GENERAL MARITIME CORP/ - 10-K Annual Report

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

FORM 10-K

/X/ Annual Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934

For the fiscal year ended December 31, 2001

/ / Transition Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
for the transition period from ______ to _____

Commission file number 001-16531

GENERAL MARITIME CORPORATION
(Exact name of registrant as specified in its charter)

Republic of the Marshall Islands 06-159-7083
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)

35 West 56th Street, New York, New York 10019
Address of principal executive office) (Zip Code)

Registrant's telephone number, including area code: (212) 763-5600

Securities of the Registrant registered pursuant to
Section 12(b) of the Act:

Common Stock, par value $.01 per share

Securities of the Registrant registered pursuant to
Section 12(g) of the Act:

None

Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days. Yes /X/ No / /

Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein and will not be contained, to
the best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. / /

The aggregate market value of the voting stock of the Registrant held by
non-affiliates of the Registrant as of March 1, 2002 was approximately
$201,833,111, based on the closing price of $10.50 per share.

The number of shares outstanding of the Registrant's common stock as of
March 1, 2002 was 37,000,000 shares.

DOCUMENTS INCORPORATED BY REFERENCE

Proxy Statement for the Annual Meeting of Shareholders to be held on May
16, 2002 (Part III)

PART I

ITEM 1. BUSINESS

OVERVIEW

We are a leading provider of international seaborne crude oil
transportation services within the Atlantic basin. We have a fleet of 29
vessels, consisting of 24 Aframax and 5 Suezmax tankers.

Our fleet generated approximately $217.1 million in voyage revenues,
$113.3 million in adjusted EBITDA(1) and $51.2 million in net income during the
fiscal year ended December 31, 2001. The 14 vessels whose results are included
in our fiscal year 2000 financial statements generated approximately $132.0
million in voyage revenues, $79.4 million in adjusted EBITDA and $30.3 million
in net income during the fiscal year ended December 31, 2000.

We have one of the largest mid-sized tanker fleets in the world, with a
total cargo carrying capacity of more than 3.0 million deadweight tons. With the
majority of our vessels operating in the Atlantic basin during the year ended
December 31, 2001, we have one of the largest fleets in this region, which
includes ports in the Caribbean, South and Central America, the United States,
Western Africa and the North Sea. We deploy the remaining vessels in regions
that we believe will maximize our financial performance.

As of December 31, 2001, based on deadweight tons, the average age of our
24 Aframax tankers was approximately 11.7 years, and the average age of our 5
Suezmax tankers was 11.3 years.

Since we commenced operations in 1997, our voyage revenues have grown
from approximately $12.4 million in 1997 to $62.0 million in 1998, $71.5 million
in 1999, $132.0 million in 2000 and $217.1 million in 2001. We acquired six
vessels in 1997, four vessels in 1998, one vessel in 1999, three vessels in 2000
and 15 vessels in 2001.

OUR COMPETITIVE STRENGTHS

We pursue an intensively customer- and service-focused strategy to
achieve superior operating results. Our strategy is based on what we believe are
our key competitive strengths:

- HIGH-QUALITY VESSELS. We operate a fleet of high-quality, mid-sized
tankers that we believe allows us to operate with relatively low
maintenance and operating costs. As of December 31, 2001, five of our
24 Aframax tankers, or 20.8% and none of our 5 Suezmax tankers, or
0.0%, were older than 15 years of age, compared to 33.0% of the world
fleet of Aframax tankers and 25.0% of the world fleet of Suezmax
tankers which were older than 15 years of age as of that date
according to published industry data. Because of increasingly
stringent operating and safety standards, the age and quality of our
fleet have given us a high level of acceptance by charterers.

- ----------
(1) Adjusted EBITDA represents net voyage revenues less direct vessel expenses
and general and administrative expenses excluding other expenses.
Adjusted EBITDA is included because it is used by certain investors to
measure a company's financial performance. Adjusted EBITDA is not an item
recognized by GAAP, and should not be considered as an alternative to net
income or any other indicator of a company's performance required by
GAAP. The definition of Adjusted EBITDA used here may not be comparable
to that used by other companies.

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- FOCUSED FLEET OF MID-SIZED TANKERS. A number of our vessels have one
or two substantially identical "sister ships" in our fleet which often
can be used interchangeably, giving us scheduling flexibility and
greater economies of scale. By focusing on the Atlantic basin, and
particularly the Caribbean, we have become a leading provider of
mid-sized tankers in this region. We believe that the high
concentration of load and discharge ports in this region enables us to
deploy our vessels on additional revenue generating voyages during
times when they would otherwise have no cargo.

- CUSTOMER RELATIONSHIPS. We believe that we have strong relationships
with our customers which include many major oil companies, such as:
Shell, Citgo, Exxon Mobil, Chevron Texaco, Sun, Kuwait Petroleum,
Saudi Petroleum and Navion Statoil. We believe that our strong
customer relationships stem from our reputation for dependability and
for delivering high quality transportation services.

- EXPERIENCED MANAGEMENT TEAM. Our founder, Peter C. Georgiopoulos, and
other senior executive officers and key employees have a combined
total of more than 100 years of experience in the shipping industry.
We have experienced management in all functions critical to our
operations, promoting a focused marketing effort, tight quality and
cost controls and effective operations and safety monitoring.

Our high quality fleet has resulted in an average of 97.1% capacity
utilization for the period from the acquisition of our first vessel in May 1997
through December 2001.

While we strive to maintain these strengths, we operate in a highly
competitive industry which is subject to downturns in regional and global
economies as well as changes in regulations which could adversely affect us and
our industry.

BUSINESS STRATEGY

Our strategy is to employ our existing competitive strengths to continue
to enhance our position and to maximize shareholder value. Our strategic
initiatives include:

- GROWING THROUGH ACQUISITIONS. We believe that the tanker industry is
fragmented, with many opportunities for consolidation. In addition,
during the past decade, many oil companies have reduced the size of
their tanker fleets. We seek to continue to expand our Aframax and
Suezmax tanker fleets through acquisitions of ship-owning businesses
and vessels.

- EXPANDING OUR PRESENCE IN THE ATLANTIC BASIN. Vessels operating in the
Atlantic basin primarily serve the U.S. oil market, which is governed
by strict environmental regulations. We believe that the quality of
our fleet and our excellent safety record will facilitate our
expansion in this region.

- STRENGTHENING OUR RELATIONSHIPS WITH CURRENT CUSTOMERS AND DEVELOPING
RELATIONSHIPS WITH NEW CUSTOMERS. Our goal is to be the first choice
of the major oil companies for crude oil transportation. Our
reputation for quality and service has enabled us to develop
relationships with many oil companies. We intend to use our reputation
to strengthen relationships with existing customers and establish
relationships with new clients. We seek to anticipate our clients'
crude oil transportation needs and to respond quickly when we
recognize opportunities.

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- BALANCING OUR FLEET DEPLOYMENT. We actively manage the deployment of
our fleet in order to achieve a balance between spot charters and time
charters. We seek to preserve significant exposure to the spot market
and rates while providing a reliable revenue stream through our time
charter contracts.

- MAINTAINING OUR COMMITMENT TO EXCELLENCE AND SAFETY. We are committed
to providing high quality service. Our fleet has an excellent safety
record. We intend to maintain our high level of quality and safety by
focusing our acquisition efforts on newer ships, inspecting our ships
frequently and maintaining them in excellent condition.

The following chart provides information regarding all of our vessels.

DH = Double-hull tanker; DS = Double-sided tanker; SH = Single-hull tanker,
TC = Time Chartered
* As of March 1, 2002
** Oil/Bulk/Ore carrier (O/B/O)
(1) - Collateral for first credit facility
(2) - Collateral for second credit facility
(3) - Norwegian International Shipping registry

We acquired 29 of our vessels as well as its two management company
subsidiaries in a series of recapitalization transactions outlined below and
described in greater detail in our Registration Statement on Form S-1 (File No.
333-49814) under the captions "RECAPITALIZATION AND ACQUISITIONS" "PRINCIPAL

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SHAREHOLDERS" and "CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS." The
recapitalization transactions consisted of the following:

- - Our acquisition, as of June 12, 2001, of seven limited partnerships owning
14 vessels, in exchange for shares of our common stock.

- - Our acquisition, as of June 15, 2001, of five special purpose entities,
each owning one vessel, in exchange for shares of our common stock.

- - Our acquisition, in June and July 2001, of seven vessels which were owned
and commercially operated by unaffiliated parties, in exchange for cash.

- - Our acquisition, in August 2001, of three vessels which were owned and
commercially operated by unaffiliated parties, in exchange for shares of
our common stock.

- - Our acquisition, as of June 12, 2001, of all the issued and outstanding
shares of common stock of two vessel management companies. One of these
companies was acquired in exchange for cash and the other in exchange for
shares of our common stock.

Our predecessor entities, which were the owners of the 14 vessels
acquired as of June 12, 2001, began operations in 1997. The financial statements
as well as the historical and financial information for periods prior to June
12, 2001 reflect only those 14 vessels and their operating results. The vessels
acquired subsequent to June 12, 2001 are included in our financial information
as of the date we acquired them.

FLEET DEPLOYMENT

We strive to optimize the financial performance of our fleet by deploying
our vessels on time charters and in the spot market. We believe that our fleet
deployment strategy provides us with the ability to benefit from increases in
tanker rates while at the same time maintaining a measure of stability through
cycles in the industry. The following table details the percentage of our fleet
operating on time charters and in the spot market during the past three years.

TIME CHARTER VS. SPOT MIX
(as % of operating days)

- ----------
(1) Including 62 days of bareboat charters.
(2) Including 143 days of bareboat charters.

Vessels operating on time charters may be chartered for several months or
years whereas vessels operating in the spot market typically are chartered for
up to several weeks. Vessels operating in the spot market may generate increased
profit margins during improvements in tanker rates, while vessels operating on
time charters generally provide more predictable cash flows. Accordingly, we
actively monitor macroeconomic trends and governmental rules and regulations
that may affect tanker rates in an attempt to optimize the deployment of our
fleet. As of March 1, 2002, we had four vessels on time charters expiring on
dates between September 2002 and August 2003.

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Three of the ships that we purchased in 2000--the GENMAR ZOE, the GENMAR
MACEDON and the GENMAR SPARTIATE--were purchased from Chevron Corporation, in
May, June and July, respectively. At the time of the purchase, we granted
Chevron Corporation an option to hire two of those vessels on time charters at
the prevailing market rate. This option may be exercised up to two years from
the date the ships were delivered to us. The minimum term for the charters
pursuant to this is option is one year, and the charters may not extend beyond
three years from the date the ships were delivered to us, unless we grant
permission for a longer term. This option provides that we may elect to sell,
charter or otherwise commit one of these three vessels to a third party only if
Chevron Corporation has not already elected to hire the vessel or has not
elected to match our offer to sell, charter or otherwise commit the vessel under
the terms offered to the third party. As of March 1, 2002, Chevron Corporation
had not exercised this option.

CLASSIFICATION AND INSPECTION

All of our vessels have been certified as being "in-class" by Det Norske
Veritas, the American Bureau of Shipping or Nippon Kaiji Kyokai. Each of these
classification societies is a member of the International Association of
Classification Societies. Every commercial vessel's hull and machinery is
evaluated by a classification society authorized by its country of registry. The
classification society certifies 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. Each vessel is
inspected by a surveyor of the classification society in three surveys of
varying frequency and thoroughness: every year for the annual survey, every two
to three years for the intermediate survey and every four to five years for
special surveys. Vessels may be required, as part of the intermediate survey
process, to be drydocked every 24 to 30 months for inspection of the underwater
portions of the vessel and for necessary repair stemming from the inspection.
Special surveys always require drydocking.

In addition to the classification inspections, many of our customers
regularly inspect our vessels as a precondition to chartering them for voyages.
We believe that our well-maintained, high-quality vessels provide us with a
competitive advantage in the current environment of increasing regulation and
customer emphasis on quality.

We have implemented the International Safety Management Code, which was
promulgated by the International Maritime Organization, a United Nations'
agency, to establish pollution prevention requirements applicable to tankers.
Prior to July 1, 1998, we obtained documents of compliance for our offices and
safety management certificates for all of our vessels for which the certificates
are required by the International Maritime Organization.

OPERATIONS AND SHIP MANAGEMENT

We employ experienced management in all functions critical to our
operations, aiming to provide a focused marketing effort, tight quality and cost
controls and effective operations and safety monitoring. We currently provide
the technical management necessary for the operations of 28 of our vessels.
These operations include ship maintenance, officer staffing, technical support,
shipyard supervision, insurance and financial management services.

Our crews inspect our vessels and perform ordinary course maintenance,
both at sea and in port. We regularly inspect our vessels using rigorous
criteria. We examine each vessel and make specific notations and recommendations
for improvements to the overall condition of the vessel, maintenance of the
vessel and safety and welfare of the crew.

5

We have a chartering staff located in New York, NY, which actively
monitors fleet operations, vessel positions and spot-market charter rates
worldwide. We believe that monitoring this information is critical to making
informed bids on competitive brokered charters.

CREWING AND EMPLOYEES

As of March 1, 2002, we employed approximately 51 office personnel.
Approximately 30 of these employees are located in New York, NY and manage the
commercial operations of our business. The other 21 employees are located in
Piraeus, Greece and manage the technical operations of our business. Our 21
employees located in Greece are subject to Greece's national employment
collective bargaining agreement which covers terms and conditions of their
employment.

As of March 1, 2002, we employed approximately 80 seaborne personnel to
crew our fleet of 29 vessels, consisting of captains, chief engineers, chief
officers and first engineers. The balance of each crew is staffed by employees
of a third party to whom we contract for crew management services. We believe
that we could obtain a replacement provider for these services, or could provide
these services internally, without any adverse impact on our operations.

We place great emphasis on attracting qualified crew members for
employment on our tankers. Recruiting qualified senior officers has become an
increasingly difficult task for tanker operators. We pay competitive salaries
and provide competitive benefits to our personnel. We believe that the
well-maintained quarters and equipment on our vessels help to attract and retain
motivated and qualified seamen and officers. Our crew management services
contractors have collective bargaining agreements which cover all the junior
officers and seamen whom they provide to us.

CUSTOMERS

Our customers include oil companies, oil traders, tanker owners and
others. During 2001, Skaugen PetroTrans, Inc., accounted for 12.6% of our voyage
revenues. During 2000, the Coastal Corporation, an international oil company
acquired in 2001 by El Paso Energy Corporation, and OMI Corporation, another
tanker owner, accounted for approximately 14.7% and 11.3%, respectively, of our
voyage revenues. Revenues from OMI Corporation primarily resulted from time
charter arrangements for the GENMAR ALTA and the GENMAR HARRIET; we terminated
our time charters for these two vessels, effective fourth quarter of 2000. See
"Item 3--LEGAL PROCEEDINGS."

COMPETITION

International seaborne transportation of crude oil and other petroleum
products is provided by two main types of operators: fleets owned by independent
companies and fleets of oil companies (both private and state-owned). Many oil
companies and other oil trading companies, the primary charterers of the vessels
we own, also operate their own vessels and transport oil for themselves and
third party charterers in direct competition with independent owners and
operators. Competition for charters is intense and is based upon price, vessel
location, the size, age, condition and acceptability of the vessel, and the
quality and reputation of the vessel's operator.

We compete principally with other Aframax and Suezmax owners. However,
competition in the Aframax and Suezmax markets is also affected by the
availability of alternative size vessels. Panamax size vessels and oil/bulk/ore
carriers (which carry oil or dry bulk cargo) can compete for many of the same
charters for which we compete. Because Ultra Large Crude Carriers and Very Large
Crude Carriers cannot enter the ports we serve due to their large size, they
rarely compete directly with our tankers for specific charters.

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Other significant operators of multiple Aframax and Suezmax vessels in
the Atlantic basin include American Eagle Tankers, Inc. Limited, OMI
Corporation, Overseas Shipholding Group, Inc. and Teekay Shipping Corporation.
There are also numerous, smaller tanker operators in the Atlantic basin. We
believe that we have significant competitive advantages in the Aframax and
Suezmax tanker markets as a result of the age, quality, type and size of our
vessels and our market share in the Atlantic basin.

INSURANCE

The operation of any ocean-going vessel carries an inherent risk of
catastrophic marine disasters and property losses caused by adverse weather
conditions, mechanical failures, human error, war, terrorism and other
circumstances or events. In addition, the transportation of crude oil is subject
to the risk of spills, and business interruptions due to political circumstances
in foreign countries, hostilities, labor strikes and boycotts. The U.S. Oil
Pollution Act of 1990 has made liability insurance more expensive for ship
owners and operators imposing potentially unlimited liability upon owners,
operators and bareboat charterers for certain oil pollution accidents in the
United States. We believe that our current insurance coverage is adequate to
protect us against the principal accident-related risks which we face in the
conduct of our business.

Our protection and indemnity insurance covers third-party liabilities and
other related expenses from, among other things, injury or death of crew,
passengers and other third parties, claims arising from collisions, damage to
cargo and other third-party property and pollution arising from oil or other
substances. Our current protection and indemnity insurance coverage for
pollution is $1 billion per vessel per incident and is provided by mutual
protection and indemnity associations. Each of the vessels currently in our
fleet is entered in a protection and indemnity association which is a member of
the International Group of Protection and Indemnity Mutual Assurance
Associations. The 14 protection and indemnity 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 protection and indemnity association has capped its exposure
to this pooling agreement at $4.25 billion. As a member of protection and
indemnity associations, which are in turn members of the International Group, we
are subject to calls payable to the associations based on its claim records as
well as the claim records of all other members of the individual associations
and members of the pool of protection and indemnity associations comprising the
International Group.

Our hull and machinery insurance covers risks of actual or constructive
loss from collision, fire, grounding and engine breakdown. Our war risk
insurance covers risks of confiscation, seizure, capture, vandalism, sabotage
and other war-related risks. Our loss of hire insurance covers loss of revenue
for up to 90 or 120 days resulting from vessel off-hire for all but two of our
vessels.

ENVIRONMENTAL AND OTHER REGULATION

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.

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We believe that the heightened level of environmental and quality
concerns among insurance underwriters, regulators and charterers is leading to
greater inspection and safety requirements on all vessels and may accelerate the
scrapping of older vessels throughout the industry. Increasing environmental
concerns have created a demand for vessels that conform to the stricter
environmental standards. We maintain operating standards for all of our vessels
that emphasize operational safety, quality maintenance, continuous training of
our crews and officers 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.

INTERNATIONAL MARITIME ORGANIZATION

The International Maritime Organization, the United Nations' agency for
maritime safety, has adopted regulations which set forth pollution prevention
requirements applicable to tankers. These regulations, which have been
implemented in many jurisdictions in which our vessels operate, provide, in
part, that:

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

- 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

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

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

- all tankers will be subject to enhanced inspections.

Also, under International Maritime Organization 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:

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

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

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

As of March 1, 2002, we owned nine single-hull vessels. Under the current
regulations, these vessels will be able to operate for various periods for up to
eight years before being required to be scrapped or retrofitted to conform to
international environmental standards. Although five of these vessels are 15
years of age or older as of December 31, 2001, the oldest was only 22.6 years
old and, therefore, the International Maritime Organization requirements
currently in effect regarding 25- and 30-year old

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tankers will not affect our fleet in the near future. Compliance with the new
regulations regarding inspections of all vessels, however, could adversely
affect our operations.

The International Maritime Organization has approved an accelerated
time-table for the phase-out of single-hull oil tankers. The new regulations,
expected to take 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. Of the nine single-hull vessels
in our fleet, one will be phased-out by 2006 and two will be phased-out by 2007
under the new regulations. The remaining six single-hull tankers would be phased
out by 2015 unless retrofitted with a second hull.

The requirements contained in the International Safety Management Code,
or ISM Code, promulgated by the International Maritime Organization, 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 and our third party technical managers have
developed.

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

Noncompliance with the ISM Code and other International Maritime
Organization 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 International Maritime Organization 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

The U.S. Oil Pollution Act of 1990, or OPA 90, established an extensive
regulatory and liability regime for environmental protection and cleanup of oil
spills. The U.S. Oil Pollution Act of 1990 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
whether on land or at sea. Both the U.S. Oil Pollution Act of 1990 and CERCLA
impact our operations.

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Under the U.S. Oil Pollution Act of 1990, 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:

- natural resource damages and related assessment costs,

- real and personal property damages,

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

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

- loss of subsistence use of natural resources.

The U.S. Oil Pollution Act of 1990 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. The U.S. Oil Pollution Act of 1990 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 90, CERCLA
and all applicable state regulations in the ports where our vessels call.

The U.S. Oil Pollution Act of 1990 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 U.S. Oil Pollution Act of 1990 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 the U.S. Oil
Pollution Act of 1990 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 the U.S. Oil Pollution
Act of 1990 and CERCLA. We have provided requisite guarantees and received
certificates of financial responsibility from the U.S. Coast Guard for each of
our vessels required to have one.

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

10

Under the U.S. Oil Pollution Act of 1990, with certain limited
exceptions, all newly-built or converted tankers operating in U.S. waters must
be built with double-hulls, and existing vessels that do not comply with the
double-hull requirement must be phased out over a 20-year period (1995-2015)
based on size, age and place of discharge, unless retrofitted with double-hulls.
Notwithstanding the phase-out period, the act currently permits existing
single-hull tankers to operate until the year 2015 if their operations within
U.S. waters are limited to discharging at the Louisiana Offshore Oil Port 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.

Owners or operators of tankers operating in the waters of the United
States must file vessel response plans with the U.S. Coast Guard, and their
tankers are required to operate in compliance with their U.S. Coast Guard
approved plans. These response plans must, among other things:

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

- describe crew training and drills; and

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

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

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
International Maritime Organization 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, 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.
Liability is limited to approximately $183 per gross registered ton (a unit
of measurement of the total enclosed spaces within a vessel) or approximately
$19.3 million, whichever is less, or approximately $76.9 million, as
calculated based on conversion of $59.7 million special drawing rights as of
February 27, 2001, 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, which raised the maximum limit to
approximately $82.7 million. The limit of liability is tied to a unit of
account which varies according to a basket of currencies. The right to limit
liability is forfeited under the 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 insurance policy covers the liability under the plan adopted by the
International Maritime Organization.

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

11

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 has announced a ban of single-hull
crude oil tankers over 5,000 dwt from most Italian ports, effective April 2001.
This ban was placed on oil product carriers, effective December 1, 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.

ADDITIONAL FACTORS THAT MAY AFFECT FUTURE RESULTS

The following risk factors and other information included in this report
should be carefully considered. The risks and uncertainties described below are
not the only ones we face. Additional risks and uncertainties not presently
known to us or that we currently deem immaterial also may impair our business
operations. If any of the following risks occur, our business, financial
condition, operating results and cash flows could be materially adversely
affected and the trading price of our common stock could decline.

AN INCREASE IN THE SUPPLY OF TANKER CAPACITY WITHOUT AN INCREASE IN DEMAND FOR
TANKER CAPACITY COULD CAUSE CHARTER RATES TO DECLINE, WHICH COULD MATERIALLY AND
ADVERSELY AFFECT OUR FINANCIAL PERFORMANCE.

Historically, the tanker industry has been cyclical. The profitability
and asset values of companies in the industry have fluctuated based on changes
in the supply of and demand for tanker capacity. The supply of tankers generally
increases with deliveries of new vessels and decreases with the scrapping of
older vessels, conversion of vessels to other uses, such as floating production
and storage facilities, and loss of tonnage as a result of casualties. If the
number of new ships delivered exceeds the number of vessels being scrapped,
tanker capacity will increase. If the supply of tanker capacity increases and
the demand for tanker capacity does not, the charter rates paid for our vessels
could materially decline. A material decline in our charter rates would decrease
our profitability.

A DECLINE IN DEMAND FOR CRUDE OIL OR A SHIFT IN OIL TRANSPORT PATTERNS COULD
MATERIALLY AND ADVERSELY AFFECT OUR REVENUES.

The demand for tanker capacity to transport crude oil depends upon world
and regional oil markets. A number of factors influence these markets,
including:

- global and regional economic conditions;

- increases and decreases in production of and demand for crude oil;

- developments in international trade; and

- changes in seaborne and other transportation patterns.

Historically, these markets have been volatile as a result of the many
conditions and events that can affect the price, demand, production and
transport of oil, as well as competition from alternative

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energy sources. Falling tanker charter rates in our markets or fewer charters
may have a material adverse effect on our revenues.

A DECLINE IN CHARTER RATES OR AN INCREASE IN COSTS COULD MATERIALLY AND
ADVERSELY AFFECT OUR FINANCIAL PERFORMANCE.

Our revenues depend on the rates that charterers pay for transportation
of crude oil by Aframax and Suezmax tankers. Because many of the factors which
influence the supply of and demand for vessel capacity are unpredictable, the
nature, timing and degree of changes in charter rates are unpredictable. In
2001, the average daily rate in the spot market for our Aframax tankers was
$20,118 and the average daily rate in the spot market for our Suezmax tankers
was $27,032. In 2000, the average daily rate in the spot market for our Aframax
tankers was $27,531 and the average daily rate in the spot market for Suezmax
tankers was $35,751. Our current average daily rates in the spot market for our
Aframax and Suezmax tankers are considerably lower than the rates we realized
during 2001. If charter rates continue to fall, our results could be materially
adversely affected.

Our vessel operating expenses depend on a variety of factors which
include crew costs, provisions, deck and engine stores, lubricating oil,
insurance, maintenance and repairs, many of which are beyond our control and
affect the entire shipping industry. Some of these costs, primarily insurance
and enhanced security measures implemented after September 11, 2001, are
increasing. These increases are anticipated to increase direct vessel operating
expenses for 2002. If costs continue to rise, our results could be materially
adversely affected.

THE MARKET FOR CRUDE OIL TRANSPORTATION SERVICES IS HIGHLY COMPETITIVE AND WE
MAY NOT BE ABLE TO EFFECTIVELY COMPETE.

Our vessels are employed in a highly competitive market. Our competitors
include the owners of other Aframax and Suezmax tankers and, to a lesser degree,
owners of other size tankers. Both groups include independent oil tanker
companies as well as oil companies. We do not control a sufficiently large share
of the market to influence the market price charged for crude oil transportation
services.

Our market share may decrease in the future. We may not be able to
compete profitably as we expand our business into new geographic regions or
provide new services. New markets may require different skills, knowledge or
strategies than we use in our current markets, and the competitors in those new
markets may have greater financial strength and capital resources than we do.

FLUCTUATIONS IN THE MARKET VALUE OF OUR FLEET MAY IMPAIR OUR ABILITY TO OBTAIN
ADDITIONAL FUNDING.

The market value of tankers fluctuates depending upon general economic
and market conditions affecting the tanker industry, the number of vessels in
the world fleet, the price of newbuildings, types and sizes of vessels and the
cost of other modes of transportation. The market value of our fleet may decline
as a result of a downswing in the historically cyclical shipping industry.
Declining vessel values could affect our ability to raise cash and thereby
adversely impact our liquidity. In addition, declining vessel values could
result in a breach of loan covenants, which could give rise to events of default
under our financing agreements.

REGULATIONS AFFECTING THE TANKER INDUSTRY MAY LIMIT OUR ABILITY TO DO BUSINESS
AND MAY INCREASE OUR COSTS.

Our operations are affected by extensive and changing environmental
protection laws and other regulations. Complying with these laws has been
expensive historically and has periodically required

13

ship modifications and changes in operating procedures across the industry,
additional maintenance and inspection requirements, contingency arrangements for
potential spills and insurance coverage. The U.S. Oil Pollution Act of 1990
provides for the phase-in of the exclusive use of double-hull tankers at U.S.
ports. To comply with the act tanker owners must meet maintenance and inspection
requirements, develop contingency arrangements for potential spills and maintain
financial responsibility requirements for vessels operating in the United
States' 200-mile exclusive economic zone. While we believe that we currently
comply with all regulations, we cannot assure you that we will always be able to
do so in the future.

Under the U.S. Oil Pollution Act of 1990, owners, operators and bareboat
charterers are strictly liable for the discharge of oil within the 200-mile
exclusive economic zone around the United States. The act limits this strict
liability to the greater of $1,200 per gross ton or $10 million. However, it
also allows unlimited liability in some circumstances and specifically permits
individual states to impose their own penalties for oil pollution within their
boundaries. Most states bordering on a navigable waterway have enacted
legislation providing for potentially unlimited liability for the discharge of
pollutants within their waters.

We believe that the Atlantic basin, including certain ports in the United
States, is currently one of the most environmentally sensitive shipping markets
in the world, and the companies which operate there must meet more stringent
environmental regulations than companies operating elsewhere. If we fail to meet
those requirements, our operations in the region could be restricted and our
results could be materially and adversely affected.

In 1992, the International Maritime Organization, or IMO, the United
Nations' agency for maritime safety, followed the example set by the U.S. Oil
Pollution Act of 1990 and adopted regulations for tanker design and inspection.
The IMO's regulations aim to reduce the likelihood of oil pollution in
international waters and are being phased in on a schedule based upon vessel
age. In April 2001, the IMO set forth a proposal to revise these regulations
which is expected to become effective September 2002. The revised regulations
provide for a more aggressive phase-out of single-hull oil tankers as well as
increased inspection and verification requirements. The revised regulations
provide for the phase-out of most single-hull oil tankers by 2015 or earlier,
depending on the age of the vessel and whether the vessel complies with
requirements for protectively located segregated ballast tanks. Segregated
ballast tanks use ballast water that is completely separate from the cargo oil
and oil fuel system. Segregated ballast tanks are currently required by the IMO
on crude oil tankers constructed after 1983. The changes, which will likely
increase the number of tankers that are scrapped beginning in 2004, are intended
to reduce the likelihood of oil pollution in international waters.

In addition, the European Union and countries elsewhere are considering
stricter technical and operational requirements for tankers and legislation that
would affect the liability of tanker owners and operators for oil pollution and
limit their ability to use vessels other than double-hull vessels. The European
Union adopted a legislative resolution confirming an accelerated phase-out
schedule for single hull tankers in line with the new IMO schedule. In addition,
the European Union is presently considering the establishment of a fund for the
compensation of oil pollution damage occurring in European waters. Italy has
already announced a ban of single-hull crude oil tankers and carriers of oil
products over 5,000 dwt from most Italian ports. Additional laws and regulations
may be adopted which could limit our ability to do business or increase our
costs. The results of these or potential future environmental regulations could
have a material adverse effect on our operations.

14

SHIPPING IS AN INHERENTLY RISKY BUSINESS AND OUR INSURANCE MAY NOT BE ADEQUATE.

Our vessels and their cargoes are at risk of being damaged or lost
because of events such as marine disasters, bad weather, mechanical failures,
human error, war, terrorism, piracy and other circumstances or events. In
addition, transporting crude oil creates a risk of business interruptions due to
political circumstances in foreign countries, hostilities, labor strikes and
boycotts. Any of these events may result in loss of revenues and increased
costs.

We carry insurance to protect against most of the accident-related risks
involved in the conduct of our business. We currently maintain $1 billion in
coverage for each of our vessels for liability for spillage or leakage of oil or
pollution. We also carry insurance covering lost revenue resulting from vessel
off-hire for all but two of our time-chartered vessels. Nonetheless, risks may
arise against which we are not adequately insured. For example, a catastrophic
spill could exceed our insurance coverage and have a material adverse effect on
our operations. In addition, we may not be able to procure adequate insurance
coverage at commercially reasonable rates in the future and we can not guarantee
that any particular claim will be paid. In the past, new and stricter
environmental regulations have led to higher costs for insurance covering
environmental damage or pollution, and new regulations could lead to similar
increases or even make this type of insurance unavailable. Furthermore, even if
insurance coverage is adequate to cover our losses, we may not be able to timely
obtain a replacement ship in the event of a loss. We may also be subject to
calls, or premiums, in amounts based not only on our own claim records but also
the claim records of all other members of the protection and indemnity
associations through which we receive insurance coverage for tort liability. Our
payment of these calls could result in significant expenses to us which could
reduce our profits or cause losses.

OUR OPERATING RESULTS MAY FLUCTUATE SEASONALLY.

We operate our tankers in markets that have historically exhibited
seasonal variations in tanker demand and, as a result, in charter rates. Tanker
markets are typically stronger in the fall and winter months (the fourth and
first quarters of the calendar year) in anticipation of increased oil
consumption in the northern hemisphere during the winter months. Unpredictable
weather patterns and variations in oil reserves disrupt vessel scheduling. While
this seasonality has not materially affected our operating results since 1997,
it could materially affect our operating results in the future.

WE MAY NOT BE ABLE TO GROW OR TO EFFECTIVELY MANAGE OUR GROWTH.

A principal focus of our strategy is to continue to grow by expanding our
business in the Atlantic basin, the primary geographic area and market where we
operate. Our future growth will depend upon a number of factors, some of which
we can control and some of which we cannot. These factors include our ability
to:

- identify businesses engaged in managing, operating or owning vessels
for acquisitions or joint ventures;

- identify vessels for acquisitions;

- consummate acquisitions or joint ventures;

- integrate any acquired businesses or vessels successfully with our
existing operations;

- hire, train and retain qualified personnel to manage and operate our
growing business and fleet;

15

- identify new markets outside of the Atlantic basin;

- improve our operating and financial systems and controls; and

- obtain required financing for our existing and new operations.

OUR LOAN AGREEMENTS CONTAIN RESTRICTIVE COVENANTS WHICH MAY LIMIT OUR LIQUIDITY
AND CORPORATE ACTIVITIES.

Our vessels are subject to mortgages. These financing agreements impose
operating and financial restrictions, including restrictions which limit our
ability to:

- incur additional indebtedness;

- create liens on our assets;

- sell the capital stock of our subsidiaries or other assets;

- make investments;

- engage in mergers and acquisitions;

- make capital expenditures or pay dividends;

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

- sell our vessels; and

- change control of our company.

Accordingly, to engage in various corporate activities we will need the
permission of our lenders, whose interests are different from and may be adverse
to those of our shareholders. We cannot assure you that we will be able to
obtain our lenders' permission if and when we need it. Our failure to obtain
permission will keep us from effecting corporate transactions and may prevent us
from expanding or properly managing our company.

IF WE DEFAULT UNDER ANY OF OUR LOAN AGREEMENTS, WE COULD FORFEIT OUR RIGHTS IN
OUR VESSELS AND THEIR CHARTERS.

We have pledged all of our vessels and related collateral as security to
the lenders under our loan agreements. Default under any of these loan
agreements, if not waived or modified, would permit the lenders to foreclose on
the mortgages over the vessels and the related collateral, and we could lose our
rights in the vessels and their charters.

When final payments are due under our loan agreements, we must repay
any borrowings outstanding. To the extent that our cash flows are insufficient
to repay any of these borrowings, we will need to refinance some or all of our
loan agreements or replace them with an alternate credit arrangement. We may not
be able to refinance or replace our loan agreements at the time they become due.
In addition, the terms of any refinancing or alternate credit arrangement may
restrict our financial and operating flexibility.

16

As of December 31, 2000, we were in default under our previous loan
facility agreements for breaching several covenants. The lenders waived their
right to take action with respect to these defaults. The breaches which were
waived are set forth below:

- we did not meet all of our working capital and cash balance
requirements; and

- some of our limited partnerships made intercompany loans, all of which
were subsequently repaid in full.

These previous loan facility agreements were refinanced concurrently with
our initial public offering and replaced with our current loan facility
agreements.

As of December 31, 2001, we were not in default under either of our
credit facilities.

IF WE LOSE ANY OF OUR CUSTOMERS OR A SIGNIFICANT PORTION OF OUR REVENUES, OUR
OPERATING RESULTS COULD BE MATERIALLY ADVERSELY AFFECTED.

We derive, and believe that we will continue to derive, a significant
portion of our voyage revenues from a limited number of customers. During the
year ended December 31, 2001, Skaugen PetroTrans, Inc., Sun International Ltd.
and Phillips Petroleum Company accounted for 12.6%, 6.6% and 6.5% respectively,
of our voyage revenues. During 2000, The Coastal Corporation, an international
oil company acquired in January 2001 by El Paso Energy Corporation, and OMI
Corporation, another tanker owner, accounted for 14.7% and 11.3%, respectively
of our voyage revenues (revenues from OMI Corporation resulted primarily from
the time charters of two of our vessels which we terminated, effective during
the fourth quarter of 2000). If we lose a significant customer, or if a
significant customer decreases the amount of business it transacts with us, our
revenues could be materially adversely affected.

WE MAY NOT BE ABLE TO SUCCESSFULLY INTEGRATE OR MANAGE OUR RECENTLY FORMED
TECHNICAL MANAGEMENT SUBSIDIARY.

We depend on United Overseas Tankers Ltd. to manage the technical
operations, such as the staffing and maintenance of many of our vessels. In
connection with our recapitalization, we acquired United Overseas Tankers Ltd.,
a Liberian corporation that was formed and commenced operations in 2000. Since
its formation, United Overseas Tankers Ltd. has been engaged in the business of
managing the technical operations of many of our vessels and has not provided
this service to any other customers. United Overseas Tankers Ltd. may encounter
risks, uncertainties, expenses and difficulties frequently encountered by
companies with limited operating histories. Because we did not operate the
business of United Overseas Tankers Ltd. prior to our acquisition of that
company in June 2001, we may have difficulty successfully integrating and
managing its operations.

AS OUR FLEET AGES, THE RISKS ASSOCIATED WITH OLDER VESSELS COULD ADVERSELY
AFFECT OUR OPERATIONS.

In general, the costs to maintain a vessel in good operating condition
increase as the vessel ages. As of December 31, 2001, the average age, based on
deadweight tons, of our 29-vessel fleet was 11.6 years. Due to improvements in
engine technology, older vessels are typically less fuel-efficient than more
recently constructed vessels. 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. For instance, under the International Maritime

17

Organization's regulations, oil tankers over 25 years old must be double-hulled,
have a mid-deck design or be hydrostatically balanced. We cannot assure you
that, as our vessels age, market conditions will justify any required
expenditures or enable us to operate our vessels profitably during the remainder
of their useful lives. In addition, new regulations proposed by the
International Maritime Organization that are expected to take effect in 2002
will require us to phase-out our single-hull tankers by 2015 or earlier,
depending on the age of the tanker.

OUR INABILITY TO TRADE WITH OUR SINGLE-HULL VESSELS IN U.S. WATERS UNDER THE
U.S. OIL POLLUTION ACT BEGINNING IN 2004 COULD ADVERSELY AFFECT OUR OPERATIONS
AND MARKET POSITION.

Under the U.S. Oil Pollution Act of 1990, all oil tankers that do not
have double hulls will be phased out by 2015 and will not be permitted to come
to U.S. ports or trade in U.S. waters. Our 29-vessel fleet consists of nine
single-hull vessels, six double-sided vessels and 14 double-hull vessels. Three
of our single-hull vessels and two of our double-hull vessels do not currently
serve U.S. ports and are not currently subject to the U.S. Oil Pollution Act of
1990. The remaining six single-hull vessels and the four double-sided vessels
may be redeployed to other markets, sold or scrapped when they can no longer
serve U.S. ports under the act. The U.S. Coast Guard annually inspects vessels
that trade in U.S. waters and determines which vessels will be phased out under
the act. These dates are recorded in tank vessel examination letters provided to
the tanker owner. On the dates set forth below, the following tankers will be
prohibited, based upon their respective ages, from trading in U.S. waters,
except that they may trade in U.S. waters until 2015 if their operations 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.

* The date of prohibition can be extended using hydrostatic balanced
loading. The extended dates of prohibition would be: STAVANGER PRINCE
June 1, 2009, KENTUCKY January 1, 2010, WEST VIRGINIA January 1, 2010,
GENMAR BOSS January 1, 2015, GENMAR SUN January 1, 2015.

As our vessels reach their phase-out dates, we may need to spend
significant funds to reconfigure, retrofit or redeploy them or to sell them and
purchase alternative vessels. We cannot assure you that these expenditures will
be economically justified or that we will have or be able to obtain sufficient
funds to make these repairs or purchases. If we scrap or sell vessels without
replacement, our cash flow and our market position could be negatively affected.

18

AMENDMENTS TO THE INTERNATIONAL MARITIME ORGANIZATION'S REGULATIONS, WHICH ARE
EXPECTED TO TAKE EFFECT IN SEPTEMBER 2002, COULD FORCE US TO PHASE-OUT OR
RETROFIT OUR SINGLE-HULL VESSELS SOONER THAN EXPECTED, WHICH WOULD ADVERSELY
AFFECT OUR OPERATIONS.

Under IMO regulations that are expected to take effect in 2002, all of
our single-hull vessels would be phased-out by 2015 unless they were fitted with
a second hull. The amendments to the International Convention for the Prevention
of Marine Pollution from Ships 1973, as amended, include a time-table for the
phase-out of single-hull tankers that accelerates the phase-out schedule
previously set by the IMO in 1992. Of the nine single-hull vessels in our fleet,
one would be phased out by 2006 and two would be phased out by 2007. The
remaining six vessels would be phased out by 2015, unless we retrofit them to
comply with the new IMO standards. Although the IMO's member countries have not
yet ratified the amendments, the amendments are expected to be approved. If it
is not economically feasible to retrofit our tankers to comply with these new
regulations, the accelerated phase-out of our single-hull tankers may negatively
impact our operations and cash flow.

OUR REVENUES MAY BE ADVERSELY AFFECTED IF WE DO NOT SUCCESSFULLY EMPLOY OUR
VESSELS.

We seek to deploy our vessels between spot charters and time charters in
a manner that optimizes our revenues. A spot charter is generally a contract to
carry a specific cargo from a load port to a discharge port for a fixed dollar
amount. A time charter is generally a contract to charter a vessel for a fixed
period of time at a set daily rate. As of March 1, 2002, four of our vessels
were contractually committed to time charters, with the remaining terms of these
charters expiring on dates between September 2002 and August 2003. Although
these time charters provide reliable revenues, they also limit the portion of
our fleet available for spot voyages during an upswing in the tanker industry
cycle, when spot voyages might be more profitable.

We earned approximately 72.2% of our net voyage revenue from spot
charters for the year ended December 31, 2001. The spot charter market is highly
competitive, and spot charter rates may fluctuate dramatically based on tanker
and oil supply and demand and other factors. We cannot assure you that future
spot charters will be available at rates that will allow us to operate our
vessels profitably.

WE MAY FACE UNEXPECTED REPAIR COSTS FOR OUR VESSELS.

Repairs and maintenance costs are difficult to predict with certainty and
may be substantial. Many of these expenses are not covered by our insurance.
Large repair expenses could decrease our profits and reduce our liquidity.

ARRESTS OF OUR VESSELS BY MARITIME CLAIMANTS COULD CAUSE A SIGNIFICANT LOSS OF
EARNINGS FOR THE RELATED OFF HIRE PERIOD.

Crew members, suppliers of goods and services to a vessel, shippers of
cargo and other parties may be entitled to a maritime lien against a vessel for
unsatisfied debts, claims or damages. In many jurisdictions, a maritime
lienholder may enforce its lien by "arresting" or "attaching" a vessel through
foreclosure proceedings. The arrest or attachment of one or more of our vessels
could result in a significant loss of earnings for the related off-hire period.

In addition, in jurisdictions where the "sister ship" theory of liability
applies, 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. In countries with "sister ship" liability laws,
claims might be asserted against us, any of our subsidiaries or our vessels for
liabilities of other vessels that we own.

19

OUR VESSELS MAY BE REQUISITIONED BY GOVERNMENTS WITHOUT ADEQUATE COMPENSATION.

A government could requisition for title or seize our vessels. Under
requisition for title, a government takes control of a vessel and becomes its
owner. Also, a government could requisition our vessels for hire. Under
requisition for hire, a government takes control of a vessel and effectively
becomes its charterer at dictated charter rates. Generally, requisitions occur
during a period of war or emergency. Although we as owner would be entitled to
compensation in the event of a requisition, the amount and timing of payment
would be uncertain.

WE DEPEND ON OUR KEY PERSONNEL AND MAY HAVE DIFFICULTY ATTRACTING AND RETAINING
SKILLED EMPLOYEES.

The loss of the services of any of our key personnel or our inability to
successfully attract and retain qualified personnel, including ships' officers,
in the future could have a material adverse effect on our business, financial
condition and operating results. Our future success depends particularly on the
continued service of Peter C. Georgiopoulos, our Chairman and Chief Executive
Officer.

PORTIONS OF OUR INCOME MAY BE SUBJECT TO U.S. TAX.

If we qualify for an exemption pursuant to Section 883 of the U.S.
Internal Revenue Code of 1986, then we will not be subject to federal income tax
in the United States on our shipping income. In general, shipping income for
this purpose is income derived by us or our wholly owned subsidiaries from the
operation or leasing of our vessels and from the performance of services
directly related thereto. We will satisfy the requirements under Section 883 if,
inter alia, our stock is treated as primarily and regularly traded on an
established securities market in the U.S. or in a country that provides an
equivalent exemption from tax. Under proposed regulations, we likely would not
satisfy this publicly traded requirement in any taxable year in which 50% or
more of our stock is held at any time during that taxable year by persons who
own (or are deemed to own under applicable rules) 5% or more of our stock ("5%
owners"). We believe that in 2001 we satisfied the publicly traded requirement,
and thus qualified for the Section 883 exemption. However, we may not qualify
for the Section 883 exemption in 2002 or in the future if one or more persons
becomes a 5% owner or if a current 5% owner increases its stock ownership, and,
as a result, the 5% owners hold in the aggregate 50% or more of our stock. We
believe that, as of March 1, 2002, 5% owners held in the aggregate approximately
48% of our stock. Our plan of recapitalization calls for various share
adjustments, which may result in changes to this number. The proposed
regulations are not yet in effect and the final regulations, when adopted, could
differ from the proposed regulations.

If we do not qualify for the Section 883 exemption, we likely would be
subject to U.S. tax equal to 2% of our gross shipping income attributable to
transportation beginning or ending in the United States. In 2001, the vast
majority our revenues were attributable to transportation beginning or ending in
the United States. If we had been subject to this gross income tax during 2001,
such tax would have been as much as approximately $4.3 million. In lieu of the
tax on gross shipping income, if we do not qualify for the Section 883 exemption
we may be subject to U.S. tax on a net income basis with respect to that portion
of our shipping income, if any, that is effectively connected to the conduct of
a trade or business in the United States. In addition, we may be subject to U.S.
tax on a net income basis with respect to that portion of our income, if any,
that does not qualify as shipping income and that is effectively connected to
the conduct of a trade or business in the United States.

If we are a controlled foreign corporation, which would be the case if
more than 50% of our stock is owned (or deemed to be owned) by U.S. persons who
own (or are deemed to own) 10% or more of our voting stock ("U.S. 10% owners"),
then we would qualify for the Section 883 exemption (even though we would not
satisfy the publicly traded requirement). However, our U.S. 10% owners in that
event will be

20

required to include in income each year their pro-rata share of our shipping
income and any other income that is "Subpart F income," as defined. We do not
believe that we are a controlled foreign corporation. In addition, special
rules, including either treating a portion of distributions or disposition
proceeds as ordinary income with an interest charge, or alternatively electing
to mark to market our shares or to include a pro-rata share of our income on a
current basis, would apply to U.S. shareholders if we were classified as a
passive foreign investment company. Current income inclusions by certain of our
U.S. shareholders would also be required if we were a foreign personal holding
company. We do not believe that those regimes apply to us. Holders should
consult their tax advisors.

INCREASES IN TONNAGE TAXES ON OUR VESSELS WOULD INCREASE THE COSTS OF OUR
OPERATIONS.

Our vessels are currently registered under the following flags: Liberia,
Malta, the Republic of the Marshall Islands and Norwegian International Ship
Registry. These jurisdictions impose taxes based on the tonnage capacity of each
of the vessels registered under their flag. The tonnage taxes imposed by these
countries could increase, which would cause the costs of our operations would
increase.

OUR INCORPORATION UNDER THE LAWS OF THE REPUBLIC OF THE MARSHALL ISLANDS MAY
LIMIT THE ABILITY OF OUR SHAREHOLDERS TO PROTECT THEIR INTERESTS.

Our corporate affairs are governed by our Articles of Incorporation and
Bylaws and by the Marshall Islands Business Corporations Act. The provisions of
the Marshall Islands Business Corporations Act resemble provisions of the
corporation laws of a number of states in the United States. However, there have
been few judicial cases in the Republic of the Marshall Islands interpreting the
Marshall Islands Business Corporations Act. For example, the rights and
fiduciary responsibilities of directors under the laws of the Republic of the
Marshall Islands are not as clearly established as the rights and fiduciary
responsibilities of directors under statutes or judicial precedent in existence
in certain U.S. jurisdictions. Although the Marshall Islands Business
Corporations Act does specifically incorporate the non-statutory law, or
judicial case law, of the State of Delaware and other states with substantially
similar legislative provisions, our public shareholders may have more difficulty
in protecting their interests in the face of actions by management, directors or
controlling shareholders than would shareholders of a corporation incorporated
in a U.S. jurisdiction.

IT MAY NOT BE POSSIBLE FOR OUR INVESTORS TO ENFORCE U.S. JUDGMENTS AGAINST US.

We are incorporated in the Republic of the Marshall Islands and most of
our subsidiaries are organized in the Cayman Islands and the Marshall Islands.
Substantially all of our assets and those of our subsidiaries are located
outside the United States. As a result, it may be difficult or impossible for
U.S. investors to serve process within the United States upon us or to enforce
judgment upon us for civil liabilities in U.S. courts. In addition, you should
not assume that courts in the countries in which we or our subsidiaries are
incorporated or where our or the assets of our subsidiaries are located (i)
would enforce judgments of U.S. courts obtained in actions against us or our
subsidiaries based upon the civil liability provisions of applicable U.S.
federal and state securities laws or (ii) would enforce, in original actions,
liabilities against us or our subsidiaries based upon these laws.

A SUCCESSFUL CLAIM THAT OUR RECAPITALIZATION TRANSACTION REQUIRED REGISTRATION
UNDER THE SECURITIES ACT OF 1933 COULD RESULT IN A CLAIMANT'S RESCISSION OF ITS
EXCHANGE OF ASSETS OR SECURITIES, WHICH COULD HAVE A MATERIAL ADVERSE EFFECT ON
OUR RESULTS OF OPERATIONS.

We formed our company by exchanging our common stock for equity
securities and assets of shipowners and management companies through a
recapitalization transaction. The negotiations with respect to these
transactions continued and the execution of agreements for these transactions
occurred

21

after the filing of the registration statement for our initial public offering.
Also, after that filing, we agreed to acquire two additional vessels in our
recapitalization for common stock. The staff of the Securities and Exchange
Commission raised questions as to the availability of the private placement
exemption for these transactions on three occasions during the review of our
Registration Statement. We believe that the recapitalization transaction
qualified as a private placement under the Securities Act of 1933. However, one
or more of the participants exchanging securities or assets in the
recapitalization transaction may assert that the recapitalization transaction
should be integrated with our initial public offering, and thus require
registration under Section 5 of the Securities Act of 1933. If any of these
participants were successful in bringing this type of action against us, it
could obtain remedies which could include rescission of its exchange of assets
or securities. Thus, successful participants could obtain return of the
interests in vessels they contributed to our company. The aggregate net asset
value of all of the vessels for which we issued shares of our common stock
(based on their appraised value at December 31, 2001, minus indebtedness, plus
net working capital) was approximately $478.7 million. If successful
participants no longer held the shares of common stock issued to them, the
participants could obtain damages equal to the difference between the value of
the interests in the vessels contributed by them in exchange for the shares of
common stock issued to them, with interest, reduced by the amount received when
the participant sold the shares, with interest and reduced by any income
received by the participants on the shares of common stock sold. If a claim of
this type were successful, it could be material to our assets and operating
results. We have obtained from each participant a waiver of the right to bring
an action of this type and agreement to contribute any benefit obtained from an
action of this type to us. However, this waiver and agreement may not be
enforceable as contrary to public policy. We understand that it is the view of
the staff of the Securities and Exchange Commission that this waiver and
agreement are not enforceable. Our management has not classified any of our
outstanding shares outside of permanent shareholders' equity (as temporary
equity) because it has concluded that a successful assertion of a claim of
rescission is remote. This conclusion was based upon management's assessment of
the issues discussed above and facts and circumstances of the recapitalization,
including the nature and characteristics of persons receiving shares of our
common stock in the recapitalization transaction, their awareness of these
issues and their agreement to enter into the waiver and contribution agreements
described above (taking into account the views of the staff of the Securities
and Exchange Commission as to enforceability).

ANTI-TAKEOVER PROVISIONS IN OUR FINANCING AGREEMENTS AND OUR ORGANIZATIONAL
DOCUMENTS COULD HAVE THE EFFECT OF DISCOURAGING, DELAYING OR PREVENTING A MERGER
OR ACQUISITION, WHICH COULD ADVERSELY AFFECT THE MARKET PRICE OF OUR COMMON
STOCK.

Several of our existing financing agreements impose restrictions on
changes of control of our company and our ship-owning subsidiaries. These
include requirements that we obtain the lenders' consent prior to any change of
control and that we make an offer to redeem certain indebtedness before a change
of control can take place.

Several provisions of our amended and restated articles of incorporation
and our bylaws could discourage, delay or prevent a merger or acquisition that
shareholders may consider favorable. These provisions include:

- authorizing our board of directors to issue "blank check" preferred
stock without shareholder approval;

- providing for a classified board of directors with staggered,
three-year terms;

22

- prohibiting us from engaging in a "business combination" with an
"interested shareholder" for a period of three years after the date of
the transaction in which the person became an interested shareholder
unless certain provisions are met;

- prohibiting cumulative voting in the election of directors;

- authorizing the removal of directors only for cause and only upon the
affirmative vote of the holders of at least 80% of the outstanding
shares of our common stock entitled to vote for the directors;

- prohibiting shareholder action by written consent unless the written
consent is signed by all shareholders entitled to vote on the action;

- limiting the persons who may call special meetings of shareholders;
and

- establishing advance notice requirements for nominations for election
to our board of directors or for proposing matters that can be acted
on by shareholders at shareholder meetings.

OUR COMMON STOCK PRICE MAY BE HIGHLY VOLATILE AND AN INVESTMENT IN OUR COMMON
STOCK COULD DECLINE IN VALUE.

The market price of our common stock may fluctuate significantly in
response to many factors, many of which are beyond our control. Investors in our
common stock may not be able to resell their shares at or above their purchase
price due to those factors, which include the risks and uncertainties set forth
in this report. In the past, following periods of volatility in the market price
of a particular company's securities, securities class action litigation has
often been brought against the company. We may become involved in this type of
litigation in the future. Litigation of this type could be extremely expensive
and divert management's attention and resources from running our company.

FUTURE SALES OF OUR COMMON STOCK COULD CAUSE THE MARKET PRICE OF OUR COMMON
STOCK TO DECLINE.

The market price of our common stock could decline due to sales of a
large number of shares in the market, including sales of shares by our large
shareholders, or the perception that these sales could occur. These sales could
also make it more difficult or impossible for us to sell equity securities in
the future at a time and price that we deem appropriate to raise funds through
future offerings of common stock. We have entered into registration rights
agreements with the securityholders who received shares in our recapitalization
transactions that entitle them to have an aggregate of 29,000,000 shares
registered for sale in the public market. In addition, those shares may become
eligible for sale in the public market beginning on June 12, 2002, pursuant to
Rule 144 under the Securities Act. We also intend to register on Form S-8 an
aggregate of 2,900,000 shares issuable upon exercise of options we have granted
to purchase common stock or reserved for issuance under our equity compensation
plans.

ITEM 2. PROPERTIES

We lease two properties, both of which house offices used in the
administration of our operations: a property of approximately 11,000 square feet
in New York, New York and a property of approximately 7,400 square feet in
Piraeus, Greece. We do not own or lease any production facilities, plants, mines
or similar real properties.

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ITEM 3. LEGAL PROCEEDINGS

LEGAL PROCEEDINGS

Except as set forth below, we are not aware of any material pending legal
proceedings, other than ordinary routine litigation incidental to our business,
to which we or our subsidiaries is a party or of which our property is the
subject. 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 by us of significant financial and managerial resources.

We time chartered one of our vessels, the GENMAR HARRIET, to an affiliate
of OMI Corporation in September 1997, for a period of four years plus or minus
30 days. Under the charter, we had the right to cancel the balance of the
charter at any time after its second anniversary date upon 90 days written
notice with a payment of $1.0 million to the charterer, which payment has been
made by us. On October 2, 2000, we gave notice to the charterer that this option
was being exercised. Subsequently, it was calculated that redelivery was to take
place on February 2, 2001. In January 2001, the charterer indicated that it was
not possible to complete a laden voyage by such date. The charterer asserted
that the vessel would not have to be redelivered until February 24, 2001, which
would permit it time to conduct an additional voyage. The charterer demanded
arbitration and, under protest, redelivered the vessel to us on January 14,
2001. The charterer has alleged that it is entitled to damages in the amount of
approximately $1.9 million, exclusive of interest and costs, as a result of its
inability to commence and complete another voyage. Our position is that pursuant
to the terms of the charter and the existing law, the charterer was not entitled
to commence another voyage if the vessel could not reasonably be redelivered
prior to the redelivery date. We believe that the charterer's anticipatory
breach of the charter has damaged us. The parties agreed to arbitration in the
State of New York and nominated a sole arbitrator. The parties have exchanged
correspondence expressing differing views of the law and the facts of the matter
and have made various settlement offers. At a hearing held before the arbitrator
on October 3, 2001, the charterer presented witnesses and other evidence in
support of its claim. A second hearing was held on November 20, 2001, at which
we presented witnesses in support of our claim. Both sides have notified the
arbitrator that they do not intend to call any more witnesses, and the parties
are awaiting a schedule for the submission of briefs to the arbitrator.

On March 14, 2001, the GENMAR HECTOR experienced severe weather while
unloading at the BP Amoco Co. terminal in Texas City, Texas. As a result of
heavy winds, the vessel became separated from the terminal. The terminal's
loading arms were damaged and there was a discharge of approximately 200 to 300
barrels of oil. The U.S. Coast Guard has determined that this oil originated
from the terminal and that BP Amoco is the responsible party for the discharge
under the Oil Pollution Act of 1990, although BP Amoco retains a right of
contribution against the vessel. On March 16, 2001, BP Amoco Corporation, BP
Amoco Oil Co. and Amoco Oil Company filed a lawsuit in the United States
District Court for the Southern District of Texas, Galveston Division, against
the GENMAR HECTOR IN REM, seeking damages in the amount of $1.5 million. The
protection and indemnity association for this vessel, which provides insurance
coverage for such incidents, issued a letter to BP Amoco Co., et al.
guaranteeing the payment of up to $1.5 million for any damages for which this
vessel may be found liable in order to prevent the arrest of the vessel. On July
31, 2001, the plaintiffs filed a an amended complaint which added as defendants
United Overseas Tankers Ltd., (a subsidiary of General Maritime) and General
Maritime. On or about August 3, 2001, Valero Refining Company-Texas and Valero
Marketing & Supply Co., co-lessors with BP Amoco of the BP Amoco terminal and
the voyage charterer of the vessel, intervened in the above-referenced lawsuit,
asserting claims against the vessel, Genmar Hector Ltd., United Overseas
Tankers, General Maritime and BP Amoco in the aggregate amount of approximately
$3.2 million. On or about September 28, 2001, BP Amoco filed a second amended
complaint, increasing the aggregate amount of

24

its claims against the defendants, including General Maritime, from $1.5 million
to approximately $3.2 million. BP Amoco asserted that such increase is due to
subsequent demurrage claims made against BP Amoco by other vessels whose voyages
were delayed or otherwise affected by the incident. We believe that the claims
asserted by BP Amoco are generally the same as those asserted by Valero Refining
Company-Texas and Valero Marketing & Supply Co. and that, as a result, the
aggregate amount of such claims taken together will be approximately $3.2
million. A counterclaim has been filed on behalf of the Defendants against the
BP Amoco and Valero plaintiffs in the approximate amount of $25,000.
On October 30, 2001, these two civil actions were consolidated and on December
26, 2001, a complaint for damages in an unspecified amount due to personal
injuries from the inhalation of oil fumes was filed by certain individuals
against the vessel, BP Amoco, United Overseas Tankers, and General Maritime
Corporation. These personal injury plaintiffs filed an amended complaint on
January 24, 2002, adding another individual as a plaintiff and asserting a claim
against United Overseas Tankers and General Maritime Corporation for punitive
damages. We believe that the claim for punitive damages is without merit. With
the possible exception of the claim for punitive damages, all of the claims
asserted against us appear to be covered by insurance. Accordingly, we believe
that this incident will have no material effect on the value of the GENMAR
HECTOR or on its results of operations.

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

No matter was submitted to a vote of security holders, through the
solicitation of proxies or otherwise, during the fourth quarter of the fiscal
year ended December 31, 2001.

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PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

MARKET INFORMATION, HOLDERS AND DIVIDENDS

The common stock of General Maritime Corporation has traded on the New
York Stock Exchange under the symbol "GMR" since General Maritime's initial
public offering on June 12, 2001. The following table sets forth for the periods
indicated the high and low prices for the common stock as of the close of
trading as reported on the New York Stock Exchange:

As of February 19, 2002, there were approximately 964 holders of our
common stock.

We have never declared or paid any cash dividends on our capital stock.
General Maritime currently intends to retain all available earnings for use in
its business and does not anticipate paying any cash dividends in the
foreseeable future. Certain financing agreements of General Maritime and its
subsidiaries contain limitations or prohibitions on the payment of dividends
without the lender's consent or in conjunction with a subsidiary's failure to
comply with various financial covenants.

USE OF PROCEEDS

Pursuant to a Registration Statement on Form S-1 (Registration
No. 333-49814) that was declared effective by the Securities and Exchange
Commission on June 12, 2001, 8,000,000 shares of our common stock, par value
$0.01 per share, which were sold in connection with our initial public
offering, were registered under the Securities Act of 1933, as amended. We
provided information regarding the proceeds of our offering under Item 2(b)
of Part II of our Quarterly Reports on Form 10-Q for the periods ended June
31, 2001 and September 30, 2001. During the three months ended December 31,
2001, we used the remaining $1.8 million of net proceeds from that offering
for general corporate purposes.

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ITEM 6. SELECTED CONSOLIDATED FINANCIAL AND OTHER DATA

Set forth below are selected historical consolidated and other data of
General Maritime Corporation at the dates and for the fiscal years shown.

1) Since our inception on February 1, 1997
2) Long term debt is inclusive of current portion of long term debt for the
relevant period. In 1999, it excludes a $15 million note payable to one of
our shareholders, which was cancelled and contributed to our capital in
June 2000.
3) Adjusted EBITDA represents net voyage revenues less direct vessel expenses
and general and administrative expenses excluding other expenses. Adjusted
EBITDA is included because it is used by certain investors to measure a
company's financial performance. Adjusted EBITDA is not an item recognized
by GAAP, and should not be considered as an alternative to net income or
any other indicator of a company's performance required by GAAP. The
definition of Adjusted EBITDA used here may not be comparable to that used
by other companies.
4) Weighted average number of vessels is the average number of vessels that
constituted our fleet for that year, as measured by the sum of the number
of days each vessel was part of our fleet divided by the number of calendar
days in that year.
5) Voyage days are the total days our vessels were in our possession, net of
off-hire days associated with major repairs, drydockings or special
surveys.
6) Reflects an extra day in 2000, which was a leap year.
7) Calendar days are the total days our vessels were in our possession,
including off-hire days associated with major repairs, drydockings or
special surveys.
8) Fleet utilization is the percentage of time that the vessels in our
possession were available for revenue generating voyages and is determined
by dividing voyage days by calendar days.
9) Time charter equivalent, or TCE, is a measure of the average daily revenue
performance of a vessel on a per voyage basis. Our method of calculating
time charter equivalent is consistent with industry standards and is
determined by dividing net voyage revenue by voyage days for the time
period. Net voyage revenues are voyage revenues minus voyage expenses.
Voyage expenses primarily consist of

28

commissions and port, canal and fuel costs that are unique to a particular
voyage, which otherwise by paid by a charterer under a time charter.
10) Total vessel operating expenses are our total expenses associated with
operating our vessels. We determine total vessel operating expenses by
dividing the sum of direct vessel expenses and general and administrative
expenses by calendar days.
11) Basic earnings / (loss) per share are computed by dividing net income /
(loss) by the weighted average number of shares of common share outstanding
during the year. Diluted income / (loss) per share reflects the potential
dilution that could occur if securities or other contracts to issue common
stock were exercised. There were no dilutive securities outstanding during
the years presented.

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

This report contains forward-looking statements made pursuant to the safe
harbor provisions of the Private Securities Litigation Reform Act of 1995. These
forward looking statements are based on management's current expectations and
observations. Included among the factors that, in our view, could cause actual
results to differ materially from the forward looking statements contained in
this report are the following: changes in demand or material decline in rates in
the tanker market; changes in production of or demand for oil and petroleum
products, generally or in particular regions; greater than anticipated levels of
tanker newbuilding orders or lower than anticipated rates of tanker scrapping;
changes in rules and regulations applicable to the tanker industry, including,
without limitation, legislation adopted by international organizations such as
the International Maritime Organization and the European Union or by individual
countries; actions taken by regulatory authorities; changes in trading patterns
significantly impacting overall tanker tonnage requirements; changes in the
typical seasonal variations in tanker charter rates; changes in the cost of
other modes of oil transportation; changes in oil transportation technology;
increases in costs including without limitation: crew wages, insurance,
provisions, repairs and maintenance: changes in general domestic and
international political conditions; changes in the condition of our vessels or
applicable maintenance or regulatory standards (which may affect, among other
things, our anticipated drydocking or maintenance and repair costs); and other
factors listed from time to time in our filings with the Securities and Exchange
Commission. For a description of some of these factors, see the discussion under
the heading "Item 1 - BUSINESS - ADDITIONAL FACTORS THAT MAY AFFECT FUTURE
RESULTS."

Because the limited partnerships through which we were operated prior to
June 12, 2001 were generally treated as flow through entities for U.S. income
tax purposes during the period prior to our recapitalization, our income was
passed through to the partners of the limited partnerships. In addition, we
believe that we qualify for an exemption pursuant to Section 883 of the U.S.
Internal Revenue Code of 1986 and, as a result, will not be subject to federal
income tax in the United States on our shipping income. We also believe that we
will not be subject to the U.S. federal tax equal to 2% of our gross shipping
income from transportation beginning or ending in the United States.
Accordingly, liability for U.S. income tax is not reflected in our financial
statements or in the discussion below, and we have not included a pro forma
discussion showing the effects of any projected U.S. income taxes. For further
information, see the discussion under the heading "Item 1 - BUSINESS -
ADDITIONAL FACTORS THAT MAY AFFECT FUTURE RESULTS - PORTIONS OF OUR INCOME..."
in this report.

The following is a discussion of our financial condition and results of
operations for the years ended December 31, 2001 and 2000, and for the years
ended December 31, 2000 and 1999. You should consider the foregoing when
reviewing the consolidated financial statements and this discussion. You

29

should read this section together with the consolidated financial statements
including the notes to those financial statements for the years mentioned above.

For discussion and analysis purposes only, we evaluate performance using
net voyage revenues. Net voyage revenues are voyage revenues minus voyage
expenses. Voyage expenses primarily consist of commissions, port, canal and fuel
costs that are unique to a particular voyage, which would otherwise be paid by a
charterer under a time charter. We believe that presenting voyage revenues, net
of voyage expenses, neutralizes the variability created by unique costs
associated with particular voyages or the deployment of vessels on time charter
or on the spot market and presents a more accurate representation of the
revenues generated by our vessels.

We actively manage the deployment of our fleet between spot charters,
which generally last from several days to several weeks, and time charters,
which can last up to several years. A spot charter is generally a contract to
carry a specific cargo from a load port to a discharge port for an agreed upon
total amount. Under spot charters, we pay voyage expenses such as port, canal
and fuel costs. A time charter is generally a contract to charter a vessel for a
fixed period of time at a set daily rate. Under time charters, the charterer
pays voyage expenses such as port, canal and fuel costs. We primarily operate in
the Atlantic basin, which includes ports in the Caribbean, South and Central
America, the United States, Western Africa and the North Sea. We also currently
operate four vessels in the Black Sea which we believe will enable us to take
advantage of opportunities in that market.

We strive to optimize the performance of our fleet through the deployment
of our vessels in both time charters and in the spot market. Vessels operating
on time charters provide more predictable cash flows, but can yield lower profit
margins than vessels operating in the spot market during periods characterized
by favorable market conditions. Vessels operating in the spot market generate
revenues that are less predictable but may enable us to capture increased profit
margins during periods of improvement in tanker rates.

In the past we have also deployed our vessels on bareboat contracts
whereby we lease vessels for a set period of time and the charterer bears all
operating expenses including crew and drydocking costs. Although revenues and
net voyage revenues are lower under this type of contract, operating income is
generally equivalent to operating income generated from time charters during
comparable periods.

Our voyage revenues and voyage expenses are recognized ratably over the
duration of the voyages and the lives of the charters, while direct vessel
expenses are recognized when incurred. We recognize the revenues of time
charters that contain rate escalation schedules at the average rate during the
life of the contract. Time charter equivalent, or "TCE," rates are calculated by
dividing net voyage revenue by the aggregate number of vessel operating days
that we owned each vessel. We also generate demurrage revenue, which represents
fees charged to charterers associated with our spot voyages when the charterer
exceeds the agreed upon time required to load or discharge a cargo. Corporate
income and expenses, which include general and administrative and net interest
expense, are allocated to vessels on a pro rata basis based on the number of
months that a vessel was owned. Daily direct vessel operating expenses and daily
general and administrative expenses are calculated by dividing the total
expenses by the aggregate number of calendar days that we owned each vessel for
the period.

We depreciate our vessels on a straight-line basis over their estimated
useful lives determined to be 25 years from the date of their initial delivery
from the shipyard. Depreciation is based on cost less the estimated residual
scrap value of $125 per lightweight ton. We capitalize the total costs
associated with a drydock and amortize these costs on a straight-line basis over
the period between drydockings. Our expenditures for major maintenance and
repairs are capitalized if the work extends the operating life of the vessel or
materially improves the vessel's performance, otherwise costs are expensed as
incurred.

30

Total expenses associated with replaced parts are capitalized, less the
depreciated value of the old part being replaced, and are depreciated on a
straight line basis over the shorter of the remaining life of the new part