AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 31, 1998

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

                                   ----------

                                    FORM 10-K
               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 MARCH 24, 1998:
                                  $395,767,760

         NUMBER OF SHARES OF THE REGISTRANT'S COMMON STOCK OUTSTANDING
                             AS OF MARCH 24, 1998:
                                  43,076,763

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

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

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<PAGE>
<TABLE>
<CAPTION>
                                      INDEX

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                                     PART I
ITEMS                                                                           PAGE(S)
-----                                                                           -------
<S>        <C>                                                                   <C>
 1 and 2.  Business and Properties .............................................  1-13
 3.        Legal Proceedings ...................................................    14
 4.        Submission of Matters to a Vote of Security Holders .................    14
           Executive Officers of OMI ........................................... 15-17

                                     PART II

 5.        Market for OMI's Common Stock and Related Stockholder Matters .......    18
 6.        Selected Financial Data .............................................    19
 7.        Management's Discussion and Analysis of Financial Condition and
            Results of Operations .............................................. 20-29
 8.        Financial Statements and Supplementary Data ......................... 30-67
 9.        Changes in and Disagreements with Accountants on Accounting and
            Financial Disclosure ...............................................    68

                                    PART III

10.        Directors and Executive Officers of OMI .............................    68
11.        Executive Compensation ..............................................    68
12.        Security Ownership of Certain Beneficial Owners and Management ......    68
13.        Certain Relationships and Related Transactions ......................    68

                                     PART IV

14.        Exhibits, Financial Statement Schedules and Reports on Form 8-K ..... 68-70
           SIGNATURES ..........................................................    71
</TABLE>

                                       i

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                                     PART I

ITEMS 1 AND 2. BUSINESS AND PROPERTIES

GENERAL

     OMI Corp. ("OMI" or the "Company"), organized under the laws of the State
of Delaware on July 19, 1968, is currently located at 90 Park Avenue, New York,
New York pursuant to a sublease which expires in 1999. The telephone number is
(212) 986-1960.

     The Company has announced that it entered into an agreement to acquire
Marine Transport Lines, Inc. ("MTL"), a privately owned company specializing in
marine and transportation services, principally to the energy and chemical
industries. In connection with the acquisition of MTL, OMI plans to spin off to
shareholders a subsidiary owning and operating OMI's foreign assets ("New OMI").
Subject to certain exceptions, the spin off will be tax free to OMI and the
shareholders of OMI. New OMI will retain the OMI name and will be managed by
OMI's current management. OMI will change its name to Marine Transport Lines,
Inc. ("New MTL") and will be managed by MTL's current management. MTL
shareholders will receive OMI shares in exchange for their MTL ownership. For a
more complete description of the transaction, the conditions and certain other
items described herein, and the approvals being sought from shareholders,
shareholders are referred to OMI's 1997 Proxy Statement to be filed including
exhibits thereto, which is incorporated by reference.

     The following descriptions pertain primarily to historical events. Assuming
the consummation of the acquisition and spin off, the descriptions of the
Company herein will not be an accurate reflection of the Company following such
consummation.

     The Company is primarily engaged in the business of owning and operating
tankers. It has over the last several years been concentrating its efforts in
two distinct areas: Suezmax tankers, which carry approximately one million
barrels of crude oil and handysize (approximately 30,000 deadweight ton ("dwt"))
product carriers, which carry petroleum products. In concentrating its efforts,
it has reduced its ownership in U.S.

                                       1
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flag vessels (ownership has decreased by thirteen vessels since 1993) and has
been moving away from joint ownership in its international fleet. The Company
now owns six Suezmax tankers (one with a joint venture partner), has four on
time charter, has committed to sell one and has five Suezmax newbuildings on
order, three for delivery in 1998, one for delivery in 1999 and one for delivery
in 2000. The Company has options to acquire two additional Suezmax tankers. The
Company owns ten handysize product carriers and has two newbuildings on order.
The Company's existing fleet is as shown on the following table:
<TABLE>
<CAPTION>

                                                                                            DEAD-
                                                                                            WEIGHT       CHARTER
                                                                                YEAR        METRIC       EXPIRA-
             NAME OF VESSEL                          TYPE OF VESSEL           BUILT (1)     TONNAGE      TION (2)
             --------------                          --------------           ---------     -------      --------
             FOREIGN FLAG VESSELS:
                 <S>                                  <C>                       <C>         <C>            <C>
                 SETTLEBELLO (3)...................   Crude Oil Tanker          1986        322,446        Spot
                 WHITE SEA (4).....................   Crude Oil Tanker          1975        155,702        Spot
                 CAIRO SEA.........................   Crude Oil Tanker          1975        154,719        Spot
                 TRINIDAD SEA......................   Crude Oil Tanker          1974        154,605        Spot
                 CZANTORIA.........................   Crude Oil Tanker          1975        146,104        Spot
                 SOKOLICA..........................   Crude Oil Tanker          1975        145,649        Spot
                 TANANA (5)........................   Crude Oil Tanker          1992        141,720        Spot
                 COLORADO..........................   Crude Oil Tanker          1980         86,648        9/98
                 ELBE..............................   Product Carrier           1984         66,800       12/98
                 NILE..............................   Product Carrier           1981         65,755        9/98
                 VOLGA.............................   Product Carrier           1981         65,689        Spot
                 LIMAR.............................   Product Carrier           1988         29,999        Spot
                 SHANNON...........................   Product Carrier           1991         29,999        Spot
                 DANUBE............................   Product Carrier           1990         29,998        Spot
                 TRENT.............................   Product Carrier           1991         29,998        Spot
                 TIBER.............................   Product Carrier           1989         29,998        Spot
                 SEVERN............................   Product Carrier           1988         29,998        Spot
                 PAGODA............................   Product Carrier           1988         29,996        Spot
                 ALMA..............................   Product Carrier           1988         29,994        Spot
                 PAULINA...........................   Product Carrier           1984         29,993        Spot
                 PATRICIA..........................   Product Carrier           1984         29,993        Spot
                 MARITIME OMI (6)..................   Dry Bulk Carrier          1994         72,800        Spot
                                                                                          ---------
                 Total Foreign Owned Fleet: 22 Vessels................................    1,878,603
                          8 Chartered-in Crude Tankers (7)(8).........................      962,847
                                                                                          ---------
                          Total Foreign Flag Operating Fleet: 30 Vessels..............    2,841,450

             U.S. FLAG VESSELS:
                 PATRIOT...........................   Product Carrier 1976                   35,662       Laid Up
                 COURIER...........................   Product Carrier 1977                   35,662       Laid Up
                 ROVER.............................   Product Carrier 1977                   35,662       Laid Up
                                                                                          ---------
                          Total U.S. Flag Owned Fleet: 3 Vessels......................      106,986
                          1 Chartered-in Crude Tanker (7).............................      138,698
                                                                                          ---------
                          Total U.S. Flag Operating Fleet: 4 Vessels..................      245,684
                          Total OMI Operating Fleet: 34 Vessels.......................    3,087,134
                                                                                          =========
</TABLE>

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(1)  Weighted average age (based on carrying capacity) of the Company's owned
     fleet (including jointly-owned) at year-end 1997 is 15.4 years.

(2)  Expiration dates do not reflect charterers' options for extensions or
     cancellations or other contingencies.

(3)  Joint ownership with Bergesen d.y. A/S Norway.

(4)  Joint ownership with affiliates of Anders Wilhelmsen & Co., Oslo, Norway.

(5)  Under contract to be sold.

(6)  Joint ownership with an affiliate of International Maritime Carriers
     Limited ("IMC"), Hong Kong and chartered into pools operated by IMC.

(7)  Time chartered-in under charters expiring in 1998 through 2002.

(8)  Four tankers aggregating 361,760 dwt are time chartered by OMI Petrolink, a
     subsidiary which will be part of New MTL rather New OMI.

     A brief description of the functions of the various types of vessels owned
or operated by the Company is set forth below:

    Product Carrier  ---  Normally carries refined petroleum products such as
                          gasoline, naphtha and kerosene.

    Crude Oil Tanker ---  Normally carries crude oil and dirty products.

    Dry Bulk Carrier ---  Carries dry bulk products such as coal, ore, grain and
                          fertilizer.

     The change in the fleet from the previous year's list reflects (a) the
disposition of (i) two dry bulk carriers from a joint venture and (ii) the sale
and leaseback of one foreign flag Suezmax tanker, (b) the acquisition of one
handysize product carrier and (c) the chartering in of four Suezmax tankers
(including that referred to in (a) (ii) above), aggregating 601,087 dwt.

                                        3


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     The Company's movement toward concentrations in specific vessel categories
reflects management's belief that large concentrated fleets create strategic
advantages:

     First, the fleet will be more attractive to large customers by providing
better scheduling opportunities through substitution, thus creating the
potential to increase vessel utilization. Second, large and concentrated fleets
create economies of scale to efficiently spread the overhead costs associated
with environmental regulations and inspections. Third, operating expertise and
efficiency are enhanced by concentration in certain vessel classes. Fourth, the
Company believes that large customers will prefer to deal with a limited number
of large shipping companies with fleets that they have pre-vetted for quality,
rather than smaller shipping companies characteristic of the fragmented
international tanker market.

     Management believes that the Company maintains an ability to participate in
expected improvements in the international tanker market with its Suezmax
tankers while reducing its downside risk through the more stable cash flows
provided by product carriers. The Company also believes that Suezmax tankers
provide nearly the upside potential of VLCCs with less of the downside risk,
primarily because Suezmaxes have greater geographic flexibility than VLCCs.
Product carriers have historically provided the Company with relatively more
stable cash flows, even in weak markets. However, weakness in the product
carrier markets over the last six months, due to mild weather and reduced Asian
demand, has resulted in unusually low rates on a historical basis.

     There are two aspects to vessel operations, technical operation, which
involves maintaining, crewing and insuring the vessel, and commercial operation,
which involves arranging the business of the vessel. OMI is technical and
commercial operator of all its wholly-owned vessels. Technical and commercial
operation of the jointly-owned vessels is allocated to OMI or its joint venture
partner based primarily on the experience of the entity with the type and size
of vessel.

                                        4


<PAGE>


     The Company's vessels are available for charter on a voyage, time or
bareboat basis. Under a voyage charter, the operator of a vessel agrees to
provide the vessel for the transport of specific goods between specific ports in
return for the payment of an agreed-upon freight per ton of cargo or,
alternatively, for a named total amount. All operating costs are for the
operator's account. A single voyage (generally two to ten weeks) charter is
often referred to as a "spot market" charter. Vessels in the spot market may
also spend time idle or laid up as they await business. A voyage charter
involving more than one voyage with the same charterer is commonly known as a
"consecutive voyage" charter.

     A time charter involves the placing of a vessel at the charterer's disposal
for a set period of time during which the charterer may use the vessel in return
for the payment by the charterer of a specified daily or monthly hire rate. In
time charters, operating costs such as for crews, maintenance and insurance are
typically paid by the owner of the vessel and voyage costs such as fuel and port
charges are paid by the charterer.

     Under a bareboat charter, the charterer takes possession of the vessel in
return for a specified amount payable to the owner of the vessel. The bareboat
charterer must provide its own crew, pay all operating and voyage expenses and
is responsible for the operation and management of the vessel.

     Voyage, time and bareboat charters are available for varying periods,
ranging from a single trip to a long-term arrangement approximating the useful
life of the ship, to commercial firms (such as oil companies) and governmental
agencies, both foreign and domestic, on a worldwide basis. In general, a
long-term charter affords the vessel owner greater assurance that it will be
able to cover its costs (including depreciation, interest, and operating costs).
Operating the vessel in the spot market affords the owner greater speculative
opportunity, which may result in high rates when ships are in high demand or low
rates (possibly insufficient to cover costs) when ship availability

                                        5


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exceeds demand. Ship charter rates are affected by world economics,
international events, weather conditions, strikes, governmental policies, supply
and demand, and many other factors beyond the control of the Company.

     The Company operates its tankers in markets that have historically
exhibited seasonal variations in demand and, therefore, spot rates. Tanker
markets are typically stronger in the winter months as a result of increased oil
consumption in the northern hemisphere. In addition, unpredictable weather
patterns in the winter months tend to disrupt vessel scheduling. The oil price
volatility resulting from these factors has historically led to increased oil
trading activities. As a result, the Company's revenues have historically been
weaker during its second quarter.

     As of December 31, 1997, OMI's ships were subject to mortgages in the
aggregate principal amount of approximately $153,089,000 (not including debt of
jointly-owned ships). The Company and its joint venture partners are also
several guarantors, in proportion to their respective beneficial ownership, of
certain loan transactions relating to the joint ventures. The aggregate amount
of such guaranteed joint venture debt was approximately $17,542,000, with OMI's
share being approximately $8,744,000.

     As of March 9, 1998, the Company owns 100% of OMI Petrolink Corporation
("Petrolink"), a Houston-based company which renders lightering services for
large tankers in the U.S. Gulf. Petrolink charters-in, for varying term periods,
such vessels as are necessary to satisfy the needs of its customers. Lightering
is the business of transferring cargo from a larger vessel to smaller vessels
and delivering the cargo to ports which the larger laden vessel can not enter.

     The Company's wholly-owned subsidiary, OMI Ship Management, Inc., provides
technical services to the U.S. Maritime Administration for nine vessels in the
Ready Reserve Fleet Program under a multi-year contract. From time to time, OMI
Ship

                                        6


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Management also manages vessel conversion contracts for various U.S. government
agencies.

     Both Petrolink and OMI Ship Management will be part of New MTL following
the acquisition of MTL and spin off of New OMI.

CUSTOMERS

     One charterer accounted for 11% of OMI's consolidated revenues in 1997. No
other customer accounted for 10% or more of OMI's consolidated revenues. For
information about major customers, see Note 16 to OMI's Consolidated Financial
Statements.

U.S. SUBSIDIES

     Operating costs differentials favor foreign ships in worldwide commerce.
Until early 1997 the Company's remaining U.S. flag vessels were eligible to
receive operating subsidies from the U.S. government. All contracts for such
subsidies have expired and no further subsidies are expected other than existing
receivables. However, because United States laws restrict U.S. coastwise trade
(generally transport of cargo by sea from one U.S. port to another) to U.S.
built, U.S. flag ships, foreign flag ships cannot compete for U.S. coastwise
cargoes. All of the Company's U.S. flag vessels are eligible to participate in
this trade.

     The Merchant Marine Act, 1936, as amended (the "Merchant Marine Act"),
permits domestic shipping companies to establish a tax-deferred fund called a
Capital Construction Fund ("CCF") for such purposes as acquiring qualified
vessels for use in certain U.S. flag trades, reconstruction of existing vessels
and payment of principal on certain existing indebtedness. The Company maintains
a CCF. As of December 31, 1997, the balance in the CCF was $10,969,000.

                                        7


<PAGE>


REGULATIONS

     The Company is required by various governmental and quasi-governmental
agencies to obtain certain permits, licenses and certificates with respect to
its vessels. The kinds of permits, licenses and certificates required depend
upon such factors as the country of registry, the commodity transported, the
waters in which the vessel operates, the nationality of the vessel's crew, the
age of the vessel and the status of the Company as owner or charterer. The
Company believes that is has or can readily obtain all permits, licenses and
certificates necessary to permit its vessels to operate.

     In the operation of its U.S. flag vessels, the Company is subject to
various statutes and regulations, including the Merchant Marine Act. Under the
Merchant Marine Act, vessels owned by United States citizens are subject to
requisition by purchase or charter by the United States whenever the President
declares that the national security requires such action. The owner of any such
vessel must receive just compensation as provided in the Merchant Marine Act,
but there is not assurance that lost profits, if any, will be fully recovered.

     Additionally, U.S. law requires that, to be eligible for U.S. coastwise
trade, a corporation owning a vessel must be at least 75% U.S. owned. In order
to assure compliance with this citizenship requirement, the Restated Certificate
of Incorporation of the Company authorizes, and the Board of Directors has
adopted, a By-law authorizing the Board to determine a minimum percentage of
outstanding shares of common stock of the Company that must be held by U.S.
citizens. The minimum percentage established by the Board now stands at 77% and
officers of the Company have been authorized to set such percentage higher, if
deemed advisable. The Board has also adopted procedures for establishing the
citizenship of the Company's stockholders. The Company's stock certificates
(otherwise identical) are identified as "Domestic Share Certificates"
(certificates representing shares issued to United States citizens)

                                        8


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and "Foreign Share Certificates" (certificates representing shares issued to
persons who are non-U.S. citizens). Any purported transfer of shares represented
by a Domestic Share Certificate to a non-U.S. citizen that would cause the level
of ownership by U.S. citizens to drop below the minimum set by the Board of
Directors will not be recorded on the registration books of the Company and will
be ineffective to transfer the shares or any voting, dividend or other rights in
respect thereof. The By-laws authorize the Company to make all determinations
with respect to the validity of any transfer under these provision and any such
decision by the Company is final and binding.

     The Company's operations are also affected by U.S., state and foreign
environmental protection laws and regulations, particularly the U.S. Port and
Tanker Safety Act, the Act to Prevent Pollution from Ships, various volatile
organic compound emission requirements, the BCH Code for chemical carriers, the
IMO/USCG pollution regulations and various SOLAS amendments. Compliance with
such laws and regulations entail additional expense, including vessel
modifications and changes in operating procedures.

     The Oil Pollution Act of 1990 ("OPA") affects all vessel owners shipping
oil or hazardous material to, from, or within the U.S. The law phases out the
use of tankers having single hulls, effectively imposes on vessel owners and
operators unlimited liability in the event of a catastrophic oil spill and
establishes the Oil Spill Liability Trust Fund. OPA requires that tankers over
5,000 gross tons calling at U.S. ports have double hulls if contracted after
June 30, 1990, or delivered after January 1, 1994; furthermore, it calls for the
elimination of all single hull vessels by the year 2010 on a phase-in schedule
that is based on size and age, unless the tankers are retrofitted with double
hulls. The law permits existing single hull tankers to operate until the year
2015 if they discharge at deep water ports, such as the Louisiana Offshore Oil
Port ("LOOP"), or lighter more than 60 miles offshore. The International
Maritime Organization ("IMO") has adopted a regulation that requires tankers,
5,000 dwt and over contracted after July

                                        9


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6, 1993 to have double hull, mid-deck or equivalent design. Existing single hull
tankers will be phased-out unless they are retrofitted with double hull,
mid-deck or equivalent design no later than 30 years after delivery. Another IMO
regulation mandates that existing single hull crude oil tankers larger than
20,000 dwt and product tankers over 30,000 dwt without segregated ballast tanks
("SBT") must convert to SBT operations using at least 30% of their wing tanks,
or cargo tank bottom area, for this purpose by the age of 25 or be
hydrostatically-balance loaded in the wing tanks to provide equivalent oil
outflow abatement in the event of casualty. The U.S. has not accepted these IMO
regulations, as they recognize, in addition to double hull, other designs as
well as contain different phase out dates for existing single hull tankers which
are in conflict with provisions of OPA.

     Liability for an oil spill is governed not only by OPA, but also by the
laws, rules and regulations established by every coastal and inland waterway
state; Federal law does not preempt these state laws and provides that claims
made by state governments and other affected parties are not subject to
limitation of liability if the oil spill results from gross negligence, willful
misconduct or violation of any federal operating or safety standard. One result
of OPA has been to create greater prominence for those independent owners with a
reputation for high quality of technical management and well-maintained physical
assets. Another effect of the new law has been to increase costs for liability
insurance for vessel owners trading to the U.S. While the Company maintains
insurance at levels it believes prudent, the claim from a catastrophic spill
could exceed the insurance coverage available, in which event there could be a
material adverse effect on the Company.

     The Company believes that compliance with applicable environmental and
pollution laws and regulations has not had and is not expected to have a
material adverse effect upon its competitive position; however the Company's
financial position, value and useful life of its vessels and results of
operations may be affected as a result of OPA and other environmental laws and
regulations.

                                       10


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COMPETITION

     The Company competes with a small number of domestic and a large number of
foreign fleets. Both the domestic and foreign fleets include vessels owned by
independent operators and major oil companies; in addition, many foreign fleets
are government owned. Some of the Company's competitors have greater financial
resources than the Company.

     Competition in the ocean shipping industry varies primarily according to
the nature of the contractual relationship as well as with respect to the kind
of commodity being shipped. Federal regulations insulate domestic shipping from
direct competition with international shipping. Competition in virtually all
bulk trades, including crude oil, petroleum products and dry bulk (mainly coal,
grain and ore) is intense.

EMPLOYEES AND LABOR RELATIONS

     On December 31, 1997, the Company and its subsidiaries had approximately
700 employees, of whom approximately 625 were seagoing employees. The Company's
seagoing employees who serve aboard its U.S. flag vessels are covered by
collective bargaining agreements with various maritime unions, which expire in
2000. Together with other maritime employers, the Company is obligated through
these agreements to contribute to various multi-employer pension and health and
welfare and other plans. The Employee Retirement Income Security Act of 1974, as
amended, provides for liabilities for withdrawal from a multi-employer pension
plan if an employer reduces its operations below a minimum level. The failure or
withdrawal of any shipping company employer may cause other employers (such as
the Company) to increase their plan contributions. The Company does not believe
that it has any withdrawal liability as of December 31, 1997.

                                       11


<PAGE>


     The Company primarily uses hiring agents to crew its foreign flag vessels,
one of which recruits exclusively for the Company. Although agents sign labor
contracts with labor organizations in various foreign countries that represent
seagoing personnel from these countries, the Company is not a party to these
contracts. Some senior shipboard positions on foreign flag vessels are filled
directly by the Company.

     The Company considers its relationship with its employees, including its
seagoing crews, to be satisfactory.

VALUE OF ASSETS, CASH REQUIREMENTS AND TAXES

     Although the replacement costs of comparable new vessels are significantly
above the book value of OMI's fleet, the market value of OMI's fleet may be
below book value when market conditions are weak. In common with other
shipowners, OMI continually considers asset redeployment which could at time
include the sale of vessels at less than their book value.

     OMI's results of operations and cash flow may be significantly affected by
future charter markets since currently a small percentage of its tonnage
(including jointly-owned and time chartered vessels) is on charters extending
beyond year-end 1998.

     At December 31, 1997, net book values of vessels exceeded their tax bases
by approximately $118,500,000. Accordingly, if such vessels were
disposed of at prices at or near book value, the Company's current liability for
taxes on the resulting taxable gain would be substantial. See Note 8 to OMI's
Consolidated Financial Statements set forth in Item 8.

     The 1986 Tax Reform Act ("1996 Act") had a significant effect on the
taxation of income from U.S. controlled (over 50%) foreign shipping operations.
This change in the

                                       12


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tax law affected retained earnings applicable to OMI's international fleet
operations, other than the Company's joint ventures with overseas partners.
There is no basic change with respect to the exclusion from taxation of U.S.
controlled foreign companies' income earned and re-invested in foreign shipping
operations between January 1, 1976 and December 31, 1986; earnings prior to 1976
are not subject to taxes unless repatriated.

     Under the 1986 Act, effective January 1, 1987, earnings of U.S. controlled
foreign shipping companies are subject to U.S. income tax. As in the past,
disinvestment of qualified investments in foreign shipping operations (as
defined) can lead to taxation of past reinvested earnings; year end 1986 has
been established as a permanent base, with the amount of any decrease in assets
recorded at the end of subsequent years deemed to be taxable income in the
respective years, limited to the total amount reinvested from 1976 through 1986.
Shifting of earning assets to non-U.S. controlled (50% or less interest) foreign
companies could result in disinvestment.

     OMI assets have a low tax basis and a relatively large deferred tax
liability due to the following practices:

     Prior to enactment of the 1986 Act, OMI used accelerated depreciation for
tax purposes in determining earnings on its vessels. Accelerated depreciation on
foreign flag vessels is no longer permitted. Accelerated depreciation for tax
purposes is allowed on U.S. flag vessels. The tax on the difference between
accelerated and book depreciation is recorded as a deferred tax liability.

     OMI has employed monies held in its CCF, for the acquisition of qualified
U.S. flag tonnage. The depreciable tax base of such assets is reduced by the
amount of the tax savings related to the CCF monies employed.

                                       13


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ITEM 3. LEGAL PROCEEDINGS

     Except as hereinafter stated, OMI and its subsidiaries are not parties to
any material pending legal proceedings for damages, or related group of such
proceedings, other than ordinary routine litigation incidental to the business.

     OMI is a party, as plaintiff or defendant, in a variety of lawsuits for
damages arising principally from personal injuries or other casualties in the
ordinary course of the maritime business. All such personal injury and casualty
claims against OMI are covered by insurance (subject to deductibles which are
not material) including asbestosis related proceedings. However, one insurer of
asbestosis claims for a period from 1976 to 1982 is insolvent and if there were
to be judgments against the Company related to such period, the Company would be
effectively uninsured.

     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.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

     No matters were submitted to a vote of the security holders of the Company
during the fourth quarter of 1997.

                                       14


<PAGE>


                                   MANAGEMENT

     Set forth below is certain information with respect to the Company's
executive officers as of March 31, 1998.
<TABLE>
<CAPTION>

                                                                                                           YEAR
                                                                                                         APPOINTED
          NAME                                        AGE       POSITION                                 TO OFFICE
          ----                                        ---       --------                                 ---------
          <S>                                         <C>       <C>                                         <C>
          Craig H. Stevenson, Jr. ..................  44        Chief Executive Officer                     1993
                                                                and President

          Vincent J. de Sostoa .....................  53        Senior Vice President, Chief                1989
                                                                Financial Officer and Treasurer

          Fredric S. London ........................  50        Senior Vice President, General              1987
                                                                Counsel and Secretary

          Robert Bugbee ............................  37        Senior Vice President                       1995

          Henry Blaustein ..........................  55        Senior Vice President                       1997

          Kathleen C. Haines .......................  43        Vice President/Controller                   1994

          William A.G. Hogg ........................  60        Vice President                              1994

          Thomas M. Scott ..........................  41        Vice President                              1995

          Stavros Skopelitis .......................  51        Vice President                              1996
</TABLE>


     There is no family relationship by blood, marriage or adoption (not more
remote than first cousin (between any of the above individuals and any other
executive officer or any OMI director).

     The term of office of each officer is until the first meeting of directors
after the annual stockholders' meeting next succeeding his election and until
his respective successor is chosen and qualified.

     There are no arrangements or understandings between any of the above
officers and any other person pursuant to which any of the above was selected as
an officer.

                                       15


<PAGE>


     The following descriptions of occupations or positions that the executive
officers of the Company have held during the last five years:

     CRAIG H. STEVENSON, JR. became Chief Executive Officer effective January 1,
1997. He was appointed President in November 1995, having been elected Executive
Vice President and Chief Operating Officer in November 1994 and Senior Vice
President/Chartering of the Company in August 1993. For five years prior
thereto, he was President of Ocean Specialty Tankers Corp., a marketing manager
for several of the Company's U.S. flag chemical tankers.

     VINCENT J. DE SOSTOA was elected Chief Financial Officer in January 1994.
He was elected Senior Vice President/Finance of the Company in January 1989.

     FREDRIC S. LONDON was elected Senior Vice President of the Company in
December 1991. He was elected Vice President of the Company in December 1988.

     HENRY BLAUSTEIN was elected Senior Vice President in August 1997. He had
been a ship management consultant for the five preceding years.

     ROBERT BUGBEE was elected Senior Vice President in August 1995. He joined
the Company in February 1995. Prior thereto, he was Head of Business Development
at Gotaas-Larsen Shipping Corporation.

     KATHLEEN C. HAINES was elected Vice President and Controller of the Company
in January 1994. She was elected Assistant Vice President and Controller in
December 1992. Prior thereto, she was Assistant Controller.

     WILLIAM A. G. HOGG was elected Vice President of the Company in January
1994. He was elected Assistant Vice President of the Company in June 1987.

                                       16


<PAGE>


     THOMAS M. SCOTT was elected Vice President of the Company in February 1995.
He was Ship Manager starting in September 1991 and was elected Assistant Vice
President/Operations in 1993.

     STAVROS SKOPELITIS was elected Vice President and Economist of the Company
in May 1996. He was elected Assistant Vice President and Economist in January
1994. In 1987 he joined the Company as Economist.

                                       17


<PAGE>
                                    PART II

ITEM 5. MARKET FOR OMI CORP.'S COMMON STOCK AND RELATED
        STOCKHOLDER MATTERS

COMMON STOCK

     The Company listed for trading on the New York Stock Exchange all of its
common stock on March 13, 1992 (NYSE-OMM). Previously, the Company's common
stock initially traded on the over-the-counter market on January 4, 1984, began
trading on the NASDAQ National Market System on February 18, 1986, and on
January 27, 1989 was listed for trading on the American Stock Exchange. As of
March 27, 1998, the number of holders of OMI common stock was approximately
3,937. The high and low sale prices of the common stock, as reported by the New
York Stock Exchange, were as follows:
<TABLE>
<CAPTION>

            1997 Quarter                      1st                2nd             3rd                4th
            ------------                    --------------------------------------------------------------
            <S>                             <C>                 <C>            <C>                 <C>
            High                            11 1/4              10 5/8          14 1/2              13 3/4
            Low                              8 1/4               9               9 1/2               9 1/8
<CAPTION>

            1996 Quarter                      1st                2nd             3rd                4th
            ------------                    --------------------------------------------------------------
            <S>                             <C>                 <C>            <C>                 <C>
            High                             8 1/8               8 7/8           8 3/4              9 1/4
            Low                              5 5/8               7 1/2           6 7/8              6 1/2
</TABLE>


PAYMENT OF DIVIDENDS TO STOCKHOLDERS

     On June 15, 1993, the Board voted to declare special dividends rather than
adhere to a regular dividend policy and no dividends have been paid since that
time. Payment of dividends is limited by the terms of certain agreements to
which OMI and its subsidiaries are party. (See Note 6 to Consolidated Financial
Statements.)

                                       18

<PAGE>

ITEM 6.  SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>

                                               OMI CORP. AND SUBSIDIARIES
                                        (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)


                                                                       FOR THE YEARS ENDED DECEMBER 31,

                                                         --------------------------------------------------------------
                                                           1997          1996        1995        1994           1993
                                                         ---------    ---------    ---------   ---------      ---------
<S>                                                      <C>          <C>          <C>         <C>            <C>
INCOME STATEMENT DATA:
  Net voyage revenues (1) ............................   $  50,050    $  58,319    $  19,626   $  37,817      $  49,392
                                                         =========    =========    =========   =========      =========
  Total revenues .....................................   $ 231,654    $ 233,883    $ 239,880   $ 266,796      $ 270,479
                                                         ---------    ---------    ---------   ---------      ---------
Operating expenses:
  Vessel and voyage ..................................     121,498      129,204      171,730     141,133        140,967
  Operating leases ...................................      52,865       38,055       41,233      82,407         75,421
  Depreciation and amortization ......................      28,944       30,448       34,734      37,770         35,441
  Provision for losses:
  Impaired value of vessels ..........................        --           --          8,707      14,798           --
  Lease obligation ...................................        --           --          6,687      19,800           --
  General and administrative .........................      23,998       16,438       15,303      18,972         16,748
                                                         ---------    ---------    ---------   ---------      ---------
Total operating expenses .............................     227,305      214,145      278,394     314,880        268,577
                                                         ---------    ---------    ---------   ---------      ---------
Operating income (loss) ..............................       4,349       19,738      (38,514)    (48,084)         1,902
Gain on disposal of assets-net .......................         870       11,153        5,480      10,222          4,401
Provision for writedown of investments ...............        --           --           --         1,250          1,625
Interest expense .....................................      12,249       26,462       26,708      28,808         21,788
Equity in operations of joint ventures ...............         737        2,482        5,528       5,402          5,544
(Loss) income before extraordinary loss and
  cumulative effect of change in accounting
  principle ..........................................      (2,970)       6,189      (31,896)    (37,865)        (8,747)
Extraordinary loss-net of income tax benefit .........        --         (2,772)        --          --             --
Cumulative effect of change in accounting
  principle-net of income tax provision ..............      13,797         --           --          --             --
Net income (loss) ....................................   $  10,827    $   3,417    $ (31,896)  $ (37,865)     $  (8,747)
                                                         =========    =========    =========   =========      =========
=======================================================================================================================
BASIC EARNINGS (LOSS)-PER COMMON SHARE:
  (Loss) income before extraordinary loss and cum-
    ulative effect of change in accounting principle .   $   (0.07)   $    0.19    $   (1.04)  $   (1.24)     $   (0.29)
  Net income (loss) ..................................   $    0.25    $    0.10    $   (1.04)  $   (1.24)     $   (0.29)

DILUTED EARNINGS (LOSS)-PER COMMON SHARE:
  (Loss) income before extraordinary loss and cum-
    ulative effect of change in accounting principle .   $   (0.07)   $    0.18    $   (1.04)  $   (1.24)     $   (0.29)
  Net income (loss) ..................................   $    0.25    $    0.10    $   (1.04)  $   (1.24)     $   (0.29)
Weighted average shares outstanding ..................      42,914       33,440       30,745      30,417         30,590
                                                         =========    =========    =========   =========      =========
=======================================================================================================================
OTHER FINANCIAL DATA:
Cash flows provided (used) by:
  Operating activities ...............................   $   8,279    $  (5,721)   $  (4,601)  $   1,647      $  31,415
  Investing activities ...............................      49,343       31,989       (9,959)      9,739        (20,601)
  Financing activities ...............................     (73,010)     (10,960)      15,332     (24,910)        17,657
Cash dividends received from joint ventures ..........         735          368          539       2,477         11,823
Capital expenditures:
  Vessel Purchases ...................................      53,255       48,704       27,618      12,614         28,374
  Routine fleet expenditures .........................       5,215        2,066       10,522       2,704          8,174
=======================================================================================================================
BALANCE SHEET DATA:
  Cash and cash equivalents ..........................   $  32,489    $  47,877    $  32,569   $  31,797      $  45,321
  Vessels and other property-net .....................     314,193      341,309      368,441     400,998        453,683
  Construction in progress ...........................      56,032       10,754         --          --             --
  Investments in, and advances to joint ventures .....      28,155       59,322       84,915      81,868         77,802
  Total assets .......................................     518,587      552,282      565,486     605,132        671,516
  Total debt .........................................     162,916      237,148      283,866     272,139        297,627
  Total stockholders' equity .........................     221,023      207,578      145,415     179,896        220,026
=======================================================================================================================
</TABLE>

(1)  Voyage revenues less vessel and voyage expenses and operating leases.

                 See notes to consolidated financial statements


                                       19
<PAGE>


ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
        AND FINANCIAL CONDITION

     The following presentation of management's discussion and analysis of OMI's
financial condition and results of operations should be read in conjunction with
the consolidated financial statements, accompanying notes thereto and other
financial information appearing elsewhere in this Form 10-K.

GENERAL

     Overview

     OMI Corp. ("OMI" or the "Company") is one of the largest, measured by
deadweight tonnage ("dwt"), publicly traded bulk shipping companies
headquartered in the United States. OMI provides seaborne transportation
services for crude oil, refined petroleum products and, to a much lesser extent,
dry bulk cargoes (primarily iron ore, coal and grain) through a joint venture.
The charter rates that the Company is able to obtain for its vessels are
determined in highly competitive markets. The industry is cyclical, experiencing
significant swings in profitability and asset values resulting from changes in
the supply and demand for vessels.

     Net income for the year ended December 31, 1997 was $10.8 million or $0.25
per share compared to $3.4 million or $0.10 per share for the year ended
December 31, 1996. Included in net income of $10.8 million for the year ended
December 31, 1997 is income of $13.8 million, net of tax, from the cumulative
effect of a change in accounting principle, $4.3 million in losses from the sale
of joint venture vessels and gain on disposal of assets-net of $.9 million.
Included in net income of $3.4 million for the year ended December 31, 1996 is
an extraordinary loss of $2.8 million, net of tax, loss from the sale of a joint
venture vessel of $.7 million and gain on disposal of assets-net of $11.2
million.

MARKET OVERVIEW

     The product carrier market is the market segment which transports refined
petroleum products such as gasoline, jet fuel, kerosene, naphtha and gas oil.
Average freight rates in this market improved further in 1997. However, rates
reached a very high level early in the year but receded gradually after that.
The fall was the result of higher refinery throughput in industrialized
countries as well as reduced growth in oil product imports in the Pacific region
due to refinery capacity additions in the area and financial crises in Southeast
Asia and Korea. Product tanker rates were at low levels early in 1998 as a
result of the continued Asian financial problems and a very mild winter in the
U.S. and Europe. Historically, earnings from the product tanker fleet have been
less volatile than earnings in the crude oil market.

     The improvement in tanker freight rates which began in mid-1995 continued
through 1997 with average rates increasing for all tanker size groups. The rate
gains in the last few years have been the result of high oil demand growth which
together with a modest increase in supply of tankers have created a better
tanker supply/demand balance. Average freight rates for Suezmaxes and Very Large
Crude Carriers early in 1998 were higher than the rates prevailing in the same
period a year ago, but lower for Aframax and tankers. Tanker freight rates are
expected to improve further due to the general strength of the world economy and
the expected continued increase in oil demand growth, notwithstanding the
financial crises in Southeast Asia and Korea, the large proportion of old tanker
tonnage relative to the orderbook and the continued focus of governments and
charterers on safe, well maintained tonnage.

     Management of OMI Corp. has implemented several strategies in order to
position the Company to take advantage of market conditions:

O    Shifted its focus to its international fleet. Since 1993, OMI has
disposed of thirteen U.S. flag vessels. In January 1997, the Company completed
the sale and leaseback of the OMI COLUMBIA, its largest U.S. flag vessel for $49


                                       20
<PAGE>


million. Under the terms of the lease, OMI continues as the operator of the
vessel.

     In the past, OMI's operations were a combination of U.S. flag and foreign
flag operations. However, on September 16, 1997, OMI agreed, as a final step to
owning a purely international fleet, 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 million 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 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 holding and operating its foreign
assets ("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 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.

O    Developed large and concentrated fleets of handysize product carriers and
Suezmax tankers.

     The Company currently operates a wholly-owned foreign flag fleet consisting
of thirteen product carriers and six crude oil tankers (five Suezmaxes and one
Aframax). Additionally, the fleet's results include two crude oil carriers and
one drybulk carrier owned approximately 50 percent with joint venture partners
and four chartered-in tankers.

     The Company's Suezmax fleet is one of the largest independent fleets in the
world. OMI has targeted the Suezmax market segment due to the flexibility of the
Suezmax tankers to engage in long-haul and short-haul trades, as well as the
growth potential in the crude oil market. To take advantage of the upward
freight rate trend in the crude tanker market, the Company is building five
double-hulled Suezmax tankers, with an option for two more; four for a cost of
approximately $54 million per vessel and one for approximately $50 million. One
of these new 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. In
addition, OMI placed an order for two 35,000 dwt. product carriers, for a cost
of approximately $30 million per vessel for delivery in the second half of 1999.

O    Reduced its reliance on joint ventures which own vessels.

     During December 1996, Wilomi, Inc. ("Wilomi") acquired its partner's 51
percent interest in Wilomi, which became a wholly-owned subsidiary of OMI.
Similarly, in December 1997, Mosaic Alliance Corporation ("Mosaic") acquired the
50.1 percent interest in Mosaic not owned by OMI and became a wholly-owned
subsidiary of OMI. The Company is currently evaluating its position in its other
ventures.

O    Reduced leverage of the Company.

     During 1997, corporate debt was reduced by a net of $74 million. The net
decrease in average debt outstanding along with reduced interest rates, resulted
in a reduction in interest expense from $26.5 million in 1996 to $12.2 million
in 1997. Interest expense historically has been a significant factor in the
Company's financial performance. In July 1996, the Company purchased $130
million of its Senior Notes in a tender offer and the debt was refinanced with
commercial banks at more favorable rates. Such debt was reduced by approximately
$60 million of the net proceeds of a $76.5 million public offering of 11,500,000
shares of the Company's common stock in the fourth quarter of 1996, and in the
first half of 1997 by proceeds of $40 million from the sale of the OMI COLUMBIA.
In April 1997, the Company again refinanced its remaining debt under more
favorable terms. In May 1997, debt of $16.9 million was paid upon the sale of
the vessel ALTA and the facility which included that vessel was renegotiated.
(See Balance Sheets and Liquidity and Capital Resources-Financing Facilities).


                                       21
<PAGE>


RESULTS OF OPERATIONS

     Results of operations of OMI include operating activities of the Company's
domestic and foreign vessels. The discussion that follows explains the Company's
operating results in terms of net voyage revenues, which equals voyage revenues
minus vessel and voyage and operating lease expenses, because fluctuations in
voyage revenues and expenses occur based on the nature of a charter. The
Company's vessels currently operate, or have operated in prior years, on time,
bareboat or voyage ("spot") charters. Each type of charter denotes a method by
which revenues are recorded and expenses are allocated. Under a time charter,
revenue is measured based on a daily or monthly rate and the charterer assumes
certain operating expenses, such as fuel and port charges. Under a bareboat
charter, the charterer assumes all operating expenses; as a result, the revenue
rate is likely to be lower than a time charter. Under a voyage charter, revenue
is calculated based on the amount of cargo carried, nearly all expenses are for
the ship owner's account and the length of the charter is one voyage. Revenues
therefore may be higher in the spot market, as the owner is responsible for most
of the costs of the voyage. Other factors affecting net voyage revenue for
voyage charters are waiting time between cargoes, port costs and bunker prices.

     Vessel expenses included in net voyage revenues discussed above include
operating expenses for items such as crew payroll/benefits/travel, stores,
maintenance and repair, drydock, insurance and other miscellaneous vessel
expenses. These expenses are a function of the fleet size, utilization levels
for certain expenses and requirements under laws, by charterers and Company
standards. Insurance expense varies with the overall insurance market conditions
as well as the insured's loss record, level of insurance and desired coverage.

YEAR ENDED DECEMBER 31, 1997 VERSUS DECEMBER 31, 1996

VOYAGE REVENUES LESS VESSEL AND VOYAGE EXPENSES

     Net voyage revenues of $50.1 million for the year ended December 31, 1997
decreased by a net $8.2 million from $58.3 million for the same period in 1996.
Changes in net voyage revenues for the year ended 1997 compared to 1996 are
discussed as follows by the market segments in which OMI primarily operates.
<TABLE>
<CAPTION>
                                                           FOR THE YEARS ENDED DECEMBER 31,
                                                       -------------------------------------
(IN THOUSANDS)                                            1997           1996        1995
                                                       ----------      --------    ---------
<S>                                                    <C>             <C>         <C>
VOYAGE REVENUES:
Domestic ............................................  $     82.4      $  117.7    $   142.1
Foreign:
  Product Carrier Fleet .............................        67.9          54.9         46.4
  Crude Oil Tanker Fleet ............................        72.7          49.9         37.3
  All Other .........................................         1.4           3.0          6.8
                                                       ----------      --------    ---------
     Total ..........................................  $    224.4      $  225.5    $   232.6
                                                       ==========      ========    =========
VESSEL, VOYAGE AND OPERATING LEASE EXPENSES:
Domestic ............................................  $     87.6      $   98.8    $   149.0
Foreign:
  Product Carrier Fleet .............................        35.3          31.7         23.0
  Crude Oil Tanker Fleet ............................        50.4          37.6         35.9
  All Other .........................................         1.0           (.9)         5.1
                                                       ----------      --------    ---------
     Total ..........................................  $    174.3      $  167.2    $   213.0
                                                       ==========      ========    =========
NET VOYAGE REVENUES:
Domestic ............................................  $     (5.2)     $   18.9    $    (6.9)
Foreign:
  Product Carrier Fleet .............................        32.6          23.2         23.4
  Crude Oil Tanker Fleet ............................        22.3          12.3          1.4
  All Other .........................................          .4           3.9          1.7
                                                       ----------      --------    ---------
     Total ..........................................  $     50.1      $   58.3    $    19.6
                                                       ==========      ========    =========
</TABLE>

                                       22
<PAGE>


DOMESTIC

     Domestic net voyage revenues decreased $24.1 million to a loss of $5.2 for
the year ended December 31, 1997, as compared to $18.9 million for the same
period in 1996.

     Decreases of approximately $8.5 million in net voyage revenues were
attributable to the six vessels sold during 1996. Included in the $8.5 million
decrease is a $3.8 million credit to drydock expense relating to the reversals
of the drydock accruals (the accrual method of accounting for drydock was used
in 1996) for the vessels disposed of in 1996. Approximately $6.6 million of the
decrease in net voyage revenues was a result of two product carriers which were
on time charters in 1996 but were laid up for an aggregate 527 days in 1997. The
third product carriers net voyage revenues decreased by approximately $2.8
million primarily because it operated on a time charter in 1996 which ended in
1997 at a time when rates were lower. In addition, the vessel incurred 23 more
offhire days due to idle time. Net voyage revenues generated by the OMI COLUMBIA
decreased $6.4 million as a result of the sale of the vessel in January 1997, as
well as offhire incurred for repairs in 1997.

     On January 31, 1997, the OMI COLUMBIA, a crude oil tanker which transports
Alaskan North Slope oil for a major oil company, was sold and leased back under
a charter agreement terminating December 31, 2002. OMI continues to operate the
OMI COLUMBIA and the decrease in net voyage revenue of approximately $5.9
million mentioned above is attributable to charter hire expense. OMI received
$40 million in cash and a $9 million note receivable for the vessel. A gain of
approximately $25 million was deferred and is currently being amortized to the
end of the lease term (see Balance Sheet and Liquidity and Capital
Resources-Cash Flows).

     The three remaining vessels in the domestic fleet were on time charters in
the first half of 1996. Two of the vessels were redelivered in February and
April 1997 having been on long-term time charters with the U.S. Military Sealift
Command. One of the vessels was then on another time charter until February
1998. The third vessel was on time charter in 1996 which ended in February 1997.
All of these vessels are currently laid up; however, the Company continues to
actively seek and evaluate all employment opportunities for these vessels
including reflagging.

FOREIGN

     Foreign net voyage revenues increased $15.9 million to $55.3 million for
the year ended December 31, 1997, as compared to $39.4 million for the same
period in 1996. Decreases of $3.0 million relate to the sale of the LPG carrier
which was disposed of in March 1997. Other changes are discussed as follows
according to the two foreign market segments in which OMI primarily operates.

PRODUCT CARRIER FLEET

     The product carrier fleet consisted of thirteen vessels (ten handysize and
three panamaxes) at December 31, 1997 as compared to ten vessels (seven
handysize and three panamaxes) at December 31, 1996. The Company maintained a
mix of approximately half its product carriers on time charters in both years.

     Net voyage revenues include results of two product carriers acquired in
1996 and one vessel, purchased in April 1997, which contributed an additional
$6.5 million to net voyage revenues during the twelve months ended 1997. With
respect to the ten remaining vessels, net voyage revenues, in the aggregate,
remained relatively unchanged during 1997 compared to 1996.

CRUDE TANKER FLEET

     In the year ending December 31, 1997, the crude fleet consisted of six
wholly-owned vessels and four chartered-in vessels; eight are currently
operating in the spot market and two vessels are operating on time charters. One
vessel which had been on a long-term time charter was redelivered in the fourth
quarter of 1997. In 1996, OMI owned seven vessels and chartered-in one vessel,
with four of these vessels operating in the spot market. The Company maintains
the majority of its crude oil tankers in the spot market.


                                       23
<PAGE>


     Net voyage revenues generated by the crude tanker fleet increased primarily
for two reasons; first, by $9.9 million due to the acquisition of the ALTA and
the TANANA, (two Suezmax tankers in which the Company acquired its partner's
interest on December 30, 1996) and second, due to improved rates resulting from
better market conditions in 1997. In addition, in order to maximize profits on
voyages, the Company attempts to triangulate voyages for the new ships, that is,
lessen the amount of the ballast leg (the part of the voyage where no cargo is
carried), in order to increase the utilization of the vessel.

OTHER OPERATING EXPENSES

     The Company's operating expenses, other than vessel and voyage expenses,
operating lease expenses and provision for losses, consists of depreciation and
amortization and general and administrative expenses. For the year ended
December 31, 1997, these expenses increased $6.1 million to $52.9 million, from
$46.8 million for the same period in 1996. General and administrative expenses
increased $7.6 million primarily due to accruals for bonuses and severance
aggregating approximately $5.3 million, relocation of OMI's corporate
headquarters to Stamford, Connecticut of approximately $2.6 million, expenses
allocated to the anticipated spin off and formation of New OMI of approximately
$.8 million. Other general and administrative expenses declined approximately
$1.1 million. The decrease in depreciation expense of $1.5 million relates to
the sale of vessels (including the sale and leaseback of the OMI COLUMBIA).

OTHER INCOME (EXPENSE)

     Other income (expense) consists of gain on disposal of assets-net, interest
expense, interest income, minority interest in (income) loss of subsidiary and
Other-net. Net other expense decreased by $5.5 million for the year ended
December 31, 1997 compared to the same period in 1996. Interest expense
decreased by a net of $14.2 million due to the following; reduction in the
average mortgage debt in 1997 compared to 1996, payment of debt from proceeds of
vessel sales and proceeds from the public offering of stock in the fourth
quarter 1996, increased capitalized interest on four vessels under construction
for twelve months 1997 compared to two vessels for one month in 1996 and lower
average interest rates on debt refinanced in July 1996 and April 1997. Decreases
in Net other expense were offset in part by decreases in the gain on disposal of
assets-net of $10.3 million for the year ended December 31, 1997. This decrease
resulted primarily from the gain on sale of $9.7 million for OMI Petrolink
Corporation ("Petrolink") workboats and $3.6 million gain on the sale of a crude
oil carrier in 1996 offset in part by the gain on sale of the LPG carrier of
approximately $1.0 in the first quarter of 1997.

BENEFIT (PROVISION) FOR INCOME TAXES

     The income tax benefit of $.2 million (excluding the income tax provision
for the cumulative effect of the change in accounting principle) for the year
ended December 31, 1997 varied from statutory rates primarily because deferred
taxes are not recorded for equity in operations of joint ventures, net of
dividends declared, other than Amazon Transport, Inc. ("Amazon") and White Sea
Holdings, Ltd. ("White Sea") as management considers such earnings to be
invested for an indefinite period.

EQUITY IN OPERATIONS OF JOINT VENTURES

     Equity in operations of joint ventures decreased by $1.7 million to $.7 in
the year ended 1997 compared to $2.5 million for the same period in 1996. The
decrease in equity was primarily attributable to the loss on sale of a vessel
owned by Mosaic of approximately $10.5 million (OMI's portion of the loss was
approximately $5.2 million) in the third quarter of 1997 offset in part by the
gain on the sale of a vessel of $1.9 million (OMI's portion of the gain was
approximately $0.9 million) in the second quarter of 1997. In accordance with
the Company's plan to decrease its participation in joint ventures, on December
10, 1997, Mosaic acquired the majority shareholder's interest in the venture for
cash of $32.3 million and 50.1 percent of stock in its subsidiary Kanejoy
Corporation, with a book value of $3.5 million, and Mosaic became a 100 percent
owned subsidiary of OMI.


                                       24
<PAGE>


     On December 30, 1996, the interest in Wilomi owned by a partner was
acquired by the venture, and Wilomi became a 100 percent owned subsidiary of OMI
with its earnings consolidated in OMI's results. The decrease in equity in
operations of joint ventures attributable to Wilomi was $1.3 million for the
year ended December 31, 1997.

     Increases in equity in operations of joint ventures offsetting the
aforementioned decreases relate to Amazon, a 49 percent owned joint venture
which operates one crude oil tanker, the SETTEBELLO. The equity in earnings for
Amazon increased by $3.1 million in 1997 as compared to the same period in 1996.
The SETTEBELLO was in drydock for 92 days in 1996 which resulted in both a lack
of earnings and additional drydock expense. Also, equity increased by $1.7
million from WHITE SEA as a result 66 offhire days in 1996 related to drydocking
of the vessel.

BALANCE SHEET

     Effective January 1, 1997, OMI 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 was generally a two to three year
period. Under the prepaid method, the Company capitalizes its drydocking costs
and amortizes them over the period through the next drydocking. 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 the change in accounting principle as of January 1, 1997 on
the Company's balance sheet increased total assets by $11.3 million, decreased
total liabilities by $2.5 million and increased total stockholders' equity by
$13.8 million.

     In 1997 the Company sold and leased back the OMI COLUMBIA and the ALTA for
approximately $49 million and $40 million, respectively. The gain on sale of
these vessels, aggregating approximately $40.4 million has been deferred and
will be credited to income as an adjustment to lease expense over the term of
the leases. At December 31, 1997, the balance of the deferred gain was $36.1
million.

YEAR ENDED DECEMBER 31, 1996 VERSUS DECEMBER 31, 1995

VOYAGE REVENUES LESS VESSEL AND VOYAGE EXPENSES

     Net voyage revenues of $58.3 million for the year ended December 31, 1996
increased $38.7 million, or 197 percent as compared to net voyage revenues of
$19.6 million for the year ended December 31, 1995.

     Since 1994, U.S. flag operations have generated insufficient revenue to
cover operating costs and to contribute to debt service. In addition, in 1995
and 1994 losses from U.S. flag vessels were compounded by additional losses
taken for provisions due to impairment of vessel values. In 1996, the Company
sold a total of six U.S. flag vessels which had, or were expected to, adversely
effect operating income. The OMI SACRAMENTO was delivered to new owners in March
1996 and, in exchange, a foreign flag product carrier was acquired. The OMI
HUDSON, OMI DYNACHEM and the OMI STAR were sold or exchanged in a transaction
with Hvide Marine Inc. in August 1996. In September and December 1996, OMI sold
the RANGER and the PLATTE.

     Net increases in 1996 domestic operations primarily resulted from the
following: (i) the OMI COLUMBIA operated on a time charter for the full year of
1996 at higher rates with three offhire days compared to 86 offhire days,
including 14 days for drydock, in 1995; (ii) two vessels, the PATRIOT and the
COURIER, operated on a time charter with the U.S. Military Sealift Command;
in 1995 these vessels were offhire for an aggregate of 107 days while
in drydock undergoing upgrades; (iii) the OMI STAR was purchased in June 1995,
thus eliminating expenses of chartering-in this ship; (iv) the PLATTE went into
lay up in June 1996, thus significantly reducing its expenses compared to 1995
(the vessel was sold in December 1996); and (v) results of operations of
Petrolink improved in 1996.

     The OMI COLUMBIA operated on a long-term charter which began in late spring
of 1996, after legislation to eliminate restrictions on the export of Alaskan
North Slope ("ANS") crude oil was enacted. Such export became legal in May 1996,
provided that exports are carried on U.S. flag vessels. Prior to this charter,
the OMI COLUMBIA was in lay up for a significant amount of time from 1993 to
1995.


                                       25
<PAGE>


     Four Operating-Differential Subsidy ("ODS") contracts with the Marine
Subsidy Board of the U.S. Department of Transportation were held by the Company
which provided subsidy for a portion of the difference in the costs of operating
a U.S. flag vessel versus a foreign flag vessel in foreign trades. The Company
received subsidy payments of $4.4 million in 1996 and $9.2 million in 1995. Two
of the Company's vessels, the RANGER and the ROVER, were eligible to receive
subsidy throughout 1995 and into 1996. The subsidy contract for the RANGER
expired in July 1996, after which the vessel was put into lay up and
subsequently sold in late 1996. The ROVER collected subsidy until its contract
expired in January 1997.

     The PATRIOT and the COURIER, two product carriers which also held ODS
contracts, began time charters in April 1995 to MSC and were no longer eligible
for subsidy after that date. Prior to the commencement of the charters with MSC,
these vessels were in drydock undergoing upgrades including the conversion of
cargo tanks into segregated ballast tanks. One vessel was redelivered to OMI by
MSC in February 1997 and the other was redelivered in April 1997.

     Foreign net voyage revenues were $39.4 million in 1996, an increase of
$12.9 million, or 48.7 percent over 1995. These results are primarily due to
more favorable freight rates and conditions in the crude oil market and a stable
product tanker market. At December 31, 1996, the Company's wholly-owned foreign
fleet consisted of seven crude oil tankers, 12 product carriers and one LPG
carrier which was sold in March 1997.

     In 1996, net voyage revenues earned by the crude oil tanker fleet increased
by approximately $10.9 million. The higher revenues were due to a combination of
better freight rates and fewer offhire days in 1996 compared to 1995. During
1996, one vessel was in drydock for 75 days, as compared to 1995 when four
vessels were in drydock for a total of 220 days. In addition, vessel and voyage
expenses decreased $6.2 million because of the sale of the PROMISE in June of
1996.

OTHER INCOME

     During the year ended December 31, 1996, other income increased $1.0
million or 13.7 percent to $8.3 million from $7.3 million for the year ended
1995. The increases in 1996 were primarily from fees received from the U.S.
Government for the management of ten vessels over the entire year in 1996
compared to management of ten vessels for the Ready Reserve Fleet for one
quarter and six vessels for three quarters in 1995. Increases were offset in
part by decreases in management fees from two joint ventures, one of which was
managed by OMI's joint venture partner and the other one was managed by a
contracted technical manager.

OTHER OPERATING EXPENSES

     For the year ended December 31, 1996, these expenses decreased an aggregate
of $3.2 million or 6.3 percent. Depreciation expense declined by $4.3 million as
a result of the writedown of the carrying value of two vessels in December 1995
to recognize impairment losses and the sale of vessels offset partly by the
purchase of two vessels. General and administrative expenses increased by five
percent primarily due to increases in marketing expense, property taxes and
salary and benefit expense attributable to Petrolink.

PROVISION FOR LOSSES

     OMI periodically reviews the book value of its vessels and its ability to
recover the remaining book value of the vessels using estimated undiscounted
forecasted future cash flows over the remaining life of each vessel. During its
1995 review, the Company determined that the carrying value of two of its
domestic product carriers operating in the foreign spot market exceeded their
forecasted estimated undiscounted future net cash flows from operations.
Impairment losses of $8.7 million measured by the excess of the vessels'
carrying values over their estimated fair values, based on appraised values from
a ship broker, were recognized as a separate component of operating expenses in
the Consolidated Statements of Operations.


                                       26
<PAGE>


     In anticipation of the sale of the OMI HUDSON to Hvide, OMI entered into an
agreement with the owner/lessor of the OMI HUDSON to terminate the lease and
purchase the vessel. In February 1996, OMI paid cash of $22.0 million and issued
a $3.0 million, seven percent convertible note to terminate the lease. The net
loss on the termination of the lease of $6.7 million was reported as a separate
item on the Company's 1995 Consolidated Statements of Operations.

OTHER INCOME (EXPENSE)

     The net decrease of $4.1 million or 23 percent in net other expense for the
year ended December 31, 1996 compared to the same period in 1995 was primarily
due to the increase in gain on disposal of assets. The Company recognized a $9.6
million net gain from the sale of vessels including a $9.7 million gain from the
sale of three workboats owned by Petrolink. In 1995, 2,503,389 shares of Noble
Drilling Corporation stock were sold for a gain of $7.8 million which
was offset by the losses from the sale of two foreign vessels of $3.3 million.
Minority interest in income (loss) of subsidiary increased by $1.5 million
primarily due to the gain on the sale of the workboats.

BENEFIT (PROVISION) FOR INCOME TAXES.

  The income tax provision of $2.3 million and benefit of $19.0 million for the
years ended December 31, 1996 and 1995, respectively, varied from statutory
rates primarily because deferred taxes are not recorded for equity in operations
of joint ventures, net of dividends declared, other than Amazon and White Sea as
management considers such earnings to be invested for an indefinite period.

EQUITY IN OPERATIONS OF JOINT VENTURES

     Equity in operation of joint ventures of $2.5 million decreased $3.0
million for the year ended December 31, 1996 from $5.5 million for 1995. The net
decreases were primarily attributable to four joint ventures. One 49.9 percent
joint venture, Geraldton Navigation Company Inc. had a gain in the first half of
1995 from the sale of a vessel. OMI's portion of this 1995 gain was
approximately $1.0 million. The SETTEBELLO, owned by Amazon, was offhire due to
drydocking an aggregate of 87 days and also incurred expenses when the vessel
was upgraded in 1996. In 1996 income earned by Mosaic was $3.7 million less than
that earned in 1995 as the joint venture had two ships in 1996 as compared with
four in 1995. In addition, Mosaic was affected by weak conditions in the dry
bulk market.

     In accordance with the Company's plan to decrease its participation in
joint ventures, 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 $46.4 million
consisting of a vessel, a vessel under construction, cash and other assets, net
of long-term debt of $27.3 million 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, in the amount of $17.3 million, was charged to capital
surplus.

EXTRAORDINARY LOSS

     In 1996, the Company recorded an extraordinary loss of $2.8 million (net of
a tax benefit of $1.5 million), or $0.09 per share, in connection with the
repurchase of $130 million aggregate principal amount of its Senior Notes.

LIQUIDITY AND CAPITAL RESOURCES

     CASH FLOWS

     Cash and cash equivalents of $32.5 million at December 31, 1997 decreased
$15.3 million from cash and cash equivalents of $47.8 million at December 31,
1996. The Company's working capital of $19.8 million decreased $27.4 million
from working capital of $47.2 million at December 31, 1996. Current assets
decreased $42.2 million primarily due to the decrease in cash and cash
equivalents (explained below) and a decrease of $34.4 million in vessels held
for


                                       27
<PAGE>


sale (two vessels were held for sale at December 31, 1996). Current liabilities
decreased $14.7 million primarily due to the decrease of $18.3 million of
current maturities of long-term debt which was refinanced (See Financing
Facilities).

     Net cash provided by operating activities increased $14.0 million to $8.3
million for the year ended December 31, 1997 compared to the year ended December
31, 1996. The increase was primarily attributable to the payment of OMI HUDSON
lease termination cost of $25 million ($22 million cash paid) in February 1996.

     Cash used by financing activities was $73.0 million in 1997 compared to
$11.0 million for the year ended 1996. Payments on long-term debt of $188.3
million were made in 1997. Of this amount, $158.0 million was used to prepay
debt, ($56.9 million related to prepayments from the sale of vessels, $91.1
million was refinanced and $10.0 million prepaid on the 1997 new credit
facility-see Financing Facilities) and $30.3 million was used for scheduled debt
repayments. Proceeds received from refinanced debt and new debt, including debt
for the purchase of a vessel in April 1997, was $109.1 million (an additional
$5.0 million was drawn down and repaid in the fourth quarter).

     The Company operates in a capital-intensive industry and augments cash
generated by operating activities with debt and sales of vessels that no longer
fit the Company's strategy. Cash provided by investing activities was $49.3
million in 1997 compared to $32.0 million in the year ended December 31, 1996.
Net proceeds of $79 million were received in the first half of 1997 from the
sale of two vessels. Of these proceeds, $40 million in cash and a $9 million
interest bearing note receivable was received from the sale of the OMI COLUMBIA
and $39.1 million was received for the ALTA. Proceeds of $11 million were
received from the sale of the LPG carrier in March 1997 were used to pay a
portion of the purchase price of the SEVERN for $18.7 million in April. OMI also
paid $43.1 million in scheduled construction in progress payments on four of its
new building vessels and approximately $5.1 million in capital expenditures for
improvements on various vessels.

FINANCING FACILITIES

     In March 1997, OMI signed a revolving credit/term loan agreement providing
for a credit facility in the amount of $133.0 million not to exceed 70 percent
of the fair market value of the vessels securing the loan. The Company had an
outstanding balance of $99.1 million under this credit facility at December 31,
1997 which was secured by mortgages on eleven vessels with a book value
aggregating $181.1 million. 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 $5.5 million the next four are $8.9
million 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 current
maturities of long-term debt at December 31, 1997 include two reductions
aggregating $11.0 million as the Company intends to make such payments in 1998.
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 cash, interest rate
coverage, net worth and funded debt to equity. At December 31, 1997, the Company
was in compliance with all financial covenants. 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 $50.0 million and $75.0 million.
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 to 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 $253.1 million
(including the $181.l million mentioned above) had been pledged as collateral on
long-term debt issues.


                                       28
<PAGE>


     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
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.

     The Company believes that the actions it has taken in the last year to
improve its liquidity and financial position will give the Company greater
flexibility to fund its vessel acquisition program and finance its other cash
needs.

COMMITMENTS

     OMI acts as a co-guarantor for a portion of the debt incurred by joint
ventures with affiliates of its joint venture partners. The portion of debt
guaranteed by the partners was approximately $17.5 million at December 31, 1997,
with OMI's share of such guarantees being approximately $8.7 million.

     On February 3, 1998, the Company entered into an agreement for the sale of
the TANANA for $45.5 million. The vessel will be delivered to its new owners in
August 1998.

     The Company and its joint venture partners have committed to fund any
working capital deficiencies that may be incurred by their joint venture
investments. In 1997, OMI and its partners advanced $.8 million in the form of
non-interest bearing loans to cover operating expenses of a newly formed
venture, OMI's portion of the loan was $.4 million. At December 31, 1997, no
other such deficiencies have been funded.

EFFECTS OF INFLATION

     The Company does not consider inflation to be a significant risk to the
cost of doing business in the current or foreseeable future. Inflation has
moderate impact on operating expenses, drydocking expenses and corporate
overhead.

YEAR 2000

     The "Year 2000 issue" arises from the fact that many computer hardware and
software systems use only two digits to represent the year. As a result, these
systems may not calculate dates beyond 1999, which may result in system
failures. The Company has taken steps to ensure that its systems will be year
2000 compliant. The Company has been in the process over the last year in
upgrading its hardware and software systems for business reasons other than Year
2000 compliance. The Company does not believe it will incur any additional costs
as its new systems are Year 2000 compliant. Therefore, the Company believes,
after conversion to the new systems, the Year 2000 issue will not pose
significant operational problems for its computer systems. However, the Year
2000 readiness of the Company's customers, suppliers and business partners may
vary, and the impact of the readiness of these parties on the Company's
operations is not known at this time.


                                       29
<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.


                                              30
<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.


                                       31
<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.


                                                32
<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.


                                                     33
<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>

                                       34

<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

                                       35


<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

                                       36


<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.

                                       37


<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)
                                                          ========     ========

                                       38


<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.

                                       39


<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


                                       40


<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>

                                       41


<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

                                       42


<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.

                                       43


<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>

                                       44


<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

                                       45


<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

                                       46


<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."

                                       47


<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.

                                       48


<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.

                                       49


<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
                                                ======     =======     =======


                                       50


<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.


                                       51

<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 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.

                                       52

<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

                                       53

<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.

                                       54
<PAGE>


                                                                      SCHEDULE I

                                    OMI CORP.

       CONDENSED STATEMENTS OF OPERATIONS AND RETAINED EARNINGS (DEFICIT)
                                 (IN THOUSANDS)
<TABLE>
<CAPTION>

                                                            For the Years Ended December 31,
                                                            --------------------------------
                                                              1997        1996        1995
                                                            --------    --------    --------
<S>                                                         <C>         <C>         <C>
Revenues:
  Voyage revenues .......................................   $     --    $  2,743    $  4,316
  Other income ..........................................      1,973      11,462       5,734
                                                            --------    --------    --------
   Total revenues .......................................      1,973      14,205      10,050
                                                            --------    --------    --------
Operating Expenses:
  Vessel and voyage .....................................      3,492       6,216      11,353
  Depreciation and amortization .........................        881       1,670       1,713
  General and administrative ............................     18,774      13,704      13,355
                                                            --------    --------    --------
   Total operating expenses .............................     23,147      21,590      26,421
                                                            --------    --------    --------
Operating loss ..........................................    (21,174)     (7,385)    (16,371)
                                                            --------    --------    --------
Other Income (Expense):
  (Loss) gain on disposal of assets-net .................        (13)     (1,612)        871
  Interest expense ......................................    (10,415)    (18,491)    (18,098)
  Interest income .......................................      8,467       7,395         994
  Minority interest in loss (income) of subsidiary ......       (114)     (1,262)        229
  Other-net .............................................         --          --       1,040
                                                            --------    --------    --------
   Net other expense ....................................     (2,075)    (13,970)    (14,964)
                                                            --------    --------    --------
(Loss) before income taxes, equity in earnings (losses)
  of subsidiaries and extraordinary loss ................    (23,249)    (21,355)    (31,335)
Benefit (provision) for income taxes ....................        180      (2,271)     18,973
                                                            --------    --------    --------
(Loss) before equity in earnings (losses) of subsidiaries
  and extraordinary loss ................................    (23,069)    (23,626)    (12,362)
Equity in earnings (losses) of subsidiaries .............     33,896      29,815     (19,534)
                                                            --------    --------    --------
Income (loss) before extraordinary loss .................     10,827       6,189     (31,896)
Extraordinary loss, net of income tax benefit of $1,493 .         --      (2,772)         --
                                                            --------    --------    --------
Net income (loss) .......................................     10,827       3,417     (31,896)
Retained (deficit) earnings, beginning of year ..........     (1,848)     (5,265)     26,631
                                                            --------    --------    --------
Retained earnings (deficit), end of year ................   $  8,979    $ (1,848)   $ (5,265)
                                                            ========    ========    ========
</TABLE>

                  See notes to condensed financial statements


                                       55
<PAGE>

                                                                      SCHEDULE I
<TABLE>
                                    OMI CORP.

                            CONDENSED BALANCE SHEETS
                                 (IN THOUSANDS)
<CAPTION>

                                                                                            December 31,
                                                                                   --------------------------

                                                                                      1997              1996
                                                                                   --------          --------
                                     ASSETS
<S>                                                                                <C>               <C>
Current assets:
  Cash (including cash equivalents of $0 in 1997 and $29,032
   in 1996) (Note 2).............................................................. $    233          $ 29,170
  Prepaid expenses and other current assets.......................................    5,032             5,782
                                                                                   --------          --------
         Total current assets.....................................................    5,265            34,952
                                                                                   --------          --------
Capital Construction Fund.........................................................   10,969            10,283
Investment in (at equity) and net advances to subsidiaries........................  385,598           345,748
Other property:
  Other property..................................................................    6,465             7,047
  Less accumulated depreciation...................................................    5,214             5,254
                                                                                   --------          --------
  Other property-net..............................................................    1,251             1,793
                                                                                   --------          --------
Other assets and deferred charges.................................................    2,319             1,080
                                                                                   --------          --------
         Total.................................................................... $405,402          $393,856
                                                                                   ========          ========

                       LIABILITIES AND STOCKHOLDERS EQUITY
Current liabilities:
  Accounts payable................................................................ $    169          $    456
  Accrued liabilities:
     Vessel and voyage............................................................      810               723
     Interest.....................................................................    1,241             3,272
     Other........................................................................    6,888             2,235
  Current portion of long-term debt (Note 3)......................................   11,000            25,000
                                                                                   --------          --------
         Total current liabilities................................................   20,108            31,686
                                                                                   --------          --------
Advance time charter revenues and other liabilities...............................      173               170
Long-term debt (Note 3)...........................................................   97,917            86,977
Deferred income taxes.............................................................   64,264            63,808
Minority interest in subsidiary...................................................    1,917             3,637

Stockholders' equity:
  Common stock....................................................................   21,533            21,346
  Capital surplus.................................................................  186,726           184,251
  Returned earnings (deficit).....................................................    8,979            (1,848)
  Cumulative translation adjustment-net...........................................    4,912             4,912
  Unearned compensation-restricted stock..........................................   (1,105)           (1,039)
  Unrealized loss on securities, net of deferred income tax of
    1997-$11; 1996-$23............................................................      (22)              (44)
                                                                                   --------          --------
         Total stockholders' equity...............................................  221,023           207,578
                                                                                   --------          --------
         Total.................................................................... $405,402          $393,856
                                                                                   ========          ========
</TABLE>

                  See notes to condensed financial statements.

                                       56
<PAGE>

                                                                      SCHEDULE I
<TABLE>
                                    OMI CORP.

                       CONDENSED STATEMENTS OF CASH FLOWS
                                 (IN THOUSANDS)
<CAPTION>

                                                                        For the Years Ended December 31,
                                                                     -------------------------------------------

                                                                       1997              1996             1995
                                                                     --------         ---------        ---------
<S>                                                                 <C>               <C>              <C>
Cash Flows (Used) Provided by Operating Activities:
   Net income (loss) ...........................................    $  10,827         $   3,417        $ (31,896)
   Adjustments to reconcile net income (loss) to net cash
     (used) provided by operating activities:
       Increase (decrease) in deferred income taxes ............          445             2,258          (13,322)
       Depreciation and amortization ...........................          881             1,670            1,713
       Amortization of unearned compensation ...................          372               365              943
       Loss (gain) on disposal of assets-net ...................           13             1,612             (871)
       Other-net ...............................................         --                --             (1,040)
       Equity in (earnings) losses of subsidiaries and joint
         ventures less dividends received ......................      (33,896)          (29,815)          55,489
       Extraordinary loss-net of tax ...........................         --               2,772             --
       Changes in assets and liabilities-net ...................       (2,389)           15,873           (9,653)
                                                                    ---------         ---------        ---------
   Net cash (used) provided by operating activities ............      (23,747)           (1,848)           1,363
                                                                    ---------         ---------        ---------
Cash Flows Provided (Used) by Investing Activities:
   Proceeds from disposition of vessel .........................         --               3,472             --
   Additions to vessels and other property .....................         (358)             (284)            (250)
   Payments for the retirement of minority shareholder's
     interest ..................................................       (2,456)             --               --
   Proceeds received from sale of marketable securities ........         --                --              2,715
   Proceeds and interest received and reinvested in
     Capital Construction Fund .................................         (661)             (717)            (428)
                                                                    ---------         ---------        ---------
   Net cash flows (used) provided by investing activities ......       (3,475)            2,471            2,037
                                                                    ---------         ---------        ---------
Cash Flows Provided (Used) by Financing Activities:
   Cash proceeds from issuance of long-term debt ...............      114,090           170,923             --
   Proceeds from issuance of common stock ......................        1,996            76,526            1,275
   Payments on long-term debt ..................................     (117,150)         (218,639)         (14,346)
   Payments for debt issue costs ...............................         (651)           (1,381)            --
                                                                    ---------         ---------        ---------
   Net cash flows (used) provided by financing activities ......       (1,715)           27,429          (13,071)
                                                                    ---------         ---------        ---------
   Net increase (decrease) in cash and cash equivalents ........      (28,937)           28,052           (9,671)
   Cash and cash equivalents, beginning of year ................       29,170             1,118           10,789
                                                                    ---------         ---------        ---------
  Cash and cash equivalents, end of year .......................    $     233         $  29,170        $   1,118
                                                                    =========         =========        =========
</TABLE>


                   See note to condensed financial statements

                                       57
<PAGE>

                                                                      SCHEDULE I

                                    OMI CORP.

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

1.   The condensed financial statements present the separate financial data
     (parent only) of the OMI Corp. ("OMI" or the "Company"). All domestic and
     foreign subsidiaries which are more than 20 percent owned and investments
     in joint ventures are accounted for by the equity method.

     See  Notes to Consolidated Financial Statements on pages 35 through
     page 52 of OMI's 1997 Annual Report on Form 1O-K.

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

2.   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 $12,446,000, $19,594,000 and $18,262,000,
     respectively. Income taxes of $12,208,000 were paid in l997. There were no
     income taxes paid during 1996 and 1995.

3.   LONG-TERM DEBT-Long-term debt as of December 31, 1997 and 1996 consists of
     the following:
<TABLE>
<CAPTION>

                                                          1997        1996
                                                       --------    --------
                                                       (dollars in thousands)
<S>                                                    <C>         <C>
10.25% unsecured Senior Notes due 2003 (1)............ $  6,827    $  6,827
Loans under bank credit agreements
 secured by vessels:
  Credit Agreement at LIBOR plus 1.75 percent due
   January 1998 (2)     ..............................       --      92,150
  Bank loans under credit agreements at variable
   rates above LIBOR (2) (3)..........................   99,090      10,000
7% convertible note due 2004..........................    3,000       3,000
                                                       --------    --------
Total.................................................  108,917     111,977
Less current portion of long-term debt................   11,000      25,000
                                                       --------    --------
Long-term debt........................................ $ 97,917    $ 86,977
                                                       ========    ========
</TABLE>
----------
(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, 1996 were 7.4365 percent and 7.6875 percent. At
     December 1996, the Company has outstanding a credit facility of $10,000,000
     in a line of credit with a bank at variable rate based on LIBOR. Rate at
     December 3l, 1996 was 7.125 percent.
(3)  Rates at December 31, 1997 ranged from 6.45 percent to 7.2123 percent.


     In 1994 and 1995, OMI repurchased $9,350,000 and $9,650,000 of the 10.25%
unsecured Senior Notes due 2003 for net gains of $753,000 and $1,040,000 which
are included in other-net in the accompanying consolidated statements of
operations.

     In January l996, the Company repurchased $14,050,000 of its outstanding
Notes. On July l2, 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 (net of the income tax
benefit) of $2,772,000 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 in the following.


                                       58
<PAGE>



                                                                      SCHEDULE I

     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 3l,
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.

     In 1995, Mosaic Alliance Corporation purchased $2,000,000 of OMI's Notes at
a cost of $1,736,000. The Company's portion of such Notes is considered a
retirement of debt.

                                       59
<PAGE>


WHITE SEA HOLDINGS LTD.

TABLE OF CONTENTS
================================================================================
                                                                      Page
                                                                      ----
FINANCIAL STATEMENTS:

     Balance Sheets at December 31, 1997 and 1996 ................     61

     Statements of Income and Retained
       Earnings for the three years ended December 31, 1997 ......     62

     Statements of Cash Flows for the three
       years ended December 31, 1997 .............................     63

     Notes to Financial Statements ...............................  64-66

INDEPENDENT AUDITORS' REPORT .....................................     67


                                       60
<PAGE>


                             WHITE SEA HOLDINGS LTD.
                                 BALANCE SHEETS
                          (IN THOUSANDS, EXCEPT SHARES)

                                                             December 31,
                                                         -------------------
                                                           1997        1996
                                                         -------     -------
ASSETS:

CURRENT ASSETS:
  Cash and cash equivalents (Note 2)...................  $ 2,856     $   561
  Advances to masters..................................       38         106
  Receivables:
    Traffic............................................      583          83
    Other..............................................      225         219
  Prepaid expenses and other current assets............      336         643
                                                         -------     -------
       Total current assets............................    4,038       1,612
                                                         -------     -------
VESSEL AT COST:
  Vessel (Note 2)......................................    7,389       7,382
  Less accumulated depreciation........................    1,759       1,317
                                                         -------     -------
  Vessel--net..........................................    5,630       6,065
                                                         -------     -------
PREPAID DRYDOCK EXPENSE (Note 5).......................      645          --
                                                         -------     -------
TOTAL ASSETS...........................................  $10,313     $ 7,677
                                                         =======     =======

LIABILITIES AND STOCKHOLDERS EQUITY:

CURRENT LIABILITIES:
  Accounts payable.....................................  $   146     $    77
  Accrued expenses.....................................      508         778
  Payable to affiliates (Note 3).......................      364       1,240
  Accrued interest.....................................        3          32
  Current portion of long-term debt (Note 4)...........      500         500
                                                         -------     -------
      Total current liabilities........................    1,521       2,627
                                                         -------     -------
ADVANCE TIME CHARTER REVENUES AND OTHER
  LIABILITIES..........................................      191         227
LONG-TERM DEBT (Note 4)................................      500       1,000

STOCKHOLDERS' EQUITY:
  Common stock-no par value; 500 shares authorized
    and outstanding....................................        1           1
  Capital surplus......................................    2,499       2,499
  Retained earnings (Note 6)...........................    5,601       1,323
                                                         -------     -------
      Total stockholders' equity.......................    8,101       3,823
                                                         -------     -------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY.............  $10,313     $ 7,677
                                                         =======     =======


                       See notes to financial statements.

                                       61
<PAGE>


                             WHITE SEA HOLDINGS LTD.
                   STATEMENTS OF INCOME AND RETAINED EARNINGS
                                 (IN THOUSANDS)

<TABLE>
<CAPTION>

                                                           For The Years Ended December 31,
                                                           ------------------------------
                                                             1997       1996        1995
                                                           -------     ------     -------
<S>                                                        <C>         <C>        <C>
VOYAGE REVENUES (Note 2).................................. $12,552     $8,503     $ 8,936
                                                           -------     ------     -------
OPERATING EXPENSES:
  Vessel and voyage (Note 2)..............................   7,375      6,887       6,935
  Depreciation (Note 2)...................................     442        331         325
  General and administrative..............................      94         99          86
                                                           -------     ------     -------
       Total operating expenses...........................   7,911      7,317       7,346
                                                           -------     ------     -------
INCOME BEFORE NET INTEREST EXPENSE AND CUMULATIVE
  EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE................   4,641      1,186       1,590

NET INTEREST EXPENSE:
  Interest expense........................................     158        214         190
  Interest income.........................................     (99)       (66)        (63)
                                                           -------     ------     -------
       Net interest expense...............................      59        148         127
                                                           -------     ------     -------

INCOME BEFORE CUMULATIVE EFFECT OF CHANGE IN
  ACCOUNTING PRINCIPLE....................................   4,582      1,038       1,463

CUMULATIVE EFFECT OF CHANGE IN
  ACCOUNTING PRINCIPLE (Notes 2, 5).......................   1,196         --       (140)
                                                           -------     ------     -------
NET INCOME................................................   5,778      1,038       1,323
RETAINED EARNINGS, BEGINNING OF YEAR......................   1,323      1,035         812
DIVIDENDS PAID (Note 6)...................................  (1,500)      (750)     (1,100)
                                                           -------     ------     -------
RETAINED EARNINGS, END OF YEAR............................ $ 5,601     $1,323     $ 1,035
                                                           =======     ======     =======
</TABLE>


                       See notes to financial statements.

                                       62
<PAGE>


<TABLE>
                             WHITE SEA HOLDINGS LTD.
                            STATEMENTS OF CASH FLOWS
                                 (IN THOUSANDS)
<CAPTION>

                                                                For The Years Ended December 31,
                                                               ----------------------------------
                                                                 1997         1996         1995
                                                               -------      -------       -------
<S>                                                            <C>          <C>           <C>
CASH FLOWS PROVIDED BY OPERATING ACTIVITIES:
  Net income ...............................................   $ 5,778      $ 1,038       $ 1,323
  Adjustments to reconcile net income to net cash flows
   provided by operating activities:
    Depreciation ...........................................       442          331           325
    Cumulative effect of change in accounting principle ....    (1,196)        --             140
  Change in assets and liabilities:
    Receivables and advances to masters ....................      (438)          48         1,136
    Prepaid expenses and other current assets ..............       307         (210)          169
    Accounts payable and accrued liabilities ...............      (229)      (1,141)          820
    Payable to affiliates ..................................      (877)         419          (123)
    Prepaid drydock expense ................................       520         --
    Advanced time charter revenues and other liabilities ...        (5)         238          (425)
                                                               -------      -------       -------
       Net cash provided by operating activities ...........     4,302          723         3,365
                                                               -------      -------       -------
CASH FLOWS USED BY INVESTING ACTIVITIES:
  Additions to vessel ......................................        (7)        (421)         --
                                                               -------      -------       -------
       Net cash used by investing activities ...............        (7)        (421)         --
                                                               -------      -------       -------
CASH FLOWS USED BY FINANCING ACTIVITIES:
  Dividends paid ...........................................    (1,500)        (750)       (1,100)
  Payments on long-term debt ...............................      (500)        (500)       (1,000)
                                                               -------      -------       -------
      Net cash used by financing activities ................    (2,000)      (1,250)       (2,100)
                                                               -------      -------       -------
NET INCREASE (DECREASE) IN CASH AND
  CASH EQUIVALENTS .........................................     2,295         (948)        1,265
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR ...............       561        1,509           244
                                                               -------      -------       -------
CASH AND CASH EQUIVALENTS, END OF YEAR .....................   $ 2,856      $   561       $ 1,509
                                                               =======      =======       =======
</TABLE>

                       See notes to financial statements.

                                       63
<PAGE>


                             WHITE SEA HOLDINGS LTD.
                          NOTES TO FINANCIAL STATEMENTS
                   FOR THE THREE YEARS ENDED DECEMBER 31,1997

1. COMPANY

     White Sea Holdings Ltd. (the "Company") is jointly owned by a subsidiary of
Universal Bulk Carriers, Inc. ("UBC"), a wholly-owned subsidiary of OMI Corp.
("OMI"), and an affiliate of Anders Wilhelmsen & Co. A/S ("Wilhelmsen"), Norway,
with interests of 49 and 51 percent, respectively. The Company began operating
as a joint venture on February 5, 1993 for the purpose of owning and chartering
commercial vessels. The Company owns and operates one crude carrier, the White
Sea.

2. SUMMARY OF SIGNIFICANT ACCOUNTING 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 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
costs incurred to date to estimated total voyage costs. Estimated losses are
provided 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 5).

     Prior to 1995, the Company had accounted for voyage revenues and expenses
from the discharge date of one voyage to the discharge date of the subsequent
voyage. Effective January 1, 1995, the Company changed its method to account
for voyages from the load date of one voyage to the load date of the subsequent
voyage. This change in accounting method provided for a better matching of
revenues and expenses when the vessel switches between time charters and voyage
charters.

     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
lightweight tonnage multiplied by a scrap rate.

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

                                       64
<PAGE>


                             WHITE SEA HOLDINGS LTD.
                          NOTES TO FINANCIAL STATEMENTS
                                   (CONTINUED)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

     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
$181,948, $143,611 and $209,571 in interest during 1997, 1996 and 1995,
respectively.

3. RELATED PARTY TRANSACTIONS

     The Company has entered into management service agreements with OMI, who
acts as both technical and commercial manager of the White Sea. The Company paid
OMI management fees of $78,000 for each of the years ended December 31, 1997 and
1996.

     The following table summarizes the balance due to affiliated companies at
December 31:

     Payable to affiliates:

                                               1997              1996
                                              -----            ------
       OMI .................................. $ 345              $217
       UBC ..................................     5               150
       Wilomi, Inc.* ........................    14               873
                                              -----            ------
                                              $ 364            $1,240
                                              =====            ======

      * Jointly owned by OMI and Wilhelmsen until December 30, 1996 when Wilomi,
        Inc. acquired the shares owned by Wilhelmsen, resulting in Wilomi, Inc.
        becoming a wholly-owned subsidiary of OMI.

4. LONG-TERM DEBT

     At December 31, 1997 the Company had $1,000,000 outstanding on a mortgage
note secured by the vessel at a rate of 7.375 percent payable in semi-annual
installments to March 19,1999. The fair value of long-term debt at December 31,
1997 approximates its carrying value. The debt of the Company is guaranteed by
OMI and affiliates of Wilhelmsen.

     Aggregate annual maturities are $500,000 during each of the next two years,
1998 and 1999.

                                       65
<PAGE>


                             WHITE SEA HOLDINGS LTD.
                          NOTES TO FINANCIAL STATEMENTS
                                   (CONCLUDED)

NOTE 5 - 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 $1,196,000.

     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
$1,166,000, decrease total liabilities by $30,000 and increase total
stockholders' equity by $1,196,000.

     The years ended December 31, 1996 and 1995 were previously presented using
the accrual method of accounting. The pro forma amounts for net income for
December 31, 1996 and 1995 assuming the prepaid method had been retroactively
applied was $1,101,000 and $1,634,000, respectively.

6. DIVIDENDS

     During 1997, 1996 and 1995 the Company declared and paid dividends of
$1,500,000, $750,000 and $1,100,000, respectively.


                                       66


<PAGE>


INDEPENDENT AUDITORS' REPORT

To the Stockholders of White Sea Holdings Ltd.:

     We have audited the accompanying balance sheets of White Sea Holdings Ltd.
as of December 31, 1997 and 1996 and the related statements of income and
retained earnings and of cash flows for each of the three 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 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, the accompanying financial statements present fairly, in
all material respects, the financial position of the Company at December 31,
1997 and 1996, and the results of its operations and its cash flows for the
years then ended in conformity with generally accepted accounting principles.

     As described in Note 2 to the financial statements, 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. Also, as
described in Note 2 to the financial statements, effective January 1, 1995, the
Company changed its method of accounting for voyage revenues and expenses from
the discharge date of one voyage to the discharge date of the subsequent voyage
to the load date of one voyage to the load date of the subsequent voyage.



DELOITTE & TOUCHE LLP


New York, New York
March 6, 1998


                                       67


<PAGE>



ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
        FINANCIAL DISCLOSURE

     None.

                                    PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF OMI

     Pursuant to General Instruction G(3) the information regarding directors
called for by this item is hereby incorporated by reference from OMI's 1997
Proxy Statement to be filed with the Securities and Exchange Commission. Certain
information relating to Executive Officers of the Company appears at the end of
Part I of this Form 10-K Annual Report.

ITEM 11. EXECUTIVE COMPENSATION

     Pursuant to General Instruction G(3) the information called for by this
item is hereby incorporated by reference from OMI's 1997 Proxy Statement to be
filed with the Securities and Exchange Commission.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

     Pursuant to General Instruction G(3) the information called for by this
item is hereby incorporated by reference from OMI's 1997 Proxy Statement to be
filed with the Securities and Exchange Commission.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     Pursuant to General Instruction G(3) the information called for by this
item is hereby incorporated by reference from OMI's 1997 Proxy Statement to be
filed with the Securities and Exchange Commission.


                                     PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

(a) Financial Statements and Financial Statement Schedules

     1. Financial Statements:

          OMI Corp. and Subsidiaries Consolidated Statements of Operations for
          the three years ended December 31, 1997.

          OMI Corp. and Subsidiaries Consolidated Balance Sheets at December 31,
          1997 and 1996.

          OMI Corp. and Subsidiaries Consolidated Statements of Cash Flows for
          the three years ended December 31, 1997.

          OMI Corp. and Subsidiaries Consolidated Statements of Changes in
          Stockholders' Equity for the three years ended December 31, 1997.

          OMI Corp. and Subsidiaries Notes to Consolidated Financial Statements
          for the three years ended December 31, 1997.

          OMI Corp. and Subsidiaries Quarterly Results of Operations for 1997
          and 1996.

     2. Financial Statement Schedules:

          OMI Corp. (Parent only) Condensed financial information as to
          financial position as of December 31, 1997 and 1996, and cash flows
          and results of operations for the years ended December 31, 1997, 1996
          and 1995.

                                       68
<PAGE>

<TABLE>
<CAPTION>

                                                                             EXHIBITS


NUMBER         INCORPORATED BY REFERENCE TO                       DESCRIPTION OF EXHIBIT
------         ----------------------------                       -----------------------
<S>            <C>                                                <C>
3.1            Exhibit 3.1 to 1990 Form 10-K Report of the        Certificate of Incorporation as
               Company (No. 2-87930)                              amended and restated.

3.2            Exhibit 3.2 to 1990 Form 10-K Report of the        By-laws as amended.
               Company (No. 2-87930)

4-1            Exhibit 4.1 to 1 989 Form 10-K Report of the       Form of Common Stock Certificate
               Company (No. 2-87930)                              (Domestic).

4.2            Exhibit 4.2 to 1989 Form 10-K Report of the        Form of Common Stock Certificate
               Company (No. 2-87930)                              (Foreign).

10.1           Exhibit 10(d) to 1983 Form 10-K Report of the      OMI Incentive Stock Option Plan(1)
               Company (No. 2-87930)

10.2           Exhibit 10.11 to Registration Statement on         OMI Supplementary Deferred Benefit
               Form S-1 (No. 33-7341)                             Plan, as amended.

10.3           Exhibit 10.9 to Registration Statement on          OMI Non-Qualified Stock Option
               Form S-1 (No. 33-7341)                             Plan.(1)

10.4           Exhibit 10.31 to 1990 Form 10-K Report of          OMI Corp. 1990 Equity Incentive
               the Company (No. 2-87930)                          Plan.(1)

10.5           Exhibit 10.44 to 1991 Form 10-K Report of          OMI Corp. Key Employees Deferred
               the Company (No. 2-87930)                          Compensation Plan, effective January
                                                                  1, 1992.(1)

10.6           Exhibit 10.14 to 1994 Form 10-K Report of          Stock Option and Restricted Stock
               the Company (No. 2-87930)                          Award Agreement dated as of
                                                                  February 23, 1994 between Craig H.
                                                                  Stevenson, Jr. and the Company.

10.7(a)        Exhibit 10.15(c) to 1994 Form 10-K Report of       Employment Agreement dated as of
               the Company (No. 2-87930)                          January 1, 1995 between Vincent J.
                                                                  deSostoa and the Company.(1)

10.7(b)        Exhibit 10.15(d) to 1994 Form 10-K Report of       Employment Agreement dated as of
               the Company (No. 2-87930)                          January 1, 1995 between Fredric S.
                                                                  London and the Company.(1)

10.7(c)        Exhibit 10.15(e) to 1994 Form 10-K Report of       Form of Employment Agreement
               the Company (No. 2-87930)                          dated as of January 1, 1995 between
                                                                  any Vice-President and the Company.(1)

10.7(d)        Exhibit 10.10(g) to 1995 Form 10-K Report of       Employment Agreement dated as of
               the Company (No. 2-87930)                          August 3, 1995 between Robert
                                                                  Bugbee and the Company.(1)

10.7(e)        Exhibit 10.10(i) to 1995 Form 10-K Report of       Amended and Restated Employment
               the Company (No. 2-87930)                          Agreement dated as of November 21,

----------

(1) Denotes executive compensation plan and/or placement agreement.

</TABLE>

                                       69
<PAGE>

<TABLE>
<CAPTION>

                                                                               EXHIBITS


NUMBER           INCORPORATED BY REFERENCE TO                       DESCRIPTION OF EXHIBIT
------           ----------------------------                       -----------------------
<S>              <C>                                                <C>

                                                                    1995 between Craig H. Stevenson, Jr.
                                                                    and the Company.(1)

 10.7(f)         Exhibit 10. 10(g) to 1996 Form 10-K Report of      Employment Agreement dated as of
                 the Company (No. 2-87930)                          January 1, 1997 between Jack
                                                                    Goldstein and the Company.(1)

 10.7(g)                                                            Employment Agreement dated as of
                                                                    July 15, 1997 between Henry Blaustein
                                                                    and the Company.(1)

 10.8            Exhibit 10. 14 to Form 10-Q for period ended       OMI Corp. 1995 Incentive Equity
                 June 30, 1995 (No. 2-87930)                        Plan.(1)

 10.9            Exhibit 10. 14 to Form 10-Q for period ended       OMI Corp. 1995 Stock Option Plan for
                 June 30, 1995 (No. 2-87930)                        Non-Employee Directors.(1)

 10.10           Exhibit 10. 13 to 1995 Form 10-K Report of         Annual Executive Incentive
                 the Company (No. 2-87930)                          Compensation Plan.(1)

 10.11           Exhibit 10. 13 to 1997 Form 10-Q for period        Acquisition Agreement dated as of
                 ended September 30, 1997 (No. 2-87930)             September 30, 1997 by and among
                                                                    OMI Corp., Universal Bulk Carriers,
                                                                    Inc., Marine Transport Lines, Inc. and
                                                                    the persons set forth on Exhibit A
                                                                    attached hereto.

 10.12           Exhibit 10. 14 to 1997 Form 10-Q for period        OMI Corp. Amended and Restated
                 ended September 30, 1997 (No. 2-87930)             Annual Executive Incentive Plan.(1)

 10.13                                                              OMI Corp. Executive Savings Plan

 21                                                                 Subsidiaries of the Company.

 27.01                                                              Financial Data Schedule dated
                                                                    December 31, 1997.

 99                                                                 Declarations Executive Risk Policy
                                                                    No. 81092598-H dated January 19,
                                                                    1996, for the period from January 31,
                                                                    1996 to January 31, 1999 and Excess
                                                                    Directors and Officers Insurance and
                                                                    Corporate Reimbursement Policy,
                                                                    Policy No. 482-51-72, dated January
                                                                    22, 1996, for the period from January
                                                                    31, 1996 to January 31, 1999.


----------

(1) Denotes executive compensation plan and/or placement agreement.

</TABLE>


                                       70


<PAGE>


                                   SIGNATURES

     Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.

                                     OMI Corp.

                                     By /S/ CRAIG H. STEVENSON, JR.
                                       ---------------------------------------
                                            CRAIG H. STEVENSON, JR., PRESIDENT,
                                            CHIEF EXECUTIVE OFFICER AND DIRECTOR
                                                  MARCH 30, 1998

     Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dated indicated.
<TABLE>
<CAPTION>

       Signature                                      Title                                      Date
       ---------                                      -----                                      ----
    <S>                                       <C>                                          <C>
    /S/ CRAIG H. STEVENSON, JR.               President, Chief Executive Officer           March 30, 1998
        ---------------------------             and Director
        Craig H. Stevenson, Jr.


    /S/ JACK GOLDSTEIN                        Chairman of the Board                        March 30, 1998
        ---------------------------
        Jack Goldstein


    /S/ CONSTANTINE G. CARAS                  Director                                     March 30, 1998
        ---------------------------
        Constantine G. Caras


    /S/ MICHAEL KLEBANOFF                     Director                                     March 30, 1998
        ---------------------------
        Michael Klebanoff


    /s/ EMANUEL L. ROUVELAS                   Director                                     March 30, 1998
        ---------------------------
        Emanuel L. Rouvelas


    /S/ VINCENT J. DE SOSTOA                  Senior Vice President, Treasurer,            March 30, 1998
        ---------------------------             Chief Financial Officer and
        Vincent J. de Sostoa                    Chief Accounting Officer

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