UNITED STATES
SECURITIES 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, 2002

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 0-29106
KNIGHTSBRIDGE TANKERS LIMITED
(Exact name of Registrant as specified in its charter)
ISLANDS OF BERMUDA
(Jurisdiction of incorporation or organization)
Par-la-Ville Place

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

Securities registered or to be registered pursuant to section 12(b) of the Act:
None Securities registered or to be registered pursuant to section 12(g) of the
Act.
Common Shares, $0.01 Par Value
(Title of class)

Securities for which there is a reporting obligation pursuant to Section 15(d)
of the Act: None 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.

17,100,000 Common Shares, $0.01 Par Value

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

Yes X No
----- -----

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

Item 17 Item 18 X
----- -----

TABLE OF CONTENTS

PART I

Item 1. Identity of Directors, Senior Management and Advisors 1

Item 2. Offer Statistics and Expected Timetable 1

Item 3. Key Information 1

Item 4. Information on the Company 6

Item 5. Operating and Financial Review and Prospects 16

Item 6. Directors, Senior Management and Employees 21

Item 7. Major Shareholders and Related Party Transactions 24

Item 8. Financial Information 24

Item 9. The Offer and Listing 26

Item 10. Additional Information 27

Item 11. Quantitative and Qualitative Disclosures about Market Risk 28

Item 12. Description of Securities Other Than Equity Securities 29

PART II

Item 13. Defaults, Dividend Arrearages and Delinquencies 30

Item 14. Material Modifications to the Rights of Security
Holders and Use of Proceeds 30

Item 15. Controls and Procedures 30

Item 16. Reserved

PART III

Item 17. Financial Statements 31

Item 18. Financial Statements 31

Item 19. Exhibits

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.

Knightsbridge Tankers Limited desires to take advantage of the safe harbor
provisions of the Private Securities Litigation Reform Act of 1995 and is
including this cautionary statement in connection with this safe harbor
legislation. This document and any other written or oral statements made by us
or on our behalf may include forward-looking statements, which reflect our
current views with respect to future events and financial performance. The words
"believe," "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 Knightsbridge Tanker Limited 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 consolidated income statement data of Knightsbridge Tankers Limited
and its subsidiaries (the "Company") with respect to the fiscal years ended
December 31, 2002, 2001, and 2000 and the selected consolidated balance sheet
data of the Company with respect to the fiscal years ended December 31, 2002 and
2001 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 consolidated income statement data with respect to
the fiscal years ended December 31, 1999 and 1998 and the selected consolidated
balance sheet data with respect to the fiscal years ended December 31, 2000,
1999 and 1998 has been derived from consolidated financial statements of the
Company not included herein. The following table should also be read in
conjunction with Item 5 "Operating and Financial Review and Prospects" and the
Company's Consolidated Financial Statements and Notes thereto included herein.

Year Ended December 31

2002 2001 2000 1999 1998

(in US$, except share data)

INCOME STATEMENT DATA:
Charter hire
revenues $ 40,275,925 $ 61,534,355 $ 76,335,975 $ 40,275,925 $ 45,039,385
Net operating income $ 21,877,636 $ 43,140,556 $ 57,935,758 $ 21,842,043 $ 26,605,385
Net income $ 12,550,786 $ 33,915,432 $ 48,723,745 $ 12,572,476 $ 17,385,820
Earnings per share
- basic and diluted $ 0.73 $ 1.98 $ 2.85 $ 0.74 $ 1.02
Cash dividends per share $ 1.81 $ 4.24 $ 2.66 $ 1.80 $ 2.36
BALANCE SHEET DATA
(at December 31):
Cash and cash
equivalents $ 226,215 $ 278,268 $ 247,370 $ 70,695 $ 315,223
Vessels under capital
lease, net $ 337,001,052 $ 354,593,912 $ 372,186,772 $ 389,779,632 $ 407,372,491
Total assets $ 347,824,729 $ 366,204,004 $ 404,739,841 $ 403,265,501 $ 428,293,722
Long-term debt
(including current
portion) $ 125,397,399 $ 125,397,399 $ 125,397,399 $ 127,078,937 $ 133,805,088
Shareholders' equity $ 208,639,114 $ 229,077,216 $ 277,218,288 $ 273,980,543 $ 292,188,066
Common Shares $ 171,000 $ 171,000 $ 171,000 $ 171,000 $ 171,000
Common shares
outstanding 17,100,000 17,100,000 17,100,000 17,100,000 17,100,000

B. CAPITALIZATION AND INDEBTEDNESS

Not Applicable

C. REASONS FOR THE OFFER AND USE OF PROCEEDS

Not Applicable

D. RISK FACTORS

Please note: In this section, "we", "us" and "our" all refer to the Company and
its subsidiaries.

Industry Specific Risk Factors

The cyclical nature of the tanker industry may lead to volatile changes in
charter rates which may adversely affect our earnings

If the tanker industry, which has been cyclical, is depressed in the future when
our vessels' charters expire or when we want to sell a vessel, our earnings and
available cash flow may decrease. Our ability to recharter our vessels on the
expiration or termination of their current 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 tanker vessels 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:

o demand for oil and oil products;

o global and regional economic conditions;

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

o changes in seaborne and other transportation patterns

The factors that influence the supply of tanker capacity include:

o the number of newbuilding deliveries;

o the scrapping rate of older vessels; and

o the number of vessels that are out of service.

Our vessels are currently operated under bareboat charters to Shell
International Petroleum Company Limited. We receive a set minimum base rate
charter hire and variable additional hire under these bareboat charters. The
amount of additional hire is determined quarterly with reference to three
round-trip traditional trade routes and therefore is subject to variation
depending on general tanker market conditions. We cannot assure you that we will
receive additional hire for any quarter.

Any decrease in shipments of crude oil from the Arabian Gulf may adversely
affect our financial performance

The demand for our very large crude carrier, or VLCC, oil tankers derives
primarily from demand for Arabian Gulf crude oil, which, in turn, primarily
depends on the economies of the world's industrial countries and competition
from alternative energy sources. A wide range of economic, social and other
factors can significantly affect the strength of the world's industrial
economies and their demand for Arabian Gulf crude oil. One such factor is the
price of worldwide crude oil. The world's oil markets have experienced high
levels of volatility in the last 25 years. If oil prices were to rise
dramatically, the economies of the world's industrial countries may experience a
significant downturn.

Any decrease in shipments of crude oil from the Arabian Gulf would have a
material adverse effect on our financial performance at any time after the
expiration or termination of our current charters with Shell International (or
earlier if a decrease adversely affects VLCC charterhire rates for shipments
from the Arabian Gulf.) Among the factors which could lead to such a decrease
are:

o increased crude oil production from non-Arabian Gulf areas;

o increased refining capacity in the Arabian Gulf area;

o increased use of existing and future crude oil pipelines in the
Arabian Gulf area;

o a decision by Arabian Gulf oil-producing nations to increase their
crude oil prices or to further decrease or limit their crude oil
production;

o armed conflict in the Arabian Gulf and political or other factors; and

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

The value of our vessels may fluctuate and also depends on whether Shell
International renews its charters which could result in a lower share price

Tanker values have generally experienced high volatility. Investors can expect
the fair market value of our VLCC oil tankers to fluctuate, depending on general
economic and market conditions affecting the tanker industry and competition
from other shipping companies, types and sizes of vessels, and other modes of
transportation. In addition, as vessels grow older, they generally decline in
value. These factors will affect the value of our vessels at the termination of
their charters or earlier at the time of their sale. It is very possible that
the value of our vessels could be well below both their implied value based on
the trading price for our shares and their present market value without the
Shell International charters. While the trading price for our shares depends on
many factors, the failure of Shell International to renew the charters could
result in a lower market price for our shares. Based on the closing price for
our common shares on April 30, 2003, taking into account our total indebtedness
of $125.4 million, and assuming no other factors, such as liquidity premiums,
our cash position, or expectations of future performance, the implied value of
each of our vessels with the Shell International charter was $66.9 million. The
market value of a similar vessel, without charter, may be significantly lower
than the implied value of our vessels.

Company Specific Risk Factors

Because our charters expire in 2004, unless extended at the option of the
charterer, we may incur additional expenses and not be able to recharter our
vessels profitably

Each of our charters with Shell International expires approximately seven years
after the date of delivery of each vessel to us, which could be as early as
February 2004, unless extended at the option of the charterer for an additional
period of approximately seven years, on eight months' prior written notice. The
charterer has the sole discretion to exercise that option under one or more of
the charters. We cannot predict whether the charterer will exercise that option
under one or more of the charters. The charterer will not owe any fiduciary or
other duty to us or our shareholders in deciding whether to exercise the
extension option, and the charterer's decision may be contrary to our interests
or those of our shareholders.

We cannot predict at this time any of the factors that the charterer will
consider in deciding whether to exercise any of its extension options under the
charters. It is likely, however, that the charterer would consider a variety of
factors, which may include whether a vessel is surplus or suitable to the
charterer's requirements and whether competitive charterhire rates are available
to the charterer in the open market at that time.

In the event Shell International does not extend our current charters, we will
present to our shareholders a recommendation by our Board of Directors as to
whether it believes that the sale of our vessels is in our shareholders' best
interests or whether an alternative plan, such as attempting to arrange a
replacement charter, might be of greater benefit to us. Replacement charters may
include shorter term time charters and employing the vessels on the spot charter
market (which is subject to greater fluctuation than the time charter market).
Any replacement charters may bring us lower charter rates and would likely
require us to incur greater expenses which may reduce the amounts available, if
any, to pay distributions to shareholders.

We operate in the highly competitive international tanker market which could
affect our position if Shell International does not renew our charters

The operation of tanker vessels and transportation of crude and petroleum
products and the other businesses in which we operate are extremely competitive.
Competition arises primarily from other tanker owners, including major oil
companies as well as independent tanker companies, some of whom have
substantially greater resources than we do. Competition for the transportation
of oil and oil products can be intense and depends on price, location, size,
age, condition and the acceptability of the tanker and its operators to the
charterers. During the term of our existing charters with Shell International we
are not exposed to the risk associated with this competition. In the event that
Shell International does not renew the charters in 2004, we will have to compete
with other tanker owners, including major oil companies as well as independent
tanker companies for charterers. Due in part to the fragmented tanker market,
competitors with greater resources could enter and operate larger fleets through
acquisitions or consolidations and may be able to offer better prices and
fleets, which could result in our achieving lower revenues from our VLCC oil
tankers.

Compliance with environmental laws or regulations may adversely affect our
earnings and financial conditions if Shell International does not renew its
charters

Regulations in the various states and other jurisdictions in which our vessels
trade affect our business. Extensive and changing environmental laws and other
regulations, compliance with which may entail significant expenses, including
expenses for ship modifications and changes in operating procedures, affect the
operation of our vessels. Although Shell International is responsible for all
operational matters and bears all these expenses during the term of our current
charters, these expenses could have an adverse effect on our business operations
at any time after the expiration or termination of a charter or in the event
Shell International fails to make a necessary payment.

We may not have adequate insurance in the event existing charters are not
renewed

We are highly dependent on Shell International and its guarantors

We are highly dependent on the due performance by Shell International of its
obligations under the charters and by its guarantors, Shell Petroleum N.V. and
The Shell Petroleum Company Limited, of their obligations under their respective
guarantees. Any failure by Shell International or the guarantors to perform
their obligations could result in enforcement by our lenders of their rights
including foreclosing on the mortgages over the vessels and the outstanding
capital stock of our subsidiaries, all of which are pledged to the lenders, and
all of the subsidiaries' rights in the charters, and the consequent forfeiture
of our vessels. Our shareholders do not have any recourse against Shell
International or its guarantors.

Our ability to recharter or sell the vessels if Shell International and its
guarantors default would be subject to the rights of the lenders and the rights
of the lessor under finance leases to which we are a party for our vessels. In
addition, if Shell International were to default on its obligations under a
charter or not exercise its charter extension option, we may be required to
change the flagging or registration of the related vessel and may incur
additional costs, including maintenance and crew costs.

Incurrence of expenses or liabilities may reduce or eliminate distributions

We have made distributions quarterly since April 1997, in an aggregate amount
equal to the charterhire received from Shell International less our cash
expenses and less any reserves required in respect of any contingent
liabilities. It is possible that we could incur other expenses or contingent
liabilities that would reduce or eliminate the cash available for distribution
by us as dividends. In particular, toward the end of the term of the charters in
2004, we are likely to have additional expenses and may have to set aside
amounts for future payments of interest and principal. Our loan agreements
prohibit the declaration and payment of dividends if we are in default under
them. In addition, the declaration and payment of dividends is subject at all
times to the discretion of our Board. We cannot assure you that we will pay
dividends in the amounts anticipated or at all.

If we cannot refinance our loans, we may have to sell our vessels, which may
leave no additional funds for distributions to shareholders

Whether or not Shell International renews our charters, our outstanding loan
facility will mature in August 2004, seven years and six months after the date
of delivery of the related vessel, and we will be obligated to repay or
refinance the related loan at that time. There is no assurance that we will be
able to repay or refinance those loans. In addition, even if Shell International
renews the charters for one or more of our vessels, but we are unable to
refinance the related loan facility on acceptable terms, we may be forced to
attempt to sell the vessels subject to the charters. Depending on the market
value for our vessels at the time, it is possible that there could be no funds
left to distribute to our shareholders.

We have a limited business purpose which limits our flexibility

Our bye-laws limit our business to engaging in the acquisition, disposition,
ownership, leasing and chartering of our five VLCC oil tankers. During the terms
of our charters with Shell International we expect that the only source of
operating revenue from which we may pay distributions will be from these
charters.

Governments could requisition our vessels during a period of war or emergency,
resulting in a 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. If a vessel is requisitioned for hire from
a pre-existing charterer beyond the scheduled termination date, Shell
International will be obligated to pay to us only those amounts received by it
as charterhire from the requisitioning entity, less operating costs. This amount
could be materially less than the charterhire that would have been payable
otherwise. In addition, we would bear all risk of loss or damage to the vessel
after the charter would otherwise have terminated.

ITEM 4. INFORMATION ON THE COMPANY

A. HISTORY AND DEVELOPMENT OF THE COMPANY

Knightsbridge Tankers Limited (the "Company") was incorporated in Bermuda on
September 18, 1996. The Company's registered and principal executive offices are
located at Par-la-Ville Place, 14 Par-la-Ville Road, Hamilton, HM 08, Bermuda,
and its telephone number is +1 (441) 295-0182. The Company was incorporated for
the purpose of the acquisition, disposition, ownership, leasing and chartering
of, through wholly-owned subsidiaries (the "Subsidiaries"), five very large
crude oil carriers ("VLCCs") (the "Vessels"), and certain related activities.
The Company charters the Vessels to Shell International Petroleum Company
Limited (the "Charterer") on long-term "hell and high water" bareboat charters
(the "Charters"). The obligations of the Charterer under these charters are
jointly and severally guaranteed (the "Charter Guarantees") by Shell Petroleum
N.V. and The Shell Petroleum Company Limited (the "Charter Guarantors"). The
Charterer and the Charter Guarantors are all companies of the Royal Dutch/Shell
Group of Companies. References herein to the Company include the Company and the
Subsidiaries, unless otherwise indicated.

The business of the Company is limited by its Bye-Laws to the consummation of
the transactions described above and related activities including the ownership
of the Subsidiaries engaged in the acquisition, disposition, ownership, leasing
and chartering of the Vessels and engaging in activities necessary, suitable or
convenient to accomplish, or in connection with or incidental to, the foregoing,
including entering into the Credit Facility (as defined below) and U.K finance
leases and the refinancing thereof. During the terms of the Charters, the
Company expects that its only source of operating revenue from which the Company
may pay distributions to shareholders on its common shares, par value $.01 per
share, (the "Common Shares") will be cash payments from the Subsidiaries to the
Company. Also, during the terms of the Charters, the Subsidiaries' only source
of operating revenue will be charterhire paid to the Subsidiaries by the
Charterer. The Company's Bye-Laws may be amended only upon the affirmative vote
of 66-2/3% of the outstanding Common Shares, and, insofar as the Company's
purposes or powers are concerned or insofar as the interests of the lenders
under the Credit Facility are prejudiced, with the approval of the lenders under
the Credit Facility. In addition, the Company and the Subsidiaries have agreed
with the Charterer not to take certain acts which would subject them to general
jurisdiction of the U.S. courts.

In February 1997, upon the exercise by the underwriters of their overallotment
option, the Company offered and sold to the public 16,100,000 Common Shares at
an initial offering price of $20 per share. Simultaneously, the Company sold
1,000,000 Common Shares at a price of $20 per share to ICB International Limited
("ICB International"), a company which since 1999 has been an indirect
wholly-owned subsidiary of Frontline Ltd. ("Frontline"), a Bermuda publicly
traded oil tanker owning and operating company. As of December 31, 2002, ICB
International owns approximately 0.01 % of the outstanding Common Shares. ICB
Shipping (Bermuda) Limited (the "Manager"), another indirect wholly-owned
subsidiary of Frontline, manages the business of the Company.

The Company used the net proceeds of the offerings described above, together
with advances totaling $145.6 million under a credit facility from an
international syndicate of lenders (the "Credit Facility"), primarily to fund
the purchase by the Subsidiaries of the Vessels. Upon their purchase from their
previous owners on February 27, 1997 (the "Delivery Date"), the Vessels were
delivered by the Company to the Charterer under the Charters. The term of each
of the Charters is a minimum of seven years, with an option for the Charterer to
extend the period for each Vessel's Charter for an additional seven-year term,
to a maximum of 14 years per Charter. Under the Charters, the Charterer pays the
greater of a base rate of hire or a spot market related rate. See B. Business
Overview below.

The Subsidiaries have each entered into conditional sale/leaseback arrangements
(the "U.K. Finance Leases") with a subsidiary of National Westminster Bank plc,
NatWest Leasing and Asset Finance Ltd. (the "U.K. Lessor") pursuant to which
each Subsidiary has sold a Vessel to the U.K. Lessor under a conditional sale
agreement (the "CSA") and concurrently leased its Vessel back from the U.K.
Lessor for a term of 25 years. By virtue of certain benefits under United
Kingdom tax laws which will be passed to the Charterer, the U.K. Finance Leases
enable the Charterer to achieve a reduction in its costs of hiring and using the
Vessels, without reducing the Base Hire, Additional Hire, if any, or
Supplemental Hire (as these terms are defined herein) payable to the
Subsidiaries. During the term of the U.K. Finance Leases, the Vessels will
remain on the Company's consolidated balance sheet and each Subsidiary will
retain title to the related Vessel.

On the Delivery Date, the U.K. Lessor paid to the Subsidiaries an amount equal
to $439.8 million in the aggregate and each Subsidiary delivered its related
Vessel to the Charterer as agent for the U.K. Lessor. Each Subsidiary procured
the opening of a letter of credit (each a "Letter of Credit" and, collectively,
the "Letters of Credit") by a major commercial bank (each an "LC Bank" and,
collectively, the "LC Banks") from which the U.K. Lessor will be paid rental and
other payments due under the U.K. Finance Leases. The Subsidiaries also
established letter of credit reimbursement accounts (each a "LC Account" and,
collectively, the "LC Accounts") with the LC Banks, as security for their
respective obligations to reimburse the LC Banks for amounts paid under the
Letters of Credit. Interest on the LC Accounts will be added to such security,
and, therefore, will not benefit the Company.

The U.K. Lessor, the Charterer and each Subsidiary have entered into a direct
support agreement (each a "Direct Support Agreement" and, collectively, the
"Direct Support Agreements") containing certain indemnification and other
payment obligations of the Charterer in favor of the U.K. Lessor. The U.K.
Finance Leases are structured so that the LC Banks may not make claims for
reimbursement against the Subsidiaries or the Vessels for amounts paid or
capable of being drawn under the Letters of Credit, other than claims in respect
of funds on deposit in the LC Accounts (including interest thereon), except in
the event that such funds are returned to the Subsidiaries or paid to a creditor
or a trustee or similar official and then only to the extent of such returned or
paid funds. In addition, the U.K. Lessor may not make claims against the
Subsidiaries or the Vessels for amounts otherwise due under the U.K. Finance
Leases and capable of being drawn under the Letters of Credit, except to the
extent that the Charterer has paid to a Subsidiary under the Charters separate
amounts denominated in Pounds Sterling ("Sterling Hire") for the sole purpose of
enabling the Subsidiaries to meet their obligations to the U.K. Lessor.

The U.K. Lessor, the Charterer and each Subsidiary (with the consent of the
Charterer) may not terminate the U.K. Finance Leases apart from under certain
conditions and upon such termination a termination sum (the "Termination Sum")
will be payable to the U.K. Lessor. One of those conditions includes the
termination of the Charter and the failure to substitute an acceptable
replacement charter. The recourse of the U.K. Lessor against the Subsidiaries or
the Vessels for all or any portion of the Termination Sum will be limited to
amounts capable of being drawn under the Letters of Credit and to any amounts
paid in respect thereof by the Charterer to the Subsidiaries as Sterling Hire.
To the extent the Termination Sum exceeds the amount capable of being drawn
under the Letters of Credit, the Charterer will be obligated to pay the U.K.
Lessor the difference. Also, upon termination, the U.K. Lessor will agree to
sell its interest in the related Vessel and to allow the relevant Subsidiary to
control the disposition of such interest in the related Vessel and to receive
the net proceeds of any sale thereof except in limited circumstances. However,
the Subsidiaries' rights will be subject to the rights of the agent on behalf of
the lenders under the Credit Facility, as described below, who will be entitled
to control such disposition in certain circumstances.

The Company has entered into the Credit Facility with a syndicate of
international lenders, pursuant to which the Company on the Delivery Date
borrowed $145.6 million in the form of term loans. Of such amount, $125.4
million was in respect of five loans (the "Primary Loans"), each in respect of a
Vessel, and $20.2 million was in respect of five loans (the "Amortizing Loans"),
each in respect of a Vessel. The Primary and Amortizing Loans were equal to
approximately 31.65% of the purchase price of the Vessels, which was
$439,821,545 million in the aggregate. Each Primary Loan will mature on August
27, 2004. The Amortizing Loans amortized in equal quarterly installments
beginning on April 15, 1997 through January 15, 2000, when they were repaid in
full. Whether or not the term of any of the Charters is extended, the Company is
obligated to repay the borrowings under the Credit Facility on the maturity
date. The Credit Facility provides for payment of interest on the outstanding
principal balance of each of the Primary Loans and on the Amortizing Loans
quarterly, in arrears, at a floating interest rate based on the rate in the
London interbank eurocurrency market. However, the Company has entered into an
interest rate swap transaction (the "Swap") with Goldman Sachs Capital Markets,
L.P., an affiliate of Goldman, Sachs & Co. (the "Swap Counterparty"), so that it
has effectively fixed its interest rate on the Primary Loans and the Amortizing
Loans at the rate of approximately 7.14% and 6.51%, respectively, per annum.

If a Subsidiary sells or disposes of the related Vessel or the Company sells or
disposes of its shareholding in such Subsidiary, or the U.K. Lessor sells or
otherwise disposes of its interest in a Vessel and rebates the proceeds thereof
to the Subsidiary the Company will be obligated to make a loan prepayment in
respect of the Credit Facility which will be applied against the Primary Loans
in a manner depending upon whether the disposal occurred prior to, or on or
after February, 2004.

The Credit Facility is secured by, among other things, a pledge by the Company
of 100% of the issued and outstanding capital stock of the Subsidiaries, a
guarantee from each Subsidiary, a mortgage on each Vessel (collectively, the
"Mortgages"), assignments of the Charters and the Charter Guaranties and an
assignment of the U.K. Lessor's rights to take title to the Vessels and the
proceeds from the sale or any novation thereof. The Credit Facility is not
guaranteed by the Charterer or the Charter Guarantors. The failure by the
Company to make payments due and payable under the Credit Facility could result
in the acceleration of all principal and interest on the Credit Facility, the
enforcement by the lenders under the Credit Facility of their rights with
respect to the security therefor, and the consequent forfeiture by the Company
of one or more of the Vessels. The Credit Facility and the Swap also provide for
other customary events of default.

The Credit Facility contains a number of covenants made by the Company and each
of the Subsidiaries that, among other things, restrict the ability of the
Company to incur additional indebtedness, pay dividends if the Company is in
default, change the business conducted by the Company, create liens on assets or
dispose of assets. In addition, upon termination of a Charter, the Company and
the relevant Subsidiary will be subject to additional covenants pursuant to the
Credit Facility pertaining primarily to the maintenance and operation of the
Vessels.

The Charter Guarantors have entered into the separate joint and several Charter
Guaranties in favor of the Company and each Subsidiary. Pursuant to the Charter
Guaranties, the Charter Guarantors on a joint and several basis fully and
unconditionally guarantee the prompt payment and performance by the Charterer of
all its obligations under and in connection with each Charter to the relevant
Subsidiary and certain indemnification obligations under the Charters to the
Company. The Charter Guaranties do not confer any rights or remedies thereunder
on any person, other than the Company and the Subsidiaries, and are not
guaranties of the payment of dividends or any other amounts to the holders of
Common Shares. As the Charter Guarantors are holding companies, the Charter
Guaranties are effectively subordinated to the debt of their subsidiaries which
are operating companies.

B. BUSINESS OVERVIEW

The Charterer is Shell International Petroleum Company Limited, a wholly-owned
subsidiary of The Shell Petroleum Company Limited, which, in turn, is a
subsidiary of N.V. Koninklijke Nederlandsche Petroleum Maatschappij, which owns
60% of its share capital, the remaining 40% being owned by The "Shell" Transport
and Trading Company, p.l.c.

The principal activities of the Charterer are to buy, sell and otherwise deal
in, and to transport, crude oil, petroleum products and coal and to provide
services to the companies of the Royal Dutch/Shell Group of Companies. The
Charterer currently charters the Vessels from the Subsidiaries under the
Existing Charters.

Pursuant to the Charters, each Vessel is chartered for an initial term of seven
years (ending in February 2004). Each Charter is subject to extension at the
option of the Charterer for an additional period of seven years plus, subject to
the notice requirement described below, at the option of the Charterer, up to 90
days plus up to 30 days thereafter upon at least eight months' prior notice of
such extension, which notice shall be irrevocable. The obligation of the
Charterer to pay charterhire for the Vessels commenced on the Delivery Date. The
Charterer is obligated to give written notice (which shall be irrevocable), not
less than three months prior to the seventh or as applicable, the fourteenth,
anniversary of the Delivery Date (February 2004 and February 2011,
respectively), of the number of days, if any, by which the original term or the
extended term, respectively, of a Charter will extend beyond such anniversary.

Pursuant to the terms of the Charters, the Charterer's obligation to pay
charterhire for the entire charter period is absolute, whether there is a loss
or damage to a Vessel of any kind or whether such Vessel or any part thereof is
rendered unfit for use or is requisitioned for hire or for title, and regardless
of any other reason whatsoever. The Charter Guarantors have agreed to guarantee
all of the Charterer's obligations under each of the Charters.

A Subsidiary has the right to assign the income it receives under the relevant
Charter without the Charterer's consent; however, the Subsidiary may not
otherwise assign its rights and obligations under such Charter, without the
prior written consent of the Charterer, which consent shall not be unreasonably
withheld, provided that for this purpose (i) a transfer of the legal ownership
of the shares of a Subsidiary shall be deemed to be an assignment of such rights
and obligations by such Subsidiary for which the Charterer's consent shall be
required, and (ii) without limitation, it shall be reasonable for the Charterer
to withhold its consent to a transfer and assignment by a Subsidiary of its
rights and obligations under the relevant Charter to a person or entity with
whom the Charterer does not wish, in good faith, for policy or other reasons to
enter into a business relationship.

The Charterer may not assign its rights and obligations under each of the
Charters nor may it charter a Vessel by demise, to any company other than a
company of the Royal Dutch/Shell Group of Companies without the prior written
consent of the relevant Subsidiary, which consent shall not be unreasonably
withheld. The Charterer may otherwise charter a Vessel without the prior consent
of the relevant Subsidiary, provided that the Charterer remains responsible as
principal (or appoints another person to be responsible in its stead) for
navigating and managing such Vessel throughout the period of such Charter and
for defraying all expenses in connection with such Vessel throughout such
period. In any such case the Charterer will remain liable for payment and
performance of the Charterer's obligations under such Charter and the relevant
Charter Guaranty shall remain in effect with respect to such Charter.

Under each Charter, the Charterer is liable for all expenses of operating,
repairing and maintaining the related Vessel, other than the initial
registration expenses of such Vessel, and bears all risk of loss of or damage to
such Vessel during the term of such Charter. In addition, a Subsidiary (i) has
no liability to the Charterer for breaches of any of its representations or
warranties made to the Charterer with respect to the Vessel owned by such
Subsidiary, except to the extent of actual recoveries made by a Subsidiary from
third parties in relation thereto, and (ii) is not liable to continue to supply
a Vessel or any part thereof if, following the delivery of such Vessel under a
Charter, such Vessel or any part thereof is lost, damaged rendered unfit for
use, confiscated, seized, requisitioned, restrained or appropriated and, in any
such case or for any reason whatsoever, the charterhire payable in respect of
such Vessel shall continue to be payable.

The Charterer is obligated under each Charter to indemnify the relevant
Subsidiary and the Company in respect of events arising prior to and through the
term of the Charters with respect to, among other things (i) all costs and
expenses of operating, maintaining and replacing all parts in respect of the
Vessels and (ii) all liabilities, claims and proceedings claimed by anyone
arising in any manner out of, among other things, the operation or chartering of
the Vessels, including environmental liabilities, other than liabilities arising
out of the gross negligence or willful misconduct of such Subsidiary or the
Company. The indemnities provided in the Charters continue in full force (in
respect of events occurring during the pendency of a Charter) notwithstanding
termination or expiration of such Charter. All amounts payable under the
Charters by the Charterer, including indemnity payments, are required to be paid
free from and without deduction for certain taxes specified in the Charter. The
Charterer has the right at its expense to assume the defense of indemnified
claims.

During the term of each Charter, the Charterer is required, at its own cost, (a)
to maintain the related Vessel, as well as the machinery, cargo handling and
other equipment, appurtenances and spare parts thereof, in the same good state
of repair and efficient operating condition as other vessels owned or operated
by companies of the Royal Dutch/Shell Group of Companies, ordinary wear and tear
excepted, and (b) to keep each Vessel with unexpired classification of Lloyds
Register of Shipping and with other required certificates (including, without
limitation, those required by the Vessel's country of registry). In addition,
the Charterer is required to drydock such Vessel and clean and paint its
underwater parts whenever the same shall be necessary, in accordance with the
practices applied to other vessels owned or operated by companies of the Royal
Dutch/Shell Group of Companies. A Subsidiary shall have the right, at any time
on reasonable notice to the Charterer and at such Subsidiary's expense, to
inspect or survey the relevant Vessel, to ascertain that such Vessel is being
properly repaired and maintained, provided that such inspection or survey will
not interfere with such Vessel's trading requirements and such Subsidiary shall
be required to rebate to Charterer a sum equivalent to charterhire payable
during any period of drydocking caused solely by the subsidiary's inspection and
survey.

Pursuant to the Charters, the Charterer is obliged to maintain marine (hull and
machinery), war, protection and indemnity and pollution risk insurance on each
Vessel in a manner consistent with insurance arrangements currently in force in
relation to similar vessels owned or operated by companies of the Royal
Dutch/Shell Group of Companies, provided that the Charterer is entitled to self
insure with respect to marine (hull and machinery) and war risks.

The daily charterhire rate payable under each Charter is comprised of two
primary components: (i) the Base Rate, which is a fixed minimum rate of
charterhire equal to $22,069 per Vessel per day, payable quarterly in arrears,
and (ii) Additional Hire, which is additional charterhire (determined and paid
quarterly in arrears and may equal zero) that will equal the excess, if any, of
a weighted average of the daily time charter rates for three round-trip trade
routes traditionally served by VLCCs, less an agreed amount of $10,500 during
the initial term of the Charters, and $14,900 for any extended term,
representing daily operating costs over the Base Rate. This charterhire
computation is intended to enable the Company to receive the greater of (i) an
average of prevailing spot charter rates for VLCCs trading on such routes after
deducting daily operating costs of $10,500 during the initial term of the
Charters, and $14,900 for any extended term and (ii) the Base Rate.

The Charterer has also been obligated to pay Supplemental Hire quarterly in
arrears until January 15, 2000 in fixed amounts that were calculated with
reference to the swap fixed interest rate under the Credit Facility and which
were equivalent to amounts due under the Amortizing Loan. Supplemental Hire
therefore served the Company's business purpose of repaying the Amortizing Loan.
The Charterer was obligated to pay Supplemental Hire as set forth below:

January 15, 1999 $1,819,615
April 15, 1999 $1,789,599
July 15, 1999 $1,763,484
October 15, 1999 $1,736,769
January 15, 2000 $1,709,153

The amount of Additional Hire, if any, that is payable is calculated based on a
determination of the London Tanker Brokers Panel (the "Brokers Panel") or
another panel of brokers mutually acceptable to the Subsidiaries and the
Charterer of the average spot rates (the "Average Spot Rates") in Worldscale
points over the three months ending on the last day of the month preceding the
relevant charterhire payment date (the "Hire Payment Date") on the following
three standard notional round voyage routes and cargo sizes for similar ships:

(A) Arabian Gulf to Rotterdam with 280,000 tonnes of cargo;

(B) Arabian Gulf to Singapore with 260,000 tonnes of cargo; and

The determination of the Brokers Panel shall be binding upon both the
Subsidiaries and the Charterer. "Worldscale" is an index commonly used in the
tanker industry for calculating freight rates in the spot charter market.

Industry Conditions

The oil tanker industry has been highly cyclical, experiencing volatility in
charterhire rates and vessel values resulting from changes in the supply of and
the demand for crude oil and tanker capacity. The demand for tankers is
influenced by, among other factors, the demand for crude oil, global and
regional economic conditions, developments in international trade, changes in
seaborne and other transportation patterns, weather patterns, oil production,
armed conflicts, port congestion, canal closures, embargoes and strikes. In
addition, the Company anticipates that the future demand for VLCCs, such as the
Vessels, will also be dependent upon continued economic growth in the United
States, Continental Europe and the Far East and competition from pipelines and
other sizes of tankers. Adverse economic, political, social or other
developments in any of these regions could have an adverse effect on the
Company's business and results of operations. In addition, even if demand for
crude oil grows in these areas, demand for VLCCs may not necessarily grow and
may even decline. Demand for crude oil is affected by, among other things,
general economic conditions, commodity prices, environmental concerns, taxation,
weather and competition from alternatives to oil. Demand for the seaborne
carriage of oil depends partly on the distance between areas that produce crude
oil and areas that consume it and their demand for oil. The incremental supply
of tanker capacity is a function of the delivery of new vessels and the number
of older vessels scrapped, in lay-up, converted to other uses, reactivated or
lost. Such supply may be affected by regulation of maritime transportation
practices by governmental and international authorities. All of the factors
influencing the supply of and demand for oil tankers are outside the control of
the Company, and the nature, timing and degree of changes in industry conditions
are unpredictable. Furthermore, the amount of Additional Hire will be determined
quarterly with reference to three round-trip trade routes between the following
locations: (i) the Arabian Gulf and Rotterdam, The Netherlands, (ii) the Arabian
Gulf and Japan and (iii) the Arabian Gulf and Singapore. Therefore, the demand
for oil in the areas serviced by such routes could have a significant effect on
the amount of Additional Hire that may be payable. There can be no assurance
that Additional Hire will be payable for any quarter.

VLCCs are specifically designed for the transportation of crude oil and, due to
their size, are used to transport crude oil primarily from the Arabian Gulf to
the Far East, Northern Europe, the Caribbean and the Louisiana Offshore Oil Port
("LOOP"). While VLCCs are increasingly being used to carry crude oil from other
areas, any decrease in shipments of crude oil from the Arabian Gulf would have a
material adverse effect on the Company at any time after the expiration or
termination of the Charters (or earlier if such decrease adversely affects
charterhire rates for shipments from the Arabian Gulf).

Among the factors which could lead to such a decrease are (i) increased crude
oil production from non-Arabian Gulf areas, (ii) increased refining capacity in
the Arabian Gulf area, (iii) increased use of existing and future crude oil
pipelines in the Arabian Gulf area, (iv) a decision by Arabian Gulf
oil-producing nations to increase their crude oil prices or to further decrease
or limit their crude oil production, (v) armed conflict in the Arabian Gulf or
along VLCC trading routes, (vi) political or other factors and (vii) the
development and the relative costs of nuclear power, natural gas, coal and other
alternative sources of energy.

VLCC demand is primarily a function of demand for Arabian Gulf crude oil, which
in turn is primarily dependent on the economies of the world's industrial
countries and competition from alternative energy sources. A wide range of
economic, political, social and other factors can significantly affect the
strength of the world's industrial economies and their demand for Arabian Gulf
crude oil. One such factor is the price of worldwide crude oil. The world's oil
markets have experienced high levels of volatility in the last 25 years. If oil
prices were to rise dramatically, the economies of the world's industrial
countries may experience a significant downturn. See Item 5. Operating and
Financial Review and Prospects -- Operating Results -- The Tanker Market.

Vessel Values

Tanker values have generally experienced high volatility. The fair market value
of oil tankers, including the Vessels, can be expected to fluctuate, depending
upon general economic and market conditions affecting the tanker industry and
competition from other shipping companies, types and sizes of vessels, and other
modes of transportation. In addition, as vessels grow older, they may be
expected to decline in value. These factors will affect the value of the Vessels
at the termination of their respective charters or earlier at the time of their
sale.

Since the mid-1970s, during most periods there has been a substantial worldwide
oversupply of crude oil tankers, including VLCCs. In addition, the market for
secondhand VLCCs has generally been weak since the mid-1970s. Notwithstanding
the aging of the world tanker fleet and the adoption of new environmental
regulations which will result in a phaseout of many single hull tankers,
significant deliveries of new VLCCs would adversely affect market conditions.

Loss and Liability Insurance

There are a number of risks associated with the operation of ocean-going
vessels, including mechanical failure, collision, property loss, cargo loss or
damage and business interruption due to political circumstances in foreign
countries, hostilities and labor strikes. In addition, the operation of any
vessel is subject to the inherent possibility of marine disaster, including oil
spills and other environmental mishaps, and the liabilities arising from owning
and operating vessels in international trade. The United States Oil Pollution
Act of 1990, or OPA, which imposes virtually unlimited liability upon owners,
operators and demise charterers of any vessel trading in the United States
exclusive economic zone for certain oil pollution accidents in the United
States, has made liability insurance more expensive for ship owners and
operators trading in the United States market and has also caused insurers to
consider reducing available liability coverage. Pursuant to the Charters, the
Charterer will bear all risks associated with the operation of the Vessels,
including, without limitation, any total loss of one or more Vessels. The
Charterer will also indemnify each Subsidiary and the Company, and the Charter
Guarantors have agreed to guarantee such obligation, for all liabilities arising
prior to and during the term of the Charters in connection with the chartering
and operation of the Vessels, including, under environmental protection laws and
regulations, other than liabilities arising out of the gross negligence or
willful misconduct of such Subsidiary or the Company.

The Charterer is entitled to self-insure the marine (hull and machinery) and war
risk on each Vessel. In event of loss, following full payments of charterhire
under the Charter's "hell and high water" provisions, a lump sum payment will be
made to the relevant Subsidiary on expiration of a Charter, based upon three
independent shipbrokers' evaluations of fair market values of similar vessels at
the expiry of the Charter.

Protection and indemnity insurance covers the legal liability of the Charterer,
the Subsidiaries and, as required, their respective associated companies or
managers for their shipping activities. This includes the legal liability and
other related expenses of injury or death of crew, passengers and other third
parties, loss or damage to cargo, claims arising from collisions with other
vessels, damage to other third-party property, pollution arising from oil or
other substances, and salvage, towing and other related costs, including wreck
removal. The Company expects that the Charterer will obtain coverage to the
fullest extent from time to time available on normal terms from members of the
International Group of P&I Associations (currently approximately $4.25 billion,
with the exception of oil pollution liability, which has been available up to
$500 million per Vessel per accident increasing to $1.0 billion from February
20, 2000). The Company believes that the Charterer has entered each of the
Vessels into a P&I Association that is a member of the International Group of
P&I Associations. As a member of a mutual association, the Charterer (and, under
certain circumstances, a Subsidiary) will be subject to calls payable to the
association based on its claim records as well as the claim record of all other
members of the association.

Environmental and Other Regulations

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

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

Environmental Regulation--IMO

The United Nation's International Maritime Organization, or IMO, has adopted
regulations that set forth pollution prevention requirements for tankers. These
regulations, which have been implemented in many jurisdictions in which our
tankers operate, provide, in part, that:

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

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

(2) they are capable of hydrostatically balanced loading, which means
that they are loaded in such a way that if the hull is breached, water
flows into the tanker, displacing oil upwards instead of into the sea

o 30-year old tankers must be of double-hull construction or mid-deck
design with double-sided construction.

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

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

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

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

The IMO recently adopted regulations that require the phase-out of most single
hull tankers by 2015 or earlier, depending on the age of the vessel and whether
or not it complies with requirements for protectively located segregated ballast
tanks. Under these new regulations, which became effective in September 2002,
the maximum permissible age for tankers after 2007 will be 26 years. The new
regulations also provide for increased inspection and verification requirements.

The IMO's International Safety Management Code, or ISM Code, also affects our
operations. The ISM Code requires the party with operational control of a vessel
to develop a 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.

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 ISM 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
our vessels and their operators have received ISM certification.

Non-compliance with the ISM Code and other IMO regulations may subject the
vessel owner or a bareboat charterer to increased liability, may lead to
decreases in available insurance coverage for affected vessels and may result in
a tankers 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.

The IMO continues to review and introduce new regulations. It is impossible to
predict what additional regulations, if any, may be passed by the IMO and what
effect, if any, such regulations might have on the operation of oil tankers. As
a result of the oil spill in November 2002 from the loss of the m.t. Prestige,
it is likely that more stringent maritime safety rules will be imposed by the
IMO and other regulatory agencies in the future. The m.t. Prestige was a 26 year
old single hulled tanker owned and operated by a company that is not affiliated
with us.

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, which also impacts our operations,
applies to the discharge of hazardous substances whether on land or at sea.

Under OPA, vessel owners, operators and bareboat or "demise" charterers are
"responsible parties" who are liable regardless of fault, individually and as a
group, for all containment costs, clean-up costs and for other damages arising
from oil spills from their vessels. These other damages may include injury to
natural resources and real and personal property, loss of subsistence use of
natural resources, the loss of taxes, rents, royalties, profits and earnings
capacity resulting from an oil spill and the cost of public services
necessitated by an oil spill. These "responsible parties" are not be liable
under OPA if the spill results solely from the act or omission of a third party,
an act of God or an act of war. OPA limits a responsible party's liability to
the greater of $1,200 per gross ton or $10 million per vessel over 3,000 gross
tons, subject to adjustment for inflation.

CERCLA, which applies to owners and operators of vessels, contains a liability
regime similar to OPA 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
wilful misconduct. These limits do not apply if the responsible party fails or
refuses to report the incident or to co-operate and assist in connection with
the substance removal activities. OPA and CERCLA each preserve the right to
recover damages under existing law, including maritime tort law. We believe that
we are in substantial compliance with OPA, CERCLA and all applicable state
regulations in the ports where our 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 aggregate potential strict liability under OPA and CERCLA. 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 must 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. Owners or operators of tankers operating in the waters of the
U.S. must also file vessel response plans with the Coast Guard, and their
tankers are required to operate in compliance with their Coast Guard approved
plans.

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 Louisiana
Offshore Oil Port or unloading with the aid of another vessel, a process
referred to as "lightering," within authorized lightering zones more than 60
miles off-shore.

Environmental Regulation--Other

Although the United States is not a party to these conventions, many countries
have ratified and follow the liability plan adopted by the IMO and set out in
the International Convention on Civil Liability for Oil Pollution Damage of 1969
and the Convention for the Establishment of an International Fund for Oil
Pollution of 1971. Under these conventions, and depending on whether the country
in which the damage results is a party to the 1992 Protocol to the International
Convention on Civil Liability for Oil Pollution Damage, a vessel's registered
owner is strictly liable for pollution damage caused in the territorial waters
of a contracting state by discharge of persistent oil, subject to certain
complete defenses. Under an amendment that will come into effect November 1,
2003 for vessels of 5,000 to 140,000 gross tons (a unit of measurement for the
total enclosed spaces within a vessel), liability will be limited to
approximately $6.1 million plus $858 for each additional gross ton over 5,000.
For vessels of over 140,000 gross tons, liability will be limited to
approximately $122.1 million. The current maximum amount is approximately $81.2
million. The right to limit liability is forfeited under the International
Convention on Civil Liability for Oil Pollution Damage where the spill is caused
by the owner's actual fault and under the 1992 Protocol where the spill is
caused by the owner's intentional or reckless conduct. In jurisdictions where
the International Convention on Civil Liability for Oil Pollution Damage has not
been adopted, various legislative schemes or common law governs, and liability
is imposed either on the basis of fault or in a manner similar to that
convention. We believe that our P&I insurance covers the liability under the
plan adopted by the IMO.

The European Union is considering legislation that would: (1) ban manifestly
sub-standard vessels (defined as those over 15 years old that have been detained
by port authorities at least twice in a six month period) from European waters
and create an obligation of port states to inspect vessels posing a high risk to
maritime safety or the marine environment; (2) provide the European Commission
with greater authority and control over classification societies, including the
ability to seek to suspend or revoke the authority of negligent societies; and
(3) accelerate the phasing in of double-hull tankers on the same schedule as
that required under OPA. The European Union adopted a legislative resolution
confirming an accelerated phase-out schedule for single-hull tankers in line
with the schedule adopted by the IMO. Italy announced a ban of single-hull crude
oil tankers over 5,000 dwt from most Italian ports, effective April 2001.

In addition, most U.S. states that border a navigable waterway have enacted laws
that impose strict liability for clean-up costs and damages resulting from a
discharge of oil or a release of a hazardous substance. As permitted by OPA,
these state laws may provide for unlimited liability for oil spills occurring
within their boundaries.

Sale of Vessels and Replacement Charters

At least five months prior to the end of the term of a Charter (including the
extension thereof), the Company is obligated pursuant to its Bye-Laws to call a
special meeting of its shareholders for the purpose of presenting the
shareholders with a proposal to cause the Company to sell the related Vessel (or
the Subsidiary owning such Vessel) and cause the distribution of the net
proceeds of such sale to the shareholders to the extent permitted under Bermuda
law. The materials to be distributed to shareholders in connection with such
meeting will include a recommendation by the Board as to whether it believes
that the sale of the Vessel is in the best interest of the Company or whether an
alternative plan, such as attempting to arrange a replacement charter, might be
of greater benefit to the Company. Replacement charters may include shorter term
time charters and employing the Vessels on the spot charter market (which is
subject to greater fluctuation than the time charter market). Any such
replacement charters would likely require the Company to incur greater expenses
(which may reduce the amounts available to pay dividends to shareholders),
including insurance, maintenance, crew labor costs, vessel registration costs
and, in the case of spot charters, bunker (fuel oil) costs and port charges.
Also, the Company's ability to recharter or sell the Vessels would be subject to
the rights of the lenders under the Credit Facility and the rights of the U.K.
Lessor under the U.K. Finance Lease Transactions. Any proposal to cause the sale
of a Vessel (or the Subsidiary owning such Vessel) and he distribution of the
resulting net proceeds (subject to any mandatory prepayments under the Credit
Facility) will be adopted if approved by he holders of a majority of the Common
Shares voting at a duly constituted meeting of the holders thereof at which a
quorum is present and voting. If not directed by the Company's shareholders to
cause the sale of the Vessel (or the Subsidiary owning such Vessel), the Company
will attempt to recharter the Vessel on an arm's-length basis upon such terms as
the Manager recommends, subject to approval by the Board, or implement such
other plan as the Board shall approve. Alternatively, if directed by the
shareholders to sell a Vessel, the Manager, pursuant to the Management
Agreement, shall solicit bids for the sale of such Vessel through one or more
independent shipbrokers. In such case, the Manager will be obligated to
recommend the sale of the Vessel to the bidder whose bid is on the most
favorable terms to the Company. Neither the Charterer, the Guarantors nor any
other company of the Royal Dutch/Shell Group of Companies shall have any
preferential rights with respect to any sale or rechartering of any Vessel in
such instance.

Whether or not all or any of the Charters are renewed, each of the Primary Loans
will mature in July 2004, seven years and six months after the Delivery Date of
the related Vessel, and the Company will be obligated to repay or refinance such
borrowings at such time. There is no assurance that the Company will be able to
repay or refinance such borrowings. In addition, as noted above, if the Charters
for one or more of the Vessels are renewed and the Company is unable to
refinance the related Primary Loans on acceptable terms, the Company may be
forced to attempt to sell the Vessels subject to the Charters.

There can be no assurance as to the ability of the Manager to sell or recharter
a Vessel or as to the amount or timing of any payments to be received therefrom.

Any sale or any alternative plan will also be subject to the Company's
obligations under the U.K. Finance Lease Transactions.

C. ORGANIZATIONAL STRUCTURE

The Company has five wholly-owned subsidiaries, that each own one of the
Vessels. The following table sets out the details of the Subsidiaries:

COUNTRY OF OWNERSHIP VESSEL
NAME INCORPORATION INTEREST OWNED

Cedarhurst Tankers LDC Cayman Islands 100% Magdala
Hewlett Tankers LDC Cayman Islands 100% Megara
Inwood Tankers LDC Cayman Islands 100% Murex
Lawrence Tankers LDC Cayman Islands 100% Macoma
Woodmere Tankers LDC Cayman Islands 100% Myrina

D. PROPERTY, PLANT AND EQUIPMENT

Each Vessel is an approximately 298,000 deadweight tonne ("dwt") double hull
VLCC built by Daewoo Heavy Industries, Ltd. (the "Builder") at its shipyard in
Korea. The Vessels meet all material existing regulatory requirements affecting
the Vessels and their operations. The name, dwt, hull type and date of original
delivery from the Builder's yard are set forth below.

APPROXIMATE DATE OF DELIVERY FROM
VESSEL NAME DWT HULL TYPE BUILDER'S YARD

Murex 298,000 Double June 2, 1995
Macoma 298,000 Double August 1, 1995
Magdala 298,000 Double September 28, 1995
Myrina 298,000 Double November 15, 1995
Megara 298,000 Double March 5, 1996

The Vessels are modern, high-quality double hull tankers designed for enhanced
safety and reliability and for relatively low operating and maintenance costs.
Design features include a cargo system designed for optimum port performance, a
high grade anti-corrosion paint system and pipeline materials which have been
specified with a view to long service, an efficient power generation system
including shaft generator, additional firefighting and safety equipment over and
above minimum standards and improved structural design.

The Vessels are all registered in the Isle of Man.

Other than its interests in the Vessels, the Company has no interest in any
other property.

ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS

A. OPERATING RESULTS

In February, 1997, the Company offered and sold to the public 16,100,000 Common
Shares at the initial public offering price of $20 per share. Simultaneously the
Company sold 1,000,000 Common Shares at a price of $20 per share to ICB
International.

The Company's five subsidiaries each purchased one VLCC from their previous
owner on February 27, 1997 and immediately delivered the Vessels to the
Charterer under five separate "hell and high water" bareboat charters, each with
a minimum term of seven years with an option for the Charterer to extend the
period for each Vessel with another seven year period. The first seven year
period is until February 2004.

Under the Charters, the Charterer pays the higher of a base rate of hire or a
spot market related rate. The charterhire is payable quarterly in arrears and
the spot market rate of hire is assessed on a quarterly basis. In each quarter
where the spot market related rate is lower than the base rate the charterhire
payable is the base rate. In each quarter where the spot market related rate is
higher than the base rate, the spot market related rate is payable.

The base rate is the aggregate of a bareboat charter component of $22,069 per
vessel per day and an operating element of $10,500 per day (in the first seven
years) which result in a time charter equivalent rate of $32,569 per day.

The spot market related rate is assessed through a formula agreed between the
Company and the Charterer and based on market awards provided by the London
Tanker Broker Panel. The London Tanker Broker Panel is asked to provide for each
quarter the average spot rates for three standard notional round voyages for
ships similar to the Vessels:

i) Arabian Gulf to Rotterdam with 280,000 tonnes of cargo;

ii) Arabian Gulf to Singapore with 260,000 tonnes of cargo; and

iii) Arabian Gulf to Japan with 260,000 tonnes of cargo.

The relevant spot rates are weighted with (i) representing 50% and (ii) and
(iii) each representing 25% when the spot market related rate is determined.

The calculated spot market related rates for each of the years ended December
31, 2002, 2001, and 2000 were:

2002 2001 2000

First Quarter $ 16,327 $ 68,506 $ 21,713
Second Quarter $ 13,057 $ 42,949 $ 38,684
Third Quarter $ 9,093 $ 25,163 $ 59,056
Fourth Quarter $ 31,347 $ 33,360 $ 78,145

The strengthening of the spot market rates that commenced in 2000 continued
during the first half of 2001 before there was a significant weakening in the
spot market that continued through the first three quarters of 2002. As a
consequence, no Additional Hire was paid during this period. The fourth quarter
of 2002 saw strengthening market rates, however, the rebound was not significant
enough to result in the payment of Additional Hire.

The Tanker Market

After a very strong period in 2000 and first half of 2001, VLCC rates started to
decline as the global economy slowed down and OPEC decided to cut production to
maintain oil prices in the OPEC band of US$22-28 per barrel. The tanker market
showed no improvement in 2002 until the beginning of the fourth quarter where a
seasonal increase in demand and requirement for restocking enticed OPEC
countries to increase production. The strike in Venezuela in December 2002
resulted in a loss of short-haul oil to the United States and the lost
production needed to be replaced from more distant suppliers. This resulted in
steeply rising tanker rates and at the end of 2002 VLCCs were fixed in the spot
market at close to US$100,000 per day in time charter equivalent earnings. The
strong market continued into the first quarter of 2003. Due to low freight rates
in the first three quarters modern VLCC's are estimated to have earned, as an
average for 2002, approximately only US$22,000 per day compared to US$34,000 per
day in 2001. The lengthy period of slow activity led to the scrapping of 35
VLCCs in 2002.

Critical Accounting Policies and Estimates

The Company's accounting policies are more fully described in Note 2 of the
Notes to Consolidated Financial Statements. As disclosed in Note 2 of the Notes
to Consolidated Financial Statements, the preparation of financial statements in
conformity with accounting principles generally accepted in the United States of
America requires management to make estimates and assumptions about future
events that affect the amounts reported in the financial statements and
accompanying notes. Future events and their effects cannot be determined with
absolute certainty. Therefore, the determination of estimates requires the
exercise of judgment. Actual results inevitably will differ from those
estimates, and such differences may be material to the financial statements.

The most significant accounting estimates inherent in the preparation of the
Company's financial statements include estimates associated with the
determination of (i) the estimated useful lives of the Company's vessels, and
(ii) the estimated fair values of the Company's interest rate swap agreements.
Various assumptions and other factors underlie the determination of these
significant estimates.

The process of determining significant estimates is fact specific and takes into
account factors such as historical experience, current and expected economic and
industry conditions, present and expected conditions in the financial markets,
and in some cases, the credit worthiness of counter parties to contracts held by
the Company. The Company constantly re-evaluates these significant factors and
makes adjustments where facts and circumstances dictate. Historically, actual
results have not significantly deviated from those determined using the
estimates described above.

YEAR ENDED DECEMBER 31, 2002 COMPARED TO YEAR
ENDED DECEMBER 31, 2001

Charterhire

In 2002, charterhire revenue totaled $40,275,925, a decrease of 35% compared
with $61,534,335 in the year ended December 31, 2001. In 2001 the Company
received total Additional Hire of $21,258,410, primarily relating to earnings in
the first half of the year. In the second half of 2001 the market began to
weaken and this continued into 2002 with no recovery until the fourth quarter of
2002. The strengthening in the fourth quarter was not sufficient to require any
Additional Hire payment and therefore no Additional Hire was paid in fiscal
2002.

Operating Expenses

Operating expenses increased in 2002 due to an increase in administrative
expenses. This was the result of an increase in the premium paid for the
Company's directors' and officers' liability insurance. The Company does not
incur and does not expect to incur significant administrative expenses, apart
from premiums in respect of the Company's directors' and officers' and general
liability insurance, which the Company prepays on an annual basis. There can be
no assurance, however, that the Company will not have other cash expenses or
contingent liabilities for which reserves will be required.

Interest Income and Expense

Interest income decreased by $172,334 to $33,040 in 2002. This reflects the
lower cash in 2002 due to the lack of Additional Hire revenues in this period.

Interest expense decreased by 0.8% to $8,938,483 in 2002 from $9,008,839 in
2001. Interest expense relates entirely to the Primary Loan in 2002 and 2001.
Amortization of the Credit Facility expense, the main component of other
financial costs, was $371,543 in 2002 and 2001. In addition, during 2002 and
2001, the Company incurred a fee to the agent bank for the Credit Facility in
the amount of $50,000. There can be no assurance that the Company will not have
other financial expenses for which reserves will be required.

YEAR ENDED DECEMBER 31, 2001 COMPARED TO YEAR
ENDED DECEMBER 31, 2000

Charterhire

In 2001, charterhire revenue totaled $61,534,335, a decrease of 19% compared
with $76,335,975 in the year ended December 31, 2000. In 2000, the Company
benefited from the strengthening in the tanker market and, in accordance with
the terms of the Charters, received Additional Hire. The Additional Hire, which
is calculated on a quarterly basis, totalled $21,258,410 for 2001, equivalent to
an average of $11,648 per day per vessel compared with $35,949,705 in 2000,
equivalent to an average of $19,645 per day per vessel.

Operating Expenses

Operating expenses decreased in 2001 due to a reduction in administrative
expenses. This was achieved primarily through a reduction in the premium paid
for the Company's directors' and officers' liability insurance.

Interest Income and Expense

Interest income increased by $19,898 to $205,374 in 2001. This reflects the
higher cash balances during the first part of 2001 due to the additional
revenues in this period.

Interest expense increased by 0.8% to $9,008 839 in 2001 from $8,933,869 in
2000. Interest expense relates entirely to the Primary Loan in 2001 and 2000,
with the exception of $5,101 relating to the Amortizing Loan in 2000.
Amortization of the Credit Facility expense, the main component of other
financial costs, was $371,543 in 2001 and 2000. In addition, during 2001 and
2000, the Company incurred a fee to the agent bank for the Credit Facility in
the amount of $50,000.

Inflation

Management does not believe that inflation will significantly affect the
Company's expenses over the term of the Charters. However, during the term of
the Charters, inflationary pressures could result in increased spot charter
rates, thereby resulting in an increase in Additional Hire being payable by the
Charterer. On the other hand, in the event that inflation becomes a significant
factor in the world economy, management believes that inflationary pressures
could materially and adversely affect the market for crude oil and oil tankers
(including the Vessels) and result in increased vessel operating costs. These
factors may affect the Charterer's decision as to whether to extend the term
with respect to one or more of the Charters and may be significant to the
Company in the event that the Charterer does not exercise such rights of
extension.

The Company's borrowings under the Credit Facility bear interest at a floating
rate. The Company has entered into the Swap, which effectively converts its
obligations to a fixed rate, assuming the Swap Counterparty performs its
obligations thereunder. In the event of a default by such Swap Counterparty, the
Company could face increased interest expense.

Although the Company's activities are conducted worldwide, the international
shipping industry's functional currency is the United States Dollar and
virtually all of the Company's operating revenues and most of its anticipated
cash expenses are expected to be denominated in United States Dollars.
Accordingly, the Company's operating results following expiration of termination
of the Charters are not expected to be adversely affected by movements in
currency exchange rates or the imposition of currency controls in the
jurisdictions in which the vessels operate.

B. LIQUIDITY AND CAPITAL RESOURCES

Total assets of the Company at December 31, 2002, were $347,824,729 compared
with $366,204,004 at December 31, 2001. The Company's shareholders' equity at
December 31, 2002, was $208,639,114 compared with $229,077,216 at December 31,
2001. This decrease in shareholders' equity of $20,438,102 is due to net income
for 2002 of $12,550,786 less distributions to the shareholders of $30,951,000.
In addition, with the adoption of SFAS 133, the Company has recorded the fair
value of its interest rate swap agreement. The interest rate swap is designated
as a cash flow hedge against future variable-rate interest payments on the
Company's debt. SFAS No. 133 requires that all derivative instruments be
recorded on the balance sheet at their fair value. The Company is recording
changes in the fair value of the interest rate swap each period as an asset or a
liability, as appropriate, with an equal adjustment to accumulated other
comprehensive income, which is a component of shareholders' equity. At December
31, 2002 the derivative liability was $11,590,392 compared with $9,552,504 at
December 31, 2001, reflecting the unfavorable fair value of the interest rate
swap at that date.

Cash generated from operating activities in 2002 was $30,898,947 and $30,951,000
was distributed to shareholders.

The Company's sources of capital have been the proceeds of its initial public
offering and the Credit Facility and the U.K. Finance Lease. While the Manager
is required to bear the Company's expenses (other than certain extraordinary
expenses, insurance premiums for directors' and officers' liability and general
liability insurance and principal and interest on account of the Credit
Facility), the Manager has no additional obligation to make additional capital
contributions to the Company. The Company has sufficient sources of income
through the payment of charterhire by the Charterer during the term of the
Charters to pay ordinary recurring expenses that are not borne by the Manager.
However, there can be no assurance that the Company will be able to repay or
refinance its borrowings when the Primary Loan becomes due, or that it will not
incur extraordinary expenses.

Recently Issues Accounting Standards

In June 2001, the U.S. Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 141, "Business
Combinations" which requires the application of the purchase method in
accounting for business combinations including the identification of the
acquiring enterprise for each transaction. SFAS No. 141 applies to all business
combinations initiated after June 30, 2001 and all business combinations
accounted for by the purchase method that are completed after June 30, 2001. The
adoption of SFAS No. 141 by the Company did not have any impact on the Company's
consolidated financial position or results of operations.

In June 2001, the FASB issued SFAS No. 142, "Goodwill and Other Intangible
Assets". SFAS No. 142 applies to all acquired intangible assets whether acquired
singly, as part of a group, or in a business combination. The adoption of SFAS
No. 142 by the Company on January 1, 2002 did not have any impact on the
Company's consolidated financial position or results of operations.

In June 2001, the FASB issued SFAS No. 143, "Accounting for the Asset Retirement
Obligations". Under SFAS No. 143, an entity shall recognize the fair value of a
liability for an asset retirement obligation in the period in which it is
incurred if a reasonable estimate of fair value can be made. If a reasonable
estimate of fair value cannot be made in the period the asset retirement
obligation is incurred, the liability shall be recognized when a reasonable
estimate of fair value can be made. Upon initial recognition of a liability for
an asset retirement obligation, an entity shall capitalize an asset retirement
cost by increasing the carrying amount of the related long-lived asset by the
same amount as the liability. An entity shall subsequently allocate that asset
retirement cost to expense using a systematic and rational method over its
useful life. SFAS No. 143 applies to legal obligations associated with the
retirement of a tangible long-lived asset that result from the acquisition,
construction, or development and/or the normal operation of a long-lived asset,
with limited exceptions. SFAS No. 143 does not apply to obligations that arise
solely from a plan to dispose of a long-lived asset, nor does it apply to
obligations that result from the improper operation of an asset. SFAS No. 143 is
effective for fiscal years beginning after December 15, 2002. Management has not
completed their evaluation of the impact of SFAS No. 143 on the Company's
results of operations or financial position. However, management does not expect
that the adoption of the SFAS No. 143 on January 1, 2003 will have a material
impact on the Company's consolidated financial position or results of operations
In October 2001, the FASB issued SFAS No. 144, "Accounting for the Impairment or
Disposal of Long-Lived Assets". The objectives of SFAS No. 144 are to address
significant issues relating to the implementation of SFAS No. 121, "Accounting
for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed
Of", and to develop a single accounting model based on the framework established
in SFAS No. 121 for long-lived assets to be disposed of by sale. SFAS No. 144
requires that long-lived assets that are to be disposed of by sale be measured
at the lower of book value or fair value less costs to sell. Additionally, the
standard expands the scope of discontinued operations to include all components
of an entity with operations that can be distinguished from the rest of the
entity and will be eliminated from the ongoing operations of the entity in a
disposal transaction. The adoption of SFAS No. 144 by the Company on January 1,
2002 did not have any impact on the Company's consolidated financial position or
results of operations.

In April 2002, the FASB issued SFAS No. 145, "Rescission of FASB Statements No.
4, 44, and 64, Amendment of FASB Statement No. 13, and Technical Corrections."
SFAS No. 145 rescinds SFAS No. 4, "Reporting Gains and Losses from
Extinguishment of Debt," and SFAS No. 64, "Extinguishments of Debt Made to
Satisfy Sinking-Fund Requirements." SFAS No. 145 also rescinds SFAS No. 44,
"Accounting for Intangible Assets of Motor Carriers." SFAS No. 145 also amends
SFAS No. 13, "Accounting for Leases," to eliminate an inconsistency between the
required accounting for sale-leaseback transactions and the required accounting
for certain lease modifications that have economic effects that are similar to
sale-leaseback transactions. Lastly, SFAS No. 145 also amends other existing
authoritative pronouncements to make various technical corrections, clarify
meanings, or describe their applicability under changed conditions. Certain
provisions of SFAS No. 145 became effective during 2002 but did not have any
impact on the Company's consolidated financial position or results of
operations. The remaining provisions become effective in 2003, but management
does not expect that such provisions will have a material impact on the
Company's consolidated financial position or results of operations.

In June 2002, the FASB issued SFAS No. 146, "Accounting for Costs Associated
with Exit or Disposal Activities." Under SFAS No. 146, the Company will measure
costs associated with an exit or disposal activity at fair value and recognize
costs in the period in which the liability is incurred rather than at the date
of a commitment to an exist or disposal plan. The Company is required to adopt
SFAS No. 146 for all exit and disposal activities initiated after December 31,
2002. Management does not expect that the adoption of the SFAS No. 146 will have
a material impact on the Company's consolidated financial position or results of
operations.

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

In January 2003, the FASB issued Interpretation 46, "Consolidation of Variable
Interest Entities." In general, a variable interest entity is a corporation,
partnership, trust, or any other legal structure used for business purposes that
either (a) does not have equity investors with voting rights or (b) has equity
investors that do not provide sufficient financial resources for the entity to
support its activities. Interpretation 46 requires a variable interest entity to
be consolidated by a company if that company is subject to a majority of the
risk of loss from the variable interest entity's activities or entitled to
receive a majority of the entity's residual returns or both. The consolidation
requirements of Interpretation 46 apply immediately to variable interest
entities created after January 31, 2003. The consolidation requirements apply to
older entities in the first fiscal year or interim period beginning after June
15, 2003. Management does not expect that the adoption of Interpretation 46 will
have a material impact on the Company's consolidated financial position or
results of operations.

C. RESEARCH AND DEVELOPMENT, PATENTS AND LICENSES, ETC.

Not applicable

D. TREND INFORMATION

The oil tanker industry has been highly cyclical, experiencing volatility in
charterhire rates and vessel values resulting from changes in the supply of and
demand for crude oil and tanker capacity. See Item 4. Information on the Company
- - Business Overview - Industry Conditions.

According to preliminary data from industry sources, which the Company has not
verified, there was a marginal increase in global oil demand in the fourth
quarter of 2002 compared with 2001. OPEC production, which has a significant
impact on demand for VLCCs, declined on a quarterly basis through the first
three quarters of 2002 and average OPEC supply in this period fell below that of
2001. With the strong market continuing in the first quarter of 2003, OPEC
supply in the first half on 2003 is expected to be higher than the corresponding
period of 2002.

ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES

A. DIRECTORS AND SENIOR MANAGEMENT

Set forth below are the names and positions of the directors and executive
officers of the Company.

The Company

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

Ola Lorentzon 53 Director and Chairman
Tor Olav Troim 40 Director, Chief Executive
Officer and Vice-Chairman
Douglas C. Wolcott 71 Director
David M. White 61 Director
Timothy J. Counsell 44 Director
Kate Blankenship 38 Chief Financial Officer and Secretary

Pursuant to a Management Agreement with the Company, the Manager provides
management, administrative and advisory services to the Company. Set forth below
are the names and positions of the directors and executive officers of the
Manager.

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

Kate Blankenship 38 Director, Chairman and Secretary
Tom E. Jebsen 45 Director and Vice-Chairman
Timothy J. Counsell 44 Director

Directors of both the Company and the Manager are elected annually, and each
director elected holds office until a successor is elected. Officers of both the
Company and the Manager are elected from time to time by vote of the respective
board of directors and hold office until a successor is elected. Certain
biographical information with respect to each director and executive officer of
the Company and the Manager is set forth below.

Ola Lorentzon has been a director of the Company since September 18, 1996 and
Chairman since May 26, 2000. Mr. Lorentzon has also been Managing Director of
Frontline Management AS, a subsidiary of Frontline, since April 2000. Mr.
Lorentzon was a director of the United Kingdom Protection and Indemnity Club
until 2002. 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.

Tor Olav Troim has been a director, Vice-Chairman and Chief Executive Officer of
the Company since May 26, 2000. Mr. Troim has been a director of Frontline since
July 1, 1996. Mr. Troim also serves as a director of ICB and Frontline
Management AS, both subsidiaries of Frontline. He is a director of Aktiv Inkasso
ASA, Northern Oil ASA, both Norwegian Oslo Stock Exchange listed companies. He
is also a director of Northern Offshore Ltd. and Golar LNG Limited, both Bermuda
companies listed on the Oslo Stock Exchange. Prior to his service with
Frontline, from January 1992, Mr. Troim served as Managing Director and a member
of the board of Directors of DNO AS, a Norwegian oil company.

Douglas C. Wolcott has been a director of the Company since September 18, 1996.
Mr. Wolcott has also served as President of Chevron Shipping Corporation until
1994. Mr. Wolcott previously served as Deputy Chairman and Director of the
United Kingdom Protection and Indemnity Club and as a director of London &
Overseas Freighters Limited. He is currently a director of the American Bureau
of Shipping.

David M. White has been a director of the Company since September 18, 1996. Mr.
White was Chairman of Dan White Investment Limited which is now closed. Mr.
White has also served as a director of NatWest Equity Primary Markets Limited
from January 1992 to March 1996, and was previously a director of both NatWest
Markets Corporate Finance Limited and NatWest Markets Securities Limited until
December 1991.

Timothy J. Counsell has been a director of the Company since March 27, 1998 and
a director of the Manager since May 14, 1999. Mr. Counsell is a partner of the
law firm of Appleby Spurling & Kempe, Bermudian counsel to the Company and has
been with that firm since 1990. Mr. Counsell is currently a director of BT
Shipping Limited and of Benor Tankers Ltd, alternate director of Bona
Shipholding Ltd and Resident Representative of Mosvold Shipping.

Kate Blankenship has been Chief Financial Officer of the Company since April 17,
2000 and Secretary of the Company since December 27, 2000. Mrs. Blankenship has
been a director and Chairman of the Manager since March 2000 and Secretary of
the Manager since December 28, 2000. Mrs. Blankenship has been Chief Accounting
Officer and Secretary of Frontline since 1994. Prior to joining Frontline, she
was a Manager with KPMG Peat Marwick in Bermuda. She is a member of the
Institute of Chartered Accountants in England and Wales.

Tom E. Jebsen has been a director of the Manager since March 2000. Mr. 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.

Management Agreement

Under the Management Agreement the Manager is required to manage the day-to-day
business of the Company subject, always, to the objectives and policies of the
Company as established from time to time by the Board. All decisions of a
material nature concerning the business of the Company are reserved to the
Company's Board of Directors. The Management Agreement will terminate in 2012,
unless earlier terminated pursuant to the terms thereof, as discussed below.

For its services under the Management Agreement, the Manager is entitled to a
Management Fee equal to $750,000 per annum. The Company believes that these fees
are substantially on the same terms that would be obtained from a non-affiliated
party. The Manager was not affiliated with the Company, the Charterer or
Guarantors at the time these fees were negotiated.

Pursuant to the Management Agreement, the Manager is required to pay from the
Management Fee, on behalf of the Company, all of the Company's expenses
including the Company's directors' fees and expenses; provided, however, that
the Manager is not obligated to pay, and the Company is required to pay from its
own funds (i) all expenses, including attorneys' fees and expenses, incurred on
behalf of the Company in connection with (A) the closing of the Company's public
offering and all fees and expenses related thereto and to the documents and
agreements described herein, including in connection with the Credit Facility
and the U.K. Finance Leases, (B) any litigation commenced by or against the
Company unless arising from the Manager's gross negligence or willful
misconduct, and (C) any investigation by any governmental, regulatory or
self-regulatory authority involving the Company or the Offerings unless arising
from the Manager's gross negligence or willful misconduct, (ii) all premiums for
insurance of any nature, including directors' and officers' liability insurance
and general liability insurance, (iii) all costs in connection with the
administration and the registration and listing of the Common Shares, (iv)
principal and interest on the Credit Facility, (v) brokerage commissions, if
any, payable by the Company, (vi) all costs and expenses required to be incurred
or paid by the Company in connection with the redelivery of any Vessel following
the expiration or earlier termination of the related Charter, (including,
without limitation, any drydocking fees and the cost of special surveys and
appraisals) and (vii) any amount due to be paid by the Company pursuant to the
U.K. Finance Lease Transactions.

Notwithstanding the foregoing, the Manager will have no liability to the Company
under the Management Agreement for errors of judgment or negligence other than
its gross negligence or willful misconduct.

In the event the Charterer shall notify a Subsidiary that it will not extend or
renew a Charter for a Vessel, the Manager is required under the Management
Agreement to analyze the alternatives available to the Company for the use or
disposition of such Vessel, including the sale of such Vessel (or the Subsidiary
owning such Vessel) and the distribution of the proceeds to the Company's
shareholders, and to report to the Board with its recommendations and the
reasons for such recommendations at least five months before the expiration of
such Charter. If directed by the Company's shareholders to sell a Vessel (or the
Subsidiary owning such Vessel), the Manager is required upon the Board's request
to solicit bids for the sale of such Vessel (or the Subsidiary owning such
Vessel) for the presentation to the Board. In such case, the Manager will be
obligated to recommend the sale of the Vessel to the bidder which has offered
the bid most economically favorable to the Company and the holders of the Common
Shares. The Manager will receive a commission equal to 1% of the net proceeds of
such sale unless sold to the Manager or an affiliate of the Manager. If not
directed by the Company shareholders to sell the Vessel, the Manager is required
to attempt to recharter the Vessel on an arms-length basis upon such terms as
the Manager deems appropriate, subject to the approval of the Board. The Manager
will receive a commission equal to 1.25% of the gross freight earned from such
rechartering (which is the standard industry commission). In either such case,
the Manager, on behalf of the Company, may utilize the services of brokers and
lawyers, and enter into such compensation arrangements with them, subject to the
Board's approval, as the Manager deems appropriate.

If, upon the expiration of a Charter, the Company undertakes any operational
responsibility with respect to the related Vessel and requests the Manager to
perform any of such responsibility on the Company's behalf, the parties will
negotiate a new fee and expense arrangement. If the parties are unable to reach
a new fee and expense arrangement, either party may terminate the Management
Agreement on 30 days' notice to the other party.

In addition to the circumstance set forth above, the Company may terminate the
Management Agreement at any time upon 30 days' notice to the Manager for any
reason, provided that any such termination shall have been approved by a
resolution duly adopted by the affirmative vote of the holders of at least
66-2/3% of the Company's outstanding Common Shares. The Company may terminate
the Management Agreement at any time upon five business days' prior written
notice to the Manager in the event of the Manager's material breach thereof, the
failure of the Manager to maintain adequate authorization to perform its duties
thereunder, the Manager's insolvency, in the event that it becomes unlawful for
the Manager to perform its duties thereunder or if the Manager ceases to be
wholly-owned, directly or indirectly, by ICB or its successor as ultimate parent
of the Manager. Frontline, with its acquisition of ICB, is ICB's successor as
ultimate parent of the Manager. The Manager may terminate the Management
Agreement upon ten business days' prior written notice to the Company in the
event that the Company undergoes a "change of control" which is the election of
any director whose election was not recommended by the then current Board. Upon
any termination of the Management Agreement, the Manager is required to promptly
wind up its services thereunder in such a manner as to minimize any interruption
to the Company's business and submit a final accounting of funds received and
disbursed under the Management Agreement to the Company and any undisbursed
funds of the Company in the Manager's possession or control will be promptly
paid by the Manager as directed by the Company. The Company believes that in the
case of any termination of the Management Agreement, the Company could obtain an
appropriate alternative arrangement for the management of the Company, although
there can be no assurance that such alternative arrangement would not cause the
Company to incur additional cash expenses. In the case of a termination without
cause by the Company upon a resolution adopted by the holders of at least 66
2/3% of the Company's Common Shares (as described above) or by the Manager in
the case of a "change in control," the Company shall pay to the Manager an
amount equal to the present value calculated at a discount rate of 5% per annum
of all fees which the Manager would have received through the seventh
anniversary of the Delivery Date in the absence of such termination, and
following the seventh anniversary of the Delivery Date, the Company shall pay to
the Manager an amount equal to the present value calculated at a discount rate
of 5% per annum of all fees which the Manager would have received through the
fifteenth anniversary of the Delivery Date in the absence of such termination.

B. COMPENSATION

Pursuant to the Management Agreement, the Manager pays from the Management Fee
the annual directors' fees of the Company. For 2002, the directors received from
the Manager $82,000 in fees in the aggregate. No separate compensation was paid
to the Company's officers. The Manager expects to pay the same directors' fees
for the year 2003 as was paid to directors for 2002.

C. BOARD PRACTICES

As provided in the Company's Bye-laws, each Director shall hold office until the
next Annual General Meeting following his election or until his successor is
elected. 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.

The Company has established an audit committee comprised of Messrs. White and
Wolcott, independent directors of the Company.

D. EMPLOYEES

Neither the Company nor the Manager have had any employees since inception.

E. SHARE OWNERSHIP

As of April 30, 2003, none of the directors or officers of the Company owned any
Common Shares.

ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS

A. MAJOR SHAREHOLDERS

The Company is not directly or indirectly controlled by another corporation, by
a foreign government or by any other natural or legal person.

The Company is not aware of any person who owns more than 5 per cent of the
Company's outstanding Ordinary Shares as of April 30, 2003.

As of April 30, 2003, none of the directors or officers of the Company owned any
Common Shares of the Company.

B. RELATED PARTY TRANSACTIONS

Not Applicable

C. INTERESTS OF EXPERTS AND COUNSEL

Not Applicable

ITEM 8. FINANCIAL INFORMATION

A. CONSOLIDATED STATEMENTS AND OTHER FINANCIAL INFORMATION

See Item 18.

Legal Proceedings

To the best of the Company's knowledge, there are no legal or arbitration
proceedings existing or pending which have had or may have, significant effects
on the Company's financial position or profitability and no such proceedings are
pending or known to be contemplated by governmental authorities.

Dividend Policy

The Company policy is to pay quarterly distributions to holders of record of
Common Shares in each January, April, July and October in amounts substantially
equal to the charterhire received by the Company under the Charters, less cash
expenses and less any reserves required in respect of any contingent
liabilities. Currently, the Company does not have any material cash expenses
other than (i) a management fee of $750,000 per annum, payable to the Manager
(the "Management Fee") (ii) certain directors' and officers' liability insurance
premiums in the current amount of $60,000 per annum, (iii) the agent bank annual
fee of $50,000 and (iv) payment of interest on the Primary Loan. Until January
15, 2000, when the Amortizing Loans were satisfied, the Company also paid
interest and principal on the Amortizing Loans (which were equivalent to the
amounts of Supplemental Hire). Any lease payments under the U.K. Finance Leases
are expected to be paid under the Letters of Credit or otherwise by the
Charterer, and therefore are not considered cash expenses of the Company and are
not expected to reduce amounts available to the Company for the payment of
distributions to shareholders.

Declaration and payment of any dividend is subject to the discretion of the
Company's Board of Directors. The declaration and payment of distributions to
shareholders is prohibited if the Company is in default under the Credit
Facility or if such payment would be or is reasonably likely to result in an
event of default under the Credit Facility. Any payment of distributions to
shareholders by the Company in any year may also be dependent upon the adoption
by the holders of a majority of the Common Shares voting at the annual meeting
of shareholders of the Company of a resolution effectuating a reduction in the
Company's share premium and a credit to the Company's contributed capital
surplus account. The Company's shareholders adopted such a resolution at the
Company's annual general meeting in March, 1999. The timing and amount of
dividend payments will be dependent upon the Company's earnings, financial
condition, cash requirements and availability, the provisions of Bermuda law
affecting the payment of distributions to shareholders and other factors.

There can be no assurance that the Company will not have other expenses,
including extraordinary expenses, which could include costs of claims and
related litigation expenses, which are not covered by the indemnification
provisions of the Charters, or that the Company will not have contingent
liabilities for which reserves are required. As an "exempted" Bermuda company,
the Company does not expect to pay any income taxes in Bermuda. The Company also
does not expect to pay any income taxes in the Cayman Islands (the jurisdiction
of organization of the Subsidiaries) or the Isle of Man (the jurisdiction in
which the Vessels are registered).

The Company has paid dividends on a quarterly basis commencing in April 1997, in
an aggregate amount equal to the charterhire received from the charterer less
the Company's cash expenses and less any reserves required in respect of any
contingent liabilities. Such expenses will consist primarily of a management
fee, payments of principal and interest on loans, interest payments on loans and
the insurance premiums, plus any other expenses and contingent liabilities not
covered by the management fee. The Company intends to continue to pay dividends
on a quarterly basis. There can be no assurance that the Company will not incur
other expenses or contingent liabilities that would reduce or eliminate the cash
available for distribution as dividends. In particular, toward the end of the
term of the charters, the Company is likely to have additional expenses and may
have to set aside amounts for future payments of interest.

In 2002, 2001 and 2000, the Company paid the following distributions to
shareholders.

RECORD DATE PAYMENT DATE AMOUNT PER SHARE

2002
January 25, 2002 February 8, 2002 $0.46
April 25, 2002 May 8, 2002 $0.45
July 25, 2002 August 7, 2002 $0.45
October 25, 2002 November 7, 2002 $0.45

2001
January 26, 2001 February 9, 2001 $1.68
April 27, 2001 May 11, 2001 $1.39
July 26, 2001 August 9, 2001 $0.72
October 25, 2001 November 8, 2001 $0.45

2000
January 28, 2000 February 11, 2000 $0.44
April 27, 2000 May 12, 2000 $0.44
July 24, 2000 August 7, 2000 $0.61
October 26, 2000 November 8, 2000 $1.17

Because the Primary Loan matures after the initial term of the Charters and must
be repaid or refinanced at such time, the Company may, in the last year of the
initial term of a Charter, set aside amounts for payment of interest and
principal which would be due on the related Primary Loan following termination
of such Charter in the event the Charterer does not renew such Charter or the
Company cannot arrange to recharter or sell the Vessel as of the expiration date
of such Charter. In addition, the Company may have to set aside amounts in the
last year of the initial term of a Charter in anticipation of costs that may be
incurred in connection with the resale or rechartering of the Vessel in the
event the Charterer does not renew such Charter. These amounts would not be
available for the payment of distributions to shareholders at such time.

It is expected that any cash distributions by the Company will exceed the
Company's earnings and profits for U.S. tax purposes, with the result that for
each full year that the Charters are in place a portion of such distributions
may be treated as a return of the "basis" of a U.S. holder's Common Shares. The
Company is a passive foreign investment company ("PFIC"), and as a result U.S.
Holders must make a timely tax election known as "QEF Election" with respect to
the Company in order to prevent certain tax penalties from applying to such U.S.
holder. The Company intends to provide all necessary tax information to
shareholders during February of each year in order that they may make such
election. For the year ended December 31, 2002, the Company mailed such tax
information to its shareholders in February, 2003.

B. SIGNIFICANT CHANGES

Not Applicable

ITEM 9. THE OFFER AND LISTING

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

The following table sets forth, for the five most recent fiscal years during
which the Company's Common Shares were traded on the Nasdaq National Market, the
annual high and low closing prices for the Common Shares as reported by the
Nasdaq National Market.

HIGH LOW
FISCAL YEAR ENDED DECEMBER 31
2002 $18.850 $11.510
2001 $27.800 $14.320
2000 $25.250 $11.938
1999 $21.875 $11.500
1998 $30.750 $18.500

The following table sets forth, for the two most recent fiscal years, the high
and low closing prices for the Common Shares as reported by the Nasdaq National
Market.

HIGH LOW
FISCAL YEAR ENDED DECEMBER 31, 2002
First quarter $18.700 $15.500
Second quarter $18.850 $14.360
Third quarter $14.620 $11.770
Fourth quarter $15.490 $11.510
FISCAL YEAR ENDED DECEMBER 31, 2001
First quarter $25.188 $20.000
Second quarter $27.800 $20.000
Third quarter $22.690 $14.320
Fourth quarter $18.900 $15.000

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

HIGH LOW

April 2003 $14.600 $12.240
March 2003 $14.410 $13.590
February 2003 $14.850 $13.590
January 2003 $17.560 $14.120
December 2002 $14.650 $15.490
November 2002 $14.790 $13.750

The Company's Common Shares have been quoted on the Nasdaq National Market under
the symbol "VLCCF" since its initial public offering in February 1997.

ITEM 10. ADDITIONAL INFORMATION

A. SHARE CAPITAL

Not Applicable

B. MEMORANDUM AND ARTICLES OF ASSOCIATION

Incorporated by reference to "Description of Capital Stock" in the prospectus
contained in the Company's Registration Statement on Form F-1, filed December
13, 1996 (File No. 333-6170).

C. MATERIAL CONTRACTS

Not Applicable

D. EXCHANGE CONTROLS

The Company has been designated as a non-resident of Bermuda for exchange
control purposes by the Bermuda Monetary Authority, whose permission for the
issue of the Common Shares was obtained prior to the offering thereof.

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

Subject to the foregoing, there are no limitations on the rights of owners of
the Common Shares to hold or vote their shares. Because the Company has been
designated as 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 United States residents who are holders of the Common Shares, other
than in respect of local Bermuda currency.

In accordance with Bermuda law, share certificates may be issued only in the
names of corporations or individuals. In the case of an applicant acting in a
special capacity (for example, as an executor or trustee), certificates may, at
the request of the applicant, record the capacity in which the applicant is
acting. Notwithstanding the recording of any such special capacity, the Company
is not bound to investigate or incur any responsibility in respect of the proper
administration of any such estate or trust.

The Company will take no notice of any trust applicable to any of its shares or
other securities whether or not it had notice of such trust.

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, but as an
exempted company, the Company may not participate in certain business
transactions including: (i) the acquisition or holding of land in Bermuda
(except that required for its business and held by way of lease or tenancy for
terms of not more than 21 years) without the express authorization of the
Bermuda legislature; (ii) the taking of mortgages on land in Bermuda to secure
an amount in excess of $50,000 without the consent of the Minister of Finance of
Bermuda; (iii) the acquisition of securities created or issued by, or any
interest in, any local company or business, other than certain types of Bermuda
government securities or securities of another "exempted company, exempted
partnership or other corporation or partnership resident in Bermuda but
incorporated abroad; or (iv) the carrying on of business of any kind in Bermuda,
except in so far as may be necessary for the carrying on of its business outside
Bermuda or under a license granted by the Minister of Finance of Bermuda.

There is a statutory remedy under Section 111 of the Companies Act 1981 which
provides that a shareholder may seek redress in the Bermuda courts as long as
such shareholder can establish that the Company's affairs are being conducted,
or have been conducted, in a manner oppressive or prejudicial to the interests
of some part of the shareholders, including such shareholder. However, this
remedy has not yet been interpreted by the Bermuda courts.

The Bermuda government actively encourages foreign investment in "exempted"
entities like the Company that are based in Bermuda but do not operate in
competition with local business. In addition to having no restrictions on the
degree of foreign ownership, the Company is subject neither to taxes on its
income or dividends nor to any exchange controls in Bermuda. In addition, there
is no capital gains tax in Bermuda, and profits can be accumulated by the
Company, as required, without limitation. There is no income tax treaty between
the United States and Bermuda pertaining to the taxation of income other than
applicable to insurance enterprises.

E. TAXATION

The Company is incorporated in Bermuda. Under current Bermuda law, the Company
is not subject to tax on income or capital gains, and no Bermuda withholding tax
will be imposed upon payments of dividends by the Company to its shareholders.
No Bermuda tax is imposed on holders with respect to the sale or exchange of
Common Shares. Furthermore, the Company has received from the Minister of
Finance of Bermuda under the Exempted Undertakings Tax Protection Act 1966, as
amended, an assurance that, in the event that Bermuda enacts any legislation
imposing any tax computed on profits or income, including any dividend or
capital gains withholding tax, or computed on any capital asset, appreciation,
or any tax in the nature of an estate, duty or inheritance tax, then the
imposition of any such tax shall not be applicable. The assurance further
provides that such taxes, and any tax in the nature of estate duty or
inheritance tax, shall not be applicable to the Company or any of its
operations, nor to the shares, debentures or other obligations of the Company,
until March 2016.

There are no provisions of any reciprocal tax treaty between Bermuda and the
United States affecting withholding.

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 we file
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
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 Par-la-Ville Place, 14 Par-la-Ville Road,
Hamilton, Bermuda.

I. SUBSIDIARY INFORMATION

Not Applicable

ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK

The Company is exposed to market risk from changes in interest rates primarily
resulting from the floating rate of the Company's borrowings. The Company uses
interest rate swaps to manage such interest rate risk. The Company has not
entered into any financial instruments for speculative or trading purposes.

The Company's borrowings under the Credit Facility at December 31, 2002 of
$125,397,399 bear interest at a floating rate which is reset quarterly based on
the underlying London interbank eurocurrency market. Interest payments are made
quarterly, and the Credit Facility expires August 27, 2004. The fair value of
the Credit Facility at December 31, 2002 is equal to the carrying amount of the
facility at the same date.

The Company has entered into an interest rate swap transaction to hedge the
interest rate variability on the Credit Facility. The swap has a notional amount
equal to the outstanding principal under the Credit Facility and the swap
expires on the same date as that of the Credit Facility. At December 31, 2002,
the pay-fixed interest rate of the swap was 6.74% and the receive-variable rate
was 2.22%. As a hedge against the Credit Facility, the swap effectively resulted
in a fixed borrowing rate to the Company of 7.11% for the year ended December
31, 2002. Periodic cash settlements under the swap agreement occur quarterly
corresponding with the interest payments under the Credit Facility. The fair
value of the interest rate swap agreement was an unfavorable $11,590,392 at
December 31, 2002 (2001- unfavourable $9,552,504) calculated by taking into
account the cost of entering into an interest rate swap to offset the existing
swap.

ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY 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

Not Applicable

ITEM 15. CONTROLS AND PROCEDURES

(a) Evaluation of disclosure controls and procedures.

Within the 90 days prior to the date of this report, the Company carried
out an evaluation, under the supervision and with the participation of the
Company's manager ICB Shipping Bermuda, including the Company's Chief
Executive Officer and principal financial officer, of the effectiveness of
the design and operation of the Company's disclosure controls and
procedures pursuant to Exchange Act Rule 13a-14. Based upon that
evaluation, the Chief Executive Officer and principal financial officer
concluded that the Company's disclosure controls and procedures are
effective in alerting them timely to material information relating to the
Company required to be included in the Company's periodic SEC filings.

(b) Changes in internal controls

There have been no significant changes in the Company's internal controls
or in other factors that could have significantly affected those controls
subsequent to the date of the Company's most recent evaluation of internal
controls, including any corrective actions with regard to significant
deficiencies and material weaknesses.

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-12 together with the independent auditors' report of Deloitte & Touche
AB thereon, are filed as part of this annual report:

Index to Financial Statements

Page

Independent Auditors' Report F-1

Consolidated Financial Statements:

Consolidated Balance Sheets as of F-2
December 31, 2002 and 2001

Consolidated Statements of Operations F-3
for the years ended December 31, 2002, 2001and 2000

Consolidated Statements of Comprehensive Income F-4
for the years ended December 31, 2002, 2001 and 2000

Consolidated Statements of Cash Flows F-5
for the years ended December 31, 2002, 2001 and 2000

Consolidated Statements of Changes in F-6
Shareholders' Equity for the years ended December 31, 2002,
2001 and 2000

Notes to Consolidated Financial Statements F-7

INDEPENDENT AUDITORS' REPORT

To the Board of Directors of
Knightsbridge Tankers Limited

We have audited the accompanying consolidated balance sheets of Knightsbridge
Tankers Limited and subsidiaries (the "Company") as of December 31, 2002 and
2001 and the related consolidated statements of operations, comprehensive
income, cash flows and shareholders' equity for each of the three years in the
period ended December 31, 2002. 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 the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the consolidated
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the consolidated financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall consolidated financial statement presentation. We
believe that our audits provide a reasonable basis for our opinion.

In our opinion, such consolidated financial statements present fairly, in all
material respects, the consolidated financial position of Knightsbridge Tankers
Limited and subsidiaries as of December 31, 2002 and 2001 and the results of
their operations and their cash flows for each of the three years in the period
ended December 31, 2002 in conformity with accounting principles generally
accepted in the United States of America.

As discussed in Note 2 to the consolidated financial statements, in 2001 the
Company changed its method of accounting for derivative instruments and hedging
activities to conform to Statement of Financial Accounting Standards No. 133,
"Accounting for Derivative Instruments and Hedging Activities."

Deloitte & Touche AB
Stockholm, Sweden
May 7, 2003

KNIGHTSBRIDGE TANKERS LIMITED
CONSOLIDATED BALANCE SHEETS
AS OF DECEMBER 31, 2002 AND 2001
(in U.S. Dollars)

2002 2001
ASSETS

Current assets
Cash and cash equivalents 226,215 278,268
Charter hire receivable 10,151,740 10,515,600
Prepaid expenses 16,384 15,342
------------------ -----------------

Total current assets 10,394,339 10,809,210

Vessels under capital lease, net 337,001,052 354,593,912
Capitalized financing fees and expenses, net 429,338 800,882
------------------ -----------------

TOTAL ASSETS 347,824,729 366,204,004
================== ==================

LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities
Accrued expenses and other current liabilities 2,197,824 2,176,885
------------------ -----------------

Total current liabilities 2,197,824 2,176,885

Credit facility 125,397,399 125,397,399
Interest rate swap agreement at fair value 11,590,392 9,552,504
------------------ -----------------

Total liabilities 139,185,615 137,126,788

Commitments and contingencies - -

Shareholders' equity
Common shares, par value $0.01 per share:
Authorized and outstanding 17,100,000 171,000 171,000
Contributed capital surplus account 220,058,506 238,458,720
Accumulated other comprehensive income (loss) -
Net unrealized loss on derivative instrument (11,590,392) (9,552,504)
Retained earnings - -
------------------ -----------------
Total shareholders' equity 208,639,114 229,077,216
------------------ -----------------

TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY 347,824,729 366,204,004
================== =================

See accompanying notes to consolidated financial statements.

KNIGHTSBRIDGE TANKERS LIMITED
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 2002, 2001 AND 2000
(in U.S. Dollars)

2002 2001 2000

Charterhire revenue $ 40,275,925 $ 61,534,335 $ 76,335,975
Operating expenses:
Depreciation of vessels under
capital leases 17,592,860 17,592,860 17,592,860
Management fee 750,000 750,000 750,000
Administration expenses 55,429 50,919 57,357
------------ ------------- ------------
Net operating income 21,877,636 43,140,556 57,935,758

Interest income 33,040 205,374 185,476
Interest expense (8,938,483) (9,008,839) (8,933,869)
Other financial expenses (421,407) (421,659) (463,620)
------------ ------------- -------------

Net income $ 12,550,786 $ 33,915,432 $ 48,723,745
============ ============= =============

Earnings per common share
- basic and diluted $0.73 $1.98 $2.85

Weighted average number of
shares outstanding 17,100,000 17,100,000 17,100,000

See accompanying notes to consolidated financial statements.

KNIGHTSBRIDGE TANKERS LIMITED
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
FOR THE YEARS ENDED DECEMBER 31, 2002, 2001 AND 2000
(in U.S. Dollars)

2002 2001 2000

Net income $ 12,550,786 $ 33,915,432 $ 48,723,745

Other comprehensive income (loss):
Cumulative effect of change in
accounting for
derivative instruments
and hedging activities - (3,496,905) -
Net unrealized loss on derivative
instrument during the year (2,037,888) (6,055,599) -

Total other comprehensive income (loss) (2,037,888) (9,552,504) -
------------- ------------- -------------
Comprehensive income $ 10,512,898 $ 24,362,928 $ 48,723,745
============= ============= =============

See accompanying notes to consolidated financial statements.

KNIGHTSBRIDGE TANKERS LIMITED
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2002, 2001 AND 2000
(in U.S. Dollars)

2002 2001 2000

Cash flows from operating activities

Net income $ 12,550,786 $ 33,915,432 $ 48,723,745

Items to reconcile net income to net
cash provided by operating
activities:
Depreciation 17,592,860 17,592,860 17,592,860
Amortization of capitalized financing
fees and expenses 371,544 371,544 371,543
Changes in operating assets
and liabilities:
Charter hire receivable
and prepaid expenses 362,818 20,602,331 (19,262,068)
Accrued expenses and other
current liabilities 20,939 52,731 (81,867)
------------ ------------- -------------
Net cash provided by
operating activities 30,898,947 72,534,898 47,344,213

Cash flows from financing activities

Repayments of loan - - (1,681,538)
Distributions to shareholders (30,951,000 (72,504,000) (45,486,000)
------------ ------------- -------------
Net cash used in financing
activities (30,951,000) (72,504,000) (47,167,538)

Net increase (decrease) in cash
and cash equivalents (52,053) 30,898 176,675
Cash and cash equivalents at
beginning of year 278,268 247,370 70,695
------------ ------------- ------------

Cash and cash equivalents at
end of year $ 226,215 $ 278,268 $ 247,370
============= ============= =============

Supplemental cash flow information:

Interest paid $ 8,917,488 $ 8,955,981 $ 9,065,736

See accompanying notes to consolidated financial statements.

KNIGHTSBRIDGE TANKERS LIMITED
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 2002, 2001 AND 2000
(in U.S. Dollars)

2002 2001 2000

SHARE CAPITAL
Balance at the beginning of the year $ 171,000 $ 171,000 $ 171,000
Shares issued - - -
Shares bought back - - -
- ----------------------------------------------------------------------------------------------
Balance at the end of the year 171,000 171,000 171,000
- ----------------------------------------------------------------------------------------------

CONTRIBUTED CAPITAL SURPLUS ACCOUNT
Balance at the beginning of the year 238,458,720 273,809,543 273,809,543
Distributions to shareholders (18,400,214) (35,350,823) -
- ----------------------------------------------------------------------------------------------
Balance at the end of the year 220,058,506 238,458,720 273,809,543
- ----------------------------------------------------------------------------------------------

ACCUMULATED OTHER COMPREHENSIVE
INCOME (LOSS)
Balance at the beginning of the year (9,552,504) - -
Other comprehensive income (loss) (2,037,888) (9,552,504) -
- ----------------------------------------------------------------------------------------------
Balance at the end of the year (11,590,392) (9,552,504) -
- ----------------------------------------------------------------------------------------------

RETAINED EARNINGS
Balance at the beginning of the year - 3,237,745 -
Net income 12,550,786 33,915,432 48,723,745
Distributions to shareholders (12,550,786) (37,153,177) (45,486,000)
- ----------------------------------------------------------------------------------------------
Balance at the end of the year - - 3,237,745
- ----------------------------------------------------------------------------------------------
Total Stockholders' Equity $ 208,639,114 $ 229,077,216 $ 277,218,288
- ----------------------------------------------------------------------------------------------

See accompanying notes to consolidated financial statements.

KNIGHTSBRIDGE TANKERS LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2002, 2001 AND 2000

1. DESCRIPTION OF BUSINESS

General

Knightsbridge Tankers Limited (the "Company") was incorporated in Bermuda in
September, 1996, for the purpose of the acquisition, disposition, ownership,
leasing and chartering of five very large crude oil carriers (the "Vessels"),
and certain related activities. The Vessels are owned through wholly-owned
subsidiaries (the "Subsidiaries").

The Company charters the Vessels to Shell International Petroleum Company
Limited (the "Charterer") on long-term "hell and high water" bareboat charters
(the "Charters"). The obligations of the Charterer under these charters are
jointly and severally guaranteed by Shell Petroleum N.V. and The Shell Petroleum
Company Limited (the "Charter Guarantors"). The Charter and the Charter
Guarantors are all companies of the Royal Dutch/Shell Group of Companies. The
term of each of these Charters is a minimum of seven years, with an option for
the Charterer to extend the period for each Vessel's Charter for an additional
seven-year term, to a maximum of approximately 14 years per Charter. The initial
seven year term expires in February 2004. The Charterer is required to notify
Knightsbridge by the end of June 2003 as to whether it intends to exercise the
option to extend the charter period.

The daily charterhire rate payable under each Charter is comprised of two
primary components: (i) the base rate, which is a fixed minimum rate of
charterhire equal to $22,069 per Vessel per day, payable quarterly in arrears
("Base Rate"), and (ii) additional hire, which is additional charterhire
(determined and paid quarterly in arrears) that will equal the excess, if any,
of a weighted average of the daily time charter rates for three round-trip trade
routes traditionally served by VLCCs, less an agreed amount of $10,500 during
the initial term of the Charters, and $14,900 for any extended term,
representing daily operating costs over the Base Rate.

Ownership and management of the company

In February, 1997, the Company offered and sold to the public 16,100,000 common
shares, par value $0.01 per share, at an initial offering price of $20 per
share. Simultaneously, the Company sold 1,000,000 common shares at a price of
$20 per share to ICB International Limited ("ICB International"), a company
which since 1999 has been an indirect wholly-owned subsidiary of Frontline Ltd.,
a Bermuda publicly traded oil tanker owning and operating company. As of
December 31, 2002, ICB International owned approximately 0.01% of the
outstanding Common Shares.

ICB Shipping (Bermuda) Limited (the "Manager"), an indirect wholly-owned
subsidiary of Frontline Ltd., manages the business of the Company.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of presentation

The consolidated financial statements are prepared in accordance with accounting
principles generally accepted in the United States of America. The consolidated
financial statements include the assets and liabilities of Knightsbridge Tankers
Limited and its wholly-owned subsidiaries. All intercompany balances and
transactions have been eliminated upon consolidation.

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.

Reporting currency

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. The Company's subsidiaries
report in U.S. dollars.

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

Revenue and expense recognition

Revenues and expenses are recognised on the accrual basis. Revenues are
generated from the Charters and such revenues are recorded over the term of the
Charters as service is provided.

Comprehensive income

Comprehensive income is defined as the change in the Company's equity during the
year from transactions and other events and circumstances from nonowner sources.
Comprehensive income of the Company includes not only net income but also
unrealized losses on derivative instruments used in cash flow hedges of future
variable-rate interest payments on the Company's debt. Such items are reported
as accumulated other comprehensive income (loss), a separate component of
shareholders' equity, until such time as the amounts are included in net income.

Leases

In connection with the original Vessels purchase transaction, the Company
entered into a conditional sale/leaseback transaction with a third party banking
institution. The lease agreements do not encumber or obligate the Company's
current or future cash flows and has no effect on the Company's financial
position. The leasebacks have been classified as capital leases by the Company.
Accordingly, during the term of the leases, the Vessels will remain on the
Company's consolidated balance sheet and the relevant subsidiaries will retain
title to the related Vessel.

The Company has subleased the Vessels to a third party in the form of bareboat
charters. Such Charters are classified as operating leases by the Company.

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 maturities of three
months or less at the date of purchase are considered equivalent to cash.

Charter hire receivable

There is a concentration of credit risk in that all revenues are due solely from
the Charterer.

Derivative instruments and hedging activities

Interest rate swap agreements are contractual agreements between the Company and
other parties to exchange the net difference between a fixed and variable
interest rate periodically over the life of the contract without the exchange of
the underlying principal amount of the agreement. The interest rate swaps were
executed as integral elements of the Company's original financing transactions
and risk management policies to achieve specific interest rate management
objectives. At the time of obtaining its original financing, the Company entered
into pay-fixed, receive-floating interest rate swap agreements to hedge its
exposure to future cash flow variability resulting from variable interest rates
on the Company's debt. The Company has not entered into any derivative contracts
for speculative or trading purposes.

On January 1, 2001 the Company adopted Statement of Financial Accounting
Standards ("SFAS") No. 133, "Accounting for Derivatives Instruments and Hedging
Activities," as amended. SFAS No. 133 requires that all derivative instruments
be recorded on the balance sheet at their fair value. Changes in the fair value
of each derivative is recorded each period in current earnings or other
comprehensive income, depending on whether the derivative is designated as part
of a hedge transaction and, if it is, the type of hedge transaction.

Upon the adoption of SFAS No. 133 the Company recorded the fair value of its
interest rate swap agreements which were designated as cash flow hedges against
future variable-rate interest payments on the Company's debt. The amount
recorded as a transition derivative liability was $3,496,905 and an equal amount
was recorded as accumulated other comprehensive income (loss), which is a
component of shareholders' equity. Subsequent to adopting SFAS No. 133 on
January 1, 2001, the derivative liability has been adjusted to its current fair
value with equal adjustments to accumulated other comprehensive income (loss)
reflecting the effectiveness of the cash flow hedge. The adoption of SFAS No.
133 had no impact upon the Company's consolidated net income for the year ended
December 31, 2001.

Prior to the change in accounting principle referred to in the preceding
paragraph, settlement hedge accounting was used by the Company whereby the fair
values of the interest rate swap agreements were not recorded on the balance
sheet. As the swap agreements effectively altered the interest-rate
characteristics of the hedged debt, the interest rate differential between the
swap agreeements and the underlying hedged debt was accrued as interest rates
changed and recognized as an adjustment to interest expense.

Vessels and depreciation

Vessels are stated at cost less accumulated depreciation. Depreciation is
calculated based on cost, using the straight-line method, over the useful life
of each vessel. The useful life of each vessel is deemed to be 25 years.

Capitalized financing fees and expenses

Costs relating to the Credit Facility are capitalized and amortized over the
term of the Credit Facility which is seven years.

Earnings per share

Earnings per share are based on the weighted average number of common shares
outstanding for the period presented. For all periods presented, the Company had
no potentially dilutive securities outstanding and therefore basic and dilutive
earnings per share are the same.

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 by sale are reported at the lower of carrying amount
and fair value less estimated costs to sell.

Distributions to shareholders

Distributions to shareholders are applied first to retained earnings. When
retained earnings are not sufficient, distributions are applied to the
contributed capital surplus account.

New accounting standards

In October 2001, the FASB issued SFAS No. 144, "Accounting for the Impairment or
Disposal of Long-Lived Assets". The objectives of SFAS No. 144 are to address
significant issues relating to the implementation of SFAS No. 121, "Accounting
for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed
Of", and to develop a single accounting model based on the framework established
in SFAS No. 121 for long-lived assets to be disposed of by sale. SFAS No. 144
requires that long-lived assets that are to be disposed of by sale be measured
at the lower of book value or fair value less costs to sell. Additionally, the
standard expands the scope of discontinued operations to include all components
of an entity with operations that can be distinguished from the rest of the
entity and will be eliminated from the ongoing operations of the entity in a
disposal transaction. The adoption of SFAS No. 144 by the Company on January 1,
2002 did not have any impact on the Company's consolidated financial position or
results of operations.

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

In January 2003, the FASB issued Interpretation 46, "Consolidation of Variable
Interest Entities." In general, a variable interest entity is a corporation,
partnership, trust, or any other legal structure used for business purposes that
either (a) does not have equity investors with voting rights or (b) has equity
investors that do not provide sufficient financial resources for the entity to
support its activities. Interpretation 46 requires a variable interest entity to
be consolidated by a company if that company is subject to a majority of the
risk of loss from the variable interest entity's activities or entitled to
receive a majority of the entity's residual returns or both. The consolidation
requirements of Interpretation 46 apply immediately to variable interest
entities created after January 31, 2003. The consolidation requirements apply to
older entities in the first fiscal year or interim period beginning after June
15, 2003. Management does not expect that the adoption of Interpretation 46 will
have a material impact on Company's consolidated financial position or results
of operations.

3. VESSELS UNDER CAPITAL LEASE

2002 2001
(in US Dollars)
Cost $ 439,821,545 $ 439,821,545
Accumulated depreciation (102,820,493) (85,227,633)
---------------- ---------------

Net book value at end of year $ 337,001,052 $ 354,593,912
--------------- ---------------

4. CAPITALIZED FINANCING FEES AND EXPENSES

Capitalized financing fees and expenses are amortised on a straight-line basis
over the life of the Credit Facility. The capitalized financing fees and
expenses are comprised of the following amounts:

2002 2001

(in US Dollars)
Capitalized financing fees and
expenses $ 2,600,804 $ 2,600,804
Accumulated amortization (2,171,466) (1,799,922)
--------------- ---------------

Net book value at end of year $ 429,338 $ 800,882
--------------- ---------------

5. CREDIT FACILITY AND RELATED INTEREST RATE SWAP AGREEMENT

The Company has entered into a Credit Facility with a syndicate of international
lenders, pursuant to which the Company borrowed $145.6 million in the form of
two term loans (the "Loans", or the "Primary Loan" and the "Amortizing Loan").
Of such amount, $125.4 million was in respect of the Primary Loan, and $20.2
million was in respect of the Amortizing Loan.

The Credit Facility is secured by, among other things, a pledge by the Company
of 100% of the issued and outstanding capital stock of the Subsidiaries, a
guarantee from each Subsidiary, a mortgage on each Vessel, assignments of the
Charters and the Charter Guaranties and an assignment of the rights to take
title to the Vessels and the proceeds from the sale or any novation thereof.

The Credit Facility provides for payment of interest on the outstanding
principal balance of the Loans quarterly, in arrears, at a floating interest
rate based on the rate in the London interbank eurocurrency market.

During 2000, the final portion of the Amortizing Loan was repaid. The
outstanding Credit Facility of $125.4 million as of December 31, 2002 consists
of the Primary Loan and is repayable in its entirely in August 2004. The
variable rate on the Primary Loan was 2.22% at December 31, 2002.

At the time of entering into the Credit Facility, the Company entered into an
interest rate swap agreement with Goldman Sachs Capital Markets, L.P., an
affiliate of Goldman, Sachs & Co., to hedge the future variable rate interest
payments on the Primary Loan. The cash flow hedge effectively fixes the
Company's interest rate obligations on the Primary Loan at the rate of
approximately 7.14% per annum.

The terms of the interest rate swap agreement outstanding at December 31, 2002
are as follows:

Notional amount $125,397,399
Trade date February 6, 1997
Effective date February 27, 1997
Termination date August 27, 2004
Pay-fixed rate 6.74%
Receive-variable rate 2.22%

The fair value of the interest rate swap agreement was an unfavorable
$11,590,392 at December 31, 2002 (2001 - $9,552,504) calculated by taking into
account the cost of entering into an interest rate swap to offset the existing
swap. The Company's accounting policy applied to the interest rate swap
agreement changed effective January 1, 2001 and is described in more detail in
Note 2. The credit risk under the swap agreement is not considered to be
significant due to the counterparty's high credit rating.

6. LEASES

The minimum future revenues, in the form of operating lease rentals, to be
received on the Charters as of December 31, 2002 is as follows:

Years ending December 31:

2003 40,275,925
2004 6,400,010
-----------
Total minimum lease rental revenues $46,675,935
-----------

7. TAXATION

The Company is incorporated in 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.

8. RELATED PARTY TRANSACTION

On February 12, 1997, the Company entered into a management agreement with ICB
under which ICB provides certain administrative, management and advisory
services to the Company for an amount of $750,000 per year. The management
agreement will terminate in 2012 unless earlier termination is approved pursuant
to the terms of the agreement.

ITEM 19. EXHIBITS

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

1 Underwriting Agreement among Knightsbridge Tankers Limited (the
"Company"), Cedarhurst Tankers LDC ("Cedarhurst"), Hewlett Tankers LDC
("Hewlett"), Inwood Tankers LDC ("Inwood"), Lawrence Tankers LDC
("Lawrence") and Woodmere Tankers LDC ("Woodmere") (each of
Cedarhurst, Hewlett, Inwood, Lawrence and Woodmere a "Subsidiary" and
collectively the "Subsidiaries"), Lazard Freres & Co. LLC and Goldman,
Sachs & Co., as representatives for the U.S. underwriters (the
"Representatives"), ICB Shipping (Bermuda) Limited (the "Manager") and
ICB International Ltd. ("ICB International")**

3.1 Memorandum of Association of the Company (Exhibit 3.1)*

3.2 Bye-Laws of the Company (Exhibit 3.2)*

3.2.1 Execution version of Bareboat Charter dated February 12, 1997 between
Woodmere and Shell International Petroleum Company Limited ("SIPC")
relating to the M.T. Myrina.**

3.2.2 Execution version of Bareboat Charter dated February 12, 1997 between
Hewlett and SIPC relating to the M.T. Megara.**

3.2.3 Execution version of Bareboat Charter dated February 12, 1997 between
Inwood and SIPC relating to the M.T. Murex.**

3.2.4 Execution version of Bareboat Charter dated February 12, 1997 between
Lawrence and SIPC relating to the M.T. Macoma.**

3.2.5 Execution version of Bareboat Charter dated February 12, 1997 between
Cedarhurst and SIPC relating to the M.T. Magdala.**

3.3.1 Execution version of Charter Guaranty dated February 12, 1997 made by
Shell Petroleum N.V. ("SPNV") and The Shell Petroleum Company Limited
("SPCo") (collectively the "Guarantors") in favor of Woodmere relating
to the M.T. Myrina.**

3.3.2 Execution version of Charter Guaranty dated February 12, 1997 made by
the Guarantors in favor of Hewlett relating to the M.T. Megara.**

3.3.3 Execution version of Charter Guaranty dated February 12, 1997 made by
the Guarantors in favor of Inwood relating to the M.T. Murex.**

3.3.4 Execution version of Charter Guaranty dated February 12, 1997 made by
the Guarantors in favor of Lawrence relating to the M.T. Macoma.**

3.3.5 Execution version of Charter Guaranty dated February 12, 1997 made by
the Guarantors in favor of Cedarhurst relating to the M.T. Magdala.**

3.3.6 Execution version of Pooling Agreement dated February 27, 1997 among
the Subsidiaries as owners, and Shell International Trading and
Shipping Company Limited on behalf of SIPC (collectively the
"Charterers") relating to the fleet spares.**

3.4 Execution version of Charter Guaranty dated February 12, 1997 made by
the Guarantors in favor of the Company.**

3.5 Execution version of Management Agreement dated February 12, 1997
between the Manager and the Company (incorporated by reference from
Exhibit 10.5 of the Registration Statement).**

3.6.1 Memorandum of Agreement dated October 24, 1996 among Ocala Shipping
Limited ("Ocala"), the Charterers and Shell Tankers (UK) Limited
("STUK"), as buyer, relating to the M.T. Myrina (incorporated by
reference from Exhibit 10.6 of the Registration Statement).**

3.6.2 Memorandum of Agreement dated October 24, 1996 among Kerbela Shipping
Corp. ("Kerbela") the Charterers and STUK relating to the M.T. Megara
(incorporated by reference from Exhibit 10.7 of the Registration
Statement).**

3.6.3 Memorandum of Agreement dated October 24, 1996 among Trevose Shipping
Corp. ("Trevose"), the Charterers and STUK relating to the M.T. Murex
(incorporated by reference from Exhibit 10.8 of the Registration
Statement).**

3.6.4 Memorandum of Agreement dated October 24, 1996 among Tourmaline
Shipping Limited ("Tourmaline"), the Charterers and STUK relating to
the M.T. Macoma (incorporated by reference from Exhibit 10.9 of the
Registration Statement).**

3.6.5 Memorandum of Agreement dated October 24, 1996 among Fluid Navigation
Ltd. ("Fluid"), the Charterers and STUK relating to the M.T. Magdala
(incorporated by reference from Exhibit 10.10 of the Registration
Statement).**

3.7.1 Assignment Agreement dated November 25, 1996 from STUK and Shell
International Trading & Shipping Company Limited to the Company and
the Subsidiaries relating to the relevant Memorandum of Agreement
(incorporated by reference from Exhibit 10.11 of the Registration
Statement).**

3.7.2 Assignment of Rights dated February 27, 1997 between Ocala as seller
and Woodmere as buyer relating to the M.T. Myrina.**

3.7.3 Assignment of Rights dated February 27, 1997 between Kerbela as seller
and Hewlett as buyer regarding the M.T. Megara.**

3.7.4 Assignment of Rights dated February 27, 1997 between Trevose as seller
and Inwood as buyer regarding the M.T. Murex.**

3.7.5 Assignment of Rights dated February 27, 1997 between Tourmalene as
seller and Lawrence as buyer regarding the M.T. Macoma.**

3.7.6 Assignment of Rights dated February 27, 1997 between Fluid as seller
and Cedarhurst as buyer regarding the M.T. Magdala.**

3.8.1 Execution version of Letter Agreement dated February 6, 1997 among the
Company, SIPC, ICB International, the Subsidiaries and the Manager
(incorporated by reference from Exhibit 10.12.1 of the Registration
Statement).**

3.8.2 Execution version of Letter Agreement dated February 6, 1997 among the
Company, the Manager, ICB International, SIPC and the Guarantors
(incorporated by reference from Exhibit 10.12.2 of the Registration
Statement).**

3.9 U.K. Finance Lease Transaction Offer Letter dated November 12, 1996
made by National Westminster Bank Plc in favor of the Company and SIPC
(incorporated by reference from Exhibit 10.13 of the Registration
Statement).**

3.10.1 Conditional Sale Agreement dated November 25, 1996 between NatWest
Leasing (GB) Limited ("NLL") and Woodmere relating to the M.T. Myrina
(incorporated by reference from Exhibit 10.14 of the Registration
Statement).**

3.10.2 Conditional Sale Agreement dated November 25, 1996 between NLL and
Hewlett relating to the M.T. Megara (incorporated by reference from
Exhibit 10.15 of the Registration Statement).**

3.10.3 Conditional Sale Agreement dated November 25, 1996 between NLL and
Inwood relating to the M.T. Murex (incorporated by reference from
Exhibit 10.16 of the Registration Statement).**

3.10.4 Conditional Sale Agreement dated November 25, 1996 between NLL and
Lawrence relating to the M.T. Macoma (incorporated by reference from
Exhibit 10.17 of the Registration Statement).**

3.10.5 Conditional Sale Agreement dated November 25, 1996 between NLL and
Cedarhurst relating to the M.T. Magdala (incorporated by reference
from Exhibit 10.18 of the Registration Statement).**

3.11.1 Execution version of Charterparty by way of Demise dated February 12,
1997 between NLL as lessor and Woodmere as leasee relating to the M.T.
Myrina.**

3.11.2 Execution version of Charterparty by Way of Demise dated February 12,
1997 between NLL as lessor and Hewlett as leasee relating to the M.T.
Megara.**

3.11.3 Execution version of Charterparty by Way of Demise dated February 12,
1997 between NLL as lessor and Inwood as leasee relating to the M.T.
Murex.**

3.11.3(a) Amendment Agreement to the Charterparty by Way of Demise dated
February 27, 1997 among NLL, Inwood and SIPC.**

3.11.4 Execution version of Charterparty by Way of Demise dated February 12,
1997 between NLL as lessor and Lawrence as leasee relating to the M.T.
Macoma.**

3.11.5 Execution version of Charterparty by Way of Demise dated February 12,
1997 between NLL as lessor and Cedarhurst as leasee relating to the
M.T. Magdala.**

3.12.1 Execution version of Direct Support Agreement dated February 12, 1997
among NLL as lessor, SIPC and Woodmere as leasee.**

3.12.2 Execution version of Direct Support Agreement dated February 12, 1997
among NLL as lessor, SIPC and Hewlett as leasee.**

3.12.3 Execution version of Direct Support Agreement dated February 12, 1997
among NLL as lessor, SIPC and Inwood as leasee.**

3.12.4 Execution version of Direct Support Agreement dated February 12, 1997
among NLL as lessor, SIPC and Lawrence as leasee.**

3.12.5 Execution version of Direct Support Agreement dated February 12, 1997
among NLL as lessor, SIPC and Cedarhurst as leasee.**

3.13 Execution version of Lessor Direct Agreement dated February 12, 1997
among the Company as borrower, the Subsidiaries as leasees, NLL as
lessor and GSI.**

3.13(a) Amendment Agreement to the Lessor Direct Agreement dated February 27,
1997 among the Company as borrower, the Subsidiaries as leasees, NLL
as lessor and Royal Bank of Scotland Plc ("RBS") as agent.**

3.14.1 Execution version of Lessor Mortgage and Assignment dated February 12,
1997 from NLL as chargor to Woodmere as chargee.**

3.14.2 Execution version of Lessor Mortgage and Assignment dated February 12,
1997 from NLL as chargor to Hewlett as chargee.**

3.14.3 Execution version of Lessor Mortgage and Assignment dated February 12,
1997 from NLL as chargor to Inwood as chargee.**

3.14.4 Execution version of Lessor Mortgage and Assignment dated February 12,
1997 from NLL as chargor to Lawrence as chargee.**

3.14.5 Execution version of Lessor Mortgage and Assignment dated February 12,
1997 from NLL as chargor to Cedarhurst as chargee.**

3.15.1 Execution version of Deposit Agreement and Deposit Charge dated
February 12, 1997 between Woodmere as leasee and Midland Bank PLC as a
letter of credit issuing bank ("Midland").**

3.15.2 Execution version of Deposit Agreement and Deposit Charge dated
February 12, 1997 between Hewlett as leasee and Midland.**

3.15.3 Execution version of Deposit Agreement and Deposit Charge dated
February 12, 1997 between Inwood as leasee and Royal Bank of Canada
Europe Limited as a letter of credit issuing bank ("RBC").**

3.15.4 Execution version of Deposit Agreement and Deposit Charge dated
February 12, 1997 between Lawrence as leasee and National Australia
Bank Limited as a letter of credit issuing bank ("NAB").**

3.15.5 Execution version of Deposit Agreement and Deposit Charge dated
February 12, 1997 between Cedarhurst as leasee and NAB.**

3.16.1 Execution version of Irrevocable Standby Letter of Credit by Midland
in favor of Woodmere as leasee.**

3.16.2 Execution version of Irrevocable Standby Letter of Credit by Midland
in favor of Hewlett as leasee.**

3.16.3 Execution version of Irrevocable Standby Letter of Credit by RBC in
favor of Inwood as leasee.**

3.16.4 Execution version of Irrevocable Standby Letter of Credit by NAB in
favor of Lawrence as leasee.**

3.16.5 Execution version of Irrevocable Standby Letter of Credit by NAB in
favor of Cedarhurst as leasee.**

3.17.1 Execution version of Reimbursement Agreement dated February 12, 1997
between Woodmere as leasee and Midland.**

3.17.2 Execution version of Reimbursement Agreement dated February 12, 1997
between Hewlett as leasee and Midland.**

3.17.3 Execution version of Reimbursement Agreement dated February 12, 1997
between Inwood as leasee and RBC.**

3.17.4 Execution version of Reimbursement Agreement dated February 12, 1997
between Lawrence as leasee and NAB.**

3.17.5 Execution version of Reimbursement Agreement dated February 12, 1997
between Cedarhurst as leasee and NAB.**

3.18.1 Execution version of Residual Obligation Agreement dated February 12,
1997 between SIPC as obligor and Midland relating to Woodmere as
lessee.**

3.18.2 Execution version of Residual Obligation Agreement dated February 12,
1997 between SIPC as obligor and Midland relating to Hewlett as
lessee.**

3.18.3 Execution version of Residual Obligation Agreement dated February 12,
1997 between SIPC as obligor and RBC relating to Inwood as lessee.**

3.18.4 Execution version of Residual Obligation Agreement dated February 12,
1997 between SIPC as obligor and NAB relating to Lawrence as lessee.**

3.18.5 Execution version of Residual Obligation Agreement dated February 12,
1997 between SIPC as obligor and NAB relating to Cedarhurst as
lessee.**

3.19 Execution version of Term Loan Facility Agreement dated February 6,
1997 among the Company as borrower, the Subsidiaries as guarantors,
GSI as arranger and as agent, Goldman Sachs Capital Partners L.P. as
bank ("GSCP") and Goldman Sachs Capital Markets L.P. as swap
counterparty ("GSCM").**

3.19(a) Amendment Agreement to Term Loan Facility Agreement dated February 27,
1997 among the Company as borrower, the Subsidiaries as guarantors,
GSI as arranger and retiring agent, Goldman Sachs International Bank
as bank ("GSIB"), GSCM as swap counterparty and RBS as successor
agent.**

3.19(b) Side Letter to the Term Loan Facility Agreement dated February 27,
1997 among the Company, the Subsidiaries, SIPC, NLL and GSI.**

3.20.1 Vessel Mortgage dated February 27, 1997 granted by Woodmere in favor
of GSI relating to the M.T. Myrina.**

3.20.2 Vessel Mortgage dated February 27, 1997 granted by Hewlett in favor of
GSI relating to the M.T. Megara.**

3.20.3 Vessel Mortgage dated February 27, 1997 granted by Inwood in favor of
GSI relating to the M.T. Murex.**

3.20.4 Vessel Mortgage dated February 27, 1997 granted by Lawrence in favor
of GSI relating to the M.T. Macoma.**

3.20.5 Vessel Mortgage dated February 27, 1997 granted by Cedarhurst in favor
of GSI relating to the M.T. Magdala.**

3.21.1 Execution version of Floating Charge dated February 12, 1997 between
Woodmere as chargor and GSI as agent.**

3.21.2 Execution version of Floating Charge dated February 12, 1997 between
Hewlett as chargor and GSI as agent.**

3.21.3 Execution version of Floating Charge dated February 12, 1997 between
Inwood as chargor and GSI as agent.**

3.21.4 Execution version of Floating Charge dated February 12, 1997 between
Lawrence as chargor and GSI as agent.**

3.21.5 Execution version of Floating Charge dated February 12, 1997 between
Cedarhurst as chargor and GSI as agent.**

3.22 Execution version of Floating Charge dated February 12, 1997 between
the Company as chargor and GSI as agent.**

3.23 Execution version of Mortgage of Shares dated February 12, 1997
between the Company as chargor and GSI as agent.**

3.24 Execution version of Borrower Assignment dated February 12, 1997
between the Company as assignor and GSI as agent.**

3.25.1 Execution version of Guarantor (Subsidiary) Assignment dated February
12, 1997 between Woodmere as assignor and GSI as agent.**

3.25.2 Execution version of Guarantor (Subsidiary) Assignment dated February
12, 1997 between Hewlett as assignor and GSI as agent.**

3.25.3 Execution version of Guarantor (Subsidiary) Assignment dated February
12, 1997 between Inwood as assignor and GSI as agent.**

3.25.4 Execution version of Guarantor (Subsidiary) Assignment dated February
12, 1997 between Lawrence as assignor and GSI as agent.**

3.25.5 Execution version of Guarantor (Subsidiary) Assignment dated February
12, 1997 between Cedarhurst as assignor and GSI as agent.**

3.26 Execution version of ISDA Master Agreement dated February 6, 1997
between GSCM and the Company.**

3.27 Execution version of Intercreditor Agreement dated February 12, 1997
among the Company as borrower, the Subsidiaries as leasees
(collectively with the Company as Obligors), GSI as arranger and as
agent, GSCP as bank and GSCM as swap bank and SIPC, SPCo, SPNV and the
Manager, each as a subordinated creditor.**

3.27(a) Amendment Agreement dated February 27, 1997 to the Intercreditor
Agreement among the Company as borrower, the Subsidiaries as leasees
(collectively with the Company as Obligors), GSI as arranger, RBS as
agent, GSIB as bank, GSCM as swap bank and SIPC, SPCo, SPNV and the
Manager, each as a subordinated creditor.**

3.27(b) Finance Party Accession/Designation Agreement dated February 27, 1997
among the Company and the Subsidiaries as obligors, GSI as existing
party and arranger, RBS as new party, NLL as lessor, GSIB as bank,
GSCM as swap bank and SIPC, SPCo, SPNV and the Manager, each as a
subordinated creditor.**

3.28 Execution version of Multipartite Agreement dated February 12, 1997
among the Company as borrower, the Subsidiaries as guarantors, SIPC as
charterer, GSI as arranger and agent, GSCP as bank and GSCM as swap
bank.**

3.29 Execution version of Subordination Agreement dated February 12, 1997
among the Company, the Subsidiaries, ICB International, the Manager,
the Guarantors, SIPC and Goldman, Sachs & Co. as representative of the
U.S. Underwriters, and GSI as representative of the International
Underwriters.**

3.31 Execution version of Share Purchase Agreement dated February 12, 1997
between the Company and ICB International (incorporated by reference
from Exhibit 10.37 of the Company's Registration Statement on Form
F-1, filed December 13, 1996 (File No. 333-6170).

99.1 Certification pursuant to Section 302 of the Sarbanes-Oxley Act of
2002 of the Chief Executive Officer of the Company.

99.2 Certification pursuant to Section 302 of the Sarbanes-Oxley Act of
2002 of the Chief Financial Officer of the Company.

99.3 Certification pursuant to Section 906 of the Sarbanes-Oxley Act of
2002 of the Chief Executive Officer of the Company.

99.4 Certification pursuant to Section 906 of the Sarbanes-Oxley Act of
2002 of the Chief Financial Officer of the Company.

* Incorporated by reference to same Exhibit No. in the Company's
Registration Statement on Form F-1, filed December 13, 1996 (File No.
333-6170)

** Incorporated by reference to same Exhibit No. in the Company's Report
on Form 6-K, filed March 20, 1997 (File No. 0-29106)

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 authorized.

KNIGHTSBRIDGE TANKERS LIMITED

By: /s/Kate Blankenship
- -----------------------

Kate Blankenship
Chief Financial Officer

Dated: May 12, 2003

01655.0002 #404917