<Page>

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


                                   FORM 20-F/A


(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, 2001

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


             ------------------------------------------------------
                 (Translation of Registrant's name into English)

                               REPUBLIC OF LIBERIA
                 ----------------------------------------------
                 (Jurisdiction of incorporation or organization)

      STATUS CENTER, 2A AREOS STREET, VOULIAGMENI GR 16671, ATHENS, GREECE
      --------------------------------------------------------------------
                    (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

   COMMON STOCK, PAR VALUE $0.02 PER SHARE         NEW YORK STOCK EXCHANGE
   ---------------------------------------         -----------------------

<Page>

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

                                      NONE
                               ------------------
                                (Title of class)

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

                                      NONE
                               ------------------
                                (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.

11,874,750 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/

                                       ii
<Page>

                                TABLE OF CONTENTS

<Table>
<Caption>
                                                                                               Page
                                                                                               ----
<S>         <C>                                                                                <C>
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.........................................32

  ITEM 6.   DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES...........................................38

  ITEM 7.   MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS....................................43

  ITEM 8.   FINANCIAL INFORMATION................................................................44

  ITEM 9.   THE OFFER AND LISTING................................................................44

  ITEM 10.  ADDITIONAL INFORMATION...............................................................45

  ITEM 11.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK...........................56

  ITEM 12.  DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES...............................57

  ITEM 13.  DIVIDEND ARREARAGES AND DELINQUENCIES................................................57

  ITEM 14.  MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS.........58

  ITEM 15.  RESERVED.............................................................................58

  ITEM 16.  RESERVED.............................................................................58

  ITEM 17.  FINANCIAL STATEMENTS.................................................................58

  ITEM 18.  FINANCIAL STATEMENTS.................................................................58

  ITEM 19.  EXHIBITS...........................................................................II-1
</Table>

                                       iii
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            CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

         Matters discussed in this annual report may constitute forward-looking
statements. 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. 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 charterhire rates and vessel values, changes in demand
in the shipping market, including the effect 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, potential liability from pending or future litigation,
general domestic and international political conditions, potential disruption of
shipping routes due to accidents or political events, and other important
factors described from time to time in the reports filed by us with the
Securities and Exchange Commission, or SEC.

                                       iv
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                                     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 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 statement and notes thereto
included elsewhere within this document.

                                        1
<Page>

                 SELECTED CONSOLIDATED FINANCIAL AND OTHER DATA

     (IN THOUSANDS OF U.S. DOLLARS EXCEPT PER SHARE, PER DAY AND FLEET DATA)

<Table>
<Caption>
                                                                        AUDITED
                                                                 YEAR ENDED DECEMBER 31,
                                          -------------------------------------------------------------------
                                             1997          1998          1999          2000          2001
                                             ----          ----          ----          ----          ----
<S>                                       <C>           <C>           <C>           <C>           <C>
STATEMENT OF INCOME DATA:
Revenue from vessels...................   $   33,678    $   56,783    $   68,539    $   68,575    $   111,198
Revenue from vessels, net..............       32,683        55,255        66,790        66,704        108,647
Voyage expenses........................        3,928         3,106         5,194         5,450          8,743
Vessel operating expenses (1)..........        8,398        12,126        15,188        14,959         23,093
Depreciation (2).......................        6,417        12,089        15,425        15,441         21,755
Amortized deferred drydocking and
  establishment costs (3)..............          455           867           754         1,116            960
General and administrative expenses....        2,126         2,490         2,939         2,876          4,583
Impairment loss (4)....................            0             0         6,500             0              0
Operating income.......................       11,359        24,577        20,790        26,862         49,513
Interest and finance costs, net........        6,308        11,937        13,025        15,428         15,534
                                          ----------    ----------    ----------    ----------    -----------
Net income.............................   $    5,147    $   12,414    $    7,794    $   11,235    $    34,013
                                          ----------    ----------    ----------    ----------    -----------

BALANCE SHEET DATA (AT END OF PERIOD):
Cash and cash equivalents............     $   10,456    $   13,331    $   14,741    $   26,464    $    34,417
Total assets.........................        197,048       293,785       317,825       299,215        592,183
Long term debt, including current
  portion............................        149,558       215,720       231,181       200,792        367,194
Total stockholders equity............         41,390        70,755        78,415        89,566        209,448

OTHER FINANCIAL DATA:
EBITDA (5)...........................     $   18,231    $   37,533    $   43,483    $   43,434    $    72,307
Net cash provided by operating
  activities.........................         13,049        27,549        25,033        30,529         50,233
Net cash from (used in) investing
  activities.........................        (88,057)     (106,877)      (38,833)       11,872       (295,462)
Net cash from (used in) financing
  activities.........................         76,532        82,203        15,210       (30,678)       253,182

FLEET DATA:
Average number of vessels............            5.8           9.6          11.8          12.0           17.6
Number of vessels (at end of period).            8.0          11.0          12.0          11.0           22.0
Average age of fleet, excluding
  newbuildings (in years) (6)........            7.8           6.6           6.6           6.9            8.1

Total operating days (7).............          2,001         3,419         4,224         4,282          6,110
Total available ship days (8)........          2,111         3,501         4,324         4,370          6,418
Average daily revenue earned (8).....     $   13,622    $   14,895    $   14,245    $   14,017    $    15,566
TCE per vessel per day (9)...........         14,868        15,700        14,995        14,743         16,769

Vessel operating expenses per ship
  per day (1)........................     $    3,978    $    3,464    $    3,512    $    3,423    $     3,598
Vessel overhead burden per ship
  per day (10).......................          1,007           711           680           658            714

Operating cash flow per ship per day
  (11)...............................          8,636        10,721        10,056         9,939         11,253

PER SHARE DATA:

Earnings per share, basic (4)             $     1.37    $     3.31    $     2.08    $     2.94    $      3.31
Earnings per share, fully diluted               1.37          3.31          2.08          2.94           3.29
Weighted average number of shares, basic   3,750,000     3,750,000     3,750,205     3,824,750     10,290,028
Weighted average number of shares,
  fully diluted                            3,750,000     3,750,000     3,750,205     3,824,750     10,353,810
Dividends per share..................              0             0             0             0              0
</Table>

                           See footnotes on next page

                                        2
<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 a useful life of 25 years from the date of its
     delivery from the builder.

(3)  We defer costs associated with periodic drydockings and amortize them over
     the period to the next scheduled drydocking, usually two and one-half
     years. We amortize establishment costs over five years.

(4)  We recognized impairment in 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 operating income plus income taxes and non-cash
     charges, including depreciation, amortization and provision for
     impairment. EBITDA reflects cash available to meet our debt service,
     capital expenditures, drydocking costs and other non-operating cash needs.
     You should not consider only EBITDA or think of it as a substitute for net
     income (loss), cash flows from operations or other measures of liquidity
     determined in accordance with 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.

(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 the builder, weighted by the
     vessel's dwt in proportion to the total dwt of the fleet for each
     respective year.

(7)  Total operating days is the total number of days in a given period that we
     own vessels less the total number of off-hire days. We define off-hire days
     as days spent on repairs, drydockings 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 ship 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 dollars 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 shareholders 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.

                                        3
<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:

         -  demand for oil and oil products;

         -  global and regional economic conditions;

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

         -  changes in seaborne and other transportation patterns.

         The factors that influence the supply of tanker capacity include:

         -  the number of newbuilding deliveries;

         -  the scrapping rate of older vessels; and

         -  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.

                                        4
<Page>

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

         -  general economic and market conditions affecting the tanker
            industry;

         -  competition from other shipping companies;

         -  types and sizes of vessels;

         -  other modes of transportation;

         -  cost of newbuildings;

         -  governmental or other regulations;

         -  prevailing level of charter rates; and

         -  technological advances.

         When each of our tankers reach 15 years of age we consider carefully
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 the only
three of our tankers that reached 15 years of age over the past year. An
additional eight tankers in our current fleet will reach 15

                                        5
<Page>


years of age in the next three years. If for any reason we sell tankers at a
time when tanker prices have fallen, the sale price may be less than the
vessel's carrying amount on our financial statements, with the result that we
shall 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

         Market values of our tankers have generally declined during the past
year. If the market value of our fleet, calculated on a charter free basis,
declines below stated levels, 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
March 31, 2002, we had total indebtedness of $411.7 million and a ratio of
indebtedness to total capital of 65.4%. 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 operating and financial restrictions on us.
These restrictions may limit our ability to:

         -  incur additional indebtedness;

         -  create liens on our assets;

         -  sell capital stock of our subsidiaries;

         -  make investments;

         -  engage in mergers or acquisitions;

         -  pay dividends and make capital expenditures;

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

         -  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. If we cannot obtain the necessary permission or waivers
from our lenders, we may be prohibited from taking actions that are in our best
interest.

                                        6
<Page>

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. Twenty two of the 27
tankers in our current fleet, including the two under construction, are
contractually committed to time charters, with the remaining terms of these
charters ranging from three months to five years. The two additional Handymax
tankers and the two newly-built Panamax tankers that we have agreed to purchase
and seven of the tankers in our total fleet will be completing their current
time charters during 2002 and will be available either for entry into new
time charters or for trading in the spot market during the balance of 2002. The
spot market for tankers has deteriorated markedly since the first quarter of
2001. If such deterioration continues or the market does not improve, that
could substantially adversely affect our earnings as vessels complete their
current time charters. Currently, four of our tankers are trading on the spot
market. If we cannot recharter 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 2001, approximately 45.9% of our revenue derived
from three charterers and in 2000, approximately 58.0% of our revenue for our
fleet derived from four charterers. Nine of the tankers in our current fleet
operate under time charters with Vitol, which provided 18.5% of our revenues
in 2001, Adam Maritime Corporation, a subsidiary of Glencore International AG,
which provided 14.6%, and SK Shipping of South Korea, which provided 12.8%.
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.

                                        7
<Page>

IF WE FAIL TO MANAGE OUR PLANNED GROWTH PROPERLY, WE MAY NOT BE ABLE TO
SUCCESSFULLY EXPAND OUR MARKET SHARE

         In 2001, we more than doubled the number of vessels in our fleet. Our
fleet expansion will continue with the purchase of the two additional modern
secondhand Handymax tankers and the two newly-built Panamax tankers upon their
delivery from the shipyards. In addition to depending on our ability to procure
funding, our growth will also depend on our ability to:

         -  identify and consummate acquisitions or joint ventures;

         -  integrate any acquired business successfully with our existing
            operations;

         -  identify new markets;

         -  manage expansion; and

         -  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, Bruce Ogilvy, our Marketing Director, Kostas
Manoudakis, our Technical Director, and George Dienis, our Operations Director.
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 700 seafarers and 46 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.

                                        8
<Page>

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, 2001, our fleet included
11 vessels more than 10 years of age. The two Handymax tankers that we have
agreed to purchase were built in 1998. We are taking delivery of both of the
newly-built Panamax tankers directly from the shipyard. 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 carrying amount at that time.

DAMAGE TO OUR CHAIRMAN'S REPUTATION MAY AFFECT THE PRICE OF OUR STOCK

         While our Chairman and significant shareholder, Stelios Haji-Ioannou,
is not involved with our day-to-day management, our public image is very closely
associated with him. Mr. Haji-Ioannou is involved with other businesses, some of
which have a high public profile. If his personal or business reputation were to
be damaged, even once he is not our Chairman or if the event does not involve
us, that could have a material adverse effect on the market price of our stock.
Mr. Haji-Ioannou has twice been acquitted of manslaughter charges in Italy
relating to a maritime accident involving a different shipping company, but the
prosecution has appealed the decision. A conviction could adversely affect our
stock price. It was announced on October 11, 2001, that Mr. Haji-Ioannou will
not stand for reelection to the Board of Directors at the 2002 annual meeting of
shareholders and that Nicholas Hartley, our new Deputy Chairman, would be
appointed chairman if Mr. Hartley is reelected to the Board of Directors at the
annual meeting pending subsequent approval by the Board of Directors.

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:

         -  marine disaster;

         -  piracy;

         -  environmental accidents;

         -  cargo and property losses or damage; and

                                        9
<Page>

         -  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. 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 pay a lot of money to have the arrest
lifted.

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

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

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

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

         We are an international company and primarily conduct our operations
outside 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. 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

                                       10
<Page>

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.

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

         Under the United States Internal Revenue Code of 1986, or the Code,
a portion of the gross shipping income of a vessel owning or chartering
corporation, such as ourselves and our subsidiaries, may be subject to a 4%
United States federal income tax on 50% of 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 chairman, Stelios Haji-Ioannou, and his brother and sister have combined
holdings of approximately 35% 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

                                       11
<Page>

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
20% 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, 2001, 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, 2001, we have interest
rate cap and swap agreements expiring between 2005 and 2006 for approximately
28% 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
stockholders of a corporation incorporated in a U.S. jurisdiction which has
developed a substantial body of case law.

                                       12
<Page>

ITEM 4.  INFORMATION ON THE COMPANY

OUR FLEET

         We are Stelmar Shipping Ltd., an international tanker company. Our
total fleet, including the four tankers that we have agreed to purchase, is as
follows:

<Table>
<Caption>
                         YEAR                                   SISTER
        NAME             BUILT       DWT       HULL TYPE(1)     SHIPS       CHARTER TYPE
---------------------   -------   ---------   --------------   --------  ----------------------

HANDYMAX
--------
<S>                       <C>     <C>               <C>            <C>    <C>
AMBERMAR                  2002       35,700         DH             A      TC to Aug. 2003(2)
PETROMAR                  2001       35,768         DH             A      TC to Jan. 2003
NEW HANDYMAX #1           1998       47,000         DH             B      Spot Market
NEW HANDYMAX #2           1998       47,000         DH             B      Spot Market
RIMAR                     1998       45,999         DH             C      TC to Aug. 2002
LUXMAR                    1998       45,999         DH             C      TC to Aug. 2003
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. 2003
FULMAR                    1989       39,521         DS             D      TC to Jul. 2002
ERMAR                     1989       39,977         DS             F      TC to Dec. 2003
PRIMAR                    1988       39,521         DS             D      TC to Nov. 2002
ALLENMAR                  1988       41,570         DS                    TC to Jul. 2002
CAMAR                     1988       46,100         DH             E      TC to Sep. 2002
JAMAR                     1988       46,100         DH             E      Spot Market
PROMAR                    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      TC to Nov. 2002
                                  ------------
SUBTOTAL DWT                        806,470

PANAMAX
-------
NEW PANAMAX #1*+          2002       69,697         DH             H      TC (5 yrs. from del.)
NEW PANAMAX #2*+          2002       69,697         DH             H      TC (5 yrs. from del.)
RUBYMAR*+                 2002       69,697         DH             H      TC (2 yrs. from del.)
ROSEMAR*+                 2002       69,697         DH             H      TC (2 yrs. from del.)
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 Jan. 2003
POLYS*                    1993       68,623         DH             I      TC to Dec. 2002
                                  ------------
SUBTOTAL DWT                        555,428

AFRAMAX
-------
JACAMAR                   1999      104,024         DH             J      TC to Feb. 2006
TAKAMAR                   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 Jan. 2003
                                  ------------
SUBTOTAL DWT                        399,934

                                  ------------
TOTAL DWT                         1,761,832
</Table>

AVERAGE AGE OF FLEET (3)    6.5 years

        *  Tankers that can only carry dirty cargoes, namely crude oil.

        +  Tankers currently under construction and scheduled for delivery in
           the second quarter of 2002.

    (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) Average age of fleet calculated on basis of dwt, including the
        newbuildings to be delivered in the second quarter of 2002.

                                       13
<Page>

 GENERAL

         We are developing our fleet with a primary focus on:

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

         -  Panamax tankers, which primarily transport crude oil.

         We presently own and operate our current fleet of 27 tankers with a
total cargo carrying capacity of 1,528,438 dwt, which includes:

         -  17 Handymax tankers;

         -  6 Panamax tankers; and


         -  4 Aframax tankers.


         In addition, we have agreements with two separate sellers to
acquire, during the second quarter of 2002 for a total purchase price of
$123.1 million:


         -  2 modern secondhand Handymax tankers; and


         -  2 newly-built Panamax tankers on their delivery from the shipyard.

         We are also negotiating with a South Korean shipyard for the
construction of three additional Panamax tankers, all of which would be sister
ships to four of the Panamax tankers in our current fleet and the two
newly-built Panamax tankers that we have agreed to buy upon their delivery from
that shipyard. We intend to purchase additional tankers depending on market
conditions.

         We own one of the world's youngest and, due to the highly fragmented
market, largest, Handymax 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 three years, we have expanded the size and carrying capacity of
our current fleet from 826,501 dwt to 1,528,438 dwt, and the average age of
our current fleet by dwt as of March 31, 2002 was 7.3 years as compared to
approximately 13.0 years for the world tanker fleet. With the addition of the
two Handymax tankers and two newly-built Panamax tankers, the total cargo
carrying capacity of our fleet will increase to 1,761,832 dwt and the average
age of our total fleet by dwt as of March 31, 2002 is 6.5 years.


         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 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, and Citgo. Currently, our most
significant customers, and the percentage of revenues we derived from them in
2001 include :


         -  Vitol, 18.5%;

                                       14
<Page>

         -  Adam Maritime Corporation, a subsidiary of Glencore International
            AG, 14.6%; and

         -  SK Shipping of South Korea, 12.8%.

         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 75% of our net
revenues in 2001 from time charters. We have five-year time charters for the two
newly-built Panamax tankers we have agreed to purchase on their delivery from
the shipyards scheduled for the second quarter of 2002. While we expect
initially to operate in the spot market the two modern secondhand Handymax
tankers that we have agreed to acquire, in line with our strategy of employing
our tankers on a time charter basis, we intend to employ those vessels on a time
charter basis as market conditions permit.

         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:

         -  high fragmentation among vessel owners;

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

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

         -  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:

         -  operate a modern, well-maintained fleet;

         -  operate a significant fleet in selected markets;

         -  capitalize on our reputation for high operating standards;

         -  achieve high utilization rates through emphasis on time charters;

         -  maintain low-cost, highly efficient operations; and

                                       15
<Page>

         -  continue long-term relationships with major end users.

OPERATE A MODERN, WELL-MAINTAINED FLEET. We believe that we operate one of
the world's most modern and well-maintained tanker fleets in our size
classes. We intend to continue to operate a young fleet through selective
acquisitions of newly-built and modern secondhand Handymax and Panamax
tankers. As of March 31, 2002, our tanker fleet has an average age by dwt of
only 7.3 years as opposed to 13.0 years for the world fleet. 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.

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. As compared to larger tankers, Handymax and Panamax tankers have
more flexibility in terms of ports they serve and cargo carrying capacity. Our
focus provides us with the further advantage of operating a relatively large
fleet in the highly fragmented markets for these tanker sizes. These sectors
also present us with opportunities to develop a significant presence and to
build long-term relationships with charterers. By operating a significant fleet
in these selected market segments, we believe that we have enhanced our
attractiveness to charterers by offering a variety of tankers, including sister
ships, to meet a charterer's diverse scheduling needs. The availability of
sister ships, which means they are substantially identical and built by the same
manufacturer, allows us to offer charterers flexibility in placing their cargoes
over a period of time. Having sister vessels also facilitates cost control by
allowing the purchase of common spare parts, the use of common maintenance
schedules and operating costs comparisons between sister vessels.

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. We have focused on safe,
environmentally conscious vessel operations since our inception, as confirmed by
the fact that we were among the first tanker operators to be certified to be in
compliance with ISO-9002, which are ship management standards promulgated by the
International Organization for Standardization, also known as ISO. ISO-9002
contains principles of ship management relating to areas such as safety,
personnel training, pollution prevention and customer relations. After a company
has implemented a management system that addresses these requirements, it can
apply to an accreditation body, such as the American Bureau of Shipping, for
certification.

ACHIEVE HIGH UTILIZATION RATES THROUGH EMPHASIS ON TIME CHARTERS. By emphasizing
time charters, we have aimed to minimize downtime for our vessels. This emphasis
also helps us to maintain consistent cash flows. We believe that we can maximize
returns without undue risk in the current market by increasing the number of
vessels deployed on spot charters in the near future and by continuing to
operate in the less volatile Handymax and Panamax tanker market. As we increase
the number of spot charters, we will continue to explore opportunities to enter
into time charters at attractive rates and for appropriate periods of time.

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. We also minimize costs associated with off-hire periods through
an active preventative maintenance program both on-shore and at sea, employing
qualified officers and crew and continually training our personnel to

                                       16

<Page>

ensure reliable vessel operations. By maintaining a modern fleet, we believe we
increase our efficiency and achieve lower:

         -  costs associated with special surveys;

         -  operating expenses, including repairs; and

         -  costs associated with complying with governmental regulations
            applicable to older vessels.

In addition, we reduce overhead costs through investing in technology in order
to create a "paperless" office for internally generated documents and files,
thereby reducing the number of office staff personnel needed to manage the
fleet.

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. We regularly
exchange data with them in such items as:

         -  safety standards;

         -  operating standards;

         -  operating costs;

         -  recruiting policies;

         -  crew turnover; and

         -  purchasing practices.

We have done business with many of these major end-users on a repeat basis, and
these companies have previously vetted and chartered our vessels.

FLEET CHARACTERISTICS

         The tankers in our current fleet, including the two newbuildings
currently under construction and scheduled to be delivered in the second
quarter of 2002, have a total cargo capacity of 1,528,438 dwt. As of December
31, 2001, the average age of our current fleet by dwt was 7.3 years, while,
according to industry sources, the average age of the world's tanker fleet
was approximately 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. We have ten groups of sister ships. In addition, two of
our newbuildings under construction by Daewoo Heavy Industries are sister ships
with the two new Panamax newbuildings that were delivered this year.

         The vessels in our current fleet that are sister ships are as follows:

         -  AMBERMAR and PETROMAR;

         -  The two new Handymaxs tankers delivered in the second quarter of
            2002;

         -  POLYS and CLELIAMAR;

                                       17
<Page>

         -  RUBYMAR, ROSEMAR, PEARLMAR, JADEMAR, and the two new Panamax tankers
            to be delivered in the second quarter of 2002;

         -  JACAMAR and TAKAMAR;

         -  RIMAR, LUXMAR, LIMAR, ALMAR, and NEDIMAR;

         -  FULMAR and PRIMAR;

         -  CAMAR and JAMAR;

         -  ERMAR and PROMAR; and

         -  COLMAR and CITY UNIVERSITY.

         The two modern secondhand Handymax tankers that we have agreed to
     acquire are sister ships. The two newly-built Panamax tankers we have also
     agreed to acquire on their delivery from the shipyard are sister ships with
     the RUBYMAR, ROSEMAR, PEALMAR and JADEMAR. All of the three newbuilding
     Panamax tankers that we are currently negotiating to have constructed will
     be sister ships to the AMBERMAR and PETROMAR.


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 75% of our revenue in 2001 was
derived from time charters. Twenty-five of our vessels (including those
currently under construction) operate on time charters with expiration dates
from March 2002 through June 2007 and four trade in the spot market. We have
arranged for time charters for the newbuildings scheduled for delivery in 2002.
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 2001, approximately 45.9% of our revenue for our fleet was derived from
the following three charterers:

         -  Vitol;

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

         -  SK Shipping of South Korea.

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

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sell a vessel. Virtually all of our technical management functions are conducted
through our office in Greece, including activities such as:

         -  supervising the maintenance and general efficiency of the vessels;

         -  crewing;

         -  arrangement of bunkers;

         -  arrangement and supervision of drydocking and repairs;

         -  alterations and the upkeep of the vessels;

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

         -  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 a staff headed by a former Fleet
Operations Manager of Esso Petroleum Co. Ltd., the marine affiliate of
ExxonMobil, and a former General Manager of Chartering and Sale and Purchase
Division of Shell International Marine. 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:

         -  major oil companies; and

         -  independent shipowners.

         They provide transportation services for end users such as:

         -  oil companies;

         -  oil traders;

         -  petroleum product producers; and

         -  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

                                       19
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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:

         -  conduct a physical inspection;

         -  obtain a completed "vessel particulars questionnaire;"

         -  obtain Ship Inspection Report Program reports;

         -  review owner audits;

         -  obtain feedback from other charterers;

         -  review market intelligence and casualty data; and

         -  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:

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

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

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

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<Page>

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

         -  Panamax tankers, with a cargo carrying capacity of approximately
            50,000 to 80,000 dwt;

         -  Handymax tankers, with a cargo carrying capacity of approximately
            30,000 to 50,000 dwt; and

         -  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.

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<Page>

    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:

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

         -  oil prices;

         -  environmental concerns;

         -  climate;

         -  competition from alternative energy sources; and

         -  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

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

         -  the number of newbuildings on order and being delivered;

         -  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

         -  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.

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<Page>

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

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

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

ENVIRONMENTAL REGULATION -- IMO

         In April 2001, the International Maritime Organization, or IMO, the
United Nations' agency for maritime safety, revised its regulations governing
tanker design and inspection requirements. The proposed regulations, which are
expected to become effective September 2002 provided they are ratified by the
IMO member states, provide for a more aggressive phase-out of single hull oil
tankers as well as increased inspection and verification requirements. They
provide for the phase-out of most single hull oil tankers by 2015 or earlier,
depending on the age of the vessel and whether or not the vessel complies with
requirements for protectively located segregated ballast tanks. Segregated
ballast tanks use ballast water that is completely separate from the cargo oil
and oil fuel system. Segregated ballast tanks are currently required by the IMO
on crude oil tankers constructed after 1983. The changes, which will likely
increase the number of tankers that are scrapped beginning in 2004, are intended
to reduce the likelihood of oil pollution in international waters.

         The proposed regulation identifies three categories of tankers based on
cargo carrying capacity and the presence or absence of protectively located
segregated ballast tanks. Under the new IMO regulations, single-hull oil tankers
with carrying capacities of 20,000 dwt and above carrying crude oil, fuel oil,
heavy diesel oil or lubricating oil as cargo, and of 30,000 dwt and above

                                       23
<Page>

carrying other oils, which do not comply with IMO requirements for protectively
located segregated ballast tanks will be phased out no later than 2007.
Single-hull oil tankers with similar carrying capacities which do comply with
IMO requirements for protectively located segregated ballast tanks are to be
phased out by 2015, depending on the date of delivery of the vessel. All other
single-hull oil tankers with carrying capacities of 5,000 dwt and above and not
falling into one of the above categories will also be phased out by 2015,
depending on the date of delivery of the vessel.

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

         The ISM Code requires that vessel operators obtain a safety management
certificate for each vessel they operate. This certificate evidences compliance
by a vessel's management with code requirements for a safety management system.
No vessel can obtain a certificate unless its manager has been awarded a
Document of Compliance, issued by each flag state or by an appointed
classification society, under the ISM Code. All of our vessels have received
safety management certificates.

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

         The IMO has negotiated international conventions that impose liability
for oil pollution in international waters and a signatory's territorial waters.
Additional or new conventions, laws and regulations may be adopted which could
limit our ability to do business and which could have a material adverse effect
on our business and results of operations.

ENVIRONMENTAL REGULATION--UNITED STATES


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


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

         -  natural resource damages and related assessment costs;

         -  real and personal property damages;

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<Page>

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

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

         -  loss of subsistence use of natural resources.

         OPA limits the liability of responsible parties to the greater of
$1,200 per gross ton or $10 million per tanker that is over 3,000 gross tons.
This is subject to possible adjustment for inflation. OPA specifically permits
individual states to impose their own liability regimes with regard to oil
pollution incidents occurring within their boundaries, and some states have
enacted legislation providing for unlimited liability for discharge of
pollutants within their waters. In some cases, states which have enacted their
own legislation have not yet issued implementing regulations defining tanker
owners' responsibilities under these laws.

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

         -  discharging at the Louisiana Offshore Oil Port, also known as the
            LOOP; or

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

         Currently, one of our tankers, the KLIOMAR, will be required to be
phased out in accordance with OPA on January 1, 2010. Eight of our tankers, the
FULMAR, the PRIMAR, the COLMAR, the CITY UNIVERSITY, the Allenmar, the PROMAR,
the ERMAR and the CAPEMAR will be subject to OPA phase-out on January 1, 2015.

         CERCLA.  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. We believe that we are in substantial compliance with OPA,
CERCLA and all applicable state regulations in the ports where our vessels
will call.

         FINANCIAL RESPONSIBILITY.  OPA 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 OPA. 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 will be required to demonstrate
evidence of financial responsibility for the entire fleet in an amount equal
only to the financial responsibility requirement of the tanker having the
greatest maximum liability under OPA/CERCLA. We have provided requisite
guarantees and received certificates of financial responsibility from the
U.S. Coast Guard for each of our vessels required to have one.

         We insure each of our vessels with pollution liability insurance in the
maximum commercially available amount of $1 billion. A catastrophic spill could
exceed the insurance coverage available, in which event there could be a
material adverse effect on our business.

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         OPA VESSEL RESPONSE PLANS.  Owners or operators of tankers operating
in the waters of the U.S. 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:

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

         -  describe crew training and drills; and

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

         We have obtained vessel response plans approved by the U.S. Coast Guard
for our vessels operating in the waters of the U.S. In addition, the U.S. Coast
Guard has announced it intends to propose similar regulations requiring certain
tanker vessels to prepare response plans for the release of hazardous
substances.

         STATES.  In addition to federal laws and regulations, 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. OPA specifically
permits individual states to impose their own liability regimes with regard
to oil pollution incidents occurring within their boundaries, and many states
have enacted legislation providing for unlimited liability for oil spills.

         Several of our vessels currently carry cargoes to United States waters
regularly and we believe that all of our vessels are suitable to meet OPA
requirements and that they would also qualify for trade if chartered to serve
U.S. ports.

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


ENVIRONMENTAL REGULATION--CLC

         Although the U.S. is not a party to these conventions, many countries
have ratified and follow the liability scheme adopted by the IMO and set out in
the International Convention on Civil Liability for Oil Pollution Damage, 1969,
or CLC. Under this convention, a vessel's registered owner is strictly liable
for pollution damage caused in the territorial waters of a contracting state by
discharge of oil, subject to some complete defenses. Liability is limited to
approximately $270 per gross registered ton or approximately $28.3 million,
whichever is less. If, however, the country in which the damage results is a
party to the 1992 Protocol to the CLC, the maximum liability rises to
approximately $74.9 million. The limit of liability is tied to a unit of account
which varies according to a basket of currencies. The right to limit liability
is forfeited under the CLC where the spill is caused by the owner's actual fault
and under the 1992 Protocol, where the spill is caused by the owner's
intentional or reckless conduct. Vessels trading to states which are party to
this convention must provide evidence of insurance covering the limited
liability of the owner. In jurisdictions where the CLC has not been adopted,
various legislative schemes or common law govern, and liability is imposed
either on the basis of fault or in a manner similar to the CLC.

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ENVIRONMENTAL REGULATION EU

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

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

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

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

         -  Single-hull oil tankers larger than 20,000 dwt in which the cargo
            tank area is partly protected by segregated ballast tank. This
            category is proposed to be phased out by 2015.

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

         In addition, Italy has announced a ban of single hull crude oil tankers
over 5,000 dwt from most Italian ports, effective April 2001. This ban will be
placed on oil product carriers, effective December 31, 2003. 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.

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:

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         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 one-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 second hand 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

                                       28
<Page>

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

                                       29
<Page>

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.

    PROCEEDINGS AGAINST STELIOS HAJI-IOANNOU NOT CONNECTED WITH US

         Stelios Haji-Ioannou, our founder and Chairman of the Board of
Directors, faces civil actions and criminal charges relating to casualties and
oil pollution relating to the sinking of the vessel the M/T HAVEN on April 11,
1991. The vessel was managed by Troodos Shipping Company Limited, which was
owned by Loucas Haji-Ioannou, Stelios Haji-Ioannou's father. Stelios
Haji-Ioannou, who was 24 at the time, was working for and was a director of
Troodos. Charges, including manslaughter, assisting in attempted extortion and
attempting to bribe witnesses, were filed against Stelios Haji-Ioannou, his
father and another director of Troodos. Each of the defendants was acquitted of
the criminal charges at trial in November 1997, which the court of appeal upheld
on appeal. The prosecutor filed an appeal on October 28, 2000 with the Italian
Court of Cassation, which is the Italian Supreme Court. Mr. Haji-Ioannou has
advised us that he intends to contest the appeal vigorously. Most of the civil
actions arising out of the sinking of the M/T HAVEN have been settled. Civil
actions associated with the M/T HAVEN incident have been settled other than loss
of income claims brought in April 1997 aggregating approximately $15 million.
The claims were initially dismissed, but were appealed. The hearing for the
appeal is scheduled for April 17, 2002.


         Stelios Haji-Ioannou faced action in Greece arising out of
advertisements placed by easyJet plc, a U.K. company he is chairman of, in an
Athens newspaper on October 11 and October 18, 1998. This case has been
officially time barred before the Public Prosecutor of the Athens Court of
Misdemeanors and has been dismissed for statute of limitations reasons.


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.

                                       30
<Page>

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 400 square meters and is leased on a month to month basis at a
rate of $80,000 per year from an unaffiliated third party. The London office
comprises approximately 100 square meters and is leased for a term of six years
from November 27, 1997 at a rate of 17,185 British pounds per year from an
unaffiliated third person.

         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".

                                       31
<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 existing fleet
consists of 27 vessels including two Panamax tanker newbuildings under
construction in South Korea which are scheduled to be delivered during the
second quarter of 2002. The total cargo carrying capacity of the current fleet
is approximately 1.5 million dwt.

         The net proceeds of our initial public offering (including the
over-allotment), approximately $89 million, were primarily used to fund the
equity portion of the acquisition of 10 Handymax tankers from Osprey Maritime
Limited and the acquisition of two newbuilding Handymax tankers. The total cost
of the acquisitions was approximately $278 million.

         During the year ended December 31, 2001, approximately 75% of the
Company's net revenue (revenue from vessels, minus voyage expenses) was
derived from time charter contracts as opposed to 80% 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 years ended December 31, 2001 and 2000 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. The bulk of the acquired fleet from
Osprey Maritime Limited will trade under time charters. In 2001, we took
delivery of one newly-built Handymax tanker which was placed on an 18-month time
charter. During the first quarter of 2002, we took delivery of an additional
newly-built Handymax tanker which was also placed on an 18-month time charter.
More specifically, 77% and 43% of the fleet's capacity in terms of operating
days for 2002 and 2003, respectively, are covered by time charters. In line with
our strategy of employing our tankers on a time charter basis, we intend to
employ the two additional modern secondhand Handymax tankers that we have agreed
to acquire, on a time charter basis as market conditions permit. We have
five-year time charters for the two newly-built Panamax tankers we have agreed
to purchase on their delivery from the shipyard, also scheduled for the second
quarter of 2002. As with the additional Handymax tankers, we will attempt to
place under time charter, the three additional Panamax newbuildings that we may
have constructed.

         The tanker industry has historically been cyclical, experiencing
volatility in profitability and asset values resulting from changes in the
supply and demand of vessel capacity. During the third quarter of 2001, tanker
charter rates declined from the peak reached during the first quarter of that
year, mainly as a result of the OPEC production cuts announced in January, March
and September 2001 as well as fewer imports into the United States.
Notwithstanding the general market decline, the charter rates we achieved during
2001were significantly better than those of the previous year.

                                       32
<Page>

RECENT DEVELOPMENTS

     AGREEMENTS TO PURCHASE TWO MODERN SECONDHAND HANDYMAX TANKERS AND TWO
NEWLY-BUILT PANAMAX TANKERS

     We have contracted with two separate sellers to purchase a total of two
modern secondhand Handymax tankers and two newly-built Panamax tankers on
their delivery from the shipyard at a total price of $123.1 million, to be
funded by a portion of the net proceeds of this offering and approximately
$80 million in long-term secured financing that we will need to negotiate.
Each of the Handymax product tankers has a cargo carrying capacity of
approximately 47,000 dwt and was built in 1998. Each of the newly-built
Panamax tankers has a cargo carrying capacity of 69,697 dwt. Delivery of
these tankers from the shipyard is scheduled for May and June 2002,
respectively.

         During the first quarter of 2002, we took delivery of two newly-built
Panamax tankers that were placed on two-year time charters, and we expect
delivery of the additional two Panamax newbuildings during the second quarter of
2002. These Panamax newbuildings have also been placed on two-year time charters
that will commence on their delivery from the shipyard.

   INTEREST RATE SWAPS


         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 Interbank Offering Rate, or LIBOR, of 7%. For this
coverage the Company collected in 1999 an amount of $347,000, which is
included in other, net in the accompanying 1999 consolidated financial
statements. Since then, as LIBOR has not exceeded 7%, there was no charge for
the Company with respect to this interest rate cap agreement.


         On October 26, November 30, and December 20, 2000 the Company concluded
three interest rate swap agreements (the first two with effective dates of
December 11, 2000 and the third with effective date 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 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 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.

         The remaining nominal amount of all these interest rate swap
agreements as of December 31, 2001 was $86.7 million. The annual amounts to
mature over the next five years are as follows:

            -  2002 -- $8.4 million

            -  2003 -- $8.4 million

            -  2004 -- $18.4 million

            -  2005 -- $42.2 million

            -  2006 -- $9.3 million.

                                       33
<Page>

CRITICAL ACCOUNTING POLICIES

        IMPAIRMENT

        The U.S. Financial Accounting Standards Board issued SFAS 121
"Accounting for the Impairment of Long-lived Assets and for Long-lived Assets to
be Disposed of," which requires that long-lived assets and certain identifiable
intangibles held and used or to be disposed of by an entity be reviewed for
impairment whenever events or changes in circumstances indicate that the
carrying amount of the assets may not be recoverable. An impairment loss for an
asset held for use should be recognized, when the estimate of undiscounted cash
flows, excluding interest charges, expected to be generated by the use of the
asset is less than its carrying amount. Measurement of the impairment loss is
based on the fair value of the asset.

        In 1999, our review of the vessels' carrying amounts in connection with
their expected recoverable amounts and the estimated undiscounted cash flows
from future operations indicated that the carrying amount of the LOUCAS exceeded
its expected recoverable amount. Accordingly, we decided to recognize an
impairment loss of $ 6,500, based upon a calculation of discounted expected cash
flows, which was separately reflected in the 1999 consolidated statement of
income. In December 2000, the LOUCAS was sold for $ 12,900 and we realized a
gain of $ 32, which has separately been reflected in the 2000 consolidated
statement of income. Estimates of cash flows from future operations is made
based upon management's expectations of future market conditions over the life
of the various ships. For the years ended December 31, 2000 and 2001 no
impairment loss was recognized.

        ACCOUNTING FOR DRY DOCKING

        Dry-docking costs are carried out approximately every two and a half or
five years, as applicable, depending on the vessel's age and typically 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. These costs are deferred and amortized over a period to the
next dry-docking. 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, which is 25 years.

        ACCOUNTING FOR REVENUE AND EXPENSES

        Freight and hire revenue and related voyage expenses, as well as
applicable address and brokerage commissions, are recorded on a pro rata basis
over the period of the voyage or time charters. Vessel operating expenses are
accounted for on an accrual basis. Unearned revenue represents revenue
applicable to periods after December 31 of each year.

        We reviewed the criteria set forth in Staff Accounting Bulletin ("SAB")
101, Revenue Recognition, issued in November 1999, by the United States
Securities and Exchange Commission ("SEC"), which presents the SEC's position in
relation to when it is appropriate for a registrant to recognize revenue and
believe our policy for revenue recognition to be in accordance with SAB 101.

        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. Provision
has been made for such estimated future calls, which is included in Accrued
Liabilities in the consolidated balance sheets.

        P&I Clubs, which provide insurance for accidents, pollution, crew, etc.,
assess their results each year and seek supplementary amounts from their members
to cover any shortfall within the previous three years. Indications of likely
supplementary calls, which are expressed as percentages of the known basic
charge for the year, are notified to P&I Club members at various stages during
the year and provide a reasonable basis for an accrual, although final actual
calls for any given year may differ substantially from what is estimated.

                                       34
<Page>

YEAR ENDED DECEMBER 31, 2001 VERSUS YEAR ENDED DECEMBER 31, 2000

RESULTS OF OPERATIONS

         The Company recorded a net income of $34.0 million, or $3.31 per
share, basic, in the year ended December 31, 2001, compared to net income of
$11.2 million, or $2.94 per share, basic, in the year ended December 31,
2000. The results for the current year reflect an improvement in tanker
charter rates and the expansion of the fleet.

         NET REVENUE. The Company's net revenue, on a time charter basis
(revenue from vessels, minus voyage expenses), increased 62.4% to $102.5
million in the current year as compared to $63.1 million last year. This
increase is mainly due to the expansion of the fleet as well as to the
increase of almost 13.8% in the Company's average TCE rate in the current
year to $16,769 from $14,743 in the last year, notwithstanding the decrease
in the fleet's utilization to 95.2% in 2001 from 98.0% in 2000.

         In particular, the average TCE rate of the Company's Handymax fleet in
the current year increased 29.9% to $16,506 from $12,705 in 2000. The Handymax
fleet experienced 160 off-hire days during 2001 mainly due to the scheduled
drydockings, as compared to 58 days in 2000. The Handymax fleet accounted for
65.2% of the Company's net revenue during the current year as opposed to 35.5%
during the previous year. The net revenue generated under time charters
accounted for 62.0% of the Handymax fleet's net revenue during the year as
compared to 74.7% in 2000. At December 31, 2001, eleven of the Company's
Handymax tankers were operating under time charters.

         In particular, the average TCE rate of the Company's Panamax fleet in
the current year increased 34.3% to $16,930 from $12,603 in 2000. The Panamax
fleet had 84 off-hire days in 2001 due to scheduled dry docking as compared to
13 days in 2000. The Panamax fleet accounted for 10.8% of the Company's net
revenue during the current year as compared to 14.5% during the previous year.
The entire net revenue of the Panamax fleet was generated from time charters
during 2001 and 2000. At December 31, 2001, all of the Company's Panamax fleet
was operating under time charters. These time charters will end at December 31,
2002 and January 31, 2003.

         In particular, the average TCE rate of the Company's Aframax fleet in
the current year decreased 0.8% to $17,462 from $17,602 in 2000. The Aframax
fleet had 65 off-hire days during the year, of which 45 days relate to a main
engine incident involving the M/T Keymar, as compared to 17 days in 2000. The
Aframax fleet accounted for 23.9% of the Company's net revenue during the
current year as compared to 50.0% in the previous year. The entire net revenue
of the Aframax fleet was generated under time charters during the current year
as compared to 81.5% in the previous year. At December 31, 2001, all of the
Company's Aframax fleet was operating under time charters.

                                       35
<Page>

         VESSEL OPERATING EXPENSES. The Company's vessel operating expenses,
which mainly consist of crewing, repairs and maintenance, spare parts,
insurance, stores and lubricants increased 54.4% to $23.1 million in the current
year from $15.0 million in 2000, mainly due to the expansion of the fleet
together with higher repair and maintenance costs. The operating expenses per
ship per day increased 5.1% to $3,598 in the current year from $3,423 during the
previous year.

         DEPRECIATION. The Company's depreciation expense increased 40.9% to
$21.8 million in the current year as compared to $15.4 million in 2000. The
increase was the result of the fleet expansion during the current year.

         AMORTIZATION OF DEFERRED AND DRY - DOCKING COSTS. The Company's
amortization of deferred and dry-docking expenses was $1.0 million in the
current year, which reflect a slight decrease when compared to $1.1 million in
the previous year.

         GENERAL AND ADMINISTRATIVE EXPENSES. The Company's general and
administrative expenses increased 59.4% to $4.6 million for the current year as
compared to $2.9 million in the previous year. This increase resulted
principally from increased staff and additional administrative costs in
connection with the operation of a larger fleet and duties typically associated
with public companies. The overhead burden per ship per day increased 8.5% to
$714 during 2001 from $658 during 2000.

         INTEREST EXPENSE, NET. The Company's interest expense decreased 0.7% to
$15.5 million in the current year as compared to $15.4 million from the previous
year. Despite the increase in the average loan balances outstanding, due to the
fleet expansion, the decrease of market interest rates during the last year has
contributed to the decrease in interest expense.

LIQUIDITY AND CAPITAL RESOURCES

         As of December 31, 2001, the Company's cash position increased to $34.4
million, from $26.5 million as of December 31, 2000.

         Net cash flow from operating activities increased to $50.2 million in
the year ended December 31, 2001 from $30.5 million in the previous year, mainly
reflecting the increase in TCE rates and the expansion of the fleet.

         During the year ended December 31, 2001, the Company incurred capital
expenditures for vessel acquisitions and maintenance in the amount of $295.5
million. This capital expenditure included $46.5 million representing advances
for the five newbuildings scheduled for delivery in the first half of 2002 and
$248.7 million paid for the acquired fleet. The Company's scheduled debt
repayments were $25 million as compared to $30.4 million in the previous year.
The Company, during the year ended December 31, 2001, increased its borrowings
by $191.4 million, representing $165.0 million to finance the delivery of the
acquired fleet and $26.4 million for pre-delivery loans used to partially
finance the advance installments paid to the yard.

         The Company has already arranged with various banks for pre and
post-delivery loans amounting to $110.3 million to partially finance the
acquisition cost of the newbuilding Handymax and Panamax tankers for delivery in
the second quarter of 2002. These loans have a maturity period of ten years and,
in any event, no later than March 31, 2013.

                                       36

<Page>

         The Company's debt repayment obligations over the next ten years are as
follows:

                   REPAYMENT OBLIGATIONS EXCLUDING COMMITMENTS
                          ARISING FROM THE NEWBUILDINGS
                        SCHEDULED FOR DELIVERY DURING THE
                               FIRST HALF OF 2002
<Table>
<Caption>
                YEAR               AMOUNT                   YEAR                        AMOUNT
                ----               -------                  ----                        ------
                <S>             <C>                       <C>                        <C>
                2002            $36.7 million               2007                     $24.3 million
                2003            $61.3 million               2008                     $56.2 million
                2004            $33.1 million               2009                     $ 7.6 million
                2005            $51.7 million               2010                     $ 3.1 million
                2006            $24.3 million             2011-2012                  $19.2 million
</Table>

          INCLUDING COMMITMENTS ARISING FROM THE NEWBUILDINGS SCHEDULED
                   FOR DELIVERY DURING THE FIRST HALF OF 2002

<Table>
<Caption>
                YEAR                     AMOUNT                   YEAR                   AMOUNT
                ----                     ------                   -----                  ------
                <S>                  <C>                        <C>                  <C>
                2002                 $40.3 million                2007               $31.6 million
                2003                 $68.6 million                2008               $63.5 million
                2004                 $40.4 million                2009               $14.9 million
                2005                 $59.0 million                2010               $18.7 million
                2006                 $31.6 million              2011-2012            $59.5 million
</Table>

         These figures do not include any of the vessels that we have agreed to
purchase.

         The 2003 repayment include balloon payments/maturities which the
Company intends to refinance in 2003.

         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 this acquisition of vessels,
newbuildings 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.

         The above tables do not include the long term secured financing of
approximately $80 million, which has not yet been arranged, that will partially
fund the acquisition of the two modern secondhand Handymax tankers and the two
newly-built Panamax tankers discussed in "Recent Developments."

                                       37
<Page>

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.

<Table>
<Caption>
         NAME                                   AGE                           POSITION
         ----                                   ---                           --------
         <S>                                    <C>                           <C>

         Stelios Haji-Ioannou                   35                            Chairman of the Board of Directors

         Nicholas Hartley                       64                            Deputy Chairman

         Roger Haynes                           65                            Director

         Karl Meyer                             64                            Director

         Bruce Ogilvy                           59                            Marketing Director and Director

         Thomas N. Amonett                      58                            Director

         Terence A. Coghlin                     60                            Director

         Peter Goodfellow                       55                            Chief Executive Officer and Director

         Stamatis Molaris                       39                            Chief Financial Officer and Director

         George Karageorgiou                    37                            Director

         Olga Lambrianidou                      46                            Secretary
</Table>

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

         STELIOS HAJI-IOANNOU has been our Chairman of the Board of Directors
and a Director since our inception in 1992. His directorship expires in 2002. It
was announced on October 11, 2001 that Mr. Haji-Ioannou will not stand for
reelection to the Board of Directors at the 2002 annual meeting of shareholders
and that Nicholas Hartley, our new Deputy Chairman, would be appointed Chairman
if Mr. Hartley is reelected to the Board of Directors at the annual meeting
pending subsequent approval by the Board of Directors. Mr. Haji-Ioannou is the
Chairman of easyJet plc, a UK company listed on the London Stock Exchange. In
1998, he established the easy group of companies, with the objective of
exploiting the "easy" brand for ventures other than easyJet. The ventures
launched thus far include easyInternet Cafe, a chain of internet cafes,
easyValue, an internet shopping comparator, easyMoney, a financial services
company in the United Kingdom and easyCar Ltd., a budget car rental business.
Mr. Haji-Ioannou graduated from the London School of Economics and The City
University Business School. His business address is Status Center, 2A Areos
Street, Vouliagmeni, GR, 16671, Athens, Greece.

                                       38
<Page>

         NICHOLAS HARTLEY has been Deputy Chairman since 2001, a Director since
1993 and a consultant since September 1992. His directorship expires in 2002.
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.

         ROGER HAYNES has been a Director since September 1998. His directorship
expires in 2003. Mr. Haynes is an independent shipping consultant with over 23
years of experience in the shipping finance area. He was previously a Senior
Manager of Midland Bank plc. Mr. Haynes also acts as a consultant to
Hamburgische Landesbank-Gironzentrale, one of our lenders. His business address
is c/o Hamburgische Landesbank, Moorgate Hall, 155 Moorgate, London EC2M 6UJ,
England.

         KARL MEYER has been a Director since June 1998. His directorship
expires in 2002. Mr. Meyer, with over 40 years of experience in the shipping
industry, is the Chairman of the Board, Chief Executive Officer, President and
44% owner of Ermis Maritime Holdings Limited, a tanker owning company, and
Managing Director of Diogenes Management Company, an investment fund
specializing in investing in the shipping industry. Mr. Meyer was formerly a
director of BT Shipping (London) Limited, Chairman of the Board, President and
Chief Executive Officer of Marine Transport Lines, Inc., and Chairman of the
Board, President and Chief Executive Officer of Home Port Bancorp, Inc. His
business address is 60 Arch Street, Greenwich, CT 06830.

         BRUCE OGILVY has been a Director since January 1993. His directorship
expires in 2004. Mr. Ogilvy was formerly the Chartering Manager of Shell
International Marine and has 35 years of experience in the shipping industry,
including 10 years as Master for Shell International Marine. His business
address is c/o Stelmar Tankers (UK) Ltd., 24 Buckingham Gate, London, England.

         TERENCE A. COGHLIN has been a Director since October 2001. His
directorship expires in 2003. Mr. Coghlin had served for over 35 years at Thomas
R. Miller & Son until his retirement in July 2001, during which time he
supervised virtually all types of P&I Association and Defense Club disputes and
contributed to the marine P&I movement as a whole. Mr. Coghlin was elected
senior partner of Thomas R. Miller & Son and Chairman of the International Group
in 1991. 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 Status Center, 2A Areos Street, Vouliagmeni, GR, 16671,
Athens, Greece.


         THOMAS AMONETT has been a Director since March 2001. His directorship
expires in 2003. 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. From
1992 to 1996, Mr. Amonett served as President and Chief Executive Officer of
Reunion Resources Company, an oil and gas producer and provider of offshore
drilling services to the oil and gas industry. His business address is 3355 W.
Alabama, Suite 400, Houston, Texas, 77098.

         PETER  GOODFELLOW has been our Chief  Executive  Officer and a Director
since our inception in 1992. His directorship  expires in 2002. 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

                                       39
<Page>

served as Marine  Fleet  Operations  Manager,  prior to joining us. His business
address is Status  Center,  2A Areos Street,  Vouliagmeni,  GR,  16671,  Athens,
Greece

         STAMATIS MOLARIS has been our Chief Financial Officer and a Director
since August 1993. His directorship expires in 2004. Prior to that, he served as
an audit manager for Arthur Andersen, our auditors, 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.

         GEORGE KARAGEORGIOU has been a Director since our inception to May 1998
and again since October 2001. His directorship expires in 2004. Mr. Karageorgiou
is also a director of easyGroup Ltd., easyCar Ltd., Stelinvest Corp. and several
other private companies affiliated with Stelios Haji-Ioannou. Prior to that, Mr.
Karageorgiou was employed by Kassos Maritime Ltd., where he served as project
manager in various shipping projects. His business address is Status Center, 2A
Areos Street, Vouliagmeni, GR, 16671, Athens, Greece.

         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 returning to 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 $856,000 for the fiscal year ended December 31, 2001 and $750,000 for the
fiscal year ending December 31, 2000. We paid a portion of this compensation
outside of Greece for work performed outside of that country. We paid
approximately $93,000 to the non-executive directors as compensation for their
services in 2001. We did not pay any benefits in 1999 or 2000. Stelios
Haji-Ioannou does not intend to be reimbursed for expenses or take any cash
compensation from us for the foreseeable future. Non-employee directors receive
annual fees in the amount of $21,000 plus reimbursement of their out-of-pocket
expenses. This does not include the Deputy Chairman's compensation of $65,000
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.

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.

                                       40
<Page>

         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

         We have established an audit committee comprised of three members which
will be responsible for reviewing our accounting controls and recommending to
the Board of Directors the engagement of our outside auditors. Each member is an
independent director. The members of the audit committee are Messrs. Meyer,
Haynes and Amonett. We have also established a compensation committee comprised
of Messrs. Haynes, Meyer and Hartley, which will be responsible for establishing
executive officers' compensation and benefits.

D.   EMPLOYEES.

         As of December 31, 2001, we employed approximately 750 employees,
consisting of 46 shore-based personnel based in London, England and Athens,
Greece, and 700 seagoing employees from the Philippines. At year end 2000, we
employed approximately 300 employees, consisting of 280 seagoing employees and
20 shore-based employees. The increase in seagoing employees is due to our
acquisition of 10 additional vessels from Osprey Maritime and the delivery of a
newbuilding in 2001. At year end 1999, we employed 320 employees, consisting of
20 shore-based employees and 300 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, 2001,
regarding the total amount of capital stock owned by our officers and directors
on an individual basis:

                                       41
<Page>

<Table>
<Caption>
                                                                             SHARES
NAME                               POSITION                                  (NOM. HOLD.)
----                               --------                                  ------------
<S>                                <C>                                       <C>
Stelios-Haji Ioannou               Chairman of the Board                     1,950,000
Nicholas Hartley                   Deputy Chairman of the Board              *
Roger Haynes                       Directors                                 *
Karl Meyer                         Director                                  *
Bruce Ogilvy                       Director                                  *
Thomas Amonett                     Director                                  *
Peter Goodfellow                   Director, Chief Executive Officer         *
Terence A. Coghlin                 Director                                  *
Stamatis Molaris                   Director, Chief Financial Officer         *
George Karageorgiou                Director, Secretary                       *
</Table>

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

OPTION PLAN

         As of March 31, 2001, 323,500 shares of common stock had been
reserved for issuance upon exercise of the options granted to the Company's
officers, key employees and directors under the 2001 Stock Option Plan (the
"Plan") of the Company. The exercise price of each option equals $12.30. The
Company accounts for the Plan under APB opinion No. 25, according to which no
compensation expense was recognized during 2001 as the exercise price was equal
to the grant date fair value of the stock. Under the terms of the Plan, no
options can be exercised until at least two years from the closing of the
offering (March 6, 2001). The plan expires 10 years from March 6, 2001.

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 A. 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.

                                       42
<Page>

ITEM 7.  MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS.

A.   MAJOR SHAREHOLDERS.

Our capital stock is comprised of 11,874,750 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 that we are aware of as of
the date of this annual report. None of the shareholders have any special voting
rights.

<Table>
<Caption>
NAME                             NUMBER OF SHARES       PERCENTAGE OF CLASS
----                             ----------------       -------------------
<S>                                  <C>                       <C>
Stelios Haji-Ioannou                 1,950,000                 16.4%
Polys Haji-Ioannou                   1,075,000                  9.0%
Clelia Haji-Ioannou                  1,075,000                  9.0%
</Table>

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 $44,000 in 1999, $51,000 in 2000 and $25,000 in 2001. 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 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 $152,000 in 1999, $72,000 in
2000 and $64,000 in 2001 for brokerage fees on some of our charters. The fees
were based on 1.25% of the charter payments, which is standard for the industry.
Effective April 17, 2002, that contract will expire and we will no longer pay
fees to World Tankers (U.K.) Ltd.


                                       43
<Page>


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

         We currently intend to retain any earnings for the future operation and
growth of our business. Accordingly, we do not anticipate paying any cash
dividends on our common stock in the foreseeable future. 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.

For the previous three quarters:

<Table>
<Caption>
 2001                2ND QUARTER         3RD QUARTER         4TH QUARTER
<S>                  <C>                 <C>                 <C>
 LOW                 12.16               11.60               12.10
 HIGH                21.90               17.50               16.25
</Table>

                                       44
<Page>

For the previous six months:


<Table>
<Caption>
               OCTOBER           NOVEMBER         DECEMBER          JANUARY          FEBRUARY        MARCH
               2001              2001             2001              2002             2002            2002
<S>            <C>               <C>              <C>               <C>              <C>             <C>
LOW            12.85             12.10            12.96             15.31            13.89           15.55
HIGH           15.10             13.22            16.25             16.50            15.97           16.72
</Table>

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 filed in March 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.

                                       45
<Page>

         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. If we were to pay a cash dividend, we would pay that dividend in U.S.
dollars. We, however, do not expect to pay dividends for the foreseeable future.

         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

                                       46
<Page>

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.

         Kliomar Ltd. entered into a $30 million loan to assist in the financing
of the vessel the KLIOMAR. This loan is cross-collateralized by the vessels
owned by our subsidiaries Colmar Ltd., Nedimar Ltd., and Ariel Shipping
Corporation. Additionally, any default in the payments under the loans secured
by mortgages on those vessels will result in a default.

         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., Kliomar Ltd., Colmar Ltd., Nedimar
Ltd., and Ariel Shipping Corporation. Additionally, any default in the payments
under the loans secured by mortgages on those vessels will result in a default.

         Colmar Ltd. borrowed $14 million to assist in the financing of the
vessel the COLMAR. This loan is cross-collateralized by the vessel owned by our
subsidiary Kliomar Ltd. Additionally, any default in the payments under the
loans to Nedimar Limited and Ariel Shipping Corporation will result in a
default.

         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.

         Ariel Shipping Corporation borrowed $16 million to assist in the
financing of the vessel the FULMAR. This loan is secured by (i) a first priority
mortgage over the FULMAR; and (ii) a guarantee and general assignment of the
earnings, insurances and requisition compensation on behalf of the FULMAR.
Additionally, any default in the payments under the loans to Nedimar Limited and
Colmar Ltd. 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 subsidiaries Kliomar Ltd.,
Colmar Ltd., Nedimar Ltd. and Ariel Shipping Corporation. Additionally, any
default in the payments under the loans secured by mortgages on those vessels
will result in a default.

         Nedimar Ltd. borrowed $24 million to assist in the financing of the
vessel the NEDIMAR. This loan is cross-collateralized by the vessel owned by our
subsidiary Kliomar Ltd. Additionally, any default in the payments under the
loans to Ariel Shipping Corporation or Colmar Ltd. will result in a default.

         Takamar Ltd. and Keymar Ltd. jointly borrowed $52.7 million to assist
in the financing of the vessels the P. ALLIANCE and the KEYMAR. This loan is
secured by (i) first and second preferred mortgages over the P. ALLIANCE and
first and second priority mortgages over the KEYMAR; and (ii) a guarantee and

                                       47
<Page>

general assignment of the earnings, insurances, charter rights, and requisition
compensation on behalf of the P. ALLIANCE and the KEYMAR. Additionally, any
default in the payments under the loan secured by the mortgage on either vessel
will result in a default.

         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 the 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. Additionally, any default in the payments under
the loan secured by the mortgage on either vessel will result in a default.

     CONTRACTS RELATING TO NEWBUILDINGS

         We signed contracts with a South Korean shipyard to build four Panamax
tankers at a total contract price of $128.8 million, or $32.2 million per
tanker. The contracts provide for stage payments of 20% in advance, 20% during
construction and 60% at delivery. One of the vessels was delivered in January
2002, and the remaining three are to be delivered at the end of March, May and
July 2002.

         The loans for each of the four Panamax newbuildings will be secured by:

         - our guarantee of our subsidiaries' indebtedness;

         - mortgages on our financed vessels;

         - an assignment of the vessels' earnings, insurance and charters; and

         - an option to take a first priority pledge over the shares of our
           subsidiaries.

         We financed the purchase and construction of the four Panamax
newbuildings through three separate loan facilities. Through two of our
subsidiaries, we entered into a credit facility to finance two of the
newbuildings, hull numbers 5210 and 5211, with Nedship Bank N.V. and Deutsche
Schiffsbank Aktiengesellschaft, under which Nedship will serve as the agent and
security trustee. Under this facility, we expect to borrow approximately $45
million in the form of a term loan, which will be drawn down in four stages. The
credit facility will be available for drawings only until June 30, 2002. The
loan bears a variable interest rate based on LIBOR.

         Through our subsidiary Rubymar Limited, we entered into a credit
facility with Alpha Bank S.A., under which Rubymar Limited can draw up to $22.5
million to finance approximately 70% of the construction price of a third
tanker, hull number 5212. The loan will be drawn down in four tranches, each to
coincide with the scheduled payments to the shipyard. The loan bears a variable
interest rate based on LIBOR.

         We financed the fourth Panamax tanker, hull no. 5213, through a
facility with the Royal Bank of Scotland to finance 70% of the construction
price. The loan will be drawn down in four tranches and bears a variable
interest rate based on LIBOR.

         We entered into a Memorandum of Agreement on July 18, 2001 with D'Amico
International Holding SAH (on behalf of Potomac Shipping Company) to purchase a
Handymax vessel for $30.8 million. The vessel was under construction at Daedong
Shipbuilding Co., Ltd. and was delivered to us in February 2002. The Memorandum
of Agreement required a 10% deposit to be paid within 3 days of the execution of
the agreement and the balance to be paid upon acceptance of the vessel. We
entered into a $20.2 million loan agreement on February 19, 2002 with
Hamburgische Landesbank-Girozentrale to finance the payments under the
Memorandum of Agreement. The Loan Agreement has an interest rate of LIBOR plus a
margin of .9375%. The loan must be repaid over a period of eight years through
16 semi-annual installments, with a final balloon payment of $9.7 million.

         Our subsidiary Petromar Limited entered into a $20.0 million loan
agreement on June 6, 2001 with The Royal Bank of Scotland plc to finance the
purchase of Hull No. S1051, which we later named the PETROMAR. The loan has an
interest rate of LIBOR plus 1%. The loan must be repaid over a period of 10
years through twenty semi-annual installments, with a final balloon payment of
$9.4 million.

                                       48
<Page>

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

                                       49
<Page>

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

                                       50
<Page>

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."

         Our chairman, Stelios Haji-Ioannou, and his siblings, are more than 5%
owners with combined holdings of approximately 35% of the outstanding stock.
Although currently the 5 Percent Override Rule is not applicable to us, there is
a risk that at any time 50% or more of our outstanding common stock could be
owned, actually or constructively under specified stock attribution rules, by
persons who cause the 5 Percent Override Rule to become applicable to us.

         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

                                       51
<Page>

         -     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,

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

         -     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

         We do not anticipate making any distributions on our common stock for
the foreseeable future. See "Dividend Policy." 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

         -     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

         -     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.

                                       52
<Page>

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.

                                       53
<Page>

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:

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

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

         -     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

                                       54
<Page>

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:

         -     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

         -     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:

         -     fail to provide an accurate taxpayer identification number;

         -     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

         -     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

                                       55
<Page>

exceed your income tax liability by filing a refund claim with the U.S. Internal
Revenue Service.

F.   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.

ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

INFLATION

         Inflation had a very moderate impact on vessel operating expenses,
drydocking 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 the financial markets. Increasing interest rates could adversely
impact future earnings. We have entered into interest rate cap and swap
agreements expiring in 2005 and 2006 for approximately 28% of our outstanding
indebtedness as of December 31, 2001.

         Our interest expense is affected by changes in the general level of
interest rates, particularly LIBOR. As an indication of the extent of our
sensitivity to interest rate changes, an increase of 1% would have decrease our
net income and cash flows in the current year by approximately $2.6 million
based upon our debt level at December 31, 2001. The following table sets forth
our sensitivity to a 1% increase in LIBOR over the next five years on the same
basis:

                                       56

<Page>

<Table>
<Caption>
                                         NET DIFFERENCE IN EARNINGS AND
YEAR             BASE INTEREST           CASH FLOWS PLUS 1% ON BASE
----             -------------           --------------------------
<S>              <C>                     <C>
2002             5%                      $3.1 million

2003             5%                      $2.8 million

2004             5%                      $2.5 million

2005             5%                      $2.2 million

2006             5%                      $2.0 million
</Table>

FOREIGN EXCHANGE RATE FLUCTUATION

         The interna
ional 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 Greek
drachmae and British pounds sterling, while we incur a significant portion of
the cost of revenues 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 currently do not engage in any foreign currency hedging
transactions, and do not believe that we need to enter into any foreign currency
hedging transactions at this time.

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.

                                       57
<Page>

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

         Not Applicable.

ITEM 15. RESERVED.

ITEM 16. RESERVED.

ITEM 17. FINANCIAL STATEMENTS

         Not Applicable.

ITEM 18. FINANCIAL STATEMENTS


         We have incorporated by reference in response to this item the report
of the independent public accountants, the consolidated audited financial
statements and the accompanying notes appearing on pages F-1 through
F-27.

                                       58
<Page>

                     STELMAR SHIPPING LTD. AND SUBSIDIARIES
                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS


<Table>
<S>                                                                                                       <C>
Report of Independent Public Accountants..................................................................F-2
Consolidated Balance Sheets for the years ended December 31, 2000
and 2001..................................................................................................F-3
Consolidated Statements of Stockholders Equity for the years ended
December 31, 1999, 2000 and 2001..........................................................................F-4
Consolidated Statements of Income for the years ended
December 31, 1999, 2000 and 2001..........................................................................F-5
Consolidated Statements of Cash Flows for the years ended December 31, 1999
2000 and 2001.............................................................................................F-6
Notes to Consolidated Financial Statements................................................................F-7
Schedule I -- Condensed Financial Information.............................................................F-27
</Table>

                                       F-1
<Page>

                    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 December
31, 2001. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of 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

                                       F-2
<Page>

                     STELMAR SHIPPING LTD. AND SUBSIDIARIES

                           CONSOLIDATED BALANCE SHEETS
                           DECEMBER 31, 2000 AND 2001
                    (Expressed in thousands of U.S. Dollars)


<Table>
<Caption>
ASSETS                                                                                 2000           2001
------                                                                            ---------------  ------------
<S>                                                                             <C>                <C>
CURRENT ASSETS:
  Cash and cash equivalents (Note 2e)                                           $         26,464   $    34,417
                                                                                  ---------------  ------------
  Accounts receivable-
    Trade  (Note 2f)                                                                       4,323         7,678
    Other (Note 2g)                                                                          483         1,464
                                                                                  ---------------  ------------
                                                                                           4,806         9,142
                                                                                  ---------------  ------------

  Inventories (Note 2h)                                                                      415         1,380
  Prepayments and other                                                                      341         1,225
                                                                                  ---------------  ------------

        TOTAL CURRENT ASSETS                                                              32,026        46,164
                                                                                  ---------------  ------------

FIXED ASSETS:
  Advances for vessel acquisition / under construction (Notes 4 and 17)                       84        46,555
                                                                                  ---------------  ------------

  Vessels (Notes 2i, 2j, 5 and 8)                                                        321,306       569,978
  Accumulated depreciation (Notes 2k and 5)                                              (56,610)      (78,151)
                                                                                  ---------------  ------------
        NET BOOK VALUE                                                                   264,696       491,827

  Property and equipment, net (Note 2l)                                                      712           817
                                                                                  ---------------  ------------

        TOTAL FIXED ASSETS                                                               265,492       539,199
                                                                                  ---------------  ------------

DEFERRED CHARGES, NET (Notes 2m, 2o and 6)                                                 1,697         6,820
                                                                                  ---------------  ------------

        TOTAL ASSETS                                                            $        299,215  $    592,183
                                                                                  ===============  ============

LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES:
  Current portion of long-term debt (Note 8)                                    $         17,710  $     40,332
                                                                                  ---------------  ------------
  Accounts payable-
    Trade                                                                                  2,109         4,907
    Other                                                                                     42            65
                                                                                  ---------------  ------------
                                                                                           2,151         4,972
                                                                                  ---------------  ------------

  Income taxes payable (Note 15)                                                              15             3
  Accrued liabilities (Notes 2p and 7)                                                     1,417         2,018
  Accrued bank interest (Note 8)                                                           4,185         2,589
  Financial instruments fair value (Notes 2x, 2y and 14)                                       -         2,500
  Unearned revenue (Note 2t)                                                               1,089         3,459
                                                                                  ---------------  ------------

        TOTAL CURRENT LIABILITIES                                                         26,567        55,873
                                                                                  ---------------  ------------

LONG-TERM DEBT, NET OF CURRENT PORTION (NOTE 8)                                          183,082       326,862
                                                                                  ---------------  ------------

CONTINGENCIES (NOTE 9)

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; 3,824,750,
  3,824,750 and 11,874,750 issued and outstanding at December 31, 2000 and
  2001, respectively (Note 10).                                                               76           237
  Additional paid-in capital                                                              55,064       149,970
  Accumulated other comprehensive income / (loss) (Notes 2c, 2x, 2y, 14 and 16)             (227)       (2,594)
  Retained earnings                                                                       34,653        61,835
                                                                                  ---------------  ------------

        TOTAL STOCKHOLDERS' EQUITY                                                        89,566       209,448
                                                                                  ---------------  ------------

        TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                              $        299,215  $    592,183
                                                                                  ===============  ============
</Table>


The accompanying notes are an integral part of these consolidated balance
sheets.

                                       F-3
<Page>

                     STELMAR SHIPPING LTD. AND SUBSIDIARIES

                 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
              FOR THE YEARS ENDED DECEMBER 31, 1999, 2000 AND 2001
                    (Expressed in thousands of U.S. Dollars)

<Table>
<Caption>
                                                                                                    ACCUMULATED
                                                                       ADDITIONAL                      OTHER
                                           COMPREHENSIVE   CAPITAL      PAID-IN       RETAINED      COMPREHENSIVE
                                               INCOME       STOCK       CAPITAL       EARNINGS     INCOME / (LOSS)     TOTAL
                                          ==============  =========  =============  ============  ================= ============
<S>                                        <C>           <C>         <C>             <C>            <C>              <C>
BALANCE, DECEMBER 31, 1998                               $     75    $      55,065   $   15,624     $          (9)   $    70,755

     Net income                            $    7,794           -                -        7,794                 -          7,794
     Other comprehensive income
     - Currency translation adjustments          (134)          -                -            -              (134)          (134)

     Issuance of capital stock                      -           1               (1)           -                 -              -
                                          ------------
     Comprehensive income                       7,660
                                          ============ -----------  ---------------  -----------  -----------------  ------------
BALANCE, DECEMBER 31, 1999                                     76           55,064       23,418              (143)        78,415

     Net income                                11,235           -                -       11,235                 -         11,235
     Other comprehensive income
     - Currency translation adjustments           (84)          -                -            -               (84)           (84)
                                          ------------
     Comprehensive income                      11,151
                                          ============ -----------  ---------------  -----------  -----------------  ------------
BALANCE, DECEMBER 31, 2000                                     76           55,064       34,653              (227)        89,566
                                                       -----------  ---------------  -----------  -----------------  ------------

     Other comprehensive income
     - 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                  $   31,646
                                          ============ -----------  ---------------  -----------  -----------------  ------------
BALANCE, DECEMBER 31, 2001                               $    237    $     149,970   $   61,835     $      (2,594)   $   209,448
                                                       ===========  ===============  ===========  =================  ============
</Table>

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

                                       F-4
<Page>

                     STELMAR SHIPPING LTD. AND SUBSIDIARIES

                        CONSOLIDATED STATEMENTS OF INCOME
              FOR THE YEARS ENDED DECEMBER 31, 1999, 2000 AND 2001
        (Expressed in thousands of U.S. Dollars - except per share data)


<Table>
<Caption>
                                                                             1999              2000              2001
                                                                         --------------   ---------------   ---------------
<S>                                                                   <C>                 <C>               <C>
REVENUES:

REVENUE FROM VESSELS (NOTES 1 AND 2t)                                 $         68,539    $       68,575    $      111,198
   Commissions (Notes 2t and 3a)                                                (1,749)           (1,871)           (2,551)
                                                                         --------------   ---------------   ---------------
       REVENUE FROM VESSELS, NET                                                66,790            66,704           108,647
                                                                         --------------   ---------------   ---------------

EXPENSES:
   Voyage expenses (Note 2t)                                                     5,194             5,450             8,743
   Vessel operating expenses (Notes 2t and 2u)                                  15,188            14,959            23,093
   Depreciation (Notes 2k, 2l and 5)                                            15,425            15,441            21,755
   Impairment loss (Notes 2j and 5)                                              6,500                 -                 -
   Amortization of deferred charges (Notes 2l, 2n and 6)                           754             1,116               960
   General and administrative expenses (Notes 3b and 3c)                         2,939             2,876             4,583
                                                                         --------------   ---------------   ---------------
   OPERATING INCOME                                                             20,790            26,862            49,513
                                                                         --------------   ---------------   ---------------
OTHER INCOME (EXPENSES):
   Interest and finance costs  (Notes 2o, 6, 8, 12 and 14)                     (13,654)          (16,484)          (17,089)
   Interest income                                                                 629             1,056             1,555
   Foreign currency losses (Note 2d)                                               (56)              (31)             (129)
   Gain on sale of vessel (Note 13)                                                  -                32                 -
   Other, net                                                                       85             (200)               163
                                                                         --------------   ---------------   ---------------
   TOTAL OTHER INCOME (EXPENSES), NET                                          (12,996)          (15,627)          (15,500)
                                                                         --------------   ---------------   ---------------

NET INCOME                                                            $          7,794    $       11,235    $        34,013
                                                                         ==============   ===============   ===============
EARNINGS PER SHARE, BASIC (NOTES 2v AND 11)                           $           2.08    $         2.94    $          3.31
                                                                         ==============   ===============   ===============
WEIGHTED AVERAGE NUMBER OF SHARES, BASIC                                     3,750,205         3,824,750        10,290,028
                                                                         ==============   ===============   ===============
EARNINGS PER SHARE, DILUTED (NOTES 2v AND 11)                         $           2.08    $         2.94    $         3.29
                                                                         ==============   ===============   ===============
WEIGHTED AVERAGE NUMBER OF SHARES, DILUTED                                   3,750,205         3,824,750        10,353,810
                                                                         ==============   ===============   ===============
</Table>


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

                                       F-5
<Page>

                     STELMAR SHIPPING LTD. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
              FOR THE YEARS ENDED DECEMBER 31, 1999, 2000 AND 2001
                    (Expressed in thousands of U.S. Dollars)

<Table>
<Caption>
                                                                     1999          2000          2001
                                                                  ----------    ------------  ----------
<S>                                                               <C>           <C>           <C>
CASH FLOWS FROM OPERATING ACTIVITIES:

  Net income                                                      $    7,794    $   11,235    $   34,013
  Adjustments to reconcile net income to net cash
  provided by operating activities:
     Depreciation                                                     15,425        15,441        21,755
     Impairment loss                                                   6,500             -             -
     Gain from sale of vessel                                              -           (32)            -
     Amortization of deferred dry-docking costs                          576           847           960
     Amortization of other financing costs                               178           269             -
     Amortization of loan fees                                            87            86           139
     Provision for income taxes                                           14            15            79
     Interest expense, net of amounts capitalized                     13,373        16,273        16,732
  (Increase) Decrease in:
     Accounts receivable                                              (4,629)        2,175        (4,336)
     Inventories                                                        (715)          656          (965)
     Prepayments and other                                                77            34          (884)
  Increase (Decrease) in:
     Accounts payable                                                    847        (1,094)        2,821
     Accrued liabilities excluding bank loan interest                    (37)          876           601
     Unearned revenue                                                   (828)          253         2,370
  Payments for dry-docking                                            (1,045)         (726)       (4,766)
  Interest paid                                                      (12,370)      (15,681)      (18,328)

  Income taxes paid                                                      (80)          (14)          (91)
  Translation adjustment                                                (134)          (84)          133
                                                                  ----------    ----------    ----------

NET CASH FROM OPERATING ACTIVITIES                                    25,033        30,529        50,233
                                                                  ----------    ------------  ----------
CASH FLOWS FROM (USED IN) INVESTING ACTIVITIES:
     Advances for vessels acquisition-vessels under construction           -           (84)      (46,471)
     Vessel acquisitions and/or  improvements                        (38,396)            -      (248,672)
     Capital expenditure for property and equipment                     (493)         (400)         (319)
     Proceeds from sale of equipment at book value                        56             -             -
     Net proceeds from sale of vessel                                      -        12,356             -
                                                                  ----------    ------------  ----------
NET CASH FROM (USED IN) INVESTING ACTIVITIES                         (38,833)       11,872      (295,462)
                                                                  ----------    ------------  ----------
CASH FLOWS FROM (USED IN) FINANCING ACTIVITIES:
     Proceeds from long-term debt                                     31,875             -       191,359
     Principal payments of long-term debt                            (16,414)      (17,888)      (24,957)
     Repayment of long-term debt due to sale of vessel                     -       (12,501)            -
     Proceeds from initial public offering, net                            -             -        88,236
     Payments for loan fees and other financing costs                   (251)         (289)       (1,456)
                                                                  ----------    ----------    ----------
NET CASH FROM (USED IN) FINANCING ACTIVITIES                          15,210       (30,678)      253,182
                                                                  ----------    ------------  ----------
NET INCREASE IN CASH AND CASH EQUIVALENTS                              1,410        11,723         7,953
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR                        13,331        14,741        26,464
                                                                  ----------    ------------  ----------
CASH AND CASH EQUIVALENTS AT END OF YEAR                          $   14,741    $   26,464    $   34,417
                                                                  ==========    ============  ==========

The accompanying notes are an integral part of these financial statements.
</Table>

                                       F-6
<Page>

                     STELMAR SHIPPING LTD. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2000 AND 2001
    (Expressed in thousands of United States Dollars - except 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         VESSEL NAME OR
         COMPANY                 INCORPORATION    INCORPORATION   HULL NUMBER       FLAG      DWT
         -------                 -------------    -------------   -----------       ----      ---

         <S>                     <C>              <C>             <C>               <C>       <C>
         Keymar Ltd.             Liberia          July 1998       KEYMAR            CYPRUS     95,822
         Takamar Ltd.            Liberia          July 1998       TAKAMAR           PANAMA    104,050
         Primar Shipping Ltd.    Liberia          May 1993        PRIMAR            CYPRUS     39,521
         Palmar Maritime Ltd.    Liberia          July 1993       CITY UNIVERSITY   CYPRUS     39,729
         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
         Promar Ltd.             Liberia          February 2001   PROMAR            PANAMA     39,989
         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
         Ambermar Ltd.           Liberia          December 2001   HULL NO. 1071           -         -
         Pearlmar Ltd.           Liberia          July 2000       HULL NO. 5210           -         -
         Jademar Ltd.            Liberia          July 2000       HULL NO. 5211           -         -
         Rubymar Ltd.            Liberia          July 2000       HULL NO. 5212           -         -
         Rosemar Ltd.            Liberia          July 2000       HULL NO. 5213           -         -
                                                                                              -------
                                                                                              750,521
                                                                                              =======
</Table>


     (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:


<Table>
<Caption>
                                 COUNTRY OF       DATE OF         VESSEL
         COMPANY                 INCORPORATION    INCORPORATION   NAME              FLAG      DWT
         -------                 -------------    -------------   ----              ----      ---
         <S>                     <C>              <C>             <C>               <C>       <C>
         Ariel Shipping
         Corporation             Liberia          January 1993    FULMAR            CYPRUS     39,521
         Colmar Ltd.             Liberia          July 1993       COLMAR            CYPRUS     39,729
         Nedimar Ltd.            Liberia          October 1993    NEDIMAR           LIBERIA    46,821
         Kliomar Ltd.            Liberia          August 1997     KLIOMAR           CYPRUS     96,088
         Polmar Ltd.             Liberia          October 1997    POLYS             CYPRUS     68,623
         Cleliamar Ltd.          Liberia          October 1994    CLELIAMAR         CYPRUS     68,623
         Jacamar Ltd.            Liberia          January 1999    JACAMAR           PANAMA    104,024
                                                                                              -------
                                                                                              463,429
                                                                                              =======
</Table>

                                       F-7
<Page>

                     STELMAR SHIPPING LTD. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2000 AND 2001
    (Expressed in thousands of United States Dollars - except per share data
                            unless otherwise stated)

     (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. Since then it has had 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. ("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 this company has become dormant.

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

     Gross revenues for 1999, 2000 and 2001, include revenues deriving from
     charter agreements with significant charterers, as follows (in percentages
     of total gross revenues):

<Table>
<Caption>
     CHARTERER      1999       2000      2001
     ---------      ----       ----      ----

        <S>          <C>        <C>       <C>
         A           19%        20%       13%
         B            -         13%       11%
         C            -         13%       22%
         D            -         11%        -
         E           16%         -         -
         F           11%         -         -
</Table>

2.   SIGNIFICANT ACCOUNTING POLICIES:

     (a) PRINCIPLES OF CONSOLIDATION: The accompanying consolidated financial
         statements have been prepared in accordance with the United States
         generally accepted accounting principles and include in each of the
         three years in the period ended December 31, 2001, 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 United States generally accepted accounting
         principles 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.

                                       F-8
<Page>

                     STELMAR SHIPPING LTD. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2000 AND 2001
    (Expressed in thousands of United States Dollars - except per share data
                            unless otherwise stated)

     (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 current 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 Sterling. For
         consolidation purposes this subsidiary's financial statements are
         translated into US Dollars in accordance with FASB 52 and the resulting
         translation adjustments are reflected separately under stockholders'
         equity in the accompanying consolidated balance sheets in accordance
         with SFAS 130.

     (e) CASH AND CASH EQUIVALENTS: For purposes of the consolidated statements
         of cash flows, 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.

     (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.

     (g) INSURANCE CLAIMS: Insurance claims included in Accounts Receivable -
         Other at each balance sheet date consist of claims submitted and/or
         claims 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. The cost is determined by the
         first in, first out method except for bunkers, which are priced at
         moving average cost.

     (i) VESSELS 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. Such
         expenditures will otherwise be charged to expenses as incurred.

                                       F-9
<Page>

                     STELMAR SHIPPING LTD. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2000 AND 2001
    (Expressed in thousands of United States Dollars - except per share data
                            unless otherwise stated)

     (j) IMPAIRMENT OF LONG-LIVED ASSETS: The U.S. Financial Accounting
         Standards Board issued SFAS 121 "Accounting for the Impairment of
         Long-lived Assets and for Long-lived Assets to be Disposed of", which
         requires that long-lived assets and certain identifiable intangibles
         held and used or disposed of by an entity be reviewed for impairment
         whenever events or changes in circumstances indicate that the carrying
         amount of the assets may not be recoverable. An impairment loss for an
         asset held for use should be recognized, when the estimate of
         undiscounted cash flows, excluding interest charges, expected to be
         generated by the use of the asset is less than its carrying amount.
         Measurement of the impairment loss is based on the fair value of the
         asset. The review of the carrying amount in connection with the
         estimated recoverable amount for each of the Company's vessels, as of
         December 31, 2001, indicated that no impairment loss should be
         recognized over the Company's vessels.

     (k) VESSELS DEPRECIATION: Depreciation is computed using the straight-line
         method over the estimated useful life of the vessels (twenty-five
         years), after considering the estimated residual value (US Dollars
         210 per LWT ton).

     (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.

<Table>
<Caption>
                                                  USEFUL LIFE
                   DESCRIPTION                      (YEARS)
                   -----------                    ------------

          <S>                                           <C>
          Leasehold improvements                        9
          Office furniture and equipment                5
          Vehicles                                      9
          Telecommunication equipment                   5
          Computer hardware and software                5
</Table>

         Depreciation expense for 1999, 2000 and 2001 amounted to $ 343, $ 277,
         and $ 214, respectively, and is included in depreciation in the
         accompanying consolidated statements of income.

     (m) ACCOUNTING FOR DRY DOCKING: Dry-docking costs are carried out
         approximately every two and a half or five years as applicable
         depending on the vessel's age and 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. These costs are deferred and amortized over a period to
         the next dry-docking. 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 certainly preserve its useful
         life.

     (n) ACCOUNTING FOR SPECIAL SURVEY: 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

                                      F-10
<Page>

                     STELMAR SHIPPING LTD. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2000 AND 2001
    (Expressed in thousands of United States Dollars - except per share data
                            unless otherwise stated)

         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. Provision has been made for such
         estimated future calls, which is included in accrued liabilities in the
         accompanying consolidated balance sheets.

     (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 1999, 2000 and 2001, have been recorded to expenses and
         amounted to $ 122, $ 125, and $ 165, 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; however, the Company's maximum liability, if all
         employees were dismissed at December 31, 1999, 2000 and 2001, would
         have been approximately $ 40, $ 39 and $ 67, respectively, for which no
         provision has been accounted for in the accompanying consolidated
         financial statements.

     (t) ACCOUNTING FOR REVENUE AND EXPENSES: Freight and hire revenue and
         related voyage expenses as well as applicable address and brokerage
         commissions are recorded on a pro rata basis over the period of the
         voyage or time charters. Vessel operating expenses are accounted for on
         the accrual basis. Unearned revenue represents 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 $ 2,888, $ 2,326 and $ 2,855 for 1999, 2000 and
         2001 respectively.

                                      F-11
<Page>

                     STELMAR SHIPPING LTD. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2000 AND 2001
    (Expressed in thousands of United States Dollars - except per share data
                            unless otherwise stated)

     (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 reflects 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, 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) INTEREST RATE SWAP AGREEMENTS: The Company enters into interest rate
         swap agreements to partially hedge the exposure of interest rate
         fluctuations associated with its borrowings. Such swap agreements are
         recorded at fair market value following the provisions of SFAS 133 as
         further discussed below.

         The off-balance sheet risk in outstanding swap agreements involves both
         the risk of a counterparty 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
         counterparties 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) SFAS NO. 133: In June 1998, the Financial Accounting Standards Board
         issued SFAS No. 133, "Accounting for Derivative Instruments and Hedging
         Activities". SFAS No. 133 establishes accounting and reporting
         standards requiring that every derivative instrument (including certain
         derivative instruments embedded in other contracts) be recorded on the
         balance sheet as either an asset or liability measured at its fair
         value. It also requires that changes in the derivative's fair value be
         recognized currently in earnings unless specific hedge accounting
         criteria are met. Special accounting for qualifying hedges allows a
         derivative's gains and losses to offset related results on the hedged
         item in the income statement, and requires that a company must formally
         document, designate, and assess the effectiveness of transactions that
         receive hedge accounting.

         SFAS No. 138, "Accounting for Certain Derivative Instruments and
         Certain Hedging Activities" amended the accounting and recording
         standards of SFAS No. 133 for certain derivative instruments and
         certain hedging activities as indicated below.

         SFAS No. 133, as amended by (a) SFAS No. 137 "Accounting for Derivative
         Instruments and Hedging Activities - Deferral" as of the effective date
         of FASB Statement No. 133 and (b) SFAS 138, is effective for fiscal
         years beginning after June 15, 2000 and cannot be applied
         retroactively. With respect to the derivative instruments which were
         effective as of December 31, 2000, a transition adjustment of $561
         resulting from adopting SFAS 133 was reported in other comprehensive
         income as the effect of a change in accounting principles as required
         by APB Opinion No. 20, "Accounting Changes."Five interest rate swap
         agreements were open as of

                                      F-12
<Page>

                     STELMAR SHIPPING LTD. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2000 AND 2001
                    (Expressed in thousands of United States
                         Dollars - except per share data
                            unless otherwise stated)

         December 31, 2001. Five interest rate swap agreements were open as of
         December 31, 2001 and have been accounted for under SFAS 133. Such
         financial instruments met hedge accounting criteria and accordingly
         their fair value has been included in "Other Comprehensive Income" in
         the accompanying December 31, 2001 consolidated balance sheet. The
         Company's management intention is 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 be materialized.

     (z) STOCK-BASED COMPENSATION: In October 1995, the Financial Accounting
         Standards Board ("FASB" issued SFAS No. 123, "Accounting For
         Stock-Based Compensation". This statement establishes a fair value
         method of accounting for an employee stock option or similar equity
         instrument but allows companies to continue to measure compensation
         cost for those plans using the intrinsic value based method of
         accounting prescribed by Accounting Principles Board ("APB") Opinion
         No. 25, "Accounting For Stock Issued To Employees". The Company has
         elected to account for its stock-based compensation awards to employees
         and directors under the accounting prescribed by APB Opinion No. 25 and
         to provide the disclosures required by SFAS No. 123 (Note 10).

    (aa) OTHER RECENT ACCOUNTING PRONOUNCEMENTS: In November 1999, the United
         States Securities and Exchange Commission ("SEC") issued Staff
         Accounting Bulletin ("SAB") 101, Revenue Recognition, which presents
         the SEC's position in relation to when it is appropriate for a
         registrant to recognize revenue. The Company has reviewed these
         criteria and believes its policy for revenue recognition to be in
         accordance with SAB 101.

         During 2001, the Financial Accounting Standards Board ("FASB") has
         issued four Statements of Financial Accounting Standards ("SFAS"),
         which are summarized as follows:

         SFAS 141, "Business Combinations", relates to financial accounting and
         reporting for business combinations and is effective for all business
         combinations initiated after June 30, 2001 and business combinations
         completed on July 1, 2001 and thereafter. It states that all business
         combinations included within the scope of the statement should be
         accounted for using the purchase method. The Company has no currently
         pending business combinations, which would be affected by the
         statement, but any future business combinations that are contemplated
         would need to take account of the requirements of the statement.

         SFAS 142, "Goodwill and Other Intangible Assets", establishes new
         standards for accounting for goodwill and other intangible assets. The
         statement does require that goodwill and indefinite lived intangible
         assets no longer be amortized, but reviewed annually for impairment.
         The company did not have goodwill or indefinite lived intangible assets
         as of December 31, 2001 and therefore there is no impact on the
         financial statements.

         SFAS 143, "Accounting for Asset Retirement Obligations", relates to
         financial accounting and reporting requirements associated with the
         retirement of tangible long-lived assets and the associated asset
         retirement costs. The statement is effective for financial statements
         issued for fiscal years beginning after June 15, 2002. The Company has
         not determined the impact, if any, that the adoption of this statement
         will have on the Company's results of operation or financial position.

                                      F-13
<Page>

                     STELMAR SHIPPING LTD. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2000 AND 2001
                    (Expressed in thousands of United States
                         Dollars - except per share data
                            unless otherwise stated)

         SFAS 144, "Accounting for the Impairment or Disposal of Long-Lived
         Assets", addresses financial accounting and reporting for the
         impairment or disposal of long-lived assets and supersedes SFAS 121,
         "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
         Assets to be Disposed Of". The statement requires that those long-lived
         assets be measured at the lower of carrying amount or fair value less
         cost to sell, whether reported in continuing operations or in
         discontinued operations. The statement is effective for financial
         statements issued for fiscal years beginning after December 15, 2001.
         The Company has not determined the impact, if any, that the adoption of
         this statement will have on the Company's results of operation or
         financial position.

    (bb) CHANGES TO PRESENTATION: Certain changes have been made to the
         presentation of 1999 and 2000 balances so as to conform to the
         presentation of 2001.

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 1999, 2000 and 2001, amounted to $ 142, $ 72, and $ 64
         respectively, and are included in commissions in the accompanying
         consolidated statements of income. That contract will expire on April
         17, 2002, and, therefore, as of that date, the Company will no longer
         pay commissions to World Tankers (UK) Ltd.

     (b) KEY SYSTEMS S.A.: Effective 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 $ 44, $ 51 and $ 25 for 1999, 2000 and 2001, respectively.

     (c) BOARD OF DIRECTORS FEES: During 2001, the Company paid Board of
         Directors' fees of $ 93 (there were no such fees in prior years). Such
         fees are included in general and administrative expenses in the
         accompanying 2001 consolidated statement of income.

4.    ADVANCES FOR VESSELS UNDER CONSTRUCTION:

      During July 2000, the Company entered into an agreement with Daewoo
      Shipbuilding of Korea (ex Daewoo Heavy Industries) for the construction of
      four Panamax tankers with expected deliveries in January through May 2002.
      The total construction cost of the newbuildings will amount to $ 128,800
      of which 70% will be financed from the proceeds of long-term bank loans.
      In this respect the Company arranged three long-term bank loans of $
      22,500 (Note 8o), $ 45,000 (Note 8n) and $ 22,533 (Note 8p), each. The
      shipbuilding contract provides for stage payments of 20% in advance, 10%
      on keel laying, 10% on launching and 60% at delivery (Note 17).

      During July 2001, the Company entered into an agreement with a third party
      for the acquisition of a vessel under construction for $ 30,750. The
      vessel, a 35,000 DWT product, oil and chemical tanker, is being
      constructed by Daedong Shipbuilding Co. Ltd. with expected delivery in
      February

                                      F-14
<Page>

                     STELMAR SHIPPING LTD. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2000 AND 2001
    (Expressed in thousands of United States Dollars - except per share data
                            unless otherwise stated)

      2002. The Company as of December 31, 2001 paid the predelivery installment
      of $ 3,075 to the sellers and will make the final payment of approximately
      $ 28 million to the sellers upon delivery of the vessel. The cost of the
      newbuilding will be financed from the proceeds of a long-term bank loan
      and in this respect the Company arranged a long-term bank loan of $
      20,200.

      The loan mentioned above will be drawn-down in one tranche so as to
      coincide with the scheduled delivery payment and will mature eight years
      from the draw down. The loan will be repayable in sixteen semi-annual
      installments of $ 700 plus a balloon payment of $ 9,000 payable together
      with the last installment. The loan will bear interest at LIBOR plus a
      spread and will be secured as follows:

      -  First priority mortgage over the vessel

      -  Assignments of earnings and insurance of the mortgaged vessel

      -  Corporate guarantees

      The loan agreement includes covenants, among others, requiring the
      borrower to obtain the lender's prior consent in order to incur or issue
      any financial indebtedness, additional borrowings, pay dividends (as
      defined in the related agreement), pay stockholders' loans, sell vessels
      and assets and change the beneficial ownership or management of the
      vessels. Also, the covenants require the borrower to maintain a minimum
      hull value in connection with the vessel's outstanding loan, insurance
      coverage of the vessel against all customary risks and maintenance of
      operating bank accounts with minimum balances.

      The amount shown in the accompanying 2001 consolidated balance sheet
      includes payments to the shipyards and capitalized interest cost in
      accordance with the accounting policy discussed in Note 2i, as analyzed
      below:

<Table>
<Caption>
                                                                  AMOUNT
                                                               -----------
      <S>                                                         <C>
      Advance payments on signing of contracts                    28,827
      Additional pre-delivery payments                            16,096
      Capitalized interest                                           920
      Other                                                          712
                                                               -----------
                                                   TOTAL          46,555
                                                               ===========
</Table>

                                      F-15
<Page>

                     STELMAR SHIPPING LTD. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2000 AND 2001
    (Expressed in thousands of United States Dollars - except per share data
                            unless otherwise stated)

5.    VESSELS:

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

<Table>
<Caption>
                                                                              ACCUMULATED
                                                          VESSEL COST        DEPRECIATION      NET BOOK VALUE
                                                        --------------    ------------------   ---------------
      <S>                                                    <C>                   <C>                <C>
      DECEMBER 31, 1998                                       302,508              (31,506)           271,002
      Additions                                                42,711                    -             42,711
      Impairment loss                                         (6,500)                    -             (6,500)
      Depreciation for the year                                     -              (15,082)           (15,082)
                                                        --------------    ------------------   ---------------

      DECEMBER 31, 1999                                       338,719              (46,588)           292,131

      Disposals (Note 13)                                    (17,413)                5,142            (12,271)
      Depreciation for the year                                     -              (15,164)           (15,164)
                                                        --------------    ------------------   ---------------
      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
                                                        ==============    ==================   ===============
</Table>

      In 1999, the review of the Company's management as to the vessels'
      carrying amounts in connection with their expected recoverable amounts and
      the estimated undiscounted cash flows from future operations indicated
      that the carrying amount of the LOUCAS exceeded its expected recoverable
      amount. Accordingly, the management decided to recognize an impairment
      loss of $6,500, based upon a calculation of discounted expected cash
      flows, which was separately reflected in the accompanying 1999
      consolidated statement of income. In December 2000, the LOUCAS was sold
      for $12,900 and the Company realized a gain of $32, which has separately
      been reflected in the accompanying 2000 consolidated statement of income
      (Note 13).

      Cost of vessels at December 31, 1999, 2000 and 2001 includes $6,497,
      $6,334 and $8,218, respectively, of amounts capitalized in accordance with
      the accounting policy discussed in Note 2i above. Such capitalized amounts
      include interest costs of $ 2,091 relating to years prior to 1997.

      During 2001, the vessels operated mainly under time charters. At December
      31, 2001, the vessels were operating as follows:

                                      F-16
<Page>

                     STELMAR SHIPPING LTD. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2000 AND 2001
    (Expressed in thousands of United States Dollars - except per share data
                            unless otherwise stated)

<Table>
<Caption>
       VESSEL NAME          CHARTER TYPE       EXPIRATION DATE

       <S>                  <C>                <C>
       ALMAR                Time Charter       December 2006
       JACAMAR              Time Charter       February 2006
       TAKAMAR              Time Charter       September 2005
       KEYMAR               Time Charter       October 2004
       LIMAR                Time Charter       October 2004
       LUXMAR               Time Charter       August 2003
       PETROMAR             Time Charter       January 2003
       POLYS                Time Charter       December 2002
       CLELIAMAR            Time Charter       January 2003
       ALLENMAR             Time Charter       July 2002
       ERMAR                Time Charter       December 2003
       COLMAR               Time Charter       November 2002
       PRIMAR               Time Charter       November 2002
       FULMAR               Time Charter       July 2002
       KLIOMAR              Time Charter       January 2003
       NEDIMAR              Time Charter       March 2003
       RIMAR                Time Charter       August 2002
       CAMAR                Time Charter       September 2002
       JAMAR                Spot Market
       CAPEMAR              Spot Market
       PROMAR               Spot Market
       CITY UNIVERSITY      Spot Market
</Table>

6.    DEFERRED CHARGES:

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

<Table>
<Caption>
                                                                    LOAN FEES
                                                                       AND
                                              DRY-DOCKING        FINANCING COSTS       TOTAL
                                            -----------------  --------------------  ----------
      <S>                                             <C>                   <C>        <C>
      DECEMBER 31, 1998                                 797                   685       1,482
      -    Additions                                  1,045                   251       1,296
      -    Amortization                                (576)                 (265)       (841)
                                            -----------------  --------------------  ----------
      DECEMBER 31, 1999                               1,266                   671       1,937
      -    Additions                                    726                   289       1,015
      -    Write-off due to sale of the
           LOUCAS (Note 13)                               -                   (53)        (53)

      -    Amortization                                (847)                 (355)     (1,202)
                                            -----------------  --------------------  ----------
      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
                                            =================  ====================  ==========
</Table>

                                      F-17
<Page>

                     STELMAR SHIPPING LTD. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2000 AND 2001
    (Expressed in thousands of United States Dollars - except per share data
                            unless otherwise stated)

      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, in
      the accompanying consolidated statements of income.

7.    ACCRUED LIABILITIES:

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

<Table>
<Caption>
                                                           1999      2000      2001
                                                          -----     -----     -----

      <S>                                                   <C>     <C>       <C>
      P&I back calls                                         70        90       177
      Vessels' operating and voyage expenses                455       813     1,173
      General and administrative expenses                    16       514       668
                                                          -----     -----     -----
               TOTAL                                        541     1,417     2,018
                                                          =====     =====     =====
</Table>

8.    LONG-TERM DEBT:

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

<Table>
<Caption>
                                     BORROWER(S)                              2000          2001
                                     -----------                              ----          ----

         <S>                                                                 <C>           <C>
         (a)   Ariel Shipping Corporation                                      9,600         8,400
         (b)   Colmar Ltd.                                                     7,600         6,400
         (c)   Primar Shipping Ltd. and Palmar Maritime Ltd.                  23,555        20,776
         (d)   Nedimar Ltd.                                                   18,200        17,000
         (e)   Kliomar Ltd.                                                   22,463        19,950
         (f)   Polmar Ltd.                                                    22,325        20,475
         (g)   Cleliamar Ltd.                                                 22,325        20,475
         (h)   Keymar Ltd.                                                    17,583        16,153
         (i)   Takamar Ltd.                                                   27,516        25,578
         (j)   Jacamar Ltd.                                                   29,625        27,875
         (k)   Luxmar  Ltd.,  Limar Ltd.,  Camar Ltd.,  Jamar Ltd. and             -
               Ermar Ltd.                                                                   68,438
         (l)   Rimar Ltd.,  Almar Ltd.,  Allenmar  Ltd.,  Capemar Ltd.             -
               and Promar Ltd.                                                              69,875
         (m)   Petromar Ltd.                                                       -        19,440
         (n)   Pearlmar Ltd. and Jademar Ltd.                                      -        18,000
         (o)   Rubymar Ltd.                                                        -         6,750
         (p)   Rosemar Ltd.                                                        -         1,609
                                                                             --------      --------
               TOTAL                                                         200,792       367,194
               LESS- CURRENT PORTION                                         (17,710)      (40,332)
                                                                             --------      --------
               LONG-TERM PORTION                                             183,082       326,862
                                                                             ========      ========
</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 balance at December 31, 2001 is repayable in two equal
              semi-annual installments through December 2002 and a balloon
              payment of $7,200 payable in June 2003. The interest rate is based
              upon LIBOR plus a

                                      F-18

<Page>

                     STELMAR SHIPPING LTD. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2000 AND 2001
    (Expressed in thousands of United States Dollars - except per share data
                            unless otherwise stated)

              spread. The interest rates, including the spread, at December 31,
              2000 and 2001 were 6.96% and 2.75%, 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 balance at December 31, 2001 is repayable in two equal
              semi-annual installments through December 2002 and a balloon
              payment of $5,200 payable in June 2003. The interest rate is based
              upon LIBOR plus a spread. The interest rates, including the
              spread, at December 31, 2000 and 2001 were 6.96% and 2.75%,
              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 (Note 13),
              subsequent to December 31, 2000, the loan was refinanced and the
              balance at December 31, 2001 is repayable in fifteen 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, 2000 and 2001 were
              7.75% and 3.00%, 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 balance at December 31, 2001 is repayable in three
              equal semi-annual installments through June 2003 and a balloon
              payment of $15,200 payable in December 2003. The interest rate is
              based upon LIBOR plus a spread. The interest rates, including the
              spread, at December 31, 2000 and 2001 were 6.96% and 2.75%,
              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, 2001 is repayable in
              eight 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, 2000 and
              2001 were 7.48% and 2.73%, 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, 2001 is repayable
              in thirteen 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, 2000 and
              2001 were 7.60% and 4.79%, 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, 2001 is repayable in
              thirteen 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, 2000 and
              2001 were 7.52% and 4.79%, respectively.

                                      F-19
<Page>

                     STELMAR SHIPPING LTD. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2000 AND 2001
    (Expressed in thousands of United States Dollars - except per share data
                            unless otherwise stated)

          (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, 2001 is repayable
              in twenty-seven 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,
              2000 and 2001 were 7.33% and 3.27%, 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, 2001 is repayable
              in twenty-seven equal quarterly installments through September
              2008 and a balloon payment of $12,500 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,
              2000 and 2001 were 7.33% and 3.15%, 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, 2001 is repayable
              in nineteen equal semi-annual installments through February 2011
              and a balloon payment of $8,875 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, 2000 and
              2001 were 7.55% and 5.9%, 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, 2001 is repayable in fifteen equal semi-annual
              installments through June 2009. The interest rate is based upon
              LIBOR plus a spread. The interest rate, including the spread, at
              December 31, 2001 was 3.06%.

          (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. The balance at
              December 31, 2001 is repayable in fifteen equal quarterly
              installments of $2,125 each, twelve equal quarterly installments
              of $1,250 each through September 2008 and a balloon payment of
              $23,000 payable together with the last installment. The interest
              rate is based upon LIBOR plus a spread. The interest rate,
              including the spread, at December 31, 2001 was 3.21%.

          (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, 2001 is repayable in
              nineteen 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 rate, including the spread, at December 31, 2001 was
              5.49%.

          (n) LOAN: The balance at December 31, 2001, represents partial
              drawdowns of a U.S. Dollar bank loan (original amount $45,000) to
              partially finance the construction cost of the Hulls Nos. 5210 and
              5211. The part of the loan relating to Hull No. 5210 was fully
              drawn down in January 2002 (Note 17). The loan is repayable in
              twenty equal semi-annual installments through 2012 and a balloon
              payment of $14,000 payable together with the last installment. The
              interest rate, including the spread, at December 31, 2001 was
              3.13%.

                                      F-20
<Page>

                     STELMAR SHIPPING LTD. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2000 AND 2001
    (Expressed in thousands of United States Dollars - except per share data
                            unless otherwise stated)

          (o) LOAN: The balance at December 31, 2001, represents partial
              drawdowns of a U.S. Dollar bank loan (original amount $22,500) to
              partially finance the construction cost of HULL NO. 5212. The loan
              will fully be drawn down upon the delivery of the vessel (Note 4)
              and is repayable in forty quarterly equal installments and a
              balloon payment of $7,500 payable together with the last
              installment. The interest rate, including the spread, at December
              31, 2001 was 6.2%.

          (p) LOAN: The balance at December 31, 2001, represents partial draw
              downs of a U.S. Dollar bank loan (original amount $22,533) to
              partially finance the construction cost of HULL NO. 5213. The loan
              will fully be drawndown upon the delivery of the vessel (Note 4)
              and is repayable in twenty equal semi-annual installments and a
              balloon payment of $10,000 payable together with the last
              installment. The interest rate, including the spread, at December
              31, 2001 was 6.15%.

      The range of the interest rates of the above loans during the years ended
      December 31, 1999, 2000 and 2001 was as follows:

<Table>
<Caption>
      <S>         <C>
      1999        3.19% - 6.19%
      2000        6.92% - 7.33%
      2001        2.72% - 7.75%
</Table>

              Bank loan interest expense for the years ended December 31, 1999,
      2000 and 2001 amounted to $13,373, $16,273 and $16,732 respectively, and
      is included in interest and finance costs, net, in the accompanying
      consolidated statements of income.

      The loans are secured as follows:

          - First, second, third and fourth priority mortgages over the COLMAR;

          - First, second and third priority mortgages over the KLIOMAR;

          - First and second priority mortgages over the POLYS, CLELIAMAR,
            PRIMAR and CITY UNIVERSITY;

          - First priority mortgage over the FULMAR, NEDIMAR, KEYMAR, TAKAMAR,
            JACAMAR, LUXMAR, LIMAR, CAMAR, JAMAR, ERMAR, RIMAR, ALMAR, ALLENMAR,
            CAPEMAR, PROMAR AND PETROMAR;

          - Assignments of earnings and insurances of the mortgaged vessels;

          - Pledge of shares of the borrowers; and

          - 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), pay stockholders' loans, 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

                                      F-21
<Page>

                     STELMAR SHIPPING LTD. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2000 AND 2001
    (Expressed in thousands of United States Dollars - except per share data
                            unless otherwise stated)

      with the covenants of certain loans, dividends cannot be distributed
      without the prior consent of the lending banks.

      The annual principal payments required to be made subsequent to December
      31, 2001 are as follows:

<Table>
<Caption>
       YEAR                        AMOUNT
       ----                        ------
       <S>                        <C>
       2002                        40,332
       2003                        68,558
       2004                        40,358
       2005                        59,039
       2006                        31,566
       2007 and thereafter        127,341
                                 --------
                                  367,194
                                 ========
</Table>

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:


      As of March 31, 2001, 323,500 shares of common stock had been reserved for
      issuance upon exercise of the options granted to the Company's officers,
      key employees and directors under the 2001 Stock Option Plan (the "Plan")
      of the Company. The exercise price of each option equals $12.30. On
      October 11, 2001, 8,000 additional options to acquire common stock were
      granted to certain members of the Board of Directors. The exercise price
      of such options equals $13.52. The Company accounts for the Plan under APB
      opinion No. 25, according to which no compensation expense was recognized
      during 2001 as the exercise price was equal to the grant date fair value
      of the stock. Under the terms of the Plan, no options can be exercised
      until at least two years from the closing of the offering (March 6, 2001).
      The plan expires 10 years from March 6, 2001.


      In addition to the Plan, on October 11, 2001, an aggregate of 8,000
      additional options to acquire common stock were granted to certain members
      of the Board of Directors. 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.

      Presented below is a table reflecting the activity in the Plan from March
      31, 2001 through December 31, 2001.


<TABLE>
<CAPTION>

                                                          WEIGHTED                           WEIGHTED
                                                           AVERAGE                           AVERAGE
                                                           EXERCISE        OPTIONS           EXERCISE
                                           OPTIONS          PRICE        EXERCISABLE          PRICE
                                           -------       ----------      -----------         --------
<S>                                       <C>             <C>            <C>                  <C>

Options granted, March 31, 2001             323,500        12.31               -                  -
 --      Exercised                                -          -                 -                  -
 --      Vested                                   -          -                 -                  -
 --      Cancelled                                -          -                 -                  -
Options granted, October 11, 2001             8,000        13.52               -                  -
 --      Exercised                                -          -                 -                  -
 --      Vested                                   -          -                 -                  -
 --      Cancelled                                -          -                 -                  -


  December 31, 2001                       331,500          12.31               -                  -

</TABLE>


Compensation cost for the Plan determined according to SFAS No. 123, which would
not significantly reduce the Company's net income and earnings per share for
2001, has as follows:

<TABLE>
<CAPTION>


                                      AMOUNT
                                      ------
<S>                                  <C>

 Net income
 --      As reported                  34,013
 --      Pro Forma                    33,917

 Basic EPS
 --      As reported                    3.31
 --      Pro Forma                      3.30

 Diluted EPS
 --      As reported                    3.29
--       Pro Forma                      3.28

</TABLE>

      The effects of applying SFAS No. 123 are not indicative of future amounts.

                                      F-22
<Page>

                     STELMAR SHIPPING LTD. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2000 AND 2001
    (Expressed in thousands of United States Dollars - except per share data
                            unless otherwise stated)

      The fair value of options granted is estimated as of the date of grant
      using the Black-Scholes option pricing model with the following weighted
      average assumptions:

<Table>
<Caption>
      <S>                                                   <C>
      Expected life of option (years)                       10
      Risk-Free interest rate                               5.2%
      Expected volatility of the Company's stock            35.4%
      Expected dividend yield on Company's stock            N/A
</Table>

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 denominator for the calculation of basic earnings
      per share and diluted earnings per share is as follows:

<Table>
<Caption>
                                                       1999                 2000                  2001
                                                       ----                 ----                  ----
      <S>                                          <C>                  <C>                   <C>
      Basic earnings per share:
      Weighted average common
          shares outstanding........                 3,750,205            3,824,750            10,290,028
      Diluted earnings per share:
      Weighted average common
          shares outstanding........                 3,750,205            3,824,750            10,290,028
      Options........................                        -                    -                63,782
      Weighted average common
          shares - diluted                           3,750,205            3,824,750            10,353,810
      Basic earnings per common
          share:......................             $      2.08          $      2.94           $      3.31
      Diluted earnings per common
          share:.......................            $      2.08          $      2.94           $      3.29
</Table>

12.  INTEREST AND FINANCE COSTS:

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

<Table>
<Caption>
                                                 1999         2000         2001
                                                 ----         ----         ----
      <S>                                       <C>          <C>          <C>
      Interest on long-term debt                13,373       16,273       16,732
      Mortgagee interest                           138           83          130
      Bank charges                                  56           42           88
      Amortization of financing fees                87           86          139
                                               -------       -------     --------
               TOTAL                            13,654       16,484       17,089
                                               =======       =======     ========
</Table>

      On November 9, 1998, the interest rate for the loan relating to the KEYMAR
      was fixed at 5.52% (including 0.60% spread) under a swap agreement for
      originally a period of five years (through

                                      F-23
<Page>

                     STELMAR SHIPPING LTD. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2000 AND 2001
    (Expressed in thousands of United States Dollars - except per share data
                            unless otherwise stated)

      September 10, 2003). The agreement was eventually terminated on March 2,
      1999. Interest on long-term debt above includes $599 of interest
      differential gained during 1999.

13.   GAIN ON SALE OF VESSEL:

              Upon the sale of the LOUCAS the Company realized a gain, as
analyzed below:

<Table>
<Caption>
                                                                 AMOUNT
                                                                --------
        <S>                                                     <C>
        SALE PROCEEDS, NET

        -Selling price                                           12,900
        -Other sale expenses                                       (544)
                                                                -------
                                                                 12,356

        VESSEL'S NET BOOK VALUE AT THE DATE OF SALE

        -Vessel's cost (Note 5)                                 (17,413)
        -Depreciation up to the sale date (Note 5)                5,142
                                                                -------
                                                                (12,271)

        DEFERRED CHARGES, WRITTEN-OFF (NOTE 6)                      (53)
                                                                -------
                 NET GAIN                                            32
                                                                =======
</Table>

14.   INTEREST RATE AGREEMENTS:

      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. Under this agreement, the Company is covered for an interest rate
      up to LIBOR of 7%. For this coverage the Company collected in 1999 an
      amount of $347, which is included in other, net in the accompanying 1999
      consolidated financial statements. Since then, as LIBOR has not exceeded
      7%, there was no charge for the Company with respect to this interest rate
      cap agreement.

      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 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 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 interest rates at
      4.25% and 4.77%, respectively.

      During 2001, interest on long term debt (Note 12), includes losses of $914
      which were realized and applied against related interest costs.

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

                                      F-24
<Page>

                     STELMAR SHIPPING LTD. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2000 AND 2001
    (Expressed in thousands of United States Dollars - except per share data
                            unless otherwise stated)

      included in vessel operating expenses in the accompanying consolidated
      statements of income ($138, $80, and $93 in 1999, 2000 and 2001,
      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 provision for
      income taxes of $14, $15, and $79 in 1999, 2000 and 2001, respectively,
      which is included in general and administrative taxes.

      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 relevant provision
              for uncollectable 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. Accordingly the fair market value
              of the swap agreements mentioned above, at December 31, 2001, was
              $2,500 and has been included in "Comprehensive Income" in the
              accompanying December 31, 2001 consolidated balance sheet.

                                      F-25
<Page>

                     STELMAR SHIPPING LTD. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2000 AND 2001
    (Expressed in thousands of United States Dollars - except per share data
                            unless otherwise stated)

17.   SUBSEQUENT EVENT:

      DELIVERY OF VESSEL: On January 26, 2002, the Company took delivery of M/T
      Pearlmar, one of the four Panamax Tankers being constructed by Daewoo (see
      note 4). As further explained in Note 4 above the vessel's acquisition
      cost was partially financed by a loan of $22,500.

                                      F-26
<Page>

<Page>

    STELMAR SHIPPING LTD.
    SCHEDULE I - CONDENSED FINANCIAL INFORMATION
    STATEMENTS OF CASH FLOWS
    FOR THE YEARS ENDED DECEMBER 31, 1999, 2000 AND 2001
    (Expressed in thousands of U.S. Dollars)

<Table>
<Caption>

                                                            1999            2000          2001
                                                          ---------      ---------      ---------
<S>                                                       <C>            <C>            <C>
    CASH FLOWS FROM OPERATING ACTIVITIES:

      Net income                                          $   7,794      $  11,235      $  34,013
      Adjustments to reconcile net income to net cash
      provided by operating activities:
      Increase (Decrease) in:
         Accounts payable                                       104            108           (125)
      Translation adjustment                                   (134)           (84)           133
                                                          ---------      ---------      ---------
    NET CASH FROM OPERATING ACTIVITIES                        7,764         11,259         34,021
                                                          ---------      ---------      ---------

    CASH FLOWS FROM (USED IN) INVESTING ACTIVITIES:

         Reinvestment of earnings                                --             --         (6,831)
         Investment in subsidiaries                          (7,758)       (11,259)      (121,389)
                                                          ---------      ---------      ---------
    NET CASH FROM (USED IN) INVESTING ACTIVITIES             (7,758)       (11,259)      (128,220)
                                                          ---------      ---------      ---------

    CASH FLOWS FROM (USED IN) FINANCING ACTIVITIES:

         Dividends received and reinvested                       --             --          6,831
         Proceeds from initial public offering, net              --             --         88,236
                                                          ---------      ---------      ---------
    NET CASH FROM (USED IN) FINANCING ACTIVITIES                 --             --         95,067
                                                          ---------      ---------      ---------

    NET INCREASE IN CASH AND CASH EQUIVALENTS                     6             --            868
    CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR               96            102            102
                                                          ---------      ---------      ---------
    CASH AND CASH EQUIVALENTS AT END OF YEAR              $     102      $     102      $     970
                                                          =========      =========      =========
</Table>


        The accompanying notes are an integral part of these statements.


                                      F-27
<Page>

ITEM 19.  EXHIBITS.

<Table>
<Caption>
        Exhibit
         Number                             Description
        -------                             ------------
          <S>       <C>
          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))
</Table>

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<Table>

          <S>       <C>
          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))
</Table>

                                      II-2

<Page>

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          <S>       <C>
          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))
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                                      II-3
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          <S>       <C>
          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))
          10.1      Consent of Independent Public Accountants
</Table>


   *
   **Previously filed.

                                      II-4
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                                   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.

                                         By:  /s/ Peter Goodfellow
                                              ----------------------------------
                                              Name:  Peter Goodfellow
                                              Title: Chief Executive Officer

Date: April 8, 2002