Edgar Filing: FRONTLINE LTD /

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

FORM 20-F

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

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

for the fiscal year ended December 31, 2000

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

For the transition period from _____ to _____

Commission file number 0-22704

Frontline Ltd
---------------------------------------------------------------
(Exact name of Registrant as specified in its charter)

Frontline Ltd.
---------------------------------------------------------------

(Translation of Registrant's name into English)

Bermuda
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(Jurisdiction of incorporation or organisation)

Mercury House, 101 Front Street, Hamilton, HM 12, Bermuda
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(Address of principal executive offices)

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

Title of each class Name of each exchange
on which registered
None
---------------- -------------------------

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

American Depositary Shares each representing
one Ordinary Share, $2.50 Par Value
-----------------------------------------------------------
(Title of class)

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

Ordinary Shares, $2.50 Par Value
------------------------------------------------------------
(Title of class)

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

78,068,811 Ordinary Shares, $2.50 Par Value of which 3,062,784
Ordinary Shares are held in the form of 3,062,784 American
Depositary Shares
--------------------------------------------------------------

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

Yes X No

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

Item 17 Item 18 X

INDEX TO REPORT OF FORM 20-F

PART I PAGE

ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND
ADVISORS..........................................6

ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE...........6

ITEM 3. KEY INFORMATION...................................6

ITEM 4. INFORMATION ON THE COMPANY.......................16

ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS.....40

ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES.......52

ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY
TRANSACTIONS.....................................56

ITEM 8. FINANCIAL INFORMATION............................58

ITEM 9. THE OFFER AND LISTING............................59

ITEM 10. ADDITIONAL INFORMATION...........................61

ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
MARKET RISK......................................64

ITEM 12. DESCRIPTION OF SECURITIES........................65

PART II

ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES..66

ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY
HOLDERS AND USE OF PROCEEDS......................66

ITEM 15. RESERVED...........................................

ITEM 16. RESERVED...........................................

PART III

ITEM 17. FINANCIAL STATEMENTS.............................68

ITEM 18. FINANCIAL STATEMENTS.............................68

ITEM 19. EXHIBITS.........................................69

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

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

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

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

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

events, and other important factors described from time to time
in the reports filed by Frontline Ltd with the Securities and
Exchange Commission.

PART I

ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISORS

Not Applicable

ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE

Not Applicable

ITEM 3. KEY INFORMATION

A. SELECTED FINANCIAL DATA

The selected income statement data of the Company with respect to
the fiscal years ended December 31, 2000, 1999 and 1998 and the
selected balance sheet data of the Company with respect to the
fiscal years ended December 31, 2000 and 1999 have been derived
from the Company's Consolidated Financial Statements included
herein and should be read in conjunction with such statements and
the notes thereto. The selected income statement data with
respect to the fiscal years ended December 31, 1997 and 1996 and
the selected balance sheet data with respect to the fiscal years
ended December 31, 1998, 1997 and 1996 has been derived from
consolidated financial statements of the Company not included
herein. The selected financial data with respect to the fiscal
years ended December 31, 1998 and 1997 has been restated to
reflect the treatment of ICB Aktiebolag (publ) ("ICB") as an
investment accounted for in accordance with the equity method.
(See Item 4. A "Information on the Company -- History and
Development of the Company"). The following table should also be
read in conjunction with Item 5. "Operating and Financial Review
and Prospects" and the Company's Consolidated Financial
Statements and Notes thereto included herein.

Fiscal Year Ended December 31,
----------------------------------------------------------
2000 1999 1998 1997 1996
(restated) (restated)
(in thousands, except Ordinary Shares, per Ordinary Shares data and ratios)

Income Statement Data:
Net operating revenues $599,944 $253,214 $203,860 $197,197 $110,471
Net operating (loss)
income after
depreciation $376,092 $(12,210) $72,455 $55,476 $5,127
Net (loss) income $313,867 $(86,896) $31,853 $22,794 (13,981)

Earnings (loss) per
Ordinary Share
- basic $4.28 $(1.76) $0.69 $0.63 (0.92)
- diluted $4.27 $(1.76) $0.69 $0.63 $(0.92)
Cash dividends per
Ordinary Share $-- $-- $-- $-- $-

Balance Sheet Data
(at end of year):
Cash and cash
equivalents $103,514 $65,467 $74,034 $86,870 $58,003
Newbuildings and vessel
purchase options $36,326 $32,777 $75,681 $48,474 $--
Vessels and equipment,
net $2,254,921 $1,523,112 $1,078,956 $970,590 $831,981
Vessels under capital
lease, net $108,387 $- $- $- $-
Total assets $2,780,988 $1,726,793 $1,505,414 $1,369,849 $921,113
Long-term debt
(including current
portion) $1,544,139 $1,079,694 $883,021 $773,150 $561,942
Obligations under
capital lease
(including
current portion) $109,763 $- $- $- $-
Stockholders' equity $1,029,490 $557,300 $583,574 $556,010 $327,700
Ordinary Shares
outstanding $78,068,811 $60,961,860 $46,106,860 $46,105,860 $32,161,955

Other Financial Data
EBITDA (1) $481,789 $82,292 $137,099 $116,795 $42,350
Cash Earnings (2) $392,184 $5,662 $82,843 $74,278 $19,681
Return on capital
employed
(percentage) (3) 17.7% 0.1% 6.5% 6.2% 1.7%
Equity to assets
ratio
(percentage) (4) 37.0% 32.3% 38.8% 40.6% 35.6%
Debt to equity ratio (5) 1.6 1.9 1.5 1.4 1.7
Price earnings ratio (6) 3.3 neg. 2.8 19.8 neg.

Footnotes

(1) EBITDA represents net income (loss) before interest expense,
income taxes, depreciation and amortisation expenses. EBITDA
is not required by US generally accepted accounting
principles and should not be considered as an alternative to
net income or any other indicator of the Company's
performance required by US generally accepted accounting
principles.

(2) Cash earnings represents net income (loss) before foreign
exchange gains (losses) and depreciation and amortisation
expense. Cash earnings is not required by US generally
accepted accounting principles and should not be considered
as an alternative to net income or any other indicator of the
Company's performance required by US generally accepted
accounting principles.
(3) Return on capital employed is calculated as net income (loss)
before interest expense and foreign exchange gains (losses),
as a percentage of average capital employed.
(4) Equity to assets ratio is calculated as total stockholders'
equity divided by total assets.
(5) Debt to equity ratio is calculated as total interest bearing
current and long-term liabilities, including obligations
under capital leases, divided by stockholders' equity.
(6) Price earnings ratio is calculated using the closing year end
share price divided by basic Earnings per Share.

B. CAPITALIZATION AND INDEBTEDNESS

Not Applicable

C. REASONS FOR THE OFFER AND USE OF PROCEEDS

Not Applicable

D. RISK FACTORS

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

THE CYCLICAL NATURE OF THE TANKER INDUSTRY MAY LEAD TO VOLATILE
CHANGES IN CHARTER RATES AND VESSEL VALUES WHICH MAY ADVERSELY
AFFECT OUR EARNINGS

Historically, the tanker industry has been highly cyclical, with
volatility in profitability and asset values resulting from
changes in the supply of and demand for tanker capacity. If the
tanker market is depressed in the future our earnings and
available cash flow may decrease. Our ability to recharter our
vessels on the expiration or termination of their current spot
and time charters and the charter rates payable under any renewal
or replacement charters will depend upon, among other things,
economic conditions in the tanker market. Fluctuations in charter
rates and vessel values result from changes in the supply and
demand for tanker capacity and changes in the supply and demand
for oil and oil products.

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

-- demand for oil and oil products;
-- global and regional economic conditions;
-- the distance oil and oil products are to be moved by sea; and
-- changes in seaborne and other transportation patterns.

The factors that influence the supply of tanker capacity include:

-- the number of newbuilding deliveries;
-- the scrapping rate of older vessels;
-- the number of vessels that are out of service; and
-- national or international regulations that may effectively
cause reductions in the carrying capacity of vessels or early
obsolescence of tonnage.

WE ARE HIGHLY DEPENDENT ON SPOT OIL VOYAGE CHARTERS. ANY
DECREASE IN SPOT CHARTER RATES IN THE FUTURE MAY ADVERSELY AFFECT
OUR EARNINGS

The majority of our vessels currently operate on a spot charter
basis or under contracts of affreightment. Although spot
chartering is common in the tanker industry, the spot charter
market is highly competitive and spot charter rates may fluctuate
significantly based upon tanker and oil supply and demand. The
successful operation of our vessels in the spot charter market
depends upon, among other things, obtaining profitable spot
charters and minimising, to the extent possible, time waiting for
charters and time spent travelling unladen to pick up cargo. We
cannot assure you that future spot charters will be available at
rates sufficient to enable our vessels trading in the spot market
to operate profitably. In addition, bunkering, or fuel, charges
that account for a substantial portion of the operating costs,
and generally reflect prevailing oil prices, are subject to sharp
fluctuations.

OUR REVENUES EXPERIENCE SEASONAL VARIATIONS THAT MAY AFFECT OUR
INCOME

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

BECAUSE THE MARKET VALUE OF OUR VESSELS MAY FLUCTUATE
SIGNIFICANTLY, WE MAY INCUR LOSSES WHEN WE SELL VESSELS WHICH MAY
ADVERSELY AFFECT OUR EARNINGS

The fair market value of tankers may increase and decrease
depending on the following factors:

-- general economic and market conditions affecting the tanker
industry;
-- competition from other shipping companies;
-- types and sizes of vessels;
-- other modes of transportation;
-- cost of newbuildings;
-- governmental or other regulations;
-- prevailing level of charter rates; and
-- technological advances.

If we sell a tanker at a time when tanker prices have fallen, the
sale may be at less than the vessel's carrying amount on our
financial statements, with the result that we could incur a loss
and a reduction in earnings. Recent market conditions in the
tanker industry have favourably affected the market values of our
vessels. It is possible that the market value of the Company's
vessels will decline in the future.

IF WE VIOLATE ENVIRONMENTAL LAWS OR REGULATIONS, THE RESULTING
LIABILITY MAY ADVERSELY AFFECT OUR EARNINGS AND FINANCIAL
CONDITION

Our operations are subject to extensive regulation designed to
promote tanker safety, prevent oil spills and generally protect
the environment. Local, national and foreign laws, as well as
international treaties and conventions, can subject us to
material liabilities in the event that there is a release of
petroleum or other hazardous substances from our vessels.

For example, the United States Oil Pollution Act of 1990, or OPA,
provides that owners, operators and bareboat charterers are
strictly liable for the discharge of oil in U.S. waters,
including the 200 nautical mile zone off the U.S. coasts. OPA
provides for unlimited liability in some circumstances, such as a
vessel operator's gross negligence or willful misconduct.
However, in most cases OPA limits liability to the greater of
$1,200 per gross ton or $10 million per vessel. OPA also permits
states to set their own penalty limits. Most states bordering
navigable waterways impose unlimited liability for discharges of
oil in their waters. The International Maritime Organization, or
IMO, has adopted a similar liability scheme that imposes strict
liability for oil spills, subject to limits that do not apply if
the release is caused by the vessel owner's intentional or
reckless conduct.

U.S. law, the law in many of the nations in which we operate, and
international treaties and conventions that impact our operations
also establish strict rules governing vessel safety and
structure, training, inspections, financial assurance, for
potential cleanup liability and other matters. These requirements
can limit our ability to operate, and substantially increase our
operating costs. The U.S. has established strict deadlines for
phasing-out single-hull oil tankers, and both the IMO and the
European Union have adopted similar phase-out periods.

Under OPA, with certain limited exceptions, all newly built or
converted tankers operating in United States waters must be built
with double hulls conforming to particular specifications.
Tankers that do not have double hulls are subject to structural
and operational measures to reduce oil spills and will be
precluded from operating in United States waters between 1995 and
2015 according to size, age, hull configuration and place of
discharge unless retrofitted with double hulls. In addition, OPA
specifies annual inspections, vessel manning, equipment and other
construction requirements that are in various stages of
development, applicable to new and to existing vessels.

The IMO recently announced a proposed revised timetable for the
phasing out of single-hull oil tankers by 2015. The proposal
identifies three categories of tankers based on cargo carrying
capacity and the presence or absence of protectively located
segregated ballast tanks. Under the new IMO proposal, single-hull
oil tankers with carrying capacities of 20,000 deadweight tons,
or dwt, and above carrying crude oil, fuel oil, heavy diesel oil
or lubricating oil as cargo, and of 30,000 dwt and above carrying
other oils, which do not comply with IMO requirements for
protectively located segregated ballast tanks will be phased out
no later than 2007. Single-hull oil tankers with similar carrying
capacities which do comply with IMO requirements for protectively
located segregated ballast tanks are to be phased out by 2015,
depending on the date of delivery of the vessel. All other
single-hull oil tankers with carrying capacities of 5,000 dwt and
above, and not falling into one of the above categories, will
also be phased out by 2015, depending on the date of delivery of
the vessel.

These requirements can affect the resale value or useful lives of
our vessels. In addition, violations of applicable requirements
or a catastrophic release from one of our vessels could have a
material adverse impact on our financial condition and results of
operations.

OUR EARNINGS COULD SUFFER IF WE DO NOT SUCCESSFULLY EMPLOY OUR
DRY BULK VESSELS WHEN THEIR BAREBOAT CHARTERS AND TIME CHARTERS
TERMINATE

Most of the vessels (nine of the ten vessels) in the dry bulk
fleet that we acquired through our purchase of Golden Ocean Group
Limited in 2000 operate under long term charters. Although these
long term charters provide steady streams of revenue, the vessels
that are subject to these charters may not be available for spot
voyages during an upswing in the dry bulk market cycle, when spot
voyages might be more profitable. Additionally, if we cannot
recharter those vessels on long term charters or employ them in
the spot market profitably when their current charters expire,
this could have a material adverse impact on our financial
condition and results of operations.

THE MARKET FOR TRANSPORTATION OF CRUDE OIL IS HIGHLY COMPETITIVE
AND WE MAY NOT BE ABLE EFFECTIVELY TO COMPETE

The operation of tanker vessels and transportation of crude and
petroleum products and the other businesses in which we operate
are extremely competitive. Through our operating subsidiaries we
compete with other oil tanker and dry bulk carrier owners
(including major oil companies as well as independent companies),
and, to a lesser extent, owners of other size vessels. Our market
share currently is insufficient to enforce any degree of pricing
discipline in the markets in which we compete. It is possible
that our competitive position will erode in the future.

WE DO NOT EARN REVENUES WHEN WE HAVE TANKERS CONSTRUCTED FOR US,
EVEN THOUGH WE MUST MAKE PROGRESS PAYMENTS

We currently have on order two Suezmax tankers for delivery in
the second half of 2001 and six VLCCs, of which one is for
delivery in late 2001, four for delivery in 2002 and the final
one for delivery in 2003. We are required to make progress
payments during the construction of the vessel, but we will not
derive any revenue from the vessels until after its delivery. If
the shipyards are unable to complete the contract or if we are
unable to obtain the financing required to pay for the delivery
of the vessels, we may forfeit all or a portion of the
instalments that have been paid. See Item 4. "Information on the
Company".

OUR DEBT SERVICE OBLIGATIONS COULD AFFECT OUR ABILITY TO INCUR
ADDITIONAL INDEBTEDNESS OR ENGAGE IN CERTAIN TRANSACTIONS

Our existing financing agreements impose operation and financing
restrictions on us which may significantly limit or prohibit,
among other things, our 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,
our 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 our failure to comply with any of the
covenants contained in our financing agreements.

FLUCTUATIONS IN THE YEN COULD AFFECT OUR EARNINGS

The fleet of our subsidiary, Golden Ocean Group Limited, which we
acquired in 2000, has some charters and financing arrangements
that require payments of principal and interest or charter hire
in Yen. While many of the charters for the dry bulk vessels that
we acquired through Golden Ocean require the charterers to pay in
Yen so as to cover related Yen denominated debt service, the
charterers may also pay a significant part of the charter hire in
Dollars. As we have not hedged our Yen exposure against the
Dollar, a rise in the Yen could have a material adverse impact on
our financial condition and results of operations.

WE MAY BE UNABLE TO ATTRACT AND RETAIN KEY MANAGEMENT PERSONNEL
IN THE TANKER INDUSTRY, WHICH MAY NEGATIVELY IMPACT THE
EFFECTIVENESS OF OUR MANAGEMENT AND OUR RESULTS OF OPERATION

Our success depends to a significant extent upon the abilities
and efforts of our senior executives, and particularly John
Fredriksen, our Chairman and Chief Executive Officer, and Tor
Olav Troim, our Vice-President, for the management of our
activities and strategic guidance. While we believe that we have
an experienced management team, the loss or unavailability of one
or more of our senior executives, and particularly Mr. Fredriksen
or Mr. Troim, for any extended period of time could have an
adverse effect on our business and results of operations.

OUR VESSELS MAY SUFFER DAMAGE AND WE MAY FACE UNEXPECTED
DRYDOCKING COSTS WHICH COULD AFFECT OUR CASH FLOW AND OUR ABILITY
TO SERVICE OUR DEBT

If our vessels suffer damage, they may need to be repaired at a
drydock or other type of ship repair facility. The costs of
drydock and/or repairs are unpredictable and can be substantial.
We may have to pay drydocking and repair costs that our insurance
does not cover. This would decrease earnings. Repairs may
involve long periods of inactivity which may have a negative
effect on earnings and our ability to service our debt.

RISKS INVOLVED WITH OPERATING OCEAN GOING VESSELS COULD AFFECT
OUR BUSINESS AND REPUTATION, WHICH WOULD ADVERSELY AFFECT OUR
REVENUES

The operation of an ocean-going vessel carries inherent risks.
These risks include the possibility of:

-- marine disaster;
-- piracy;
-- environmental accidents;
-- cargo and property losses or damage; and
-- business interruptions caused by mechanical failure, human
error, war, terrorism, piracy, political action in various
countries, labour strikes, or adverse weather conditions.

Any of these circumstances or events could increase our costs or
lower our revenues. The involvement of our vessels in an oil
spill or other environmental disaster may harm our reputation as
a safe and reliable tanker operator.

WE MAY NOT HAVE ADEQUATE INSURANCE TO COMPENSATE US IF OUR
VESSELS ARE DAMAGED OR LOST

We procure insurance for our fleet against those risks that we
believe the shipping industry commonly insures against. These
insurances include hull and machinery insurance, protection and
indemnity insurance, which includes environmental damage and
pollution insurance coverage, and war risk insurance. We can give
no assurance that we are adequately insured against all risks. We
may not be able to obtain adequate insurance coverage at
reasonable rates for our fleet in the future. Additionally, our
insurers may not pay particular claims. Our insurance policies
contain deductibles for which we will be responsible, limitations
and exclusions which, although we believe are standard in the
shipping industry, may nevertheless increase our costs or lower
our revenue.

MARITIME CLAIMANTS COULD ARREST OUR TANKERS, WHICH COULD
INTERRUPT OUR CASH FLOW

Crew members, suppliers of goods and services to a tanker,
shippers of cargo and other parties may be entitled to a maritime
lien against that tanker for unsatisfied debts, claims or
damages. In many jurisdictions a maritime lienholder may enforce
its lien by arresting a tanker through foreclosure proceedings.
The arrest or attachment of one or more of our tankers could
interrupt our cash flow and require us to pay a lot 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 of our ships.

GOVERNMENTS COULD REQUISITION OUR VESSELS DURING A PERIOD OF WAR
OR EMERGENCY, RESULTING IN LOSS OF EARNINGS

A government could requisition for title or seize our vessels.
Requisition for title occurs when a government takes control of a
vessel and becomes her owner. Also, a government could
requisition our vessels for hire. Requisition for hire occurs
when a government takes control of a vessel and effectively
becomes her charterer at dictated charter rates. Generally,
requisitions occur during a period of war or emergency.
Government requisition of one or more of our vessels would
negatively impact our revenues.

OUR OPERATIONS OUTSIDE THE UNITED STATES EXPOSE US TO GLOBAL
RISKS THAT MAY INTERFERE WITH THE OPERATION OF OUR VESSELS

We are an international company and primarily conduct our
operations outside of the United States. Changing economic,
political and governmental conditions in the countries where we
are engaged in business or where our vessels are registered
affect us. Hostilities or other political instability in regions
where our vessels trade could affect our trade patterns and
adversely affect our operations and performance.

BECAUSE WE ARE A FOREIGN CORPORATION, YOU MAY NOT HAVE THE SAME
RIGHTS THAT A SHAREHOLDER IN A U.S. CORPORATION MAY HAVE

We are a Bermuda corporation. Our articles of incorporation and
bye-laws and the Bermuda Companies Act 1981, as amended, govern
our affairs. Investors may have more difficulty in protecting
their interests in the face of actions by management, directors
or controlling shareholders than would shareholders of a
corporation incorporated in a United States jurisdiction. In
addition, our executive officers, administrative activities, and
assets are located outside the United States. As a result, it may
be more difficult for investors to effect service of process
within the United States upon us, or to enforce both in the
United States and outside the United States judgments against us
in any action, including actions predicated upon the civil
liability provisions of the federal securities laws of the United
States.

WE MAY HAVE TO PAY TAX ON UNITED STATES SOURCE INCOME, WHICH
WOULD REDUCE OUR EARNINGS

Under the United States Internal Revenue Code of 1986, or the
Code, a portion of the gross shipping income of a vessel owning
or chartering corporation, such as ourselves and our
subsidiaries, may be subject to a 4% United States federal income
tax on 50% of the gross shipping income that is attributable to
transportation that begins or ends, but that does not both begin

and end, in the U.S., unless that corporation is entitled to a
special tax exemption under the Code which applies to the
international shipping income derived by some non-United States
corporations. We believe that we and each of our subsidiaries
qualify for this statutory tax exemption for the year ended
December 31, 2000.

However, due to the absence of final Treasury regulations or
other definitive authority concerning some aspects of this tax
exemption under the relevant provisions of the Code and to the
factual nature of the issues involved, we can give no assurances
on our tax-exempt status or that of any of our subsidiaries.

If we or our subsidiaries are not entitled to this statutory tax
exemption for any taxable year, we or our subsidiaries could be
subject for those years to an effective 4% United States federal
income tax on the portion of the income we or our subsidiaries
derive during the year from United States sources. The imposition
of this taxation would have an adverse effect on our
profitability.

ITEM 4. INFORMATION ON THE COMPANY

A. HISTORY AND DEVELOPMENT OF THE COMPANY

THE COMPANY

Frontline Ltd. is a Bermuda based shipping company engaged
primarily in the ownership and operation of oil tankers. The
Company was incorporated in Bermuda on June 12, 1992 (Company No.
EC-17460). Its registered and principal executive offices are
located at Mercury House, 101 Front Street, Hamilton, HM 12,
Bermuda, and its telephone number is +1 (441) 295-6935.

The Company is engaged primarily in the ownership and operation
of oil tankers, including oil/bulk/ore ("OBO") carriers. The
Company operates tankers of two sizes: very large crude carriers
("VLCCs") which are between 200,000 and 320,000 deadweight tons
("dwt"), and Suezmaxes, which are vessels between 120,000 and
170,000 dwt. In addition, through a corporate acquisition
completed in October 2000, the Company has acquired a fleet of
dry bulk carriers that includes Capesize, Panamax and Handymax
size bulkers. The Company operates through subsidiaries and
partnerships located in Bermuda, Liberia, Norway, Panama,
Singapore and Sweden. The Company is also involved in the
charter, purchase and sale of vessels. Since 1996, Frontline has
emerged as a leading tanker company within the VLCC and Suezmax
size sectors of the market.

The Company has its origin in Frontline AB, which was founded in
1985, and which was listed on the Stockholm Stock Exchange from

1989 to 1997. In May 1997, a decision was made to redomicile
Frontline AB from Sweden to Bermuda and to list its shares on the
Oslo Stock Exchange. The change of domicile was executed through
a share for share exchange offer from the then newly formed
Frontline Ltd. ("Old Frontline") in Bermuda. Frontline Ltd. was
incorporated under the laws of Bermuda on April 29, 1997 for the
purpose of succeeding to the business of Frontline AB and,
commencing in June 1997, the shares in Frontline AB were
exchanged for shares in Frontline. The ordinary shares of
Frontline were thereafter listed on the Oslo Stock Exchange and
delisted from the Stockholm Stock Exchange.

In September 1997 Frontline initiated an amalgamation with London
& Overseas Freighters Limited ("LOF"), also a Bermuda company.
This process was completed in May 1998. In the business
combination (discussed in detail below), which left LOF as the
surviving company, Frontline's shareholders exchanged Frontline
shares for LOF shares and LOF was subsequently renamed Frontline
Ltd. As a result of this transaction, Frontline became listed on
the London Stock Exchange and on the NASDAQ National Market in
addition to its listing on the Oslo Stock Exchange.

BUSINESS ACQUISITIONS AND COMBINATIONS

AMALGAMATION WITH LONDON & OVERSEAS FREIGHTERS LIMITED

On September 22, 1997, LOF and Frontline announced that they had
entered into an Agreement and Plan of Amalgamation (the
"Amalgamation Agreement"), providing for a business combination
in a three-step transaction. On September 29, 1997, pursuant to
the Amalgamation Agreement, Frontline commenced a cash tender
offer (the "Offer") for at least 50.1 per cent and up to 90 per
cent of the outstanding LOF Ordinary Shares and ADSs for a price
of $1.591 (restated to $15.91) per Ordinary Share ($15.91 per
ADS). The Offer expired on October 28, 1997, and effective
November 1, 1997 Frontline acquired approximately 79.74 per cent
of the outstanding LOF Ordinary Shares.

In the second step, Frontline amalgamated (the "Amalgamation")
with Dolphin Limited, a Bermuda subsidiary of LOF. Each ordinary
share of Frontline was cancelled in consideration for which the
stockholders of Frontline received (i) 3.2635 (restated to
0.32635) Ordinary Shares of LOF and (ii) 0.1902 (restated to
0.01902) of a newly issued warrant ("Frontline Warrants") to
purchase one LOF Ordinary Share. In the third step of the
combination, in order to combine the assets and liabilities, LOF
purchased the assets and liabilities of Frontline which were
vested in the amalgamated company at fair market value in
exchange for a promissory note. LOF is the legally surviving
entity in this business combination and has been renamed
Frontline Ltd. with effect from May 11, 1998. Frontline is

treated as the accounting acquirer and the transaction treated as
a reverse acquisition. The share capital of the Company has been
restated accordingly to reflect the transaction. For periods on
or after May 11, 1998, the term "Company" refers to Frontline
Ltd. (formerly London & Overseas Freighters Limited).

ACQUISITION OF ICB

On September 1, 1997, Frontline announced its intention to submit
an offer to acquire all of the shares of ICB . The final form of
the offer was an offer to acquire all of the shares of ICB (the
"ICB Shares") in exchange for SEK 130 in cash for each of the A-
shares and SEK 115 in cash for each of the B-shares. The total
acquisition price was estimated to be $423 million, financed
primarily by a US $300 million loan facility ("ICB facility")
with a syndicate of international lenders. Through the tender
offer, by October 1997 Frontline acquired 51.7 per cent of the
outstanding shares of ICB at a purchase price of approximately
$215 million. However, the shares purchased, 14,428,078 Class B
shares and 148,663 Class A shares, provided Frontline with only
31.4 per cent of the ICB voting rights. On January 8, 1998,
Frontline withdrew its bid for the remaining outstanding shares
of ICB. 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.

On September 23, 1999, pursuant to an agreement (the "ICB
Agreement"), Frontline acquired ICB Shares previously owned by
the so-called "A group" consortium including those controlled by
board members of ICB and ICB shares controlled by the
Angelicoussis family. In connection with the ICB Agreement, four
of the VLCCs owned by ICB were sold to companies controlled by
the Angelicoussis family. As a result of the acquisitions,
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, nominated by Frontline,
was appointed in ICB. In December 1999, Frontline commenced a
compulsory acquisition for the remaining shares in ICB and ICB
was delisted from the Stockholm Stock Exchange. The operations of
ICB have been incorporated into those of the Company and the
eight vessels acquired as a result of the transaction have been
transferred to the Company's management structure.

In the two year period prior to September 1999, Frontline was
unable to control, or exercise significant influence over, ICB.
Accordingly, the Company previously accounted for its investment
in ICB as an available-for-sale security in accordance with SFAS
115. As a result of Frontline acquiring control over ICB, the
Company's financial statements have been restated. For the years
ended December 31, 1997 and 1998, the investment in ICB is
accounted for in accordance with the equity method. For the year

ended December 31, 1999, ICB has been consolidated with effect
from January 1, 1999.

Through the acquisition of ICB, Frontline, through an indirect
subsidiary, has taken over responsibility for the management of
Knightsbridge Tankers Limited (Knightsbridge"), a company whose
shares are listed on the Nasdaq National Market under the symbol
"VLCCF". Knightsbridge owns five VLCCs (built 1995-96) which are
chartered to Shell International Petroleum Company Limited.
Knightsbridge reports to the US Securities and Exchange
Commission pursuant to Section 13 of the Securities Exchange Act
of 1934. The Company has an ownership interest of less than half
of one per cent in Knightsbridge as of May 31, 2001.

ACQUISITION OF GOLDEN OCEAN GROUP LIMITED

On October 10, 2000, Frontline acquired Golden Ocean Group
Limited ("Golden Ocean"), a shipping group which holds interests
in 14 VLCCs and 10 bulk carriers. On the same date, Golden Ocean
emerged from bankruptcy protection under Chapter 11 of the U.S.
Bankruptcy Code. Most of the delivered tonnage of Golden Ocean is
presently employed on medium to long term charters.

On January 14, 2000, Golden Ocean and its fellow subsidiaries,
Golden Ocean Tankers Limited and Channel Rose Holdings Inc.
(together the "Debtors") filed for bankruptcy protection under
Chapter 11 of the U.S. Bankruptcy Code with the Clerk of the
United States Bankruptcy Court for the District of Delaware (the
"Bankruptcy Court"), and through this protection received an
exclusive period of up to 120 days to file a Plan of
Reorganisation. In February, March and April 2000, Frontline
acquired a significant portion of US$ 291 million Senior Notes
due in August 2001 of Golden Ocean. As one of Golden Ocean's
largest creditors, Frontline announced that it would seek to be
actively involved in the reorganisation process. On June 6, 2000,
the Bankruptcy Court terminated Golden Ocean's exclusive period
to file a plan of reorganisation, thereby permitting any party in
interest to propose a plan.

On July 7, 2000, Frontline filed a proposed plan of
reorganisation (the "Plan of Reorganisation") and disclosure
statement (the "Disclosure Statement") with the Bankruptcy Court
which set forth the manner in which claims against and equity
interests in the Debtors would be treated. Two other competing
plans were filed within the time limit defined by the Bankruptcy
Court. On August 4, 2000 the Bankruptcy Court approved on
Frontline's Disclosure Statement and on August 14, 2000 approved
the appointment of Frontline as manager of Golden Ocean's
operations with immediate effect. The Plan of Reorganisation was
approved by an overwhelming majority of holders of claims

entitled to vote and was confirmed at a hearing on September 15,
2000.

ACQUISITION OF MOSVOLD SHIPPING LIMITED

On April 23, 2001, Frontline announced an offer for all of the
shares of Mosvold Shipping Limited ("Mosvold"), a Bermuda company
whose shares are listed on the Oslo Stock Exchange. Through a
combination of shares acquired and acceptances of the offer, as
at May 31 2001, Frontline controlled 97 per cent of the shares of
Mosvold. Mosvold owns two mid-70s built VLCCs and three
newbuilding contracts for VLCCs to be delivered, one in each of
2001, 2002 and 2003.

B. BUSINESS OVERVIEW

The Company is a world leader in the international seaborne
transportation of crude oil. The Company's tanker fleet, which is
one of the largest and most modern in the world, consists of 26
owned, part-owned or controlled VLCCs and 28 owned, part-owned or
controlled Suezmax tankers, of which 8 are Suezmax OBOs. The
Company also has eight newbuilding contracts (including those
held by Mosvold) and has purchase options or obligations to
acquire a further three VLCCs and two Suezmax tankers. The
Company also charters in three modern VLCCs and two modern
Suezmax tankers.

In 2000, the Company took delivery of three Suezmax and one VLCC
newbuildings and two secondhand Suezmax tankers. In addition, the
Company acquired three second-hand VLCCs and acquired a forty per
cent interest in a second-hand VLCC. Through the acquisition of
Golden Ocean, which was completed in October 2000, the Company
acquired its current dry bulk fleet, seven wholly or partially
owned VLCCs and five options or obligations to acquire VLCCs. Two
of the VLCCs covered by the options have since been delivered to
the Company.

In 2001 to date, the Company has sold two 1993-built VLCCs and a
2000 built Suezmax tanker, all of which had been acquired in
2000, and bought a 50.1 per cent interest in two 1993-built
VLCCs. In addition, through its acquisition of Mosvold, it has
acquired two mid-70s built VLCCs and three newbuilding contracts
for VLCCs to be delivered, one in each of 2001, 2002 and 2003.

The fleet operated by the Company has a total tonnage of
approximately 14.3 million dwt, and its tanker vessels have an
average age of 5.9 years compared with an estimated industry
average of over 12.5 years. The Company believes that its vessels
comply with the most stringent of generally applicable
environmental regulations for tankers. Its dry bulk fleet has an
average age of 3.2 years.

Frontline owns various ship owning and operating subsidiaries.
The operations of Frontline take place substantially outside of
the United States. Frontline's subsidiaries, therefore, own and
operate vessels which may be affected by changes in foreign
governments and other economic and political conditions.
Frontline is engaged primarily in transporting crude oil products
and, in addition, raw materials like coal and iron ore.
Frontline's VLCCs are specifically designed for the
transportation of crude oil and, due to their size, are normally
used only to transport crude oil from the Middle East Gulf to the
Far East, Northern Europe, the Caribbean and the Louisiana
Offshore Oil Port ("LOOP"). The Suezmax tankers are similarly
designed for worldwide trading, but the trade for these vessels
is mainly in the Atlantic Basin. Historically, the tanker
industry has been highly cyclical, with attendant volatility in
profitability and asset values resulting from changes in the
supply of and demand for tanker capacity. Frontline's OBO
carriers are specifically designed to carry oil or dry cargo and
may be used to transport either oil or dry cargo on any voyage.
When freight rates in both markets are equivalent OBO carriers
are operated most profitably in combination trade transporting
oil on one leg of the voyage and dry cargo on the other leg of a
voyage. The supply of tanker and OBO capacity is influenced by
the number of new vessels built, the number of older vessels
scrapped, converted, laid up and lost, the efficiency of the
world tanker or OBO fleet and government and industry regulation
of maritime transportation practices. The demand for tanker and
OBO capacity is influenced by global and regional economic
conditions, increases and decreases in industrial production and
demand for crude oil and petroleum products, the proportion of
world oil output supplied by Middle eastern and other producers,
political changes and armed conflicts (including wars in the
Middle East) and changes in seaborne and other transportation
patterns. The demand for OBO capacity is, in addition, influenced
by increases and decreases in the production and demand for raw
materials such as iron ore and coal. In particular, demand for
Frontline's tankers and its services in transporting crude oil
and petroleum products and dry cargoes has been dependent upon
world and regional markets. Any decrease in shipments of crude
oil or raw materials in world markets could have a material
adverse effect on Frontline's earnings. Historically, these
markets have been volatile as a result of, among other things,
general economic conditions, prices, environmental concerns,

weather and competition from alternative energy sources. Because
many factors influencing the supply of and demand for tankers and
OBO carriers are unpredictable, the nature, timing and degree of
changes in industry conditions are also unpredictable.

The Company is committed to providing quality transportation
services to all of its customers and to developing and
maintaining long term relationships with the major charterers of
tankers. Increasing global environmental concerns have created a
demand in the petroleum products/crude oil seaborne
transportation industry for vessels that are able to conform to
the stringent environmental standards currently being imposed
throughout the world. The Company's fleet of modern single hull
VLCCs may discharge crude oil at LOOP until the year 2015, and
its modern single hull Suezmax tankers may call at US ports until
the year 2010 under the phase-in schedule for double hull tankers
presently prescribed under the Oil Pollution Act of 1990
("OPA 90"). See "Regulation".

The shipping industry is highly cyclical, experiencing volatility
in profitability, vessel values and charter rates. In particular,
freight and charterhire rates are strongly influenced by the
supply of vessels and the demand for oil transportation. Freight
rates weakened in the second half of 1998 and further
deteriorated in 1999 as a result of OPEC oil production cuts to
support oil prices, relatively high world oil inventories,
weakness in oil demand due to the continued Southeast Asian
economic crisis as well as the onset of a recession in Latin
America and the relatively large tanker newbuilding delivery
schedule. Towards the end of 1999, Suezmax rates started to
improve followed by improving VLCC rates at the end of the first
quarter of 2000. According to preliminary data from industry
sources, which the Company has not verified, global oil demand is
estimated to have increased by 1% between 1999 and 2000 as a
consequence of demand increases in most geographical regions.
After production quota cuts in 1999, OPEC responded to market
demand by increasing output in 2000. Due to the weak market in
1999 and early 2000 a substantial number of tankers were scrapped
which together with higher oil production created a balance
between demand and supply in the tanker market. VLCC rates as a
consequence started to improve from the end of the first quarter
of 2000 and continued to strengthen through the year. More
stringent practices among charterers in selection of tonnage
following the sinking of the 23 year old tanker, "Erika", and
resulting oil spill off Brittany in December 1999, also
contributed to the reduction of tonnage supply as older vessels
were excluded from certain trades. Twenty six VLCCs were sold for
demolition in the year 2000, while forty one newbuildings were
delivered. Fifty six newbuilding contracts were signed during the
year, resulting in the orderbook standing at eighty seven
vessels. A total of 17 Suezmaxes were removed through scrapping

from the trading fleet in 2000 and 22 Suezmaxes were delivered
from shipyards in the period.

Demolition activity slowed down in the second half of 2000 as a
result of the strong market. New rules for tankers have been
imposed by the IMO at its meeting in April 2001. These rules, if
ratified by IMO member states, will cause the removal from
trading in the years 2003-2006 of practically all large crude oil
tankers built prior to 1980.

In 2000, VLCC earnings averaged almost $50,000 per day for modern
vessels on West bound voyages from the Arabian Gulf. The trend
increased throughout the year with forth quarter earnings
averaging more than $70,000 per day. This is a sharp improvement
compared to the corresponding figures for 1999 when modern VLCCs
earned $21,300 per day on average for the year and $16,000 per
day in the fourth quarter. A similar trend was seen in Suezmax
rates. See Item 5. "Operating and Financial Review and
Prospects".

In early 2001, OPEC reduced production quotas to accommodate a
seasonal reduction in oil demand with the aim to keep OPEC crude
oil prices within the range of US$22-28 per barrel. As a result,
tanker rates have declined in 2001 compared to the record rates
seen in the fourth quarter of 2000. Rates in the first and second
quarters of 2001 were, in spite of this decline, still attractive
for tanker owners.

All of the Company's dry bulk vessels are fixed on medium to
long-term bareboat or time charters.

The Company's plan is to create one of the world's largest
publicly traded shipping companies, with a modern, high quality
VLCC and Suezmax fleet. The Company's business strategy is
primarily based upon the following principles:

-- emphasising operational safety and quality maintenance for
all of its vessels;
-- complying with all current and proposed environmental
regulations;
-- outsourcing technical operations and crewing;
-- controlling operational costs of vessels;
-- owning one of the most modern and homogeneous fleets of
tankers in the world;
-- achieving high utilisation of its vessels;
-- achieving competitive financing arrangements: and
-- developing and maintaining relationships with major oil
companies and industrial charterers.

After having delivered their cargo, spot market vessels typically
operate in ballast until being rechartered. It is the time

element associated with these ballast legs which the Company
seeks to minimise by efficiently chartering its OBO carriers and
tankers. The Company seeks to maximise earnings in employing
vessels in the spot market, under time charters or under
Contracts of Affreightment ("COAs").

In December 1999, the Company, together with A.P. Moller, Euronav
Luxembourg SA, Osprey Maritime Ltd., Overseas Shipholding Group,
Inc and Reederei "Nord" Klaus E. Oldendorff agreed to form
Tankers International LLC ("Tankers") to pool the commercial
operation of the participating companies' modern VLCC fleets (the
"Tankers Pool"). Tankers began operations on February 1, 2000,
with an initial fleet of 39 modern VLCCs (of which the Company
contributed twelve vessels). Tankers' fleet currently constitutes
12 per cent of the world VLCC fleet. By 2002, as the participants
take delivery of newbuildings and vessels are redelivered from
time charters, Tankers' fleet is expected to reach 70 vessels.
Tankers mainly employs ships in the spot market, although it also
from time to time enters into COAs and time charters. Revenues to
each shipowner who participates in Tankers are calculated on the
basis of the pool's total earnings and the tonnage committed into
Tankers by the shipowner.

By consolidating the commercial operation of its substantial VLCC
fleet into a unified transportation system, Tankers offers its
customers "one stop shopping" for high quality modern VLCC
tonnage. The size of the fleet enables Tankers to become the
logistics partner of major customers, providing new and improved
tools to manage shipping programs, inventories and risk. The
Company believes that Tankers will enhance the financial
performance of pool vessels through higher utilisation and other
operating efficiencies. Tankers also seeks to reduce vessel
operating costs by facilitating joint purchasing of goods and
services by pool participants.

In 1998, in order to increase the Company's market share in the
Suezmax trades and increase trading flexibility, the Company and
OMI Corporation, a major international shipping company, combined
Suezmax tanker fleets for commercial purposes and created
Alliance Chartering LLC ("Alliance"). Alliance currently markets
42 Suezmax tankers, of which the majority are employed in the
Atlantic market, comprising approximately 30 per cent of the
total modern Suezmaxes trading in the spot market in the Atlantic
basin. Alliance's control of this large modern fleet of Suezmaxes
has enabled it to strengthen relationships with a number of
customers.

Alliance mainly employs ships in the spot market, although it
also from time to time enters into COAs and time charters.
Revenues to each shipowner who participates in Alliance are based
on the actual earnings from the ships contributed into Alliance

by the shipowner. Two part-owned Suezmax tankers which are
employed outside of Alliance, "Polytrader" and "Polytraveller",
have been chartered to Navion ASA until April 2001 and January
2003, respectively. Since April 2001, "Polytrader" has been
traded in the spot market.

Similar to structures commonly used by other shipping companies,
the Company's vessels are all owned by, or chartered to, separate
subsidiaries or associated companies. Frontline Management AS
("Frontline Management"), a wholly-owned subsidiary of the
Company, supports the Company in the implementation of its
decisions. Frontline Management is responsible for the commercial
management of the Company's shipowning subsidiaries, including
chartering and insurance. Each vessel owned by the Company is
registered under Bahamas, Liberian, Singaporean, Norwegian or
Panamanian flag.

Frontline has a strategy of extensive outsourcing. Ship
management, crewing and accounting services are provided by a
number of independent and competing suppliers.

-- Frontline's vessels are managed by independent ship
management companies. Pursuant to management agreements, each
of the independent ship management companies provides
operations, ship maintenance, crewing, technical support,
shipyard supervision and related services to Frontline. A
central part of Frontline's strategy is to benchmark
operational performance and cost level amongst the Company's
ship managers.
-- Independent ship managers provide crewing for Frontline's
vessels. Currently, most vessels are crewed with full Russian
crews, while others have full Indian or full Filipino crews,
or combinations of these nationalities.
-- The accounting management services for each of the shipowning
subsidiaries of Frontline are provided by the ship managers.

FURTHER EXPANSION OF FLEET

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

Based on these considerations, the Company intends to look for
further opportunities to expand its fleet and acquire additional
VLCCs and Suezmax tankers. Frontline believes that VLCC and
Suezmax freight rates and market values will support such
expansion. Due to the ageing profile of the existing world fleet,
enforcement of more stringent environmental regulations and

customer demand, the Company believes that there will be
increased demand for modern VLCCs and Suezmax tankers needed to
carry the world oil trade during the early 2000's. As a result,
opportunities exist for selective investment in VLCC and Suezmax
tankers built in the 1990's that are in good operating condition,
with prospects to yield operating profits and capital gains over
the next several years. Although freight rates and market values
are volatile, the Company believes that investment in such VLCC
and Suezmax tankers in today's market carries a relatively
limited amount of downside risk while offering the prospect of
significant upside potential.

As part of its vessel acquisition policy, the Company conducts a
physical inspection of each tanker and examines its construction,
prior ownership, operating history and classification records.
Among the second-hand VLCC and Suezmax tankers which the Company
may purchase are tankers subject to existing bareboat charters or
leases with major oil companies. The Company may also purchase
options to acquire such tankers at the expiration of such
bareboat charters or leases. The Company cannot guarantee that
its policy will be successful.

SEASONALITY

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

CUSTOMERS

Customers of the Company include major oil companies, petroleum
products traders, government agencies and various other entities.
During each of the years ended December 31, 2000, 1999 and 1998,
no customer accounted for 10 per cent or more of consolidated
freight revenues.

COMPETITION

The market for international seaborne crude oil transportation
services is highly fragmented and competitive. Seaborne crude oil
transportation services generally are provided by two main types
of operators: major oil company captive fleets (both private and
state-owned) and independent shipowner fleets. In addition,
several owners and operators pool their vessels together on an
ongoing basis, and such pools are available to customers to the
same extent as independently owned and operated fleets. Many
major oil companies and other oil trading companies, the primary

charterers of the vessels owned or controlled by the Company,
also operate their own vessels and use such vessels not only to
transport their own crude oil but also to transport crude oil for
third party charterers in direct competition with independent
owners and operators in the tanker charter market. Competition
for charters is intense and is based upon price, location, size,
age, condition and acceptability of the vessel and its manager.
Competition is also affected by the availability of other size
vessels to compete in the trades in which the Company engages.

RISK OF LOSS AND INSURANCE

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

Frontline Management is responsible for arranging for the
insurance of the Company's vessels in line with standard industry
practice. In accordance with that practice, the Company maintains
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. The
Company from time to time carries insurance covering the loss of
hire resulting from marine casualties in respect of some of its
vessels. Currently, the amount of coverage for liability for
pollution, spillage and leakage available to the Company 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.

The Company believes that its current insurance coverage is
adequate to protect against the accident-related risks involved
in the conduct of its business and that it maintains 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 the Company will be able
to procure adequate insurance coverage at commercially reasonable
rates in the future.

INSPECTION BY A CLASSIFICATION SOCIETY

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

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

REGULATIONS

Government regulation significantly affects the ownership and
operation of the Company's vessels. The various types of
governmental regulation that affect the Company's vessels include
international conventions, national, state and local laws and
regulations in force in the countries in which our vessels may
operate or where our vessels are registered. The Company 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 vessels. Various governmental and quasi-governmental
agencies require us to obtain permits, licenses and certificates
for the operation of our vessels. Although the Company believes
that it is substantially in compliance with applicable
environmental and regulatory laws and have all permits, licenses
and certificates necessary for the conduct of its operations,
future non-compliance or failure to maintain necessary permits or
approvals could require it to incur substantial costs or
temporarily suspend operation of one or more of its vessels.

The Company believes that the heightened environmental and
quality concerns of insurance underwriters, regulators and
charterers are leading to greater inspection and safety
requirements on all vessels and may accelerate the scrapping of
older vessels throughout the industry. Increasing environmental
concerns have created a demand for modern vessels that are able
to conform to the stricter environmental standards. The Company
maintains high operating standards for all of its vessels that
emphasize operational safety, quality maintenance, continuous
training of its crews and officers and compliance with United
States and international regulations.

The Company's vessels are subject to both scheduled and
unscheduled inspections by a variety of governmental and private
entities, each of which may have unique requirements. These
entities include the local port authorities such as the Coast
Guard, harbour master or equivalent, classification societies,
flag state administration or country of registry, and charterers,
particularly terminal operators and major oil companies which
conduct frequent vessel inspections.

ENVIRONMENTAL REGULATION--IMO

In April 2001, the International Maritime Organization, or IMO,
the United Nations' agency for maritime safety, revised its
regulations governing tanker design and inspection requirements.
The proposed regulations, which are expected to become effective
September 2002 provided they are ratified by the IMO member
states, provide for a more aggressive phase-out of single hull
oil tankers as well as increased inspection and verification
requirements. They provide for the phase-out of most single hull
oil tankers by 2015 or earlier, depending on the age of the
vessel and whether or not the vessel complies with requirements
for protectively located segregated ballast tanks. Segregated
ballast tanks use ballast water that is completely separate from
the cargo oil and oil fuel system. Segregated ballast tanks are
currently required by the IMO on crude oil tankers constructed
after 1983. The changes, which will likely increase the number of
tankers that are scrapped beginning in 2003, are intended to
reduce the likelihood of oil pollution in international waters.

The proposed regulations identify three categories of tankers
based on cargo carrying capacity and the presence or absence of
protectively located segregated ballast tanks. Under the new IMO
regulations, single-hull oil tankers with carrying capacities of
20,000 deadweight tons, or dwt, and above carrying crude oil,
fuel oil, heavy diesel oil or lubricating oil as cargo, and of
30,000 dwt and above carrying other oils, which do not comply
with IMO requirements for protectively located segregated ballast
tanks will be phased out no later than 2007. Single-hull oil
tankers with similar carrying capacities which do comply with IMO
requirements for protectively located segregated ballast tanks
are to be phased out by 2015, depending on the date of delivery
of the vessel. All other single-hull oil tankers with carrying
capacities of 5,000 dwt and above and not falling into one of the
above categories will also be phased out by 2015, depending on
the date of delivery of the vessel.

Excluding the two 1970's built VLCCs "Moscliff" and "Mosocean"
and the 1970's built Suezmaxes, "Polytrader" and "Polytraveller",
the Company owns, controls and charters-in 29 Suezmaxes and 30
VLCCs Of these 59 vessels, 37 (equivalent to 63 per cent) are
double-hulled. In addition, all eight newbuilding contracts are

for double-hulled vessels. The Company also owns and controls 10
dry bulk carriers. There are no requirements for double-hull
design for the type of vessels.

The requirements contained in the International Safety Management
Code, or ISM Code, promulgated by the IMO, also affect the
Company's operations. The ISM Code requires the party with
operational control of a vessel to develop an extensive safety
management system that includes, among other things, the adoption
of a safety and environmental protection policy setting forth
instructions and procedures for operating its vessels safely and
describing procedures for responding to emergencies. Our vessel
managers are certified as approved ship managers under the ISM
Code.

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. All of the Company's vessels and their operators have
received ISM Certification.

Noncompliance with the ISM Code and other IMO regulations may
subject the shipowner or a 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. Both the U.S. Coast Guard and
European Union authorities have indicated that vessels not in
compliance with the ISM Code by the applicable deadlines will be
prohibited from trading in U.S. and European Union ports, as the
case may be.

All of the Company's newbuildings delivered since 1995 are of
double hull construction and comply with the IMO regulations upon
their effective date. The Company cannot at the present time
evaluate the likelihood of whether compliance with the new
regulations regarding inspections of all vessels will adversely
affect the Company's operations, or the magnitude of any such
adverse effect, due to uncertainty of interpretation of the IMO
regulations.

The IMO continues to review and introduce new regulations on a
regular basis. It is impossible to predict what additional
regulations, if any, may be passed by the IMO, whether those
regulations will be adopted by member countries and what effect,
if any, such regulations might have on the operation of oil
tankers. Because patterns of world crude oil trade are not
constant, our vessels may load crude oil in any crude oil
producing areas of the world for delivery to areas where oil

refineries are located. In the Company's opinion, trading of the
vessels in such areas will not expose the vessels to regulations
more stringent than those of the United States and/or the IMO.
However, additional laws and regulations may be adopted which
could limit the use of oil tankers such as the Company's vessels
in oil producing and refining regions.

ENVIRONMENTAL REGULATION--OPA/CERCLA

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

Under OPA, vessel owners, operators and bareboat or "demise"
charterers are "responsible parties" who are all liable
regardless of fault, individually and as a group, for all
containment and clean-up costs and other damages arising from oil
spills from their vessels. These "responsible parties" would not
be liable if the spill results solely from the act or omission of
a third party, an act of God or an act of war. The other damages
aside from clean-up and containment costs are defined broadly to
include:

-- natural resource damages and related assessment costs;

-- real and personal property damages;

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

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

-- loss of subsistence use of natural resources.

OPA 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. This is subject to possible adjustment for
inflation. OPA specifically permits individual states to impose
their own liability regimes with regard to oil pollution
incidents occurring within their boundaries, and some states have
enacted legislation providing for unlimited liability for

discharge of pollutants within their waters. In some cases,
states which have enacted their own 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. The Company believes that it is in substantial
compliance with OPA, CERCLA and all applicable state regulations
in the ports where its vessels will call.

OPA requires owners and operators of vessels to establish and
maintain with the Coast Guard evidence of financial
responsibility sufficient to meet the limit of their potential
strict liability under OPA. The 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 will be
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 liability under OPA/CERCLA. The Company currently
maintains evidence of financial responsibility through Shoreline
Mutual (Bermuda) Ltd.

The Company currently insures and, provided such insurance
remains available at a commercially reasonable cost, plans to
insure each of its vessels with pollution, spillage and leakage
liability insurance in the amount of $1 billion per vessel per
occurrence. This is the amount currently available to the Company
in the insurance market on commercially reasonable terms. The
liability resulting from a catastrophic spill could exceed the
insurance coverage available, in which event there could be a
material adverse effect on the Company. Additionally, under OPA,
the liability of responsible parties, United States or foreign,
with regard to oil pollution damage in the United States is not
pre-empted by any international convention.

Under OPA, with limited exceptions, all newly-built or converted
tankers operating in U.S. waters must be built with double-hulls.
Existing vessels that do not comply with the double-hull
requirement must be phased out over a 20-year period beginning in
1995 based on size, age and place of discharge, unless
retrofitted with double-hulls. Notwithstanding the phase-out
period, OPA currently permits existing single-hull tankers to
operate until the year 2015 if their operations within U.S.
waters are limited to:

-- discharging at the LOOP; or

-- unloading with the aid of another vessel, a process
referred to in the industry as "lightering," within
authorized lightering zones more than 60 miles off-
shore.

Owners or operators of tankers operating in the waters of the
U.S. must file vessel response plans with the Coast Guard, and
their tankers are required to operate in compliance with their
Coast Guard approved plans. These response plans must, among
other things:

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

-- describe crew training and drills; and

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

The Company's tankers that call in the U.S. meet this
requirement.

OPA specifically permits individual states to impose their own
liability regimes with regard to oil pollution incidents
occurring within their boundaries, and many states have enacted
legislation providing for unlimited liability for oil spills. In
some cases, states which have enacted such legislation have not
yet issued implementing regulations defining tanker owners'
responsibilities under these laws. The Company intends to comply
with all applicable state regulations in ports where the
Company's vessels call.

ENVIRONMENTAL REGULATION--OTHER

Although the U.S. is not a party to these conventions, many
countries have ratified and follow the liability scheme adopted
by the IMO and set out in the International Convention on Civil

Liability for Oil Pollution Damage, 1969, or CLC. Under this
convention, a vessel's registered owner is strictly liable for
pollution damage caused in the territorial waters of a
contracting state by discharge of oil, subject to some complete
defenses. Liability is limited to approximately $183 per gross
registered ton or approximately $19.3 million, whichever is less.
If, however, the country in which the damage results is a party
to the 1992 Protocol to the CLC, the maximum liability rises to
$82.7 million. The limit of liability is tied to a unit of
account which varies according to a basket of currencies. The
right to limit liability is forfeited under the CLC where the
spill is caused by the owner's actual fault and under the 1992
Protocol, where the spill is caused by the owner's intentional or
reckless conduct. Vessels trading to states which are party to
this convention must provide evidence of insurance covering the
limited liability of the owner. In jurisdictions where the CLC
has not been adopted, various legislative schemes or common law
govern, and liability is imposed either on the basis of fault or
in a manner similar to the CLC.

In addition, 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.

It is impossible to predict what additional legislation, if any,
may be promulgated by the United States or any other country or
authority.

PROPOSED EU REGULATIONS

The International Maritime Organization has approved an
accelerated timetable for the phase-out of single hull oil
tankers. The new regulations, expected to take effect in
September 2002 provided they are ratified by the IMO member
states, require the phase-out of most single hull oil tankers by
2015 or earlier, depending on the age of the tanker and whether
or not it has segregated ballast tanks. Under the new regulations
the maximum permissible age for single hull tankers after 2007
will be 26 years, as opposed to 30 years under current
regulations. The amendments to the International Convention for
the Prevention of Marine Pollution from Ships 1973, as amended in
1978, accelerates the phase-out schedule previously set by the
IMO in 1992. We expect that the European Union will incorporate
the IMO regulations so that port states may enforce them.

The sinking of the oil tanker "Erika" off the coast of France on
December 12, 1999 polluted more than 250 miles of French
coastline with heavy oil. Following the spill, the European
Commission adopted a "communication on the safety of oil
transport by sea," also named the "Erika communication."

As a part of this, the Commission has adopted a proposal for a
general ban on single-hull oil tankers. The timetable for the ban
shall be similar to that set by the United States under OPA in
order to prevent oil tankers banned from U.S. waters from
shifting their trades to Europe. The ban plans for a gradual
phase-out of tankers depending on vessel type:

-- Single-hull oil tankers larger than 20,000 dwt without
protective ballast tanks around the cargo tanks. This
category is proposed to be phased out by 2005.

-- Single-hull oil tankers larger than 20,000 dwt in which
the cargo tank area is partly protected by segregated
ballast tank. This category is proposed to be phased
out by 2010.

-- Single-hull tankers below 20,000 dwt. This category is
proposed to be phased out by 2015.

In addition, Italy announced a ban of single hull crude oil
tankers over 5,000 dwt from most Italian ports, effective April
2001, which has since been delayed. This ban will be placed on
oil product carriers, effective December 1, 2001. 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.

C. ORGANIZATIONAL STRUCTURE

The Company's vessels are all owned by, or chartered to, separate
subsidiaries, associated companies or joint ventures. The
following table sets out the details of the Company's significant
subsidiaries and equity interests as at May 31, 2001:

NAME COUNTRY OF OWNERSHIP
VESSEL INCORPORATION PERCENTAGE

Granite Shipping Co Ltd Front Granite Bahamas 100%

ICB Shipping (Bermuda)
Limited Management company Bermuda 100%
Mosvold Shipping Limited Holding company Bermuda 97%

Bandama Ltd. Polytrader and Polytraveller Liberia 100%
Bonfield Shipping Ltd. Front Driver Liberia 100%
Dundee Navigation SA Front Dundee Liberia 50.1%
Edinburgh Navigation SA Front Edinburgh Liberia 50.1%
Fourways Marine Front Spirit Liberia 100%
Front Archer Inc. Front Archer Liberia 100%
Front Ardenne Inc. FrontArdenne Liberia 100%
Front Barbant Inc. Front Barbant Liberia 100%
Front Glory Shipping Inc. Front Glory Liberia 100%
Front Pride Shipping Inc. Front Pride Liberia 100%
Front Splendour Shipping Inc. Front Splendour Liberia 100%
Front Tobago Inc. Front Tobago Liberia 40%
Golden Aquarian Corporation Cos Hero Liberia 100%
Golden Bayshore Shipping
Corporation Navix Astral Liberia 100%
Golden Channel Corporation Stena Commodore Liberia 100%
Golden Door Corporation Golden Nerina Liberia 100%
Golden Estuary Corporation Front Commerce Liberia 100%
Golden Fjord Corporation Front Commanche Liberia 100%
Golden Fountain Corporation Golden Fountain Liberia 50%
Golden Gulf Corporation Golden Aloe Liberia 100%
Golden Hilton Shipping
Corporation Channel Navigator Liberia 100%
Golden Key Corporation Golden Disa Liberia 100%
Golden Lagoon Corporation Pacific Lagoon Liberia 50%
Golden Loch Corporation Golden Protea Liberia 100%
Golden Ocean Tankers Limited Holding Company Liberia 100%
Golden President Shipping
Corporation Channel Alliance Liberia 100%
Golden Seaway Corporation New Vanguard Liberia 100%
Golden Sound Corporation New Vista Liberia 100%
Golden Strait Corporation Golden Victory Liberia 100%
Golden Stream Corporation Golden Stream Liberia 100%
Golden Tide Corporation New Circassia Liberia 50%
Katong Investments Ltd. Front Breaker Liberia 100%

Langkawi Shipping Ltd. Front Birch Liberia 100%
Middleburg Properties Ltd. Golden Daisy Liberia 100%
Millcroft Maritime SA Front Champion Liberia 100%
Neon shipping SA Front Sky Liberia 100%
Otina Inc. Front Tina Liberia 100%
Pablo Navigation SA Front Chief Liberia 100%
Patrio Shipping Ltd. Front Hunter Liberia 100%
Quadrant Marine Inc. Front Sun Liberia 100%
Rakis Maritime SA Front Fighter Liberia 100%
Reese Development Inc. Golden Rose Liberia 50%
Ryan Shipping Corporation Front Warrior Liberia 100%
Sable Navigation SA Channel Poterne Liberia 100%
Saffron Rose Shipping Limited Front Crown Liberia 100%
Sea Ace Corporation Front Ace Liberia 100%
Sibu Shipping Ltd Front Maple Liberia 100%
South West Tankers Inc Front Sunda Liberia 100%
Tidebrook Maritime Corporation Front Commander Liberia 100%
Ultimate Shipping Ltd. Front Century Liberia 100%
West Tankers Inc. Front Comor Liberia 100%

Puerto Reinosa Shipping Co SA 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%
Touracous Pte Ltd. Kim Jacob Singapore 100%
Transcorp Pte Ltd. Front Guider Singapore 100%

D. PROPERTY, PLANTS AND EQUIPMENT

THE COMPANY'S VESSELS

The Company operates a substantially modern fleet of tankers
consisting of 29 VLCCs, 21 Suezmax tankers and eight Suezmax OBO
carriers. In addition, the Company has a fleet of 8 wholly owned
dry bulk carriers consisting of 3 Capesize, 2 Panamax and 3
Handymax size carriers and has a fifty per cent interest in a
further two Handymax size bulk carriers. The Company has eight
newbuilding contracts and has purchase options or obligations to
acquire a further three VLCCs and two Suezmax tankers. The

following table sets forth the fleet operated by the Company as
of May 31, 2001:

TANKER FLEET
OWNED TONNAGE
APPROXIMATE TYPE OF
VESSEL BUILT DWT. CONSTRUCTION FLAG EMPLOYMENT

VLCCS
Moscliff 1974 257,000 Single-hull BA Spot market
Mosocean 1975 257,000 Single-hull BA Spot market
Front Sabang 1990 285,000 Single-hull SG Tankers Pool
Front Vanadis 1990 285,000 Single-hull SG Tankers Pool
Front Highness 1991 284,000 Single-hull SG Tankers Pool
Front Lady 1991 284,000 Single-hull SG Tankers Pool
Front Lord 1991 284,000 Single-hull SG Tankers Pool
Front Duke 1992 284,000 Single-hull SG Tankers Pool
Front Duchess 1993 284,000 Single-hull SG Tankers Pool
Front Tobago (40%) 1993 261,000 Single-hull LIB Tankers Pool
Front Edinburgh (50.1%) 1993 302,000 Single-hull LIB Tankers Pool
Front Dundee (50.1%) 1993 302,000 Single-hull LIB Tankers Pool
Front Ace 1993 275,000 Single-hull LIB Tankers Pool
Golden Fountain (50%)(1) 1995 302,000 Single-hull PAN Time Charter
Golden Stream (1) 1995 276,000 Single-hull PAN Time Charter
Navix Astral (1) 1996 276,000 Single-hull PAN Bareboat Charter
New Vanguard (1) 1998 300,000 Double-hull HK Bareboat Charter
New Vista (1) 1998 300,000 Double-hull HK Bareboat Charter
Front Chief 1999 311,000 Double-hull BA Tankers Pool
Front Commander 1999 311,000 Double-hull BA Tankers Pool
Front Crown 1999 311,000 Double-hull BA Tankers Pool
New Circassia (50%) (1) 1999 306,000 Double-hull PAN Bareboat Charter
Opalia (1) (3) 1999 302,000 Double-hull IoM Bareboat Charter
Pacific Lagoon (50%) (1) 1999 306,000 Double-hull PAN Time Charter
Front Comanche (1) 1999 300,000 Double-hull LIB Tankers Pool
Front Commerce (1) 1999 300,000 Double-hull LIB Tankers Pool
Front Tina 2000 298,000 Double-hull LIB Tankers Pool
Stena Commodore (1) (2) 2000 299,000 Double-hull BDA Time Charter
Oscilla (1) (3) 2000 302,000 Double-hull IoM Bareboat Charter
Hull No. 4978 2002 299,000 Double-hull
Hull No. 4979 2002 299,000 Double-hull
Hull No. 4980 2002 299,000 Double-hull
Hull No. 1384 2001 308,000 Double-hull
Hull No. 1402 2002 308,000 Double-hull
Hull No. 1412 2003 308,000 Double-hull

SUEZMAX OBO CARRIERS
Front Breaker 1991 169,000 Double-hull NIS Spot market
Front Climber 1991 169,000 Double-hull SG Spot market
Front Driver 1991 169,000 Double-hull NIS Spot market
Front Guider 1991 169,000 Double-hull SG Spot market
Front Leader 1991 169,000 Double-hull SG Spot market
Front Rider 1992 169,000 Double-hull SG Spot market
Front Striver 1992 169,000 Double-hull SG Spot market

Front Viewer 1992 169,000 Double-hull SG Spot market

SUEZMAXES
Polytrader (40%) 1978 126,000 Single-hull NOR Spot market
Polytraveller (35%) 1979 126,000 Single-hull NOR Time charter
Front Lillo 1991 147,000 Single-hull NIS Spot market
Front Birch 1991 152,000 Double-side NIS Spot market
Front Maple 1991 152,000 Double-side NIS Spot market
Front Granite 1991 142,000 Single-hull NIS Spot market
Front Emperor 1992 147,000 Single-hull SG Spot market
Front Sunda 1992 142,000 Single-hull NIS Spot market
Front Spirit 1993 147,000 Single-hull NIS Spot market
Front Comor 1993 142,000 Single-hull NIS Spot market
Front Pride 1993 150,000 Double-hull NIS Spot market
Front Glory 1995 150,000 Double-hull NIS Spot market
Front Splendour 1995 150,000 Double-hull NIS Spot market
Front Ardenne 1997 153,000 Double-hull NIS Spot market
Front Brabant 1998 153,000 Double-hull NIS Spot market
Mindanao 1998 158,000 Double-hull SG Spot market
Front Fighter 1998 153,000 Double-hull NIS Spot market
Front Hunter 1998 153,000 Double-hull NIS Spot market
Front Sun 2000 153,000 Double-hull NIS Spot market
Front Sky 2000 153,000 Double-hull NIS Spot market
Front Archer 2000 153,000 Double-hull NIS Spot market
Hull No. 477 2001 150,000 Double-hull
Hull No. 478 2001 150,000 Double-hull

CHARTERED IN TONNAGE
APPROXIMATE TYPE OF
VESSEL BUILT DWT CONSTRUCTION FLAG EMPLOYMENT

VLCCs
Front Century 1998 311,000 Double-hull BA Tankers Pool
Front Champion 1998 311,000 Double-hull BA Tankers Pool
Golden Victory (1) 1999 305,000 Double-hull PAN Time Charter

SUEZMAX
Front Warrior 1998 153,000 Double-hull BA Spot market
Kim Jacob 1998 158,000 Double-hull SG Spot market

DRY BULK FLEET (1)
OWNED TONNAGE
APPROXIMATE TYPE OF
VESSEL BUILT DWT. CONSTRUCTION FLAG EMPLOYMENT

CAPESIZE
Channel Alliance 1996 172,000 Single-hull PHI Time Charter
Channel Navigator 1997 172,000 Single-hull PHI Time Charter
Channel Poterne 1997 172,000 Single-hull PHI Time Charter

PANAMAX
Golden Disa 1999 75,000 Single-hull PHI Time Charter
Golden Nerina 1999 75,000 Single-hull PHI Time Charter

HANDYMAX
Golden Rose (50%) 1998 47,000 Single-hull PHI Time Charter
Golden Daisy (50%) 1998 47,000 Single-hull PHI Time Charter
Golden Aloe 1998 46,000 Single-hull PHI Time Charter
Golden Protea 1998 46,000 Single-hull PHI Time Charter
Cos Hero 1999 48,000 Single-hull PAN Bareboat Charter

Key to Flags:
BA -- Bahamas, BDA -- Bermuda, HK -- Hong Kong, IoM -- Isle of Man, LIB -
Liberia, NOR - Norway, NIS - Norwegian International Ship Register, PAN --
Panama, PHI -- Philippines, SG - Singapore

(1) Vessels obtained through the acquisition of Golden Ocean
(2) Purchase options obtained through the acquisition of Golden
Ocean
(3) Purchase obligations obtained through the acquisition of
Golden Ocean

Other than its interests in the vessels described above, the
Company owns no material physical properties. The Company leases
office space in Hamilton, Bermuda from an unaffiliated third
party. Frontline Management leases office space, at market rates,
in Oslo, Norway from Sea Shipping AS, a company indirectly
affiliated with Hemen Holding Ltd ("Hemen"), the Company's
principal shareholder. One of the Company's subsidiaries leases
office space in London, England from an unaffiliated third party.

ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS

OVERVIEW

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

The Company's principal focus and expertise are to serve major
integrated oil companies and other customers that require
transportation of crude oil and oil products cargoes. The
Company's tanker fleet, consists of 29 owned, part-owned or
controlled VLCCs and 29 owned, part-owned or controlled Suezmax
tankers, of which 8 are Suezmax OBOs. In addition, the Company
has a fleet of 8 wholly owned dry bulk carriers consisting of 3
Capesize, 2 Panamax and 3 Handymax size carriers and has a fifty
per cent interest in a further two Handymax size bulk carriers.
The Company also has eight newbuilding contracts (including those
held by Mosvold) and has purchase options or obligations to

acquire a further three VLCCs and two Suezmax tankers. The
Company charters in three modern VLCCs and two modern Suezmax
tankers.

In 2000, the Company took delivery of three Suezmax newbuildings
and two secondhand Suezmax tankers. In addition, the Company
acquired three second-hand VLCCs and acquired a forty per cent
interest in a second-hand VLCC. Through the acquisition of Golden
Ocean, which was completed in October 2000, the Company acquired
its current dry bulk fleet consisting of ten dry bulk carriers,
two of which are 50 per cent owned and seven wholly or partially
owned VLCCs and five options or obligations to acquire VLCCs. Two
of the VLCCs covered by the options have since been delivered to
the Company.

Through the acquisition of ICB in 1999 (See Item 4. "Information
on the Company") the Company acquired two VLCCs and six Suezmax
tankers and chartered-in one Suezmax tanker. In the two year
period prior to September 1999, Frontline was unable to control,
or exercise significant influence over, ICB. Accordingly, the
Company previously accounted for its investment in ICB as an
available-for-sale security in accordance with SFAS 115. As a
result of Frontline acquiring control over ICB, the Company's
financial statements have been restated. For the years ended
December 31, 1997 and 1998, the investment in ICB is accounted
for in accordance with the equity method. For the year ended
December 31, 1999, ICB has been consolidated with effect from
January 1, 1999.

The Company's vessels are operated under either time charters,
bareboat charters, voyage charters or COAs. A time charter is a
contract for the use of a vessel for a specific period of time. A
voyage charter is a contract for the use of a vessel for a
specific voyage. 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, 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. However, net operating revenues would be equal. 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 ("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.

In December 1999, the Company, together with A.P. Moller, Euronav
Luxembourg SA, Osprey Maritime Ltd., Overseas Shipholding Group,
Inc and Reederei "Nord" Klaus E. Oldendorff formed Tankers
International LLC ("Tankers") to pool the commercial operation of
the participating companies' modern VLCC fleets (the "Tankers
Pool"). Tankers began operations on February 1, 2000, with an
initial fleet of 39 modern VLCCs (of which the Company
contributed twelve vessels). Tankers' fleet currently constitutes
12 per cent of the world VLCC fleet. By 2002, as the participants
take delivery of newbuildings and vessels are redelivered from
time charters, Tankers' fleet is expected to reach 70 vessels.
Tankers mainly employs ships in the spot market, although it also
from time to time enters into COAs and time charters. Revenues to
each shipowner who participates in Tankers are calculated on the
basis of the pool's total earnings and the tonnage committed into
Tankers by the shipowner.

schedule. Towards the end of 1999, Suezmax rates started to
improve followed by improving VLCC rates at the end of the first
quarter of 2000. According to preliminary data from industry
sources, which the Company has not verified, global oil demand is
estimated to have increased by 1% between 1999 and 2000 as a
consequence of demand increases in most geographical regions.
After production quota cuts in 1999, OPEC responded to market
demand by increasing output in 2000. Due to the weak market in
1999 and early 2000 a substantial number of tankers were scrapped
which together with higher oil production created a balance
between demand and supply in the tanker market. VLCC rates as a
consequence started to improve from the end of the first quarter
of 2000 and continued to strengthen through the year. More
stringent practices among charterers in selection of tonnage
following the sinking of the 23 year old tanker, "Erika" and
resulting oil spill, off Brittany in December 1999, also
contributed to the reduction of tonnage supply as older vessels
were excluded from certain trades. Twenty six VLCCs were sold for
demolition in the year 2000, while forty one newbuildings were
delivered. Fifty six newbuilding contracts were signed during the
year, resulting in the orderbook standing at eighty seven
vessels. A total of 17 Suezmaxes were removed through scrapping
from the trading fleet in 2000 and 22 Suezmaxes were delivered
from shipyards in the period. A total of 17 Suezmaxes were
removed through scrapping from the trading fleet in 2000 and 22
Suezmaxes were delivered from shipyards in the period.

VLCC earnings averaged almost $50,000 per day for modern vessels
on West bound voyages from the Arabian Gulf. The trend was
increasing throughout the year with forth quarter earnings
averaging more than $70,000 per day. This is a sharp improvement
compared to the corresponding figures for 1999 when modern VLCCs
earned $21,300 per day on average for the year and $16,000 per
day in the forth quarter. A similar trend was seen in the Suezmax
rates.

The following table sets out the daily TCEs earned on the spot
market by the Company's tanker fleet over the last five years:

2000 1999 1998 1997 1996
(in $ per day)
VLCC 46,300 20,000 31,800 32,700 27,700
Suezmax 35,500 16,700 22,400 24,800 26,800
Suezmax OBO 33,300 16,800 21,800 25,500 23,000

The Company's fleet of dry bulk carriers are all fixed on medium
to long-term bareboat or time charters. These arrangements
provide sufficient cash flows to cover the debt service on this
fleet. The charters for the dry bulk fleet have expiring dates
ranging from January 2002 to January 2014 with an average term of
8.7 years. The charters for the VLCCs or time charter or
bareboat chartes have expiry dates ranging from December 2001 to
March 2011, with an average term of 4.8 years. Six of the VLCCs
on time charter or bareboat charters have profit sharing
arrangements whereby they have the opportunity to participate in
the ultimate earnings of the vessels in the spot market.

INFLATION

Although inflation has had a moderate impact on operating
expenses, drydocking 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. However, in the
event that inflation becomes a significant factor in the world
economy, inflationary pressures could result in increased
operating and financing costs.

RESULTS OF OPERATIONS

YEAR ENDED DECEMBER 31, 2000, COMPARED WITH THE YEAR ENDED
DECEMBER 31, 1999

Total net operating revenues increased by 137 per cent in 2000
compared with 1999. This is due to a combination of the strong
increase in TCE rates earned by the Company's tanker fleet in
2000, the increase in the size of this tanker fleet and the
contribution of the dry bulk fleet acquired as part of the Golden
Ocean acquisition. The annual average daily TCEs earned by the
VLCCs, Suezmax tankers, and Suezmax OBO carriers trading in the
spot market were $46,300, $35,500 and $33,300 respectively,
compared with $20,000, $16,700 and $16,800 in 1999.

In 2000, earnings before interest, tax, depreciation and
amortisation, including earnings from associated companies
increased 485 per cent from 1999 to $481.8 million. In addition
to the tanker market being significantly weaker in 1999, the
prior year results included the Company's share of the loss on
the sale of four VLCCs in connection with the acquisition of ICB.

Ship operating expenses decreased from $92.7 million in 1999 to
$88.5 million in 2000 despite the continued expansion of the
fleet as the Company successfully maintained its low operating
costs during 2000. In addition, the Golden Ocean vessels acquired
and operating under bareboat charters do not have operating costs
borne by the owner. The average daily operating costs of the
Company's VLCCs, Suezmax tankers, and Suezmax OBO carriers was
$6,900, $5,500 and $6,200, respectively compared with $6,800,
$6,000 and $6,400 in 1999.

Administrative expenses have decreased 21 per cent in 2000,
principally due to the closure of the office of ICB in Stockholm
in early 2000.

Depreciation and amortisation increased 2 per cent from 1999 to
2000. This relatively small increase reflects the fact that while
depreciation increased due to the inclusion of the results of
Golden Ocean from October 10, 2000 and the other additional
vessels acquired in 2000, this increase was partially offset by
the change in the estimated remaining economic useful lives of
the vessels acquired in the ICB acquisition and the sale of four
ICB vessels late in 1999. In the fourth quarter of 1999,
management determined that the useful life of these vessels was
25 years rather than 20 years, as previously estimated, and a
reduced depreciation charge has consequently been applied
throughout 2000.

The share in results of associated companies increased 318 per
cent in 2000 due to the Company's acquisition of a 40 per cent
interest in the vessel "Front Tobago" and the five joint ventures
obtained through the Golden Ocean acquisition. In 2000, the
Company recorded a foreign exchange gain of $14.6 million arising
primarily in connection with the Yen financing of certain vessels
in the Golden Ocean fleet.

Net interest expense was $89.3 million compared with $81.2
million in 1999, an increase of 10 per cent. The Company had
total long-term debt outstanding of $1,544 million at December
31, 2000 compared with $1,080 million at December 31, 1999. In
addition the Company had a total amount of $110 million of
obligations under capital lease. All of this latter amount and
$314 million of the total debt outstanding at the end of 2000
related to the Golden Ocean fleet and these have only impacted
the interest expense in the last quarter of 2000. At December 31,

1999 the Company had outstanding a specific loan of $54.0 million
from Metrogas Holdings ("Metrogas"), a company related to the
Company's Chairman. This loan was repaid in full during 2000
through the conversion to shares in the Company in an amount
equal to $30 million and the remainder through cash repayment.
In 2000, the Company benefited from the repayment of high margin
debt related to ICB in late 1999, and the low interest rate on
Yen debt from Golden Ocean. This partly offset the increased
average interest rate on U.S. dollar denominated debt in 2000
compared to 1999.

YEAR ENDED DECEMBER 31, 1999, COMPARED WITH THE YEAR ENDED
DECEMBER 31, 1998

Total net operating revenues increased by 24 per cent in 1999
compared with 1998. This increase reflects the increase in the
size of the fleet due to deliveries of newbuildings during 1998
and 1999 and the consolidation of ICB, offset by lower rates
obtained in the tanker market. The average daily TCEs earned by
the Company's VLCCs, Suezmax tankers, and Suezmax OBO carriers
decreased from 1998 to 1999 by $11,800, $5,700 and $5,000,
respectively. Total days technical off-hire, including
drydockings, were 170 in 1999 compared to 135 in 1998. In 1999,
the Company sold one Suezmax and four VLCCs recording a net loss
on sales of $37.8 million. In 1998, the Company sold two VLCCs
and one woodchip carrier, recording a net loss on sales of $1.5
million.

For 1999, earnings before interest, tax, depreciation and
amortisation, including earnings from associated companies
declined 40 per cent from 1998 to $82.3 million. The result
primarily reflects the loss on sale of four vessels arising from
the acquisition and consolidation of ICB combined with the effect
of the decline in the market rates achieved.

Average daily operating costs, including provisions for
drydockings, decreased for all size of vessels as the benefits of
the cost reduction program were realised. The average daily
operating costs were $6,800, $6,000 and $6,400 for the VLCCs, the
Suezmaxes and Suezmax OBOs respectively, compared to $7,600,
$6,400 and $6,700 for 1998. Administrative expenses increased due
to ICB being consolidated in 1999.

Depreciation increased 77 per cent from 1998 to 1999, due to the
consolidation of ICB and the additional vessels delivered in 1998
and 1999. Net other expenses for 1999 were $78.9 million compared
to $40.6 million in 1998. The increase is due to the
consolidation of ICB which lead to higher debt levels and lower
income from associated companies, as well as increased debt
levels due to the fleet expansion. The average rate of interest

of the debt at year end 1999 was 7.2 per cent compared to 7.0 per
cent in 1998.

RECENTLY ISSUED ACCOUNTING STANDARDS AND SECURITIES AND EXCHANGE
COMMISSION RULES

Statement of Financial Accounting Standards No. 133, "Accounting
for Derivatives and Hedging Activities", as amended by Statement
of Financial Accounting Standards No. 137, is effective January
1, 2001 for the Company and requires that all derivative
instruments be recorded on the balance sheet at their 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. The Company adopted
SFAS 133 in the first quarter of fiscal year 2001 and upon
initial adoption recognised the fair value of its derivatives as
assets of $0.4 million and liabilities of $0.6 million. A gain of
$0.3 million was recognised in income and a charge of $0.5
million made to other comprehensive income.

In December 1999, the SEC issued Staff Accounting Bulletin No.
101 "Revenue Recognition in Financial Statements" ("SAB 101").
SAB 101, as amended, summarises certain of the SEC's views in
applying generally accepted accounting principles to revenue
recognition in the financial statements. The Company adopted SAB
101 in the fourth quarter of fiscal 2000. The adoption of SAB 101
has not had a material effect on the Company's operations or
financial position.

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 and maintaining cash reserves against
fluctuations in operating cash flows.

Revenues from time charters and bareboat charters are received
monthly in advance while revenues from voyage charters are
received upon completion of the voyage. The Company receives
distributions from the Tankers International Pool on a weekly
basis. Accounts receivable are generally collected on a timely
basis. Inventory requirements, consisting primarily of fuel,
lubricating oil and spare parts, are higher for voyage charters,
due to the majority of these items being paid for by the
charterer under a time charter. The expansion of the fleet in the

fiscal years 1998 through 2000 has resulted in increased working
capital requirements.

The Company's funding and treasury activities are conducted
within corporate policies to maximise 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.

As of December 31, 2000 and 1999, the Company has cash and cash
equivalents of $103.5 million and $65.5 million, respectively.
The Company generated cash from operations of $271.6 million in
2000, compared with $46.5 million in 1999. Net cash used in
investing activities was $497.0 million in 2000 compared to net
cash generated of $175.5 million in 1999. In 2000, investing
activities consisted primarily of payments for vessel
acquisitions, totalling $436.0 million, the investment in Golden
Ocean and the investment of $38.6 million in debt of companies
connected with Golden Ocean. In the Company's opinion, working
capital is sufficient for the Company's present requirements.

As of December 31, 1999 and 1998, the Company has cash and cash
equivalents of $65.5 million and $74.0 million, respectively. The
Company generated cash from operations of $46.5 million in 1999,
compared with $69.6 million in 1998. Net cash from investing
activities was $175.5 million in 1999 compared to $283.3 million
used in 1998. In 1999, investing activities consisted primarily
of payments for vessel acquisitions, totalling $200.7 million,
proceeds from sale of four VLCCs and one Suezmax of $239.0
million and net proceeds from acquisition of ICB of $126.0
million. In 1998, investing activities consisted primarily of
payments for vessel acquisitions, totalling $352 million. The
sale of the two VLCCs generated cash of approximately $165.0
million in 1998. A further $10.4 million was invested in ICB in
1998.

The Company generated cash of $263.4 million from financing
activities in 2000 and used net cash in financing activities
totalling $230.6 million in 1999. In 2000 proceeds from long-term
debt were $384.7 million (1999 - $505.9 million). Repayments of
debt were $209.7 million in 2000 of which $24 million related to
repayment of the amount outstanding on the Metrogas Loan and the
balance related to traditional bank financing of vessels. The
Company generated $104.6 million in 2000 through private
placements of its equity and through the exercise of warrants.

The Company generated net cash from financing activities of $61.5
million in 1998. In 1998, proceeds from long-term debt were
$327.8 million of which $230.2 million related to traditional
bank type financing of vessels and $97.6 million was in the form

of loans from Metrogas and an affiliated company. Repayments were
$679.2 million and $265.2 million in 1999 and 1998 respectively.
In 1999, Frontline generated cash of $54.7 million from issuance
of equity, and used $98.1 million on purchase of a minority
interest in ICB.

The Company had total long-term debt outstanding of $1,544
million at December 31, 2000 compared with $1,079.7 million at
December 31, 1999. At December 31, 2000 $93.25 million of this
debt was at a fixed rate of 8 per cent (1999 - $168.51 million).
The Company is exposed to various market risks, including
interest rates and foreign currency fluctuations. The Company
uses interest rate swaps to manage interest rate risk. As at
December 31, 2000 the Company's interest rate swap arrangements
effectively fix the Company's interest rate exposure on $373.5
million of floating rate debt. The interest rate swap agreements
expire between May 2001 and August 2008. The Company has not
entered into any financial instruments for speculative or trading
purposes. See Item 11, "Quantitative and Qualitative Disclosures
about Market Risk".

In December 1997, the three Suezmaxes owned originally by LOF
were refinanced. The last and major part of this loan was drawn
down at the time of the Amalgamation in May, 1998. At the same
time, Frontline repaid the related $75 million share acquisition
loan. At this time Frontline had a 10 vessel newbuilding
programme. The first two Suezmax newbuildings delivered in 1998
were financed by a facility established in December 1997; the
third Suezmax and the first VLCC new building were financed by
facilities signed in May and July 1998. The aforementioned VLCC
was subsequently sold to a German KG along with the second
delivered VLCC, and leased back. By converting the financing of
these two VLCCs from traditional bank financing to sale and lease
back, Frontline was able to free a substantial amount of cash and
thereby improve its liquidity position.

In December 1998 and March and July 1999, the three remaining
VLCC newbuildings at the time were financed through traditional
bank financing.

Metrogas Holdings ("Metrogas"), a company related to the
Company's Chairman, had outstanding as of December 31, 1998 a
specific loan of $89.0 million provided to the Company. This loan
was since converted to a separate long-term financing facility as
described below.

2001. The requested changes were made with the intention of
making the Company's financing arrangements more flexible in the
event of a prolonged negative market scenario, including falling
second-hand prices. Included in the request for changes was a
proposal to subordinate the $89.0 million loan given by Metrogas
(the "Metrogas Loan") to loans given by the Company's lending
banks. In addition, the proposal included reclassifying the
Subordinated Loan as equity for the purposes of calculating the
Company's equity ratio.

As of July 13, 1999, the discussions with Metrogas and the
Company's lending banks were finalised and the Company and
Metrogas signed a Subordinated Convertible Loan Facility
Agreement. Accordingly, the Company received acceptance of
reduced covenant levels from all but one of the Company's 19
lending banks. This one bank, however, was subject to the
authority of the majority lenders, who agreed to accept lower
covenant levels until January 1, 2001. The aforementioned bank
was since replaced.

On June 16, 1999, the Company's largest bank syndicate, led by
Skandinaviska Enskilda Banken ("SEB"), agreed to change the loan
profile on the facility provided to the Company. Quarterly
instalments at the time were reduced to $8.4 million from $10.5
million with a resultant increase in the final instalment due on
November 28, 2003 from $136.5 million to $174.3 million. This
reduction in quarterly instalments will boost the Company's
liquidity by $37.8 million during the remaining period of the
loan, equivalent to $8.4 million per annum.

On June 29, 1999, the Company signed a loan agreement for
refinancing the vessel "Lillo". The loan was drawn down on June
30, 1999, and partly used to repay the portion relating to Lillo
under the SEB facility discussed above. The net effect of the
refinancing was to improve the Company's liquidity by $9.2
million.

In September 1999 a bridge loan facility to acquire the remaining
minority shares in ICB was put in place. This loan was repaid in
December 1999, at the same time Frontline refinanced six of the
vessels acquired through the ICB transaction.

In December 1999, the Company sold one Suezmax to a German KG and
leased back. Frontline was able to free a substantial amount of
cash and thereby improve its liquidity position.

In February 2000, financing was secured on the last two Suezmax
newbuildings. At the same time financing was secured through
another bank for a Suezmax newbuilding acquired from the Mosvold
Farsund Group. In March 2000 financing was secured for a joint
venture in which Frontline controls 40% to acquire a second-hand

VLCC. In May 2000 the Company secured financing for the two VLCCs
acquired from Wilh. Wilhelmsen. At the same time a separate
financing was secured for the financing of a newbuilding taken
over from the Golden Ocean Group.

In October 2000, financing was secured for the financing of two
Suezmax vessels acquired from Euronav and one VLCC acquired from
a company related to Hemen. During a period from February 2000 up
to October the same year Frontline acquired bonds and other
claims in Golden Ocean for a total of $ 63 million, of which
$19.5 million was financed by issuing Frontline shares and the
rest through cash generated from operations.

In February 2001, financing was secured for the joint ventures
that acquired two VLCCs from Osprey. In May 2000 the Company
issued $36 million in commercial paper which was used to retire
$50.8 million in yard debt. At the same time refinancing of the
three VLCCs controlled by Golden Ocean was secured in two
financings and the vessels were or are in the process of being
transferred to Frontline.

Also in May Frontline succeeded in acquiring Mosvold at a cost of
$53 million. At the same time the Board announced a divided of $1
per share for a total of $77 million. These transactions were or
will be financed from cash generated from operations.

As of December 31, 2000 and 1999, the Company complied with the
debt covenants of its various debt agreements.

During 1999, 2000 and to date in 2001, the Company has issued
equity in a number of transactions. The proceeds from these
equity issues have been used for specific vessel acquisitions and
general corporate working capital requirements. The Company
issued 4,715,000 ordinary shares at NOK 33.00 per share to raise
approximately $20 million in equity through a private placement
in September 1999. At the same time $35 million of the Metrogas
Loan was converted to equity in exchange for 8,230,000 shares in
the Company issued at NOK 33.00 per share. In October 1999, the
Company issued 1,910,000 ordinary shares at NOK 37.00 per share
to part finance the acquisition of a Suezmax newbuilding contract
from Mosvold Farsund.

In February 2000, the Company issued 3,500,000 ordinary shares in
a private placement at NOK 57.50 per share to raise approximately
$24 million in equity. At the same time another $30 million of
the Metrogas Loan was converted to equity through the issuance of
4,350,000 ordinary shares at NOK 57.50 per share, leaving $24
million plus interest outstanding. The outstanding balance on the
Metrogas Loan was repaid in full in August 2000.

In March 2000, the Company issued 2,957,500 ordinary shares at
NOK 90.00 per share to part finance the acquisition of two VLCCs
from Wilh. Wilhelmsen ASA. In May 2000, the Company issued
3,000,000 ordinary shares at $10.15 per share in a private
placement to raise approximately $30 million in equity. The
proceeds of the issue were used to part finance the acquisition
of a newbuilding VLCC, "Front Tina". In June, 2000, the Company
raised approximately $46.8 million through the issuance of
4,000,000 ordinary shares at a price of NOK 104.5 per share in a
private placement to a group of international institutional
investors.

From November 2000 to date the Company has bought back 3,307,145
shares in the Company at an average price of $13.40 per share.
During the same period, a total of 4,247,660 warrants issued in
May 1998 were exercised and converted into 424,766 shares at
$15.91 per share. At the same time, the Company bought back and
cancelled 21,752,340 warrants for a total consideration of NOK
100.3 million.

ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES

A. DIRECTORS AND SENIOR MANAGEMENT

Information concerning each director and executive officer of the
Company is set forth below.

NAME AGE POSITION

John Fredriksen 57 Chairman, Chief Executive
Officer, President and
Director
Tor Olav Troim 38 Vice-President and
Director
A. Shaun Morris 41 Director
James Bodi 34 Director
Kate Blankenship 36 Chief Accounting Officer
and Company Secretary
Ola Lorentzon 51 Managing Director of
Frontline Management
Tom E. Jebsen 43 Chief Financial Officer of
Frontline Management

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

John Fredriksen has been the Chairman of the Board, Chief
Executive Officer, President and a director of the Company since
November 3, 1997. He was previously the Chairman and Chief
Executive Officer of Old Frontline. Mr. Fredriksen has served for
over six years as a director of Sea Tankers Management Co. Ltd.

("Sea Tankers"), a ship operating company and an affiliate of the
Company's principal shareholder. Mr. Fredriksen indirectly
controls Hemen.

Tor Olav Troim has been Vice-President and a director of the
Company since November 3, 1997. He previously served as Deputy
Chairman of Frontline from July 4, 1997, and was a director of
Old Frontline from July 1, 1996. Until April, 2000 Mr. Troim was
the Chief Executive Officer of Frontline Management, which
company supports the Company in the implementation of decisions
made by the Board of Directors. Mr. Troim also serves as a
consultant to Sea Tankers and since May 2000, has been a director
and Vice-Chairman of Knightsbridge. He is a director of Aktiv
Inkasso ASA, Northern Oil ASA and Northern Offshore Ltd., all
Norwegian publicly listed companies. Prior to his service with
Frontline, from January 1992, Mr. Troim served as Managing
Director and a member of the Board of Directors of DNO AS, a
Norwegian oil company.

A. Shaun Morris has been a non-executive director of the Company
since November 3, 1997. Mr. Morris has been a Partner at Appleby,
Spurling & Kempe since April 1995, after joining the firm in 1988
as an associate, where he specialises in corporate/commercial
law.

James Bodi has been a non-executive director of the Company since
July 28, 2000. He has been an attorney at Appleby Spurling &
Kempe since November 1999. From 1997 to 1999, he practised law
at McMillan Binch, and for three years prior to that he was a
solicitor with Thorsteinssons, both Canadian law firms.

Kate Blankenship is Chief Accounting Officer and Secretary of the
Company. Mrs. Blankenship joined the Company in 1994. Prior to
joining the Company, she was a Manager with KPMG Peat Marwick in
Bermuda. She is a member of the Institute of Chartered
Accountants in England and Wales.

Ola Lorentzon has been Managing Director of Frontline Management
since April 2000. Mr. Lorentzon has also been a director of
Knightsbridge since September 18, 1996. He was Vice Chairman of
Knightsbridge from September 18, 1996 until May 2000 when he took
over as Chairman. Mr. Lorentzon has been a director and President
of ICB since 1987. Until 2000, Mr. Lorentzon was a director of
The Swedish Protection and Indemnity Club (SAAF), Swedish Ships
Mortgage Bank and The Swedish Shipowners' Association, Deputy
Chairman of the Liberian Shipowners Council and a member of the
International Association of Tanker Owners (Intertanko) Council.

Tom E. Jebsen has served as Chief Financial Officer of Frontline
Management since June 1997. From December 1995 until June 1997,
Mr. Jebsen served as Chief Financial Officer of Tschudi & Eitzen

Shipping ASA, a publicly traded Norwegian shipowning company.
From 1991 to December 1995, Mr. Jebsen served as Vice President
of Dyno Industrier ASA, a publicly traded Norwegian explosives
producer. Mr. Jebsen is also a director of Asuranceforeningen
Skuld, Unitas, a mutual hull and machinery club and Hugin AS, an
internet company.

B. COMPENSATION

During the year ended December 31, 2000, the Company paid to its
directors and executive officers (seven persons) aggregate cash
compensation of $618,514 and an aggregate amount of $53,596 for
pension and retirement benefits.

No compensation was paid to the Directors and officers of the
Company in the form of stock options during the financial year
ended December 31, 2000.

C. BOARD PRACTICES

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

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

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

D. EMPLOYEES

As at December 31, 2000, the Company and its subsidiaries
employed 26 people in their respective offices in Bermuda, London
and Oslo. The Company contracts with the independent ship
managers to manage and operate its vessels.

E. SHARE OWNERSHIP

The beneficial interests of our Directors and officers in the
Ordinary Shares of the Company as of May 31, 2001, were as
follows:

PERCENTAGE OF
ORDINARY SHARES OF ORDINARY SHARES
DIRECTOR OR OFFICER $2.50 EACH OUTSTANDING

John Fredriksen* 34,579,054 44.90%
Tor Olav Troim 74,895 **
James Bodi -- --
A. Shaun Morris -- --
Kate Blankenship 2,000 **
Ola Lorentzon -- --
Tom E. Jebsen 1,557 **

*Includes Ordinary Shares held by Hemen Holding Ltd. and other
companies indirectly controlled by Mr. John Fredriksen.
** Less than one per cent

Details of share options held by the Company's Directors and
officers at May 31, 2001 are set out in the following table:

NUMBER OF ORDINARY EXERCISE PRICE PER
DIRECTOR OR OFFICER SHARES SUBJECT TO OPTION ORDINARY SHARE EXPIRATION DATE

John Fredriksen -- -- --
Tor Olav Troim -- -- --
James Bodi -- -- --
A. Shaun Morris -- -- --
Kate Blankenship 2,000 $ 13.82 November 8, 2004
1,000 $ 13.48 October 31, 2005
1,000 $ 11.73 February 5, 2007
13,000 NOK 44.50 January 1, 2003
9,000 NOK 120 January 22, 2006
Ola Lorentzon 50,000 NOK 59 January 1, 2003
18,000 NOK 120 January 22, 2006
Tom E. Jebsen 20,000 NOK 44.50 January 1, 2003
7,500 NOK 120 January 22, 2006

At May 31, 2001 the Norwegian Kroner:US Dollar exchange rate was
NOK 9.235:$ 1.00

The options held by the directors and officers have all been
granted under the Bermuda Plan discussed below.

As of May 31, 2001, 396,500 of the authorised and unissued
Ordinary Shares were reserved for issue pursuant to subscription
under options granted under the Company's share option plans.

The Company maintains a Bermuda Employee Share Option Plan (the
"Bermuda Plan") and a United Kingdom Employee Share Option Plan
(the "U.K. Plan"). Under the terms of the plans, the exercise
price for the options may not be less than the average of the
fair market value of the underlying shares for the three dealing

days before the date of grant. The number of shares granted under
the plans may not exceed 7 per cent of the issued share capital
of the Company. No consideration is payable for the grant of an
option.

Under the Bermuda Plan, options may be granted to any director or
employee of the Company or any subsidiary. Options are only
exercisable during a maximum period of nine years following the
first anniversary date of the grant or upon the termination of
the option holder from employment with the Company.

Under the U.K. Plan, options may be granted to any full-time
director or employee of the Company or any subsidiary. Options
are only exercisable during the period of seven years following
the third anniversary date of the grant or upon the termination
of the option holder from employment with the Company.

ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS

A. MAJOR SHAREHOLDERS

The Company is indirectly controlled by another corporation (see
below). The following table presents certain information
regarding the current ownership of the Ordinary Shares with
respect to (i) each person who is known by the Company to own
more than 5 per cent of the Company's outstanding Ordinary
Shares; and (ii) all directors and officers as a group as of May
31, 2001.

ORDINARY SHARES
OWNER AMOUNT PER CENT

Hemen Holding Ltd. and associated
companies (1) 34,579,054 44.90%

Neuberger Berman LLC 8,223,307 10.68%

All Directors and Officers as a group
(seven persons) (2) 34,657,506 45.00%

(1) Hemen Holding Ltd. is a Cyprus holding company indirectly
controlled by Mr. John Fredriksen, Chairman and Chief
Executive Officer of the Company.
(2) Includes Ordinary Shares held by Hemen Holding Ltd. and
associated companies indirectly controlled by Mr. John
Fredriksen.

At June 13, 2000 and June 30, 1999 Hemen Holding Ltd. ("Hemen")
held 46.25% and 53.02% and of the Company's Ordinary Shares,
respectively.

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

As at May 31, 2001, 19,876,270 of the Company's Ordinary Shares,
of which 5,430,262 are held in the form of ADRs, are held by 62
holders of record in the United States.

No corporation of foreign government owns more than 50% of the
Company's outstanding Ordinary Shares.

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

B. RELATED PARTY TRANSACTIONS

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 (the "Suezmax Newbuilding
Companies") affiliated with Hemen. Hemen is the Company's largest
shareholder and is indirectly controlled by Mr. John Fredriksen,
Chairman and Chief Executive Officer of the Company. The first
three of the Suezmax tankers were delivered during 1998. The
remaining two vessels were delivered in February and April, 2000.

During 1997, Frontline received options to assume from other
Hemen affiliated parties, five newbuilding contracts for the
construction and purchase of five VLCC tankers. These options
were exercised in March 1998. The first two VLCC newbuildings
were delivered in 1998, the third in January 1999 and the
remaining two were delivered in mid 1999.

In June 1998, the Company obtained the Metrogas Loan of $87.5
million to finance the acquisition of the five VLCC newbuilding
contracts described above. At December 31, 1998, an amount of
$89 million was outstanding in respect of the Metrogas Loan,
including interest accrued thereon. In the year ended December
31, 1998, the Metrogas Loan bore interest at the rate of 6.75 per
cent. Interest expense recorded by the Company in 1998 in respect
of this loan was $3,780,772. On September 30, 1999, $35 million
of the $89 million Metrogas Loan was converted to equity by the
issuance of 8,230,000 shares at an issue price of NOK 33.00 per
share. In connection with this conversion, Metrogas offered $15
million of the resulting ordinary shares to existing Frontline
shareholders and warrant holders, excluding US persons. In
connection with this secondary offering by Metrogas, Frontline
bore costs of the offering of $15,000. At December 31, 1999, an
amount of $56.7 million was outstanding in respect of the
Metrogas Loan, including interest accrued thereon. On February

25, 2000, $30 million of the Metrogas Loan was converted to
equity, resulting in the issuance of 4,350,000 ordinary shares at
an issue price of NOK 57.50 per share. In connection with this
conversion, Metrogas offered 2,000,000 of the resulting ordinary
shares to existing Frontline shareholders and warrant holders,
excluding US persons. In August 2000, the outstanding principal
amount of $24.0 million on the Metrogas Loan was repaid in full,
together with $4.3 million accrued thereon. In the years ended
December 31, 2000 and 1999, the Metrogas Loan bore interest at
the rate of 8.0 per cent and the Company incurred interest costs
of $1.6 million and $5.4 million, respectively, of which $2.7
million was expensed in 1999.

In addition to the lending arrangement described above, Hemen
affiliated parties have, during the period 1998 to 2000, provided
additional short term financing to the Company. Such financing
bore interest at a rate of between 6.75 and 8.8 per cent per
annum in 2000 and 6.75 per cent in both 1999 and 1998. Interest
expense recorded by the Company in 2000 in respect of such
financing was $1,095,380 (1999 - $428,291, 1998 - $550,803).

In September 2000, Frontline acquired a 1993-built VLCC, the
"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.

On December 5, 2000, a subsidiary of Frontline made a short-term
loan of $20 million to World Shipholding Ltd., a company
affiliated with Hemen. This loan was repaid in full on February
6, 2001 together with fees and interest of $349,680, of which
$115,000 was recorded by the Company in 2000 and $234,680 will be
recorded in 2001.

On December 28, 2000, the Company and Overseas Shipholding Group
Inc. ("OSG") entered into an agreement with Osprey Maritime Ltd.
("Osprey") to acquire the two VLCCs Golar Edinburgh and Golar
Dundee. The agreement was signed on behalf of a joint venture
company to be owned 50.1 per cent by the Company and 49.9 per
cent by OSG. The purchase price for the vessels, which were
delivered in the first quarter of 2001 was $53 million each. At
December 31, 2000, World Shipholding Ltd. held more than 50 per
cent of the shares in Osprey. In February, 2001, World
Shipholding Ltd. took control of Osprey.

C. INTERESTS OF EXPERTS AND COUNSEL

Not Applicable

ITEM 8. FINANCIAL INFORMATION

A. CONSOLIDATED STATEMENTS AND OTHER FINANCIAL INFORMATION

See Item 18.

LEGAL PROCEEDINGS

The Company is a party, as plaintiff or defendant, to several
lawsuits in various jurisdictions for demurrage, damages, off-
hire and other claims and commercial disputes arising from the
operation of its vessels, in the ordinary course of business or
in connection with its acquisition activities. The Company's
management believes that the resolution of such claims will not
have a material adverse effect on the Company's operations or
financial condition.

DIVIDEND POLICY

The Company has not paid regular quarterly or annual dividends
since 1997 and its has been the Company's policy since that time
to pay dividends only when considered appropriate by the
Company's Board of Directors. On May 8, 2001, the Company
announced a dividend of $1.00 per share, payable to holders of
record as of May 21, 2001. The timing and amount of dividends, if
any, will depend upon the Company's results of operations,
financial condition, cash requirements, restrictions in financing
arrangements and other relevant factors.

B. SIGNIFICANT CHANGES

Not Applicable

ITEM 9. THE OFFER AND LISTING

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

The Company's Ordinary Shares are traded on the Oslo Stock
Exchange ("OSE") under the Symbol "FRO" and on the London Stock
Exchange ("LSE") under the symbol "FRO" ("LOFS" prior to May 13,
1998). Prior to the transfer of Frontline to Bermuda and
subsequent listing of its ordinary shares on the OSE, Frontline
AB's shares were listed on the Stockholm Stock Exchange ("SSE").

The Company's ADSs, each of which represents one Ordinary Share,
are traded on the Nasdaq National Market under the symbol "FRONY"
("LOFSY" prior to May 12, 1998). The ADSs are evidenced by
American Depositary Receipts ("ADRs"). The ADRs are issued by The
Bank of New York as Depositary. The Company has announced its
intention to list the Ordinary Shares on the New York Stock

Exchange and has given notice of termination of the ADR program
to the Bank of New York as Depositary.

The Nasdaq National Market is the Company's "primary listing". As
an overseas company with a secondary listing on the LSE, the
Company is not required to comply with certain listing rules
applicable to companies with a primary listing on the LSE. The
listing on the OSE is also a secondary listing.

The following table sets forth, for the five most recent fiscal
years, the high and low prices for the Ordinary Shares on the OSE
and the SSE, the high and low prices for the ADSs as reported by
the Nasdaq National Market and the high and low prices for the
Ordinary Shares on the LSE.

SSE OSE NASDAQ LSE
HIGH LOW HIGH LOW HIGH LOW HIGH LOW
FISCAL YEAR ENDED
DECEMBER 31

2000 - - NOK164.00 NOK37.00 $18.250 $3.938 12.25 GBP 1.925 GBP
1999 - - NOK45.00 NOK16.00 $4.250 $3.000 3.05 GBP 1.725 GBP
1998 - - NOK92.00 NOK8.00 $14.500 $3.125 9.20 GBP 3.00 GBP
1997 SEK89 SEK70 NOK121.00 NOK86.00 $16.000 $11.750 9.70 GBP 6.60 GBP
1996 SEK69 SEK51 - - $14.750 $11.813 10.60 GBP 6.70 GBP

The following table sets forth, for each full financial quarter
for the two most recent fiscal years, the high and low prices for
the Ordinary Shares on the OSE, the high and low prices for the
ADSs as reported by the Nasdaq National Market and the high and
low prices for the Ordinary Shares on the LSE.

OSE NASDAQ LSE
HIGH LOW HIGH LOW HIGH LOW
FISCAL YEAR ENDED
DECEMBER 31, 200

First quarter NOK82.50 NOK37.00 $9.785 $3.938 3.00 GBP 1.925 GBP
Second quarter NOK106.00 NOK64.00 $12.50 $5.688 3.50 GBP 2.825 GBP
Third quarter NOK163.00 NOK98.00 $17.875 $14.750 12.25 GBP 3.50 GBP
Fourth quarter NOK164.00 NOK103.00 $18.250 $11.375 11.95 GBP 8.55 GBP
FISCAL YEAR ENDED
DECEMBER 31, 1999
First quarter NOK23.50 NOK16.50 $3.63 $3.00 3.05 GBP 2.35 GBP
Second quarter NOK29.30 NOK16.00 $3.75 $3.00 3.00 GBP 2.35 GBP

Third quarter NOK33.00 NOK26.00 $4.25 $3.00 3.00 GBP 1.78 GBP
Fourth quarter NOK45.00 NOK32.30 $4.13 $3.50 1.93 GBP 1.73 GBP

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

OSE NASDAQ LSE
HIGH LOW HIGH LOW HIGH LOW

May 2001 NOK222.00 NOK155.00 $24.500 $17.500 16.495 GBP 12.468 GBP
April 2001 NOK192.00 NOK152.00 $21.380 $17.000 14.625 GBP 12.075 GBP
March 2001 NOK162.50 NOK135.00 $18.188 $15.125 12.125 GBP 10.30 GBP
February 2001 NOK150.00 NOK102.50 $16.625 $11.750 10.90 GBP 8.65 GBP
January 2001 NOK120.00 NOK104.00 $14.000 $11.563 9.25 GBP 8.55 GBP
December 2000 NOK130.00 NOK103.00 $14.750 $11.375 10.00 GBP 8.55 GBP

The Company's Ordinary Shares have been thinly traded on the
London Stock Exchange during 1998, 1999 and 2000.

ITEM 10. ADDITIONAL INFORMATION

A. SHARE CAPITAL

Not Applicable

B. MEMORANDUM AND ARTICLES OF ASSOCIATION

The Memorandum of Association of the Company has previously been
filed as Exhibit 3.1 to the Company's Registration Statement on
Form F-1, (Registration No. 33-70158) filed with the Securities
and Exchange Commission on October 12, 1993, and is hereby
incorporated by reference into this Annual Report.

In connection with the Amalgamation, on May 11, 1998, the Company
adopted revised Bye-laws. These Amended and Restated Bye-Laws of
the Company as adopted by shareholders on May 11, 1998, have
previously been filed with the Securities and Exchange Commission
on June 12, 1998 as Exhibit 1.1 to the Company's Annual Report on
Form 20-F for the transition period ended December 31, 1997 and
are hereby incorporated by reference into this Annual Report.

The action necessary to change the rights of holders of the stock
and the conditions governing the manner in which annual general

meetings and extraordinary meetings if shareholders are convoked,
including the conditions of admission, are described in the
Company's Bye-laws filed with the Securities and Exchange
Commission on June 12, 1998 as Exhibit 1.1 to the Company's
Annual Report on Form 20-F for the transition period ended
December 31, 1997 and are hereby incorporated by reference into
this Annual Report.

The Company's Bye-laws contain certain restrictions with respect
to the registration of shares which are summarised below:

(i) The Board may decline to register the transfer of any
share held through the Verdipapirsentralen ("VPS"), the
computerised central share registry maintained in Oslo,
Norway, for bodies corporate whose shares are listed for
trading on the OSE, if the registration of such transfer
would be likely, in the opinion of the Board, to result
in fifty per cent or more of the aggregate issued share
capital of the Company or shares of the Company to which
are attached fifty per cent or more of the votes
attached to all outstanding shares of the Company being
held or owned directly or indirectly, (including,
without limitation, through the VPS) by a person or
persons resident for tax purposes in Norway (or such
other jurisdiction as the Board may nominate from time
to time).

(ii) If fifty per cent or more of the aggregate issued share
capital of the Company or shares to which are attached
fifty per cent or more of the votes attached to all
outstanding shares of the Company are found to be held
or owned directly or indirectly (including, without
limitation, through the VPS) by a person or persons
resident for tax purposes in Norway (or such other
jurisdiction as the Board may nominate from time to
time), other than the Registrar in respect of those
shares registered in its name in the Register as nominee
of persons whose interests in such shares are reflected
in the VPS, the Board shall make an announcement to such
effect through the OSE, and the Board and the Registrar
shall thereafter be entitled and required to dispose of
such number of shares of the Company or interests
therein held or owned by such persons as will result in
the percentage of the aggregate issued share capital of
the Company held or owned as aforesaid being less than
fifty per cent.

The Company has in place a Shareholders Rights Plan that would
have the effect of delaying, deferring, preventing a change in
control of the Company. The Shareholders Rights Plan has been
filed as part of the Form 8-A filed with the Securities and

Exchange Commission on December 9, 1996, and is hereby
incorporated by reference into this Annual Report.

C. MATERIAL CONTRACTS

As described in Item 4., "Information on the Company", the
Company sponsored a plan of reorganisation ("Plan") for Golden
Ocean in the United States Bankruptcy Court for the District of
Delaware. The Plan became effective on October 10, 2000, at which
time the Company acquired Golden Ocean. As part of the Plan, the
Company paid an aggregate amount of approximately $63 million and
issued an aggregate of 1,245,998 Ordinary Shares to holders of
allowed claims against Golden Ocean.

D. EXCHANGE CONTROLS

The Company is classified by the Bermuda Monetary Authority as a
non-resident of Bermuda for exchange control purposes.

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

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

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

E. TAXATION

Bermuda currently imposes no tax (including a tax in the nature
of an income, estate duty, inheritance, capital transfer or
withholding tax) on profits, income, capital gains or
appreciations derived by, or dividends or other distributions

paid to US Shareholders of ADSs or Ordinary Shares. Bermuda has
undertaken not to impose any such Bermuda taxes on US
Shareholders of ADSs or Ordinary Shares prior to the year 2016
except in so far as such tax applies to persons ordinarily
resident in Bermuda.

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

F. DIVIDENDS AND PAYING AGENTS

Not Applicable

G. STATEMENT BY EXPERTS

Not Applicable

H. DOCUMENTS ON DISPLAY

The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended. In accordance with
these requirements the Company files reports and other
information with the Securities and Exchange Commission. These
materials, including this annual report and the accompanying
exhibits, may be inspected and copied at the public reference
facilities maintained by the Commission at 450 Fifth Street,
N.W., Room 1024, Washington, D.C. 20549 and at the Commission's
Regional Offices at 7 World Trade Center, Suite 1300, New York,
New York 10048 and 500 West Madison Street, Suite 1400,
Northwestern Atrium Center, Chicago, Illinois 60661. You may
obtain information on the operation of the public reference room
by calling 1 (800) SEC-0330, and you may obtain copies at
prescribed rates from the Public Reference Section of the
Commission at its principal office in Washington, D.C. 20549.
The SEC maintains a website (http://www.sec.gov.) that contains
reports, proxy and information statements and other information
regarding registrants that file electronically with the SEC. In
addition, documents referred to in this annual report may be
inspected at the Company's headquarters at Mercury House, 101
Front Street, Hamilton, Bermuda.

I. SUBSIDIARY INFORMATION

Not Applicable

ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK

The Company is exposed to various market risks, including
interest rates and foreign currency fluctuations. The Company
uses interest rate swaps to manage interest rate risk. The
Company has not entered into any financial instruments for
speculative or trading purposes.

The exposure to interest rate risk relates primarily to its debt
and related interest rate swaps. The majority of this exposure is
the floating rate debt, which totalled $1,439.5 million at
December 31, 2000 (1999: $904.5 million). The Company has entered
into interest rate swap agreements to manage its exposure with
interest rates by locking in fixed interest rates from floating
rates. At December 31, 2000, there were nine swaps with a total
notional principal of $373.5 million (1999: ten swaps with
notional principal of $293.7 million). The swap agreements have
various maturity dates from May 2001 to August 2008, and the
Company would have a loss $0.2 million if it were to terminate
the agreements as of December 31, 2000 (1999 -- gain of $5.8
million). The maximum exposure to the interest rate fluctuations
is $1,066.0 million at December 31, 2000 (1999: $610.8 million).
A one per cent change in interest rates would increase (decrease)
the interest expense by $10.7 million per year as of December 31,
2000 (1999: $6.1 million).

The fair market value of the fixed rate debt on the balance sheet
was $93.3 million as of December 31, 2000 (1999: $168.5 million).
If the interest rate was to increase (decrease) by one per cent
with all other variables remaining constant, the market value of
the fixed rate debt would decrease (increase) by approximately
$1.5 million (1999: $3.4 million).

Marketable equity securities held by the Company are considered
to be available-for-sale securities and as such are carried at
fair value with resulting unrealised gains and losses, net of
deferred taxes if any, recorded as a separate component of other
comprehensive income in stockholders' equity. As a result, the
Company's equity is exposed to fluctuations in the share price of
marketable securities considered to be available-for-sale. A ten
per cent change in the market value of such securities would
increase (decrease) equity by $0.4 million as of December 31,
2000 (1999- $1.1 million).

The majority of the Company's transactions, assets and
liabilities are denominated in U.S. dollars, the functional
currency of the Company. Certain of the Company's subsidiaries
report in Sterling, Swedish kronor or Norwegian kroner and risks
of two kinds arise as a result: a transaction risk, that is, the
risk that currency fluctuations will have a negative effect on
the value of the Company's cash flows; and a translation risk,
the impact of adverse currency fluctuations in the translation of
foreign operations and foreign assets and liabilities into U.S.

dollars for the Company's consolidated financial statements.
Certain of the Company's subsidiaries have Yen denominated long-
term debt and charter contracts denominated in Yen. There is a
risk that currency fluctuations will have a negative effect on
the value of the Company's cashflows. At December 31, 2000 the
Company had Yen denominated long-term debt of Yen 15,587,000,000.
The Company has not entered into forward contracts for either
transaction or translation risk, which may have an adverse effect
on the Company's financial condition and results of operations.

ITEM 12. DESCRIPTION OF SECURITIES

Not Applicable

PART II

ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES

Not Applicable

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

On December 6, 1996, the Company's Board of Directors adopted a
Shareholder Rights Plan (the "Plan"). The Company adopted the
Plan to protect shareholders against unsolicited attempts to
acquire control of the Company that do not offer an adequate
price to all shareholders or are otherwise not in the best
interests of the Company and its shareholders. Under the Plan,
each shareholder of record on December 20, 1996 received one
right for each Ordinary Share held, and each registered holder of
outstanding warrants received one right for each Ordinary Share
for which they are entitled to subscribe. In addition, in
connection with the Amalgamation, the Company issued in the
aggregate 47,212,536 rights to Frontline's shareholders
(44,612,536 of which rights were attached to the Ordinary Shares
issued and 2,600,000 of which rights were attached to the
Ordinary Shares underlying the New Warrants issued). The rights
generally may not detach from the related Ordinary Shares. Each
right entitles the holder to purchase from the Company one-
quarter of an Ordinary Share at an initial purchase price of
$1.50. The rights will become exercisable and will detach from
the Ordinary Shares a specified period of time after any person
has become the beneficial owner of 20 per cent or more of the
Company's Ordinary Shares. The Plan was amended as of October 29,
1997 to provide that Frontline's purchase of Ordinary Shares
pursuant to its tender offer in connection with its acquisition
of LOF, would not result in the rights becoming exercisable.

If any person becomes the beneficial owner of 20 per cent or more
of the Company's Ordinary Shares, each right will entitle the
holder, other than the acquiring person, to purchase for the
purchase price, that number of Ordinary Shares having a market
value of eight times the purchase price.

If, following an acquisition of 20 per cent or more of the
Company's Ordinary Shares, the Company is involved in certain
amalgamations or other business combinations or sells or
transfers more than 50% of its assets or earning power, each
right will entitle the holder to purchase for the purchase price
ordinary shares of the other party to the transaction having a
market value of up to eight times the purchase price.

The Company may redeem the rights at a price of $0.001 per right
at any time prior to a specified period of time after a person

has become the beneficial owner of 20 per cent or more of its
Ordinary Shares. The rights will expire on December 31, 2006,
unless earlier exchanged or redeemed.

In connection with the Company's one-for-ten reverse stock split,
the rights were adjusted pursuant to the Plan, so that there are
currently ten rights attached to each outstanding Ordinary Share.

ITEM 15. RESERVED

ITEM 16. RESERVED

PART III

ITEM 17. FINANCIAL STATEMENTS

Not Applicable

ITEM 18. FINANCIAL STATEMENTS

The following financial statements listed below and set forth on
pages F-1 through F-55 are filed as part of this annual report:

FINANCIAL STATEMENTS FOR FRONTLINE LTD.

Index to Consolidated Financial Statements F-1

Report of Independent Accountants F-2

Report of Independent Accountants F-4

Report of Independent Accountants F-5

Consolidated Statements of Operations for the years ended
December 31, 2000, 1999 and 1998 F-7

Consolidated Balance Sheets as of
December 31, 2000 and 1999 F-9

Consolidated Statements of Cash Flows for the years ended
December 31, 2000, 1999 and 1998 F-11

Consolidated Statements of Changes in Stockholders' Equity
for the years ended December 31, 2000, 1999 and 1998 F-13

Notes to Consolidated Financial Statements F-15

The following financial statements listed below and previously
filed by the Company, are incorporated by reference to the
Company's Annual Report on Form 20-F for the Year Ended December
31, 1999 filed on June 28, 2000. These financial statements were
set forth on pages F-28 through F-47 of such Form 20-F:

FINANCIAL STATEMENTS FOR ICB SHIPPING AB.

Index to Consolidated Financial Statements

Report of Independent Accountants

Consolidated Statements of Operations for the years ended
December 31, 1998 and 1997

Consolidated Balance Sheets as of December 31, 1998 and 1997

Consolidated Statements of Changes in Financial Position for the
years ended December 31, 1998
and 1997

Notes to Consolidated Financial Statements

All other schedules for which provision is made in the applicable
accounting regulations of the SEC are not required, are
inapplicable or have been disclosed in the Notes to the
Consolidated Financial Statements are therefore have been
omitted.

ITEM 19. EXHIBITS

NUMBER DESCRIPTION OF EXHIBIT

1.1* Memorandum of Association of the Company, incorporated
by reference to Exhibit 3.1 of the Company's
Registration Statement on Form F-1, Registration No. 33-
70158 filed on October 12, 1993 (the "Original
Registration Statement").

1.2* Amended and Restated Bye-Laws of the Company as adopted
by shareholders on November 15, 1993, incorporated by
reference to Exhibit 3.3 of the Original Registration
Statement.

1.3* Amended and Restated Bye-Laws of the Company as adopted
by shareholders on May 11, 1998, (filed in proposed form
as Exhibit C to the Form F-4 Registration Statement,
filed April 13, 1998 the "Amalgamation Registration
Statement") incorporated by reference to Exhibit 1.1 of
the Company's Annual Report on Form 20-F for the
transition period ended December 31, 1997.

2.1* Form of Ordinary Share Certificate, incorporated by
reference to Exhibit 4.1 of the Original Registration
Statement.

2.2* Form of Deposit Agreement dated as of November 24, 1993,
among Frontline Ltd. (F/K/A London & Overseas Freighters
Limited), The Bank of New York as Depositary, and all
Holders from time to time of American Depositary
Receipts issued thereunder, including form of ADR,
incorporated by reference to Exhibit 4.2 of the Original
Registration Statement.

2.3 Form of Deposit Agreement dated as of November 24, 1993,
as amended and restated as of May 29, 2001, among
Frontline Ltd. (F/K/A London & Overseas Freighters
Limited), The Bank of New York as Depositary, and all

Holders from time to time of American Depositary
Receipts issued thereunder, including form of ADR.

2.4* Rights Agreement (the "Rights Agreement") between the
Company and the Bank of New York incorporated by
reference to Exhibit 1.3 of the Company's Registration
Statement on Form 8-A, File No.0-22704 filed on December
9, 1996.

2.5* Amendment No. 1 to the Rights Agreement incorporated by
reference to Exhibit 4.3 of the Amalgamation
Registration Statement.

2.6* The Subregistrar Agreement related to the registration
of certain securities issued by Frontline Ltd. in the
Norwegian Registry of Securities between Frontline Ltd.
and Christiania Bank og Kreditkasse ASA together with
the Form of Warrant Certificate and Conditions attaching
thereto, incorporated by reference to Exhibit 1.1 of the
Company's Annual Report on Form 20-F for the fiscal year
ended December 31, 1998.

4.1* Form of United Kingdom Share Option Plan, incorporated
by reference to Exhibit 10.1 of the Original
Registration Statement.

4.2* Form of Bermuda Share Option Plan, incorporated by
reference to Exhibit 10.2 of the Original Registration
Statement.

4.3* The Subordinated Convertible Loan Facility Agreement USD
89,000,000 dated July 13, 1999, between Frontline Ltd.
as Borrower and Metrogas Holdings Inc. as Lender,
incorporated by reference to Exhibit 2.1 of the
Company's Annual Report on Form 20-F for the fiscal year
ended December 31, 1998.

4.4* Master Agreement, dated September 22, 1999, among
Frontline AB and Frontline Ltd (collectively "FL"), Acol
Tankers Ltd. ("Tankers"), ICB Shipping AB ("ICB"), and
Ola Lorentzon (the "Agent"), incorporated by reference
to Exhibit 3.1 of the Company's Annual Report on Form
20-F for the fiscal year ended December 31, 1999.

8.1 Subsidiaries of the Company.

10.1 The Company's Plan of Reorganization for Golden Ocean
Group Limited, Golden Ocean Tankers Limited and Channel
Rose Holdings Inc. under Chapter 11 of the United States
Bankruptcy Code dated as of July 7, 2000, as amended.

10.2* Financial Statements of ICB Shipping AB, incorporated by
reference to Item 19 of the Company's Annual Report on
Form 20-F for the fiscal year ended December 31, 1999.

* Incorporated herein by reference.

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS OF FRONTLINE LTD.

Report of Independent Accountants...........................F-2

Report of Independent Accountants...........................F-4

Report of Independent Accountants...........................F-5

Consolidated Statements of Operations for the years ended
December 31, 2000, 1999 and 1998............................F-7

Consolidated Balance Sheets as of December 31, 2000
and 1999..................................................F-9

Consolidated Statements of Cash Flows for the years ended
December 31, 2000, 1999 and 1998............................F-11

Consolidated Statements Changes in Stockholders'
Equity for the years ended December 31, 2000,
1999 and 1998...............................................F-13

Notes to Consolidated Financial Statements..................F-15

F-1

Report of Independent Accountants

TO THE BOARD OF DIRECTORS
AND STOCKHOLDERS OF FRONTLINE LTD.

In our opinion, based on our audits and the reports of other
auditors, the accompanying consolidated balance sheets and the
related consolidated statements of operations, cash flows and
changes in stockholders' equity present fairly, in all material
respects, the financial position of Frontline Ltd. at December
31, 2000 and 1999 and the results of its operations and its cash
flows for each of the three years in the period ended December
31, 2000 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 did not audit the financial
statements of Golden Ocean Group Limited, a wholly-owned
subsidiary, which statements reflect total assets of
approximately $535.1 million at December 31, 2000 and total
revenues of approximately $23.1 million for the period from
October 10, 2000 (date of acquisition) to December 31, 2000. In
addition, we did not audit the financial statements of ICB
Shipping AB, a wholly-owned subsidiary, which is reflected in the
financial statements referred to above on a consolidated basis as
of and for the year ended December 31, 1999 and using the equity
method of accounting as of and for the year ended December 31,
1998. The financial statements of ICB Shipping AB reflect total
assets of approximately $462.5 million as of December 31, 1999
and total revenues of approximately $125.8 million for the year
ended December 31, 1999, in conformity with generally accepted
accounting principles in Sweden. The Company's net investment in
ICB Shipping AB was approximately $196.4 million at December 31,
1998, and the share in results from ICB Shipping AB for the year
ended December 31, 1998 was approximately $14.2 million, in
conformity with generally accepted accounting principles in the
United States. We have audited adjustments necessary to convert
the 1999 ICB Shipping AB financial statements to accounting
principles generally accepted in the United States. The
financial statements of Golden Ocean Group Limited and ICB
Shipping AB were audited by other auditors whose reports thereon
have been furnished to us, and our opinion expressed herein,
insofar as it relates to the amounts included for Golden Ocean
Group Limited and ICB Shipping AB, is based solely on the reports
of the other auditors and our audit of the adjustments necessary
for a presentation in accordance with generally accepted
accounting principles in the United States. We conducted our
audits of these statements in accordance with auditing standards
generally accepted in the United States of America, which require
that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material

F-2

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 and the reports of other auditors provide a reasonable
basis for our opinion.

PricewaterhouseCoopers DA

Oslo, Norway
June 12, 2001

F-3

GOLDEN OCEAN GROUP LIMITED
Report of Independent Accountants

TO THE BOARD OF DIRECTORS AND STOCKHOLDERS OF GOLDEN OCEAN GROUP
LIMITED

We have audited the consolidated balance sheet of Golden Ocean
Group Limited and subsidiaries as of December 31, 2000 and the
related consolidated statements of operations, changes in
stockholders' equity and cash flows for the period from October
10 to December 31, 2000. These consolidated financial statements
are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated
financial statements based on our audit.

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

In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the consolidated
financial position of Golden Ocean Group Limited and subsidiaries
as of December 31, 2000, and the consolidated results of their
operations and their cash flows for the period from October 10 to
December 31, 2000, in conformity with generally accepted
accounting principles in the United States.

As more fully explained in notes 1 and 19 to the consolidated
financial statements Golden Ocean Group Limited and two
subsidiaries filed a voluntary petition for relief under Chapter
11 of the United States Bankruptcy Code on January 14, 2000. A
Plan of Reorganisation became effective on October 10, 2000.

Moore Stephens Chartered Accountants
London, England
Date, February 22, 2001

F-4

Report of Independent Accountants

TO THE BOARD OF DIRECTORS AND STOCKHOLDERS
ICB SHIPPING AB

We have audited the accompanying consolidated balance sheets of
ICB Shipping AB and subsidiaries as of December 31, 1998 and
1997, and the related consolidated statements of income and
changes in financial position for the years then ended. These
consolidated financial statements are the responsibility of the
Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our
audits.

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

In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the financial
position of ICB Shipping AB and subsidiaries as of December 31,
1998 and 1997 and the results of their operations and their
changes in financial position for the years then ended in
conformity with accounting principles generally accepted in
Sweden.

Accounting principles generally accepted in Sweden vary in
certain significant respects from accounting principles generally
accepted in the United States. Application of accounting
principles generally accepted in the United States would have
affected results of operations for the years ended December 31,
1998 and 1997 and stockholders' equity as of December 31, 1998
and 1997 to the extent summarized in Note 21 to the consolidated
financial statements.

Stockholm, Sweden
April 12, 1999, except for the paragraph regarding Note 21 as to
which the date is January 25, 2000

F-5

Per Bergman
Authorized Public Accountant
KPMG

F-6

Frontline Ltd.
Consolidated Statements of Operations for the years ended
December 31, 2000, 1999 and 1998
(in thousands of $, except per share data)

2000 1999 1998
(restated)
Operating revenues
Time charter revenues 31,590 29,880 14,575
Bareboat charter revenues 8,753 - -
Voyage charter revenues 656,917 339,996 255,830
Voyage expenses and
commission (97,316) (116,662) (66,545)
-----------------------------------------------------------------
Net operating revenues 599,944 253,214 203,860
-----------------------------------------------------------------
Gain (loss) on sale of assets 1,160 (37,779) (1,514)
Operating expenses
Ship operating expenses 88,455 92,708 55,586
Charterhire expenses 34,351 31,719 14,889
Administrative expenses 9,326 11,783 7,757
-----------------------------------------------------------------
Total operating expenses 132,132 136,210 78,232
-----------------------------------------------------------------
Net operating income before
depreciation 468,972 79,225 124,114
-----------------------------------------------------------------
Depreciation and amortisation 92,880 91,435 51,659
-----------------------------------------------------------------
Net operating income (loss) after
depreciation 376,092 (12,210) 72,455
-----------------------------------------------------------------
Other income (expenses)
Interest income 6,858 7,561 2,998
Interest expense (96,174) (88,728) (59,320)
Share in results from
associated companies 12,817 3,067 12,985
Foreign currency exchange
gain (loss) 14,563 (1,123) 669
Other financial items (248) 283 2,096
-----------------------------------------------------------------
Net other expenses (62,184) (78,940) (40,572)
Net income (loss) before income
taxes and minority interest 313,908 (91,150) 31,883
Minority interest - 4,245 -
Income taxes 41 (9) 30
-----------------------------------------------------------------
Net income (loss) 313,867 (86,896) 31,853
=================================================================

F-7

Earnings (loss) per share
Basic $ 4.28 $ (1.76) $ 0.69
Diluted $ 4.27 $ (1.76) $ 0.69
=================================================================

See accompanying Notes that are an integral part of these
Consolidated Financial Statements

F-8

Frontline Ltd.
Consolidated Balance Sheets as of December 31, 2000 and 1999
(in thousands of $)

2000 1999
ASSETS
Current Assets
Cash and cash equivalents 103,514 65,467
Restricted cash 12,580 800
Marketable securities 3,713 10,867
Trade accounts receivable 95,769 12,528
Other receivables 35,252 15,765
Inventories 11,190 14,280
Voyages in progress 22,259 14,412
Prepaid expenses and accrued income 8,372 3,628
-----------------------------------------------------------------
Total current assets 292,649 137,747
Newbuildings and vessel purchase
options 36,326 32,777
Vessels and equipment, net 2,254,921 1,523,112
Vessels and equipment under capital
lease, net 108,387 -
Investment in associated companies 27,361 16,274
Deferred charges 5,836 4,680
Other long-term assets 41,123 -
Goodwill 14,385 12,203
-----------------------------------------------------------------
Total assets 2,780,988 1,726,793
=================================================================

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Short-term debt and current portion
of long-term debt 212,767 116,814
Current portion of obligations under
capital leases 7,888
Trade accounts payable 10,610 8,001
Accrued expenses 40,777 37,880
Deferred charter revenue 2,577 -
Provisions for drydocking 11,440 6,517
Other current liabilities 4,332
-----------------------------------------------------------------
Total current liabilities 290,391 169,212
Long-term liabilities
Long-term debt 1,331,372 962,880
Obligations under capital leases 101,875
Provisions for drydocking 19,727 16,562
Other long-term liabilities 2,063 1,888
-----------------------------------------------------------------
Total liabilities 1,745,428 1,150,542
Commitments and contingencies

F-9

Minority interest 6,070 18,951
Stockholders' equity
Share capital 195,172 152,405
Additional paid in capital 576,677 462,474
Warrants and options 7,662 9,333
Accumulated other comprehensive
income (loss) (3,579) (6,603)
Retained earnings (accumulated
deficit) 253,558 (60,309)
-----------------------------------------------------------------
Total stockholders' equity 1,029,490 557,300
-----------------------------------------------------------------
Total liabilities and stockholders'
equity 2,780,988 1,726,793
=================================================================
See accompanying Notes that are an integral part of these
Consolidated Financial Statements

F-10

Frontline Ltd.
Consolidated Statements of Cash Flows for the years ended
December 31, 2000, 1999 and 1998
(in thousands of $)
2000 1999 1998
(restated)
Operating activities
Net income (loss) 313,867 (86,896) 31,853
Adjustments to reconcile net income
(loss) to net cash
provided by operating activities:
Depreciation and amortisation 92,880 91,435 51,659
Amortisation of deferred
charges 1,005 2,922 3,021
(Gain) loss from sale of
assets (1,160) 37,199 1,125
Share in results from
associated companies (12,817) (3,067) (12,985)
Unrealised foreign exchange
gain (14,794) - -
Other, net (1,552) - (2,532)
Changes in operating assets
and liabilities, net of
effect of acquisitions:
Trade accounts receivable (80,758) (2,676) (2,710)
Other receivables (19,489) 1,521 1,089
Inventories 3,560 (4,915) (1,351)
Voyages in progress (7,847) (1,153) 1,072
Prepaid expenses and accrued
income (1,903) 2,049 5,208
Trade accounts payable (7,866) (1,824) 1,513
Accrued expenses 2,972 2,805 (5,001)
Deferred charter revenue (2,019) - -
Provisions for drydocking 6,858 7,158 2,408
Other, net 645 1,928 (4,777)
-----------------------------------------------------------------
Net cash provided by operating
activities 271,582 46,486 69,592
-----------------------------------------------------------------
Investing activities
Maturity (placement) of
restricted cash (4,648) 1,116 (1,916)
Additions to newbuildings,
vessels and equipment (435,980) (200,736) (352,003)
Proceeds from sale of vessels
and equipment 1,315 239,043 211,954
Acquisition of businesses
(net of cash acquired) (41,912) 126,000 -
Investment in associated
companies (3,993) 4,210 (10,430)
Investment in marketable

F-11

securities (983) - -
Investment in debt (38,553) - -
Dividends received from
associated companies 2,346 3,246 8,048
Proceeds from sales of other
assets 25,490 2,653 392
-----------------------------------------------------------------
Net cash provided by (used in)
investing activities (496,918) 175,532 (143,955)
-----------------------------------------------------------------
Financing activities
Proceeds from long-term debt 384,690 505,875 327,849
Repayments of long-term debt
and debentures (209,711) (679,210) (265,211)
Payment of obligations under
capital leases (1,990) - -
Debt fees paid (2,161) (3,068) (1,113)
Cash dividends paid - (4,714) -
Purchase of minority interest (12,020) (104,148) -
Proceeds from issuance of
equity 104,575 54,680 2
-----------------------------------------------------------------
Net cash (used in) provided
by financing activities 263,383 (230,585) 61,527
-----------------------------------------------------------------
Net increase (decrease) in cash
and cash equivalents 38,047 (8,567) (12,836)
Cash and cash equivalents at
beginning of year 65,467 74,034 86,870
Cash and cash equivalents at
end of year 103,514 65,467 74,034
=================================================================
Supplemental disclosure of cash
flow information:
Interest paid, net of
capitalised interest 92,954 94,633 60,944
Income taxes paid 26 - 31
=================================================================
See accompanying Notes that are an integral part of these
Consolidated Financial Statements

F-12

Frontline Ltd.
Consolidated Statements of Changes in Stockholders' Equity for
the years ended
December 31, 2000, 1999 and 1998
(in thousands of $, except number of shares)

2000 1999 1998
(restated)

NUMBER OF SHARES OUTSTANDING
Balance at beginning of
year 60,961,860 46,106,860 46,105,860
Shares issued 19,256,967 14,855,000 1,000
Shares bought back (2,150,016) - -
-----------------------------------------------------------------
Balance at end of year 78,068,811 60,961,860 46,106,860
-----------------------------------------------------------------

SHARE CAPITAL
Balance at beginning of year 152,405 115,267 115,265
Shares issued 48,142 37,138 2
Shares bought back (5,375) - -
-----------------------------------------------------------------
Balance at end of year 195,172 152,405 115,267
-----------------------------------------------------------------

ADDITIONAL PAID IN CAPITAL
Balance at beginning of year 462,474 435,932 435,932
Shares issued 134,005 26,542 -
Shares bought back (19,802) - -
-----------------------------------------------------------------
Balance at end of year 576,677 462,474 435,932
-----------------------------------------------------------------

WARRANTS AND OPTIONS
Balance at beginning of year 9,333 9,333 9,333
Options and warrants exercised
or expired (1,671) - -
-----------------------------------------------------------------
Balance at end of year 7,662 9,333 9,333
-----------------------------------------------------------------

ACCUMULATED OTHER COMPREHENSIVE
INCOME (LOSS)
Balance at beginning of year (6,603) (3,545) 746
Other comprehensive income
(loss) 3,024 (3,058) (4,291)
-----------------------------------------------------------------
Balance at end of year (3,579) (6,603) (3,545)
-----------------------------------------------------------------

F-13

RETAINED EARNINGS (ACCUMULATED
DEFICIT)
Balance at beginning of year (60,309) 26,587 (5,266)
Net income (loss) 313,867 (86,896) 31,853
-----------------------------------------------------------------
Balance at end of year 253,558 (60,309) 26,587
-----------------------------------------------------------------
Total Stockholders' Equity 1,029,490 557,300 583,574
-----------------------------------------------------------------

COMPREHENSIVE INCOME (LOSS)
Net (loss) income 313,867 (86,896) 31,853
Unrealised holding
gains (losses) 3,138 (2,843) -
Unrealised holding (losses) gains
in associated companies - (3,013)
Foreign currency translation (114) (215) (1,278)
-----------------------------------------------------------------
Other comprehensive
income (loss) 3,024 (3,058) (4,291)
-----------------------------------------------------------------
Comprehensive income (loss) 316,891 (89,954) 28,122
-----------------------------------------------------------------

See accompanying Notes that are an integral part of these
Consolidated Financial Statements

F-14

1. GENERAL

Frontline Ltd. (the "Company" or "Frontline") is a Bermuda
based shipping company engaged primarily in the ownership and
operation of oil tankers, including oil/bulk/ore ("OBO")
carriers. The Company operates tankers of two sizes: very
large crude carriers ("VLCCS") which are between 200,000 and
320,000 deadweight tons ("dwt"), and Suezmaxes, which are
vessels between 120,000 and 170,000 dwt. In addition, through
a corporate acquisition completed in October 2000, the
Company has acquired a fleet of dry bulk carriers that
includes Capesize, Panamax and Handymax bulkers as well as
interests in 14 VLCCs. The Company operates through
subsidiaries and partnerships located in Bermuda, Liberia,
Norway, Panama, Singapore and Sweden. The Company is also
involved in the charter, purchase and sale of vessels.

The Company has its origin in Frontline AB, which was founded
in 1985, and which was listed on the Stockholm Stock Exchange
from 1989 to 1997. In May 1997, a decision was made to
redomicile Frontline AB from Sweden to Bermuda and to list
its shares on the Oslo Stock Exchange. The change of domicile
was executed through a share for share exchange offer from
the then newly formed Frontline Ltd. in Bermuda. Frontline
Ltd. was incorporated under the laws of Bermuda on April 29,
1997 for the purpose of succeeding to the business of
Frontline AB and, commencing in June 1997, the shares in
Frontline AB were exchanged for shares in Frontline. The
ordinary shares of Frontline were thereafter listed on the
Oslo Stock Exchange and delisted from the Stockholm Stock
Exchange.

In September 1997 Frontline initiated an amalgamation with
London & Overseas Freighters Limited ("LOF"). This process
was completed in May 1998. In the business combination
(discussed in detail below), which left LOF as the surviving
company, Frontline's shareholders exchanged Frontline shares
for LOF shares and LOF was subsequently renamed Frontline
Ltd. As a result of this transaction, Frontline became listed
on the London Stock Exchange and on the NASDAQ National
Market in addition to its listing on the Oslo Stock Exchange.
LOF originally commenced operations in 1948 as a U.K. company
("LOF plc") and was listed on the London Stock Exchange in
1950. LOF was incorporated under the laws of Bermuda on June
12, 1992 for the purpose of succeeding to the business of LOF
plc. In November 1993, the shares of LOF were listed on the
Nasdaq National Market in the form of American Depositary
Shares ("ADSs"), each ADS representing ten LOF shares.

In December 1999, Frontline entered into an agreement with
five other shipowners, A.P. Moller, Euronav Luxembourg SA,

F-15

Osprey Maritime Ltd., Overseas Shipholding Group Inc. and
Reederei "Nord" Klaus E. Oldendorff to establish a Marshall
Islands corporation, Tankers International LLC ("Tankers"),
to operate a pool of their respective VLCC fleets. Tankers
commenced operations on February 1, 2000 with an initial
fleet of 39 modern VLCCs. With the exception of the VLCCs
committed to term charters, all of the Company's VLCCs are
operated in the Tankers pool.

BUSINESS COMBINATIONS AND ACQUISITIONS

LONDON & OVERSEAS FREIGHTERS LIMITED

On September 22, 1997, LOF announced that it had entered into
an Agreement and Plan of Amalgamation (the "Amalgamation
Agreement") with Frontline, providing for a business
combination in a three-step transaction. On September 29,
1997, pursuant to the Amalgamation Agreement, Frontline
commenced a cash tender offer (the "Offer") for at least 50.1
per cent and up to 90 per cent of the outstanding LOF
ordinary shares and American Depositary Shares ("ADSs") for a
price of $1.591 per ordinary share (or $15.91 per ADS). The
Offer expired on October 28, 1997 and effective November 1,
1997 Frontline had acquired approximately 79.74 per cent of
the outstanding LOF ordinary shares. (see Note 24).

In the second step, which was completed on May 11, 1998,
Frontline amalgamated (the "Amalgamation") with Dolphin
Limited, a Bermuda subsidiary of LOF. Each ordinary share of
Frontline was cancelled in consideration for which the
stockholders of Frontline received (i) 3.2635 (restated to
0.32635) ordinary shares of LOF and (ii) 0.1902 (restated to
0.01902) of a newly issued warrant ("Frontline Warrants") to
purchase one LOF ordinary share.

In the third step of the combination, in order to combine the
assets and liabilities, LOF purchased the assets and
liabilities of Frontline which were vested in the amalgamated
company at fair market value in exchange for a promissory
note. LOF is the legally surviving entity in this business
combination and has been renamed Frontline Ltd. with effect
from May 11, 1998. Frontline is treated as the accounting
acquirer and the transaction treated as a reverse
acquisition. For the purposes of these financial statements,
the Amalgamation has been recorded with effect from November
1, 1997 and the results of LOF have been consolidated from
that date. The share capital of the Company has been restated
accordingly to reflect the transaction. For periods on or
after May 11, 1998, the term Company refers to Frontline Ltd.
(formerly London & Overseas Freighters Limited).

F-16

ICB SHIPPING AB (PUBL)

On September 1, 1997, Frontline announced its intention to
submit an offer to acquire all of the shares of ICB Shipping
AB (publ) ("ICB"). The final form of the offer was an offer
to acquire all of the shares of ICB (the "ICB Shares") in
exchange for SEK 130 in cash for each of the A-shares and SEK
115 in cash for each of the B-shares. The total acquisition
price was estimated to be $423 million, financed primarily by
a US $300 million loan facility ("ICB facility") with Chase
Manhattan Bank ("Chase"). Through the tender offer, by
October 1997 Frontline acquired 51.7 per cent of the
outstanding shares of ICB at a purchase price of
approximately $215 million. However, the shares purchased,
14,428,078 Class B shares and 148,663 Class A shares,
provided Frontline with only 31.4 per cent of the ICB voting
rights. On January 8, 1998, Frontline withdrew its bid for
the remaining outstanding shares of ICB. 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.

On September 23, 1999, pursuant to an agreement (the "ICB
Agreement"), Frontline acquired ICB Shares previously owned
by the so-called "A group" consortium including those
controlled by board members of ICB and ICB shares controlled
by the Angelicoussis family. In connection with the ICB
Agreement, four of the VLCCs owned by ICB, were sold to a
companies controlled by the Angelicoussis family. As a result
of the acquisitions, 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 is consequently 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.

In the two year period prior to September 1999, Frontline was
unable to control, or exercise significant influence over,
ICB. Accordingly, the Company previously accounted for its
investment in ICB as an available-for-sale security in
accordance with SFAS 115. As a result of Frontline acquiring
control over ICB, the Company's financial statements have
been restated. For the years ended December 31, 1997 and
1998, the investment in ICB is accounted for in accordance
with the equity method. As a result, net income increased by
$5.4 million and $4.9 million from amounts previously
reported for the years ended December 31, 1997 and 1998,
respectively.

F-17

For the year ended December 31, 1999, ICB has been
consolidated with effect from January 1, 1999. In connection
with the ICB Agreement, four of the VLCCs owned by ICB, were
sold to a companies controlled by the Angelicoussis family.
This sale has resulted in Frontline recognising a loss on
sale of vessels of $37.9 million in its consolidated
statement of operations for the year ended December 31, 1999.
Twenty employees of ICB have been made redundant as the
result of the acquisition by Frontline and severance costs of
approximately $1.4 million have been incurred in the year
ended December 31, 1999. These costs are included in the
determination of the purchase price of ICB.

GOLDEN OCEAN GROUP LIMITED

On October 10, 2000, Frontline took control of Golden Ocean
Group Limited ("Golden Ocean"), a shipping group which holds
interest in 14 VLCCs and 10 bulk carriers. On the same date
Golden Ocean emerged from bankruptcy protection under Chapter
11 of the U.S. Bankruptcy Code. Most of the delivered tonnage
of Golden Ocean is presently employed on medium to long term
charters.

On January 14, 2000, Golden Ocean and its fellow
subsidiaries, Golden Ocean Tankers Limited and Channel Rose
Holdings Inc. (together the "Debtors") filed for bankruptcy
protection under Chapter 11 of the U.S. Bankruptcy Code with
the Clerk of the United States Bankruptcy Court for the
District of Delaware (the "Bankruptcy Court"), and through
this protection received an exclusive period of up to 120
days to file a Plan of Reorganisation. In February, March and
April 2000, Frontline acquired a portion of Golden Ocean US$
291 million Senior Notes due in August 2001. As one of Golden
Ocean's largest creditors, Frontline announced that it would
seek to be actively involved in the reorganisation process.
On June 6, 2000, the Bankruptcy Court terminated Golden
Ocean's exclusive period to file a plan of reorganisation,
thereby permitting any party in interest to propose a plan.

On July 7, 2000, Frontline filed a proposed plan of
reorganisation (the "Plan of Reorganisation") and disclosure
statement (the "Disclosure Statement") with the Bankruptcy
Court which set forth the manner in which claims against and
equity interests in the Debtors would be treated. Two other
competing plans were filed within the time limit defined by
the Bankruptcy Court. On August 4, 2000 the Bankruptcy Court
approved on Frontline's Disclosure Statement and on August
14, 2000 approved the appointment of Frontline as manager of
Golden Ocean's operations with immediate effect. The Plan of
Reorganisation was approved by an overwhelming majority of

F-18

holders of claims entitled to vote and was confirmed at a
hearing on September 15, 2000.

On October 10, 2000 the Plan of Reorganisation became
effective and Frontline acquired the entire share capital of
Golden Ocean. The total acquisition price paid, including
amounts paid to settle allowed claims, was approximately
$63.0 million, including 1,245,998 shares issued at a price
of $15.65 per share. The acquisition of Golden Ocean has been
accounted for using the purchase method. (See Note 11 and
Note 24). Eighteen employees of Golden Ocean have been made
redundant as the result of the acquisition by Frontline and
severance costs of approximately $2.1 million have been
incurred by Golden Ocean in the year ended December 31, 2000.
These costs were included in the determination of the
reorganised balance sheet and not in the determination of the
purchase price.

2. ACCOUNTING POLICIES

BASIS OF ACCOUNTING

The consolidated financial statements are prepared in
accordance with accounting principles generally accepted in
the United States. The consolidated financial statements
include the assets and liabilities of the Company and its
subsidiaries. Investments in companies in which the Company
directly or indirectly holds more than 50 per cent of the
voting control are consolidated. For the year ended December
1, 1999, ICB has been consolidated with effect from January
1, 1999. For the year ended December 31, 2000, Golden Ocean
has been consolidated with effect from October 10, 2000. All
intercompany balances and transactions have been eliminated
on consolidation.

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's
financial statements have been restated for the years ended
December 31, 1997 and 1998 to reflect the application of the
equity method for the investment in ICB. The investment in
ICB was previously accounted for as an available-for-sale
security in accordance with SFAS 115 prior to this
restatement (see Note 1). The Company records its investments
in equity-method investees on the consolidated balance sheets
as "Investment in associated companies" and its share of the
investees' earnings or losses in the consolidated statements
of operations as "Share in results from associated
companies". The excess, if any, of the purchase price over
the book value basis of the Company's investment in an equity

F-19

method investee is included in the accompanying consolidated
balance sheets in "Investment in associated companies".

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.

Certain of the comparative figures have been reclassified to
conform with the presentation adopted in the current period.

CASH AND CASH EQUIVALENTS

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

MARKETABLE SECURITIES

INVENTORIES

Inventories, which comprise principally of 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'
remaining economic useful lives. In the fourth quarter of
1997, management determined that the useful life of its
vessels was 25 years rather than 20 years from date of
construction, as previously estimated. Other equipment is
depreciated over its estimated residual life, which
approximates five years.

The vessels obtained through the acquisition of ICB have been
depreciated on a straight-line basis over the vessels'
remaining economic useful lives, which was determined to be

F-20

20 years. In the fourth quarter of 1999, management
determined that the useful life of these vessels was 25 years
rather than 20 years, as previously estimated. A change in
accounting estimate was recognised to reflect this decision,
resulting in a decrease in depreciation expense and
consequently increasing net income by $1.8 million and basic
and diluted earnings per share by $0.04, for 1999.

VESSELS AND EQUIPMENT UNDER CAPITAL LEASE

The Company bareboat charters in certain vessels under
agreements that are classified as capital leases.
Depreciation of vessels under capital lease is calculated in
the same manner as for owned vessels and included within
depreciation and amortisation expense in the Statement of
Operations.

NEWBUILDINGS AND VESSEL PURCHASE OPTIONS

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

Vessel purchase options are capitalised 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 capitalised and the total of the option
payment, if any, and purchase price payment is transferred to
cost of vessels, net upon exercise of the option and delivery
of the vessel to the Company.

IMPAIRMENT OF LONG-LIVED ASSETS

Long-lived assets that are held and used by the Company are
reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset
may not be recoverable. In addition, long-lived assets to be
disposed of are reported at the lower of carrying amount and
fair value less estimated costs to sell.

F-21

DEFERRED CHARGES

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

REVENUE AND EXPENSE RECOGNITION

Revenues and expenses are recognised on the accrual basis.
Revenues are generated from freight billings, 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 consolidated 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.

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. Provisions for future drydocking costs
are accrued and charged to expense on a pro-rata basis over
the period to the next drydocking. Such provisions are based
on estimates made by management of expected cost and length
of time between drydockings.

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 amortisation and is being
amortised over a period of approximately 17 years.

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

F-22

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. The differential between
the derivative and the underlying hedged item is accrued as
interest rates change and recognised as an adjustment to
interest expense. The related amount receivable from or
payable to counterparties is included in accrued interest
income or expense, respectively. The fair values of the
interest rate swaps are not recognised in the financial
statements.

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.

If a derivative ceases to meet the criteria for hedge
accounting, any subsequent gains and losses are currently
recognised 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 recognised 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 amortised over its remaining
useful life.

The Company has from time to time entered into forward
freight contracts in order to hedge exposure to the spot
market for certain trade routes. These transactions involve
entering into a contract to provide a theoretical voyage at
an agreed rate. The fair values of the forward freight
contracts are recognised in the financial statements.

Other than the forward freight contracts discussed above, the
Company has not entered into any derivative contracts for
speculative or trading purposes.

FOREIGN CURRENCIES

The Company's functional currency is the U.S. dollar as all
revenues are received in U.S. dollars and a majority of the
Company's expenditures are made in U.S. dollars. The Company
reports in U.S. dollars. Most of the Company's subsidiaries
report in U.S. dollars. For subsidiaries that maintain their
accounts in currencies other than U.S. dollars, the Company
uses the current method of translation whereby the statements
of operations are translated using the average exchange rate

F-23

and the assets and liabilities are translated using the year
end exchange rate. Foreign currency translation gains or
losses are recorded as a separate component of other
comprehensive income in stockholders' equity.

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

STOCK-BASED COMPENSATION

Under Statement of Financial Accounting Standards No. 123
("SFAS 123"), "Accounting for Stock-Based Compensation",
disclosures of stock-based compensation arrangements with
employees are required and companies are encouraged, but not
required, to record compensation costs associated with
employee stock option awards, based on estimated fair values
at the grant dates. The Company has chosen to continue to
account for stock-based compensation using the intrinsic
value method prescribed in Accounting Principles Board
Opinion No. 25 ("APB 25") "Accounting for Stock Issued to
Employees" and has disclosed the required pro forma effect on
net income and earning per share as if the fair value method
of accounting as prescribed in SFAS 123 had been applied.

EARNINGS PER SHARE

Basic EPS is computed based on the income (loss) available to
common stockholders and the weighted average number of shares
outstanding for basic EPS. Diluted EPS includes the effect of
the assumed conversion of potentially dilutive instruments
(see Note 6).

COMPREHENSIVE INCOME

Comprehensive income is defined as the change in equity of a
business enterprise during a period from transactions and
other events and circumstances from nonowner sources. It
includes all changes in equity during a period except those
resulting from investments by owners and distributions to
owners. (See Statement of Changes in Stockholders' Equity).

F-24

3. ADOPTION OF NEW ACCOUNTING STANDARDS

In June 1998, the Financial Accounting Standards Board
("FASB") issued Statement of Financial Accounting Standards
No. 133, "Accounting for Derivatives and Hedging Activities"
("FAS 133"). SFAS 133 as amended by FAS 138, establishes
accounting and reporting standards for derivative instruments
and hedging activities. It requires an entity to recognise
all derivatives as either assets or liabilities on the
balance sheet and measure those 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. The Company adopted SFAS 133 in the first
quarter of fiscal year 2001 and upon initial adoption
recognised the fair value of its derivatives as assets of
$0.4 million and liabilities of $0.6 million. A gain of $0.3
million was recognised in income and a charge of $0.5 million
made to other comprehensive income.

In December 1999, the Securities and Exchange Commission
("SEC") issued Staff Accounting Bulletin No. 101 "Revenue
Recognition in Financial Statements" ("SAB 101"). SAB 101, as
amended, summarises certain of the SEC's views in applying
generally accepted accounting principles to revenue
recognition in the financial statements. The Company adopted
SAB 101 in the fourth quarter of fiscal 2000. The adoption of
SAB 101 has not had a material effect on the Company's
operations or financial position.

4. SEGMENT INFORMATION

The Company has two reportable segments: tankers, including
oil bulk ore carriers, and dry bulk carriers. Prior to the
acquisition of Golden Ocean in 2000, the Company had one
reportable segment. Segment results are evaluated based on
income from vessel operations before general and
administrative expenses. The accounting policies used in the
reportable segments are the same as those followed in the
preparation of the Company's consolidated financial
statements.

F-25

Information about the Company's reportable segments as of and
for the year ended December 31, 2000 follows:

(IN THOUSANDS ) DRY BULK
TANKERS CARRIERS TOTAL
2000
Net operating revenues 591,805 8,065 599,870
Ship operating expenses 85,868 2,129 87,997
Depreciation and amortisation 90,297 1,952 92,249
Share in results from associated
companies 11,273 1,544 12,817
Vessels and equipment, net 2,176,303 77,727 2,254,030
Vessels under capital lease - 108,387 108,387
Investment in associated
companies 26,420 941 27,361
Total assets 2,451,589 192,808 2,644,397
Expenditure for vessels 468,575 - 468,575

Reconciliations of reportable segments information to the
Company's consolidated totals follows:

(IN THOUSANDS OF $) 2000
NET OPERATING REVENUES
Total net operating revenues for reportable
segments 599,870
Other net operating revenues 74
Total consolidated net operating revenues 599,944
Assets
Total assets for reportable segments 2,644,397
Assets not attributed to segments 136,591
Total consolidated assets 2,780,988
=================================================================

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.

F-26

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 other jurisdictions
including Norway, Singapore, Sweden and the United Kingdom
are subject to taxation in their respective jurisdictions.
The tax paid by subsidiaries of the Company which are subject
to taxation is not material.

The tax charge for the year comprises:

(in thousands of $) 2000 1999 1998
Current tax 41 (9) 30
Deferred tax - - -
-----------------------------------------------------------------
41 (9) 30
=================================================================

Temporary differences and carryforwards which give rise to
deferred tax assets, liabilities and related valuation
allowances are as follows:

(in thousands of $) 2000 1999
Deferred tax asset -- non current
Pension liabilities 13 22
Tax loss carryforwards 19,285 17,496
Valuation allowance (19,298) (17,518)
-----------------------------------------------------------------
Net deferred tax asset (liability) - -
=================================================================

As of December 31, 2000, 1999 and 1998, the Company had
$68,875,000, $62,485,000 and $15,431,000 of net operating
loss carryforwards, respectively. The loss carryforward can
be utilised only against future taxable income for the
respective subsidiary. Frontline AB accounts for a total of
$43,280,000 as at December 31, 2000 and ICB accounts for a
total of $25,334,000 as of December 31, 2000. These net
operating losses do not have an expiration date. The
Company's deferred tax assets are reduced by a valuation
allowance when, in the opinion of management, it is more
likely than not that some portion or all of the deferred tax
assets will not be realised in the future.

F-27

6. EARNINGS PER SHARE

The computation of basic EPS is based on the weighted average
number of shares outstanding during the year. The computation
of diluted EPS assumes the foregoing and the exercise of
stock options and warrants using the treasury stock method
(see Note 19). Earnings per share, for the year ended
December 31, 1998 has been restated to reflect the change in
the accounting treatment of the investment in ICB (see Note
21).

The components of the numerator for the calculation of basic
EPS and diluted EPS are as follows:

(IN THOUSANDS OF $) 2000 1999 1998
(restated)
Net income (loss) available to
stockholders 313,867 (86,896) 31,853
=================================================================

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

(IN THOUSANDS ) 2000 1999 1998
Basic earnings per share:
Weighted average number of
ordinary shares outstanding 73,391 49,486 46,107
=================================================================

Diluted earnings per share:
Weighted average number of
ordinary shares outstanding 73,391 49,468 46,107
Warrants and stock options 173 - 30
-----------------------------------------------------------------
73,564 49,468 46,137
=================================================================

7. LEASES

RENTAL EXPENSE

Charter hire payments to third parties for contracted in
vessels are accounted for as operating leases. The Company is
also committed to make rental payments under operating leases
for office premises. The future minimum rental payments under
the Company's non-cancellable operating leases, are as
follows:

F-28

YEAR ENDING DECEMBER 31,
(IN THOUSANDS OF $)
2001 44,454
2002 45,246
2003 36,520
2004 36,704
2005 37,409
2006 and later 31,743
-----------------------------------------------------------------
Total minimum lease payments 232,076
=================================================================

Total rental expense for operating leases was $34,823,000,
$31,912,000 and $15,403,000 for the years ended December 31,
2000, 1999 and 1998, respectively.

RENTAL INCOME

The minimum future revenues to be received on time charters,
bareboat charters and other contractually committed income as
of December 31, 2000 are as follows:

YEAR ENDING DECEMBER 31, YEN REVENUES DOLLAR
(IN THOUSANDS OF YEN AND $) (IN YEN) ($ EQUIVALENT) REVENUES TOTAL

2001 2,398,000 20,949 71,879 92,828
2002 2,398,000 20,949 47,696 68,645
2003 2,398,000 20,949 43,954 64,903
2004 2,405,000 21,007 44,513 65,520
2005 2,398,000 20,949 43,304 64,253
2006 and later 13,442,000 117,427 97,936 215,363
------------------------------------------------------------------------------
Total minimum
lease revenues 25,439,000 222,230 349,282 571,512
==============================================================================

The cost and accumulated depreciation of the vessels leased
to a third party at December 31, 2000 were approximately
$518.3 million and $27.4 million, respectively, and at
December 31, 1999 were approximately $86.7 million and $36.5
million, respectively.

8. MARKETABLE SECURITIES

Marketable securities held by the Company are equity
securities considered to be available-for-sale securities.

F-29

(in thousands of $) 2000 1999
Cost 3,418 13,710
Gross unrealised gain 702 -
Gross unrealised loss (407) (2,843)
-----------------------------------------------------------------
Fair value 3,713 10,867
=================================================================

The unrealised loss on marketable securities, including a
component of foreign currency translation, included in
comprehensive income decreased by $295,000 for the year ended
December 31, 2000 (1999 -- loss of $2,843,000).

(in thousands ) 2000 1999 1998
Proceeds from sale of available-
for-sale securities 10,089 2,653 392
Realised gain (loss) (1,186) 580 389
=================================================================

The cost of sale of available-for-sale marketable securities
is calculated on an average costs basis.

9. TRADE ACCOUNTS RECEIVABLE

Trade accounts receivable are presented net of allowances for
doubtful accounts amounting to $800,000 and $500,000 for the
years ended December 31, 2000 and 1999, respectively.

10. OTHER RECEIVABLES

(in thousands of $) 2000 1999
Agent receivables 1,761 9,575
Due from related party 20,000 -
Due on sale of marketable securities 4,101 -
Short-term debt receivable 6,418 -
Other receivables 2,972 6,190
-----------------------------------------------------------------
35,252 15,765
=================================================================

Other receivables are presented net of allowances for
doubtful accounts amounting to $nil for each of the years
ended December 31, 2000 and 1999.

NEWBUILDINGS AND VESSEL PURCHASE OPTIONS

F-30

(IN THOUSANDS OF $) 2000 1999
Newbuildings - 32,777
Vessel purchase options 36,326 -
-----------------------------------------------------------------
36,326 32,777
=================================================================

In connection with the acquisition of Golden Ocean, the
Company obtained certain options and obligations to acquire
vessels. The Company has options to purchase the VLCCs Stena
Commerce and Stena Comanche. The options are exercisable at
any time until December 2004. The purchase prices for each
vessel are equal to 50 per cent of the outstanding mortgage
debt under three joint loan agreements between lenders and
the vessels' owning companies. The options must be exercised
simultaneously. As at December 31, 2000 the outstanding
mortgage debt of the Stena Commerce and Stena Comanche's
owning companies amounted to $116,400,439 plus Yen
6,019,417,615 (equivalent to $52,585,111). Of this total debt
outstanding, $25,774,680 is due to the Company at December
31, 2000. This amount is included in other long-term assets
(see Note 16). This debt was acquired at a discount of
approximately 50 per cent from one of the lenders in
September 2000. The fair value assigned to these options in
the purchase accounting for Golden Ocean was $27,956,000,
calculated by reference to the discounted debt acquired by
the Company.

The Company has an option to purchase the vessel Stena
Commodore. The option is exercisable at any time until
February 2005. The purchase price is equal to the outstanding
mortgage debt under three loan agreements between lenders and
the vessel's owning company. As at December 31, 2000 the
outstanding mortgage debt of the Stena Commodore's owning
company amounted to $59,631,955 plus Yen 2,901,682,103
(equivalent to $25,348,843). The fair value assigned to this
option in the purchase accounting for Golden Ocean was $nil.
The fair value is calculated as the difference between the
fair value of the vessel and the mortgage debt outstanding.

On October 24, 2000 the Company simultaneously exercised its
options to acquire the Stena Commerce, Stena Comanche and
Stena Commodore. The owning companies of the vessels disagree
with management's interpretation of the option agreements
with regard to strike price and the Company's right or
otherwise to specify time and place for delivery of the
vessels. The matter has been referred to arbitration. At the
balance sheet date the arbitration had not been concluded. On
May 3, 2001 the Company entered into an agreement in
connection with the dispute and arbitration relating to the
Company's options to purchase the VLCCs Stena Commerce, Stena

F-31

Comanche and Stena Commodore. The Company took delivery of
the Stena Commerce on May 4, 2001, the Stena Comanche on May
18, 2001 and the delivery of Stena Commodore is scheduled for
early June, 2001.

The Company has an obligation to purchase the VLCC Opalia on
expiry of its current charter, which is for two years from
November 1999 with an optional further two years. The
purchase price is equal to 100% of the outstanding mortgage
debt under three loan agreements between lenders and the
vessel's owning company. As at December 31, 2000 the
outstanding mortgage debt of the Opalia's owning company
amounted to $60,320,740 plus Yen 2,162,981,284 (equivalent to
$18,895,617). The fair value assigned to this option in the
purchase accounting for Golden Ocean was $nil. The fair value
is calculated as the difference between the fair of the
vessel and the mortgage debt outstanding.

The Company has both an obligation and an option 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,
2000 the outstanding mortgage debt of the Oscilla's owning
company amounted to $60,005,600 plus Yen 1,247,525,412
(equivalent to $10,898,274). Included in this amount is debt
of $12,475,000 due to the Company. The fair value assigned to
this option and obligation in the purchase accounting for
Golden Ocean was $8,370,000. The fair value is calculated as
the difference between the fair of the vessel and the
mortgage debt outstanding.

12. VESSELS AND EQUIPMENT, NET

(in thousands of $) 2000 1999
Cost 2,684,603 1,861,004
Accumulated depreciation (429,682) (337,892)
-----------------------------------------------------------------
Net book value at end of year 2,254,921 1,523,112
=================================================================

Included in the above amounts as at December 31, 2000 and
1999 is equipment with a net book value of $904,000 and
$561,000, respectively. Interest capitalised in the cost of
newbuildings amounted to $400,000 and $3,163,000 in 2000 and
1999, respectively.

F-32

13. VESSELS UNDER CAPITAL LEASE, NET

(in thousands of $) 2000 1999
Cost 109,500 -
Accumulated depreciation (1,113) -
-----------------------------------------------------------------
Net book value at end of year 108,387 -
=================================================================

The outstanding obligations under capital leases are payable
as follows:

YEAR ENDING DECEMBER 31,
(IN THOUSANDS OF $ AND YEN) (IN YEN) ($ EQUIVALENT)
2001 1,203,000 10,510
2002 1,217,000 10,632
2003 1,231,000 10,756
2004 1,246,000 10,883
2005 1,261,000 11,012
2006 and later 8,053,000 70,350
-----------------------------------------------------------------
Minimum lease payments 14,211,000 124,143
-----------------------------------------------------------------
Less imputed interest 1,646,000 14,380
-----------------------------------------------------------------
Present value of obligations
under capital leases 12,565,000 109,763
=================================================================

14. INVESTMENT IN ASSOCIATED COMPANIES

At December 31, 2000, the Company has the following
participation in investments that are recorded using the
equity method:

PERCENTAGE
K/S Rasmussen Teamship A/S III 35%
K/S Rasmussen Teamship A/S II 40%
Front Tobago Inc 40%
Golden Lagoon Corporation 50%
Golden Fountain Corporation 50%
Golden Tide Corporation 50%
Middleburg properties Ltd. 50%
Reese Development Inc. 50%
Alliance Chartering LLC 50%

With the exception of Alliance Chartering LLC, the equity
method investees are engaged in the ownership and operation
of oil tankers or dry bulk carriers. At December 31, 1998,
the investment in ICB has been included in the restated

F-33

consolidated financial statements of Frontline as an
investment in associated companies.

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

(IN THOUSANDS OF $) 2000 1999
Current assets 25,614 24,164
Noncurrent assets 280,872 86,213
Current liabilities 16,750 28,302
Non current liabilities 229,242 59,109

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

(IN THOUSANDS) 2000 1999 1998
Net operating revenues 54,722 14,432 50,100
Net operating income 32,093 9,846 43,934
Net income 43,843 8,686 28,244

15. DEFERRED CHARGES

Deferred charges represent debt arrangement fees that are
capitalised and amortised 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 $) 2000 1999
Debt arrangement fees 12,971 10,810
Accumulated amortisation (7,135) (6,130)
-----------------------------------------------------------------
5,836 4,680
=================================================================

16. OTHER LONG-TERM ASSETS

(IN THOUSANDS OF $) 2000 1999
Long-term debt receivable 38,533 -
Other 2,590 -
-----------------------------------------------------------------
41,123 -
=================================================================

Included in long-term debt receivable are amounts due to the
Company from third party entities that own vessels over which
the Company has purchase options or obligations (see Note
11).

F-34

17. GOODWILL

Goodwill is stated net of related accumulated amortisation as
follows:

(IN THOUSANDS OF $) 2000 1999
Goodwill 16,009 12,737
Accumulated amortisation (1,624) (534)
-----------------------------------------------------------------
14,385 12,203
=================================================================

18. ACCRUED EXPENSES

(IN THOUSANDS OF $) 2000 1999
Voyage expenses 8,689 10,947
Ship operating expenses 13,631 12,046
Administrative expenses 786 1,430
Interest expense 12,446 11,054
Taxes 43 565
Other 5,182 1,838
-----------------------------------------------------------------
40,777 37,880
=================================================================

19. DEBT

(IN THOUSANDS OF $) 2000 1999

US Dollar denominated floating rate
debt (LIBOR + 0.485% to 3.50%) due
through 2013 1,303,307 904,464
Yen denominated floating rate debt
(LIBOR + 1.30% to 1.50%) due
through 2011 136,172 -
Fixed rate debt 8.00% due through 2005 93,250 168,510
1,532,729 1,072,974
Credit facilities 11,410 6,720
-----------------------------------------------------------------
Total debt 1,544,139 1,079,694
Less: short-term and current
portion of long-term debt (212,767) (116,814)
-----------------------------------------------------------------
1,331,372 962,880

F-35

The outstanding debt as of December 31, 2000 is repayable as
follows:

YEAR ENDING DECEMBER 31,
(IN THOUSANDS OF $)
2001 212,767
2002 231,811
2003 293,532
2004 120,345
2005 107,783
2006 and later 577,901
-----------------------------------------------------------------
Total debt 1,544,139
=================================================================

The weighted average interest rate for debt which is
denominated in US dollars, as of December 31, 2000 was 7.81
per cent (1999 -- 7.17 per cent). The weighted average
interest rate for Yen denominated debt as of December 31,
2000 was 2.74 per cent.

Certain of the fixed rate debt and the floating rate debt are
collateralised by ship mortgages and, in the case of some
debt, pledges of shares by each guarantor subsidiary. Our
existing financing agreements impose operation and financing
restrictions on us which may significantly limit or prohibit,
among other things, our ability to incur additional
indebtedness, create liens, sell capital shares of
subsidiaries, make certain investments, engage in mergers and
acquisitons, purchase and sell vessels, enter into time or
consecutive voyage charters or pay dividends without the
consent of our lenders. In addition, our 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 our failure to comply with any of the
covenants contained in our financing agreements. Various
debt agreements of the Company 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 December 31, 2000
and 1999, the Company complied with the debt covenants of its
various debt agreements.

The number of outstanding convertible debenture share
certificates ("Debentures") in the Company's subsidiary,
Frontline AB, amounted to $nil as of December 31, 2000 and
1999. The face value of each certificate was SEK 10. The
conversion period was from June 25, 1992 to July 30, 1999 and
all outstanding debentures were repaid on loan maturity on
August 24, 1999. The Debentures were convertible into shares

F-36

at a conversion price of SEK 35 per share. Annual interest of
9 per cent was payable annually on June 24 and on the
maturity date.

Metrogas Holdings ("Metrogas"), a company related to the
Company's Chairman, had outstanding as of December 31, 1999 a
specific loan of $54.0 million (1999 - $54.0 million) (the
"Metrogas Loan") provided to the Company. The Metrogas Loan
was converted to a separate long-term financing facility
during 1999, as described below.

As of December 31, 1998, the Company did not comply with the
equity ratio covenants in a number of the loan agreements.
During 1999, management initiated discussions with the
Company's lending banks with the purpose of lowering the
breached covenant requirements in such loan agreements at
least until January 1, 2001. The requested changes were made
with the intention of making the Company's financing
arrangements more flexible in the event of a prolonged
negative market scenario, including falling second-hand
prices. Included in the request for changes was a proposal to
subordinate the $89.0 million loan Metrogas Loan to loans
given by the Company's lending banks. In addition, the
proposal included reclassifying the Metrogas Loan as equity
for the purposes of calculating the Company's equity ratio.

As of July 13, 1999, the discussions with Metrogas and the
Company's lending banks were finalised and the Company and
Metrogas signed a Subordinated Convertible Loan Facility
Agreement. Accordingly, the Company has received acceptance
of reduced covenant levels from all but one of the Company's
19 lending banks. This one bank, however, is subject to the
authority of the majority lenders, who have agreed to accept
lower covenant levels until January 1, 2001. The
aforementioned bank has since been replaced.

The Metrogas loan was repaid in three tranches during 1999
and 2000. In October 1999 $35 million were converted into
shares in the Company; and in February 2000 $30 million were
converted into shares in the Company, as described in note
21. In August 2000 the remaining $24 million plus interest
accrued was repaid.

The acquisition of Golden Ocean was conducted so that the
loans held by Golden Ocean's subsidiaries are non-recourse to
Frontline. This implies that any guarantees on behalf of a
Golden Ocean subsidiary are issued only by either by Golden
Ocean and or other Golden Ocean subsidiaries. Frontline's
exposure to Golden Ocean is therefore limited to $15 million
injected as equity, a $50 million term loan and a million

F-37

revolving credit facility provided by Frontline to Golden
Ocean.

20. SHARE CAPITAL

The issued and fully paid share capital of the Company has
been restated for all periods presented to reflect the
Amalgamation as described in Note 1 and the reverse stock
split described below.

Authorised share capital:

(in thousands of $) 2000 1999
125,000,000 ordinary shares of $2.50 each
(1999 -- 100,000,000) 312,500 250,000
=================================================================

Issued and fully paid share capital:

(in thousands of $, except share numbers) 2000 1999
78,068,811 ordinary shares of $2.50 each
(1999 -- 60,961,860) 195,172 152,405
=================================================================

The Company's ordinary shares are listed on the Oslo Stock
Exchange and the London Stock Exchange. The Company's
ordinary shares trade on the Nasdaq National Market in the
form of ADSs. Each ADS represents one ordinary share.

Of the authorised and unissued ordinary shares at December
31, 2000, 2,591,732 are reserved for issue pursuant to
subscription under warrants which can be exercised at any
time up to May 11, 2001 and 319,000 are reserved for issue
pursuant to subscription under options granted under the
Company's share option plans. As at December 31, 2000, except
for the shares which would be issued on the exercise of the
warrants and the options, no unissued share capital of the
Company is under option or is conditionally or
unconditionally to be put under option.

In connection with the Amalgamation, at a stockholder meeting
on May 11, 1998 an increase in the authorised share capital
of the Company to $250,000,000, divided into 100,000,000
ordinary shares of $2.50 each, was approved. On May 11, 1998,
the Company issued 44,612,536 shares pursuant to the
Amalgamation described in Note 1.

On October 19, 1998, at the Annual General Meeting of the
Company, the stockholders approved a share consolidation of
ten shares of $0.25 par value each to one share of $2.50 par
value each. This reverse stock split was effective October

F-38

26, 1998. The number of shares authorised, issued and
outstanding, earnings per share and share options and
warrants disclosed have been restated for all periods
presented accordingly.

On August 21, 2000, at the Annual General Meeting of the
Company, the stockholders approved an increase in the
Company's authorised share capital from 100,000,000 Ordinary
Shares of $2.50 par value each to 125,000,000 Ordinary Shares
of $2.50 par value each.

On September 30, 1999, the Company issued 4,715,000 ordinary
shares in a private placement with five financial
institutions at NOK 33.00 per share (with gross proceeds of
approximately $20 million) to strengthen the equity base of
the Company. Also on September 30, 1999, $35 million of the
$89 million Metrogas subordinated loan facility was converted
to equity by the issuance of 8,230,000 shares at an issue
price of NOK 33.00 per share. In connection with this
conversion, Metrogas offered $15 million of the resulting
ordinary shares to existing Frontline shareholders and
warrant holders, excluding US persons.

On December 20, 1999 the Company issued 1,910,000 ordinary
shares at a price of NOK 37.00 per share in connection with
the acquisition of a Suezmax newbuilding. Frontline had a one
year call option to buy back 430,000 of these shares for NOK
37.00 per share plus 10 per cent interest per annum
compensation. In September 2000, Frontline exercised its call
option and bought back these 430,000 shares. In accordance
with Bermuda law, these shares were cancelled on acquisition
by the Company.

On February 25, 2000, the Company issued 3,500,000 ordinary
shares at NOK 57.50 per share in a private placement to
institutional shareholders. At the same time, $30 million of
the Metrogas Loan was converted to equity, resulting in the
issuance of 4,350,000 ordinary shares at an issue price of
NOK 57.50 per share. In connection with this conversion,
Metrogas offered 2,000,000 of the resulting ordinary shares
to existing Frontline shareholders and warrant holders,
excluding US persons.

On March 30, 2000 Frontline entered into an agreement with
Wilh. Wilhelmsen ASA to buy the two 1993-built VLCCs, Tartar
and Tarim. The agreed purchase price of $45 million per ship
was paid by $62 million in cash and through the issuance of
2,957,500 Frontline shares. The shares were issued at NOK
80.00 per share.

F-39

On May 25, 2000 the Company issued 3,000,000 ordinary shares
at $10.15 per share in a private placement to a group of
international institutional investors. The proceeds of the
issue were used to part finance the acquisition of a
newbuilding VLCC, subsequently named Front Tina.

On June 20, 2000, the Company issued 4,000,000 ordinary
shares at a price of NOK 104.5 per share in a private
placement to a group of international institutional
investors. Part of the proceeds of the issue were used to
part finance the acquisition of two secondhand Suezmax
tankers, subsequently named Front Ardenne and Front Brabant.

On July 17, 2000, the Company issued 68,700 ordinary shares
in connection with the acquisition of Golden Ocean Bonds.

On August 31, 2000 and September 15, 2000, the Company issued
73,529 and 51,029 ordinary shares respectively, pursuant to
subscriptions under warrants that could be exercised at any
time up to December 31, 2003 (see Note 19).

In the period from September through to the end of December
2000, the Company issued a total of 8,211 ordinary shares
pursuant to subscriptions under warrants that can be
exercised at any time up to May 11, 2001 (see Note 19).

On October 16, 2000, the Company issued 1,245,998 ordinary
shares in connection with the acquisition of Golden Ocean.

In December 2000, the Company bought back and cancelled a
total of 1,719,845 of its ordinary shares in a number of
separate market transactions. These share buybacks were made
within a Board of Directors authority to buy back up to
3,500,000 ordinary shares.

F-40

If any person becomes the beneficial owner of 20 per cent or
more of the Company's ordinary shares, each right will
entitle the holder, other than the acquiring person, to
purchase for the purchase price, that number of ordinary
shares having a market value of up to eight times the
purchase price.

If, following an acquisition of 20 per cent or more of the
Company's ordinary shares, the Company is involved in certain
amalgamations or other business combinations or sells or
transfers more than 50 per cent of its assets or earning
power, each right will entitle the holder to purchase for the
purchase price ordinary shares of the other party to the
transaction having a market value of up to eight times the
purchase price.

The Company may redeem the rights at a price of $0.001 per
right at any time prior to a specified period of time after a
person has become the beneficial owner of 20 per cent or more
of its ordinary shares. The rights will expire on December
31, 2006, unless earlier exchanged or redeemed.

A number of the Company's bank loans contain a clause that
prohibits dividend payments without the approval from the
lending banks.

21. WARRANTS AND SHARE OPTION PLANS

At the effective date of the Amalgamation, Frontline recorded
warrants to purchase 124,558 shares (restated from 1,245,588)
of LOF and options to purchase 288,000 shares (restated from
2,880,000) of LOF. These warrants and share options have been
recorded at fair value, calculated using the Black-Scholes
option pricing model, as an adjustment to the purchase price
on the acquisition of LOF. These warrants entitle the holder
to subscribe for one ordinary share in the Company at a price
of 4.00 pound sterling and are exercisable at any time up to
December 31, 2003. During 2000, all of these warrants were
exercised.

Pursuant to the terms of the Amalgamation Agreement, warrants
to purchase 2,600,000 shares (restated from 26,000,000) in
the Company were granted on the date of Amalgamation. These
warrants have been recorded at an estimated fair value at
November 1, 1997 using the Black-Scholes option pricing
model. These warrants entitle the holder to subscribe for one
ordinary share in the Company at a price of $15.91 and are
exercisable at any time up to May 11, 2001.

F-41

The following summarises the warrant transactions:

NUMBER
OF SHARES
Warrants outstanding at December 31, 1998 2,724,558
Exercised -
Warrants outstanding at December 31, 1999 2,724,558
Exercised or cancelled
(132,826)
-----------------------------------------------------------------
Warrants outstanding at December 31, 2000 2,591,732
=================================================================

The Company has in place a Bermuda Share Option Plan (the
"Bermuda Plan") and a United Kingdom Share Option Plan (the
"U.K. Plan"). Under the terms of the plans, the exercise
price for the share options may not be less than the average
of the fair market value of the underlying shares for the
three dealing days before the date of grant. The number of
shares granted under the plans may not in any ten year period
exceed 7 per cent of the issued share capital of the Company.
No consideration is payable for the grant of an option.

Under the Bermuda Plan, options may be granted to any
director or eligible employee of the Company or subsidiary.
Options are exercisable for a maximum period of nine years
following the first anniversary date of the grant.

F-42

The following summarises the share options transactions
relating to the Bermuda Plan:

(IN THOUSANDS, EXCEPT PER SHARE DATA) SHARES WEIGHTED
AVERAGE
EXERCISE
PRICE

Options outstanding at December 31, 1997 129 $ 14.45
Options outstanding at December 31, 1998 129 $ 14.45
Granted 300 $ 5.53
Cancelled (16) $ 12.58
Options outstanding at December 31, 1999 413 $ 7.89
Granted 15 $ 6.92
Cancelled (109) $ 14.77
-----------------------------------------------------------------
Options outstanding at December 31, 2000 319 $ 5.50
=================================================================

Options exercisable at:
December 31, 1998 129 $ 14.45
=================================================================
December 31, 1999 113 $ 14.71
=================================================================
December 31, 2000 4 $ 13.21
=================================================================

Under the U.K. Plan, options may be granted to any full-time
director or employee of the Company or subsidiary. Options
are only exercisable during the period of seven years
following the third anniversary date of the grant.

F-43

The following summarises the share options transactions
relating to the U.K. Plan:

(IN THOUSANDS, EXCEPT PER SHARE DATA) SHARES
WEIGHTED
AVERAGE
EXERCISE
PRICE
(in pound
Sterling)

Options outstanding at December 31, 1997 159 8.61
Exercised (1) 7.28
Cancelled (144) 8.57
Options outstanding at December 31, 1998 14 9.11
Exercised - -
Cancelled (12) 9.42
Options outstanding at December 31, 1999 2 7.28
Exercised 2 7.28
Cancelled - -
-----------------------------------------------------------------
Options outstanding at December 31, 2000 - -
=================================================================

Options exercisable at:
December 31, 1998 12 9.42
=================================================================
December 31, 1999 - -
=================================================================
December 31, 2000 - -
=================================================================

The weighted average fair value of options granted under the
Bermuda Plan in the year ended December 31, 2000 was $3.27.
The fair value of each option grant is estimated on the date
of grant using the Black-Scholes option pricing model with
the following weighted average assumptions used for the grant
in the year ended December 31, 2000: risk free interest rate
of 6.6 per cent; expected life of three years, expected
volatility of 63 per cent, expected dividend yield of zero
per cent.

The options outstanding under the Bermuda Plan as at December
31, 2000 have exercise prices between $5.07 and $13.82 and
outstanding at December 31, 1999 have exercise prices between
$5.32 and $15.00. The options that are not presently
exercisable vest on January 1, 2001. The options outstanding
under the Bermuda Plan as at December 31, 2000 have a
weighted average contractual life of 3.1 years.

F-44

At December 31, 2000 there were no options remaining
outstanding under the U.K. Plan. The options outstanding
under the U.K. Plan at December 31, 1999 have an exercise
price of 7.28 pound sterling and a weighted average
contractual life of 6.1 years.

The Company has recorded no compensation expense for the
issuance of share options. The share options assumed in
connection with the Amalgamation with LOF have been treated
as an adjustment to the purchase price. Had the compensation
costs for these plans been determined consistent with the
fair value method recommended in SFAS 123, the Company's net
income and earnings per share would have been reduced to the
following pro forma amounts:

(IN THOUSANDS, EXCEPT PER SHARE DATA) 2000 1999 1998
(restated)
Net income
As reported 313,867 (86,896) 31,853
Pro-forma 313,818 (87,679) 31,853

Basic earnings (loss) per share
As reported $ 4.28 $ (1.76) $ 0.69
Pro-forma $ 4.28 $ (1.77) $ 0.69

Diluted earnings (loss) per share
As reported $ 4.27 $ (1.76) $ 0.69
Pro-forma $ 4.27 $ (1.77) $ 0.69

22. 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
The Chase Manhattan Bank, Citibank N.A., Christiania Bank og
Kreditkasse, Credit Agricole Indosuez, Deutsche Schiffsbank
AG, Midland 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. The Company
has entered into the following interest rate swap
transactions involving the payment of fixed rates in exchange
for LIBOR:

F-45

PRINCIPAL INCEPTION MATURITY FIXED
DATE DATE INTEREST
RATE
(IN THOUSANDS OF $)
$50,000 February 1998 February 2003 5.685%
$25,000 August 1998 August 2003 5.755%
$25,000 August 1998 August 2003 5.756%
$50,000 February 1998 February 2003 5.775%
$50,000 March 1998 February 2003 5.885%
$35,532 reducing
quarterly to $34,051 May 1997 May 2001 6.840%
$14,000 reducing
semi-annually to
$13,000 September 1996 November 2001 6.790%
$59,845 March 1998 March 2006 7.290%
$64,099 September 1998 August 2008 7.490%

As at December 31, 2000, the notional principal amounts
subject to such swap agreements was $373,476,000 (1999 -
$293,672,000).

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. Certain of the Company's
subsidiaries report in Sterling, Swedish kronor or Norwegian
kroner and risks of two kinds arise as a result: a
transaction risk, that is, the risk that currency
fluctuations will have a negative effect on the value of the
Company's cash flows; and a translation risk, the impact of
adverse currency fluctuations in the translation of foreign
operations and foreign assets and liabilities into U.S.
dollars for the Company's consolidated financial statements.
Certain of the Company's subsidiaries have Yen denominated
long-term debt of Yen 15,587,000,000 and charter contracts
denominated in Yen with contracted payments as set forth in
note 7. There is a risk that currency fluctuations will have
a negative effect on the value of the Company's 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.

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

F-46

FAIR VALUES
The carrying value and estimated fair value of the Company's
financial instruments at December 31, 2000 and 1999 are as
follows:

2000 2000 1999 1999
(IN THOUSANDS OF $) CARRYING FAIR CARRYING FAIR
VALUE VALUE VALUE VALUE
Non-Derivatives:
Cash and cash
equivalents 103,514 103,514 65,467 65,467
Restricted cash 12,580 12,580
Marketable securities 3,713 3,713 10,867 10,867
Short-term debt 212,767 212,767 116,814 116,814
Long-term debt 1,331,372 1,331,372 962,880 962,880

Derivatives:
Interest rate swap
transactions - (210) - 5,787
Forward freight contracts - - - -

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

The estimated fair value of marketable securities is based on
the quoted market price of these or similar instruments when
available. The estimated fair value for 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.

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.

Fair value of forward freight contracts is estimated by
taking into account the cost of entering into forward freight
contracts to offset the Company's outstanding contracts.

CONCENTRATION 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, Nordlandsbanken, Den norske
Bank and Christiania Bank og Kreditkasse. 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 2000, 1999 and 1998, no customer accounted
for more than 10 per cent or more of freight revenues.

F-47

23. RELATED PARTY TRANSACTIONS

Management believes transactions with related parties are
under terms similar to those that would be arranged with
other parties.

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 (the "Suezmax
Newbuilding Companies") affiliated with Hemen Holding Ltd.
("Hemen"). Hemen is the Company's largest shareholder and is
indirectly controlled by Mr. John Fredriksen, Chairman and
Chief Executive Officer of the Company. The first three of
the Suezmax tankers were delivered during 1998. The remaining
two vessels were delivered in February and April, 2000.

In May 1998, the Company acquired control of three shipowning
and/or leasing structures which are organised in a non-
recourse entity, Independent Tankers Corporation ("ITC"). The
Company acquired ITC for $9.5 million. The Company's
investment in ITC was subsequently sold to Hemen for $9.5
million with effect from July 1, 1998. The acquisition and
sale of ITC are treated as occurring on the same date for
accounting purposes as a result of the common control
relationship between the Company and Hemen. The results of
ITC are therefore not consolidated in the Company's financial
statements for any period in 1998. The Company has remained
as the manager of the underlying assets and has received a
five year fair value call option to buy back ITC.

In June 1998, the Company obtained a loan of $87.5 million
from Metrogas, the Metrogas Loan, to finance the acquisition
of the five VLCC newbuilding contracts described above. This
loan bears interest at the rate of 6.75 per cent per annum.
At December 31, 1998, an amount of $89 million was
outstanding in respect of the Metrogas Loan, including
interest accrued thereon. In the year ended December 31,
1998, the Metrogas Loan bore interest at the rate of 6.75 per
cent. Interest expense recorded by the Company in 1998 in
respect of this loan was $3,780,772. On September 30, 1999,
$35 million of the $89 million Metrogas Loan was converted to
equity by the issuance of 8,230,000 shares at an issue price

F-48

of NOK 33.00 per share. In connection with this conversion,
Metrogas offered $15 million of the resulting ordinary shares
to existing Frontline shareholders and warrant holders,
excluding US persons. In connection with this secondary
offering by Metrogas, Frontline bore costs of the offering of
$15,000. At December 31, 1999, an amount of $56.7 million was
outstanding in respect of the Metrogas Loan, including
interest accrued thereon. On February 25, 2000, $30 million
of the Metrogas Loan was converted to equity, resulting in
the issuance of 4,350,000 ordinary shares at an issue price
of NOK 57.50 per share. In connection with this conversion,
Metrogas offered 2,000,000 of the resulting ordinary shares
to existing Frontline shareholders and warrant holders,
excluding US persons. In August 2000, the outstanding
principal amount of $24.0 on the Metrogas Loan was repaid in
full,.together with $4.3 million accrued thereon. In the
years ended December 31, 2000 and 1999, the Metrogas Loan
bore interest at the rate of 8.0 per cent and the Company
incurred interest costs of $1.6 million and $5.4 million,
respectively, of which $2.7 million was expensed in 1999.

In addition to the lending arrangement described above, Hemen
affiliated parties have, during 1998 and 1999, provided
additional short term financing to the Company. Such
financing bore interest a rate of between 6.75 and 8.8 per
cent per annum in 2000 and 6.75 per cent in both 1999 and
1998. Interest expense recorded by the Company in 2000 in
respect of such financing was $1,095,380 (1999 - $428,291,
1998 - $550,803).

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.

On December 5, 2000, a subsidiary of Frontline made a short-
term loan of $20 million to World Shipholding Ltd., a company
affiliated with Hemen. This loan was repaid in full on
February 6, 2001 together with fees and interest of $349,680,
of which $115,000 was recorded by the Company in 2000 and
$234,680 will be recorded in 2001.

On December 28, 2000, the Company and Overseas Shipholding
Group Inc. (OSG) entered into an agreement with Osprey
Maritime Ltd. (Osprey) to acquire the two VLCCs Golar
Edinburgh and Golar Dundee. The agreement was signed on
behalf of a joint venture company to be owned 50.1 per cent
by the Company and 49.9 per cent by OSG. The purchase price
for the vessels, which were delivered in the first quarter of
2001 was $53 million each. At December 31, 2000, World

F-49

Shipholding Ltd. held more than 50 per cent of the shares in
Osprey. In February, 2001, World Shipholding Ltd. took
control of Osprey.

24. ACQUISITIONS

On October 10, 2000, Frontline took control of Golden Ocean
pursuant to a Plan of Reorganisation (See Note 1). The total
acquisition price paid, including amounts paid to settle
allowed claims, was approximately $63.0 million, including
1,245,998 shares issued at a price of $15.65 per share. The
cash component of the acquisition was funded primarily from
working capital. The acquisition of Golden Ocean has been
accounted for using the purchase method. Prior to the
effective date of acquisition, Golden Ocean adopted fresh-
start reporting in accordance with the provisions of
Statement of Position 90-7 "Financial Reporting by Entities
in Reorganization Under the Bankruptcy Code" ("SOP 90-7").
The application of the provisions of SOP 90-7 resulted in the
preparation of a reorganised balance sheet at October 10,
2000, concurrent with the emergence from bankruptcy
protection. The difference between the purchase price and the
net assets acquired, has been recorded as goodwill. This
goodwill is being amortised over the average remaining life
of the identifiable long-term assets acquired which is
approximately 22 years.

In September 1999, Frontline acquired shares in ICB
sufficient to provide voting control of the company. This
acquisition followed a tender offer which commenced in
September, 1997 and further acquisitions of ICB Shares in
1998 and in the first half of 1999 (see Note 1). The
acquisition of ICB was primarily funded by loans from Chase.
The investment in ICB in 1997 and 1998 was originally
accounted for as an available-for-sale security in accordance
with SFAS 115. Following Frontline obtaining control of ICB,
the financial statements for 1997 and 1998 have been restated
and the investment accounted for using the equity method. The
results of ICB have been consolidated with effect from
January 1, 1999. For the period from the initial acquisition
of ICB Shares in 1997 to September 30, 1999, the principles
of step-by-step acquisition accounting have been applied. At
each step of the acquisition, the purchase price has been
allocated to the net assets acquired based on their estimated
fair values. The difference between the purchase price at
each step, and the net assets acquired, has been assigned to
the identifiable long-term assets of ICB or has been recorded
as goodwill, as appropriate.

Effective November 1, 1997, Frontline acquired 79.74 per cent
of the outstanding Ordinary Shares of LOF for approximately

F-50

$93.5 million in cash (see Note 1). The acquisition was
primarily funded by a loan from Chase. In 1997, the results
of LOF were consolidated with effect from the date of
acquisition. The acquisition has been accounted for using the
purchase method of accounting. Accordingly, the total
purchase price has been allocated to the net assets acquired
based on their estimated fair values. The difference between
the total purchase price and net assets acquired was deducted
from the assigned value of the three Suezmax vessels which
comprise the identifiable long-term assets of LOF. The
subsequent gain realised on the sale of LOF's Panamax tankers
was reflected as an adjustment to the purchase price.

The following table reflects unaudited pro-forma combined
results of operations of the Company on the basis that the
acquisitions of ICB had taken place at January 1, 1998:

(IN THOUSANDS OF $, EXCEPT PER SHARE DATA) 1998
Net operating revenues 316,910
Net income 52,099
Basic and diluted earnings per share 1.13

In management's opinion, the adoption of fresh-start
accounting in the financial statements of Golden Ocean means
that any presentation of unaudited pro-forma combined results
of operations would not provide any meaningful information to
the readers of these financial statements and no presentation
has been made accordingly. In management's opinion, the
unaudited pro-forma combined results of operations are not
indicative of the actual results that would have occurred had
the acquisition of ICB been consummated at the beginning of
1998 or of future operations of the combined companies.

25. COMMITMENTS AND CONTINGENCIES

Assets Pledged

(IN THOUSANDS OF $) 2000 1999
Ship mortgages 1,569,848 1,001,669
Restricted bank deposits 12,580 800
-----------------------------------------------------------------
1,582,428 1,002,469
=================================================================

Other Contractual Commitments
When newbuilding contracts were executed for the tankers
Front Melody, which was sold in 1992, and Front Rhapsody,
which was sold in 1993, Frontline also signed an agreement to
finance a peseta denominated loan in a foreign bank. Under
the agreements, Frontline was required to make a peseta
denominated deposit in the same bank. The deposits were being

F-51

used to fulfil the payment commitments on the loan
agreements. The deposits carried a higher interest rate than
the loans. In 2000 this arrangement expired. The balance of
the deposits at December 31, 1999 was $0.1 million. These
balances were contractual commitments, since the Company's
only risk was the interest rate gap between loans and
deposits.

The Company insures the legal liability risks for its
shipping activities with Assuranceforeningen SKULD, Sveriges
Angfartygs Assurans Forening (The Swedish Club), and the
United Kingdom Mutual Steamship Assurance Association
(Bermuda), all mutual protection and indemnity associations.
As a member of these mutual associations, the Company is
subject to calls payable to the associations based on the
Company's claims record in addition to the claims records of
all other members of the associations. A contingent liability
exists to the extent that the claims records of the members
of the associations in the aggregate show significant
deterioration, which result in additional calls on the
members.

The Company's subsidiary, Golden Ocean Group Limited, has
guaranteed the yen and dollar long-term borrowings of
associated companies for amounts of Yen 17,152,359,010, which
is equivalent to $149,841,522, and $25,074,130 at December
31, 2000.

Certain of the Company's subsidiaries have contractual
commitments to participate in the profits and losses of the
time charterer's subcharters of the vessel Channel Poterne
and in the profits only of the vessels New Vanguard, New
Vista, Channel Alliance and Golden Victory. An associated
company participates in the time charterer's profits and
losses on subcharters of the vessel Pacific Lagoon. Another
associated company participates in the charterer's profits on
subcharters of the vessel New Circassia. Revenues or expenses
arising from these arrangements have been accrued to the
balance sheet date.

The charterers of certain of the Company's vessels have
contractual rights to participate in the profits on sale of
those five vessels. In the case of the Channel Poterne,
Channel Alliance and Cos Hero, the charterer is entitled to
50% of the profit realised on any qualifying sale. The
Channel Alliance may only be sold if the profit from the sale
will exceed $1.0 million. The Cos Hero may only be sold if
the profit from sale will exceed $3.0 million. Profit is
defined as sale proceeds less debt outstanding in the
relevant profit share agreements. If the New Vanguard or New
Vista are sold, the charterer is entitled to claim up to $1

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million to cover losses incurred on subcharters of the
vessel. These vessels may only be sold after the second
anniversary of delivery. Any remaining profit is to be split
60:40 in favour of the owner.

Certain charterers of the Company's vessels hold purchase
options denominated in yen to purchase the Channel Poterne,
Golden Daisy, Golden Rose, Golden Aloe, Golden Protea, Golden
Disa, Golden Nerina and Navix Astral. All of the purchase
options reduce on a sliding scale over the term of the
related charter and are at strike prices which are in excess
of the related debt on the vessel. The option to purchase the
Channel Poterne is exercisable at any time. All other options
are exercisable at any time after the end of the seventh year
of the charter. The Golden Daisy and Golden Rose are owned by
associated companies.

26. SUPPLEMENTAL INFORMATION

Non-cash investing and financing activities included the
following:

(IN THOUSANDS OF $) 2000 1999 1998
(restated)
Unrealised appreciation
(depreciation) on investments
Recorded directly to equity 295 (2,843) (3,013)

In connection with purchase of
fixed assets:
Shares issued 28,000 9,000 -

Acquisition of businesses:
Assets acquired, including
goodwill 533,685 652,008 -
Liabilities assumed and
incurred 470,674 391,257 -
Conversion of equity method
investment in ICB - 236,051 -
Minority interest recorded - 150,700
Shares issued 20,350 - -

27. SUBSEQUENT EVENTS

In February 2001, Frontline entered into five newbuilding
contracts. Two Suezmaxes were ordered with the Sasebo
Shipyard in Japan for delivery in August and October 2001,
and three VLCCs were ordered with Hitachi for delivery in
April, August and October 2002. The total newbuilding project
will have a cost of approximately $330 million. The three
VLCC contracts were negotiated and entered into by Seatankers

F-53

Management Co. Ltd., an affiliated party of Hemen. Seatankers
has through historic ties a very close relationship with
Hitachi. The contracts were transferred to the Company based
on a contract price of $72.5 million per vessel plus
technical extras of approximately $1.2 million.

On March 14, 2001 the Company announced that it intends to
apply for listing of its ordinary shares on the New York
Stock Exchange. Concurrently with an NYSE listing,
Frontline's ADRs will no longer be traded on the Nasdaq
National Market.

On March 20, 2001 the Company announced that it had entered
into Memoranda of Agreement to sell two 1993 built VLCC,
Front Tartar and Front Tarim for a total price of $104
million. The Front Tartar was delivered to the purchaser on
April 24, 2001 and the Front Tarim on April 26, 2001.

In the period from January 1, 2001 to May 31, 2001 the
Company bought back 1,587,300 of its own shares. Warrants to
acquire 416,555 shares were exercised during this period and
the Company bought warrants to acquire approximately
2,065,015 of its shares. All remaining outstanding warrants
expired on May 11 2001. At May 31, 2001 77,012,566 ordinary
shares of the Company were outstanding.

On April 23, 2001, Frontline announced an offer for all of
the shares of Mosvold Shipping Limited ("Mosvold"), a Bermuda
company whose shares are listed on the Oslo Stock Exchange.
Through a combination of shares acquired and acceptances of
the offer, as at May 31 2001, Frontline controlled 97 per
cent of the shares of Mosvold. Mosvold owns two mid-70s built
VLCCs and three newbuilding contracts for VLCCs to be
delivered, one in each of 2001, 2002 and 2003.

On May 8, 2001, the Company announced a dividend of $1.00 per
share, payable to holders of record as of May 21, 2001. The
dividend was paid on June 7, 2001.

On May 14, 2001 the Company announced that it had entered
into a Memorandum of Agreement to sell the 2000-built Suezmax
tankers, Front Archer. The vessel is expected to be delivered
to the buyer in July or August 2001.

In May 2001, the Company issued NOK 330 million ($36 million)
in commercial paper. The proceeds were used to part finance
the retirement of some yard debt with a nominal value $50.75
million. The Company has hedged the NOK exposure. The
commercial paper has 6 and 12 months maturity, and given the
hedging interest is at Libor plus a margin.

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On June 5, 2001, the Company announced that it would
participate with a 33 per cent interest in a consortium,
which will be established to buy 4 VLCCs from Bergesen for a
total price of $321 million. The remaining interest in the
joint venture will be taken up by other partners in the
Tankers International Pool. The ships will be financed
through the joint venture.

F-55

SIGNATURES

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

Frontline Ltd.
_______________________
(Registrant)

Date June 13, 2001 By /s/ Kate Blankenship
__________________ _______________________
Kate Blankenship
Company Secretary

02089009.AE8