
jurisdiction of                    Industrial                Identification No.)
 incorporation                   Classification
or organization                   Code Number)
                               Par-la-Ville Place,
                              14 Par-la-Ville Road
                            Hamilton, HM 08, Bermuda.
                                 (441) 295-9500
               (Address, including zip code, and telephone number,
        including area code, of registrant's principal executive offices)

                               Seward & Kissel LLP
                            Attn: Gary J. Wolfe, Esq.
                             One Battery Park Plaza
                     New York, New York 10004 (212) 574-1200
            (Name, address, including zip code, and telephone number,
                   including area code, of agent for service)

                                   -----------

                          Copies of communications to:

         Kate Blankenship                             Gary J. Wolfe, Esq.
Ship Finance International Limited                    Seward & Kissel LLP
        Par-la-Ville Place,                         One Battery Park Plaza
       14 Par-la-Ville Road                        New York, New York 10004
     Hamilton, HM 08, Bermuda.
          (441) 295-9500

                                   -----------

Approximate date of commencement of proposed sale to the public: As soon as
practicable after this registration statement becomes effective.

                                   -----------

     If any of the securities being registered on this form are being offered on
a delayed or continuous  basis  pursuant to Rule 415 under the Securities Act of
1933, check the following box. |X|

     If this Form is filed to  register  additional  securities  for an offering
pursuant to Rule 462(b) under the  Securities  Act,  check the following box and
list the Securities Act registration  statement number of the earlier  effective
registration statement for the same offering. |_|

     If this Form is a  post-effective  amendment  filed pursuant to Rule 462(d)
under the  Securities  Act,  check the following box and list the Securities Act
registration  statement number of the earlier effective  registration  statement
for the same offering. |_|

                                   -----------

<TABLE>
                                 CALCULATION OF REGISTRATION FEE
<CAPTION>
                                                       Proposed     Proposed
                                                        maximum       maximum
                                          Amount       offering     aggregate      Amount of
Title of each class of                    to be        price per     offering    registration
securities  to be registered            registered     unit (1)       price        fee (2)
-----------------------------------------------------------------------------------------------
<S>                                         <C>           <C>        <C>           <C>
Common Shares, par value $1.00 per share    1,600,000     $21.15     $33,840,000   $4,287.53
===============================================================================================
</TABLE>

(1)  Amount of proposed maximum offering price per unit calculated in accordance
     with Rule 457(c)  based on the average of the high and low price  traded on
     the New York Stock exchange on September 21, 2004.

(2)  Estimated  solely for the purpose of calculating  the  registration  fee in
     accordance with Rule 457(f) under the Securities Act of 1933.

                                   -----------

     The  registrant  hereby amends the  registration  statement on such date or
dates as may be necessary to delay the effective date until the registrant shall
file a further  amendment  which  specifically  states  that  this  registration
statement shall  thereafter  become effective in accordance with Section 8(a) of
the  Securities  Act of 1933 or until the  registration  statement  shall become
effective  on such  date  as the  Securities  and  Exchange  Commission,  acting
pursuant to said Section 8(a), may determine.

     Until the date that is 25 days from the date of this Prospectus, all
dealers that effect transactions in the securities, whether or not participating
in this offering, may be required to deliver a prospectus.

================================================================================
<PAGE>

     The information in this prospectus is not complete and may be changed.  The
securities to be registered  pursuant to this registration  statement may not be
sold until the  registration  statement  filed with the  Securities and Exchange
Commission  is  effective.  This  prospectus  is  not an  offer  to  sell  these
securities  and it is not  soliciting  an offer to buy these  securities  in any
jurisdiction where the offer or sale is not permitted.

                                  -----------

                 Subject to Completion, Dated September __, 2004

PROSPECTUS

                             1,600,000 Common Shares

                       SHIP FINANCE INTERNATIONAL LIMITED
                                  Common Shares

     This prospectus  relates to an aggregate of 1,600,000 common shares of Ship
Finance  International  Limited  that  the  selling  shareholders  named in this
prospectus may offer for sale from time to time.  These shares were purchased by
the selling  shareholders in July, 2004 in an offering of our common shares that
was exempt from the registration  requirements of the Securities Act of 1933, as
amended.

     We will not receive any of the proceeds  from the sale of any of our common
shares by the selling  shareholders,  but will incur expenses in connection with
the offering.  The selling shareholders from time to time may offer and sell the
shares held by them directly or through agents or  broker-dealers on terms to be
determined  at the time of sale.  These  sales may be made on the New York Stock
Exchange or other  national  security  exchanges on which our common  shares are
then traded, in the over-the-counter market, or in negotiated transactions.  See
"Plan of  Distribution."  To the  extent  required,  the  names of any  agent or
broker-dealer  and  applicable  commissions  or discounts and any other required
information  with  respect  to any  particular  offer  will  be set  forth  in a
prospectus  supplement  which  will  accompany  this  prospectus.  A  prospectus
supplement  also  may  add,  update  or  change  information  contained  in this
prospectus.

     Our  common  shares are  listed on the New York  Stock  Exchange  under the
symbol  "SFL." The last reported sale price on September 24, 2004 was $21.40 per
share.

     INVESTING IN OUR COMMON SHARES INVOLVES RISKS. SEE "RISK FACTORS" BEGINNING
ON PAGE 13 TO READ ABOUT  FACTORS YOU SHOULD  CONSIDER  BEFORE  INVESTING IN OUR
COMMON SHARES.

                              ---------------------

     NEITHER THE UNITED STATES SECURITIES AND EXCHANGE  COMMISSION NOR ANY STATE
SECURITIES  COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED
UPON THE  ACCURACY OR ADEQUACY OF THIS  PROSPECTUS.  ANY  REPRESENTATION  TO THE
CONTRARY IS A CRIMINAL OFFENSE.

                  The date of this prospectus is September __, 2004
<PAGE>

                                TABLE OF CONTENTS

CAUTIONARY STATEMENT REGARDING FORWARD LOOKING STATEMENTS......................3
INFORMATION ABOUT THE ENFORCEABILITY OF JUDGMENTS AND THE EFFECT
   OF FOREIGN LAW..............................................................3
GLOSSARY OF SHIPPING TERMS.....................................................4
PROSPECTUS SUMMARY.............................................................7
SUMMARY FINANCIAL AND OTHER DATA..............................................11
RISK FACTORS..................................................................13
USE OF PROCEEDS...............................................................19
DIVIDEND POLICY...............................................................19
CAPITALIZATION................................................................19
UNAUDITED PRO FORMA FINANCIAL INFORMATION.....................................20
RATIO OF EARNINGS TO FIXED CHARGES............................................26
SELECTED FINANCIAL INFORMATION AND OTHER DATA.................................27
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
   RESULTS OF OPERATIONS......................................................29
INDUSTRY......................................................................44
BUSINESS......................................................................47
MANAGEMENT....................................................................61
COMPENSATION INFORMATION......................................................62
SECURITY OWNERSHIP OF CERTAIN SHAREHOLDERS AND MANAGEMENT.....................62
RELATED PARTY TRANSACTIONS....................................................63
SELLING SHAREHOLDERS..........................................................64
DESCRIPTION OF CAPITAL STOCK..................................................65
DESCRIPTION OF INDEBTEDNESS...................................................66
PLAN OF DISTRIBUTION..........................................................67
LEGAL MATTERS.................................................................69
EXPERTS.......................................................................69
WHERE YOU CAN FIND MORE INFORMATION...........................................69
SHIP FINANCE INTERNATIONAL LIMITED INDEX TO PREDECESSOR COMBINED
   CARVE-OUT FINANCIAL STATEMENTS.............................................71
INDEX TO UNAUDITED INTERIM FINANCIAL STATEMENTS.............................F-34

                                   -----------

     You should rely only on the information  contained in this  prospectus.  We
and the selling shareholders have not authorized any other person to provide you
with  different   information.   If  anyone   provides  you  with  different  or
inconsistent  information,  you  should  not  rely  on it.  We and  the  selling
shareholders   are  not  making  an  offer  to  sell  these  securities  in  any
jurisdiction where the offer or sale is not permitted.

     As used in this prospectus, the terms "Ship Finance International Limited",
"company," "we," "us" and "our" refer only to Ship Finance International Limited
and its subsidiaries, unless the context otherwise requires.

                                   -----------
<PAGE>

            CAUTIONARY STATEMENT REGARDING FORWARD LOOKING STATEMENTS

     This prospectus contains assumptions, expectations, projections, intentions
and beliefs about future events, in particular under the headings "Business" and
"Management's  Discussion  and  Analysis of Financial  Condition  and Results of
Operations".  These statements are intended as "forward-looking  statements." We
may also from  time to time  make  forward-looking  statements  in our  periodic
reports  that we will  file  with the  United  States  Securities  and  Exchange
Commission,  other information sent to our security  holders,  and other written
materials. We caution that assumptions,  expectations,  projections,  intentions
and beliefs  about future  events may and often do vary from actual  results and
the differences can be material.

     All statements in this document that are not statements of historical  fact
are forward-looking statements.  Forward-looking statements include, but are not
limited to, such matters as:

          o    future operating or financial results;

          o    statements about future, pending or recent acquisitions, business
               strategy,  areas of  possible  expansion,  and  expected  capital
               spending or operating expenses;

          o    statements  about tanker market trends,  including  charter rates
               and factors affecting supply and demand;

          o    expectations  about the availability of vessels to purchase,  the
               time which it may take to  construct  new  vessels,  or  vessels'
               useful lives; and

          o    our ability to obtain additional financing.

     When  used  in  this   document,   words  such  as   "believe,"   "intend,"
"anticipate,"  "estimate,"  "project,"  "forecast," "plan," "potential," "will,"
"may,"  "should," and "expect" and similar  expressions are intended to identify
forward-looking  statements but are not the exclusive means of identifying  such
statements.

     We undertake no obligation to publicly update or revise any forward-looking
statements contained in this prospectus, whether as a result of new information,
future events or otherwise,  except as required by law. In light of these risks,
uncertainties  and  assumptions,  the  forward-looking  events discussed in this
prospectus might not occur, and our actual results could differ  materially from
those anticipated in these forward-looking statements.

                INFORMATION ABOUT THE ENFORCEABILITY OF JUDGMENTS
                          AND THE EFFECT OF FOREIGN LAW

     We are a Bermuda  exempted company and we operate through our vessel owning
subsidiaries  located  in the  Bahamas,  the Isle of Man,  Liberia,  Panama  and
Singapore.  Our executive offices are located outside of the United States.  The
majority of our  directors,  officers and the experts  named in this  prospectus
reside  outside of the United  States.  In  addition,  substantially  all of our
assets and the assets of our directors, officers and experts are located outside
of the United States. As a result, you may have difficulty serving legal process
within the United States upon us or on some of these persons.

     We have been advised by our Bermuda counsel,  Mello,  Jones & Martin,  that
the United States and Bermuda do not currently  have a treaty  providing for the
reciprocal  recognition  and  enforcement  of  judgments  obtained  in civil and
commercial  matters  and that there is  uncertainty  as to whether the courts of
Bermuda would (1) enforce  judgments of United States courts obtained against us
or such persons  predicated  upon the civil  liability  provisions of the United
States  federal  or state  securities  laws or (2)  entertain  original  actions
brought in Bermuda against us or such persons, predicated upon the United States
federal and state securities  laws. As a result,  it may be difficult for you to
enforce  judgments  obtained in United States courts  against our assets located
outside the United States,  and it may be difficult for you to enforce judgments
obtained in United States  courts  against our  directors,  officers and experts
that are not in the United States.

                            INDUSTRY AND MARKET DATA

     Some of the industry and market data used  throughout  this prospectus were
obtained  through  company  research,  surveys  and studies  conducted  by third
parties and industry and general publications.  We believe that this information
is accurate and accordingly rely on it in this prospectus,  however,  neither we
nor  any  of  our  respective   affiliates   have   undertaken  any  independent
investigation  to confirm the accuracy or completeness of such  information.  In
addition,  some of the  shipping  industry  information,  statistics  and charts
contained in the section  entitled  "Industry" have been compiled by P.F. Bass0e
AS & Co. ("P.F. Bass0e"), a leading shipping industry consultant.

                                   -----------

                           GLOSSARY OF SHIPPING TERMS

     The  following are  definitions  of certain terms that are commonly used in
the tanker shipping industry and in this Prospectus.

Aframax tanker. Tanker ranging in size from 80,000 dwt to 120,000 dwt.

Annual survey. The inspection of a vessel pursuant to international conventions,
by a classification  society  surveyor,  on behalf of the flag state, that takes
place every year.

Ballast.  A substance,  usually water, used to improve the stability and control
the draft of a ship.

Bareboat charter.  Charter of a vessel under which the shipowner is usually paid
a fixed  amount of  charterhire  for a certain  period of time during  which the
charterer is  responsible  for the  operating and voyage costs of the vessel and
for the management of the vessel,  including crewing. A bareboat charter is also
known as a "demise charter" or a "time charter by demise."

Bunkers. Heavy fuel oil used to power the engines of a vessel.

Charter. The hire of a vessel for a specified period of time or to carry a cargo
from a loading port to a discharging  port. The contract for a charter is called
a charterparty.

Charterer. The company that hires a vessel.

Charterhire. A sum of money paid to the shipowner by a charterer under a charter
for the use of a vessel.

Classification  society. An independent society that certifies that a vessel has
been built and  maintained  according  to the  society's  rules for that type of
vessel and complies with the applicable  rules and regulations of the country of
the vessel and the international  conventions of which that country is a member.
A vessel that  receives  its  certification  from time to time is referred to as
being "in-class."

Contract of  Affreightment.  A contract for the carriage of a specific  type and
quantity of cargo which will be carried in two or more  shipments over an agreed
period of time, usually for more than one year.

Demurrage. The delaying of a ship caused by a voyage charterer's failure to take
on or discharge  its cargo before the time of scheduled  departure.  The term is
also used to describe the payment owed by the voyage charterer for such delay.

Double-bottom.  Hull  construction  design  in  which a  vessel  has  watertight
protective  spaces  that do not carry any oil and which  separate  the bottom of
tanks that hold any oil within the cargo tank  length from the outer skin of the
vessel.

Double hull. Hull  construction  design in which a vessel has an inner and outer
side and bottom separated by void space, usually several feet in width.

Double  side.  Hull  construction  design  in  which  a  vessel  has  watertight
protective  spaces  that do not carry any oil and  which  separate  the sides of
tanks that hold any oil within the cargo tank  length from the outer skin of the
vessel.

Drydocking.  The removal of a vessel from the water for inspection and/or repair
of those parts of a vessel which are below the water line.

Dwt. Deadweight ton. A unit of a vessel's capacity,  for cargo, fuel oil, stores
and crew, measured in metric tons of 1,000 kilograms.

Gross ton. Unit of 100 cubic feet or 2.831 cubic meters.

Hull. Shell or body of a ship.

IMO. International  Maritime  Organization,  a United Nations agency that issues
international standards for shipping.

Lightering.  To put cargo in a lighter  to  partially  discharge  a vessel or to
reduce her draft.  A lighter is a small  vessel used to  transport  cargo from a
vessel anchored offshore.

Newbuilding. A new vessel under construction or just completed.

OBO carrier. Oil/bulk/ore carrier. A vessel that is designed to carry either oil
or dry bulk cargoes, such as ores and minerals,  coal, grain forest products and
iron/steel products.

Off hire.  The period a vessel is unable to perform the services for which it is
immediately  required under a time charter.  Off hire periods include days spent
on repairs, drydocking and surveys, whether or not scheduled.

OPA. The United States Oil Pollution Act of 1990.

Operating  Costs.  The costs of  operating a vessel  that is  incurred  during a
charter,  primarily  consisting of crew wages and  associated  costs,  insurance
premiums,  lubricants and spare parts,  and repair and maintenance  costs. For a
time charter or a voyage  charter,  the shipowner  pays operating  costs.  For a
bareboat charter, the charterer pays operating costs.

Panamax  tanker.  A tanker of  approximately  50,000 to 80,000 dwt.  The term is
derived  from the maximum  length,  breadth and draft  capable of passing  fully
loaded through the Panama Canal.

Petroleum products.  Refined crude oil products, such as fuel oils, gasoline and
jet fuel.

Protection  and  indemnity  insurance.   Insurance  obtained  through  a  mutual
association  formed by  shipowners  to provide  liability  insurance  protection
against large financial loss to one member by contribution  towards that loss by
all members.

Scrapping. The disposal of old vessel tonnage by way of sale as scrap metal.

Single hull. Hull construction design in which a vessel has only one hull.

Special survey. The inspection of a vessel by a classification  society surveyor
that takes place every four to five years.

Spot market.  The market for immediate  chartering a vessel,  usually for single
voyages.

Suezmax tanker. Tanker ranging in size from 120,000 dwt to 200,000 dwt. The term
is derived from the maximum  length,  breadth and draft capable of passing fully
loaded through the Suez Canal.

Tanker.  Ship  designed  for the  carriage of liquid  cargoes in bulk with cargo
space  consisting of many tanks.  Tankers carry a variety of products  including
crude oil, refined products, liquid chemicals and liquid gas.

Time charter. Charter under which the shipowner is paid charterhire on a per day
basis for a certain period of time.  The shipowner is responsible  for providing
the crew and paying  operating  costs while the  charterer  is  responsible  for
paying  the voyage  costs.  Any  delays at port or during  the  voyages  are the
responsibility  of the charterer,  save for certain specific  exceptions such as
off-hire.

Time charter equivalent. A measure of the average daily revenue performance of a
vessel on a per voyage  basis  determined  by  dividing  net voyage  revenues by
voyage days for the applicable  time period.  For bareboat  charters,  operating
costs are added to revenues attributable to such charters.

ULCC. Ultra large crude carrier. Tanker that is 320,000 dwt or greater in size.

VLCC.  Very large crude carrier.  Tanker ranging in size from 200,000 to 320,000
dwt.

Voyage charter.  Charter under which a shipowner is paid freight on the basis of
moving  cargo  from a  loading  port  to a  discharge  port.  The  shipowner  is
responsible for paying both operating  costs and voyage costs.  The charterer is
typically responsible for any delay at the loading or discharging ports.

Voyage  costs.  Bunker  costs,  port charges and canal dues (or tolls)  incurred
during the course of a voyage.

Voyage revenues. Revenues generated from voyage charters and time charters.
<PAGE>

                               PROSPECTUS SUMMARY

     This summary highlights information contained elsewhere in this prospectus.
As an investor or prospective investor in our common shares you should read this
entire prospectus  carefully,  including the section entitled "Risk Factors" and
our financial statements and related notes for a more complete  understanding of
our business and this offering.  Unless we specify otherwise, all references and
data in this prospectus to our business, our vessels and our fleet refers to our
fleet of 46  vessels  and  option to  purchase  one  additional  vessel  that we
acquired in the first quarter of 2004.

Overview

     We were formed in October  2003 as a wholly owned  subsidiary  of Frontline
Ltd. (NYSE: FRO), which we believe is one of the largest owners and operators of
large crude oil tankers in the world. On June 16, 2004 Frontline distributed 25%
of our  common  shares  to its  shareholders,  with each  Frontline  shareholder
receiving one of our common shares for every four Frontline shares held. On June
17, 2004,  our common shares began trading on the New York Stock  Exchange under
the ticker  symbol  "SFL".  On  September  24,  2004,  Frontline  made a further
distribution  of  approximately  10% of its holdings of our common shares to its
shareholders, with each Frontline shareholder receiving one of our common shares
for every ten Frontline shares held.

     We  purchased  our fleet of 46 crude oil tankers from  Frontline,  which we
have  chartered  under long term,  fixed rate  charters  to  Frontline  Shipping
Limited,  a  wholly  owned  subsidiary  of  Frontline  that we  refer  to as the
Charterer.  We also acquired from Frontline an option to purchase one additional
VLCC tanker,  which we expect to exercise  before the end of 2004. The Charterer
was  initially  capitalized  with $250 million in cash  provided by Frontline to
support its  obligation to make payments to us under the charters.  We have also
entered into fixed rate management and administrative  services  agreements with
Frontline  Management  (Bermuda) Ltd.,  which we refer as Frontline  Management,
also a wholly owned  subsidiary of  Frontline,  to provide for the operation and
maintenance  of  our  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.

Our Fleet

     The vessels we acquired from Frontline,  including the vessel under option,
consist of 23 very large  crude  carriers,  or VLCCs,  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.  Our fleet is one of the largest  tanker  fleets in the
world,  with a combined  deadweight  tonnage  of 10.5  million  dwt,  and has an
average age of 8.6 years as of December 31,  2003.  Thirteen of our VLCCs and 16
of our Suezmax tankers are of double hull construction, with the remainder being
modern single hull or double sided vessels built since 1990.

     Our  tankers  primarily  transport  crude oil.  VLCCs,  due to their  size,
principally  operate on routes  from the Middle  East to the Far East,  Northern
Europe,  the  Caribbean and the  Louisiana  Offshore Oil Port, or LOOP.  Suezmax
tankers are similarly designed for worldwide trade, although the trade for those
vessels is mainly in the Atlantic basin on routes between Northern  Europe,  the
Caribbean and the United States.  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.

Strategy

     Our long term  charters with the Charterer are our sole source of operating
income.  We currently plan to grow our fleet and to replace  vessels as they are
retired  with modern  double hull  vessels to maintain  stable cash flow and the
quality of our fleet.  We expect that our replacement and growth vessels will be
either  existing or newly  built VLCC or Suezmax  tankers.  Depending  on market
conditions,  we may charter any  additional  vessels  that we acquire on long or
short term time charters or in the spot  markets.  We may also seek to diversify
our customer base by securing  charters with companies other than the Charterer.

Competitive Strengths

     We believe that our fleet, together with our contractual  arrangements with
Frontline, 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  Charterer's  earnings  from
               deploying our vessels exceed certain levels;

          o    substantially   fixed   operating   costs  under  our  management
               agreements;

          o    a charter counterparty initially capitalized with $250 million to
               support its obligation to make charter payments to us; and

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

Fleet Purchase Agreement

     Pursuant  to a fleet  purchase  agreement  executed in  December  2003,  we
acquired from Frontline 46 vessel owning  subsidiaries  and one subsidiary  that
holds an option to purchase an additional vessel for an aggregate purchase price
of $950  million,  excluding  working  capital and other  intercompany  balances
retained by Frontline.  We also assumed senior secured indebtedness with respect
to our fleet of 46 vessels in the amount of  approximately  $1.158 billion.  The
purchase price for the fleet and the  refinancing of the existing senior secured
indebtedness  were financed  through a combination  of the net proceeds from the
sale of $580 million  8.5% senior  notes,  due 2013,  that we issued in December
2003,  funds from a $1.058 billion  senior secured credit  facility and a deemed
equity contribution from Frontline.  The charters and the management  agreements
were each given economic effect as of January 1, 2004.

Time Charters

     We have  chartered  the vessels  that we  acquired  from  Frontline  to the
Charter  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 certain exceptions, the daily base charter rates, 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

These daily base charter rates are subject to reductions  after some periods and
to  deferral  rights  that we  describe  more  fully  in this  prospectus  under
"Business-Charter Arrangements."

     In addition to the base charter rates, the Charterer has agreed to pay us a
profit sharing payment equal to 20% of its excess revenues,  calculated annually
on a time charter equivalent,  or TCE, basis,  realized by the Charterer for our
fleet above a weighted average rate of $25,575 per day for each VLCC and $21,100
per day for each Suezmax tanker.

The Charterer

     The Charterer was initially  capitalized  by Frontline with $250 million in
cash,  which  serves to support  the  Charterer's  obligations  to make  charter
payments  to us. The  Charterer  is entitled to use these funds only (1) to make
charter payments to us and (2) for reasonable working capital to meet short term
voyage  expenses.  The  Charterer's  obligations  to us under the  charters  are
secured  by a lien  over all the  assets  of the  Charterer  and a pledge of the
equity interests of the Charterer.

     The  Charterer is a Bermuda  corporation  and a wholly owned  subsidiary of
Frontline,  formed to charter  the vessels in our fleet and to engage in matters
necessary or incidental to that business.  Under its constituent documents,  the
Charterer 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.

Management and Administrative Services Agreements

     To give us added  certainty  with  respect  to the costs of  operating  our
vessels,  our vessel owning subsidiaries have entered into fixed rate management
agreements with Frontline Management. Under the management agreements, Frontline
Management is responsible for all technical management of the vessels, including
crewing,  maintenance,  repair, capital expenditures,  drydocking, vessel taxes,
maintaining insurance and other vessel operating expenses.  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.  Under the
management agreements, we pay Frontline Management a fixed fee of $6,500 per day
per vessel for all of these services,  for as long as the relevant charter is in
place. Frontline has guaranteed to us Frontline  Management's  performance under
these management agreements.

     We  have  also  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.

     Because Frontline Management has assumed full managerial responsibility for
our fleet and our administrative  services,  we currently do not have management
or employees who are not also  officers or employees of  Frontline.  We have one
independent  director,  while each of our other  directors is also a director or
executive officer of Frontline.

Corporate Structure

     The following diagram depicts our ownership and contractual structure:

                                 --------------
                                 Frontline Ltd.
                                   (NYSE:FRO)
                                 --------------
                                        |
                                        |
                                        |
           -----------------------------------------------------------
           |                            |                            |
          100%                         100%                        63.5%
           |                            |                            |
 --------------------      --------------------------      ---------------------
 Frontline Management      Frontline Shipping Limited           Ship Finance
    (Bermuda) Ltd.                (Charterer)              International Limited
(Frontline Managment)
 --------------------      --------------------------      ---------------------
          ^                            |                              |
          |                            |       Fixed rate           100%
          |                            |    charter payments          |
          |                            |                        -------------
          |                            |--------------------->  Vessel Owning
          |---------------------------------------------------  Subsidiaries
       Fixed payments for vessel management and administration  -------------

Our Contractual Cash Flow

     The following  table sets forth the aggregate  contracted  charter  revenue
that is payable to us under our charters with the  Charterer,  together with the
management  fees that are payable by us under the management  agreements and the
administrative  services  agreement,  but does not include  any debt  service or
other  expenses.  These  figures do not include any profit  sharing  payments or
reflect charter payment deferrals.  These amounts are based on our current fleet
of 46 vessels and include the additional VLCC under option from January 1, 2005.
This table assumes that all parties fully  perform their  obligations  under the
relevant  agreements and that none of the charters are terminated due to loss of
the  vessel or  otherwise,  except  for the  charters  for our  non-double  hull
vessels,  which are  assumed to be  terminated  after 2010.  Factors  beyond our
control  may  affect  other  parties'  ability  to  satisfy  their   contractual
obligations  to us, and we cannot assure you that these results will actually be
achieved.  These factors may include,  among others, a decline in tanker charter
rates that could  prevent  the  Charterer  from  earning  sufficient  revenue to
satisfy  its  obligation  to us if the $250  million  cash  reserve  provided by
Frontline  is  not  sufficient  to  cover  any  deficiency.   Please  see  "Risk
Factors-Risks Relating to Our Business-We depend on the Charterer for all of our
operating cash flow" and "The Charterer's ability to pay charterhire to us could
be materially and adversely  affected by volatility in the tanker markets".  For
more complete information about the rates and terms of our charters,  please see
"Business-Charter Arrangements".

                                                                             Net
                                                  Management and      Contracted
                                       Charter    Administrative           Cash
Year                                  Payments              Fees        Payments
----                                  --------              ----        --------
                                                (dollars in millions)

2004...............................     $385.9            $110.9          $275.0
2005...............................      394.1             112.9           281.2
2006...............................      394.1             112.9           281.2
2007...............................      387.3             112.9           274.4
2008...............................      388.4             113.3           275.1
2009...............................      383.0             112.9           270.1
2010...............................      370.4             112.9           257.5
2011...............................      226.6              69.9           156.7
2012...............................      219.4              70.1           149.3
2013...............................      214.1              69.9           144.2
2014 and beyond....................    1,517.1             496.8         1,020.3
Total..............................     $4,880          $1,495.4        $3,385.0

The Offering

Common shares offered by the selling       1,600,000 common shares
shareholders


Common shares outstanding prior to this    73,925,837 common shares
offering (as of June 30, 2004)

Risk Factors                               See "Risk Factors" and other
                                           information included in this
                                           prospectus for a discussion of
                                           factors you should carefully consider
                                           before deciding to invest in our
                                           common shares.

New York Stock Exchange symbol             "SFL"
<PAGE>

                        SUMMARY FINANCIAL AND OTHER DATA

The  following  summary  financial  and  other  data  summarize  our  historical
financial information. The summary combined income statement data for the fiscal
years ended December 31, 2003,  2002, and 2001, and the summary combined balance
sheet data with  respect to the fiscal  years ended  December  31, 2003 and 2002
have been  derived from our audited  predecessor  combined  carve-out  financial
statements included herein. The summary combined balance sheet data with respect
to the fiscal year ended  December  31, 2001 has been  derived  from our audited
predecessor combined carve-out financial statements not included herein.

The summary  combined  balance sheet data for the six months ended June 30, 2003
has been derived from our unaudited  predecessor  combined  carve-out  financial
statements not included  herein.  The summary combined income statement data for
the six  months  ended  June  30,  2003  has been  derived  from  our  unaudited
predecessor combined carve-out financial statements included herein.

The summary financial  information as at June 30, 2004 has been derived from our
unaudited standalone financial statements included herein.

In the opinion of our management,  the summary financial information for the six
months ended June 30, 2004 and 2003,  includes all  adjustments,  consisting  of
normal  recurring   accruals,   necessary  for  a  fair   presentation  of  that
information.  The summary combined financial data are not necessarily indicative
of  future  results.  This  information  should  be  read  in  conjunction  with
"Management's  Discussion  and  Analysis of Financial  Condition  and Results of
Operations"  and  our  historical   predecessor   combined  carve-out  financial
statements and the notes thereto and the unaudited interim financial  statements
and notes thereto included elsewhere in this registration statement.

<TABLE>
<CAPTION>
                                     Six month s ended June 30              Year Ended December 31,
                                     --------------------------    -----------------------------------------
                                        2004           2003           2003           2002           2001
                                     -----------    -----------    -----------    -----------    -----------
                                                     (in thousands of $ except per share data)
<S>                                     <C>            <C>            <C>            <C>            <C>
Income Statement Data:
  Total operating revenues .......      $219,513       $401,589       $695,068       $365,174       $486,655
  Net operating income ...........       138,865        227,617        348,816         86,091        230,718
  Net income .....................       106,312        228,958        334,812         18,024        212,010
  Earnings per share, basic
  and diluted (2)..........                $1.44          $3.10          $4.53          $0.24          $2.87
Balance Sheet Data (at end of
  period):
  Cash and cash equivalents ......        32,138         25,257        $26,519        $20,634        $26,041
  Total assets ...................     2,145,006      2,164,349      2,156,348      2,123,607      1,951,353
  Stockholders' equity ...........       564,446        715,615        822,026        485,605        466,742
Cash Flow Data
  Cash provided by operating
  activities .....................       109,523        241,912       $415,523       $115,658       $307,167
  Cash provided by (used in)
  investing activities ...........        (7,780)           360        (51,632)      (261,779)      (271,850)
  Cash provided by (used in)
  financing activities ...........       (69,605)      (237,649)      (358,006)       140,714        (24,549)

Fleet Data
  Number of wholly owned vessels
  (end of period) ................            46             43             43             42             38
  Number of vessels owned in joint
  ventures (end of period) .......             0              8              6              9              7
Average Daily Time Charter
  Equivalent(1)
  VLCCs ..........................       $56,600        $47,500        $40,400        $22,200        $34,600
  Suezmaxes ......................       $37,100        $40,400        $33,500        $18,400        $30,600
  Suezmax OBOs ...................       $27,000        $38,700        $32,000        $17,700        $28,900
</TABLE>

----------

(1)  The Company's vessels are operated under time charters,  bareboat charters,
     voyage charters pool arrangements and contracts of affreightments, or COAs.
     Under a time charter,  the charterer pays  substantially  all of the vessel
     voyage 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 such 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 take account
     of the owner's  payment of 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
     time charter  equivalent  earnings,  or 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. Net voyage
     revenues,  a non-GAAP measure,  provides more meaningful  information to us
     than voyage revenues, the most directly comparable GAAP measure. 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.  The  following  table  reconciles  our net  voyage
     revenues to voyage revenues.

<TABLE>
<CAPTION>
                              Six month s ended June 30        Year Ended December 31,
                              -------------------------     --------------------------------
                                   2004        2003           2003        2002        2001
                                 --------    --------       --------    --------    --------
                                                            (in thousands of $)
<S>                                <C>        <C>           <C>          <C>         <C>
Voyage revenues                    49,750     377,126        628,323     324,180     453,784
Voyage expenses and commission     (8,971)    (80,862)      (148,533)    (93,996)    (75,199)
                                 --------    --------       --------    --------    --------
Net voyage revenues                40,779     296,264        479,790     230,184     378,585
                                 ========    ========       ========    ========    ========
</TABLE>

(2)  For all periods  presented per share amounts are based on a denominator  of
     73,925,837  common shares  outstanding which is the number of issued 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.

<PAGE>

                                  RISK FACTORS

     An  investment  in our common  shares  involves a high degree of risk.  You
should carefully consider the following risks and other information  included in
this prospectus that summarize the risks that may materially affect our business
before making an investment in our common shares.

Risks Relating to Our Business

WE DEPEND ON THE CHARTERER FOR ALL OF OUR OPERATING CASH FLOW.

     All of our  vessels are  chartered  to the  Charterer  under long term time
charters,  and the  Charterer's  payments to us are currently our sole source of
operating  cash flow.  The Charterer was created to charter our fleet and has no
business or sources of funds other than those  related to the  chartering of our
fleet to third parties and no assets other than, initially, $250 million in cash
provided by Frontline,  which serves to support the  Charterer's  obligations to
make charter payments to us under the charters. Neither Frontline nor any of its
affiliates  guarantees  the payment of the charter  payments or is  obligated to
contribute additional capital to the Charterer at any time.

     Although there are  restrictions on the Charterer's  rights to use its cash
to pay dividends or make other  distributions if its cash reserves are below the
specified  minimum  reserve  requirement,  the Charterer is permitted to use its
cash reserves to pay charter  payments to us and for reasonable  working capital
purposes. Accordingly, at any given time in the future, its cash reserves may be
diminished  or exhausted,  and we cannot  assure you that the Charterer  will be
able to make charter  payments to us. If the Charterer is unable to make charter
payments  to us, our  results of  operations  and  financial  condition  will be
materially adversely affected.

VOLATILITY IN THE TANKER CHARTER MARKETS MAY CAUSE THE CHARTERER TO BE UNABLE TO
MAKE CHARTERHIRE PAYMENTS TO US.

     The  Charterer  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,  it is 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 Charterer's  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  Charterer at rates  sufficient to enable the Charterer to meet
its obligations to pay charterhire to us.

THE  MAJORITY  OF OUR  COMMON  SHARES  ARE OWNED BY  FRONTLINE  AND WE DEPEND ON
OFFICERS  AND  DIRECTORS  OF  FRONTLINE  FOR OUR  MANAGEMENT,  WHICH MAY  CREATE
CONFLICTS OF INTEREST.

     Frontline  currently  owns  63.5%  of our  common  shares.  For so  long as
Frontline owns at least a majority of our  outstanding  common  shares,  it will
generally be able to control the outcome of any shareholder vote,  including the
election of  directors.  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 ITS OTHER  AFFILIATES  MAY BE LESS
FAVORABLE THAN AGREEMENTS THAT WE COULD OBTAIN FROM UNAFFILIATED THIRD PARTIES.

     The charters,  the management  agreements,  the charter ancillary agreement
and the  other  contractual  agreements  we have  with  Frontline  and its other
affiliates  were made in the  context  of an  affiliated  relationship  and were
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  Charterer to use its  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  agreement  with the
Charterer  and  Frontline,  we are  entitled to receive  annual  profit  sharing
payments  to the extent that the  average  TCE rates  realized by the  Charterer
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 our
profit sharing payments or charter payments under our charters.

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 Charterer,  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.  Some of these breaches may constitute an event of
default  under the  indenture  for our 8.5%  Senior  Notes  until we  complete a
successful  public  listing.  We will be deemed to have  completed a  successful
public listing when Frontline has distributed at least 40% of our common shares.

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,  it is unlikely that we would be able to
re-charter these vessels on a long term basis with terms similar to the terms of
our charters  with the  Charterer.  While the terms of our current  charters end
between 2014 and 2025, the Charterer has 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.  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
Charterer  or with a third  party  charterer.  In  addition,  under  our  vessel
management  agreements  with Frontline  Management,  for a fixed  management fee
Frontline  Management is  responsible  for all of the technical and  operational
management of our vessels,  and will indemnify us against certain losses of hire
and various  other  liabilities  relating to the  operation of the vessels.  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 do not  believe  we could  obtain  similar  fixed rate terms from an
independent third party.

     With  respect to any vessels we acquire that are not subject to the charter
and management agreements with the Charterer 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.

AN  INCREASE  IN  INTEREST  RATES  COULD  MATERIALLY  AND  ADVERSELY  AFFECT OUR
FINANCIAL PERFORMANCE.

     We have  outstanding  approximately  $971.5  million in floating  rate debt
under a  senior  secured  credit  facility  as of the  date of this  prospectus.
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 August 31, 2004 we have entered into interest rate swaps
to fix the  interest  on $586.4  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 $385.1 million
at August 31,  2004. A one per cent change in interest  rates would  increase or
decrease interest expense by $3.9 million per year as of August 31, 2004.

BECAUSE WE ARE A NEW COMPANY WITH NO SEPARATE OPERATING HISTORY,  OUR HISTORICAL
FINANCIAL AND OPERATING DATA 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 in this  prospectus 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.

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 and have significant principal
amortization  requirements during the term of our 8.5% Senior Notes. 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. We may incur  additional  debt in
the future, subject to limitations under our credit facilities and the indenture
for our Senior Notes. These limitations include:

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

          o    limitations on our incurrence of liens; and

          o    limitations on our ability to pay dividends.

          o    For more detailed  descriptions of these limitations,  please see
               "Description of Other Indebtedness".

     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  in the  future for  capital
expenditures,  acquisitions, and other general corporate activities. It also may
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  and  place  us at a
competitive disadvantage against other less leveraged competitors.

AN ACCELERATION OF THE CURRENT PROHIBITION TO TRADE DEADLINES FOR OUR NON-DOUBLE
HULL TANKERS COULD ADVERSELY AFFECT OUR OPERATIONS.

     Our tanker 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, which range from 2010 to 2015. The
sinking of the single hull m.t. Prestige offshore Spain in November 2002 has led
to proposals by the European Union and the IMO to accelerate the  prohibition to
trade of all  non-double  hull  tankers,  with certain  limited  exceptions.  In
December 2003, the Marine Environmental  Protection Committee of the IMO adopted
a proposed  amendment to the  International  Convention  for the  Prevention  of
Pollution  from Ships to  accelerate  the phase out of single hull  tankers from
2015 to 2010  unless the  relevant  flag  states  extend the date to 2015.  This
proposed  amendment  will take  effect in April  2005  unless  objected  to by a
sufficient  number of states.  We do not know whether any of our vessels will be
subject to this accelerated phase-out,  but this change could result in a number
of our vessels being unable to trade in many markets after 2010.  Moreover,  the
IMO may still adopt  regulations in the future that could  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  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  Charterer,  we will
not be  permitted to sell it to take  advantage  of  increases in vessel  values
without the Charterer's  agreement.  On the other hand, if the Charterer 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 Charterer,  which could impair its 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
CHARTERER'S 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  Charterer's  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
TANKERS.

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

IF FRONTLINE WERE TO BECOME INSOLVENT,  A BANKRUPTCY COURT COULD POOL OUR OR THE
CHARTERER'S  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  Charterer's  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 Charterer will be made to our
subsidiaries.  As a result,  our ability to make required  payments on the notes
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  interest  or  principal  on the notes when due, or to redeem the
notes upon a change of control,  unless we obtain funds from other  sources.  We
cannot assure you that we will be able to obtain the necessary  funds from other
sources.
<PAGE>

                                 USE OF PROCEEDS

     Our  common  shares  being  offered by this  prospectus  are solely for the
account of the selling  shareholders.  We will not receive any proceeds from the
sale of our common shares by the selling shareholders.  The selling shareholders
will pay brokerage fees, selling commission and underwriting  discounts,  if any
incurred in connection with disposing of the shares pursuant to this prospectus.
We will bear all other  costs,  fees and  expenses  incurred  in  effecting  the
registration of the shares covered by this prospectus.

                                 DIVIDEND POLICY

     Any  determination  to pay dividends will be at the sole  discretion of our
Board of Directors and will be dependant on, among other factors,  our earnings,
financial  condition,   operating  results,  capital  requirements,   regulatory
restrictions,  and  contractual  restrictions  imposed by our debt  instruments.
Although we cannot assure you that any dividends will be declared or paid in the
future,   our  Board  of  Directors  has  determined  to  establish  a  targeted
sustainable long-term dividend yield at $1.40 per common share.

     We also account for certain payments as deemed dividends (see  Management's
Discussion  and  Analysis  of  Financial  Condition  and  Results of  Operations
included elsewhere in this prospectus).

                                 CAPITALIZATION

     The following table sets forth our  capitalization  at June 30, 2004 and as
adjusted to reflect:

          1.   Our  repurchase of $5.0 million of our 8.5% Senior Notes in July,
               2004;

          2.   The  repayment of an  instalment  of $22.8  million on our senior
               secured credit facility in August 2004;

          3.   Our issuance of 1,600,000  new common  shares for net proceeds of
               $25.2 million in July 2004; and

          4.   A dividend of $0.35 per share declared on August 19, 2004.

     The  information  presented  below  should  be  read  in  conjunction  with
"Management's  Discussion  and  Analysis of Financial  Condition  and Results of
Operations"  and our  interim  financial  statements  and  predecessor  combined
carve-out financial statements together with the notes thereto, included in this
prospectus.

<TABLE>
<CAPTION>
                                                        June 30, 2004
                                         ---------------------------------------------
                                                Actual                As Adjusted
                                         ----------------------  ---------------------
                                         (dollars in  millions)  (dollars in millions)
<S>                                             <C>                    <C>
Long-term debt including current portion:
  8.5% Senior Notes due 2013 (1)                  $560.0                 $555.0
  Senior secured credit facility                   994.3                  971.5
Total debt                                       1,554.3                1,526.5
                                                 -------                -------
Stockholders' equity                               564.4                  563.7
                                                 -------                -------
Total capitalization                            $2,118.7               $2,090.2
                                                ========               ========
</TABLE>

(1)  Represents  the issued amount of $580 million less $20 million  repurchased
     as at June 30, 2004.

                    UNAUDITED PRO FORMA FINANCIAL INFORMATION

     The unaudited pro forma  statements of operations  for the six months ended
June 30, 2004 and year ended  December  31, 2003 gives  effect to the  following
events as if they had  occurred on and from  January 1, 2004 and January 1, 2003
respectively.

          o    Our purchase from Frontline of our subsidiaries  that own a fleet
               of 46 crude  oil  tankers  and an option to  acquire  the  vessel
               Oscilla,  which assumes the exercise of our option to acquire the
               vessel Oscilla

          o    The charter by us of the fleet to the  Charterer  under long term
               fixed rate charters.

          o    Our  entry  into  the  charter   ancillary   agreement  with  the
               Charterer.

          o    Our  entry  into  the  vessel   management   agreements  and  the
               administrative services agreement with Frontline Management.

          o    The  refinancing  of our  subsidiaries'  existing  senior secured
               indebtedness.

          o    Our issuance of $580 million of 8.5% Senior Notes due 2013.

     The unaudited pro forma financial  information is provided for illustrative
purposes only and does not  represent  what our  statements of operations  would
actually have been if the  transactions  had in fact occurred on those dates and
is not  representative  of our  results of  operations  for any future  periods.
Investors are cautioned not to place undue  reliance on this unaudited pro forma
financial information.

     The  footnotes  to the  pro  forma  financial  information  contain  a more
detailed discussion of how adjustments to reflect the events described above are
presented.  The unaudited pro forma  statements of operations  should be read in
conjunction  with our interim  financial  statements,  our predecessor  combined
carve-out  financial  statements and  stand-alone  financial  statements and the
related  notes  and  other  financial  information  included  elsewhere  in this
prospectus. The historical statement of operations for the six months ended June
30, 2004 is derived from our interim financial  statements included elsewhere in
this prospectus.  The historical statement of operations for year ended December
31,  2003 is derived  from the stand  alone  statement  of  operations  included
elsewhere in this prospectus.

     Ten of the 46 vessels we have purchased from Frontline are currently  under
bareboat  or  time  charter  to  third  parties.  Four of our  existing  charter
arrangements  will expire  prior to December  31,  2004 and the  remainder  will
expire on or before  December 31, 2007 subject to charterer's  options to extend
some of these  charters.  We also acquired from  Frontline an option to purchase
one additional VLCC tanker, the Oscilla,  which we expect to exercise before the
end of 2004. This vessel is currently under a variable rate bareboat  charter to
a third party until March 30, 2005.

     The cash flow  obligations  from our  charters  with the  Charterer  became
effective as of January 1, 2004;  however,  we have not  reflected any change in
the status of the current charter arrangements with third parties for those that
expire after  September 30, 2004 in the pro forma  statements of operations.  We
account for 38 of the  long-term  charters to the Charterer as sales type leases
under  U.S.  GAAP  in the  unaudited  pro-forma  statement  of  operations.  The
remaining 8 vessels and Oscilla are currently  accounted for as chartered  under
operating  leases.  We  refer  you to  footnote  A to the  unaudited  pro  forma
statements  of   operations   for  further   information   regarding  the  lease
classification of our charters.  Classification of charters as sales type leases
or as operating  leases is  determined  with  reference  to, among other things,
assumptions  about useful lives, fair values on January 1, 2004 and scrap values
of our  vessels.  The lease  classification  of our charters for the purposes of
preparing this unaudited pro forma financial information is based on assumptions
that reflect our best estimates and reasonably available information.

     The following  table  summarizes our key  assumptions  about fair values on
January 1, 2004, useful lives and scrap values of our fleet,  including the VLCC
we have an option to  purchase,  which we use in  classifying  our  charters  as
operating  leases or sales type  leases.  Fair values of vessels  are  generally
estimated using the average of three independent broker valuations (which assume
a sale  between a willing  buyer and a willing  seller  under no  compulsion  to
sell).

<TABLE>
<CAPTION>
                                                                                  Average of        Average of
                                   Number of     Dates of        Estimated      estimated fair   estimated scrap
Type of vessel                      vessels    construction   scrapping dates       values           values
--------------                     ---------   ------------   ---------------   --------------   ---------------
                                                                                     (dollars in millions)
<S>                                    <C>     <C>              <C>                  <C>              <C>
Double hull Suezmax OBO                 8      1991 to 1992     2016 to 2017         $34.8            $2.4
Double hull Suezmax                     8      1993 to 1998     2018 to 2023         $44.6            $3.3
Non-double hull Suezmax                 8      1991 to 1993     2015 to 2017         $24.6            $3.0
Double hull VLC                        13      1998 to 2002     2023 to 2027         $79.3            $6.0
Non-double hull VLCC                   10      1990 to 1996     2015 to 2017         $34.7            $4.2
</TABLE>

Unaudited Pro Forma  Statement of  Operations  for the Six months Ended June 30,
2004

<TABLE>
<CAPTION>
                                                             Pro forma
                                                   Actual   Adjustments   Notes   Pro forma
                                                   ------   -----------   -----   ---------
<S>                                               <C>          <C>          <C>   <C>
Operating revenues
   Time, bareboat and voyage charter revenues     121,975      (67,983)     A       53,992
   Finance lease interest income                   64,056       16,005      A       80,061
   Finance lease service revenues                  33,482        6,740      A       40,222
                                                  -------                         --------
Total operating revenues                          219,513                          174,275
                                                  -------                         --------
Operating expenses
   Voyage expenses and commission                   8,971       (7,726)     B        1,245
   Ship operating expenses                         48,377          224      B       48,601
   Depreciation and amortisation                   21,786       (9,556)     C       12,230
   Administrative expenses                          1,514                   D        1,514
                                                  -------                         --------
Total operating expenses                           80,648                           63,590
                                                  -------                         --------
Net operating income                              138,865                          110,685
Other income (expenses)
   Interest income                                 2,269                            2,269
   Interest expense                              (48,929)         (612)     E     (49,736)
                                                                  (548)     F
                                                                  (353)     G
   Foreign currency exchange gain                     117                              117
   Other financial items, net                      13,990                           13,990
                                                  -------                         --------
   Net other income (expenses)                    (32,553)                         (33,360)
                                                  -------                         --------
Net income (loss)                                 106,312                           77,325
                                                  =======                         ========
</TABLE>

Unaudited Pro Forma Statement of Operations for the Year Ended December 31, 2003

<TABLE>
<CAPTION>
                                                             Pro forma
                                                   Actual   Adjustments   Notes   Pro forma
                                                   ------   -----------   -----   ---------
<S>                                               <C>          <C>          <C>   <C>
Operating revenues
   Time, bareboat and voyage charter revenues           -       121,470     A      121,470
   Finance lease interest income                        -       168,010     A      168,010
   Finance lease service revenues                       -        80,665     A       80,665
                                                  -------                         --------
Total operating revenues                                -                          370,145
                                                  -------                         --------
Operating expenses
   Voyage expenses and commission                       -        17,988     B       17,988
   Ship operating expenses                              -        97,273     B       97,273
   Depreciation and amortisation                        -        24,026     C       24,026
   Administrative expenses                             14           960     D          974
                                                  -------                         --------
Total operating expenses                               14                          140,261
                                                  -------                         --------
Net operating income                                  (14)                          229,884
Other income (expenses)
   Interest income                                    199                              199
   Interest expense                                (2,123)      (25,723)    E      (79,650)

                                                                (47,931)    F
                                                                 (3,873)    G
                                                  -------                         --------
   Net other income (expenses)                     (1,924)                         (79,451)
                                                  -------                         --------
Net income (loss)                                  (1,938)                         150,433
                                                  =======                         ========
</TABLE>

Notes to Adjustments to Unaudited Pro Forma Statements of Operations

     A. We have  chartered all of the 46 vessels we acquired  from  Frontline to
     the Charterer under long term charters.  Ten of these vessels are currently
     under charter to third parties.  We refer you to the  introduction  to this
     section and to "Business--Our Fleet" in this prospectus for key information
     regarding the vessels that we acquired and chartered to the Charterer.

     Thirty eight of these vessels have completed or will complete their current
     voyage or time charter  prior to  September  30, 2004 and are assumed to be
     free and  available  as of  January  1,  2004 and  January  1, 2003 for the
     purposes of this  unaudited pro forma  financial  information.  Charters of
     these  vessels  have been  accounted  for as sales type  leases and our net
     investment  in the lease is recorded  at the  inception  of the lease.  For
     sales type leases,  we will remove the  depreciated  cost of the associated
     vessel from our  balance  sheet and record a net  investment  in sales type
     leases.  The net  investment in a sales type lease is calculated as the sum
     of the net present  values of the minimum  lease cash flows,  calculated at
     the inception of the lease.

     Lease  cash  flows from sales type  leases,  net of  executory  costs,  are
     allocated  between  finance lease  interest  income,  finance lease service
     revenues and a reduction in the balance of the net  investment  in a manner
     that results in a constant periodic return based on the reducing balance of
     the net investment.

     For the purposes of this  unaudited  pro forma  financial  information  the
     remaining eight vessels and Oscilla will be classified as  chartered  under
     operating  leases in  accordance with  U.S. GAAP.  These eight  vessels and
     Oscilla are currently on charters that end after September 30, 2004 and are
     therefore  assumed by us to be not free and available as of January 1, 2004
     and January 1, 2003.

     Lease cash flows from operating leases are recorded wholly as revenues. For
     these vessels,  including  Oscilla,  pro forma charter revenues reflect the
     rates due under  existing  charter  arrangements.  These  charters  will be
     accounted  for as  operating  leases until the  expiration  of the existing
     charters.

     As the  economic  effect of the new charters to the  Charterer  took effect
     January 1, 2004,  we pay to or receive from the  Charterer  the  difference
     between  the new  charter  rates and the  underlying  charter  rates  until
     vessels  complete their current  charter  arrangements.  These payments are
     recorded as deemed  dividends in our statements of changes in stockholders'
     equity  and  are  therefore  not  reflected  in  this  unaudited  pro-forma
     financial information.

     As the  remaining 8 vessels  and Oscilla  complete  their  current  charter
     arrangements, actual operating revenues will change as the current charters
     are on  different  rates than those that will be in effect  after  entering
     into the new lease arrangements with the Charterer.  As such, the pro forma
     financial information does not reflect such future effect of the completion
     of the current charters.

     Under the provisions of the lease  agreements,  the Charterer has exercised
     its option to lease four of the vessels from us under bareboat charters and
     pay us a charter rate that is reduced by $6,500 per day in comparison  with
     the equivalent  time charter  rates.  Under a bareboat  charter,  we do not
     provide  services to the  Charterer as provided  under an  equivalent  time
     charter and  accordingly  we do not receive  revenues from services under a
     bareboat  charter.   Revenues  from  services are reported as finance lease
     service  revenues in our statement of operations.  Additionally,  we do not
     incur the corresponding management fee expenses of $6,500 per day for those
     four vessels as are incurred by us for vessels leased under time  charters.
     Management fee expenses are reported as ship operating  expenses.  See also
     pro forma adjustment B.

     Current  charter arrangements  for the eight  vessels on charters  expiring
     after September 30, 2004 expire as follows:

Period of charter expiration                                   Number of vessels
----------------------------                                   -----------------

October 1, 2004 to December 31, 2004                                           2
January 1, 2005 to December 31, 2005                                           0
January 1, 2006 to December 31, 2006                                           5
January 1, 2007 to December 31, 2007                                           1
                                                               -----------------
   Total                                                                       8

The pro forma  adjustments for the six months ended June 30, 2004 are calculated
as follows:

                                                                      Six months
                                                                      ended June
                                                                      30, 2004
                                                                      ----------

Adjustment to eliminate historical
revenues from vessels that will be
chartered to the Charterer by September
30, 2004 under sales type leases                                      $(76,428)

Adjustment to recognize estimated
revenues from Oscilla from January 1, 2004                               8,445
                                                                      --------
Total pro forma adjustment                                            $(67,983)
                                                                      ========

Adjustment to recognize finance lease
interest income from charters accounted
for as sales type leases                                                16,005
                                                                      --------
Total pro forma adjustment                                             $16,005
                                                                      ========

Adjustment to recognize finance lease
service revenues from charters accounted
for as sales type leases                                                 6,740
                                                                      --------
Total pro forma adjustment                                              $6,740
                                                                      ========

The pro forma adjustments for the year ended December 31, 2003 are calculated as
follows:

                                                                    Year ended
                                                                    December 31,
                                                                        2003
                                                                    ------------

Adjustment to recognize historical
revenues from eight vessels currently
chartered under operating type leases                                 $108,739

Adjustment to recognize estimated
revenues from acquisition of Oscilla
from January 1, 2003                                                    12,731
                                                                       --------
Total pro forma adjustment                                            $121,470
                                                                       ========
Adjustment to recognize finance lease
interest income from charters accounted
for as sales type leases                                               168,010
                                                                       --------
Total pro forma adjustment                                            $168,010
                                                                       ========

Adjustment to recognize finance lease
service revenues from charters accounted
for as sales type leases                                                80,665
                                                                       --------
Total pro forma adjustment                                             $80,665
                                                                       ========

In addition  to the  charters to the  Charterer  which are given  effect in this
unaudited pro forma financial information, we have entered into a profit sharing
agreement with the Charterer. Under the terms of this agreement,  beginning with
the final  11-month  period in 2004 and for each calendar year  thereafter,  the
Charterer  has  agreed to pay us a profit  sharing  payment  equal to 20% of the
charter  revenues for the  applicable  period,  calculated  and paid annually in
arrears on a TCE basis, realized by the Charterer from their use of our fleet in
excess of a weighted  average  rate of $25,575 per day for each VLCC and $21,100
per day for each Suexmax  tanker.  We have assumed that there would be no profit
sharing payments made to us in the 2003 pro-forma statement of operations and no
adjustment has been made to this pro forma financial  information to reflect any
effect of this arrangement.  Our interim financial statements for the six months
ended June 30, 2004 include profit sharing revenues of $5.7 million.

B. This adjustment is to recognize  voyage expenses and ship operating  expenses
for the 46  vessels we  acquired  and the  exercise  of our option to aquire the
vessel  Oscilla  and to reflect  the $6,500 per day per vessel that we pay under
the vessel  management  agreements in the pro-forma  statement of operations for
the year ended  December 31, 2003 and to eliminate  historical  voyage  expenses
from vessels that will be chartered to the Charterer by September 30, 2004 under
sales-type  leases in the pro-forma  statement of operations  for the six months
ended June 30, 2004. The adjustment to recognize $6,500 per day per vessel under
the vessel  management agreement does not include  the four vessels  and Oscilla
chartered under bareboat  charters,  see also pro forma adjustment A. Management
fees payable in respect of our vessels are classified as ship  operating  costs,
and, as such are recorded as a component of operating expenses.

C. This  adjustment is to recognize the  depreciation  charge  relating to the 8
vessels  accounted  for as chartered  under  operating  leases in the  pro-forma
statement of  operations  for the year ended  December  31,  2003,  to eliminate
historical  depreciation from vessels that will be chartered to the Charterer by
September  30,  2004  under  sales-type  leases in the  pro-forma  statement  of
operations for the six months ended June 30, 2004 and to adjust  depreciation to
reflect the  acquisition of Oscilla for the year ended December 21, 2003 and the
six months ended June 30, 2004.

D. This adjustment is to recognize  administrative  expenses of $20,000 per year
for the year ended December 31, 2003 payable by us and each of our  subsidiaries
under the  administrative  services  agreement  in the  pro-forma  statement  of
operations for the year ended December  31,2003.  No adjustment has been made to
the  amount of third  party  expenses  which  comprise  out of  pocket  expenses
incurred on behalf of the service recipients,  including legal fees, independent
auditors,  printers,  mailing costs,  depositories,  transfer agents, insurance,
proxy solicitors,  filing fees,  self-regulatory  agencies,  listing fees, stock
exchange  maintenance  fees,  directors'  fees  as set by the  relevant  service
recipient,  and similar  fees and  expenses.  These costs are not covered by the
administrative  services  agreement  and  will  be  borne  by the  Company.  The
administrative  expenses are included with our  historical  expenses for the six
months ended June 30, 2004.

E. We refinanced the senior secured indebtedness of our subsidiaries at the time
that we acquired them from  Frontline  with the proceeds of a new senior secured
credit facility.  This new credit facility has an original  principal balance of
$1,058 million and is repayable over six years.  This adjustment is to recognize
the change in interest  expense that we would have  incurred if our  refinancing
had taken  place as of January 1, 2004 and  January  1, 2003.  We assume  annual
total  repayments of $93.7  million  based on the  repayment  profile of the new
credit  facility.  The pro forma  adjustments  for the six months ended June 30,
2004 and year ended December 31, 2003 are calculated as follows:

                                                                   Six months
                                                                   ended June
                                                                    30, 2004
                                                                   -----------

Estimated average balance                                           $1,046.286
Effective Interest rate                                                   2.37%
Estimated interest on new credit facility                              $12,520
Adjustment to eliminate historical interest expense                  $(11,908)

Total pro forma adjustment                                                $612
                                                                   ===========

                                                                    Year ended
                                                                   December 31,
                                                                       2003
                                                                   -----------
Estimated average balance                                           $1,022,634
Effective Interest rate                                                   2.48%
Estimated interest on new credit facility                              $25,723

Total pro forma adjustment                                             $25,723
                                                                   ===========

Interest  on the new credit  facility  is payable at an  interest  rate based on
LIBOR plus a margin of 1.25%.  We estimated  interest  payable on the new credit
facility  using  average  LIBOR rates of 1.12% for the six months ended June 30,
2004 and 1.235% for the year ended  December 31, 2003.  These rates are based on
an average of three  month  LIBOR over the  applicable  period.  An  increase or
decrease  in  assumed  interest  rates of  0.125%  would  increase  or  decrease
estimated  interest  expense by $0.7  million and $1.3 million in the six months
ended June 30, 2004 and year ended December 31, 2003 respectively.

In accordance with the terms of our new credit facility we have entered into new
interest rate swap  agreements to  effectively  fix the interest rate payable on
$500  million of our new credit  facility  for five years.  We have not made any
adjustments  to this  unaudited pro forma  financial  information to reflect the
estimated effect of these new interest rate swap agreements. We have effectively
fixed the LIBOR  element  of the  interest  rate  payable at 3.38% and our total
interest  rate  including  margin  at 4.63% on $500  million  of our new  credit
facility.  The estimated effect of effectively fixing our interest rate at 4.63%
on $500 million principal amount of debt would be to record additional  interest
expense of $1.5  millionfor the six months ended June 30, 2004 and $10.9 million
for the year ended December 31, 2003. Our interim  financial  statements for the
six months ended June 30, 2004 include $4.2 million  interest expense in respect
of these swaps and $1.8 million  interest  expense in respect of other swaps. We
have not  estimated the effect of changes in market values of interest rate swap
contracts  in this  unaudited  pro  forma  financial  information.  Our  interim
financial  statements  for the six months ended June 30, 2004  include  gains of
$15.1  million  in respect of changes  in market  valuations  of  interest  rate
swaps.

F.  This  adjustment  is to  reflect  the  interest  expense  on the notes at an
interest  rate of 8.5% per year as if they had  occurred  on January 1, 2004 and
January 1, 2003.

The pro forma  adjustments  for the six months  ended June 30,  2004 and for the
year ended December 31, 2003 are calculated as follows:

                                           Six months ended      Year ended
                                             June 30, 2004    December 31, 2003
                                           ----------------   -----------------
Estimated interest on the notes ........         24,924            49,985
Adjustment to eliminate historical
interest expense .......................        (24,376)           (2,054)

Total pro forma adjustment .............           $548           $47,931

G. This  adjustment  represents  the  estimated  adjustment of  amortization  of
deferred  charges and financing  fees resulting  from our  refinancing.  The pro
forma  adjustments  for the six months  ended  June 30,  2004 and the year ended
December 31, 2003 are calculated as follows:

                                                                    Six months
                                                                    ended June
                                                                     30, 2004
                                                                   -------------

Amortization of deferred charges and
financing fees associated with the
refinancing of the existing bank debt                                    1,134

Amortization of deferred charges and
financing fees associated with the notes                                 1,542

Adjustment to eliminate historical
amortization of deferred charges and
financing fees                                                          (2,323)
                                                                        -------
Total pro forma adjustment                                                $353
                                                                        =======

                                                                     Year ended
                                                                    December 31,
                                                                         2003
                                                                    ------------
Amortization of deferred charges and
financing fees associated with the
refinancing of the existing bank debt                                    2,268

Amortization of deferred charges and
financing fees associated with the notes                                 1,674

Adjustment to eliminate historical
amortization of deferred charges and
financing fees                                                             (69)
                                                                        -------
Total pro forma adjustment                                              $3,873
                                                                        =======

     The pro forma income  statements for the six months ended June 30, 2004 and
year ended  December  31, 2003  include four vessels recorded as operating under
finance  leases  that  are  included  in the  interim  financial  statements  as
operating under operating leases. The impact on our balance sheet in our interim
financial statements for the  six months ended June 30, 2004  of recording these
four vessels as operating under finance leases would be to decrease  vessels and
equipment,  net by $199.2 million, to increase net investments in finance leases
by $199.2 million.

                       RATIO OF EARNINGS TO FIXED CHARGES

     The  following  table sets forth our ratio of earnings to fixed charges for
six month periods ended June 30, 2004 and 2003 and the 12-month  periods  ending
December 31, 2003,  2002 and 2001.  We define the term  "earnings" is defined as
the amount  resulting from adding and subtracting the following  items:  add the
following:  (a) net income or loss, (b) fixed  charges.  From the total of added
items subtract the following:  (a) share in results of associated companies, (b)
interest  capitalized.  We define  the term  "fixed  charges"  as the sum of the
following: (a) interest expensed, (b) interest capitalized,  (c) amortization of
deferred finance charges.

<TABLE>
<CAPTION>
                                      Six months ended June 30,        Year ended December 31,
                                      -------------------------   ---------------------------------
                                          2004         2003         2003         2002         2001
<S>                                     <C>          <C>          <C>           <C>         <C>
Earnings                                155,241      232,351      347,831       70,275      256,643
Fixed charges                            48,929       18,931       35,117       43,062       59,763

                                        ===========================================================
Ratio of earnings to fixed charges         3.17        12.27         9.90         1.63         4.29
                                        ===========================================================
</TABLE>

                  PRO FORMA RATIO OF EARNINGS TO FIXED CHARGES

                                                                      Year ended
                                                   Six months ended    December
                                                    June 30, 2004      31, 2003
                                                   -----------------------------

Pro forma Earnings                                 126,944            230,083
Pro forma Fixed charges                             49,348             77,144

                                                   ==========================
Pro forma Ratio of earnings to fixed charges          2.57               2.94
                                                   ==========================

                  SELECTED FINANCIAL INFORMATION AND OTHER DATA

     The following  selected  financial and other data  summarize our historical
financial  information.  The selected income statement data for the fiscal years
ended December 31, 2003,  2002,  and 2001, the selected  balance sheet data with
respect to the fiscal  years ended  December 31, 2003 and 2002 have been derived
from our audited predecessor  combined carve-out  financial  statements included
herein.  The selected  income  statement data for the fiscal year ended December
31, 2000 and the  selected  balance  sheet data with  respect to the fiscal year
ended December 31, 2001 and 2000 have been derived from our audited  predecessor
combined  carve-out  financial  statements  not  included  herein.

     The selected  income  statement data for the six months ended June 30, 2003
has been derived from our unaudited  predecessor  combined  carve-out  financial
statements  included herein.  The selected balance sheet information for the six
months  ended June 30,  2003 has been  derived  from our  unaudited  predecessor
combined carve-out financial statements not included herein.

     The selected  financial  information for the six months ended June 30, 2004
has been  derived  from our  unaudited  interim  financial  statements  included
herein.

     In the opinion of our management,  the selected  financial  information for
the six  months  ended  June  30,  2004  and  2003,  includes  all  adjustments,
consisting of normal recurring  accruals,  necessary for a fair  presentation of
that information.  The selected financial data is not necessarily  indicative of
future  results.   This   information   should  be  read  in  conjunction   with
"Management's  Discussion  and  Analysis of Financial  Condition  and Results of
Operations"  and our  unaudited  interim  financial  statements  and our audited
predecessor  combined carve-out  financial  statements and the notes thereto and
unaudited interim financial  statements and notes thereto included  elsewhere in
this prospectus.

     This prospectus does not include selected combined financial and other data
for the 12-month period ending December 31, 1999. As noted above,  the Company's
selected  financial  and other data prior to January 1, 2004 is derived from the
combined carve-out financial statements of Frontline and the Company is not in a
position to prepare  carve-out  financial  statements  for the  12-month  period
ending  December 31, 1999 or the selected  financial and other data derived from
such financial statements without unreasonable effort and expense.

<TABLE>
<CAPTION>
                                              Six months ended June 30                     Year Ended December 31,
                                                                            -----------------------------------------------------
                                                2004           2003           2003           2002           2001           2000
                                                                            -----------------------------------------------------
                                                          (dollars in thousands, except ratios and per share data)
<S>                                           <C>            <C>            <C>            <C>            <C>            <C>
Income Statement Data:
   Total operating revenues                   $219,513       $401,589       $695,068       $365,174       $486,655       $482,908
   Total operating expenses                     80,648        173,972        346,252        279,083        255,937        220,657
   Net operating income                        138,865        227,617        348,816         86,091        230,718        262,251
   Net other income (expenses)                 (32,553)         1,341        (14,004)       (53,925)       (43,180)       (50,107)
   Net income (loss) before
   cumulative effect of
   change in accounting principle              106,312        228,958        334,812         32,166        187,538        212,144
   Cumulative effect of change
   in accounting principle                          --             --             --        (14,142)        24,472             --
   Net income                                  106,312        228,958        334,812         18,024        212,010        212,144
   Earnings per share,
   basic and diluted (3)                         $1.44          $3.10          $4.53          $0.24          $2.87          $2.87

Balance Sheet Data (at end of period):
   Cash and cash equivalents                   $32,138        $25,257        $26,519        $20,634        $26,041        $15,274
   Newbuildings and vessel purchase
   options                                          --          8,370          8,370          8,370         63,470         36,326
   Vessels and equipment, net                  518,479      1,918,073      1,863,504      1,904,146      1,696,528      1,572,844
   Total assets                              2,145,006      2,164,349      2,156,348      2,123,607      1,951,353      1,784,676
   Short-term debt and current portion
   of long term debt                            88,843        135,027        141,522        131,293        130,428        121,399
   Long-term debt                            1,465,431        949,180        850,088        975,554        870,109        850,453
   Share capital                                73,925             --             --             --             --             --
   Stockholders' equity                        564,446        715,615        822,026        485,605        466,742        259,632
   Dividends paid and deemed dividends          66,362             --             --             --             --             --
Cash Flow Data
   Cash provided by operating activities       109,523        241,912       $415,523       $115,658       $307,167
   Cash provided by (used in)
   investing activities                         (7,780)           360        (51,632)      (261,779)      (271,850)
   Cash provided by (used in)
   financing activities                        (69,605)      (237,649)      (358,006)       140,714        (24,549)

Fleet Data
   Number of wholly owned vessels
   (end of period)                                  46             43             43             42             38             35
   Number of vessels owned in joint
   ventures (end of period)                          0              8              6              9              7              2
Average Daily Time Charter Equivalent(1)
   VLCCs                                       $56,600        $47,500        $40,400        $22,200        $34,600        $34,500
   Suezmaxes                                   $37,100        $40,400        $33,500        $18,400        $30,600        $35,000
   Suezmax OBOs                                $27,000        $38,700        $32,000        $17,700        $28,900        $33,500
</TABLE>

----------
(1)  Time  charter  equivalent,  or TCE, is a standard  industry  measure of the
     average  daily  revenue  performance  of a vessel.  This is  calculated  by
     dividing  net  operating  revenues  by the number of days on  charter.  Net
     operating revenues are revenues minus voyage expenses.  Days spent off hire
     are excluded  from this  calculation.  For a  reconciliation  of net voyage
     revenues to voyage revenues,  see note 2 to "Summary Combined Financial and
     Other Data".

(2)  On May 28, 2004,  the Company  declared a dividend of $0.25 per share which
     was paid on July 9, 2004.

(3)  For all periods  presented per share amounts are based on a denominator  of
     73,925,837  common shares  outstanding which is the number of issued 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.
<PAGE>

                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  FINANCIAL CONDITION AND RESULTS OF OPERATIONS

     The  following  discussion  of  our  financial  condition  and  results  of
operations should be read in conjunction with our interim  financial  statements
as at and for the six months  ended June 30, 2004 and our  predecessor  combined
carve-out  financial  statements  as at and  for the  three  year  period  ended
December 31, 2003 and for the six months ended June 30, 2003,  which we call our
combined  financial  statements,  and the related notes, and the other financial
information  included  elsewhere  in this  document.  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 - Predecessor

     For the years ended  December 31, 2003,  2002 and 2001,  and the six months
ended June 30, 2003, the combined  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 necessarily indicative of those that would
have been achieved had we operated autonomously for all periods presented.

     Our combined financial  statements assume that our business was operated as
a separate corporate entity prior to its inception.  Ship Finance  International
Limited, or the Company,  was formed on October 10, 2003, and prior to that time
our business was operated as part of the  shipping  business of  Frontline.  Our
combined  financial  statements have been prepared to reflect the combination of
certain of  Frontline's  wholly  owned  VLCC and  Suezmax  owning  subsidiaries,
interests in joint ventures and an option to acquire an additional  VLCC,  which
taken together  represent the 46 vessel owning  subsidiaries  and one subsidiary
holding an option to acquire a VLCC that we have  acquired  from  Frontline  and
which we refer to collectively as the Vessel Interests.

     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
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.  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 the Company
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 in the
three  year  period  ended  December  31,  2003 as  described  in Note 21 to our
combined financial statements. Goodwill has been allocated to the Company on the
basis that the vessels obtained in these acquisitions, and to which the goodwill
is considered to relate, are included in our combined financial statements.  The
associated  amortization  of goodwill has also been allocated to the Company and
recognized in our combined financial  statements.  Following the adoption of FAS
142 effective January 1, 2002, we no longer amortize  goodwill,  but rather test
it for impairment at least on an annual basis.

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 has a purchase  option.  The associated  interest  expense has also been
allocated to our combined 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 combined  statements.  The associated mark to market adjustments  arising on
the swaps has also been  allocated to our combined  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.

     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.

     Our  combined  financial   statements  have  been  prepared  based  on  the
completion of the  transaction  between the Company and  Frontline  described in
this prospectus.

     The Company and Frontline entered into a fleet purchase  agreement pursuant
to which we purchased the Vessel Interests for $950 million,  excluding  working
capital  and other  intercompany  balances to be  retained  by  Frontline,  plus
assumption  of senior  secured  indebtedness  with  respect  to the fleet in the
amount of $1.158  billion.  The purchase price for the Vessel  Interests and the
refinancing of the existing senior secured  indebtedness  was financed through a
combination  of the net  proceeds  of the Notes,  funds from our $1.058  billion
senior secured credit facility and a deemed equity contribution from Frontline.

     All of our  vessels are  chartered  to the  Charterer  under long term time
charters.  All  of  our  vessel  technical  management  is  performed  for us by
Frontline Management under the management  agreements for a fixed rate. As such,
our  future  operations  and the  operations  of our  subsidiaries  will  differ
significantly  from the historical  operations of Frontline and its subsidiaries
upon  which our  historical  carved  out  financial  statements  are  based.  In
particular,  our revenues are generated  primarily from charter payments made to
us by the  Charterer  under the  charters  that consist of sales type leases and
operating  leases.  Our expenses consist  primarily of interest on the notes and
our senior  secured  credit  facility  and  payments  that we make to  Frontline
Management.

Overview - Successor

     Ship Finance  International  Limited was incorporated in Bermuda on October
10,  2003 for the purpose of  acquiring  certain of the  shipping  assets of its
parent  company,  Frontline  Ltd.  Frontline is a publicly  listed Bermuda based
shipping  company  engaged  primarily  in the  ownership  and  operation  of oil
tankers,  including  oil/bulk/ore,  OBO, carriers. The Company is a wholly owned
subsidiary of Frontline.  Frontline  operates  tankers of two sizes:  very large
crude carriers, which are between 200,000 and 320,000 dwt, and Suezmaxes,  which
are vessels  between  120,000 and 170,000 dwt.  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 the Company  entered into a purchase  agreement  with
Frontline  to  purchase  certain of  Frontline's  wholly  owned VLCC and Suezmax
owning subsidiaries,  including certain subsidiaries  acquired or expected to be
acquired through a reorganization  of interests in certain joint ventures plus a
purchase option to acquire a further VLCC, which we refer to collectively as the
Vessel Interests.

     On December  18, 2003 the Company  issued $580 million of 8.5% Senior Notes
due 2013 in a private offering to Qualified  Institutional  Buyers. The proceeds
from this offering,  together with a deemed equity contribution of approximately
$525 million from Frontline, were used to complete the acquisition of the Vessel
Interests.

     On  January  1, 2004 the  Company  completed  the  purchase  of the  Vessel
Interests it agreed to purchase from Frontline on December 11, 2003.

     As a result of these  transactions  the Company has  acquired a fleet of 24
Suezmax  tankers,  22 VLCCs,  and an option to acquire an additional VLCC with a
combined deadweight tonnage of 10,498,000,000 tones and a combined book value of
approximately $2,107 million.

     On January 1, 2004 the Company  entered into time charter  agreements  with
Frontline  Shipping  Ltd., a subsidiary of Frontline,  to charter the 46 vessels
for substantially the remainder of their useful lives at fixed rates.

     On January 1, 2004 the Company  entered  into  management  agreements  with
Frontline Management (Bermuda) Ltd. a subsidiary of Frontline,  to manage the 46
vessels for substantially the remainder of their useful lives at fixed rates.

Predecessor Business

     Our  combined  financial  statements  reflect the  business  activities  of
Frontline  related  to the Vessel  Interests.  Frontline's  principal  focus and
expertise  is  to  provide  transportation  services  to  major  integrated  oil
companies and other customers that require  transportation  of crude oil and oil
products cargoes.

     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  which each own a VLCC. In 2002, we took
delivery of four wholly owned  newbuilding  double hull VLCCs.  In 2001, we took
delivery  of three  VLCCs  built in 1999 on which we had  purchase  options.  In
addition, through Frontline's acquisition of Mosvold Shipping Limited, which was
completed  in  2001,  we  acquired  one VLCC  newbuilding  contract,  which  was
delivered in October 2002. In 2000,  through  Frontline's  acquisition of Golden
Ocean Group  Limited,  we acquired  three  VLCCs,  interests  in two  associated
companies which each owned a VLCC and four options to acquire a VLCC.

Successor Business

     The  completion  of  the  purchase  of  the  46  crude  oil  tanker  owning
subsidiaries and one subsidiary  holding an option on an additional  tanker from
Frontline  took place as of January 1, 2004. We have  chartered our fleet to the
Charterer,  a wholly owned subsidiary of Frontline,  under long term, fixed rate
charters   effective  as  of  January  1,  2004.  The  Charterer  was  initially
capitalized  by Frontline  with $250 million to support its  obligation  to make
charter  payments to us. We also entered into fixed rate  management  agreements
with another  wholly owned  subsidiary  of  Frontline.  These  arrangements  are
intended  to  provide  us with  stable  cash flow and  reduce  our  exposure  to
volatility in the markets for these vessels.

Factors Affecting Our Historical Results

     The  principal  factors  that  have  affected  our  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.

     We have 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 time charter  equivalent  earnings,  or TCEs.  For voyage
charters, this is calculated by dividing net operating revenues by the number of
days on charter. Days spent offhire are excluded from this calculation.

     As at December 31, 2003, 2002 and 2001, 29, 35 and 24, 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 over the last three years:

                                         2003        2002        2001
                                        ------      ------      ------
            (dollars per day)
          VLCC ....................     40,400      22,200      34,600
          Suezmax .................     33,500      18,400      30,600
          Suezmax OBO .............     32,000      17,700      28,900

     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  and   2001,   administrative   expenses   also   included
administrative  costs  associated with the Frontline's  participation in Tankers
International  LLC,  or  Tankers,  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 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.  As at December
31, 2003,  all of our debt was floating  rate debt.  We may enter into  interest
rate swap arrangements if we believe it is advantageous to do so. As at December
31, 2003,  certain of our  subsidiaries  had Yen  denominated  debt and charters
denominated  in Yen,  which expose us to exchange  rate risk. As at December 31,
2003 and 2002, we had Yen denominated debt in subsidiaries of (Y)9.6 billion and
(Y)5.1 billion respectively.

     Although  inflation  has had a  moderate  impact  on our  vessel  operating
expenses and corporate overheads, management does not consider inflation to be a
significant  risk to  direct  costs  in the  current  and  foreseeable  economic
environment. 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.

Factors Affecting Our Future Results

     Principal  factors  that are  expected  to affect  our  future  results  of
operations and financial position include:

          o    the earnings of our vessels under time charters to the Charterer;

          o    the amount we receive under the profit sharing  arrangement  with
               the Charterer;

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

          o    vessel management fees;

          o    administrative expenses; and

          o    interest expense.

     Initially,  our future  revenues will derive  primarily from our long term,
fixed  rate  time  charters  with the  Charterer.  All 46  vessels  that we have
acquired from Frontline are chartered to the Charterer under long term charters,
described under  "Business--Charter  Arrangements." In addition,  beginning with
the final  11-month  period in 2004 and for each calendar year  thereafter,  the
Charterer will pay us a profit sharing  payment if our vessels'  earnings exceed
certain amounts.

     The Company's future expenses will 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 cost
management agreements with Frontline Management under which Frontline Management
will be  responsible  for all  technical  management  of the vessels,  including
crewing, maintenance, repair, capital expenditures, drydocking, vessel taxes and
other vessel  operating  and voyage  expenses.  Each of these  subsidiaries  pay
Frontline  Management  a fixed fee of $6,500  per day per  vessel for all of the
above services.

     The Company has entered  into an  administrative  services  agreement  with
Frontline   Management  under  which  Frontline   Management  provides  us  with
administrative  support  services such as the maintenance of our corporate books
and records, the preparation of tax returns and financial statements, assistance
with  corporate and  regulatory  compliance  matters not related to our vessels,
payroll services,  legal services,  and other non-vessel related  administrative
services.   The  Company  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,
if any,  advanced  on our  behalf by  Frontline,  including  directors  fees and
expenses,  shareholder communications and public relations,  registrars,  audit,
legal fees and  listings  costs.  The  Company  currently  does not have its own
employees.

     Other than the interest  expense  associated with our notes,  the amount of
our interest expense will be dependent on the same factors set forth above as to
Frontline's  historic  incurrence of interest expense.  The Company has a $1.058
billion  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.  We have entered into interest rate swaps to fix
the  interest on $500.0  million of the  borrowings  under this  facility  for a
period of five years at an average rate of 3.4%.

Change in Accounting Policies

     In 2001, the Company  changed its accounting  policy for drydockings to the
"expense as incurred" method,  whereby  drydocking  expenses are recognized when
they take place.  Prior to 2001,  provisions for future drydockings were accrued
and  charged  as an  expense  on a  pro-rata  basis  over the period to the next
scheduled vessel  drydocking.  The "expense as incurred" method is considered by
management to be more reliable as it eliminates the uncertainty  associated with
estimating the cost and timing of future  drydockings.  The cumulative effect of
this  change  in  accounting  principle  is  shown  separately  in the  combined
statements of operations  for the year ended December 31, 2001 and resulted in a
credit to income of $24.5 million in 2001. The cumulative  effect of this change
as of  January  1,  2001 on our  combined  balance  sheet  was to  reduce  total
liabilities by $24.5 million.

     In June 2001, the FASB approved Statement of Financial Accounting Standard,
or SFAS, No. 142, "Goodwill and Other Intangible Assets." As of January 1, 2002,
the Company  adopted SFAS No. 142,  "Goodwill and Other  Intangible  Assets" and
recorded an impairment  charge of $14.1 million for the unamortized  goodwill on
that date that is shown separately in the combined  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
Frontline's shares.

     As of January 1, 2001, the Company  adopted SFAS No. 133,  "Accounting  for
Derivatives and Hedging  Activities."  Certain hedge relationships met the hedge
criteria  prior to SFAS 133, but do not meet the  criteria for hedge  accounting
under SFAS 133. The Company adopted SFAS 133 in the first quarter of fiscal year
2001 and upon initial adoption recorded certain transition adjustments resulting
in recognizing  the fair value of its  derivatives as assets of $0.4 million and
liabilities of $0.7 million.  We recognized a gain of $0.2 million in income and
a charge of $0.5 million made to other comprehensive income. 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
will be  reclassified  to the income  statement  over the life of the underlying
instrument.

Recently Issued Accounting Standards

     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.  In  accordance  with  the  requirements  of
Interpretation  46(R),  the company has  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.  This  application has not
had an impact on the results of operations or financial  position of the Company
as no additional entities were required to be consolidated.

     The  Company has an option to  purchase  the VLCC  Oscilla on or before the
expiry of a five-year  bareboat charter,  which commenced in March 2000. Oscilla
is owned and operated by an unrelated special purpose entity,  Seacrest Shipping
Ltd. ("Seacrest"). Prior to the adoption of FIN 46R this special purpose  entity
was not  consolidated  by the  predecessor  combined  carve out entity.  We have
determined  that the entity that owns Oscilla is a variable  interest entity and
that  the  Company  is the  primary  beneficiary.  At the  current  date,  after
exhaustive  efforts,  we have been unable to obtain the  accounting  information
necessary to be able to consolidate the entity that owns Oscilla. 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.

Critical Accounting Policies

     The  preparation of our combined  financial  statements in accordance  with
U.S. GAAP 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  combined  financial  statements  and the
reported  amounts of revenues  and expenses  during the  reporting  period.  The
following is a discussion of the accounting policies applied by the Company that
are considered to involve a higher degree of judgment in their application.  See
Note 2 to our combined financial  statements for details of all of the Company's
material accounting policies.

Carve out of the Financial Statements of Frontline

     For the  years  ended  December  31,  2003,  2002 and  2001,  our  combined
financial  statements  presented  herein have been  carved out of the  financial
statements of Frontline.

     Frontline is a shipping  company with activities that include the ownership
and  operations  of oil  tankers  and dry bulk  carriers  as well as  leasing in
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 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 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 the Company  operated on a
stand-alone basis for all periods presented. 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
years  presented  as  the  Company  may  have  made  different  operational  and
investment decisions as a company independent of Frontline.

Revenue Recognition

     Revenues are generated from freight  billings,  contracts of affreightment,
time  charter and bareboat  charter  hires.  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 the Company's  vessels is depreciated on a straight-line  basis
over the vessels'  remaining  economic  useful lives.  Management  estimates the
useful  life of the  Company's  vessels  to be 25 years.  This is a common  life
expectancy  applied in the  shipping  industry.  Effective  in April  2001,  the
International  Maritime  Organization,  or IMO, implemented new regulations that
result in the accelerated phase out of certain non-double hull vessels.

     In December 2003, the Marine Environmental  Protection Committee of the IMO
adopted a proposed amendment to the International  Convention for the Prevention
of Pollution  from Ships to accelerate the phase out of single hull tankers from
2015 to 2010  unless the  relevant  flag  states  extend the date to 2015.  This
proposed  amendment  will take  effect in April  2005  unless  objected  to by a
sufficient  number of states.  As a result,  the  Company has  re-evaluated  the
estimated  useful lives of its single hull vessels and determined this to be the
earlier of 25 years or the vessel's  anniversary date in 2015,  resulting in the
reduction of the estimated useful lives of thirteen of the Company's  vessels in
the  fourth  quarter of 2003.  This  reduction  has  resulted  in an  annualized
increase in depreciation expense of $4.4 million effective from October 1, 2003.

     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.  The  Company  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.

     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,  the Company 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 and the  estimated  economic  useful life of our
vessels.  In making these  assumptions,  the Company refers 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.

Leases

     Leases 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 3  independent  broker  valuations  of a vessel.  Our  estimates  of
expected future values of vessels are based on current fair values  amortised in
accordance  with our standard  depreciation  policy for owned vessels.  Lessee's
cost of capital is estimated using an average which 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

     In January  2003,  the FASB  issued  Interpretation  46,  Consolidation  of
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.   Interpretation   46  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 December 2003, the FASB issued FASB Interpretation 46(R),  Consolidation
of Variable  Interest  Entities.  FIN 46(R)  replaces FIN 46 and  clarifies  the
accounting  for  interests  in  variable  interest  entities.

     In applying the provisions of  Interpretation  46(R), the Company 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.

     The Company 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. This application has not had a material impact on the results
of  operations  or financial  position of the Company.  In  accordance  with the
requirements of Interpretation  46(R),  the Company will  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. This application
has not had a material impact on the results of operations or financial position
of the Company.

Results of Operations

Six Months ended June 30, 2004 compared with the six months ended June 30, 2003

     Total  operating  revenues  decreased  by 45% to $219.5  million in the six
months ended June 30, 2004 compared with $401.6  million in the six months ended
June 30, 2003. Operating revenues 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.  They also include
charter  revenues for vessels  trading under long term charters to third parties
during the period.

     In the  period  since we  acquired  our fleet of  vessels  from  Frontline,
sixteen of our twenty four  Suezmax  tankers and eighteen of our twenty two VLCC
tankers have commenced  employment with Frontline under long-term charters which
are accounted for as finance leases.  Receipts from finance leases are allocated
as finance lease  interest  income,  finance lease service  revenues and capital
repayments  in order to  realize  a  constant  periodic  rate of  return  on the
unamortized finance lease investment.

     In the six months  ended June 30,  2004 and six months  ended June 30, 2003
finance lease interest income was $64.1 million and $nil  respectively,  finance
lease  service  revenues  were $33.5  million and $nil  respectively  and profit
sharing revenues recognized were $5.7 million and $nil respectively. We recorded
capital  repayments  on finance  leases  amounting  to $26.7  million in the six
months ended June 30, 2004 ($nil - 2003).

     In accordance with US GAAP we recognize  profit sharing  revenues only when
those  revenues  are  earned  and  realizable.  In  accordance  with  US GAAP we
recognize  profit  sharing  revenues  only when  those  revenues  are 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 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,  which are $21,100 per
day for  Suezmaxes and $25,575 per day for VLCCs,  on a time charter  equivalent
basis. Our profit sharing revenues are 20% of a vessel's  underlying earnings in
excess of the threshold. The total profit sharing revenues earned and realizable
for the six months  ended June 30, 2004 are $5.7  million.  This amount has been
recognized in our interim  financial  statements.  Should our vessels'  earnings
continue to equal or exceed the daily  profit  sharing  threshold  rates for the
remainder of 2004 a further  $34.4  million of profit  sharing  revenues will be
recognized  by us in  respect of our  vessels'  underlying  earnings  in the six
months ended June 30, 2004.

     Net voyage  revenues  earned by our fleet in the period prior to commencing
trading under their  charters to Frontline were $40.8 million for the six months
ended June 30, 2004 and $296.3  million  for the six months  ended June 30, 2003
respectively.  As all of our vessels are now employed under long-term charter to
Frontline or to third  parties so we do not expect to report  further net voyage
revenues.

     Charter  revenues from vessels under long-term  charters  (comprising  time
charters and bareboat  charters) to third  parties were $66.6 million in the six
months ended June 30, 2004  compared  with $24.5 million in the six months ended
June 30,  2003.  At June  30,  2004 we had  eight  Suezmaxes  and four  VLCCs on
long-term  charters to third  parties.  These vessels will be  redelivered to us
between  August 2004 and  February  2007.  Upon  redelivery  these  vessels will
immediately go on long-term charter to Frontline.

     Under the terms of our charter  agreements with Frontline we pay or receive
any difference  between our earnings from our vessels which are not currently on
charter to Frontline and the rates Frontline has agreed to pay us. Payments made
under this  arrangement  are  accounted  for as deemed  dividends  and amount to
$47.9million in the six months ended June 30, 2004 compared with $nil in the six
months ended June 30, 2003.

     Ship operating  expenses,  which since January 1, 2004 primarily consist of
the  management  fee payable to Frontline,  were $48.4 million in the six months
ended June 30, 2004 compared with $38.6 million in the six months ended June 30,
2003.  The change is primarily  due to changes in our fleet and to the fact that
ship  operating  expenses  in  our  predecessor   combined  carve-out  financial
statements  consist of actual  operating costs of our fleet whereas from January
1, 2004 ship operating  expenses comprise a management fee of $6,500 per day for
all of our  vessels.  In the six months  ended June 30,  2004 we operated 4 more
wholly owned VLCCs than in the six months  ended June 30, 2003.  This was due to
transactions  whereby we acquired  100%  interests in the VLCCs New Circassia on
June 30, 2003 and Edinburgh,  Ariake and Hakata during February of 2004.  Actual
ship  operating  costs per day on average in the six months  ended June 30, 2003
were $5,200 for our Suezmax  OBOs,  $5,400 for our  Suezmaxes and $6,100 for our
VLCCs.

     Administrative  expenses were $1.5 million in the six months ended June 30,
2004 and $3.0  million  in the six  months  ended  June 30,  2003 and  primarily
consist of legal,  professional and audit fees. Administrative expenses reported
in  our  predecessor  combined  carve-out  financial  statements  consist  of an
allocation  of total  administrative  expenses  reported by  Frontline,  whereas
administrative expenses reported since January 1 consist of actual costs. Actual
administrative  expenses  in the six  months  ended  June 30,  2004  include  an
management  fee of $0.5 million paid to Frontline  Management  for  provision of
administrative  support  services  and $1.0  million of other  expenses,  mainly
legal, professional and audit costs, which are not covered by our administrative
sevices agreement with Frontline Management.

     Depreciation  was $21.8  million in the six months  ended June 30, 2004 and
$51.4  million in the six  months  ended June 30,  2003.  Depreciation  expenses
relate to the vessels on charters to third  parties  that are  accounted  for as
operating leases. The reduction is due to the fact that most of our fleet is now
employed  under  long-term  charters to  Frontline  which are  accounted  for as
sales-type   leases.  In  the  six  months  ended  June  30,  2003  we  recorded
depreciation on our entire  wholly-owned  fleet of 42 vessels whereas in the six
months  ended  June  30,  2004 we  recorded  depreciation  on  only  12  vessels
throughout the period.  Additionally we recorded  depreciation on vessels during
the period before they  commenced  employment  with  Frontline  under  long-term
charter.

     Interest  income was $2.3  million,  for the six months ended June 30, 2004
and $4.6 million for the six months ended June 30, 2003 and interest expense was
$48.9  million for the six months ended June 30, 2004 and $18.9  million for the
six months  ended June 30,  2003.  Interest  expense  includes  interest on bank
financing  and on the $580.0  million 8.5% Senior Notes issued in December  2003
together  with swap interest and  amortization  of deferred  finance  fees.  The
increase in interest  expense is  primarily  due to our issuance of Senior Notes
together with a write off of $4.3 million of unamortized fees on refinanced bank
debt in the six  months  ended  June 30,  2004.  At June 30,  2003 we had  total
outstanding  debt of $1,084.2 million compared with $1,554.3 million at June 30,
2004.  Interest  expense includes swap interest of $6.0 million and $2.6 million
and  amortization  of deferred  finance fees of $6.6 million and $0.5 million in
the six months ended June 30, 2004 and June 30, 2003 respectively.

     Other  financial items for the six months ended June 30, 2004 were a credit
of $14.0  million  compared  with a loss of $0.2 million in the six months ended
June 30,  2003.  Other  financial  items  consists  primarily  of mark to market
valuation  changes on our  interest  rate swap  contracts.  At June 30, 2004 the
Company had interest rate swaps with a total notional principal amount of $500.0
million  outstanding and has recorded a $12.6 million credit attributable to the
mark to market  valuation of these  interest  rate swaps in the six months ended
June 30, 2004  compared  with a credit of $1.3  million for the six months ended
June 30, 2003.

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

     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,  the
Company 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 the Company's 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 have experienced during
2003.

     Spot voyage charters  represented 88% and 85% of the Company's time charter
equivalent  revenues in 2003 and 2002 respectively.  Accordingly,  the Company's
revenues are 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  have  resulted  in spot  market  rates  being
significantly  stronger  than in  2002.  Oil  demand  for 2003  experienced  its
strongest growth in 15 years with an increase of approximately 3.5% for the 2003
calendar year.

     Voyage expenses and commission  increased by 58% from $94.0 million in 2002
to  $148.5  million  in 2003.  This  increase  is  primarily  as a result of the
withdrawal of Frontline from participation in the Tankers International LLC 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.

     Vessel operating  expenses,  which include  drydocking costs, have 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
the  Company's  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  have  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  and  amortization  increased 10% to $106.0 million in 2003 to
$96.8  million  in  2002.  The  increase  primarily  relates  to a  full  year's
depreciation  being  included in 2003 for the four  vessels  delivered  in 2002.
Effective October 1, 2003, 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 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  an  increase  in costs  recognized  in
relation to Frontline's  employee  share option plan along with increased  legal
costs incurred by the Company.

     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,  the Company 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.

     The share in result 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.  In the year ended  December 31, 2003,  the
Company   recorded  an  impairment   charge  of  $5.2  million  related  to  the
other-than-temporary  decline  in  value of its  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.

     The Company 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 debt in certain subsidiaries. In the 2003, the
Yen strengthened  against the U.S. dollar from (Y)118.54 at December 31, 2002 to
(Y)107.1 at December 31, 2003. At December 31, 2003, the Company had Yen debt of
(Y)9.6 billion, compared with (Y)5.1 billion at December 31, 2002.

     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.

Year ended December 31, 2002 compared with the year ended December 31, 2001

     Total  operating  revenues  decreased by 25% to $365.2 million in 2002 from
$486.7 million in 2001.  Time charter  equivalent  revenues  decreased by 34% to
$271.2  million in 2002  compared  with  $411.5  million in 2001.  In 2002,  the
Company  took  delivery of four wholly  owned  double hull VLCCs.  The  decrease
reflects the  significantly  weaker tanker  charter market in 2002 compared with
2001.  The annual  average  daily TCEs earned by the  Company's  VLCCs,  Suezmax
tankers,  and Suezmax OBO carriers for 2002 were  $22,200,  $18,400 and $17,700,
respectively, compared with $34,600, $30,600 and $28,900, respectively, in 2001.
Spot voyage  charters  represented  85% and 92% of the  Company's  time  charter
equivalent  revenues in 2002 and 2001  respectively.  The tanker market weakened
significantly in the first half of 2002 mainly as a result of the influence of a
global economic recession that began in 2001; the lingering effects on September
11 on the airline  industry and the quota cuts imposed by OPEC which resulted in
an  increase  in short haul  imports.  Market  conditions  improved  in the last
quarter of 2002 as demand for oil increased due to factors such as a colder than
normal winter,  a gradual global  economic  recovery and the shutdown of nuclear
power plants in Japan resulting in increased consumption of fossil fuels.

     Voyage expenses and commission  increased by 25% from $75.2 million in 2001
to  $94.0  million  in 2002.  This  increase  is  primarily  as a result  of the
withdrawal of Frontline from participation in the Tankers International LLC 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.

     Vessel operating expenses,  which include drydocking costs, decreased 4% to
$81.4 million from $85.1  million in 2001.  This decrease was a result of a cost
saving initiative. The average daily operating costs, including drydockings,  of
the  Company's  VLCCs,  Suezmax  tankers and Suezmax OBO  carriers  were $7,211,
$5,972  and $5,711  respectively,  compared  with  $7,012,  $6,049  and  $8,883,
respectively,  in 2001.  In 2002,  11 of the vessels went into drydock  compared
with 15 in 2001.  The  decrease  in daily  operating  costs for the  Suezmax OBO
carriers was a result of seven out of the eight vessels having been drydocked in
2001.

     Administrative  expenses  decreased  1% to $6.9  million  in 2002 from $7.0
million in 2001. A reduction in non-cash  charges in  connection  with  employee
stock options offset expenses for an increased number of Frontline employees.

     Depreciation  and  amortization  increased 9% from $88.6 million in 2001 to
$96.8  million in 2002.  The  increase  relates to the  acquisition  of four new
vessels in 2002 and the impact for a full year of the  reduced  expected  useful
life  for one of the  Company's  vessels  following  the  implementation  of IMO
regulations in 2001.

     Net interest expense for 2002 was $33.6 million, a decrease of 38% compared
with $54.5 million in 2001.  Interest  expense  decreased  from $58.9 million in
2001 to $42.1  million in 2002.  At December  31, 2002 the Company had  $1,104.0
million of floating rate debt and the decrease in the interest  expense reflects
the benefit of lower interest rates throughout 2002.

     The share in result of  associated  companies  decreased  from  earnings of
$14.3  million  in 2001 to a loss of  $10.1  million  in  2002.  Certain  of the
associated  companies in which the Company has investments  have Yen denominated
long term debt. In 2002 the loss was due to a combination  of lower revenues and
the  strengthening  of the Yen  against  the  U.S.  dollar  with  the  resulting
unrealized loss included with the share in results of associated companies.

     The Company  incurred a foreign  currency  exchange loss of $5.6 million in
2002  compared  with  a gain  of  $6.2  million  in  2001,  as a  result  of the
strengthening  of the Yen against the U.S. dollar from (Y)131.14 at December 31,
2001 to (Y)118.54 at December  31, 2002.  At December 31, 2002,  the Company had
Yen debt of (Y)5.1 billion, compared with (Y)5.6 billion at December 31, 2001.

     The charge for other financial items decreased from $9.1 million in 2001 to
$4.5 million in 2002. 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. These mark to market valuation adjustments were $3.3
million and $8.6 million for 2002 and 2001, respectively.

     The Company  adopted FAS 142  effective  January 1, 2002 and  recognized an
impairment  loss on goodwill of $14.1  million that is shown  separately  in the
consolidated  statement  of  operations  as a  cumulative  effect  of  change in
accounting principle. Net income for 2002 before the cumulative effect of change
in accounting principle was $32.2 million.

Results of Operations - Successor

Year ended December 31, 2003.

     Administrative  expenses  consist of initial start up costs incurred by the
Company.  Interest income consists of interest accruing on the net proceeds from
the offering.  Interest  expense  consists of interest  accruing on our issue of
$580  million  of 8.5%  Senior  Notes due 2013  together  with  amortization  of
capitalized fees associated with our offering.

Liquidity and Capital Resources

     The Company operates in a capital  intensive  industry and has historically
financed  its  purchase  of tankers  and other  capital  expenditures  through a
combination  of cash generated  from  operations,  equity capital and borrowings
from  commercial  banks.  The liquidity  requirements  of the Company  relate to
servicing  its 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 time charters and bareboat
charters are received  monthly or  fortnightly  in advance,  while revenues from
voyage charters are received upon completion of the voyage.

     The  Company's  funding  and  treasury   activities  are  conducted  within
corporate policies to maximize investment returns while maintaining  appropriate
liquidity for the Company's  requirements.  Cash and cash  equivalents  are held
primarily in U.S.  dollars,  with some balances  held in Japanese  Yen,  British
Pound and Norwegian Kroner.

     Short-term  liquidity  requirements  of the Company relate to servicing our
debt and funding working capital  requirements.  Sources of short-term liquidity
include cash balances,  restricted  cash balances,  short-term  investments  and
receipts from our charters.

     Long-term liquidity requirements of the Company included funding the equity
portion of investments in new or replacement vessels, and repayment of long-term
debt  balances  including  our $580  million  8.5% Senior Notes due 2013 and our
$1.058  billion  credit  facility  due 2010.  Sources of funding  our  long-term
liquidity requirements includes new loans or equity issues.

     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. To the extent we determine to acquire  additional  vessels,  we may
consider  additional  borrowings,  and equity and debt issuances.  Our long-term
liquidity  requirements  include  repayment  of the balance  our secured  credit
facility in 2010 and repayment of our issue of 8.5% Senior Notes in 2013. We may
require  additional  borrowings  or issuances of equity in the long-term to meet
these requirements.

Liquidity and Capital Resources - Predecessor

     As of December 31, 2003 and 2002, the Company had cash and cash equivalents
of $26.5 million,  and $20.6 million,  respectively.  The Company 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,  the  Company's
investing  activities  related to the  acquisition  of four VLCC's 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 at December 31, 2003
compared  with cash provided by financing  activities of $140.7  million in 2002
and cash used in financing  activities of $24.5 million at December 31, 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 parent  company
compared  with an  increase  of $41.4  million in 2002 and a  decrease  of $59.5
million in 2001.

     In July,  2003 the  Company  disposed  of it  interests  in  Golden  Lagoon
Corporation and Ichiban Transport Corporation for proceeds of $17 million.

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

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

     In February 2001, the Company acquired a 50.1% interest in a joint venture,
which acquired a VLCC built in 1993 for approximately $53.0 million. At the same
time, $35 million of financing was secured for this joint venture.

     In 2001,  the Company took  delivery of three  vessels  that were  acquired
through the exercise of purchase options;  Front Commerce;  Front Comanche;  and
Opalia.  In April 2001, the Company  obtained bank financing for Front Commerce,
for a total  amount of $55  million.  In May 2001,  the  Company  obtained  bank
financing  for a total sum of $59  million  for the Front  Comanche  and in July
2001, obtained bank financing for a total sum of $50 million for Opalia.

     The  Company  had total  long term debt  outstanding  of $991.6  million at
December  31, 2003  compared  with  $1,106.8  million at  December  31, 2002 and
$1,000.5 million at December 31, 2001. As of December 31, 2003, all of company's
debt was floating  rate debt.  The Company is exposed to various  market  risks,
including  interest rates and foreign  currency  fluctuations.  The Company uses
floating-to-fixed interest rate swaps to manage interest rate risk. The interest
rates  swaps  are used  solely  to hedge  interest  flow on the  Company's  debt
portfolio and are not used for  speculative  purposes.  As at December 31, 2003,
the Company's  interest rate swap  arrangements  effectively fixed the Company's
interest  rate  exposure on $152.6  million of floating  rate debt (2002  $327.7
million,  2001 362.8 million).  The interest rate swap agreements expire between
January 2006 and August 2008.

At December 31, 2003, the Company,  on a predecessor  combined  carve-out basis,
had outstanding debt of $991.6 million which is repayable as follows:

                                                               December 31, 2003
                                                               -----------------
          (dollars in thousands)

          2004                                                          141,522
          2005                                                          230,993
          2006                                                          205,044
          2007                                                          111,543
          2008 and later                                                302,508
                                                               -----------------
          Total debt                                                   $991,610
                                                               =================

Liquidity and Capital Resources - Successor

     As of June 30, 2004 and December  31,  2003,  the Company had cash and cash
equivalents  (including  restricted  cash) of $40.0 million and $565.5  million,
respectively.  At December 31, 2003 the $565.5 million cash balance  represented
the net  proceeds  from our issue of 8.5%  Senior  Notes due 2013.  The  Company
generated  cash from  operations of $109.5  million in the six months ended June
30, 2004 compared with $241.9 million in the six months ended June 30, 2003.

     On January 1, 2004,  our  agreements  with the Charterer and the management
agreements  and  administrative  services  agreements  that we  entered  into on
December 11, 2003 became effective. Under these agreements, we are contracted to
make and receive  amounts  that will impact our future  liquidity  requirements.
Based upon our current fleet of 46 vessels,  and including the  additional  VLCC
under  option  from  January  1,  2005,   we  estimate   that  we  will  receive
approximately  $385.9 million under these contracts in 2004 and will be required
to pay  approximately  $110.9  million  during  the  same  period.  For  further
information on contractual  operating cash flows, please refer to "Summary - Our
Contractual  Cash Flow".  In the six months  ended  June 30, 2004 we used $536.8
milion to acquire our vessel owning subsidiaries from Frontline.

     As of June 30, 2004 and  December 31,  2003,  the Company on a  stand-alone
basis had total  long term debt  outstanding  of  $1,554.3  million  and  $580.0
million,  respectively.  As at December  31, 2003 this amount  consisted  of our
issue of $580 million 8.5% Senior Notes due 2013. We expect interest  expense on
the  Notes to amount  to $49.3  million  per year and  amortization  of  related
capitalized fees and expenses to amount to approximately  $1.7 million per year.
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  bears  interest  at Libor  plus  1.25% and is
repayable between 2004 and 2010 with a final bullet of $499.7 million payable on
maturity.  This facility  contains a minimum value  covenant which requires that
the aggregate  value of the  Company's  vessels  exceed 140% of the  outstanding
amount of the facility.  Covenants  contained in our secured loan agreements may
restrict  our ability to obtain new  secured  facilities  in future.  We were in
compliance  with all loan  covenants at June 30,  2004.  As at June 30, 2004 the
outstanding amount on this facility was $994.3 million.

     In  connection  with its new $1,058.0  million  syndicated  senior  secured
credit facility, the Company entered into new five year interest rate swaps with
a combined  principal  amount of $500.0  million  in the first  quarter of 2004.
These swaps are at rates between 3.3% and 3.5%.

     The Company uses financial  instruments to reduce the risk  associated with
fluctuations in interest rates.  The Company does not hold or issue  instruments
for speculative or trading purposes.

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

     On August 19, 2004, the Board of Ship Finance  declared a dividend of $0.35
per share. The record date for the dividend is August 30, 2004, ex dividend date
is August 26, 2004 and the dividend will be paid on September 13, 2004.

Contractual Commitments

     At December  31, 2003,  on a  predecessor  combined  carve-out  basis,  the
Company had the following contractual obligations and commitments:

<TABLE>
<CAPTION>
                                                                   Payment due by period
                                     Less than 1 year   1 - 3 years   3 - 5 years   After 5 years     Total
                                     -----------------------------------------------------------------------
<S>                                          <C>            <C>           <C>           <C>         <C>
In thousands of $ Borrowings                 141,522        230,993       316,587       302,508     991,610

                                     -----------------------------------------------------------------------
Total contractual cash obligations           141,522        230,993       316,587       302,508     991,610
                                     -----------------------------------------------------------------------
</TABLE>

     At  December  31,  2003,  on a  stand  alone  basis,  the  Company  had  no
contractual  commitments  other than those relating to our agreement to purchase
the Vessel  Interests from Frontline and our issue of $580.0 million 8.5% Senior
Notes due 2013. These commitments are discussed in "Overview" above.

     At June 30, 2004, the Company had the following contractual obligations and
commitments:

<TABLE>
<CAPTION>
                                                                      Payment due by period
                                     Less than 1 year   1 - 3 years   3 - 5 years   After 5 years       Total
                                     -------------------------------------------------------------------------
<C>                                           <C>           <C>           <C>           <C>           <C>
In thousands of $
$580 million 8.5% notes (1)                        -              -             -       560,000       560,000
$1.058 billion credit facility                88,843        177,684       177,684       550,063       994,274

                                     -------------------------------------------------------------------------
Total contractual cash obligations            88,843        177,684       177,684     1,110,063     1,554,274
                                     -------------------------------------------------------------------------
</TABLE>

(1)  Includes  $20 million in 8.5% Senior  Notes  repurchased  by the Company in
     2004.
<PAGE>

                                    INDUSTRY

     The discussion of tanker  industry  statistics  under this heading has been
compiled by P.F. Bass0e AS & Co., which has confirmed to us that they accurately
describe  the  international  tanker  market,  subject to the  availability  and
reliability of the data supporting the statistical  information presented.  P.F.
Bass0e AS & Co.'s  methodologies  for  collecting  data,  and therefore the data
collected, may differ from those of other sources, and its data does not reflect
all or even necessarily a comprehensive set of the actual transactions occurring
in the market.

Overview

     The tanker industry provides crude oil transportation between oil producing
and consuming  nations.  Almost  one-half of the world's crude oil production is
transported  by sea.  There are  primarily  two types of operators  that provide
international seaborne oil and petroleum products transportation services: major
integrated oil companies with captive fleets (both private and  state-owned) and
independent  shipowners.  Both types of operators transport oil under short-term
contracts  (including  single voyage spot  charters) and long term time charters
with oil  companies,  oil traders,  petroleum  product  producers and government
agencies.  The oil companies use their fleets to transport their own oil as well
as to  transport  oil for third  party  charterers  in direct  competition  with
independent shipowners in the tanker charter market.

     Since the latter half of the 1990s,  the market situation for tanker owners
has  improved   significantly.   Several   factors  have   contributed  to  this
improvement. Increased focus on vessel quality has been a main driver. Long seen
as a commodity market with little degree of differentiation  between vessels and
owners,  the  industry  began to change  during  the  1990s.  This  process  was
triggered by the Exxon Valdez incident in 1989, which began the movement towards
double  hull  vessels and  tighter  industry  regulations,  including  OPA.  The
emergence of vessels equipped with double hulls represented a differentiation in
vessel  quality and enabled  such  vessels to command  higher  rates in the spot
charter  markets.  The effect has been a shift in major  charterers'  preference
towards  greater use of double  hulls and,  therefore,  more  difficult  trading
conditions  for older single hull  vessels.  These  changes are reflected in the
increase  in  scrapping  of  older  vessels  during  periods  of  weaker  market
conditions  in recent  years.  As a result,  the net increase in  transportation
capacity for Suezmax tankers and VLCCs has been low during this period.

     Types of Tankers

     The oil tanker fleet is  generally  divided  into six major  categories  of
vessels,  based on carrying capacity.  To minimize the cost of shipping,  tanker
charterers transporting crude oil will typically charter the largest vessel that
meets the  specific  port and canal size  restrictions  for the voyage.  The six
types of vessels, categorized according to their size in dwt, are:

     o    ULCCs of approximately 320,000 dwt or more;
     o    VLCCs of approximately 200,000 to 320,000 dwt;
     o    Suezmax tankers of approximately 120,000 to 200,000 dwt;
     o    Aframax tankers of approximately 80,000 to 120,000 dwt;
     o    Panamax tankers of approximately 50,000 to 80,000 dwt; and
     o    Small tankers (such as  Handysize) of less than  approximately  50,000
          dwt.

     World Crude Oil Tanker Fleet by Type of Vessel

     ULCCs  and  VLCCs   provide   the  most   efficient   means  of  long  haul
transportation, mainly transporting oil from the Arabian Gulf to Western Europe,
the United States and Asia.  According to P.F. Bass0e,  as of [October 31, 2003,
the  cargo  capacity  of ULCCs and VLCCs  represented  approximately  55% of the
world's crude oil tanker fleet above 80,000 dwt.]

     Suezmax tankers engage in both long- and medium-haul crude oil trades, such
as from West  Africa and the North Sea to the  United  States.  Aframax  vessels
generally  engage in both medium- and  short-haul  trades and carry crude oil or
petroleum products. As of October 31, 2003, data from P.F. Bass0e shows that the
cargo capacity of Aframax and Suezmax tankers represented  approximately 24% and
20%,  respectively,  of the total world crude oil tanker  fleet over 80,000 dwt.
Unlike smaller  vessels,  Aframax and Suezmax  vessels are large enough to allow
them to benefit from economies of scale in some regional markets. They also have
access to a wide  range of ports,  many of which  are not  accessible  by larger
vessels such as ULCCs and VLCCs, and are particularly well-suited for trading in
regional markets, including the Atlantic basin.

     Panamax and smaller tankers mostly transport  petroleum  products in short-
to medium-haul trades.

     Besides tankers,  oil/bulk/ore  (OBO) carriers are vessels that are capable
of carrying  either crude oil or dry bulk cargoes.  As a result of being able to
transport more than one type of cargo,  OBOs can have a higher  utilization  and
charter rates over a similar size tanker.

Tanker Demand Drivers

     Overview

     Tanker demand is derived from a combination of factors, including world oil
supply and demand,  and the geographic  locations of oil production,  refinement
and  consumption.  Tanker demand is generally  expressed in  "ton-miles"  and is
measured as the product of (1) cargo  volume,  usually  measured in metric tons,
and (2) the distance over which this oil is transported.

     Tanker  demand is a function of global  trends in oil  consumption  and oil
production,  with a particular  emphasis on the geographic  location of both the
consumers  and the  producers.  Consumption  and  production  trends are in turn
influenced by a combination of economic growth,  oil prices,  weather conditions
and long term geological profiles.  Tonnage of oil shipped is also influenced by
the cost and availability of transportation alternatives such as pipelines.

     Oil Demand

     Oil demand has grown at a compound annual growth rate of 1.5% over the past
ten years. In addition, oil demand has consistently grown every year for over 40
years, except for two periods:  1974 to 1975 and 1980 to 1983. Demand growth was
weak in the early part of this decade following the sharp increase in oil prices
since 1999 and the ensuing  recession in  industrialized  countries.  During the
past year growth has increased,  led by strong economic performance in China and
the recovery in the United States.  The  International  Energy  Agency,  or IEA,
recently  upgraded its outlook for global  demand growth  through 2005.  The IEA
expects world oil demand to increase by 2.53 million  barrels per day (mbd),  or
3.2%, in 2004 and 1.8 mbd, or 2.2%, in 2005. Longer-term, the IEA expects global
oil  demand to grow at an  overall  rate of 1.6% per year.  Growth in the mature
OECD  regions  is  expected  to be less than 1.0% per year  while  growth in the
emerging Asian economies is expected to be between 3.0% and 4.0% per year. Given
that the  region is a net  importer  on oil,  we expect  this trend to result in
increased tanker demand.

     Oil production and reserves

     There are significant  differences in reserves,  geological  profiles,  and
production costs in the various oil producing regions of the world. While swings
in oil  prices,  technological  advances  and  government  energy  policies  can
influence  production  trends  in the  short- to  medium-term,  the level of oil
reserves will ultimately determine production trends in the long term.

     Countries in the Middle East have nearly  twice the proved  reserves of all
of the  other  countries  combined,  which  will  continue  to drive  long-  and
medium-haul seaborne transportation.

     World oil  production  is expected to reach  approximately  83 mbd in 2004.
OPEC countries  located in the Middle East are expected to supply  approximately
34% of this volume.  Given the  dominance of world oil reserves  located in this
region,  this share is expected  to grow in coming  years as oil fields in other
parts of the world  gradually  reach  maturity  and begin a process  of  natural
decline.  The length of  transportation  distances  between  the Middle East and
consuming  areas  means that such a trend  would  boost  ton-miles  and would be
beneficial for tanker demand.

     Seaborne Transportation of Crude Oil

     Seaborne  transportation  of oil has grown on average by 2.7% per year over
the past  decade,  which is  nearly  twice as fast as the rate of  growth in oil
demand over the same  period.  The higher rate of growth for  seaborne oil trade
illustrates that while total trade is roughly 60% of total oil demand, virtually
all of the increase in consumption from year to year has to be transported.

     Major consumers, producers, importers and exporters of oil

     The United States is the largest consumer and importer of oil, and China is
the  fastest  growing  importer of oil.  The Middle  East and the former  Soviet
Union, or FSU, are the largest  producers and,  together with the North Sea, the
largest  exporters  of oil,  making  them  the  primary  drivers  of  long-  and
medium-haul seaborne transportation.  The FSU is the fastest growing exporter of
crude oil and generates demand for medium-haul transportation.

     Crude Oil Trading Patterns

     The  distance  over which oil is  transported  by sea  reflects  prevailing
seaborne  trading  and  distribution  patterns.  These  patterns  are in  turn a
function of the optimal  economic  distribution  of that production for refining
and  consumption,  as dictated  by,  among other  things,  the level of spot and
forward oil prices,  the price between  different crude oil qualities,  refining
margins and freight  rates.  Seaborne  trading  patterns also are  influenced by
geopolitical events that divert tankers from normal trading patterns, as well as
by  inter-regional  oil trading activity created by global oil supply and demand
imbalances.  The  Middle  East  is the  only  region  in the  world  that  holds
significant volumes of excess oil production  capacity.  Production volumes from
this  region  fluctuate  in line with  OPEC's  attempts to keep world oil prices
steady. Because the Middle East is the main loading area for VLCCs, these output
swings have a direct and significant bearing on the VLCC freight market.

     Crude Oil Inventories

     The level of oil  inventories  is an  important  element  of tanker  demand
because  it  indicates  the  available  cushion  in the oil  industry  to absorb
unexpected  events.  Typically,  low  inventories  will raise the  importance of
tanker  transportation in providing incremental supply to meet higher oil demand
or shortfalls in production.  Currently,  U.S. commercial oil inventories (crude
and  products)  are  [near  their  five  year  lows]  and  OECD  commercial  oil
inventories  are in the bottom  half of their  five year range at  approximately
[1,200 and 2,590] million barrels,  respectively.  This decrease has taken place
over a protracted  period and reflects both major oil companies' drive to reduce
capital employed as well as OPEC's desire for higher oil prices.  The result for
the tanker  industry  has been that its role in the supply  logistics of the oil
market has increased.

     Demand for oil  fluctuates  with the  different  seasons and in response to
price swings and unforeseen events. As inventory levels have declined, producers
with  excess  capacity  have been  relied  upon to balance  such  swings.  These
producers  are mainly  located in the Middle East and are net  exporters of oil,
which  means  demand  for  tankers  increasingly  has  become  a  part  of  such
fluctuations.

     Continued  low  inventories  would in all  likelihood  result in  continued
volatility in tanker rates as demand for tonnage  responds to swings in regional
oil balances.  A general  increase in inventory  levels would likely reduce this
volatility but would involve a period of above-trend tanker demand.

Tanker Supply Drivers

     Overview

     The  supply of tankers  increases  with  deliveries  of  newbuildings,  and
decreases  with  scrapping  of older  vessels and loss of tonnage as a result of
casualties and conversion of vessels to other uses, such as floating  production
and storage facilities.  A tanker's size is measured in dwt, which is the amount
of crude oil measured in metric tons that the vessel is capable of loading.  The
supply of tankers is  measured  both in the number of vessels  and in  aggregate
dwt.

     Newbuildings

     Typically,  newbuildings  are  delivered  18 months after they are ordered,
depending on the available  capacity of the shipyard.  Shipyard capacity for the
rest of 2004, 2005 and part of 2006 has already been committed and, as a result,
a large tanker ordered today is unlikely to be delivered until 2007.

     Scrapping

     Vessel owners often  conclude that it is more  economical to scrap a vessel
that has  exhausted  its useful  life than to upgrade  the vessel to maintain it
in-class.   A  vessel  is  deemed  to  be  "in-class"  if  the  surveyors  of  a
classification  society  determine that the vessel conforms to the standards and
rules of that classification  society. In many cases,  particularly when tankers
reach 25 years of age, the costs of conducting the special survey and performing
associated repairs, such as the replacement of steel plate, in order to maintain
a  vessel  in-class  may not be  economically  efficient.  Customers,  insurance
companies  and other  industry  participants  use the survey and  classification
regime to obtain reasonable assurance of a vessel's  seaworthiness,  and vessels
must be  certified  as  in-class  in order to  continue  to trade  (i.e.,  to be
admitted to ports  worldwide).  In addition,  regulations  set by the IMO impose
significant restrictions on tankers trading beyond 25 years of age.

     Scrapping of most of the vessels  delivered in the mid-1970s,  as they near
the end of their useful lives,  in conjunction  with  customers'  preference for
younger vessels, has changed the tanker business in recent years and is expected
to continue to do so during the next several years. Factors affecting the amount
of tonnage scrapped  include market  conditions and second hand vessel values in
relation to scrap  prices.  Scrap prices are  currently at a modern-day  high of
$420 per light  weight ton, or the weight of the tanker  unloaded.  According to
P.F. Bass0e,  approximately 8 million dwt of VLCC tankers and 1.6 million dwt of
Suezmax tankers were scrapped during 2003.

     Deliveries and Scrapping of VLCC and Suezmax Tankers

     Despite the large number of  newbuildings  delivered in the past two years,
the  size of the  VLCC  and  Suezmax  tanker  fleets  have  remained  relatively
constant.  Increased  focus on  environmental  and  safety  concerns  has led to
increased scrapping to offset the increase in newbuilding  deliveries,  creating
greater  stability in tanker  supply.  In 2003,  there was a net increase in the
global VLCC fleet of 6 vessels or 1.3  million  dwt and 2004 is  expecting a net
increase of  approximately 20 vessels for an estimated total of 5.1 million dwt.
Since  1999,  there has been a net  increase  in the  global  VLCC fleet of  2.0
million  dwt,  or  approximately  0.5%  growth per year.  Suezmax net supply has
increased by approximately  2.8 million dwt, or about 1.7% per year. The Suezmax
world fleet is  estimated to receive net  additions of 13-14 ships in 2004.  The
marginal  increase in world fleet growth was absorbed  through  increased tanker
demand, which grew by more than 3.0% per year over the same time period,  driven
in part by a 7.0% increase in long-haul movements from the Middle East.

                                    BUSINESS

Overview

     We were  formed  in  October  of  2003  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 June 16, 2004 Frontline  distributed 25% of our common
shares to its shareholders, with each Frontline shareholder receiving one of our
common shares for every four Frontline shares held. On June 17, 2004, our common
shares  began  trading on the New York Stock  Exchange  under the ticker  symbol
"SFL".

     We have purchased from Frontline a fleet of 46 crude oil tankers,  which we
have  chartered  under long term,  fixed rate  charters  to  Frontline  Shipping
Limited,  which we refer to as the  Charterer  and the  option  to  purchase  an
additional vessel. The Charterer was initially  capitalized with $250 million in
cash  provided by Frontline  to support its  obligation  to make  payments to us
under  the  charters.  We have also  entered  into  fixed  rate  management  and
administrative  services agreements with Frontline Management (Bermuda) Limited,
or Frontline  Management,  to provide for the operation and  maintenance  of our
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 have acquired from Frontline 23 VLCCs,  including the VLCC under option,
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.  Our fleet is one of the  largest
tanker fleets in the world, with a combined  deadweight  tonnage of 10.5 million
dwt, and has an average age of 8.6 years as of December  31,  2003.  Thirteen of
our VLCCs and 16 of our Suezmax  tankers are of double hull  construction,  with
the remainder being modern single hull or double sided 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.

Strategy

     Our long term  charters with the Charterer are our sole source of operating
income.  We plan to grow our fleet and to replace  vessels  as they are  retired
with modern double hull vessels to maintain  stable cash flow and the quality of
our fleet.  We expect that our  replacement  and growth  vessels  will be either
existing or newly built VLCC or Suezmax tankers. Depending on market conditions,
we may charter our additional  vessels on long or short term time charters or in
the spot  markets.  We may also seek to diversify  our customer base by securing
charters with companies other than the Charterer.

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  Charterer's  earnings  from
               deploying our vessels exceed certain levels;

          o    substantially   fixed   operating   costs  under  our  management
               agreements;

          o    a charter counterparty initially capitalized with $250 million to
               support its 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

     Time Charters

     We have  chartered the vessels we acquired from  Frontline to the Charterer
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  Charterer  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  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.

     With the exceptions  described below,  the daily base charter rates,  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  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.

     The Charterer

     The Charterer's  activities are limited in its organizational  documents to
chartering our vessels and any business necessary or incidental to that purpose.
Under its  constituent  documents,  the  Charterer 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 will be required to file for
bankruptcy,   liquidate  or  dissolve  the  Charterer,  merge  or  sell  all  or
substantially  all of the  Charterer's  assets.  The  Charterer is also required
under its constituent  documents to maintain,  among other things, its corporate
separateness  from its  affiliates,  to maintain  books,  records  and  accounts
separate from any other entities, to observe all corporate  formalities,  not to
co-mingle  its  assets,  to  maintain  an  arm's-length  relationship  with  its
affiliates  and not to guarantee or become  obligated for the debts of any other
entity.

     Charter Ancillary Agreement

     We have entered into a charter ancillary agreement with the Charterer,  our
vessel owning subsidiaries that own our vessels and Frontline,  which remains in
effect  until  the last long  term  charter  with the  Charterer  terminates  in
accordance with its terms. Frontline has guaranteed the Charterer's  obligations
under the charter ancillary agreement.

Charter Service Reserve.  Frontline has made an initial capital  contribution to
the Charterer in the amount of $250 million in cash.  These funds are being held
as a charter  service  reserve to support  the  Charterer's  obligation  to make
charter payments to us under the charters.  The Charterer is 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 Charterer is
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,
the  Charterer  has agreed not to pay  dividends or other  distributions  to its
shareholders or loan, repay or make any other payment in respect of indebtedness
of the  Charterer  or any of its  affiliates  (other than us or our wholly owned
subsidiaries),  unless  (1)  the  Charterer  is  then  in  compliance  with  its
obligations  under the charter ancillary  agreement,  (2) after giving effect to
the  dividend  or other  distribution,  (A) it remains in  compliance  with such
obligations, (B) the balance of the charter service reserve equals at least $250
million (which threshold will be reduced by $5.3 million upon the termination of
each charter 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  the Charterer's  reasonably  expected
payment obligations during such 30-day period, (3) any charter payments deferred
pursuant to the deferral  provisions  described below by the Charterer have been
fully paid to us and (4) any profit sharing  payments  deferred by the Charterer
pursuant to the profit sharing  payments  provisions  described  below have been
fully  paid to us. In  addition,  the  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 any
               of its  subsidiaries 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 Charterer 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 the Charterer  are less than $75 million,  the Charterer 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.  The  Charterer  will be
required to immediately use all revenues that the Charterer 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 the  Charterer  are greater
than $75 million,  unless the  Charterer  reasonably  believes that the cash and
cash  equivalents held by the Charterer will not exceed $75 million for at least
30 days after the date of the payment.  In addition,  the Charterer  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  agreement,
beginning  with the final  11-month  period in 2004 and for each  calendar  year
after that, the Charterer 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 the  Charterer  for our fleet in excess of a  weighted
average  rate of  $25,575  per day for each  VLCC and  $21,100  per day for each
Suezmax tanker.  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.
The  Charterer  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.

     The Charterer 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.  The  Charterer  is
required to immediately use all revenues that the Charterer 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 the  Charterer  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, the Charterer 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  agreement  provides  that the
obligations of the Charterer to us under the charters and the charter  ancillary
agreement  are secured by a lien over all of the assets of the  Charterer  and a
pledge of the equity interests in the Charterer.

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

          o    the Charterer  materially  breaches any of its obligations  under
               any of the Charters,

          o    the  Charterer  or  Frontline  materially  breaches  any  of  its
               obligations  under  the  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  Charterer  fails at any time to hold at least $55 million in
               cash and cash equivalents.

     The  occurrence  of any  event  of  default  under  the  charter  ancillary
agreement that continues for 30 days after notice, we may elect to:

          o    terminate any or all of the charters,

          o    foreclose on any or all of our security interests described above
               and/or

          o    pursue any other available rights or remedies.

Management and Administrative Services Agreements

     Vessel Management Agreements

     Our  vessel  owning   subsidiaries   entered  into  fixed  rate  management
agreements with Frontline Management. 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 the Charterer does so under the charters.  We expect that Frontline
Management will outsource 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 the  Charterer  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 under which 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.

     Because Frontline Management has assumed full managerial responsibility for
our fleet and our  administrative  services,  we currently do not have  separate
management or employees. We do, however, have one director who is not affiliated
with Frontline.

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

Frontline Performance Guarantee

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

          o    the  performance of the  obligations  of the Charterer  under the
               charters  with the  exception of payment of charter  hire,  which
               will not be guaranteed,

          o    the  performance of the  obligations  of the Charterer  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 Charterer 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.

Our Fleet

     The following chart summarizes  certain  information  about the 47 vessels,
including the vessel under option, we acquired from Frontline:

<TABLE>
<CAPTION>
                            Year                                               Charter Termination
Vessel                     Built      Dwt.      Construction   Flag            Date December 31,
------                     -----      ----      ------------   ----            --------------------
<S>                         <C>        <C>      <C>            <C>                  <C>
VLCCs
Front Sabang............    1990       286,000  Single hull    Singapore            2014(1)
Front Vanadis...........    1990       286,000  Single hull    Singapore            2014(1)
Front Highness..........    1991       284,000  Single hull    Singapore            2014(1)
Front Lady..............    1991       284,000  Single hull    Singapore            2014(1)
Front Lord..............    1991       284,000  Single hull    Singapore            2014(1)
Front Duke..............    1992       284,000  Single hull    Singapore            2014(1)
Front Duchess...........    1993       284,000  Single hull    Singapore            2014(1)
Front Ace...............    1993       276,000  Single hull    Liberia              2014(1)
Edinburgh...............    1993       302,000  Double side    Liberia              2016(1)
Navix Astral............    1996       276,000  Single hull    Panama               2014(1)
Front Vanguard..........    1998       300,000  Double hull    Marshall Islands      2021
Front Vista.............    1998       300,000  Double hull    Marshall Islands      2021
Omala...................    1999       306,000  Double hull    Isle of Man           2022
Opalia..................    1999       302,000  Double hull    Isle of Man           2022
Front Comanche..........    1999       300,000  Double hull    France                2022
Ocana...................    1999       300,000  Double hull    Isle of Man           2022
Oscilla (2).............    2000       302,000  Double hull    Isle of Man           2024
Ariake..................    2001       298,000  Double hull    Bahamas               2024
Front Serenade..........    2002       299,000  Double hull    Liberia               2025
Front Stratus...........    2002       299,000  Double hull    Liberia               2025
Front Falcon............    2002       308,000  Double hull    Bahamas               2025
Front Page..............    2002       299,000  Double hull    Liberia               2025
Otina...................    2002       296,000  Double hull    Isle of Man           2025
Suezmax OBO Carriers
Front Breaker...........    1991       169,000  Double hull    Marshall Islands      2015
Front Climber...........    1991       169,000  Double hull    Singapore             2015
Front Driver............    1991       169,000  Double hull    Marshall Islands      2015
Front Guider............    1991       169,000  Double hull    Singapore             2015
Front Leader............    1991       169,000  Double hull    Singapore             2015
Front Rider.............    1992       169,000  Double hull    Singapore             2016
Front Striver...........    1992       169,000  Double hull    Singapore             2016
Front Viewer............    1992       169,000  Double hull    Singapore             2016
Suezmax Tankers
Front Lillo.............    1991       147,000  Single hull    Marshall Islands     2014(1)
Front Birch.............    1991       152,000  Double side    Marshall Islands     2015(1)
Front Maple.............    1991       152,000  Double side    Marshall Islands     2015(1)
Front Granite...........    1991       142,000  Single hull    Marshall Islands     2014(1)
Front Emperor...........    1992       147,000  Single hull    Singapore            2014(1)
Front Sunda.............    1992       142,000  Single hull    Marshall Islands     2014(1)
Front Spirit............    1993       147,000  Single hull    Marshall Islands     2014(1)
Front Comor.............    1993       142,000  Single hull    Norway               2014(1)
Front Pride.............    1993       150,000  Double hull    Norway                2017
Front Glory.............    1995       150,000  Double hull    Norway                2018
Front Splendour.........    1995       150,000  Double hull    Norway                2018
Front Ardenne...........    1997       153,000  Double hull    Norway                2020
Front Brabant...........    1998       153,000  Double hull    Norway                2021
Mindanao................    1998       158,000  Double hull    Singapore             2021
Front Fighter...........    1998       153,000  Double hull    Norway                2021
Front Hunter............    1998       153,000  Double hull    Norway                2021
</TABLE>

----------
(1)  Charter subject to termination at the Charterer's option after 2010.
(2)  We have acquired an option to purchase the Oscilla from  Seacrest  Shipping
     Ltd. As of the date of this prospectus we have not exercised the option.

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

Our Contractual Cash Flow

     The following  table sets forth the aggregate  contracted  charter  revenue
that is payable to us under our charters with the  Charterer,  together with the
management  fees that are payable by us under the management  agreements and the
administrative  services  agreement,  but does not include  any debt  service or
other expenses.  These figures do not include any profit sharing payments. These
amounts are based on our current fleet of 46 vessels and include the  additional
VLCC under option from January 1, 2005.  These amounts further assume that we do
not make any other  vessel  acquisitions.  This table  assumes  that all parties
fully perform their obligations  under the relevant  agreements and that none of
the charters are terminated  due to loss of the vessel or otherwise,  except for
the charters for our non-double hull vessels, which are assumed to be terminated
after 2010. We cannot assure you that these results will actually be achieved.

                                               Management and                Net
                                     Charter   Administrative         Contracted
     Year                           Payments             Fees      Cash Payments
     ----                           --------         --------           --------
                                               (dollars in millions)

     2004a ......................     $395.1           $113.3             $281.9
     2005a ......................      394.1            112.9              281.2
     2006a ......................      394.1            112.9              281.2
     2007a ......................      387.3            112.9              274.3
     2008a ......................      388.4            113.3              275.1
     2009a ......................      383.0            112.9              270.1
     2010a ......................      370.4            112.9              257.5
     2011a ......................      226.6             69.9              156.7
     2012a ......................      219.4             70.1              149.3
     2013a ......................      214.1             69.9              144.2
     2014 and beyond ............    1,517.7            496.8            1,020.3

     Total ......................   $4,880.4         $1,495.4           $3,385.0

Risk of Loss and Insurance

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

     Frontline  Management is responsible for arranging for the insurance of our
vessels on terms specified in the management agreements, which we believe are in
line  with  standard  industry  practice.  In  accordance  with  that  practice,
Frontline  Management  has  procured  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.
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

     All  of  our  tankers  have  been  certified  as  being  "in-class"  by the
classification  societies that inspect our vessels. Each of these classification
societies  is a  member  of  the  International  Association  of  Classification
Societies.  Every  commercial  vessel's  hull and  machinery  is  evaluated by a
classification society authorized by its country of registry. The classification
society  certifies  that the vessel has been built and  maintained in accordance
with the rules of the classification  society and complies with applicable rules
and  regulations  of the  vessel's  country of  registry  and the  international
conventions  of which that  country is a member.  Each vessel is  inspected by a
surveyor of the classification society in three surveys of varying frequency and
thoroughness:  every year for the annual  survey,  every two to three  years for
intermediate  surveys and every four to five years for special  surveys.  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.   Vessels  may  be  required,  as  part  of  the  annual  and
intermediate  survey  process,  to be drydocked for inspection of the underwater
portions of the vessel and for necessary  repair  stemming from the  inspection.
Special surveys always require drydocking.

Environmental Regulation

     Government regulation  significantly affects the ownership and operation of
our tankers. They are subject to international conventions,  national, state and
local laws and  regulations  in force in the  countries in which our tankers may
operate or are registered. Under our management agreements, Frontline Management
has assumed full managerial  responsibility for our fleet,  including compliance
with all government and other  regulations.  If our management  agreements  with
Frontline Management terminate,  we would assume responsibility for managing our
vessels,  including  compliance  with the regulations  described  herein and any
costs associated with such compliance.

     A variety of governmental  and private entities subject our tankers to both
scheduled and  unscheduled  inspections.  These entities  include the local port
authorities  (U.S.  Coast Guard,  harbor master or  equivalent),  classification
societies,  flag state  administration  (country of  registry)  and  charterers,
particularly  terminal  operators and oil  companies.  Certain of these entities
require us to obtain permits, licenses and certificates for the operation of our
tankers.  Failure to maintain necessary permits or approvals could require us to
incur substantial  costs or temporarily  suspend operation of one or more of our
tankers.

     We believe that the heightened level of environmental  and quality concerns
among  insurance  underwriters,  regulators and charterers is leading to greater
inspection  and  safety  requirements  on all  tankers  and may  accelerate  the
scrapping of older tankers  throughout  the industry.  Increasing  environmental
concerns  have  created  a demand  for  tankers  that  conform  to the  stricter
environmental standards.  Frontline Management is required to maintain operating
standards for all of our tankers that will emphasize operational safety, quality
maintenance,  continuous  training of our officers and crews and compliance with
U.S. and international regulations. We believe that the operation of our vessels
are  in  substantial   compliance   with  applicable   environmental   laws  and
regulations;  however,  because such laws and regulations are frequently changed
and may  impose  increasingly  stricter  requirements,  we  cannot  predict  the
ultimate  cost of  complying  with  these  requirements,  or the impact of these
requirements on the resale value or useful lives of our tankers.

International Maritime Organization

     In 1992,  the  International  Maritime  Organization,  or IMO  (the  United
Nations  agency for maritime  safety and the  prevention of marine  pollution by
ships) adopted  regulations  that set forth  pollution  prevention  requirements
applicable to tankers.  These  regulations,  which have been adopted by over 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
               less  cargo into a tanker so 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.

     Effective  September 2002, the IMO  accelerated its existing  timetable for
the  phase-out  of  single  hull oil  tankers.  These  regulations  require  the
phase-out  of most single hull oil tankers by 2015 or earlier,  depending on the
age of the tanker and whether it has segregated  ballast tanks.  After 2007, the
maximum permissible age for single hull tankers will be 26 years. Fifteen of our
vessels  are single  hull  tankers  that were built in 1990 or later.  Under the
IMO's current regulations, these tankers and our three double sided tankers will
be  able  to  operate  until  2015  before  being  required  to be  scrapped  or
retrofitted to conform to international  environmental standards.  Under current
regulations,  retrofitting  will enable a vessel to operate until the earlier of
25 years of age and the anniversary date of its delivery in 2017.  However, as a
result  of the oil  spill  in  November  2002  relating  to the loss of the m.t.
Prestige,  which was owned by a company not affiliated with us, in December 2003
the Marine  Environmental  Protection  Committee  of the IMO  adopted a proposed
amendment to the  International  Convention for the Prevention of Pollution from
Ships to  accelerate  the  phase out of single  hull  tankers  from 2015 to 2010
unless the relevant flag states extend the date to 2015. This proposed amendment
will come into effect in April 2005 unless objected to by a sufficient number of
member states. We do not know whether any of our vessels will be subject to this
accelerated  phase-out,  but this could result in a number of our vessels  being
unable to trade in many markets  after 2010.  Moreover,  the IMO may still adopt
regulations in the future that could adversely affect the remaining useful lives
of our single hull tankers as well as our ability to generate income from them.

     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 is  expected  to be  ratified  by the end of  2003,  and  will  become
effective 12 months  after  ratification.  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
chlorofluorocarbons.  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.  Frontline  Management  is  formulating a plan to
comply with the Annex VI regulations once they come into effect. 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. Additional or new conventions, laws and regulations may be adopted that
could adversely affect Frontline Management's ability to manage our ships.

     Under the International Safety Management Code, or ISM Code, promulgated by
the IMO the party with operational control of a vessel is required to develop an
extensive  safety  management  system that  includes,  among other  things,  the
adoption  of  a  safety  and  environmental   protection  policy  setting  forth
instructions  and  procedures  for operating its vessels  safely and  describing
procedures for responding to  emergencies.  Frontline  Management will rely upon
the safety  management  system  that  Frontline  and its third  party  technical
managers have developed.

     The ISM Code  requires  that vessel  operators  obtain a safety  management
certificate for each vessel they operate.  This certificate evidences compliance
by a vessel's  management with code requirements for a safety management system.
No vessel  can  obtain a  certificate  unless  its  manager  has been  awarded a
document of compliance,  issued by each flag state,  under the ISM Code. We have
the  requisite  documents of  compliance  for our offices and safety  management
certificates  for all of our tankers for which the  certificates are required by
the IMO. Frontline Management is required to renew these documents of compliance
and safety management certificates annually.

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

     Although  the  United  States  is not a party  to these  conventions,  many
countries have ratified and follow the liability plan adopted by the IMO and set
out in the International  Convention on Civil Liability for Oil Pollution Damage
of 1969. Under this convention and depending on whether the country in which the
damage results is a party to the 1992 Protocol to the  International  Convention
on Civil  Liability for Oil Pollution  Damage,  a vessel's  registered  owner is
strictly  liable for  pollution  damage  caused in the  territorial  waters of a
contracting  state by discharge of persistent oil,  subject to certain  complete
defenses.  Under an amendment to the Protocol that became  effective on November
1, 2003, for vessels of 5,000 to 140,000 gross tons (a unit of  measurement  for
the total  enclosed  spaces  within a  vessel),  liability  will be  limited  to
approximately  $6.5 million plus $907 for each additional  gross ton over 5,000.
For  vessels  of  over  140,000  gross  tons,   liability  will  be  limited  to
approximately $122.5 million. The current maximum amount under the 1992 protocol
is approximately $86.98 million. As the convention calculates liability in terms
of a basket of currencies, these figures are based on currency exchange rates on
April  14,  2004.  The  right  to  limit   liability  is  forfeited   under  the
International  Convention on Civil Liability for Oil Pollution  Damage where the
spill is caused by the owner's  actual fault and under the 1992  Protocol  where
the spill is caused by the  owner's  intentional  or reckless  conduct.  Vessels
trading to states that are parties to these conventions must provide evidence of
insurance  covering  the  liability  of the owner.  In  jurisdictions  where the
International  Convention on Civil  Liability  for Oil Pollution  Damage has not
been adopted, various legislative schemes or common law govern, and liability is
imposed either on the basis of fault or in a manner similar to that  convention.
We  believe  that our P&I  insurance  will  cover the  liability  under the plan
adopted by the IMO.

U.S.  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 U.S. Oil Pollution Act of 1990, or OPA, and
the  Comprehensive  Environmental  Response,  Compensation and Liability Act, 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  U.S.  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 resource damages and related assessment costs;

          o    real and personal property damages;

          o    net  loss  of  taxes,  royalties,   rents,  profits  or  earnings
               capacity;

          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  vessels,  contains a similar  liability  regime and  provides  for  cleanup,
removal and natural resource  damages.  Liability under CERCLA is limited to the
greater of $300 per gross ton or $5 million.

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

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

     Frontline  Management  has  insured  each  of our  tankers  with  pollution
liability  insurance  in the  maximum  commercially  available  amount  of  $1.0
billion.  However,  a  catastrophic  spill could exceed the  insurance  coverage
available,  in which  event  there  could be a  material  adverse  effect on our
business,  on the  Charterer's  business,  which  could  impair the  Charterer's
ability to make payments to us under our charters, and on Frontline Management's
business,  which  could  impair  Frontline  Management's  ability  to manage our
vessels.

     Under OPA, oil tankers  without  double hulls will not be permitted to come
to U.S. ports or trade in U.S.  waters by 2015.  Based on the current  phase-out
requirement,  our 15 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
U.S.  waters until 2015 if their  operations  are limited to  discharging  their
cargoes at the LOOP or off-loading by 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 must file
vessel response plans with the U.S. Coast Guard,  and their tankers are required
to operate in  compliance  with their U.S.  Coast Guard  approved  plans.  These
response plans must, among other things:

          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 U.S. Coast Guard.  In addition,  the U.S. Coast
Guard has announced it intends to propose similar regulations  requiring certain
vessels to prepare  response  plans for the  release  of  hazardous  substances.
Frontline  Management is  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 U.S. federal law.

European Union Tanker Restrictions

     In July 2003, in response to the m.t.  Prestige oil spill in November 2002,
the European  Union adopted  legislation  that prohibits all single hull tankers
from entering into its ports or offshore  terminals by 2010.  The European Union
has also  banned all  single  hull  tankers  carrying  heavy  grades of oil from
entering or leaving its ports or offshore  terminals or anchoring in areas under
its jurisdiction. Commencing in 2005, certain single hull tankers above 15 years
of age will also be restricted from entering or leaving  European Union ports or
offshore terminals and anchoring in areas under European Union jurisdiction. The
European Union is also  considering  legislation  that would: (1) ban manifestly
sub-standard vessels (defined as those over 15 years old that have been detained
by port  authorities at least twice in a six month period) from European  waters
and create an obligation of port states to inspect vessels posing a high risk to
maritime  safety or the marine  environment;  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 lead
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.  For  example,  Italy
announced  a ban of single  hull crude oil  tankers  over  5,000 dwt.  from most
Italian ports,  effective April 2001. Spain has announced a similar prohibition.
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.

     There are 18 tankers in our total  fleet that are not double  hull and that
will begin to be phased out  beginning in 2010 under  regulations  imposed under
OPA, the IMO and the European Union.

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 U.S. Coast Guard
issued regulations requiring the implementation of certain security requirements
aboard  vessels  operating in waters subject to the  jurisdiction  of the United
States.  Similarly, in December 2002, amendments to 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 is scheduled to go
into effect in July 2004 and will impose various detailed  security  obligations
on  vessels  and port  authorities,  most of which  are  contained  in the newly
created  International Ship and Port Facilities  Security (ISPS) Code. 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 U.S.  Coast Guard  regulations,  intended  to align with  international
maritime security standards,  exempt non-U.S.  tankers from MTSA vessel security
measures  provided  such  vessels  have  on  board,  by July  1,  2004,  a valid
International  Ship  Security  Certificate  (ISSC) that  attests to the vessel's
compliance  with  SOLAS  security  requirements  and the  ISPS  Code.  Frontline
Management will implement the various security  measures  addressed by the MTSA,
SOLAS and the ISPS Code and ensure that our tankers attain  compliance  with all
applicable  security  requirements within the prescribed time periods. We do not
believe these additional  requirements will have a material  financial impact on
our operations.

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.
<PAGE>

                                   MANAGEMENT

Directors and Executive Officers

     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 Tr0im                      41               Chairman   of  the   Board,
                                                     Chief  Executive   Officer,
                                                     President  and  Director of
                                                     the Company
Tom E. Jebsen                       46               Chief Financial Officer and
                                                     Vice   President   of   the
                                                     Company
Kate Blankenship                    39               Chief  Accounting  Officer,
                                                     Company    Secretary    and
                                                     Director of the Company
Paul Leand                          37               Director of the Company
Oscar Spieler                       42               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.  We are also  required,  among other things,  to maintain our
corporate  separateness  from our  affiliates,  to maintain  books,  records and
accounts separate from any other entities,  to observe all corporate formalities
and not to co-mingle our assets with any other entity.

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

     Tor Olav Tr0im is the  Chairman  of the  Board,  Chief  Executive  Officer,
President  and a  Director  of the  Company.  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. Mr. Tr0m also serves as a consultant to
Seatankers  Management  Co.  Ltd.  and since May 2000,  has been a director  and
Vice-Chairman  of  Knightsbridge  Tankers  Limited  ("Knightsbridge").  He  is a
director of Aktiv  Inkasso ASA and Northern Oil ASA, both  Norwegian  Oslo Stock
Exchange listed  companies.  Prior to his service with  Frontline,  from January
1992,  Mr.  Tr0im  served  as  Managing  Director  and a member  of the Board of
Directors of DNO AS, a Norwegian oil company. Mr. Tr0im has served as a director
of Golar LNG Limited since May 2001.

     Tom E.  Jebsen is the Chief  Financial  Officer and Vice  President  of the
Company.  Mr. Jebsen has served as Chief  Financial  Officer of Frontline  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.

     Kate  Blankenship  is Chief  Accounting  Officer,  Company  Secretary and a
Director of the Company. 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 was a Manager with KPMG
Peat  Marwick  in  Bermuda.  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.

     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 American
Marine Advisors,  Inc., 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.

     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.

                            COMPENSATION INFORMATION

     With the exception of Mr. Leand, the Company does not currently  compensate
its directors and officers for their services to the Company. 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 the Company.  The
Company does not currently have any board committees.

            SECURITY OWNERSHIP OF CERTAIN SHAREHOLDERS AND MANAGEMENT

     As of  August,  2004,  a total of  75,525,837  of our  common  shares  were
outstanding, of which 73 percent was held by Frontline.

     The beneficial interests of our Directors and officers in the common shares
of the Company as of August 31, 2004, were as follows:

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

Tor Olav Troim                            25,873                  *
Paul Leand                                     -                  -
Kate Blankenship                           2,500                  *
Tom E. Jebsen                              9,889                  *
Oscar Spieler                              4,500                  *

*    Less than one per cent

The  Company  does  not  have a share  option  plan  and  none of the  Company's
Directors and officers hold any options to acquire common shares of the Company.

     The following  table  presents  certain  information  regarding the current
ownership  of the common  shares with respect to (i) each person who is known by
the Company to own more than five per cent of the Company's  outstanding  common
shares; and (ii) all directors and officers as a group as of August 31, 2004.

                                                    Ordinary Shares
Owner                                                        Amount     Per cent

Frontline Ltd                                            55,444,370          73%
Hemen Holding Ltd                                        12,277,669        16.3%
All Directors and Officers as a group (five persons)         61,791            *

*Less than one percent


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

                           RELATED PARTY TRANSACTIONS

     We were formed as a wholly  owned  subsidiary  of Frontline in October 2003
and  commenced  operations  in January  2004.  We acquired  the  majority of our
assets,  which  consist  primarily  of our fleet of 46 vessels  and an option to
acquire one additional  vessel,  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  do  not  have  a  corporate  policy  regarding   related  party
transactions,  nor are there any  provisions in our Memorandum of Association or
bye-laws regarding related party transactions. Our Bye-laws, as permitted by the
Bermuda Companies Act of 1981, provides that we, or one of our subsidiaries, may
enter into a contract  with on or our  directors  or  officers,  or an entity in
which a director  or an officer  has a material  interest,  if the  director  or
officer discloses its interest to our Board of Directors.

Frontline  Ltd.-Fleet  Purchase  Agreement.  We acquired  our 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 for an aggregate  purchase price
of $950 million. 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 from Frontline.  The fleet purchase  agreement
provides  that the  charters  and the  management  agreements  were  each  given
economic effect as of January 1, 2004.

Frontline Shipping  Limited-Charters.  We have chartered our fleet of vessels to
the Charterer  under long term time charters,  which extend for periods  ranging
from  approximately  seven to 23 years.  We expect that the  Charterer  will, 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  Charterer  has the right to terminate a charter for a non
double hull vessel after 2010.  The daily charter rate that the  Charterer  will
pay to us is not  dependant  on the  revenue  that  the  Charter  receives  from
chartering our vessels to third  parties.  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.

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

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

          o    profit  sharing  payments  by the  Charterer  to us when  charter
               revenues for our fleet exceed a weighted  average rate of $25,575
               per day for  each  VLCC  and  $21,100  per day for  each  Suezmax
               tanker, and

          o    the deferral of charter  payments to us by the  Charterer  during
               any period when cash and cash  equivalents  held by the Charterer
               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  Charterer's  obligations  to us under  the  charters  and the  charter
ancillary  agreement  are  secured by a lien over its assets and a pledge of the
equity  interests in the  Charterer.  In addition,  Frontline has guaranteed the
Charterer's  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 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 Charterer's performance of its obligations under the charters
               other than the payment of charter hire,

          o    the Charterer's  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 Charterer and Frontline  Management that are guaranteed under
the performance guarantee have been performed.

                              SELLING SHAREHOLDERS

     Based solely upon  information  furnished to us, the  following  table sets
forth  information  about  the  selling   shareholders.   Although  the  selling
shareholders may offer for sale from time to time all or a portion of the shares
pursuant to this prospectus,  or an amendment or supplement thereto, the tabular
information  below assumes that all of the shares registered will be offered and
sold  by  the  selling  shareholders.  In  addition,  the  selling  shareholders
identified in the table may have sold,  transferred or otherwise disposed of all
or a portion  of their  shares  since the date on which  they  provided  us with
information  regarding their shares in transactions exempt from the registration
requirements  of  the  Securities  Act.   Information   concerning  the  selling
shareholders may change from time to time and, to the extent  required,  will be
set forth in supplements or amendments to this prospectus.

<TABLE>
<CAPTION>
                                                               Shares owned prior to          Shares owned
Selling Shareholder            Shares offered for Sale         offering                       after offering
-------------------------------------------------------------  -----------------------------  --------------
<S>                            <C>                             <C>                             <C>
Passport Master Fund, LP       899,360 Common Shares;          899,360 Common Shares;         -0-
c/o Passport Management, LLC   representing 1.190% of all      representing 1.190% of all
402 Jackson St.                issued and outstanding common   issued and outstanding common
San Francisco, CA 94111        shares                          shares

Passport Master Fund II, LP    700,640 Common Shares;          700,640 Common Shares;         -0-
c/o Passport Management, LLC   representing 0.927% of all      representing 0.927% of all
402 Jackson St.                issued and outstanding common   issued and outstanding common
San Francisco, CA 94111        shares                          shares
</TABLE>

                          DESCRIPTION OF CAPITAL STOCK

     Under  our  Amended  Memorandum  of  Association,  our  authorized  capital
consists of 125,000,000 common shares having a par value of $1.00 each, of which
75,525,837 are issued and outstanding.

     We were  formed in  October  of 2003 with an  authorized  share  capital of
$12,000,  divided  into shares of $1.00  each.  In  connection  with our partial
spin-off from Frontline in June 2004, our authorized share capital was increased
to 125,000,000  shares,  each having a par value of $1.00,  of which  73,925,837
were issued and  outstanding  immediately  after the partial  spin-off.  In July
2004,  we issued  1,600,000  common shares to the selling  shareholders  for the
price of $15.75 per share.  Immediately following our issues of these shares our
total outstanding shares were 75,525,837.

     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.

     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  authorituy 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 securityt fgor 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.

                           DESCRIPTION OF INDEBTEDNESS

Credit Facility

     We have entered  into a $1.058  billion  senior term loan secured  facility
with a syndicate of lenders led by Citigroup  Global Markets  Limited and Nordea
Bank Norge ASA.  The  facility is for a term of term of six years.  The proceeds
from the facility  were used in part to fund the  acquisition  of our fleet from
Frontline and to refinance existing debt on all of our vessels.  Our obligations
under the loan facility are secured by all of our assets, including our vessels,
the equity  interests of our vessel owning  subsidiaries and our interest in the
Charterer's  assets.  In addition,  each of our vessel owning  subsidiaries  has
guaranteed our performance under the loans.

     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.  As required under the terms
of the facility,  we have entered into an interest rate swap 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  principal  amortization  schedule  in respect of the loan  facility is
follows:

Year                     Amount(dollars in millions)
----                     ---------------------------

2004                                  $93.7
2005                                   93.7
2006                                   93.7
2007                                   93.7
2008                                   93.7
2009                                   89.8
At maturity in 2010                   499.7

     The loan facility subjects us to 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.

8.5% Senior Notes due 2013

     We issued $580 million in principal  amount of senior  notes,  due 2013, on
December 18, 2003 in a private placement  pursuant to Rule 144A and Regulation S
under the Securities Act of 1933, as amended. We commenced an exchange offer for
the notes on May 25, 2004  pursuant to which we offered to exchange  these notes
for identical notes, or exchange notes,  that are registered under the 1933 Act.
The  expiration  date of the  exchange  offer was July 26,  2004,  and as of the
expiration date 100% of the outstanding notes had been tendered for exchange. We
have  repurchased $25 million face value of the notes,  which were  subsequently
cancelled.  The exchange notes are  registered  under the Securities Act of 1933
pursuant  to a  registration  statement  filed on Form F-4  filed  with the U.S.
Securities and Exchange Commission.

     The notes are issued  under an  Indenture  dated as of December  18,  2003,
among us, our subsidiaries and Wilmington Trust Company,  as trustee.  The notes
are our general unsecured, senior obligations. They will be limited initially to
an  aggregate  principal  amount of $580 million and will mature on December 15,
2013.  The notes rank  equally  in right of payment to any of our future  senior
Indebtedness,  but will be  effectively  subordinated  to all of our present and
future  secured  Indebtedness,  to the  extent  of the  value of the  collateral
securing such Indebtedness. The notes are unconditionally guaranteed on a senior
unsecured  basis  by  each  of our  subsidiaries,  but  the  guarantees  will be
effectively  subordinated to all present and future secured  indebtedness of our
subsidiaries,  to the  extent  of the  value  of the  collateral  securing  such
indebtedness.

     Interest on the notes will accrue at the rate of 8.50% per annum  beginning
on the date of issuance or the most recent  interest  payment date.  Interest on
the notes  will be  payable  in cash  semi-annually  in  arrears  on June 15 and
December 15, and commenced on June 15, 2004.

                              PLAN OF DISTRIBUTION

     We are registering for sale by the selling  shareholders  from time to time
1,600,000 of our common  shares.  The selling  shareholders  may offer and sell,
from time to time, some or all of the common shares covered by this  prospectus.
We have  registered the common shares  covered by this  prospectus for offer and
sale by the selling  shareholders so that those shares may be freely sold to the
public by them.  Registration  of the common shares  covered by this  prospectus
does not mean, however, that those shares necessarily will be offered or sold.

     The  term  "selling  shareholder"  includes  donees,  pledgees,  assignees,
transferees or other  successors-in-interest  selling shares  received after the
date  of  this  prospectus  from  a  selling  shareholder  as  a  gift,  pledge,
assignment, partnership distribution or other transfer. The selling shareholders
will act  independently  of us in making  decisions  with respect to the timing,
manner and size of each sale.  The selling  shareholders  may sell their  common
shares  covered  by  this   prospectus  from  time  to  time,  in  one  or  more
transactions, at market prices prevailing at the time of sale, at prices related
to market  prices,  at a fixed  price or prices  subject to  change,  at varying
prices  determined at the time of sale or at negotiated  prices, by a variety of
methods including the following:

     o    on the New  York  Stock  Exchange  or any  other  national  securities
          exchange  or  U.S.   inter-dealer  system  of  a  registered  national
          securities  association  on which our  common  shares may be listed or
          quoted at the time of sale;

     o    in the over-the-counter market;

     o    in privately negotiated transactions;

     o    through broker-dealers, who may act as agents or principals;

     o    through sales "at the market" to or through a market-maker;

     o    in a block trade in which a broker-dealer will attempt to sell a block
          of shares  of common  stock as agent  but may  position  and  resell a
          portion of the block as principal to facilitate the transaction;

     o    through one or more  underwriters on a firm commitment or best-efforts
          basis; - directly to one or more purchasers;

     o    through agents;

     o    in options transactions;

     o    over the internet; or

     o    in any combination of the above.

     In effecting sales,  brokers or dealers engaged by the selling shareholders
may  arrange  for  other  brokers  or  dealers  to  participate.   Broker-dealer
transactions may include:

     o    purchases of the common  shares by a  broker-dealer  as principal  and
          resales  of the common  shares by the  broker-dealer  for its  account
          pursuant to this prospectus;

     o    ordinary brokerage transactions; or

     o    transactions in which the broker-dealer solicits purchasers.

     In addition,  the selling  shareholders may sell any shares covered by this
prospectus in private  transactions  or under Rule 144 under the  Securities Act
rather than pursuant to this prospectus.

     In  connection  with  the  sale  of  shares  covered  by  this  prospectus,
broker-dealers  may receive  commissions or other  compensation from the selling
stockholder in the form of commissions, discounts or concessions. Broker-dealers
may also receive compensation from purchasers of the shares for whom they act as
agents  or to whom  they  sell  as  principals  or  both.  Compensation  as to a
particular broker-dealer may be in excess of customary commissions or in amounts
to be negotiated. In connection with any underwritten offering, underwriters may
receive  compensation in the form of discounts,  concessions or commissions from
the selling  shareholders  or from purchasers of the shares for whom they act as
agents. Underwriters may sell the shares to or through dealers, and such dealers
may receive  compensation  in the form of discounts,  concessions or commissions
from the underwriters  and/or  commissions from the purchasers for whom they may
act as agents. The selling shareholders and any underwriters,  broker-dealers or
agents that  participate in the  distribution of the common shares may be deemed
to be "underwriters" within the meaning of the Securities Act, and any profit on
the sale of the shares by them and any  discounts,  commissions  or  concessions
received by any of those underwriters, broker-dealers or agents may be deemed to
be underwriting discounts and commissions under the Securities Act.

     In  connection  with  the  distribution  of  the  shares  covered  by  this
prospectus  or  otherwise,  the  selling  shareholders  may enter  into  hedging
transactions with broker-dealers or other financial institutions.  In connection
with such  transactions,  broker-dealers  or other  financial  institutions  may
engage in short sales of our common stock in the course of hedging the positions
they assume with the selling  shareholders.  The selling  shareholders  may also
sell shares of our common  stock  short and  deliver the shares  offered by this
prospectus to close out its short positions.  The selling  shareholders may also
enter into option or other  transactions with  broker-dealers or other financial
institutions which require the delivery to such broker-dealer or other financial
institution   of  shares   offered  by  this   prospectus,   which  shares  such
broker-dealer  or  other  financial  institution  may  resell  pursuant  to this
prospectus, as supplemented or amended to reflect such transaction.  The selling
shareholders  also may from time to time pledge their common shares  pursuant to
the margin  provisions of their customer  agreements  with their  brokers.  Upon
default by a selling  shareholder,  the  broker may offer and sell such  pledged
common shares from time to time pursuant to this prospectus,  as supplemented or
amended to reflect such transaction.

     At any  time a  particular  offer  of the  common  shares  covered  by this
prospectus is made, a revised prospectus or prospectus supplement,  if required,
will be distributed  which will set forth the aggregate amount of common covered
by this  prospectus  being offered and the terms of the offering,  including the
name or names of any underwriters,  dealers,  brokers or agents,  any discounts,
commissions,  concessions  and other items  constituting  compensation  from the
selling  shareholders and any discounts,  commissions or concessions  allowed or
reallowed or paid to dealers. Such prospectus  supplement,  and, if necessary, a
post-effective  amendment to the registration statement of which this prospectus
is a part,  will be filed with the SEC to reflect the  disclosure  of additional
information  with respect to the  distribution  of the common shares  covered by
this prospectus.  In order to comply with the securities laws of certain states,
if  applicable,  the shares sold under this  prospectus may only be sold through
registered or licensed  broker-dealers.  In addition,  in some states the shares
may not be sold unless they have been  registered  or qualified  for sale in the
applicable state or an exemption from registration or qualification requirements
is available and is complied  with.  We have  informed the selling  shareholders
that the  anti-manipulative  provisions of  Regulation M  promulgated  under the
Exchange  Act may  apply  to their  sales of  shares  in the  market  and to the
activities of the selling  shareholders  and their  respective  affiliates.  The
selling  shareholders  have  advised  us that  they  have not  entered  into any
agreements,   understandings   or   arrangements   with  any   underwriters   or
broker-dealers  regarding the sale of the shares, nor is there an underwriter or
coordinating broker acting in connection with the proposed sale of the shares by
the selling shareholders.

     We have agreed to pay all expenses incident to the offering and sale of the
shares covered by this prospectus, other than commissions, discounts and fees of
underwriters, broker-dealers or agents, and have agreed to indemnify the selling
shareholders,   their  controlling   persons  and  their  respective   officers,
directors,  partners,  employees,  representatives  and agents  against  certain
losses, claims, damages,  actions,  expenses and other liabilities arising under
the securities laws in connection with this offering.  The selling  shareholders
have agreed, severally, to indemnify us, our officers and directors who sign the
registration statement and each of our controlling persons,  against any losses,
claims,  damages,  actions,  expenses and other  liabilities,  arising under the
securities  laws in  connection  with this  offering  with  respect  to  written
information  furnished to us by the selling  shareholders  for  inclusion in the
registration  statement of which this prospectus is a part (and up to the amount
of the net proceeds received by the selling shareholder from sales of the shares
giving rise to such obligations).

                                  LEGAL MATTERS

     Certain  legal  matters in  connection  with the sale of the common  shares
offered hereby are being passed upon for the Company by Seward & Kissel LLP, New
York,  New York,  as to matters of United  States and New York law and by Mello,
Jones & Martin as to matters of Bermuda law.

                                     EXPERTS

     The predecessor  combined carve-out financial statements as of December 31,
2003  and for the  year  then  ended,  and the  predecessor  combined  carve-out
financial  statements  for the year ended  December  31,  2001  included in this
prospectus   have   been   so   included   in   reliance   on  the   report   of
PricewaterhouseCoopers   DA  Oslo,  Norway,  an  Independent  Registered  Public
Accountant  Firm, given on the authority of said firm as experts in auditing and
accounting. Effective as of July 1, 2004,  PricewaterhouseCoopers DA was renamed
PricewaterhouseCoopers AS following a legal restructuring.

     The predecessor  combined carve-out financial  statements as of and for the
year ended December 31, 2002 included in this  prospectus  have been so included
in  reliance  on the  report of  PricewaterhouseCoopers  Hamilton,  Bermuda,  an
Independent  Registered  Public  Accountant Firm, given on the authority of said
firm as experts in auditing and accounting.

     The stand alone financial statements of Ship Finance  International Limited
as of December 31, 2003 and for the period from October 10, 2003  (Inception) to
December 31, 2003 included in this  prospectus have been so included in reliance
on  the  report  of  PricewaterhouseCoopers  DA  Oslo,  Norway,  an  Independent
Registered  Public  Accountant  Firm,  given on the  authority  of said  firm as
experts in auditing and accounting.

     The section in this  prospectus  entitled  "Industry"  has been reviewed by
P.F. Bass0e AS & Co., which has confirmed to us that it accurately describes the
international tanker market,  subject to the availability and reliability of the
data  supporting the  statistical  and graphical  information  presented in this
prospectus,  as  indicated  in the consent of P.F.  Bass0e AS & Co.  filed as an
exhibit to the  registration  statement on Form F-1 under the  Securities Act of
which this prospectus is a part.

                       WHERE YOU CAN FIND MORE INFORMATION

     We have filed with the SEC a registration  statement including exhibits and
schedules  thereto on Form F-1 under the  Securities Act of 1933 with respect to
the common shares offered  hereby.  This  prospectus,  which forms a part of the
registration  statement,  does  not  contain  all  of  the  information  in  the
registration statement,  as permitted by SEC rules and regulations.  For further
information  with respect to the Company and the commons shares offered  hereby,
reference is made to the registration  statement. In addition, we are subject to
the reporting  requirements  of Sections 13 or 15(d) of the Securities  Exchange
Act of 1934 and file such  reports and other  information  with the SEC. You can
read and copy any materials we file with the SEC at its Public Reference Room at
450 Fifth Street, NW,  Washington,  D.C. 20549. You can obtain information about
the  operation  of the  SEC's  Public  Reference  Room  by  calling  the  SEC at
1-800-SEC-0330.  The SEC also maintains a Web site that contains  information we
file   electronically,   which   you   can   access   over   the   internet   at
http://www.sec.gov.

     You may request a copy of our filings at no cost, by writing or telephoning
us at the following address:

                       Ship Finance International Limited
                               Par-la-Ville Place,
                              14 Par-la-Ville Road
                            Hamilton, HM 08, Bermuda.
                                 (441) 295-9500

You should rely only on the information  contained in this  prospectus.  We have
not  authorized any other person to provide you with any other  information.  If
anyone provides you with different or inconsistent  information,  you should not
rely on it.

You should not assume  that the  information  contained  in this  prospectus  is
accurate  as of any  date  other  than  the  date  on the  front  cover  of this
prospectus.

<PAGE>

                       SHIP FINANCE INTERNATIONAL LIMITED
          INDEX TO PREDECESSOR COMBINED CARVE-OUT FINANCIAL STATEMENTS


Report of Independent Registered Public Accounting Firm                     F-1

Report of Independent Registered Public Accounting Firm                     F-2

Report of Independent Registered Public Accounting Firm                     F-3

Audited Predecessor Combined Carve-out Statements of
Operations for the years ended December 31, 2003, 2002 and 2001             F-4

Audited Predecessor Combined Carve-out Balance
Sheets as of December 31, 2003 and 2002                                     F-5

Audited Predecessor Combined Carve-out Statements of Cash
Flows for the years ended December 31, 2003, 2002 and 2001                  F-6

Audited Predecessor Combined Carve-out Statements of Changes
in Stockholders' Equity for the years ended
December 31, 2003, 2002 and 2001                                            F-7

Notes to Predecessor Combined Carve-out Financial Statements                F-8

<PAGE>

                                                                            F-4

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Stockholder 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  stockholder's  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
22 March 2004

<PAGE>

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Stockholder 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  stockholder's  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, 2002
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
Hamilton, Bermuda
28 November 2003

<PAGE>

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Stockholder of Ship Finance International Limited.

In our opinion,  the accompanying  predecessor  combined carve-out statements of
operations,  cash flows and changes in stockholder's  equity present fairly,  in
all material  respects,  the results of  operations  and their cash flows of the
predecessor  to Ship Finance  International  Limited and its  subsidiaries  (the
Company) for the year ended  December  31, 2001 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, 2001 the
Company  changed  its method of  accounting  for  drydocking  costs and  adopted
Statement of Financial Accounting Standard No. 133.

PricewaterhouseCoopers DA
Oslo, Norway
28 November 2003

<PAGE>

                       SHIP FINANCE INTERNATIONAL LIMITED
              Audited Predecessor Combined Carve-out Statements of
                         Operations for the years ended
                        December 31, 2003, 2002 and 2001
                               (in thousands of $)

                                                        Year ended December 31,
                                                        -----------------------
                                                2003       2002        2001
                                                ----       ----        ----
Operating revenues
   Time charter revenues                        40,759     10,873        5,804
   Bareboat charter revenues                    25,986     30,121       27,067
   Voyage charter revenues                     628,323    324,180      453,784
                                             ----------------------------------
Total operating revenues                       695,068    365,174      486,655
Operating expenses
   Voyage expenses and commission              148,533     93,996       75,199
   Ship operating expenses                      81,989     81,369       85,105
   Depreciation and amortization               106,015     96,773       88,603
   Administrative expenses                       9,715      6,945        7,030
                                             ----------------------------------
Total operating expenses                       346,252    279,083      255,937
                                             ----------------------------------
Net operating income                           348,816     86,091      230,718
Other income (expenses)
   Interest income                               5,866      8,511        4,346
   Interest expense                            (35,117)   (42,126)     (58,892)
   Share of results of associated companies     22,098    (10,125)      14,259
   Foreign currency exchange gain (loss)       (10,442)    (5,644)       6,246
   Other financial items, net                    3,591     (4,541)      (9,139)
                                             ----------------------------------
   Net other income (expenses)                 (14,004)   (53,925)     (43,180)
                                             ----------------------------------
Net income before cumulative effect of
    change in accounting principle             334,812     32,166      187,538
                                             ----------------------------------
Cumulative effect of change in
    accounting principle                             -    (14,142)      24,472
                                             ----------------------------------
Net income (loss)                              334,812     18,024      212,010
                                             ==================================

See accompanying  Notes that are an integral part of these Predecessor  Combined
Carve-out Financial Statements

<PAGE>

                       SHIP FINANCE INTERNATIONAL LIMITED
           Audited Predecessor Combined Carve-out Balance Sheets as of
                           December 31, 2003 and 2002
                               (in thousands of $)


                                             December 31,      December 31,
                                                 2003             2002
                                             ------------------------------
ASSETS
Current Assets
   Cash and cash equivalents                      26,519            20,634
   Trade accounts receivable                      23,896            22,993
   Other receivables                               7,251             6,967
   Inventories                                    16,248            19,949
   Voyages in progress                            34,916            30,648
   Prepaid expenses and accrued income             2,234             1,699
                                             ------------------------------
   Total current assets                          111,064           102,890
                                             ------------------------------
Newbuildings and vessel purchase options           8,370             8,370
Vessels and equipment, net                     1,863,504         1,904,146
Investment in associated companies               160,082            93,673
Deferred charges                                   4,304             4,338
Other long term assets                             9,024            10,190

   Total assets                                2,156,348         2,123,607
                                             =============================


LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
   Short term debt and current
     portion of long-term debt                   141,522           131,293
   Trade accounts payable                          4,664             5,215
   Accrued expenses                               18,729            26,621
   Mark to market valuation of derivatives         9,217            16,066
   Other current liabilities                      10,936             7,237
   Amount due to parent company                  299,166           476,016
                                             ------------------------------
   Total current liabilities                     484,234           662,448
Long-term liabilities
   Long term debt                                850,088           975,554
                                             ------------------------------
   Total liabilities                           1,334,322         1,638,002
Commitments and contingencies
Stockholders' equity
   Invested equity                               822,026           485,605
                                             ------------------------------
   Total stockholders' equity                    822,026           485,605
                                             ------------------------------
   Total liabilities and
    stockholders' equity                       2,156,348         2,123,607
                                             ==============================


See accompanying  Notes that are an integral part of these Predecessor  Combined
Carve-out Financial Statements
<PAGE>

<TABLE>
                           SHIP FINANCE INTERNATIONAL LIMITED
                    Audited Predecessor Combined Carve-out Statements
                           of Cash Flows for the years ended
                            December 31, 2003, 2002 and 2001
                                   (in thousands of $)
<CAPTION>
                                                           Year ended December 31,
                                                           -----------------------
                                                         2003        2002        2001
                                                       --------    --------    --------
<S>                                                    <C>         <C>         <C>
Operating activities
Net income (loss)                                       334,812      18,024     212,010
Adjustments to reconcile net income (loss)
to net cash provided by
operating activities:
Depreciation and amortization                           106,015      96,773      88,603
Amortization of deferred charges                          1,019         814         775
Share of results of associated companies                (22,098)     10,125     (14,259)
Interest income, capitalized                             (4,489)     (7,077)       (638)
Unrealized foreign exchange (gain) loss                  10,716       5,334      (6,706)
Change in accounting principle                               --      14,142     (24,472)
Adjustment of derivatives to market value                (6,850)      2,511      10,996
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                                  (343)      6,517      23,292
Other receivables                                          (129)     (3,537)      4,817
Inventories                                               4,540     (10,718)       (158)
Voyages in progress                                      (3,061)    (23,990)     14,410
Prepaid expenses and accrued income                        (285)        (72)        244
Trade accounts payable                                     (539)      1,115       1,351
Accrued expenses                                         (9,092)      3,899      (2,226)
Other current liabilities                                 3,698         959        (872)
                                                       --------    --------    --------
Net cash provided by operating activities               415,523     115,658     307,167
                                                       --------    --------    --------
Investing activities
Additions to newbuildings, vessels and equipment             --    (249,291)   (210,036)
Investments in associated companies                     (70,045)     (7,490)    (65,100)
Proceeds from sales of investments in associated
companies                                                17,245          --          --
Net maturity (placement) of loans receivable              1,168      (1,085)      3,286
Repayment of other long term liabilities                     --      (3,913)         --
                                                       --------    --------    --------
Net cash provided by (used in) investing activities     (51,632)   (261,779)   (271,850)
                                                       --------    --------    --------
Financing activities
Amount due to parent company                           (178,785)     41,424     (59,454)
Proceeds from long term debt                                 --     228,686     164,600
Repayments of long term debt                           (178,236)   (126,713)   (129,208)
Debt fees paid                                             (985)     (2,683)       (487)
                                                       --------    --------    --------
Net cash (used in) provided by financing activities    (358,006)    140,714     (24,549)
                                                       --------    --------    --------
Net increase (decrease) in cash and cash equivalents      5,885      (5,407)     10,768
Cash and cash equivalents at beginning of period         20,634      26,041      15,273
Cash and cash equivalents at end of period               26,519      20,634      26,041
                                                       ========    ========    ========

Supplemental disclosure of cash flow information:
Interest paid, net of capitalized interest               31,543      43,036      54,963
                                                       ========    ========    ========
</TABLE>

See accompanying  Notes that are an integral part of these Predecessor  Combined
Carve-out Financial Statements
<PAGE>

                       SHIP FINANCE INTERNATIONAL LIMITED
              Audited Predecessor Combined Carve-out Statements of
                         Changes in Stockholders' Equity
              for the years ended December 31, 2003, 2002 and 2001

                               (in thousands of $)

                                                           Invested equity
                                                           ---------------

Balance at December 31, 2000                                     259,632
Net income                                                       212,010
Transition adjustment on adoption of SFAS 133                     (2,844)
Change in fair values of derivative instruments
  accounted for as cash flow hedges                               (2,056)

Other comprehensive income (loss)                                 (4,900)

Comprehensive income                                             207,110

Balance at December 31, 2001                                     466,742
Net income                                                        18,024
Release of accumulated other comprehensive
  income to net income                                               839

Other comprehensive income (loss)                                    839

Comprehensive income                                              18,863

Balance at December 31, 2002                                     485,605

Net income                                                       334,812
Release of accumulated other
  comprehensive income to net income                               1,609

Other comprehensive income (loss)                                  1,609

Comprehensive income                                             336,421

Balance at December 31, 2003                                     822,026

See accompanying  Notes that are an integral part of these Predecessor  Combined
Carve-out Financial Statements

<PAGE>

                       SHIP FINANCE INTERNATIONAL LIMITED
        Notes to the Predecessor Combined Carve-out Financial Statements

1.   GENERAL

     Ship Finance  International  Limited (the "Company" or "Ship  Finance") was
incorporated in Bermuda on October 10, 2003 for the purpose of acquiring certain
of the shipping  assets of its parent  company,  Frontline  Ltd.  ("Frontline").
Frontline is a publicly listed Bermuda based shipping company engaged  primarily
in the ownership and operation of oil tankers,  including  oil/bulk/ore  ("OBO")
carriers.  The Company is a wholly  owned  subsidiary  of  Frontline.  Frontline
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.  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.

     These  predecessor   combined  carve-out  financial  statements  have  been
prepared to reflect the combination of certain of Frontline's  wholly owned VLCC
and Suezmax  owning  subsidiaries,  interests in joint  ventures plus a purchase
option to acquire a further VLCC.

     These  predecessor   combined  carve-out  financial  statements  have  been
prepared in contemplation  of a proposed  transaction to be entered into between
the Company and Frontline.  Pursuant to a fleet purchase  agreement  executed in
December 2003,  effective  January 1, 2004, the Company  acquired from Frontline
certain of  Frontline's  wholly  owned  VLCC and  Suezmax  owning  subsidiaries,
including  certain  subsidiaries  acquired or expected to be acquired  through a
reorganization  of interests in certain joint ventures plus a purchase option to
acquire a further VLCC (together the "Vessel Interests").

2.   ACCOUNTING POLICIES

Basis of accounting

     For the years ended  December  31,  2003,  2002 and 2001,  the  predecessor
combined carve-out financial statements presented herein have been carved out of
the consolidated  financial statements of Frontline.  These predecessor combined
carve-out  financial  statements  include the combined  assets,  liabilities and
results of operations  and cash flows of the  corporations  listed in Note 4 and
the combined  interests in joint ventures  listed in Note 11. These  predecessor
combined carve-out  financial  statements for the years ended December 31, 2003,
2002 and 2001 therefore reflect the following:

     o    the historical  book values of the  corporations  listed in Note 4 and
          the  interests  in  associated  companies  listed in Note 11,  held by
          Frontline on January 1, 2001; and

     o    the  acquisitions  undertaken  by  Frontline  in the three year period
          ended  December  31,  2003 as  described  in Note 21.  These  acquired
          corporations  have  been  accounted  for at fair  value at the date of
          acquisition.

     The predecessor  combined  carve-out  financial  statements are prepared in
accordance with accounting  principles  generally accepted in the United States.
The predecessor  combined carve-out financial  statements include the assets and
liabilities of the Company's planned  subsidiaries.  Investments in companies in
which the  Company  directly  or  indirectly  holds more than 50 per cent of the
voting  control  are  combined,  unless the  Company  is unable to  control  the
investee.  Subsidiaries  acquired  have  been  combined  with  effect  from  the
acquisition date.

     Investments in companies in which the Company holds between 20 per cent and
50 per cent of an  ownership  interest,  and over  which the  Company  exercises
significant  influence,  are accounted for using the equity method.  The Company
records its investments in equity-method  investees on the predecessor  combined
carve-out  balance sheets as "Investment in associated  companies" and its share
of the  investees'  earning  or losses  in the  predecessor  combined  carve-out
statements of operations as "Share in results from  associated  companies".  Six
companies in which the Company owns 50.1 per cent have been  accounted for using
the equity method as the Company is not able to exercise control. 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 in
the three year period ended December 31, 2003 as described in Note 21.  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,  $9,308,000 and $nil, as of December 31, 2003, December
31,  2002 and 2001,  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.  The amount of such costs,  presented  as part of
administrative  expenses,  which was  allocated  from  these  organizations  was
$8,995,000,  $5,364,000  and  $4,532,000  for the years ended December 31, 2003,
2002 and 2001 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.

     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.  The
predecessor  combined  carve-out  financial  statements  do  not  purport  to be
indicative  of either the future  financial  position,  results of operations or
cash flows had Ship Finance been a stand-alone entity for the periods presented.

Cash and cash equivalents

     For the purposes of the predecessor combined carve-out financial statements
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 comprise  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.

     With  effect  from April  2001,  the  International  Maritime  Organization
implemented new regulations that resulted in the 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 2017  whichever  came  first.  As a  result,  the
estimated useful life of five of the Company's vessels was reduced in the fourth
quarter of 2001. A change in accounting  estimate was recognized to reflect this
decision,  resulting  in an increase in  depreciation  expense and  consequently
decreasing net income by $0.3 million for 2001.

     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  to
reflect  this  decision,  resulting in an increase in  depreciation  expense and
consequently decreasing net income by $1.1 million in 2003.

Newbuildings and vessel purchase options

     The  carrying  value of the  vessels  under  construction  ("Newbuildings")
represents the accumulated  costs to the balance sheet date that the Company has
had to  pay by way of  purchase  installments  and  other  capital  expenditures
together with capitalized loan interest and associated  finance costs. No charge
for depreciation is made until the vessel is put into operation.

     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 no  longer  be  appropriate.  We  assess
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  predecessor combined carve-out statement of operations.  Amortization
of loan costs is included in interest expense.

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 in the predecessor  combined
carve-out statements of operations.  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.

     In December  1999,  Frontline  entered  into an  agreement  with five other
shipowners  to  operate a pool (the  "Tankers  Pool") of their  respective  VLCC
fleets.  The  Tankers  Pool  commenced  operations  on  February 1, 2000 with an
initial  fleet of 39 modern  VLCCs.  In July 2002,  Frontline  withdrew from the
Tankers Pool. These predecessor  combined carve-out financial statements reflect
the operation of the Tankers Pool for those  vessels  included in the carve out.
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 time charter  equivalent  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 net  operating
revenues.

Drydocking provisions

     Normal  vessel  repair and  maintenance  costs are charged to expense  when
incurred.

     In 2001, the Company changed its accounting  policy for drydockings.  Prior
to 2001,  provisions for future  drydockings were accrued and charged to expense
on a pro-rata basis over the period to the next scheduled drydockings. Effective
January 1, 2001 the Company  recognizes the cost of a drydocking at the time the
drydocking  takes place,  that is, it applies the "expense as incurred"  method.
The expense as incurred method is considered by management to be a more reliable
method  of  recognizing  drydocking  costs  as  it  eliminates  the  uncertainty
associated  with  estimating  the cost and  timing  of future  drydockings.  The
cumulative effect of this change in accounting  principle is shown separately in
the predecessor  combined carve-out  statements of operations for the year ended
December 31, 2001 and  resulted in a credit to income of $24.5  million in 2001.
The  cumulative  effect of this  change as of January  1, 2001 on the  Company's
combined balance sheet was to reduce total liabilities by $24.5 million.

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.  Supplemental  comparative  disclosure as if this  accounting
change had been retroactively applied is as follows:

(in thousands of $)                                         2001
-------------------                                         ----

Net income
As reported                                                212,010
Goodwill amortization                                          700
Adjusted net income                                        212,710

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.  Hedge
accounting is used to account for these swaps provided  certain hedging criteria
are met.  As of January 1, 2001,  the Company  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. The Company  adopted SFAS 133 in the first  quarter of fiscal year 2001 and
upon initial  adoption  recorded  certain  transition  adjustments  resulting in
recognizing  the fair value of its  derivatives  as assets of $0.4  million  and
liabilities of $0.7 million. A gain of $0.2 million was recognized in income and
a charge of $0.5 million made to other comprehensive income. 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
will be  reclassified  to the  statement  of  operations  over  the  life of the
underlying hedged instrument.

Pre-SFAS 133 Adoption

     Hedge  accounting is applied where the  derivative  reduces the risk of the
underlying hedged item and is designated at inception as a hedge with respect to
the hedged item.  Additionally,  the derivative  must result in payoffs that are
expected to be inversely correlated to those of the hedged item. Derivatives are
measured for effectiveness both at inception and on an ongoing basis. When hedge
accounting  is  applied,   the  differential  between  the  derivative  and  the
underlying  hedged item is accrued as interest rates change and recognized as an
adjustment to interest expense. The related amount receivable from or payable to
counterparties is included in accrued interest income or expense,  respectively.
Prior to January 1, 2001,  the fair  values of the  interest  rate swaps are not
recognized in the financial statements.

     If a  derivative  ceases to meet the  criteria  for hedge  accounting,  any
subsequent  gains and losses are currently  recognized  in income.  If a hedging
instrument is sold or terminated prior to maturity, gains and losses continue to
be deferred  until the hedged  instrument is recognized in income.  Accordingly,
should a swap be terminated while the underlying debt remains  outstanding,  the
gain or loss is adjusted to the basis of the underlying  debt and amortized over
its remaining useful life.

Post-SFAS 133 Adoption

     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.

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.

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. All of the Company's combined entities 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 predecessor  combined  carve-out
statements of operations.

3.   RECENTLY ISSUED ACCOUNTING STANDARDS

     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  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.

4.   COMBINED ENTITIES

     The  Vessel  Interests  are all  owned  by  separate  legal  entities.  The
following  table  sets  out  the  details  of the  significant  subsidiaries  of
Frontline included in the carved out combined financial statements:

                                                       Country of     Ownership
Name                                   Vessel          Incorporation  Percentage
----                                   ------          -------------  ----------

Granite Shipping Co. Ltd.               Front Granite    Bahamas        100%
Golden Current Limited                  Opalia           Isle of Man    100%
Bonfield Shipping Ltd.                  Front Driver     Liberia        100%
Fourways Marine Limited                 Front Spirit     Liberia        100%
Front Ardenne Inc.                      Front Ardenne    Liberia        100%
Front Brabant Inc.                      Front Brabant    Liberia        100%
Front Falcon Corp.                      Front Falcon     Liberia        100%
Front Glory Shipping Inc.               Front Glory      Liberia        100%
Front Pride Shipping Inc.               Front Pride      Liberia        100%
Front Saga Inc.                         Front Page       Liberia        100%
Front Serenade Inc.                     Front Serenade   Liberia        100%
Front Splendour Shipping Inc.           Front Splendour  Liberia        100%
Front Stratus Inc.                      Front Stratus    Liberia        100%
Golden Bayshore Shipping Corporation    Navix Astral     Liberia        100%
Golden Estuary Corporation              Front Comanche   Liberia        100%
Golden Fjord Corporation                Front Commerce   Liberia        100%
Golden Seaway Corporation               New Vanguard     Liberia        100%
Golden Sound Corporation                New Vista        Liberia        100%
Golden Tide Corporation                 New Circassia    Liberia        100%
Katong Investments Ltd.                 Front Breaker    Liberia        100%
Langkawi Shipping Ltd.                  Front Birch      Liberia        100%
Patrio Shipping Ltd.                    Front Hunter     Liberia        100%
Rakis Maritime S.A.                     Front Fighter    Liberia        100%
Sea Ace Corporation                     Front Ace        Liberia        100%
Sibu Shipping Ltd.                      Front Maple      Liberia        100%
Southwest Tankers Inc.                  Front Sunda      Liberia        100%
West Tankers Inc.                       Front Comor      Liberia        100%
Puerto Reinosa Shipping Co. S.A.        Front Lillo      Panama         100%
Aspinall Pte Ltd.                       Front Viewer     Singapore      100%
Blizana Pte Ltd.                        Front Rider      Singapore      100%
Bolzano Pte Ltd.                        Mindanao         Singapore      100%
Cirebon Shipping Pte Ltd.               Front Vanadis    Singapore      100%
Fox Maritime Pte Ltd.                   Front Sabang     Singapore      100%
Front Dua Pte Ltd.                      Front Duchess    Singapore      100%
Front Empat Pte Ltd.                    Front Highness   Singapore      100%
Front Enam Pte Ltd.                     Front Lord       Singapore      100%
Front Lapan Pte Ltd.                    Front Climber    Singapore      100%
Front Lima Pte Ltd.                     Front Lady       Singapore      100%
Front Tiga Pte Ltd.                     Front Duke       Singapore      100%
Front Tujuh Pte Ltd.                    Front Emperor    Singapore      100%
Front Sembilan Pte Ltd.                 Front Leader     Singapore      100%
Rettie Pte Ltd.                         Front Striver    Singapore      100%
Transcorp Pte Ltd.                      Front Guider     Singapore      100%

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.   LEASES

     The minimum  future  revenues to be  received  on time  charters,  bareboat
charters and other contractually committed income as of December 31, 2003 are as
follows:

                                                Yen revenues
                                                ------------

Year ending December 31,                                     Dollar
in thousands of (Y) and $)     (in (Y))     ($ equivalent)   revenues    Total
--------------------------     --------     --------------   --------    -----

2004                              768,600       7,176          30,722    37,898
2005.                             766,500       7,157          30,821    37,977
2006.                             766,500       7,157          31,003    38,160
2007.                             766,500       7,157          19,790    26,947
2008.                             768,600       7,176           8,300    15,476
2009 and later                  1,694,700      15,824               -    15,824
                               ------------------------------------------------
Total minimum lease revenues    5,531,400      51,647         120,636   172,283
                               ================================================

     The  cost and  accumulated  depreciation  of the  vessels  leased  to third
parties at December 31, 2003 and 2002 were as follows:

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

Cost                                      513,470           354,199
Accumulated depreciation                   45,044            29,719

7.   TRADE ACCOUNTS RECEIVABLE

     Trade  accounts  receivable  are presented  net of allowances  for doubtful
accounts  amounting  to $724,000  and  $540,000 as of December 31, 2003 and 2002
respectively.

8.   OTHER RECEIVABLES

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

Agent receivables                           2,385             2,781
Other receivables                           4,866             4,186
                                           ------            ------
                                            7,251             6,967
                                           ======            ======

     Other  receivables  are presented net of allowances  for doubtful  accounts
amounting to $nil as of each of December 31, 2003, 2002 and 2001, respectively.

9.   NEWBUILDINGS AND VESSEL PURCHASE OPTIONS

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

Newbuildings                                   --                --
Vessel purchase options                     8,370             8,370
                                           ------            ------
                                            8,370             8,370
                                           ======            ======

     The carrying value of newbuildings  represents the accumulated costs to the
balance sheet date, which the Company has paid by way of purchase  installments,
and other capital expenditures together with capitalized loan interest. Interest
capitalized in the cost of  newbuildings  amounted to $nil, and $936,000 in 2003
and 2002  respectively.  The Company took delivery of four  newbuildings  during
2002.

     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,
2003 the outstanding  mortgage debt of the Oscilla's  owning company amounted to
$35,990,067 plus (Y)674,645,262  (equivalent to $6,299,209).  (2002--$43,013,215
plus  (Y)759,454,316  (equivalent  to  $6,406,735)).  Included in this amount at
December 31, 2003 is debt of $9,023,090 due to the Company  (2002--$10,190,000).
The fair value  assigned to this option in the  purchase  accounting  for Golden
Ocean was  $8,370,000.  The fair value was calculated at the time of purchase as
the  difference  between  the fair  value of the vessel  and the  mortgage  debt
outstanding.

10.  VESSELS AND EQUIPMENT, NET

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

Cost                                    2,607,693         2,542,320
Accumulated depreciation                 (744,189)         (638,174)
                                       -----------       -----------
Net book value at end of year           1,863,504         1,904,146
                                       ===========       ===========

     Depreciation  expense was $106.1  million,  $96.8 million and $87.9 million
for the years ended December 31, 2003, 2002 and 2001, respectively.

11.  INVESTMENT IN ASSOCIATED COMPANIES

           At December 31, 2003, the Company has the following participation in
investments that are recorded using the equity method:

                                     Vessel/         Country of      Ownership
Name                                 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%

The equity  method  investees  are engaged in the ownership and operation of oil
tankers.

Summarized balance sheet information of the Company's equity method investees is
as follows:

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

Current assets                             29,617            44,545
Non current assets                        387,322           623,538
Current liabilities                      (106,984)         (191,652)
Non current liabilities.                 (201,347)         (470,486)

Summarized  statement of operations  information of the Company's  equity method
investees is as follows:

(in thousands of $)                     2003           2002            2001
-------------------                     ----           ----            ----

Net operating revenues                 93,872         61,159          49,207
Net operating income                   79,434         17,879          24,612
Net income (loss)                      45,039        (19,208)         25,804

     In the year ended  December 31, 2003,  the Company  recorded an  impairment
charge of $5.2 million related to the  other-than-temporary  decline in value of
its 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.  We disposed of those investments in July 2003 and increased
our investments in Ariake Transport  Corporation,  Sakura Transport Corporation,
Tokyo Transport Corporation and Hitachi Hull No 4983 Ltd. from 33.33% to 50.10%.

     We 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 our 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 we acquired  the  remaining  50% of the shares of this company for $9.5
million  and we combined  the  assets,  principally  the  vessel,  amounting  to
approximately  $65.5 million and  liabilities,  principally  the long-term debt,
amounting to approximately $52.3 million, from that date.

12.  DEFERRED CHARGES

     Deferred  charges  represent debt arrangement fees that are capitalized and
amortized on a straight-line basis to interest expense over the life of the debt
instrument. The deferred charges are comprised of the following amounts:

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

Debt arrangement fees                       8,142             7,173
Accumulated amortization                   (3,838)           (2,835)
                                          -------            -------
                                            4,304             4,338
                                          =======            =======

13.  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).

14.  GOODWILL

     Goodwill is stated net of related accumulated amortization as follows:

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

Goodwill                                       --            14,142
Accumulated amortization                       --           (14,142)
                                          -------           --------
                                               --                --
                                          =======           ========

     The Company  adopted  SFAS 142  effective  January 1, 2002 and  recorded an
impairment  charge of $14.1  million for the  unamortised  goodwill on that date
(see Note 2). See Note 21 for a description  of the business  acquisitions  that
have  resulted  in the  recording  of  goodwill  in these  carved out  financial
statements.

15.  ACCRUED EXPENSES

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

Ship operating and voyage expenses         15,923              22,259
Administrative expenses                       152                 159
Interest expense                            2,654               4,203
                                         --------             --------
                                           18,729              26,621
                                         ========             ========

16.  AMOUNT DUE TO PARENT COMPANY

     The  amount  due to  parent  company  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.

16.  AMOUNT DUE TO PARENT COMPANY

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

17.  DEBT

     For the purposes of the predecessor combined carve-out financial statements
for the years  ended  December  31,  2003 and 2002,  two types of debt have been
included:

     1.   Vessel specific debt included in the subsidiary financial  statements.
          As of December 31, 2003 and 2002 this was a total of $982,808,000  and
          $1,094,727,000 respectively.

     2.   An allocation of corporate debt of Frontline.  As of December 31, 2003
          and 2002 this was a total of $8,608,000 and $9,308,000 respectively.

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

US Dollar denominated floating
rate debt (LIBOR + 0.485% to 2.75%)
due through 2011                          901,585         1,061,030
Yen denominated floating rate debt
(LIBOR + 1.125% to 1.3135%) due
through 2011                               89,830            43,006
Credit facilities                             195             2,811
                                         ----------      -----------
Total debt                                991,610         1,106,847
Less: short term and current
portion of long term debt                (141,522)         (131,293)
                                         ----------      -----------
                                          850,088           975,554
                                         ==========      ===========

     The outstanding debt as of December 31, 2003 is repayable as follows:

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

2004                                                        141,522
2005                                                        230,993
2006                                                        205,044
2007                                                        111,543
2008 and later                                              302,508
                                                           ---------
Total debt                                                  991,610
                                                           ==========

     The weighted  average  interest rate for the floating rate debt denominated
in US dollars  was 3.07 per cent and 3.83 per cent as of  December  31, 2003 and
December 31, 2002,  respectively.  The weighted  average  interest  rate for the
floating rate debt  denominated in Yen was 1.32 per cent and 1.37 per cent as of
December 31, 2003 and 2002,  respectively.  These rates take into  consideration
related interest rate swaps.

     Substantially  all of the debt is  collateralised by ship mortgages and, in
the case of some debt, pledges of shares by each guarantor subsidiary.  Existing
financing  agreements  impose  operation  and financing  restrictions  which may
significantly  limit or  prohibit,  among  other  things,  the  ability to incur
additional indebtedness, create liens, sell capital shares of subsidiaries, make
certain  investments,  engage in mergers  and  acquisitions,  purchase  and sell
vessels, enter into time or consecutive voyage charters or pay dividends without
the consent of our lenders. In addition, the lenders may accelerate the maturity
of indebtedness under our financing agreements and foreclose upon the collateral
securing the  indebtedness  upon the  occurrence  of certain  events of default,
including failure to comply with any of the covenants contained in our financing
agreements.  Various debt  agreements  contain  certain  covenants which require
compliance  with certain  financial  ratios.  Such ratios  include  equity ratio
covenants,  minimum value  clauses,  and minimum free cash  restrictions.  These
covenants  are assessed at the parent  company.  i.e. at Frontline  consolidated
level.  As of December 31, 2003 and December 31, 2002,  Frontline  complied with
all the debt covenants of its various debt agreements.

18.  SHARE CAPITAL

     The Company was  incorporated  on October  10, 2003 with  authorized  share
capital of 12,000 ordinary shares of $1.00 par value each. On that date,  12,000
ordinary shares of $1.00 par value each were issued to the initial  shareholder,
Frontline  Ltd.  For  the  purposes  of  these  predecessor  combined  carve-out
financial  statements,  the Company is assumed to have no issued  share  capital
prior to October 10, 2003.

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,  Midland Bank
(HSBC), Den norske Bank and Skandinaviska Enskilda Banken. Credit risk exists to
the extent that the counterparties are unable to perform under the contracts.

     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:

                                                                         Fixed
                                       Inception          Maturity      Interest
Principal at December 31, 2003          Date                Date          Rate
------------------------------          ----                ----          ----

(in thousands of $)
$50,000                                 January 2001      January 2006   5.635%
$49,338 reducing monthly to $29,793     March 1998        March 2006     7.288%
$53,352 reducing monthly to $17,527     September 1998    August 2008    7.490%

     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 Yen denominated  long-term debt
which as of December 31, 2003 stood at Yen  9,620,805,000 and a charter contract
denominated in Yen with  contracted  payments as set forth in Note 6. There is a
risk that currency  fluctuations will have a negative effect on the value of the
Company's  cashflows.  The Company has not entered into derivative contracts for
either  transaction  or  translation  risk.  Accordingly,  such risk 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, 2003 and 2002 are as follows:

<TABLE>
<CAPTION>
                                  December 2003    December 2003   December 2002    December 2002
                                  Carrying Value   Fair Value      Carrying Value   Fair Value
                                  --------------   ----------      --------------   ----------
<S>                                  <C>             <C>              <C>             <C>
Non-Derivatives:
Cash and cash equivalents             26,519          26,519           20,634          20,634
Short term debt and current
portion of long term debt            141,522         141,522          131,293         131,293
Long term debt                       850,088         850,088          975,554         975,554
Derivatives:
Interest rate swap transactions        5,258           5,258           16,066          16,066
</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 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 the Bank of America  N.A.,  Skandinaviska
Enskilda Banken,  BNP Paribas,  Den norske Bank and Nordea Bank Norge.  However,
the Company  believes this risk is remote as these banks are high credit quality
financial institutions.

     The majority of the vessels' gross earnings are receivable in U.S. dollars.
In 2003 and  2002,  no  customer  accounted  for 10 per cent or more of  freight
revenues.

20.  RELATED PARTY TRANSACTIONS

     During 1996, 1997 and January 1998,  Frontline  received  options to assume
newbuilding  contracts for the construction and purchase of five Suezmax tankers
at the Hyundai Heavy Industries Co. Ltd. shipyard in South Korea for delivery in
1998 and 2000 from single-ship  owning  companies  affiliated with Hemen Holding
Ltd.  ("Hemen").  Hemen is  Frontline's  largest  shareholder  and is indirectly
controlled  by Mr. John  Fredriksen,  Chairman  and Chief  Executive  Officer of
Frontline and of the Company.  Two of the single-ship  owning companies,  owning
vessels  delivered in 1998,  have been  included in these  carved out  financial
statements.

     In September 2000  Frontline  acquired a 1993-built  VLCC,  which was named
Front Ace from a company  affiliated with Hemen.  This vessel was acquired for a
price of $53 million which was based on three  independent  valuations less a $1
million  discount  compared to appraised  market  value.  The single ship owning
company  that owns Front Ace has been  included  in these  predecessor  combined
carve-out financial statements.

     In  February  2001,  the Company  acquired  newbuilding  contracts  for the
construction and purchase of three VLCC tankers at the Hitachi shipyard in Japan
for delivery in 2002 from Seatankers  Management Co. Ltd., a company  affiliated
with Hemen. 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 these  predecessor  combined  carve-out
financial statements.

21.  ACQUISITIONS

     ICB Shipping AB (publ)

     In  September  1997,  Frontline  made a public  offer to acquire all of the
shares of ICB Shipping AB (publ)  ("ICB").  Through the tender offer, by October
1997  Frontline  acquired  51.7  per  cent  of the  outstanding  shares  of ICB,
representing  31.4  per  cent of the  voting  rights,  at a  purchase  price  of
approximately $215 million. During 1998, Frontline made further purchases of ICB
Shares in the market and at  December  31,  1998 had 34.2 per cent of the voting
power. In the latter half of 1999 Frontline increased its shareholding in ICB to
approximately  90 per cent of the capital and 93 per cent of the voting  rights.
In  October  1999,  a new  Board  of  Directors  was  appointed  in ICB  and ICB
consequently was controlled by Frontline.  In December 1999, Frontline commenced
a compulsory  acquisition  for the remaining  shares in ICB and ICB was delisted
from the Stockholm  Stock Exchange.  The carved out financial  statements of the
Company  include all of the VLCC and  Suezmax  owning  subsidiaries  acquired by
Frontline and the goodwill arising on the acquisition of ICB.

     Golden Ocean Group Limited

     On October 10, 2000,  Frontline acquired the entire share capital of Golden
Ocean Group Limited ("Golden  Ocean"),  a shipping group which held interests in
14 VLCCs and 10 bulk  carriers.  The total  acquisition  price  paid,  including
amounts paid to settle allowed  claims,  was  approximately  $63.0 million.  The
difference  between the  purchase  price and the net assets  acquired,  has been
recorded as goodwill. The predecessor combined carve-out financial statements of
the Company include seven VLCC owning  subsidiaries  acquired by Frontline,  one
option to acquire a VLCC and one interest in an associated  company which owns a
VLCC, and the goodwill arising on this acquisition.

     Mosvold Shipping Limited

     In April  2001,  the  Company  announced  an offer for all of the shares of
Mosvold Shipping Limited ("Mosvold"), a Bermuda company whose shares were listed
on the Oslo  Stock  Exchange.  Through  a  combination  of shares  acquired  and
acceptances  of the  offer,  Frontline  acquired  97 per cent of the  shares  of
Mosvold.  The remaining 3 per cent of the shares of Mosvold were acquired during
2001 through a compulsory acquisition. Through the purchase of Mosvold Frontline
acquired two mid-70s built VLCCs and three newbuilding  contracts for VLCCs. The
two mid-70s built VLCCs have subsequently been sold by Frontline.  The first two
of the newbuildings were delivered in 2002 and the third in July 2003. The total
acquisition  price paid for  Mosvold  was  approximately  $70.0  million and the
acquisition  has been  accounted for using the purchase  method.  The difference
between the purchase price and the net assets acquired, has been assigned to the
identifiable long term assets of Mosvold.  Thirty employees of Mosvold were made
redundant as the result of the  acquisition by Frontline and severance  costs of
approximately  $0.3 million were incurred by Mosvold in the year ended  December
31, 2001. The predecessor combined carve-out financial statements of the Company
include one newbuilding VLCC owning subsidiary acquired by Frontline.

22.  COMMITMENTS AND CONTINGENCIES

     Assets Pledged

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

     Ship mortgages                       1,863,504                1,904,146

Other Contractual Commitments

     Frontline  insures the legal  liability  risks for its shipping  activities
with Assuranceforeningen  SKULD,  Assuranceforeningen Gard Gjensidig,  Britannia
Steam  Ship  Insurance  Association  Limited,  and  the  United  Kingdom  Mutual
Steamship Assurance Association  (Bermuda),  all mutual protection and indemnity
associations. As a member of these mutual associations,  Frontline is subject to
calls  payable to the  associations  based on the  Frontline'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.

     Certain of Frontline's  subsidiaries included in these predecessor combined
carve-out  financial  statements have  contractual  rights to participate in the
profits of the vessels New Vanguard and New Vista.  Revenues  arising from these
arrangements have been accrued to the balance sheet date.

     The charterers of two of the vessels  included in these carved out combined
financial  statements have  contractual  rights to participate in the profits on
sale of those vessels.  If the New Vanguard or New Vista are sold, the charterer
is entitled to claim up to $1 million to cover losses incurred on subcharters of
the vessel. Any remaining profit is to be split 60:40 in favor of the owner.

     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.

23.  SUBSEQUENT EVENTS

     In December 2003, Frontline agreed with its partner,  Overseas Shipholding,
Group,  Inc.  ("OSG"),  to reorganize  their mutual  interests in six associated
companies,  which  each  own a VLCC.  These  agreements  resulted  in  Frontline
exchanging  its interests in the vessels  Dundee,  Sakura I and Tanabe for OSG's
interests in the vessels  Edinburgh,  Ariake and Hakata,  thereby increasing its
interest in these  vessels to 100.0% each.  These  exchanges  were  concluded in
February  2004.  These  interests  have been  allocated to Ship Finance in these
predecessor  combined carve-out financial statements on the basis of Frontline's
historical interest in these associated companies.

<PAGE>

                       SHIP FINANCE INTERNATIONAL LIMITED
                    INDEX TO STAND ALONE FINANCIAL STATEMENTS

Report of Independent Auditor                                              F-29

Audited Statement of Operations for the period from
October 10, 2003 (Inception) to December 31, 2003                          F-30

Audited Balance Sheet as of December 31, 2003                              F-31

Audited Statement of Cash Flows for the period from
October 10, 2003 (Inception) to December 31, 2003                          F-32

Notes to Financial Statements                                              F-33

<PAGE>

                          REPORT OF INDEPENDENT AUDITOR

To the Board of Directors and Stockholder of Ship Finance International Limited.

     In our opinion, the accompanying balance sheet and the related statement of
operations,  cash flows and changes in stockholder's  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 their  operations
for the period from October 10, 2003  (Inception)  to December 31, 2003, and its
cash flows for the period  from  October  10,  2003 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 audits.  We conducted our audit of these  statements in
accordance with auditing  standards  generally  accepted in the United States of
America,  which required 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
audits provide a reasonable basis for our opinion.

PricewaterhouseCoopers DA
Oslo, Norway
6 February 2004, except for Note 12, for which date is 17 February 2004.

<PAGE>

                       SHIP FINANCE INTERNATIONAL LIMITED
               Audited Statement of Operations for the period from
               October 10, 2003 (Inception) to December 31, 2003

                               (in thousands of $)

Operating expenses
   Administrative expenses                                              14
                                                                   ---------
Total operating expenses                                                14
                                                                   ---------
Other income (expenses)
   Interest income                                                     199
   Interest expense                                                 (2,122)
   Net other income (expenses)                                      (1,923)
                                                                   ---------
Net income (loss)                                                   (1,937)
                                                                   =========

 See accompanying Notes that are an integral part of these Financial Statements
<PAGE>

                       SHIP FINANCE INTERNATIONAL LIMITED
                  Audited Balance Sheet as of December 31, 2003

                               (in thousands of $)

ASSETS
Current Assets
   Restricted cash                                                  565,500
   Other receivables                                                    211
                                                                  ----------
   Total current assets                                             565,711
                                                                  ----------
Deferred charges                                                     16,481
                                                                  ----------
   Total assets                                                     582,192
                                                                  ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
   Trade accounts payable                                                 -
   Accrued expenses                                                   4,015
   Amount due to parent company                                         102
                                                                  ----------
   Total current liabilities                                          4,117
Long-term liabilities
   Long term debt                                                   580,000
                                                                  ----------
   Total liabilities                                                584,117
Commitments and contingencies                                             -
Stockholders' equity
   Share capital (12,000 shares of $1 authorized and issued)             12
   Retained deficit                                                  (1,937)
                                                                  ----------
   Total stockholders' equity                                        (1,925)
                                                                  ----------
   Total liabilities and stockholders' equity                       582,192
                                                                  ==========

 See accompanying Notes that are an integral part of these Financial Statements
<PAGE>

                       SHIP FINANCE INTERNATIONAL LIMITED
               Audited Statement of Cash Flows for the period from
               October 10, 2003 (Inception) to December 31, 2003

                               (in thousands of $)

Operating activities
Net loss                                                             (1,937)
Adjustments to reconcile net loss to net cash
  provided by operating activities:
   Amortization of deferred charges                                      69
   Other receivables                                                   (199)
   Accrued expenses                                                   2,063
   Amount due to parent company                                          4
                                                                  ----------
   Net cash provided by operating activities                            nil
                                                                  ----------
Investing activities
   Net placement of restricted cash                                (565,500)
                                                                  ----------
   Net cash provided by (used in) investing activities             (565,500)
                                                                  ----------
Financing activities
   Proceeds from long term debt                                     580,000
   Debt fees paid                                                   (14,500)

   Net cash (used in) provided by financing activities              565,500

Net increase (decrease) in cash and cash equivalents                    nil
Cash and cash equivalents at beginning of period                        nil
Cash and cash equivalents at end of period                              nil
                                                                  ==========
Supplemental disclosure of cash flow information:
   Interest paid, net of capitalized interest                           nil
                                                                  ==========

 See accompanying Notes that are an integral part of these Financial Statements
<PAGE>

                       SHIP FINANCE INTERNATIONAL LIMITED
                        Notes to the Financial Statements

1.   GENERAL

     Ship Finance  International  Limited (the "Company" or "Ship  Finance") was
incorporated in Bermuda on October 10, 2003 for the purpose of acquiring certain
of the shipping  assets of its parent  company,  Frontline  Ltd.  ("Frontline").
Frontline is a publicly listed Bermuda based shipping company engaged  primarily
in the ownership and operation of oil tankers,  including  oil/bulk/ore  ("OBO")
carriers.  The Company is a wholly  owned  subsidiary  of  Frontline.  Frontline
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.  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 the Company  entered into a purchase  agreement  with
Frontline  to  purchase  certain of  Frontline's  wholly  owned VLCC and Suezmax
owning subsidiaries,  including certain subsidiaries  acquired or expected to be
acquired through a reorganization  of interests in certain joint ventures plus a
purchase option to acquire a further VLCC (together the "Vessel Interests").

     On December  18, 2003 the Company  issued $580 million of 8.5% Senior Notes
due 2013 in a private offering to Qualified  Institutional  Buyers. The proceeds
from this offering,  together with a deemed equity contribution of approximately
$525 million from  Frontline,  will be used to complete the  acquisition  of the
Vessel Interests.

2.   ACCOUNTING POLICIES

Basis of accounting

     These  financial  statements  are prepared in  accordance  with  accounting
principles generally accepted in the United States.

     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.

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.

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.

     The  Company  has no  independent  assets or  operations  from those if its
subsidiaries who have provided guarantees to its indebtedness.  These guarantees
are  full  and  unconditional  and  joint  and  several.  All of  the  Company's
subsidiaries are guarantors.

3.   RECENTLY ISSUED ACCOUNTING STANDARDS

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

     In January  2003,  the FASB  issued  Interpretation  46,  Consolidation  of
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..   Interpretation   46  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.
This party is referred to as the primary beneficiary.

     In December 2003, the FASB issued FASB Interpretation 46(R),  Consolidation
of Variable  Interest  Entities.  FIN 46(R)  replaces FIN 46 and  clarifies  the
accounting for interests in variable interest  entities.  The company will begin
to apply FIN 46 (R) to entities  considered to be variable interest entities for
periods after December 31, 2003.

     Management is currently considering the impact of FIN 46 (R).

4.   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.

5.   DEFERRED CHARGES

     Deferred  charges  represent debt arrangement fees that are capitalized and
amortized on a straight-line basis to interest expense over the life of the debt
instrument. The deferred charges are comprised of the following amounts:

(in thousands of $)                                December 31, 2003
-------------------                                -----------------

Debt arrangement fees                                  16,550
Accumulated amortization                                  (69)
                                                     ----------
                                                       16,481
                                                     ==========

6.   ACCRUED EXPENSES

(in thousands of $)                                December 31, 2003
-------------------                                -----------------

Debt fees                                               1,961
Interest expense                                        2,054
                                                     ----------
                                                        4,015
                                                     ==========

7.   AMOUNT DUE TO PARENT COMPANY

     The amount due to parent  company  represents  advances  to the  Company by
Frontline to fund payment of our start up costs and expenses  incurred  prior to
our issuance of Senior Notes. For the purposes of these financial statements, no
interest expense has been imputed on the balance due to Frontline.

8.   DEBT

     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.  These covenants are
fully  explained in the  Prospectus  to the notes issue and in the  Registration
Statement that will be filed in connection with an Exchange Offer for the notes.

The notes:

     o    are general unsecured, senior obligations of the Company;

     o    are  limited  initially  to an  aggregate  principal  amount  of  $580
          million;

     o    will mature on December 15, 2013;

     o    were  issued in  denominations  of $1,000 and  integral  multiples  of
          $1,000;

     o    are represented by one or more registered notes in global form, but in
          certain circumstances may be represented by notes in definitive form;

     o    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;

     o    the notes will be  unconditionally  guaranteed  on a senior  unsecured
          basis by each  subsidiary of the Company,  but the guarantees  will be
          effectively   subordinated   to  all   present   and  future   secured
          indebtedness  of the  subsidiaries,  to the extent of the value of the
          collateral securing such Indebtedness;

     o    The notes are not  redeemable  prior to  December  15,  2008 except as
          described  below.  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%; and

     o    are expected to be eligible for trading in the PORTAL market.

Interest on the notes:

     o    accrues at the rate of 8.50% per annum;

     o    accrues from the date of issuance or the most recent interest  payment
          date;

     o    is payable in cash  semi-annually  in arrears on June 15 and  December
          15, commencing on June 15, 2004;

     o    is  payable  to  the  holders  of  record  on  June 1 and  December  1
          immediately preceding the related interest payment dates; and

     o    is computed on the basis of a 360-day year  comprised of twelve 30-day
          months.

9.   SHARE CAPITAL

     The Company was  incorporated  on October  10, 2003 with  authorized  share
capital of 12,000 ordinary shares of $1.00 par value each. On that date,  12,000
ordinary shares of $1.00 par value each were issued to the initial  shareholder,
Frontline Ltd.

10.  FINANCIAL INSTRUMENTS

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

                                    December 31, 2003        December 31, 2003
(in thousands of $)                   Carrying Value           Fair Value
-------------------                   --------------           ----------

Non-Derivatives:
   Restricted cash                       565,500               565,500
   Long term debt                        580,000               580,000

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

     The estimated  fair value for our long-term  debt is considered to be equal
to the carrying value since the Company  estimate that the market  interest rate
for debt with similar  terms to our debt is the same as the interest rate on our
debt.

11.  COMMITMENTS AND CONTINGENCIES

     Other Contractual Commitments

     On December  11, 2003 the Company  entered into a purchase  agreement  with
Frontline  to  purchase  certain of  Frontline's  wholly  owned VLCC and Suezmax
owning subsidiaries,  including certain subsidiaries  acquired or expected to be
acquired through a reorganization  of interests in certain joint ventures plus a
purchase option to acquire a further VLCC (together the "Vessel Interests"). The
purchase price for the Vessel  Interests is $950 million and is to be settled in
cash, net of a deemed equity contribution of $525 million by Frontline.

12.  SUBSEQUENT EVENTS

     On  January  1, 2004 the  Company  completed  the  purchase  of the  Vessel
Interests it agreed to purchase from Frontline on December 11, 2003.

     As a result of these  transactions  the Company has  acquired a fleet of 24
Suezmax   tankers   and  23  VLCCs  with  a  combined   deadweight   tonnage  of
10,498,000,000 tones and a combined book value of approximately $2,107 million.

     On January 1, 2004 the Company  entered into time charter  agreements  with
Frontline  Shipping  Ltd., a subsidiary of Frontline,  to charter the 46 vessels
for substantially the remainder of their useful lives at fixed rates.

     On January 1, 2004 the Company  entered  into  management  agreements  with
Frontline Management (Bermuda) Ltd., a subsidiary of Frontline, to manage the 46
vessels for substantially the remainder of their useful lives at fixed rates.

     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.  This facility bears interest at LIBOR plus 1.25% payable  quarterly in
arrears and may be prepaid without penalty. The principal  amortization schedule
in respect of our senior  secured  credit  facility,  assuming  that it is fully
drawn upon, will be as follows:

                                                          Amount
Year                                              (dollars in millions)
----                                              ---------------------

2004                                                         $93.7
2005                                                          93.7
2006                                                          93.7
2007                                                          93.7
2008                                                          93.7
2009                                                          89.8
At maturity in 2010                                          499.7
<PAGE>

                 INDEX TO UNAUDITED INTERIM FINANCIAL STATEMENTS

Unaudited Statement of Operations for the six months ended June
30, 2004 and Unaudited Predecessor Combined Carve-out Statement
of F-35 Operations for the six months ended June 30, 2003                  F-35

Unaudited Balance Sheet as of June 30, 2004, Audited Predecessor
Combined Carve-out Balance Sheet as of December 31, 2003 and
Audited Balance Sheet as of December 31, 2003                              F-36

Unaudited Statement of Cash Flows for the six months ended June
30, 2004 and Unaudited Predecessor Combined Carve-out Statement
of F-37 Cash Flows for the six months ended June 30, 2003                  F-37

Unaudited Statements of Changes in Stockholders' Equity for the
six months ended June 30, 2004 and Unaudited Predecessor Combined
F-38 Carve-out Statements of Changes in Stockholders' Equity for
the year ended December 31, 2003                                           F-38

Notes to Unaudited Interim Financial Statements                            F-39

<PAGE>

                       SHIP FINANCE INTERNATIONAL LIMITED
    Unaudited Statement of Operations for the six months ended June 30, 2004
            and Unaudited Predecessor Combined Carve-out Statement of
                Operations for the six months ended June 30, 2003
                               (in thousands of $)

                                                                  Predecessor
                                                             combined carve-out
                                                             ------------------
                                                    Six months ended June 30
                                                    ------------------------
                                                  2004                  2003
                                                  ----                  ----

Operating revenues
   Time charter revenues                          47,264               10,456
   Bareboat charter revenues.                     19,305               14,007
   Voyage charter revenues                        49,750              377,126
   Finance lease interest income                  64,056                    -
   Finance lease service revenues                 33,482                    -
   Profit sharing revenue                          5,656                    -
                                                ----------           ---------
Total operating revenues                         219,513              401,589
                                                ----------           ---------
Operating expenses
   Voyage expenses and commission                  8,971               80,862
   Ship operating expenses                        48,377               38,625
   Depreciation and amortisation                  21,786               51,446
   Administrative expenses                         1,514                3,039
                                                ----------           ---------
Total operating expenses                          80,648              173,972
                                                ----------           ---------
Net operating income                             138,865              227,617
Other income (expenses)
   Interest income                                 2,269                4,604
   Interest expense                              (48,929)             (18,931)
   Share of results of associated companies            -               15,538
   Foreign currency exchange gain (loss)             117                  301
   Other financial items, net                     13,990                (171)
                                                ----------           ---------
   Net other income (expenses)                   (32,553)                1,341
                                                ----------           ---------
Net income                                       106,312              228,958
                                                ==========           =========

   Earnings Per Share - Basic and Diluted          $1.44                $3.10

See accompanying Notes that are an integral part of these Financial Statements
<PAGE>

                       SHIP FINANCE INTERNATIONAL LIMITED
                  Unaudited Balance Sheet as of June 30, 2004,
           Audited Predecessor Combined Carve-out Balance Sheet as of
       December 31, 2003 and Audited Balance Sheet as of December 31, 2003
                               (in thousands of $)
                                   Predecessor
                                                                     combined
                                                                     carve-out
                                                                     -----------
                                              June 30,   December     December
                                                2004     31, 2003     31, 2003
                                             ---------   ---------    ---------
                                                         (audited)    (audited)

ASSETS
Current Assets
Cash and cash equivalents                       32,138          --       26,519
Restricted cash.                                 7,886     565,500           --
Trade accounts receivable                        3,634          --       23,896
Other receivables                                1,017         211        7,251
Inventories                                         --          --       16,248
Voyages in progress                                 --          --       34,916
Prepaid expenses and accrued income              6,312          --        2,234
Amount due from parent company                  55,254          --           --
Investments in finance leases,
current portion                                 65,411          --           --
                                             ---------   ---------    ---------
Total current assets                           171,652     565,711      111,064
                                             ---------   ---------    ---------
Newbuildings and vessel purchase options            --          --        8,370
Vessels and equipment, net                     518,479          --    1,863,504
Investments in finance leases                1,417,480          --           --
Investment in associated companies                  --          --      160,082
Deferred charges                                27,953      16,481        4,304
Mark to market valuation of derivatives          9,442          --           --
Other long term assets                              --          --        9,024

Total assets                                 2,145,006     582,192    2,156,348
                                             =========   =========    =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Short term debt and current portion of
long-term debt                                  88,843          --      141,522
Trade accounts payable                             284          --        4,664
Accrued expenses                                 7,042       4,015       18,729
Mark to market valuation of derivatives             --          --        9,217
Other current liabilities                       18,960          --       10,936
Amount due to parent company                        --         102      299,166
                                             ---------   ---------    ---------
Total current liabilities                      115,129       4,117      484,234
Long-term liabilities
Long term debt                               1,465,431     580,000      850,088
                                             ---------   ---------    ---------
Total liabilities                            1,580,560     584,117    1,334,322
Commitments and contingencies
Stockholders' equity
Share capital                                   73,925          12           --
Contributed surplus                            452,508          --           --
Retained earnings (deficit)                     38,013      (1,937)          --
Invested equity                                     --          --      822,026
                                             ---------   ---------    ---------
Total stockholders' equity                     564,446      (1,925)     822,026
                                             ---------   ---------    ---------
Total liabilities and stockholders' equity   2,145,006     582,192    2,156,348
                                             =========   =========    =========

See accompanying Notes that are an integral part of these Financial Statements
<PAGE>

                           SHIP FINANCE INTERNATIONAL LIMITED
           Unaudited Statement of Cash Flows for the six months ended June 30,
             2004 and Unaudited Predecessor Combined Carve-out Statement of
                    Cash Flows for the six months ended June 30, 2003

                                   (in thousands of $)

                                                                     Predecessor
                                                                     combined
                                                                     carve-out
                                                                     ---------
                                                       Six months    Six months
                                                       ended June    ended June
                                                        30, 2004      30, 2003
                                                       ----------    ----------

Operating activities
Net income (loss                                          106,312       228,958
Adjustments to reconcile net income (loss)
to net cash provided by operating activities:
Depreciation and amortisation                              21,786        51,446
Amortisation of deferred charges                            6,583           486
Share of results of associated companies                       --       (15,538)
Interest income, capitalised                                   --        (3,684)
Unrealised foreign exchange (gain) loss                      (137)       (2,792)
Change in accounting principle                                 --            --
Adjustment of derivatives to market value                 (15,095)       (2,325)
Release of accumulated other comprehensive
income to net income                                        1,052
Other                                                        (488)           --
Changes in operating assets and liabilities, net
of effect of acquisitions:
Trade accounts receivable                                  (3,634)       (7,137)
Other receivables                                            (776)       (1,435)
Inventories                                                    --         1,727
Voyages in progress                                            --        (3,651)
Prepaid expenses and accrued income                        (6,112)       (2,320)
Trade accounts payable                                        284          (389)
Accrued expenses                                              396        (4,049)
Other current liabilities                                     404         1,563
                                                       ----------    ----------
Net cash provided by operating activities                 109,523       241,912
                                                       ----------    ----------
Investing activities
Acquisition of subsidiaries, net of cash acquired        (536,793)           --
  for $1,061,793 net of an equity contribution
  by parent company of $525,000
Investments in associated companies                            --          (348)
Net maturity (placement) of loans receivable                   --           708
Net maturity of restricted cash                           557,614            --
Repayments from investments in finance leases              26,653            --
Short-term loan advances to parent company                (55,254)           --
Repayment of other long term liabilities                       --            --
                                                       ----------    ----------
Net cash provided by (used in) investing activities        (7,780)          360
                                                       ----------    ----------
Financing activities
Amount due to parent company                             (164,549)
Proceeds from long term debt                            1,017,000            --
Repayments of long term debt                           (1,025,009)      (72,130)
Debt fees paid                                            (13,787)         (970)
Deemed dividends                                          (47,909)           --
                                                       ----------    ----------
Net cash (used in) provided by financing activities        69,605      (237,649)
                                                       ----------    ----------
Net increase (decrease) in cash and cash equivalents       32,138         4,623
Cash and cash equivalents at beginning of period               --        20,634
Cash and cash equivalents at end of period                 32,138        25,257
                                                       ==========    ==========
Supplemental disclosure of cash flow information:
Interest paid, net of capitalised interest                 44,687        19,622
                                                       ==========    ==========

See accompanying Notes that are an integral part of these Financial Statements
<PAGE>

                       SHIP FINANCE INTERNATIONAL LIMITED
         Unaudited Statements of Changes in Stockholders' Equity for the
        six months ended June 30, 2004 and Unaudited Predecessor Combined
         Carve-out Statements of Changes in Invested Equity for the for
                        the year ended December 31, 2003
                               (in thousands of $)

                                                                      Invested
                                                                       equity

Balance at December 31, 2002                                          485,605
                                                                     --------
Net income                                                            334,812
Release of accumulated other
comprehensive income to net income                                      1,609
                                                                     --------
Other comprehensive income (loss)                                       1,609
                                                                     --------
Comprehensive income                                                  336,421
                                                                     --------
Balance at December 31, 2003                                          822,026
                                                                     ========

<TABLE>
<CAPTION>
                                                                  Retained
                                          Share     Contributed   Earnings
                                          Capital     Surplus     (Deficit)   Total
                                          --------    --------    --------    --------
<S>                                       <C>         <C>         <C>         <C>
Balance at December 31, 2003                    12          --      (1,937)     (1,925)
Net income                                      --          --     106,312     106,312
Issue of new shares to parent company       73,913     (73,913)         --          --
Equity contribution from parent company         --     525,000          --     525,000
Deemed equity contribution                      --       1,421          --       1,421
Dividends declared                              --          --     (18,453)    (18,453)
Deemed dividends                                                   (47,909)    (47,909)
                                          --------    --------    --------    --------
Balance at June 30, 2004                    73,925     452,508      38,013     564,446
                                          ========    ========    ========    ========
</TABLE>

See accompanying Notes that are an integral part of these Financial Statements
<PAGE>

                       SHIP FINANCE INTERNATIONAL LIMITED
               Notes to the Unaudited Interim Financial Statements

1.   General

Ship  Finance  International  Limited  ("Ship  Finance"  or  the  "Company"),  a
subsidiary of Frontline Ltd (NYSE:FRO),  was  incorporated in Bermuda in October
2003 for the purpose of acquiring  certain of the  shipping  assets of Frontline
Ltd. 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.  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.

The Company was incorporated as a wholly owned subsidiary of Frontline.  On June
16, 2004,  Frontline  completed the partial spin off of Ship Finance.  Frontline
distributed 25 per cent 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".

2.   Accounting Policies

Basis of Accounting

The accompanying unaudited financial statements have been prepared in accordance
with accounting  principles  generally accepted in the United States for interim
financial information.  Accordingly,  they do not include all of the information
and footnotes required by GAAP for complete financial statements. In the opinion
of  management,  all  adjustments  (consisting  of  normal  recurring  accruals)
considered  necessary for a fair presentation have been included.  The principal
accounting  policies used in the preparation of these  financial  statements are
set out below.  The balance sheet at December 31, 2003 has been derived from the
audited  financial  statements  at that  date but does  not  include  all of the
information and footnotes required by GAAP for complete financial statements.

These  interim  financial  statements  should  be read in  conjunction  with the
audited predecessor  combined carve-out and standalone  financial statements and
accompanying notes included elsewhere in this prospectus

The  interim  financial  statements  include the assets and  liabilities  of the
Company and its subsidiaries and certain variable interest entities in which the
Company  is  deemed to be  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. All  intercompany  balances and transactions
have been eliminated on consolidation.

Comparative financial information in these interim financial statements has been
derived from our audited predecessor combined carve out and standalone financial
statements where appropriate.

For the year ended December 31, 2003 and the six months ended June 30, 2003, the
predecessor  combined carve-out financial statements have been carved out of the
consolidated  financial  statements  of  Frontline.   These  combined  financial
statements assume that our business was operated as a separate  corporate entity
prior to its inception.  The combined financial statements have been prepared to
reflect the combination of certain of Frontline's  wholly owned VLCC and Suezmax
owning  subsidiaries,  interests  in joint  ventures and an option to acquire an
additional VLCC.

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  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").

The Company accounts for certain of the long term charters to Frontline as sales
type leases while the  remaining  charters  will  initially be 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.

Revenue and expense recognition

     Revenues and expenses are  recognized  on the accrual  basis.  Revenues are
generated  from freight  billings,  contracts of  affreightment,  time  charter,
bareboat  charter hires,  finance lease interest  income,  finance lease service
revenues  and  profit  sharing  revenues.  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.

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

     We  recognize  profit  sharing  revenues  related  to  the  profit  sharing
agreement  between the Company and Frontline  Ltd. only when those  revenues are
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 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, which are $21,100
per  day  for  Suezmaxes  and  $25,575  per day  for  VLCCs,  on a time  charter
equivalent  basis. Our profit sharing revenues are 20% of a vessel's  underlying
earnings in excess of the threshold.

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.

Impairment of long-lived assets

     The  carrying  value  of  long-lived  assets  that are held and used by the
Company are reviewed  whenever events or changes in circumstances  indicate that
the  carrying  amount  of an asset  may no  longer  be  appropriate.  We  assess
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.

Leases

Thirty four of the long term  charters  with  Frontline  Shipping  Limited ("the
Charterer")  have been  classified  as a sales type  leases in  accordance  with
Statement of Financial Standards No 13.

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.

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.

     The  Company  has no  independent  assets or  operations  from those if its
subsidiaries who have provided guarantees to its indebtedness.  These guarantees
are  full  and  unconditional  and  joint  and  several.  All of  the  Company's
subsidiaries are guarantors.

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.

Earnings per share

     Basic  EPS is  computed  based on the  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.  Diluted EPS
includes  the  effect  of  the  assumed   conversion  of  potentially   dilutive
instruments.  For  all  periods  presented  there  are no  potentially  dilutive
instruments.

3.   Investments in Finance Leases

Our  vessels  are  chartered  on long term,  fixed rate  charters  to  Frontline
Shipping Limited,  a wholly owned subsidiary of Frontline ("the Charterer) which
will 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
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.

In accordance  with US GAAP,  thirty four of these charters are accounted for as
sales type leases.  The following  lists the  components of the  investments  in
finance leases as of June 30, 2004:

(in thousands of $)                                              June 30, 2004
-------------------                                              -------------

Total minimum lease payments to be received                          3,288,539
Less:  amounts  representing  estimated  executory
costs including  profit thereon,  included in total
minimum lease payments                                               (960,492)
                                                                 -------------
                                                                     2,328,047
Less: allowance for uncollectibles                                           -
                                                                 -------------
Net minimum lease payments receivable                                2,328,047
Estimated residual values of leased property (unguaranteed)            392,611
Less: unearned income                                              (1,154,145)
                                                                 -------------
                                                                    1,566,513

Less: deferred deemed equity contribution (see Note 8)                (85,043)
Add:  accumulated amortization of deferred deemed equity
      contribution                                                      1,421
                                                                 -------------
                                                                     1,482,891
                                                                 -------------
Current portion                                                         65,411

Long-term portion                                                    1,417,480
                                                                 =============
                                                                     1,482,891
                                                                 =============

     At June 30, 2004,  minimum lease  payments for each of the five  succeeding
years were as  follows:  $284,922 in 2005,  $284,922 in 2006,  $282,474 in 2007,
$279,404 in 2008 and $275,671 in 2009.

4.   Vessels and Equipment, net

                                                                 Predecessor
(in thousands of $)                     June 30, 2004         Combined Carve-out
-------------------                     -------------         ------------------

Cost                                      850,575                 2,607,693
Accumulated depreciation                 (332,096)                 (744,189)
                                      -----------                -----------
Net book value at end of year             518,479                 1,863,504
                                      ===========                ===========

Depreciation  expense  was $21.8  million  and $51.5  million for the six months
ended June 30, 2004 and 2003 respectively.

5.   Debt

        The outstanding debt as of June 30, 2004 is repayable as follows:

                                                       Predecessor
                                                       Combined
                                                       Carve-Out     Successor
                                          June         December      December
(in thousands of $)                       2004         2003          2003
-------------------                       ---------    ---------     ---------

8.5% Senior notes due 2013a                 560,000           --       580,000

US Dollar denominated floating
rate debt (LIBOR + 0.485% to 2.75%)
due through 2011                            994,274      901,585            --

Yen denominated floating rate debt
(LIBOR + 1.125% to 1.3135%)
due through 2011a                                         89,830            --

Credit facilities                                --          195            --
                                                                     ---------
Total debt                                1,554,274      991,610       580,000
                                          ---------    ---------     ---------
Less: short term and current
portion of long term debt                   (88,843)    (141,522)           --
                                                                     ---------
                                          1,465,431      850,088       580,000
                                                                     ---------

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

2004                                                                     88,843
2005                                                                     88,843
2006                                                                     88,843
2007                                                                     88,843
2008 and later                                                        1,198,902
                                                                    -----------
Total debt                                                            1,554,274
                                                                    ===========

The weighted  average interest rate for the floating rate debt denominated in US
dollars  was  5.5411  per  cent,  3.07 per cent,  and 8.5% as of June 30,  2004,
December  31, 2003 (carve out basis),  and December 31, 2003 (stand alone basis)
respectively.  The weighted  average  interest  rate for the floating  rate debt
denominated  in Yen was nil and 1.32 per cent as of June 30,  2004 and  December
31,  respectively.  These rates take into  consideration  related  interest rate
swaps.

Substantially  all of the debt is  collateralised  by ship mortgages and, in the
case of some debt,  pledges  of shares by each  guarantor  subsidiary.  Existing
financing  agreements  impose  operation  and financing  restrictions  which may
significantly  limit or  prohibit,  among  other  things,  the  ability to incur
additional indebtedness, create liens, sell capital shares of subsidiaries, make
certain  investments,  engage in mergers  and  acquisitions,  purchase  and sell
vessels, enter into time or consecutive voyage charters or pay dividends without
the consent of our lenders. In addition, the lenders may accelerate the maturity
of indebtedness under our financing agreements and foreclose upon the collateral
securing the  indebtedness  upon the  occurrence  of certain  events of default,
including failure to comply with any of the covenants contained in our financing
agreements.  Various debt  agreements  contain  certain  covenants which require
compliance  with certain  financial  ratios.  Such ratios  include  equity ratio
covenants, minimum value clauses, and minimum free cash restrictions. As of June
30, 2004 and December 31, 2003, the Company complied with all the debt covenants
of its various debt agreements.

6.   Related Party Transactions

We acquired  all of our vessels  from our parent  company,  Frontline  Ltd, in a
spin-off  transaction.  We paid a total of $1,061.8 to Frontline  being the book
value of assets  transferred  to us by  Frontline  less  amounts of debt that we
assumed.  As part of this  spin-off  transaction  we  also  received  an  equity
contribution of $525.0 million from Frontline.

We charter all of our vessels 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
$1,593.2 million,  finance lease interest income of $64.1 million, finance lease
service  revenues of $33.5  million,  repayments of net  investments  in finance
leases of $26.7 million and deemed  dividends of $47.9 million in the six months
ended June 30,  2004.  At June 30,  2004 the balance of our net  investments  in
finance  leases  with  Frontline  was$1,566.5  million  of which  $65.4  million
represents short-term maturities.

We pay Frontline a management fee of $6,500 per day for all of our vessels, with
the exception of four of our vessels which are bareboat  chartered  resulting in
expenses of $48.4 million for the six months ended June 30, 2004. The management
fees have been classified as ship operating expenses.

We pay  Frontline  an  administrative  management  fee of $20,000  per year plus
$20,000 per vessel per year.  Based on our current  fleet we will pay  Frontline
$960,000 in 2004 under this arrangement and have incurred an expense of $480,000
for the six months  ended June 30,  2004.  These  fees have been  classified  as
administrative expenses.

Frontline  will 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 six months ended June 30, 2004, we earned and
recognized revenue of $5.7 million under this arrangement.

7.   Share Capital and Contributed Surplus

     Under  our  Amended  Memorandum  of  Association,  our  authorized  capital
consists of 125,000,000 common shares having a par value of $1.00 each, of which
75,525,837 are issued and outstanding.

     We were  formed in  October  of 2003 with an  authorized  share  capital of
$12,000,  divided  into shares of $1.00  each.  In  connection  with our partial
spin-off from Frontline in June 2004, our authorized share capital was increased
to 125,000,000  shares,  each having a par value of $1.00,  of which  73,925,837
were issued and  outstanding  immediately  after the partial  spin-off.  In July
2004, we issued 1,600,000 common shares in a private  placement for the price of
$15.75 per share.  Immediately  following  our issues of these  shares our total
outstanding shares were 75,525,837.

     In connection  with our purchase of our fleet from Frontline Ltd in January
2004, we received an equity contribution of $525.0 million.

     As each of our 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 six months ended June
30, 2004 the  Company  has  accounted  for $1.4  million of such  deemed  equity
contributions.

8.   Subsequent Events

     On July 13, 2004, the Company  completed the private placement of 1,600,000
common shares to an institutional  investor at a purchase price of US $15.75 per
share.  The Company is intending to use the total  proceeds of $25.2  million to
expand the business.

     On August 19,  2004,  the  Company  declared a dividend of $0.35 per common
share to be paid on or about September 13, 2004.

     On  September  24,  2004,   Frontline  made  a  further   distribution   of
approximately 10% of its holding in the Company whereby each Frontline  ordinary
shareholder  received one common  share in Ship Finance for every ten  Frontline
ordinary shares held.


<PAGE>

               PART II: INFORMATION NOT REQUIRED IN THE PROSPECTUS

Item 6. Indemnification of Directors and Officers.

     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.

     The  Company's  bye-laws  provide  that no  director,  alternate  director,
officer, person or member of a committee, if any, resident representative of the
Company or his heirs, executors or administrators (collectively an "indemnitee")
is liable for the acts, receipts, neglects, or defaults of any other such person
or any person  involved  in the  formation  of the  Company,  or for any loss or
expense incurred by the Company through the insufficiency or deficiency of title
to any property acquired by the Company,  or for the insufficiency of deficiency
of any  security  in or upon  which any of the  monies of the  Company  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  the  Company  or  otherwise  in  relation  thereto.  Each
indemnitee will be indemnified and held harmless out of the funds of the Company
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.
The Company is  permitted to purchase  insurance  to cover any  liability it may
incur under the indemnification provisions of its bye-laws.

Item 7. Recent Sale of Unregistered Securities.

     The following is a summary of the transactions by the registrant, since its
formation in October 2003,  involving sales of the  registrants  securities that
were not registered under the Securities Act of 1933.

     On December 18, 2003, the Company  issued $580 million in principal  amount
of senior  notes,  due 2013,  in a private  placement  pursuant to Rule 144A and
Regulation S under the Securities Act of 1933, as amended.  The Company received
net proceeds from the issuance of the notes of approximately $560 million, which
was used to fund in part the  acquisition  of the Company's  fleet of 46 tankers
and  one  newbuild  option  from  Frontline.  The  issuance  of  the  notes  was
underwritten by Jefferies & Co and by Citigroup.

     The  Company  commenced  an  exchange  offer for the notes on May 25,  2004
pursuant to which 100% of the outstanding  unregistered notes were exchanged for
identical  notes  registered  under the  Securities  Act of 1933  pursuant  to a
registration  statement  filed on Form F-4 filed  with the U.S.  Securities  and
Exchange  Commission.  The  exchange  offer  expired on July 26,  2004.  We have
repurchased  $25  million  face  value of the  notes,  which  were  subsequently
cancelled.

     On July 14, 2004, the Company  completed the private placement of 1,600,000
common  shares to an  institutional  investor at a purchase  price of $15.75 per
share.  The Company is intending to use the total  proceeds of $25.2  million to
expand its business.

Item 8. Exhibits and Financial Statement Schedules

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

3.1            Memorandum of Association of Ship Finance International Limited
               (Filed as Exhibit 3.1 to Ship Finance International Limited's
               Registration Statement, SEC File No. 333-115705, filed on May 21,
               2004)

3.2            Amended and Restated Bye-laws of Ship Finance International
               Limited (Filed as Exhibit 3.2 to Ship Finance International
               Limited's Registration Statement, SEC File No. 333-115705, filed
               on May 21, 2004)

4.1            Form of Common Stock Certificate of Ship Finance International
               Limited (Filed as Exhibit 4.1 to Ship Finance International
               Limited's Registration Statement, SEC File No. 333-115705, filed
               on May 21, 2004)

4.2            Indenture relating to 8.5% Senior Notes due 2013, dated December
               18, 2003 (Filed as Exhibit 4.4 to Ship Finance International
               Limited's Registration Statement, SEC File No. 333-115705, filed
               on May 21, 2004)

5.1            Opinion of Mello, Jones & Martin regarding Bermuda law

10.1           Form of $1.058 billion Credit Facility (Filed as Exhibit 10.1 to
               Ship Finance International Limited's Registration Statement, SEC
               File No. 333-115705, filed on May 21, 2004)

10.2           Fleet Purchase Agreement dated December 11, 2003 (Filed as
               Exhibit 10.2 to Ship Finance International Limited's Registration
               Statement, SEC File No. 333-115705, filed on May 21, 2004)

10.3           Form of Performance Guarantee issued by Frontline Ltd. (Filed as
               Exhibit 10.3 to Ship Finance International Limited's Registration
               Statement, SEC File No. 333-115705, filed on May 21, 2004)

10.4           Form of Time Charter (Filed as Exhibit 10.4 to Ship Finance
               International Limited's Registration Statement, SEC File No.
               333-115705, filed on May 21, 2004)

10.5           Form of Vessel Management Agreements (Filed as Exhibit 10.5 to
               Ship Finance International Limited's Registration Statement, SEC
               File No. 333-115705, filed on May 21, 2004)

10.6           Form of Charter Ancillary Agreement (Filed as Exhibit 10.6 to
               Ship Finance International Limited's Registration Statement, SEC
               File No. 333-115705, filed on May 21, 2004)

10.7           Form of Administrative Services Agreement (Filed as Exhibit 10.7
               to Ship Finance International Limited's Registration Statement,
               SEC File No. 333-115705, filed on May 21, 2004)

12.1           Computation of Ratio of Earnings to Fixed Charges

21.1           List of Subsidiaries (Filed as Exhibit 21.1 to Ship Finance
               International Limited's Registration Statement, SEC File No.
               333-115705, filed on May 21, 2004)

23.1           Consent of PricewaterhouseCoopers Hamilton, Bermuda

23.2           Consent of PricewaterhouseCoppers Oslo, Norway

23.3           Consent of Mello, Jones & Martin (included in its opinion filed
               as Exhibit 5.1)

23.4           Consent of Seward & Kissel LLP with regard to United States and
               New York law
<PAGE>

Item 9. Undertakings

     The undersigned Registrant hereby undertakes:

     (1)  To file,  during any period in which offers or sales are being made, a
          post-effective amendment to this registration statement:

          (i)  To include any  prospectus  required  by section  10(a)(3) of the
               Securities Act of 1933;

          (ii) To reflect in the  prospectus  any facts or events  arising after
               the  effective  date of the  registration  statement (or the most
               recent post-effective  amendment thereof) which,  individually or
               in  the  aggregate,   represent  a  fundamental   change  in  the
               information   set   forth   in   the   registration    statement.
               Notwithstanding the foregoing, any increase or decrease in volume
               of  securities  offered (if the total dollar value of  securities
               offered  would not  exceed  that  which was  registered)  and any
               deviation  from  the low or  high  end of the  estimated  maximum
               offering  range may be reflected in the form of prospectus  filed
               with the Commission pursuant to Rule 424(b) if, in the aggregate,
               the changes in volume and price represent no more than 20% change
               in  the  maximum  aggregate  offering  price  set  forth  in  the
               "Calculation  of   Registration   Fee"  table  in  the  effective
               registration statement;

         (iii) To include any material  information  with respect to the plan of
               distribution   not  previously   disclosed  in  the  registration
               statement  or any  material  change  to such  information  in the
               registration statement;

     (2)  That,  for  the  purpose  of  determining   any  liability  under  the
          Securities Act of 1933,  each such  post-effective  amendment shall be
          deemed to be a new registration  statement  relating to the securities
          offered  therein,  and the  offering of such  securities  at that time
          shall be deemed to be the initial bona fide offering thereof.

     (3)  To remove from registration by means of a post-effective amendment any
          of  the  securities  being  registered  which  remain  unsold  at  the
          termination of the offering.

     (4)  Insofar  as   indemnification   for  liabilities   arising  under  the
          Securities  Act of 1933 may be  permitted to  directors,  officers and
          controlling  persons  of the  Registrant  pursuant  to  the  foregoing
          provisions,  or otherwise, the Registrant has been advised that in the
          opinion of the Securities and Exchange Commission such indemnification
          is against  public policy as expressed in the  Securities  Act of 1933
          and is,  therefore,  unenforceable.  In the  event  that a  claim  for
          indemnification  against such  liabilities  (other than the payment by
          the Registrant of expenses incurred or paid by a director,  officer or
          controlling  person of the Registrant in the successful defense of any
          action,  suit or proceeding) is asserted by such director,  officer or
          controlling person in connection with the securities being registered,
          the Registrant  will,  unless in the opinion of its counsel the matter
          has  been  settled  by  controlling  precedent,  submit  to a court of
          appropriate  jurisdiction the question whether such indemnification by
          it is against public policy as expressed in the Securities Act of 1933
          and will be governed by the final adjudication of such issue.
<PAGE>

                                   SIGNATURES

     Pursuant to the requirements of the Securities Act of 1933, as amended, the
registrant  has duly  caused  this  registration  statement  to be signed on its
behalf by the undersigned,  thereunto duly authorized,  in Bermuda,  on the 27th
day of September, 2004.

                               SHIP FINANCE INTERNATIONAL LIMITED

                               By:        /s/ Tor Olav TrOim
                               Name:      Tor Olav Tr0im
                               Title:     Chairman and Chief Executive Officer


                                POWER OF ATTORNEY

     KNOW ALL MEN BY THESE PRESENTS,  that each person whose  signature  appears
below constitutes and appoints Gary J. Wolfe and Robert E. Lustrin, or either of
them, with full power to act alone, his or her true lawful attorneys-in-fact and
agents, with full powers of substitution and resubstitution,  for him or her and
in his or her name,  place and stead, in any and all capacities,  to sign any or
all  amendments  (including  post-effective  amendments)  to  this  registration
statement,  and to file the same, with all exhibits thereto, and other documents
in connection therewith,  with the Securities and Exchange Commission,  granting
unto said  attorneys-in-fact  and  agents  full  power and  authority  to do and
perform  each and  every act and thing  necessary  to be done,  as fully for all
intents and purposes as he or she might or could do in person  hereby  ratifying
and confirming all that said  attorneys-in-fact  and agents,  or his substitute,
may lawfully do or cause to be done by virtue hereof.

     In  accordance  with the  requirements  of the  Securities  Act of 1933, as
amended, this registration statement has been signed by the following persons in
the capacities indicated.

Signature                Title                                     Date
---------                -----                                     ----

/s/ Tor Olav Tr0im       Chairman, Chief Executive
                         Officer,  President and Director     September 27, 2004

/s/ Tom E. Jebsen        Chief Financial Officer
                         and Vice President                   September 27, 2004

/s/ Kate Blankenship     Chief Accounting Officer,
                         Secretary and Director               September 27, 2004

/s/ Puglisi & Associates Authorized Representative
                         in the United States                 September 27, 2004

23153.0001 #511657

</TEXT>
</DOCUMENT>
