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

                                   FORM 20-F

(Mark One)

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

                                      OR

[X]              ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
                    OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2002
                          ----------------------------------------------------

                                      OR

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

For the transition period from
                              ------------------------------------------------

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


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


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


                              Republic of Liberia
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                (Jurisdiction of incorporation or organization)


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

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


                                                     Name of each exchange
            Title of each class                     on which registered

       common stock, par value $0.02 per share      New York Stock  Exchange
------------------------------------------------------------------------------


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

                                     NONE
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                               (Title of class)


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

                                     NONE
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                               (Title of class)

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

16,819,750 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
                             -------             --------


<PAGE>


                               TABLE OF CONTENTS

                                                                          Page

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

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

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

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

   ITEM 4.  INFORMATION ON THE COMPANY......................................14

   ITEM 5.  OPERATING AND FINANCIAL REVIEW AND PROSPECTS....................30

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

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

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

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

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

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

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

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

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

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

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

   ITEM 17. FINANCIAL STATEMENTS............................................61

   ITEM 18. FINANCIAL STATEMENTS............................................61

   ITEM 19. EXHIBITS......................................................II-1



<PAGE>


          CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

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

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

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

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


<PAGE>


                                    PART I

ITEM 1. Identity Of Directors, Senior Management and Advisers

        Not  applicable

ITEM 2. Offer Statistics and Expected Timetable

        Not  Applicable

ITEM 3. Key Information

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

A. Selected Financial Data

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


<PAGE>


                 SELECTED CONSOLIDATED FINANCIAL AND OTHER DATA

     The following  selected  consolidated  financial and other data summarize
our historical  consolidated financial information.  The information as of and
for each of the five  years  ended  December  31,  2002 was  derived  from our
audited  consolidated  financial  statements  prepared in accordance with U.S.
Generally Accepted Accounting Principles.

                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,
                            ---------------------------------------------
                               1998        1999       2000            2001        2002
                               ----        ----       ----           ----         ----
<S>                            <C>         <C>         <C>           <C>          <C>
Statement of Income Data:
Revenue from vessels......     $56,783     $68,539     $68,575      $111,198      $160,210
Revenue from vessels, net.      55,255      66,790      66,704       108,647       156,508
Voyage expenses...........       3,106       5,194       5,450         8,743         8,129
Vessel  operating
expenses  (1)..............     12,126      15,188      14,959        23,093        40,310
Depreciation (2)..........      12,089      15,425      15,441        21,755        34,644
Amortized deferred
  drydocking and
  establishment costs (3).         867         754       1,116           960         3,211
General and administrative
  expenses................       2,490       2,939       2,876         4,583         7,751
Impairment loss (4).......           0       6,500           0             0             0
Operating income..........      24,577      20,790      26,862        49,513        62,463
Interest  and finance
 costs, net..............       11,937      13,025      15,428        15,534        18,545
                                ------      ------      ------        ------        ------
Net income................     $12,414      $7,794     $11,235       $34,013       $43,286
                               =======      ======     =======       =======       =======

Balance  Sheet Data (at end
of period):
Cash and cash equivalents.     $13,331     $14,741     $26,464       $34,417       $36,123
Total assets..............     293,785     317,825     299,215       592,183       823,357
Long term  debt,  including
  current portion.........     215,720     231,181     200,792       367,194       488,609
Total stockholders equity.      70,755      78,415      89,566       209,448       312,148

Other Financial Data:
EBITDA (5)................     $37,533     $43,483     $43,434       $72,307      $100,318
Net   cash    provided   by
  operating activities....      27,549      25,033      30,529        50,233        74,575
Net  cash  from  (used  in)
  investing activities....    (106,877)    (38,833)     11,872      (295,462)     (258,278)
Net  cash  from  (used  in)
  financing activities....      82,203      15,210     (30,678)      253,182       185,409

Fleet Data:
Average number of vessels.         9.6        11.8        12.0          17.6          28.1
Number of  vessels  (at end
  of period)..............        11.0        12.0        11.0          22.0          31.0
Average   age   of   fleet,
  excluding    newbuildings
  (in years) (6)..........         6.6         6.6         6.9           8.1           7.2

Total operating days (7)..       3,419       4,224       4,282         6,110         9,912
Total  available  ship
days (8).....................    3,501       4,324       4,370         6,418        10,254
Average    daily    revenue
  earned (8)..............     $14,895     $14,245     $14,017       $15,566       $14,469
TCE per vessel per day (9)      15,700      14,995      14,743        16,769        15,341

Vessel operating expenses
  per ship
  per day (1).............      $3,464      $3,512      $3,423        $3,598        $3,931
Vessel overhead burden
  per ship
  per day (10)............         711         680         658           715           756

Operating   cash  flow
  per ship
  per day (11).......           10,721      10,056       9,939        11,266         9,783

Per Share Data:

Earnings per  share,
  basic (4)...............       $3.31       $2.08       $2.94         $3.31         $2.84
Earnings  per share,
  fully diluted..........         3.31        2.08        2.94          3.29          2.83
Weighted  average number of
  shares, basic...........    3,750,000  3,750,205   3,824,750    10,290,028    15,262,194
Weighted  average number of
  shares, fully diluted       3,750,000  3,750,203   3,824,750    10,353,810    15,314,250
Dividends per share.......            0          0           0             0             0



</TABLE>

                          See footnotes on next page


<PAGE>


(1)  Vessel  operating  expenses are costs that vessel owners  typically bear,
     including crew wages, vessel supplies,  insurance, tonnage taxes, routine
     repairs and maintenance,  including  continuous  special survey costs and
     other direct operating costs. We calculate vessel operating  expenses per
     ship per day as the result of vessel  operating  expenses  divided by the
     total number of available ship days.

(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 their
     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.

(4)  We recognized  impairment in the carrying amount of one of our vessels in
     1999. The effect of the impairment was to reduce our earnings per share
     by $1.66.

     (5) We define  EBITDA as net  income  plus net  interest,  income  taxes,
depreciation, impairment, amortization, foreign exchange gains (losses), gains
(losses) on disposition of assets and other minor non-operating expenses.
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.

     EBITDA was calculated as follows:

                                Year Ended December 31,
                           1998     1999      2000     2001      2002
                           ----     ----      ----     ----      ----
     Net income          12,414    7,794    11,235   34,013    43,286
     Interest and        12,468   13,654    16,484   17,089    18,826
     finance cost
     Interest income      (531)     (629)   (1,056)  (1,555)     (281)
     Depreciation        12,089   15,425    15,441   21,755    34,644
     Impairment loss          0    6,500         0        0         0
     Amortization           867      754     1,116      960     3,211
     Other items (a)        226      (15)      214       45       632
                         ----------------------------------------------
     EBITDA              37,553   43,483    43,434   72,307   100,318
                         ==============================================

     (a) Other  items  consist  of  foreign  exchange  gains  (losses),  gains
         (losses) on disposition of assets and other minor non-operating
         expenses.

(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.  On a fleet
     basis we  calculate  TCE per  vessel  per day by  dividing  revenue  from
     vessels net of voyage expenses with the total operating 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. 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.


<PAGE>


B.   Reason for the Offer and Use of Proceeds

     Not  Applicable.

C.   Risk Factors

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

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

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

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

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

     o    demand for oil and oil products;

     o    global and regional economic conditions;

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

     o    changes in seaborne and other transportation patterns.

     The  factors that influence the supply of tanker capacity include:

     o    the number of newbuilding deliveries;

     o    the scrapping rate of older vessels; and

     o    the number of vessels that are out of service.

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

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

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

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

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

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

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

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

     o    general  economic  and  market   conditions   affecting  the  tanker
          industry;

     o    competition from other shipping companies;

     o    types and sizes of vessels;

     o    other modes of transportation;

     o    cost of newbuildings;

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

     o    prevailing level of charter rates; and

     o    technological advances.

     When each of our tankers reach 15 years of age we 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 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 years of age in the next two
years.  If we determine at any time that a vessel's future limited useful life
and earnings requires us to impair its value on our financial statements, that
could  result  in a charge  against  our  earnings  and the  reduction  of our
shareholder's  equity. If for any reason we sell tankers at a time when tanker
prices have fallen,  the sale may be less than the vessel's carrying amount on
our financial statements,  with the result that we would also incur a loss and
a reduction in earnings.

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

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

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

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

     We must dedicate a large part of our cash flow from  operations to paying
principal  and  interest  on our  indebtedness.  These  payments  limit  funds
available for working capital,  capital expenditures and other purposes. As of
December 31, 2002, we had total  indebtedness of $488.6 million and a ratio of
indebtedness  to total capital of 61%. As we expand our fleet, we will need to
incur additional indebtedness. Our inability to service our debt could lead to
acceleration of our debt and the foreclosure of our fleet.

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

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

     o    incur additional indebtedness;

     o    create liens on our assets;

     o    sell capital stock of our subsidiaries;

     o    make investments;

     o    engage in mergers or acquisitions;

     o    pay dividends and make capital expenditures;

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

     o    sell our vessels.

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

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

     We seek to  deploy  our  tankers  both on time  charters  and in the spot
market in a manner that will optimize our  earnings.  As of December 31, 2002,
27 tankers in our current fleet are contractually  committed to time charters,
with the remaining terms of these charters  ranging from one month to four and
a half years.  Ten of the tankers in our total fleet  completed  their current
time charters  during 2002. In terms of net operating days, 78% and 37% of our
fleet's capacity are covered by time charters for 2003 and 2004, respectively.
While the spot market for tankers has recently improved,  if market rates drop
to  previous  lower  levels,  that could  substantially  adversely  affect our
earnings  as  vessels  complete  their  current  time  charters.  If we cannot
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 2002,  approximately  22% of our revenue
derived from two charterers and in 2001,  approximately 47% of our revenue for
our fleet derived from three  charterers.  Seven of the tankers in our current
fleet operate under time charters with Adam Maritime Corporation, a subsidiary
of Glencore  International AG, which provided 17.4% of our revenue in 2002 and
ST Shipping,  a company related to Adam Maritime  Corporation,  which provided
4.8%.  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.

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

     From 2001 to 2002,  we more than  doubled  the  number of  vessels in our
fleet. During 2002, we received delivery of six Panamax newbuildings and three
modern Handymax  tankers.  Our fleet expansion will continue with the purchase
of the five Panamax tanker  newbuildings  under  construction  in South Korea,
which are  scheduled  to be  delivered  during the period from  November  2003
through July 2004,  as well as the  purchase of the six Handymax  newbuildings
which are scheduled to be delivered  between December 2003 and September 2004.
In addition to  depending on our ability to procure  funding,  our growth will
also depend on our ability to:

     o    identify and consummate acquisitions or joint ventures;

     o    integrate  any  acquired  business  successfully  with our  existing
          operations;

     o    identify new markets;

     o    manage expansion; and

     o    obtain required financing.

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

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

     Our  success  depends to a  significant  extent  upon the  abilities  and
efforts of our management  team. Most of our senior  executives have each been
with us for over seven years and have significant industry  experience.  We do
not  currently  have long term  employment  contracts  with any of our  senior
executives,  including Peter Goodfellow, our Chief Executive Officer, Stamatis
Molaris,  our  Chief  Financial  Officer,  Kostas  Manoudakis,  our  Technical
Manager,  and George Dienis, our Operations  Manager.  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 900 seafarers and 63 land-based employees in the
Athens  and  London   offices.   The   employees  in  Athens  are  covered  by
industry-wide  collective bargaining  agreements that set basic standards.  We
cannot assure you that these agreements will prevent labor interruptions.  Any
labor  interruptions  could  disrupt  our  operations  and harm our  financial
performance.

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

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

     On February  1, 2003,  M/T Keymar was  grounded  by strong  winds and was
subsequently refloated. She is currently undergoing major repairs, the cost of
which is covered by her underwriters. The vessel is estimated to remain out of
operations until August 2003.

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

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

     In general,  the costs to maintain a vessel in good  operating  condition
increase  with the age of the  vessel.  As of  December  31,  2002,  our fleet
included 11 vessels  more than 10 years of age.  Older  vessels are  typically
less fuel-efficient than more recently constructed vessels due to improvements
in engine technology. Cargo insurance rates increase with the age of a vessel,
making older vessels less desirable to charterers.

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

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

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

     o    marine disaster;

     o    piracy;

     o    environmental accidents;

     o    cargo and property losses or damage; and

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

     We generate all of our revenues in U.S.  dollars but incur  approximately
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, 2002, 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, 2002, we have interest
rate cap and swap agreements  expiring between 2005 and 2006 for approximately
25.5% of the then outstanding principal amounts of our loans that may mitigate
some of this exposure.

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

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


<PAGE>


ITEM 4.


Information On The Company

Our Fleet

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


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

Handymax
--------

Ambermar            2002     35,700     DH         A        TC to Aug. 2003 (2)
Petromar            2001     35,768     DH         A        TC to Jan. 2003
Maremar             1998     47,225     DH         B        TC to March 2005
Aquamar             1998     47,236     DH         B        TC to Aug. 2004
Rimar               1998     45,999     DH         C        TC to 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
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        TC to April 2003
Ermar               1988     39,977     DS         F        TC to Dec. 2003
Promar(3)           1988     39,989     DS         F        Spot Market
Capemar             1987     37,615     DS                  Spot Market
City University     1987     39,729     DS         G        Spot Market
Colmar              1987     39,729     DS         G        Spot Market
                            -------
Subtotal dwt                806,931

Panamax
-------

Hull 5239*+
Hull 5240*+
Hull 5241*+
Hull 5242*+
Hull 5243*+
Goldmar*            2002     69,700     DH         H        TC to May 2007
Silvermar*          2002     69,700     DH         H        TC to June 2007
Rubymar*            2002     69,697     DH         H        TC to April 2004
Rosemar*            2002     69,697     DH         H        TC to May 2004
Pearlmar*           2002     69,697     DH         H        TC to Jan. 2004
Jademar*            2002     69,697     DH         H        TC to Mar. 2004
Cleliamar*          1993     68,623     DH         I        TC to Jan. 2003
Polys*              1993     68,623     DH         I        TC to Dec. 2002
                            -------
Subtotal dwt                555,434

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                 1,762,299


Average Age of Fleet (4)  7.2 years


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

     +    Tankers  currently  under  construction  and  scheduled for delivery
          during the period from November 2003 through July 2004.

(1)  DH is a double-hulled  vessel  constructed  with double sides and a double
     bottom; DS is a double-sided  vessel constructed with double sides but is
     not equipped  with a double  bottom;  and SH is a single hull vessel that
     has neither double sides nor a double bottom.

(2)  TC means time charter.

(3)  Sold after December 31, 2002.

(4)  Average  age  of  fleet  calculated  on  basis  of  dwt,   excluding  the
     newbuildings to be delivered during the period from November 2003 through
     July 2004.

General

     We   are developing our fleet with a primary focus on:

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

     o    Panamax tankers, which primarily transport crude oil.

     As of  December  31,  2002 we own and  operate  our  current  fleet of 31
tankers with a total cargo carrying capacity of approximately 1.8 million dwt,
which includes:

     o    19 Handymax tankers;

     o    8 Panamax tankers; and

     o    4 Aframax tankers.

     In addition,  we have  contracted  for the  construction  of five Panamax
tankers  with  Daewoo  shipyards  in South  Korea  which are  scheduled  to be
delivered  during the period from November  2003 through July 2004.  The total
contract cost is $153.8 million.

     We have  also  agreed  to  purchase  six high  specification  double-hull
Handymax  newbuildings  being  constructed  for privately owned Greek shipping
interests.  These new vessels  will be  delivered  between  December  2003 and
September 2004 at a total contract price of approximately $173.2 million.

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

     Since our  inception,  we have  pursued a program of growth  through  the
purchase  of newly  constructed  and modern  secondhand  small-to-medium-sized
tankers, with an increasing recent focus on Handymax and Panamax tankers. Over
the past four years,  we have  expanded the size and carrying  capacity of our
current  fleet from 826,501 dwt to  1,762,299  dwt, and the average age of our
current  fleet by dwt as of December 31, 2002 was  approximately  7 years,  as
compared  to  approximately  14 years for the  world  tanker  fleet.  With the
addition  of the  five  newly-built  Panamax  tankers  and  the  six  Handymax
newbuildings  currently under construction,  the total cargo carrying capacity
of our fleet will increase to 2.4 million dwt and the average age of our total
fleet by dwt at the completion of delivery will be 6 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 major oil companies,  such as ExxonMobil,  Shell  International  Petroleum
Company,  BP  Amoco  plc  and  Chevron  Texaco,  Corp.  These  companies  have
previously  vetted and chartered our vessels,  and we believe that our vessels
will continue to qualify for future service with these companies.  Our current
customers  include  oil  traders  and oil  companies  such as Vitol,  Glencore
International  AG, SK Shipping,  PDVSA,  the Venezuelan  national oil company,
Citgo, ExxonMobil, and Famm, a commercial arm of Chevron Texaco Corp. In 2002,
we derived approximately 22% of our revenues from the following charterers:

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

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

     We have historically  achieved consistent cash flows and high utilization
rates by  chartering  most of our tankers for fixed periods of time under time
charters,  ranging from one to seven years. We also stage our time charters so
that they expire at  different  times in order to mitigate  the effects of the
cyclical tanker charter market.  We generated  approximately  94.7% of our net
revenues in 2002 from time charters. Our two newest Panamax tankers which were
delivered  during  the  second  quarter of 2002 are  already  operating  under
five-year time charters.

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

Strategy

     The  following characterize the international tanker industry:

     o    high fragmentation among vessel owners;

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

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

     o    an aging world tanker fleet.

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

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

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

     o    Operate  a  Significant  Fleet  in  Selected  Markets.  We  focus on
          Handymax  tankers  that  primarily  carry  refined oil  products and
          Panamax  crude oil  tankers  because  rates for those  tankers  have
          historically  been less volatile than rates for larger tankers.  Due
          to the highly  fragmented  market,  our current fleet of 19 Handymax
          tankers and 8 Panamax tankers constitutes one of the world's largest
          modern  Handymax  and Panamax  tanker  fleets.  The 6 Handymax and 5
          Panamax newbuildings will add to that fleet when they are delivered.

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

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

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

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

Fleet Characteristics

     The tankers in our current fleet, including the five Panamax newbuildings
currently under  construction  and scheduled to be delivered during the period
from November 2003 through July 2004, and the six Handymax newbuildings,  have
a total cargo  capacity of 2.4 million dwt. As of December 31, 2002, the
average age of our current fleet was 7.2 years, while,  according to industry
sources, the average age of the world's tanker fleet was 14.0 years.

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

     As of December 31, 2002, the vessels in our current fleet that are sister
     ships are as follows:

     o    Ambermar and Petromar;

     o    Maremar and Aquamar;

     o    Polys and Cleliamar;

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

     o    Jacamar and Takamar;

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

     o    Fulmar and Primar;

     o    Camar and Jamar;

     o    Ermar and Promar; and

     o    Colmar and City University.

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

Chartering of the Fleet

     We have  historically  chartered most of our vessels for fixed periods of
approximately  one to seven  years.  Under  the terms of these  charters,  the
charterer designates the cargo, trade route and schedule and bears bunkers and
port costs, while we are responsible for maintaining and operating the vessel,
including  provision of the crew.  Approximately  94.7% of our revenue in 2002
was derived from time charters.  Twenty-seven of our vessels  (including those
currently under  construction)  operate on time charters with expiration dates
from January 2003 through June 2007 and four trade in the spot market. We have
arranged for time charters for four of the five Panamax newbuildings scheduled
for delivery  during the period from  November 2003 through July 2004. We also
trade in the spot market to take advantage of potential market  opportunities,
to  maintain a constant  presence in the market and to  strategically  monitor
market trends.

Customers

     Our current  customers  include oil  traders  and oil  companies  such as
Vitol, Glencore International AG, SK Shipping,  PDVSA, the Venezuelan national
oil company,  Citgo,  ExxonMobil and Famm, a commercial  arm of  ChevronTexaco
Corp. In 2002, we derived  approximately 22% of our revenue from the following
charterers:

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

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

Management of the Fleet

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

     o    supervising the maintenance and general efficiency of the vessels;

     o    crewing;

     o    arrangement of bunkers;

     o    arrangement and supervision of drydocking and repairs;

     o    alterations and the upkeep of the vessels;

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

     o    appointment of supervisors and technical consultants.

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

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

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

The International Tanker Industry

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

     o    major oil companies; and

     o    independent shipowners.

     They provide transportation services for end users such as:

     o    oil companies;

     o    oil traders;

     o    petroleum product producers; and

     o    government agencies.

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

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

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

     o    conduct a physical inspection;

     o    obtain a completed "vessel particulars questionnaire;"

     o    obtain Ship Inspection Report Program reports;

     o    review owner audits;

     o    obtain feedback from other charterers;

     o    review market intelligence and casualty data; and

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

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

     Tanker Categories

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

     Supply and Demand -- General

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

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

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

     o    oil prices;

     o    environmental concerns;

     o    climate;

     o    competition from alternative energy sources; and

     o    regulatory environment.

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

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

     o    the number of newbuildings on order and being delivered;

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

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

     Charter Rates

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

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

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

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

Environmental and Other Regulations

     Government  regulation  significantly affects the ownership and operation
of our vessels. They are subject to international conventions, national, state
and local laws and  regulations in force in the countries in which our vessels
may  operate  or 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  is  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  officers and crews and  compliance  with U.S. 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  (U.S. Coast
Guard,  harbor master or  equivalent),  classification  societies,  flag state
administration  (country of registry) and  charterers,  particularly  terminal
operators and oil companies.

Environmental Regulation -- IMO

     The IMO has  adopted  regulations  which set forth  pollution  prevention
requirements  applicable  to  tankers.  These  regulations,  which  have  been
implemented in many  jurisdictions in which our tankers operate,  provide,  in
part, that:

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

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

          (2)  they are capable of  hydrostatically  balanced loading (loading
               less  cargo  into a tanker  so that in the event of a breach of
               the hull,  water flows into the tanker,  displacing oil upwards
               instead of into the sea);

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

     o    all tankers will be subject to enhanced inspections.

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

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

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

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

     As of December  31,  2002,  we owned one  single-hull  tanker.  Under the
current  regulations,  this tanker will be able to operate until its 25th year
anniversary  in 2014 before being  required to be scrapped or  retrofitted  to
conform to these international  environmental  standards.  Compliance with the
new regulations regarding inspections of all tankers, however, could adversely
affect our operations.

     The IMO has  approved an  accelerated  time-table  for the  phase-out  of
single-hull oil tankers.  The new  regulations  which took effect in September
2002,  require  the  phase-out  of most  single-hull  oil  tankers  by 2015 or
earlier,  depending  on the age of the  tanker and  whether it has  segregated
ballast tanks.  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.  Also, more stringent maritime safety rules are also more
likely to be imposed  worldwide as a result of the oil spill in November  2002
relating to the loss of the m.t. Prestige. The m.t. Prestige was a 26-year old
single-hull  tanker  owned by a  company  not  affiliated  with  us.  The m.t.
Prestige  disaster  could lead to proposals to  accelerate  the phasing out of
single-hull tankers.

     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 intend to rely upon the safety
management system that we have developed.

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

     Noncompliance with the ISM Code and other IMO regulations may subject the
shipowner or bareboat charterer to increased liability,  may lead to decreases
in available  insurance  coverage  for affected  vessels and may result in the
denial of access to, or  detention  in, some ports.  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.

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

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

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

     o    natural resource damages and related assessment costs;

     o    real and personal property damages;

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

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

     o    loss of subsistence use of natural resources.

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

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

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

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

     Under OPA, with certain limited exceptions,  all newly-built or converted
vessels operating in U.S. waters must be built with double-hulls, and existing
vessels that do not comply with the double-hull requirement will be prohibited
from trading in U.S. waters over a 20-year period  (1995-2015)  based on size,
age  and  place  of   discharge,   unless   retrofitted   with   double-hulls.
Notwithstanding  the prohibition to trade schedule,  the act currently permits
existing  single-hull and double-sided  tankers to operate until the year 2015
if their  operations  within  U.S.  waters are limited to  discharging  at the
Louisiana  Offshore Oil Port or  off-loading by lightering  within  authorized
lightering  zones more than 60 miles  off-shore.  Lightering is the process by
which  vessels at sea  off-load  their cargo to smaller  vessels for  ultimate
delivery to the discharge port.

     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.

Other Regulation

     Although  the  United  States is not a party to these  conventions,  many
countries  have ratified and follow the liability  plan adopted by the IMO and
set out in the  International  Convention on Civil Liability for Oil Pollution
Damage of 1969 and the Convention for the  Establishment  of an  International
Fund for Oil  Pollution  of 1971.  Under these  conventions  and  depending on
whether  the  country  in  which  the  damage  results  is a party to the 1992
Protocol to the International  Convention on Civil Liability for Oil Pollution
Damage,  a vessel's  registered  owner is strictly liable for pollution damage
caused  in the  territorial  waters of a  contracting  state by  discharge  of
persistent oil, subject to certain complete defenses.  Under an amendment that
will come into  effect on  November  1, 2003,  for vessels of 5,000 to 140,000
gross  tons (a unit of  measurement  for the total  enclosed  spaces  within a
vessel), liability will be limited to approximately $6.1 million plus $858 for
each additional  gross ton over 5,000. For vessels of over 140,000 gross tons,
liability will be limited to approximately $122.1 million. The current maximum
amount  under  the  1992  protocol  is  approximately  $81.2  million.  As the
convention calculates liability in terms of Special Drawing Rights, or SDRs, a
unit of account pegged to a basket of currencies, these figures are based on a
conversion  rate on January  13, 2003 of 1 SDR=  $1.36025.  The right to limit
liability is forfeited under the  International  Convention on Civil Liability
for Oil Pollution Damage where the spill is caused by the owner's actual fault
and  under  the 1992  Protocol  where  the  spill  is  caused  by the  owner's
intentional or reckless  conduct.  Vessels trading to states which are parties
to these conventions must provide evidence of insurance covering the liability
of the owner. In  jurisdictions  where the  International  Convention on Civil
Liability for Oil Pollution Damage has not been adopted,  various  legislative
schemes or common law govern,  and liability is imposed either on the basis of
fault or in a manner  similar  to that  convention.  We  believe  that our P&I
insurance covers the liability under the plan adopted by the IMO.

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

     In  addition,  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.

Inspection by Classification Societies

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

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

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

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

     Intermediate  Surveys:   Extended  annual  surveys  are  referred  to  as
intermediate  surveys and typically are conducted two and 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  secondhand  vessels  that we
purchase  must be  certified  prior  to  their  delivery  under  our  standard
contracts and  memorandum of agreement.  If the vessel is not certified on the
date of closing, we have no obligation to take delivery of the vessel.

Risk of Loss and Liability Insurance

     General

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

     Hull and Machinery Insurance

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

     Protection and Indemnity Insurance

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

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

Competition

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

Legal Proceedings

     Proceedings against us

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

Organizational Structure

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

Property, Plant and Equipment

     We have no freehold interest in any real property.  We lease office space
in  Athens,  Greece  and in  London,  England.  The  Athens  office  comprises
approximately  723 square  meters and is leased for a term of 3 years from
February 2002 at a rate of $216,000 per year from an unaffiliated  third party.
The London office comprises  approximately 115 square  meters  and is leased
for a term of ten years from January 1, 2003 at a rate of 32,188 British
pounds per year from an unaffiliated third party.

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

ITEM 5. Operating and financial review and prospects

General

     The  Company  is  a  leading  provider  of  international  transportation
services of refined  petroleum  products and crude oil to major oil companies,
major oil traders,  and  government  agencies.  The  Company's  current  fleet
consists  of 42  vessels,  including  five  Panamax  and six  Handymax  tanker
newbuildings  under  construction  in South Korea,  which are  scheduled to be
delivered during the period from November 2003 through September 2004.

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

     During the year  ended  December  31,  2002,  approximately  94.7% of the
Company's  net revenue  (revenue  from  vessels,  minus voyage  expenses)  was
derived  from time  charter  contracts  as opposed to 75% 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, 2002 and 2001 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 entire  acquired  fleet
financed  through the recent  follow-on  offering  proceeds  trades under time
charters. More specifically,  78% and 37% of the fleet's capacity, in terms of
net  operating  days,  for 2003 and 2004,  respectively,  are  covered by time
charters.

     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.  For the most  part of 2002,  tanker
charter rates  remained  depressed.  However,  during the last quarter of 2002
tanker  demand has been driven by short term factors  relating to  war-related
fears and the  disruption of Venezuelan oil  production.  In October 2002, the
Prestige  spill took place leading to increased  demand for modern  tonnage in
Europe and  renewing the call for a more rapid  phase-out  of existing  single
hull tankers.

     As a result  of these  developments,  the  tanker  market  has  improved.
Product  tanker  rates have  increased  from a low $9,000 per day to more than
$20,000 per day during the last  quarter of 2002.  The time  charter  strategy
employed by the Company has provided the Company with  significant  insulation
from the general market decline experienced during most of 2002. However,  the
"lead-and-lag"  effect of this time charter strategy did not allow the Company
to capitalize on the increased rates experienced during the last quarter.

     As we enter the first  quarter of 2003,  the  Company  has four  Handymax
vessels  operating  in the spot market with  another  three  Handymax  vessels
coming off from their time charter  arrangements.  The current  bullish market
environment  should  positively  affect  the  performance  of  these  Handymax
vessels.

Recent Developments

     Agreements to Have  Constructed  Five Additional  Panamax Tankers and Six
     Additional  Handymax  Tankers  are  discussed  in  the  section  entitled
     "Expected Additional Capital Commitments"

     The Company has completed its recent follow-on offering as of April 17th,
2002  under  which it sold  4,930,000  shares  for $14 each and  raised  gross
proceeds of $69.2 million.  The net proceeds (after payment for  underwriters'
fees and legal and audit expenses) were $64.8 million.

     The major portion of these  proceeds was used to fund the  acquisition of
two newly-built Panamax tankers,  the Goldmar and the Silvermar,  by investing
$26.3 million, as well as two modern double-hull Handymax tankers, the Maremar
and the Aquamar,  by investing $17.6 million.  An additional $14.8 million was
paid to fund the 10%  advance  payment  to the yard  upon the  signing  of the
recent  newbuilding  contract  under which we will have  constructed a further
five newbuilding Panamax tankers in Daewoo shipyards.

     The unused balance of the net proceeds from the follow-on  offering as of
December 31, 2002 was approximately $6.1 million.

     The Handymax  tankers  have a cargo  carrying  capacity of  approximately
47,000 dwt and were built in 1998. The first Handymax tanker, the Maremar, was
delivered  at the end of  June  2002  and her  sistership,  the  Aquamar,  was
delivered  in mid-July  2002.  Both  Handymax  tankers  currently  trade under
long-term time charters, each earning approximately $14,000 per day.

     Each of the newly built Panamax tankers have a cargo carrying capacity of
69,697 dwt and were built in 2002. The first Panamax tanker, the Goldmar,  was
delivered  at the  end of May  2002  and her  sistership,  the  Silvermar,  at
mid-June 2002. Both Panamax tankers  immediately entered into a five year time
charter, each earning $18,500 per day.

     In January,  March, April and May 2002, the Company also took delivery of
the last four Panamax tanker  newbuildings  that the Company had contracted to
have  built in July  2000.  In this  respect,  upon  their  delivery  from the
shipyard,  all four  Panamax  tankers  immediately  entered into two year time
charters.  Under these time  charters,  the  Pearlmar and the Jademar are each
earning  $18,500 per day,  and the  Rubymar  and the Rosemar are each  earning
$17,500 per day. The cost of these four Panamax tanker newbuildings was funded
with pre-arranged debt and the balance from retained earnings.

     In February  2002 the Company also took  delivery of the Handymax  tanker
the  Ambermar,  which  currently  trades  under a short time  charter  earning
$16,500 per day.

     In February 2003 the Company acquired six Handymax newbuilding  contracts
for  a  total   consideration   of  $173.2  million.   These  Handymax  tanker
newbuildings  will be constructed in STX shipyard of South Korea from December
2003  through  September  2004.  The Company has paid an amount equal to $23.7
million in cash and the Company  will issue  shares  worth $6.4 million to the
sellers to finalize the acquisition of those contracts.

     In May 2003 we sold the Promar, a 1988-built, double-sided Handymax tanker
at a non-operating loss of approximately $7 million.

     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%.  Since LIBOR has not
exceeded 7%, there was no charge for the Company with respect to this interest
rate cap agreement for the years 2000, 2001 and 2002.

     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 an 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 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 of December 17, 2001 and December 18, 2001,
respectively.  The first is for a period of three years for an amount of $16.8
million  and the  second  for a period  of five  years  for an amount of $18.2
million. Under these agreements, the Company has fixed interest rates at 4.25%
and 4.77%, respectively.

     On July 10, 2002, the Company concluded two interest rate swap agreements
with  effective  dates as of  September  13,  2002.  Both  interest  rate swap
agreements are for a period of five years for an amount of $23.6 million each.
Under these  agreements,  the Company  has fixed  interest  rates at 4.20% and
4.38%, respectively.

     The remaining  nominal amount of all these interest rate swap  agreements
as of December 31, 2002, was $124.6 million. The annual amounts to mature over
the next five years are as follows:

o 2003--$11.8 million (average swap rate 5.39%)
o 2004--$21.8 million (average swap rate 4.78%)
o 2005--$45.6 million (average swap rate 5.92%)
o 2006--$12.7 million (average swap rate 4.66%)
o 2007--$32.7 million (average swap rate 4.30%)

Critical Accounting Policies

     Vessels Depreciation

     The Company's  vessels are depreciated on a straight-line  basis over the
vessels'  remaining  useful lives,  after  considering the estimated  residual
value (US Dollars 210 per LWT ton).  Management  estimates  the useful life of
the  Company's  vessels  to be 25 years and this is a common  life  expectancy
applied  in  the  shipping  industry.  In  view  of  the  IMO-implemented  new
regulations  and the recent call from the European  Union for the  accelerated
phase-out of single hull tankers after the spill resulting from the sinking of
"Prestige",  the Company's  management has re-evaluated the useful life of its
single hull vessel the Kliomar and effective January 1, 2003,  estimates it to
be 21 years.  If the estimated  economic life is incorrect an impairment  loss
could result in future periods.

     Impairment

     The U.S. Financial Accounting Standards Board issued SFAS 144 "Accounting
for  the  Impairment  or  Disposal  of  Long-lived  Assets",  which  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 Long-lived Assets to be Disposed of" and the accounting
and  reporting  provisions  of APB Opinion No. 30,  "Reporting  the Results of
Operations  for a Disposal of a Segment of a  Business."  The Company  adopted
SFAS 144 as of January 1, 2002, without any effect on the Company's  financial
position and results of  operations.  The standard  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, 2002,  indicated
that no impairment loss should be recognized over the Company's vessels.

     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.  The Company  defers and amortizes  these costs
over a period of two and half years or five years,  as  applicable,  or to the
next  dry-docking date if such has been  determined.  Unamortized  dry-docking
costs of vessels  sold are written  off to income in the year of the  vessels'
sale.

     Dry-docking  costs have several aspects including the replacement of worn
components,  the  installation  of items or features  that are required by new
maritime  regulations,  and the installation of new equipment or features that
might increase  efficiency or safety. Such expenditures do maintain the vessel
and preserve its useful life.

     Accounting for Revenue and Expenses

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

     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.  For year 2002, no P&I back calls are anticipated due to the Club's
change of billing policy.

Results of Operations

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

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

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

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

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

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

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

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

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

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

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

     Year Ended December 31, 2001 Compared to Year Ended December 31, 2000

     The Company  recorded  net income of $34.01  million,  or $3.29 per fully
diluted share, in the year ended December 31, 2001,  compared to net income of
$11.2 million,  or $2.94 per fully diluted  share,  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 by 62.4% to $102.5 million in
2001 as compared to $63.1 million in 2000.  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  2001  to  $16,769  from  $14,743  in  2000,
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
2001  increased by 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 dry
dockings,  as compared to 58 days in 2000.  The Handymax  fleet  accounted for
65.3% of the  Company's  net revenue in 2001, as opposed to 35.5% during 2000.
The  net  revenue  generated  under  time  charters  accounted  for 62% of the
Handymax fleet's net revenue in 2001 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
2001 increased by 34.3% to $16,930 from $12,603 in 2000. The Panamax fleet had
84 off-hire  days during 2001 due to scheduled  drydockings  as compared to 13
days in 2000.  The Panamax  fleet  accounted  for 10.8% of the  Company's  net
revenue in 2001 as compared to 14.5%  during  2000.  The entire net revenue of
the Panamax fleet was generated from time charters during 2001 and 2000.

     In  particular,  the average TCE rate of the  Company's  Aframax fleet in
2001  decreased by 0.8% to $17,462 from $17,602 in 2000. The Aframax fleet had
65  off-hire  days  during  2001,  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 2001 as compared
to 50.0% in 2000.  The entire net revenue of the Aframax  fleet was  generated
under time charters during 2001 as compared to 80.1% in 2000.

     Vessel Operating Expenses. The Company's vessel operating expenses, which
mainly consist of crewing,  repairs and maintenance,  spare parts,  insurance,
stores and  lubricants  increased by 54.0% to $23.1 million in 2001 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,
however, increased by 5.1% to $3,598 in 2001 from $3,423 in 2000.

      Depreciation. The Company's depreciation expense increased by 41.6% to
$21.8 million in 2001 as compared to $15.4 million in 2000. The increase was
the result of the fleet expansion during 2001.

     Amortization   of  Deferred  and   Dry-Docking   Costs.   The   Company's
amortization  of deferred and  dry-docking  expenses was $1.0 million in 2001,
which reflects a slight decrease when compared to $1.1 million in 2000.

     General  and   Administrative   Expenses.   The  Company's   general  and
administrative expenses increased by 59.4% to $4.6 million in 2001 as compared
to $2.9 million in 2000.  This increase  resulted  principally  from increased
staff and additional  administrative costs in connection with the operation of
our larger fleet and duties typically  associated with public  companies.  The
overhead  burden per ship per day  increased  by 8.5% to $714 during 2001 from
$658 during 2000.

     Interest Expense,  net. The Company's  interest expense increased by 0.7%
to $15.5 million in 2001 as compared to $15.4 million during 2000. Despite the
increase in the average loan balances  outstanding,  resulting  from our fleet
expansion,  the decrease of market  interest rates during 2000 has contributed
to the decrease in interest expense.

Liquidity and Capital Resources

     As of December 31, 2002, the Company's  cash position  increased to $36.1
million, from $34.4 million as of December 31, 2001.

     Net cash flow from operating activities increased to $74.6 million in the
year ended  December  31,  2002,  from $50.2  million as of December 31, 2001,
mainly reflecting the expansion of the fleet.

     During the year ended  December 31, 2002,  the Company  incurred  capital
expenditures  mainly for vessel acquisitions and improvements in the amount of
$258.3 million.  This capital expenditure  included $14.8 million representing
advances  for the five  Panamax  tanker  newbuildings  scheduled  for delivery
during the period from  November  2003 through July 2004.  $242.3  million was
paid for the acquired fleet consisting of six Panamax tanker newbuildings, the
Pearlmar,  Jademar,  Rubymar,  Rosemar, Goldmar and the Silvermar delivered on
January,  March,  April, May and June 2002,  respectively,  and three Handymax
tankers,  the Ambermar,  Maremar and Aquamar which were delivered in February,
June and July 2002, respectively.

     The Company's scheduled debt repayments were $42.7 million as compared to
$25.0 million in the previous year. The Company,  during the year ended December
31, 2002,  increased its  borrowings by $164.1 million to finance the delivery
of the acquired  fleet and to complete its previous  newbuilding  program.  In
this respect,  the Company borrowed $63.6 million to take delivery of the four
Panamax  tankers,  the Pearlmar,  Jademar,  Rubymar and Rosemar which had been
ordered in July 2000,  $20.2  million to take  delivery  of a Handymax  tanker
newbuilding,  the Ambermar,  and finally $80.3 million to take delivery of two
further newbuilding Panamax tankers, the Goldmar and the Silvermar, as well as
two modern Handymax tankers, the Maremar and Aquamar.

     The Company has already  arranged  with a consortium of banks for pre and
post-delivery  financing of $100 million to partially finance the construction
and the  delivery  of the  recently  contracted  newbuilding  Panamax  tankers
scheduled for delivery during the period from November 2003 through July 2004.

     The Company's  debt  repayment  obligations,  excluding the arranged $100
million loan facility, over the next ten years are as follows:


Year                        Amount

2003.......................$74.8 million
2004.......................$46.5 million
2005.......................$65.2 million
2006.......................$37.8 million
2007.......................$37.4 million
2008.......................$91.9 million
2009.......................$20.3 million
2010.......................$34.0 million
2011.......................$27.7 million
2012.......................$53.0 million

     The 2003  repayments  include $28.2 million in maturities of debt,  which
the Company intends to refinance during the first half of 2003.

     The Company's  debt  repayment  obligations,  including the arranged $100
million loan facility, over the next ten years are as follows:


Year                        Amount

2003.......................$74.8 million
2004.......................$49.7 million
2005.......................$71.7 million
2006.......................$44.3 million
2007.......................$43.9 million
2008.......................$98.4 million
2009.......................$26.8 million
2010.......................$40.5 million
2011.......................$34.2 million
2012.......................$104.6 million

     As part of its growth  strategy,  the Company  will  continue to consider
strategic  opportunities,  including the acquisition of additional vessels and
further penetration into the Handymax and Panamax tanker markets.  The Company
may choose to pursue  opportunities  to grow through  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.

Expected Additional Capital Commitments

     We will incur additional capital commitments for the five Panamax tankers
that we have  contracted to have  constructed  with Daewoo  shipyards in South
Korea. The total contracted cost is $153.8 million.

     In accordance with normal industry practice, we made installment payments
to the yard on signing representing 10% of the contract of approximately $14.8
million.  This  payment  was funded  through  the net  proceeds  of the recent
offering.  No further  payments  were paid  until the end of 2002.  During the
course of construction of these five Panamax  tankers,  and in accordance with
industry  practice,  we expect  to make the  following  payments  to the yards
representing the steel cutting, keel laying and launching  installments of 10%
of the contract value for each ship. In this respect,  a total amount of $45.8
million will be paid in 2003 and 2004,  all of which will be financed  through
the $100 million facility  discussed above. The amounts to be paid to the yard
in 2003 and 2004 are:


Year        Amount

2003     $29.8 million
2004     $14.9 million
         -------------
         $44.7 million

     At delivery of these five Panamax tanker newbuildings, we will pay 60% of
the remaining value of each contract,  or a total $94.3 million,  out of which
$18.8 million will be paid close to the end of 2003 when the first newbuilding
is expected to be delivered.  The balance of $75.5 million will be paid during
the first seven months of 2004 as each Panamax tanker newbuilding is delivered
from the yard. We will pay $8.3 million in 2003 and $30.6 million in 2004 from
internally  generated  cash  flows and the  balance  of $10.6  million  and
$44.8 million through the loan facility  already  arranged.  We also expect to
incur additional expenditure of approximately $2.0 million representing
capitalized interest on  pre-construction  financing  together with supervision
costs, the bulk of which will be paid in 2004.

     We will also incur  additional  capital  commitments for the six Handymax
tanker  newbuilding  contracts  that  we have  recently  acquired.  The  total
contracted cost is approximately $173.2 million. $58.8 million will be paid in
2003,  excluding $6.4 million  representing the stock consideration to be paid
to sellers,  and $108.0  million will be paid in 2004. We also expect to incur
additional expenditures of approximately $3.5 million representing capitalized
interest on pre-construction financing together with supervision costs.

     We have  already  arranged  for a stand-by  financing  facility  of $40.0
million  with a bank to partially  finance the $23.7  million one time deposit
already paid to the sellers and the stage payments to the yard,  comprising of
keel  laying  and  launching  installments  of 10% each for each  shipbuilding
contract.

     At delivery  we intend to finance  the balance of the stand by  financing
facility,  together with the delivery  installments  for each Handymax tanker,
with a  long-term  bank loan  facility  in the  amount of  approximately  $125
million.

Summary of Contractual Obligations

The following table sets out our contractual obligations as of December 31,
2002.

                            Payments due by period
                            ----------------------
                    Total   2003     2004     2005    2006    2007   Thereafter
                    -----   ----     ----     ----    ----    ----   ----------

Long-term debt     488,609  74,758    46,558  65,239  37,766  37,366  226,922
Construction of
five Panamax
tankers            138,875  48,600    90,275       -      -      -        -
Operating leases     1,015     276       276      90     53     53      267

Off Balance Sheet Arrangements

We do not engage in off-balance sheet arrangements.

Quantitative and Qualitative Disclosures about Market Risks

See ITEM 11

ITEM 6. Directors, senior management and employees

A. Directors and Executive Officers

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

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

      Nicholas Hartley           65                  Chairman of the Board of
                                                     Directors

      Roger Haynes               66                  Director

      Thomas N. Amonett          59                  Director

      Terence Coghlin            61                  Director

      Peter Goodfellow           56                  Chief Executive Officer
                                                     and Director

      Stamatis Molaris           41                  Chief Financial Officer
                                                     and Director

      George Karageorgiou        38                  Director

      Olga Lambrianidou          47                  Secretary


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

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

     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.

     Thomas N. 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.  Mr.  Amonett is a director of PetroCorp  Incorporated,  a company
engaged in the  exploration and production of oil and natural gas primarily in
the United States,  and Reunion  Industries,  Inc.,  which owns and operates a
diverse  group of  manufacturing  companies.  His business  address is 3355 W.
Alabama, Suite 400, Houston, Texas, 77098.

     Terence Coghlin has been a Director since October 2001. His  directorship
expires in 2003. Mr. Coghlin, having qualified as an English barrister,  spent
over 35 years advising shipowners  throughout the world on legal and liability
insurance  matters.  In 1991 he became  Chairman of Thomas  Miller and,  for a
three-year  spell,  Chairman of the  International  Group of P&I Clubs.  Since
retirement  from the  City in 2001 he has  become a  maritime  arbitrator  and
prepared the fifth edition of the book on time charterparty law of which he is
a founding co-author.  Mr. Coghlin is an associate of Southampton University's
Institute of Maritime Law, a member of the editorial board of Lloyd's Maritime
&  Commercial  Law  Quarterly  and a series  editor of  Lloyd's  Shipping  Law
Library. His business address is Ockley Manor, Keymer, Sussex, England.

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

     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  $1,157,000  for the fiscal year ended  December  31,  2002,  out of which
$225,000 was paid in the form of restricted  shares. We paid a portion of this
compensation  outside of Greece for work performed outside of that country. We
paid approximately $177,000 to the non-executive directors as compensation for
their  services in 2002.  Non-employee  directors  receive  annual fees in the
amount of $30,000  plus  reimbursement  of their  out-of-pocket  expenses.  In
addition,  each  non-employee  director  who acts as a chairman of a committee
receives an additional  $10,000  annually with each committee member receiving
an  additional   $5,000  annually.   This  does  not  include  the  Chairman's
compensation of $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 before Mr. Ogilvy retired in November 2002.

C. Board practices.

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

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

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

Committees of the Board of Directors

     Audit  Committee.  The NYSE currently has a rule requiring U.S.  domestic
companies  to  establish  audit  committees  consisting  of three  independent
directors.  This  rule  does not  apply to the  Company,  which is a  "foreign
private  issuer".  However,  the  Company  voluntarily  submits  to the  audit
committee rule. Accordingly,  the Company's Board of Directors has established
an Audit  Committee,  consisting  of  three  independent  directors.  With the
resignation of Mr. Meyer,  the Audit Committee  currently  consists of Messrs.
Roger Haynes and Thomas N. Amonett.  Mr. Amonett is currently  acting chairman
of the Audit  Committee.  The Company is actively  seeking to add at least one
additional  independent  director to the Board of Directors,  and also to fill
the vacancy on the Audit Committee.

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

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

     Nominating/Governance   Committee.   The  Company's  Board  of  Directors
anticipates appointing a  Nominating/Governance  Committee to assist the Board
of Directors in the areas of  membership  selection,  committee  selection and
rotation  practices,  evaluation of the overall  effectiveness of the Board of
Directors,   and  review  and   consideration  of  developments  in  corporate
governance practices. The Nominating/Governance  Committee will be brought for
discussion and ratification at the next meeting of the Board of Directors. The
proposed members of the  Nominating/Governance  Committee are Messrs.  Terence
Coghlin, George Karageorgiou and Thomas N. Amonett.

D. Employees.

     As of  December  31,  2002,  we  employed  approximately  960  employees,
consisting of 63 shore-based  personnel  based in London,  England and Athens,
Greece, and 900 seagoing employees from the Philippines.  At year-end 2001, we
employed approximately 746 employees, consisting of 700 seagoing employees and
46  shore-based  employees.  The increase in seagoing  employees is due to our
acquisition  of  additional  vessels  and the  delivery  of  newbuildings.  At
year-end  2000,  we employed  approximately  300  employees,  consisting of 20
shore-based  employees  and 280  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, 2002,  regarding  the total amount of capital  stock owned by our
officers and directors on an individual basis:

                                                       Shares
Name                   Position                       (Nom. Hold.)
----                   --------                       ------------
Nicholas Hartley       Chairman of the Board           *

Roger Haynes           Directors                       *

Thomas Amonett         Director                        *

Peter Goodfellow       Director, Chief Executive       *
                       Officer

Terence A. Coghlin     Director                        *

Stamatis Molaris       Director, Chief Financial       *
                       Officer

George Karageorgiou    Director                        *

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

Option Plan

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

     Our 2001 Stock  Option Plan,  or the Plan,  entitles  our  officers,  key
employees,  including  senior sea staff,  and directors to receive  options to
acquire  common  stock.  A total of  323,500  shares of common  stock has been
reserved for issuance  under the Plan.  The Plan will be  administered  by our
board of  directors.  Under the terms of the Plan,  the board of directors may
grant new options  exercisable  at a price per share to be  determined  by the
board of  directors.  The exercise  price of $12.30  equals the average  daily
closing price of our common stock over the 30 day period following the closing
of our initial public offering on March 6, 2001.  Under the terms of the Plan,
no options may be exercised  until at least two years after the closing of our
initial public  offering.  Any shares  received on exercise of the options may
not be sold  until  three  years  after  the  closing  of our  initial  public
offering.  All options  will expire 10 years from the date of grant.  The Plan
will expire 10 years from the closing of our initial  public  offering.  As of
December 31, 2002, 3,000 options had been cancelled.

Additional Stock Options

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

ITEM 7. Major Shareholders and Related Party Transactions.

A. Major shareholders.

     Our capital stock is comprised of 17,265,372  shares of common stock, par
value $0.02 per share.  The following table sets forth  information  regarding
the owners of more than five (5) percent of our common  shares of which we are
aware as of the date of this annual  report from  reports on Schedule  13D and
Schedule 13G filed with the  Securities and Exchange  Commission.  None of the
shareholders have any special voting rights.

Name                                     Number of Shares    Percentage of Class
----                                     ----------------    -------------------
FMR Corp.                                   2,179,850               12.62%
Polys Haji-Ioannou                          1,976,006               11.44%
Stelios Haji-Ioannou                        1,601,554                9.27%
Clelia Haji-Ioannou                         1,075,000                6.39%

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 $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  former
chairman,  Stelios  Haji-Ioannou,  does not  participate  in the management of
World  Tankers  Ltd,  and does not own any of its  shares.  He has  executed a
non-compete  agreement  with us  which  prohibits  him  from  engaging  in the
business of owning or  operating  tankers for two years after the later of Mr.
Haji-Ioannou's  ceasing to own at least 5% of our outstanding  common stock or
ceasing  to  serve  as our  director  or  officer  so long as we are a  public
company.  During that time,  Mr.  Haji-Ioannou  may choose to hold up to 5% in
publicly traded companies.  We paid World Tankers $72,000 in 2000,  $64,000 in
2001 and $24,000 in 2002 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 May 17, 2002, that contract  expired and we no longer pay
fees to World Tankers (U.K.) Ltd.

C. Interests of experts and counsel.

     Not  applicable.

ITEM 8. Financial Information.

A. Consolidated Statements and Other Financial Information.

     See  Item 18.

Dividend Distribution Policy

     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:

 2002          2nd quarter   3rd quarter   4th quarter
 Low           14.55         13.86         13.65
 High          16.70         16.05         15.62

For the previous six months:

          September   October     November    December    January     February
          2002        2002        2002        2002        2003        2003
Low       13.86       13.65       14.45       14.90       15.26       14.94
High      16.05       14.92       15.62       15.62       16.00       16.10

B. Markets.

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

ITEM 10. Additional Information

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

A.   Share capital.

     Not  applicable

B.   Memorandum and articles of association.

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

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

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

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

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

     Dividends.  A Liberian  corporation  may pay dividends in cash,  stock or
other property, except when the corporation is insolvent or the payment of the
dividend would make the corporation  insolvent.  In addition, the payment must
not  violate  any  restrictions  contained  in the  corporation's  articles of
incorporation.  Our  articles  of  incorporation  contain no  restrictions  on
payments  of  dividends.  A  Liberian  corporation  may pay  dividends  out of
surplus,  which is additional  paid-in  capital plus any retained  earnings or
minus any accumulated  deficit.  If the corporation does not have surplus,  it
may pay dividends  out of net profits for the current  fiscal year and for the
preceding fiscal year. Subject to these  requirements,  the board of directors
of Liberian corporations,  including ours, has the authority to decide whether
that  corporation will pay a dividend.  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 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 Takamar and the Keymar.  This loan is secured
by (i) first and second  preferred  mortgages  over the  Takamar and first and
second  priority  mortgages over the Keymar;  and (ii) a guarantee and general
assignment  of the  earnings,  insurances,  charter  rights,  and  requisition
compensation  on behalf  of the  Takamar  and the  Keymar.  Additionally,  any
default  in the  payments  under the loan  secured by the  mortgage  on either
vessel will result in a default.

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

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

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

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

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

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

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

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

     Contracts Relating to Newbuildings

     In  January,  March,  April and May 2002,  we took  delivery  of the four
Panamax tankers the Pearlmar,  the Jademar, the Rubymar and the Rosemar, built
by a South Korean  shipyard.  We financed the purchase and construction of the
four Panamax  tankers  through the proceeds of three bank loan  facilities  as
follows:

o    Through our subsidiaries Pearlmar Ltd. and Jademar Ltd. we entered into a
     $45 million  bank loan  facility  with  Nedship  Bank N.V.  and  Deutsche
     Schiffsbank to finance  approximately the 70% of the construction cost of
     the  Pearlmar and the Jademar.  The loan bears a variable  interest  rate
     based on LIBOR plus a spread.

o    Through our subsidiary  Rubymar Ltd. we entered into a $22.5 million bank
     loan  facility with Alpha Bank S.A. to finance  approximately  the 70% of
     the construction cost of the Rubymar.  The loan bears a variable interest
     rate based on LIBOR plus a spread.

o    Through our subsidiary  Rosemar Ltd. we entered into a $22.5 million bank
     loan  facility with Royal Bank of Scotland to finance  approximately  the
     70% of the  construction  cost of the Rosemar.  The loan bears a variable
     interest rate based on LIBOR plus a spread.

     In February  2002 we took delivery from a South Korean yard of a Handymax
tanker the M/T Ambermar.  We financed  approximately 65% of the vessel's value
at  delivery  through  a  bank  loan  facility  with  Hamburgische  Landesbank
Girozentrale of $20.2 million.  The loan bears a variable  interest rate based
on LIBOR plus a spread.

     In May and June 2002 we acquired two newly built  tankers the Goldmar and
Silvermar.  We  partially  financed  the  acquisition  cotst of these  tankers
through the proceeds of the recent follow-on offering,  completed on April 17,
2002,  and a bank loan  facility of $48 million  with Fortis Bank  (Nederland)
N.V. The loan bears a variable interest rate based on LIBOR plus a spread.

     In June and July 2002 we acquired  two  Handymax  tankers the Maremar and
the Aquamar.  We  partially  financed the  acquisition  cost of these  tankers
through the proceeds of the recent follow-on  offering  completed on April 17,
2002,  and two bank loan  facilities of $16.5  million each with  Hamburgische
Landesbank  Girozentrale.  The loans  bear a variable  interest  rate based on
LIBOR plus a spread.

     In April 2002, we signed a contract with a South Korean  shipyard for the
construction  of five Panamax  tankers with expected  deliveries from November
2003 through July 2004. The total contract price will amount to  approximately
$153.75  million of which $100 million will be financed from the proceeds of a
bank  loan  facility.   Subject  to  the  supply  of  additional   spares  the
construction cost may increase by $5,000.  The shipbuilding  contract provides
for  stage  payments  of 10% in  advance,  10% on steel  cutting,  10% on keel
laying, 10% on launching and 60% on delivery.

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

o    First priority mortgage over the vessel

o    Assignment of earnings and insurance of the mortgaged vessels

o    Pledge of shares of the borrowers

o    Corporate guarantee

     In February  2003 we acquired six Handymax new building  contracts  for a
total  consideration of approximately  $173.2 million.  These Handymax tankers
will be  constructed by a South Korean  shipyard with expected  delivery dates
from December 2003 through  September  2004. The contract price will partially
be financed through bank financing.

D.   Exchange controls.

     Not  applicable

E.   Taxation.

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

Liberian Tax Considerations

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

U.S. Federal Income Tax Considerations

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

U.S. Taxation of Our Company

     Taxation of Operating Income: In General

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

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

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

     Exemption of Operating Income from U.S. Taxation

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

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

     (2)  either

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

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

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

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

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

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

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

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

     U.S. Taxation of Gain on Sale of Vessels

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

     Fixed Place of Business within the U.S.

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

U.S. Taxation of U.S. Holders

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

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

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

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

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

Distributions

     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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

     Dividends On Common Stock

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

Sale, Exchange or Other Disposition of Common Stock

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

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

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

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

   Backup Withholding and Information Reporting

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

     o    fail to provide an accurate taxpayer identification number;

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

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

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

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

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

F.   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, 2006 and 2007 for approximately 25.5% of
our outstanding indebtedness as of December 31, 2002.

     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 decreased
our net  income  and cash  flows in the  current  year by  approximately  $3.5
million based upon our debt level at December 31, 2002.

     The following  table sets forth our sensitivity to a 1% increase in LIBOR
over  the  next  five  years on the same  basis,  excluding  the $100  million
long-term  loan  facility   already  arranged  for  the  five  Panamax  tanker
newbuildings under construction at Daewoo:

Net difference in Earnings and Cash Flows:

Year        Amount
----        ------
2002       $3.5 million
2003       $2.9 million
2004       $3.1 million
2005       $2.9 million
2006       $2.3 million


Foreign Exchange Rate Fluctuation

     The  international  tanker  industry's  functional  currency  is the U.S.
dollar  and,  as  a  result,   all  of  our  revenues  are  in  U.S.  dollars.
Historically,  we incur a major  portion  of our  general  and  administrative
expenses in Euro (formerly 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.

ITEM 14. Material Modifications to the Rights of Security holders and use of
proceeds

     Not Applicable.

ITEM 15. CONTROLS AND PROCEDURES.

(a)  Evaluation of disclosure controls and procedures.

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

(b)  Changes in internal controls

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

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

ITEM 16. Reserved.

ITEM 17. Financial statements

     See  ITEM 18.

ITEM 18. Financial statements

See PAGES F-1 to F-34.


<PAGE>


                    STELMAR SHIPPING LTD. AND SUBSIDIARIES
                  INDEX TO CONSOLIDATED FINANCIAL STATEMENTS


Report of Independent Public Accountants (Ernst & Young 2002)...........F-2
Report of Independent Public Accountants
(Arthur Andersen - 2001, 2002)..........................................F-3
Consolidated Balance Sheets for the years
ended December 31, 2001 and 2002........................................F-4
Consolidated Statements of Income for the years ended
December 31, 2000, 2001 and 2002........................................F-5
Consolidated Statements of Stockholders' Equity for the
years ended December 31, 2000, 2001 and 2002............................F-6
Consolidated Statements of Cash Flows for the years
ended December 31, 2000, 2001 and 2002..................................F-7
Notes to Consolidated Financial Statements..............................F-8
Schedule I-Condensed Financial Information-Balance Sheets...............F-31
Schedule I-Condensed Financial Information-Statements of Income.........F-32
Schedule I-Condensed Financial Information-Statements
of Stockholders' Equity................................................ F-33
Schedule I-Condensed Financial Information-Statements
of Cash Flows...........................................................F-34


<PAGE>


                   REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS


To: Board of Directors of
STELMAR SHIPPING LTD.


We have  audited  the  accompanying  consolidated  balance  sheet  of  STELMAR
SHIPPING LTD., a Liberian  company,  and subsidiaries  (the "Company"),  as of
December  31,  2002  and  the  related  consolidated   statements  of  income,
stockholders'  equity  and cash  flows  for the year  ended.  Our  audit  also
included the condensed  financial  information listed in the Index as Schedule
I. These  financial  statements  and  schedule are the  responsibility  of the
Company's  management.  Our  responsibility  is to express an opinion on these
financial  statements  and  schedule  based  on our  audit.  The  consolidated
financial statements and Schedule I of the Company as of December 31, 2001 and
2000 and for the years  then ended were  audited  by other  auditors  who have
ceased operations.  Those auditors  expressed an unqualified  opinion on those
financial statements and Schedule I in their report dated February 1, 2002.

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

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


ERNST & YOUNG

Athens, Greece
February 5, 2003

<PAGE>

     The audit  report of  Arthur  Andersen,  our  former  independent  public
accountants,  which is set forth below,  is included in this Annual  Report on
Form 20-F for  purposes of  including  the  opinion of Arthur  Andersen on our
financial statements for the years ended December 31, 2000 and 2001.

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

                   REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To: STELMAR SHIPPING LTD.

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

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

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

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

ARTHUR ANDERSEN

Athens, Greece,
February 1, 2002

<PAGE>


                    STELMAR SHIPPING LTD. AND SUBSIDIARIES

                          CONSOLIDATED BALANCE SHEETS
                          DECEMBER 31, 2001 AND 2002
                   (Expressed in thousands of U.S. Dollars)

ASSETS                                                      2001      2002
------                                                      ----      ----

CURRENT ASSETS:
  Cash and cash equivalents (Note 2d)                      $34,417    $36,123
    Accounts receivable-
    Trade  (Note 2e)                                         7,678      6,888
  Other (Note 2f)                                            1,464      2,494
              -                                              -----      -----

                                                             9,142      9,382


  Inventories (Note 2g)                                      1,380      1,551
  Prepayments and other                                      1,225      1,263


      Total current assets                                  46,164     48,319

FIXED ASSETS:
  Advances  for  vessel
  acquisition / under  construction  (Note 4)               46,555     15,088

  Vessels (Notes 2h, 2i, 5 and 8)                          569,978    858,876
  Accumulated depreciation (Notes 2j and 5)                (78,151) (112,712)

      Net Book Value                                       491,827    746,164

  Property and equipment, net (Note 2k)                        817      1,581

      Total fixed assets                                   539,199    762,833

DEFERRED CHARGES, net (Notes  2l, 2n and 6)                  6,820     12,205

      Total assets                                        $592,183   $823,357
                                                          ========   ========

LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES:
  Current portion of long-term debt (Note 8)               $40,332    $74,758

  Accounts payable-
  Trade                                                      4,907      6,131
  Other                                                         65         50
                                                             -----      ------
                                                             4,972      6,181

  Income taxes payable (Note 14)                                 3          -
  Accrued liabilities (Notes 2o and 7)                       2,018      3,316
  Accrued bank interest                                      2,589      2,943
  Financial instruments-fair value
 (Notes 2w, 13 and 15c)                                      2,500      7,950
  Unearned revenue (Note 2s)                                 3,459      2,210
                                                             -----      -----


      Total current liabilities                             55,873     97,358

LONG-TERM DEBT, net of current portion
 (Note 8)                                                  326,862    413,851

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;  11,874,750 and 16,819,750  issued and
  outstanding   at  December   31,  2001  and  2002,
  respectively.                                                237        336
  Additional paid-in capital                               149,970    215,635
  Accumulated  other  comprehensive  income/(loss)
  (Notes 2c, 2w, 13 and 15c)                                (2,594)   (7,940)
  Retained earnings                                         61,835    104,117
                                                            ------    -------

      Total stockholders' equity                           209,448    312,148

      Total liabilities and stockholders' equity          $592,183   $823,357
                                                          ========   ========

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


<PAGE>


                          STELMAR SHIPPING LTD. AND SUBSIDIARIES

                            CONSOLIDATED STATEMENTS OF INCOME
                   FOR THE YEARS ENDED DECEMBER 31, 2000, 2001AND 2002
             (Expressed in thousands of U.S. Dollars - except per share data)

<TABLE>
<CAPTION>

                                                     2000          2001         2002
                                                     ----          ----         ----
<S>                                                  <C>           <C>          <C>
REVENUES:
Revenue from vessels (Notes 1 and 2s)                  $68,575       $111,198     $160,210

   Commissions (Notes 2s and 3a)                        (1,871)        (2,551)      (3,702)
                                                        ------         ------       ------
       Revenue from vessels, net                        66,704        108,647      156,508
                                                        ------        -------      -------


EXPENSES:
   Voyage expenses (Note 2s)                             5,450          8,743        8,129
   Vessel operating expenses
   (Notes 2s and 2t)                                    14,959         23,093       40,310
   Depreciation (Notes 2j, 2k and 5)                    15,441         21,755       34,644
   Amortization  of deferred  charges
   (Notes 2l, 2n and 6)                                  1,116            960        3,211
   General and administrative expenses (Note 14)         2,876          4,583        7,751
                                                         -----          -----        -----

   Operating income                                     26,862         49,513       62,463
                                                       -------        -------      -------

OTHER INCOME (EXPENSES):
   Interest  and finance  costs
   (Notes 2n, 6, 8 and 12)                             (16,484)       (17,089)    (18,826)
   Interest income                                       1,056          1,555          281
   Foreign currency losses (Note 2c)
                                                           (31)          (129)       (366)
   Gain on sale of vessel                                   32              -            -
   Other, net                                             (200)           163        (266)
                                                       -------        -------     -------

   Total other income (expenses), net                  (15,627)       (15,500)    (19,177)
                                                       -------        -------     -------

Net Income                                             $11,235        $34,013      $43,286
                                                     =========     ==========   ==========

Earnings per share, basic (Notes 2u and 11)              $2.94          $3.31        $2.84
                                                     =========     ==========   ==========

Weighted average number of shares, basic             3,824,750     10,290,028   15,262,194
                                                     =========     ==========   ==========

Earnings per share, diluted (Notes 2u and 11)            $2.94          $3.29        $2.83
                                                     =========     ==========   ==========

Weighted average number of shares, diluted           3,824,750     10,353,810   15,314,250
                                                     =========     ==========   ==========

</TABLE>

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


<PAGE>

<TABLE>
<CAPTION>


                                             STELMAR SHIPPING LTD. AND SUBSIDIARIES

                                         CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
                                      FOR THE YEARS ENDED DECEMBER 31, 2000, 2001 AND 2002
                                            (Expressed in thousands of U.S. Dollars)


                                                                                     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, 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

  Cumulative   effect   of
  measurement
  of   fair    value    of
  financial instrument
  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

  Issuance of common stock                -         99       69,131           -         -             69,230

  Expenses related to
  the issuance of
  common stock                             -       -         (4,470)          -          -            (4,470)

  Reinvestment  of
  earnings                                 -       -          1,004      (1,004)         -                -

  Net income                          43,286       -              -      43,286          -            43,286
  Other    comprehensive
  income
  -   Fair    value   of
  financial instruments              (5,450)       -              -           -     (5,450)           (5,450)
  -  Currency  translation
  adjustments                            104       -              -           -        104               104
                                  ----------
  Comprehensive income              $37,940
                                   =========      -----    ---------    ---------  --------         ---------
BALANCE,   December   31,  2002                    336      215,635     104,117    (7,940)           312,148
                                                  =====    =========    =========  =======          =========





</TABLE>


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

<PAGE>


                          STELMAR SHIPPING LTD. AND SUBSIDIARIES

                          CONSOLIDATED STATEMENTS OF CASH FLOWS
                   FOR THE YEARS ENDED DECEMBER 31, 2000, 2001 AND 2002
                         (Expressed in thousands of U.S. Dollars)
<TABLE>
<CAPTION>

                                                             2000        2001      2002
                                                             ----        ----      -----
<S>                                                          <C>         <C>        <C>
Cash Flows from Operating Activities:
     Net income                                              $11,235    $34,013    $43,286
     Adjustments to reconcile net income to
     net cash provided by operating activities:
       Depreciation                                           15,441     21,755     34,644
       Gain from sale of vessel                                 (32)          -          -
       Amortization of deferred dry-docking costs                847        960      3,211
       Amortization of loan fees                                  86        139        292
       Amortization of other financing costs                     269          -          -
       Non cash compensation                                       -          -        300
       Provision for income taxes                                 15         79          6
       Interest expense, net of amounts capitalized
                                                              16,273     16,732     18,160
     (Increase) Decrease in:
        Accounts receivable                                    2,175     (4,336)      (240)
       Inventories                                               656      (965)      (171)
       Prepayments and other                                      34      (884)       (38)
     Increase (Decrease) in:
       Accounts payable                                       (1,094)     2,821      1,209
       Accrued liabilities excluding bank
       loan interest                                             876        601        998
       Unearned revenue                                          253      2,370     (1,249)
       Payments for dry-docking                                 (726)    (4,766)    (8,122)
     Interest paid                                           (15,681)   (18,328)   (17,806)
     Income taxes paid                                           (14)       (91)        (9)
     Translation adjustment                                      (84)       133        104
                                                              -------   --------  ---------

   Net Cash from Operating Activities                         30,529     50,233     74,575
                                                              -------   --------  ---------

   Cash Flows from (used in) Investing Activities:
       Advances  for  vessels   acquisition-vessels
       under construction                                        (84)   (46,471)   (15,088)
       Vessel acquisitions and/or improvements                     -   (248,672)  (242,343)
       Purchase of property and equipment                       (400)      (319)      (847)
       Net proceeds from sale of vessel                       12,356          -          -

   Net Cash from (used in) Investing Activities               11,872   (295,462)  (258,278)
                                                              -------   --------  ---------

   Cash Flows from (used in) Financing Activities:
       Proceeds from long-term debt                                -    191,359    164,147
       Principal payments of long-term debt                  (17,888)   (24,957)   (42,732)
       Repayment of long-term debt due to sale
       of vessel                                             (12,501)         -          -
       Issuance of common stock                                    -     96,599     69,230
       Payments  of  expenses  related to the
       issuance of common stock                                    -    (8,363)    (4,470)
       Payments for loan fees and other
       financing costs                                          (289)    (1,456)      (766)
                                                              -------   --------  ---------

   Net Cash from (used in) Financing Activities              (30,678)  253,182    185,409
                                                              -------   --------  ---------

   Net increase in cash and cash equivalents                  11,723      7,953      1,706
   Cash and cash equivalents at beginning of year             14,741     26,464     34,417
                                                              -------   --------  ---------

   Cash and cash equivalents at end of year                  $26,464    $34,417    $36,123
                                                             =======    ========  =========

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


</TABLE>


<PAGE>


                    STELMAR SHIPPING LTD. AND SUBSIDIARIES

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                          DECEMBER 31, 2001 AND 2002
         (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
Company                  Incorporation     Incorporation       or 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    104,000
Primar Shipping Ltd.      Liberia          May 1993           Primar              Cyprus     39,521
Palmar Maritime Ltd.      Liberia          July 1993          University City     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      Ambermar            Cyprus     35,700
Pearlmar Ltd.             Liberia          July 2000          Pearlmar            Cyprus     69,697
Jademar Ltd.              Liberia          July 2000          Jademar             Cyprus     69,697
Rubymar Ltd.              Liberia          July 2000          Rubymar             Cyprus     69,697
Rosemar Ltd.              Liberia          July 2000          Rosemar             Cyprus     69,697
Goldmar Limited           Liberia          April 2002         Goldmar             Cyprus     69,700
Silvermar Limited         Liberia          April 2002         Silvermar           Panama     69,700
Aquamar   Shipping
Limited                   Liberia          April 2002         Aquamar             Cyprus     47,236
Maremar Limited           Liberia          April 2002         Maremar             Cyprus     47,225
Reymar Limited            Liberia          April 2002         Hull 5241           -               -
Reginamar Limited         Liberia          April 2002         Hull 5242           -               -
Reinemar Limited          Liberia          April 2002         Hull 5243           -               -
                                                                                          -----------
                                                                                          1,298,870
                                                                                          =========


</TABLE>


                    STELMAR SHIPPING LTD. AND SUBSIDIARIES

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                          DECEMBER 31, 2001 AND 2002
         (Expressed in thousands of United States Dollars - except per
                      share data unless otherwise stated)


1.   Basis of Presentation and General Information (continued):


     (b)  Martank Shipping  Holdings Ltd. (the "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>

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

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

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

                    STELMAR SHIPPING LTD. AND SUBSIDIARIES

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                          DECEMBER 31, 2001 AND 2002
         (Expressed in thousands of United States Dollars - except per
                      share data unless otherwise stated)

1.   Basis of Presentation and General Information (continued):

     Gross revenues for 2000,  2001 and 2002 included  revenues  deriving from
     charter   agreements  with   significant   charterers,   as  follows  (in
     percentages of total gross revenues):

     Charterer    2000   2001   2002
     ---------    ----   ----   ----

          A        -      19%     -
          B       13%     15%    22%
          C       20%     13%     -
          D       13%      -      -
          E       11%      -      -

2.   Significant Accounting Policies:

     (a)  Principles of Consolidation: The accompanying consolidated financial
          statements   have  been  prepared  in  accordance   with  accounting
          principles  generally  accepted in the United  States and include in
          each of the three years in the period ended  December 31, 2002,  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  accounting   principles  generally
          accepted in the United States requires  management to make estimates
          and  assumptions  that  affect  the  reported  amounts of assets and
          liabilities  and disclosure of contingent  assets and liabilities at
          the date of the consolidated  financial  statements and the reported
          amounts of revenues and expenses during the reporting period. Actual
          results could differ from those estimates.

     (c)  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 and records 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  Sterling  Pound.  For
          consolidation  purposes this subsidiary's  financial  statements are
          translated  into  US  Dollars  in  accordance  with  SFAS 52 and the
          resulting  translation  adjustments are reflected  separately  under
          stockholders'  equity  in the  accompanying  consolidated  financial
          statements.

     (d)  Cash and Cash  Equivalents:  The  Company  considers  highly  liquid
          investments  such as time deposits and  certificates of deposit with
          original maturities of three months or less to be cash equivalents.

     (e)  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.

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

     (g)  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.

     (h)  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,
          otherwise are charged to expenses as incurred.

     (i)  Impairment  of  long-lived  Assets:  The U.S.  Financial  Accounting
          Standards  Board issued SFAS 144  "Accounting  for the Impairment or
          Disposal of Long-lived Assets", which addresses financial accounting
          and  reporting  for the  impairment or disposal of long lived assets
          and supercedes SFAS 121 "Accounting for the Impairment of Long-Lived
          Assets  and  for  Long-Lived  Assets  to be  Disposed  of"  and  the
          accounting   and  reporting   provisions  of  APB  Opinion  No.  30,
          "Reporting  the Results of Operations for a Disposal of a Segment of
          a  Business".  The Company  adopted  SFAS 144 as of January 1, 2002,
          without any effect on the Company's  financial  position and results
          of  operations.  The standard  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, 2002,
          indicated  that no  impairment  loss should be  recognized  over the
          Company's vessels.

     (j)  Vessels   Depreciation:   The  cost  of  the  Company's  vessels  is
          depreciated  on a  straight-line  basis over the vessels'  remaining
          economic  useful lives,  after  considering  the estimated  residual
          value (US Dollars 210 per LWT ton).  Management estimates the useful
          life  of  the  Company's  vessels  to be  25  years.  However,  when
          regulations  place limitations over the ability of a vessel to trade
          on a  worldwide  basis  then  its  useful  life is  re-evaluated  in
          consideration of the date such regulations become effective.

     (k)  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.



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

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

          Depreciation  expense for 2000,  2001 and 2002  amounted to $ 277, $
          214 and $ 83,  respectively,  and is included in depreciation in the
          accompanying consolidated statements of income.

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

     (m)  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
          included  together with repairs and maintenance in vessel  operating
          expenses in the accompanying consolidated statements of income.

     (n)  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.

     (o)  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.

     (p)  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.

     (q)  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 2000,  2001 and 2002,  have
          been  recorded to expenses  and  amounted to $ 125, $ 165 and $ 283,
          respectively.

     (r)  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, 2000,
          2001 and 2002,  would have been  approximately  $ 39, $ 67 and $361,
          respectively,  for which no provision has been  accounted for in the
          accompanying consolidated financial statements.

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

     (t)  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 $ 2,326, $ 2,855 and
          $ 6,600 for 2000, 2001 and 2002 respectively.

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

     (v)  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.

     (w)  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.

          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
          principle  as required by APB  Opinion No. 20,  Accounting  Changes.
          Seven  interest  rate swap  agreements  were open as of December 31,
          2002 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, 2002  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.

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

     (x)  Stock-based compensation: In December 2002, the Financial Accounting
          Standards  Board  issued  FASB  Statement  No. 148,  Accounting  for
          Stock-Based  Compensation - Transition and Disclosure  ("SFAS 148").
          This  statement  amends  FASB  Statement  No.  123,  Accounting  for
          Stock-Based   Compensation  ("SFAS  123"),  to  provide  alternative
          methods of  transition to SFAS 123's fair value method of accounting
          for stock-based employee compensation. It also amends the disclosure
          provisions  of  SFAS  123 to  require  prominent  disclosure  in the
          summary  of  significant  accounting  policies  of the  effect of an
          entity's  accounting  policy with  respect to  stock-based  employee
          compensation on reported net income and earnings per share in annual
          financial  statements.  SFAS 148's  amendment of the  transition and
          annual disclosure requirements are effective for fiscal years ending
          after  December 15, 2002. At December 31, 2002,  the company has two
          stock-based  employee  compensation  plans, which are described more
          fully in Note 10. The  company  accounts  for those  plans under the
          recognition  and  measurement  principles  of APB  Opinion  No.  25,
          Accounting   for   Stock   Issued   to   Employees,    and   related
          interpretations.   No  stock-based  employee  compensation  cost  is
          reflected in net income,  as all options  granted  under those plans
          had an exercise  price equal to the market  value of the  underlying
          common stock on the date of grant.  The following table  illustrates
          the effect on net income and  earnings  per share if the company had
          applied the fair value recognition  provisions of SFAS Statement No.
          123,  Accounting  for  Stock-Based   Compensation,   to  stock-based
          employee compensation.



                                      Year ended              Year ended
                                      December 31 2001        December 31 2002

Net income, as reported               34,013                  43,286

Deduct:    total    stock-based
employee  compensation
expense  determined  under fair
value  based   method  for  all
awards,   net  of  related  tax
effects                                   96                       -
                                      ------                  -------
Pro forma net income                  33,917                  43,286
                                      ======                  =======
Earnings per share:
    Basic - as reported                 3.31                    2.84
    Basic - pro forma                   3.30                    2.84

    Diluted - as reported               3.29                    2.83
    Diluted - pro forma                 3.28                    2.83

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

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

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

          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  management of the Company does not believe that the adoption of
          this statement will have a material effect on the Company's  results
          of operations and financial position.

          FIN 45, In November  2002, the FASB issued FASB  interpretation  No.
          45,   Guarantor's   Accounting  and  Disclosure   Requirements   for
          Guarantees,  Including Indirect Guarantees of Indebtedness of Others
          ("FIN 45").  FIN 45 requires that upon issuance of a guarantee,  the
          guarantor  must  recognize  a  liability  for the fair  value of the
          obligation it assumes under the guarantee. The disclosure provisions
          of FIN 45 are effective for financial  statements of annual  periods
          that end  after  December  15,  2002.  The  provisions  for  initial
          recognition and measurement are effective on a prospective basis for
          guarantees  that are issued or modified  after  December  31,  2002.
          Adoption of FIN 45 is not expected to have a material  effect on the
          financial statements.

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),  brokerage  fees of
          1.25% on the charter agreements concluded with a specific charterer.
          Such commissions for 2000, 2001 and 2002, amounted to $ 72, $ 64 and
          $  24   respectively,   and  are  included  in  commissions  in  the
          accompanying consolidated statements of income.

     (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 $ 51  and  $ 25  for  2000  and  2001,
          respectively.

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

4.   Advances for Vessels Under Construction:

     In  July  2000,  the  Company  entered  into  an  agreement  with  Daewoo
     Shipbuilding of Korea (ex Daewoo Heavy  Industries) for the  construction
     of  four  Panamax  tankers  which  were  delivered  in  2002.  The  total
     construction cost of the new-buildings  amounted to $ 129,813,  which was
     partially  financed from the proceeds of long-term bank loans of $ 22,500
     (Note 8o) $ 45,000 (Note 8n) and $ 22,533 (Note 8p).

     In 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, was constructed by
     Daedong  Shipbuilding  Co. Ltd. and was delivered in February  2002.  The
     cost of the  newbuilding  was  financed  from the proceeds of a long-term
     bank loan of $ 20,200 (Note 8q).

     In  April  2002,  the  Company  entered  into an  agreement  with  Daewoo
     Shipbuilding of Korea (ex Daewoo Heavy  Industries) for the  construction
     of five  Panamax  tankers,  with  expected  deliveries  in November  2003
     through July 2004. The construction cost of the new buildings will amount
     to $153,750 of which  $100,000  will be financed  from the  proceeds of a
     long term bank  loan.  Subject to the supply of  additional  spares,  the
     construction  cost may  increase  by $5,000.  The  shipbuilding  contract
     provides for stage payments of 10% in advance,  10% on steel cutting, 10%
     on keel laying, 10% on launching and 60% on delivery.

     The  $100,000  loan  mentioned  above will be  drawn-down  in a number of
     tranches so as to coincide with the scheduled  delivery payments and will
     mature on the date falling 93 months after the delivery of the last hull.
     The loan will be repayable in fifteen equal  semi-annual  installments of
     $3,225 each plus a balloon payment of $51,625  payable  together with the
     last installment.  The loan will bear interest at LIBOR plus a spread and
     will be secured as follows:

     o    First priority mortgage over the vessels

     o    Assignments of earnings and insurance of the mortgaged vessels

     o    Pledge of shares of the borrowers o Corporate guarantees.

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

                                               2001           2002
                                               ----           ----
     Advance   payments   on
     signing  of contracts                     28,827       14,875
     Additional pre-delivery payments          16,096            -
     Capitalized interest                         920            -
     Other                                        712          213
                                           -----------  -----------
                                     Total     46,555       15,088
                                           ===========  ===========

5.   Vessels:

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


                                       Vessel      Accumulated      Net Book
                                       Cost        Depreciation     Value
                                       ------      ------------     -----

     December 31, 1999                   338,719       (46,588)     292,131
     -  Additions                              -              -           -
     -  Disposals                       (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'              246,788              -     246,788
        contract price)
     -  Additions (additional              1,884              -       1,884
        capitalized costs)
     -  Depreciation for the year              -       (21,541)     (21,541)
                                       ----------  -------------  ----------
     December 31, 2001                   569,978       (78,151)     491,827
     o  Additions (vessels'              282,610              -     282,610
        contract price)
     o  Additions (additional              6,288              -       6,288
        capitalized costs)
     o  Depreciation for the year              -       (34,561)     (34,561)
                                       ----------  -------------  ----------
     December 31, 2002                   858,876      (112,712)     746,164
                                       ==========  =============  ==========


Cost of vessels at December 31, 2000,  2001 and 2002 includes  $6,334,  $8,218
and $14,506,  respectively,  of amounts  capitalized  in  accordance  with the
accounting policy discussed in Note 2h above. Such capitalized amounts include
interest costs of $2,091  relating to years prior to 1997 and $886 and $233 in
2001 and 2002, respectively.

     During  2002,  the vessels  operated,  mainly,  under time  charters.  At
     December 31, 2002,  with the exception of vessels  Promar,  Colmar,  City
     University  and Capemar,  which were  operating  in the spot market,  all
     other vessels were operating as follows:

                   Expiration
     Vessel Name   Date

     Silvermar     June 2007
     Goldmar       May 2007
     Almar         December 2006
     Jacamar       February 2006
     Takamar       September 2005
     Nedimar       April 2005
     Maremar       March 2005
     Keymar        October 2004
     Aquamar       August 2004
     Rosemar       May 2004
     Rubymar       April 2004
     Jademar       March 2004
     Petromar      January 2004
     Fulmar        January 2004
     Pearlmar      January 2004
     Polys         December 2003
     Cleliamar     December 2003
     Ermar         December 2003
     Allenmar      November 2003
     Camar         November 2003
     Limar         October 2003
     Ambermar      August 2003
     Luxmar        July 2003
     Primar        June 2003
     Jamar         April 2003
     Rimar         February 2003
     Kliomar       January 2003


<PAGE>


6. Deferred Charges:

   The unamortized balance shown in the accompanying consolidated balance
   sheets is analyzed as follows:
                                                 Loan Fees
                                                    and
                               Dry-docking    Financing Costs       Total
                               ------------   ----------------  --------------

     December 31, 1999              1,266                 671          1,937

     -  Additions                     726                 289          1,015
     -  Write-off  due to sale
        of the Loucas                   -                (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
     -  Additions                   8,122                 766          8,888
     -  Amortization               (3,211)               (292)        (3,503)
                               ------------   ----------------  --------------
     December 31, 2002              9,862               2,343         12,205
                               ============    ===============  ==============

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


7.   Accrued Liabilities:

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



                                                  2001    2002
                                                  ----    ----

     P&I back calls                                177        -
     Vessels'   operating
     and  voyage  expenses                       1,173    2,371
     General and
      administrative  expenses                     668      945
                                               -------    ------
              Total                              2,018    3,316
                                               =======    ======
For year 2002 no P&I back calls are anticipated following the clubs' change of
billing policy.

8. Long-term Debt:

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

                       Borrower (s)                   2001       2002
                       ------------                   ----       ----

      (a)  Ariel Shipping Corporation                  8,400      7,200
      (b)  Colmar Ltd.                                 6,400      5,200
      (c)  Primar   Shipping   Ltd.  and  Palmar      20,776     17,996
           Maritime Ltd.
      (d)  Nedimar Ltd.                               17,000     15,800
      (e)  Kliomar Ltd.                               19,950     17,438
      (f)  Polmar Ltd.                                20,475     18,625
      (g)  Cleliamar Ltd.                             20,475     18,625
      (h)  Keymar Ltd.                                16,153     14,722
      (i)  Takamar Ltd.                               25,578     23,641
      (j)  Jacamar Ltd.                               27,875     25,875
      (k)  Luxmar Ltd.,  Limar Ltd., Camar Ltd.,
           Jamar Ltd. and Ermar Ltd.                  68,438     59,313
      (l)  Rimar  Ltd.,  Almar  Ltd.,   Allenmar
           Ltd., Capemar Ltd. and Promar Ltd.         69,875     61,375
      (m)  Petromar Ltd.                              19,440     18,320
      (n)  Pearlmar Ltd. and Jademar Ltd.             18,000     43,450
      (o)  Rubymar Ltd.                                6,750     21,750
      (p)  Rosemar Ltd.                                1,609     21,906
      (q)  Ambermar Ltd.                                   0     19,500
      (r)  Goldmar  Limited                                0     22,786
      (s)  Silvermar Limited                               0     22,787
      (t)  Aquamar Shipping Limited                        0     16,500
      (u)  Maremar Limited                                 0     15,800
                                                     --------   -------
                                                     367,194    488,609
           Total
           Less- current portion                     (40,332)   (74,758)
                                                     --------   -------
           Long-term portion                         326,862    413,851
                                                     ========   =======

     (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, 2002  represents a balloon payment
          of $ 7,200  payable in June 2003.  The  interest  rate is based upon
          LIBOR plus a spread.  The interest rates,  including the spread,  at
          December 31, 2001 and 2002 were 2.75% and 2.19%, 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, 2002  represents 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, 2001 and 2002 were 2.75% and 2.19%, respectively.

     (c)  1995 to refinance a previous loan with the same bank.  Following the
          assumption  of the  unpaid  balance  of $ 3,080  of the  loan of the
          Loucas following its sale, subsequent to December 31, 2000, the loan
          was  refinanced and the balance at December 31, 2002 is repayable in
          eleven 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, 2001 and
          2002 were 3.00% and 3.16%, 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,  2002  is  repayable  in  one
          installment  in 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,
          2001 and 2002 were 2.75% and 2.19%, 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, 2002 is repayable in six
          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, 2001 and 2002 were 2.73% and
          2.41%, 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,  2002 is  repayable  in
          eleven 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, 2001 and
          2002 were 4.79% and 2.6%, 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, 2002 is repayable in
          eleven 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, 2001 and
          2002 were 4.79% and 2.6%, respectively.

     (h)  Loan:  Balance of U.S.  Dollar bank loan (original  amount $ 20,800)
          obtained in September 1998 to partially finance the acquisition cost
          of the  Keymar.  The balance at December  31, 2002 is  repayable  in
          twenty-three 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, 2001 and
          2002 were 3.27% and 2.89%, 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, 2002 is  repayable in
          twenty-three equal quarterly installments through September 2008 and
          a 10. Long-term Debt (continued):

         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, 2001 and 2002
         were 3.15% and 2.89%, 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, 2002 is  repayable in
          seventeen 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, 2001 and
          2002 were 5.9% and 2.04%, 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, 2002 is repayable  in thirteen  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 and 2002 were 3.06% and 2.56%, respectively.

     (l)  Loan:  Balance of U.S.  Dollar bank loan (original  amount $ 72,000)
          obtained in May 2001 to partially  finance the  acquisition  cost of
          the Rimar,  Almar,  Allenmar,  Capemar  and  Promar.  The balance at
          December  31,  2002  is   repayable   in  eleven   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  and 2002  were  3.21%  and  2.79%,
          respectively.

     (m)  Loan:  Balance of U.S.  Dollar bank loan (original  amount $ 20,000)
          obtained in June 2001 to partially  finance the acquisition  cost of
          the  Petromar.  The balance at December  31,  2002 is  repayable  in
          seventeen  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 and
          2002 were 5.49% and 2.71, respectively.

     (n)  Loan:  Balance of a U.S. Dollar bank loan (original amount $ 45,000)
          obtained in January 2002 to partially  finance the construction cost
          of the  Pearlmar  and  Jademar.  The balance at December 31, 2002 is
          repayable in nineteen equal semi-annual  installments  through March
          2012 and a balloon  payment of $ 14,000  payable  together  with the
          last  installment.  The  interest  rate,  including  the spread,  at
          December 31, 2001 and 2002 were 3.13% and 3.04%, respectively.

     (o)  Loan:  Balance of a U.S. Dollar bank loan (original amount $ 22,500)
          obtained in April 2002 to partially finance the construction cost of
          Rubymar.   The  balance  at  December   31,  2002  is  repayable  in
          thirty-eight  quarterly equal installments  through April 2012 and a
          balloon   payment  of  $  7,500  payable   together  with  the  last
          installment.  The interest rate,  including the spread,  at December
          31, 2001 and 2002 were 6.2% and 3.22%.

     (p)  Loan:  Balance of a U.S. Dollar bank loan (original amount $ 22,533)
          obtained in May 2002 to partially  finance the construction  cost of
          Rosemar The balance at December  31, 2002 is  repayable  in nineteen
          equal  semi-annual  installments  through  May  2012  and a  balloon
          payment of $10,000 payable together with the last  installment.  The
          interest rate,  including the spread,  at December 31, 2001 and 2002
          were 6.15% and 3.38%, respectively.

     (q)  Loan:  Balance of a US Dollar bank loan  (original  amount $ 20,200)
          obtained in February 2002 to partially  finance the  acquisition  of
          Ambermar.  The balance at December  31, 2002 is repayable in fifteen
          equal semi annual  installments  through February 2010 and a balloon
          payment of $9,000 payable  together with the last  installment.  The
          interest rate, including the spread, at December 31, 2002 was 2.88%.

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

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

     (t)  Loan: Balance of a US Dollar bank loan (original amount of $ 16,500)
          obtained  in July  2002 to  partially  finance  the  acquisition  of
          Aquamar.  The balance at Decemeber  31, 2002 is repayable in sixteen
          equal  semi  annual  installments  through  July  2010 and a balloon
          payment of $5,300 payable  together with the last  installment.  The
          interest rate, including the spread, at December 31, 2002 was 2.87%.

     (u)  Loan: Balance of a US Dollar bank loan (original amount of $ 16,500)
          obtained  in June  2002 to  partially  finance  the  acquisition  of
          Maremar.  The balance at December  31, 2002 is  repayable in fifteen
          equal  semi  annual  installments  through  June  2010 and a balloon
          payment of $5,300 payable  together with the last  installment.  The
          interest rate, including the spread, at December 31, 2002 was 3.1%.

     The  balances  of loans (a) (b) and (d) above are  included  in the short
     term  portion  as they  are due in  2003.  Management's  intention  is to
     refinance these loans for five years within the first half of 2003.

     The range of the interest rates of the above loans during the years ended
     December 31, 2000, 2001 and 2002 was as follows:

     2000    6.92% - 7.33%
     2001    2.72% - 7.75%
     2002    2.04% - 6.47%

     Bank loan interest  expense for the years ended  December 31, 2000,  2001
     and 2002 amounted to $ 16,273, $ 16,732 and $ 18,160 respectively, and is
     included in interest and finance costs in the  accompanying  consolidated
     statements of income.

The loans are secured as follows:

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

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

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

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

     o    Assignments of earnings and insurances of the mortgaged vessels;

     o    Pledge of shares of the borrowers; and o Corporate guarantees.

     The  loan  agreements  among  others  include  covenants   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 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, 2002 are as follows:

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

     2003                          74,758
     2004                          46,558
     2005                          65,239
     2006                          37,766
     2007                          37,366
     2008 and thereafter          226,922

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.  Under the terms of the Plan,  no options can be  exercised  until
     December  31,  2002.  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  were  granted  to  certain  members  of the Board of
     Directors. These options have an exercise price of $13.52 and are subject
     to the terms and  conditions as set forth in the Plan. As at December 31,
     2002, 3,000 options had been cancelled.

     The Company  accounts  for the Plan under APB opinion No. 25 according to
     which, no compensation expense was recognized during 2001 and 2002 as the
     exercise price was equal to the grant date fair value of these options.



<PAGE>


10. Stock Option Plan (Continued):
     Presented below is a table reflecting the activity in the Plan from March
     31, 2001 through December 31, 2002.

                                          Weighted                   Weighted
                                          Average                    Average
                                          Exercise    Options        Exercise
                                Options   Price      Exercisable     Price
                                -------   -----      -----------     -----
Options granted,
 March 31, 2001                 323,500    12.30         -            -
      --    Exercised             -           -          -            -
      --    Vested                -           -          -            -
      --    Cancelled             3,000       -          -            -
Options  granted,
  October  11, 2001               8,000    13.52
      --    Exercised             -           -          -            -
      --    Vested                -           -          -            -
      --    Cancelled             -           -          -            -
    December 31, 2002           328,500    12.34         -            -


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 dilative 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:

                                     2000           2001          2002
                                     ----           ----          ----

    Basic earnings per share:
    Weighted average common
    shares outstanding               3,824,750      10,290,028    15,262,194

    Diluted  earnings per
    share:
    Weighted average common
    shares  outstanding              3,824,750      10,290,028    15,262,194

    Option                              -               63,782       331,233
    Weighted average common
    shares - diluted                 3,824,750       10,353,810    15,314,250
    Basic earnings per common
    share:                               $2.94           $3.31         $2.84
    Diluted earnings per
    common share:                        $2.94           $3.29         $2.83


12.  Interest and Finance Costs, net:

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


                                  2000     2001     2002
                                  ----     ----     ----

     Interest on long-term debt   16,273   16,732   18,160
     Mortgagee interest               83      130      237
     Bank charges                     42       88      137
     Amortization of loan fees        86      139      292
                                  -------  ------   ------
              Total               16,484   17,089   18,826
                                  =======  ======   ======
13.  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%.  Since LIBOR has not  exceeded 7% for years 2000,
     2001 and 2002,  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 an amount of
     $14,000, $10,000 and $31,500,  respectively.  Under these agreements, the
     Company  has  fixed  the  interest  rate  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 the interest rate
     at 4.25% and 4.765%, respectively.

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

14.  Income Taxes:

     Liberia,  Greece,  Panama and Cyprus do not impose a tax on international
     shipping income. Under the laws of Liberia, Greece, Panama and Cyprus the
     countries of the companies' incorporation and vessels' registration,  the
     companies are subject to  registration  and tonnage taxes which have been
     included in vessel operating  expenses in the  accompanying  consolidated
     statements  of  income  ( $ 80, $ 93 and $ 179 in  2000,  2001 and  2002,
     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 $ 15, $ 79 and $ 6 in, 2000, 2001 and 2002,
     respectively, which is included in general and administrative expenses.

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


15   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,
     derivatives 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)  Concentration   of  credit  risk:   Financial   instruments,   which
          potentially  subject the Company to  significant  concentrations  of
          credit  risk  consist  principally  of cash  investments  and  trade
          accounts   receivable.   The  Company   places  its  temporary  cash
          investments consisting mostly of deposits with high credit qualified
          financial  institutions.  Credit risk with respect to trade accounts
          receivable  is  generally  diversified  due to the  large  number of
          entities   comprising   the  Company's   charterer  base  and  their
          dispersion across many geographic areas.

     (c)  Fairvalue:  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 13 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, 2002, was $7,950 and has
          been included in "Comprehensive Income" in the accompanying December
          31, 2002 consolidated balance sheet.

16   Subsequent Events:

     (a)  In February 2003 the Company concluded an agreement for the purchase
          of six  Handymax  tankers  being under  construction  with  expected
          delivery  dates  between  December  2003  and  September  2004.  The
          expected cost including specifications, supervision and pre-delivery
          financing costs will amount to approximately $173.2 million and will
          be paid through bank  financing  and from the  Company's  own funds.
          Furthermore,  $6.4  million  of the  total  price  will  be  paid in
          Company's stock.

     (b)  In February  2003 the  following  companies,  directly  owned by the
          holding company, were established:


 Company                       Country of Incorporation      Hull Number
 -------                       ------------------------      -----------
 Cabo Hellas Limited           Liberia                        Hull 5239
 Cabo Sounion Limited          Liberia                        Hull 5240

     (c)  On February 1, 2003, M/T Keymar was grounded by strong winds and was
          subsequently  refloated.  She is currently undergoing major repairs,
          the cost of which is covered by her insurers.


                                   STELMAR SHIPPING LTD.
                       SCHEDULE I - CONDENSED FINANCIAL INFORMATION
                                      BALANCE SHEETS
                                DECEMBER 31, 2001 AND 2002
                   (Expressed in thousands of U.S. Dollars)

ASSETS                                             2001             2002


CURRENT ASSETS:
  Cash and cash equivalents                         $970          $1,250
                                                --------        --------
  Due from subsidiaries                               -            3,873
  Prepayments and other                               -               85
                                                --------        --------
   Total current assets                              970           5,208

   INVESTMENTS                                   208,625         315,610

   Total assets                                 $209,595        $320,818
                                                ========        =========
LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES:

   Accounts payable-Trade                            147             125
   Accrued liabilities                                 -             595
   Financial instruments fair value                    -           7,950
                                                --------        --------
   Total current liabilities                         147           8,670

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;
   11,874,750 and 16,819,750  issued
   and outstanding at December 31, 2001
   and 2002, respectively.                           237            336
   Additional paid-in capital, net               149,970        215,635
   Accumulated other comprehensive
   income / (loss)                                (2,594)         (7,940)
   Retained earnings                              61,835         104,117
                                                -------         --------
   Total stockholders' equity                    209,448         312,148

   Total liabilities and
   stockholders' equity                         $209,595        $320,818
                                                ========        ========


<PAGE>


                                  STELMAR SHIPPING LTD.
                       SCHEDULE I - CONDENSED FINANCIAL INFORMATION
                                   STATEMENTS OF INCOME
                   FOR THE YEARS ENDED DECEMBER 31, 2000, 2001AND 2002
             (Expressed in thousands of U.S. Dollars - except per share data)

                                             2000         2001       2002
                                           ----------   ---------  ---------

REVENUES:
Revenue from investments                  $11,408       $33,636      $44,997
General and administrative expenses            98           465        1,810
                                         --------       -------      -------
   Operating income                        11,310        33,171       43,187

OTHER INCOME (EXPENSES):
   Interest and finance costs, net            (75)          842           99

   Total other income (expenses), net         (75)          842          99

Net Income                                $11,235       $34,013      $43,286
                                         ========       =======      =======
Earnings per share, basic                   $2.94         $3.31        $2.84
                                         ========       =======      =======
Weighted average number of
shares, basic                           3,824,750    10,290,028   15,262,194
                                        =========    ==========   ==========
Earnings per share, diluted                 $2.94         $3.29        $2.83
                                        =========    ==========   ==========
Weighted average number of
shares, diluted                         3,824,750    10,353,810   15,314,250
                                        =========    ==========  ===========

<PAGE>


                                    STELMAR SHIPPING LTD.
                         SCHEDULE I - CONDENSED FINANCIAL INFORMATION
                              STATEMENTS OF STOCKHOLDERS' EQUITY
                     FOR THE YEARS ENDED DECEMBER 31, 2000, 2001 AND 2002
                   (Expressed in thousands of U.S. Dollars)
<TABLE>
<CAPTION>

                                                                                        Accumulated
                                                                                        Other
                                                               Additional               Comprehensive
                                   Comprehensive   Capital     Paid-in     Retained     Income/
                                   Income          Stock       Capital     Earnings     (Loss)     Total
                                   ------          -----       -------     --------     ------     -----
<S>                                <C>              <C>         <C>        <C>           <C>       <C>
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

   Cumulative effect of
   measurement at 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

   Issuance of common
   stock                                -               99       69,131          -           -      69,230

   Expenses   related   to
   the issuance
   of common stock                      -                -       (4,470)         -           -      (4,470)
   Reinvestment  of
   earnings                             -                -       11,004     (1,004)          -          -

   Net income                      43,286                -            -     43,286           -      43,286
   Othercomprehensive
   income
   - Fair value of
     financial instruments         (5,450)               -            -          -      (5,450)     (5,450)
   - Currency translation
     adjustments                      104                -            -          -         104        104
                                  -------
   Comprehensive income           $37,940
                                  =======          -------     ---------   --------     --------   ---------
BALANCE, December 31, 2002                            $336     $215,635   $104,117     $(7,940)   $312,148
                                                   =======     ========    ========     ========   =========

</TABLE>


<PAGE>

                            STELMAR SHIPPING LTD.
                 SCHEDULE I- CONDENSED FINANCIAL INFORMATION
                           STATEMENTS OF CASH FLOWS
             FOR THE YEARS ENDED DECEMBER 31, 2000, 2001 AND 2002
                   (Expressed in thousands of U.S. Dollars)

                                                2000       2001       2002
                                                ----       ----       ----

Cash Flows from Operating Activities:

   Net income                                   $11,235    34,013     43,286
   Adjustments  to reconcile
   net income to net cash
   provided by operating activities:
   (Increase) Decrease in:
      Accounts receivable                          -           -      (3,958)
   Increase (Decrease) in:
      Accounts payable                              108      (125)       (22)
      Accrued liabilities
      excluding bank loan interest                    -         -        595
     Translation adjustment                         (84)      133        104
                                                -------   -------     ------
 Net Cash from Operating Activities              11,259   34,021      40,005

Cash  Flows from (used in)
Investing Activities:
      Reinvestment of earnings                        -    (6,831)    (1,004)
      Investment in subsidiaries                (11,259) (121,389   (104,485)
                                                -------  --------   ---------
Net Cash used in Investing Activities           (11,259) (128,220)  (105,489)

Cash Flows from (used in) Financing
 Activities:
      Dividends received and reinvested               -     6,831      1,004
      Contribution to paid-in capital                 -    88,236     64,760
                                                -------   -------    -------
Net Cash from Financing Activities                    -    95,067     65,764

Net increase in cash and cash equivalents             -       868        280
Cash and cash equivalents at
beginning of year                                   102       102        970
                                                -------   -------    -------
Cash and cash equivalents at end of year           $102      $970     $1,250
                                                =======   =======    =======

<PAGE>



ITEM 19. exhibits.

               Exhibit                   Description
               Number

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

            4.11        Loan  Agreement,  between  Alpha Bank A.E. and Rubymar
                        Limited for Hull No. 5212  (incorporated  by reference
                        to  Exhibit  10.12  to  the   Company's   Registration
                        Statement   on  Form   F-1   (SEC   Registration   No.
                        333-13128)) 4.12 [reserved]

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

            23.1        Independent Auditors' Consent

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

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

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

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


**Previously filed.

<PAGE>


                                  SIGNATURES

Pursuant to the  requirements of Section 12 of the Securities  Exchange Act of
1934, the registrant  hereby  certifies that it meets all of the  requirements
for  filing  on Form  20-F and  that it has duly  caused  and  authorized  the
undersigned to sign this annual report on its behalf.

                                                  Stelmar Shipping Ltd.
                                                  ---------------------
                                                      (Registrant)

Date  June 16, 2003                             By  /s/ Peter Goodfellow
                                                    --------------------
                                                    Peter Goodfellow
                                                   Chief Executive Officer



02509.0004 #385569