AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 14, 1998
================================================================================

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

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

                                   FORM 10-K/A
                ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF
                       THE SECURITIES EXCHANGE ACT OF 1934

                   FOR THE FISCAL YEAR ENDED DECEMBER 31, 1997

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

                         COMMISSION FILE NUMBER 1-10164

                                    OMI CORP.
             ------------------------------------------------------
             (Exact name of Registrant as specified in its charter)

           DELAWARE                                              13-2625280
-------------------------------                               ----------------
(State or other jurisdiction of                               (I.R.S. Employer
 incorporation or organization)                              Identification No.)


       REGISTRANT'S TELEPHONE NUMBER INCLUDING AREA CODE: (212) 986-1960.

           SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:


COMMON STOCK, PAR VALUE $.50 PER SHARE             NEW YORK STOCK EXCHANGE
--------------------------------------      ------------------------------------
           Title of Class                   Name of Exchange on which Registered

        SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT: NONE

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

     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 IF DISCLOSURE OF DELINQUENT FILERS PURSUANT TO ITEM
405 OF REGULATION S-K IS NOT CONTAINED HEREIN, AND WILL NOT BE CONTAINED, TO THE
BEST OF REGISTRANT'S KNOWLEDGE, IN DEFINITIVE PROXY OR INFORMATION STATEMENTS
INCORPORATED BY REFERENCE IN PART III OF THIS FORM 10-K OR ANY AMENDMENT TO THIS
FORM 10-K.

             YES [X]         NO [_]

  AGGREGATE MARKET VALUE OF REGISTRANT'S VOTING STOCK, HELD BY NON-AFFILIATES,
           BASED ON THE CLOSING PRICE ON THE NEW YORK STOCK EXCHANGE
                  AS OF THE CLOSE OF BUSINESS ON MAY 14, 1998:

                                  $436,281,299

                NUMBER OF SHARES OF THE REGISTRANT'S COMMON STOCK
                        OUTSTANDING PAS OF MAY 13, 1998:

                                   43,089,511

         THE FOLLOWING DOCUMENT IS HEREBY INCORPORATED BY REFERENCE INTO
                          PART III OF THIS FORM 10-KA:

(1)  PORTIONS OF THE OMI CORP. 1997 PROXY STATEMENT TO BE FILED WITH THE
     SECURITIES AND EXCHANGE COMMISSION.

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

<PAGE>

                           OMI CORP. AND SUBSIDIARIES
                                   FORM 10-KA
                                DECEMBER 31, 1997

     Filed herewith is the Company's amended Form 10K (Form 10KA) for the year
ended December 31, 1997.

     In accordance with Rule 408 (g) of Regulation S-X, the financial statements
of Amazon Transport, Inc. in which the Company has a 49 percent ownership
interest are included in this Form 10K.

 
                                      2

<PAGE>


ITEM 8: FINANCIAL STATEMENT AND SUPPLEMENTARY DATA

                                  OMI CORP. AND SUBSIDIARIES
                             CONSOLIDATED STATEMENTS OF OPERATIONS
                             (IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
                                                            FOR THE YEARS ENDED DECEMBER 31,
                                                          -----------------------------------
                                                             1997         1996        1995
                                                          ---------    ---------    ---------
<S>                                                       <C>          <C>          <C>       
REVENUES:
  Voyage revenues (Notes 1, 5) ........................   $ 224,413    $ 225,578    $ 232,589
  Other income (Note 5) ...............................       7,241        8,305        7,291
                                                          ---------    ---------    ---------
    Total revenues ....................................     231,654      233,883      239,880
                                                          ---------    ---------    ---------
OPERATING EXPENSES:
  Vessel and voyage (Notes 1, 3) ......................     121,498      129,204      171,730
  Operating leases (Note 13) ..........................      52,865       38,055       41,233
  Depreciation and amortization .......................      28,944       30,448       34,734
  Provision for losses (Note 14):
    Impaired value of vessels .........................        --           --          8,707
    Lease obligation ..................................        --           --          6,687
  General and administrative ..........................      23,998       16,438       15,303
                                                          ---------    ---------    ---------
Total operating expenses ..............................     227,305      214,145      278,394
                                                          ---------    ---------    ---------
OPERATING  INCOME (LOSS) ..............................       4,349       19,738      (38,514)
                                                          ---------    ---------    ---------
OTHER INCOME (EXPENSE)
  Gain on disposal of assets-net (Note 15) ............         870       11,153        5,480
  Interest expense ....................................     (12,249)     (26,462)     (26,708)
  Interest income .....................................       3,257        2,810        2,076
  Minority interest in (income)  loss of subsidiary ...        (114)      (1,261)         229
  Other-net ...........................................        --           --          1,040
                                                          ---------    ---------    ---------
    Net other expense .................................      (8,236)     (13,760)     (17,883)
                                                          ---------    ---------    ---------
(Loss) income before income taxes, equity in operations
  of joint ventures, extraordinary loss and cumulative
  effect of change in accounting principle ............      (3,887)       5,978      (56,397)
Benefit (provision) for income taxes (Note 8) .........         180       (2,271)      18,973
                                                          ---------    ---------    ---------
(Loss) income before equity in operations of joint
  ventures, extraordinary loss and cumulative effect
  of change in accounting principle ...................      (3,707)       3,707      (37,424)
Equity in operations of joint ventures (Note 5) .......         737        2,482        5,528
                                                          ---------    ---------    ---------
(Loss) income before extraordinary loss and cumulative
  effect of change in accounting principle ............      (2,970)       6,189      (31,896)
Extraordinary loss, net of income tax benefit
  of $1,493 (Note 6) ..................................        --         (2,772)        --
Cumulative effect of change in accounting
  principle-net of income tax provision
  of $7,429 (Note 3) ..................................      13,797         --           --
                                                          ---------    ---------    ---------
NET  INCOME (LOSS) ....................................   $  10,827    $   3,417    $ (31,896)
                                                          =========    =========    ========= 
BASIC EARNINGS (LOSS) PER COMMON SHARE:
(Loss) income before extraordinary loss and
  cumulative effect of change in accounting principle .   $   (0.07)   $   0 .19    $  (1.04)

Net income (loss) (Notes 1, 3, 4 and 10) ..............   $    0.25    $   0 .10    $  (1.04)

DILUTED EARNINGS (LOSS) PER COMMON SHARE:
(Loss) income before extraordinary loss and
  cumulative  effect of change in accounting principle    $   (0.07)   $    0.18    $  (1.04)

Net income (loss) (Notes 1, 3, 4 and 10) ..............   $    0.25    $    0.10    $  (1.04)

</TABLE>


                       See notes to consolidated financial statements.


                                              3
<PAGE>


                           OMI CORP. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
                                 (IN THOUSANDS)

                                     ASSETS

                                                                 DECEMBER 31,
                                                             -------------------
                                                               1997       1996
                                                             --------   --------
CURRENT ASSETS:
Cash, including cash equivalents of:
  1997-$25,900; 1996-$36,132 (Notes 1, 7) ................   $ 32,489   $ 47,877
Advances to masters ......................................        549      1,422
Receivables:
  Traffic ................................................     11,527     11,715
  Other ..................................................      8,105     12,234
Prepaid drydock expense (Note 3) .........................      2,309       --
Other prepaid expenses and current assets ................     16,423      5,918
Vessels held for sale (Notes 13 and 15) ..................       --       34,399
                                                             --------   --------
  Total current assets ...................................     71,402    113,565
                                                             --------   --------
CAPITAL CONSTRUCTION FUND (NOTES 1, 7) ...................     10,969     10,283
VESSELS  AND OTHER PROPERTY (NOTE 1):
Vessels (Notes 6, 15) ....................................    510,312    518,956
Construction in progress  (Notes 1, 17) ..................     56,032     10,754
Other property ...........................................      8,397      8,505
                                                             --------   --------
Total vessels and other property .........................    574,741    538,215
Less accumulated depreciation ............................    204,516    186,152
                                                             --------   --------
Vessels and other property-net ...........................    370,225    352,063
                                                             --------   --------
INVESTMENTS IN, AND ADVANCES TO JOINT VENTURES (NOTE 5) ..     28,155     59,322

NOTE RECEIVABLE (NOTE 13) ................................      9,000       --

PREPAID  DRYDOCK EXPENSE (NOTE 3) ........................      6,205       --

OTHER ASSETS AND DEFERRED CHARGES ........................     22,631     17,049
                                                             --------   --------
TOTAL ....................................................   $518,587   $552,282
                                                             ========   ========

                 See notes to consolidated financial statements.


                                        4
<PAGE>


                                     OMI CORP. AND SUBSIDIARIES
                                    CONSOLIDATED BALANCE SHEETS
                                   (IN THOUSANDS, EXCEPT SHARES)

                                LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
                                                                                 DECEMBER 31,
                                                                            ----------------------
                                                                               1997        1996
                                                                            ---------    ---------
<S>                                                                         <C>          <C>      
CURRENT LIABILITIES:
 Accounts payable .......................................................   $   6,314    $   6,278
 Accrued liabilities:
   Voyage and vessel (Note 3) ...........................................      10,979       17,555
   Interest .............................................................       1,528        4,150
   Other ................................................................      10,424        3,443
 Deferred gain on sale of vessel (Note 13) ..............................       5,809          -- 
 Current portion of long-term debt (Notes 6, 7) .........................      16,575       34,892
                                                                            ---------    ---------
   Total current liabilities ............................................      51,629       66,318
                                                                            ---------    ---------
ADVANCE TIME CHARTER REVENUES AND OTHER LIABILITIES (Note 3) ............       3,114        8,685
LONG-TERM DEBT (Notes 6, 7) .............................................     146,341      202,256
DEFERRED GAIN ON SALE OF VESSELS (Note 13) ..............................      30,299          --
DEFERRED INCOME TAXES (Note 8) ..........................................      64,264       63,808
MINORITY INTEREST IN SUBSIDIARY (Note 18)................................       1,917        3,637
COMMITMENTS AND CONTINGENCIES (Note 17)
STOCKHOLDERS' EQUITY:
 Common stock, $0.50 par value; 80,000,000 shares authorized;
  shares issued and outstanding: 1997--43,066,679; 1996--42,691,580
  (Notes 10, 12) ........................................................      21,533       21,346
 Capital surplus (Notes 5, 12) ..........................................     186,726      184,251
 Retained earnings (deficit) (Note 6) ...................................       8,979       (1,848)
 Cumulative translation adjustment ......................................       4,912        4,912
 Unearned compensation-restricted stock (Note 10) .......................      (1,105)      (1,039)
 Unrealized loss on securities-net of deferred income
  taxes of 1997--$11; 1996--$23  (Notes 1, 7) ...........................         (22)         (44)
                                                                            ---------    ---------
   Total stockholders' equity ...........................................     221,023      207,578
                                                                            ---------    ---------
TOTAL ...................................................................   $ 518,587    $ 552,282
                                                                            =========    =========
</TABLE>

                          See notes to consolidated financial statements.


                                                5
<PAGE>


                                          OMI CORP. AND SUBSIDIARIES
                                    CONSOLIDATED STATEMENTS OF CASH FLOWS
                                                (IN THOUSANDS)
<TABLE>
<CAPTION>

                                                                          FOR THE YEARS ENDED DECEMBER 31,
                                                                         ----------------------------------
                                                                           1997         1996         1995
                                                                         ---------    ---------    --------
<S>                                                                      <C>          <C>          <C>      
CASH FLOWS PROVIDED (USED) BY OPERATING ACTIVITIES:
  Net  income (loss) .................................................   $  10,827    $   3,417    $(31,896)
Adjustments to reconcile net income (loss) to net
  cash provided (used) by operating activities:
  Cumulative effect of change in accounting principle,
    net of income tax provision ......................................     (13,797)        --          --
  Extraordinary loss--net of income tax benefit ......................        --          2,772        --
  (Decrease) increase in deferred income taxes .......................      (6,984)       2,258     (13,322)
  Depreciation and amortization ......................................      28,944       30,448      34,734
  Amortization of unearned compensation ..............................         372          365         943
  Gain on disposal of assets--net ....................................        (870)     (11,153)     (5,480)
  Amortization of deferred gains on sale of vessels ..................      (4,377)        --          --
  Provision for losses on vessels/lease obligation ...................        --           --        15,394
  Other--net .........................................................        --           --        (1,040)
  Equity in operations of joint ventures over
    dividends received ...............................................          (2)      (2,114)     (4,989)
Changes in assets and liabilities:
  (Increase) decrease in receivables and other current assets ........      (5,748)       4,868         191
  Increase (decrease) in accounts payable and accrued liabilities ....       2,777      (30,436)       (274)
  Advances (from) to joint ventures--net .............................        (150)      (7,359)      2,578
  (Increase) decrease in other assets and deferred charges ...........      (1,624)        (416)      4,055
  (Decrease) increase in advance time charter revenues
     and other liabilities ...........................................      (1,311)       1,223      (6,216)
  Other assets and liabilities--net ..................................         222          406         721
                                                                         ---------    ---------    -------- 
    Net cash provided (used) by operating activities .................       8,279       (5,721)     (4,601)
                                                                         ---------    ---------    -------- 
CASH FLOWS PROVIDED (USED) BY INVESTING ACTIVITIES:
  Proceeds from disposition of vessels and other property ............      78,972       76,808       8,559
  Additions to vessels and other property ............................     (58,470)     (50,770)    (38,140)
  Proceeds from sale of securities ...................................        --          1,080      15,076
  Withdrawals from Capital Construction Fund .........................        --           --         5,200
  Proceeds and interest received and reinvested in Capital
    Construction Fund ................................................        (661)        (717)       (654)
  Cash acquired in retirement of partner's equity interest
   in joint venture ..................................................      32,301        4,813        --
  Payments for the retirement of minority stockholder's interests ....      (2,456)        --          --
  Other ..............................................................        (343)         775        --
                                                                         ---------    ---------    -------- 
    Net cash provided (used) by investing activities .................      49,343       31,989      (9,959)
                                                                         ---------    ---------    -------- 
CASH FLOWS  (USED) PROVIDED BY FINANCING ACTIVITIES:
  Proceeds from issuance of long-term debt ...........................     114,090      173,923      44,600
  Payments on long-term debt .........................................    (188,322)    (259,556)    (30,543)
  Payments for debt issue costs ......................................        (774)      (1,853)       --
  Proceeds from issuance of common stock .............................       1,996       76,526       1,275
                                                                         ---------    ---------    -------- 
    Net cash (used) provided by financing activities .................     (73,010)     (10,960)     15,332
                                                                         ---------    ---------    -------- 
NET  (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS ................     (15,388)      15,308         772
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR .......................      47,877       32,569      31,797
                                                                         ---------    ---------    -------- 
CASH AND CASH EQUIVALENTS AT END OF YEAR .............................   $  32,489    $  47,877    $ 32,569
                                                                         =========    =========    ========
</TABLE>

                               See notes to consolidated financial statements.


                                                     6
<PAGE>
<TABLE>
<CAPTION>

                                                     OMI CORP. AND SUBSIDIARIES
                                     CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
                                             FOR THE THREE YEARS ENDED DECEMBER 31, 1997
                                                           (IN THOUSANDS)

                                                                               UNEARNED UNEARNED  UNREALIZED
                                                                                COMPEN-  COMPEN-    GAIN                    TOTAL
                              COMMON STOCK                RETAINED  CUMULATIVE  SATION   SATION   (LOSS) ON                 STOCK-
                             ----------------   CAPITAL   EARNINGS  TRANSLATION  FROM  RESTRICTED SECURITIES-  TREASURY    HOLDERS'
                             SHARES   AMOUNT    SURPLUS  (DEFICIT)  ADJUSTMENT   ESOP    STOCK       NET        STOCK      EQUITY
                             ------   -------   -------- ---------  ----------- ------ ---------- -----------  ---------  ---------
<S>                          <C>      <C>       <C>       <C>         <C>       <C>     <C>         <C>         <C>       <C>     
Balance at January 1, 1995 . 30,672   $15,336   $129,919  $26,631     $4,912    $(663)  $  (941)    $5,684      $(982)    $179,896
Net loss ...................                              (31,896)                                                         (31,896)
Issuance of restricted
  stock awards .............    110        55        688                                   (743)                                --
Exercise of stock options ..    259       130      1,145                                                                     1,275
Amortization of unearned
  compensation .............                                                      663       280                                943
Net change in valuation
  account ..................                                                                         1,139                   1,139
Sale of securities .........                                                                        (6,794)                 (6,794)
Sale of treasury stock .....                        (130)                                                         982          852
                             ------   -------   --------  -------   --------   ------   -------    -------      -----     --------
Balance at December 
  31, 1995 ................. 31,041    15,521    131,622   (5,265)     4,912       --    (1,404)        29         --      145,415
Net income .................                                3,417                                                            3,417
Shares issued in common
  stock offering ........... 11,500     5,750     69,982                                                                    75,732
Retirement of partner's
  equity interest in 
  joint venture ............                     (18,072)                                                                  (18,072)
Exercise of stock options 
  and stock appreciation 
  rights ...................    150        75        719                                                                       794
Amortization of unearned 
  compensation .............                                                                365                                365
Net change in valuation 
  account ..................                                                                           (73)                    (73)
                             ------   -------   --------  -------   --------   ------   -------    -------      -----     --------
Balance at December 
  31, 1996 ................. 42,691    21,346    184,251   (1,848)     4,912       --    (1,039)       (44)        --      207,578
Net income .................                               10,827                                                           10,827
Retirement of partner's
  equity interest in
  joint venture ............                         777                                                                       777
Retirement of minority 
  stockholder's equity
  interest in subsidiary ...                        (549)                                                                     (549)
Exercise of stock 
  options ..................    325       162      1,834                                                                     1,996
Issuance of restricted 
  stock awards .............     50        25        413                                   (438)                                --
Amortization of unearned 
  compensation .............                                                                372                                372
Net change in
  valuation account ........                                                                            22                      22
                             ------   -------   --------  -------   --------   ------   -------    -------      -----     --------
Balance at December 
  31, 1997 ................. 43,066   $21,533   $186,726  $ 8,979   $  4,912   $   --   $(1,105)   $   (22)     $  --     $221,023
                             ======   =======   ========  =======   ========   ======   =======    =======      =====     ========


                                           See notes to consolidated financial statements.

</TABLE>

                                       7

<PAGE>

                           OMI CORP. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                   FOR THE THREE YEARS ENDED DECEMBER 31, 1997
                     (ALL TABULAR AMOUNTS ARE IN THOUSANDS)

NOTE 1--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

     BUSINESS--OMI Corp. ("OMI" or the "Company") is one of the largest,
measured by deadweight tons ("dwt"), publicly traded bulk shipping companies
headquartered in the United States. OMI provides seaborne transportation
services for crude oil, petroleum products and, to a much lesser extent, through
joint ventures, dry bulk cargoes (primarily iron, ore, coal and grain). The
Company operates in both international and U.S. shipping markets.

     PRINCIPLES OF CONSOLIDATION--The consolidated financial statements include
all domestic and foreign subsidiaries which are more than 50 percent owned by
OMI. All significant intercompany accounts and transactions have been eliminated
in consolidation.

     Investments in joint ventures, in which the Company's interest is 50
percent or less and where it is deemed that the Company's ownership gives it
significant influence over operating and financial policies, are accounted for
by the equity method.

     ACCOUNTING ESTIMATES--The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosures 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.

     OPERATING REVENUES AND EXPENSES--Voyage revenues and expenses are
recognized on the percentage of completion method of accounting based on voyage
revenues earned and voyage costs incurred to date as compared to estimated
totals. Estimated losses on voyages are provided for in full at the time such
losses become evident.

     Effective January 1, 1997, special survey and drydock expenses are
accounted for using the prepaid method. Under the prepaid method, expenses are
capitalized and amortized over the survey cycle, which is generally a two to
three year period. Prior to 1997, special survey and drydock expenses were
accrued and charged to operating expenses over the survey cycle, which is
generally a two to three year period. The accruals of such expenses were based
on management's best estimates of future costs and the expected length of the
survey cycle. However, the ultimate liability may have been more or less than
such estimates. (See Note 3).

     CAPITAL CONSTRUCTION FUND--The Capital Construction Fund ("CCF") is
restricted to provide for replacement vessels, additional vessels or
reconstruction of vessels built in the United States.

     VESSELS AND OTHER PROPERTY--Vessels and other property are recorded at
cost. Depreciation for financial reporting purposes is provided principally on
the straight-line method based on the estimated useful lives of the assets up to
the assets' estimated salvage value. The useful lives of the vessels range from
20 to 30 years. Salvage value is based upon a vessel's lightweight tonnage
multiplied by a scrap rate.

     Expenditures for maintenance, repairs and minor renewals are expensed.
Major replacements and renewals are capitalized. In the event that facts and
circumstances indicate that the carrying value of a vessel may be impaired, an
evaluation of recoverability is performed. If an evaluation is required, the

                                        8


<PAGE>

                           OMI CORP. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
                     (ALL TABULAR AMOUNTS ARE IN THOUSANDS)


NOTE 1--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

estimated future undiscounted cash flows associated with the vessel are compared
to the vessel's carrying value to determine if a writedown to fair value or
discounted cash flow is required (see Note 14).

     Interest costs incurred during the construction of vessels (until the
vessel is substantially complete and ready for its intended use) are
capitalized. Interest capitalized was $2,207,000 in 1997 and $71,000 in 1996. No
interest was capitalized in 1995.

     Leasehold improvements are amortized on the straight-line method over the
terms of the leases or the estimated useful lives of the improvements as
appropriate.

     GOODWILL--Goodwill, included in Other Assets and Deferred Charges,
recognized in business combinations accounted for as purchases, of $17,868,000
before accumulated amortization of $5,525,000 and $4,662,000 at December 31,
1997 and 1996, respectively, is being amortized over 25 years. The carrying
value of goodwill is reviewed periodically based on the estimated future
undiscounted cash flows of the entity acquired over the remaining amortization
period in order to ensure that the carrying value of goodwill has not been
impaired.

     EARNINGS (LOSS) PER COMMON SHARE--In 1997 the Financial Accounting
Standards Board issued Statement of Accounting Standards No. 128 ("SFAS 128")
"Earnings per Share" which the Company adopted for both interim and annual
reports. SFAS 128 specifies the computation, presentation, and disclosure
requirements for earnings per share ("EPS"). It replaces the presentation of
primary and fully diluted EPS with basic and diluted EPS. Basic EPS excludes the
dilutive effect of stock options. It is based upon the weighted average number
of common shares outstanding during the period. Diluted EPS reflects the
potential dilution that would occur if securities or other contracts to issue
common stock were exercised or converted into common stock.

     FEDERAL INCOME TAXES--OMI files a consolidated Federal income tax return
which includes all its domestic subsidiary companies. Deferred income taxes are
determined on the asset and liability method in accordance with SFAS No. 109,
"Accounting for Income Taxes" (see Note 8).

     CASH FLOWS--Cash equivalents represent liquid investments which mature
within 90 days. The carrying amount approximates fair value.

     During the years ended December 31, 1997, 1996 and 1995 interest paid
totaled approximately $16,423,000, $23,791,000 and $24,688,000 respectively.
Income taxes of $12,208,000 were paid in 1997. There were no income taxes paid
during 1996 or 1995.

     RECLASSIFICATIONS--Certain reclassifications have been made to the 1996 and
1995 financial statements to conform to the 1997 presentation.

     STOCK BASED COMPENSATION--Effective January 1, 1996, the Company adopted
Statement of Financial Accounting Standards No. 123 ("SFAS 123"), "Accounting
for Stock-Based Compensation." SFAS 123 requires expanded disclosures of
stock-based compensation arrangements with employees and encourages (but does
not require) companies to record estimated fair values for stock-based employee

                                       9


<PAGE>

                           OMI CORP. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
                     (ALL TABULAR AMOUNTS ARE IN THOUSANDS)


NOTE 1--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

compensation plans. The Company has chosen to continue to account for
stock-based compensation using the intrinsic value method prescribed in
Accounting Principles Board Opinion No. 25 "Accounting for Stock Issued to
Employees" and has disclosed the required pro forma effect on net income (loss)
and net income (loss) per share (see Note 10).

     NEWLY ISSUED ACCOUNTING STANDARDS--In 1997 Statement of Financial
Accounting Standards No. 130 ("SFAS 130") "Reporting Comprehensive Income" was
issued. The Company is required to adopt SFAS 130 for fiscal 1998.

     Also in 1997 Statement of Financial Accounting Standards No. 131 ("SFAS
131"), "Disclosures about Segments of an Enterprise and Related Information" was
issued. SFAS 131 requires public enterprises to disclose information relating to
segments of their operations using a management approach. The Company has
elected early adoption of this accounting standard and the required information
is presented in Note 16.

NOTE 2--RESTRUCTURING

     OMI has agreed to acquire Marine Transport Lines, Inc. ("MTL"), a privately
owned company specializing in U.S. marine and transportation services,
principally to the energy and chemical industries, for approximately $5,000,000
payable in common stock of the Company as constituted prior to the transaction
defined in the following paragraph plus a number of additional shares sufficient
to give the owners of MTL approximately an additional 30 percent of the shares
of the Company as constituted following that transaction, (subject to certain
adjustments described in the agreement between OMI and MTL).

     In connection with the acquisition of MTL, OMI plans to spin off, as a tax
free distribution to shareholders, the entity owning and operating its foreign
assets and operations ("New OMI"). New OMI will retain the OMI name and will be
managed by OMI's current management. The combined OMI-MTL entity ("New MTL")
will use the MTL name and will be managed by MTL's current management. Upon
completion of the acquisition and the spin off, holders of OMI shares prior to
the transaction will own approximately 69 percent of the outstanding shares of
New MTL, as well as substantially all outstanding shares of New OMI. Former MTL
shareholders will hold approximately 31 percent of the outstanding shares of New
MTL.

     The transaction is subject to a number of conditions, any of which may be
waived by OMI, including the receipt by OMI of a favorable private letter ruling
from the Internal Revenue Service and OMI shareholder approval. OMI filed a
request for a private letter ruling in September 1997 and the transaction is
expected to close in May or June 1998 after the ruling is received and the
shareholders approve the acquisition of MTL.

     DIVIDENDS--Any determination to pay dividends in the future by New OMI and
New MTL will be at the discretion of the respective boards of directors of these
companies and will be dependent upon their results of operations, financial
condition, capital restrictions, covenants and other factors deemed relevant by
the boards of directors.

     Currently, the payment of dividends by OMI is restricted by the credit
agreements which will be assumed by New OMI after the spin off.

                                       10


<PAGE>

                           OMI CORP. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
                     (ALL TABULAR AMOUNTS ARE IN THOUSANDS)


NOTE 2--RESTRUCTURING (CONTINUED)

     EMPLOYEE BENEFITS--Immediately prior to the acquisition of MTL and the spin
off of New OMI, OMI Corp. will transfer to New OMI the employment of all
employees. OMI Corp. currently has a 401(k) Plan (the "Plan") which is available
to full-time employees who meet the Plan's eligibility requirements (see Note
9). The Plan will be amended prior to the spin off to terminate the sponsorship
by OMI and substitute New OMI as Plan sponsor effective as of the spin off.

NOTE 3--ACCOUNTING CHANGE FOR SPECIAL SURVEY AND DRYDOCK EXPENSES

     Effective January 1, 1997, the Company changed its method of accounting for
special survey and drydock expenses from the accrual method to the prepaid
method. Special survey and drydock expenses had been accrued and charged to
operating expenses over the vessel's survey cycle, which is generally a two to
three year period. Under the prepaid method, survey and drydock expenses are
capitalized and amortized over the period until the next survey cycle.
Management believes the prepaid method better matches costs with revenues, and
minimizes any significant changes in estimates associated with the accrual
method. The cumulative effect of this accounting change is shown separately in
the consolidated statement of operations and resulted in income of $13,797,000
(net of income tax provision of $7,429,000), or $0.32 per share.

     The cumulative effect of this change in accounting principle as of January
1, 1997 on the Company's balance sheet was to increase total assets by
$11,318,000, decrease total liabilities by $2,479,000 and increase total
stockholders' equity by $13,797,000.

     The years ended December 31, 1996 and 1995, respectively, were previously
presented using the accrual method of accounting. Pro forma amounts for these
periods assuming the prepaid method had been retroactively applied are
summarized as follows:

                                                           FOR THE YEARS ENDED
                                                               DECEMBER 31,
                                                          ---------------------
                                                            1996         1995
                                                          --------     --------
Income (loss) before extraordinary loss ...............   $    224     $(30,307)
                                                          ========     ========
Net loss ..............................................   $ (2,548)    $(30,307)
                                                          ========     ========
Basic and diluted earnings (loss) per common share:

Income (loss) before extraordinary loss ...............   $   0.01     $  (0.99)
                                                          ========     ========

Net loss ..............................................   $  (0.08)    $  (0.99)
                                                          ========     ========

                                       11


<PAGE>


                           OMI CORP. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
                     (ALL TABULAR AMOUNTS ARE IN THOUSANDS)


NOTE 4--EARNINGS (LOSS) PER COMMON SHARE

     The computation of basic earnings per share is based on the weighted
average number of common shares outstanding during the year. The computation of
diluted earnings per share assumes the foregoing and the exercise of all stock
options using the treasury stock method and the conversion of the 7% convertible
note due 2004 (See Note 6).

     The components of the denominator for the calculation of basic earnings per
share and diluted earnings per share are as follows:

<TABLE>
<CAPTION>

                                                              YEARS ENDED DECEMBER 31,
                                                           ------------------------------
                                                             1997       1996       1995
                                                           --------   --------   --------
<S>                                                        <C>        <C>        <C>
Basic earnings per share:
  Weighted average common shares outstanding ..........     42,914     33,440     30,745
                                                           =======    =======    =======
Diluted earnings per share:
  Weighted average common shares outstanding ..........     42,914     33,440     30,745
  Options .............................................         --        454         --
                                                           -------    -------    -------
Weighted average common shares-diluted ................     42,914     33,894     30,745
                                                           =======    =======    =======
Basic earnings (loss) per common share:
  Net (loss) income before extraordinary loss and
    cumulative effect of change in accounting
    principle .........................................    $ (0.07)   $  0.19    $ (1.04)
Extraordinary loss, net of income tax  benefit ........         --      (0.09)        --
Cumulative effect of change in accounting
  principle, net of income tax provision ..............       0.32         --         --
                                                           -------     ------    -------
Net income (loss) per common share ....................    $  0.25    $  0.10    $ (1.04)
                                                           =======    =======    ======= 
Diluted earnings (loss) per common share:
  Net income (loss) before extraordinary loss and
    cumulative effect of change in accounting
    principle .........................................    $ (0.07)   $  0.18    $ (1.04)
  Extraordinary loss, net of income tax benefit .......         --      (0.08)        --
  Cumulative effect of change in accounting
    principle, net of income tax provision ............       0.32         --         --
                                                           -------    -------    -------
Net income (loss) per common share ....................    $  0.25    $  0.10    $ (1.04)
                                                           =======    =======    =======
</TABLE>

     The effect of the assumed conversion of the 7% convertible note due 2004
was not included in the computation of diluted earnings per share because the
effect was antidilutive. Options were not included in the computation except in
1996 since their effect was also antidilutive.

                                       12


<PAGE>

                           OMI CORP. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
                     (ALL TABULAR AMOUNTS ARE IN THOUSANDS)


NOTE 5--INVESTMENTS IN JOINT VENTURES

     The operating results of the joint ventures have been included in the
accompanying consolidated financial statements on the basis of ownership as
follows:

                                                                   PERCENT OF
                                                                   OWNERSHIP
                                                                   ----------
Amazon Transport, Inc. ("Amazon") ...............................    49.0
Ecomarine USA ...................................................    49.0(1)
Gainwell Investments Ltd. .......................................    25.0
Geraldton Navigation Company Inc. ("Geraldton") .................    49.9
Grandteam Ship Management Ltd. ..................................    50.0(2)
Kanejoy Corporation ("Kanejoy") .................................    49.9
Mosaic Alliance Corporation ("Mosaic") ..........................    49.9(3)
Ocean Specialty Tankers Corp. ("OSTC") ..........................    50.0(4)
OMI-Heidmar Shipping Ltd. .......................................    50.0
Vanomi Management, Inc. .........................................    50.0(2)
White Sea Holdings Ltd. ("White Sea") ...........................    49.0
Wilomi, Inc. ("Wilomi") .........................................    49.0(5)

(1)  Joint venture interest was sold in December 1995.

(2)  The Company transferred its joint venture interest to the other joint
     venturer on January 9, 1997. 

(3)  Partner's interest was acquired on December 10, 1997.

(4)  Joint venture interest was sold August 14, 1996.

(5)  Partner's interest retired on December 30, 1996.


     On December 30, 1996, the interest in Wilomi owned by an affiliate of
Anders Wilhelmsen & Co. of Oslo, Norway ("Wilhelmsen") was reacquired by the
venture for net assets with a book value of $46,449,000 consisting of one
vessel, a vessel under construction, cash and other assets, net of long-term
debt of $27,340,000 and certain other liabilities, and Wilomi became a 100
percent owned subsidiary of OMI. The excess of the carrying value of net assets
transferred to Wilhelmsen over the book value of its equity interest in the
venture of $17,295,000 was charged to capital surplus.

     In September 1997, Mosaic sold a vessel to one of its joint venture
partners (the majority shareholder) at a loss, of which OMI's proportionate
share was $5,244,000. On December 10, 1997, Mosaic acquired that shareholder's
interest in the venture for cash of $32,332,000 and 50.1 percent of the stock in
its subsidiary Kanejoy, with a book value of $3,501,535, and Mosaic became a 100
percent owned subsidiary of OMI.

     Summarized combined financial information pertaining to all affiliated
companies accounted for by the equity method is as follows:

                                                FOR THE YEARS ENDED DECEMBER 31,
                                                --------------------------------
                                                  1997        1996        1995
                                                --------    --------    --------
Results of operations:

Revenues .....................................  $ 41,804    $ 94,938    $123,256
Operating income .............................    10,762      13,446      23,488
(Loss) gain on disposal of assets-net ........    (8,765)       (254)      1,791
Cumulative effect of change in accounting
  principle ..................................     1,196          --          --
Net income ...................................     2,502       6,187      15,587


                                       13


<PAGE>


                           OMI CORP. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
                     (ALL TABULAR AMOUNTS ARE IN THOUSANDS)


NOTE 5--INVESTMENTS IN JOINT VENTURES (CONTINUED)

                                                        DECEMBER 31,
                                                   ----------------------
                                                     1997          1966
                                                   --------      --------
Net Assets:
  Current assets ...............................   $ 21,757      $ 35,916
  Vessels and other property-net ...............     75,382       129,235
  Other assets .................................      3,091         3,329
                                                   --------      --------
Total assets ...................................    100,230       168,480
                                                   --------      --------
Less:
  Current liabilities ..........................      9,184        11,765
  Long-term debt ...............................     37,159        39,213
  Other liabilities ............................        191           227
                                                   --------      --------
Total liabilities ..............................     46,534        51,205
                                                   --------      --------
Shareholders' and partners' equity .............   $ 53,696      $117,275
                                                   ========      ========


     During 1995, and until August 14, 1996, OMI chartered three vessels to OSTC
for $26,099,000 and $15,814,000, respectively. These amounts are included in
revenues of OMI as the operations of OSTC were not consolidated (See Note 15).

     During 1997, 1996 and 1995 OMI received dividends from White Sea of
$735,000, $368,000 and $539,000, respectively.

     Certain of the loan agreements to which the Company's joint ventures are
party contain restrictive covenants requiring minimum levels of net worth,
maintenance of specified financial ratios and collateral values, and restrict
the ability of the joint ventures to pay dividends to the Company. These loan
agreements also contain various provisions restricting the right of the joint
ventures to make certain investments, to place additional liens on their
property, to incur additional long-term debt, to make certain payments
(including in certain instances, dividends), to merge or to undergo a similar
corporate reorganization, and to enter into transactions with affiliated
companies.

NOTE 6--LONG-TERM DEBT AND CREDIT ARRANGEMENTS

     Long-term debt consists of the following:

<TABLE>
<CAPTION>

                                                                          DECEMBER 31,
                                                                     ----------------------
                                                                       1997          1996
                                                                     --------      --------
<S>                                                                  <C>           <C>     
10.25% unsecured Senior Notes due 2003(1) .........................  $  6,827      $  6,827
Mortgage notes and loans under bank credit
  agreements secured by vessels:
    Mortgage notes at variable rates above the London
    Interbank Offering Rate ("LIBOR") in varying
      installments to 2004(2) .....................................    53,999        90,171
Credit Agreement at LIBOR plus 1.75 percent due January 1998 (3) ..       --         92,150
Loans under bank credit agreements at variable rates
  above LIBOR(2) ..................................................    99,090        45,000
7% convertible note due 2004 ......................................     3,000         3,000
                                                                     --------      --------
Total .............................................................   162,916       237,148
Less current portion of long-term debt ............................    16,575        34,892
                                                                     --------      --------
Long-term debt ....................................................  $146,341      $202,256
                                                                     ========      ========
</TABLE>

                                       14


<PAGE>


                           OMI CORP. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
                     (ALL TABULAR AMOUNTS ARE IN THOUSANDS)


NOTE 6--LONG-TERM DEBT AND CREDIT ARRANGEMENTS (CONTINUED)

(1)  On July 12, 1996, OMI completed its cash tender offer for the purchase at
     par of its outstanding Notes (see below).

(2)  Rates at December 31, 1997 and 1996 ranged from 6.45 percent to 7.2123
     percent and 6.25 percent to 7.125 percent, respectively.

(3)  Rates at December 31, 1996 were 7.4365 percent and 7.6875 percent.

     Aggregate maturities during the next five years from December 31, 1997 are
$16,575,000, $5,898,000, $6,250,000, $6,646,000 and $9,029,000.

     In January 1996, the Company repurchased $14,050,000 of its outstanding
Notes. On July 12, 1996, OMI completed its cash tender offer for the purchase at
par of its outstanding Notes. Of the $136,950,000 outstanding aggregate amount
of its Notes, $130,123,000 was tendered for payment pursuant to the offer and
$6,827,000 remain outstanding. An extraordinary loss of $2,772,000 (net of an
income tax benefit of $1,493,000) or $.09 per share was recorded for the early
extinguishment of debt. The purchase of the Notes in connection with the cash
tender offer was financed by a new credit agreement described below.

     In July 1996, to fund the purchase of its Notes, finance the purchase of a
vessel and refinance secured indebtedness on two vessels and certain other
indebtedness, the Company signed a $167,750,000 credit agreement with two
foreign banks as co-arrangers. This agreement, which was renegotiated in March
1997, had a balance of $92,150,000 at December 31, 1996.

     In March 1997, OMI signed a revolving credit/term loan agreement providing
for a credit facility in the amount of $133,000,000 not to exceed 70 percent of
the fair market value of the vessels securing the loan. The Company had an
outstanding balance of $99,090,000 under this credit facility at December 31,
1997 which was secured by mortgages on eleven vessels with a book value
aggregating $181,098,000. The notes under the credit facility bear interest at
LIBOR plus a margin ranging from 60-95 basis points which is computed based on
the Company's funded debt to equity ratio and interest coverage ratio. The
agreement which expires in March 2002 provides for nine semi-annual reductions
in the credit facility; the first five are $5,500,000, the next four are
$8,875,000 and the balance is due at maturity. As long as the available balance
of the credit facility exceeds the outstanding loan balance and the collateral
tests are met, current amortization is not required. However, the amounts
classified as current maturities of long-term debt at December 31, 1997 include
two reductions aggregating $11,000,000 as the Company intends to make such
payments. In the event any vessels collateralizing the agreement are sold, the
credit facility shall be reduced by up to 100 percent of the sale proceeds;
however, the Company is permitted to substitute another vessel as collateral.
The credit facility contains financial covenants with respect to required levels
of cash, interest rate coverage, net worth and ratio of funded debt to equity.
Dividends paid in any year are limited to 50 percent of net income in that year.

     During October 1997, the Company signed agreements with lenders for two new
revolving credit facilities in the amounts of $50,000,000 and $75,000,000. These
revolving credit facilities are to be used to finance, on an interim basis, the
acquisition of vessels and will be secured by such vessels. Amounts drawn on the
revolving credit facilities are to be repaid no later than six months after
drawdown. The revolving credit facilities will bear interest at LIBOR plus a
margin ranging from 55-80 basis points which is computed based on the
Company's funded debt to total capitalization ratio and interest coverage ratio.
The new revolving credit facilities contain the same financial covenants as the
facilities described above.

     At December 31, 1997, vessels with a net book value of $253,103,000
(including the $181,098,000 mentioned above) have been pledged as collateral on
long-term debt issues.

     Certain of the loan agreements of the Company's subsidiaries contain
restrictive covenants requiring minimum levels of cash or cash equivalents,
working capital and net worth, maintenance of specified financial ratios and
collateral values, and restrict the ability of the Company's subsidiaries to pay
dividends to the Company. These loan agreements also contain various provisions
restricting the right of OMI and/or its subsidiaries to make certain
investments, to place additional liens on the property of certain of OMI's

                                       15


<PAGE>

                           OMI CORP. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
                     (ALL TABULAR AMOUNTS ARE IN THOUSANDS)


NOTE 6--LONG-TERM DEBT AND CREDIT ARRANGEMENTS (CONTINUED)

subsidiaries, to incur additional long-term debt, to make certain payments, to
merge or to undergo a similar corporate reorganization, and to enter into
transactions with affiliated companies.

     OMI has entered into interest rate swap agreements to manage interest costs
and the risk associated with changing interest rates. The Company had
outstanding three interest rate swap agreements with commercial banks at
December 31, 1997 and 1996. These agreements effectively change the Company's
interest rate exposure on floating rate loans to fixed rates ranging from 6.91
percent to 8.475 percent. The differential to be paid or received is recognized
as an adjustment to interest expense over the lives of the agreements. The swap
agreements have various maturity dates from February 1998 to June 1999. The
changes in the notional principal amounts are as follows:

                                                            DECEMBER 31,
                                                       ---------------------
                                                         1997         1996
                                                       -------       -------
Notional principal amount, beginning of year .......   $52,700       $32,700
Maturity/termination of swaps ......................   (20,000)           --
New swap agreements ................................        --        20,000(1)
                                                       -------       -------
Notional principal amount, end of year .............   $32,700       $52,700
                                                       =======       =======


(1) Swap acquired as part of the Wilomi transaction (see Note 4).

Interest expense pertaining to interest rate swaps for the years ended December
31, 1997, 1996 and 1995 was $765,000, $799,000 and $786,000, respectively.

     The Company is exposed to credit loss in the event of non-performance by
other parties to the interest rate swap agreements. However, OMI does not
anticipate non-performance by the counter-parties. The Company has granted the
counter-party to two swap agreements a second priority mortgage on one of its
vessels as security.

NOTE 7--FAIR VALUE OF FINANCIAL INSTRUMENTS

     The estimated fair values of the Company's financial instruments are as
follows:

                                                     DECEMBER 31,
                                      ------------------------------------------
                                              1997                  1996
                                      -------------------   --------------------
                                      CARRYING     FAIR     CARRYING      FAIR
                                       VALUE       VALUE     VALUE        VALUE
                                      --------   --------   --------    --------
Cash and cash equivalents ........... $ 32,489   $ 32,489   $ 47,877    $ 47,877
Capital Construction Fund ...........   10,969     10,969     10,283      10,283
Total debt ..........................  162,916    163,903    237,148     237,612
Unrecognized financial instruments:
  Interest rate swaps in a net
    payable position ................               1,058                  1,576


     The fair value of the Company's Notes, included in long-term debt, is
determined by using the quoted market price at the end of the reporting period.
The fair value of other long-term debt is estimated based on the current rates
offered to the Company for similar debt of the same remaining maturities. The
fair value of interest rate swaps (used for purposes other than trading) is the
estimated amount the Company would receive or pay to terminate swap agreements
at the reporting date, taking into account current interest rates and the
current credit-worthiness of the swap counter-parties.

                                       16


<PAGE>


                           OMI CORP. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
                     (ALL TABULAR AMOUNTS ARE IN THOUSANDS)


NOTE 7--FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED)

     Securities available-for-sale included in the Capital Construction Fund
consist of the following components:

<TABLE>
<CAPTION>

                                                                DECEMBER 31,
                                              -----------------------------------------------
                                                      1997                     1996
                                              ---------------------    ----------------------
                                              CARRYING   UNREALIZED    CARRYING    UNREALIZED
                                               VALUE        LOSS         VALUE        LOSS
                                              --------   ----------    --------    ----------
<S>                                           <C>          <C>         <C>           <C>
Capital Construction Fund:
  Cash equivalents........................... $   299                  $   146
  Preferred stocks...........................   3,070      $ (33)        3,037       $ (67)
  Time deposit...............................   7,600                    7,100
                                              -------      ------      -------       ------
Total........................................  10,969        (33)       10,283         (67)
Deferred income taxes........................                 11                        23
                                                           ------                    ------
Unrealized loss on securities--net...........              $ (22)                    $ (44)
                                                           ======                    ======
</TABLE>


NOTE 8--INCOME TAXES

     A summary of the components of the benefit (provision) for income taxes on
income excluding the cumulative effect of change in accounting principle and the
extraordinary loss is as follows:

<TABLE>
<CAPTION>

                                                            FOR THE YEARS ENDED DECEMBER 31,
                                                            --------------------------------
                                                              1997        1976       1995
                                                            -------     -------     -------
<S>                                                         <C>         <C>         <C>    
Current (provision) benefit ............................    $(6,804)    $   (13)    $ 5,651
Deferred tax benefit ...................................      6,984      (2,258)     13,322
                                                            -------     -------     -------
Benefit (provision) for income taxes....................    $   180     $(2,271)    $18,973
                                                            =======     =======     =======
</TABLE>


     The benefit (provision) for income taxes varies from the statutory rates
due to the following:

<TABLE>
<CAPTION>

                                                            FOR THE YEARS ENDED DECEMBER 31,
                                                            --------------------------------
                                                              1997        1996       1995
                                                            -------     -------     -------
<S>                                                         <C>         <C>         <C>    
Benefit (provision)  at statutory rate....................  $ 1,103     $(2,961)    $17,804
Minority interest in (income) loss of subsidiary..........      (61)       (679)        123
Equity in (loss) earnings of joint ventures (other than
  Amazon/White Sea) net of dividends declared.............   (1,114)      1,148       1,876
Decrease (increase) in valuation allowance................       --         525        (525)
Other.....................................................      252        (304)       (305)
                                                            -------     -------     -------
Benefit (provision) for income taxes......................  $   180     $(2,271)    $18,973
                                                            =======     =======     =======
</TABLE>

                                       17


<PAGE>


                           OMI CORP. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
                     (ALL TABULAR AMOUNTS ARE IN THOUSANDS)


NOTE 8--INCOME TAXES (CONTINUED)

     The components of deferred income taxes relate to the tax effects of
temporary differences as follows:

                                                               DECEMBER 31,
                                                          ---------------------
                                                            1997         1996
                                                          --------     --------
Deferred tax liabilities:
 Difference between book and tax basis in assets ......   $50,843      $58,653
 Capital Construction Fund ............................     3,839        3,622
 Previously excluded foreign income ...................     8,105        8,105
 Prepaid drydock costs ................................     2,980           --
                                                          -------      -------
   Total deferred tax liabilities .....................    65,767       70,380
                                                          -------      -------
Deferred tax assets:
 Unrealized losses on investments .....................    (1,673)      (1,673)
 Reserve for drydocking ...............................        --       (3,101)
 Deferred foreign deficits ............................      (117)        (574)
 Difference between book and tax basis                
  of investments in Amazon/White Sea ..................       488         (626)
 Other ................................................      (201)        (598)
                                                          -------      -------
   Total deferred tax assets ..........................    (1,503)      (6,572)
                                                          -------      -------
Deferred income taxes .................................   $64,264      $63,808
                                                          =======      =======
                                                   
     The Company has not provided deferred income taxes on its equity in the
undistributed earnings of foreign corporate joint ventures accounted for under
the equity method other than those of Amazon and White Sea because these
earnings are considered by management to be invested in the business for an
indefinite period. If the earnings were not considered indefinitely invested,
approximately $6,502,000 of additional deferred tax liabilities would have been
required at December 31, 1997.

     In connection with the restructuring described in Note 2, the Company
estimates that the distribution of the net assets and operations of the foreign
business to shareholders of OMI will result in Federal income taxes becoming
currently payable by OMI of approximately $4,000,000 representing Federal income
taxes on previously excluded foreign ("Subpart F") income and on the
distribution of shares to non U.S. shareholders. As management believes that New
OMI will not be subject to any additional income taxes, including taxes
applicable to future operations of this foreign business as a Marshall Islands
Corporation, the remaining balance of deferred income taxes applicable to such
operations of approximately $33,000,000 of deferred income taxes applicable to
such operations will be credited to income.

NOTE 9--EMPLOYEE STOCK OWNERSHIP PLAN, RETIREMENT AND DEFERRED COMPENSATION

     Under an Employee Stock Ownership Plan ("ESOP"), shares were allocated
annually to eligible participants based on a percentage of their annual salaries
up to the extent allowable by the Internal Revenue Code. Unearned Compensation
from ESOP in the accompanying Consolidated Statements of Changes in
Stockholders' Equity represents the cost of unallocated shares held by the ESOP
trust. At December 31, 1995, all shares were allocated by the trust and, in
1996, the Company merged the ESOP and the existing 401(k) Plan.

     The Company has a 401(k) Plan (the "Plan") which is available to full-time
employees who meet the Plan's eligibility requirements. This Plan is a defined
contribution plan, which permits employees to make contributions up to ten
percent of their annual salaries with the Company then matching up to the first
three

                                       18


<PAGE>


                           OMI CORP. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
                     (ALL TABULAR AMOUNTS ARE IN THOUSANDS)


NOTE 9--EMPLOYEE STOCK OWNERSHIP PLAN, RETIREMENT AND DEFERRED
        COMPENSATION (CONTINUED)

percent in 1996 and six percent in 1997. The Company may elect to make
additional contributions to the Plan at the discretion of the Company's Board of
Directors. Company contributions were $528,000, $511,000 and $171,000 in 1997,
1996 and 1995, respectively. The Company elected to make a three percent
discretionary contribution included in 1996 contributions aggregating $251,000.

     In addition, certain domestic subsidiaries make contributions to union
sponsored multi-employer pension plans covering seagoing personnel.
Contributions to these plans amounted to approximately $200,000, $531,000 and
$751,000 for 1997, 1996, and 1995, respectively. If these subsidiaries were to
withdraw from the plans or the plans were to terminate, the subsidiaries would
be liable for a portion of any unfunded plan benefits that might exist. The
Company does not believe that it has any withdrawal liability as of December 31,
1997.

NOTE 10--STOCK OPTION AND RESTRICTED STOCK PLANS

     The Company currently has five option plans; the 1995 Equity Incentive Plan
("1995 Plan"), the 1995 Stock Option Plan for Non-Employee Directors
("Directors' Plan"), the 1990 Equity Incentive Plan ("1990 Plan"), the 1984
Incentive Stock Option Plan and the 1986 Non-Qualified Stock Option Plan.

     In 1995, the shareholders approved the 1995 Plan. The total number of
shares that may be optioned or awarded under the 1995 Plan is 1,000,000 shares
of OMI common stock. No further options may be granted under the 1990 Plan;
432,000 shares are reserved with respect to options granted under this plan. The
Company also has a 1986 Non-Qualified Stock Option Plan which provided for the
granting of up to 500,000 shares. No options may be granted under this plan
after April 3, 1996.

     Under the 1995 Plan, the Company may grant incentive and non-qualified
stock options, stock appreciation rights ("SARs") and restricted shares. SARs
entitle a recipient the alternative of electing to cancel the related stock
option, and to receive instead an amount in cash, stock or a combination of cash
and stock equal to the difference between the option price and the market price
of the Company's stock on the date on which the SARs are exercised. Under all
plans, the option price per share may not be less than the fair market value of
a share at the date of grant.

     In 1997, no options were awarded. During 1996 and 1995, the Company awarded
options to acquire an aggregate of 10,000 shares and 591,000 shares,
respectively. The options granted are non-qualified stock options and vest
equally over a three year period from the date of grant. No SARs were issued in
1996 or 1995. In September 1997, in anticipation of the restructuring described
in Note 2, the Board of Directors amended the 1995 plan to provide that all
outstanding options were deemed vested. During 1997 and 1995 the Company awarded
50,000 and 110,000 restricted shares, respectively, all under the 1995 Plan. The
restrictions on these shares awarded lapse equally over a five year period.

     The total number of shares of OMI common stock allocated to the Directors'
Plan was 300,000 shares. During 1995, the Company awarded options to acquire an
aggregate of 150,000 shares under this Plan. Each option permits the
non-employee director, for a period of up to ten years from the date of grant,
to purchase from the Company 30,000 shares. Options become exercisable equally
over a three year period. The initial option exercise price is not less than the
fair market value at the date of grant. The option exercise price with respect
to the shares which become exercisable on the second and third anniversary of
the date of grant increase by 15 percent over the option exercise price
applicable to shares which first became exercisable in the year immediately
preceding each such anniversary date.

     Proceeds received from the exercise of the options are credited to the
capital accounts. Compensation expense relating to SARs is recorded with respect
to the rights based upon the quoted market value of the shares and exercise
provisions. Benefits to net income relating to SARs and/or options for the years
ended

                                       19


<PAGE>

                           OMI CORP. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
                     (ALL TABULAR AMOUNTS ARE IN THOUSANDS)


NOTE 10--STOCK OPTION AND RESTRICTED STOCK PLANS (CONTINUED)

December 31, 1996 and 1995 were $43,000 and $17,000, respectively. There was no
effect on net income in 1997.

     A summary of the changes in shares under option for all plans is as
follows:

                                                                        WEIGHTED
                                                                         AVERAGE
                                        NUMBER OF                       EXERCISE
                                         OPTIONS      OPTION PRICE        PRICE
                                        ---------  ------------------   --------
Outstanding at January 1, 1995 .......     915     $4.25  to  $ 9.875    $ 5.71
 Granted .............................     741      5.38  to    6.690      6.17
 Exercised ...........................    (259)     4.25  to    5.125      4.96
 Forfeited ...........................     (35)     4.50  to    9.875      7.63
                                         -----
Outstanding at December 31, 1995 .....   1,362      4.25  to    9.875      6.04
 Granted .............................      10      7.50                   7.50
 Exercised ...........................    (150)     4.25  to    6.310      5.16
 Forfeited ...........................     (46)     6.31  to    9.875      6.64
                                         -----
Outstanding at December 31, 1996 .....   1,176      4.50  to    9.875      6.23
 Exercised ...........................    (325)     4.50  to    9.875      6.15
 Forfeited ...........................     (40)     6.31  to    9.875      8.30
                                         -----
Outstanding at December 31, 1997 .....     811      4.50  to    9.875      6.16
                                         =====

     The Company applies Accounting Principles Board Opinion No. 25 and related
Interpretations in accounting for its stock option plans. Accordingly, no
compensation cost has been recognized for its stock option plans. Had
compensation cost for the Company's stock option plans been determined based on
the fair value at the grant dates for awards under those plans consistent with
the methods recommended by SFAS 123, the Company's net income (loss) and net
income (loss) per share for the years ended December 31, 1997, 1996 and 1995
would have been stated at the pro forma amounts indicated below:

                                                  1997      1996       1995
                                                -------    ------    --------
  Net income (loss):
      As reported ...........................   $10,827    $3,417    $(31,896)
      Pro forma .............................    10,547     2,942     (32,265)

  Basic and diluted earnings (loss) per
    common share:
      As reported ...........................   $  0.25    $ 0.10    $  (1.04)
      Pro forma .............................      0.24      0.09       (1.05)

The fair value of options granted under the Company's stock option plans during
1997, 1996 and 1995 was estimated on the dates of grant using the Black-Scholes
option-pricing model with the following weighted-average assumptions used: no
dividend yield, expected volatility of 36 percent, risk free average interest
rates of 5.5 percent and 6.04 percent for 1996 and 1995, respectively, and
expected lives of five years.

See Note 11 regarding "Change in Control."

                                       20


<PAGE>


                           OMI CORP. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
                     (ALL TABULAR AMOUNTS ARE IN THOUSANDS)


NOTE 11--EMPLOYMENT AGREEMENTS

     The Company's Separation Allowance Program provides for severance benefits
to all non-union employees other than non-resident aliens, leased employees,
directors who are not employees of the Company or employees with individual
severance plans in the event there is a change of control in OMI and such
employees are thereafter terminated without cause or transferred or their
position is significantly changed. Severance benefits include a lump-sum payment
equal to the employee's average monthly wages immediately prior to the date of
termination times the lesser of 24 or one for each year of full-time employment
by the Company (but not less than six).

     The Company has employment agreements with its Chairman and all executive
officers. Each of the employment agreements provide that if the employee is
terminated without cause or, except for the Chairman, voluntarily terminates his
employment within 90 days of a relocation or reduction in compensation or
responsibilities, such employee will continue to receive base salary and other
benefits until December 31, 1998 or twelve months from the date of termination,
whichever is later. The Chairman's contract terminates in December 31, 2001 and
the Company has an option to terminate the contract at December 31, 1999. In
addition, if any such employee is terminated without cause (other than for
reasons of disability) within two years of a Change of Control (as defined in
the Company's Separation Allowance Program), the Company will pay such employee
an amount equal to three times the sum of his then current base salary and the
incentive bonus to which the employee is entitled. 

     In February 1998, the Company learned that a U.S. institutional investor
had acquired in excess of 20 percent of the Company's outstanding common stock.
The schedules filed by the investor with the Securities and Exchange Commission
("SEC") indicated that such shares were acquired solely for investment purposes
and not to achieve control of the Company.

     Various employee compensation plans and agreements of the Company have
provisions stating that a change in control of OMI will be deemed to occur when
any person or entity becomes the beneficial owner of 20 percent or more of OMI's
outstanding voting securities. Upon a change in control, these plans and
agreements provide that (a) restrictions on restricted stock lapse, (b)
outstanding unexercised stock options are canceled and, in one plan, the Company
is obligated to pay the holders of such options cash equal to the difference
between the fair market value of the shares under the canceled options at the
time of the change in control and the exercise price, and (c) cash payments
equal to prior year bonuses be made to officers with employment agreements.

     The Board of Directors did not believe that acquisition of a 20 percent or
greater interest by an institutional investor acquiring such interest for
investment purposes should be considered a change in control for purposes of the
Company's compensation plans and agreements. The Board caused the Company to
amend all the affected plans and agreements retroactive to October 1, 1997 to
provide that a change in control will not be deemed to have occurred for the
purposes specified under each such plan and agreement if the person or entity
becoming the beneficial owner represents that it has acquired the ownership
interest for investment purposes (maintains a Schedule 13G pursuant to Rule
13d-1 under the Securities Exchange Act of 1934) rather than for purposes of
attaining control (as would be demonstrated upon the filing by such investor of
a Schedule 13D with the SEC). The Company has received acceptance and agreement
of this retroactive change from substantially all affected individuals and has
concluded that a change in control has not occurred except under OMI's
Separation Allowance Program. However, no payments under that program are made
unless an employee is terminated as a result of the change in control.

                                       21


<PAGE>

                           OMI CORP. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
                     (ALL TABULAR AMOUNTS ARE IN THOUSANDS)


NOTE 12--COMMON STOCK OFFERING

     In December 1996, the Company completed a public offering of 11,500,000
shares of its common stock at a public offering price of $7.00 per share (the
"Offering"). Approximately $59,732,000 of the net proceeds from the Offering
were used to pay a portion of the Company's indebtedness under its $167,750,000
Credit Agreement and approximately $16,000,000 was used for downpayments on
contracts to build new vessels (see Note 17).

NOTE 13--OPERATING LEASES

     Time charters to third parties of the Company's owned vessels are accounted
for as operating leases. Minimum future revenues by year, to be received
subsequent to December 31, 1997 on these time charters, are as follows:

            1998 ..................................    $ 38,181
            1999 ..................................      19,657
            2000 ..................................      20,230
            2001 ..................................      20,804
            2002 ..................................      21,377
                                                       --------
                Total .............................    $120,249(1)
                                                       ======== 

(1) Minimum future revenues for later years are not included above due to the
    charterers' options to continue the leases at such dates.

     On January 31, 1997, the Company sold and leased back (under a time charter
agreement terminating December 31, 2002) the OMI COLUMBIA (a domestic vessel)
for $49,000,000 of which $9,000,000 is in the form of an 8.172 percent interest
bearing note receivable. The Company has a purchase option for the vessel at
fair market value at the expiration of the lease. The gain on the sale of
$24,700,000 has been deferred and is being credited to income as an adjustment
to operating lease expense over the term of the lease.

     In May 1997, the Company sold the ALTA (a crude oil tanker) for
approximately $39,900,000 and leased back the vessel for five years. The gain on
the sale of approximately $15,700,000 has been deferred and is being credited to
income as an adjustment to operating lease expense over the term of the lease.
The lessor has the option to cancel the lease after two years and the payment of
a $1,000,000 termination fee.

     Total rental expense amounted to $58,927,000, $39,899,000 and $47,840,000
for the years ended December 31, 1997, 1996 and 1995, respectively. Leases are
primarily for vessels and office space.

     The future minimum rental payments required by year, under operating leases
subsequent to December 31, 1997, are as follows:

1998 .................................. $ 63,192 
1999 ..................................   50,818
2000 ..................................   37,556
2001 ..................................   22,979 
2002 ..................................   15,506 
                                        -------- 
     Total............................. $190,051(2)
                                        ======== 

(2)  Minimum future rental payments for later years are not included above due
     to the Company's option to continue the leases at such dates.

                                       22


<PAGE>

                           OMI CORP. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
                     (ALL TABULAR AMOUNTS ARE IN THOUSANDS)


NOTE 14--IMPAIRMENT AND PROVISION FOR LOSS ON LEASE OBLIGATION

     As part of OMI's periodic review in 1995 of the recoverability of its
investment in its vessels, the Company determined that the carrying value of two
of its U.S. flag product carriers operating in foreign markets exceeded their
undiscounted forecasted future net cash flows from operations. These losses were
measured by the excess of the carrying value of the vessels over their estimated
fair values which were based on values provided by ship brokers. It was
determined that impairment losses for these vessels should be recognized and the
carrying values of the vessels were reduced by $8,707,000 in 1995. The reduction
is reported as a separate item in the accompanying Consolidated Statements of
Operations.

     In October 1995, the Company entered into an agreement with the
owner/lessor of the OMI HUDSON to terminate the operating lease and to purchase,
or to cause the sale of the vessel to a designated purchaser, for approximately
$30,000,000 (see Note 15). The termination of the lease was completed on
February 29, 1996 at which time the Company paid the lessor a $25,000,000
cancellation fee consisting of $22,000,000 cash and a convertible note of
$3,000,000 (see Note 6). The loss on the termination of the lease, in the amount
of $6,687,000, was charged to earnings in 1995. On March 20, 1996, the Company
purchased the vessel for $9,300,000 in cash and the assumption of $19,570,000 of
indebtedness secured by the vessel.

NOTE 15--DISPOSAL OF ASSETS

     In March 1996, the Company delivered the OMI SACRAMENTO to new owners as
part of an exchange transaction. The vessel ELBE, which was acquired in the
exchange transaction was previously owned by a company 49.9 percent owned by
OMI. In August 1996, the Company sold the OMI HUDSON, the OMI STAR, the OMI
DYNACHEM and its interest in OSTC to Hvide Marine, Inc. ("Hvide"). Of the
$64,650,000 sale price, OMI received approximately $30,000,000 in cash and Hvide
assumed $34,650,000 of debt which had been secured by mortgages on two of the
vessels. On September 30, 1996, Petrolink sold three workboats for $11,600,000
in cash resulting in a gain of $9,708,000. In December 1996, OMI contracted to
sell the GENERAL, its liquid petroleum gas carrier which was delivered March 12,
1997 for a gain of approximately $1,000,000. The net book value of the vessel
was included in vessels held for sale at December 31, 1996.

     On February 3, 1998, the Company entered into an agreement for the sale of
the TANANA for $45,500,000. The vessel will be delivered to the new owners in
August 1998.

     Gain on disposal of assets-net consists of the following:

                                                FOR THE YEARS ENDED DECEMBER 31,
                                                --------------------------------
                                                  1997       1996        1995
                                                -------    --------    ---------

Gain (loss) on sale of vessels and workboats .. $  995     $ 9,603     $(3,288)
(Loss) gain on sale of marketable securities ..     --         (72)      8,586
Net loss on sale of CCF investments ...........     --          --        (467)
Disposal of joint venture interests ...........     --         142         649
Net gain (loss) on disposal of other assets ...   (125)        980          --
Gain on sale of long-term securities ..........     --         500          --
                                                ------     -------     -------
  Total ....................................... $  870     $11,153     $ 5,480
                                                ======     =======     =======


                                       23


<PAGE>
                           OMI CORP. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
                     (ALL TABULAR AMOUNTS ARE IN THOUSANDS)

NOTE 16--FINANCIAL INFORMATION RELATING TO DOMESTIC AND FOREIGN 
         OPERATIONS

      The Company organizes its business principally into three segments. These
segments and their respective operations are as follows:

      DOMESTIC - Includes U.S. Flag vessels, OMI Petrolink Corporation, OMI Ship
      Management, Inc., and corporate expenses which are unallocated to
      operations of particular vessels.

      PRODUCT CARRIER FLEET - Includes vessels that normally carry refined
      petroleum products such as gasoline, naphtha and kerosene.

      CRUDE OIL TANKER FLEET - Includes vessels that normally carry crude oil
      and "dirty" products.

      The following is a summary of the operations by major operating segments
for the years ended December 31, 1997, 1996, and 1995:

                                             FOR THE YEARS ENDED DECEMBER 31,
                                          --------------------------------------
                                            1997          1996          1995
                                          ---------     ---------     ---------
TOTAL REVENUES:
Domestic .............................    $  89,914     $ 122,792     $ 148,430
Foreign:
  Product Carrier Fleet ..............       67,919        54,950        47,149
  Crude Oil Tanker Fleet .............       72,678        49,985        37,662
  All Other ..........................        1,388         6,357         7,008
Eliminations .........................         (245)         (201)         (369)
                                          ---------     ---------     ---------
     Total ...........................    $ 231,654     $ 233,883     $ 239,880
                                          =========     =========     =========

OPERATING INCOME:
Domestic .............................    $ (17,929)    $   5,041     $ (42,112)
Foreign:
  Product Carrier Fleet ..............       19,126        10,358         7,702
  Crude Oil Tanker Fleet .............       14,468         4,842        (6,553)
  All Other ..........................      (11,316)         (503)        2,449
                                          ---------     ---------     ---------
     Total ...........................    $   4,349     $  19,738     $ (38,514)
                                          =========     =========     =========

IDENTIFIABLE ASSETS:
Domestic .............................    $ 419,666     $ 390,197     $ 457,107
Foreign:
  Product Carrier Fleet ..............      201,126       211,285       176,115
  Crude Oil Tanker Fleet .............      164,344       129,460        65,504
  All Other ..........................       47,204        97,116       135,430
Eliminations .........................     (313,753)     (275,776)     (268,670)
                                          ---------     ---------     ---------
     Total ...........................    $ 518,587     $ 552,282     $ 565,486
                                          =========     =========     =========

CAPITAL EXPENDITURES:
Domestic .............................    $   3,173     $  12,792     $  18,493
Foreign:
  Product Carrier Fleet ..............        9,241        26,274        19,208
  Crude Oil Tanker Fleet .............       45,620        11,634           439
  All Other ..........................          436            70          --
                                          ---------     ---------     ---------
    Total ............................    $  58,470     $  50,770     $  38,140
                                          =========     =========     =========
DEPRECIATION AND AMORTIZATION:
Domestic .............................    $   6,269     $  12,307     $  17,113
Foreign:
  Product Carrier Fleet ..............       13,597        10,509         9,923
  Crude Oil Tanker Fleet .............        8,179         6,155         6,119
  All Other ..........................          899         1,477         1,579
                                          ---------     ---------     ---------
    Total ............................    $  28,944     $  30,448     $  34,734
                                          =========     =========     =========
INTEREST EXPENSE:
Domestic .............................    $   9,087     $  14,941     $  12,533
Foreign:
  Product Carrier Fleet ..............        7,742         8,177         3,523
  Crude Oil Tanker Fleet .............        2,008         1,422         1,422
  All Other ..........................        2,006         7,313        13,079
Eliminations .........................       (8,594)       (5,391)       (3,849)
                                          ---------     ---------     ---------
    Total ............................    $  12,249     $  26,462     $  26,708
                                          =========     =========     =========

     All other identifiable assets includes investments in, and advances to
joint ventures, cash held by foreign subsidiaries, allocations of assets to
foreign subsidiaries, and a liquid petroleum gas carrier.

     Mortgage debt of OMI and its related interest expense have been allocated
to Foreign activities based upon the value of the vessel collateralizing the
debt. Interest relating to unsecured debt has been allocated to Foreign
activities based on the value of encumbered vessels available to collateralize
such debt had it been secured debt.

     General and administrative expense included in determining operating income
includes an allocation of costs of corporate administrative services provided by
Domestic. The foreign segments are charged a fixed amount per month per vessel
for vessel management and accounting activities and is charged 1.25 percent of
revenues earned by each vessel for commercial management. General corporate
activities, such as salaries (other than those included in the aforementioned
fees), legal, accounting, communications and other administrative expenses were
allocated based on the services provided to the segment. Rent expense was
allocated based on the number of employees included in the corporate allocation.
Management believes the methods for allocating expenses are reasonable.


                                       24

<PAGE>

                           OMI CORP. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONCLUDED)
                     (ALL TABULAR AMOUNTS ARE IN THOUSANDS)


NOTE 16--FINANCIAL INFORMATION RELATING TO DOMESTIC AND 
         FOREIGN OPERATIONS (CONTINUED)

     The operating losses pertaining to domestic operations for the year ended
December 31, 1995 include the provisions for impairment of vessels and losses on
lease obligation (see Note 12).

     In 1997 revenues from one customer accounted for approximately 11 percent
of voyage revenues. There were no charterers that were considered to be major
customers in the years ending December 31, 1996 and 1995.

NOTE 17--COMMITMENTS AND CONTINGENCIES

   
     OMI and certain subsidiaries are defendants in various actions arising from
shipping operations. Such actions are covered by insurance or, in the opinion of
management, after review with its general counsel, are of such nature that the
ultimate liability, if any, would not have a material adverse effect on the
consolidated financial statements.
    

     The Company is currently a defendant in an arbitration arising from alleged
defects in a vessel sold to a third party. The claim exceeds $7,000,000 and
encompasses damages for repairs to the vessel, lost revenues, interest and
costs. The Company believes the claim to be without merit. However, an adverse
decision could have a material adverse affect on the Company.

     The Company is constructing five doubled-hulled Suezmax tankers, with an
option for two more; four for a cost of approximately $54,000,000 per vessel and
one for approximately $50,000,000. One of these vessels will be delivered
mid-1998, two in the third quarter of 1998, one in the first quarter of 1999 and
one in the second quarter of 2000. On February 26, 1998, the Company contracted
with the same shipyard for the construction of two 35,000 dwt product carriers
at a cost of approximately $30,000,000 per vessel and a Suezmax tanker at a cost
of approximately $50,000,000. The product carriers, which are time chartered out
for two years, are to be delivered in the second half of 1999, and the Suezmax
tanker will be delivered in May 2000.

     OMI acts as a guarantor for a portion of the debt incurred by a joint
venture with affiliates of its joint venture partner. Such debt was
approximately $17,542,000 at December 31, 1997 with OMI's guaranty of such debt
being approximately $8,744,000.

     The Company and its joint venture partners have committed to fund any
working capital deficiencies which may be incurred by their joint venture
investments. In 1997, OMI and its partners advanced $787,000 in the form of non
interest bearing loans to cover operating expenses of a new joint venture, OMI's
portion of the loan was $393,000.

NOTE 18--SUBSEQUENT EVENT

     On March 9, 1998 OMI purchased the remaining 9.29 percent interest in OMI
Petrolink for $2,600,000 and Petrolink became a 100 percent owned subsidiary of
OMI.

                                       25

<PAGE>

INDEPENDENT AUDITORS' REPORT


To the Board of Directors and Stockholders of OMI Corp.:


     We have audited the accompanying consolidated balance sheets of OMI Corp.
and its subsidiaries as of December 31, 1997 and 1996 and the related
consolidated statements of operations, stockholders' equity and cash flows for
each of the three years in the period ended December 31, 1997. Our audits also
included the financial statement schedules listed in Item 14. These financial
statements and financial statement schedules are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements and financial statement schedules based on our audits.

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

     In our opinion, such consolidated financial statements present fairly, in
all material respects, the financial position of the companies at December 31,
1997 and 1996, and the results of their operations and their cash flows for each
of the three years in the period ended December 31, 1997 in conformity with
generally accepted accounting principles. Also, in our opinion, such financial
statement schedules, when considered in relation to the basic consolidated
financial statements taken as a whole, present fairly, in all material respects,
the information set forth therein.

     As disclosed in Note 3 to the consolidated financial statements, the
Company changed its method of accounting for special survey and drydock expenses
from the accrual method to the prepaid method.


DELOITTE & TOUCHE LLP


New York, New York
March 9, 1998

                                       26

<PAGE>

ITEM 8 SUPPLEMENTARY DATA
<TABLE>
<CAPTION>

                                      QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)
                                       (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

                                                     1997 Quarter Ended                           1996 Quarter Ended
                                         -------------------------------------------   -------------------------------------------
                                         March 31     June 30   Sept. 30     Dec. 31   March 31    June 30    Sept. 30      Dec. 31
                                         --------     -------   --------     -------   -------     -------    -------     --------
<S>                                      <C>          <C>       <C>          <C>       <C>         <C>        <C>         <C>     
Revenues ..............................  $59,156      $55,610   $ 54,618     $62,270   $61,838     $61,282    $58,599     $ 52,164
                                         -------      -------   --------     -------   -------     -------    -------     --------
Operating income (loss) ...............    3,438        2,738        878      (2,705)    5,425       3,501      6,221        4,591
Extraordinary gain (loss) net
  of income tax benefit ...............      --            --         --          --       361          --     (3,022)        (111)
Cumulative effect of change in
  accounting principle, net
  of income tax provision..............   13,797           --         --          --        --          --         --           --
                                         -------      -------   --------     -------   -------     -------    -------     --------
Net income (loss) .....................  $15,337      $ 2,410   $ (4,931)    $ 1,989   $   605     $   675    $ 2,046     $     91
                                         =======      =======   ========     =======   =======     =======    =======     ========
Basic earnings (loss) per common share:

Net income (loss) before
  extraordinary loss and
  cumulative effect of change in
  accounting principle ................  $  0.04      $  0.06   $  (0.11)    $ (0.05)  $  0.01     $  0.02    $  0.16     $   0.01

Extraordinary gain (loss), net of
  income tax benefit ...................      --           --         --          --      0.01        --        (0.10)       (0.01)

Cumulative effect of change in
  accounting principle, net of
  income tax provision .................    0.32           --         --          --        --          --         --           --
                                         -------      -------   --------     -------   -------     -------    -------     --------
Net income (loss) per common
  share (1) ............................ $  0.36      $  0.06   $  (0.11)    $ (0.05)  $  0.02     $  0.02    $  0.06     $   0.00
                                         =======      =======   ========     =======   =======     =======    =======     ========
Weighted average number of
  shares of common stock
  outstanding-basic ....................  42,783       42,856     42,956      43,056    31,199      31,499     31,558       35,821
                                         =======      =======   ========     =======   =======     =======    =======     ========
Diluted earnings (loss) per common
  share:

Net income (loss) before
  extraordinary loss and
  cumulative effect of change in
  accounting principle (1) ............. $  0.03      $  0.06   $  (0.11)    $ (0.05)  $  0.01     $  0.02    $  0.16     $   0.01
Extraordinary gain (loss), net of
  income tax benefit ...................      --           --         --          --      0.01        --        (0.10)       (0.01)
Cumulative effect of change in
  accounting principle, net of    
  income tax provision .................    0.32           --         --          --        --          --         --           --
                                         -------      -------   --------     -------   -------     -------    -------     --------

Net income (loss) per common
  share (1) ............................ $  0.35      $  0.06   $ (0.11)     $ (0.05)  $  0.02     $  0.02    $  0.06     $   0.00)
                                         =======      =======   ========     =======   =======     =======    =======     ========

Weighted average number of
  shares of common stock
  outstanding-diluted ..................  43,466       43,487    42,956       43,056    31,593      32,259     31,966       36,287
                                         =======      =======   ========     =======   =======     =======    =======     ========
</TABLE>


(1) Earnings per share are based on stand-alone quarters.

                                       27

<PAGE>

                         INDEX TO FINANCIAL STATEMENTS


                                                                          Page
                                                                          ----

AMAZON TRANSPORT INC.

Reports of Independent Auditors:
  Deloitte & Touche LLP ...............................................    1
  Arthur Andersen & Co. ...............................................    2
Balance Sheets as of December 31, 1997 and 1996 .......................    3
Statements of Operations for the three years ended December 31, 1997 ..    4
Statements of Cash Flows for the three years ended December 31, 1997 ..    5
Notes to Financial Statements .........................................    6
                                                                         

                                       28
<PAGE>

INDEPENDENT AUDITORS' REPORT

To the Stockholders of Amazon Transport, Inc.:

We have audited the accompanying statement of operations and statement of cash
flows of Amazon Transport, Inc. for the year ended December 31, 1995. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.

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

In our opinion, such financial statements present fairly, in all material
respects, the results of operations and cash flows of the Company for the year
ended December 31, 1995, in conformity with generally accepted accounting
principles.



DELOITTE & TOUCHE LLP


New York, New York
February 28, 1996


                                       F-1

<PAGE>

REPORT OF INDEPENDENT PUBLIC ACCOUNTANT

To the Stockholders of Amazon Transport, Inc.:


We have audited the accompanying balance sheets of Amazon Transport, Inc. as of
December 31, 1997 and 1996 and the related statements of operations and
statements of cash flows for each of the two years in the period ended December
31, 1997. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Amazon Transport Inc. as of
December 31, 1997 and 1996, and the results of its operations and its cash flows
for each of the two years ended December 31, 1997 in conformity with generally
accepted accounting principles.


         Arthur Andersen & Co.
         --------------------------------------------------------
         Morten Drake State Authorized Public Accountant (Norway)


Oslo, Norway February 23, 1998


                                       F-2

<PAGE>

                             AMAZON TRANSPORT, INC.
                                 BALANCE SHEETS

                                                         DECEMBER 31,
                                                 ------------------------------
                                                     1997              1996
                                                 -----------       ------------

ASSETS

CURRENTS ASSETS
Cash and cash equivalents ................       $ 3,786,565       $  2,382,368

Accounts receivable ......................         2,158,842            881,835
Bunkers ..................................           491,848            618,453
                                                 -----------       ------------
Total currents assets ....................         6,437,255          3,882,656
                                                 -----------       ------------

Long term assets

Vessel - net of accumulated
  depreciation ...........................        14,028,230         14,648,956
                                                 -----------       ------------
Total long term assets ...................        14,028,230         14,648,956
                                                 -----------       ------------
Total assets .............................       $20,465,485       $ 18,531,612
                                                 ===========       ============

LIABILITIES AND EQUITY

Current Liabilities

Payable to shareholders ..................       $        --       $  3,000,000
Accounts payable .........................         2,991,260          1,485,939
                                                 -----------       ------------
Total current liabilities ................         2,991,260          4,485,939
                                                 -----------       ------------
Total liabilities ........................         2,991,260          4,485,939
                                                 -----------       ------------

EQUITY

Share capital ............................               900                900

Accumulated result 1/1 ...................        14,044,773         16,950,101
Net income (loss) ........................         3,428,552         (2,905,328)
                                                 -----------       ------------
Total equity .............................        17,474,225         14,045,673
                                                 -----------       ------------
Total liabilities and equity .............       $20,465,485       $ 18,531,612
                                                 ===========       ============


                                        F-3

<PAGE>

                             AMAZON TRANSPORT, INC.
                            STATEMENTS OF OPERATIONS

                                          FOR THE YEARS ENDED DECEMBER 31,
                                   --------------------------------------------
                                        1997            1996            1995
                                   ------------    ------------    ------------

OPERATING INCOME AND COSTS

Gross freight ..................   $ 15,692,654    $ 10,841,157    $ 10,248,009
Voyage related costs ...........     (6,584,317)     (5,121,885)     (5,284,785)
                                   ------------    ------------    ------------
Net voyage revenue .............      9,108,337       5,719,272       4,963,224

Crew wages and social security .     (1,462,583)     (1,832,746)     (1,103,596)
Other operating costs ..........     (3,794,536)     (6,342,667)     (4,571,021)
                                   ------------    ------------    ------------
Profit before depreciation .....      3,851,218      (2,456,141)       (711,393)

Depreciation ...................       (620,726)       (620,726)       (620,619)
                                   ------------    ------------    ------------
Operating result ...............      3,230,492      (3,076,867)     (1,332,012)
                                   ------------    ------------    ------------
FINANCIAL INCOME AND COSTS:

Interest received ..............        200,267         174,453         119,588
Net gain (loss) on foreign
  exchange .......................         (311)         (1,648)             --
Other financial costs ..........         (1,896)         (1,266)             --
                                   ------------    ------------    ------------
Net financial items ............        198,060         171,539         119,588
                                   ------------    ------------    ------------
Net income (loss) ..............   $  3,428,552    $ (2,905,328)   $ (1,212,424)
                                   ============    ============    ============


                                        F-4

<PAGE>


                                            AMAZON TRANSPORT, INC.
                                           STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
                                                                         FOR THE YEARS ENDED DECEMBER 31,
                                                               -----------------------------------------------------
                                                                   1997                1996                 1995
                                                               -----------          -----------          -----------

<S>                                                            <C>                  <C>                  <C>
CASH FLOWS PROVIDED (USED) BY OPERATING ACTIVITIES

Net income (loss) ........................................     $ 3,428,552          $(2,905,328)         $(1,212,424)

Depreciation .............................................         620,726              620,726              620,619

Change in short term assets ..............................      (1,150,402)            (479,882)            (178,013)

Change in short term liabilities .........................       1,505,321              944,225            2,367,932
                                                               -----------          -----------          -----------
Net cash provided (used) by operating
  activities .............................................       4,404,197           (1,820,259)           1,598,114
                                                               -----------          -----------          -----------
CASH FLOW USED BY FINANCING ACTIVITIES
Repayment of loan to shareholders ........................      (3,000,000)                  --                   --
                                                               -----------          -----------          -----------
CASH FLOW USED BY INVESTING ACTIVITIES
Additions to vessel ......................................              --                   --              (17,265)
                                                               -----------          -----------          -----------
Net increase (decrease) in cash and cash
  equivalents ............................................       1,404,197           (1,820,259)           1,580,849

Cash and cash equivalents beginning of year ..............       2,382,368            4,202,627            2,621,778
                                                               -----------          -----------          -----------
Cash and cash equivalents end of year ....................     $ 3,786,565          $ 2,382,368          $ 4,202,627
                                                               ===========          ===========          ===========
</TABLE>


                                        F-5

<PAGE>

AMAZON TRANSPORT, INC.

NOTES TO FINANCIAL STATEMENTS
FOR THE THREE YEARS ENDED DECEMBER 31, 1997
--------------------------------------------------------------------------------

1.   COMPANY

     Amazon Transport, Inc. (the "Company" or "Amazon") is jointly owned by a
     subsidiary of Universal Bulk Carriers, Inc. ("UBC"), a wholly-owned
     subsidiary of OMI Corp. ("OMI"), and Bergesen d.y. A/S ("Bergesen") with
     interests of 49 and 51 percent, respectively. The Company began operating
     as a joint venture on December 3, 1988 for the purpose of owning and
     chartering commercial vessels. The Company owns and operates one vessel,
     the Settebello, for all years presented.

2.   SUMMARY OF SIGNIFICANT ACCOUNT POLICIES

     Accounting Estimates - The preparation of financial statements in
     conformity with generally accepted accounting principles requires
     management to make estimates and assumptions that affect the reported
     amounts of assets and liabilities and disclosures of contingent assets and
     liabilities at the date of the financial statements and the reported
     amounts of revenues and expenses during the reported period. Actual results
     could differ from those estimates.

     Operating Revenues and Expenses - Voyage revenues and expenses are
     recognized on the percentage of completion method of accounting based on
     voyage costs incurred to date to estimated total voyage costs. Estimated
     losses are provided in full at the time such losses become evident.

     Special survey and drydock expenses are accrued and charged to operating
     expenses over the survey cycle, which is generally a three year period. The
     accruals of such expenses are based on management's best estimates of
     future cost and the expected length of the survey cycle. However, the
     ultimate liability may be more or less than such estimates.

     Vessel - The vessel is recorded at cost. Depreciation is provided on the
     straight-line method based on the estimated 25 year useful life of the
     vessel up to the estimated salvage value. Salvage value is based upon the
     vessel's light weight tonnage multiplied by a scrap rate.

     Expenditures for maintenance, repairs and minor renewals are expensed.
     Major replacements and renewals are capitalized.

     In the event that facts and circumstances indicate that the carrying amount
     of the vessel may be impaired, an evaluation of recoverability is
     performed. If an evaluation is required, the estimated future undiscounted
     cash flows associated with the vessel are compared to the vessel's carrying
     value to determine if a writedown to fair value or discounted cash flow is
     required.

     Federal Income Taxes - No provision has been made for Federal income taxes.
     The income of the Company is not generally subject to tax as a result of
     various provisions of the Internal Revenue Code. Additionally, the country
     in which the Company is incorporated exempts shipping and maritime
     operations from taxation.


     Cash Flows - Cash equivalents represent liquid investments which mature
     within 90 days. The carrying amount approximates fair value. The Company
     paid no interest in 1997, 1996 or 1995.


                                        F-6

<PAGE>

3.   RELATED PARTY TRANSACTIONS

     The Company has entered into management service agreements with Bergesen,
     who act as technical and commercial managers of the Settebello. The Company
     paid Bergesen management fees of $256,204 for the year ended December 31,
     1997 and $250,000 for the year ended December 31, 1996.

     For the year ended December 31, 1995, the Company had management service
     agreements with UBC who acted as technical manager and Bergesen who acted
     as commercial manager. The Company paid UBC and Bergesen $85,001 and
     $125,001, respectively, for the year ended December 31, 1995.

     During 1997 the Company paid back the loan to the shareholders of
     $3,000,000.


                                        F-7