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

                                    FORM 20-F

(Mark One)

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

                                       OR

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

For the fiscal year ended December 31, 2003
                          ------------------------------------------------------

                                       OR

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

For the transition period from _________________________________________________

Commission file number File No. 001-15176
                       ---------------------------------------------------------

                              STELMAR SHIPPING LTD.
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             (Exact name of Registrant as specified in its charter)

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                 (Translation of Registrant's name into English)

                               Republic of Liberia
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                 (Jurisdiction of incorporation or organization)

      Status Center, 2A Areos Street, Vouliagmeni GR 16671, Athens, Greece
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                    (Address of principal executive offices)

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

        Title of each class                         Name of each exchange
                                                     on which registered
preferred stock, par value $0.01 per share
common stock, par value $0.02 per share             New York Stock Exchange
--------------------------------------------------------------------------------

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

                                      NONE
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                                (Title of class)

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

                                      NONE
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                                (Title of class)

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

17,305,687 shares of common stock, par value $0.02 per share

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

                                 Yes |X| No |_|

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

                             Item 17 |_| Item 18 |X|
<PAGE>

                                TABLE OF CONTENTS

                                                                            Page
                                                                            ----

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS.....................iv

     ITEM 1.   IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS...........1

     ITEM 2.   OFFER STATISTICS AND EXPECTED TIMETABLE.........................1

     ITEM 3.   KEY INFORMATION.................................................1

     ITEM 4.   INFORMATION ON THE COMPANY.....................................13

     ITEM 5.   OPERATING AND FINANCIAL REVIEW AND PROSPECTS...................31

     ITEM 6.   DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES.....................40

     ITEM 7.   MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS..............45

     ITEM 8.   FINANCIAL INFORMATION..........................................46

     ITEM 9.   THE OFFER AND LISTING..........................................46

     ITEM 10.  ADDITIONAL INFORMATION.........................................47

     ITEM 11.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.....59

     ITEM 12.  DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES.........60

     ITEM 13.  DIVIDEND ARREARAGES AND DELINQUENCIES..........................60

     ITEM 14.  MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS
               AND USE OF PROCEEDS............................................60

     ITEM 15.  CONTROLS AND PROCEDURES........................................60

     ITEM 16.  RESERVED.......................................................61

     ITEM 17.  FINANCIAL STATEMENTS...........................................62

     ITEM 18.  FINANCIAL STATEMENTS...........................................62

     ITEM 19.  EXHIBITS.....................................................II-1
<PAGE>

            CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

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

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

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

     In addition to these important factors and matters discussed elsewhere
herein, important factors that, in our view, could cause actual results to
differ materially from those discussed in the forward-looking statements include
the strength of world economies and currencies, general market conditions,
including fluctuations in charter hire rates and vessel values, changes in
demand in the shipping market, as a result of changes in OPEC's petroleum
production levels and worldwide oil consumption and storage, changes in the
company's operating expenses, including bunker prices, dry-docking and insurance
costs, changes in governmental rules and regulations or actions taken by
regulatory authorities, including those that may limit the commercial useful
lives of oil tankers, potential liability from pending or future litigation,
general domestic and international political conditions, potential disruption of
shipping routes due to accidents or political events, and other important
factors described from time to time in the reports we file with the Securities
and Exchange Commission and the New York Stock Exchange.
<PAGE>

                                     PART I

ITEM 1.  Identity Of Directors, Senior Management and Advisers

     Not applicable

ITEM 2.  Offer Statistics and Expected Timetable

     Not Applicable

ITEM 3.  Key Information

     Throughout this document, we use the term deadweight ton, or dwt, in
describing the size of vessels. Dwt, expressed in metric tons, each of which is
equivalent to 1000 kilograms, refers to the maximum weight of cargo and supplies
that a vessel can carry.

A. Selected Financial Data

     The following table sets forth our selected consolidated financial and
other data for each of the periods indicated. The selected historical
consolidated financial data should be read in conjunction with "Operating and
Financial Review and Prospects", and the audited consolidated financial
statements and notes thereto included elsewhere within this document.
<PAGE>

                      Stelmar Shipping Ltd and Subsidiaries
                      -------------------------------------
                 Selected Consolidated Financial and Other Data

The following selected consolidated financial and other data summarizes our
historical consolidated financial information. The information as of and for
each of the five years ended December 31, 2003, except for fleet data, was
derived from our audited consolidated financial statements prepared in
accordance with accounting principles generally accepted in the United States

(in thousands of U.S. dollars except per share, per day and fleet data)

<TABLE>
<CAPTION>
                                                                                 Audited
                                                                         Year Ended December 31,
                                                                         -----------------------

                                                      1999          2000          2001           2002            2003
                                                   ----------    ----------    -----------    -----------     -----------
<S>                                                <C>           <C>           <C>            <C>             <C>
Statement of Income Data:
Revenue from vessels                               $   68,539    $   68,575    $   111,198    $   160,210     $   176,248
Revenue from vessels, net of commissions               66,790        66,704        108,647        156,508         171,924
Voyage expenses                                         5,194         5,450          8,743          8,129           9,533
Vessel operating expenses (1)                          15,188        14,959         23,093         39,816          44,371
Depreciation (2)                                       15,425        15,441         21,755         34,644          39,394
Amortization of deferred charges (3)                      754         1,116            960          3,211           4,646
General and administrative expenses                     2,939         2,876          4,583          7,824           9,433
Impairment loss (4)                                     6,500            --             --             --              --
Operating income                                       20,790        26,862         49,513         61,971          62,879
Interest and finance costs, net                        13,025        15,428         15,534         18,545          16,553
Net income                                              7,794        11,235         34,013         43,286          38,631

Balance Sheet Data (end of year):
Cash and cash equivalents                          $   14,741    $   26,464    $    34,417    $    36,123     $    36,463
Net Book Value of Vessels, including
those under construction                              392,131       264,780        538,382        761,252         811,515

Total assets                                          317,825       299,215        592,183        823,357         897,421
Long term debt, including current portion             231,181       200,792        367,194        488,609         507,650
Total stockholders' equity                             78,415        89,566        209,448        312,148         358,841

Other Financial Data:
EBITDA (5)                                         $   43,483    $   43,434    $    72,307    $   100,318     $   107,984
Net cash provided from operating activities            25,033        30,529         50,233         74,575          75,001
Net cash from (used in) investing activities          (38,833)       11,872       (295,462)      (258,278)        (96,125)
Net cash from (used in) financing activities           15,210       (30,678)       253,182        185,409          21,464

Fleet Data:
Average number of vessels                                11.8          12.0           17.6           28.1            30.5
Number of vessels (year end)                             12.0          11.0           22.0           31.0            31.0
Average age of fleet, excluding newbuildings
(in years) (6)                                            6.6           6.9            8.1            7.2             7.5

Total operating days (7)                                4,224         4,282          6,110          9,912          10,562
Total available ship days (8)                           4,324         4,370          6,418         10,254          11,142
Average daily revenue earned per vessel (8)        $   14,245    $   14,017    $    15,566    $    14,469     $    14,575
TCE per vessel per day (9)                             14,995        14,743         16,769         15,341          15,785

Vessel operating expenses per vessel
per day (1)                                        $    3,512    $    3,423    $     3,598    $     3,931     $     3,982
Vessel overhead burden per vessel
per day (10)                                              680           658            715            756             847

Operating cash flow per vessel per day (11)            10,056         9,939         11,266          9,783           9,692

Per Share Data:

Earnings per share, basic (4)                      $     2.08    $     2.94    $      3.31    $      2.84     $      2.25
Earning per share, fully diluted                         2.08          2.94           3.29           2.83            2.24
Weighted average number of shares, basic            3,750,205     3,824,750     10,290,028     15,262,194      17,195,152
Weighted average number of shares, fully diluted    3,750,205     3,824,750     10,353,810     15,314,250      17,278,889
Dividends per share                                        --            --             --             --            0.12
</TABLE>

                           See footnotes on next page
<PAGE>

(1) Vessel operating expenses are costs that vessel owners typically bear,
including crew wages, vessel supplies, insurance, tonnage taxes, routine repairs
and maintenance, including continuous special survey costs and other direct
operating costs.

(2) We compute depreciation using the straight-line method over the estimated
useful life of the asset to its estimated scrap value. In the case of vessels,
we estimate useful life of 25 years from the date of its delivery from the
builder. However, when regulations place limitations over the ability of a
vessel to trade on a worldwide basis, its useful life is re-estimated to end at
the date such regulations become effective. On this basis the useful life of M/T
Kliomar was reduced to 21 years.

(3) We defer costs associated with periodic dry dockings and amortize them over
the period to the next scheduled dry docking, usually two and a half years or
five years.

(4) We recognized impairment on the carrying amount of one of our vessels in
1999. This was a non-recurring charge. The effect of the impairment was to
reduce our earnings per share by $1.66.

(5) We define EBITDA as net income plus interest expense, net, income taxes,
depreciation and amortization. EBITDA reflects cash available to meet our debt
service, capital expenditures, dry docking costs and other non operating cash
needs. EBITDA should not be considered as a substitute for net income (loss),
cash flows from operations or other measures of liquidity determined in
accordance with U.S. Generally Accepted Accounting Principles, or GAAP. GAAP
does not recognize EBITDA. Not all companies calculate EBITDA in the same way.
We believe, however, that EBITDA is relevant because some investors may use it
to analyze our operating performance and ability to service our debt.

<TABLE>
EBITDA Reconciliation
<CAPTION>
                                    1999         2000         2001         2002         2003
                                  ---------    ---------    ---------    ---------    ---------
<S>                               <C>          <C>          <C>          <C>          <C>
EBITDA                            $  43,483    $  43,434    $  72,307    $ 100,318    $ 107,984
                                  ---------    ---------    ---------    ---------    ---------
Depreciation and Amortization       (16,179)     (16,557)     (22,715)     (37,855)     (44,040)
Interest and finance cost, net      (13,025)     (15,428)     (15,534)     (18,545)     (16,553)
Gain (loss) from sale of vessel          --           32           --           --       (7,270)
Impairment loss                      (6,500)          --           --           --           --
Foreign currency losses                 (56)         (31)        (129)        (366)        (360)
Other                                    71         (215)          84         (266)      (1,130)
                                  ---------    ---------    ---------    ---------    ---------
Net Income                        $   7,794    $  11,235    $  34,013    $  43,286    $  38,631
                                  =========    =========    =========    =========    =========
</TABLE>

(6) We define the average age of our fleet as the result of the age of each
vessel in each year from its delivery from builder, weighted by the vessel's dwt
in proportion to the total dwt of the fleet for each respective year.

(7) Total operating days are the total number of days in a given period that we
own the vessels less the total number of off-hire days. We define off-hire days
as days spent on repairs, dry docking and special surveys, vessel upgrades,
initial positioning after our purchase of the vessel and awaiting employment.

(8) We define average daily revenue earned as total revenues less commissions
and voyage costs divided by the total number of available days. Voyage costs
include cost of fuel, port charges and canal charges. We calculate total
available ship days on the basis of a 365 day fiscal year multiplied by the
average number of vessels in the fleet for that year.

(9) The shipping industry uses time charter equivalent, or TCE, to calculate
revenues per vessel in dollars per day for vessels on voyage charters. The
industry does this because it does not commonly express charter rates for
vessels on voyage charters in dollar per day. TCE allows vessel operators to
compare the revenues of vessels that are on voyage charters with those on time
charters. For vessels on voyage charters, we calculate TCE by taking revenues
earned on the voyage and deducting the voyage costs and dividing by the actual
number of voyage days. TCE differs from average daily revenue earned in that TCE
is based on revenues before commissions and does not take into account off-hire
days.

(10)We calculate vessel overhead burden per ship per day as the result of
general and administrative expenses divided by the total number of available
ship days.

(11)Operating cash flow per ship per day represents EBITDA divided by total
available ship days. GAAP does not require operating cash flow. You should not
consider operating cash flow as an alternative to net income or any other
indicator of our performance required by GAAP.

(12)We decided to reverse split our shares in January 2001. In this reverse
split, our current stockholders exchanged two shares for one share, and we
reduced our number of outstanding shares by 50%. All per share numbers reflect
that reverse split retroactively.
<PAGE>

B. Reason for the Offer and Use of Proceeds

     Not Applicable.

C. Risk Factors

     Some of the following risks relate principally to the industry in which we
operate and our business in general. Other risks relate principally to the
securities market and ownership of our stock. Any of the risk factors could
significantly and negatively affect our business, financial condition or
operating results and the trading price of our stock.

Industry Specific Risk Factors
------------------------------

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

     If the tanker market, which has been cyclical, is depressed in the future
when our vessels' charters expire or when we want to sell a vessel, our earnings
and available cash flow may decrease. Our ability to recharter our vessels on
the expiration or termination of their current spot and time charters and the
charter rates payable under any renewal or replacement charters will depend
upon, among other things, economic conditions in the tanker market. Fluctuations
in charter rates and vessel values result from changes in the supply and demand
for tanker capacity and changes in the supply and demand for oil and oil
products.

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

     o    demand for oil and oil products;

     o    global and regional economic conditions;

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

     o    changes in seaborne and other transportation patterns.

     The factors that influence the supply of tanker capacity include:

     o    the number of newbuilding deliveries;

     o    the scrapping rate of older vessels; and

     o    the number of vessels that are out of service.

If we violate environmental laws or regulations, the resulting liability may
adversely affect our earnings and financial condition.

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

     For example, the United States Oil Pollution Act of 1990, or OPA, provides
that owners, operators and bareboat charterers are strictly liable for the
discharge of oil in U.S. waters, including the 200 nautical mile zone off the
U.S. coasts. OPA provides for unlimited liability in some circumstances, such as
a vessel operator's gross negligence or willful misconduct. However, in most
cases OPA limits liability to the greater of $1,200 per gross ton or $10 million
per vessel. OPA also permits states to set their own penalty limits. Most states
bordering navigable waterways impose unlimited liability for discharges of oil
in their waters.

     The International Maritime Organization, or IMO, has adopted a similar
liability scheme that imposes strict liability for oil spills, subject to limits
that do not apply if the release is caused by the vessel owner's intentional or
reckless conduct.

     U.S. law, the law in many of the nations in which we operate, and
international treaties and conventions that impact our operations also establish
strict rules governing vessel safety and structure, training, inspections,
financial assurance for potential cleanup liability and other matters. These
requirements can limit our ability to operate, and substantially increase our
operating costs. The U.S. has established strict deadlines for phasing-out
single-hull oil tankers, and both the IMO and the European Union have initiated
similar phase-out periods and the European Commission has approved a timetable
for a general ban on single-hull oil tankers. Under OPA, all oil tankers that do
not have double hulls will be phased out by 2015 and will not be permitted to
come to United States ports or trade in United States waters. One of our vessels
will be prohibited from trading in U.S. waters on January 1, 2010, and eight of
our vessels will be prohibited from trading in U.S. waters on January 1, 2015.

     These requirements can affect the resale value or useful lives of our
vessels. As a result of accidents such as the recent oil spill relating to the
loss of the m.t. Prestige, a 26-year old single-hull tanker owned by a company
not affiliated with us, we believe that regulation of the tanker industry will
continue to become more stringent and more expensive for us and our competitors.
Substantial violations of applicable requirements or a catastrophic release from
one of our vessels could have a material adverse impact on our financial
condition and results of operations.

Because the market value of our vessels may fluctuate significantly, we may
incur losses when we sell vessels which may adversely affect our earnings

     The carrying amount of our vessels on our financial statements does not
necessarily reflect their fair market value, which can fluctuate significantly.
The fair market value of tankers may increase and or decrease depending on the
following factors:

     o    general economic and market conditions affecting the tanker industry;

     o    competition from other shipping companies;

     o    types and sizes of vessels;

     o    other modes of transportation;

     o    cost of newbuildings;

     o    governmental or other regulations including required phase-outs of
          non-double hull tankers;

     o    prevailing level of charter rates; and

     o    technological advances.

     When each of our tankers reach 15 years of age we carefully consider the
future ownership life of these vessels. Factors considered are the condition and
future tradability of the vessels as well as the capital investment needed to
continue to operate and maintain the vessels to the highest industry standards.
After taking these factors into account, we did not sell seven of our tankers
that reached 15 years of age over the past year. An additional three tankers in
our current fleet will reach 15 years of age in the next two years. If we
determine at any time that a vessel's future limited useful life and earnings
requires us to impair its value in our financial statements, that could result
in a charge against our earnings and the reduction of our stockholders' equity.
If for any reason we sell tankers at a time when tanker prices have fallen, the
sale may be less than the vessel's carrying amount on our financial statements,
with the result that we would also incur a loss and a reduction in earnings.

Company Specific Risk Factors
-----------------------------

A decline in the market value of our vessels could lead to a default under our
loan agreements and the loss of our vessels

     If the market value of our fleet declines, we may not be able to refinance
our debt or obtain future financing. Also, declining vessel values could cause
us to breach some of the covenants under our financing agreements. If we are
unable to pledge additional collateral, or obtain waivers from our lenders, our
lenders could accelerate our debt and foreclose on our fleet.

Servicing our debt limits funds available for other purposes and if we cannot
service our debt, we may lose our tankers

     We must dedicate a large part of our cash flow from operations to paying
principal and interest on our indebtedness. These payments limit funds available
for working capital, capital expenditures and other purposes. As of December 31,
2003, we had total indebtedness of $507.7 million and a ratio of indebtedness to
total capital of 58.6%. As we expand our fleet, we will need to incur additional
indebtedness. Our inability to service our debt could lead to acceleration of
our debt and the foreclosure of our fleet.

Our loan agreements contain restrictive covenants which may limit our liquidity
and corporate activities and prevent proper service of debt, which could result
in the loss of our tankers

     Our loan agreements impose significant operating and financial restrictions
on us. These restrictions may limit our ability to:

     o    incur additional indebtedness;

     o    create liens on our assets;

     o    sell capital stock of our subsidiaries;

     o    make investments;

     o    engage in mergers or acquisitions;

     o    pay dividends and make capital expenditures;

     o    change the management of our vessels or terminate or materially amend
          the management agreement relating to each vessel; and

     o    sell our vessels.

     Therefore, we may need to seek permission from our lenders in order to
engage in some corporate actions. Our lenders' interests may be different from
ours and we cannot guarantee that we will be able to obtain our lenders'
permission when needed. This may prevent us from taking actions that are in our
best interest.

Our earnings may be adversely affected if we do not successfully employ our
tankers on long-term time charters or use them profitably on the spot market

     We seek to deploy our tankers both on time charters and in the spot market
in a manner that will optimize our earnings. As of December 31, 2003, 27 tankers
in our current fleet are contractually committed to time charters, with the
remaining terms of these charters ranging from one month to three and a half
years. Three of the tankers in our total fleet completed their current time
charters during 2003. In terms of net operating days, 62% and 28% of our fleet's
capacity are covered by time charters for 2004 and 2005, respectively. While the
spot market for tankers has recently improved, if market rates drop to previous
lower levels, that could substantially adversely affect our earnings as vessels
complete their current time charters. If we cannot re-charter our vessels
successfully on long-term time charters or trade them in the spot market
profitably, our results of operations and operating cash flow may suffer. In
addition, although our time charters provide steady streams of revenue, our
tankers committed to time charters may not be available for spot voyages during
an eventual upswing in the tanker industry cycle, when spot voyages might be
more profitable.

In the highly competitive international tanker market, we may not be able to
compete for charters with new entrants or established companies with greater
resources

     We employ our vessels in a highly competitive market that is capital
intensive and highly fragmented. Competition arises primarily from other tanker
owners, including major oil companies as well as independent tanker companies,
some of which have substantially greater resources than we do. Competition for
the transportation of oil and oil products can be intense and depends on price,
location, size, age, condition and the acceptability of the tanker and its
operators to the charterers. Due in part to the highly fragmented market,
competitors with greater resources could enter and operate larger fleets through
acquisitions or consolidations and may be able to offer better prices and
fleets.

We depend upon a few significant customers for a large part of our revenues. The
loss of one or more of these customers could adversely affect our financial
performance

     We have historically derived a significant part of our revenue from a small
number of charterers. During 2003, approximately 19% of our revenue derived from
two charterers and in 2002, approximately 22% of our revenue for our fleet
derived from the same charterers. Eight of the tankers in our current fleet
operate under time charters with Adam Maritime Corporation, a subsidiary of
Glencore International AG, which provided 17% of our revenue in 2003 and ST
Shipping, a company related to Adam Maritime Corporation, which provided 2%. The
occurrence of any problems with these charterers may adversely affect our
revenues.

As we expand our business, we will need to hire more seafarers and shoreside
personnel; if we cannot recruit suitable employees, we may not have enough
personnel to conduct our operations

     As we expand our fleet, we will need to recruit suitable additional
seafarers and shoreside administrative and management personnel. Our crewing
agent supplies our senior officers and crewmen, all of whom are from the
Philippines. While we have not experienced any difficulty in recruiting to date,
we cannot guarantee that we will be able to continue to hire suitable employees.
If our crewing agent encounters business or financial difficulties, we may not
be able to adequately staff our vessels and our operations may be adversely
affected.

If we fail to manage our planned growth properly, we may not be able to
successfully expand our market share

     During 2003, we received delivery of one Panamax newbuilding. Our fleet
expansion will continue with the purchase of the four Panamax tanker
newbuildings under construction in South Korea, as well as the purchase of the
six Handymax newbuildings under construction in China, which are scheduled to be
delivered between January 2004 and August 2004. In addition to depending on our
ability to procure funding, our growth will also depend on our ability to:

     o    identify and consummate acquisitions or joint ventures;

     o    integrate any acquired business successfully with our existing
          operations;

     o    identify new markets;

     o    manage expansion; and

     o    obtain required financing.

     Our current operating and financial systems may not be adequate as we
implement our plan to expand the size of our fleet, and our attempts to improve
those systems may be ineffective. If we are unable to execute the points noted
above, our financial condition may be adversely affected.

We may be unable to attract and retain key management personnel and other
employees in the tanker industry, which may negatively affect the effectiveness
of our management and our results of operations

     Our success depends to a significant extent upon the abilities and efforts
of our management team. Most of our senior executives have each been with us for
over seven years and have significant industry experience. We do not currently
have long-term employment contracts with any of our senior executives, including
Peter Goodfellow, our Chief Executive Officer, Stamatis Molaris, our Chief
Financial Officer and George Dienis, our Chief Operating Officer. Our success
will depend upon our ability to hire and retain key members of our management
team. The loss of any of these individuals could adversely affect our business
prospects and financial condition. Difficulty in hiring and retaining personnel
could adversely affect our results of operations. We do not maintain "key man"
life insurance on any of our officers.

Because most of our employees are covered by industry-wide collective bargaining
agreements, failure of industry groups to renew those agreements may disrupt our
operations and adversely affect our earnings

     We employ approximately 1,250 seafarers and 75 land-based employees in the
Athens and London offices. The employees in Athens are covered by industry-wide
collective bargaining agreements that set basic standards. We cannot assure you
that these agreements will prevent labor interruptions. Any labor interruptions
could disrupt our operations and harm our financial performance.

Our vessels may suffer damage and we may face unexpected drydocking costs which
could affect our cash flow and financial condition.

     If our vessels suffer damage, they may need to be repaired at a drydocking
facility. The costs of drydock repairs are unpredictable and can be substantial.
We may have to pay drydocking costs that our insurance does not cover. This
would decrease earnings.

     On February 1, 2003, M/T Keymar was grounded by strong winds and was
subsequently refloated. She underwent major repairs, the cost of which is
expected to be covered by her underwriters. The vessel was refloated in October
2003.

Purchasing and operating secondhand vessels may result in increased operating
costs which could adversely affect our earnings.

     We have vessels constructed for us directly by builders and also purchase
secondhand vessels from other owners. Our current business strategy includes
additional growth through the acquisition of additional secondhand vessels.
While we inspect secondhand vessels prior to purchase, this does not normally
provide us with the same knowledge about their condition that we would have had
if these vessels had been built for and operated exclusively by us. Also, we do
not receive the benefit of warranties from the builders if the vessels we buy
are older than one year.

     In general, the costs to maintain a vessel in good operating condition
increase with the age of the vessel. As of December 31, 2003, our fleet included
10 vessels more than 10 years of age. Older vessels are typically less
fuel-efficient than more recently constructed vessels due to improvements in
engine technology. Cargo insurance rates increase with the age of a vessel,
making older vessels less desirable to charterers.

     Governmental regulations, safety or other equipment standards related to
the age of vessels may require expenditures for alterations, or the addition of
new equipment, to our vessels and may restrict the type of activities in which
the vessels may engage. We cannot assure you that, as our tankers age, market
conditions will justify those expenditures or enable us to operate our tankers
profitably during the remainder of their useful lives. If we sell vessels, we
are not certain that the price for which we sell them will equal at least their
net carrying amount at that time.

Risks involved with operating ocean-going vessels could affect our business and
reputation, which would adversely affect our revenues and stock price.

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

     o    marine disaster;

     o    piracy;

     o    environmental accidents;

     o    cargo and property losses or damage; and

     o    business interruptions caused by mechanical failure, human error, war,
          terrorism, piracy, political action in various countries, labor
          strikes, or adverse weather conditions.

     Any of these circumstances or events could increase our costs or lower our
revenues. For instance, in Venezuela, an oil industry strike lessened the flow
of oil to the United States and, therefore, the demand for oil on that route.
The involvement of our vessels in an oil spill or other environmental disaster
may harm our reputation as a safe and reliable tanker operator.

We may not have adequate insurance to compensate us if we lose our tankers.

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

Maritime claimants could arrest our tankers, which could interrupt our cash
flow.

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

     In addition, in some jurisdictions, such as South Africa, under the "sister
ship" theory of liability, a claimant may arrest both the vessel which is
subject to the claimant's maritime lien and any "associated" vessel, which is
any vessel owned or controlled by the same owner. Claimants could try to assert
"sister ship" liability against one vessel in our fleet for claims relating to
another of our ships.

Governments could requisition our vessels during a period of war or emergency,
resulting in loss of earnings.

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

Our operations outside the United States expose us to global risks that may
interfere with the operation of our vessels.

     We are an international company and primarily conduct our operations
outside the United States. Changing economic, political and governmental
conditions in the countries where we are engaged in business or where our
vessels are registered affect us. In the past, political conflicts, particularly
in the Arabian Gulf, resulted in attacks on tankers, mining of waterways and
other efforts to disrupt shipping in the area. For example, in October 2002, the
VLCC Limburg was attacked by terrorists in Yemen. Acts of terrorism and piracy
have also affected vessels trading in regions such as the South China Sea.
Following the terrorist attack in New York City on September 11, 2001, and the
military response of the United States, the likelihood of future acts of
terrorism may increase, and our vessels may face higher risks of being attacked
in the Middle East region. In addition, future hostilities or other political
instability in regions where our vessels trade could affect our trade patterns
and adversely affect our operations and performance.

Existing stockholders, who hold approximately 28% of our common stock, can exert
considerable control over us, which may limit your ability to influence our
actions.

     Our former chairman, Stelios Haji-Ioannou, his brother, Polys Haji-Ioannou,
and his sister, Clelia Haji-Ioannou, own, directly or indirectly, approximately
28% of our outstanding shares of common stock. While they have no agreement,
arrangement or understanding relating to the voting of their shares of common
stock, they may have the effective power to elect all of the members of the
board of directors and to control the vote on substantially all other matters,
including significant corporate actions, without the approval of other
stockholders, including you.

We may have to pay tax on United States source income, which would reduce our
earnings.

     Under the United States Internal Revenue Code of 1986, or the Code, a
portion of the gross or net shipping income of a vessel owning or chartering
corporation, such as ourselves and our subsidiaries, may be subject to a 4%
United States federal income tax on 50% of its gross shipping income that is
attributable to transportation that begins or ends, but that does not both begin
and end, in the U.S., unless that corporation is entitled to a special tax
exemption under the Code which applies to the international shipping income
derived by some non-United States corporations. We expect that we and each of
our subsidiaries qualify for this statutory tax exemption and we will take this
position for U.S. tax return reporting purposes. However, there are several
risks that could cause us to become taxed on our U.S. source income. Our former
chairman, Stelios Haji-Ioannou, and his brother and sister have combined
holdings of approximately 28% of our outstanding stock. There is a risk that we
could no longer qualify under the statutory tax exemption if these individuals
or other shareholders with a five percent or greater interest were to combine to
own 50% or more of our outstanding shares of common stock. In addition, due to
the absence of final Treasury regulations or other definitive authority
concerning some aspects of this tax exemption under the relevant provisions of
the Code and to the factual nature of the issues involved, we can give no
assurances on our tax-exempt status or that of any of our subsidiaries.

     If we or our subsidiaries are not entitled to this statutory tax exemption
for any taxable year, we or our subsidiaries could be subject for those years to
an effective 4% United States federal income tax on the portion of the income
these companies derive during the year from United States sources. The
imposition of this taxation would have a negative effect on our business and
would result in decreased earnings available for distribution to our
shareholders.

If U.S. tax authorities were to treat us as a "Passive Foreign Investment
Company," that could have adverse consequences on U.S. holders.

     A foreign corporation will be treated as a "passive foreign investment
company" for U.S. Federal income tax purposes if either (1) at least 75% of its
gross income for any taxable year consists of certain types of "passive income",
or (2) at least 50% of the average value of the corporation's assets produce, or
are held for the production of, such types of "passive income." For purposes of
these tests, "passive income" includes dividends, interest, and gains from the
sale or exchange of investment property and rents and royalties other than rents
and royalties which are received from unrelated parties in connection with the
active conduct of trade or business. For purposes of these tests, income derived
from the performance of services does not constitute "passive income." Those
holders of a passive foreign investment company who are citizens or residents of
the United States or domestic entities would be subject to a special adverse
U.S. Federal income tax regime with respect to the income derived by the passive
foreign investment company, the distributions they receive from the passive
foreign investment company and the gain, if any, they derive from the sale or
other disposition of their shares in the passive foreign investment company.

     Based on our current operations and future projections, we do not believe
that we are, nor do we expect to become, a passive foreign investment company
with respect to any taxable year. Since we expect to derive substantially all of
our income each year from the time chartering and voyage chartering activities
of our wholly-owned subsidiaries, we believe that such income will be treated
for relevant U.S. Federal income tax purposes as services income, rather than
rental income. Correspondingly, such income should not constitute "passive
income," and the assets that we or our wholly-owned subsidiaries own and operate
in connection with the production of that income, in particular our vessels,
should not constitute passive assets for purposes of determining whether we are
a passive foreign investment company in any taxable year. However, no assurance
can be given that the Internal Revenue Service will accept this position or that
we would not constitute a passive foreign investment company for any future
taxable year if there were to be changes in the nature and extent of our
operations.

Because we generate all of our revenues in U.S. dollars but incur a significant
portion of our expenses in other currencies, exchange rate fluctuations could
hurt our results of operations.

     We generate all of our revenues in U.S. dollars but incur approximately 25%
of our vessel operating expenses in currencies other than U.S. dollars. This
variation in operating revenues and expenses could lead to fluctuations in net
income due to changes in the value of the U.S. dollar relative to the other
currencies, in particular the Japanese yen, the Euro, the Singapore dollar and
the British pound sterling. Expenses incurred in foreign currencies against
which the U.S. dollar falls in value can increase, decreasing our revenues. We
do not hedge these risks. Our operations could suffer as a result.

Interest rate fluctuations may significantly affect our loan payments, which
could adversely affect our financial condition.

     At December 31, 2003, a significant portion of our loans bore interest at
floating rates. Increases in prevailing rates could increase the amounts that we
would have to pay to our lenders. As of December 31, 2003, we have interest rate
cap and swap agreements expiring between 2005 and 2007 for approximately 22.2%
of the then outstanding principal amounts of our loans that may mitigate some of
this exposure.

Because we are a foreign corporation, you may not have the same rights that a
shareholder in a U.S. corporation may have.

     We are a Liberian corporation. Our articles of incorporation and bylaws and
the Business Corporation Act of Liberia 1976 govern our affairs. While the
Liberian Business Corporation Act resembles provisions of the corporation laws
of a number of states in the United States, Liberian law does not as clearly
establish your rights and the fiduciary responsibilities of our directors as do
statutes and judicial precedent in some U.S. jurisdictions. However, while the
Liberian courts generally follow U.S. court precedent, there have been few
judicial cases in Liberia interpreting the Liberian Business Corporation Act.
Investors may have more difficulty in protecting their interests in the face of
actions by the management, directors or controlling stockholders than would
shareholders of a corporation incorporated in a U.S. jurisdiction which has
developed a substantial body of case law.
<PAGE>

ITEM 4. INFORMATION ON THE COMPANY

Our Fleet

     We are Stelmar Shipping Ltd., an international tanker company. Our total
fleet, including the five Panamax tankers and the six Handymax tankers under
construction, is as follows:

                   Year               Hull      Sister
     Name          Built       DWT    Type(1)   Ships       Charter Type
---------------    -----   -------   --------   ------   -----------------------

Handymax
--------

Hull S-1108+
Hull S-1109+
Hull S-1110+
Hull S-1124+
Hull S-1125+
Hull S-1126+
Ambermar           2002      35,700     DH        A      TC to Aug. 2005 (2)
Petromar           2001      35,768     DH        A      TC to Feb. 2004
Maremar            1998      47,225     DH        B      TC to March 2005
Aquamar            1998      47,236     DH        B      TC to Aug. 2004
Rimar              1998      45,999     DH        C      TC to Jan. 2005
Luxmar             1998      45,999     DH        C      TC to Mar. 2005
Limar              1996      46,170     DH        C      TC to Oct. 2004
Almar              1996      46,162     DH        C      TC to Dec. 2006
Nedimar            1996      46,821     DH        C      TC to Mar. 2005
Fulmar             1989      39,521     DS        D      TC to Jul. 2004
Primar             1988      39,521     DS        D      TC to Nov. 2005
Allenmar           1988      41,570     DS               TC to Feb. 2005
Camar              1988      46,100     DH        E      TC to June 2004
Jamar              1988      46,100     DH        E      TC to Oct. 2004
Ermar              1989      39,977     DS        F      TC to Feb. 2004
Promar(3)          1988      39,989     DS        F      Spot Market
Capemar            1987      37,615     DS               Spot Market
City University    1987      39,729     DS        G      Spot Market
Colmar             1987      39,729     DS        G      Spot Market
                            -------
Subtotal dwt                806,931

Panamax
--'-----

Hull 5240*+                                       H
Hull 5241*+                                       H
Hull 5242*+                                       H
Hull 5243*+                                       H
Cabo Hellas*       2003      69,180     DH        H      TC to Nov. 2005
Goldmar*           2002      69,700     DH        H      TC to May 2007
Silvermar*         2002      69,700     DH        H      TC to June 2007
Rubymar*           2002      69,697     DH        H      TC to April 2004
Rosemar*           2002      69,697     DH        H      TC to May 2004
Pearlmar*          2002      69,697     DH        H      TC to Jan. 2004
Jademar*           2002      69,697     DH        H      TC to Mar. 2004
Cleliamar*         1993      68,623     DH        I      TC to Mar. 2004
Polys*             1993      68,623     DH        I      TC to Feb. 2004
                            -------
Subtotal dwt                624,614

Aframax
-------

Jacamar(5)         1999     104,024     DH        J      TC to Feb. 2006
Takamar(5)         1998     104,000     DH        J      TC to Sep. 2005
Keymar*            1993      95,822     DH               TC to Oct. 2004
Kliomar*           1989      96,088     SH               TC to Sep. 2004
                            -------
Subtotal dwt                399,934

                          ---------
Total dwt                 1,831,479

Average Age of Fleet (4)       7.5 years

          *    Tankers that can only carry dirty cargoes, namely crude oil.
          +    Tankers currently under construction and scheduled for delivery
               during the period from January 2004 through August 2004.
     (1)  DH is a double-hulled vessel constructed with double sides and a
          double bottom; DS is a double-sided vessel constructed with double
          sides but is not equipped with a double bottom; and SH is a single
          hull vessel that has neither double sides nor a double bottom.
     (2)  TC means time charter.
     (3)  Sold in May 2003.
     (4)  Average age of fleet calculated on basis of dwt, excluding the
          newbuildings to be delivered during the period from January 2004
          through August 2004.
     (5)  The vessels were sold and leased back in January 2004.

General

     We are developing our fleet with a primary focus on:

     o    Handymax tankers, which primarily transport refined petroleum
          products; and

     o    Panamax tankers, which primarily transport crude oil.

     As of December 31, 2003 we own and operate our current fleet of 31 tankers,
including 2 leased Aframax tankers with a total cargo carrying capacity of
1,791,490 dwt, which includes:

     o    18 Handymax tankers;

     o    9 Panamax tankers; and

     o    4 Aframax tankers.

     As part of the Company's fleet growth and renewal program, during the
fourth quarter of 2003, Stelmar received delivery of the first newbuilding in a
series of eleven new vessels to be delivered in 2004. Subsequent to receiving
delivery of the Cabo Hellas, a 2003-built double-hull Panamax tanker, Stelmar
received five additional tankers. Two 2004-built double hull Panamax vessels,
the Cabo Sounion and the Reymar, and three 2004-built double-hull Handymax
vessels, the Alcmar, the Alcesmar and the Andromar, were received from January
2004 through March 2004.

     We own one of the world's youngest and, due to the highly fragmented
market, largest Handymax and Panamax tanker fleets. We have consistently
operated profitably since 1995, despite the highly cyclical nature of the tanker
industry.

     Since our inception, we have pursued a program of growth through the
purchase of newly constructed and modern secondhand small-to-medium-sized
tankers, with an increasing recent focus on Handymax and Panamax tankers. Over
the past four years, we have expanded the size and carrying capacity of our
current fleet from 826,501 dwt to 1,791,490 dwt, and the average age of our
current fleet by dwt as of December 31, 2003 was approximately 7.5 years, as
compared to approximately 13 years for the world tanker fleet. By August 2004,
we will complete our newbuilding program and receive delivery of five additional
newbuildings consisting of two Panamaxes and three Handymaxes. The expansion
will bring our fleet to 41 vessels, consisting of 24 Handymax, 13 Panamax and
four Aframax tankers. Eighty percent of the fleet will be double-hull, and the
entire fleet will include only one single-hull vessel. Assuming no further
disposals are made, the fleet will have an average age of 6 years and a total
carrying capacity of 2,342,110 dwt.

     We believe we have established a reputation in the international tanker
industry for maintaining a fleet with high standards of performance, reliability
and safety. We have conducted business with substantially all of the major oil
companies, such as ExxonMobil, Shell International Petroleum Company, BP Amoco
plc and Chevron Texaco, Corp. These companies have previously vetted and
chartered our vessels, and we believe that our vessels will continue to qualify
for future service with these companies. Our current customers include oil
traders and oil companies such as Vitol, Glencore International AG, SK Shipping,
PDVSA, the Venezuelan national oil company, Citgo, ExxonMobil, and Famm, a
commercial arm of Chevron Texaco Corp. In 2003, we derived approximately 19% of
our revenues from the following charterers:

     o    Adam Maritime Corporation, a subsidiary of Glencore International AG;
          and

     o    ST Shipping, a company related with Adam Maritime Corporation.

     We have historically achieved consistent cash flows and high utilization
rates by chartering most of our tankers for fixed periods of time under time
charters, ranging from one to seven years. We also stage our time charters so
that they expire at different times in order to mitigate the effects of the
cyclical tanker charter market. We generated approximately 87.2% of our net
revenues in 2003 from time charters.

     We also trade in the spot market in order to take advantage of potential
market opportunities, to maintain a constant presence in the market and to
strategically monitor market trends. As we expand our fleet of tankers, we
intend to manage the balance of time and spot charters so as to maintain
consistent cash flows, thereby allowing us to take advantage of market
opportunities in a highly cyclical business. When we trade in the spot market,
we generally use brokers to arrange individual voyage charters for our vessels
at rates determined by the market.

Strategy

     The following characterize the international tanker industry:

     o    high fragmentation among vessel owners;

     o    significant volatility resulting in part from OPEC members' production
          fluctuations;

     o    increasing international emphasis on environmental safety in oil
          tanker operations; and

     o    an aging world tanker fleet.

     We believe that our business strategy of owning and operating a
large-modern fleet of Handymax tankers, or tankers between 30,000 and 50,000
dwt, and Panamax tankers, or tankers between 50,000 and 80,000 dwt, offers us
favorable business opportunities in the tanker industry. In our view, most
charterers of oil tankers prefer to charter newer vessels and are willing to pay
higher charter rates for them, primarily due to safety and environmental
concerns. Handymax and Panamax tanker rates have also been subject to less
volatility than rates for larger tankers. Finally, by owning a relatively large
tanker fleet, we believe we can realize savings associated with economies of
scale.

     We believe we can maximize operating cash flow and return on our
investments through a six-part strategy:

     o    Operate a Modern, Well-Maintained Fleet. We believe that we operate
          one of the world's most modern and well-maintained Handymax and
          Panamax tanker fleets. We intend to continue to operate a young fleet
          through selective acquisitions of newly-built and modern, high
          quality, secondhand Handymax and Panamax tankers, and by considering
          disposal of our older vessels and employing a rigorous maintenance
          program.

     o    Operate a Significant Fleet in Selected Markets. We focus on Handymax
          tankers that primarily carry refined oil products and Panamax crude
          oil tankers because rates for those tankers have historically been
          less volatile than rates for larger tankers. Due to the highly
          fragmented market, our current fleet of 21 Handymax tankers and 11
          Panamax tankers constitutes one of the world's largest modern Handymax
          and Panamax tanker fleets. The 3 Handymax and 2 Panamax newbuildings
          will add to that fleet when they are delivered.

     o    Capitalize on Our Established Reputation for High Operating Standards.
          We believe that charterers consider factors other than cost when
          chartering a vessel, including the vessel manager's reputation. We
          believe that we have established a reputation in the international
          tanker industry for maintaining high standards of performance,
          reliability and safety. This will aid us in establishing relationships
          with charterers who are concerned with reputation and safety records
          when chartering vessels.

     o    Achieve High Utilization Rates Through Emphasis on Time Charters. By
          emphasizing time charters, we aim to minimize downtime and attempt to
          maintain consistent cash flows in a cyclical industry. We believe that
          operating Handymax and Panamax tankers offers us greater opportunities
          for period employment.

     o    Maintain Low-Cost, Highly Efficient Operations. We believe we are a
          cost-efficient and reliable international tanker operator because of
          the strength of our management team. It is our objective to reduce
          operating costs through constant evaluation of each vessel's
          performance and concurrent adjustment of operating and chartering
          procedures to maximize each vessel's profitability.

     o    Continue Long-Term Relationships with Major End Users. We have
          actively developed and maintained relationships with major private oil
          companies, oil traders and state-owned oil companies. As part of a
          continuous dialogue, we make in-person presentations to these major
          end-users, maintain ongoing telephonic and electronic contact and
          encourage frequent on-site visits.

Fleet Characteristics

     The tankers in our current fleet, including the two Panamax newbuildings
and three Handymax newbuildings currently under construction, have a total cargo
capacity of approximately 2.3 million dwt. As of December 31, 2003, the average
age of our current fleet was 7.5 years, while, according to industry sources,
the average age of the world's tanker fleet was 13.0 years.

     Many of our vessels are sister ships. This increases our operating
efficiencies because technical knowledge and spare parts can be applied to all
vessels in a series. It also provides some scheduling flexibility and greater
economies of scale.

     As of December 31, 2003, the vessels in our current fleet that are sister
ships are as follows:

     o    Ambermar and Petromar;

     o    Maremar and Aquamar;

     o    Polys and Cleliamar;

     o    Rubymar, Rosemar, Pearlmar, Jademar, Goldmar, Silvermar and Cabo
          Hellas;

     o    Jacamar and Takamar;

     o    Rimar, Luxmar, Limar, Almar, and Nedimar;

     o    Fulmar and Primar;

     o    Camar and Jamar; and

     o    Colmar and City University.

     All of the five newbuilding Panamax tankers that we have contracted to have
constructed will be sister ships to the Rubymar, Rosemar, Pearlmar, Jademar,
Goldmar and Silvermar.

Chartering of the Fleet

     We have historically chartered most of our vessels for fixed periods of
approximately one to seven years. Under the terms of these charters, the
charterer designates the cargo, trade route and schedule and bears bunkers and
port costs, while we are responsible for maintaining and operating the vessel,
including provision of the crew. Approximately 87.2% of our revenue in 2003 was
derived from time charters. Twenty-seven of our vessels (including those
currently under construction) operate on time charters with expiration dates
from January 2003 through June 2007 and four trade in the spot market. We have
arranged for time charters for four of the five Panamax newbuildings scheduled
for delivery during the period from November 2003 through July 2004. We also
trade in the spot market to take advantage of potential market opportunities, to
maintain a constant presence in the market and to strategically monitor market
trends.

Customers

     Our current customers include oil traders and oil companies such as Vitol,
Glencore International AG, SK Shipping, PDVSA, the Venezuelan national oil
company, Citgo, ExxonMobil and Famm, a commercial arm of ChevronTexaco Corp. In
2003, we derived approximately 19% of our revenue from the following charterers:

     o    Adam Maritime Corporation, a subsidiary of Glencore International AG;
          and

     o    ST Shipping, a company related with Adam Maritime Corporation.

Management of the Fleet

     We provide in-house most of the operations, chartering, ship maintenance,
technical support, shipyard supervision, insurance and financing management
services necessary to support our fleet. Our chartering and brokerage staff is
located in London, England, while our fleet management personnel are located in
Athens, Greece. Our staff in London makes recommendations to our senior
management in Greece regarding the chartering of our vessels as well as
identifying when opportunities arise to buy or sell a vessel. Virtually all of
our technical management functions are conducted through our office in Greece,
including activities such as:

     o    supervising the maintenance and general efficiency of the vessels;

     o    crewing;

     o    arrangement of bunkers;

     o    arrangement and supervision of drydocking and repairs;

     o    alterations and the upkeep of the vessels;

     o    arrangement of the supply of necessary stores, spares and lubricating
          oil; and

     o    appointment of supervisors and technical consultants.

     We have done business with substantially all the major oil companies, which
have vetted and chartered our vessels in the past. We believe our vessels will
continue to qualify for service in the future.

     Our fleet's management is overseen by the Chief Executive Officer, a former
Fleet Operations Manager of Esso Petroleum Co. Ltd., the marine affiliate of
ExxonMobil. Our management subsidiary in Piraeus received its International
Safety Management, or ISM, certification in 1994 from the American Bureau of
Shipping, one of the first tanker managers to do so, and well in advance of the
1998 deadline for doing so.

     Additionally, our seafaring employees perform most of the necessary
ordinary course maintenance on our vessels. We inspect all of the vessels, both
at sea and while the vessels are in port. Vessels are typically inspected four
times per year using rigorous criteria. Each vessel is examined and specific
notations are made, and recommendations are given for improvements to the
overall condition of the vessel, maintenance, safety and crew welfare.

The International Tanker Industry

     The international tanker industry provides seaborne transportation of crude
oil and refined petroleum products for the oil market. The two main types of
operators that provide transportation services in the tanker market are:

     o    major oil companies; and

     o    independent shipowners.

     They provide transportation services for end users such as:

     o    oil companies;

     o    oil traders;

     o    petroleum product producers; and

     o    government agencies.

     Oil companies own, or control through long-term time charters,
approximately one-third of the current world tanker capacity. Independent
shipowners own or control the other two thirds. Oil companies use their fleets
not only to transport their own oil, but also compete with the independent
shipowners to transport oil for others. The seaborne oil transportation industry
is fragmented, with the largest owner controlling less than 5% of the dwt of the
world tanker fleet.

     The quality of tanker vessels and operations has improved over the past
several years as charterers and regulators increasingly focus on safety and
protection of the environment. National authorities and international
conventions have historically regulated the oil transportation industry. Since
1990, the emphasis on environmental protection has increased. Legislation and
regulations such as the U.S. Oil Pollution Act of 1990, or OPA, International
Maritime Organization, or IMO, protocols and classification society procedures
demand higher-quality tanker construction, maintenance, repair and operations.
Charterers of all types, including oil companies, terminal operators, shippers
and receivers are becoming increasingly selective in their acceptance of tankers
and are inspecting and vetting both vessels and companies on a periodic basis.
As these changes have imposed costs and potential liabilities on tanker owners
and operators, they have also raised barriers to entry and favored shipowners
with quality fleets and operations. Limitations imposed by port states and the
IMO on trading of older single hull vessels should accelerate the commercial
obsolescence of older, poor-quality tankers.

     The major oil companies, as well as other charterers, each have their own
vetting systems and criteria. The Oil Companies' International Maritime Forum,
which has consultative status with the IMO, provides technical and operational
guidelines for the vetting process. In 1993, the Oil Companies' International
Maritime Forum introduced the Ship Inspection Report Program, which is comprised
of a readily accessible pool of technical information concerning the condition,
operational procedures and physical details of tankers. In addition, the Oil
Companies' International Maritime Forum promulgates a "vessel particulars
questionnaire" used in the vetting process. Although the procedure varies from
company to company, when conducting the vetting process, a charterer may:

     o    conduct a physical inspection;

     o    obtain a completed "vessel particulars questionnaire;"

     o    obtain Ship Inspection Report Program reports;

     o    review owner audits;

     o    obtain feedback from other charterers;

     o    review market intelligence and casualty data; and

     o    consider any recent management, manning or classification society
          changes as well as the owner's reputation.

     On December 12, 1999, the 24-year old tanker Erika sank off the coast of
France polluting more than 250 miles of coastline with heavy oil. Following this
incident, major oil companies became increasingly selective in their vetting and
acceptance of tankers.

     Tanker Categories

     Tanker vessels generally fall into one of six major types of vessel
classifications based upon carrying capacity:

     o    ULCCs (Ultra Large Crude Carriers), with a cargo carrying capacity of
          320,000 dwt or more;

     o    VLCCs (Very Large Crude Carriers), with a cargo carrying capacity of
          approximately 200,000 to 320,000 dwt;

     o    Suezmax tankers, with a cargo carrying capacity of approximately
          120,000 to 200,000 dwt;

     o    Aframax tankers, with a cargo carrying capacity of approximately
          80,000 to 120,000 dwt;

     o    Panamax tankers, with a cargo carrying capacity of approximately
          60,000 to 80,000 dwt;

     o    Handymax tankers, with a cargo carrying capacity of approximately
          30,000 to 60,000 dwt; and

     o    Handysize tankers, with a cargo carrying capacity of approximately
          10,000 to 30,000 dwt.

     Additionally, tankers are differentiated by the type of cargo that they
carry. The industry identifies tankers as either product tankers or crude oil
tankers on the basis of various factors including technical specifications and
trading histories. Crude oil tankers carry crude oil and so-called "dirty"
products such as fuel oils. Product tankers carry refined petroleum products
such as gasoline, jet fuel, kerosene, naptha and gas oil, which are often
referred to as "clean" products.

     Product tankers are tankers that typically have cargo handling systems that
are designed to transport several different refined products simultaneously,
such as gasoline, jet fuel, kerosene, naptha and heating oil, from refineries to
the ultimate consumer. Product tankers generally have coated cargo tanks that
assist in tank cleaning between voyages involving different cargoes. This
coating also protects the steel in the tanks from corrosive cargoes.

     Product tankers generally range in size from 10,000 dwt to 80,000 dwt,
although there are some larger product carriers designed for niche long-range
trades like the Middle East to Southeast Asia.

     Although product tankers can carry dirty products, they generally do not
switch between clean and dirty cargoes because a vessel carrying dirty cargo
must undergo a cleaning process prior to loading clean cargo. In addition,
specified design, outfitting and technical factors tend to make some vessels
better suited to handling the physical properties of distinct cargoes.

     ULCCs and VLCCs carry the largest percentage of crude oil transported by
sea. These large tankers are typically on long-haul voyages, but port
constraints limit their trading routes. For example, only a few U.S. ports, such
as the Louisiana Offshore Oil Port, are capable of handling a fully laden VLCC.

     Suezmax tankers engage in a range of crude oil trades, most usually from
West Africa to the United States, the Gulf of Mexico, the Caribbean or Europe,
within the Mediterranean, or within Asia. Most Aframax tankers carry dirty
products in short regional trades, mainly within Northwest Europe, within the
Caribbean, within the Mediterranean or within Asia. Panamax tankers, which are
the largest tankers that can pass fully-loaded through the Panama Canal, take
advantage of size restrictions on larger vessels in South and North American
terminals. Three-quarters of the world's Panamax fleet transports dirty products
and the remainder transports clean products.

     Handymax and Handysize tankers carry the vast majority of clean products,
comprising 90% of all product tankers. Handymax tankers comprise the largest
concentration of product tankers because smaller tankers have the greatest
flexibility in trade routes and port access. They can service many ports and
utilize berthing facilities which cannot accommodate larger tankers due to size
limitations or because those tankers require deeper water in which to operate.
Also, port facilities may lack sufficient storage capacity to unload the large
loads carried by larger tankers. At the same time, Handymax tankers can load a
variety of different cargoes and thereby operate in a number of international
oil and oil product trading routes.

     Supply and Demand -- General

     The supply of, and demand for, tanker capacity strongly influence tanker
charter rates and vessel values for all tankers. Supply and demand have
historically caused fluctuations in tanker charter rates and secondhand values.

     Tankers transport over 80% of oil shipped internationally. Demand for oil
tankers is related to the demand for crude oil and refined petroleum products
and the distance between points of production and points of consumption. Demand
for crude oil and refined petroleum products is, in turn, affected by, among
other things:

     o    general economic conditions, which include increases and decreases in
          industrial production and transportation;

     o    oil prices;

     o    environmental concerns;

     o    climate;

     o    competition from alternative energy sources; and

     o    regulatory environment.

     The supply of tanker capacity is a function of the number of tankers
delivered to the fleet relative to the number of tankers permanently taken from
service when they become technically or economically obsolete. Currently, it
takes approximately 18 to 36 months from the time a building contract is entered
into before a newbuilding is delivered. Other factors affecting the supply of
tankers include

     o    the number of combined carriers, or vessels capable of carrying oil or
          dry bulk cargoes, carrying oil cargoes;

     o    the number of newbuildings on order and being delivered;

     o    the number of tankers in lay-up, which refers to vessels that are in
          storage, drydocked, awaiting repairs or otherwise not available or out
          of commission; and

     o    the number of tankers scrapped for obsolescence or subject to
          casualties.

     Charter Rates

     Vessels can be chartered in a variety of ways. The spot market provides the
most frequent source of employment for tankers. In the spot market, the
charterer hires the vessel to carry cargo on a specific voyage. The owner
provides the crew and bears all vessel operating costs and voyage costs,
including fuel and port costs. The owners generally use brokers who negotiate
the terms of each individual voyage charter at market-driven charter rates.

     Spot charter rates are frequently expressed in terms of "Worldscale."
"Worldscale," which converts to an amount expressed in U.S. dollars, is an index
devised to allow comparison of spot freight rates for various size tanker
routes.

     An end-user and owner can also enter into a time charter for a vessel. Time
charters involve a charterer hiring a vessel for a fixed period, which may range
from a short number of days to several years. Typical time charters are for
periods of between six and 12 months. In a time charter, the owner bears
operating costs, while the charterer is responsible for the voyage costs,
including fuel oil.

     In order to compare time charter rates with spot rates, the industry has
adopted the use of Time Charter Equivalent, or TCE rates. TCE rates allow vessel
operators to compare the revenues of vessels that are on voyage charters with
those on time charters. TCE is calculated by taking revenues earned on the
voyage, deducting the voyage costs and dividing by the actual number of voyage
days.

Environmental and Other Regulations

     Government regulation significantly affects the ownership and operation of
our tankers. They are subject to international conventions, national, state and
local laws and regulations in force in the countries in which our tankers may
operate or are registered.

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

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

     Environmental Regulation -- IMO

     In 1992, the International Maritime Organization, or IMO (the United
Nations agency for maritime safety and the prevention of marine pollution by
ships) adopted regulations that set forth pollution prevention requirements
applicable to tankers. These regulations, which have been adopted by over 150
nations, including many of the jurisdictions in which our tankers operate,
provide, in part, that:

          o tankers between 25 and 30 years old must be of double hull
construction or of a mid-deck design with double sided construction, unless (1)
they have wing tanks or double-bottom spaces not used for the carriage of oil,
which cover at least 30% of the length of the cargo tank section of the hull or
bottom; or (2) they are capable of hydrostatically balanced loading (loading
less cargo into a tanker so that in the event of a breach of the hull, water
flows into the tanker, displacing oil upwards instead of into the sea);

          o tankers 30 years old or older must be of double hull construction or
mid-deck design with double sided construction; and

          o all tankers are subject to enhanced inspections.

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

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

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

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

     Effective September 2002, the IMO accelerated its existing timetable for
the phase-out of single hull oil tankers. These regulations require the
phase-out of most single hull oil tankers by 2015 or earlier, depending on the
age of the tanker and whether it has segregated ballast tanks. After 2007, the
maximum permissible age for single hull tankers will be 26 years. As of December
31, 2003, we owned one single-hull tanker. Under the current regulations, this
tanker will be able to operate until its 25th year anniversary in 2014 before
being required to be scrapped or retrofitted to conform to these international
environmental standards. Compliance with the new regulations regarding
inspections of all tankers, however, could adversely affect our operations.
Under current regulations, retrofitting will enable a vessel to operate until
the earlier of 25 years of age and the anniversary date of its delivery in 2017.
However, as a result of the oil spill in November 2002 relating to the loss of
the m.t. Prestige, which was owned by a company not affiliated with us, in
December 2003 the Marine Environmental Protection Committee of the IMO adopted a
proposed amendment to the International Convention for the Prevention of
Pollution from Ships to accelerate the phase out of single hull tankers from
2015 to 2010 unless the relevant flag states extend the date to 2015. This
proposed amendment will come into effect in April 2005 unless objected to by a
sufficient number of member states.

     The IMO has also negotiated international conventions that impose liability
for oil pollution in international waters and a signatory's territorial waters.
In September 1997, the IMO adopted Annex VI to the International Convention for
the Prevention of Pollution from Ships to address air pollution from ships.
Annex VI is expected to be ratified by the end of 2003, and will become
effective 12 months after ratification. Annex VI, when it becomes effective,
will set limits on sulfur oxide and nitrogen oxide emissions from ship exhausts
and prohibit deliberate emissions of ozone depleting substances, such as
chlorofluorocarbons. Annex VI also includes a global cap on the sulfur content
of fuel oil and allows for special areas to be established with more stringent
controls on sulfur emissions. We are formulating a plan to comply with the Annex
VI regulations once they come into effect. Compliance with these regulations
could require the installation of expensive emission control systems and could
have an adverse financial impact on the operation of our vessels. Additional or
new conventions, laws and regulations may be adopted that could adversely affect
our ability to manage our ships.

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

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

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

     Although the United States is not a party to these conventions, many
countries have ratified and follow the liability plan adopted by the IMO and set
out in the International Convention on Civil Liability for Oil Pollution Damage
of 1969. Under this convention and depending on whether the country in which the
damage results is a party to the 1992 Protocol to the International Convention
on Civil Liability for Oil Pollution Damage, a vessel's registered owner is
strictly liable for pollution damage caused in the territorial waters of a
contracting state by discharge of persistent oil, subject to certain complete
defenses. Under an amendment to the Protocol that became effective on November
1, 2003, for vessels of 5,000 to 140,000 gross tons (a unit of measurement for
the total enclosed spaces within a vessel), liability will be limited to
approximately $6.5 million plus $907 for each additional gross ton over 5,000.
For vessels of over 140,000 gross tons, liability will be limited to
approximately $122.5 million. The current maximum amount under the 1992 protocol
is approximately $81.2 million. As the convention calculates liability in terms
of a basket of currencies, these figures are based on currency exchange rates on
October 29, 2003. The right to limit liability is forfeited under the
International Convention on Civil Liability for Oil Pollution Damage where the
spill is caused by the owner's actual fault and under the 1992 Protocol where
the spill is caused by the owner's intentional or reckless conduct. Vessels
trading to states that are parties to these conventions must provide evidence of
insurance covering the liability of the owner. In jurisdictions where the
International Convention on Civil Liability for Oil Pollution Damage has not
been adopted, various legislative schemes or common law govern, and liability is
imposed either on the basis of fault or in a manner similar to that convention.
We believe that our P&I insurance will cover the liability under the plan
adopted by the IMO.

     U.S. Oil Pollution Act of 1990 and Comprehensive Environmental
     Response, Compensation and Liability Act

     The United States regulates the tanker industry with an extensive
regulatory and liability regime for environmental protection and cleanup of oil
spills, consisting primarily of the U.S. Oil Pollution Act of 1990, or OPA, and
the Comprehensive Environmental Response, Compensation and Liability Act, or
CERCLA. OPA affects all owners and operators whose vessels trade with the United
States or its territories or possessions, or whose vessels operate in the waters
of the United States, which include the U.S. territorial sea and the 200
nautical mile exclusive economic zone around the United States. CERCLA applies
to the discharge of hazardous substances (other than oil) whether on land or at
sea. Both OPA and CERCLA impact our operations.

     Under OPA, vessel owners, operators and bareboat charterers are
"responsible parties" who are jointly, severally and strictly liable (unless the
spill results solely from the act or omission of a third party, an act of God or
an act of war) for all containment and clean-up costs and other damages arising
from oil spills from their vessels. These other damages are defined broadly to
include:

          o natural resource damages and related assessment costs;

          o real and personal property damages;

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

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

          o loss of subsistence use of natural resources.

     OPA limits the liability of responsible parties to the greater of $1,200
per gross ton or $10 million per tanker that is over 3,000 gross tons (subject
to possible adjustment for inflation). The act specifically permits individual
states to impose their own liability regimes with regard to oil pollution
incidents occurring within their boundaries, and some states have enacted
legislation providing for unlimited liability for discharge of pollutants within
their waters. In some cases, states that have enacted this type of legislation
have not yet issued implementing regulations defining tanker owners'
responsibilities under these laws. CERCLA, which applies to owners and operators
of vessels, contains a similar liability regime and provides for cleanup,
removal and natural resource damages. Liability under CERCLA is limited to the
greater of $300 per gross ton or $5 million.

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

     OPA also requires owners and operators of vessels to establish and maintain
with the U.S. Coast Guard evidence of financial responsibility sufficient to
meet the limit of their potential strict liability under the act. The U.S. Coast
Guard has enacted regulations requiring evidence of financial responsibility in
the amount of $1,500 per gross ton for tankers, coupling the OPA limitation on
liability of $1,200 per gross ton with the CERCLA liability limit of $300 per
gross ton. Under the regulations, evidence of financial responsibility may be
demonstrated by insurance, surety bond, self-insurance or guaranty. Under OPA
regulations, an owner or operator of more than one tanker is required to
demonstrate evidence of financial responsibility for the entire fleet in an
amount equal only to the financial responsibility requirement of the tanker
having the greatest maximum strict liability under OPA and CERCLA. We have
provided the requisite guarantees and received certificates of financial
responsibility from the U.S. Coast Guard for each of our tankers required to
have one.

     We insure each of our vessels with pollution liability insurance in the
maximum commercially available amount of $1.0 billion. A catastrophic spill
could exceed the insurance coverage available, in which event there could be a
material adverse effect on our business.

     Under OPA, oil tankers without double hulls will not be permitted to come
to U.S. ports or trade in U.S. waters by 2015. Currently, one of our tankers,
the Kliomar, will be required to be phased out in accordance with OPA on January
1, 2010. Nine of our tankers, the Fulmar, the Primar, the Colmar, the City
University, the Allenmar, the Camar, the Jamar, the Ermar and the Capemar will
be subject to OPA phase-out on January 1, 2015.

     OPA also amended the Federal Water Pollution Control Act to require owners
or operators of tankers operating in the waters of the United States must file
vessel response plans with the U.S. Coast Guard, and their tankers are required
to operate in compliance with their U.S. Coast Guard approved plans. These
response plans must, among other things:

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

          o describe crew training and drills; and

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

     Vessel response plans for our tankers operating in the waters of the United
States have been approved by the U.S. Coast Guard. In addition, the U.S. Coast
Guard has announced it intends to propose similar regulations requiring certain
vessels to prepare response plans for the release of hazardous substances. We
are responsible for ensuring our vessels comply with any additional regulations.

     OPA does not prevent individual states from imposing their own liability
regimes with respect to oil pollution incidents occurring within their
boundaries. In fact, most U.S. states that border a navigable waterway have
enacted environmental pollution laws that impose strict liability on a person
for removal costs and damages resulting from a discharge of oil or a release of
a hazardous substance. These laws may be more stringent than U.S. federal law.

     European Union Tanker Restrictions

     In July 2003, in response to the m.t. Prestige oil spill in November 2002,
the European Union adopted legislation that prohibits all single hull tankers
from entering into its ports or offshore terminals by 2010. The European Union
has also banned all single hull tankers carrying heavy grades of oil from
entering or leaving its ports or offshore terminals or anchoring in areas under
its jurisdiction. Commencing in 2005, certain single hull tankers above 15 years
of age will also be restricted from entering or leaving European Union ports or
offshore terminals and anchoring in areas under European Union jurisdiction. The
European Union is also considering legislation that would: (1) ban manifestly
sub-standard vessels (defined as those over 15 years old that have been detained
by port authorities at least twice in a six month period) from European waters
and create an obligation of port states to inspect vessels posing a high risk to
maritime safety or the marine environment; and (2) provide the European Union
with greater authority and control over classification societies, including the
ability to seek to suspend or revoke the authority of negligent societies. The
sinking of the m.t. Prestige and resulting oil spill in November 2002 has lead
to the adoption of other environmental regulations by certain European Union
nations, which could adversely affect the remaining useful lives of all of our
tankers and our ability to generate income from them. For example, Italy
announced a ban of single hull crude oil tankers over 5,000 dwt. from most
Italian ports, effective April 2001. Spain has announced a similar prohibition.
It is impossible to predict what legislation or additional regulations, if any,
may be promulgated by the European Union or any other country or authority.

Only one of our tankers is not double hull and that will begin to be phased out
beginning in 2010 under regulations imposed under OPA, the IMO and the European
Union.

     Vessel Security Regulations

     Since the terrorist attacks of September 11, 2001, there have been a
variety of initiatives intended to enhance vessel security. On November 25,
2002, the Maritime Transportation Security Act of 2002 (MTSA) came into effect.
To implement certain portions of the MTSA, in July 2003, the U.S. Coast Guard
issued regulations requiring the implementation of certain security requirements
aboard vessels operating in waters subject to the jurisdiction of the United
States. Similarly, in December 2002, amendments to the International Convention
for the Safety of Life at Sea (SOLAS) created a new chapter of the convention
dealing specifically with maritime security. The new chapter is scheduled to go
into effect in July 2004 and will impose various detailed security obligations
on vessels and port authorities, most of which are contained in the newly
created International Ship and Port Facilities Security (ISPS) Code. Among the
various requirements are:

          o on-board installation of automatic information systems, or AIS, to
enhance vessel-to-vessel and vessel-to-shore communications;

          o on-board installation of ship security alert systems;

          o the development of vessel security plans; and

          o compliance with flag state security certification requirements.

     The U.S. Coast Guard regulations, intended to align with international
maritime security standards, exempt non-U.S. tankers from MTSA vessel security
measures provided such vessels have on board, by July 1, 2004, a valid
International Ship Security Certificate (ISSC) that attests to the vessel's
compliance with SOLAS security requirements and the ISPS Code. We will implement
the various security measures addressed by the MTSA, SOLAS and the ISPS Code and
ensure that our tankers attain compliance with all applicable security
requirements within the prescribed time periods. We do not believe these
additional requirements will have a material financial impact on our operations.

     Inspection by Classification Societies

     Every seagoing vessel must be "classed" by a classification society. The
classification society certifies that the vessel is "in class," signifying that
the vessel has been built and maintained in accordance with the rules of the
classification society and complies with applicable rules and regulations of the
vessel's country of registry and the international conventions of which that
country is a member. In addition, where surveys are required by international
conventions and corresponding laws and ordinances of a flag state, the
classification society will undertake them on application or by official order,
acting on behalf of the authorities concerned.

     The classification society also undertakes on request other surveys and
checks that are required by regulations and requirements of the flag state.
These surveys are subject to agreements made in each individual case and/or to
the regulations of the country concerned.

     For maintenance of the class, regular and extraordinary surveys of hull,
machinery, including the electrical plant, and any special equipment classed are
required to be performed as follows:

     Annual Surveys: For seagoing ships, annual surveys are conducted for the
hull and the machinery, including the electrical plant, and where applicable for
special equipment classed, at intervals of 12 months from the date of
commencement of the class period indicated in the certificate.

     Intermediate Surveys: Extended annual surveys are referred to as
intermediate surveys and typically are conducted two and a half years after
commissioning and each class renewal. Intermediate surveys may be carried out on
the occasion of the second or third annual survey.

     Class Renewal Surveys: Class renewal surveys, also known as special
surveys, are carried out for the ship's hull, machinery, including the
electrical plant, and for any special equipment classed, at the intervals
indicated by the character of classification for the hull. At the special
survey, the vessel is thoroughly examined, including audio-gauging to determine
the thickness of the steel structures. Should the thickness be found to be less
than class requirements, the classification society would prescribe steel
renewals. The classification society may grant a one-year grace period for
completion of the special survey. Substantial amounts of money may have to be
spent for steel renewals to pass a special survey if the vessel experiences
excessive wear and tear. In lieu of the special survey every four or five years,
depending on whether a grace period was granted, a shipowner has the option of
arranging with the classification society for the vessel's hull or machinery to
be on a continuous survey cycle, in which every part of the vessel would be
surveyed within a five-year cycle.

     At an owner's application, the surveys required for class renewal may be
split according to an agreed schedule to extend over the entire period of class.
This process is referred to as continuous class renewal.

     All areas subject to survey as defined by the classification society are
required to be surveyed at least once per class period, unless shorter intervals
between surveys are prescribed elsewhere. The period between two subsequent
surveys of each area must not exceed five years.

     Most vessels are also dry-docked every 30 to 36 months for inspection of
the underwater parts and for repairs related to inspections. If any defects are
found, the classification surveyor will issue a "recommendation" which must be
rectified by the ship owner within prescribed time limits.

     Most insurance underwriters make it a condition for insurance coverage that
a vessel be certified as "in class" by a classification society which is a
member of the International Association of Classification Societies. All our
vessels are certified as being "in class" by the American Bureau of Shipping or
Lloyd's Register of Shipping. All new and secondhand vessels that we purchase
must be certified prior to their delivery under our standard contracts and
memorandum of agreement. If the vessel is not certified on the date of closing,
we have no obligation to take delivery of the vessel.

Risk of Loss and Liability Insurance

     General

     The operation of any cargo vessel includes risks such as mechanical
failure, collision, property loss, cargo loss or damage and business
interruption due to political circumstances in foreign countries, hostilities
and labor strikes. In addition, there is always an inherent possibility of
marine disaster, including oil spills and other environmental mishaps, and the
liabilities arising from owning and operating vessels in international trade.
OPA, which imposes virtually unlimited liability upon owners, operators and
demise charterers of any vessel trading in the United States exclusive economic
zone for certain oil pollution accidents in the United States, has made
liability insurance more expensive for ship owners and operators trading in the
United States market. We do not carry insurance against loss of hire, which
protects against business interruption following a loss under our hull and
machinery policy or other business interruption. While we believe that our
present insurance coverage is adequate, not all risks can be insured, and there
can be no guarantee that any specific claim will be paid, or that we will always
be able to obtain adequate insurance coverage at reasonable rates.

     Hull and Machinery Insurance

     We have obtained marine hull and machinery and war risk insurance, which
includes the risk of actual or constructive total loss, for all of our vessels.
The vessels are each covered up to at least fair market value, with deductibles
of $125,000 per vessel per incident. We also arranged increased value coverage
for each vessel. Under this increased value coverage, in the event of total loss
of a vessel, we will be able recover for amounts not recoverable under the hull
and machinery policy by reason of any under-insurance.

     Protection and Indemnity Insurance

     Protection and indemnity insurance is provided by mutual protection and
indemnity associations, or P&I Associations, which covers our third party
liabilities in connection with our shipping activities. This includes
third-party liability and other related expenses of injury or death of crew,
passengers and other third parties, loss or damage to cargo, claims arising from
collisions with other vessels, damage to other third-party property, pollution
arising from oil or other substances, and salvage, towing and other related
costs, including wreck removal. Protection and indemnity insurance is a form of
mutual indemnity insurance, extended by protection and indemnity mutual
associations, or "clubs." Subject to the "capping" discussed below, our
coverage, except for pollution, is unlimited.

     Our current protection and indemnity insurance coverage for pollution is $1
billion per vessel per incident. The eighteen P&I Associations that comprise the
International Group insure approximately 90% of the world's commercial tonnage
and have entered into a pooling agreement to reinsure each association's
liabilities. Each P&I Association has capped its exposure to this pooling
agreement at $4.25 billion. As a member of a P&I Association, which is a member
of the International Group, we are subject to calls payable to the associations
based on its claim records as well as the claim records, type of ship, and pool
claims which may become payable in any policy year.

Competition

     We operate in markets that are highly competitive and based primarily on
supply and demand. We compete for charters on the basis of price, vessel
location, size, age and condition of the vessel, as well as on our reputation as
an operator. We arrange our time charters and voyage charters in the spot market
through the use of brokers, who negotiate the terms of the charters based on
market conditions. We compete primarily with owners of tankers in the Handymax
and Panamax class sizes, and to a lesser extent, in the Aframax sector.
Ownership of tankers is highly fragmented and is divided among major oil
companies and independent tanker owners.

Legal Proceedings

     Proceedings against us.

     We are party, as plaintiff or defendant, to a variety of lawsuits for
damages arising principally from personal injury and property casualty claims.
Most claims are covered by insurance, subject to customary deductibles. We
believe that these claims will not, either individually or in the aggregate,
have a material adverse effect on us, our financial condition or results of
operations. From time to time in the future we may be subject to legal
proceedings and claims in the ordinary course of business, principally personal
injury and property casualty claims. Those claims, even if lacking merit, could
result in the expenditure of significant financial and managerial resources. We
have not been involved in any legal proceedings which may have, or have had a
significant effect on our financial position, nor are we aware of any
proceedings that are pending or threatened which may have a significant effect
on our financial position, results of operations or cash flows.

Organizational Structure

     We were formed in January 1997 as a Liberian corporation under the name
Diostel, Inc. and became the holder of all outstanding shares of Martank
Shipping (Holdings) Ltd. and Marship Tankers (Holdings) Ltd. These were two
British Virgin Island intermediate holding companies formed in 1993 that owned
separate single-purpose Liberian corporations that in turn owned some of our
current vessels. We subsequently changed our name to Stelships, Inc. and then to
Stelmar Shipping Ltd. In January 1999, we purchased Stelmar Tankers (Management)
Ltd., or STM, and Stelmar Tankers (U.K.) Ltd., or STUK, from a Luxembourg
holding company, which in turn, was equally held by three trusts established for
the benefit of the employees of STM, STUK and members of Stelios Haji-Ioannou's
family. Prior to the purchase, Mr. Haji-Ioannou effectively controlled STM and
STUK. Accordingly, the results of STM and STUK have been consolidated with ours.

Property, Plant and Equipment

     We have no freehold interest in any real property. We lease office space in
Athens, Greece and in London, England. The Athens office comprises approximately
723 square meters and is leased for a term of three years from February 2002 at
a rate of $216,000 per year from an unaffiliated third party. The London office
comprises approximately 115 square meters and is leased for a term of ten years
from January 1, 2003 at a rate of 32,188 British pounds per year from an
unaffiliated third party.

     We have filed trademark applications in Greece and in the European Union
for the registration of our logo depicting the flying bird and the word
"STELMAR". We have also filed trademark applications in the United States for
registration of (i) our logo depicting the flying bird and the word "STELMAR",
(ii) the flying bird standing-alone and (iii) the stand-alone word "STELMAR".
<PAGE>

ITEM 5.  OPERATING AND FINANCIAL REVIEW AND PROSPECTS

General

The Company is a leading provider of international transportation services of
refined petroleum products and crude oil to major oil companies, major oil
traders, and government agencies. The Company's current fleet consists of 41
vessels including three Panamax and four Handymax tankers, which are under
construction, scheduled to be delivered from March 2004 through August 2004.

The total cargo carrying capacity of the current fleet is approximately 2.3
million dwt.

During the year ended December 31, 2003, approximately 87.2% of the Company's
net revenue (revenue from vessels, minus voyage expenses) was derived from time
charter contracts as opposed to 94.7% during the previous year. Time charter is
a method of employment whereby vessels are chartered to customers for a fixed
period of time and at a fixed rate. The Company predominantly trades its vessels
under this method of employment. The balance of the revenue for the periods
ended December 31, 2003 and 2002 was derived under voyage charters in the spot
market. The focus on time charters contributes to the low volatility of the
Company's revenue, cash flow from operations and net income.

The Company's existing fleet will continue to be employed predominantly under
time charters in the forthcoming year. More specifically, 62% and 28% of the
fleet's capacity, in terms of net operating days, for 2004 and 2005 respectively
are covered by time charters.

The tanker industry has historically been cyclical, experiencing volatility in
profitability and assets' values resulting from changes in the supply and demand
of vessel capacity. During the fourth quarter of 2003, tanker charter rates
increased substantially from those experienced in the previous quarter. The spot
Handymax fleet earned on the average $16,173 per day, as opposed to $10,465 per
day for the same quarter last year, a 54.5% increase. On an annual basis, for
2003, the spot Handymax fleet earned $16,161 per day as opposed to $9,500 for
2002, a 70.1% increase.

The whole fleet average time charter equivalent rate the Company achieved during
the fourth quarter of 2003 was 2.6% higher over the same quarter of 2002. The
fleet average time charter equivalent rate the Company achieved during the
twelve month period of 2003 was higher over the equivalent average of the same
period of 2002 by approximately 2.9%, predominantly due to higher rates achieved
by the Handymax fleet operating in the spot market.
<PAGE>

Recent Developments

     Agreements for the construction of five additional Panamax tankers are
discussed in "Expected Additional Capital Commitments"

     In February 2003 the Company acquired six Handymax new building contracts
with an aggregate construction cost of $173.2 million. These Handymax tanker new
buildings are being constructed in STX shipyard of South Korea and will be
delivered at various dates through July 2004. The Company has paid an amount
equal to $23.7 million in cash and has issued common shares in the amount of
$6.4 million to the sellers to finalize the acquisition of those contracts. See
"Expected Additional Capital Commitments" for a discussion of the Company's
agreements to purchase six additional Handymax tankers.

     Up to March 2004 the Company took delivery of its two Panamax tankers the
Cabo Sounion and the Reymar, and of its three Handymax tankers, the Alcesmar,
Alcmar and Andromar.

     In January 2004 the Takamar and Jacamar, two coated Aframax tankers, were
sold and leased back under a bare boat charter party for a period of seven
years.

Financial Instruments

     On October 10, 1999, the Company concluded an interest rate cap agreement
for a period of six years (through October 10, 2005) for an amount of $15.0
million. Under this agreement, the Company is covered for interest rates up to
the London Inter-bank Offering Rate, or LIBOR, of 7%. Since LIBOR has not
exceeded 7% there was no charge for the Company with respect to this interest
rate cap agreement for years 2001, 2002 and 2003.

     On October 26, November 30, and December 20, 2000 the Company concluded
three interest rate swap agreements (the first two with effective dates as of
December 11, 2000 and the third with effective date as of March 12, 2001) for a
period of five years (through September 12, 2005) for amounts of $14.0 million,
$10.0 million and $31.5 million, respectively. Under these agreements, the
Company has fixed its interest rates at 6.50%, 6.45% and 5.88% respectively.

     On November 28, 2001, the Company concluded two interest rate swap
agreements with effective dates as of December 17, 2001 and December 18, 2001,
respectively. The first is for a period of three years for an amount of $16.8
million and the second for a period of five years for an amount of $18.2
million. Under these agreements the Company has fixed interest rates at 4.25%
and 4.77% respectively.

     On July 20, 2002, the Company concluded two interest rate swap agreements
with effective dates as of September 13, 2002. Both interest rate swap
agreements are for a period of five years for an amount of $23.6 million each.
Under these agreements the Company has fixed interest rates at 4.20% and 4.38%
respectively.

     On December 15, 2003, the Company entered a foreign currency forward
contract for a period of six months to sell an amount of Euros 6.5 million and
purchase U.S. Dollars. Under this contract the Company has fixed the Euro
exchange rate against the U.S. Dollar at 1.2182.

     The remaining nominal amount of all these interest rate swap agreements as
of December 31, 2003 was $112.8 million. The annual amounts to mature over the
next four years are as follows:

o 2004--$21.8 million (average swap rate 4.78%)
o 2005--$45.6 million (average swap rate 5.92%)
o 2006--$12.7 million (average swap rate 4.66%)
o 2007--$32.7 million (average swap rate 4.30%)

Insurance claims

On February 1, 2003, M/T Keymar was grounded by strong winds and was
subsequently re-floated. The vessel was dry-docked on February 27, 2003, to
undergo major repairs and resumed operations on October 16, 2003. The cost of
repairs carried out by the shipyard amounted to $29.8 million and was agreed to
be paid in four installments. As of December 31, 2003, the underwriters had paid
the first two installments amounting to $12.3 million while the third
installment of $8 million was paid by the Company and has been included in
Insurance Claims. In January 2004 the Company made a partial payment of the
fourth installment amounting to $3.5 million. The Company expects that it will
recover from the insurance underwriters the total amount paid to the shipyard.
The amount of the claim, net of deductible, outstanding at December 31, 2003,
totalled $18.3 million and is included in Insurance Claims. The amount payable
to the shipyard at December 31, 2003, totalled $8 million and is included in
Accounts Payable Trade.

Critical Accounting Policies

Vessels' Depreciation

Depreciation is computed using the straight-line method over the estimated
useful life of the vessels, after considering the estimated residual value.
Management estimates the useful life of the Company's vessels to be 25 years,
which is a common life expectancy applied in the shipping industry. However,
when regulations place limitations over the ability of a vessel to trade on a
worldwide basis, its useful life is re-estimated to end at the date such
regulations become effective. On this basis, the useful life of Kliomar was
reduced to 21 years.

Impairment of Long-Lived Assets

Management evaluates the carrying amounts and periods over which long-lived
assets are depreciated to determine if events have occurred which would require
modification to their carrying values or useful lives. In evaluating the
carrying values of long-lived assets, management reviews valuations performed by
independent marine valuers and compares this to the vessels carrying value.
Should the valuations suggest potential impairment, management determines
undiscounted projected net operating cash flows for each vessel and compares it
to the vessel carrying value. In the event that impairment occurs, a charge is
recorded by comparing the asset's carrying value to the estimated fair value.
The review of the carrying amount for each of the Company's vessels, as of
December 31, 2003 indicated that no impairment loss should be recognized.

Accounting for Dry Docking Costs

Dry-docking costs are carried out approximately every two and a half or five
years to coincide with the validity of the related certificates issued by the
Classification Societies, unless a further extension is obtained in rare cases
and under certain conditions. The Company defers and amortizes these costs over
a period of two and a half years or five years as applicable or to the next
dry-docking date if such has been determined. Unamortized dry-docking costs of
vessels sold are written off to income in the year of the vessels' sale.
Dry-docking costs have several aspects including the replacement of worn
components, the installation of items or features that are required by new
maritime regulations, and the installation of new equipment or features that
might increase efficiency or safety. Such expenditures do maintain the vessel
and preserve its useful life.

Accounting for Revenue and Expenses

Revenues are generated from freight billings and time charters. Time charter
revenues are recorded over the term of the charter as service is provided. Under
a voyage charter, the revenues and associated voyage costs are recognized
ratably over the duration of the voyage. The operating results of voyages in
progress at a reporting date are estimated and recognized pro-rata on a per day
basis. Probable losses on voyages are provided for in full at the time such
losses can be estimated. Vessel operating expenses are accounted for on the
accrual basis. Unearned revenue represents cash received prior to year-end
related to revenue applicable to periods after December 31 of each year.

Results of Operations

Year Ended December 31, 2003 versus Year Ended December 31, 2002

The Company recorded net income of $38.6 million (after loss on the sale of
Promar), or $2.24 per fully diluted share in the year ended December 31, 2003.
Net income, however, before the loss on the sale of Promar, would have been
$45.9 million, or $2.66 per fully diluted share, for the year ended December 31,
2003, compared to net income of $43.3 million, or $2.83 per fully diluted share,
for the year ended December 31, 2002. The results for the current year reflect
the expansion of the fleet together with the improved market conditions, which
to a very large extent were off set by the lost days from the grounding of
Keymar.

Revenue on a Time Charter Basis. The Company's net revenue, on a time charter
basis (revenue from vessels, minus voyage expenses) increased 9.6% to $166.7
million in the current year as compared to $152.1 million in last year. This
increase is mainly due to the expansion of the fleet as net operating days
increased by 6.6% to 10,562 days from 9,912 days last year. The Company's
average TCE rate in the current year was increased by 2.9% to $15,785 from
$15,341 over last year, reflecting the improved market conditions faced by the
Handymax fleet of the Company. The fleet's utilization declined to 94.8% from
96.7% in last year due to the dry docking of certain vessels and the grounding
of Keymar, which took the vessel out of service from February 7, 2003, until
October 16, 2003.

The average TCE rate of the Company's Handymax fleet in 2003 was increased by
5.9% to $14,450 from $13,651 in 2002. The Handymax fleet experienced 278
off-hire days during 2003 mainly due to the scheduled dry dockings, as compared
to 310 days in 2002. The Handymax fleet accounted for 55.8% of the Company's net
revenue for both current and previous years. The net revenue generated under
time charters accounted for 80.0% of the Handymax fleet's net revenue during the
year as compared to 86.2% in 2002. At December 31, 2003, 15 out of the Company's
eighteen Handymax tankers were operating under time charters.

The average TCE rate of the Company's Panamax fleet in 2003 was decreased by
2.8% to $17,293 from $17,787 in 2002. The Panamax fleet had 19 off-hire days in
2003 as compared to 3 off-hire days in 2002. The Panamax fleet accounted for
30.6% of the Company's net revenue during 2003 as compared to 26.4% during 2002.
The entire net revenue of the Panamax fleet was generated from time charters
during 2003 and 2002. At December 31, 2003, all of the Company's Panamax tankers
were operating under time charters.

The average TCE rate of the Company's Aframax fleet in 2003 was increased by
2.6% to $19,296 from $18,801 in 2002. The Aframax fleet had 283 off-hire days in
2003 as compared to 28 days in 2002, mainly due to the grounding of Keymar. The
Aframax fleet accounted for 13.6% of the Company's net revenue in 2003 as
compared to 17.8% in 2002. The net revenue of the Aframax fleet, with the
exception of Keymar that operated in the spot market since it resumed operation
in October 2003, was generated under time charters during 2003 while the entire
net revenue of 2002 was generated under time charters. At December 31, 2003, all
of the Company's Aframax tankers were operating under time charters except for
Keymar which was operating in the spot market.

Vessel Operating Expenses. The Company's vessel operating expenses, which mainly
consist of crewing, repairs and maintenance, spare parts, insurance, stores and
lubricants was increased by 11.6% to $44.4 million in 2003 from $39.8 million in
2002, mainly due to the expansion of the fleet together with higher repair and
maintenance costs and higher insurance premiums. The operating expenses per ship
per day, however, increased only by 1.3% to $3,982 in 2003 from $3,931 in 2002.

Depreciation. The Company's depreciation expense increased by 13.9% to $39.4
million in 2003 as compared to $34.6 million in 2002. The primary reason for the
increase was the result of the fleet expansion during 2003 and the change in the
useful life of our only single hull tanker Kliomar from 25 years to 21 years
effective July 1, 2003, which increased the current year depreciation expense by
$0.8 million.

Amortization of Deferred and Dry-Docking Costs. The Company's amortization of
deferred and dry-docking expenses was increased by 43.8% to $4.6 million in the
current year from $3.2 million in 2002. The increase is due to the fact that a
much larger number of vessels were dry-docked during 2003.

General and Administrative Expenses. The Company's general and administrative
expenses were increased by 20.5% to $9.4 million for 2003 as compared to $7.8
million in 2002. This increase resulted principally from increased personnel in
the Athens office together with the strengthening of the Euro against the U.S.
Dollar, which impacted the Euro denominated costs such as salaries paid to the
Athens based personnel. However, the increase in the overhead burden per ship
per day was contained to 12.0%, with $847 in 2003 compared to $756 in 2002.

Interest and Finance Cost, net. The Company's interest and finance cost, net of
interest income, were decreased by 10.3% to $16.6 million in the current year as
compared to $18.5 million in 2002, despite the increase in the average loan
balances outstanding, resulting from our fleet expansion. The low US Dollar
interest rates significantly reduced our interest expenses.

Year Ended December 31, 2002 Compared to Year Ended December 31, 2001

The Company recorded net income of $43.3 million, or $2.83 per fully diluted
share, in the year ended December 31, 2002, compared to net income of $34.01
million, or $3.29 per fully diluted share, in the year ended December 31, 2001.
The results for the current year reflect the expansion of the fleet, the
additional shares issued after the follow on offering, the deteriorating market
conditions with tanker charter rates falling close to historic lows before their
rebound during the fourth quarter of 2002, and finally the increase in operating
and general and administrative costs.

Net Revenue. The Company's net revenue, on a time charter basis (revenue from
vessels, minus voyage expenses) increased by 48.4% to $152.1 million in 2002 as
compared to $102.5 million in 2001. This increase is mainly due to the expansion
of the fleet as net operating days increased by 62.2% to 9,912 days from 6,110
days over the same period last year. However, the Company's average TCE rate in
the current period decreased by 8.5% to $15,341 from $16,769 over the same
period last year, reflecting the challenging market conditions predominantly
faced by the Handymax fleet as both Panamax and Aframax fleets were on time
charters arranged before the market declined. The fleet's utilization increased
to 96.7% as compared to 95.2% in the previous year.

In particular, the average TCE rate of the Company's Handymax fleet in 2002
decreased by 17.3% to $13,651 from $16,506 in 2001. The Handymax fleet
experienced 310 off-hire days during 2002, mainly due to the scheduled dry
dockings, as compared to 160 days in 2001. The Handymax fleet accounted for
55.8% of the Company's net revenue in 2002, as opposed to 65.3% during 2001. The
net revenue generated under time charters accounted for 86.2% of the Handymax
fleet's net revenue in 2002 as compared to 62% in 2001.

In particular, the average TCE rate of the Company's Panamax fleet in 2002
increased by 5% to $17,787 from $16,930 in 2001. The Panamax fleet had three
off-hire days during 2002 as compared to 84 days in 2001. The Panamax fleet
accounted for 26.4% of the Company's net revenue in 2002 as compared to 10.8%
during 2001. The entire net revenue of the Panamax fleet was generated from time
charters during 2002 and 2001.

In particular, the average TCE rate of the Company's Aframax fleet in 2002
increased by 7.7% to $18,801 from $17,463 in 2001. The Aframax fleet had 28
off-hire days during 2002 as compared to 65 days in 2001. The Aframax fleet
accounted for 17.8% of the Company's net revenue during 2002 as compared to
23.9% in 2001. The entire net revenue of the Aframax fleet was generated under
time charters during 2002 and 2001.

Vessel Operating Expenses. The Company's vessel operating expenses, which mainly
consist of crewing, repairs and maintenance, spare parts, insurance, stores and
lubricants increased by 74.5% to$40.3 million in 2002 from $23.1 million in
2001, mainly due to the expansion of the fleet together with its worldwide
trading pattern, which resulted in more expensive storing of supplies and higher
repair and maintenance costs, especially with the part of the fleet trading in
the Western Hemisphere. The operating expenses per ship per day, however,
increased by only 9.3% to $3,931 in 2002 from $3,598 in 2001.

Depreciation. The Company's depreciation expense increased by 58.7% to $34.6
million in 2002 as compared to $21.8 million in 2001. The increase was the
result of the fleet expansion during the current period.

Amortization of Deferred and Dry-Docking Costs. The Company's amortization of
deferred and dry-docking expenses increased 220.0% to $3.2 million in 2002 from
$1.0 million in 2001 due to the increased number of dry dockings in 2002.

General and Administrative Expenses. The Company's general and administrative
expenses increased by 69.6% to $7.8 million in 2002 as compared to $4.6 million
in 2001. This increase resulted principally from increased staff in line with
our growth plan of 64 on-shore staff members at the end of 2002, up from 40 at
the end of 2001, together with additional costs relating to the function of the
Board of Directors and the Company's public presence. In addition, the Company
awarded restricted stock worth $0.3 million to senior management which was
directly expensed. The overhead burden per ship per day, however, increased by
only 5.8% to $756 during 2002 from $714 during 2001.

Interest Expense, net. The Company's interest expense increased by 19.4% to
$18.5 million in 2002 as compared to $15.5 million during 2001. The increase in
the average loan balances outstanding, resulting from our fleet expansion, was
to a certain extent offset by the decrease in US dollar interest rates from 2001
levels.

Liquidity and Capital Resources

As of December 31, 2003, the Company's cash position increased to $36.5 million,
from $36.1 million as of December 31, 2002.

Net cash flow from operating activities increased to $75.0 million in the year
ended December 31, 2003, from $74.6 million in the previous year, mainly
reflecting the expansion of the fleet.

During the year ended December 31, 2003, the Company incurred capital
expenditures of $103.7 million. The capital expenditures primarily concern the
acquisition of the new-building contracts of the six Handymax tankers ($30.1
million) and the stage payments made to shipyards for the construction and
delivery of the Company's new building Handymax and Panamax tankers ($73.4
million).

The Company during the year dry docked eight vessels, the Luxmar, Allenmar,
Rimar, Aquamar, Maremar, Primar, Jamar and Takamar and incurred expenditure of
$7.8 million in 2003 as compared to $8.1 million in 2002.

The Company's debt repayments in 2003 were $53.4 million (including repayment of
debt of $7.7 million due to the sale of Promar) as compared to $42.7 million in
2002. The Company, during the year ended December 31, 2003, increased its
borrowings by $72.4 million to finance the advance and stage payments to the
yards of the Handymax and Panamax tankers under construction and the delivery of
the first Panamax tanker the Cabo Hellas which was delivered in November 2003.

The Company's debt repayment obligations over the next nine years, excluding the
post delivery financing installments for the Panamax and Handymax tankers under
construction, are as shown in Table 1 below:

TABLE 1

Year                                                      Amount
2004....................................................$ 55.0 million
2005....................................................$ 83.1 million
2006....................................................$ 51.5 million
2007....................................................$ 49.3 million
2008....................................................$109.0 million
2009....................................................$ 26.0 million
2010....................................................$ 38.7 million
2011....................................................$ 31.8 million
2012....................................................$ 63.2 million

The Company's debt repayment obligations over the next ten years, including the
arranged $100.0 million loan facility, for the post delivery financing of the
five Panamax new buildings and the $131.3 million loan facilities for the post
delivery of the six Handymax new buildings and excluding the repayment of the
debt of the two coated Aframax tankers, that were sold and leased back in
January 2004 (Takamar and Jacamar of $21.7 million and $23.9 million,
respectively) are as shown in Table 2 below:

TABLE 2

Year                                                      Amount
2004....................................................$ 50.0 million
2005....................................................$ 77.6 million
2006....................................................$ 50.4 million
2007....................................................$ 50.0 million
2008....................................................$ 98.0 million
2009....................................................$ 31.6 million
2010....................................................$ 45.2 million
2011....................................................$ 31.1 million
2012....................................................$111.4 million
2013 and 2014...........................................$ 75.7 million

As part of its growth strategy, the Company will continue to consider strategic
opportunities, including the acquisition of additional vessels and further
penetration into the Handymax and Panamax tanker markets. The Company may choose
to pursue opportunities to grow through the acquisition of vessels, new
buildings or fleets from other companies. The Company intends to finance any
future acquisitions through various sources of capital, including internally
generated cash flow, additional debt borrowings and the issuance of additional
shares of common stock.

Expected Additional Capital Commitments

We will incur additional capital commitments for the four Panamax tankers that
we have contracted to construct with Daewoo shipyards in South Korea. The total
contracted cost is for $ 123.5 million. We also expect to incur additional
expenditure of approximately $3 million representing capitalized interest on
preconstruction financing together with supervision costs. The Company expects
to make the following payments to the yard over the next two quarters:

                              Stage        Delivery          Total
                          Installments   Installments      Payments
                          ------------   ------------    ------------
                               (amounts in millions of U.S. Dollars)

1st Quarter 2004                 13.7            35.7            49.4
2nd Quarter 2004                   --            38.0            38.0
                         ------------    ------------    ------------
                                 13.7            73.7            87.4
                         ============    ============    ============

The total payments will be financed through a loan facility of $100 million,
arranged in December 2002, out of which the Company had drawn $43.3 million as
of December 31, 2003. The remaining balance required to fund the previously
mentioned payments will be funded through the Company's own funds. In this
respect, the loan and equity portion that will be paid over the next two
quarters will be as follows:

                               Loan           Equity           Total
                             --------        --------        --------
                               (amounts in millions of U.S. Dollars)

1st Quarter 2004                 33.0            16.4            49.4
2nd Quarter 2004                 23.7            14.3            38.0
                             --------        --------        --------
                                 56.7            30.7            87.4
                             ========        ========        ========

We will also incur additional capital commitments for the six Handymax tanker
new building contracts that we acquired in February 2003. The total contract
cost is approximately $173.2 million, of which $37.0 million was paid in 2003,
excluding $6.4 million representing the consideration paid to sellers in the
form of common shares. We also expect to incur additional expenditures of
approximately $3.5 million representing capitalized interest on pre-construction
financing together with supervision costs. The Company expects to make the
following payments to the yard over the next three quarters:

                              Stage        Delivery          Total
                          Installments   Installments      Payments
                         ------------   ------------    ------------
                               (amounts in millions of U.S. Dollars)

1st Quarter 2004                 10.6            55.6            66.2
2nd Quarter 2004                  8.0              --             8.0
3rd Quarter 2004                   --            55.6            55.6
                         ------------    ------------    ------------
                                 18.6          111.2            129.8
                         ============    ============    ============

     The total payments will be financed through two loan facilities totaling
$131.3 million, already arranged in September 2003. The remaining balance
required to fund the previously mentioned payments will be funded through
Company's own funds. In this respect the loan and equity portion that will be
paid over the next three quarters will be as follows:

                               Loan          Equity          Total
                             ----------     ----------      ----------
                               (amounts in millions of U.S. Dollars)

1st Quarter 2004                 52.0            14.2            66.2
2nd Quarter 2004                  8.0              --             8.0
3rd Quarter 2004                 42.1            13.5            55.6
                           ----------      ----------      ----------
                                102.1            27.7           129.8
                           ==========      ==========      ==========

Off Balance Sheet Arrangements

We do not engage in off-balance sheet arrangements.

Quantitative and Qualitative Disclosures about Market Risks

See ITEM 11

ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES

A. Directors and Executive Officers

     Set forth below are the names, ages and positions of our directors and
executive officers. Our board of directors is elected annually on a staggered
basis, and each director elected holds office for a three-year term. Officers
are elected from time to time by vote of our board of directors and hold office
until a successor is elected.

     Name                        Age                Position

     Nicholas Hartley            65                 Chairman of the Board of
                                                    Directors

     Thomas N. Amonett           60                 Director

     Terence Coghlin             61                 Director

     Peter Goodfellow            57                 Chief Executive Officer and
                                                    Director

     Ray Miles                   59                 Director

     Stamatis Molaris            41                 Chief Financial Officer and
                                                    Director

     Eileen Kamerick             45                 Director

     Olga Lambrianidou           48                 Secretary

     Biographical information with respect to each of our directors and
executives is set forth below.

     Nicholas Hartley has been our Chairman of the Board of Directors since
April 2002 and Deputy Chairman since 2001, a Director since 1993 and a
consultant since September 1992. His directorship expires in 2005. Mr. Hartley
is an independent shipping consultant with over 35 years experience in the oil
and shipping industries. Prior to 1992, he worked at BP Shipping for 35 years,
where his posts included Managing Director of BP Southern Africa and Managing
Director of BP Shipping. He is also a non-executive director of easyGroup (UK)
Limited, easyJet plc, easyInternet Cafe Limited, and easyCar Limited. His
business address is 17 Brooklands Avenue, Cambridge CB2 2BG, England.

     Thomas N. Amonett has been a Director since March 2001. His directorship
expires in 2006. Mr. Amonett has been president of Champion Technologies, Inc.,
an international provider of specialty chemicals and related services to the
oilfield production industry, since 1999. From 1997 to 1999, Mr. Amonett was
president and chief executive officer of American Residential Services, Inc., a
provider of air conditioning, plumbing and electrical services to commercial
customers, and from 1996 to 1997 was interim President and Chief Executive
Officer of Weatherford Enterra Inc., a diversified provider of energy services
to the oil and gas exploration, production and transportation industries. Mr.
Amonett is a director of PetroCorp Incorporated, a company engaged in the
exploration and production of oil and natural gas primarily in the United
States, and Reunion Industries, Inc., which owns and operates a diverse group of
manufacturing companies. His business address is 3355 W. Alabama, Suite 400,
Houston, Texas, 77098.

     Terence Coghlin has been a Director since October 2001. His directorship
expires in 2006. Mr. Coghlin, having qualified as an English barrister, spent
over 35 years advising shipowners throughout the world on legal and liability
insurance matters. In 1991 he became Chairman of Thomas Miller and, for a
three-year spell, Chairman of the International Group of P&I Clubs. Since
retirement from the City in 2001 he has become a maritime arbitrator and
prepared the fifth edition of the book on time charterparty law of which he is a
founding co-author. Mr. Coghlin is an associate of Southampton University's
Institute of Maritime Law, a member of the editorial board of Lloyd's Maritime &
Commercial Law Quarterly and a series editor of Lloyd's Shipping Law Library.
His business address is Ockley Manor, Keymer, Sussex, England.

     Peter Goodfellow has been our Chief Executive Officer and a Director since
our inception in 1992. His directorship expires in 2005. Mr. Goodfellow, with 33
years of experience in the shipping industry, was previously employed at Shell
Tankers (U.K.) Ltd. and Esso Petroleum Co. Ltd., where he served as Marine Fleet
Operations Manager, prior to joining us. His business address is Status Center,
2A Areos Street, Vouliagmeni, GR, 16671, Athens, Greece

     Ray Miles has been a Director since April 18, 2004. His directorship
expires in 2007. Mr. Miles has been Chief Executive Officer of CP Ships, a
publicly listed container shipping company, from 1998 to May 2004, at which time
he became chairman. He has worked in the shipping industry since 1972. He is a
non executive Director of Provident Financial in the U.K.and West of England P &
I Club, Chairman of Box Club, the container shipping industry's CEO forum,
Chairman of World Shipping Council, the industry's U.S. representative
organization and a trustee of the National Maritime Museums at both Greenwich,
London and Falmouth, Cornwall. His business address is CP Ships 62-65 Trafalgar
Sq, London.

     Stamatis Molaris has been our Chief Financial Officer and a Director since
August 1993. His directorship expires in 2007. Prior to that, he served as an
audit manager for Arthur Andersen for six years. Mr. Molaris obtained an
undergraduate degree in Business Administration and Economics from Richmond
College in London and a post-graduate degree in Finance from Strathclyde
University of Glasgow. His business address is Status Center, 2A Areos Street,
Vouliagmeni, GR, 16671, Athens, Greece.

     Eileen Kamerick has been a director since July 2003. Her directorship
expires in 2005. Ms. Kamerick has extensive international finance and legal
experience and has held senior finance and management positions with Amoco
Corporation, GE Capital, and Whirlpool Corporation. Until the recent acquisition
of Bccom3 Group, Inc. by Publicis, Ms. Kamerick was the Chief Financial Officer
and Executive Vice President of the $2 billion global advertising and marketing
agency. Ms. Kamerick received a JD and an MBA with honors from the University of
Chicago. She received her BA, summa cum laude, from Boston College.

     Olga Lambrianidou has been our secretary since January 2002. Ms.
Lambrianidou joined us in August of 2001 and following a period of training has
taken up the responsibilities of Corporate Secretary. Ms. Lambrianidou has
studied in the United States and has a BBA Degree in Business Administration and
Marketing and an MBA Degree in Banking/Finance. Before settling in Greece
permanently Ms. Lambrianidou pursued a career in banking and insurance in New
York. Her business address is Status Center, 2A Areos Street, Vouliagmeni, GR,
16671, Athens, Greece.

B. Compensation.

     The aggregate annual compensation paid to members of senior management was
$678 for the fiscal year ended December 31, 2003, out of which $57 was paid in
the form of restricted shares. We paid a portion of this compensation outside of
Greece for work performed outside of that country. We paid approximately $273 to
the non-executive directors as compensation for their services in 2003.
Non-employee directors receive annual fees in the amount of $30,000 plus
reimbursement of their out-of-pocket expenses. In addition, each non-employee
director who acts as a chairman of a committee receives an additional $10,000
annually with each committee member receiving an additional $5,000 annually.
This does not include the Chairman's compensation of $90,000 plus reimbursement
of his out-of-pocket expenses. We do not have a retirement plan for our officers
or directors, but we have provided payments to private retirement plans for
Peter Goodfellow and Bruce Ogilvy before Mr. Ogilvy retired in November 2002.

C. Board practices.

     Our directors are elected by a plurality of the votes cast by shareholders
entitled to vote. There is no provision for cumulative voting.

     The board of directors is divided into three classes having staggered
terms, with a minimum of two directors in each class. Shareholders may change
the number of directors only by the affirmative vote of holders of a majority of
the outstanding common stock. The board of directors may change the number of
directors only by a majority vote of the entire board. The members of each class
are elected for a term of three years. The board of directors has the authority
to fix the amounts which shall be payable to the members of the board of
directors for attendance at any meeting or for services rendered to us.

     We do not have a corporate policy relating to related party transactions,
nor are there any provisions in our articles of incorporation or bylaws
regarding related party transactions. The LBCA provides that contracts or
transactions between a corporation and one of its directors will be permitted if
the director's interest is disclosed or known to the board and the contract or
transaction is approved by a majority of the disinterested directors, or by a
unanimous vote of the disinterested directors if the vote of the disinterested
directors is insufficient to constitute an act of the board.

Committees of the Board of Directors

     Audit Committee. The NYSE currently has a rule requiring U.S. domestic
companies to establish audit committees consisting of three independent
directors. This rule does not apply to the Company, which is a "foreign private
issuer". However, the Company voluntarily submits to the audit committee rule.
Accordingly, the Company's Board of Directors has established an Audit
Committee, consisting of three independent directors. The Audit Committee
currently consists of Messrs. Terence Coghlin, Thomas N. Amonett and Ms. Eileen
Kamerick. Mr. Amonett is the Chairrman of the Audit Committee.

     Executive Committee. The Company's Board of Directors has established an
Executive Committee to manage certain day-to-day business activities and
ordinary course financings, consisting of three directors. The members of the
Executive Committee are Messrs. Nicholas Hartley, Peter R. Goodfellow and
Stamatis Molaris.

     Remuneration Committee. The Company's Board of Directors has established a
Remuneration Committee to provide assistance to the Board of Directors in
fulfilling their responsibility for ensuring that remuneration and benefit
packages offered to the executive officers and other employees of the Company
are consistent with the Company's remuneration objectives. The members of the
Remuneration Committee are Messrs. Terence Coghlin and Ray Miles. Terence
Coghlin is the Chairman of the Remuneration Committee.

     Nominating Committee. The Company's Board of Directors has established a
Nominating Committee to, as and when so required by the Board of Directors,
assist the Board of Directors in (1) identifying individuals qualified to become
members of the Board of Directors; (2) reviewing shareholder proposals for
nomination to the Board of Directors; and (3) when requested, identifying
individuals qualified to serve as senior executives of the Company. The current
members of the Nominating Committee are Messrs. Terence Coghlin and Thomas N.
Amonett. Terence Coghlin is the current Chairman of the Nominating Committee.

     Additional Disclosure. On October 27 and November 10, 2003, Peter
Goodfellow, the Chief Executive Officer of the Company, and Stamatis Molaris,
the Chief Financial Officer of the Company, respectively, took non-interest
bearing advances from the Company in the amount of (Pound Sterling)100,000 and
$125,000, in apparent violation of applicable U.S. law prohibiting loans by
public companies to their directors and executive officers. These advances were
repaid on February 9 and 10, 2004, respectively. The Company believes that the
advances were taken based on the executives' mistaken belief that the
prohibition on loans under U.S. law did not encompass short term advances and
thus were not legally prohibited. The Board of Directors, with the two
executives involved having removed themselves from its deliberations, imposed
fines on the Chief Executive Officer and the Chief Financial Officer in the
amount of $50,000 and $30,000 respectively, which each has paid to the Company.
The Board also instituted additional controls on payments to the Company's
directors and executive officers.

D. Employees

     As of December 31, 2003, we employed approximately 1,325 employees,
consisting of 75 shore-based personnel based in London, England and Athens,
Greece, and 1,250 seagoing employees from the Philippines. At year-end 2002, we
employed approximately 960 employees, consisting of 900 seagoing employees and
63 shore-based employees. The increase in seagoing employees is due to our
acquisition of additional vessels and the delivery of newbuildings. At year-end
2001, we employed approximately 746 employees, consisting of 46 shore-based
employees and 700 seagoing employees. We directly employ the senior officers
onboard our vessels. The relevant shipowning subsidiary employs the other
seagoing personnel for the duration of each voyage. We ensure that all seamen
have the qualifications and licenses required to comply with international
regulations and shipping conventions, and that our vessels employ experienced
and competent personnel.

     We crew our vessels with officers and seamen from the Philippines through
Michaelmar Shipping Services Inc., an independent crewing agency with whom we
have had arrangements since 1995. We always man our vessels above minimum
manning requirements of the vessel's flag country in order to perform
maintenance duties. Michaelmar locates and recommends qualified seamen for
employment with us and handles each person's training, travel and payroll. We
seek to retain qualified crew members through several programs such as the
incentive bonus program which permits seamen to receive a bonus upon rejoining
us following time off and a training program for onboard familiarization with a
vessel's machinery, equipment and safe operating systems.

     Our employees are subject to collective bargaining agreements with the
Philippine government that cover all Philippine nationals. Our staff in Greece
is also subject to a general collective bargaining agreement covering employees
of shipping agents. These agreements set industry-wide minimum standards.

E. Share ownership

     The following table sets forth information as of December 31, 2003,
regarding the total amount of capital stock owned by our officers and directors
on an individual basis:

                                                                 Shares
Name                   Position                                  (Nom. Hold.)
----                   --------                                  ------------

Nicholas Hartley       Chairman of the Board                     *

Roger Haynes           Director                                  *

Thomas Amonett         Director                                  *

Peter Goodfellow       Director, Chief Executive Officer         *

Terence A. Coghlin     Director                                  *

Stamatis Molaris       Director, Chief Financial Officer         *

Eileen Kamerick        Director                                  *

----------

* The person beneficially owns less than one percent of the shares.

Option Plan

     In February 2001, our board of directors adopted the 2001 Stock Option
Plan. The 2001 Stock Option Plan was subsequently adopted by our shareholders.

     Our 2001 Stock Option Plan, or the Plan, entitles our officers, key
employees, including senior sea staff, and directors to receive options to
acquire common stock. A total of 323,500 shares of common stock has been
reserved for issuance under the Plan. The Plan will be administered by our board
of directors. Under the terms of the Plan, the board of directors may grant new
options exercisable at a price per share to be determined by the board of
directors. The exercise price of $12.30 equals the average daily closing price
of our common stock over the 30 day period following the closing of our initial
public offering on March 6, 2001. Under the terms of the Plan, no options may be
exercised until at least two years after the closing of our initial public
offering. Any shares received on exercise of the options may not be sold until
three years after the closing of our initial public offering. All options will
expire 10 years from the date of grant. The Plan will expire 10 years from the
closing of our initial public offering.

Additional Stock Options

     In addition to the Plan, an aggregate of 8,000 additional options to
acquire common stock were granted to Nicholas Hartley, Terence Coghlin and
George Karageorgiou in the amounts of 4,000, 2,000 and 2,000 shares of common
stock, respectively. These options have an exercise price of $13.52, which
equals the arithmetic average of the closing price of our common stock on the
New York Stock Exchange during the period from October 11th to November 11th
2001 and are subject to the terms and conditions as set forth in the Plan.

     As of December 31, 2003, 20,000 options had been exercised and 38,000
options had been forfeited.

ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS.

A. Major shareholders.

     Our capital stock is comprised of 17,305,687 shares of common stock, par
value $0.02 per share. The following table sets forth information regarding the
owners of more than five (5) percent of our common shares of which we are aware
as of the date of this annual report from reports on Schedule 13D and Schedule
13G filed with the Securities and Exchange Commission. None of the shareholders
have any special voting rights.

                                                                   Percentage
Name                                            Number of Shares    of Class
----                                            ----------------   ----------

Polys Haji-Ioannou                                  2,412,026         13.90

Neuberger Berman Inc., Neuberger Berman, LLC        2,133,000         12.35%

FMR Corp.                                           1,841,700        10.65%

Stelios Haji-Ioannou                                1,288,584         7.45%

Clelia Haji-Ioannou                                 1,075,000         6.21%

B. Related party transactions.

     Computer and Information Systems Support. We have contracted with Key
Systems, S.A. to provide us with all of our computer hardware and software
support for both our land-based operation and for use on board our vessels. Key
Systems was controlled by one of our major stockholders until September 2001. We
paid Key Systems $25,000 in 2001 while no fees were paid in 2002 and 2003. We
believe that the fees and expenses incurred under this agreement are no greater
than would be incurred with a third party on an arm's length basis.

     Shipbrokering. Our time charters with Pertamina on two of our vessels were
arranged by World Tankers (U.K.) Ltd., which receives an industry standard
brokerage fee in the amount of 1.25% of charter hire paid for the duration of
the charters. World Tankers (U.K.) Ltd. is beneficially owned by members of the
Haji-Ioannou family, excluding Stelios Haji-Ioannou. We believe that the fees
incurred under this agreement are no greater than would be incurred with a
third-party London-based shipbrokering firm on an arm's-length basis.

     World Tankers Ltd. Members of the Haji-Ioannou family, including Polys
Haji-Ioannou and Clelia Haji-Ioannou, are the beneficial owners of World Tankers
(U.K.) Ltd., which owns and operates a fleet of tankers in age classifications
that are older than our vessels. However, these vessels occasionally compete
with our vessels for charter business. Our former chairman, Stelios
Haji-Ioannou, does not participate in the management of World Tankers Ltd, and
does not own any of its shares. He has executed a non-compete agreement with us
which prohibits him from engaging in the business of owning or operating tankers
for two years after the later of Mr. Haji-Ioannou's ceasing to own at least 5%
of our outstanding common stock or ceasing to serve as our director or officer
so long as we are a public company. During that time, Mr. Haji-Ioannou may
choose to hold up to 5% in publicly traded companies. We paid World Tankers
$64,000 in 2001 and $24,000 in 2002 for brokerage fees on some of our charters.
No fees were paid in 2003. The fees were based on 1.25% of the charter payments,
which is standard for the industry. Effective May 17, 2002, that contract
expired and we no longer pay fees to World Tankers (U.K.) Ltd.

C. Interests of experts and counsel.

     Not applicable.

ITEM 8. FINANCIAL INFORMATION.

A. Consolidated Statements and Other Financial Information.

     See Item 18.

Dividend Distribution Policy

     Each share of our common stock is currently entitled to a quarterly
dividend payment of $0.12 per share. We paid our first dividend for the third
quarter of 2003. Any future dividends declared will be at the discretion of the
board of directors and will depend upon our financial condition, earnings and
other factors. In addition, since we are a holding company with no material
assets and conduct our operations through subsidiaries, our ability to pay any
dividends to shareholders will depend on our subsidiaries' distributing to us
their earnings and cash flow. Some of our loan agreements currently limit our
subsidiaries' ability to make distributions to us and prohibit us from paying
more than 50% of our consolidated annual net income as dividends.

B. Significant Changes.

     Not Applicable.

ITEM 9. THE OFFER AND LISTING.

A. Listing Details.

     We conducted our initial public offering in March 2001. Our common stock
currently trades on the New York Stock Exchange under the symbol "SJH." The
price history of our common stock is provided below.

Annually since our initial public offering:

               2001              2002              2003
               ----              ----              ----
Low            11.50             13.56             14.06
High           21.90             16.80             22.20

Quarterly for the previous two years:

2003           1st quarter       2nd quarter       3rd quarter       4th quarter
----           -----------       -----------       -----------       -----------
Low            14.60             14.06             16.01             17.15
High           16.10             16.99             18.60             22.20

2002           1st quarter       2nd quarter       3rd quarter       4th quarter
----           -----------       -----------       -----------       -----------
Low            13.86             14.30             13.81             13.56
High           16.72             16.80             16.21             15.99

Monthly for the previous six months:

                May         April        March        February        January
               -----        -----        -----        --------        -------
Low            23.50        23.90        26.89        24.83           20.90
High           31.85        29.48        29.35        28.73           28.25

               December
               --------
Low            20.20
High           22.20

B. Markets.

     Our shares of common stock are traded on the New York Stock Exchange under
the symbol "SJH."

ITEM 10. ADDITIONAL INFORMATION

     This section summarizes our share capital and the material provisions of
our Articles of Association, including rights of holders of our shares. The
description is only a summary and does not describe everything that our Articles
of Association contain. A copy of our Articles of Association has been
previously filed with the SEC as an exhibit to our Registration Statement on
Form F-1 (Reg. # 333-13128) filed on March 6, 2001. As a foreign private issuer,
we are not subject to the proxy rules applicable to issuers under Section 14 of
the Exchange Act of 1934, and our officers, directors and principal shareholders
are not subject to the short-swing profit disclosure and recovery provisions of
Section 16 of the Exchange Act.

A. Share capital.

     Not applicable

B. Memorandum and articles of association.

     The Business Corporation Act of Liberia 1976. The Business Corporation Act
of Liberia 1976, or the LBCA, is similar to the corporation laws of the states
of Delaware and New York. It permits corporations to provide for shareholder
rights in their articles of incorporation or bylaws, or to limit or alter rights
provided by the LBCA. For example, corporations can provide for staggered boards
and cumulative voting for their directors, but are not so required. Similarly,
the LBCA provides for preemptive rights when shareholder voting rights would be
adversely affected by the issuance of securities, but permits corporations to
withhold these rights. However, the LBCA does specifically provide for
shareholders to approve corporate matters by unanimous written consent in place
of meetings and for all shareholders the right to access corporate records.
These rights may not be altered by the corporations.

     Sales of Assets, Mergers and Dissolution. Under the LBCA, the sale of all
or substantially all of our assets not made in our usual or regular course of
business and our non-judicial dissolution and liquidation are required to be
approved by the holders of 66 2/3% of the outstanding shares of common stock.
Holders of one-half of the outstanding shares of common stock may institute
judicial dissolution proceedings in accordance with the LBCA. In the event of
our dissolution, the holders of the common stock will be entitled to share pro
rata in our net assets available for distribution to them, after payment to all
creditors and the liquidation preferences of any of our outstanding preferred
stock. Under the LBCA, a merger or consolidation involving us, other than with
subsidiaries in which we own at least 90% of the shares, is required to be
approved by the holders of a majority of the outstanding shares of common stock
and the board of directors.

     Under the LBCA, amendments to the articles of incorporation of a Liberian
company may be authorized by vote of the holders of a majority of all
outstanding shares. However, in the case of provisions in articles of
incorporation requiring the approval of a super-majority of the members of the
board of directors or outstanding common stock as a condition to the taking of
specified corporate actions, the LBCA requires the approval of holders of 66
2/3% of the outstanding shares of common stock entitled to vote on the matter,
or of a greater proportion of shares, or class or series of shares, as may be
provided specifically in the articles of incorporation.

     Our Articles of Incorporation and Bylaws. Our purpose, as stated in Section
B of our Articles of Incorporation, is to engage in any lawful act or activity
for which corporations may be organized under the LBCA. Our articles of
incorporation and bylaws do not impose any limitations on the ownership rights
of our shareholders.

     Under our bylaws, annual shareholder meetings will be held at a time and
place selected by our board of directors. The meetings may be held in or outside
of the Republic of Liberia. Special meetings may be called shareholders holding
at least one-tenth of all outstanding shares entitled to be at the meeting. The
board of directors may set a record date between 15 and 60 days before the date
of any meeting to determine the shareholders that will be eligible to receive
notice and vote at the meeting.

     Dividends. A Liberian corporation may pay dividends in cash, stock or other
property, except when the corporation is insolvent or the payment of the
dividend would make the corporation insolvent. In addition, the payment must not
violate any restrictions contained in the corporation's articles of
incorporation. Our articles of incorporation contain no restrictions on payments
of dividends. A Liberian corporation may pay dividends out of surplus, which is
additional paid-in capital plus any retained earnings or minus any accumulated
deficit. If the corporation does not have surplus, it may pay dividends out of
net profits for the current fiscal year and for the preceding fiscal year.
Subject to these requirements, the board of directors of Liberian corporations,
including ours, has the authority to decide whether that corporation will pay a
dividend.

     Dissenters' Rights of Appraisal and Payment. Under the LBCA, our
shareholders have the right to dissent from various corporate actions, including
any merger or sale of all or substantially all of our assets not made in the
usual course of our business, and receive payment of the fair value of their
shares. In the event of any further amendment of the articles, a shareholder
also has the right to dissent and receive payment for his or her shares if the
amendment alters certain rights in respect of those shares. The dissenting
shareholder must follow the procedures set forth in the LBCA to receive payment.
In the event that we and any dissenting shareholder fail to agree on a price for
the shares, the LBCA procedures involve, among other things, the institution of
proceedings in the circuit court in the judicial circuit in Liberia in which our
Liberian office is situated. The value of the shares of the dissenting
shareholder is fixed by the court after reference, if the court so elects, to
the recommendations of a court-appointed appraiser.

     Shareholders' Derivative Actions. Under the LBCA, any of our shareholders
may bring an action in our name to procure a judgment in our favor, also known
as a derivative action, provided that the shareholder bringing the action is a
holder of common stock both at the time the derivative action is commenced and
at the time of the transaction to which the action relates.

     Certain Liberian Company Considerations

     Our corporate affairs are governed by our articles of incorporation and
bylaws and by the LBCA. The provisions of the LBCA resemble provisions of the
corporation laws of a number of states in the United States. However, while most
states have a fairly well-developed body of case law interpreting their
respective corporate statutes, there have been few judicial cases in Liberia
interpreting the LBCA. Thus, you may have more difficulty in protecting your
interests in the face of actions by the management, directors or controlling
stockholders than would stockholders of a corporation incorporated in a United
States jurisdiction which has developed a substantial body of case law.

C. Material contracts.

     The following is a summary of our material contracts. It is qualified in
its entirety by reference to the full text of the actual documents which govern
the transactions we describe.

     Ariel Shipping Corporation, Colmar Ltd and Nedimar Ltd borrowed $28.2
million for the re-financing of the vessels Fulmar, Colmar and Nedimar in June
2003. This loan is cross-collateralized by the respective vessels owned by these
subsidiaries.

     Kliomar Ltd. entered into a $30 million loan to assist in the financing of
the vessel the Kliomar. This loan was cross-collateralized by the vessels owned
by our subsidiaries Colmar Ltd., Nedimar Ltd., and Ariel Shipping Corporation
whose loans were refinanced in June 2003 with another bank.

     Jacamar Ltd. borrowed $31.9 million to assist in the financing of the
vessel the Jacamar. This loan is cross-collateralized by the vessels owned by
our subsidiaries Cleliamar Ltd., Polmar Ltd., and Kliomar Ltd. Additionally, any
default in the payments under the loans secured by mortgages on those vessels
will result in a default. Following the sale of the Jacamar in January 2004 the
loan was fully repaid.

     Primar Shipping and Palmar Maritime Ltd. jointly borrowed $31.5 million to
assist in the financing of the vessels the Primar and the City University. This
loan is secured by (i) a first priority mortgage over the City University and a
first preferred mortgage over the Primar; (ii) a guarantee and general
assignment of the earnings, insurances and requisition compensation on behalf of
the Primar and the City University; and (iii) a master security deed executed by
both Primar Shipping and Palmar Maritime Ltd. Additionally, any default in the
payments under the loan secured by the mortgage on either vessel will result in
a default.

     Polmar Ltd. and Cleliamar Ltd. jointly borrowed $51 million to assist in
the financing of the vessels the Polys and the Cleliamar. This loan is
cross-collateralized by the vessels owned by our subsidiary Kliomar Ltd.,
Additionally, any default in the payments under the loans secured by mortgages
on those vessels will result in a default.

     Takamar Ltd. and Keymar Ltd. jointly borrowed $52.7 million to assist in
the financing of the vessels the Takamar and the Keymar. This loan is secured by
(i) first and second preferred mortgages over the Takamar and first and second
priority mortgages over the Keymar; and (ii) a guarantee and general assignment
of the earnings, insurances, charter rights, and requisition compensation on
behalf of the Takamar and the Keymar. Additionally, any default in the payments
under the loan secured by the mortgage on either vessel will result in a
default. Following the sale of Takamar in January 2004 its loan portion of $31.8
million was fully repaid.

     Luxmar Ltd., Limar Ltd., Camar Ltd., Jamar Ltd. and Ermar Ltd. jointly
borrowed $73 million to assist in the financing of the vessels the Luxmar, the
Limar,the Camar, the Jamar and the Ermar. This loan is secured by (i) first and
second preferred mortgages over the above vessels; and (ii) a guarantee and
general assignment of the earnings, insurances, charter rights, and requisition
compensation on behalf of the aforementioned vessels. Additionally, any default
in the payments under the loan secured by mortgage on either vessel will result
in a default.

     Rimar Ltd., Almar Ltd., Allenmar Ltd., Capemar Ltd. and Promar Ltd. jointly
borrowed $72 million to assist in the financing of the vessels the Rimar, the
Almar, the Allenmar, the Capemar and the Promar. This loan is secured by (i)
first and second preferred mortgages over the above vessels; and (ii) a
guarantee and general assignment of the earnings, insurances, charter rights,
and requisition compensation on behalf of the aforementioned vessels.
Additionally, any default in the payments under the loan secured by the mortgage
on either vessel will result in a default.

     Petromar Ltd. borrowed $20 million to assist in the financing of the vessel
Petromar. This loan is secured by (i) first and second preferred mortgages over
the above vessel; and (ii) a guarantee and general assignment of the earnings,
insurances, charter rights, and requisition compensation on behalf of the
aforementioned vessel.

     Pearlmar Ltd. and Jademar Ltd. jointly borrowed $45 million to assist in
the financing of the vessels the Pearlmar and the Jademar. This loan is secured
by (i) first preferred mortgage over the above vessels; and (ii) a guarantee and
general assignment of earnings, insurances, charter rights, and requisition
compensation on behalf of the above vessels.

     Ambermar Ltd. borrowed $20.2 million to assist in the financing of the
vessel the Ambermar. The loan is secured by (i) first preferred mortgage over
the above vessel; and (ii) a guarantee and general assignment of earnings,
insurances, charter rights, and requisition compensation on behalf of the above
vessel.

     Goldmar Limited and Silvermar Limited jointly borrowed $47.3 million to
assist in the financing of the vessels the Goldmar and the Silvermar. The loan
is secured by (i) first preferred mortgage over the above vessels; and (ii)
guarantee and general assignment of earnings, insurances, charter rights, and
requisition compensation on behalf of the above vessels.

     Aquamar Shipping Limited borrowed $16.5 million to assist in the financing
of the vessel the Aquamar. The loan is secured by (i) first preferred mortgage
over the above vessel; and (ii) guarantee and general assignment of earnings,
insurances, charter right, and requisition compensation on behalf of the above
vessel.

     Maremar Limited borrowed $16.5 million to assist in the financing of the
vessel the Maremar. The loan is secured by (i) first preferred mortgage over the
above vessel; and (ii) guarantee and general assignment of earnings and
insurances, charter right, and requisition compensation on behalf of the above
vessel.

     Rubymar Limited borrowed $22.5 million to assist in the financing of the
vessel the Rubymar. The loan is secured by (i) first preferred mortgage over the
above vessel; and (ii) guarantee and general assignment of earnings and
insurances, charter right, and requisition compensation on behalf of the above
vessel.

     Rosemar Limited borrowed $22.5 million to assist in the financing of the
vessel the Rosemar. The loan is secured by (i) first preferred mortgage over the
above vessel; and (ii) guarantee and general assignment of earnings and
insurances, charter right, and requisition compensation on behalf of the above
vessel.

     Contracts Relating to Newbuildings

     In April 2002, we signed a contract with a South Korean shipyard for the
construction of five Panamax tankers with expected deliveries from November 2003
through July 2004. The total contract price will amount to approximately $152.75
million of which $100 million will be financed from the proceeds of a bank loan
facility. Subject to the supply of additional spares the construction cost may
increase by $5,000. The shipbuilding contract provides for stage payments of 10%
in advance, 10% on steel cutting, 10% on keel laying, 10% on launching and 60%
on delivery.

     The $100 million loan facility mentioned above, will be drawn-down in a
number of tranches so as to coinside with the scheduled delivery payments and
will mature on the date falling 93 months after the delivery of the last hull.
As of December 31, 2003, $43.3 million had been drawn to finance the scheduled
delivery payments as above. The loan will bear a variable interest rate based on
LIBOR plus a spread and will be secured as follows:

     o    First priority mortgage over the vessel
     o    Assignment of earnings and insurance of the mortgaged vessels
     o    Pledge of shares of the borrowers
     o    Corporate guarantee

     In February 2003 we acquired six Handymax new building contracts for a
total consideration of approximately $173.2 million. These Handymax tankers are
being constructed by a South Korean shipyard with expected delivery dates from
January 2004 through August 2004. The contract price will partially be financed
through bank financing. More specifically the stage payments except for the
delivery payment are financed through a $40 million revolving facility while the
delivery payments and the amounts drawn down fro the revolving facility will be
financed through two loan facilities totaling $131.3 million, already arranged
in September 2003.

D. Exchange controls.

     Not applicable

E. Taxation.

     The following discussion is a summary of the material Liberian and U.S.
federal income tax considerations relevant to an investment decision by a U.S.
Holder, as defined below, with respect to the common stock. This discussion does
not purport to deal with the tax consequences of owning common stock to all
categories of investors, some of which, such as dealers in securities and
investors whose functional currency is not the U.S. dollar, may be subject to
special rules. This discussion deals only with holders who purchase common stock
in connection with the offering. You should consult your own tax advisors
concerning the overall tax consequences arising in your own particular situation
under U.S. federal, state, local or foreign law of the ownership of common
stock.

Liberian Tax Considerations

     In the opinion of Seward & Kissel LLP, the following are the material
Liberian tax consequences of our activities to us and shareholders of our common
stock. We are incorporated in the Republic of Liberia. Under current Liberian
law, we are not subject to tax on income or capital gains, and no Liberian
withholding tax will be imposed upon payments of dividends by us to our
shareholders.

U.S. Federal Income Tax Considerations

     In the opinion of Seward & Kissel LLP, our U.S. counsel, the following are
the material U.S. federal income tax consequences to us of our activities and to
U.S. Holders, as defined below, of our common stock. The following discussion of
U.S. federal income tax matters is based on the Internal Revenue Code of 1986,
or the "Code", judicial decisions, administrative pronouncements, and existing
and proposed regulations issued by the U.S. Department of the Treasury, all of
which are subject to change, possibly with retroactive effect. In addition, the
discussion is based, in part, on the description of our business as described in
"Item 4" above and assumes that we conduct our business as described in that
section. Except as otherwise noted, this discussion is based on the assumption
that we will not maintain an office or other fixed place of business within the
U.S. Reference in the following discussion to "we" and "us" are to Stelmar
Shipping Ltd. and its subsidiaries on a consolidated basis.

U.S. Taxation of Our Company

     Taxation of Operating Income: In General

     Unless exempt from U.S. taxation under the rules discussed below, a
non-U.S. corporation is subject to U.S. federal income taxation in respect of
any income that is derived from the use of vessels, from the hiring or leasing
of vessels for use on a time, voyage or bareboat charter basis, or from the
performance of services directly related to those uses, which we refer to as
"shipping income", to the extent that the shipping income is derived from
sources within the U.S. For these purposes, 50% of shipping income that is
attributable to transportation that begins or ends, but that does not both begin
and end, in the U.S. constitutes income from sources within the U.S., which we
refer to as "50% U.S.-source shipping income." The tax on non-exempt 50%
U.S.-source shipping income is 4% of the amount of that income, not reduced by
any deductions.

     A foreign corporation, such as ourselves, which does not maintain an office
or other fixed place of business within the U.S., is not subject to U.S.
taxation with respect to shipping income that is not considered to be from
sources within the U.S., such as income attributable to transportation that
begins and ends outside of the U.S. and 50% of the shipping income that is
attributable to transportation that both begins or ends, but that does not both
begin and end, in the U.S.

     The vessels will be operated by us in various parts of the world and, in
part, are expected to be involved in transportation of cargoes that begins or
ends, but that does not both begin and end, in U.S. ports. Therefore, we do not
expect to engage in transportation that results in 100% of our shipping income
being treated as derived from sources within the U.S.

     Exemption of Operating Income from U.S. Taxation

     Under section 883 of the Code, we will be exempt from U.S. taxation on our
50% U.S.-source shipping income, if both

     (1)  we are organized in a foreign country that grants an "equivalent
          exemption" to corporations organized in the U.S., and

     (2)  either

          a.   more than 50% of the value of our stock is owned, directly or
               indirectly, by individuals who are "residents" of that foreign
               country or of another foreign country that grants an "equivalent
               exemption" to corporations organized in the U.S., which we refer
               to as the "50% Ownership Test" or

          b.   our stock is "primarily and regularly traded on an established
               securities market" in that same foreign country, in another
               country that grants an "equivalent exemption" to U.S.
               corporations, or in the U.S., which we refer to as the
               "Publicly-Traded Test."

     The Republic of Liberia and the British Virgin Islands, the jurisdictions
where our ship-owning subsidiaries are incorporated, grant an "equivalent
exemption" to U.S. corporations. Therefore, we will be exempt from U.S. federal
income taxation with respect to our 50% U.S.-source shipping income if either
the 50% Ownership Test or the Publicly-Traded Test is met. Because our common
stock is publicly traded, it may be difficult to establish that the 50%
Ownership Test will be satisfied. However, because the common stock is listed on
the New York Stock Exchange, the Publicly-Traded Test should be satisfied, as
discussed below.

     Proposed regulations under Code section 883 were promulgated by the
Internal Revenue Service, or the "IRS", in February, 2000. It currently is
unclear when the proposed regulations will be finalized and whether they will be
finalized in their present form.

     The proposed regulations provide, in pertinent part, that stock of a
foreign corporation will be considered to be "primarily traded" on an
established securities market if the number of shares that are traded during any
taxable year on that market exceeds the number of shares traded during that year
on any other established securities market. Our common stock is "primarily"
traded on the New York Stock Exchange.

     Under the proposed regulations, our stock will be considered to be
"regularly traded" on an established securities market if (i) one or more
classes of our stock representing 80 percent or more of our outstanding shares,
by voting power and value, is listed on the market and is traded on the market,
other than in de minimis quantities, on at least 60 days during the taxable
year; and (ii) the aggregate number of shares of our stock traded during the
taxable year is at least 10 percent of the average number of shares of the stock
outstanding during the year. Notwithstanding the foregoing, the proposed
regulations provide, in pertinent part, that our stock will not be considered to
be "regularly traded" on an established securities market for any taxable year
in which 50% or more of our outstanding shares of the stock are owned, actually
or constructively under specified stock attribution rules, at any time during
the taxable year by persons who each own 5 percent or more of the value of our
outstanding stock, which we refer to as the "5 Percent Override Rule."

     Accordingly, our stock is considered for purposes of Code section 883 to be
"primarily and regularly traded on an established securities market". Therefore,
we believe we currently qualify for the Code section 883 exemption. In this
sense, we have timely filed a return on IRS Form 1120F claiming the exemption
from U.S. taxation under Code section 883 for every taxable year we have
obtained U.S. -source shipping income.

     While the provisions concerning the Publicly-Traded Test that are contained
in the Proposed Regulations may be modified prior to the finalization of these
regulations, we do not anticipate that any modifications will further restrict
these provisions. As Code section 883 has been the subject of legislative
modifications in prior years that have had the effect of limiting its general
availability, there can be no assurance that future legislation or changes in
the ownership of our stock would not preclude us from being entitled to the tax
exemption provided in Code section 883 for any taxable year. At this time, we
are not aware of any legislation currently pending before the U.S. Congress
which would affect the general availability of Code section 883. However, if the
exemption is not applicable to us, we and our subsidiaries generally will be
subject to a 4% U.S. tax on our 50% U.S.-source shipping income.

     U.S. Taxation of Gain on Sale of Vessels

     Regardless of whether we qualify for exemption under Code section 883, we
will not be subject to U.S. taxation with respect to gain realized on a sale of
a vessel, provided the sale is considered to occur outside of the U.S. under
U.S. tax principles. In general, a sale of a vessel will be considered to occur
outside of the U.S. for this purpose if title to the vessel, and risk of loss
with respect to the vessel, pass to the buyer outside of the U.S. It is expected
that any sale of a vessel will be considered to occur outside of the U.S.

     Fixed Place of Business within the U.S.

     As noted above, we do not expect to have an office or other fixed place of
business within the U.S. However, if we were considered to maintain such an
office or other fixed place of business, we could become subject to U.S. federal
corporate income tax, which currently is imposed at rates of up to 35%, on our
U.S.-source shipping income, net of applicable deductions. In addition, that net
after tax U.S.-source shipping income would potentially be subject to the 30%
"branch profits tax" regime of section 884 of the Code.

U.S. Taxation of U.S. Holders

     As used herein, the term "U.S. Holder" means a beneficial owner of common
stock that

     o    is a U.S. citizen or resident, U.S. corporation or other U.S. entity
          taxable as a corporation, an estate the income of which is subject to
          U.S. Federal income taxation regardless of its source, or a trust if a
          court within the U.S. is able to exercise primary jurisdiction over
          the administration of the trust and one or more U.S. persons have the
          authority to control all substantial decisions of the trust,

     o    owns the common stock as a capital asset, generally, for investment
          purposes and

     o    owns less than 10% of our common stock for U.S. Federal income tax
          purposes.

     If a partnership holds our common stock, the tax treatment of a partner
will generally depend upon the status of the partner and upon the activities of
the partnership. If you are a partner in a partnership holding our common stock,
you should consult your tax advisor.

Distributions

     Subject to the discussion of passive foreign investment companies discussed
below, any distributions made by us with respect to our common stock to a U.S.
Holder will generally constitute dividends, taxable as ordinary income, to the
extent of our current or accumulated earnings and profits, as determined under
U.S. Federal income tax principles. Distributions in excess of our earnings and
profits will be treated first as a nontaxable return of capital to the extent of
the U.S. Holder's tax basis in his common stock on a dollar for dollar basis and
thereafter as capital gain. Because we are not a U.S. corporation, U.S. Holders
that are corporations will not be entitled to claim a dividends received
deduction with respect to any distributions they receive from us. Dividends paid
with respect to our common stock will generally be treated as "passive income"
or, in the case of certain types of U.S. Holders, "financial services income",
for purposes of computing allowable foreign tax credits for U.S. foreign tax
credit purposes.

Sale, Exchange Or Other Disposition Of Common Stock

     Assuming we do not constitute a passive foreign investment company for any
taxable year, a U.S. Holder generally will recognize taxable gain or loss upon a
sale, exchange or other disposition of our common stock in an amount equal to
the difference between the amount realized by the U.S. Holder from such sale,
exchange or other disposition and the U.S. Holder's tax basis in such stock.
Such gain or loss will be treated as long-term capital gain or loss if the U.S.
Holder's holding period is greater than one year at the time of the sale,
exchange or other disposition. Such capital gain or loss will generally be
treated as U.S.-source income or loss, as applicable, for U.S. foreign tax
credit purposes. A U.S. Holder's ability to deduct capital losses is subject to
certain limitations.

Passive Foreign Investment Company Status And Significant Tax Consequences

     Special and adverse U.S. tax rules apply to a U.S. Holder that holds stock
in a foreign corporation classified as a passive foreign investment company for
U.S. Federal income tax purposes. In general, we will be treated as a passive
foreign investment company with respect to a U.S. Holder if, for any taxable
year in which such holder held our common stock, either

     o    at least 75% of our gross income for such taxable year consists of
          passive income (e.g., dividends, interest, capital gains and rents
          derived other than in the active conduct of a rental business), or

     o    at least 50% of the average value of the assets held by the
          corporation during such taxable year produce, or are held for the
          production of, passive income.

For purposes of determining whether we are a passive foreign investment company,
we will be treated as earning and owning our proportionate share of the income
and assets, respectively, of any of our subsidiary corporations in which we own
at least 25 percent of the value of the subsidiary's stock. In addition, income
earned, or deemed earned, by us in connection with the performance of services
would not constitute passive income. By contrast, rental income would generally
constitute "passive income" unless we were treated under specific rules as
deriving our rental income in the active conduct of a trade or business.

     Based on our current operations and future projections, we do not believe
that we are, nor do we expect to become, a passive foreign investment company
with respect to any taxable year. Although there is no legal authority directly
on point, and we are not relying upon an opinion of counsel on this issue, our
belief is based principally on the position that, for purposes of determining
whether we are a passive foreign investment company, the gross income we derive
or are deemed to derive from the time chartering and voyage chartering
activities of our wholly-owned subsidiaries should constitute services income,
rather than rental income. Correspondingly, such income should not constitute
passive income, and the assets that we or our wholly-owned subsidiaries own and
operate in connection with the production of such income, in particular, the
vessels, should not constitute passive assets for purposes of determining
whether we were a passive foreign investment company. We believe there is
substantial legal authority supporting our position consisting of case law and
Internal Revenue Service pronouncements concerning the characterization of
income derived from time charters and voyage charters as services income for
other tax purposes. However, in the absence of any legal authority specifically
relating to the statutory provisions governing passive foreign investment
companies, the Internal Revenue Service or a court could disagree with our
position. In addition, although we intend to conduct our affairs in a manner to
avoid being classified as a passive foreign investment company with respect to
any taxable year, we cannot assure you that the nature of our operations will
not change in the future. If we were to be treated as a passive foreign
investment company for any taxable year, we would provide each U.S. Holder with
all necessary information in order to make the qualified electing fund election
described below.

     As discussed more fully below, if we were to be treated as a passive
foreign investment company for any taxable year, a U.S. Holder would be subject
to different taxation rules depending on whether the U.S. Holder makes an
election to treat us as a "Qualified Electing Fund", which election we refer to
as a "QEF election". As an alternative to making a QEF election, a U.S. Holder
should be able to make a "mark-to-market" election with respect to our common
stock, as discussed below.

Taxation Of U.S. Holders Making A Timely QEF Election

     If a U.S. Holder makes a timely QEF election, which U.S. Holder we refer to
as an "Electing Holder," the Electing Holder must report each year for U.S.
Federal income tax purposes his pro rata share of our ordinary earnings and our
net capital gain, if any, for our taxable year that ends with or within the
taxable year of the Electing Holder, regardless of whether or not distributions
were received. The Electing Holder's basis in the common stock will be increased
to reflect taxed but undistributed income. Distributions of income that had been
previously taxed will result in a corresponding reduction in the basis in the
common stock and will not be taxed again once distributed. An Electing Holder
would generally recognize capital gain or loss on the sale, exchange or other
disposition of our common stock. A U.S. Holder would make a QEF election with
respect to any year that our company is a passive foreign investment company by
filing one copy of IRS Form 8621 with his U.S. Federal income tax return and a
second copy in accordance with the instructions to such Form.

Taxation Of U.S. Holders Making A "Mark-To-Market" Election

     Alternatively, if we were to be treated as a passive foreign investment
company for any taxable year and, as we anticipate, our stock is treated as
"marketable stock," a U.S. Holder would be allowed to make a mark-to-market
election with respect to our common stock, provided the U.S. Holder completes
and files IRS Form 8621 in accordance with the relevant instructions and related
Treasury Regulations. If that election is made, the U.S. Holder generally would
include in each taxable year as ordinary income the excess, if any, of the fair
market value of the common stock at the end of the taxable year over such
holder's adjusted tax basis in the common stock. The U.S. Holder would also be
permitted an ordinary loss in respect of the excess, if any, of the U.S.
Holder's adjusted tax basis in the common stock over its fair market value at
the end of the taxable year, but only to the extent of the net amount previously
included in income as a result of the "mark-to-market" election. A U.S. Holder's
tax basis in his common stock would be adjusted to reflect any such income or
loss amount. Gain realized on the sale, exchange or other disposition of our
common stock would be treated as ordinary income, and any loss realized on the
sale, exchange or other disposition of the common stock would be treated as
ordinary loss to the extent that such loss does not exceed the net
mark-to-market gains previously included by the U.S. Holder.

Taxation Of U.S. Holders Not Making A Timely QEF Or Mark-To-Market Election

     Finally, if we were to be treated as a passive foreign investment company
for any taxable year, a U.S. Holder who does not make either a QEF election or a
"mark-to-market" election for that year, whom we refer to as a "Non-Electing
Holder," would be subject to special rules with respect to (1) any excess
distribution (i.e., the portion of any distributions received by the
Non-Electing Holder on our common stock in a taxable year in excess of 125
percent of the average annual distributions received by the Non-Electing Holder
in the three preceding taxable years, or, if shorter, the Non-Electing Holder's
holding period for the common stock), and (2) any gain realized on the sale,
exchange or other disposition of our common stock. Under these special rules:

     o    the excess distribution or gain would be allocated ratably over the
          Non-Electing Holders aggregate holding period for the common stock;

     o    the amount allocated to the current taxable year would be taxed as
          ordinary income; and

     o    the amount allocated to each of the other taxable years would be
          subject to tax at the highest rate of tax in effect for the applicable
          class of taxpayer for that year, and an interest charge for the deemed
          deferral benefit would be imposed with respect to the resulting tax
          attributable to each such other taxable year.

     These penalties would not apply to a pension or profit sharing trust or
other tax-exempt organization that did not borrow money or otherwise utilize
leverage in connection with its acquisition of our common stock. If a
Non-Electing Holder who is an individual dies while owning our common stock,
such holders successor generally would not receive a step-up in tax basis with
respect to such stock.

U.S. Taxation of "Non-U.S. Holders"

     A beneficial owner of common stock that is not a U.S. Holder is referred to
herein as a "Non-U.S. Holder."

Dividends On Common Stock

     Non-U.S. Holders generally will not be subject to U.S. Federal income tax
or withholding tax on dividends received from us with respect to our common
stock, unless that income is effectively connected with the Non-U.S. Holder's
conduct of a trade or business in the U.S. If the Non-U.S. Holder is entitled to
the benefits of an income tax treaty with respect to those dividends, that
income is attributable to a permanent establishment maintained by the Non-U.S.
Holder in the U.S.

Sale, Exchange or Other Disposition of Common Stock

     Non-U.S. Holders generally will not be subject to U.S. Federal income tax
or withholding tax on any gain realized upon the sale, exchange or other
disposition of our common stock, unless:

     o    the gain is effectively connected with the Non-U.S. Holder's conduct
          of a trade or business in the U.S. If the Non-U.S. Holder is entitled
          to the benefits of an income tax treaty with respect to that gain,
          that gain is attributable to a permanent establishment maintained by
          the Non-U.S. Holder in the U.S.; or

     o    the non-U.S. Holder is an individual who is present in the U.S. for
          183 days or more during the taxable year of disposition and other
          conditions are met.

     If the Non-U.S. Holder is engaged in a U.S. trade or business for U.S.
Federal income tax purposes, the income from the common stock, including
dividends and the gain from the sale, exchange or other disposition of the stock
that is effectively connected with the conduct of that trade or business will
generally be subject to regular U.S. Federal income tax in the same manner as
discussed in the previous section relating to the taxation of U.S. Holders. In
addition, if you are a corporate Non-U.S. Holder, your earnings and profits that
are attributable to the effectively connected income, which are subject to
certain adjustments, may be subject to an additional branch profits tax at a
rate of 30%, or at a lower rate as may be specified by an applicable income tax
treaty.

     Backup Withholding and Information Reporting

     In general, dividend payments, or other taxable distributions, made within
the U.S. to you will be subject to information reporting requirements and backup
withholding tax at the rate of up to 31% if you are a non-corporate U.S. Holder
and you:

     o    fail to provide an accurate taxpayer identification number;

     o    are notified by the Internal Revenue Service that you have failed to
          report all interest or dividends required to be shown on your federal
          income tax returns; or

     o    in certain circumstances, fail to comply with applicable certification
          requirements.

     Non-U.S. Holders may be required to establish their exemption from
information reporting and backup withholding by certifying their status on IRS
Form W-8BEN.

     If you sell your common stock to or through a U.S. office or broker, the
payment of the proceeds is subject to both U.S. backup withholding and
information reporting unless you certify that you are a non-U.S. person, under
penalties of perjury, or you otherwise establish an exemption. If you sell your
common stock through a non-U.S. office of a non-U.S. broker and the sales
proceeds are paid to you outside the U.S. then information reporting and backup
withholding generally will not apply to that payment. However, U.S. information
reporting requirements, but not backup withholding, will apply to a payment of
sales proceeds, even if that payment is made to you outside the U.S., if you
sell your common stock through a non-U.S. office of a broker that is a U.S.
person or has some other contacts with the U.S.

     You generally may obtain a refund of any amounts withheld under backup
withholding rules that exceed your income tax liability by filing a refund claim
with the U.S. Internal Revenue Service.

F. Dividends and Paying Agents

     Not applicable.

G. Statements by Experts

     Not applicable.

H. Documents on display.

     We are subject to the informational requirements of the Securities Exchange
Act of 1934, as amended. In accordance with these requirements we file reports
and other information with the SEC. These materials, including this annual
report and the accompanying exhibits, may be inspected and copied at the public
reference facilities maintained by the Commission at 450 Fifth Street, N.W.,
Room 1024, Washington, D.C. 20549. You may obtain information on the operation
of the public reference room by calling 1 (800) SEC-0330, and you may obtain
copies at prescribed rates from the Public Reference Section of the Commission
at its principal office in Washington, D.C. 20549. The SEC maintains a website
(http://www.sec.gov) that contains reports, proxy and information statements and
other information that we and other registrants have filed electronically with
the SEC. In addition, documents referred to in this annual report may be
inspected at our headquarters at Status Center, 2A Areos Street, Vouliagmeni, GR
16671, Athens, Greece.

I. Subsidiary Information

     Not applicable.

ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Inflation

Inflation had a very moderate impact on vessel operating expenses, dry-docking
expenses and corporate overhead. Management does not consider inflation to be a
significant risk to costs in the current and foreseeable future economic
environment. However, in the event that inflation becomes a significant factor
in the world economy, inflationary pressures could result in increased operating
and financing costs.

Interest Rate Fluctuation

The international tanker industry is a capital intensive industry, requiring
significant amounts of investment. Much of this investment is provided in the
form of long-term debt. Our debt usually contains interest rates that fluctuate
with LIBOR. Increasing interest rates could adversely impact future earnings. We
have entered into interest rate cap and swap agreements expiring in 2005, 2006
and 2007 for approximately 22.2% of our outstanding indebtedness as of December
31, 2003.

Our interest expense is affected by changes in the general level of interest
rates. The following table sets forth our sensitivity to a 1% increase in LIBOR
over the next five years on the same basis:

Net difference in Earnings and Cash Flows:

Year                       Amount
----                       ------
2004                    $3.5 million
2005                    $3.1 million
2006                    $4.6 million
2007                    $4.0 million
2008 and thereafter     $3.4 million

Foreign Exchange Rate Fluctuation

The international tanker industry's functional currency is the U.S. dollar and,
as a result, all of our revenues are in U.S. dollars. Historically, we incur a
major portion of our general and administrative expenses in Euro and British
pounds sterling, while we incur a significant portion of the operating expenses
in U.S. dollars and, to a much lesser extent, other currencies. We have a policy
of continuously monitoring and managing our foreign exchange exposure. We are
engaged in foreign currency hedging transactions to mitigate exposure from
foreign currencies exchange rates fluctuations.

Seasonal Variations

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

ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES

     Not applicable

ITEM 13. DIVIDEND ARREARAGES AND DELINQUENCIES

     Neither ourselves, or any of our subsidiaries have been subject to a
material default in the payment of principal, interest, a sinking fund or
purchase fund installment or any other material default that was not cured
within 30 days. In addition, the payment of our dividends are not, and have not
been in arrears or have not been subject to a material delinquency that was not
cured within 30 days.

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

     Not Applicable.

ITEM 15. CONTROLS AND PROCEDURES.

(a)  Evaluation of disclosure controls and procedures.

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

(b)  Not applicable

(c)  Not applicable

(d)  Changes in internal controls

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

     Although we believe our pre-existing disclosure controls and procedures and
     internal controls were adequate to enable us to comply with our disclosure
     obligations, as a result of such review we intend to implement changes,
     primarily to formalize and document procedures already in place. You should
     note that the design and operation of any system of controls and procedures
     is based in part upon certain assumptions about the likelihood of future
     events, and there can be no assurance that any design will succeed in
     achieving its stated goals under all potential future conditions,
     regardless of how remote.

ITEM 16. RESERVED

ITEM 16A. AUDIT COMMITTEE FINANCIAL EXPERT

     Our Board of Directors has not determined that a particular member of the
Audit Committee is a "financial expert" as it is not required to make such
determination as a result of its status as a foreign private issuer. The Board
of Directors believes, however, that the Audit Committee members have
significant financial experience and are substantially qualified to execute
their duties as members of the Audit Committee.

ITEM 16B. CODE OF ETHICS

     We intend to adopt a Code of Ethics (the "Code") applicable to our
Directors, executive officers and senior employees. The Code will be designed to
deter wrongdoing and to promote: honest and ethical conduct, including the
ethical handling of actual or apparent conflicts of interest between personal
and professional relationships; full, fair, accurate, timely and understandable
disclosure in reports and documents that we file with, or submit to, the
Securities and Exchange Commission and in other public communications we make;
compliance with applicable law, rules and regulations; the prompt internal
reporting of violations of the Code; and accountability for adherence to the
Code. A copy of the code will be available on our internet website at
www.stelmar.com upon its adoption.

ITEM 16C. PRINCIPAL ACCOUNTANT FEES AND AUDIT RELATED SERVICES

During the past two fiscal years, the Company has paid its auditors, Ernst &
Young Certified Auditors Accountants S.A. (Greece), the following fees:

                                                            December 31
                                                   -----------------------------
                                                     2003                 2002
                                                   --------             --------

Audit fees                                         $155,455             $114,737
Audit related fees                                 $     --             $     --
Tax fees                                           $  5,045             $     --
All other fees                                     $     --             $     --

----------

     Audit Fees

     The audit fees include the aggregate fees billed in each 2003 and 2002 for
professional services rendered for the audit of our financial statements or
services that are normally provided by the auditor in connection with the audits
and regulatory filings or engagements for those financial years (including
comfort letters, consents and other services related to SEC matters).

     Audit - Related fees

     The audit related fees include the aggregate fees billed for assurance and
related services that are reasonably related to the performance of the audit or
review of our financial statements and are not reported under audit services. No
such fees were paid in 2003 and 2002.

     Tax Fees

     The tax fees in 2003 mainly relate to tax compliance and advice.

     All Other fees

     The other fees relate to permitted services not included in the above
categories. No such fees were paid in 2003 and 2002.

     The above listed services were approved by the Company's audit committee.

     The Company's Audit Committee reviews and pre-approves the scope and the
cost of all audit and permissible non-audit services performed by the
independent auditors, other than those for de minimus services which are
approved by the Audit Committee prior to the completion of the audit.

ITEM 16D EXEMPTION FROM THE LISTING STANDARDS FOR AUDIT COMMITTEE

     Not Applicable.

ITEM 16E PURCHASES OF EQUITY SECURITIES BY ISSUER AND AFFILIATES

     Not Applicable.

ITEM 17. FINANCIAL STATEMENTS

     See ITEM 18.

ITEM 18. FINANCIAL STATEMENTS

     See PAGES F-1 to F-34.
<PAGE>

                     STELMAR SHIPPING LTD. AND SUBSIDIARIES
                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Report of Independent Public Accountants (Ernst & Young 2003 and 2002).......F-2
Report of Independent Public Accountants (Arthur Andersen - 2001)............F-3
Consolidated Balance Sheets as of December 31, 2002 and 2003.................F-4
Consolidated Statements of Income for the years ended
December 31, 2001, 2002 and 2003.............................................F-5
Consolidated Statements of Stockholders' Equity for the years ended
December 31, 2001, 2002 and 2003.............................................F-6
Consolidated Statements of Cash Flows for the years ended December 31,
2001, 2002 and 2003..........................................................F-7
Notes to Consolidated Financial Statements...................................F-8
Schedule I-Condensed Financial Information-Balance Sheets
as of December 31, 2002 and 2003............................................F-31
Schedule I-Condensed Financial Information-Statements of Income
for the years ended December 31, 2001, 2002 and 2003........................F-32
Schedule I-Condensed Financial Information-Statements of Stockholders'
Equity for the years ended December 31, 2001, 2002 and 2003.................F-33
Schedule I-Condensed Financial Information-Statements of Cash Flows
for the years ended December 31, 2001, 2002 and 2003........................F-34
<PAGE>

                         REPORT OF INDEPENDENT AUDITORS
                         ------------------------------

To: Board of Directors of
STELMAR SHIPPING LTD.

We have audited the accompanying consolidated balance sheets of STELMAR SHIPPING
LTD., a Liberian company, and subsidiaries (the "Company"), as of December 31,
2003 and 2002 and the related consolidated statements of income, stockholders'
equity and cash flows for the two years then ended. Our audits also included the
condensed financial information listed in the Index as Schedule I. These
financial statements and schedule are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements and schedule based on our audits. The consolidated financial
statements and Schedule I of the Company as of December 31, 2001 and for the
year then ended were audited by other auditors who have ceased operations as a
foreign associated firm of the Securities and Exchange Commission Practice
Section of the American Institute of Certified Public Accountants. Those
auditors expressed an unqualified opinion on those financial statements and
Schedule I in their report dated February 1, 2002.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of STELMAR SHIPPING
LTD. and its subsidiaries at December 31, 2003 and 2002 and the consolidated
results of their operations and their cash flows for the two years then ended,
in conformity with U.S. generally accepted accounting principles. Also, in our
opinion, the related financial statement schedule, when considered in relation
to the basic financial statements taken as a whole, presents fairly in all
material respects the information set forth therein.

ERNST & YOUNG

Athens, Greece
March 3, 2004
<PAGE>

     The audit report of Arthur Andersen, our former independent auditors, which
is set forth below, is included in this Annual Report for purposes of including
the opinion of Arthur Andersen on our financial statements for the years ended
December 31, 2000 and 2001.

     The audit report set forth below is a copy of the audit report dated
February 1, 2002, rendered by Arthur Andersen that was included in our Annual
Report on Form 20-F for 2001 filed on April 8, 2002. We are including this copy
of the February 1, 2002, Arthur Andersen audit report pursuant to Rule 2-02(e)
of Regulation S-X under the Securities Exchange Act of 1934. Your ability to
assert claims against Arthur Andersen based on its report may be limited. This
audit report has not been reissued by Arthur Andersen in connection with this
Annual Report.

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To: STELMAR SHIPPING LTD.

We have audited the accompanying consolidated balance sheets of STELMAR SHIPPING
LTD., a Liberian company, and Subsidiaries (the "Company") as of December 31,
2000 and 2001, and the related consolidated statements of income, stockholders'
equity and cash flows for each of the three years in the period ended 31
December 31, 2001. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of STELMAR SHIPPING LTD. and its
Subsidiaries as of December 31, 2000 and 2001, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 2001, in conformity with the United States generally accepted
accounting principles.

Our audit was made for the purpose of forming an opinion on the basic financial
statements taken as a whole. The schedule listed in the index of financial
statements is presented for purposes of complying with the Securities and
Exchange Commission's rules and is not part of the basic financial statements.
This schedule has been subjected to the auditing procedures applied in the audit
of the basic financial statements and, in our opinion, fairly state in all
material respects the financial data required to be set forth therein in
relation to the basic financial statements taken as a whole.

ARTHUR ANDERSEN

Athens, Greece,
February 1, 2002
<PAGE>

<TABLE>
STELMAR SHIPPING LTD. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 2002 AND 2003
(Expressed in thousands of U.S. Dollars)
<CAPTION>
ASSETS                                                         2002         2003
------                                                         ----         ----
<S>                                                         <C>          <C>
CURRENT ASSETS:
Cash and cash equivalents                                   $  36,123    $  36,463

Accounts receivable - trade, net                                6,888        7,075

Insurance claims (Note 5)                                         855       18,422

Inventories                                                     1,551        1,412
Advances to employees (Note 3 )                                   232          651
Prepayments and other                                           2,670        3,636
                                                            ---------    ---------

Total current assets                                           48,319       67,659
                                                            ---------    ---------

FIXED ASSETS:

Advances for vessels under construction (Note 4)               15,088       88,071

Vessels (Note 5)                                              858,876      872,463

Accumulated depreciation (Note 5)                            (112,712)    (149,019)
                                                            ---------    ---------

Net Book Value                                                746,164      723,444

Property and equipment, net                                     1,581        1,343
                                                            ---------    ---------

Total fixed assets                                            762,833      812,858
                                                            ---------    ---------

RESTRICTED CASH                                                    --          750

DEFERRED CHARGES, net (Note 6)                                 12,205       16,154
                                                            ---------    ---------

Total assets                                                $ 823,357    $ 897,421
                                                            =========    =========

LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES:
Current portion of long-term debt (Note 8)                  $  74,758    $  55,003

Accounts payable-
Trade (Note 5)                                                  6,131       17,577

Other
                                                                   50          133
                                                            ---------    ---------
                                                                6,181       17,710

Accrued liabilities (Note 7)                                    3,316        2,430

Accrued bank interest                                           2,943        2,244

Financial instruments fair value (Note 14)                      7,950        5,122

Unearned revenue                                                2,210        3,424
                                                            ---------    ---------

Total current liabilities                                      97,358       85,933
                                                            ---------    ---------

LONG-TERM DEBT, net of current portion (Note 8)               413,851      452,647

STOCKHOLDERS' EQUITY:
Preferred stock, $0.01 par value; 20,000,000
shares authorized, none issued.                                    --           --
Common stock, $0.02 par value; 25,000,000 shares
authorized; 16,819,750 and 17,305,687 issued and
outstanding at December 31, 2002 and December 31,
2003, respectively.                                               336          346
Additional paid-in capital                                    215,635      222,598
Accumulated other comprehensive income / (loss) (Note 14)      (7,940)      (4,774)
Retained earnings                                             104,117      140,671
                                                            ---------    ---------

Total stockholders' equity                                    312,148      358,841
                                                            ---------    ---------

Total liabilities and stockholders' equity                  $ 823,357    $ 897,421
                                                            =========    =========
</TABLE>

  The accompanying notes are an integral part of these consolidated statements.
<PAGE>

<TABLE>
STELMAR SHIPPING LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME
FOR THE YEARS ENDED DECEMBER 31, 2001, 2002 AND 2003
(Expressed in thousands of U.S. Dollars - except share and per share data)
<CAPTION>
                                                          2001            2002            2003
                                                          ----            ----            ----
<S>                                                   <C>             <C>             <C>
REVENUES:

Revenue from vessels                                  $    111,198    $    160,210    $    176,248

Voyage expenses                                             (8,743)         (8,129)         (9,533)
                                                      ------------    ------------    ------------
Revenue on a time charter basis                            102,455         152,081         166,715

Commissions                                                 (2,551)         (3,702)         (4,324)
                                                      ------------    ------------    ------------
Revenue from vessels, net                                   99,904         148,379         162,391
EXPENSES:

Vessel operating expenses                                   23,093          39,816          44,371

Depreciation (Note 5)                                       21,755          34,644          39,394

Amortization of deferred charges (Note 6)                      960           3,211           4,646

General and administrative expenses                          4,583           7,824           9,433

Provision for doubtful accounts                                 --             492           1,065

Insurance deductibles                                           --             421             603
                                                      ------------    ------------    ------------
Operating income                                            49,513          61,971          62,879
                                                      ------------    ------------    ------------

OTHER INCOME (EXPENSES):

Interest and finance costs, net (Notes 6, 8 and 12)        (17,089)        (18,826)        (16,880)

Interest income                                              1,555             281             327

Foreign currency losses, net                                  (129)           (366)           (360)

Loss on sale of vessel (Note 13)                                --              --          (7,270)

Other, net                                                     163             226             (65)
                                                      ------------    ------------    ------------

Total other income (expenses), net                         (15,500)        (18,685)        (24,248)
                                                      ------------    ------------    ------------

Net income                                            $     34,013    $     43,286    $     38,631
                                                      ============    ============    ============

Earnings per share, basic (Note 11)                   $       3.31    $       2.84    $       2.25
                                                      ============    ============    ============

Weighted average number of shares, basic                10,290,028      15,262,194      17,195,152
                                                      ============    ============    ============

Earnings per share, diluted (Note 11)                 $       3.29    $       2.83    $       2.24
                                                      ============    ============    ============

Weighted average number of shares, diluted              10,353,810      15,314,250      17,278,889
                                                      ============    ============    ============
</TABLE>

  The accompanying notes are an integral part of these consolidated statements.
<PAGE>

<TABLE>
STELMAR SHIPPING LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 2001, 2002 AND 2003
(Expressed in thousands of U.S. Dollars - except share and per share data)
<CAPTION>
                                                                                                Accumulated
                                                                                Additional         Other
                                                  Comprehensive    Capital       Paid in       Comprehensive   Retained
                                                      Income        Stock        Capital      Income / (Loss)  Earnings     Total
                                                  ------------   ------------  ------------     ------------   --------   --------
<S>                                               <C>            <C>           <C>              <C>            <C>        <C>
BALANCE, December 31, 2000                                       $         76  $     55,064     $       (227)  $ 34,653   $ 89,566
Cumulative effect of measurement
of fair value of financial instruments
at January 1, 2001                                        (561)            --            --             (561)        --       (561)
Issuance of common stock                                                  161        96,438               --         --     96,599
Expenses related to the issuance of common stock                           --        (8,363)              --         --     (8,363)
Reinvestment of earnings                                                   --         6,831               --     (6,831)        --
Net income                                              34,013             --            --               --     34,013     34,013
Other comprehensive income
- Fair value of financial instruments                   (1,939)            --            --           (1,939)        --     (1,939)
- Currency translation adjustments                         133             --            --              133         --        133
                                                  ------------
Comprehensive income                              $     32,207
                                                  ============   ------------  ------------     ------------   --------   --------
BALANCE, December 31, 2001                                       $        237  $    149,970     $     (2,594)  $ 61,835   $209,448
Issuance of common stock                                                   99        69,131               --         --     69,230
Expenses related to the issuance of common stock
                                                                           --        (4,470)              --         --     (4,470)
Reinvestment of earnings                                                   --         1,004               --     (1,004)        --
Net income                                              43,286             --            --               --     43,286     43,286
Other comprehensive income
- Fair value of financial instruments                   (5,450)            --            --           (5,450)        --     (5,450)
- Currency translation adjustments                         104             --            --              104         --        104
                                                  ------------
Comprehensive income                              $     37,940
                                                  ============   ------------  ------------     ------------   --------   --------
BALANCE, December 31, 2002                                       $        336  $    215,635     $     (7,940)  $104,117   $312,148
Issuance of common stock                                    10          6,963            --               --      6,973
Net income                                              38,631             --            --               --     38,631     38,631
Dividends paid (US dollars 0.12 per share)
                                                                           --            --               --     (2,077)    (2,077)
Other comprehensive income
- Fair value of financial instruments                    3,065             --            --            3,065         --      3,065
- Currency translation adjustments                         101             --            --              101         --        101
                                                  ------------
Comprehensive income                              $     41,797
                                                  ============   ------------  ------------     ------------   --------   --------
BALANCE, December 31, 2003                                       $        346  $    222,598     $     (4,774)  $140,671   $358,841
                                                                 ============  ============     ============   ========   ========
</TABLE>

  The accompanying notes are an integral part of these consolidated statements.

<PAGE>

<TABLE>
STELMAR SHIPPING LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2001, 2002 AND 2003
(Expressed in thousands of U.S. Dollars)
<CAPTION>
                                                                 2001         2002         2003
                                                                 ----         ----         ----
<S>                                                           <C>          <C>          <C>
Cash Flows from Operating Activities:
Net Income                                                    $  34,013    $  43,286    $  38,631
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation                                                     21,755       34,644       39,394
Fair value of foreign exchange deal                                  --           --          237
Loss from sale of vessel                                             --           --        7,270
Amortization of deferred dry-docking costs                          960        3,211        4,646
Amortization of loan fees                                           139          292          353
Non cash compensation                                                --          300           --
Provision for income taxes                                           79            6            0
Interest expense, net                                            16,732       18,160       16,766
(Increase) Decrease in:
Accounts receivable                                              (3,355)         790         (187)
Insurance claims                                                   (785)         (70)     (17,567)
Inventories                                                        (965)        (171)         139
Prepayments and other                                            (1,080)        (998)      (1,385)
Increase (Decrease) in:
Accounts payable                                                  2,821        1,209       11,529
Accrued liabilities excluding bank loan interest                    601          998         (886)
Unearned revenue                                                  2,370       (1,249)       1,214
Interest paid                                                   (18,328)     (17,806)     (17,465)
Income taxes paid                                                   (91)          (9)          --
Payments for dry-docking                                         (4,766)      (8,122)      (7,789)
Translation adjustment                                              133          104          101
                                                              ---------    ---------    ---------

Net Cash from Operating Activities                               50,233       74,575       75,001
                                                              ---------    ---------    ---------

Cash Flows from (used in) Investing Activities:
Advances for vessels under construction                         (46,471)     (15,088)     (76,040)
Vessel acquisitions                                            (248,672)    (242,343)     (27,487)
Capital expenditure for property and equipment                     (319)        (847)        (212)
Increase in restricted cash                                          --           --         (750)
Net proceeds from sale of vessel                                     --           --        8,364
                                                              ---------    ---------    ---------

Net Cash used in Investing Activities                          (295,462)    (258,278)     (96,125)
                                                              ---------    ---------    ---------

Cash Flows from (used in) Financing Activities:
Proceeds from long-term debt                                    191,359      164,147       72,426
Principal payments of long-term debt                            (24,957)     (42,732)     (45,735)
Repayment of long-term debt due to sale of vessel                    --           --       (7,650)
Dividends paid                                                       --           --       (2,077)
Issuance of common stock                                         96,599       69,230        6,973
Payment of expenses related to the issuance of common stock      (8,363)      (4,470)          --
Payments for loan fees                                           (1,456)        (766)      (2,473)
                                                              ---------    ---------    ---------

Net Cash from Financing Activities                              253,182      185,409       21,464
                                                              ---------    ---------    ---------
Net increase in cash and cash equivalents                         7,953        1,706          340
Cash and cash equivalents at beginning of year                   26,464       34,417       36,123
                                                              ---------    ---------    ---------
Cash and cash equivalents at end of year                         34,417       36,123       36,463
                                                              =========    =========    =========
</TABLE>

 The accompanying notes are an integral part of these consolidated statements.
<PAGE>

                     STELMAR SHIPPING LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2002 AND 2003
(Expressed in thousands of United States Dollars - except share and per share
data unless otherwise stated)

1.   Basis of Presentation and General Information:

     The accompanying consolidated financial statements include the accounts of
     Stelmar Shipping Ltd. (the "Holding Company") formerly Stelships Inc. and
     its wholly owned subsidiaries (the "Company"). The Holding Company was
     formed in January 1997, under the laws of Liberia and became the sole owner
     of all outstanding shares of Martank Shipping Holdings Ltd. and its
     subsidiaries, Marship Tankers (Holdings) Ltd. and its subsidiaries, Stelmar
     Tankers (Management) Ltd. and Stelmar Tankers (UK) Ltd. All of the
     above-mentioned companies share common ownership and management.

     (a)  Ship-owning companies directly owned by the Holding Company:

<TABLE>
<CAPTION>
                                          Country of       Date of
                   Company              Incorporation   Incorporation   Vessel Name       Flag     Dwt
                   -------              -------------   -------------   -----------       ----     ---

          Ship-owning companies with vessels in operation
          -----------------------------------------------
          <S>                           <C>             <C>             <C>               <C>      <C>
          Ariel Shipping Corporation    Liberia         January 1993    Fulmar            Cyprus      39,521
          Primar Shipping Ltd.          Liberia         May 1993        Primar            Cyprus      39,521
          Keymar Ltd.                   Liberia         July 1998       Keymar            Cyprus      95,822
          Takamar Ltd.                  Liberia         July 1998       Takamar           Panama     104,000
          Palmar Maritime Ltd.          Liberia         July 1993       City University   Cyprus      39,729
          Colmar Ltd.                   Liberia         July 1993       Colmar            Cyprus      39,729
          Nedimar Ltd.                  Liberia         October 1993    Nedimar           Cyprus      46,821
          Pearlmar Ltd.                 Liberia         July 2000       Pearlmar          Cyprus      69,697
          Jademar Ltd.                  Liberia         July 2000       Jademar           Cyprus      69,697
          Rubymar Ltd.                  Liberia         July 2000       Rubymar           Cyprus      69,697
          Rosemar Ltd.                  Liberia         July 2000       Rosemar           Cyprus      69,697
          Luxmar Ltd.                   Liberia         February 2001   Luxmar            Panama      45,999
          Rimar Ltd.                    Liberia         February 2001   Rimar             Panama      45,999
          Limar Ltd                     Liberia         February 2001   Limar             Panama      46,170
          Almar Ltd.                    Liberia         February 2001   Almar             Panama      46,162
          Jamar Ltd.                    Liberia         February 2001   Jamar             Panama      46,100
          Camar Ltd.                    Liberia         February 2001   Camar             Panama      46,100
          Ermar Ltd.                    Liberia         February 2001   Ermar             Panama      39,977
          Allenmar Ltd.                 Liberia         February 2001   Allenmar          Panama      41,570
          Capemar Ltd.                  Liberia         February 2001   Capemar           Panama      37,615
          Petromar Ltd.                 Liberia         May 2001        Petromar          Panama      35,768
          Cabo Hellas Limited           Liberia         February 2003   Cabo Hellas       Cyprus      69,180
          Ambermar Ltd.                 Liberia         December 2001   Ambermar          Cyprus      35,700
          Goldmar Limited               Liberia         April 2002      Goldmar           Cyprus      69,700
          Silvermar Limited             Liberia         April 2002      Silvermar         Panama      69,700
          Aquamar Shipping Limited      Liberia         April 2002      Aquamar           Cyprus      47,236
          Maremar Limited               Liberia         April 2002      Maremar           Cyprus      47,225
                                                                                                   ----------
                                                                                                   1,454,132
                                                                                                   ==========
</TABLE>

<PAGE>

                     STELMAR SHIPPING LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2002 AND 2003
(Expressed in thousands of United States Dollars - except share and per share
data unless otherwise stated)

                            Country of      Date of
     Company                Incorporation   Incorporation   Hull Number

     Ship-owning companies with vessels under construction
     -----------------------------------------------------
     Reymar Limited         Liberia         April 2002      Hull 5241
     Reginamar Limited      Liberia         April 2002      Hull 5242
     Reinemar Limited       Liberia         April 2002      Hull 5243
     Cabo Sounion Limited   Liberia         February 2003   Hull 5240
     Alcesmar Limited       Liberia         February 2003   Hull  S-1108
     Alcmar Limited         Liberia         February 2003   Hull  S-1109
     Andromar Limited       Liberia         February 2003   Hull  S-1110
     Antigmar Limited       Liberia         February 2003   Hull  S-1124
     Ariadmar Limited       Liberia         February 2003   Hull  S-1125
     Atalmar Limited        Liberia         February 2003   Hull  S-1126

     Ship-owning companies with sold vessel
     --------------------------------------

     Promar Ltd.            Liberia         February 2001   (vessel M/T Promar
                                                            was sold on May 21,
                                                            2003.)

     Loucamar Ltd.          Liberia         April 1997      (vessel M/T Loucas
                                                            was sold in December
                                                            2000.)

     (b)  Martank Shipping Holdings Ltd. ("Martank"): Martank was formed in
          March 1993, under the laws of the British Virgin Islands and is the
          sole owner of the shares of the following ship-owning companies:

                      Country of       Date of       Vessel
         Company     Incorporation  Incorporation     Name     Flag     Dwt
         -------     -------------  -------------     ----     ----     ---

     Cleliamar Ltd.  Liberia        October 1994   Cleliamar   Cyprus     68,623
     Kliomar Ltd.    Liberia        August 1997    Kliomar     Cyprus     96,088
     Polmar Ltd.     Liberia        October 1997   Polys       Cyprus     68,623
     Jacamar Ltd.    Liberia        January 1999   Jacamar     Panama    104,024
                                                                        --------
                                                                         337,358
                                                                        ========

     (c)  Stelmar Tankers (Management) Ltd. (the "Manager"): The Manager was
          formed in September 1992 under the laws of Liberia as Blue Weave
          Tankers and was renamed Stelmar Tankers (Management) Ltd. in February
          1993. It has an office in Greece, established under the provisions of
          Law 89 of 1967, as amended and as such is not subject to any income
          taxes in Greece. The Manager provides the vessels with a wide range of
          shipping services such as technical support and maintenance, insurance
          consulting, financial and accounting services, for a fixed monthly fee
          per vessel, which has been eliminated for consolidation purposes.

     (d)  Stelmar Tankers (UK) Ltd.: Stelmar Tankers (UK) Ltd. was formed in
          June 1992, under the laws of the United Kingdom to provide the Company
          with sale, purchase and chartering services, in exchange for a
          commission which is charged in accordance with accepted industry
          standards. Such commission has been eliminated for consolidation
          purposes.

     (e)  Marship Tankers (Holdings) Ltd. (the "Marship"): Marship was formed in
          August 1993, under the laws of the British Virgin Islands and was the
          sole owner of the shares of Primar Shipping Ltd. and Palmar Maritime
          Ltd. Following the transfer of the ownership of the aforementioned
          companies to the Holding Company prior to 2001, the company became
          dormant.

     The Company is engaged in the ocean transportation of petroleum cargoes
     worldwide through the ownership and operation of the tanker vessels
     mentioned above.

     Gross revenues for 2001, 2002 and 2003 included revenues deriving from
     charter agreements with significant charterers as follows (in percentages
     of total gross revenues):

     Charterer   2001   2002   2003
     ---------   ----   ----   ----
     A           19%     --     --
     B           15%     22%    19%
     C           13%     --     --

2.   Significant Accounting Policies:

     (a)  Principles of Consolidation: The accompanying consolidated financial
          statements have been prepared in accordance with the accounting
          principles generally accepted in the United States and include in each
          of the three years in the period ended December 31, 2003, the accounts
          of the Holding Company and its wholly-owned subsidiaries referred to
          in Note 1 above.

     (b)  Use of Estimates: The preparation of consolidated financial statements
          in conformity with the accounting principles generally accepted in the
          United States requires management to make estimates and assumptions
          that affect the reported amounts of assets and liabilities and
          disclosure of contingent assets and liabilities at the date of the
          consolidated financial statements and the reported amounts of revenues
          and expenses during the reporting period. Actual results could differ
          from those estimates.

     (c)  Other Comprehensive Income: The Company has adopted the provisions of
          Statement of Financial Accounting Standards "Statement of
          Comprehensive Income" (SFAS 130), which requires separate presentation
          of certain transactions, which are recorded directly as components of
          stockholders' equity.

     (d)  Foreign Currency Translation: The functional currency of the Company
          is the U.S. Dollar because the Company's vessels operate in
          international shipping markets, which utilize the U.S. Dollar as the
          functional currency. The Company's books of accounts are maintained in
          U.S. Dollars. Transactions involving other currencies during the year
          are converted into U.S. Dollars using the exchange rates in effect at
          the time of the transactions. At the balance sheet dates, monetary
          assets and liabilities, which are denominated in other currencies, are
          translated to reflect the year-end exchange rates. Resulting gains or
          losses are reflected separately in the accompanying consolidated
          statements of income. Year-end translation losses or gains were
          insignificant.

          The functional currency of the Company's wholly owned subsidiary
          Stelmar Tankers (UK) Ltd. is the British Pound. Accordingly, all
          balance sheet accounts of this subsidiary are translated using the
          exchange rate in effect at the balance sheet date. Revenues and
          expenses are translated at the weighted average rate of exchange
          prevailing during the year. Cumulative translation gains and losses
          (gains of $104 and $101 at December 31, 2002 and 2003, respectively)
          are reported as cumulative translation adjustment in "Accumulated
          Other Comprehensive Income (Loss)", a separate component of
          stockholders' equity. Transaction gains or losses are reported in the
          consolidated statements of income.

     (e)  Cash and Cash Equivalents: The Company considers highly liquid
          investments such as time deposits and certificates of deposit with
          original maturity of three months or less to be cash equivalents.
          Restricted cash concerns minimum cash deposits required to be
          maintained with a bank for loan compliance purposes.

     (f)  Accounts Receivable - Trade: The amount shown as Accounts Receivable -
          Trade at each balance sheet date, includes estimated recoveries from
          charterers for hire, freight and demurrage billings, net of provision
          for doubtful accounts. At each balance sheet date, all potentially
          uncollectible accounts are assessed individually for purposes of
          determining the appropriate provision for doubtful accounts.

     (g)  Insurance Claims: Insurance claims at each balance sheet date consist
          of claims submitted and/or claims being in the process of compilation
          or submission (claims pending). They are recorded on the accrual basis
          and represent the claimable expenses, net of deductibles, incurred
          through December 31 of each year, which are expected to be recovered
          from insurance companies. Any remaining costs to complete the claims
          are included in accrued liabilities. The classification of insurance
          claims (if any) into current and non-current assets is based on
          management's expectations as to their collection dates.

     (h)  Inventories: Inventories consist of bunkers and lubricants and are
          stated at the lower of cost or market. Lubricants value is determined
          by the first in, first out method whereas bunkers are priced at moving
          average cost.

     (i)  Vessel Cost: Vessels are stated at cost, which consists of the
          contract price, any material expenses incurred upon acquisition
          (initial repairs, improvements and delivery expenses) and interest and
          supervision costs incurred during the construction period. Subsequent
          expenditures for conversions and major improvements are also
          capitalized when they appreciably extend the life, increase the
          earning capacity or improve the efficiency or safety of the vessels,
          otherwise are charged to expenses as incurred.

     (j)  Impairment of Long-Lived Assets: Management evaluates the carrying
          amounts and periods over which long-lived assets are depreciated to
          determine if events have occurred which would require modification to
          their carrying values or useful lives. In evaluating the carrying
          values of long-lived assets, management reviews valuations performed
          by independent marine valuers and compares this to the vessels
          carrying value. Should the valuation suggest potential impairment,
          management determines undiscounted projected net operating cash flows
          for each vessel and compares it to the vessel carrying value. In the
          event that impairment occurs, a charge is recorded by comparing the
          asset's carrying value to the estimated fair value. The review of the
          carrying amount for each of the Company's vessels, as of December 31,
          2003 indicated that no impairment loss should be recognized.

     (k)  Vessels Depreciation: Depreciation is computed using the straight-line
          method over the estimated useful life of the vessels, after
          considering the estimated residual value. Management estimates the
          useful life of the Company's vessels to be 25 years. However, when
          regulations place limitations over the ability of a vessel to trade on
          a worldwide basis, its useful life is re-estimated to end at the date
          such regulations become effective. On this basis the useful life of
          Kliomar was reduced to 21 years.

     (l)  Property and Equipment and Related Depreciation: Property and
          equipment in the accompanying consolidated balance sheets are stated
          at cost. The cost and related accumulated depreciation of assets
          retired or sold are removed from the accounts at the time of sale or
          retirement, and any gain or loss is included in the accompanying
          consolidated statements of income. Depreciation is computed based on
          the straight-line method at rates equivalent to average estimated
          economic useful lives.

                                                Useful Life
          Description                             (years)
          -----------                             -------

          Leasehold improvements                   Nine
          Office furniture and equipment           Five
          Telecommunication equipment              Five
          Computer hardware and software           Five

          Depreciation expense for 2001, 2002 and 2003 amounted to $ 214, $ 83
          and $450, respectively, and is included in depreciation in the
          accompanying consolidated statements of income.

     (m)  Accounting for Dry Docking Costs: Dry-docking costs are carried out
          approximately every two and a half or five years to coincide with the
          validity of the related certificates issued by the Classification
          Societies, unless a further extension is obtained in rare cases and
          under certain conditions. The Company defers and amortizes these costs
          over a period of two and a half or five years as applicable or to the
          next dry-docking date if such has been determined. Unamortized
          dry-docking costs of vessels sold are written off to income in the
          year of the vessels' sale. Dry-docking costs have several aspects
          including the replacement of worn components, the installation of
          items or features that are required by new maritime regulations, the
          installation of new equipment or features that might increase
          efficiency or safety. Such expenditures do maintain the vessel and
          preserve its useful life.

     (n)  Accounting for Special Survey Costs: The vessels' special survey,
          which is required to be completed every four to five years, is
          performed on a continuous basis and related costs are expensed as
          incurred without material effect on the annual operating results. Such
          costs are included together with repairs and maintenance in vessel
          operating expenses in the accompanying consolidated statements of
          income.

     (o)  Loan Fees and Other Financing Costs: Fees incurred for obtaining new
          loans or refinancing existing ones are deferred and amortized over the
          loans' repayment periods. Fees relating to loans repaid or refinanced
          are expensed in the period the repayment or refinancing is made. Other
          financing costs are amortized over the period the benefit is expected
          to materialize.

     (p)  Accounting for P&I Back Calls: The vessels' Protection and Indemnity
          (P&I) Club insurance is subject to additional premiums referred to as
          back calls or supplemental calls and are accounted for on the accrual
          basis. For years 2002 and 2003, following the Club's change in billing
          policy, such calls were incorporated in premiums paid.

     (q)  Pension and Retirement Benefit Obligations - Crew: The ship-owning
          companies included in the consolidation, employ the crew on board,
          under short-term contracts (usually up to nine months) and
          accordingly, they are not liable for any pension or post retirement
          benefits.

     (r)  Pension Indemnities - Administrative Personnel: The employees of the
          Company are covered by state-sponsored pension funds and are required
          to contribute a portion of their monthly salary to the fund, with the
          Company also contributing a portion. Upon retirement, the pension
          funds are responsible for paying the employees retirement benefits and
          accordingly there is no obligation for the Company for any
          post-retirement benefits. The Company's contributions to the pension
          funds for 2001, 2002 and 2003, have been recorded to expenses and
          amounted to $ 165, $ 283 and $ 426, respectively.

     (s)  Staff Leaving Indemnities - Administrative Personnel: The Company's
          employees are entitled to termination payments in the event of
          dismissal or retirement with the amount of payment varying in relation
          to the employee's compensation, length of service and manner of
          termination (dismissed or retired). Employees who resign or are
          dismissed with cause are not entitled to termination payments. The
          number of employees to be dismissed or retired within the coming years
          is not known. The Company's liability, on an actuarially determined
          basis, at December 31, 2002 and 2003, amounted to approximately $ 90,
          and $ 118, respectively.

     (t)  Accounting for Revenue and Expenses: Revenues are generated from
          freight billings and time charters. Time charter revenues are recorded
          over the term of the charter as service is provided. Under a voyage
          charter the revenues and associated voyage costs are recognized
          ratably over the duration of the voyage. The operating results of
          voyages in progress at a reporting date are estimated and recognized
          pro-rata on a per day basis. Probable losses on voyages are provided
          for in full at the time such losses can be estimated. Vessel operating
          expenses are accounted for on the accrual basis. Unearned revenue
          represents cash received prior to year-end related to revenue
          applicable to periods after December 31 of each year.

     (u)  Repairs and Maintenance: All repair and maintenance expenses including
          major overhauling and underwater inspection expenses are charged
          against income in the year incurred. Such costs, which are included in
          vessel operating expenses in the accompanying consolidated statements
          of income, amounted to $ 2,855, $ 6,600 and $ 7,770 for 2001, 2002 and
          2003 respectively.

     (v)  Earnings per Share: Basic earnings per share are computed by dividing
          net income by the weighted average number of common shares outstanding
          during the year. Diluted earnings per share reflect the potential
          dilution that could occur if securities or other contracts to issue
          common stock were exercised.

     (w)  Segment Reporting: The Company reports financial information and
          evaluates its operations by charter revenues and not by the length of
          ship employment for its customers, i.e. spot or time charters. The
          Company does not have discrete financial information to evaluate the
          operating results for each such type of charter. Although revenue can
          be identified for these types of charters, management cannot and does
          not identify expenses, profitability or other financial information
          for these charters. As a result, the management, including the chief
          operating decision makers, reviews operating results solely by revenue
          per day and operating results of the fleet and thus the Company has
          determined that it operates under one reportable segment.

     (x)  Derivatives: The Company enters into interest rate swap agreements to
          partially hedge the exposure of interest rate fluctuations associated
          with its borrowings as well as in foreign currency forward contracts
          to partially hedge the exposure against foreign currencies
          devaluation. Such swap agreements and foreign currency forward
          contracts are recorded at fair market value in accordance with the
          provisions of SFAS 133.

          Seven interest rate swap agreements and one foreign currency forward
          contract were open as of December 31, 2003 and have been accounted for
          under SFAS 133. Interest rate swap agreements met hedge accounting
          criteria and accordingly their fair value has been included in "Other
          Comprehensive Income (Loss)" in the accompanying December 31, 2003
          consolidated balance sheet. It is the Company's intention to hold
          these swap agreements to maturity and accordingly the fair value
          reflected under "Accumulated Other Comprehensive Income (Loss)" is
          only for presentation purposes, as it is not expected to materialize.

          The foreign currency forward contract did not meet hedge accounting
          criteria and accordingly its fair value has been included in "Foreign
          Exchange Losses" in the accompanying December 31, 2003 consolidated
          statement of income.

          The off-balance sheet risk in outstanding swap agreements involves
          both the risk of a counter party not performing under the terms of the
          contract and the risk associated with changes in market value. The
          Company monitors its positions, the credit ratings of counterparties
          and the level of contracts it enters into with any one party. The
          counter parties to these contracts are major financial institutions.
          The Company has a policy of entering into contracts with parties that
          meet stringent qualifications and, given the high level of credit
          quality of its derivative counterparties, the Company does not believe
          it is necessary to obtain collateral arrangements.

     (y)  Stock-based compensation: In December 2002, the Financial Accounting
          Standards Board issued FASB Statement No. 148, Accounting for
          Stock-Based Compensation - Transition and Disclosure ("SFAS 148").
          This statement amends FASB Statement No. 123, Accounting For
          Stock-Based Compensation ("SFAS 123"), to provide alternative methods
          of transition to SFAS 123's fair value method of accounting for
          stock-based employee compensation. It also amends the disclosure
          provisions of SFAS 123 to require prominent disclosure in the summary
          of significant accounting policies of the effect of an entity's
          accounting policy with respect to stock-based employee compensation on
          reported net income and earnings per share in annual financial
          statements. SFAS 148's amendment of the transition and annual
          disclosure requirements are effective for fiscal years ending after
          December 15, 2002. The Company accounts for this plan under the
          recognition and measurement principles of APB Opinion No. 25,
          Accounting for Stock Issued to Employees, and related interpretations.
          No stock-based employee compensation cost is reflected in net income,
          as all options granted under those plans had an exercise price equal
          to the market value of the underlying common stock on the date of the
          grant. The following table illustrates the effect on net income and
          earnings per share if the company had applied fair value recognition
          provisions of SFAS 123, Accounting for Stock-Based Compensation, to
          stock-based employee compensation.

<TABLE>
<CAPTION>
                                                                  Year ended   Year ended    Year ended
                                                                 December 31   December 31   December 31
                                                                     2001         2002          2003
                                                                 -----------   -----------   -----------
<S>                                                                   <C>           <C>           <C>
          Net income, as reported                                     34,013        43,286        38,631

          Add: total stock-based employee compensation expense
          included in reported net income, net of related tax
          effect                                                          --            --            --
                                                                 -----------   -----------   -----------
                                                                      34,013        43,286        38,631
          Deduct: total stock-based employee compensation
          expense determined under fair value based method for
          all awards, net of related tax effects                          96            --            --
                                                                 -----------   -----------   -----------

          Pro-forma net income                                        33,917        43,286        38,631
                                                                 ===========   ===========   ===========

          Earnings per share:
          Basic - as reported                                           3.31          2.84          2.25
          Basic - pro forma                                             3.30          2.84          2.25

          Diluted - as reported                                         3.29          2.83          2.24
          Diluted - pro forma                                           3.28          2.83          2.24
</TABLE>

          The effects of applying SFAS 123 are not indicative of future amounts.
          The fair value of options granted was estimated as of the date of the
          grant using the Black-Scholes option pricing model with the following
          weighted average assumptions:

          Expected life of options (years) 10 Risk-free interest rate 3.44%
          Expected volatility of the Company's stock 35% Expected dividend yield
          on Company's stock N/A

     (z)  Other Recent Accounting Pronouncements: Recent Statements of Financial
          Accounting Standards ("SFAS") issued by the Financial Accounting
          Standards Board ("FASB") are summarized as follows:

          FIN 46, in 2003, the FASB issued Interpretation No.46, as revised
          ("FIN 46") "Consolidation of Variable Interest Entities, an
          interpretation of Accounting Research Bulletin No. 51". FIN 46
          introduces a variable interests model to determine control and
          consolidation of variable interest entities ("VIE"). A VIE is an
          entity that, by design, lacks sufficient equity or is structured such
          that the decision-making ability of its equity holders is limited. FIN
          46 generally requires consolidation of a VIE by its primary
          beneficiary. A VIE's primary beneficiary is the enterprise that, as a
          result of its interest in the VIE, absorbs a majority of the VIE's
          expected losses, receives a majority of the VIE's expected residual
          returns, or both. FIN 46 applies to those entities that are considered
          to be special purpose entities under previously existing U.S. GAAP for
          financial statement reporting periods ending after December 15, 2003,
          or may optionally be selectively applied to individual VIE's effective
          July 1, 2003. For all remaining entities that are subject to FIN 46,
          the interpretation applies for financial statement reporting periods
          ending after March 15, 2004.

          The Company is not involved with any entities in which it has
          ownership or other financial interests to which the provisions of FIN
          46 would apply. Therefore, except as described above, the adoption of
          FIN 46 is not expected to have a material effect on the Company's
          results of operations or financial position.

     (aa) Presentation Changes: Certain minor reclassifications have been made
          to the 2002 prior year consolidated financial statements to conform to
          the presentation in the 2003 consolidated financial statements.
          Insurance claims and advances to employees previously reported under
          accounts receivable, other, are now separately reflected in the
          accompanying consolidated balance sheets. The provision for doubtful
          accounts and insurance deductibles, previously reported under other,
          net and operating expenses, are now separately reflected in the
          accompanying consolidated statements of income.

3.   Transactions with Related Parties:

     (a)  World Tankers (UK) Ltd.: The Company, effective 1997, pays to World
          Tankers (UK) Ltd. (a company controlled by two of the Company's major
          stockholders and their family members), a brokerage fee of 1.25% on
          the charter agreements concluded with a specific charterer. Such
          commissions for 2001, and 2002, amounted to $ 64, and $ 24
          respectively and are included in commissions in the accompanying
          consolidated statements of income. No commissions were paid in 2003.

     (b)  Key Systems S.A.: In 1996, the Company signed a supply and support
          agreement with Key Systems S.A., (a Greek corporation, which was
          controlled by one of the Company's major stockholders up to September
          2001), to receive computer and software support for both its
          inland-based operation and on board its vessels. The fees paid to Key
          Systems S.A. in this respect are included in general and
          administrative expenses in the accompanying consolidated statements of
          income and amounted to $ 25 for 2001. No fees were paid in 2002 and
          2003.

     (c)  Board of Directors Fees: During 2001, 2002 and 2003, the Company paid
          Board of Directors' fees of $93, $177 and $273 respectively. Such fees
          are included in General and Administrative expenses in the
          accompanying consolidated statements of income.

     (d)  Advances to Employees: The amount reflected in the accompanying 2003
          consolidated balance sheet includes $ 284 of short-term advances to
          certain executive directors. Such advances were repaid in early
          February 2004.

4.   Advances for Vessels Under Construction:

     In April 2002, the Company entered into an agreement with Daewoo
     Shipbuilding of Korea (ex Daewoo Heavy Industries) for the construction of
     five Panamax tankers, with expected deliveries in November 2003 through
     July 2004. The construction cost of the new buildings will amount to $
     152,750 of which $ 100,000 will be financed from the proceeds of a
     long-term bank loan. The shipbuilding contract provides for stage payments
     of 10% in advance, 10% on steel cutting, 10% on keel laying, 10% on
     launching and 60% on delivery.

     The loan mentioned above will be drawn-down in a number of tranches so as
     to coincide with the scheduled delivery payments and will mature the date
     falling 93 months after the delivery of the last hull. The loan will be
     repayable in fifteen equal semi-annual installments of $ 3,225 each plus a
     balloon payment of $ 51,625 payable together with the last installment. The
     loan will bear interest at LIBOR plus a spread and will be secured as
     follows:

          o    First priority mortgage over the vessels
          o    Assignments of earnings and insurance of the mortgaged vessels
          o    Pledge of shares of the borrowers
          o    Corporate guarantees.

     In February 2003, the Company concluded an agreement for the purchase of
     six Handymax tankers under construction with expected delivery dates
     between January 2004 and July 2004 at a cost of $173,220. The amount will
     partially be paid through bank loans and partially from the Company's own
     funds. Furthermore, $6,412 of the total price was paid in Company's stock.

     The amounts shown in the accompanying consolidated balance sheets include
     payments to the shipyard and other capitalized costs, in accordance with
     the accounting policy discussed in Note 2i, as analyzed below:

                                                           2002           2003
                                                         --------       --------
     Advance payments on signing of contracts              14,875         42,020
     Stage payments to the shipyards                           --         37,058
     Capitalized interest                                      --          1,209
     Other                                                    213          7,784
                                                         --------       --------
     Total                                                 15,088         88,071
                                                         ========       ========

     The movement of the account in 2002 and 2003 was as follows:

     December 31, 2001                                     46,555
     - Additions                                          133,285
     - Transfers to vessel cost                          (164,752)
                                                         --------
     December 31, 2002                                     15,088
     - Additions                                          103,527
     - Transfers to vessel cost                           (30,544)
                                                         --------
     December 31, 2003                                     88,071
                                                         ========

5.   Vessels:

     The amounts in the accompanying consolidated financial statements are
     analyzed as follows:

<TABLE>
<CAPTION>
                                                   Vessel     Accumulated     Net Book
                                                    Cost      Depreciation      Value
                                                  --------      --------      --------
<S>                                                <C>          <C>            <C>
     December 31, 2000                             321,306       (56,610)      264,696
     - Additions (vessels' contract price)         246,788            --       246,788
     - Additions (additional capitalized costs)      1,884            --         1,884
     - Depreciation for the year                        --       (21,541)      (21,541)
                                                  --------      --------      --------

     December 31, 2001                             569,978       (78,151)      491,827
     - Additions (vessels' contract price)         282,610            --       282,610
     - Additions (additional capitalized costs)      6,288            --         6,288
     - Depreciation for the year                        --       (34,561)      (34,561)
                                                  --------      --------      --------

     December 31, 2002                             858,876      (112,712)      746,164
     - Additions (vessels' contract price)          29,750            --        29,750
     - Additions (additional capitalized costs)        794            --           794
     - Disposals (Note 13)                         (16,957)        2,637       (14,320)
     - Depreciation for the year                        --       (38,944)      (38,944)
                                                  --------      --------      --------
     December 31, 2003                             872,463      (149,019)      723,444
                                                  ========      ========      ========
</TABLE>

     Cost of vessels at December 31, 2001, 2002 and 2003 includes $ 8,218, $
     14,506 and $ 15,300, respectively, of amounts capitalized in accordance
     with the accounting policy discussed in Note 2i. These capitalized amounts
     include interest costs of $ 2,977 (2001), $3,210 (2002) and $3,377 (2003).

     On May 21, 2003, M/T Promar was sold for $8,500. The loss resulting from
     the sale of the vessel, after the elimination of the deferred charges,
     amounted to $7,270 and has separately been reflected in the accompanying
     December 31, 2003, consolidated statement of income.

     On February 1, 2003, M/T Keymar was grounded by strong winds and was
     subsequently re-floated. The vessel was dry-docked on February 27, 2003, to
     undergo major repairs and resumed operations on October 16, 2003. The cost
     of repairs carried out by the shipyard amounted to $29.8 million and was
     agreed to be paid in four installments. As of December 31, 2003, the
     underwriters had paid the first two installments amounting to $12.3 million
     while the third installment of $8 million was paid by the Company and has
     been included in Insurance Claims in the accompanying December 31, 2003
     consolidated balance sheet. In January 2004 the Company made a partial
     payment of the fourth installment amounting to $3.5 million. The Company
     expects that it will recover from the underwriters the total amount paid to
     the shipyard. The amount of the claim, net of deductible, outstanding at
     December 31, 2003, totaled $ 18.3 million and is included in Insurance
     Claims in the accompanying 2003 consolidated balance sheet. The amount
     payable to the shipyard at December 31, 2003 totaled $ 8 million and is
     included in Accounts Payable Trade in the accompanying 2003 consolidated
     balance sheet.

     During 2003, the majority of the vessels operated under time charters. At
     December 31, 2003, vessels Camar, Limar, Keymar and City University were
     operating in the spot market, while all remaining vessels were operating
     under time charters as follows:

     Vessel            Expiring in            Vessel            Expiring in
     ---------------   --------------------   ---------------   ----------------
     Silvermar         June 2007              Capemar           April 2004
     Goldmar           May 2007               Primar            April 2004
     Almar             June 2006              Rubymar           April 2004
     Jacamar           February 2006          Jademar           March 2004
     Cabo Hellas       November 2005          Jamar             February 2004
     Takamar           September 2005         Kliomar           February 2004
     Ambermar          August 2005            Petromar          February 2004
     Maremar           March 2005             Fulmar            January 2004
     Nedimar           March 2005             Pearlmar          January 2004
     Luxmar            February 2005          Polys             January 2004
     Rimar             December 2004          Cleliamar         January 2004
     Aquamar           August 2004            Ermar             January 2004
     Colmar            August 2004            Allenmar          January 2004
     Rosemar           May 2004

6.   Deferred Charges:

     The unamortized balance shown in the accompanying consolidated balance
     sheets is analyzed as follows:

                                                        Loan Fees
                                                           and
                                                        Financing
                                         Dry-docking       Costs        Total
                                           -------       -------       -------

     December 31, 2000                       1,145           552         1,697
     - Additions                             4,766         1,456         6,222
     - Amortization                           (960)         (139)       (1,099)
                                           -------       -------       -------

     December 31, 2001                       4,951         1,869         6,820
     - Additions                             8,122           766         8,888
     - Amortization                         (3,211)         (292)       (3,503)
                                           -------       -------       -------

     December 31, 2002                       9,862         2,343        12,205
     - Additions                             7,789         2,473        10,262
     - Write - off due to sale
       of the Promar (Note 13)              (1,276)          (38)       (1,314)
     - Amortization                         (4,646)         (353)       (4,999)
                                           -------       -------       -------
     December 31, 2003                      11,729         4,425        16,154
                                           =======       =======       =======

     Amortization for dry-docking and other financing costs is separately
     reflected in the accompanying consolidated statements of income, while
     amortization of loan fees is included in interest and finance costs, net in
     the accompanying consolidated statements of income.

7.   Accrued Liabilities:

     The amounts in the accompanying consolidated balance sheets are analyzed as
     follows:

                                                           2002       2003
                                                           -----      -----

     Vessels' operating and voyage expenses                2,371      1,750
     General and administrative expenses                     945        680
                                                           -----      -----
              Total                                        3,316      2,430
                                                           =====      =====

8.   Long-term Debt:

     The amounts in the accompanying consolidated balance sheets are analyzed as
     follows:

<TABLE>
<CAPTION>
         Borrower (s)                                                2002        2003
         ------------                                              --------    --------
<S>                                                                <C>         <C>
     (a) Ariel Shipping Corporation                                   7,200       7,200
     (b) Colmar Ltd.                                                  5,200       5,200
     (c) Primar Shipping Ltd. and Palmar Maritime Ltd.               17,996      15,216
     (d) Nedimar Ltd.                                                15,800      15,800
     (e) Kliomar Ltd.                                                17,438      14,925
     (f) Polmar Ltd.                                                 18,625      16,775
     (g) Cleliamar Ltd.                                              18,625      16,775
     (h) Keymar Ltd.                                                 14,722      13,293
     (i) Takamar Ltd.                                                23,641      21,703
     (j) Jacamar Ltd.                                                25,875      23,875
     (k) Luxmar Ltd., Limar Ltd., Camar Ltd., Jamar Ltd.
         and Ermar Ltd.                                              59,313      50,188
     (l) Rimar Ltd., Almar Ltd., Allenmar Ltd., Capemar Ltd.
         and Promar Ltd.                                             61,375      46,048
     (m) Petromar Ltd.                                               18,320      17,200
     (n) Pearlmar Ltd. and Jademar Ltd.                              43,450      40,350
     (o) Rubymar Ltd.                                                21,750      20,250
     (p) Rosemar Ltd.                                                21,906      20,653
     (q) Ambermar Ltd.                                               19,500      18,100
     (r) Goldmar Limited                                             22,786      21,086
     (s) Silvermar Limited                                           22,787      21,087
     (t) Aquamar Shipping Limited                                    16,500      15,100
     (u) Maremar Limited                                             15,800      14,400
     (v) Cabo Hellas Limited                                             --      19,476
     (w) Alcesmar Limited, Alcmar Limited,  Andromar Limited,
         Antigmar Limited,  Ariadmar Limited and Atalmar Limited         --      29,150
     (x) Cabo Sounion Limited, Reymar Limited, Reginamar
         Limited and Reinemar Limited                                    --      23,800
                                                                   --------    --------

         Total                                                      488,609     507,650
         Less- current portion                                      (74,758)    (55,003)
                                                                   --------    --------

         Long-term portion                                          413,851     452,647
                                                                   ========    ========
</TABLE>

     (a)  Loan: Balance of U.S. Dollar bank loan (original amount $ 16,000)
          obtained in June 1995 to refinance a previous loan with the same bank.
          The loan was refinanced in June 2003 and is payable in twenty equal
          quarterly installments through December 2008 and a balloon payment of
          $2,092 payable together with the last installment. The interest rate
          is based upon LIBOR plus a spread. The interest rates, including the
          spread, at December 31, 2002 and 2003 were 2.19% and 2.58%,
          respectively.

     (b)  Loan: Balance of U.S. Dollar bank loan (original amount $ 14,000)
          obtained in June 1995 to refinance a previous loan with the same bank.
          The loan was refinanced in June 2003 and is payable in twenty equal
          quarterly installments through December 2008 and a balloon payment of
          $1,512 payable together with the last installment. The interest rate
          is based upon LIBOR plus a spread. The interest rates, including the
          spread, at December 31, 2002 and 2003 were 2.19% and 2.58%,
          respectively.

     (c)  Loan: Balance of U.S. Dollar bank loan (original amount $ 31,500)
          obtained in September 1995 to refinance a previous loan with the same
          bank. Following the assumption of the unpaid balance of $ 3,080 of the
          loan of the Loucas following its sale, subsequent to December 31,
          2000, the loan was refinanced and the balance at December 31, 2003 is
          repayable in seven equal quarterly installments through September 2005
          and a balloon payment of $ 10,351 payable together with the last
          installment. The interest rate is based upon LIBOR plus a spread. The
          interest rates, including the spread, at December 31, 2002 and 2003
          were 3.00% and 2.42%, respectively.

     (d)  Loan: Balance of U.S. Dollar bank loan (original amount $ 24,000)
          obtained in December 1995 to refinance a previous loan with the same
          bank. The loan was refinanced in June 2003 and is payable in twenty
          equal quarterly installments through December 2008 and a balloon
          payment of $4,596 payable together with the last installment. The
          interest rate is based upon LIBOR plus a spread. The interest rates,
          including the spread, at December 31, 2002 and 2003 were 2.19% and
          2.58%, respectively.

     (e)  Loan: Balance of U.S. Dollar bank loan (original amount $ 30,000)
          obtained in October 1997 to partially finance the acquisition cost of
          the Kliomar. The balance at December 31, 2003 is repayable in four
          equal semi-annual installments through October 2005 and a balloon
          payment of $ 9,900 payable together with the last installment. The
          interest rate is based upon LIBOR plus a spread. The interest rates,
          including the spread, at December 31, 2002 and 2003 were 2.41% and
          1.79%, respectively.

     (f)  Loan: Balance of U.S. Dollar bank loan (original amount $ 25,500)
          obtained in December 1997 to partially finance the acquisition cost of
          the Polys. The balance at December 31, 2003 is repayable in nine equal
          semi-annual installments through January 2008 and a balloon payment of
          $ 8,450 payable together with the last installment. The interest rate
          is based upon LIBOR plus a spread. The interest rates, including the
          spread, at December 31, 2002 and 2003 were 2.6% and 1.73%,
          respectively.

     (g)  Loan: Balance of U.S. Dollar bank loan (original amount $ 25,500)
          obtained in January 1998 to partially finance the acquisition cost of
          the Cleliamar. The balance at December 31, 2003 is repayable in nine
          equal semi-annual installments through January 2008 and a balloon
          payment of $ 8,450 payable together with the last installment. The
          interest rate is based upon LIBOR plus a spread. The interest rates,
          including the spread, at December 31, 2002 and 2003 were 2.6% and
          1.73%, respectively.

     (h)  Loan: Balance of U.S. Dollar bank loan (original amount $ 20,800)
          obtained in September 1998 to partially finance the acquisition cost
          of the Keymar. The balance at December 31, 2003 is repayable in
          nineteen equal quarterly installments through September 2008 and a
          balloon payment of $ 6,500 payable together with the last installment.
          The interest rate is based upon LIBOR plus a spread. The interest
          rates, including the spread, at December 31, 2002 and 2003 were 2.89%
          and 2.45%, respectively.

     (i)  Loan: Balance of U.S. Dollar bank loan (original amount $ 31,875)
          obtained in September 1998 to partially finance the acquisition cost
          of the Takamar. The balance at December 31, 2003 was fully repaid in
          January 2004 following the sale and leaseback of the vessel (Note 17).
          The interest rate was based upon LIBOR plus a spread. The interest
          rates, including the spread, at December 31, 2002 and 2003 were 2.89%
          and 2.33%, respectively.

     (j)  Loan: Balance of U.S. Dollar bank loan (original amount $ 31,875)
          obtained in February 1999 to partially finance the acquisition cost of
          the Jacamar. The balance at December 31, 2003 was fully repaid in
          January 2004 following the sale and leaseback of the vessel (Note 17).
          The interest rate was based upon LIBOR plus a spread. The interest
          rates, including the spread, at December 31, 2002 and 2003 were 2.04%
          and 1.77%, respectively.

     (k)  Loan: Balance of U.S. Dollar bank loan (original amount $ 73,000)
          obtained in April 2001 to partially finance the acquisition cost of
          the Luxmar, Limar, Camar, Jamar and Ermar. The balance at December 31,
          2003 is repayable in eleven equal semi-annual installments through
          June 2009. The interest rate is based upon LIBOR plus a spread. The
          interest rates, including the spread, at December 31, 2002 and 2003
          were 2.56% and 2.31% respectively.

     (l)  Loan: Balance of U.S. Dollar bank loan (original amount $ 72,000)
          obtained in May 2001 to partially finance the acquisition cost of the
          Rimar, Almar, Allenmar, Capemar and Promar. Following the sale of
          Promar in May 2003 its loan was fully repaid. The balance at December
          31, 2003 is repayable in seven equal quarterly installments of $ 1,850
          each, twelve equal quarterly installments of $ 1,089 each through
          September 2008 and a balloon payment of $ 20,030 payable together with
          the last installment. The interest rate is based upon LIBOR plus a
          spread. The interest rates, including the spread, at December 31, 2002
          and 2003 were 2.79% and 2.55% respectively.

     (m)  Loan: Balance of U.S. Dollar bank loan (original amount $ 20,000)
          obtained in June 2001 to partially finance the acquisition cost of the
          Petromar. The balance at December 31, 2003 is repayable in fifteen
          equal semi-annual installments through June 2011 and a balloon payment
          of $ 8,800 payable together with the last installment. The interest
          rate is based upon LIBOR plus a spread. The interest rates, including
          the spread, at December 31, 2002 and 2003 were 2.71% and 2.5%
          respectively.

     (n)  Loan: Balance of a U.S. Dollar bank loan (original amount $ 45,000)
          obtained in January 2002 to partially finance the construction cost of
          the Pearlmar and Jademar. The balance at December 31, 2003 is
          repayable in seventeen equal semi-annual installments through March
          2012 and a balloon payment of $ 14,000 payable together with the last
          installment. The interest rate is based upon LIBOR plus a spread. The
          interest rates, including the spread, at December 31, 2002 and 2003
          were 3.04% and 2.46% respectively.

     (o)  Loan: Balance of a U.S. Dollar bank loan (original amount $ 22,500)
          obtained in April 2002 to partially finance the construction cost of
          Rubymar. The balance at December 31, 2003 is repayable in thirty-four
          quarterly equal installments through April 2012 and a balloon payment
          of $ 7,500 payable together with the last installment. The interest
          rate is based upon LIBOR plus a spread. The interest rates, including
          the spread, at December 31, 2002 and 2003 were 3.22% and 2.3%
          respectively.

     (p)  Loan: Balance of a U.S. Dollar bank loan (original amount $ 22,533)
          obtained in May 2002 to partially finance the construction cost of
          Rosemar The balance at December 31, 2003 is repayable in seventeen
          equal semi-annual installments through May 2012 and a balloon payment
          of $10,000 payable together with the last installment. The interest
          rate is based upon LIBOR plus a spread. The interest rates, including
          the spread, at December 31, 2002 and 2003 were 3.38% and 2.48%
          respectively.

     (q)  Loan: Balance of a U.S. Dollar bank loan (original amount $ 20,200)
          obtained in February 2002 to partially finance the acquisition of
          Ambermar. The balance at December 31, 2003 is repayable in thirteen
          equal semi annual installments through February 2010 and a balloon
          payment of $9,000 payable together with the last installment. The
          interest rate is based upon LIBOR plus a spread. The interest rates,
          including the spread, at December 31, 2002 and 2003 were 2.88% and
          2.06% respectively.

     (r)  Loan: Balance of a U.S. Dollar bank loan (original amount of $ 23,636)
          obtained in May 2002 to partially finance the acquisition of Goldmar.
          The balance at December 31, 2003 is repayable in fourteen equal
          quarterly installments of $425 each, nineteen equal quarterly
          installments of $325 each through March 2012 and a balloon payment of
          $8,961 payable together with the last installment. The interest rate
          is based upon LIBOR plus a spread. The interest rates, including the
          spread, at December 31, 2002 and 2003 were 3.1% and 2.3% respectively.

     (s)  Loan: Balance of a U.S. Dollar bank loan (original amount of $ 23,637)
          obtained in June 2002 to partially finance the acquisition of
          Silvermar. The balance at December 31, 2003 is repayable in fourteen
          equal quarterly installments of $425 each, nineteen equal quarterly
          installments of $325 each through March 2012 and a balloon payment of
          $8,962 payable together with the last installment. The interest rate
          is based upon LIBOR plus a spread. The interest rates, including the
          spread, at December 31, 2002 and 2003 were 3.1% and 2.3% respectively.

     (t)  Loan: Balance of a U.S. Dollar bank loan (original amount of $ 16,500)
          obtained in July 2002 to partially finance the acquisition of Aquamar.
          The balance at December 31, 2003 is repayable in fourteen equal semi
          annual installments through July 2010 and a balloon payment of $5,300
          payable together with the last installment. The interest rate is based
          upon LIBOR plus a spread. The interest rates, including the spread, at
          December 31, 2002 and 2003 were 2.87% and 2.18% respectively.

     (u)  Loan: Balance of a U.S. Dollar bank loan (original amount of $ 16,500)
          obtained in June 2002 to partially finance the acquisition of Maremar.
          The balance at December 31, 2003 is repayable in thirteen equal semi
          annual installments through June 2010 and a balloon payment of $5,300
          payable together with the last installment. The interest rate is based
          upon LIBOR plus a spread. The interest rates, including the spread, at
          December 31, 2002 and 2003 were 3.1% and 2.27% respectively.

     (v)  Loan: U.S. Dollar bank loan (part of a $100,000 loan facility to
          partially finance the construction cost of Cabo Hellas, Cabo Sounion,
          Reymar, Reginamar and Reinemar) obtained in November 2003 to partially
          finance the acquisition of Cabo Hellas. The balance at December 31,
          2003 is repayable in fifteen equal semi annual installments together
          with a balloon payment of $10,054 payable with the last installment,
          by June 2012 at the latest. The interest rate is based upon LIBOR plus
          a spread. The interest rate, including the spread, at December 31,
          2003 was 2.61%.

     (w)  Loan: Partial draw downs of a $40 million U.S. Dollar revolving
          facility obtained to finance the stage payments to the shipyard in
          connection with the construction of Alcesmar, Alcmar, Andromar,
          Antigmar, Ariadmar and Atalmar. The facility has no repayment terms
          and upon delivery of each hull the corresponding drawn portion of the
          facility will be repaid by already arranged U.S. Dollar bank loans.
          The facility will fully be repaid upon delivery of the last hull. The
          interest rate is based upon LIBOR plus a spread. The interest rate,
          including the spread, at December 31, 2003 was 2.40%.

     (x)  Loan: Partial draw downs of a U.S. Dollar $100 million bank loan
          obtained to partially finance the construction cost of Cabo Sounion,
          Reymar, Reginamar and Reinemar. The loan will fully be drawn down upon
          delivery of the last hull. The repayment of the loan will start three
          months after the delivery of the last hull or on December 15, 2004
          whichever is earlier and will be made in fifteen equal semi annual
          installments together with a balloon payment of $41,571 payable with
          the last installment, by June 2012 at the latest. The interest rate is
          based upon LIBOR plus a spread. The interest rate, including the
          spread, at December 31, 2003 was 2.42%.

          The range of the interest rates of the above loans during the years
          ended December 31, 2001, 2002 and 2003 was as follows:

          2001   2.72% - 7.75%
          2002   2.04% - 6.47%
          2003   1.77% - 6.47%

               Bank loan interest expense for the years ended December 31, 2001,
          2002 and 2003 amounted to $ 17,618, $ 18,393 and $ 17,449
          respectively, and is included in interest and finance costs, net in
          the accompanying consolidated statements of income. Of these amounts $
          886, $ 233 and $ 683 in 2001, 2002 and 2003, respectively, were
          capitalized and are included in Vessels Under Construction and in
          Vessels in the accompanying consolidated balance sheets.

          The loans are secured as follows:

          o    First, second, third and fourth priority mortgages over the
               Colmar;

          o    First, second and third priority mortgages over the Kliomar;

          o    First and second priority mortgages over the Polys, Cleliamar,
               Primar and City University;

          o    First priority mortgage over the Fulmar, Nedimar, Keymar,
               Takamar, Jacamar, Luxmar, Limar, Camar, Jamar, Ermar, Rimar,
               Almar, Allenmar, Capemar, Promar, Petromar, Ambermar, Pearlmar,
               Jademar, Rubymar, Rosemar, Goldmar, Silvermar, Aquamar, Maremar
               and Cabo Hellas;

          o    Assignments of earnings and insurances of the mortgaged vessels;

          o    Pledge of shares of the borrowers; and

          o    Corporate guarantees.

          The loan agreements include covenants, among others, requiring the
          borrowers to obtain the lenders' prior consent in order to incur or
          issue any financial indebtedness, additional borrowings, pay dividends
          (as defined in the related agreements), give loans to stockholders,
          sell vessels and assets and change the beneficial ownership or
          management of the vessels. Also, the covenants require the borrowers
          to maintain a minimum hull value in connection with the vessels'
          outstanding loans, minimum ratios of total debt against equity,
          insurance coverage of the vessels against all customary risks and
          maintenance of operating bank accounts with minimum balances. In
          relation with the covenants of certain loans, dividends can be
          distributed without the prior consent of the lending banks for an
          amount not exceeding 50% of the net income.

          The annual principal payments required to be made subsequent to
          December 31, 2003 are as follows:

          Year                  Amount
          ----                  ------

          2004                    55,003
          2005                    83,125
          2006                    51,544
          2007                    49,295
          2008                   108,959
          2009 and thereafter    159,724
                                ---------
                                 507,650
                                =========

9.   Contingencies:

     Various claims, suits, and complaints, including those involving government
     regulations and product liability, arise in the ordinary course of the
     shipping business. In addition, losses may arise from disputes with
     charterers, agents, insurance and other claims with suppliers relating to
     the operations of the Company's vessels. Currently, management is not aware
     of any such contingent liabilities, which should be disclosed or for which
     a provision should be established in the accompanying consolidated
     financial statements.

     The Company accrues for the cost of environmental liabilities when
     management becomes aware that a liability is probable and is able to
     reasonably estimate the probable exposure. Currently, management is not
     aware of any such claims or contingent liabilities, which should be
     disclosed or for which a provision should be established in the
     accompanying consolidated financial statements. Up to $ 1 billion of the
     liabilities associated with the individual vessels actions, mainly for sea
     pollution is covered by the Protection and indemnity (P&I) Club insurance.
     Other liabilities are insured up to the prevailing reinsurance limit of $
     4.25 billion.

10.  Stock Option Plan:

     On March 6, 2001, 323,500 stock options with an exercise price of $12.30
     were granted to the Company's officers, key employees and directors under
     the 2001 Stock Option Plan (the "Plan") of the Company. Under the original
     terms of the Plan, the options were scheduled to fully vest on March 6,
     2003. These options expire on March 6, 2011.

     On October 11, 2001, an aggregate of 8,000 additional options with an
     exercise price of $13.52 were granted to certain members of the Board of
     Directors. These options are subject to the terms and conditions as set
     forth in the Plan and were originally scheduled to fully vest on March 6,
     2003. These options expire on March 6, 2011.

     On October 22, 2002, the Board of Directors modified the Plan to accelerate
     the vesting date of all options outstanding to December 31, 2002, thus
     establishing a new measurement date for all outstanding options under the
     Plan on the modification date. The Plan modification did not have a
     material impact on the Company's financial position or results of
     operations.

     A summary of the status of the stock options as of December 31, 2001, 2002
     and 2003 and changes for the three years then ended, is presented below:

<TABLE>
<CAPTION>
                                2001                       2002                      2003
                      ------------------------   -----------------------   ------------------------
                                    Weighted -                Weighted -                 Weighted -
                                      average                   average                    average
                                     exercise                  exercise                   exercise
                        Shares        price        Shares       price        Shares        price
                      ----------    ----------   ----------   ----------   ----------    ----------
<S>                      <C>             <C>        <C>            <C>        <C>             <C>
Outstanding at
beginning of year             --            --      328,500        12.34      328,500         12.34
Granted                  331,500         12.34           --           --           --            --
Exercised                     --            --           --           --      (20,000)        12.31
Forfeited                 (3,000)        12.31           --           --      (38,000)        12.31
Expired                       --            --           --           --           --            --
                      ----------    ----------   ----------   ----------   ----------    ----------

Outstanding at
end of year              328,500         12.34      328,500        12.34      270,500         12.35
                      ==========    ==========   ==========   ==========   ==========    ==========
Options exercisable
at year-end                   --            --      328,500        12.34      270,500         12.35
                      ==========    ==========   ==========   ==========   ==========    ==========
</TABLE>

     As of December 31, 2003, the weighted-average remaining contractual life of
     outstanding options is 7.2 years.

     The total fair value of the options granted under the stock plans in 2001
     was computed as approximately $ 96. No new options were granted in 2003 and
     2002.

11.  Earnings 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 dilutive stock options using the treasury stock method.

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

<TABLE>
<CAPTION>
                                                       2001         2002         2003
                                                    ----------   ----------   ----------
<S>                                                 <C>          <C>          <C>
     Numerator:
     Net income - basic and diluted                     34,013       43,286       38,631
                                                    ==========   ==========   ==========

     Denominator:
     Denominator for basic earnings per share -
     weighted average shares                        10,290,028   15,262,194   17,195,152

     Effect of dilutive securities:
     Employee stock options                             63,782       52,056       83,737
                                                    ----------   ----------   ----------

     Dilutive potential common shares
     Denominator for diluted earnings per share -
     adjusted weighted average shares and assumed
     conversions                                    10,353,810   15,314,250   17,278,889
                                                    ==========   ==========   ==========

     Basic earnings per share                       $     3.31   $     2.84   $     2.25
                                                    ==========   ==========   ==========

     Diluted earnings per share                     $     3.29   $     2.83   $     2.24
                                                    ==========   ==========   ==========
</TABLE>

12.  Interest and Finance Costs:

     The amounts in the accompanying consolidated statements of income are
     analyzed as follows:

                                                2001       2002       2003
                                               ------     ------     ------

     Interest on long-term debt                16,732     18,160     16,073
     Mortgagee interest                           130        237        257
     Bank charges                                  88        137        197
     Amortization of financing fees               139        292        353
                                               ------     ------     ------
     Total                                     17,089     18,826     16,880
                                               ======     ======     ======

13.  Loss on Sale of Vessel:

     Upon the sale of the Promar the Company realized a loss, as analyzed below:

                                                                    Amount
                                                                   --------
     Sale proceeds, net
     -Selling price                                                  8,500
     -Selling expenses                                                (136)
                                                                   -------

     Vessel's net book value at the date of sale

     -Vessel's cost (Note 5)                                       (16,957)
     -Depreciation up to the sale date (Note 5)                      2,637
                                                                   -------
                                                                   (14,320)
     Deferred charges, written-off (Note 6)                         (1,314)
                                                                   -------
     Net loss                                                       (7,270)
                                                                   =======

14.  Financial Instruments:

     On October 10, 1999, the Company concluded an interest rate cap agreement
     for a period of six years (through October 10, 2005) for an amount of $
     15,000. Since LIBOR has not exceeded 7% there was no charge for the Company
     with respect to this interest rate cap agreement for years 2001, 2002 and
     2003.

     On October 26, November 30, and December 20, 2000 the Company concluded
     three interest rate swap agreements (the first two with effective date
     December 11, 2000 and the third with effective date March 12, 2001) for a
     period of five years (through September 12, 2005) for amounts of $ 14,000,
     $ 10,000 and $ 31,500, respectively. Under these agreements, the Company
     has fixed the interest rate up to 6.50%, 6.45% and 5.88%, respectively.

     On November 28, 2001, the Company concluded two interest rate swap
     agreements with effective dates December 17, 2001 and December 18, 2001
     respectively. The first is for a period of three years for an amount of
     $16,781 and the second for a period of five years for an amount of $18,168.
     Under these agreements the Company has fixed the interest rate at 4.25% and
     4.77%, respectively.

     On July 10, 2002, the Company concluded two interest swap agreements with
     effective dates September 13, 2002 each. Both are for a period of five
     years and for an amount of $ 23,575 each. Under the agreement the Company
     has fixed the interest rate at 4.20% and 4.38% respectively.

     On December 15, 2003, the Company entered a foreign currency forward
     contract for a period of six months to sell an amount of Euros 6.5 million
     and purchase U.S. Dollars. Under this contract the Company has fixed the
     Euro exchange rate against the U.S. Dollar at 1.2182.

15.  Income Taxes:

     Liberia, Greece, Panama and Cyprus do not impose a tax on international
     shipping income. Under the laws of Liberia, Greece, Panama and Cyprus the
     countries of the companies' incorporation and vessels' registration, the
     companies are subject to registration and tonnage taxes which have been
     included in vessel operating expenses in the accompanying consolidated
     statements of income ($ 93, $ 179 and $ 200 in 2001, 2002 and 2003,
     respectively).

     Stelmar Tankers (UK) Ltd. is subject to income tax in accordance with the
     tax laws of the United Kingdom. No provision for income taxes was required
     for the years up to 1997 as the company utilized carry-forward tax losses.
     The accompanying consolidated statements of income include a provision for
     income taxes of $ 79, $6 and $0 in, 2001, 2002 and 2003, respectively,
     which is included in general and administrative expenses.

     Pursuant to the Internal Revenue Code of the United States (the "Code"),
     U.S. source income from the international operations of ships is generally
     exempt from U.S. tax if the company operating the ships meets certain
     requirements. Among other things, in order to qualify for this exemption,
     the company operating the ships must be incorporated in a country, which
     grants an equivalent exemption from income taxes to U.S. corporations. All
     the company's ship-operating subsidiaries satisfy these initial criteria.
     In addition, these companies must be more than 50% owned by individuals who
     are residents, as defined, in the countries of incorporation or another
     foreign country that grants an equivalent exemption to U.S. corporations.
     Subject to proposed regulations becoming finalized in their current form,
     the management of the Company believes that by virtue of a special rule
     applicable to situations where the ship operating companies are
     beneficially owned by a publicly traded company like the Company, the
     second criterion can also be satisfied based on the trading volume and
     ownership of the Company's shares, but no assurance can be given that this
     will remain so in the future.

16.  Financial Instruments:

     The principal financial assets of the Company consist of cash on hand and
     at banks and accounts receivable due from charterers. The principal
     financial liabilities of the Company consist of long-term bank loans and
     accounts payable due to suppliers.

     (a)  Interest rate risk: The Company's interest rates and long-term loans
          repayment terms are described in Note 8.

     (b)  Credit risk: The credit risk is minimized since accounts receivable
          from charterers are presented net of the relevant provision for
          uncollectible amounts, whenever required.

     (c)  Fair value: The carrying amounts reflected in the accompanying
          consolidated balance sheets of financial assets and liabilities
          approximate their respective fair values due to the short maturities
          of these instruments. The fair values of long-term bank loans
          approximate the recorded values, generally due to their variable
          interest rates. The fair value of the swap agreements discussed in
          Note 14 equates to the amount that would be paid by the Company to
          cancel the swap. Such fair value at December 31, 2003, was a liability
          of $ 4,885 and has been included in "Accumulated Other Comprehensive
          Income/(Loss)" in the accompanying consolidated balance sheet. The
          fair market value of the foreign currency forward contract also
          discussed in Note 14, at December 31, 2003, was $237 and has been
          included in "Foreign currency losses, net" in the accompanying 2003
          consolidated statement of income.

17.  Subsequent Events:

     (a)  Sale and Leaseback: In January 2004 the Company sold and leased back,
          under separate Bare Boat charter agreements, the vessels Takamar and
          Jacamar. The vessels were sold at a price of $35.5 million and $36.9
          million respectively resulting to a net gain of $0.7 million. The Bare
          Boat charter agreements each have durations of seven years.

     (b)  Delivery of Hulls S-1108 and S-1109: In January 2004 the Company took
          delivery of the first two STX Handymax tankers (Note 4). The vessels'
          cost amounted to $29.9 million and $29.5 million respectively and was
          partially financed by U.S. Dollar bank loans.

     (c)  Delivery of Hull 5240: In January 2004 the Company took delivery of
          its second Panamax tanker (Note 4). The vessel's cost amounted to
          $30.3 million and was partially financed by a U.S. Dollar bank loan.
<PAGE>

STELMAR SHIPPING LTD.

SCHEDULE I - CONDENSED FINANCIAL INFORMATION
BALANCE SHEETS - DECEMBER 31, 2002 AND 2003
(Expressed in thousands of U.S. Dollars)

ASSETS                                                      2002         2003
------                                                   ---------    ---------

CURRENT ASSETS:
Cash and cash equivalents                                $   1,250    $     347
Due from subsidiaries                                        3,873          175
Prepayments and other                                           85           66
                                                         ---------    ---------

Total current assets                                         5,208          588
                                                         ---------    ---------

INVESTMENTS                                                315,610      364,392
                                                         ---------    ---------

Total assets                                             $ 320,818    $ 364,980
                                                         =========    =========

LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES:

Accounts payable- trade                                        125          117
Accrued liabilities                                            595          900
Financial instruments fair value                             7,950        5,122
                                                         ---------    ---------

Total current liabilities                                    8,670        6,139
                                                         ---------    ---------

STOCKHOLDERS' EQUITY:
Preferred stock, $ 0.01 par value; 20,000,000 shares
authorized, none issued.                                        --           --
Common stock, $ 0.02 par value; 25,000,000 shares
authorized; 16,819,750 and 17,305,687 issued and
outstanding at December 31, 2002 and 2003, respectively.       336          346
Additional paid-in capital, net                            215,635      222,598
Accumulated other comprehensive income / (loss)             (7,940)      (4,774)
Retained earnings                                          104,117      140,671
                                                         ---------    ---------

Total stockholders' equity                                 312,148      358,841
                                                         ---------    ---------

Total liabilities and stockholders' equity               $ 320,818    $ 364,980
                                                         =========    =========

<PAGE>


STELMAR SHIPPING LTD.
<TABLE>

SCHEDULE I - CONDENSED FINANCIAL INFORMATION
STATEMENTS OF INCOME
FOR THE YEARS ENDED DECEMBER 31, 2001, 2002 AND 2003
(Expressed in thousands of U.S. Dollars - except per share data)
<CAPTION>

                                                   2001               2002                2003
                                                   ----               ----                ----
<S>                                               <C>                 <C>                <C>
REVENUES:
Revenue from investments                          $   33,636          $   44,997        $   41,208
General and administrative expenses                     (465)             (1,810)           (2,593)
                                                  -----------         -----------       -----------

Operating income                                      33,171              43,187            38,615
                                                  -----------         -----------       -----------

OTHER INCOME (EXPENSES):
Interest and finance costs, net                          842                  99                16
                                                  -----------         -----------       -----------

Total other income (expenses), net                       842                  99                16
                                                  -----------         -----------       -----------

Net Income                                        $   34,013          $   43,286        $   38,631
                                                  ===========         ==========        ===========

Earnings per share, basic                         $     3.31          $     2.84        $     2.25
                                                  ===========         ==========        ===========

Weighted average number of shares, basic          10,290,028          15,262,194         17,195,152
                                                  ===========         ==========        ===========

Earnings per share, diluted                       $     3.29          $     2.83        $     2.24
                                                  ===========         ==========        ===========

Weighted average number of shares, diluted        10,353,810          15,314,250        17,278,889
                                                  ===========         ==========        ===========
</TABLE>

<PAGE>

STELMAR SHIPPING LTD.
<TABLE>

SCHEDULE I - CONDENSED FINANCIAL INFORMATION
STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 2001, 2002 AND 2003
(Expressed in thousands of U.S. Dollars)
<CAPTION>
                                                                                               Accumulated
                                                                                  Additional   Other
                                                         Comprehensive   Capital  Paid-in      Comprehensive   Retained
                                                         Income          Stock    Capital      Income/(Loss)   Earnings   Total
                                                         ------          -----    -------      -------------   --------   -----
<S>                                                      <C>             <C>      <C>          <C>             <C>        <C>
BALANCE, December 31, 2000                                               $   76   $  55,064     $   (227)     $  34,653     89,566
  Cumulative  effect of  measurement  of fair  value of
  financial instruments at January 1, 2001                    (561)           -           -         (561)             -      (561)
  Issuance of common stock                                       -          161      96,438            -              -     96,599
  Expenses related to the issuance of common stock               -            -      (8,363)           -              -     (8,363)
  Reinvestment of earnings                                       -            -       6,831            -         (6,831)         -
  Other comprehensive income
  - Fair value of financial instruments                     (1,939)           -           -       (1,939)             -     (1,939)
  - Currency translation adjustments                           133            -           -          133              -        133
                                                         -----------
  Comprehensive income                                   $  31,646
                                                         ===========    --------  ---------     ---------     ----------  ----------

BALANCE, December 31, 2001                                               $  237   $ 149,970     $ (2,594)     $  61,835  $ 209,448
  Issuance of common stock                                       -           99      69,131            -              -     69,230
  Expenses related to the issuance of common stock               -            -      (4,470)           -              -     (4,470)
  Reinvestment of earnings                                       -            -       1,004            -         (1,004)         -
  Net income                                                43,286            -           -            -         43,286     43,286
  Other comprehensive income
  - Fair value of financial instruments                     (5,450)           -           -       (5,450)             -     (5,450)
  - Currency translation adjustments                           104            -           -          104              -        104
                                                         -----------
  Comprehensive income                                   $  37,940
                                                         ===========    --------  ---------     ---------     ----------  ----------

BALANCE, December 31, 2002                                                  336   $ 215,635     $ (7,940)     $ 104,117  $ 312,148
  Issuance of common stock                                       -           10       6,963            -              -      6,973
  Net income                                                38,631            -           -            -         38,631     38,631
  Dividends paid (US dollars 0.12 per share)                     -            -           -            -         (2,077)    (2,077)
  Other comprehensive income
  - Fair value of financial instruments                      3,065            -           -        3,065              -      3,065
  - Currency translation adjustments                           101            -           -          101              -        101
  Comprehensive income                                   $  41,797
                                                         ===========    --------  ---------     ---------     ----------  ----------

BALANCE, December 31, 2003                                                  346   $ 222,598     $ (4,774)     $ 140,671  $ 358,841
                                                                        ========  =========     =========     =========   ==========
</TABLE>

<PAGE>

STELMAR SHIPPING LTD.
<TABLE>

SCHEDULE I- CONDENSED FINANCIAL INFORMATION
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2001, 2002 AND 2003
(Expressed in thousands of U.S. Dollars)
<CAPTION>

                                                            2001           2002            2003
                                                            ----           ----            ----
<S>                                                         <C>             <C>            <C>
Cash Flows from Operating Activities:

    Net income                                              $   34,013     $   43,286       $   38,631
    Adjustments to reconcile net income to net cash
    provided by operating activities:
         Fair value of foreign exchange deal                         -              -             237
    (Increase) Decrease in:
         Accounts receivable                                         -        (3,958)           3,717
    Increase (Decrease) in:
         Accounts payable                                        (125)           (22)             (8)
         Accrued liabilities excluding bank loan interest            -            595             305
    Translation adjustment                                         133            104             101
                                                           -----------     -----------     -----------

Net Cash from Operating Activities                              34,021         40,005          42,983
                                                           -----------     -----------     -----------

Cash Flows from (used in) Investing Activities:
         Reinvestment of earnings                              (6,831)        (1,004)               -
         Investment in subsidiaries                          (121,389)      (104,485)        (48,782)
                                                           -----------     -----------     -----------

Net Cash used in Investing Activities                        (128,220)      (105,489)        (48,782)
                                                           -----------     -----------     -----------

Cash Flows from (used in) Financing Activities:
         Dividends received and reinvested                       6,831          1,004               -
         Dividends paid                                              -              -         (2,077)
         Contribution to paid-in capital                        88,236         64,760           6,973
                                                           -----------     -----------     -----------

Net Cash from Financing Activities                              95,067         65,764           4,896
                                                           -----------     -----------     -----------

Net increase (decrease) in cash and cash equivalents               868            280           (903)
Cash and cash equivalents at beginning of year                     102            970           1,250
                                                           -----------     -----------     -----------
Cash and cash equivalents at end of year                    $      970     $    1,250       $     347
                                                           ===========     ===========     ===========
</TABLE>

<PAGE>


Schedule 1 - Notes to Condensed Financial information of Stelmar Tankers Ltd.

In the Parent Company only financial statements the Company's investment and
subsidiaries is stated at cost plus equity in undistributed earnings of
subsidiaries since the date of acquisition. The Parent Company only financial
statements should be read in conjunction with the Company's consolidated
financial statements.

<PAGE>

ITEM 19 EXHIBITS.

Exhibit Number                                                       Description

          1.1       Articles of Incorporation of Diostel Inc. (incorporated by
                    reference to Exhibit 3.1 to Stelmar Shipping Ltd.'s (the
                    "Company") Registration Statement on Form F-1 (SEC
                    Registration No. 333-13128))

          1.2       Articles of Amendment of Articles of Incorporation of
                    Diostel Inc. (changing name to Stelships Inc.) (incorporated
                    by reference to Exhibit 3.2 to the Company's Registration
                    Statement on Form F-1 (SEC Registration No. 333-13128))

          1.3       Articles of Amendment of Articles of Incorporation of
                    Stelships Inc. (changing name to Stelmar Shipping Ltd.
                    (incorporated by reference to Exhibit 3.3 to the Company's
                    Registration Statement on Form F-1 (SEC Registration No.
                    333-13128))

          1.4       Articles of Amendment of the Articles of Incorporation of
                    the Company (effectuating a reverse stock split and
                    increasing the Company's authorized common stock)
                    (incorporated by reference to Exhibit 3.4 to the Company's
                    Registration Statement on Form F-1 (SEC Registration No.
                    333-13128))

          1.5       By-Laws of the Company (incorporated by reference to Exhibit
                    3.5 to the Company's Registration Statement on Form F-1 (SEC
                    Registration No. 333-13128))

          4.1       Loan Agreement, between Marship Tankers (Holdings) Limited
                    and Royal Bank of Scotland plc, dated June 11, 1997
                    (incorporated by reference to Exhibit 10.1 to the Company's
                    Registration Statement on Form F-1 (SEC Registration No.
                    333-13128))

          4.2       ISDA Master Agreement, between Royal Bank of Scotland plc
                    and Marship Tankers (Holdings) Limited, dated June 11, 1997
                    (incorporated by reference to Exhibit 10.2 to the Company's
                    Registration Statement on Form F-1 (SEC Registration No.
                    333-13128))

          4.3       Loan Agreement, between Royal Bank of Scotland plc and
                    Marship Tankers (Holdings) Limited, dated September 27, 1995
                    (incorporated by reference to Exhibit 10.3 to the Company's
                    Registration Statement on Form F-1 (SEC Registration No.
                    333-13128))

          4.4       ISDA Master Agreement, between Royal Bank of Scotland plc
                    and Marship Tankers (Holdings) Limited, dated September 27,
                    1995 (incorporated by reference to Exhibit 10.4 to the
                    Company's Registration Statement on Form F-1 (SEC
                    Registration No. 333-13128))

          4.5       Loan Agreement, between Hamburgische Landesbank-Girozentrale
                    and Polmar Ltd. and Cleliamar Ltd., dated November 28, 1997
                    (incorporated by reference to Exhibit 10.5 to the Company's
                    Registration Statement on Form F-1 (SEC Registration No.
                    333-13128))

          4.6       Loan Agreement, between Hamburgische Landesbank-Girozentrale
                    and Clio Ltd., dated October 15, 1997 (incorporated by
                    reference to Exhibit 10.6 to the Company's Registration
                    Statement on Form F-1 (SEC Registration No. 333-13128))

          4.7       Loan Agreement, between Hamburgische Landesbank-Girozentrale
                    and Colmar Ltd., dated June 28, 1995, as amended
                    (incorporated by reference to Exhibit 10.7 to the Company's
                    Registration Statement on Form F-1 (SEC Registration No.
                    333-13128))

          4.8       Loan Agreement, between Hamburgische Landesbank-Girozentrale
                    and Nedimar Limited, dated June 28, 1995, as amended
                    (incorporated by reference to Exhibit 10.8 to the Company's
                    Registration Statement on Form F-1 (SEC Registration No.
                    333-13128))

          4.9       Loan Agreement, between Hamburgische Landesbank-Girozentrale
                    and Ariel Shipping Corporation, dated June 28, 1995, as
                    amended (incorporated by reference to Exhibit 10.9 to the
                    Company's Registration Statement on Form F-1 (SEC
                    Registration No. 333-13128))

          4.10      Loan Agreement, between Nedship Bank N.V., and Jademar
                    Limited and Pearlmar Limited, for Hull No. 5210 and Hull No.
                    5211 (incorporated by reference to Exhibits 10.10 and 10.11
                    to the Company's Registration Statement on Form F-1 (SEC
                    Registration No. 333-13128))

          4.11      Loan Agreement, between Alpha Bank A.E. and Rubymar Limited
                    for Hull No. 5212 (incorporated by reference to Exhibit
                    10.12 to the Company's Registration Statement on Form F-1
                    (SEC Registration No. 333-13128))

          4.12      [reserved]

          4.13      Loan Agreement, between The Royal Bank of Scotland plc and
                    Rosemar Limited, Palmar Maritime Ltd., and Primar Shipping
                    Limited for Hull No. 5213 and for refinancing a previous
                    loan (incorporated by reference to Exhibit 10.13 to the
                    Company's Registration Statement on Form F-1 (SEC
                    Registration No. 333-13128))

          4.14      Loan Agreement, between the Royal Bank of Scotland and
                    Petromar Ltd. dated June 6, 2001**

          4.15      Loan Agreement, between Hamburgische Landesbank-Girozentrale
                    and Ambermar Limited dated February 19, 2002**

          4.16      Memorandum of Agreement between the Company and D'Amico
                    International Holding SAH, dated July 18, 2001, for the
                    purchase of Hull No. 1071**

          4.17      The Company's 2001 Stock Option Plan (incorporated by
                    reference to Exhibit 10.17 to the Company's Registration
                    Statement on Form F-1 (SEC Registration No. 333-13128))

          4.18      Shipbuilding Contract for the Construction and Sale of Hull
                    No. 5210, between the Company and Daewoo Heavy Industries
                    Ltd., dated July 13, 2000 (incorporated by reference to
                    Exhibit 10.18 to the Company's Registration Statement on
                    Form F-1 (SEC Registration No. 333-13128))

          4.19      Shipbuilding Contract for the Construction and Sale of Hull
                    No. 5211, between the Company and Daewoo Heavy Industries
                    Ltd., dated July 13, 2000 (incorporated by reference to
                    Exhibit 10.19 to the Company's Registration Statement on
                    Form F-1 (SEC Registration No. 333-13128))

          4.20      Shipbuilding Contract for the Construction and Sale of Hull
                    No. 5212, between the Company and Daewoo Heavy Industries
                    Ltd., dated July 13, 2000 (incorporated by reference to
                    Exhibit 10.20 to the Company's Registration Statement on
                    Form F-1 (SEC Registration No. 333-13128))

          4.21      Shipbuilding Contract for the Construction and Sale of Hull
                    No. 5213, between the Company and Daewoo Heavy Industries
                    Ltd., dated July 13, 2000 (incorporated by reference to
                    Exhibit 10.21 to the Company's Registration Statement on
                    Form F-1 (SEC Registration No. 333-13128))

          4.22      Lease Agreement, between Stelmar Tankers UK Limited and
                    Pierre-Ecureuil II, dated November 27, 1997 (incorporated by
                    reference to Exhibit 10.22 to the Company's Registration
                    Statement on Form F-1 (SEC Registration No. 333-13128))

          4.23      Lease Agreement, between Stelmar Tankers (Management)
                    Limited and Status Center, dated March 14, 1995
                    (incorporated by reference to Exhibit 10.23 to the Company's
                    Registration Statement on Form F-1 (SEC Registration No.
                    333-13128))

          4.24      Exclusivity and Non-Compete Agreement, between the Company
                    and Stelios Haji-Ioannou (incorporated by reference to
                    Exhibit 10.24 to the Company's Registration Statement on
                    Form F-1 (SEC Registration No. 333-13128))

          4.25      Heads of Agreement, between the Company and Osprey Maritime
                    Limited, dated February 1, 2001 (incorporated by reference
                    to Exhibit 10.25 to the Company's Registration Statement on
                    Form F-1 (SEC Registration No. 333-13128))

          4.26      Form of Memorandum of Agreement, between the Company and
                    Osprey Maritime Limited, to purchase the tanker Petrobulk
                    Pollux (incorporated by reference to Exhibit 10.26 to the
                    Company's Registration Statement on Form F-1 (SEC
                    Registration No. 333-13128))

          4.27      Memorandum of Agreement, between the Company and Osprey
                    Maritime Limited, to purchase the tanker Petrobulk Sirius
                    (incorporated by reference to Exhibit 10.27 to the Company's
                    Registration Statement on Form F-1 (SEC Registration No.
                    333-13128))

          4.28      Memorandum of Agreement, between the Company and Osprey
                    Maritime Limited, to purchase the tanker Osprey Lyra
                    (incorporated by reference to Exhibit 10.28 to the Company's
                    Registration Statement on Form F-1 (SEC Registration No.
                    333-13128))

          4.29      Memorandum of Agreement, between the Company and Osprey
                    Maritime Limited, to purchase the tanker Osprey Altair
                    (incorporated by reference to Exhibit 10.29 to the Company's
                    Registration Statement on Form F-1 (SEC Registration No.
                    333-13128))

          4.30      Memorandum of Agreement, between the Company and Osprey
                    Maritime Limited, to purchase the tanker Petrobulk Power
                    (incorporated by reference to Exhibit 10.30 to the Company's
                    Registration Statement on Form F-1 (SEC Registration No.
                    333-13128))

          4.31      Memorandum of Agreement, between the Company and Osprey
                    Maritime Limited, to purchase the tanker Petrobulk Progress
                    (incorporated by reference to Exhibit 10.31 to the Company's
                    Registration Statement on Form F-1 (SEC Registration No.
                    333-13128))

          4.32      Memorandum of Agreement, between the Company and Osprey
                    Maritime Limited, to purchase the tanker Petrobulk Cougar
                    (incorporated by reference to Exhibit 10.32 to the Company's
                    Registration Statement on Form F-1 (SEC Registration No.
                    333-13128))

          4.33      Memorandum of Agreement, between the Company and Osprey
                    Maritime Limited, to purchase the tanker Petrobulk Jaguar
                    (incorporated by reference to Exhibit 10.33 to the Company's
                    Registration Statement on Form F-1 (SEC Registration No.
                    333-13128))

          4.34      Memorandum of Agreement, between the Company and Osprey
                    Maritime Limited, to purchase the tanker Petrobulk
                    Challenger (incorporated by reference to Exhibit 10.34 to
                    the Company's Registration Statement on Form F-1 (SEC
                    Registration No. 333-13128))

          4.35      Memorandum of Agreement, between the Company and Osprey
                    Maritime Limited, to purchase the tanker Petrobulk Cape
                    (incorporated by reference to Exhibit 10.35 to the Company's
                    Registration Statement on Form F-1 (SEC Registration No.
                    333-13128))

          4.36      Interest Rate Swap Agreement, between the Company and Fortis
                    Bank (Nederland) N.V. (incorporated by reference to Exhibit
                    10.36 to the Company's Registration Statement on Form F-1
                    (SEC Registration No. 333-13128))

          8.0       Subsidiaries of the Company (incorporated by reference to
                    Exhibit 21 to the Company's Registration Statement on Form
                    F-1 (SEC Registration No. 333-13128))

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

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

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

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

<PAGE>

                                   SIGNATURES

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

                                                       Stelmar Shipping Ltd.
                                                   ----------------------------
                                                          (Registrant)

Date  May 30, 2004                                By  /s/ Peter Goodfellow
     -------------                                    ---------------------
                                                          Peter Goodfellow
                                                     Chief Executive Officer





02509.0004 #490347