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Form 10-Q
Page 1


UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q

(Mark One)
|X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE
ACT OF 1934

For the quarterly period ended JUNE 30, 2002

OR

|_| 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 1-6479-1

OVERSEAS SHIPHOLDING GROUP, INC.
(Exact name of registrant as specified in its charter)

DELAWARE 13-2637623
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)

511 Fifth Avenue, New York, New York 10017
(Address of principal executive offices) (Zip Code)

(212) 953-4100
Registrant's telephone number, including area code

No Change
Former name, former address and former fiscal year, if changed since last report

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 |_|

APPLICABLE ONLY TO CORPORATE ISSUERS

Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practical date.

Common Shares outstanding as of August 12, 2002 - 34,426,148




Form 10-Q
Page 2


OVERSEAS SHIPHOLDING GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
IN THOUSANDS



JUNE 30, DECEMBER 31,
2002 2001
---- ----
(UNAUDITED)

ASSETS
Current Assets:
Cash and cash equivalents $ 13,971 $ 30,256
Investments in marketable securities 42,595 69,958
Receivables, including unbilled voyage receivables of
$23,346 and $18,221 34,911 38,054
Inventories and prepaid expenses 7,114 8,354
---------- ----------
Total Current Assets 98,591 146,622

Capital Construction Fund 234,879 232,971
Vessels, at cost, less accumulated depreciation of $429,862 and
$434,442 - Note G 1,314,036 1,307,311
Vessels under Capital Leases, less accumulated amortization of
$86,371 and $83,681 35,719 38,408
Investments in Joint Ventures - Note E 157,525 149,775
Other Assets 88,243 89,188
---------- ----------
Total Assets $1,928,993 $1,964,275
========== ==========

LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 3,910 $ 3,132
Sundry liabilities and accrued expenses 23,322 34,880
Federal income taxes -- 23,756
Short-term debt and current installments of long-term debt 47,600 17,600
Current obligations under capital leases 6,470 6,164
---------- ----------
Total Current Liabilities 81,302 85,532

Long-term Debt - Note G 785,079 795,736
Obligations under Capital Leases 55,734 59,193
Deferred Federal Income Taxes ($130,360 and $132,170), Deferred
Credits and Other Liabilities - Notes F and H 204,316 210,388

Shareholders' Equity - Notes H and I 802,562 813,426
---------- ----------
Total Liabilities and Shareholders' Equity $1,928,993 $1,964,275
========== ==========


See notes to condensed consolidated financial statements.




Form 10-Q
Page 3


OVERSEAS SHIPHOLDING GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS
(UNAUDITED)



THREE MONTHS ENDED SIX MONTHS ENDED
----------------------------------- ----------------------------------
JUNE 30, 2002 JUNE 30, 2001 JUNE 30, 2002 JUNE 30, 2001
---------------- ---------------- ---------------- ---------------

Shipping Revenues - Note C:
Voyage charter revenues $ 14,520 $ 68,225 $ 35,819 $ 150,449
Time and bareboat charter revenues, including
vessels operating in certain pools 56,225 60,902 108,421 128,417
---------------- ---------------- ---------------- ---------------
70,745 129,127 144,240 278,866
Voyage expenses (7,424) (22,544) (17,040) (45,539)
---------------- ---------------- ---------------- ---------------
Time Charter Equivalent Revenues 63,321 106,583 127,200 233,327
---------------- ---------------- ---------------- ---------------

Ship Operating Expenses:
Vessel expenses 21,833 20,861 43,124 40,497
Time and bareboat charter hire expenses 5,997 11,589 12,344 25,895
Depreciation and amortization 19,758 17,298 38,618 34,184
General and administrative 7,599 9,218 15,445 19,092
Restructuring charge - Note J -- 269 -- 8,814
---------------- ---------------- ---------------- ---------------
Total Ship Operating Expenses 55,187 59,235 109,531 128,482
---------------- ---------------- ---------------- ---------------

Income from Vessel Operations 8,134 47,348 17,669 104,845
Equity in Income of Joint Ventures - Note E 1,342 4,334 3,287 9,642
---------------- ---------------- ---------------- ---------------
Operating Income 9,476 51,682 20,956 114,487
Other Income - net - Note K 10,247 24,015 12,782 33,002
---------------- ---------------- ---------------- ---------------
19,723 75,697 33,738 147,489
Interest Expense 13,868 10,866 26,814 22,065
---------------- ---------------- ---------------- ---------------

Income before Federal Income Taxes 5,855 64,831 6,924 125,424
Provision for Federal Income Taxes - Note H 2,185 22,120 2,510 42,350
---------------- ---------------- ---------------- ---------------
Net Income $ 3,670 $ 42,711 $ 4,414 $ 83,074
================ ================ ================ ===============

Per Share Amounts - Note L2:
Basic net income $ 0.11 $ 1.25 $ 0.13 $ 2.44
================ ================ ================ ===============
Diluted net income $ 0.11 $ 1.23 $ 0.13 $ 2.39
================ ================ ================ ===============
Cash dividends declared $ 0.30 $ 0.30 $ 0.45 $ 0.45
================ ================ ================ ===============


See notes to condensed consolidated financial statements.





Form 10-Q
Page 4


OVERSEAS SHIPHOLDING GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
IN THOUSANDS
(UNAUDITED)



SIX MONTHS ENDED
-----------------------------
JUNE 30, 2002 JUNE 30, 2001
------------- -------------


Net cash provided by/(used in) operating activities $ (8,774) $ 138,378
--------- ---------

Cash Flows from Investing Activities:
Purchases of marketable securities -- (109,583)
Proceeds from sales of marketable securities 32,164 83,926
Expenditures for vessels, including $38,649 and $39,253 related
to vessels under construction (39,781) (40,117)
Proceeds from disposal of vessels 2,949 1,142
Investments in and advances to joint ventures (16,247) (31,712)
Distributions from joint ventures 5,087 1,458
Other - net 845 1,202
--------- ---------
Net cash (used in) investing activities (14,983) (93,684)
--------- ---------

Cash Flows from Financing Activities:
Issuance of debt 26,000 --
Payments on debt and obligations under capital leases (9,453) (32,211)
Cash dividends paid (10,306) (10,237)
Issuance of common stock upon exercise of stock options 2,213 3,964
Other - net (982) 17
--------- ---------
Net cash provided by/(used in) financing activities 7,472 (38,467)
--------- ---------

Net increase/(decrease) in cash and cash equivalents (16,285) 6,227
Cash and cash equivalents at beginning of period 30,256 15,781
--------- ---------
Cash and cash equivalents at end of period $ 13,971 $ 22,008
========= =========


See notes to condensed consolidated financial statements.




Form 10-Q
Page 5


OVERSEAS SHIPHOLDING GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
DOLLARS IN THOUSANDS
(UNAUDITED)



Accumulated
Paid-in Treasury Stock Other
Common Additional Retained -------------------- Comprehensive
Stock* Capital Earnings Shares Amount Income/(Loss)** Total
------ ------- -------- ------ ------ --------------- -----

Balance at January 1, 2002 $ 39,591 $ 103,529 $ 769,457 5,312,867 $ (72,868) $ (26,283) $ 813,426
---------
Net Income 4,414 4,414
Net Unrealized Holding Losses on
Available-For-Sale Securities (334) (334)
Effect of Derivative Instruments (3,409) (3,409)
Minimum Pension Liability 279 279
---------
Comprehensive Income 950***
---------
Cash Dividends Declared (15,470) (15,470)
Deferred Compensation Related to Options Granted 1,131 1,131
Options Exercised and Employee Stock Purchase Plan 25 (145,855) 2,188 2,213
Tax Benefit Related to Options Exercised 312 312
-------- --------- --------- --------- --------- --------- ---------
Balance at June 30, 2002 $ 39,591 $ 104,997 $ 758,401 5,167,012 $ (70,680) $ (29,747) $ 802,562
======== ========= ========= ========= ========= ========= =========

Balance at January 1, 2001 $ 39,591 $ 99,009 $ 688,528 5,604,275 $ (76,857) $ (104) $ 750,167
---------
Net Income 83,074 83,074
Cumulative Effect of Change in Accounting
Principle, net of taxes of $1,861 - Note B 3,455 3,455
Net Unrealized Holding Gains on
Available-For-Sale Securities 1,818 1,818
Effect of Derivative Instruments (2,668) (2,668)
---------
Comprehensive Income 85,679***
---------
Cash Dividends Declared (15,365) (15,365)
Deferred Compensation Related to Options Granted 1,131 1,131
Options Exercised and Employee Stock Purchase Plan 527 (254,571) 3,437 3,964
Tax Benefit Related to Options Exercised 1,230 1,230
-------- --------- --------- --------- --------- --------- ---------
Balance at June 30, 2001 $ 39,591 $ 101,897 $ 756,237 5,349,703 $ (73,420) $ 2,501 $ 826,806
======== ========= ========= ========= ========= ========= =========



* Par value $1 per share; 60,000,000 shares authorized and 39,590,759 shares
issued.

** Amounts are net of tax.

*** There was a comprehensive loss of $11,245 for the three months ended June
30, 2002. Comprehensive income was $36,367 for the three months ended June
30, 2001. See notes to condensed consolidated financial statements.




Form 10-Q
Page 6


OVERSEAS SHIPHOLDING GROUP, INC. AND SUBSIDIARIES

Notes to Unaudited Condensed Financial Statements

Note A - Basis of Presentation:

The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the three month and six month periods ended
June 30, 2002 are not necessarily indicative of the results that may be expected
for the year ended December 31, 2002.

The balance sheet at December 31, 2001 has been derived from the audited
financial statements at that date, but does not include all of the information
and footnotes required by generally accepted accounting principles for complete
financial statements.

For further information, refer to the consolidated financial statements and
footnotes thereto included in the Company's annual report on Form 10-K for the
year ended December 31, 2001.

The condensed consolidated statements of income for the three month and six
month periods ended June 30, 2001 and the condensed consolidated statement of
cash flows for the six month period ended June 30, 2001 have been reclassified
to conform with the 2002 presentation of certain items.

Note B - Change in Accounting for Derivatives and Hedging Activities:

In June 1998, the Financial Accounting Standards Board issued Statement No. 133,
"Accounting for Derivative Instruments and Hedging Activities" ("FAS 133"). FAS
133 requires the Company to recognize all derivatives on the balance sheet at
fair value. Derivatives that are not hedges must be adjusted to fair value
through income. If the derivative is a hedge, depending on the nature of the
hedge, a change in the fair value of the derivative is either offset against the
change in fair value of the hedged item (fair value hedge), or recognized in
other comprehensive income/(loss) until the hedged item is reflected in earnings
(cash flow hedge). The ineffective portion (that is, the change in fair value of
the derivative that does not offset the change in fair value of the hedged item)
of a derivative's change in fair value will be immediately recognized in
earnings. The adoption of FAS 133 on January 1, 2001 resulted in the cumulative
effect of an accounting change, net of taxes, of $3,455,000 being recognized as
a gain in other comprehensive income/(loss). The cumulative effect of such
accounting change on net income was insignificant.





Form 10-Q
Page 7


OVERSEAS SHIPHOLDING GROUP, INC. AND SUBSIDIARIES

Notes to Unaudited Condensed Financial Statements

Note C -Segment Reporting:

The Company has five reportable segments: Foreign Flag VLCCs, Aframaxes, and
Product Carriers, and U.S. Flag Crude Tankers and Dry Bulk Carriers. Information
about the Company's reportable segments as of and for the three month and six
month periods ended June 30, 2002 and 2001 is as follows:



Foreign Flag U.S. Flag
----------------------------------- -------------------------
Product Crude Dry Bulk
In thousands VLCCs Aframaxes Carriers Tankers Carriers All other Totals
- --------------------------------------------------------------------------- ----------------------------------------------------
Three months ended June 30, 2002:

Shipping revenues * $ 16,666 $ 19,413 $ 12,485 $ 7,013 $ 3,972 $ 11,196 $ 70,745
Time charter equivalent revenues 16,522 19,491 8,416 7,013 775 11,104 63,321
Income from vessel operations 1,421 8,050 2,272 3,458 (2,918) 3,450 15,733**
Equity in income of joint ventures (450) 146 1,648 (2) 1,342
Total assets at June 30, 2002 863,941 429,410 96,244 5,521 5,604 160,538 1,561,258

Six months ended June 30, 2002:
Shipping revenues * 34,388 35,892 25,644 14,026 12,399 21,891 144,240
Time charter equivalent revenues 33,784 35,956 17,287 14,026 4,443 21,704 127,200
Income from vessel operations 4,273 13,982 5,093 6,883 (4,262) 7,145 33,114**
Equity in income of joint ventures 668 (180) 2,801 (2) 3,287

Three months ended June 30, 2001:
Shipping revenues * 35,075 46,213 18,417 7,013 8,475 13,934 129,127
Time charter equivalent revenues 34,916 32,576 14,462 7,013 3,816 13,800 106,583
Income from vessel operations 23,251 20,271 7,861 3,400 (925) 2,977 56,835**
Equity in income of joint ventures 3,079 1,255 4,334
Total assets at June 30, 2001 792,956 398,936 106,476 2,128 15,645 172,033 1,488,174

Six months ended June 30, 2001:
Shipping revenues * 73,108 96,908 46,248 14,026 16,691 31,885 278,866
Time charter equivalent revenues 72,828 70,618 38,004 14,026 6,202 31,649 233,327
Income from vessel operations 49,636 49,526 24,600 7,291 (4,538) 6,236 132,751**
Equity in income of joint ventures 5,315 3,066 1,228 33 9,642



* Beginning in 2002, operation of the PDV Marina/OSG Aframax pool, now doing
business as Aframax International, changed to be substantially similar to
the operations of the Tankers and dry bulk carrier pools. Accordingly, in
the first quarter of 2002, Aframax International began reporting results
on a time charter equivalent basis (after reduction for voyage expenses).
Prior to 2002, revenues of the Aframaxes were reported on a voyage charter
basis, that is, before reduction for voyage expenses that aggregated
$13,637 for the three months ended June 30, 2001 and $26,290 for the six
months ended June 30, 2001.

For vessels operating in pools or on time or bareboat charters, shipping
revenues are substantially the same as time charter equivalent revenues.

** Segment totals for income/(loss) from vessel operations are before general
and administrative expenses and the restructuring charge.



Form 10-Q
Page 8


OVERSEAS SHIPHOLDING GROUP, INC. AND SUBSIDIARIES

Notes to Unaudited Condensed Financial Statements

Note C -Segment Reporting (continued):

A reconciliation of total assets of the segments to amounts included in the
condensed consolidated balance sheets is as follow:

IN THOUSANDS AS OF
----------------------------
JUNE 30, 2002 JUNE 30, 2001
------------- -------------
Total assets of all segments $1,561,258 $1,488,174
Corporate cash and securities, including capital
construction fund 291,445 342,458
Other unallocated amounts 76,290 77,417
---------- ----------
Consolidated total assets $1,928,993 $1,908,049
========== ==========

Note D - Assets and Liabilities of Foreign Subsidiaries:

A condensed summary of the combined assets and liabilities of the Company's
foreign subsidiaries, whose operations are principally conducted in U.S.
dollars, is as follows:



IN THOUSANDS AS OF
------------------------
JUNE 30, DECEMBER 31,
2002 2001
---------- ----------

Current assets $ 35,764 $ 35,182
Vessels, net 1,269,708 1,259,383
Other assets 177,994 166,238
---------- ----------
Total Assets $1,483,466 $1,460,803
========== ==========

Current installments of long-term debt, including
intercompany of $33,400 and $66,800 $ 81,000 $ 79,400
Other current liabilities 10,925 16,135
---------- ----------
Total current liabilities 91,925 95,535

Long-term debt, deferred credits and other liabilities 321,097 304,861
Equity 1,070,444 1,060,407
---------- ----------
Total Liabilities and Equity $1,483,466 $1,460,803
========== ==========


Note E - Joint Ventures:

As of June 30, 2002, the Company is a partner in joint ventures that own ten
foreign flag vessels (nine VLCCs and one Aframax) and one VLCC newbuilding that
is scheduled to be delivered in early-July 2002. Seven of these VLCCs
participate in the Tankers pool; two operate on long-term charters, one to the
Company and one to the other joint venture partner, and do not participate in
the Tankers pool. The Aframax participates in the Aframax International pool.



Form 10-Q
Page 9


OVERSEAS SHIPHOLDING GROUP, INC. AND SUBSIDIARIES

Notes to Unaudited Condensed Financial Statements

Note E - Joint Ventures (continued):

In May 2002, a joint venture in which the Company has a 50% interest exercised a
purchase option to acquire the 1992-built Aframax tanker that it had bareboat
chartered in. The purchase price of approximately $13 million was financed
through capital contributions from the partners.

A condensed summary of the results of operations of the joint ventures is as
follows:



IN THOUSANDS
------------------------------------------------
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
---------------------- ----------------------
2002 2001 2002 2001
---- ---- ---- ----

Shipping revenues $ 57,881 $ 56,330 $ 117,575 $ 110,304
Voyage expenses 84 256 105 933
--------- --------- --------- ---------
Time charter equivalent revenues 57,797 56,074 117,470 109,371
Ship operating expenses 52,137 48,025 102,100 93,409
--------- --------- --------- ---------
Income from vessel operations 5,660 8,049 15,370 15,962
Other income 163 278 354 507
Interest expense * (6,397) (3,259) (12,084) (5,289)
--------- --------- --------- ---------
Net income/(loss) $ (574) $ 5,068 $ 3,640 $ 11,180
========= ========= ========= =========


* Interest expense includes interest on subordinated loans payable to the
joint venture partners of $3,360,000 (three months ended June 30, 2002),
$801,000 (three months ended June 30, 2001), $6,199,000 (six months ended
June 30, 2002) and $1,130,000 (six months ended June 30, 2001). The
Company's share of such interest is eliminated in consolidation.

As of June 30, 2002, the joint ventures in which the Company had interests
ranging from 30% to 50% had bank debt of $300,147,000 and subordinated loans
payable to all joint venture partners of $193,376,000. The Company's guaranties
in connection with the joint ventures' bank financings, which are otherwise
nonrecourse to the joint venture partners, aggregated $31,020,000 at June 30,
2002. The amount of these guaranties reduces as the bank loans are paid down.

Note F - Derivatives:

As of June 30, 2002, the Company is a party to floating to fixed interest rate
swaps with various major financial institutions covering notional amounts
aggregating approximately $450,000,000, pursuant to which it pays fixed rates
ranging from 5.1% to 7.1% and receives floating rates based on LIBOR
(approximately 1.9% as of June 30, 2002). These agreements contain no leverage
features and have various maturity dates from August 2002 to December 2008. As
of June 30, 2002, the Company has recorded a liability of $14,496,000 related to
the fair values of these swaps in other liabilities.


Form 10-Q
Page 10


OVERSEAS SHIPHOLDING GROUP, INC. AND SUBSIDIARIES

Notes to Unaudited Condensed Financial Statements

Note G - Debt:

In February 2002, the Company increased its unsecured short-term credit facility
to $45,000,000 from $15,000,000. There was $35,000,000 outstanding under such
facility at June 30, 2002. In addition, the Company has unsecured long-term
credit facilities aggregating $700,000,000, of which $525,000,000 was used at
June 30, 2002.

In late July and early August 2002, the Company entered into four secured loan
agreements aggregating in excess of $250,000,000. Seven vessels (three VLCCs and
four Aframaxes) were pledged as collateral in connection with such loans. The
loans have terms ranging from 10 to 12 years and carry interest rates based on a
spread above LIBOR. The Company will use the proceeds received from these
borrowings to pay down existing term loans (with an outstanding balance as of
June 30, 2002 of $117,100,000), which have significantly shorter remaining
terms, and to further increase the Company's liquidity.

Agreements relating to long-term debt provide for prepayment privileges (in
certain instances with penalties), a limitation on the amount of total
borrowings, and acceleration of payment under certain circumstances, including
failure to satisfy the financial covenants contained in certain of such
agreements.

As of June 30, 2002, approximately 9.6% of the net book amount of the Company's
vessels, representing two foreign flag vessels, is pledged as collateral for
certain long-term debt.

Interest paid approximated $26,738,000 (six months ended June 30, 2002) and
$22,617,000 (six months ended June 30, 2001), excluding capitalized interest.

Note H - Taxes:

Since January 1, 1987, earnings of the foreign shipping companies (exclusive of
foreign joint ventures in which the Company has a less than 50% interest) are
subject to U.S. income taxation in the year earned and may be distributed to the
U.S. parent without further tax. Prior to 1987, tax on such earnings was
deferred as long as the earnings were reinvested in foreign shipping operations.
Foreign income, substantially all of which resulted from the operations of
companies that are not subject to income taxes in their country of
incorporation, aggregated $926,000 (three months ended June 30, 2002),
$44,593,000 (three months ended June 30, 2001), $4,097,000 (six months ended
June 30, 2002) and $114,230,000 (six months ended June 30, 2001), before any
U.S. income tax effect. No provision for U.S. income taxes on the undistributed
income of the foreign shipping companies accumulated through December 31, 1986
was required at June 30, 2002 since undistributed earnings of foreign shipping
companies have been reinvested or are intended to be reinvested in foreign
shipping operations so that the qualified investment therein is not expected to
be reduced below the corresponding amount at December 31, 1986. Further, no
provision for U.S. income taxes on the Company's share of the undistributed
earnings of the less than 50%-owned foreign shipping joint ventures was required
as of June 30, 2002, since it is intended that such undistributed earnings
($4,100,000 at June 30, 2002) will be indefinitely reinvested; the unrecognized
deferred U.S. income taxes attributable thereto approximated $1,400,000.




Form 10-Q
Page 11


OVERSEAS SHIPHOLDING GROUP, INC. AND SUBSIDIARIES

Notes to Unaudited Condensed Financial Statements

Note H - Taxes (continued):

The components of the provision for federal income taxes are as follows:

IN THOUSANDS
------------------------------------------------------
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
----------------------- ------------------------
2002 2001 2002 2001
---- ---- ---- ----
Current $ 107 $ 11,000 $ (224) $ 21,200
Deferred 2,078 11,120 2,734 21,150
-------- -------- -------- --------
$ 2,185 $ 22,120 $ 2,510 $ 42,350
======== ======== ======== ========

Federal income taxes paid during the six months ended June 30, 2002 amounted to
$24,500,000, all of which related to 2001. Federal income taxes paid during the
six months ended June 30, 2001 amounted to $6,100,000, of which $3,100,000
related to 2000.

Note I - Accumulated Other Comprehensive Income/(Loss):

The components of accumulated other comprehensive income/(loss), net of related
taxes are as follows:

IN THOUSANDS AS OF
-------------------------
JUNE 30, DECEMBER 31,
2002 2001
--------- -------------
Unrealized losses on available-for-sale securities $(16,779) $(16,445)
Unrealized losses on derivative instruments (9,423) (6,014)
Minimum pension liability (3,545) (3,824)
-------- --------
$(29,747) $(26,283)
======== ========

Note J - Restructuring Charge:

In the first quarter of 2001, the Company completed a review of its ship
management and administrative functions and adopted a plan to transfer a major
portion of such functions to its subsidiary in Newcastle, United Kingdom,
resulting in New York headquarters staff reductions numbering approximately 100
persons. In connection with such staff reductions, the Company recorded
restructuring charges of $269,000 (three months ended June 30, 2001) and
$8,814,000 (six months ended June 30, 2001). The charge included $7,244,000
related to employee termination and severance costs associated with the
reduction in workforce and $1,570,000 for the disposal of certain assets.
Additional charges related to this restructuring aggregating $1,625,000 were
recognized over the remainder of 2001, in accordance with existing accounting
pronouncements. The restructuring has been completed. The remaining liability of
$513,000, for severance costs to be paid over the remaining six months of 2002,
is included in sundry liabilities and accrued expenses in the condensed
consolidated balance sheet as of June 30, 2002.



Form 10-Q
Page 12


OVERSEAS SHIPHOLDING GROUP, INC. AND SUBSIDIARIES

Notes to Unaudited Condensed Financial Statements

Note K - Other Income - net:

Other income - net consists of the following:



IN THOUSANDS
----------------------------------------------
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
-------------------- ----------------------
2002 2001 2002 2001
---- ---- ---- ----
Investment income:

Interest and dividends $ 2,975 $ 6,508 $ 5,512 $ 9,852
Gain on sale of securities - net 3,328 19,120 2,683 20,255
Foreign currency exchange gain/(loss) on
available-for-sale securities 3,240 (1,247) 3,483 (2,270)
-------- -------- -------- --------
9,543 24,381 11,678 27,837

Gain on sale of vessels 688 436 688 436
Gain on derivative transactions -- 7 325 4,463
Miscellaneous - net 16 (809) 91 266
-------- -------- -------- --------
$ 10,247 $ 24,015 $ 12,782 $ 33,002
======== ======== ======== ========


Note L - Commitments and Per Share Amounts:

1. As of June 30, 2002, the Company had non-cancelable contracts for the
construction of three double-hulled foreign flag tankers (one VLCC and two
Aframaxes), scheduled for delivery between January 2003 and January 2004, with
an aggregate unpaid cost of approximately $108,400,000. Unpaid costs, which are
net of $44,400,000 of progress payments, will be funded as follows: $39,700,000
during the remaining six months of 2002 and $68,700,000 in 2003. The progress
payments are covered by refundment guaranties. In late July, the Company prepaid
approximately $47,600,000 of vessel construction costs recognizing the benefit
of a contractually provided prepayment discount and reducing the 2003
commitments by $52 million.

In addition, as of June 30, 2002, a joint venture in which the Company has a
33.3% interest had a non-cancelable contract for the construction of one
double-hulled VLCC, scheduled for delivery in early-July 2002, with an unpaid
cost of approximately $50,900,000. Long-term bank financing exists for such
unpaid cost. In connection with the bank financing, the partners will severally
issue guaranties covering a portion of the loan balance.

2. Basic net income per share is based on the following weighted average number
of common shares outstanding during each period: 34,405,000 shares (three months
ended June 30, 2002), 34,190,000 shares (three months ended June 30, 2001),
34,359,000 shares (six months ended June 30, 2002) and 34,086,000 shares (six
months ended June 30, 2001). Diluted net income per share, which gives effect to
stock options, is based on the following weighted average number of shares
during each period: 34,751,000 shares (three months ended June 30, 2002),
34,851,000 shares (three months ended June 30, 2001), 34,679,000 shares (six
months ended June 30, 2002) and 34,691,000 shares (six months ended June 30,
2001).



Form 10-Q
Page 13


OVERSEAS SHIPHOLDING GROUP, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
OPERATIONS AND FINANCIAL CONDITION

General:

The Company is one of the largest independent bulk shipping companies in the
world. The Company's operating fleet consists of 52 vessels aggregating 8.3
million deadweight tons ("dwt"), including ten vessels that are owned by joint
ventures in which the Company has an average interest of 41%. An additional four
newbuildings aggregating 0.8 million dwt are scheduled for delivery in the next
18 months, including one VLCC that will be owned by a joint venture in which the
Company has a 33.3% interest.

Operations:

The Company's revenues are highly sensitive to patterns of supply and demand for
vessels of the types and sizes owned and operated by the Company and the trades
in which those vessels operate. Rates for the transportation of crude oil and
refined petroleum products from which the Company earns a substantial majority
of its revenue are determined by market forces such as the supply and demand for
oil, the distance that cargoes must be transported, and the number of vessels
expected to be available at the time such cargoes need to be transported. The
demand for oil shipments is significantly affected by the state of the global
economy and the level of OPEC's exports. The number of vessels is affected by
newbuilding deliveries and by the removal of existing vessels from service,
principally because of scrapping. The Company's revenues are also affected by
the mix of charters between spot (voyage charter) and long-term (time charter).
Because shipping revenues and voyage expenses are significantly affected by the
mix between voyage charters and time charters, the Company manages its vessels
based on time charter equivalent ("TCE") revenues. Management makes economic
decisions based on anticipated TCE rates and evaluates financial performance
based on TCE rates achieved.

Set forth in the tables below are daily TCE rates that prevailed in various
markets in which the Company's vessels operated for the periods indicated. In
each case, the rates may differ from the actual TCE rates achieved by the
Company in the period indicated because of the timing and length of voyages and
the portion of revenue generated from long-term charters. It is important to
note that the spot market is quoted in Worldscale rates. The conversion of
Worldscale rates to the following TCE rates necessarily required the Company to
make certain assumptions as to brokerage commissions, port time, port costs,
speed and fuel consumption, all of which will vary in actual usage.

Foreign Flag VLCC Segment

Spot Market TCE Rates
VLCCs in the Arabian Gulf
------------------------------------------------------
Three Months Ended June 30, Six Months Ended June 30,
--------------------------- -------------------------
2002 2001 2002 2001
---- ---- ---- ----
Average $10,800 $31,000 $12,200 $42,000
High $26,800 $53,400 $26,800 $69,800
Low $ 4,700 $15,200 $ 4,700 $15,200



Form 10-Q
Page 14


OVERSEAS SHIPHOLDING GROUP, INC. AND SUBSIDIARIES

Operations (continued):

During the second quarter of 2002, TCE rates for modern VLCCs operating in the
Arabian Gulf fell to an average of $10,800 per day, more than 65% below the
average daily rate of $31,000 per day achieved in the second quarter of 2001.
This drop in rates was primarily attributable to a slowdown in economic growth
and a resulting reduction in worldwide demand for oil. Approximately two-thirds
of the cutback of 1.5 million barrels per day pledged by OPEC in January 2002
has been borne by member countries located in the Arabian Gulf, the primary
source of VLCC employment. OPEC production in the second quarter of 2002 was 2.6
million barrels per day, or 10%, lower than the production levels in the second
quarter of 2001.

Foreign Flag Aframax Segment

Spot Market TCE Rates
Aframaxes in the Caribbean
------------------------------------------------------
Three Months Ended June 30, Six Months Ended June 30,
--------------------------- -------------------------
2002 2001 2002 2001
---- ---- ---- ----
Average $17,800 $25,400 $15,300 $30,800
High $24,000 $36,000 $24,000 $51,000
Low $13,500 $16,000 $10,500 $16,000

Aframaxes are not as reliant on the Arabian Gulf trades; therefore, they have
been less affected by OPEC cutbacks and have been the main beneficiaries of
increased non-OPEC production. Non-OPEC oil supply averaged 47.7 million barrels
per day during the second quarter of 2002, 1.6 million barrels per day, or 3.5%,
higher than the second quarter of 2001. Nearly one-half of this increase is
attributable to higher output in the Former Soviet Union ("FSU"). Aframax
vessels operating in the Mediterranean benefited from this increase in oil
production since much of this oil is exported through terminals in the Black
Sea. TCE rates for Aframaxes operating in the Caribbean trade, however, were
negatively impacted by a strike by Venezuelan oil workers and lower demand
caused by high petroleum inventory levels in North America and Europe. Thus,
rates in the second quarter of 2002 averaged $17,800 per day, 30% below the
average of $25,400 per day that prevailed in the second quarter of 2001.

Foreign Flag Product Carriers Segment

Spot Market TCE Rates
Panamaxes in the Pacific and Bostonmaxes in the Caribbean
---------------------------------------------------------
Three Months Ended June 30, Six Months Ended June 30,
--------------------------- -------------------------
2002 2001 2002 2001
---- ---- ---- ----
Panamax Average $10,700 $26,200 $11,300 $35,900
Panamax High $13,300 $29,000 $13,300 $58,000
Panamax Low $ 9,000 $23,000 $ 9,000 $23,000

Bostonmax Average $11,300 $20,400 $10,300 $22,200
Bostonmax High $12,400 $23,000 $12,400 $32,000
Bostonmax Low $ 9,000 $15,300 $ 8,300 $15,300




Form 10-Q
Page 15


OVERSEAS SHIPHOLDING GROUP, INC. AND SUBSIDIARIES

Operations (continued):

TCE rates for Panamax Product Carriers in the Pacific averaged $10,700 per day
during the second quarter compared with $26,200 per day in the second quarter of
2001, a decrease of 59%. Weak industrial demand for oil has caused a buildup of
refined-products inventories in the Pacific. Japanese deliveries remained weak
at 4% to 6% below year ago levels.

Long haul product trades from the Middle East to Europe continued to weaken in
the second quarter, which reduced demand for the larger product tankers. Some of
these reductions in trade have been offset by increased imports into Europe from
the FSU. Although, product exports from the FSU increased by approximately 19%
from the first quarter of 2002 and by about 12% from the second quarter of last
year, the resulting increase in employment has primarily benefited medium-size
(30-40,000 dwt) product carriers.

TCE rates for Bostonmax Product Carriers (approximately 39,000 dwt) trading from
the Caribbean fell to an average of $11,300 per day in the second quarter of
2002 from $20,400 per day in the second quarter of 2001, a decrease of 45%.
Refined-products inventories in North America reached their highest end-of-May
levels since 1999 as a result of a surge in imports from Europe in anticipation
of the summer driving season, causing an increase in TCE rates from the first
quarter.

Update on Critical Accounting Policies:

The Company's consolidated financial statements are prepared in accordance with
accounting principles generally accepted in the United States, which require the
Company to make estimates in the application of its accounting policies based on
the best assumptions, judgments, and opinions of management. For a description
of all of the Company's material accounting policies, see Note A to the
Company's consolidated financial statements included in the Company's annual
report on Form 10-K for the year ended December 31, 2001.

Market Value of Marketable Securities

The Company's holdings in marketable securities are classified as available for
sale and, therefore, are carried on the balance sheet at fair market value with
changes in carrying value being recorded in Accumulated Other Comprehensive
Income/(Loss) until the investments are sold. Fair market value is determined
using period-end sales prices on U.S. or foreign stock exchanges. The Company
evaluates all material declines in fair market value in accordance with the
provisions of Statement of Financial Accounting Standards No. 115 and Staff
Accounting Bulletin No. 59.

The fair value of certain of the Company's marketable securities has declined
below the Company's cost basis in those securities. At June 30, 2002, the net
after tax unrealized loss applicable to available-for-sale securities included
in Accumulated Other Comprehensive Income/(Loss) was $16.8 million, including
$12.3 million applicable to securities classified as investments in marketable
securities in the accompanying condensed consolidated balance sheets. Certain of
these securities have had fair values below their carrying values for several
months. The Company has evaluated the circumstances



Form 10-Q
Page 16


OVERSEAS SHIPHOLDING GROUP, INC. AND SUBSIDIARIES

Update on Critical Accounting Policies (continued):

surrounding the decline in market values as of June 30, 2002, and believes that
these declines are temporary and, accordingly, continues to record the
unrealized loss in Accumulated Other Comprehensive Income/(Loss). If, however,
the market values of these securities do not recover in the near term, the
decline may then be considered to be other-than-temporary, which would result in
charges to earnings in future periods, which charges previously have been
included in Accumulated Other Comprehensive Income/(Loss).

Income from Vessel Operations:

During the second quarter of 2002, TCE revenues decreased by $43,262,000, or
41%, to $63,321,000 from $106,583,000 in the second quarter of 2001, resulting
from a sharp decline in average daily TCE rates for vessels operating in the
spot market partially offset by an increase in revenue days. During the second
quarter of 2002, approximately 66% of the Company's TCE revenues were derived in
the spot market, including vessels in pools that predominantly perform voyage
charters, compared with 75% in the second quarter of 2001. Conversely, in the
second quarter of 2002, approximately 34% of TCE revenues were generated from
long-term charters compared with 25% in the second quarter of 2001.

During the first six months of 2002, TCE revenues decreased by $106,127,000, or
45%, to $127,200,000 from $233,327,000 in the first six months of 2001 because
of a significant decrease in spot market rates partially offset by an increase
in revenue days. For the first six months of 2002, approximately 67% of the
Company's TCE revenues were derived in the spot market compared with 78% for the
first six months of 2001.

The increased contribution from long-term charters during the second quarter of
2002 and the first six months of 2002 compared with the comparable periods of
2001 reflects the sharp decline in average daily TCE rates for the vessels
operating in the spot market.

The reliance on the spot market contributes to fluctuations in the Company's
revenue, cash flow, and net income, but affords the Company greater opportunity
to increase income from vessel operations when rates rise. On the other hand,
long-term charters provide the Company with a more predictable level of
revenues.

During the second quarter of 2002, income from vessel operations decreased by
$39,214,000 to $8,134,000 from $47,348,000 in the second quarter of 2001. Income
from vessel operations for the 2001 period reflects a restructuring charge of
$269,000. The reduction resulted from a decrease in average daily TCE rates and
revenues for all of the Company's Foreign Flag segments (see Note C to the
condensed financial statements for additional information on the Company's
segments).

During the first six months of 2002, income from vessel operations decreased by
$87,176,000 to $17,669,000 from $104,845,000 in the first six months of 2001.
Income from vessel operations from the 2001 period reflects a restructuring
charge of $8,814,000. This reduction resulted from a decrease in average daily
TCE rates and revenues for all of the Company's Foreign Flag segments.



Form 10-Q
Page 17


OVERSEAS SHIPHOLDING GROUP, INC. AND SUBSIDIARIES

Income from Vessel Operations (continued):

VLCC Segment



Three Months Ended June 30, Six Months Ended June 30,
--------------------------- -------------------------
2002 2001 2002 2001
---- ---- ---- ----

TCE revenues (in thousands) $16,522 $34,916 $33,784 $72,828
Running expenses (in thousands)(a) 15,101 11,665 29,511 23,192
------- ------- ------- -------
Income from vessel operations (in thousands)(b) $ 1,421 $23,251 $ 4,273 $49,636
======= ======= ======= =======
Average daily TCE rate $16,689 $48,094 $18,252 $51,396
Average number of vessels(c) 10.0 7.0 9.5 7.0
Average number of vessels chartered in under operating
leases 1.0 1.0 1.0 1.0
Number of revenue days(d) 990 726 1,851 1,417
Number of ship-operating days(e) 998 728 1,898 1,448


a) Running expenses represent vessel expenses, time and bareboat charter hire
expenses, and depreciation and amortization.

b) Income from vessel operations by segment is before general and
administrative expenses and the restructuring charge.

c) The average is calculated to reflect the addition and disposal of vessels
during the period.

d) Revenue days represent ship-operating days less days that vessels were not
available for employment due to repairs, drydock or lay-up.

e) Ship-operating days represent calendar days.

The VLCC segment includes two vessels that were time chartered out during the
periods. The charter on one of these vessels expired at the end of February
2002, at which time the vessel commenced participation in the Tankers pool. The
following table presents information for the VLCCs generating revenue in the
spot market.



Three Months Ended June 30, Six Months Ended June 30,
--------------------------- -------------------------
2002 2001 2002 2001
---- ---- ---- ----

Spot Market:
TCE revenues (in thousands) $13,314 $28,783 $26,179 $60,818
Running expenses (in thousands) 13,116 8,637 24,499 17,190
------- ------- ------- -------
Income from vessel operations (in thousands) $ 198 $20,146 $ 1,680 $43,628
======= ======= ======= =======
Average daily TCE rate $14,810 $52,718 $16,002 $57,539
Number of revenue days 899 546 1,636 1,057


During the second quarter of 2002, TCE revenues for the VLCC segment decreased
by $18,394,000, or 53%, to $16,522,000 from $34,916,000 in the second quarter of
2001. This reduction in TCE revenues resulted from a decrease of $31,405 per day
in the average daily TCE rate earned partially offset by an increase in the
number of revenue days. The increase in revenue days resulted from the delivery
of three VLCCs (two in the second half of 2001 and one in early-April 2002).
Running expenses increased by $3,436,000 to $15,101,000 in the second quarter of
2002 from $11,665,000 in the prior year's second quarter as a result of an
increase in ship-operating days.



Form 10-Q
Page 18


OVERSEAS SHIPHOLDING GROUP, INC. AND SUBSIDIARIES

Income from Vessel Operations (continued):

For the first six months of 2002, TCE revenues decreased by $39,044,000, or 54%,
to $33,784,000 from $72,828,000 in the first six months of 2001. The reduction
in TCE revenues resulted from a decrease of $33,144 per day in the average daily
TCE rate earned partially offset by an increase in revenue days resulting from
the delivery of new vessels. Running expenses increased by $6,319,000 to
$29,511,000 from $23,192,000 in 2001 because of an increase in ship-operating
days.

Aframax Segment



Three Months Ended June 30, Six Months Ended June 30,
--------------------------- -------------------------
2002 2001 2002 2001
---- ---- ---- ----

TCE revenues (in thousands) $19,491 $32,576 $35,956 $70,618
Running expenses (in thousands) 11,441 12,305 21,974 21,092
------- ------- ------- -------
Income from vessel operations (in thousands) $ 8,050 $20,271 $13,982 $49,526
======= ======= ======= =======
Average daily TCE rate $18,371 $33,445 $17,270 $39,695
Average number of vessels 12.0 10.0 11.7 9.5
Average number of vessels chartered in under operating
leases -- 0.8 -- 0.4
Number of revenue days 1,061 974 2,082 1,779
Number of ship-operating days 1,092 984 2,115 1,789


During the second quarter of 2002, TCE revenues for the Aframax segment
decreased by $13,085,000, or 40%, to $19,491,000 from $32,576,000 in the second
quarter of 2001. This reduction in TCE revenues resulted from a decrease of
$15,074 per day in the average daily TCE rate earned partially offset by an
increase in revenue days resulting from the delivery of two Aframaxes subsequent
to June 30, 2001 (one in 2001 and one in 2002). TCE revenues for the second
quarter of 2001 include $1,583,000 generated by forward freight agreements.
Running expenses decreased by $864,000 to $11,441,000 in the second quarter of
2002 from $12,305,000 in the prior year's second quarter as a result of a
reduction in charter in expense partially offset by an increase in
ship-operating days.

For the first six months of 2002, TCE revenues decreased by $34,662,000, or 49%,
to $35,956,000 from $70,618,000 in the first six months of 2001. The reduction
in TCE revenues resulted from a decrease of $22,425 per day in the average daily
TCE rate earned partially offset by an increase in revenue days resulting from
the delivery of four new vessels since January 1, 2001. TCE revenues for the
first six months of 2001 include $2,785,000 generated by forward freight
agreements. Running expenses increased by $882,000 to $21,974,000 from
$21,092,000 as a result of an increase in ship-operating days partially offset
by a decrease in charter-in expense.

Average daily running expenses for the second quarter and first six months of
2002, excluding the impact of chartered in vessels, decreased by more than $400
per day compared with the comparable periods of 2001.



Form 10-Q
Page 19


OVERSEAS SHIPHOLDING GROUP, INC. AND SUBSIDIARIES

Income from Vessel Operations (continued):

Product Carrier Segment



Three Months Ended June 30, Six Months Ended June 30,
--------------------------- -------------------------
2002 2001 2002 2001
---- ---- ---- ----

TCE revenues (in thousands) $ 8,416 $14,462 $17,287 $38,004
Running expenses (in thousands) 6,144 6,601 12,194 13,404
------- ------- ------- -------
Income from vessel operations (in thousands) $ 2,272 $ 7,861 $ 5,093 $24,600
======= ======= ======= =======
Average daily TCE rate $11,560 $22,920 $12,243 $26,726
Average number of vessels 8.0 8.0 8.0 8.0
Average number of vessels chartered in under
operating leases -- -- -- 0.5
Number of revenue days 728 631 1,412 1,422
Number of ship-operating days 728 728 1,448 1,535


During the second quarter of 2002, TCE revenues for the Product Carrier segment
decreased by $6,046,000, or 42%, to $8,416,000 from $14,462,000 in the second
quarter of 2001. This reduction in TCE revenues resulted from a decrease of
$11,360 per day in the average daily TCE rate earned partially offset by an
increase in revenue days resulting from a decrease in repair and drydocking days
for the segment's vessels. Running expenses decreased by $457,000 to $6,144,000
in the second quarter of 2002 from $6,601,000 in the second quarter of 2001
because of a decrease in repair expenses and insurance costs related to hull and
machinery claims.

For the first six months of 2002, TCE revenues for the Product Carrier segment
decreased by $20,717,000, or 55%, to $17,287,000 from $38,004,000 in the first
six months of 2001. The reduction in TCE revenues resulted from a decrease of
$14,483 per day in the average daily TCE rate earned and the redelivery of a
chartered in vessel to its owner in late-March 2001 partially offset by an
increase in revenue days caused by a 77 day reduction in revenue days lost for
repairs and drydockings. Running expenses decreased by $1,210,000 to $12,194,000
from $13,404,000 in the first six months of 2001 as a result of a decrease in
charter in expense and a $100 per day decrease in average daily running
expenses.

U.S. Flag Crude Tanker Segment

TCE revenues in the second quarter of 2002 and in the first six months of 2002
for the U.S. Flag Crude Tanker segment were unchanged from the comparable 2001
periods because the segment's vessels are bareboat chartered at fixed rates to
Alaska Tanker Company ("ATC").

U.S. Flag Dry Bulk Carrier Segment

During the second quarter of 2002, TCE revenues for the U.S. Flag Dry Bulk
Carrier segment decreased by $3,041,000 to $775,000 from $3,816,000 in the
second quarter of 2001 reflecting a decrease of $12,697 per day in the charter
rates earned and a 28 day reduction in revenue days. Running expenses decreased
by $1,048,000 to $3,693,000 from $4,741,000 in the second quarter of 2001 due to
the sales in June 2001 and June 2002 of an older U.S. Flag Product Carrier and
an older U.S. Flag Tanker, respectively, both of which had participated in the
U.S. grain trade program since the beginning of 2000.



Form 10-Q
Page 20


OVERSEAS SHIPHOLDING GROUP, INC. AND SUBSIDIARIES

Income from Vessel Operations (continued):

For the first six months of 2002, TCE revenues for the U.S. Flag Dry Bulk
Carriers decreased by $1,759,000, or 28%, to $4,443,000 from $6,202,000 in the
first six months of 2001. The reduction in TCE revenues resulted from a decrease
of $3,397 per day in the average daily TCE rate earned. Running expenses
decreased by $2,035,000 to $8,705,000 from $10,740,000 in the first six months
of 2001 as a result of the sale in June 2001 of one of the segment's vessels.

All Other

As of June 30, 2002, the Company also owns and operates a U.S. Flag Pure Car
Carrier, two U.S. Flag Handysize Product Carriers operating in the Jones Act
trade, and a Foreign Flag Suezmax, all on long-term charter, as well as two
Foreign Flag Dry Bulk Carriers that operate in a pool of Capesize Dry Bulk
Carriers. TCE revenues decreased by $2,696,000, or 20%, to $11,104,000 in the
second quarter of 2002 from $13,800,000 in the second quarter of 2001
principally because of the Company's reduced participation in the charter-in of
vessels that were commercially managed by the Capesize pool. Running expenses
similarly decreased because of the reduction in charter in expense attributable
to such vessels. The increase in TCE revenues of $1,056,000 earned in the second
quarter of 2002 by the two U.S. Flag Product Carriers, which commenced long-term
charters in 2001, was offset by significantly weaker results from the Foreign
Flag Dry Bulk Carriers.

For the first six months of 2002, TCE revenues decreased by $9,945,000, or 31%,
to $21,704,000 from $31,649,000 in the first six months of 2001. The reduction
in TCE revenues resulted from OSG's reduced participation in the charter-in of
vessels that were commercially managed by the Capesize pool and a decrease in
TCE rates earned by the two Foreign Flag Dry Bulk Carriers. Such decreases were
partially offset by an increase in TCE revenues of $2,627,000 earned by two U.S.
Flag Product Carriers.

The reduced participation in the charter-in of vessels discussed in the two
preceding paragraphs had a positive impact on the change in consolidated income
from vessel operations of $741,000 in the second quarter of 2002 and $1,596,000
in the first six months of 2002, compared with the comparable periods of 2001.
The average daily rates paid with respect to the chartered in vessels were
higher than the TCE rates earned by such vessels during the respective periods.

General and Administrative Expenses

During the second quarter of 2002, general and administrative expenses decreased
by $1,619,000 to $7,599,000 from $9,218,000 in the second quarter of 2001
principally due to a decrease in cash compensation and related benefits.

During the first six months of 2002, general and administrative expenses
decreased by $3,647,000 to $15,445,000 from $19,092,000 in the first six months
of 2001 principally due to a decrease in cash compensation and related benefits.



Form 10-Q
Page 21


OVERSEAS SHIPHOLDING GROUP, INC. AND SUBSIDIARIES

Equity in Income of Joint Ventures:

The following is a summary of the Company's interest in its joint ventures,
excluding ATC (see discussion below), and the revenue days for the respective
vessels since their acquisition date. Revenue days are adjusted for the
Company's percentage ownership in order to state the revenue days on a basis
comparable to that of a wholly-owned vessel. For the VLCCs operating in the
Tankers pool, the ownership percentage reflected below is an average as of June
30, 2002. The Company's actual ownership percentages for these joint ventures
range from 30% to 49.9%:



Number of Revenue Days
------------------------------------------
2002 2001
------------------ ------------------
Average % Three Six Three Six
Ownership Months Months Months Months
--------- ------ ------ ------ ------

VLCCs participating in Tankers pool 37.8% 238 455 115 170
VLCCs owned jointly with a major oil company 50.0% 91 181 91 181

Aframax participating in Aframax International pool 50.0% 46 91 46 91
--- --- --- ---
Total 375 727 252 442
--- --- --- ---


The increase in revenue days resulted from the delivery since January 1, 2001 of
six joint venture vessels.

Additionally, the Company is a partner in ATC, a joint venture that operates ten
U.S. Flag Tankers transporting Alaskan crude oil for BP. The participation in
ATC provides the Company with the opportunity to earn income (in the form of its
share of incentive hire paid by BP to ATC) based on ATC's meeting certain
predetermined performance standards.

During the second quarter of 2002, equity in income of joint ventures decreased
by $2,992,000 to $1,342,000 from $4,334,000 in 2001, principally due to a
decrease in average daily TCE rates earned by the joint venture vessels
partially offset by an increase of $1,648,000 in the Company's share of
incentive hire earned by ATC.

During the first six months of 2002, equity in income of joint ventures
decreased by $6,355,000 to $3,287,000 from $9,642,000 in 2001, principally due
to a decrease in average daily TCE rates earned by the joint venture vessels
partially offset by an increase of $1,573,000 in the Company's share of
incentive hire earned by ATC.

Interest Expense:

Interest expense increased by $3,002,000 to $13,868,000 in the second quarter of
2002 from $10,866,000 in the second quarter of 2001 as a result of an increase
in the average amount of debt outstanding of $64,300,000 and a reduction of
$2,666,000 ($672,000 in the second quarter of 2002 compared with $3,338,000 in
the second quarter of 2001) in interest capitalized in connection with vessel
construction. Such increases were offset by a decrease of 240 basis points in
the average rate paid on floating rate debt to 3.1% in the 2002 second quarter
from 5.5% in the comparable quarter of 2001.



Form 10-Q
Page 22


OVERSEAS SHIPHOLDING GROUP, INC. AND SUBSIDIARIES

Interest Expense (continued):

The impact of this reduction in rates on floating rate debt was significantly
offset by the impact of floating-to-fixed interest rate swaps that increased
interest expense by $3,878,000 in the second quarter of 2002 and $471,000 in the
second quarter of 2001.

Interest expense increased by $4,749,000 to $26,814,000 in the first six months
of 2002 from $22,065,000 in the first six months of 2001 as a result of an
increase in the average amount of debt outstanding of $46,200,000 and a
reduction of $5,602,000 ($2,267,000 in the six months of 2002 compared with
$7,869,000 in the first six months of 2001) in interest capitalized in
connection with vessel construction. Such increases were offset by a decrease of
310 basis points in the average rate paid on floating rate debt to 3.1% in the
first half of 2002 from 6.2% in the comparable period of 2001. The impact of
this reduction in rates on floating rate debt was significantly offset by the
impact of floating-to-fixed interest rate swaps that increased interest expense
by $7,657,000 in the first six months of 2002 and $199,000 in the first six
months of 2001.

Liquidity and Sources of Capital:

Working capital at June 30, 2002 was approximately $17,000,000 compared with
$61,000,000 at December 31, 2001. Current assets are highly liquid, consisting
principally of cash, interest-bearing deposits, investments in marketable
securities and receivables. In addition, the Company maintains a capital
construction fund with a market value of approximately $235,000,000 at June 30,
2002. Net cash used in operating activities in the first six months of 2002
approximated $9,000,000 (which is not necessarily indicative of the cash to be
provided by or used in operating activities for the year ended December 31,
2002) compared with net cash provided by operating activities of $138,000,000 in
the first six months of 2001. Net cash used in operating activities in the first
six months of 2002 reflects $24,500,000 of payments with respect to estimated
2001 federal income taxes. Excluding such payments, net cash provided by
operating activities amounted to approximately $16,000,000. Current financial
resources, together with cash anticipated to be generated from operations, are
expected to be adequate to meet requirements in the next year.

The Company has unsecured long-term credit facilities aggregating $700,000,000,
of which $525,000,000 was used at June 30, 2002, and an unsecured short-term
credit facility of $45,000,000, of which $35,000,000 was used at June 30, 2002.
In late July and early August 2002, the Company entered into four secured loan
agreements aggregating in excess of $250,000,000. Seven vessels (three VLCCs and
four Aframaxes) were pledged as collateral in connection with such loans. The
loans have terms ranging from 10 to 12 years and carry interest rates based on a
spread above LIBOR. The Company will use the proceeds received from these
borrowings to pay down existing term loans (with an outstanding balance as of
June 30, 2002 of $117,100,000), which have significantly shorter remaining
terms, and to further increase the Company's liquidity.

As of June 30, 2002, the joint ventures in which the Company participates had
total bank debt of $300,147,000. The Company's percentage interests in these
joint ventures range from 30% to 50%. The Company has guaranteed a total of
$31,020,000 of the joint venture debt at June 30, 2002. The balance of the joint
venture debt is nonrecourse to the Company. The amount of the Company's
guaranties reduces proportionately as the principal amounts of the joint venture
debt are paid down.



Form 10-Q
Page 23


OVERSEAS SHIPHOLDING GROUP, INC. AND SUBSIDIARIES

Liquidity and Sources of Capital (continued):

As of June 30, 2002, the Company had non-cancelable contracts for the
construction of three double-hulled foreign flag tankers for delivery between
January 2003 and January 2004, with an aggregate unpaid cost of approximately
$108,400,000. Unpaid costs are net of progress payments, which are covered by
refundment guaranties. In July, the Company prepaid approximately $47,600,000 of
progress payments for two newbuildings recognizing the benefit of a
contractually provided prepayment discount and reducing its remaining capital
commitments to $39,700,000 during the second half of 2002 and $16,700,000 in
2003. The Company expects to finance such vessel commitments from working
capital, cash anticipated to be generated from operations, existing long-term
credit facilities and additional long-term debt, as required. The amounts of
working capital and cash generated from operations that may, in the future, be
utilized to finance vessel commitments are dependent on the rates at which the
Company can charter its vessels. Such rates are volatile. Cancellation of these
contracts by the Company, except as provided in the contracts, could require the
Company to reimburse the respective shipyard for any losses that the shipyard
may incur as a result of such cancellation.

The Company has used interest rate swaps to effectively convert a portion of its
debt from a floating to a fixed rate basis. These agreements contain no leverage
features and have various maturity dates from August 2002 to December 2008. As
of June 30, 2002, the interest rate swaps effectively convert the Company's
interest rate exposure on $450,000,000 from a floating rate based on LIBOR to an
average fixed rate of 6.58%.

Risk Management:

The Company is exposed to market risk from changes in interest rates, which
could impact its results of operations and financial condition. The Company
manages this exposure to market risk through its regular operating and financing
activities and, when deemed appropriate, through the use of derivative financial
instruments. The Company manages its ratio of fixed to floating rate debt with
the objective of achieving a mix that reflects management's interest rate
outlook at various times. To manage this mix in a cost-effective manner, the
Company, from time to time, enters into interest rate swap agreements, in which
it agrees to exchange various combinations of fixed and variable interest rates
based on agreed upon notional amounts. The Company uses derivative financial
instruments as risk management tools and not for speculative or trading
purposes. In addition, derivative financial instruments are entered into with a
diversified group of major financial institutions in order to manage exposure to
nonperformance on such instruments by the counterparties.

Independent Accountants' Report on Review of Interim Financial Information

The accompanying condensed consolidated financial statements as of June 30, 2002
and for the three months and six months ended June 30, 2002 and 2001 are
unaudited; however, such financial statements have been reviewed by the
Company's independent accountants.



Form 10-Q
Page 24


OVERSEAS SHIPHOLDING GROUP, INC. AND SUBSIDIARIES

PART II

Item 4. Submission of Matters to a Vote of Security Holders

At the Annual Meeting of Stockholders on June 5, 2002, the stockholders elected
eleven directors, each for a term of one year, and approved the appointment of
Ernst & Young LLP as independent auditors for the year 2002. Proxies for the
meeting were solicited pursuant to Regulation 14A of the Securities Exchange Act
of 1934. A total of 32,468,711 shares were voted with respect to each of the
aforementioned matters, and there were no broker non-votes.

The tabulation of the votes cast for each nominee for director was as follows:

NUMBER OF SHARES
- --------------------------------------------------------------------------------
WITHHELD
NAME OF NOMINEE FOR DIRECTOR VOTED FOR AUTHORITY TO VOTE
---------------------------- --------- -----------------

Oudi Recanati 32,222,706 246,005
Morton P. Hyman 30,580,129 1,888,582
Robert N. Cowen 30,581,082 1,887,629
Ariel Recanati 30,635,368 1,833,343
Alan R. Batkin 32,333,578 135,133
Charles Fribourg 32,334,231 134,480
William L. Frost 32,277,816 190,895
Stanley Komaroff 32,275,385 193,326
Solomon N. Merkin 32,332,714 135,997
Joel I. Pickett 32,277,979 190,732
Michael J. Zimmerman 32,278,831 189,880


The resolution to approve the appointment of Ernst & Young LLP as independent
auditors was adopted by a vote of 31,678,442 shares in favor, 786,309 shares
against and 3,960 shares abstained.

Item 6(a). Exhibits

See Exhibit Index on page 27.

Item 6(b). Reports on Form 8-K

The Registrant was not required to file any report on Form 8-K during the
quarter ended June 30, 2002.



Form 10-Q
Page 25


Ernst & Young LLP 5 Times Square Phone: 212 773-3000
New York, New York 10036

INDEPENDENT ACCOUNTANTS' REVIEW REPORT

To the Shareholders
Overseas Shipholding Group, Inc.

We have reviewed the accompanying condensed consolidated balance sheet of
Overseas Shipholding Group, Inc. and subsidiaries as of June 30, 2002, and the
related condensed consolidated statements of income for the three and six month
periods ended June 30, 2002 and 2001 and the condensed consolidated statements
of cash flows and changes in shareholders' equity for the six month periods
ended June 30, 2002 and 2001. These financial statements are the responsibility
of the Company's management.

We conducted our reviews in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures to
financial data, and making inquiries of persons responsible for financial and
accounting matters. It is substantially less in scope than an audit conducted in
accordance with auditing standards generally accepted in the United States,
which will be performed for the full year with the objective of expressing an
opinion regarding the financial statements taken as a whole. Accordingly, we do
not express such an opinion.

Based on our reviews, we are not aware of any material modifications that should
be made to the accompanying condensed consolidated financial statements referred
to above for them to be in conformity with accounting principles generally
accepted in the United States.

We have previously audited, in accordance with auditing standards generally
accepted in the United States, the consolidated balance sheet of Overseas
Shipholding Group, Inc. and subsidiaries as of December 31, 2001, and the
related consolidated statements of income, cash flows and changes in
shareholders' equity for the year then ended, not presented herein, and in our
report dated February 20, 2002, we expressed an unqualified opinion on those
consolidated financial statements. In our opinion, the information set forth in
the accompanying condensed consolidated balance sheet as of December 31, 2001 is
fairly stated, in all material respects, in relation to the consolidated balance
sheet from which it has been derived.

ERNST & YOUNG LLP

New York, New York
August 12, 2002



Form 10-Q
Page 26

OVERSEAS SHIPHOLDING GROUP, INC.
AND SUBSIDIARIES

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.

OVERSEAS SHIPHOLDING GROUP, INC.
--------------------------------
(Registrant)


Date: August 12, 2002 /s/ Morton P. Hyman
-------------------
Morton P. Hyman
Chairman, President and Chief Executive Officer


Date: August 12, 2002 /s/ Myles R. Itkin
------------------
Myles R. Itkin
Senior Vice President, Chief
Financial Officer and Treasurer



Form 10-Q
Page 27


OVERSEAS SHIPHOLDING GROUP, INC. AND SUBSIDIARIES

EXHIBIT INDEX

10. Form of Amendment to the agreements listed as Exhibits 10(iii)(c),
10(iii)(d), 10(iii)(e), 10(iii)(f), 10(iii)(h) and 10(iii)(i) to the
Registrant's Annual Report on Form 10-K for 2001.

15. Letter from Ernst & Young LLP.

NOTE: Instruments authorizing long-term debt of the Registrant and its
subsidiaries, where the amounts authorized thereunder do not exceed 10% of
total assets of the Registrant on a consolidated basis, are not being
filed herewith. The Registrant agrees to furnish a copy of each such
instrument to the Commission upon request.