**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


**Washington,
      D.C. 20549**




**F
      O R M 20-F**




**ANNUAL
      REPORT PURSUANT TO SECTION 13 OR 15(d)**


**OF
      THE SECURITIES EXCHANGE ACT OF 1934**





For
      the
      fiscal year ended December 31, 2005





Commission
      file number 001-09987










B
      + H O C E A N C A R R I E R S L T D.


(Exact
      name of Registrant as specified in its charter)





Liberia


(Jurisdiction
      of incorporation


or
      organization)





3rd
      Floor, Par La Ville Place


14
      Par La
      Ville Road


Hamilton
      HM 08, Bermuda


(Address
      of principal executive offices)





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




Name
      of each
      exchange


Title
      of each class  on
      which
      registered


Common Stock,   American
      Stock Exchange


par
      value  $.01 per
      share





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


NONE





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


NONE





The
      number of shares outstanding of the registrant's co mmon
      stock ,
      $.01
      par value, at December 31, 2005 was 7,081,921 shares.





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.


YesX No





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




Item
      17Item
      18X









Item 1.
            Identity
                of Directors, Senior Management and
                AdvisersItem 2.
            Offer
                Statistics and Expected TimetableItem 3.
            Key
                InformationItem 4.
            Information
                on the CompanyItem 5.
            Operating
                and Financial Review and
                ProspectsItem 6.
            Directors,
                Senior Management and
                EmployeesItem 7.
            Major
                Shareholders and Related Party
                TransactionsItem 8.
            Financial
                InformationItem 9.
            The
                Offer and ListingItem 10.
            Additional
                InformationItem 11.
            Quantitative
                and Qualitative Disclosures About Market
                RiskItem 12.
            Description
                of Securities Other than Equity
                SecuritiesItem 13.
            Defaults,
                Dividend Arrearages and
                DelinquenciesItem 14.
            Material
                Modifications to the Rights of Security Holders and
                Use of ProceedsItem 15.
            Controls
                and ProceduresItem 16A.
            Audit
                Committee Financial ExpertItem 16B.
            Code
                of EthicsItem 16C.
            Principal
                Accountant Fees and ServicesItem 17.
            Financial
                StatementsItem 18.
            Financial
                StatementsItem 19.
            Exhibits









**PART
                    I****Item
                    1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND
                    ADVISERS**Not
                    applicable**Item
                    2. OFFER STATISTICS AND EXPECTED
                    TIMETABLE**Not
                    applicable**Item
                    3. KEY INFORMATION****A.
                    Selected financial information**The
                    following selected consolidated financial data of the Company
                    and its
                    subsidiaries are derived from and should be read in conjunction
                    with the
                    Consolidated Financial Statements and notes thereto appearing
                    elsewhere in this annual report.**Income
                    Statement Data:**
                
                
                **Year
                    ended December 31,****2005**
                
                
                **2004**
                
                
                **2003**
                
                
                **2002**
                
                
                **2001**Voyage,
                    time and bareboat charter revenues
                
                
                71,388,561
                
                
                51,362,910
                
                $
                55,156,875
                
                $
                64,537,505
                
                $
                67,324,434Other
                    operating income
                
                
                514,491
                
                
                -
                
                
                -
                
                
                27,881
                
                
                397,170Voyage
                    expenses
                
                
                (6,033,470
                )
                
                (9,663,653
                )
                
                (19,373,318
                )
                
                (28,683,727
                )
                
                (21,728,221
                )Vessel
                    operating expenses
                
                
                (26,369,749
                )
                
                (19,742,875
                )
                
                (25,089,187
                )
                
                (16,282,104
                )
                
                (15,582,033
                )Depreciation
                    and amortization
                
                
                (11,917,359
                )
                
                (7,763,640
                )
                
                (9,024,806
                )
                
                (10,407,804
                )
                
                (10,008,586
                )Gain
                    (loss) on sale of vessels
                
                
                828,115
                
                
                (4,682,965
                )
                
                (16,187,604
                )
                
                -
                
                
                (545,386
                )General
                    and administrative expenses
                
                
                (3,797,613
                )
                
                (3,755,136
                )
                
                (3,897,885
                )
                
                (3,503,418
                )
                
                (3,839,088
                )Income
                    (loss) from operations
                
                
                24,612,976
                
                
                5,754,641
                
                
                (18,415,925
                )
                
                5,688,333
                
                
                16,018,290Gain
                    on retirement of 9 7/8 First PreferredShip
                    Mortgage Notes
                
                
                -
                
                
                -
                
                
                6,803,965
                
                
                797,875
                
                
                513,131Minority
                    interest in net loss (income) of consolidated subsidiary
                
                
                -
                
                
                -
                
                
                23,866
                
                
                -
                
                
                (33,196
                )Interest
                    expense, net
                
                
                (4,383,627
                )
                
                (1,328,896
                )
                
                (1,504,191
                )
                
                (3,405,876
                )
                
                (5,378,517
                )Earn-out
                    interest
                
                
                -
                
                
                -
                
                
                -
                
                
                1,004,150
                
                
                -Other
                    expense
                
                
                (130,704
                )
                
                (1,730
                )
                
                -
                
                
                -
                
                
                -Net
                    income (loss)
                
                $
                20,098,645
                
                $
                4,424,015
                
                $
                (13,092,285
                )
                $
                4,084,482
                
                $
                11,119,708Basic
                    earnings (loss) per share (1)
                
                $
                3.44
                
                $
                1.15
                
                $
                (3.41
                )
                $
                1.06
                
                $
                2.63Diluted
                    earnings (loss) per share (2)
                
                $
                3.30
                
                $
                1.00
                
                $
                (3.41
                )
                $
                0.93
                
                $
                2.37Dividends
                    declared per share
                
                $
                -
                
                $
                -
                
                $
                -
                
                $
                -
                
                $
                -(1)
                    Based on weighted average number of shares outstanding of 5,844,301
                    in
                    2005, 3,839,242 in 2004, 3,835,269 in 2003, 3,869,865 in 2002
                    and
                    4,221,228 in 2001.(2)
                    Based on the weighted average number of shares outstanding, increased
                    in
                    2005, 2004, 2002 and 2001 by the net effects of stock options
                    using the
                    treasury stock method and by theassumed
                    distribution of all shares to BHM under the 1998 agreement (See
                    Item 7).
                    The denominator for the diluted earnings
                    per share calculation is 6,092,522 in 2005, 4,404,757 in 2004,
                    3,835,269
                    in 2003, 4,413,423 in 2002 and 4,691,082 in
                    2001.**Year
                    ended December 31,****Balance
                    Sheet Data:**
                
                
                **2005**
                
                
                **2004**
                
                
                **2003**
                
                
                **2002**
                
                
                **2001**Current
                    assets
                
                
                65,719,790
                
                
                19,344,004
                
                $
                6,534,213
                
                $
                14,589,138
                
                $
                15,159,460Total
                    assets
                
                
                281,423,286
                
                
                82,902,304
                
                
                70,830,212
                
                
                117,585,093
                
                
                128,570,380Current
                    liabilities
                
                
                44,305,700
                
                
                20,073,194
                
                
                17,024,634
                
                
                23,819,743
                
                
                23,569,450Long-term
                    liabilities
                
                
                117,063,472
                
                
                18,465,472
                
                
                13,310,674
                
                
                40,189,750
                
                
                54,616,691Noncontrolling
                    interest in subsidiary
                
                
                -
                
                
                -
                
                
                -
                
                
                23,866
                
                
                23,866Working
                    capital (deficit)
                
                
                21,414,090
                
                
                (729,190
                )
                
                (10,490,421
                )
                
                (9,230,605
                )
                
                (8,409,990
                )Shareholders'
                    equity
                
                
                120,054,114
                
                
                44,363,637
                
                
                40,494,904
                
                
                53,551,734
                
                
                50,360,373


**B.
      Capitalization and indebtedness**




Not
      applicable





**C.**
            **Reasons
                for the offer and use of
                proceeds**





Not
      applicable





**D.
      Risk factors**





You
      should consider carefully the following factors as well as other information
      set
      forth in this report. Some of the following risks relate principally to the
      industry in which the Company operates and its business in general. Other risks
      relate principally to the securities market and ownership of its stock. Any
      of
      the risk factors could significantly and negatively affect its business,
      financial condition or operating results and the trading price of its stock.
      You
      could lose all or part of your investment.





**Industry
      Specific Risk Factors**





**The
      cyclical nature of the international shipping industry may lead to volatile
      changes in charter rates and vessel values, which may adversely affect its
      earnings**





The
      shipping industry is generally known to be cyclical. Vessel values and charter
      freight rates fluctuate widely and frequently, and the Company expects they
      will
      continue to do so in the future. Growth within the largest economies will
      normally contribute to an increase in the ton-mile demand in global seaborne
      trade.








**The
      operations of the Company on a worldwide basis may increase the volatility
      of
      the Company’s business**





The
      operations of the Company are conducted primarily outside the United States
      and
      therefore may be affected by currency fluctuations and by changing economic,
      political and governmental conditions in the countries where its vessels operate
      and are registered. Future hostilities or other political instability in the
      regions in which the Company conducts its operations could affect the Company’s
      trade patterns and could adversely affect the Company’s business and results of
      operations. Although the substantial majority of the Company’s revenues and
      expenses have historically been denominated in United States dollars, there
      can
      be no assurance that the portion of the Company’s business conducted in other
      currencies will not increase in the future, which could expand the Company’s
      exposure to losses arising from currency fluctuations.


**The
      Company is subject to regulation and liability under environmental laws that
      could require significant expenditures and affect its cash flows and net income**





The
      Company’s operations are subject to extensive regulation in the form of local,
      national and foreign laws, as well as international treaties and conventions
      that can subject us to material liabilities for environmental events.





The
      operation of its vessels is affected by the requirements set forth in the
      International Management Code for the Safe Operation of Ships and Pollution
      Prevention (the “ISM Code”). The ISM Code requires shipowners and bareboat
      charterers to develop and maintain an extensive “Safety Management System” that
      includes the adoption of a safety and environmental protection policy setting
      forth instructions and procedures for safe operation and describing procedures
      for dealing with emergencies. The failure of a shipowner or bareboat charterer
      to comply with the ISM Code may subject such party to increased liability,
      may
      decrease available insurance coverage for the affected vessels, and may result
      in a denial of access to, or detention in, certain ports. Currently, each of
      the
      vessels in its fleet is ISM Code-certified. However, there can be no assurance
      that such certification will be maintained indefinitely.





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





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





The
      U.S.
      has established strict deadlines for phasing-out single-hull oil tankers, and
      both the IMO and the European Union have proposed similar phase-out periods.
      Under OPA, all oil tankers that do not have double hulls will be phased out
      by
      2015 and will not be permitted to come to United States ports or trade in United
      States waters. Seven of the Company’s product tankers, or approximately 35% by
      deadweight ton (“DWT”) of the Company’s combined fleet, will be prohibited from
      carrying crude oil and oil products in U.S. waters by August 2011, with the
      phase out of such tankers occurring over the course of the period from August
      2006 until August 2011.





In
      December 2003, the IMO adopted a proposed amendment to the International
      Convention for the Prevention of Pollution from Ships to accelerate the phase
      out of single-hull and non-qualifying double sided tankers from 2015 to 2010
      unless the relevant flag states extend the date to 2015. This amendment took
      effect in April 2005. The Company expects that its six single-hull medium
      range (“MR”) tankers and its double sided Panamax product tanker will be unable
      to carry crude oil and petroleum products in many markets commencing between
      2007 and 2009. Moreover, the IMO or other regulatory bodies may adopt further
      regulations in the future that could adversely affect the useful lives of its
      tankers as well as its inability to generate income from them.





The
      Panama Canal Authority (PCA) recently issued an Advisory announcing that it
      may
      exercise its authority to deny the transit of a single-hull oil tanker which
      has
      been granted a Flag State exemption from the phase-out provisions of MARPOL
      (the
      International Convention for the Prevention of Pollution from Ships). If it
      does
      allow such transit, all additional costs or resources provided to minimize
      the
      risk of
      environmental damage will be charged to the vessel. The PCA will evaluate each
      ship on a case-by-case basis.





These
      requirements can affect the resale value or useful lives of its vessels. As
      a
      result of accidents such as the November 2002 oil spill relating to the loss
      of
      the *M/T
      Prestige* ,
      a
      26-year old single-hull tanker, the Company believes that regulation of the
      tanker industry will continue to become more stringent and more expensive for
      us
      and its competitors. Substantial violations of applicable requirements or a
      catastrophic release from one of its vessels could have a material adverse
      impact on its financial condition and results of operations as well as its
      reputation in the crude oil and refined petroleum products sectors, and could
      therefore negatively impact its ability to obtain charters proceeding forward
      for the rest of its fleet.





**The
      Company’s vessels are subject to inspection by a classification
      society**





The
      hull
      and machinery of every commercial vessel must be classed by a classification
      society authorized by its country of registry. The classification society
      certifies that a vessel is safe and seaworthy in accordance with the applicable
      rules and regulations of the country of registry of the vessel and the Safety
      of
      Life at Sea Convention. The Company’s fleet is currently enrolled with the
      American Bureau of Shipping, Bureau Veritas and Det Norske Veritas.




A
      vessel
      must undergo Annual Surveys, Intermediate Surveys and Special Surveys. In lieu
      of a Special Survey, a vessel’s machinery may be on a continuous survey cycle,
      under which the machinery would be surveyed periodically over a five-year
      period. The Company’s vessels are on Special Survey cycles for hull inspection
      and continuous survey cycles for machinery inspection. Every vessel is also
      required to be drydocked every two to three years for inspection of the
      underwater parts of such vessel.





If
      any
      vessel does not maintain its class or fails any Annual Survey, Intermediate
      Survey or Special Survey, the vessel will be unable to trade between ports
      and
      will be unemployable and the Company could be in violation of certain covenants
      in its loan agreements. This would negatively impact its revenues.





**Maritime
      claimants could arrest its vessels, which could interrupt its cash flow**





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





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





**Governments
      could requisition the Company’s vessels during a period of war or emergency,
      resulting in loss of** ****** **earnings**





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





**The
      shipping business is subject to the effect of world events**





Terrorist
      attacks such as the attacks on the United States on September 11, 2001, and
      the continuing response of the United States to these attacks, as well as the
      threat of future terrorist attacks, continue to cause uncertainty in the world
      financial markets and may affect the Company’s business, results of operations
      and financial condition. The recent conflict in Iraq may lead to additional
      acts
      of terrorism and armed conflict around the world, which may contribute to
      further economic instability in the global financial markets. These
      uncertainties could also adversely affect its ability to obtain additional
      financing on terms acceptable to us or at all.





Terrorist
      attacks, such as the attack on the vessel *Limburg* in
      October 2002, may in the future also negatively affect the Company’s
      operations and financial condition and directly impact the Company’s vessels or
      customers. Future terrorist attacks could result in increased volatility of
      the
      financial markets in the United States and globally and could result in an
      economic recession in the United States or the world. Any of these occurrences
      could have a material adverse impact on its operating results, revenue and
      costs.




**Company
      Specific Risk Factors**





**The
      Company’s business is dependent on the markets for product tankers and OBOs,
      which can be cyclical**





The
      Company’s fleet consists of product tankers and ore/bulk/oil combination
      carriers (“OBOs”). Thus, the Company is dependent upon the petroleum product
      industry, the vegetable oil and chemical industries and the dry bulk industry
      as
      its primary sources of revenue. These industries have historically been subject
      to substantial fluctuation as a result of, among other things, economic
      conditions in general and demand for petroleum products, steel and iron ore,
      coal, vegetable oil and chemicals, in particular. Any material seasonal
      fluctuation in the industry or any material diminution in the level of activity
      therein could have a material adverse effect on the Company’s business and
      operating results. The profitability of these vessels and their asset value
      results from changes in the supply of and demand for such capacity. The factors
      affecting such supply and demand are described in more detail under “Industry
      Specific Risk Factors” above.





**Single
      hull and double sided vessels are being phased out**





Seven
      of
      its product tankers, or approximately 35% by DWT of its combined fleet, are
      single hull or double sided vessels. Under the United States Oil Pollution
      Act
      of 1990, all oil tankers that do not have double hulls will be phased
      out over a 20-year period (1995-2015) based on size, age and place of discharge,
      unless retrofitted with double-hulls, and
      will
      not be permitted to come to United States ports or trade in United States
      waters. The European Union has required the phase out of single hull vessels
      carrying “heavy oil” and as a result its single hull vessels are prohibited from
      carrying this product to European Union ports. In addition, due to regulations
      adopted by the IMO under Annex I (oil) of MARPOL single hull vessels carrying
      petroleum products tankers must be phased out over the course of the period
      between 2005 and 2010. As a result of the MARPOL regulations, the Company
      expects that its seven MR product tankers will be unable to carry crude oil
      and
      petroleum products in many markets commencing between 2007 and 2009. Unless
      these vessels are converted to double hull vessels, they will


no
      longer
      be marketable to charterers after such time and will be required to be scrapped.
      There is no assurance that the Company will be able to convert these vessels
      prior to the phase out time, and the cost of conversion could potentially impose
      a financial burden upon the Company.





**The
      Company’s fleet consists of second-hand vessels**





All
      of
      the vessels comprising the Company’s fleet were acquired second-hand. The
      Company intends to purchase additional second-hand vessels. In general,
      expenditures necessary for maintaining a vessel in good operating condition
      increase as the age of the vessel increases. Moreover, second-hand vessels
      typically carry very limited warranties with respect to their condition as
      compared to warranties available for newer vessels. Because of improvements
      in
      engine technology, older vessels are typically less fuel efficient than newer
      vessels. Changes in governmental regulations, safety or other equipment
      standards may require expenditures for alterations to existing equipment or
      the
      addition of new equipment to the vessels and restrict the cargoes that the
      vessels may transport. There can be no assurance that market conditions will
      justify such expenditures or enable the Company to generate sufficient income
      or
      cash flow to allow it to meet its debt obligations.





**The
      Company is subject to financial risks related to the purchase of additional
      vessels**





The
      Company’s current business strategy includes the acquisition of newer,
      high-quality second-hand vessels. Such vessels will likely be purchased at
      what
      are now historically high vessel prices. If charter rates fall in the future,
      the Company may not be able to recover its investments in the new ships or
      even
      satisfy its payment obligations on its debt facilities that will be increased
      to
      finance the purchase of such new vessels. There can also be no assurance that
      such acquisitions will be available on terms favorable to the Company or that,
      if acquired, such second-hand vessels will have sufficient useful lives or
      carry
      adequate warranties.





**The
      Company may be subject to loss and liability for which it may not be fully
      insured**





The
      operation of any ocean-going vessel carries an inherent risk, without regard
      to
      fault, of catastrophic marine disaster, mechanical failure, collision and
      property losses to the vessel. Also, the business of the Company is affected
      by
      the risk of environmental accidents, the risk of cargo loss or damage, the
      risk
      of business interruption because of political action in foreign countries,
      labor
      strikes and adverse weather conditions, all of which could result in loss of
      revenues, increased costs or loss of reputation.





The
      Company maintains, and intends to continue to maintain, insurance consistent
      with industry standards against these risks. The Company procures hull and
      machinery insurance, protection and indemnity insurance, which includes
      environmental damage and pollution insurance coverage and war risk insurance
      for
      its fleet. The Company does not maintain insurance against loss of hire for
      its
      product tankers, which covers business interruptions that result in the loss
      of
      use of a vessel. There can be no assurance that all risks will be adequately
      insured against, that any particular claim will be paid out of such insurance
      or
      that the Company will be able to procure adequate insurance coverage at
      commercially reasonable rates in the future. More stringent environmental and
      other regulations may result in increased costs for, or the lack of availability
      of, insurance against the risks of environmental damage, pollution, damages
      asserted against the Company or the loss of income resulting from a vessel
      being
      removed from operations. The Company’s insurance policies contain deductibles
      for which the Company will be responsible and limitations and exclusions which
      may increase its costs or lower its revenue.








The
      Company places a portion of its Hull and Machinery insurance with Northampton
      Assurance Ltd (“NAL”) , the great majority of which NAL reinsures with market
      underwriters. NAL is a subsidiary of Northampton Holdings Ltd., a major
      stockholder. Although the reinsurers are investment grade insurance companies,
      it is possible that they might default in the settlement of a claim. Although
      the Company believes that NAL is adequately capitalized, in the event the
      reinsurers default, NAL, as primary insurer, may be unable in turn to settle
      the
      Company’s claim.





Moreover,
      even if insurance proceeds are paid to the Company to cover the financial losses
      incurred following the occurrence of one of these events, there can be no
      assurance that the Company’s business reputation, and therefore its ability to
      obtain future charters, will not be materially adversely affected by such event.
      Such an impact on the Company’s business reputation could have a material
      adverse effect on the Company’s business and results of operations. The Company
      may not be able to obtain adequate insurance coverage for its fleet in the
      future. The insurers may not pay particular claims.





**Risks
      involved with operating ocean-going vessels could affect the Company’s business
      and reputation, which would adversely affect its revenues and stock price**





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





·
            marine
                disaster;


·
            piracy;


·
            environmental
                accidents;


·
            cargo
                and property losses or damage; and


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





Any
      of
      these circumstances or events could increase the Company’s costs or lower its
      revenues. The involvement of its vessels in an oil spill or other environmental
      disaster may harm its reputation as a safe and reliable vessel operator and
      lead
      to a loss of customers and revenue.





**The
      Company may suffer adverse consequences from the fluctuation in the market
      value
      of its vessels**





The
      fair
      market value of its vessels may increase and decrease significantly depending
      on
      a number of factors including:





·
            supply
                and demand for products, including crude oil, petroleum products,
                vegetable oil, ores, coal and
                grain;


·
            general
                economic and market conditions affecting the shipping industry;


·
            competition
                from other shipping companies;


·
            types
                and sizes of vessels;


·
            other
                modes of transportation;


·
            cost
                of building new vessels;


·
            governmental
                or other regulations;


·
            prevailing
                level of charter rates; and


·
            technological
                advances.





If
      the
      Company sells vessels at a time when vessel prices have fallen and before the
      Company has recorded an impairment adjustment, based on its test for impairment,
      to its financial statements, the sale may be at less than the vessel’s carrying
      amount on its financial statements, resulting in a loss and a reduction in
      earnings.





In
      addition, the Company’s mortgage indebtedness at December 31, 2005 of $149.7
      million is secured by mortgages on the existing fleet of vessels of the Company
      and its subsidiaries. If the market value of its fleet declines, the Company
      may
      not be in compliance with certain provisions of its existing credit facilities
      and the Company may not be able to refinance its debt or obtain additional
      financing. If the Company is unable to pledge additional collateral, its lenders
      could accelerate its debt and foreclose on its fleet.





**The
      Company’s vessels may suffer damage and the Company may face unexpected
      drydocking costs, which could affect its cash flow and financial condition**





If
      the
      Company’s vessels suffer damage, they may need to be repaired at a drydocking
      facility. The costs of drydock repairs are unpredictable and can be substantial.
      The Company may have to pay drydocking costs that its insurance does not cover.
      The loss of earnings while these vessels are being repaired and repositioned,
      as
      well as the actual cost of these repairs, would decrease its earnings.





**Purchasing
      and operating previously owned, or secondhand, vessels may result in increased
      operating costs and vessels off-hire, which could adversely affect its earnings**





The
      Company’s inspection of secondhand vessels prior to purchase does not provide us
      with the same knowledge about their condition and cost of required (or
      anticipated) repairs that the Company would have had if these vessels had been
      built for and operated exclusively by us. Generally, the Company does not
      receive the benefit of warranties on secondhand vessels.





In
      general, the costs to maintain a vessel in good operating condition increase
      with the age of the vessel. As of December 31, 2005, the average age of the
      vessels in its fleet was 18 years. Older vessels are typically less fuel
      efficient and more costly to maintain than more recently constructed vessels
      due
      to improvements in engine technology. Cargo insurance rates increase with the
      age of a vessel, making older vessels less desirable to charterers.





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




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





**The
      market for product tanker and OBO charters is highly competitive**





The
      ownership of the world’s product tanker fleet is fragmented. Competition in the
      industry among vessels approved by major oil companies is primarily based on
      price, but also vessel specification and age. There are approximately 1,100
      crude oil and product tankers worldwide of between 25,000 and 50,000 DWT.
      Tankers are typically owned in groups or pools comprising up to about 25
      vessels.





The
      OBO
      industry is also fragmented and competition is also primarily based on price,
      but also vessel specification and age. There are approximately 78 OBOs worldwide
      of between 50,000 and 100,000 DWT. In this size range, the largest ownership
      group has nine vessels. Otherwise vessels are owned in groups of four vessels
      or
      less.





The
      Company competes principally with other vessel owners through the global tanker
      and dry bulk charter market, which is comprised of shipbrokers representing
      both
      charterers and ship owners. Charterparties are quoted on either an open or
      private basis. Requests for quotations on an open charter are usually made
      by
      major oil companies on a general basis to a large number of vessel operators.
      Competition for open charters can be intense and involves vessels owned by
      operators such as other major oil companies, oil traders and independent ship
      owners. Requests for quotations on a private basis are made to a limited number
      of vessel operators and are greatly influenced by prior customer relationships.
      The Company bids for both open and private charters.





Competition
      generally intensifies during times of low market activity when several vessels
      may bid to transport the same cargo. Many of the Company’s competitors have
      greater financial strength and capital resources, as well as younger
      vessels.





**The
      Company may be dependent on the spot market for charters**





The
      Company’s vessels are operated on a mix of time charters and spot market
      voyages. The spot charter market is highly competitive and spot charter rates
      are subject to greater fluctuation than time charter rates. There can be no
      assurance that the Company will be successful in keeping its vessels fully
      employed in the spot market or that future spot charter rates will be sufficient
      to enable the Company’s vessels to be operated profitably.





**The
      Company is dependent upon certain significant customers**





In
      2005,
      revenues of $23.9 million from TTMI Sarl represented 32.0% of total revenues,
      revenues of $13.5 million from FR8 Singapore Pte. Ltd. represented 18.1% of
      total revenues and revenues of $9.8 million from Swissmarine Services SA
      represented 13.1% of total revenues. During 2004, revenues of $8.2 million
      from
      Lexington Shipping Corp., $7.2 million from Bunge Global Markets and $5.8
      million from Swissmarine Services represented 15.9%, 13.9% and 11.2%,
      respectively of total revenues. Revenues in 2003 included charter hire revenues
      of $10.4 million from Bunge Global Markets, $6.8 million from Shell
      International and $6.6 million from Lexington Shipping representing 18.9%,
      12.3%
      and 11.9% of total revenues, respectively.





**The
      Company will depend entirely on B+H Management Ltd. (“BHM”) to manage and
      charter its fleet**





The
      Company subcontracts the commercial and most of the technical management of
      its
      fleet, including crewing, maintenance and repair to BHM, an affiliated company
      with which the Company is under common control. The loss of BHM’s services or
      its failure to perform its obligations to us could materially and adversely
      affect the results of its operations. Although the Company may have rights
      against BHM if it defaults on its obligations to us, you will have no recourse
      against BHM. Further, the Company expects that it will need to seek approval
      from lenders to change its manager.





**BHM
      is a privately held company and there is little or no publicly available
      information about it**





The
      ability of BHM to continue providing services for its benefit will depend in
      part on its own financial strength. Circumstances beyond its control could
      impair BHM’s financial strength, and because it is privately held it is unlikely
      that information about its financial strength would become public unless BHM
      began to default on its obligations. As a result, an investor in the Company’s
      shares might have little advance warning of problems affecting BHM, even though
      these problems could have a material adverse effect on us.





**The
      Company’s Chairman and Chief Executive Officer has affiliations with BHM which
      could create conflicts of interest**





The
      Company’s majority shareholders, which are affiliated with Mr. Michael S.
      Hudner, own 47% of the Company and also own BHM. Mr. Hudner is also BHM’s
      Chairman and Chief Executive Officer. These responsibilities and relationships
      could create conflicts of interest between us, on the one hand, and BHM, on
      the
      other hand. These conflicts may arise in connection with the chartering,
      purchase, sale and operations of the vessels in its fleet versus vessels managed
      by other companies affiliated with BHM and Mr. Hudner. In particular, BHM
      may give preferential treatment to vessels that are beneficially owned by
      related parties because Mr. Hudner and members of his family may receive
      greater economic benefits.





**If
      the Company fails to manage its planned growth properly, the Company may not
      be
      able to successfully expand its market share**





The
      Company intends to increase substantially the size of its fleet via
      acquisitions. This will impose significant additional responsibilities on its
      management and staff, and the management and staff of BHM, and may necessitate
      that the Company, and they, increase the number of personnel. BHM may have
      to
      increase its customer base to provide continued employment for the vessels
      to be
      acquired.





The
      Company’s growth will depend on:





·
            locating
                and acquiring suitable vessels;


·
            identifying
                and consummating acquisitions or joint ventures;


·
            integrating
                any acquired business successfully with its existing operations;


·
            enhancing
                its customer base;


·
            managing
                its expansion; and


·
            Obtaining
                required financing.





Growing
      any business by acquisition presents numerous risks such as undisclosed
      liabilities and obligations, difficulty experienced in obtaining additional
      qualified personnel and managing relationships with customers and suppliers
      and
      integrating newly acquired operations into existing infrastructures. The Company
      cannot give any assurance that the Company will be successful in executing
      its
      growth plans or that the Company will not incur significant expenses and losses
      in connection therewith.





**There
      is no assurance that the Company will be able to pay
      dividends**





The
      Company has a policy of investment for future growth and does not anticipate
      paying cash dividends on the common stock in the foreseeable future. Declaration
      and payment of any dividend is subject to the discretion of its Board of
      Directors. The timing and amount of dividend payments will be dependent upon
      its
      earnings, financial condition, cash requirements and availability, fleet renewal
      and expansion, restrictions in its loan agreements, the provisions of Liberia
      law affecting the payment of distributions to shareholders and other factors.
      If
      there is a substantial decline in the petroleum product market or bulk charter
      market, its earnings would be negatively affected thus limiting its ability
      to
      pay dividends. Liberia law generally prohibits the payment of dividends other
      than from surplus or while a company is insolvent or would be rendered insolvent
      upon the payment of such dividend. The current floating rate facility restricts
      the Company from paying dividends.





**Servicing
      future debt would limit funds available for other purposes such as the payment
      of dividends**





To
      finance its future fleet expansion program, the Company expects to incur secured
      debt. The Company will need to dedicate a portion of its cash flow from
      operations to pay the principal and interest on its debt. These payments limit
      funds otherwise available for working capital, capital expenditures and other
      purposes. The need to service its debt may limit funds available for other
      purposes, including distributing cash to its shareholders, and its inability
      to
      service debt could lead to acceleration of its debt and foreclosure on its
      fleet.





**The
      Company’s loan agreements contain restrictive covenants that may limit the
      Company’s liquidity and corporate activities**





The
      Company’s loan agreements impose operating and financial restrictions on us.
      These restrictions may limit its ability to:





·
            incur
                additional indebtedness;


·
            create
                liens on its assets;


·
            sell
                capital stock of its subsidiaries;


·
            engage
                in mergers or acquisitions;


·
            make
                capital expenditures;


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


·
            sell
                its vessels.





Therefore,
      the Company may need to seek permission from its lender in order to engage
      in
      some corporate actions. The Company’s lender’s interests may be different from
      ours, and the Company cannot guarantee that the Company will be able to obtain
      its lender’s permission when needed. This may prevent us from taking actions
      that are in its best interest.




**The
      Company’s loan agreements contain financial covenants**




The
      terms
      of its $36 million credit facility with Nordea Bank Norge ASA contain a number
      of financial covenants and general covenants that require us to, among other
      things and subject to certain qualifications, maintain vessel market values
      of
      at least 140% of the outstanding facility amount, a minimum cash balance on
      deposit of the greater of $2 million and 6% of its aggregate indebtedness
      (including indebtedness of its subsidiaries) and insurance on the vessels and
      other property against such risks and in at least such amounts as are usually
      insured against by similar companies. It is also a condition that the Company
      remains under the control of Michael S. Hudner. Nordea Bank Norge ASA has
      expressed that Mr. Hudner currently is considered to have control with 48%
      of
      the issued Shares and that he will be considered to have control at 42% of
      the
      issued Shares of the Company.





The
      Company’s $138.1 million Reducing Revolving Term Loan facility, drawn down
      October and November 2005, imposes certain restrictive covenants on the Company,
      which among other things, requires mandatory prepayment in the event of the
      total loss or sale of a vessel acquired with the proceeds thereof. Also, while
      a
      loan to vessel value clause has been suspended for three years, the Company
      is
      required to ensure that consolidated EBITDA is always at least 1.25 times
      consolidated fixed charges. The Company is also required to maintain liquid
      assets, as defined, in an amount equal to the greater of $5.0 million and 6%
      of
      the aggregate indebtedness of the Company on a consolidated basis.





**The
      Company is a holding company, and the Company depends on the ability of its
      subsidiaries to distribute funds to us in order to satisfy its financial
      obligations or to make dividend payments**





The
      Company is a holding company and its subsidiaries, which are all wholly-owned
      by
      us, conduct all of their operations and own all of their operating assets.
      The
      Company has no significant assets other than the equity interests in its
      wholly-owned subsidiaries. As a result, its ability to make dividend payments
      depends on its subsidiaries and their ability to distribute funds to us. If
      the
      Company is unable to obtain funds from its subsidiaries its Board of Directors
      may exercise its discretion not to pay dividends.





**The
      Company may not generate sufficient gross revenue to operate profitably or
      to
      service its indebtedness**





The
      Company had net income of $20.1 million on gross revenue of $71.9 million in
      2005. Income from vessel operations of $24.6 million is net of expenses totaling
      $0.9 million for interim drydockings to maintain the vessels in class, which
      are
      not capitalized. At December 31, 2005, the Company had approximately $149.7
      million in indebtedness. There can be no assurance that future charter rates
      will be sufficient to generate adequate revenues or that the Company will be
      able to maintain efficiency levels to permit the Company to operate profitably
      or to service its indebtedness.





**The
      creditworthiness and performance of its time charterers may affect its financial
      condition and its ability to obtain additional debt financing and pay dividends**





The
      Company’s income is derived from the charter of its vessels. Any defaults by any
      of its charterers could adversely impact its financial condition, including
      its
      ability to service its debt and pay dividends. In addition, the actual or
      perceived credit quality of its charterers, and any defaults by them, may
      materially affect its ability to obtain the additional capital resources that
      the Company will require purchasing additional vessels or may significantly
      increase its costs of obtaining such capital. The Company’s inability to obtain
      additional financing at all or at a higher than anticipated cost may materially
      affect its results of operation and its ability to implement its business
      strategy.





**As
      the Company expands its business, the Company will need to improve its
      operations and financial systems, staff and crew; if the Company cannot improve
      these systems or recruit suitable employees, its performance may be adversely
      affected**





The
      Company’s current operating and financial systems may not be adequate as the
      Company implements its plan to expand the size of its fleet, and its attempts
      to
      improve those systems may be ineffective. In addition, as the Company expands
      its fleet, the Company will have to rely on BHM to recruit suitable additional
      seafarers and shoreside administrative and management personnel. The Company
      cannot assure you that BHM will be able to continue to hire suitable employees
      as the Company expands its fleet. If BHM’s unaffiliated crewing agent encounters
      business or financial difficulties, the Company may not be able to adequately
      staff its vessels. If the Company is unable to operate its financial and
      operations systems effectively or to recruit suitable employees as the Company
      expand its fleet, its performance may be adversely affected.





**In
      the highly competitive international shipping industry, the Company may not
      be
      able to compete for charters with new entrants or established companies with
      greater resources**





The
      Company employs its vessels in a highly competitive market that is capital
      intensive and highly fragmented. Competition arises primarily from other vessel
      owners some of whom have substantially greater resources than the Company does.
      Competition for the transportation of dry bulk and liquid cargo can be intense
      and depends on price, location, size, age, condition and the acceptability
      of
      the vessel and its managers to the charterers. Due in part to the highly
      fragmented market, competitors with greater resources could enter and operate
      larger fleets through consolidations or acquisitions that may be able to offer
      better prices and fleets.





**The
      Company may be unable to attract and retain key management personnel and other
      employees in the shipping industry, which may negatively affect the
      effectiveness of its management and its results of
      operations**





The
      Company’s success depends to a significant extent upon the abilities and efforts
      of its management team. The Company has no employment contract with its Chairman
      and Chief Executive Officer, Michael S. Hudner, or any other key individual;
      instead all management services are provided by BHM, Ltd. The Company’s success
      will depend upon BHM’s ability to hire and retain key members of its management
      team. The loss of any of these individuals could adversely affect its business
      prospects and financial condition. Difficulty in hiring and retaining personnel
      could adversely affect its results of operations.





**The
      Company is subject to the reporting requirements of Sarbanes
      Oxley**





Effective
      for its first fiscal year ending on or after July 15, 2006, the Company is
      subject to full compliance with all provisions of the Sarbanes Oxley Act of
      2002. As directed by Section 404 of the Sarbanes-Oxley Act of 2002, the
      Securities and Exchange Commission adopted rules requiring public companies
      to
      include a report of management on the company’s internal control over financial
      reporting in their annual reports on Form 20-F. Such a report is required to
      contain an assessment by management of the effectiveness of a company’s internal
      controls over financial reporting. In addition, the independent registered
      public accounting firm auditing a public company’s financial statements must
      attest to and report on management’s assessment of the effectiveness of the
      company’s internal controls over financial reporting. While the Company would
      expend significant resources in developing the necessary documentation and
      testing procedures required by Section 404, there is a risk that the Company
      would not comply with all of the requirements imposed by Section 404. If the
      Company fails to implement required new or improved controls, the Company may
      be
      unable to comply with the requirements of Section 404 in a timely manner. This
      could result in an adverse reaction in the financial markets due to a loss
      of
      confidence in the reliability of its financial statements, which could cause
      the
      market price of its common stock to decline and make it more difficult for
      us to
      finance its operations.





**The
      Company may have to pay tax on United States source income, which would reduce
      its earnings**





Under
      the
      United States Internal Revenue Code of 1986, or the Code, 50% of the gross
      shipping income of a vessel owning or chartering corporation, such as ourselves
      and its subsidiaries, that is attributable to transportation that begins or
      ends, but that does not begin and end, in the United States is characterized
      as
      United States source shipping income and as such is subject to a four percent
      United States federal income tax without allowance for deduction, unless that
      corporation qualifies for exemption from tax under Section 883 of the Code
      and the Treasury Regulations promulgated thereunder in August 2003, which
      Treasury Regulations became effective on January 1, 2005, for calendar year
      taxpayers such as ourselves and its subsidiaries.





The
      Company expects that the Company will qualify for this statutory tax exemption
      and the Company will take this position for United States federal income tax
      return reporting purposes. If the Company is not entitled to this exemption
      under Section 883 for any taxable year, it would be subject for those years
      to a 4% United States federal income tax on its U.S. source shipping income.
      The
      imposition of this taxation could have a negative effect on its business and
      would result in decreased earnings available for distribution to its
      shareholders.





**U.S.
      tax authorities could treat us as a “passive foreign investment company,” which
      could have adverse U.S. federal income tax consequences to U.S. holders**





A
      foreign
      corporation will be treated as a “passive foreign investment company,” or PFIC,
      for U.S. federal income tax purposes if either (1) at least 75% of its
      gross income for any taxable year consists of certain types of “passive income”
or (2) at least 50% of the average value of the corporation’s assets
      produce or are held for the production of those types of “passive income.” For
      purposes of these tests, “passive income” includes dividends, interest, and
      gains from the sale or exchange of investment property and rents and royalties
      other than rents and royalties which are received from unrelated parties in
      connection with the active conduct of a trade or business. For purposes of
      these
      tests, income derived from the performance of services does not constitute
      “passive income.” U.S. shareholders of a PFIC are subject to a disadvantageous
      U.S. federal income tax regime with respect to the income derived by the PFIC,
      the distributions they receive from the PFIC and the gain, if any, they derive
      from the sale or other disposition of their shares in the PFIC.





Based
      on
      its proposed method of operation, the Company does not believe that the Company
      will be a PFIC with respect to any taxable year. In this regard, the Company
      intends to treat the gross income the Company derives or are deemed to derive
      from its time chartering activities as services income, rather than rental
      income. Accordingly, the Company believes that its income from time chartering
      activities does not constitute “passive income,” and the assets that the Company
      owns and operates in connection with the production of that income does not
      constitute passive assets.





There
      is,
      however, no direct legal authority under the PFIC rules addressing its proposed
      method of operation. Accordingly, no assurance can be given that the U.S.
      Internal Revenue Service, or IRS, or a court of law will accept its position,
      and there is a risk that the IRS or a court of law could determine that the
      Company is a PFIC. Moreover, no assurance can be given that the Company would
      not constitute a PFIC for any future taxable year if there were to be changes
      in
      the nature and extent of its operations.





If
      the
      IRS were to find that the Company is or has been a PFIC for any taxable year,
      its U.S. shareholders will face adverse U.S. tax consequences. Under the PFIC
      rules, unless those shareholders make an election available under the Code
      (which election could itself have adverse consequences for such shareholders,
      as
      discussed below under “Tax Considerations—U.S. Federal Income Taxation of U.S.
      Holders”), such shareholders would be liable to pay U.S. federal income tax at
      the then prevailing income tax rates on ordinary income plus interest upon
      excess distributions and upon any gain from the disposition of its common
      shares, as if the excess distribution or gain had been recognized ratably over
      the shareholder’s holding period of its common shares.





**The
      Company may not be exempt from Liberian taxation, which would materially reduce
      its net income and cash flow by the amount of the applicable
      tax**





The
      Republic of Liberia enacted a new income tax law generally effective as of
      January 1, 2001 (the “New Act”), which repealed, in its entirety, the prior
      income tax law in effect since 1977 pursuant to which the Company and its
      Liberian subsidiaries, as non-resident domestic corporations, were wholly exempt
      from Liberian tax.





In
      2004,
      the Liberian Ministry of Finance issued regulations pursuant to which a
      non-resident domestic corporation engaged in international shipping such as
      ourselves will not be subject to tax under the New Act retroactive to January
      1,
      2001 (the “New Regulations”). In addition, the Liberian Ministry of Justice
      issued an opinion that the New Regulations were a valid exercise of the
      regulatory authority of the Ministry of Finance. Therefore, assuming that the
      New Regulations are valid, the Company and its Liberian subsidiaries will be
      wholly exempt from tax as under Prior Law.





If
      the
      Company were subject to Liberian income tax under the New Act, the Company
      and
      its Liberian subsidiaries would be subject to tax at a rate of 35% on its
      worldwide income. As a result, its net income and cash flow would be materially
      reduced by the amount of the applicable tax. In addition, shareholders would
      be
      subject to Liberian withholding tax on dividends at rates ranging from 15%
      to
      20%.




**The
      Company is incorporated in the Republic of the Liberia, which does not have
      a
      well-developed body of corporate law**





The
      Company’s corporate affairs are governed by its Articles of Incorporation and
      By-laws and by the Liberia Business Corporations Act, or BCA. The provisions
      of
      the BCA 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 Liberia interpreting the BCA. The rights and fiduciary responsibilities
      of
      directors under the law of the Republic of the Liberia are not as clearly
      established as the rights and fiduciary responsibilities of directors under
      statutes or judicial precedent in existence in certain United States
      jurisdictions. Shareholder rights may differ as well. While the BCA does
      specifically incorporate the non-statutory law, or judicial case law, of the
      State of Delaware and other states with substantially similar legislative
      provisions, its public shareholders may have more difficulty in protecting
      their
      interests in the face of actions by the management, directors or controlling
      shareholders than would shareholders of a corporation incorporated in a United
      States jurisdiction.





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





The
      Company’s vessel owning subsidiaries employ approximately 280 seafarers. All of
      the seafarers on the ships in its fleet are covered by industry-wide collective
      bargaining agreements that set basic standards. The Company cannot assure you
      that these agreements will prevent labor interruptions. Any labor interruptions
      could disrupt its operations and harm its financial performance.





**Item
      4. INFORMATION ON THE COMPANY.**





**A.
      History and development of the Company**





B+H
      Ocean
      Carriers Ltd. (the "Company"*) was organized in April 1988 to engage in the
      business of acquiring, investing in, owning, operating and selling vessels
      for
      dry bulk and liquid cargo transporta-tion. As of December 31, 2005, the Company
      owned and operated six MR product tankers, one Panamax product tanker and five
      OBOs. Each vessel accounts for a significant portion of the Company’s
      revenues.





The
      Company’s fleet of product tankers consist of “handy-size” vessels which are
      between 30,000 and 50,000 summer dead-weight tons ("DWT"), and are able, by
      reason of their smaller size, to trans-port commodities to and from most ports
      in the world, includ-ing those located in less developed third-world countries.
      The Company’s Panamax product tanker is 68,500 DWT. Product tankers are
      single-deck oceangoing vessels designed to carry simulta-neously a number of
      segregated liquid bulk commodi-ties, such as refined petroleum products,
      vegetable oils, caustic soda and molasses. The Company’s fleet of OBOs are
      between 74,000 and 98,000 DWT. OBOs are combination carriers used to trans-port
      liquid, iron ore or bulk products such as coal, grain, bauxite, phosphate,
      sugar, steel products and other dry bulk commodities.





The
      Company is incorporated in Liberia and its princi-pal executive office is
      located at ParLaVille Place, 14 Par-La-Ville Road, Hamilton HM 08, Bermuda
      (telephone number (441) 295-6875).






















*
            When
                referred to in the context of vessel ownership, the “Company” shall mean
                the wholly-owned subsidiaries of B+H Ocean Carriers Ltd. that are
                registered owners.











·
            Acquisitions,
                Disposals and Other Significant
                Transactions





On
      May
      25, 2005, the Company completed a private placement of 3,243,243 shares of
      Common Stock of the Company at a price of $18.50 per share, for aggregate gross
      proceeds of approximately $60 million. The Company also obtained a listing
      on
      the Oslo Stock Exchange on April 12, 2006. The proceeds from the private
      placement have been and are expected to continue to be used for acquisitions
      of
      secondhand shipping tonnage, refinancing of debt and working capital.





On
      February 4, 2005,  the
      Company, through a wholly-owned subsidiary, acquired three 83,000 DWT
      OBO
      (Ore/Bulk/Oil), combination tanker/bulk carriers built in 1993 and 1994, for
      a
      total of $110.2 million. Two of the vessels are time chartered for five years
      at
      $26,600, $24,600, $23,600, $22,600 and $20,600 per day for the first through
      fifth years, respectively. The third vessel is time chartered for five years
      at
      $26,000, $24,000, $23,000, $22,000 and $20,000, respectively, for years one
      through five. The Company has a profit sharing arrangement with the charterers
      which entitles the Company to 35% of the charterer’s profits from this vessel
      for years 2 through 5. In conjunction with the acquisition, the Company entered
      into a floating rate loan facility totaling $102 million. See  ITEM
      5
      B.





On
      June
      15, 2005, the Company, through a wholly-owned subsidiary, acquired a 74,800
      DWT
      OBO built in 1992 for $33.25 million. The vessel is time chartered for three
      years at $23,500 per day. On November 8, 2005, the Company completed an
      additional drawdown on its floating rate facility to finance a portion of the
      purchase price. See  ITEM
      5
      B.





On
      June
      20, 2005, the Company, through a wholly-owned subsidiary, sold the vessel M/T
      COMMUTER for $8.5 million to an unaffiliated party. The excess of the sales
      proceeds over the book value of the vessel of $0.8 is included in the
      Consolidated Statements of Operations for the year ended December 31,
      2005.





On
      August
      19, 2005, the Company, through a wholly-owned subsidiary, acquired a 68,500
      DWT
      Panamax product tanker built in 1991 for $24.3 million. The vessel is time
      chartered for three years at $23,500 per day. On November 8, 2005, the Company
      completed an additional drawdown on its floating rate facility to finance a
      portion of the purchase price. See  ITEM
      5
      B.





In
      January 2006, the Company acquired a 1993-built, 83,000 DWT Combination Carrier
      for $36.4 million. The purchase also reflects the continuation of a five-year
      Time Charter which commenced in October 2005. The purchase was effected through
      an existing tax lease structure with the Company as disponent owner through
      a
      bareboat charter party.





Also
      in
      January 2006, the Company acquired a 50% disponent owner interest in another
      vessel, a 1992-built 75,000 DWT Combination Carrier. This purchase was also
      effected through an existing tax lease structure. The Company acquired its
      50%
      interest in an entity which is the disponent owner through a bareboat charter
      party. The terms of the transaction were based on a vessel value of $30.4
      million and include a three-year charter which commenced in February 2006.
      The
      charter includes a 50% profit sharing arrangement above a guaranteed minimum
      daily rate.





Due
      to
      the existing tax lease structures on these two vessels acquired in 2006, no
      additional mortgage financing would be needed to fund the
      transactions.





On
      April
      12, 2006, the Company obtained a listing on the Oslo Stock Exchange.








·
            Prior
                year acquisitions, disposals and other significant transactions





On
      March
      12, 2004, the Company, through a 50%-owned consolidated subsidiary, acquired
      the
      50% of Atlantic Bulker Shipping Corp. (“ABSC”) owned by an affiliated entity for
      $1.00.




On
      April
      29, 2004, the Company, through a wholly-owned subsidiary, acquired a 98,000
      DWT
      OBO built in 1986, for $19.4 million. Capital improvements made subsequent
      to
      acquisition to prepare the vessel for its intended use totaled $1.2 million,
      which were capitalized and included in the vessel’s carrying amount on the
      Consolidated Balance Sheets. The vessel, which was on timecharter until March,
      2006, now trades on the spot market. In conjunction with the acquisition, the
      Company refinanced the existing floating rate loan facility and borrowed an
      additional $19 million. See “ Item
      5.
      OPERATING AND FINANCIAL REVIEW AND PROSPECTS.”





On
      May
      25, 2004, the Company, through a wholly-owned subsidiary, sold the vessel
      M/T SKOWHEGAN for $3.8 million to an unaffiliated party. The excess of the
      book
      value of the vessel over the sales proceeds of $4.1 million is included in
      the
      Consolidated Statements of Operations as of December 31, 2004. See “ Item
      5.
      OPERATING AND FINANCIAL REVIEW AND PROSPECTS.”





On
      December 7, 2004, the Company, through a wholly-owned
      subsidiary, sold the vessel
      M/T ACOAXET for $5.7 million to an unaffiliated party. The excess of the book
      value of the vessel over the sales proceeds of $0.6 million is included in
      the
      Consolidated Statements of Operations as of December 31, 2004. See “ Item
      5.
      OPERATING AND FINANCIAL REVIEW AND PROSPECTS.”





On
      April
      16, 2003, the Company amended
      the $38.6 million floating rate loan facility agreement dated August 8, 2002.
      The amendment made available an additional $5.0 million for the purpose of
      acquiring the remaining Notes on the open market. A portion of the p roceeds
      was used to repay the short-term note from affiliates described below. In
      consideration for the cancellation of the Notes pledged as collateral for the
      original loan and as additional security for the obligations of the borrower,
      the Company agreed to provide to the lenders guarantees with respect to the
      original loan and mortgages on all vessels owned by the Company. This agreement
      was amended and restated on April 29, 2004, as noted above.





In
      April
      2003, the Company acquired the remaining $12.2 million face value of the Notes
      from unaffiliated entities for an aggregate cost of $5.1 million. The difference
      between the cost of the investment in bonds and the corresponding bond liability
      was recorded in consolidation as a gain on the retirement of debt and included
      as gain in the Consolidated Statements of Operations at December 31, 2003.
      The
      Company borrowed $2.5 million from affiliates under a short-term note to finance
      the acquisition. The note was repaid from the proceeds of the mortgage as
      discussed above.





On
      June
      10, July 1, July 16 and July 17, 2003, the Company, through wholly-owned
      subsidiaries, sold the vessels M/T CANSO for $2.7 million M/T CHEBUCTO for
      $2.7
      million, M/T CASCO for $2.6 million and M/T CATAUMET for $2.6 million,
      respectively to unaffiliated parties. The aggregate excess of the book value
      of
      the vessels over the sales proceeds of $16.5 million is included in the
      Consolidated Statements of Operations as of December 31, 2003. T he
      net
      proceeds of the sale were used to repay a portion of the mortgage as required
      under the amendment dated April 16, 2003. See “ Item
      5.
      OPERATING AND FINANCIAL REVIEW AND PROSPECTS.”





On
      November 6, 2003, the Company, through a 50% owned consolidated subsidiary,
      sold
      the vessel M/V ALLIANCE TRADER for $2.9 million. The excess of the selling
      price
      over the book value of $0.3 million is included in the Consolidated Statements
      of Operations as of December 31, 2003. A portion of the proceeds was used to
      repay the balance of the floating
      rate loan facility dated November 26, 1996. See “ Item
      5.
      OPERATING AND FINANCIAL REVIEW AND PROSPECTS.”





**B.
      Business Overview**





Management
      of the Company





The
      shipowning activities of the Company are managed by BHM under a Management
      Services Agreement (the “Management Agreement") dated June 27, 1988 and amended
      on October 10, 1995, subject to the oversight and direction of the Company's
      Board of Directors.





The
      shipowning activities of the Company entail three separate functions, all under
      the overall control and responsibility of BHM: (1) the shipowning function,
      which is that of an investment manager and includes the purchase and sale of
      vessels and other shipping interests; (2) the marketing and operations function
      which involves the deployment and operation of the vessels; and (3) the vessel
      technical management function, which encompasses the day-to-day physical
      maintenance, operation and crewing of the vessels.





BHM
      employs Navinvest Marine Services (USA) Inc. ("NMS"), a Connecticut corporation,
      under an agency agreement, to assist with the performance of certain of its
      financial reporting and administrative duties under the Management
      Agreement.





The
      Management Agreement may be terminated by the Company in the following
      circumstances: (i) certain events involving the bankruptcy or insolvency of
      BHM;
      (ii) an act of fraud, embezzlement or other serious criminal activity by Michael
      S. Hudner with respect to the Company; (iii) gross negligence or willful
      misconduct by BHM; or (iv) a change in control of BHM.





Marketing
      and Operations of Vessels





At
      December 31, 2005, Company vessels were time chartered to Product Transport
      Corp. Ltd, (“PROTRANS”), a Bermuda Corporation and wholly-owned subsidiary of
      the Company, on an open rate basis as described hereunder.





BHM
      is
      the manager of PROTRANS and has delegated certain administrative, marketing
      and
      operational functions to NMS and Product Transport (S) Pte. Ltd, a Singapore
      corporation, under agency agreements.





PROTRANS
      subcharters the vessels on a voyage charter or time charter basis to third
      party
      charterers. Under a voyage charter, PROTRANS agrees to provide a vessel for
      the
      transport of cargo between specific ports in return for the payment of an agreed
      freight per ton of cargo or an agreed lump sum amount. Voyage costs, such as
      canal and port charges and bunker (fuel) expenses, are the responsibility of
      PROTRANS. A single voyage charter (generally three to ten weeks) is commonly
      referred to as a spot market charter, and a voyage charter involving more than
      one voyage is commonly referred to as a consecutive voyage charter. Under a
      time
      charter, PROTRANS places a vessel at the disposal of a subcharterer for a given
      period of time in return for the payment of a specified rate per DWT capacity
      per month or a specified rate of hire per day. Voyage costs are the
      responsibility of the subcharterer. In both voyage charters and time charters,
      operating costs (such as repairs and maintenance, crew wages and insurance
      premiums) are the responsibility of the shipown-er.





Voyage
      and time charters can be for varying periods of time, ranging from a single
      trip
      to terms approximating the useful life of a vessel, depending on the evaluation
      of market trends by PROTRANS and by subcharterers. Long-term charters afford
      greater assurance that the Company will be able to cover their costs (including
      depreciation, debt service, and operating costs), and afford subcharterers
      greater stability of transporta-tion costs. Operating or chartering a vessel
      in
      the spot market affords both PROTRANS and subcharterers greater speculative
      opportunities, which may result in high rates when ships are in demand or low
      rates (possibly insufficient to cover costs) when ship availability exceeds
      demand. Charter rates are affected by world economic condi-tions, international
      events, weather condi-tions, strikes, govern-ment policies, supply and demand,
      and many other factors beyond the control of PROTRANS and the Company.





Vessel
      Technical Management





At
      December 31, 2005, BHM was the technical manager of eleven of the Company's
      vessels, under technical management agreements. BHM employs B+H Equimar
      Singapore Pte. Ltd. ("BHES"), a Singapore corporation, under agency agreements
      to assist with certain of its duties under the technical management agreements.
      The vessel technical manager is responsible for all technical aspects of
      day-to-day vessel operations, including physical maintenance, provisioning
      and
      crewing, and receives compensation of $12,388 per MR product tanker per month
      and $15,000 per Panamax product tanker or OBO per month, which may be adjusted
      annually for any increases in the Consumer Price Index. Such supervision
      includes the establishment of operating budgets and the review of actual
      operating expenses against budgeted expenses on a regular basis. One of the
      OBOs
      acquired in March 2005 is managed by a third party manager under a technical
      management agreement.





Insurance
      and Safety





The
      business of the Company is affected by a number of risks, including mechanical
      failure of the vessels, collisions, property loss to the vessels, cargo loss
      or
      damage and business interruption due to political circumstances in foreign
      countries, hostilities and labor strikes. In addition, the operation of any
      ocean-going vessel is subject to the inherent possibility of catastrophic marine
      disaster, including oil spills and other environmental mishaps, and the
      liabilities arising from owning and operating vessels in international trade. The
      Oil
      Pollution Act ‘90 (“OPA 90”) ,
      by
      imposing potentially unlimited liability upon owners, operators and bareboat
      charterers for certain oil pollution accidents in the United States, has made
      liability insurance more expensive for ship owners and operators and has also
      caused insurers to consider reducing available liability coverage.





The
      Company maintains hull and machinery and war risks insurance, which include
      the
      risk of actual or constructive total loss, protection and indemnity insurance
      with mutual assurance associations and loss of hire insurance on the four OBOs.
      The Company believes that its current insurance coverage is adequate to protect
      it against most accident-related risks involved in the conduct of its business
      and that it maintains appropriate levels of environmental damage and pollution
      insurance coverage. Currently, the available amount of coverage for pollution
      is
      $1 billion per vessel per incident. However, there can be no assurance that
      all
      risks are adequately insured against, that any particular claim will be paid
      or
      that the Company will be able to procure adequate insurance coverage at
      commercially reasonable rates in the future.





Competition





The
      product tanker industry is fragmented. Competition in the industry among vessels
      approved by major oil companies is primarily based on price. There are
      approximately 1100 crude oil and product tankers worldwide of between 30,000
      and
      50,000 DWT. Tankers are typically owned in groups or pools controlling up to
      30
      tankers.





The
      OBO
      industry is also fragmented and competition is also primarily based on price,
      but also vessel specification and age. There are approximately 80 OBOs worldwide
      of between 50,000 and 100,000 DWT. In this size range, the largest ownership
      group has nine vessels. Otherwise vessels are owned in groups of four or less.





The
      Company competes principally with other handysize vessel owners through the
      global tanker charter market, which is comprised of tanker brokers representing
      both charterers and ship owners. Charterparties are quoted on either an open
      or
      private basis. Requests for quotations on an open charter are usually made
      by
      major oil companies on a general basis to a large number of vessel operators.
      Competition for open charters can be intense and involves vessels owned by
      operators such as other major oil companies, oil traders and independent ship
      owners. Requests for quotations on a private basis are made to a limited number
      of vessel operators and are greatly influenced by prior customer relationships.
      The Company bids for both open and private charters.





Competition
      generally intensifies during times of low market activity when several vessels
      may bid to transport the same cargo. In these situations, the Company's customer
      relationships are paramount, often allowing the Company the opportunity of
      first
      refusal on the cargo. The Company believes that it has a significant competitive
      advantage in the handysize tanker market as a result of the quality and type
      of
      its vessels and through its close customer relationships, particularly in the
      Atlantic and in the Indo-Asia Pacific Region. Some of the Company’s competitors,
      however, have greater financial strength and capital resources.





Seasonality





Although
      the Company's liquid cargo trade is affected by season-al oil uses, such as
      heating in winter and increased automobile use in summer, the volume of liquid
      cargo transported generally remains the same through the year, with rates firmer
      in midwinter and midsummer and softer in the spring.





Inspection
      by Classification Society





The
      hull
      and machinery of every commercial vessel must be classed by a classification
      society authorized by its country of registry. The classification society
      certifies that a vessel is safe and seaworthy in accordance with the applicable
      rules and regulations of the country of registry of the vessel and the Safety
      of
      Life at Sea Convention. The Company’s fleet is currently enrolled with the
      American Bureau of Shipping, Bureau Veritas and Det Norske Veritas.





A
      vessel
      must be inspected by a surveyor of the classi-fi-ca-tion society every year
      ("Annual Survey"), every two and a half years ("Inter-mediate Survey") and
      every
      five years ("Special Survey"). In lieu of a Special Survey, a shipowner has
      the
      option of arranging with the classification society for the vessel's machin-ery
      to be on a continuous survey cycle, under which the machinery would be surveyed
      over a five-year period. The Company's vessels are on Special Survey cycles
      for
      hull inspection and continu-ous survey cy-cles for machinery inspection. Every
      vessel 15 years and older is also re-quired to be drydocked at least twice
      in a
      five-year period for inspection of under-water parts of the vessel.





If
      any
      defects are found in the course of a survey or drydocki-ng, the clas-sification
      survey-or will require immediate rectification or issue a "condition of class"
      under which the appropriate repairs must be carried out within a prescribed
      time
      limit. The hull Special Survey includes measurements of the thickness of the
      steel structures in the hull of the vessel. Should the thickness be found to
      be
      less than class require-ments, steel renewals will be prescribed. Substantial
      expense may be incurred on steel renewal to pass a Special Survey if the vessel
      has suffered excessive cor-rosion.





In
      January 1997, BHES was awarded its International Safety Management (“ISM”)
      Document of Compliance by Lloyd's Register, certifying that BHES complied with
      the requirements of the International Management Code for the Safe Operation
      of
      Ships and for Pollution Prevention (ISM Code). Following
      the award of the Document of Compliance (“DOC”), each individual vessel in the
      fleet under management was audited by Lloyds Register for compliance with the
      documented BHES management procedures on which the DOC is based. After the
      audit, each vessel was awarded a ship specific Safe Management Certificate
      (“SMC”). Both the DOC and the SMC are subject to annual internal and external
      audits over a 5-year period. A successful renewal audit of the DOC was conducted
      by Lloyds Register on February 7, 2002. However, the Company entered into a
      Master Service Agreement (“MSA”) with the American Bureau of Shipping on April
      27, 2000. To conform to the MSA and to streamline a periodic revision of our
      safety procedures, American Bureau of Shipping was requested to undertake an
      audit of the Company’s compliance with the ISM Code. This audit was successfully
      completed on November 8, 2002 and new DOC’s were issued by American Bureau of
      Shipping.





Regulation





The
      business of the Company and the operation of its vessels are materially affected
      by government regulation in the form of international conventions, national,
      state and local laws and regulations in force in the jurisdictions in which
      the
      vessels operate, as well as in the country or countries of their registration.
      Because such conventions, laws and regulations are subject to revision, it
      is
      difficult to predict what legislation, if any, may be promulgated by any country
      or authority. The Company also cannot predict the ultimate cost of complying
      with such conventions, laws and regulations, or the impact thereof on the resale
      price or useful life of its vessels. Various governmental and quasi-governmental
      agencies require the Company to obtain certain permits, licenses and
      certificates with respect to the operation of its vessels. Subject to the
      discussion below and to the fact that the required permits, licenses and
      certificates depend upon a number of factors, the Company believes that it
      has
      been and will be able to obtain all permits, licenses and certificates material
      to the conduct of its operations.





The
      Company believes that the heightened environmental and quality concerns of
      insurance underwriters, regulators and charterers will impose greater inspection
      and safety requirements on all vessels in the tanker market. The Company’s
      vessels are subject to both scheduled and unscheduled inspections by a variety
      of governmental and private interests, each of whom may have a different
      perspective and standards. These interests include Coast Guard, port state,
      classification society, flag state administration (country of registry) and
      charterers, particularly major oil companies which conduct vetting inspections
      and terminal operators.





*Environmental
      Regulation-IMO.* On
      March 6, 1992, the International Maritime Organization (“IMO”) adopted
      regulations under Annex I (oil) of MARPOL (the International Convention for
      the
      Prevention of Pollution from Ships) that set forth new pollution prevention
      requirements applicable to tankers. These regulations required that crude
      tankers of 20,000 DWT and above and product tankers of 30,000 DWT and above,
      which did not have protective segregated ballast tanks (PL/SBT) and which were
      25 years old, were to be fitted with double sides and double bottoms. Product
      tankers of 30,000 DWT and above, which did have SBT, were exempt until they
      reached the age of 30. From July 6, 1993 all newbuilding tankers were required
      to be of double hull construction. In addition, existing tankers were subject
      to
      an Enhanced Survey Program.





On
      September 1, 2002, revised MARPOL regulations for the phase-out of single hull
      tankers took effect. Under these revised regulations, single hull crude tankers
      of 20,000 DWT and above and single hull product carriers of 30,000 DWT and
      above
      were to be phased out by certain scheduled dates between 2003-2015, depending
      on
      age, type of oil carried and vessel construction. The Revised Regulations
      applied only to tankers carrying petroleum products and thus did not apply
      to
      tankers carrying noxious liquid substances, vegetable or animal oils or other
      non-petroleum liquids.





Under
      further revisions to the MARPOL regulations, which were adopted on December
      4,
      2003, the final phasing out date for Category 1 tankers (principally those
      not
      fitted with PL/SBT) was brought forward to 2005 from 2007 and the final phasing
      out date for Category 2 tankers (principally those fitted with PL/SBT) was
      brought forward to 2010 from 2015. The Condition Assessment Scheme (CAS) was
      also to be made applicable to all single hull tankers of 15 years or older,
      rather than just to Category 1 tankers continuing to trade after 2005 and to
      Category 2 tankers continuing to trade after 2010. Flag states were permitted
      to
      allow continued operation of Category 2 tankers beyond 2010 subject to
      satisfactory results from the CAS and provided that the continued operation
      did
      not extend beyond 2015 or the date on which the vessel reached 25 years of
      age.
      Flag states were also permitted to allow continued operation of Category 2
      tankers beyond 2010 if they were fitted with qualifying double sides or double
      bottoms, provided that the continued operation did not extend beyond the date
      on
      which the vessel reached 25 years of age. Notwithstanding these rights of flag
      states to allow continued operation beyond 2010, Port States were permitted
      to
      deny entry by single hull tankers after 2010 and tankers with qualifying double
      sides or double bottoms after 2015.





New
      MARPOL regulations were also introduced in respect of the carriage of Heavy
      Grade Oil (HGO). HGO includes crude oil having a density higher than 900kg/m3
      at
      15 degrees C and fuels oils having a density higher than 900kg/m3 at 15 degrees
      C or a kinematic viscosity higher than 180mm2/s at 50 degrees C. Notwithstanding
      these regulations, any party to MARPOL would be entitled to deny entry of single
      hull tankers carrying HGO, which had been otherwise allowed to carry such cargo
      under MARPOL, into the ports and offshore terminals under its jurisdiction.
      From
      October 21, 2003 and subject to certain exceptions, all HGO to or from European
      Union ports must be carried in tankers of double hull construction





The
      phase
      out dates for the purposes of carriage of petroleum products under MARPOL,
      for
      the vessels currently owned by the Company, are set out in the table below.
      In
      October 2004, a revision was adopted to MARPOL Annex II where noxious liquid
      substances (NLS) such as all vegetable oils will be required to be carried
      on
      vessels complying with the International Bulk Chemical Code (IBC). In their
      current configuration, the Company’s vessels do not comply with the IBC Code.
      The revision comes into force on January 1, 2007. These regulatory changes
      have
      led the Company to believe that structural modifications to its existing fleet
      may provide the best solution to the phase-out issues for single hull tankers. The
      Company has entered into a contract for the conversion of its six single-hull
      MR
      Product Tankers to fully double hull, Marpol compliant vessels suitable
      for trading in petroleum products and vegetable oils. Carrying
      out such a conversion will completely eliminate the present regulatory
      phaseout dates applicable to these vessels. The Company will carry out this
      conversion project one vessel at a time, commencing in June 2006, with the
      completion of the sixth vessel in late 2007. The Company expects the average
      total cost for each conversion to be approximately $4.0 million per
      vessel.





In
      short,
      the IMO regulations, which have been adopted by over 150 nations, including
      many
      of the jurisdictions in which our tankers operate, provide for, among other
      things, phase-out of single-hulled tankers and more stringent inspection
      requirements; including, in part, that:





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


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


·
            all
                tankers are subject to enhanced
                inspections.





Also,
      under IMO regulations, a tanker must be of double-hulled 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.





The
      IMO
      has also negotiated international conventions that impose liability for oil
      pollution in international waters and a signatory’s territorial waters. In
      September 1997, the IMO adopted Annex VI to the MARPOL Convention to address
      air
      pollution from ships. Annex VI was ratified in May 2004, and will become
      effective May 19, 2005. Annex VI, when it becomes effective, will set limits
      on
      sulfur oxide and nitrogen oxide emissions from ship exhausts and prohibit
      deliberate emissions of ozone depleting substances, such as chlorofluorocarbons.
      Annex VI also includes a global cap on the sulfur content of fuel oil and allows
      for special areas to be established with more stringent controls on sulfur
      emissions. Vessels built before 2002 are not obligated to comply with
      regulations pertaining to nitrogen oxide emissions. The
      Company believes that all our vessels are currently compliant in all material
      respects with these regulations. Additional or new conventions, laws and
      regulations may be adopted that could adversely affect our business, cash flows,
      results of operations and financial condition.





The
      IMO
      also has adopted the International Convention for the Safety of Life at Sea,
      or
      SOLAS Convention, which imposes a variety of standards to regulate design and
      operational features of ships. SOLAS standards are revised periodically. We
      believe that all our vessels are in substantial compliance with SOLAS
      standards.





Under
      the
      International Safety Management Code for the Safe Operation of Ships and for
      Pollution Prevention, or ISM Code, promulgated by the IMO, the party with
      operational control of a vessel is required to develop an extensive safety
      management system that includes, among other things, the adoption of a safety
      and environmental protection policy setting forth instructions and procedures
      for operating its vessels safely and describing procedures for responding to
      emergencies. In 1994, the ISM Code became mandatory with the adoption of Chapter
      IX of SOLAS. We intend to rely on the safety management system that BHM has
      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 operator has been awarded a document of
      compliance, issued by each flag state, under the ISM Code. We believe that
      has
      all material requisite documents of compliance for its offices and safety
      management certificates for vessels in our fleet for which the certificates
      are
      required by the IMO. BHM will be required to review these documents of
      compliance and safety management certificates annually.





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





*Environmental
      Regulation-OPA 90/CERCLA.*  OPA
      90 established
      an extensive regulatory and liability regime for environmental protection and
      cleanup of oil spills. OPA 90 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 United States
      territorial sea and the two hundred nautical mile exclusive economic zone of
      the
      United States. The Comprehensive Environmental Response, Compensation and
      Liability Act (“CERCLA”) applies to the discharge of hazardous substances, which
      the Company’s vessels are capable of carrying.





Under
      OPA
      90, vessel owners, operators and bareboat (or “demise”) 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 oil spill containment and clean-up costs and other
      damages arising from oil spills caused by their vessels. These other damages
      are
      defined broadly to include (i) natural resource damages and the costs of
      assessment thereof, (ii) real and personal property damages, (iii) net
      loss of taxes, royalties, rents, fees and other lost natural resources damage,
      (v) net cost of public services necessitated by a spill response, such as
      protection from fire, safety or health hazards, (iv) loss of profits or
      impairment of earning capacity due to injury, destruction or loss of real
      property, personal property and natural resources, and (v) loss of
      subsistence use of natural resources. OPA 90 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 and $600 per gross ton or $500,000 for non-tanker vessels
      (subject to possible adjustment for inflation). 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
      would not apply if the incident were proximately caused by violation of
      applicable United States federal safety, construction or operating regulations,
      or by the responsible party’s gross negligence or willful misconduct, or if the
      responsible party fails or refuses to report the incident or to cooperate and
      assist in connection with the oil removal activities. OPA and CERCLA each
      preserve the right to recover damages under other laws, including maritime
      tort
      law. OPA 90 specifically permits individual states to impose their own liability
      regimes with regard to oil pollution incidents occurring within their
      boundaries, and some states that have enacted legislation providing for
      unlimited liability for oil spills. In some cases, states, which have enacted
      such legislation, have not yet issued implementing regulations defining tanker
      owners’ responsibilities under these laws. Moreover, OPA 90 and CERCLA preserve
      the right to recover


damages
      under existing law, including maritime tort law. The Company intends to comply
      with all applicable state regulations in the ports where its vessels call.





The
      Company currently maintains and plans to continue to maintain pollution
      liability insurance for its vessels in the amount of $1 billion. A catastrophic
      spill could exceed the insurance coverage available, in which event there could
      be a material adverse effect on the Company. OPA 90 does not by its terms impose
      liability on lenders or the holders of mortgages on vessels.





Under
      OPA
      90, with certain limited exceptions, all newly built or converted tankers
      operating in United States 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,
      OPA
      90 currently permits existing single-hull tankers to operate until the year
      2015
      if their operations within United States waters are limited to discharging
      at
      the Louisiana Off-Shore Oil Platform, or off-loading by means of lightering
      activities within authorized lightering zones more than 60 miles offshore.





OPA
      90
      expands the preexisting financial responsibility requirements for vessels
      operating in United States waters and requires owners and operators of vessels
      to establish and maintain with the Coast Guard evidence of financial
      responsibility sufficient to meet the limit of their potential strict liability
      under OPA 90. In December 1994, the Coast Guard enacted regulations
      requiring evidence of financial responsibility in the amount of $1,500 per
      gross
      ton for tankers, coupling the OPA limitation on liability of $1,200 per gross
      ton with the CERCLA liability limit of $300 per gross ton. Under the
      regulations, such evidence of financial responsibility may be demonstrated
      by
      insurance, surety bond, self-insurance or guaranty. Under OPA 90 regulations,
      an
      owner or operator of more than one tanker will be required to demonstrate
      evidence of financial responsibility for the entire fleet in an amount equal
      only to the financial responsibility requirement of the tanker having the
      greatest maximum strict liability under OPA 90/CERCLA. The Company has provided
      requisite guarantees from a Coast Guard approved mutual insurance organization
      and received certificates of financial responsibility from the Coast Guard
      for
      each vessel required to have one.





The
      Coast
      Guard’s regulations concerning certificates of financial responsibility provide,
      in accordance with OPA 90 and CERCLA, that claimants may bring suit directly
      against an insurer or guarantor that furnishes certificates of financial
      responsibility; and, in the event that such insurer or guarantor is sued
      directly, it is prohibited from asserting any defense that it may have had
      against the responsible party and is limited to asserting those defenses
      available to the responsible party and the defense that the incident was caused
      by the willful misconduct of the responsible party. Certain insurance
      organizations, which typically provide guarantees for certificates of financial
      responsibility, including the major protection and indemnity organizations
      which
      the Company would normally expect to provide guarantees for a certificate of
      financial responsibility on its behalf, declined to furnish evidence of
      insurance for vessel owners and operators if they are subject to direct actions
      or required to waive insurance policy defenses.





Owners
      or
      operators of tankers operating in the waters of the United States were required
      to file vessel response plans with the Coast Guard, and their tankers were
      required to be operating in compliance with their Coast Guard approved plans
      by
      August 18, 1993. Such response plans must, among other things,
      (i) 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,” (ii) describe crew
      training and drills, and (iii) identify a qualified individual with full
      authority to implement removal actions. The Company has vessel response plans
      approved by the Coast Guard for tankers in its fleet operating in the waters
      of
      the United States. The Coast Guard has


announced
      it intends to propose similar regulations requiring certain tank vessels to
      prepare response plans for the release of hazardous substances.





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





The
      phase
      out dates for the purposes of carriage of petroleum products under OPA 90,
      for
      the vessels currently owned by the Company, are set out in the table
      below.





**VESSEL**
              **(as
                of MARCH 31, 2006)**
            **HULL**
            **DATE
                BUILT**
            **DWT**
            **PHASE
                OUT FOR CARRIAGE OF**
              **PETROLEUM
                PRODUCTS**MARPOL/EU
            
            OPA
                90M/T
                ACUSHNET
            SH
            Nov-81
            40,454
            Nov-07
            
            Nov-06M/T
                AGAWAM
            SH
            Jun-82
            40,454
            Jun-08
            
            Jun-07M/T
                ALGONQUIN
            SH
            Jan-83
            40,454
            Jan-09
            
            Jan-08M/T
                ANAWAN
            SH
            Aug-81
            40,454
            Aug-07
            
            Aug-06M/T
                AQUIDNECK
            SH
            Sep-81
            40,454
            Sep-07
            
            Sep-06M/T
                PEQUOD
            SH
            Jan-82
            40,632
            Jan-08
            
            Jan-07M/T
                SAGAMORE(1)
            DS
            Feb-91
            68,536
            Feb-07
            
            Feb-15OBO
                SACHUEST
            DH
            Sep-86
            98,000
            N/A
            
            N/AOBO
                RIP HUDNER
            DH
            Jul-94
            83,155
            N/A
            
            N/AOBO
                BONNIE SMITHWICK
            DH
            Dec-93
            83,155
            N/A
            
            N/AOBO
                SEAROSE G
            DH
            Apr-94
            83,155
            N/A
            
            N/AOBO
                ROGER M JONES
            DH
            Nov-92
            74,868
            N/A
            
            N/AOBO
                SIBOHELLE(2)
            DH
            May-93
            83,155
            N/A
            
            N/AOBO
                SIBOTESSE(3)
            DH
            Sep-92
            75,000
            N/A
            
            N/A





1.
            Vessel
                must comply with Reg.13F by Feb-07. However, the ship may continue
                trading
                until 25 years old under Reg.13G subject to acceptance by the flag
                state
                administration.


2.
            Disponent
                owners through a bareboat charter
                party.


3.
            50%
                owner of the entity which is the disponent owner through a bareboat
                charter party.


.





*Environmental
      Regulation-Other.* Although
      the United States is not a party to these conventions, many countries have
      ratified and follow the liability scheme adopted by the IMO and set out in
      the
      International Convention on Civil Liability for Oil Pollution Damage, 1969,
      as
      amended (the “CLC”) and the Convention for the Establishment of an International
      Fund for Oil Pollution of 1971, as amended (“Fund Convention”). Under these
      conventions, a vessel’s registered owner is strictly liable for pollution damage
      caused on the territorial waters of a contracting state by discharge of
      persistent oil, subject to certain complete defenses. Under an amendment to
      the
      1992 Protocol that became effective on November 1, 2003, for vessels of 5,000
      to
      140,000 gross tons (a unit of measurement for the total enclosed spaces within
      a
      vessel), liability will be limited to approximately $6.88 million plus $962.24
      for each additional gross ton over 5,000. For vessels of over 140,000 gross
      tons, liability will be limited to approximately $136.89 million. As the
      convention calculates liability in terms of a basket of currencies, these
      figures are based on currency exchange rates on January 19, 2005. Under the
      1969
      Convention, the right to limit liability is forfeited where the spill is caused
      by the owner’s actual fault; under the 1992 Protocol, a shipowner cannot limit
      liability where the spill is caused by the owner’s intentional or reckless
      conduct. Vessels trading in jurisdictions that are parties to these conventions
      must provide evidence of insurance covering the liability of the owner. In
      jurisdictions where the International Convention on Civil Liability for Oil
      Pollution Damage has not been adopted, various legislative schemes or common
      law
      govern, and liability is imposed either on the basis of fault or in a manner
      similar to that convention. We believe that our protection and indemnity
      insurance will cover the liability under the plan adopted by the
      IMO.





*Additional
      U.S. Environmental Requirements.* The
      U.S.
      Clean Air Act of 1970, as amended by the Clean Air Act Amendments of 1977 and
      1990 (the “CAA”), requires the EPA to promulgate standards applicable to
      emissions of volatile organic compounds and other air contaminants. Our vessels
      are subject to vapor control and recovery requirements for certain cargoes
      when
      loading, unloading, ballasting, cleaning and conducting other operations in
      regulated port areas. Our vessels that operate in such port areas are equipped
      with vapor control systems that satisfy these requirements. The CAA also
      requires states to draft State Implementation Plans, or SIPs, designed to attain
      national health-based air quality standards in primarily major metropolitan
      and/or industrial areas. Several SIPs regulate emissions resulting from vessel
      loading and unloading operations by requiring the installation of vapor control
      equipment. As indicated above, our vessels operating in covered port areas
      are
      already equipped with vapor control systems that satisfy these requirements.
      Although a risk exists that new regulations could require significant capital
      expenditures and otherwise increase our costs, we believe, based on the
      regulations that have been proposed to date, that no material capital
      expenditures beyond those currently contemplated and no material increase in
      costs are likely to be required.




The
      Clean
      Water Act (“CWA”) prohibits the discharge of oil or hazardous substances into
      navigable waters and imposes strict liability in the form of penalties for
      any
      unauthorized discharges. The CWA also imposes substantial liability for the
      costs of removal, remediation and damages. State laws for the control of water
      pollution also provide varying civil, criminal and administrative penalties
      in
      the case of a discharge of petroleum or hazardous materials into state waters.
      The CWA compl ements
      the remedies available under the more recent OPA and CERCLA, discussed
      above.





The
      National Invasive Species Act (“NISA”) was enacted in 1996 in response to
      growing reports of harmful organisms being released into U.S. ports through
      ballast water taken on by ships in foreign ports. NISA established a ballast
      water management program for ships entering U.S. waters. Under NISA, mid-ocean
      ballast water exchange is voluntary, except for ships heading to the Great
      Lakes, Hudson Bay, or vessels engaged in the foreign export of Alaskan North
      Slope crude oil. However, NISA’s exporting and record-keeping requirements are
      mandatory for vessels bound for any port in the United States. Although ballast
      water exchange is the primary means of compliance with the act’s guidelines,
      compliance can also be achieved through the retention of ballast water onboard
      the ship, or the use of environmentally sound alternative ballast water
      management methods approved by the U.S. Coast Guard. If the mid-ocean ballast
      exchange is made mandatory throughout the United States, or if water treatment
      requirements or options are instituted, the costs of compliance could increase
      for ocean carriers.





*European
      Union Tanker Restrictions.* In
      July
      2003, in response to the MT Prestige oil spill in November 2002, the European
      Union adopted legislation that accelerates the IMO single hull tanker phase-out
      timetable and, by 2010 will prohibit all single-hulled tankers used for the
      transport of oil from entering into its ports or offshore terminals. The
      European Union, following the lead of certain European Union nations such as
      Italy and Spain, has also banned, as of October 21, 2003, all single-hulled
      tankers carrying heavy grades of oil, regardless of flag, from entering or
      leaving its ports or offshore terminals or anchoring in areas under its
      jurisdiction. Commencing in 2005, certain single-hulled tankers above 15 years
      of age will also be restricted from entering or leaving European Union ports
      or
      offshore terminals and anchoring in areas under European Union jurisdiction.
      The
      European Union is also considering legislation that would: (1) ban manifestly
      sub-standard vessels (defined as those over 15 years old that have been detained
      by port authorities at least twice in a six-month period) from European waters
      and create an obligation of port states to inspect vessels posing a high risk
      to
      maritime safety or the marine environment; and (2) provide the European Union
      with greater authority and control over classification societies, including
      the
      ability to seek to suspend or revoke the authority of negligent societies.
      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
      jurisdictions where the CLC has not been adopted, various legislative schemes
      or
      common law govern, and liability is imposed either on the basis of fault or
      in a
      manner similar to the CLC.


**C.
      Organizational Structure**





The
      Company owns each of its vessels through separate wholly-owned subsidiaries
      incorporated in Liberia and the Marshall Islands. The operations of the
      Company’s vessels are managed by B+H Management Ltd., under a management
      agreement. See ITEM 7.





As
      of
      March 31, 2006, the Company’s subsidiaries are as follows:





**B+H
                  OCEAN CARRIERS LTD.**
              Parent***CLIASHIP
                  HOLDINGS LTD.***
              100%
                  Wholly-ownedSubsidiaries:ACUSHNET
                  SHIPPING CORP.
              100%
                  Wholly-owned
              Owns
                  M/T ACUSHNETAGAWAM
                  SHIPPING CORP.
              100%
                  Wholly-owned
              Owns
                  M/T AGAWAMALGONQUIN
                  SHIPPING CORP
              100%
                  Wholly-owned
              Owns
                  M/T ALGONQUINANAWAN
                  SHIPPING CORP.
              100%
                  Wholly-owned
              Owns
                  M/T ANAWANAQUIDNECK
                  SHIPPING CORP.
              100%
                  Wholly-owned
              Owns
                  M/T AQUIDNECKISABELLE
                  SHIPHOLDINGS CORP.
              100%
                  Wholly-owned
              Owns
                  M/T PEQUODSACHUEST
                  SHIPPING LTD.
              100%
                  Wholly-owned
              Owns
                  M/V SACHUEST***OBO
                  HOLDINGS LTD.***
              100%
                  Wholly-ownedSubsidiaries:BHOBO
                  ONE LTD.
              100%
                  Wholly-owned
              Owns
                  M/V RIP HUDNERBHOBO
                  TWO LTD.
              100%
                  Wholly-owned
              Owns
                  M/V BONNIE SMITHWICKBHOBO
                  THREE LTD.
              100%
                  Wholly-owned
              Owns
                  M/V SEAROSE GRMJ
                  SHIPPING LTD.
              100%
                  Wholly-owned
              Owns
                  M/V ROGER M JONESAGAMORE
                  SHIPPING CORP.
              100%
                  Wholly-owned
              Owns
                  M/T SAGAMORE***SEASAK
                  OBO HOLDINGS LTD.***
              100%
                  Wholly-ownedSubsidiaries:SAKONNET
                  SHIPPING LTD.
              100%
                  Wholly-owned
              Disponent
                  Owner of M/V SIBOHELLE(1)SEAPOWET
                  TRADING LTD.
              100%
                  Wholly-owned
              Disponent
                  Owner of 50% of M/V SIBOTESSE
(2)
 
 (1)
        Disponent owner of M/V Sibohelle through a bareboat charter party.
 (2)
        Disponent owner of M/V Sibotesse as 50% owner of Nordan OBO II Ltd. which
        is
        disponent owner through a bareboat charter party.








**D.
      Property, Plant and Equipment**





Fleet





Each
      of
      the Company’s vessels is owned by a separate wholly-owned subsidiary, except as
      noted in the table above.





Other





Pursuant
      to the terms of the Management Agreement and as part of the services provided
      to
      the Company thereunder, BHM furnishes the Company with office space and
      administrative services at its offices in Hamilton, Bermuda.








**Item
      5. OPERATING AND FINANCIAL REVIEW AND
      PROSPECTS**





**A.**
            **Operating
                results**





The
      following is a discussion of our financial condition and results of operations
      for the years ended December
      31, 2005, 2004 and 2003. You should read this section together with the
      consolidated financial statements including the notes to those financial
      statements for the periods mentioned above.





We
      are a
      provider of international liquid and dry bulk seaborne transportation services,
      carrying petroleum products, crude oil, vegetable oils and dry bulk cargoes.
      The
      Company’s fleet consists of six MR product tankers, one Panamax product tanker
      and five combination carriers. The MR product tankers are all medium range
      or
“handy-size” vessels which are between 30,000 and 50,000 summer deadweight tons
      (“DWT”), and are able, by reason of their small size, to transport commodities
      to and from most ports in the world, including those located in less developed
      third-world countries. The Panamax product tanker is 68,500 DWT. Product
      tankers are single-deck oceangoing vessels designed to carry simultaneously
      a
      number of segregated liquid bulk commodities, such as petroleum products and
      vegetable oils. The combination carriers, known as an OBOs (oil-bulk-ore
      carrier), are between 74,000 and 98,000 DWT (Aframax). Combination carriers
      can
      operate as tankers or as bulk carriers. They can be used to transport liquid
      cargo including crude, fuel oils and clean petroleum products (CPP), and they
      can also be used to transport dry bulk commodities, such as iron ore, coal,
      and
      grain.





The
      Company’s fleet operates under a mix of time and voyage charters. Our product
      tankers carry primarily petroleum products and vegetable oils and our OBOs
      carry
      crude oil, petroleum products, iron ore and coal. Historically, we deploy our
      fleet on both time charters, which can last from a few months to several years,
      and spot market charters, which generally last from several days to several
      weeks. Under spot market voyage 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 specified daily rate. Under time charters,
      the
      charterer pays voyage expenses such as port, canal and fuel costs. Under both
      types of charters, we pay for vessel operating expenses, which include crew
      costs, provisions, deck and engine stores, lubricating oil, insurance,
      maintenance and repairs. We are also responsible for the vessel's intermediate
      and special survey costs.





Vessels
      operating on time charters provide more predictable cash flows, but can, in
      a
      strong market, yield lower profit margins than vessels operating in the spot
      market. Vessels operating in the spot market generate revenues that are less
      predictable but may enable us to capture increased profit margins during periods
      of improvements in tanker rates although we are exposed to the risk of declining
      tanker rates, which may have a materially adverse impact on our financial
      performance. We are constantly evaluating the appropriate balance between the
      number of our vessels deployed on time charter and the number employed on the
      spot market.





For
      discussion and analysis purposes only, we evaluate performance using time
      charter equivalent, or TCE revenues. TCE revenues are voyage revenues minus
      direct voyage expenses. Direct voyage expenses primarily consist of port, canal
      and fuel costs that are unique to a particular voyage, which would otherwise
      be
      paid by a charterer under a time charter, as well as commissions. We believe
      that presenting voyage revenues on a TCE basis enables a proper comparison
      to be
      made between vessels deployed on time charter or those deployed on the spot
      market.





Our
      voyage revenues and voyage expenses are recognized ratably over the duration
      of
      the voyages and the lives of the charters, while vessel operating expenses
      are
      recognized on the accrual basis. We calculate daily TCE rates by dividing TCE
      revenues by voyage days for the relevant time period. We also generate demurrage
      revenue, which an owner charges a charterer for exceeding the agreed upon time
      to load or discharge a cargo. We calculate daily direct vessel operating
      expenses and daily general and administrative expenses for the relevant period
      by dividing the total expenses by the aggregate number of calendar days in
      the
      period.





We
      depreciate our vessels on a straight-line basis over their estimated useful
      lives determined to be 30 years from the date of their initial delivery from
      the
      shipyard. Depreciation is based on cost less the estimated residual value.
      We
      capitalize the total costs associated with special surveys, which take place
      every five years and amortize them on a straight-line basis over 60 months.
      Regulations and/or incidents may change the estimated dates of next drydockings.





***Year
      ended December 31, 2005 versus December 31, 2004***





**2005**
              
              
              **2004**Gross
                  revenue
              
              $
              71,903,000
              
              $
              51,363,000Voyage
                  expenses
              
              
              (6,033,000
              )
              
              (9,663,000
              )Net
                  revenue
              
              
              65,870,000
              
              
              41,700,000Gross
                  voyage revenue
              
              
              5,871,000
              
              
              22,044,000Less:
                  direct voyage expenses
              
              
              (1,621,000
              )
              
              (5,253,000
              )Time
                  charter equivalent (TCE) revenue
              
              
              4,250,000
              
              
              16,791,000Time
                  charter revenue
              
              
              65,518,000
              
              
              29,319,000Less:
                  brokerage commissions
              
              
              (1,202,000
              )
              
              (1,860,000
              )Time
                  charter revenue
              
              
              64,316,000
              
              
              27,459,000Less:
                  other voyage expenses
              
              
              (3,210,000
              )
              
              (2,550,000
              )Other
              
              
              514,000
              
              
              -Net
                  revenue
              
              $
              65,870,000
              
              $
              41,700,000Days
                  revenue on voyage
              
              
              201
              
              
              946Days
                  revenue on time charter
              
              
              3,614
              
              
              2,2443,815
              
              
              3,190TCE
                  rate
              
              
              21,144
              
              
              17,749Average
                  time charter rate
              
              
              18,129
              
              
              13,066Company
                  average TCE
              
              
              19,637
              
              
              15,407
  *Revenues*


Revenues from voyage and time charters increased $20.0 million or 39% from
        2004.
        The increase is due to the Company’s ongoing vessel acquisition program, the
        composition of the fleet in terms of size and type of vessel and to higher
        time
        charter equivalent rates. A portion of the revenue earned in respect of certain
        long-term time charters with variable rates is included as deferred income
        on
        the Consolidated Balance Sheets at December 31, 2005. This treatment reflects
        US
        Generally Accepted Accounting Principles (“US GAAP”), but has no basis with
        respect to actual future liability under the terms of the Charter Party.
        The
        income deferred in respect of these time charters will be recognized as the
        time
        charter rates are reduced below the contract average in 2008, 2009 and 2010.





*Voyage
      expenses*





Voyage
      expenses consist of port, canal and fuel costs that are unique to a particular
      voyage and commercial overhead costs, including commercial management fees
      paid
      to BHM. Under a time charter, the Company does not incur port, canal or fuel
      costs. Voyage expenses decreased $3.6 million, or 38%, to $6.0 million for
      the
      year ended December 31, 2005 compared to $9.6 million for the comparable period
      of 2004. This is due to the significant decrease in voyage days from 946 in
      2004
      to 201 in 2005 as all of the Company’s MR product tankers and OBOs have been
      employed on long term time charters since March 2005. The newly acquired Panamax
      product tanker was employed on a voyage from the date of delivery to December
      31, 2005 when it commenced on a three year time charter.





*Vessel
      operating expenses*





The
      increase in vessel operating expenses is due to the increase in the number
      of
      vessels, as noted above. Vessel operating expenses increased $6.6 million (34%)
      which is comprised of $7.9 million for five vessels acquired in 2005 and $1.4
      million for a vessel owned less than nine months in 2004. This is offset by
      a
      $2.6 million decrease relating to the sale of one vessel in each of the second
      and fourth quarters of 2004 and one vessel sold in the third quarter of 2005.





*Depreciation
      and amortization*





Depreciation
      and amortization, which includes depreciation of vessels as well as amortization
      of special surveys and debt issuance costs, increased by $4.2 million, or 54%,
      to $11.9 million for the year ended December 31, 2005 compared to $7.8 million
      for the prior period. This increase is predominantly due to changes in the
      fleet, as noted above.


**2005**
              
              **2004**Depreciation
                  of vessels
              
              $
                  10,199,000
              
              $
                  5,526,000Amortization
                  of special survey costs
              
              
              1,475,000
              
              
              1,890,000Amortization
                  of debt issuance costs
              
              
              243,000
              
              
              348,000Total
                  depreciation and amortization
              
              $
              11,917,000
              
              $
              7,764,000





*General
      and administrative expenses*





General
      and administrative expenses include all of our onshore expenses, consulting
      fees, professional fees and the fees that BHM charges for administration of
      our
      vessels and shipowning companies. Management fees increased by $0.35 million,
      or
      64%, to $0.89 million for the year ended December 31, 2005 compared to $0.55
      million for the prior period. The increase is due to the increase in the number
      of vessels and therefore the number of months during which fees were incurred.





*Gain
      on Sale of Vessels*





The
      Company had a gain on the sale of the vessel M/T COMMUTER of $0.8 million for
      the year ended December 31, 2005 compared to losses of $4.7 million on the
      M/T
      SKOWHEGAN and M/T ACOAXET during 2004. The current market conditions were
      responsible for the dramatic shift in the value of MR product tankers in the
      course of the year.





*Interest
      Expense and Interest Income*





The
      $4.2
      million (312%) increase in interest expense is due to the increase of $102
      million in debt for the acquisition of three vessels in March 2005 and the
      additional drawdown of $43.0 million in the fourth quarter to finance the
      acquisition of two vessels. The increase in interest income of $1.2 million
      is
      due to the fact that the Company issued 3,243,243 shares of its common stock
      for
      net cash proceeds of $57 million in May 2005.





***Year
      Ended December 31, 2004 versus December 31, 2003***





**2004**
              
              **2003**Gross
                  revenue
              
              $
              51,363,000
              
              $
              55,157,000Voyage
                  expenses
              
              
              (9,663,000
              )
              
              (19,373,000
              )Net
                  revenue
              
              
              41,700,000
              
              
              35,784,000Gross
                  voyage revenue
              
              
              22,044,000
              
              
              37,399,000Less:
                  direct voyage expenses
              
              
              (5,253,000
              )
              
              (15,997,000
              )Time
                  charter equivalent (TCE) revenue
              
              
              16,791,000
              
              
              21,402,000Time
                  charter revenue
              
              
              29,319,000
              
              
              19,025,000Less:
                  brokerage commissions
              
              
              (1,860,000
              )
              
              (1,067,000
              )Time
                  charter revenue
              
              
              27,459,000
              
              
              17,958,000Less:
                  other voyage expenses
              
              
              (2,550,000
              )
              
              (3,376,000
              )Bareboat
                  charter revenue
              
              
              -
              
              
              105,000Other
              
              
              -
              
              
              (1,372,000
              )Net
                  revenue
              
              $
              41,700,000
              
              $
              35,784,000Days
                  revenue on voyage
              
              
              946
              
              
              1,969Days
                  revenue on time charter
              
              
              2,244
              
              
              1,846Days
                  revenue on bareboat charter
              
              
              -
              
              
              253,190
              
              
              3,840TCE
                  rate
              
              
              17,749
              
              
              10,869Average
                  time charter rate
              
              
              13,066
              
              
              10,306Company
                  average TCE
              
              
              15,407
              
              
              10,588





*Revenues*




Revenues
      from voyage and time charters decreased $3.8 million or 6.8% from 2003. The
      decrease is due to the fact that there was a 17% decrease in total revenue
      days
      in 2004. This decrease was offset by a $4,914 per day (45%) increase in the
      average voyage Time Charter Equivalent (“TCE”) rate from $10,869 per day in 2003
      to $15,783 per day in 2004 and an increase in time charter rates of $2,759
      per
      day (27%) from $10,306 per day in 2003 to $13,066 per day in 2004.





The
      difference in revenue days of 650 is made up of 687 days lost from four vessels
      sold during 2003 and to the loss of 225 days due to the sale of two additional
      ships during 2004. This was offset by the acquisition of the OBO SACHUEST in
      April for an addition of 213 days, 41 fewer offhire days in 2004 than in 2003
      and an additional 8 days attributable to leap year.





Voyage
      TCE revenue decreased $6.5 million or 30% from 2003. Revenue from time charters
      increased by $10.3 million or 54%. Bareboat revenue decreased by the 2003 total
      of $0.1 million. In 2003, revenue was reduced by bareboat charter losses on
      the
      Alliance Trader and other miscellaneous charges of $1.4 million.





*Voyage
      expenses*





Total
      voyage expenses consist of port, canal and fuel costs that are unique to a
      particular voyage and commercial overhead costs, including commercial management
      fees paid to BHM. Voyage expenses decreased $9.7 million, or 50%, to $9.7
      million for the year ended December 31, 2004 compared to $19.4 million for
      the
      prior period, due to the decrease in voyage days, as noted above and the
      decrease in the number of vessels in the fleet. Voyage
      expenses decreased at a greater percentage rate than voyage revenue due to
      favorable market conditions which increase profit margins. For example, bunker
      costs as a percentage of gross voyage revenues deceased 10% from 28% to 18%
      and
      port costs as a percentage of gross voyage revenue decreased 4%.





*Vessel
      operating expenses*





The
      decrease in vessel operating expenses is predominantly due to the decrease
      in
      the number of vessels, as noted above. Vessel operating expenses decreased
      $5.3
      million (16.4%) which is comprised of $3.1 million relating to a 15% net
      reduction in operating days, $2.0 million reduction in expenses for drydocking
      and by a decrease in the fleet average daily operating cost of approximately
      $73
      per day for a total of $0.2 million.





*Depreciation
      and amortization*





Depreciation
      and amortization, which includes depreciation of vessels as well as amortization
      of special surveys, decreased by $1.3 million, or 14.0%, to $7.8 million for
      the
      year ended December 31, 2004 compared to $9.0 million for the prior period.





Depreciation
      of vessels decreased by $1.1 million, or 17%, to $5.5 million for the year
      ended
      December 31, 2004 compared to $6.6 million for the prior period. This decrease
      is due to the decrease in the number of vessels in the fleet after four were
      sold in the second
      and third quarters of 2003, one was sold in May 2004 and another was sold in
      December 2004. This reduction was offset by depreciation of the OBO acquired
      in
      April 2004 .





Amortization
      of special survey costs decreased by $0.2 million, or 12%, to $1.9 million
      for
      the year ended December 31, 2004 compared to $2.1 million for the prior period.
      This decrease is due to the fact that the vessel sold in May 2004 had
      significant capitalized special survey expenses which were amortized for a
      full
      year in 2003 but for only 5 months in 2004. We anticipate that the amortization
      associated with drydockings will begin to increase in 2005 due to the fact
      that
      there are two special surveys scheduled for the first quarter of the
      year.





**2004**
              
              **2003**Depreciation
                  of vessels
              
              $
              5,526,000
              
              $
              6,629,000Amortization
                  of special survey costs
              
              
              1,890,000
              
              
              2,139,000Amortization
                  of debt issuance costs
              
              
              348,000
              
              
              257,000Total
                  depreciation and amortization
              
              $
              7,764,000
              
              $
              9,025,000





*General
      and administrative expenses*





General
      and administrative expenses include all of our onshore expenses, consulting
      fees, professional fees and the fees that BHM charges for administration of
      our
      vessels and shipowning companies. Management fees decreased by $0.3 million,
      or
      38.5%, to $0.5 million for the year ended December 31, 2004 compared to $0.8
      million for the prior period. The decrease is due to the decrease in the number
      of vessels from 2003 and therefore the number of months during which fees was
      incurred. The increase of $0.2 million in Other general and administrative
      expense is due
      to an
      increase in charitable contributions of $0.1 million and to additional IT
      expenses and expenses to inspect vessels for possible acquisition totaling
      $0.1
      million .
      General
      and administrative expenses are typically incurred prior to the acquisition
      of a
      vessel and remain for a period of time after the disposition of a vessel;
      therefore, during periods of changes in the average number of vessels in our
      fleet these daily expenses increase relative to the number of days that vessels
      are owned.





*Loss
      on sale of vessels*





We
      incurred a loss on sale of vessels of $4.7 million for the year ended December
      31, 2004 compared to a loss of $16.2 million for the prior period. The loss
      in
      2004 was due to the sale of two vessels, one of which was
      acquired at a relatively high price during 1997 when the market for such ships
      was at a peak. The
      decision to sell the first vessel was made in light of a review of commercial
      considerations, the expected cost to overhaul the ship and the high maintenance
      Pielstick engine, which had been problem prone. The second vessel sold was
      acquired at a much lower cost in 1999, but was fit with uncoated tanks and
      Alubrass coils which resulted in trading restrictions.





**B.**
            **Liquidity
                and capital resources**





The
      Company requires cash to service its debt, fund the equity portion of
      investments in vessels, fund working capital and maintain cash reserves against
      fluctuations in operating cash flow. Net cash flow generated by continuing
      operations has historically been the main source of liquidity for the Company.
      Additional sources of liquidity have also included proceeds from asset sales
      and
      refinancings.





The
      Company’s ability to generate cash flow from operations will depend upon the
      Company’s future performance, which will be subject to general economic
      conditions and to financial, business and other factors affecting the operations
      of the Company, many of which are beyond its control.





The
      Company’s fleet consists of product tankers and OBOs thus, the Company is
      dependent upon the petroleum product industry, the vegetable oil, chemical
      industries and bulk products market as its primary sources of revenue. These
      industries have historically been subject to substantial fluctuation as a result
      of, among other things, economic conditions in general and demand for petroleum
      products, vegetable oil, ore, bulk, and chemicals in particular. Any material
      seasonal fluctuation in the industry or any material diminution in the level
      of
      activity therein could have a material adverse effect on the Company’s business
      and operating results. The profitability of product tankers and their asset
      value results from changes in the supply of and demand for such capacity. The
      supply of such capacity is a function of the number of new vessels being
      constructed and the number of older vessels that are laid-up or scrapped. The
      demand for product tanker capacity is influenced by global and regional economic
      conditions, increases and decreases in industrial production and demand for
      petroleum products, vegetable oils and chemicals, developments in international
      trade and changes in seaborne and other transportation patterns. The nature,
      timing and degree of change in these industry conditions are unpredictable
      as a
      result of the many factors affecting the supply of and demand for capacity.
      Although there can be no assurance that the Company’s business will continue to
      generate cash flow at or above current levels, the Company believes that the
      current market rates are sustainable which increases the likelihood that it
      will
      generate cash flow at levels sufficient to service its liquidity requirements
      in
      the future.





Cash
      at
      December 31, 2005, amounted to $60.8 million, an increase of $48.8 million
      as
      compared to December 31, 2004. The increase in the cash balance is
      attributable to net inflows from operations of $34.4 million and inflows from
      financing activities of $174.7 million. These inflows were offset by outflows
      for investing activities of $160.3 million.





The
      inflow for financing activities is primarily attributable to mortgage proceeds
      of $145.0 million to finance the acquisition of three combination carriers
      in
      the first quarter, a Panamax product tanker and a combination carrier in the
      fourth quarter, to the issuance of common stock for net proceeds of $56.7
      million and the issuance of treasury stock for $0.2 million. This was offset
      by
      the payment of mortgage principal of $24.6 million, payments for debt issuance
      costs of $1.3 million and the purchase of treasury stock of $1.3
      million.





The
      outflow for investing activities is attributable to the purchase of four
      combination carriers and a Panamax product tanker for $167.7 million and a
      net
      investment in marketable securities of $0.4 million. This was offset by proceeds
      from the sale of one vessel of $7.9 million.


The
        Compa ny
        had
        working capital totaling $21.4 million at December 31, 2005 as compared to
        a
        deficit of $0.7 million at December 31, 2004. This increase in working capital
        is due to the issuance of 3,243,243 shares of common stock in a private
        placement, which raised $57.0 million after issuance costs. It is important
        to
        note that it is customary for shipping companies and their lenders to exclude
        the current portion of long-term debt in any working capital analysis. Excluding
        the current portion of long-term debt, the Company had working capital of
        $54.0
        million at December 31, 2005 as compared to $10.1 million at December 31,
        2004.




Trade
      accounts receivable decreased $3.2 million due predominantly to the fact that
      there were three voyages in progress at December 31, 2004 two of which were
      substantially complete and all at relatively high rates as compared to December
      31, 2005, when only one voyage was in progress. In addition, the only voyage
      in
      progress at December 31, 2005 was the first voyage since the completion of
      one
      on March 21, 2005. At
      December 31, 2005, the Company’s largest accounts receivable balance represented
      81% of total accounts receivable. At December 31, 2004, the Company’s three
      largest accounts receivable balances represented 82% of total accounts
      receivable. The allowance for doubtful accounts was $229,000 at December 31,
      2005 and $137,000 at December 31, 2004.




In
      2005,
      revenues of $23.9 million from TTMI Sarl represented 32.0% of total revenues,
      revenues of $13.5 million from FR8 Singapore Pte. Ltd. represented 18.1% of
      total revenues and revenues of $9.8 million from Swissmarine Services SA
      represented 13.1% of total revenues. During 2004, revenues of $8.2 million
      from
      Lexington Shipping Corp., $7.2 million from Bunge Global Markets and $5.8
      million from Swissmarine Services represented 15.9%, 13.9% and 11.2%,
      respectively of total revenues. Revenues in 2003 included charter hire revenues
      of $10.4 million from Bunge Global Markets, $6.8 million from Shell
      International and $6.6 million from Lexington Shipping representing 18.9%,
      12.3%
      and 11.9% of total revenues, respectively.





Vessels
      and capital improvements, net of accumulated depreciation, amounted to
      approximately $214.2 million at December 31, 2005, an increase of $151.2 million
      as compared with December 31, 2004. The increase is primarily attributable
      to
      the purchase of five OBOs and one Panamax product tanker for a total of $167.8
      million and to the investment in capital improvements of $2.1 million. This
      was
      offset by the sale of one vessel with an aggregate net book value of $7.1
      million and to depreciation and amortization of special survey costs totaling
      $11.6 million.





Accounts
      payable decreased $1.3 million and accrued liabilities decreased $0.5 million
      from December 31, 2004 to December 31, 2005. The decrease in accounts payable
      is
      due to the improved cash position of the Company. The decrease in accrued
      liabilities is due to the timing of major overhaul work completed in the third
      and fourth quarters of 2004. No work of this nature was performed and therefore
      accrued for at the end of 2005.




Accrued
      interest represents interest payable on the Company’s outstanding debt, the
      increase in which is due to the additional borrowing of $145.0 million during
      2005. The outstanding mortgage payable at December 31, 2005 was $149.7 million
      as compared to $29.3 million at December 31, 2004.


Deferred
        income increased $4.1 million from 2004 due to the increase in the number
        of
        time charter contracts, for which revenue is paid in advance. In addition,
        the
        Company has deferred a portion of the revenue from long-term variable rate
        time
        charters, recognizing the average time charter rate over the term of the
        time
        charter in income for the period instead of the actual rate received for
        the
        period. The amount deferred on these long-term contracts was approximately
        $2.7
        million in 2005 Amounts to be deferred in 2006 and 2007 are $1.5 million
        and
        $0.2 million, respectively. In 2008, $0.9 million of the total deferred will
        be
        recognized as revenue, followed by $2.9 million in 2009 and $0.6 million
        in
        2010. This
        treatment reflects US Generally Accepted Accounting Principles (“US GAAP”), but
        has no basis with respect to actual future liability under the terms of the
        Charter Party.





On
      February 23, 2005, the Company, through a wholly owned subsidiary, entered
      into
      a $102,000,000 floating rate loan facility (the “facility”). The agreement was
      entered into for the purpose of acquiring three OBOs.





On
      October 18, 2005 the Company entered into a $138,100,000 Reducing Revolving
      and
      Term Loan Facilities Agreement which
      was
      used to refinance the outstanding balance of the loan entered into on February
      23, 2005 and to provide an additional $43.0 million for the purpose of acquiring
      the M/V ROGER M JONES and the M/T SAGAMORE.





The
      facility is apportioned into two tranches, a Senior and a Junior portion.




The
      Senior tranche is payable in twenty-one quarterly installments as
      follows:


a.
                Installment
                1
            $
            2,900,000b.
                Installment 2 through 5
            
            4,463,000c.
                Installment 6 through 13
            
            
            4,775,000d.
                Installment 14 through 20
            
            
            4,275,000e.
                Ballon due on September 15, 2010
            
            
            21,100,000f.
                Balloon due on December 15, 2010
            
            
            10,748,000The
                junior tranche is payable in sixteen quarterly installments beginning
                on
                June 14, 2005 as follows:a.
                Installment 1 through 4
            $
            
            2,000,000b.
                Installment 5 through 8
            
            
            1,250,000c.
                Installment 9 through 12
            
            
            1,000,000d.
                Installment 13 through 16
            
            
            750,000





Interest
      on the Senior tranche of the facility is equal to LIBOR plus 1.0%. The Junior
      tranche carries interest of LIBOR plus 2.25%. Expenses associated with the
      loan
      have been capitalized and are being amortized over the 5 year term of the
      loan.





The
      facility contains certain restrictive covenants on the Company, which among
      other things, restricts additional leverage without consent of the lender.
      In
      addition, the agreement requires mandatory prepayment in the event of the total
      loss or sale of a vessel. The loan to vessel value clause described below has
      been suspended for three years, however, the Company is required to ensure
      that
      consolidated EBITDA is always at least 1.25 times consolidated fixed charges.
      The Company is also required to maintain liquid assets, as defined, in an amount
      equal to the greater of $5.0 million and 6% of the aggregate indebtedness of
      the
      Company on a consolidated basis. At the end of three years, and in the event
      that the fair market value of the vessels acquired in 2005 falls below 120%
      of
      the Senior tranche and 100% of the total outstanding at any time, the agreement
      requires mandatory prepayment At December 31, 2005, the Company was in
      compliance with these covenants.





On
      April
      29, 2004, the Company entered into an amended and restated $36,000,000 floating
      rate loan facility. The amendment made available an additional $19.0 million
      for
      the purpose of acquiring the OBO SACHUEST.





The
      facility is apportioned into two tranches with Tranche 1 attributable to the
      Existing Vessel fleet and Tranche 2 attributable to the new acquisition. Tranche
      1 is payable in twelve quarterly installments of $1.2 million commencing on
      July
      29, 2004, the twelfth installment being a balloon payment in an amount necessary
      to repay the tranche in full. Interest on the facility is equal to LIBOR plus
      2.5%. Tranche 2 is payable in twenty quarterly installments. The first eight
      installments of $1.5 million are followed by eleven installments of $0.6 million
      and a final installment of $0.4 million is due on the maturity date.





Expenses
      associated with the floating rate loan facility include arrangement fees of
      $360,000, which are capitalized and are being expensed over the five-year period
      of the loan.





The floating
      rate loan facility contains
      certain restrictive covenants on the Company, which among other things, require
      minimum collateral coverage and restrict leverage without consent of the lender.
      In addition, the agreement requires mandatory prepayment in the event of the
      total loss or sale of a vessel and in the event that the fair market value
      of
      the vessels acquired falls below 140% of the Tranche 1 balance outstanding
      or
      the fair market value of the Sachuest falls below 110% of the Tranche 2 balance
      outstanding. The Company is also required to maintain liquid assets, as defined,
      in an amount equal to the greater of (a) $2.0 million and (b) six percent (6%)
      of the aggregate amount of indebtedness of the Company on a consolidated basis.
      At December 31, 2005 and 2004, the Company was in compliance with these
      covenants.





Management
      expects that the total expense for drydock and related repair work performed
      during 2006 will be approximately $1.6 million for two vessels. The expenses
      for
      drydock and related repair work totaled $0.9 million for one vessel in 2005
      and
      $1.6 million in 2004 for two vessels. The capitalized costs for scheduled
      classification survey and related vessel upgrades were $2.1 million in 2005
      for
      two vessels.





Management
      does not believe that inflation has had any material impact on the Company's
      operations although certain of the Company's operating expenses (e.g., crewing,
      insurance and docking costs) are subject to fluctuation as a result of market
      forces. Inflationary pressures on bunker (fuel) costs are not expected to have
      a
      material effect on the Company's future operations since such costs are paid
      by
      the subcharterers in the case of time charters and all the vessels in the fleet
      are time charter through the end of 2005. In the case of voyage charters,
      charter rates are generally sensitive to the price of bunkers. However, a
      short-term fluctuation in bunker costs can impact the profitability of a voyage
      charter, which commenced prior to such fluctuation. Also, the Company is
      responsible for the bunker costs of its vessels while they are off
      hire.





Critical
      accounting policies





**Basis
      of accounting:**





The
      discussion and analysis of our financial condition and results of operations
      is
      based upon our consolidated financial statements, which have been prepared
      in
      accordance with generally accepted accounting principles in the United States
      of
      America or US GAAP. The preparation of those financial statements requires
      us to
      make estimates and judgments that affect the reported amount of assets and
      liabilities, revenues and expenses and related disclosure of contingent assets
      and liabilities at the date of our financial statements. Actual results may
      differ from these estimates under different assumptions or
      conditions.





Critical
      accounting policies are those that reflect significant judgments or
      uncertainties, and potentially result in materially different results under
      different assumptions and conditions. We have described below what we believe
      are our most critical accounting policies that involve a high degree of judgment
      and the methods of their application. For a description of all of our
      significant accounting policies, see Note 2 to the consolidated financial
      statements.





**Principles
      of consolidation:**





The
      accompanying Consolidated Financial Statements include the accounts of the
      Company and its wholly-owned
      subsidiaries. All intercompany transactions and accounts have been eliminated
      in
      consolidation.





**Revenue
      recognition, trade accounts receivable and concentration of credit
      risk:**




Revenues
      from voyage and time charters are recognized in proportion to the charter-time
      elapsed during the reporting periods. Charter revenue received in advance is
      recorded as a liability until charter services are rendered.





Under
      a
      voyage charter, the Company agrees to provide a vessel for the transport of
      cargo between specific ports in return for the payment of an agreed freight
      per
      ton of cargo or an agreed lump sum amount. Voyage costs, such as canal and
      port
      charges and bunker (fuel) expenses, are the Company’s responsibility. Voyage
      revenues and voyage expenses include estimates for voyage charters in progress
      which are recognized on a percentage-of-completion basis by prorating the
      estimated final voyage profit using the ratio of voyage days completed through
      year end to the total voyage days.





Under
      a
      time charter, the Company places a vessel at the disposal of a charterer for
      a
      given period of time in return for the payment of a specified rate per DWT
      capacity per month or a specified rate of hire per day. Voyage costs are the
      responsibility of the charterer.  Revenue
      from time charters in progress is calculated using the daily charter hire rate,
      net of brokerage commissions, multiplied by the number of on-hire days through
      the year-end. Revenue
        recognized under long-term variable rate time charters is equal to the average
        daily rate for the term of the contract.





Trade
      accounts receivable are recorded at the invoiced amount and do not bear
      interest. The allowance for doubtful accounts is the Company’s best estimate of
      the total losses likely in its existing accounts receivable. The allowance
      is
      based on historical write-off experience and patterns that have developed with
      respect to the type of receivable and an analysis of the collectibility of
      current amounts. Past due balances that are not specifically reserved for are
      reviewed individually for collectibility. Specific accounts receivable invoices
      are charged off against the allowance when the Company determines that
      collection is unlikely. Credit risk with respect to trade accounts receivable
      is
      limited due to the long standing relationships with significant customers and
      their relative financial stability. The Company performs ongoing credit
      evaluations of its customers’ financial condition and maintains allowances for
      potential credit losses when necessary. The Company does not have any
      off-balance sheet credit exposure related to its customers.





**Vessels,
      capital improvements and depreciation:**





Vessels
      are stated at cost, which includes contract price, acquisition costs and
      significant capital expenditures made within nine months of the date of
      purchase .
      Depreciation is provided using the straight-line method over the remaining
      estimated useful lives of the vessels, based on cost less salvage value. The
      estimated useful lives used are 30 years from the date of construction. When
      vessels are sold, the cost and related accumulated depreciation are reversed
      from the accounts, and any resulting gain or loss is reflected in the
      accompanying Consolidated Statements of Operations.





Capital
      improvements to vessels made during special surveys are capitalized when
      incurred and amortized over the 5-year period until the next special survey.
      Capital improvements made
      during special surveys totaled $2.1 million for the year ended December 31,
      2005. There were no special surveys in 2004 or 2003.





**Impairment
      of long-lived assets:**





The
      Company is required to review its
      long-lived assets for
      impairment whenever events or circumstances indicate that the carrying amount
      of
      an asset may not be recoverable. Upon the occurrence of an indicator of
      impairment, Long-lived assets are measured for impairment when the estimate
      of
      undiscounted future cash flows expected to be generated by the asset is less
      than its carrying amount. Measurement of the impairment loss is based on the
      asset grouping and is calculated based upon comparison of the fair value to
      the
      carrying value of the asset grouping.





**Recent
      accounting pronouncements:**





In
      December 2004, the FASB issued Statement of Financial Accounting Standards
      No.
      123R *Accounting
      for Stock-Based Compensation* (“SFAS
      No. 123R”), **** that
      will
      require compensation costs related to share-based payment transactions to be
      recognized in the financial statements. With limited exceptions, the amount
      of
      compensation cost will be measured based on the grant-date fair value of the
      equity or liability instruments issued. In addition, liability awards will
      be
      remeasured each reporting period. Compensation cost will be recognized over
      the
      period that an employee provides service in exchange for the award. SFAS No.
      123R replaces SFAS No. 123, *Accounting
      for Stock-Based Compensation* (“SFAS
      No. 123”), **** and
      supersedes APB 25. This statement is effective for the Company on January 1,
      2006. Entities that used the fair-value-based method for either recognizing
      or
      disclosure under SFAS No. 123 will apply this revised Statement using a modified
      version of prospective application. Under this transition method, for the
      portion of outstanding awards for which the requisite service has not yet been
      rendered, compensation cost is recognized on or after the required effective
      date based on the grant-date fair value of those awards calculated under SFAS
      No. 123 for either recognition or pro forma disclosures. For periods before
      the
      required effective date, those entities may elect to apply a modified version
      of
      the retrospective application under which financial statements for periods
      are
      adjusted on a basis consistent with the pro forma disclosures required for
      those
      periods under SFAS No. 123. The Company is currently evaluating the impact
      of
      adopting SFAS No. 123R, but it does not anticipate it having a material effect
      on the Company’s Consolidated Financial Statements.





On
      January 17, 2003, the FASB issued FASB Interpretation No. 46R, ("FIN 46R"), *Consolidation
      of Variable Interest Entities* .
      FIN 46R
      clarifies the application of Accounting Research Bulletin No. 51, Consolidated
      Financial Statements, to certain entities in which equity investors lack the
      characteristics of a controlling financial interest or do not have sufficient
      equity at risk for the entity to finance its activities without additional
      financial support from other parties. A variable interest entity is required
      to
      be consolidated by the company that has a majority of the expected losses or
      profits of the variable interest entity. The consolidation provisions of FIN
      46R, as revised, were effective immediately for interests created after January
      31, 2003 and were effective on March 31, 2004 for interests created before
      February 1, 2003. FIN 46R did not have a significant impact on the Company’s
      Consolidated Financial Statements.





**C.
      Research and development, patents and licenses, etc.**





Not
      applicable





**D.
      Trend information**





The
      Company’s fleet of product tankers consists of six single hull Medium Range (MR)
      tankers of about 40,000 DWT, and one double sided Long Range (LR) Panamax tanker
      of 68,000 DWT. Six of these vessels are currently on time charters with original
      length of one year or more and one is operated in the spot market.





The
      Company’s fleet of OBOs consists of seven vessels within the range of 74,000 to
      98,000 DWT. Six of these OBOs are currently on time charters with original
      length of two years or more and one is operated in the spot market. The
      Company expects to operate these vessels in both the voyage (spot) markets
      and
      on long-term time charters as the existing time charters expire.





The
      Company entered into a contract in 2006 to convert its single hull product
      tankers to fully compliant double hull vessels in 2006-2007 to extend their
      useful trading life beyond IMO and OPA regulatory phase out dates for single
      hull tankers.





**E.
      Off-balance sheet arrangements**





During
      2005, the Company entered into interest rate swap agreements to convert variable
      rate debt to fixed rate debt to mitigate its risk to variability in the cash
      flows attributable to certain future interest payments. These instruments did
      not qualify for hedge accounting in accordance with FAS 133. At
      December 31, 2005, the fair value of such interest rate swaps was not
      material.





**F.
      Tabular disclosure of contractual obligations**





At
      December 31, 2005, the Company’s contractual obligations consist of the OBO
      Holdings, Ltd. and the Cliaship Holdings Corp. floating rate facilities. The
      mortgage rate is stated as a margin (which varies from 1% to 2.25%) over LIBOR.
      The aggregate maturities, including an estimate of the interest payable are
      as
      follows:





**Principal**
              
              **Interest****1**
              
              **Total**2006
              
              $
              32,602,000
              
              $
              7,596,000
              
              $
              40,198,0002007
              
              
              29,415,000
              
              
              5,819,000
              
              
              35,234,0002008
              
              
              23,500,000
              
              
              4,310,000
              
              
              27,810,0002009
              
              
              18,100,000
              
              
              3,133,000
              
              
              21,233,0002010
              
              
              46,048,000
              
              
              1,887,000
              
              
              47,935,000$
              149,665,000
              
              $
              22,745,000
              
              $
              172,410,000





1 Interest
      is calculated using the 3 month LIBOR rate in effect at December 31, 2005 and
      the balance outstanding for the period. The Company does not expect changes
      in
      the rate to have a material impact on the Company’s financial statements due to
      the mitigation of such risk resulting from interest rate swaps.




**G.** **Forward
      Looking Statements**





This
      Annual Report contains certain statements, other than statements of historical
      fact, that constitute forward-looking statements within the meaning of Section
      27A of the Securities Act of 1933, as amended, and Section 21E of the Securities
      Exchange Act of 1934, as amended. When used herein, the words “anticipates,”
“believes,” “seeks,” “intends,” “plans,” or “projects” and similar expressions
      are intended to identify forward-looking statements. The forward-looking
      statements express the current beliefs and expectations of management and
      involve a number of known and unknown risks and uncertainties that could cause
      the Company’s future results, performance or achievements to differ
      significantly from the results, performance or achievements expressed or implied
      by such forward-looking statements. Important factors that could cause or
      contribute to such difference include, but are not limited to, those set forth
      in this Annual Report and the Company’s filings with the Securities and Exchange
      Commission. Further, although the Company believes that its assumptions
      underlying the forward-looking statements are reasonable, any of the assumptions
      could prove inaccurate and, therefore, there can be no assurance that the
      forward-looking statements included in this Annual Report will prove to be
      accurate.





**Item
      6. DIRECTORS, SENIOR MANAGEMENT AND
      EMPLOYEES**





**A.
      Directors and senior management**





The
      directors and executive officers of the Company as of March 31, 2006 are as
      follows:


Name
              Age
              Position
                  with the CompanyMichael
                  S. Hudner
              59
              Chairman
                  of the Board, President and Chief Executive Officer and Class A
                  DirectorTrevor
                  J. Williams
              63
              Vice
                  President and Class A DirectorR.
                  Anthony Dalzell
              61
              Treasurer
                  and Chief Financial Officer and Class B DirectorCharles
                  L. Brock
              63
              Class
                  B DirectorJohn
                  M. LeFrere
              60
              Class
                  A DirectorAnthony
                  J. Hardy
              66
              Class
                  A DirectorPer
                  Ditlev-Simonsen
              73
              Class
                  B DirectorO.
                  Michael Lewis
              56
              Director








All
      directors and executive officers of the Company were first elected in June
      1988
      except Mr. LeFrere, who was elected a director in December 1995, Mr. Dalzell,
      who was appointed to his position as Treasurer and Chief Financial Officer
      in
      March 1997 and elected as Class B Director in June 1997, Messrs. Hardy and
      Ditlev-Simonsen, who were elected directors in February 1998 and Mr. Lewis,
      who
      was appointed in November 2005 for election at the 2006 Annual Meeting of
      Shareholders.





Pursuant
      to the Company-'s Articles of Incorporation, the Board of Direc-tors is divided
      into two classes of at least three persons each. Each class is elected for
      a
      two-year term. The Class A directors will serve until the 2006 annual meeting
      and the Class B directors will serve until the 2007 annual meeting of
      shareholders. Officers are appointed by the Board of Directors and serve until
      their succes-sors are appointed and qualified. Former Class B director Roger
      M.
      Jones retired during 2000 and has not been replaced.





**Michael
      S. Hudner** Michael
      S. Hudner has been President and Chief Executive Officer and a director of
      the
      Company since 1988 and Chairman of the Board of the Company since October 1993.
      He is also President and a director of BHM, a director of Protrans and has
      a
      controlling ownership interest, and is President and a director of NMS. Since
      1978, Mr. Hudner, in his capacity as a partner in B+H Company ("BHC"), and
      its
      predecessor, was primarily responsible for the acquisition and financing of
      over
      100 bulk carriers, product tankers and crude oil tankers for BHC and its
      affiliates and joint ventures (including all the vessels owned by the Company).
      Mr. Hudner is a member of the New York Bar, and is a member of the Council
      of
      the American Bureau of Shipping. Mr. Hudner is a US citizen and resides in
      Rhode
      Island, United States.





**Trevor
      J. Williams** Mr.
      Williams has been principally engaged since 1985 as President and Director
      of
      Consolidated Services Limited, a Bermuda-based firm providing management
      services to the shipping industry. He is a director of PROTRANS and has been
      for
      more than five years a director and Vice President of the Company and BHM.
      Mr.
      Williams is a British citizen and resides in Bermuda.





**R.
      Anthony Dalzell** Mr.
      Dalzell has been affiliated with BHM since October 1995. He was appointed
      Treasurer and Chief Financial Officer of the Company in March 1997. Mr. Dalzell
      was Managing Director of Ugland Brothers Ltd., a U.K. based shipowner and
      shipmanager from March 1982 until March 1988. From April 1988 until December
      1992, he was General Manager of NMS and Secretary and a Vice President of the
      Company. From June 1993 until October 1995, Mr. Dalzell was affiliated with
      B+H
      Bulk Carriers Ltd. Mr. Dalzell is a British citizen and resides in the United
      Kingdom.





**Charles
      L. Brock** Mr.
      Brock
      has been a member of the law firm of Brock Partners since April 1995 which
      firm
      acted as United States counsel for the Company from 1995 to 2000 and since
      June
      2002, a member of the investment banking firm of Brock Capital Group. Mr. Brock
      is a US citizen and resides in East Hampton, New York, United
      States.





**John
      M. LeFrere** Mr.
      LeFrere has been a private investor and consultant to several major corporations
      since March 1996. From February 1993 to March 1996, he was a Managing Director
      of Bankers Trust Company of New York in charge of equity research for the
      Capital Markets Division. Mr. LeFrere is President of J. V. Equities Corp.,
      an
      investment banking firm and a partner in several research and investment banking
      firms. Mr. LeFrere is a US citizen and resides in Florida, United States.





**Anthony
      J. Hardy** Mr.
      Hardy
      has been Chairman since 1986 of A.J. Hardy Limited of Hong Kong, a consulting
      firm to the shipping industry. Prior thereto, he was Chairman (1972-1986) and
      Managing Director (1965-1981) of the Wallem Group of Companies, a major
      international shipping group headquartered in Hong Kong. Mr. Hardy has devoted
      40 years to many aspects of the shipping industry, such as shipbroking, ship
      management, offshore oil rigs, and marine insurance. He was Chairman of the
      Hong
      Kong Shipowners Association (1970-1973). Mr. Hardy is a British citizen and
      resides in Hong Kong.





**Per
      Ditlev-Simonsen** Mr.
      Ditlev-Simonsen is Chairman of the Board of Eidsiva Rederi ASA, an Oslo Stock
      Exchange listed shipping company with its main interests in bulk, car and ro-ro
      carriers. Mr. Ditlev-Simonsen has more than 35 years experience in international
      shipping and offshore drilling. In the years 1991-1996, he was Chairman of
      the
      Board of Christiana Bank og Kreditkasse, Norway’s second largest commercial bank
      and one of the world’s largest shipping banks. Mr. Ditlev-Simonsen, the Mayor of
      Oslo since 1995, has served as a member of the Norwegian Parliament and the
      Oslo
      City Council, and as Chairman of the Conservative Party in Oslo. He was also
      Minister of Defense in the Norwegian Government from October 1989 to November
      1990. Mr. Ditlev-Simonsen is a Norwegian citizen and resides in Oslo,
      Norway.





**O.
      Michael Lewis** Mr.
      Lewis was the Senior Partner of London law firm Peachey & Co from 1997 to
      2005 having been a partner since 1979. Mr Lewis specialised in advising
      international shipping groups. Mr. Lewis is a trustee of the Boris Karloff
      Charitable Foundation.





No
      family
      relationships exist between any of the executive officers and directors of
      the
      Company.





**B.**
            **Compensation**





The
      Company does not pay salaries or provide other direct compensa-tion to its
      executive officers. Directors who are not officers of the Company are entitled
      to receive annual fees of $15,000, and the Chairman of the Audit Committee
      is
      entitled to receive an additional fee of $2,000 per month. Certain direc-tors
      and executive officers of the Company earn compensation indirectly through
      entities which provide services to the Compa-ny. (See Item 7).





**C.**  **Board
      practices**





The
      By-Laws of the Company provide for an Audit Committee of the Board of Directors
      consisting of two or more directors of the Company designated by a majority
      vote
      of the entire Board. The Audit Committee consists of directors who are not
      officers of the Company and who are not and have not been employed by the
      Manager or by any person or entity under the control of, controlled by, or
      under
      common control with, the Manager. The Audit Committee is currently comprised
      of
      Messrs. Brock (Chairman), Ditlev-Simonsen and Lewis and is currently charged
      under the By-Laws with reviewing the following matters and advising and
      consulting with the entire Board of Directors with respect thereto: (a) the
      preparation of the Company’s annual financial statements in collaboration with
      the Company’s independent registered public accounting firm; (b) the performance
      by the Manager of its obligations under the Management Services Agreement with
      the Company; and (c) all agreements between the Company and the Manager, any
      officer of the Company, or affiliates of the Manager or any such officer. The
      Audit Committee, like most independent Board committees of public companies,
      does not have the explicit authority to veto any actions of the entire Board
      of
      Directors relating to the foregoing or other matters; however, the Company’s
      senior management, recognizing their own fiduciary duty to the Company and
      its
      shareholders, is committed not to take any action contrary to the recommendation
      of the Audit Committee in any matter within the scope of its review. See also
      “Item 6.A. Directors and senior management.”





**D** . **Employees**





The
      Company employed, as of December 31, 2005, four non-salaried individuals on
      a
      part-time basis as officers of the Company and, through its vessel-owning
      subsidiaries, utilizes the services of ap-proximately 212 officers and crew.
      The
      Company's vessels are manned principally by crews from the Philippines,
      Pakistan, Croatia, Turkey and India.





**E.
      Share ownership**





See
“Item
      7.A. Major shareholders.”


**Item
      7. MAJOR SHAREHOLDERS AND RELATED PARTY
      TRANSACTIONS**





**A.**
            **Major
                shareholders**





The
      following table sets forth information as of April 25, 2006, concerning the
      beneficial ownership of the common stock of the Company by (i) the only
      persons known by the Company's management to own beneficially more than 5%
      of
      the outstanding shares of common stock, (ii) each of the Company's
      directors and executive officers, and (iii) all executive officers and
      directors of the Company as a group:








**Name
                of Beneficial Owner**
            Number
              of
                Shares
              Beneficially
                Owned
            Percent
                of
              Common
              Stock
                (a)Northampton
                Holdings Ltd.
            2,011,926
            28.38%Michael
                S. Hudner (b)
            3,502,183
            47.83%Fundamental
                Securities International Ltd.
            1,258,797
            17.77%Devonport
                Holdings Ltd. (c)
            1,258,797
            17.77%B+H
                Management Ltd. (d)
            231,460
            3.16%Charles
                L. Brock
            —
            *R.
                Anthony Dalzell (e)
            81,765
            1.15%John
                M. LeFrere
            —
            *Anthony
                J. Hardy
            —
            *Per
                Ditlev-Simonsen
            —
            *Trevor
                J. Williams (f)
            3,502,183
            47.83%UBS
                AG (g)
            1,052,000
            14.86%Gandara
                Advisors EU (h)
            1,018,000
            14.37%HBK
                Investments L.P. (i)
            402,400
            5.70%Nordic
                Alpha plc (j)
            416,870
            5.88%Orkla
                Finans Kapitalforvaltning ASA (k)
            416,870
            5.88%All
                executive officers and directors as a group (8 persons)
            3,583,948
            48.95%


** *  Less
      than
      1%




(a)
            As
                used herein, the term beneficial ownership with respect to a security
                is
                defined by Rule 13d-3 under the Exchange Act as consisting of sole
                or
                shared voting power (including the power to vote or direct the vote)
                and/or sole or shared investment power (including the power to dispose
                or
                direct the disposition) with respect to the security through any
                contract,
                arrangement, understanding, relationship, or otherwise, including
                a right
                to acquire such power(s) during the next 60 days. Unless otherwise
                noted,
                beneficial ownership consists of sole ownership, voting, and investment
                power with respect to all shares of common stock shown as beneficially
                owned by them.




(b)
            Comprised
                of shares shown in the table as held by Northampton Holdings Ltd.
                (“NHL”),
                Fundamental Securities International Ltd. (“Fundamental”) and B+H
                Management Ltd. (“BHM”). Mr. Hudner is a general partner in the
                partnership which is the ultimate parent of Fundamental and a general
                partner in the ultimate owner of the general partner of B+H/Equimar
                95
                Associates, L.P. (“95 Associates”), which is a 60.6% owner of NHL.
                Fundamental is a 30.3% shareholder of NHL. Mr. Hudner is a 45%
                shareholder, a director and President of BHM. Accordingly, Mr. Hudner
                may
                be deemed to share voting and dispositive power as an indirect beneficial
                owner of the shares held by NHL, Fundamental and
                BHM.




(c)
            Devonport
                Holdings Ltd. is a general partner of the partnership that is the
                ultimate
                parent of Fundamental and is also a general partner in the ultimate
                owner
                of the general partner of 95
                Associates.




(d)
            Comprised
                of shares to be issued by the Company upon exercise of options granted
                to
                BHM.




(e)
            Includes
                61,540 shares held by an affiliated corporation of Mr. 
                Dalzell.




(f)
            Comprised
                of shares shown in the table for NHL plus the shares held by Fundamental.
                Mr. Williams is president and a director of Fundamental and the president
                and a director of 95 Associates. Mr. Williams is a 20% shareholder
                and a
                Vice President of BHM. Accordingly, Mr.  Williams may be deemed to
                share voting and dispositive power as an indirect beneficial owner
                of the
                shares held by NHL, Fundamental and
                BHM.




(g)  
      Per Schedule 13F, as filed with the Unites States Securities and Exchange
      Commission as of December 2005.





(h)  
      Per Schedule 13F, as filed with the United States Securities and Exchange
      Commission as of December 2005





(i)  
      Per Schedule 13G, as filed with the United States Securities and Exchange
      Commission as of April 6, 2006.





(j)  
      Per Schedule 13G, as filed with the United States Securities and Exchange
      Commission as of January 31, 2006.





(k)  
      Comprised of shares held by Nordic Alpha plc., as investment manager of the
      Company.


**B.
      Related party transactions**





BHM/NMS/BHES/PROTRANS




The
      shipowning activities of the Company are managed by B+H Management Ltd. (“BHM”)
      under a Management Services Agreement (the “Management Agreement") dated June
      27, 1988 and amended on October 10, 1995, subject to the oversight and direction
      of the Company's Board of Directors.





The
      shipowning activities of the Company entail three separate functions, all under
      the overall control and responsibility of BHM: (1) the shipowning function,
      which is that of an investment manager and includes the purchase and sale of
      vessels and other shipping interests; (2) the marketing and operations function
      which involves the deployment and operation of the vessels; and (3) the vessel
      technical management function, which encompasses the day-to-day physical
      maintenance, operation and crewing of the vessels.





BHM
      employs Navinvest Marine Services (USA) Inc. ("NMS"), a Connecticut corporation,
      under an agency agreement, to assist with the performance of certain of its
      financial reporting and administrative duties under the Management
      Agreement.





The
      Management Agreement may be terminated by the Company in the following
      circumstances: (i) certain events involving the bankruptcy or insolvency of
      BHM;
      (ii) an act of fraud, embezzlement or other serious criminal activity by Michael
      S. Hudner, Chief Executive Officer, President, Chairman of the Board and
      significant shareholder of the Company, with respect to the Company; (iii)
      gross
      negligence or willful misconduct by BHM; or (iv) a change in control of
      BHM.





Mr.
      Hudner is President of BHM. Mr. Hudner is the sole shareholder of NMS. BHM
      is
      technical manager of the Company’s wholly-owned vessels under technical
      management agreements. BHM employs B&H Equimar Singapore (PTE) Ltd.,
      (“BHES”), to assist with certain duties under the technical management
      agreements. BHES is a wholly-owned subsidiary of BHM.





Currently,
      the Company pays BHM a monthly rate of $6,034 per vessel for general,
      administrative and accounting services, which may be adjusted annually for
      any
      increases in the Consumer Price Index. During the years ended December 31,
      2005,
      2004 and 2003, the Company paid BHM fees of approximately $797,000, $460,000
      and
      $860,000, respectively for these services. The total fees vary due to the change
      in the number of fee months resulting from changes in the number of vessels
      owned during each period.





The
      Company also pays BHM a monthly rate of $12,388 per MR product tanker and
      $15,000 per Panamax product tanker or OBO for technical management services,
      which may be adjusted annually for any increases in the Consumer Price Index.
      Vessel technical managers coordinate all technical aspects of day to day vessel
      operations including physical maintenance, provisioning and crewing of the
      vessels. During the years ended December 31, 2005, 2004 and 2003, the Company
      paid BHM fees of approximately $2,040,000, $1,274,000 and $1,673,000,
      respectively for these services. The total fees increased in 2005 due to the
      acquisition of 5 new vessels, all of which are charged at the higher rates
      noted
      above.





The
      Company engages
      BHM to provide commercial management services at a monthly rate of $9,825 per
      vessel, which may be adjusted annually for any increases in the Consumer Price
      Index. BHM obtains support services from Protrans (Singapore) Pte. Ltd., which
      is owned by BHM. Commercial managers provide marketing and operations services.
      During the years ended December 31, 2005, 2004 and 2003, the
      Company paid
      BHM
      fees of approximately $1,238,000, $993,000 and $1,327,000, respectively for
      these services. The total fees increased in 2005 due to the increase in the
      number of fee months resulting from the increase in the number of vessels
      owned.





The
      Company engaged Centennial Maritime Services Corp. (“Centennial”), a
      company
      affiliated with the Company through common ownership, to
      provide manning services at a monthly rate of $1,995 per vessel and agency
      services at variable rates, based on the number of crew members placed on board.
      During the years ended December 31, 2005, 2004 and 2003, the Company paid
      Centennial manning fees of approximately $370,000, $215,000 and $329,000,
      respectively.





BHM
      received brokerage commissions of $85,000 in connection with the sale of the
      M/T
      COMMUTER in August 2005. BHM received brokerage commissions of $194,000 in
      connection with the purchase of the OBO SACHUEST in April 2004. The Company
      also
      paid BHM standard industry chartering commissions of $333,000 in 2005 in respect
      of certain time charters in effect during those periods. Clearwater Chartering
      Corporation, a company affiliated through common ownership, was paid $1,194,000
      in 2005, $980,000 in 2004 and $1,390,000 in 2003 for standard industry
      chartering commissions.




During
        2005, 2004 and 2003, the Company paid fees of $60,000, $205,000 and $240,000
        to
        J.V. Equities, Inc. for consulting services rendered. J.V. Equities is
        controlled by John LeFrere, a director of the Company.  In December, 2004,
        in a restructuring of the Company’s consulting arrangement, J.V. Equities,
        terminated its existing consulting arrangement providing for payments of
        $240,000 per year, surrendered an option to purchase 307,000 shares of Company
        common stock exercisable at $1.00 per share, and received a fee of $644,000
        as
        consideration for canceling the options, which was recorded as a charge to
        paid
        in capital in the Company’s Consolidated Balance Sheets at December 31,
        2004.  J. V. Equities will receive additional payments aggregating
        $1,396,000, consisting of $5,000 per month payable in 2005, and $41,750 per
        month from January 2006 through August 2008.





During
      2005, 2004 and 2003, the Company paid fees of $49,334, $27,000 and $58,000,
      respectively, to Dean Investments for consulting services rendered. Dean
      Investments is controlled by R. Anthony Dalzell, the Chief Financial Officer,
      Vice President and a director of the Company.





During
      1998, the Company’s Board of Directors approved an agreement with BHM whereby up
      to 110,022 shares of common stock of the Company will be issued to BHM for
      distribution to individual members of management, contingent upon certain
      performance criteria. The Company will issue the shares of common stock to
      BHM
      at such time as the specific requirements of the agreement are met. During
      2005,
      an additional 8,065 shares, bringing the total to 48,391 shares, have been
      issued from treasury stock being held for this purpose. Compensation cost of
      $102,000, $89,000 and $35,000 based on the market price of the shares at
      the date of issue was included as management fees to related parties in the
      Consolidated Statement of Operations as of December 31, 2005, 2004 and 2003
      respectively.





Effective
      December 31, 2000, the Company granted 600,000 stock options, with a value
      of
      $78,000 to BHM as payment for services in connection with the acquisition of
      the
      Notes. The exercise price is the fair market value at the date of grant and
      the
      options are exercisable over a ten-year period.





Information
      regarding these stock options is as follows:





Shares
              
              Option
                  PriceOutstanding
                  at January 1, 2005
              
              293,000
              
              $
                  1.00Granted
              
              
              -
              
              
              -Exercised
              
              
              61,540
              
              
              1.00Outstanding
                  at December 31, 2005
              
              
              231,460
              
              
              $
                  1.00





As
      a
      result of BHM's possible future management of other shipowning companies and
      BHM's possible future involvement for its own account in other shipping
      ventures, BHM may be subject to conflicts of interest in connection with its
      management of the Company. To avoid any potential conflict of interest, the
      management agreement between BHM and the Company provides that BHM must provide
      the Company with full disclosure of any disposition of handysize bulk carriers
      by BHM or any of its affiliates on behalf of persons other than the Company.





For
      the
      policy period ending February 20, 2006, the Company placed 100% of its Hull
      and Machinery (“H&M”) insurance in excess of claims of $125,000 each
      incident with NAL up to a maximum of an average of $64,750 each incident
      on  one  vessel, up to  an average of $42,500 each
      incident on six  vessels and up to an average of $61,250 each incident on
      one vessel. In addition, the Company placed  (a) 75% of its
      H&M insurance in excess of between $125,000
      and  $220,000 each incident  and (b) 100% of its Loss
      of Hire insurance in excess of 14 or 21 days deductible with NAL,
      which risks NAL fully reinsured with third party carriers.





For
      the
      policy period ending February 20, 2005, the Company placed 100% of its H&M
      insurance in excess of claims of $125,000 each incident with NAL up to a maximum
      of an average of $76,250 each incident on two vessels, up to an average of
      $47,500 each incident on seven vessels and up to an average of $55,000 each
      incident on one vessel. In addition, the Company placed 70% of its H&M
      insurance in excess of between $125,000 and $175,000 each incident with NAL,
      which risk NAL fully reinsured.





For
      the
      policy period ending February 20, 2004, the Company placed 35% of its H&M
      insurance in excess of claims of $125,000 each incident with NAL up to a maximum
      of $125,000 each incident on three vessels and up to a maximum of $50,000 each
      incident on four vessels. In addition, the Company placed 55% of its H&M
      insurance in excess of $125,000 each incident with NAL, which risk NAL fully
      reinsured. Further it placed 100% of its Increased Value insurance with NAL,
      which risk NAL also fully reinsured.





For
      the
      periods ending December 31, 2005, 2004 and 2003, vessel operating expenses
      on
      the Consolidated Statements of Operations include approximately $780,000,
      $900,000 and $1,033,000, respectively, of insurance premiums paid to NAL (of
      which $637,000, $684,000 and $851,000, respectively, was ceded to reinsurers)
      and approximately $123,000, $133,000 and $189,000, respectively, of brokerage
      commissions paid to NAL. The Company had accounts payable to NAL at December
      31,
      2005 of $340,000 and at December 31, 2004 of $339,000. NAL paid consulting
      fees
      of $174,000 during each of the three years ending December 31, 2005 to R.
      Anthony Dalzell and a company controlled by Mr. Dalzell.





The
      Company believes that the terms of all transactions between the Company and
      the
      existing officers, directors, shareholders and any of their affiliates described
      above are no less favorable to the Company than terms that could have been
      obtained from third parties.





**C.**
            **Interests
                of experts and counsel**





Not
      applicable


**Item
      8. FINANCIAL INFORMATION**





**A.**
            **Consolidated
                statements and other financial
                information**





See
      Item
      18.





**A.7.
      Legal proceedings**





There
      are
      no material pending legal proceedings to which the Company or any of its
      subsidiaries is a party or of which any of its or their property is the subject,
      other than ordinary routine litigation incidental to the Company's
      business.





**A.8.
      Policy on dividend distributions**





The
      Company has a policy of investment for future growth and does not anticipate
      paying cash dividends on the common stock in the foreseeable future. The payment
      of cash dividends on shares of common stock will be within the discretion of
      the
      Company’s Board of Directors and will depend upon the earnings of the Company,
      the Company’s capital requirements and other financial factors which are
      considered relevant by the Company’s Board of Directors. Both the Cliaship and
      the OBO Holdings Ltd. loan facilities restrict the payment of
      dividends.





**B.
      Significant changes**





Not
      applicable




**Item
      9. THE OFFER AND THE LISTING**





**A.
      Offer and listing details**





The
      following table sets forth, for the last six months, the high and low sales
      price, for the two most recent fiscal years, the quarterly high and low sales
      prices and for the prior three fiscal years, the annual high and low sales
      price
      for a share of Common Stock on the American Stock Ex-change:




**Sales
                  price**
              **High******
              **Low**1stQuarter
              24.40
              9.502ndQuarter
              22.85
              17.703rdQuarter
              21.80
              16.004thQuarter
              20.80
              17.00July
              21.45
              16.00August
              20.12
              17.70September
              21.80
              19.40October
              20.80
              19.15November
              20.45
              17.00December
              19.40
              18.00**2004**1stQuarter
              18.30
              9.902ndQuarter
              22.30
              8.103rdQuarter
              27.43
              7.604thQuarter
              27.15
              12.50**Annual**2003
              16.65
              6.502002
              8.20
              4.902001
              6.25
              0.402000
              2.25
              0.251999
              4.00
              1.00







As
      of
      December 31, 2005, there were 222 record holders of Common Stock, 179 of whom,
      holding approximately 81% of the outstanding shares of Common Stock, had
      registered addresses in the United States.





**B.**
            **Plan
                of distribution**





Not
      applicable





**C.  
      Markets**





The
      Company's Common Stock has been publicly held and listed for trading on the
      American Stock Exchange since the completion of the Company's public offering
      in
      August 1988. The symbol for the Company's Common Stock on the American Stock
      Exchange is "BHO." The Common Stock is also listed for trading on the VPS system
      in Norway and is currently in the process of applying for listing with the
      Oslo
      Bors.





**Item
      10. ADDITIONAL INFORMATION**





**A.**
            **Share
                capital**





Not
      applicable





**B.**
            **Memorandum
                and articles of
                association**





The
      Articles of Incorporation of the Company as amended July 25, 1988, were filed
      as
      Ex-hibit 3.1 to the Company's Registra-tion State-ment on Form S-1, Registration
      No. 33-22811 (“the Registration Statement”). The Amendment adopted October 11,
      1995 to the Articles of Incorporation of the Company, was filed as Exhibit
      1.1(i) to the Company’s Annual Report on Form 20-F for the fiscal year ended
      December 31, 1995. The Amendment adopted October 21, 1998 to the Articles of
      Incorporation, was filed as Exhibit 1.2(ii) to the Company’s Annual Report on
      Form 20-F for the fiscal year ended December 31, 1998.





The
      By-Laws of the Company, were filed as Exhibit 3.2 to the Registration Statement.
      The Amendment adopted October 11, 1995 to the By-Laws of the Company, was filed
      as Exhibit 1.2(i) to the Company’s Annual Report on Form 20-F for the fiscal
      year ended December 31, 1995. The Amendment adopted October 21, 1998 to the
      By-Laws of the Company, was filed as Exhibit 1.2(iii) to the Company’s Annual
      Report on Form 20-F for the fiscal year ended December 31, 1998.





**C.**
            **Material
                contracts**





Material
      contracts are listed as exhibits and described elsewhere in the
      text.





**D.  
      Exchange controls**





Currently,
      there are no governmental laws, decrees or regulations in Liberia, the country
      in which the Company is incorporated, which restrict the export or import of
      capital (including foreign exchange controls), or which affect the remittance
      of
      dividends or other payments to nonresident holders of the securities of Liberian
      corporations. Also, there are no limitations currently imposed by Liberian
      law
      or by the Company's Articles of Incorporation and By-Laws on the right of
      nonresident or foreign owners to hold or vote the Company's Common
      Stock.





**E.  
      Taxation**





United
      States shareholders of the Company are not subject to any taxes under existing
      laws and regulations of Liberia. There is currently no reciprocal tax treaty
      between Liberia and the United States regarding income tax withholding on
      dividends.




**H.  
      Documents on Display**




We
      are
      subject to the informational requirements of the Securities Exchange Act of
      1934, as amended. In accordance with these requirements we file reports and
      other information with the SEC. These materials, including this annual report
      and the accompanying exhibits, may be inspected and copied at the public
      reference facilities maintained by the Commission at 450 Fifth Street, N.W.,
      Room 1024, Washington D.C. 20459. You may obtain information on the operation
      of
      the public reference room by calling 1 (800) SEC-0330, and you may obtain copies
      at prescribed rates from the Public Reference Section of the Commission at
      its
      principal office in Washington, D.C. 20549. The SEC maintains a website
      ( http://www.sec.gov )
      that
      contains reports, proxy and information statements and other information that
      we
      and other registrant’s have filed electronically with the SEC. In addition,
      documents referred to in this annual report may be inspected at our offices
      located at 3rd
      Floor, Par La Ville Place, 14 Par La Ville Road, Hamilton HM 08,
      Bermuda.





**Item
      11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
      RISK**





The
      carrying amount reported in the Consolidated Balance Sheets for cash and cash
      equivalents, trade accounts receivable, accounts payable and accrued liabilities
      approximates their fair value due to the short-term maturities. The carrying
      amount reported in the Consolidated Balance Sheets for long-term debt
      approximates its fair value due to variable interest rates, which approximate
      market rates.





*Credit
      Risk* .
      The
      Company’s financial instruments that are exposed to concentrations of credit
      risk consist primarily of cash equivalents and trade receivables. The Company
      maintains its cash accounts with various major financial institutions in the
      United States, the United Kingdom and Norway. The Company performs periodic
      evaluations of the relative credit standing of these financial institutions
      and
      limits the amount of credit exposure with any one institution.





Credit
      risk with respect to trade accounts receivable is limited due to the long
      standing relationships with significant customers and their relative financial
      stability. The Company performs ongoing credit evaluations of its customers’
financial condition and maintains allowances for potential credit losses. At
      December 31, 2005, the Company’s largest accounts receivable balance represented
      81% of total accounts receivable. At December 31, 2004, the Company’s three
      largest accounts receivable balances represented 82% of total accounts
      receivable. The allowance for doubtful accounts was $229,000 at December 31,
      2005 and $137,000 at December 31, 2004.




In
      2005,
      revenues of $23.9 million from TTMI Sarl represented 32.0% of total revenues,
      revenues of $13.5 million from FR8 Singapore Pte. Ltd. represented 18.1% of
      total revenues and revenues of $9.8 million Swissmarine Services SA represented
      13.1% of total revenues. During 2004, revenues of $8.2 million from Lexington
      Shipping Corp., $7.2 million from Bunge Global Markets and $5.8 million from
      Swissmarine Services represented 15.9%, 13.9% and 11.2%, respectively of total
      revenues. Revenues in 2003 included charter hire revenues of $10.4 million
      from
      Bunge Global Markets, $6.8 million from Shell International and $6.6 million
      from Lexington Shipping representing 18.9%, 12.3% and 11.9% of total revenues,
      respectively.





*Interest
      Rate Fluctuation.* The
      Company’s debt contains interest rates that fluctuate with LIBOR. Increasing
      interest rates could adversely impact future earnings. The
      Company does not expect this rate to fluctuate dramatically, however slight
      increases can be expected. The Company does not expect rate changes to have
      a
      material adverse effect on the liquidity and capital resources due to the
      mitigation of such risk resulting from interest rate swaps.





*Foreign
      Exchange Rate Risk.* The
      Company generate all of its revenues in U.S. dollars but the Company incurs
      a
      portion of its expenses in currencies other than U.S. dollars. For accounting
      purposes, expenses incurred in foreign currencies are translated into U.S.
      dollars at exchange rates prevailing at the date of transaction. Resulting
      exchange gains and/or losses on settlement or translation are included in the
      accompanying Consolidated Statements of Operations.





*Inflation.* Although
      inflation has had a moderate impact on its trading fleet’s operating and voyage
      expenses in recent years, management does not consider inflation to be a
      significant risk to operating or voyage costs in the current economic
      environment. However, in the event that inflation becomes a significant factor
      in the global economy, inflationary pressures would result in increased
      operating, voyage and financing costs.





*Asset/Liability
      Risk Management* **




The
      Company continuously measures and quantifies interest rate risk and foreign
      exchange risk, in each case taking into account the effect of hedging activity.
      The Company uses derivatives as part of its asset/liability management program
      in order to reduce Interest rate exposure arising from changes in interest
      rates. The Company does not use derivative financial instruments for the purpose
      of generating earnings from changes in market conditions. Before entering into
      a
      derivative transaction, the Company determines that there is a high correlation
      between the change in value of, or the cash flows associated with, the hedged
      asset or liability and the value of, or the cash flows associated with, the
      derivative instrument





**Item
      12.****DESCRIPTION
      OF SECURITIES OTHER THAN EQUITY SECURITIES**





Not
      Applicable




**PART
      II**




**Item
      13.****DEFAULTS,
      DIVIDEND ARREARAGES AND DELINQUENCIES**





Not
      Applicable





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





Not
                Applicable





**Item
      15.****CONTROLS
      AND PROCEDURES**





A.
            As
                of the end of the period covered by this annual report, an evaluation
                of
                the effectiveness of the design and operation of our disclosure controls
                and procedures was carried out under the supervision and with the
                participation of the Company’s Chief Executive Officer and Chief Financial
                Officer. Based on that evaluation, the Company’s management has concluded
                that the Company’s disclosure controls and procedures are effective to
                ensure that material information relating to the Company and its
                consolidated subsidiaries is made known to them, particularly during
                the
                period when our periodic reports are being prepared.





B.
            Subsequent
                to the date of management’s evaluation, there were no significant changes
                in the Company’s internal controls or in other factors that could
                significantly affect the internal controls, including any corrective
                actions with regard to significant deficiencies and material
                weaknesses.







**Item
      16A. AUDIT COMMITTEE FINANCIAL EXPERT**




The
      Company’s Board of Directors has determined that Charles Brock who is the
      Chairman of the Audit Committee, is duly qualified as a Financial
      Expert.





**Item
      16B.****CODE
      OF ETHICS**




The
      Company has adopted a Code of Ethics that applies to all officers, directors
      and
      employees (collectively, the “Covered Persons”). The Company expects each of the
      Covered Persons to act in accordance with the highest standards of personal
      and
      professional integrity in all aspects of their activities, to comply with all
      applicable laws, rules and regulations, to deter wrongdoing, and to abide by
      the
      Code of Ethics.





Any
      change to or waiver of the Code of Ethics for Covered Persons must be approved
      by the Board and disclosed promptly to the Company’s shareholders.





The
      Company undertakes to provide a copy of the Code of Ethics, free of charge,
      upon
      written request to the Secretary at the following address: B+H Ocean Carriers,
      Ltd, 3 rd Floor,
      Par La Ville Place, 14 Par La Ville Road, Hamilton HM 08, Bermuda, Attention:
      Deborah Paterson.





**Item
      16C. PRINCIPAL ACCOUNTING FEES AND
      SERVICES**





Fees,
      including reimbursements for expenses, for professional services rendered by
      Ernst & Young LLP for the audit of the Company’s financial statements for
      the years ended December 31, 2005 was $86,000. The fees for
      PricewaterhouseCoopers, LLP for the audit of the Company’s annual financial
      statements for the years ended December 31, 2004 and 2003 were $112,500 and
      $115,000, respectively. Neither Ernst & Young LLP or PricewaterhouseCoopers,
      LLP provided other services to the Company.




**Item
      17. FINANCIAL
      STATEMENTS**




The
      Company has elected to furnish the financial statements and related information
      specified in Item 18




Item
      18. FINANCIAL
      STATEMENTS




The following Consolidated Financial Statements of the Company and its
      subsidiaries appear at the end of this Annual Report:


Page
                  No.Consolidated
                  Financial Statements:Reports
                  of Independent Registered Public Accounting Firm
              F-2Consolidated
                  Balance Sheets at December 31, 2005 and 2004
              F-4Consolidated
                  Statements of Operations for the Years EndedDecember
                  31, 2005, 2004 and 2003
              F-5Consolidated
                  Statements of Changes in Stockholders’ Equityfor
                  the Years Ended December 31, 2005, 2004 and 2003
              F-6Consolidated
                  Statements of Cash Flows for the Years EndedDecember
                  31, 2005, 2004 and 2003
              F-7Notes
                  to Consolidated Financial Statements
              F-8


**Item
      19. EXHIBITS.**





I.
            Revolving
                Reducing and Term Loan Agreement dated October 18, 2005 between Nordea
                Bank Norge ASA and OBO Holdings Ltd. Providing for a $138,100,000
                Secured
                Term Loan Facility.







The
      following documents have been filed as Exhibits to the Annual Report on Form
      20-F of B+H Ocean Carriers Ltd., incorporated herein by reference:





Floating
      Rate Loan Agreement dated February 23, 2005 between Nordea Bank Norge ASA and
      OBO Holdings Ltd. Providing for a $102,000,000 Secured Term Loan
      Facility.

















**SIGNATURES**


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




B+H
      OCEAN
      CARRIERS LTD.


(Registrant)


Date: May
      23, 2006


By: /s/Michael S. Hudner


Chairman
      of the Board, President, Chief
      Executive Officer and Class
      A
      Director











**CERTIFICATION
      PURSUANT TO SECTION 302** **(RULES
      13A - 14(A) AND 15D - 14(A))** **OF THE SARBANES-OXLEY ACT OF 2002**





I,
      Michael S. Hudner, certify that:





1.
      I have
      reviewed this annual report on Form 20-F of B+H Ocean Carriers Ltd.;





2.
      Based
      on my knowledge, this annual report does not contain any untrue statement of
      a
      material fact or to omit to state a material fact necessary to make the
      statements made, in light of the circumstances under which such statements
      were
      made, not misleading with respect to the period covered by this annual report;





3.
      Based
      on my knowledge, the financial statements, and other financial information
      included in this annual report, fairly present in all material respects the
      financial condition, results of operations and cash flows of the registrant
      as
      of, and for, the periods presented in this annual report.





4.
      The
      Company’s other certifying officers and I are responsible for establishing and
      maintaining disclosure controls and procedures (as defined in Exchange Act
      Rules
      13a-15(e) and 15d-15(e)) and internal control over financial reporting (as
      defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and
      have:





(a)
            Designed
                such disclosure controls and procedures, or caused such disclosure
                controls and procedures to be designed under our supervision, to
                ensure
                that material information relating to the registrant, including its
                consolidated subsidiaries, is made known to us by others within those
                entities, particularly during the period in which this annual report
                is
                being prepared;


(b)
            Designed
                such internal control over financial reporting, or caused such internal
                control over financial reporting to be designed under our supervision,
                to
                provide reasonable assurance regarding the reliability of financial
                reporting and the preparation of financial statements for external
                purposes in accordance with generally accepted accounting
                principles;


(c)
            Evaluated
                the effectiveness of the registrant’s disclosure controls and procedures
                and presented in this annual report our conclusions about the
                effectiveness of the disclosure controls and procedures as of the
                end of
                the period covered by this annual report based on such evaluation;
                and


(d)
            Disclosed
                in this report any change in the Company’s internal control over financial
                reporting that occurred during the period covered by this annual
                report
                that has materially affected, or is reasonably likely to materially
                affect
                the Company’s internal control over financial reporting; and





5.
      The
      Company’s other certifying officers and I have disclosed, based on our most
      recent evaluation of internal control over financial reporting, to the Company’s
      auditors and the audit committee of the Company’s board of
      directors:





(a)
            All
                significant deficiencies and material weaknesses in the design or
                operation of internal control over reporting which are reasonably
                likely
                to adversely affect the Company’s ability to record, process, summarize
                and report financial information;
                and


(b)
            Any
                fraud, whether or not material, that involves management or other
                employees who have a significant role in the registrant’s internal
                controls over financial reporting.







Date: May
      23 ,
      2006


By: /s/ Michael S. Hudner


Michael
      S. Hudner


Chairman
      of the Board, President and Chief
      Executive Officer and Class A Director





**CERTIFICATION
      PURSUANT TO SECTION 302** **(RULES
      13A - 14(A) AND 15D - 14(A))** **OF THE SARBANES-OXLEY ACT OF 2002**





I,
      R.
      Anthony Dalzell, certify that:





1.
      I have
      reviewed this annual report on Form 20-F of B+H Ocean Carriers Ltd.;





2.
      Based
      on my knowledge, this annual report does not contain any untrue statement of
      a
      material fact or to omit to state a material fact necessary to make the
      statements made, in light of the circumstances under which such statements
      were
      made, not misleading with respect to the period covered by this annual report;





3.
      Based
      on my knowledge, the financial statements, and other financial information
      included in this annual report, fairly present in all material respects the
      financial condition, results of operations and cash flows of the registrant
      as
      of, and for, the periods presented in this annual report.





4.
      The
      Company’s other certifying officers and I are responsible for establishing and
      maintaining disclosure controls and procedures (as defined in Exchange Act
      Rules
      13a-15(e) and 15d-15(e)) and internal control over financial reporting (as
      defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and
      have:





(a)
            Designed
                such disclosure controls and procedures, or caused such disclosure
                controls and procedures to be designed under our supervision, to
                ensure
                that material information relating to the registrant, including its
                consolidated subsidiaries, is made known to us by others within those
                entities, particularly during the period in which this annual report
                is
                being prepared;


(b)
            Designed
                such internal control over financial reporting, or caused such internal
                control over financial reporting to be designed under our supervision,
                to
                provide reasonable assurance regarding the reliability of financial
                reporting and the preparation of financial statements for external
                purposes in accordance with generally accepted accounting
                principles;


(c)
            Evaluated
                the effectiveness of the registrant’s disclosure controls and procedures
                and presented in this annual report our conclusions about the
                effectiveness of the disclosure controls and procedures as of the
                end of
                the period covered by this annual report based on such evaluation;
                and


(d)
            Disclosed
                in this report any change in the Company’s internal control over financial
                reporting that occurred during the period covered by this annual
                report
                that has materially affected, or is reasonably likely to materially
                affect
                the Company’s internal control over financial reporting; and





5.
      The
      Company’s other certifying officers and I have disclosed, based on our most
      recent evaluation of internal control over financial reporting, to the Company’s
      auditors and the audit committee of the Company’s board of
      directors:





(a)
            All
                significant deficiencies and material weaknesses in the design or
                operation of internal control over reporting which are reasonably
                likely
                to adversely affect the Company’s ability to record, process, summarize
                and report financial information;
                and


(b)
            Any
                fraud, whether or not material, that involves management or other
                employees who have a significant role in the registrant’s internal
                controls over financial reporting.








Date: May
      23 ,
      2006


By: /s/R.
      Anthony Dalzell


R.
      Anthony Dalzell


Treasurer
      and Chief Financial Officer A nd
      Class
      B Director








**CERTIFICATION
      PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE
      SARBANES-OXLEY ACT OF 2002**





In
      connection with the Annual Report of B+H Ocean Carriers Ltd.; (the “Company”) on
      Form 20-F for the year ending December 31, 2005 as filed with the Securities
      and
      Exchange Commission on the date hereof (the “Report”), I, Michael S. Hudner,
      Chairman of the Board, President and Chief Executive Officer and Class A
      Director of the Company, certify, pursuant to 18 U.S.C. 1350, as adopted
      pursuant to 906 of the Sarbanes-Oxley Act of 2002, that:





(1)The
      Report fully complies with the requirements of Section 13 (a) or 15(d), as
      applicable, of the Securities Exchange Act of 1934, as amended; and




(2)
            The
                information contained in the Report fairly presents, in all material
                respects, the financial condition and results of operations of the
                Company.
















Date: May
      23 , 2006


By:
      /s/ Michael S. Hudner


Michael
      S. Hudner


Chairman
      of the Board, President and Chief
      Executive Officer and Class A Director








**CERTIFICATION
      PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE
      SARBANES-OXLEY ACT OF 2002** **-
      continued --------------------------**







In
      connection with the Annual Report of B+H Ocean Carriers Ltd.; (the “Company”) on
      Form 20-F for the year ending December 31, 2003 as filed with the Securities
      and
      Exchange Commission on the date hereof (the “Report”), I, R. Anthony Dalzell,
      Treasurer and Chief Financial Officer and Class B Director of the Company,
      certify, pursuant to 18 U.S.C. 1350, as adopted pursuant to 906 of the
      Sarbanes-Oxley Act of 2002, that:





(1)
      The
      Report fully complies with the requirements of Section 13 (a) or 15(d), as
      applicable, of the Securities Exchange Act of 1934, as amended; and




(3)
            The
                information contained in the Report fairly presents, in all material
                respects, the financial condition and results of operations of the
                Company.
















Date : May
      23 , 2006


By :
      /s/R. Anthony Dalzell


R.
      Anthony Dalzell


Treasurer
      and Chief Financial Officer And
      Class
      B Director















**Item
        18. FINANCIAL STATEMENTS.**
 
 
 
 
 **B+H
        Ocean** **Carriers Ltd.**
 **Index
        to Consolidated Financial Statements**
 
 
 Reports
                  of Independent Registered Public Accounting Firm
              F-2Consolidated
                  Balance Sheets as of December 31, 2005 and 2004
              F-4Consolidated
                  Statements of Operations for the three years ended December 31,
                  2005
              F-5Consolidated
                  Statements of Changes in Shareholders’ Equity for the three years ended
                  December 31, 2005.
              F-6Consolidated
                  Statements of Cash Flows for the three years ended December 31,
                  2005.
              F-7Notes
                  to Consolidated Financial Statements
              F-8
 
 
 
 
  F-1
   
 **Report
        of Independent Registered Public Accounting Firm**
 
 
 
 To
        the
        Board of Directors and Shareholders of
 B+H
        Ocean
        Carriers Ltd.
 
 In
        our
        opinion, the accompanying consolidated balance sheets and the related
        consolidated statements of operations, of changes in shareholders’ equity and of
        cash flows present fairly, in all material respects, the financial position
        of
        B+H Ocean Carriers Ltd. and its subsidiaries (the “Company”) at December 31,
        2004 and 2003, and the results of their operations and their cash flows for
        each
        of the three years in the period ended December 31, 2004 in conformity with
        accounting principles generally accepted in the United States of America.
        These
        financial statements are the responsibility of the Company's management;
        our
        responsibility is to express an opinion on these financial statements based
        on
        our audits. We conducted our audits of these statements in accordance with
        the
        standards of the Public Company Accounting Oversight Board (United States
        of America). Those standards require that we plan and perform the audit to
        obtain reasonable assurance about whether the financial statements are free
        of
        material misstatement. An audit includes examining, on a test basis, evidence
        supporting the amounts and disclosures in the financial statements, assessing
        the accounting principles used and significant estimates made by management,
        and
        evaluating the overall financial statement presentation. We believe that
        our
        audits provide a reasonable basis for our opinion.
 
 
 
 
 PricewaterhouseCoopers
        LLP
 Boston,
        MA
 April
        6,
        2005
  F-2
  **Report
        of Independent Registered Public Accounting Firm**
 
 
 
 To
        the
        Board of Directors and Shareholders of
 B+H
        Ocean
        Carriers Ltd.
 
 We
          have
          audited the accompanying consolidated balance sheet of B+H Ocean Carriers
          Ltd.
          as of December 31, 2005 and the related consolidated statements of operations,
          changes in shareholders’ equity and cash flows for the year then ended. These
          financial statements are the responsibility of the Company’s management. Our
          responsibility is to express an opinion on these financial statements based
          on
          our audit.
 
 We
          conducted our audit in accordance with the standards of the Public Company
          Accounting Oversight Board (United States). Those standards require that
          we plan
          and perform the audit to obtain reasonable assurance about whether the
          financial
          statements are free of material misstatement. We were not engaged to perform
          an
          audit of the Company’s internal control over financial reporting. Our audit
          included consideration of internal control over financial reporting as
          a basis
          for designing audit procedures that are appropriate in the circumstances,
          but
          not for the purpose of expressing an opinion on the effectiveness of the
          Company’s internal control over financial reporting. Accordingly, we express no
          such opinion. An audit also includes examining, on a test basis, evidence
          supporting the amounts and disclosures in the financial statements, assessing
          the accounting principles used and significant estimates made by management,
          and
          evaluating the overall financial statement presentation. We believe that
          our
          audit provides a reasonable basis for our opinion.
 
 In
          our
          opinion, the financial statements referred to above present fairly, in
          all
          material respects, the consolidated financial position of B+H Ocean Carriers
          Ltd. at December 31, 2005 and the consolidated results of its operations
          and its cash flows for the year then ended, in conformity with U.S.
          generally accepted accounting principles.
 
 Ernst
        & Young LLP
 Providence,
        RI
 April
        12,
        2006
 
 
  F-3
   **B+H
        Ocean Carriers Ltd.**
 **Consolidated
        Balance Sheets**
 **December
        31, 2005 and 2004**
  ASSETS
                  
                  **2005**
                  
                  **2004**CURRENT
                      ASSETS:Cash
                      and cash equivalents
                  
                  $
                  60,827,651
                  
                  $
                  12,063,022Marketable
                      securities
                  
                  
                  567,566
                  
                  
                  198,270Trade
                      accounts receivable, less allowance for doubtful accounts
                    of
                      $229,000 and $137,000 in 2005 and 2004, respectively
                  
                  
                  2,258,572
                  
                  
                  5,545,504Inventories
                  
                  
                  855,086
                  
                  
                  770,381Prepaid
                      expenses and other current assets
                  
                  
                  1,210,915
                  
                  
                  766,827**Total
                      current assets**
                  
                  
                  65,719,790
                  
                  
                  19,344,004Vessels,
                      at cost:Vessels
                  
                  
                  249,067,385
                  
                  
                  94,705,496Less
                      - Accumulated depreciation
                  
                  
                  (34,900,653
                  )
                  
                  (31,608,510
                  )214,166,732
                  
                  
                  63,096,986Other
                      assets
                  
                  
                  1,536,764
                  
                  
                  461,313**Total
                      assets**
                  
                  $
                  281,423,286
                  
                  $
                  82,902,303LIABILITIES
                      AND SHAREHOLDERS' EQUITYCURRENT
                      LIABILITIES:Accounts
                      payable
                  
                  $
                  4,025,919
                  
                  $
                  5,331,028Accrued
                      liabilities
                  
                  
                  1,747,909
                  
                  
                  2,298,824Accrued
                      interest
                  
                  
                  454,620
                  
                  
                  267,842Current
                      portion of mortgage payable
                  
                  
                  32,602,000
                  
                  
                  10,800,000Deferred
                      income
                  
                  
                  5,415,416
                  
                  
                  1,299,414Other
                      liabilities
                  
                  
                  59,836
                  
                  
                  76,086**Total
                      current liabilities**
                  
                  
                  44,305,700
                  
                  
                  20,073,194Mortgage
                      payable
                  
                  
                  117,063,472
                  
                  
                  18,465,472Commitments
                      and contingencies (Note 7)
                  
                  
                  -
                  
                  
                  -SHAREHOLDERS'
                      EQUITY:Preferred
                      stock, $0.01 par value; 20,000,000 shares authorized;no
                      shares issued and outstanding
                  
                  
                  -
                  
                  
                  -Common
                      stock, $0.01 par value; 30,000,000 shares authorized;7,557,268
                      shares issued, 7,081,920 and 3,839,242 sharesoutstanding
                      as of December 31, 2005 and 2004, respectively
                  
                  
                  75,572
                  
                  
                  43,140Paid-in
                      capital
                  
                  
                  94,042,310
                  
                  
                  37,538,669Retained
                      earnings
                  
                  
                  29,905,939
                  
                  
                  9,807,294Treasury
                      stock
                  
                  
                  (3,969,707
                  )
                  
                  (3,025,466
                  )**Total
                      shareholders' equity**
                  
                  
                  120,054,114
                  
                  
                  44,363,637**Total
                      liabilities and shareholders' equity**
                  
                  $
                  281,423,286
                  
                  $
                  82,902,303
 
 
  The
              accompanying notes are an integral part of these consolidated financial
              statements.
  F-4
   **B+H
        Ocean Carriers Ltd.**
 **Consolidated
        Statements of Operations**
 **For
        the years ended December 31, 2005, 2004 and 2003**
 
 **2005**
                
                **2004**
                
                **2003**Revenues:Voyage,
                    time and bareboat charter revenues
                
                $
                71,388,561
                
                $
                51,362,910
                
                $
                55,156,875Other
                    revenue
                
                
                514,491
                
                
                -
                
                
                -Total
                    revenues
                
                
                71,903,052
                
                
                51,362,910
                
                
                55,156,875Operating
                    expenses:Voyage
                    expenses
                
                
                6,033,470
                
                
                9,663,653
                
                
                19,373,318Vessel
                    operating expenses, drydocking and survey costs
                
                
                26,369,749
                
                
                19,742,875
                
                
                25,089,187Depreciation
                    and amortization
                
                
                11,917,359
                
                
                7,763,640
                
                
                9,024,806(Gain)
                    loss on sale of vessels
                
                
                (828,115
                )
                
                4,682,965
                
                
                16,187,604General
                    and administrative:Management
                    fees to related party
                
                
                898,490
                
                
                548,653
                
                
                891,570Consulting
                    and professional fees, and other expenses
                
                
                2,899,123
                
                
                3,206,483
                
                
                3,006,315Total
                    operating expenses
                
                
                47,290,076
                
                
                45,608,269
                
                
                73,572,800Income
                    (loss) from vessel operations
                
                
                24,612,976
                
                
                5,754,641
                
                
                (18,415,925
                )Other
                    income (expense):Gain
                    on retirement of 9-7/8%
                    First Preferred Ship Mortgage Notes
                
                
                -
                
                
                -
                
                
                6,803,965Interest
                    expense
                
                
                (5,604,637
                )
                
                (1,361,753
                )
                
                (1,506,023
                )Interest
                    income
                
                
                1,221,010
                
                
                32,857
                
                
                1,832Loss
                    to minority interest in subsidiary
                
                
                -
                
                
                -
                
                
                23,866Other
                    expense
                
                
                (130,704
                )
                
                (1,730
                )
                
                -Total
                    other (expenses) income, net
                
                
                (4,514,331
                )
                
                (1,330,626
                )
                
                5,323,640Net
                    income (loss)
                
                $
                20,098,645
                
                $
                4,424,015
                
                $
                (13,092,285
                )Basic
                    earnings (loss) per common share
                
                $
                3.44
                
                $
                1.15
                
                $
                (3.41
                )Diluted
                    earnings (loss) per common share
                
                $
                3.30
                
                $
                1.00
                
                $
                (3.41
                )Weighted
                    average number of common shares outstanding:Basic
                
                
                5,844,301
                
                
                3,839,242
                
                
                3,835,269Diluted
                
                
                6,092,522
                
                
                4,404,757
                
                
                3,835,269
 
 
  The
              accompanying notes are an integral part of these consolidated financial
              statements.
  F-5
   **B+H
        Ocean Carriers Ltd.**
 **Consolidated
        Statements of Changes in Shareholders' Equity**
 
 
 **Common**
                
                
                
                **Treasury**
                
                
                
                **Paid-in**
                
                
                
                **Retained****Stock**
                
                
                
                **Stock**
                
                
                
                **Capital**
                
                
                
                **Earnings**
                
                
                
                **Total**Balance,
                    December 31, 2002
                
                $
                43,140
                
                
                
                
                $
                (3,008,951
                )
                
                
                
                $
                38,041,981
                
                
                
                
                $
                18,475,564
                
                
                
                
                $
                53,551,734Net
                    loss
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                (13,092,285
                )
                
                
                
                
                (13,092,285
                )Contribution
                    from minority shareholder
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                93,990
                
                
                
                
                
                
                
                
                
                
                
                93,990Treasury
                    shares issued (1)
                
                
                
                
                
                
                
                
                28,815
                
                
                
                
                
                6,372
                
                
                
                
                
                
                
                
                
                
                
                35,187Treasury
                    shares acquired (2)
                
                
                
                
                
                
                
                
                (93,722
                )
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                (93,722
                )Balance,
                    December 31, 2003
                
                
                43,140
                
                
                
                
                
                (3,073,858
                )
                
                
                
                
                38,142,343
                
                
                
                
                
                5,383,279
                
                
                
                
                
                40,494,904Net
                    income
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                4,424,015
                
                
                
                
                
                4,424,015307,000
                    Options cancelled (3)
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                (644,000
                )
                
                
                
                
                
                
                
                
                
                
                (644,000
                )8,065
                    Treasury shares issued (1)
                
                
                
                
                
                
                
                
                48,392
                
                
                
                
                
                40,326
                
                
                
                
                
                
                
                
                
                
                
                88,718Balance,
                    December 31, 2004
                
                
                43,140
                
                
                
                
                
                (3,025,466
                )
                
                
                
                
                37,538,669
                
                
                
                
                
                9,807,294
                
                
                
                
                
                44,363,637Net
                    income
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                20,098,645
                
                
                
                
                
                20,098,645Common
                    stock issued (4)
                
                
                32,432
                
                
                
                
                
                
                
                
                
                
                
                56,643,497
                
                
                
                
                
                
                
                
                
                
                
                56,675,9298,065
                    Treasury shares issued (1)
                
                
                
                
                
                
                
                
                48,240
                
                
                
                
                
                53,382
                
                
                
                
                
                
                
                
                
                
                
                101,62261,540
                    Treasury shares issued (2)
                
                
                
                
                
                
                
                
                254,778
                
                
                
                
                
                (193,238
                )
                
                
                
                
                
                
                
                
                
                
                61,54070,170
                    Treasury shares acquired (5)
                
                
                
                
                
                
                
                
                (1,247,259
                )
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                (1,247,259
                )Balance,
                    December 31, 2005
                
                $
                75,572
                
                
                
                
                $
                (3,969,707
                )
                
                
                
                $
                94,042,310
                
                
                
                
                $
                29,905,939
                
                
                
                
                $
                120,054,114
 
 
 Shares
        outstanding at December 31, 2005, 2004 and 2003 totaled 7,081,920, 3,839,242
        and
        3,831,177, respectively.
 
 (1)
              Treasury
                  shares issued per 1998 Agreement, see NOTE
                  5.
 (2)
              Pursuant
                  to a program to repurchase up to 600,000 shares for reissuance
                  to B+H
                  Management Ltd. (“BHM”) when options are exercised. See NOTE
                  5.
 (3)
              Options
                  cancelled, see NOTE 5.
 (4)
              Private
                  placement of shares, see NOTE 3.
 (5)
              Pursuant
                  to a program to repurchase up to 10% of the Company’s shares, which was
                  authorized by the Board of Directors in October
                  2005.
 
 
 Treasury
        shares outstanding are as follows:
 
 Treasury
                    shares outstanding at December 31, 2002
                474,503Treasury
                    shares acquired
                13,100Treasury
                    shares issued
                (4,755)Treasury
                    shares outstanding at December 31, 2003
                482,848Treasury
                    shares acquired
                -Treasury
                    shares issued
                (8,065)Trasury
                    shares outstanding at December 31, 2004
                474,783Treasury
                    shares acquired
                70,170Treasury
                    shares issued
                (69,605)Trasury
                    shares outstanding at December 31, 2005
                475,348
 
 
  The
              accompanying notes are an integral part of these consolidated financial
              statements.
  F-6
   **B+H
        Ocean Carriers Ltd.**
 **Consolidated
        Statements of Cash Flows**
 **For
        the years ended December 31, 2005, 2004 and 2003**
 
 
 **2005**
                
                **2004**
                
                **2003**CASH
                    FLOWS FROM OPERATING ACTIVITIES:Net
                    income (loss)
                
                $20,098,645
                
                $4,424,015
                
                $(13,092,285)Adjustments
                    to reconcile net income (loss) to net cash provided by operating
                    activities:Vessel
                    depreciation
                
                10,199,748
                
                5,525,640
                
                6,628,806Amortization
                    of deferred charges
                
                
                1,717,611
                
                
                2,238,000
                
                
                2,396,000(Gain)
                    loss on sale of vessels
                
                
                (828,115
                )
                
                4,682,965
                
                
                16,187,604Income
                    to minority interest in subsidiary
                
                
                -
                
                
                -
                
                
                (23,866
                )Provision
                    for bad debts
                
                
                92,000
                
                
                29,394
                
                
                -Loss
                    on fair value of marketable securities
                
                
                130,704
                
                
                1,730
                
                
                -Gain
                    on retirement of 9-7/8% First Preferred Ship Mortgage Notes
                
                
                -
                
                
                -
                
                
                (6,803,965
                )Changes
                    in assets and liabilities:Decrease
                    (increase) in trade accounts receivable
                
                
                3,194,932
                
                
                (3,750,890
                )
                
                2,490,483(Increase)
                    decrease in inventories
                
                
                (84,705
                )
                
                137,566
                
                
                895,674(Increase)
                    decrease in prepaid expenses and other current assets
                
                
                (444,088
                )
                
                126,606
                
                
                (11,089
                )(Decrease)
                    increase in accounts payable
                
                
                (1,305,109
                )
                
                (2,115,851
                )
                
                515,261(Decrease)
                    increase in accrued liabilities
                
                
                (550,915
                )
                
                533,947
                
                
                (296,395
                )Increase
                    (decrease) in accrued interest
                
                
                186,778
                
                
                78,973
                
                
                (1,227,860
                )Increase
                    (decrease) in deferred income
                
                
                4,116,002
                
                
                569,159
                
                
                (58,572
                )Decrease
                    in other liabilities
                
                
                (16,250
                )
                
                (18,356
                )
                
                (602,432
                )Payments
                    for special surveys
                
                
                (2,084,866
                )
                
                -
                
                
                -Total
                    adjustments
                
                
                11,636,727
                
                
                8,038,883
                
                
                20,089,649Net
                    cash provided by operating activities
                
                
                34,422,372
                
                
                12,462,898
                
                
                6,997,364CASH
                    FLOWS FROM INVESTING ACTIVITIES:Purchase
                    and investment in vessels
                
                
                (167,750,000
                )
                
                (20,589,234
                )
                
                -Proceeds
                    from sale of vessels
                
                
                7,918,810
                
                
                9,239,985
                
                
                13,209,375Purchase
                    of marketable securities
                
                
                (500,000
                )
                
                (200,000
                )
                
                -Net
                    cash (used in) provided by investing activities
                
                
                (160,331,190
                )
                
                (11,549,249
                )
                
                13,209,375CASH
                    FLOWS FROM FINANCING ACTIVITIES:Payments
                    for debt financing costs
                
                
                (1,318,385
                )
                
                (359,655
                )
                
                (71,894
                )Contribution
                    from minority shareholder
                
                
                -
                
                
                -
                
                
                93,990Retirement
                    of 9-7/8% First Preferred Ship Mortgage Notes
                
                
                -
                
                
                -
                
                
                (5,075,971
                )Issuance
                    of common stock, net of issuance costs
                
                
                56,675,929Purchase
                    of treasury stock
                
                
                (1,247,259
                )
                
                -
                
                
                (93,722
                )Repurchase
                    of options
                
                
                -
                
                
                (644,000
                )
                
                -Issuance
                    of treasury shares
                
                
                163,162
                
                
                88,718
                
                
                35,187Proceeds
                    from vessel financing
                
                
                145,000,000
                
                
                19,000,000
                
                
                4,995,298Related
                    party loan
                
                
                -
                
                
                (944,686
                )
                
                944,686Payments
                    of mortgage principal
                
                
                (24,600,000
                )
                
                (8,899,828
                )
                
                (25,712,748
                )Net
                    cash provided by (used in) financing activities
                
                
                174,673,447
                
                
                8,240,549
                
                
                (24,885,174
                )Net
                    increase (decrease) in cash and cash equivalents
                
                
                48,764,629
                
                
                9,154,198
                
                
                (4,678,435
                )Cash
                    and cash equivalents, beginning of year
                
                
                12,063,022
                
                
                2,908,824
                
                
                7,587,259Cash
                    and cash equivalents, end of year
                
                $
                60,827,651
                
                $
                12,063,022
                
                $
                2,908,824
 
 Supplemental
        schedule of noncash financing and investing transactions (NOTE 9).
 
  7The
              accompanying notes are an integral part of these consolidated financial
              statements.
 F-7
   
 **NOTE
        1-ORGANIZATION**
 
 B+H
        Ocean
        Carriers Ltd. (the "Company"), a Liberian Corporation, was incorporated in
        April 1988 and was initially capitalized on June 27, 1988. The Company
        is engaged in the business of acquiring, investing in, owning, operating
        and
        selling product tankers and bulk carriers. In August 1988, the Company
        completed a public offering of 4,000,000 shares of its common stock. In May
        2005, the Company made a private offering of 3,243,243 shares of its common
        stock. See NOTE 3.
 
 As
        of
        December 31, 2005, the Company owned and operated six medium range and one
        panamax product tanker and five OBO (Ore/Bulk/Oil) combination carriers.
        As of
        December 31, 2004, the Company owned and operated seven product tankers and
        one
        combination carrier. At December 31, 2003, the Company owned and operated
        nine
        product tankers.
  **NOTE
        2-SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:**
 
 **Basis
        of accounting:**
 
 The
        accompanying Consolidated Financial Statements are prepared on the accrual
        basis
        of accounting in accordance with accounting principles generally accepted
        in the
        United States of America. A summary of significant accounting policies
        follows.
 
 **Principles
        of consolidation:**
 
 The
        accompanying Consolidated Financial Statements include the accounts of the
        Company and its wholly-owned subsidiaries, including Cliaship Holdings Ltd.
        (“Cliaship”), Equimar Shipholdings Ltd. (“Equimar”), OBO Holdings Ltd. (“OBO
        Holdings”) and Product Transport Corporation Ltd. (“Protrans”). All significant
        intercompany transactions and accounts have been eliminated in consolidation.
 
 **Revenue
        recognition, trade accounts receivable and concentration of credit
        risk:**
 
 Revenues
        from voyage and time charters are recognized in proportion to the charter-time
        elapsed during the reporting periods. Charter revenue received in advance
        is
        recorded as deferred income until charter services are rendered.
 
 Under
        a
        voyage charter, the Company agrees to provide a vessel for the transport
        of
        cargo between specific ports in return for the payment of an agreed freight
        per
        ton of cargo or an agreed lump sum amount. Voyage costs, such as canal and
        port
        charges and bunker (fuel) expenses, are the Company’s responsibility. Voyage
        revenues and voyage expenses include estimates for voyage charters in progress
        which are recognized on a percentage-of-completion basis by prorating the
        estimated final voyage profit using the ratio of voyage days completed through
        year end to the total voyage days.
 
 Under
        a
        time charter, the Company places a vessel at the disposal of a charterer
        for a
        given period of time in return for the payment of a specified rate per
        deadweight ton (“DWT”) capacity per month or a specified rate of hire per day.
        Voyage costs are the responsibility of the charterer.  Revenue
        from time charters in progress is calculated using the daily charter hire
        rate,
        net of brokerage commissions, multiplied by the number of on-hire days through
        the year-end. Revenue
        recognized under long-term variable rate time charters is equal to the average
        daily rate for the term of the contract.
 
 The
        Company’s financial instruments that are exposed to concentrations of credit
        risk consist primarily of cash equivalents and trade receivables. The Company
        maintains its cash accounts with various high quality financial institutions
        in
        the United States, the United Kingdom and Norway. The Company performs periodic
        evaluations of the relative credit standing of these financial institutions.
        At
        various times throughout the year, the Company may maintain certain US bank
        account balances in excess of Federal Deposit Insurance Corporation limits.
        The
        Company does not believe that significant concentration of credit risk exists
        with respect to these cash equivalents.
 
 Trade
        accounts receivable are recorded at the invoiced amount and do not bear
        interest. The allowance for doubtful accounts is the Company’s best estimate of
        the total losses likely in its existing accounts receivable. The allowance
        is
        based on historical write-off experience and patterns that have developed
        with
        respect to the type of receivable and the analysis of collectibility of current
        amounts. Past due balances that are not specifically reserved for are reviewed
        individually for collectibility. Specific accounts receivable invoices are
        charged off against the allowance when the Company determines that collection
        is
        unlikely. Credit risk with respect to trade accounts receivable is limited
        due
        to the long standing relationships with significant customers and their relative
        financial stability. The Company performs ongoing credit evaluations of its
        customers’ financial condition and maintains allowances for potential credit
        losses when necessary. The Company does not have any off-balance sheet credit
        exposure related to its customers.
 
 At
        December 31, 2005, the Company’s largest single accounts receivable balance
        represented 81% of total accounts receivable. At December 31, 2004, the
        Company’s three largest accounts receivable balances represented 82% of total
        accounts receivable.
 
 In
        2005,
        revenues of $23.9 million from TTMI Sarl represented 32.0% of total revenues,
        revenues of $13.5 million from FR8 Singapore Pte. Ltd. represented 18.1%
        of
        total revenues and revenues of $9.8 million from Swissmarine Services SA
        represented 13.1% of total revenues. During 2004, revenues of $8.2 million
        from
        Lexington Shipping Corp., $7.2 million from Bunge Global Markets and $5.8
        million from Swissmarine Services represented 15.9%, 13.9% and 11.2%,
        respectively of total revenues. Revenues in 2003 included charter hire revenues
        of $10.4 million from Bunge Global Markets, $6.8 million from Shell
        International and $6.6 million from Lexington Shipping representing 18.9%,
        12.3%
        and 11.9% of total revenues, respectively.
 
 **Basic
        and diluted net income per common share:**
 
 Basic
        net
        income per common share is computed by dividing the net income for the year
        by
        the weighted average number of common shares outstanding in accordance with
        Statement of Financial Accounting Standards No. 128 (“SFAS No. 128”), *Earnings
        per Share.* Diluted
        earnings per share (“EPS”) is calculated by dividing net income for the year by
        the weighted average number of common shares, increased by potentially dilutive
        securities. In 2005 and 2004, d iluted
        EPS reflects the net effect on shares outstanding, using the treasury stock
        method, of the stock options granted to BHM in 2000 and the treasury shares
        held
        to satisfy the 1998 agreement discussed in NOTE 5.
 
 In
        2003,
        the net effect on shares outstanding, using the treasury stock method, of
        the
        stock options granted to BHM in 2000 and the treasury shares held to satisfy
        the
        1998 agreement was anti-dilutive. There is therefore no difference between
        basic
        and diluted earnings per share in 2003.
 **2005**
                
                
                **2004**
                
                
                **2003**Weighted
                    average number of shares outstanding - basic
                
                
                5,844,301
                
                
                3,839,242
                
                
                3,835,269Net
                    effect of outstanding stock options
                
                
                232,090
                
                
                541,319
                
                
                521,363Stock
                    compensation shares not issued
                
                
                16,131
                
                
                24,196
                
                
                32,261Weighted
                    average number of shares outstanding - diluted
                
                
                6,092,522
                
                
                4,404,757
                
                
                4,388,893
 
 **Cash
        and cash equivalents:**
 
 Cash
        and
        cash equivalents include cash, certain money market accounts and overnight
        deposits with a maturity of 90 days or less when acquired.
 
 **Marketable
        Securities** :
 Investments
          consist of equity investments and money market accounts that are recorded
          at
          fair value determined on the basis of quoted market price. Such investments
          are
          classified as trading securities in accordance with SFAS No. 115, *Accounting
          For Investments In Debt And Equity Securities* .
          Interest income, unrealized gains and losses and realized gains and losses
          on
          sales of securities, are reflected as part of interest
          income.
 
 **Fair
        value of financial instruments:**
 
 The
        following method and assumptions were used to estimate the fair value of
        financial instruments included in the following categories:
 
 The
        carrying amount reported in the accompanying Consolidated Balance Sheets
        for
        cash and cash equivalents and accounts receivable approximates their fair
        value
        due to the current maturities of such instruments.
 
 The
        carrying amount reported in the accompanying Consolidated Balance Sheets
        for
        short-term debt approximates its fair value due to the current maturity of
        such
        instruments coupled with interest at variable rates that are periodically
        adjusted to reflect changes in overall market rates. The carrying amount
        of the
        Company’s variable rate long-term debt approximates fair value.
 
 **Vessels,
        capital improvements and depreciation:**
 
 Vessels
        are stated at cost, which includes contract price, acquisition costs and
        significant capital expenditures made within nine months of the date of
        purchase. Depreciation is provided using the straight-line method over the
        remaining estimated useful lives of the vessels, based on cost less salvage
        value. The estimated useful lives used are 30 years from the date of
        construction. When vessels are sold, the cost and related accumulated
        depreciation are eliminated from the accounts, and any resulting gain or
        loss is
        reflected in the accompanying Consolidated Statements of
        Operations.
 
 Capital
        improvements to vessels made during special surveys are capitalized when
        incurred and amortized over the 5-year period until the next special survey.
        Capital improvements for classification survey s,
        vessel
        upgrades and related work (referred to as “special surveys”) totaled $2.1
        million for the year ended December
        31, 2005. There were no special surveys in 2004 or 2003.
        Payments for special survey costs are characterized as operating activities
        on
        the Consolidated Statements of Cash Flows. Amortization of special survey
        costs
        is characterized as amortization of deferred charges on the Consolidated
        Statements of Cash Flows. Amortization of special surveys was previously
        included in depreciation and amortization on the Consolidated Statements
        of Cash
        Flows.
 
 **Repairs
        and maintenance:**
 
 Expenditures
        for repairs and maintenance and interim
        drydocking of vessels are charged against income in the year incurred. Repairs
        and maintenance expense approximated $1.8 million, $1.2 million and $1.8
        million
        for the years ended December 31, 2005, 2004 and 2003, respectively. Interim
        drydocking expense was approximately $0.9 million, $1.6 million and $3.6
        million
        for the years ended December 31, 2005, 2004 and 2003 respectively.
 
 **Impairment
        of long-lived assets:**
 
 The
        Company is required to review its long-lived assets for impairment whenever
        events or circumstances indicate that the carrying amount of an asset may
        not be
        recoverable. Upon the occurrence of an indicator of impairment, long-lived
        assets are measured for impairment when the estimate of undiscounted future
        cash
        flows expected to be generated by the asset is less than its carrying amount.
        Measurement of the impairment loss is based on the asset grouping and is
        calculated based upon comparison of the fair value to the carrying value
        of the
        asset grouping.
 
 **Segment
        Reporting:**
 
 The
        Company has determined that it operates in one reportable segment, the
        international transport of dry bulk and liquid cargo.
 
 **Inventories:**
 
 Inventories
        consist of engine and machinery lubricants and bunkers (fuel) required for
        the
        operation and maintenance of each vessel. Inventories are valued at cost,
        using
        the first-in, first-out method. Expenditures on other consumables are charged
        against income when incurred.
 
 **Taxation:**
 
 The
        Company is not subject to corporate income taxes on its profits in Liberia
        because its income is derived from non-Liberian sources. The Company is not
        subject to corporate income tax in other jurisdictions.
  **Derivatives
        and hedging activities:**
 
 The
        Company accounts for derivatives in accordance with the provisions of SFAS
        No.
        133, as amended, “ *Accounting
        for Derivative Instruments and Hedging Activities* ,”
(“SFAS
        No. 133”). The Company uses derivatives to reduce market risks associated with
        its operations, principally changes in interest rates. Derivative instruments
        are recorded as assets or liabilities and are measured at fair value.
        Derivatives that are not hedges are adjusted to fair value through income.
        If
        the derivative is a hedge, depending upon the nature of the hedge, changes
        in
        the fair value of the derivatives are either offset against the fair value
        of
        assets, liabilities or firm commitments through income, or recognized in
        other
        comprehensive income until the hedged item is recognized in income. The
        ineffective portion of a derivative’s change in fair value is immediately
        recognized into income.
 
 **Use
        of estimates:**
 
 The
        preparation of financial statements in conformity with accounting principles
        generally accepted in the United States of America requires management to
        make
        estimates and assumptions that affect the reported amounts of assets and
        liabilities and disclosure of contingent assets and liabilities at the date
        of
        the financial statements and the reported amounts of revenues and expenses
        during the reporting period. Actual results could differ from those estimates
        and assumptions.
 
 **Term
        loan issuance costs:**
 
 Term
        loan
        issuance costs are amortized over the life of the obligation using the
        straight-line method, which approximates the interest method.
 
 **Recent
        accounting pronouncements:**
 
 In
        December 2004, the FASB issued Statement of Financial Accounting Standards
        No.
        123R *Accounting
        for Stock-Based Compensation* (“SFAS
        No. 123R”), that will require compensation costs related to share-based payment
        transactions to be recognized in the financial statements. With limited
        exceptions, the amount of compensation cost will be measured based on the
        grant-date fair value of the equity or liability instruments issued. In
        addition, liability awards will be remeasured each reporting period.
        Compensation cost will be recognized over the period that an employee provides
        service in exchange for the award. SFAS No. 123R replaces SFAS No. 123, *Accounting
        for Stock-Based Compensation*  (“SFAS
        No. 123”), **** and
        supersedes APB 25. This statement is effective for the Company as of January
        1,
        2006. Entities that used the fair-value-based method for either recognizing
        or
        disclosure under SFAS No. 123 will apply this revised Statement using a modified
        version of prospective application. Under
        this transition method, for the portion of outstanding awards for which the
        requisite service has not yet been rendered, compensation cost is recognized
        on
        or after the required effective date based on the grant-date fair value of
        those
        awards calculated under SFAS No. 123 for either recognition or pro forma
        disclosures. The Company does not expect that the impact of adopting SFAS
        No.
        123R will have a material effect on the Company’s Consolidated Financial
        Statements.
  On
        January 17, 2003, the FASB issued FASB Interpretation No. 46R, ("FIN 46R"), *Consolidation
        of Variable Interest Entities* .
        FIN 46R
        clarifies the application of Accounting Research Bulletin No. 51, *Consolidated
        Financial Statements* ,
        to
        certain entities in which equity investors lack the characteristics of a
        controlling financial interest or do not have sufficient equity at risk for
        the
        entity to finance its activities without additional financial support from
        other
        parties. A variable interest entity is required to be consolidated by the
        company that has a majority of the expected losses or profits of the variable
        interest entity. The consolidation provisions of FIN 46R, as revised, were
        effective immediately for interests created after January 31, 2003 and were
        effective on March 31, 2004 for interests created before February 1, 2003.
        FIN
        46R did not have a significant impact on the Company’s Consolidated Financial
        Statements.
  **NOTE
        3- ACQUISITIONS AND OTHER SIGNIFICANT TRANSACTIONS:**
 
 On
        May
        25, 2005, the Company executed a private placement of 3,243,243 shares of
        Common
        Stock of the Company at a price of $18.50 per share, for aggregate gross
        proceeds of approximately $60 million. The newly issued shares will trade
        over
        the counter in Norway. The Company also obtained a listing on the Oslo Stock
        Exchange on April 12, 2006. The proceeds from the private placement have
        been
        and are expected to continue to be used for acquisitions of secondhand shipping
        tonnage, refinancing of debt and working capital.
 
 **Vessel
        acquisitions and related amendment of loan facility:**
 
 On
        February 4, 2005,  the
        Company, through a wholly-owned subsidiary, acquired three 83,000 DWT
        OBO,
        combination tanker/bulk carriers built in 1993 and 1994, for a total of $110.2
        million. Two of the vessels are time chartered for five years at $26,600,
        $24,600, $23,600, $22,600 and $20,600 per day for the first through fifth
        years,
        respectively. The third vessel is time chartered for five years at $26,000,
        $24,000, $23,000, $22,000 and $20,000, respectively, for years one through
        five.
        The Company has a profit sharing arrangement with the charterers which entitles
        the Company to 35% of the charterer’s profits from this vessel for years 2
        through 5. In conjunction with the acquisition, the Company entered into
        a
        floating rate loan facility totaling $102 million. See NOTE 6-MORTGAGE
        PAYABLE.
 
 On
        June
        15, 2005, the Company, through a wholly-owned subsidiary, acquired a 74,800
        DWT
        OBO built in 1992 for $33.25 million. The vessel is time chartered for three
        years at $23,500 per day. On November 8, 2005, the Company completed an
        additional drawdown on its floating rate facility to finance a portion of
        the
        purchase price. See
        NOTE
        6-MORTGAGE PAYABLE.
 
 On
        August
        19, 2005, the Company, through a wholly-owned subsidiary, acquired a 68,500
        DWT
        OBO built in 1991 for $24.3 million. The vessel is time chartered for three
        years at $23,500 per day. On November 8, 2005, the Company completed an
        additional drawdown on its floating rate facility to finance a portion of
        the
        purchase price. See  NOTE
        6-MORTGAGE PAYABLE.
 
 On
        April
        29, 2004, the Company, through a wholly-owned subsidiary, acquired a 98,000
        DWT
        OBO, a combination tanker/bulk carrier built in 1986, for $19.4 million.
        Capital
        improvements made subsequent to acquisition to prepare the vessel for its
        intended use totaled $1.2 million, which were capitalized and included in
        the
        vessel’s carrying amount. The vessel is on timecharter until March 2006, plus or
        minus one month, at $27,000 per day. In conjunction with the acquisition,
        the
        Company refinanced the existing floating rate loan facility and borrowed
        an
        additional $19 million. See NOTE 6-MORTGAGE PAYABLE.
 
 **Issuance
        of 9** **7** **/8%
        First Preferred Ship Mortgage Notes due 2007:**
 
 Effective
        June 25, 1997, Equimar issued 9 7 /8% First
        Preferred Ship Mortgage Notes (the “Notes”) in the aggregate principal amount of
        $125,000,000. The Notes were fully and unconditionally guaranteed by the
        Company, the sole stockholder of Equimar, and by certain subsidiaries of
        Equimar
        (the “Subsidiary Guarantors”). The Notes were secured by first preferred ship
        mortgages on the 10 vessels owned by the Subsidiary Guarantors at December
        31,
        2001 and by certain other property and contract rights. During 2002, 2001,
        2000
        and 1998, the Company repurchased $1,250,000, $1,165,000, $109,355,000 and
        $1,000,000, respectively of the Notes. In
        April
        2003, the Company acquired the remaining $12,230,000 face value of the Notes
        from unaffiliated entities for an aggregate cost of $5,100,000. The difference
        between the cost of the investment in bonds and the corresponding bond liability
        was recorded in consolidation as a gain on the retirement of debt and included
        as gain in the Consolidated Statements of Operations at December 31, 2003.
        The
        Notes issue was subsequently cancelled.
 
 **Vessel
        disposals:**
 
 On
        June
        20, 2005, the Company, through a wholly-owned subsidiary, sold the vessel
        M/T
        COMMUTER for $8.5 million to an unaffiliated party. The excess of the sales
        proceeds over the book value of the vessel of $0.8 million is included in
        the
        Consolidated Statements of Operations for the year ended December 31,
        2005.
 
 On
        May
        25, 2004, the Company, through a wholly-owned subsidiary, sold the vessel
        M/T SKOWHEGAN for $3.8 million to an unaffiliated party. The excess of the
        book
        value of the vessel over the sales proceeds of $4.1 million is included in
        the
        Consolidated Statements of Operations for
        the
        year ended December
        31, 2004.
 
 On
        December 7, 2004, the Company, through a wholly-owned
        subsidiary, sold the vessel
        M/T ACOAXET for $5.7 million to an unaffiliated party. The excess of the
        book
        value of the vessel over the sales proceeds of $0.6 million is included in
        the
        Consolidated Statements of Operations for
        the
        year ended December
        31, 2004,. A
        portion of the net proceeds of the sale were used to repay a portion of the
        mortgage as required under the amended facility dated April 29, 2004. See
        NOTE
        6.
 
 In
        2003,
        the Company, through wholly-owned subsidiaries, sold the vessels M/T CANSO
        for
        $2.7 million, M/T CHEBUCTO for $2.7 million, M/T CASCO for $2.6. million
        and M/T
        CATAUMET for $2.6 million. The aggregate excess of the book value of the
        vessels
        over the sales proceeds of $16.5 million is included in the Consolidated
        Statements of Operations for
        the
        year ended December
        31, 2003. T he
        net
        proceeds of the sale were used to repay a portion of the mortgage as required
        under the amendment dated April 16, 2003. See NOTE 6.
 
 On
        November 6, 2003, the Company, through a 50% owned consolidated subsidiary,
        sold
        the vessel M/V ALLIANCE TRADER for $2.9 million. The excess of the selling
        price
        over the book value of $0.3 million is included in the Consolidated Statements
        of Operations for the year ended December 31, 2003. A portion of the proceeds
        was used to repay the balance of the floating
        rate loan facility dated November 26, 1996.
 
 **NOTE
        4-OTHER ASSETS:**
 
 Other
        assets is comprised of the following:
 **2005**
                
                **2004**Debt
                    financing and related fees
                
                
                1,387,152
                
                
                311,701Other
                    assets
                
                
                149,612
                
                
                149,612Total
                    other assets
                
                $
                1,536,764
                
                $
                461,313
 
 Mortgage
        commitment and related fees totaling $1.3 million incurred in connection
        with
        the OBO Holdings loan facility dated February 23, 2005 and amended on October
        18, 2005, are being amortized over the 5-year term of the loan. Mortgage
        commitment and related fees of $0.4 million, incurred in connection with
        the
        Cliaship loan facility dated April 29, 2004, are being amortized over the
        5-year
        term of the loan. The remaining unamortized mortgage commitment fees of $283,000
        incurred in connection with the Cliaship loan facility dated August 8, 2002
        were
        written off in conjunction with the refinancing discussed in NOTE 6.
 
 **NOTE
        5-RELATED PARTY TRANSACTIONS:**
 
 The
        shipowning activities of the Company are managed by an affiliate, B+H Management
        Ltd. (“BHM”) under a Management Services Agreement (the “Management Agreement")
        dated June 27, 1988 and amended on October 10, 1995, subject to the oversight
        and direction of the Company's Board of Directors.
 
 The
        shipowning activities of the Company entail three separate functions, all
        under
        the overall control and responsibility of BHM: (1) the shipowning function,
        which is that of an investment manager and includes the purchase and sale
        of
        vessels and other shipping interests; (2) the marketing and operations function
        which involves the deployment and operation of the vessels; and (3) the vessel
        technical management function, which encompasses the day-to-day physical
        maintenance, operation and crewing of the vessels.
 
 BHM
        employs Navinvest Marine Services (USA) Inc. ("NMS"), a Connecticut corporation,
        under an agency agreement, to assist with the performance of certain of its
        financial reporting and administrative duties under the Management
        Agreement.
 
 The
        Management Agreement may be terminated by the Company in the following
        circumstances: (i) certain events involving the bankruptcy or insolvency
        of BHM;
        (ii) an act of fraud, embezzlement or other serious criminal activity by
        Michael
        S. Hudner, Chief Executive Officer, President, Chairman of the Board and
        significant shareholder of the Company, with respect to the Company; (iii)
        gross
        negligence or willful misconduct by BHM; or (iv) a change in control of
        BHM.
 
 Mr. Hudner is President of BHM and the sole shareholder of NMS. BHM is technical
        manager of the Company’s wholly-owned vessels under technical management
        agreements. BHM employs B&H Equimar Singapore (PTE) Ltd., (“BHES”), to
        assist with certain duties under the technical management agreements. BHES
        is a
        wholly-owned subsidiary of BHM.
 
 Currently, the Company pays BHM a monthly rate of $6,034 per vessel for general,
        administrative and accounting services, which may be adjusted annually for
        any
        increases in the Consumer Price Index. During the years ended December 31,
        2005,
        2004 and 2003, the Company paid BHM fees of approximately $797,000, $460,000
        and
        $860,000, respectively for these services. The total fees vary due to the
        change
        in the number of fee months resulting from changes in the number of vessels
        owned during each period.
 The Company also pays BHM a monthly rate of $12,388 per MR product tanker
          and
          $15,000 per Panamax product tanker or OBO for technical management services,
          which may be adjusted annually for any increases in the Consumer Price
          Index.
          Vessel technical managers coordinate all technical aspects of day to day
          vessel
          operations including physical maintenance, provisioning and crewing of
          the
          vessels. During the years ended December 31, 2005, 2004 and 2003, the Company
          paid BHM fees of approximately $2,040,000, $1,274,000 and $1,673,000,
          respectively for these services. Technical management fees are included
          in
          vessel operating expenses in the Consolidated Statements of Operations.
          The
          total fees increased in 2005 due to the acquisition of 5 new vessels, all
          of
          which are charged at the higher rates noted above.
 
 The Company engages
          BHM to provide commercial management services at a monthly rate of $9,825
          per
          vessel, which may be adjusted annually for any increases in the Consumer
          Price
          Index. BHM obtains support services from Protrans (Singapore) Pte. Ltd.,
          which
          is owned by BHM. Commercial managers provide marketing and operations services.
          During the years ended December 31, 2005, 2004 and 2003, the
          Company paid
          BHM
          fees of approximately $1,238,000, $993,000 and $1,327,000, respectively
          for
          these services. Commercial management fees are included in voyage expenses
          in
          the Consolidated Statements of Operations. The total fees increased in
          2005 due
          to the increase in the number of fee months resulting from the increase
          in the
          number of vessels owned.
 
 The
          Company engaged Centennial Maritime Services Corp. (“Centennial”), a
          company
          affiliated with the Company through common ownership, to
          provide manning services at a monthly rate of $1,995 per vessel and agency
          services at variable rates, based on the number of crew members placed
          on board.
          During the years ended December 31, 2005, 2004 and 2003, the Company paid
          Centennial manning fees of approximately $370,000, $215,000 and $329,000,
          respectively. Manning fees are included in vessel operating expenses in
          the
          Consolidated Statements of Operations.
 
 BHM
          received brokerage commissions of $85,000 in connection with the sale of
          the M/T
          COMMUTER in August 2005. BHM received brokerage commissions of $194,000
          in
          connection with the purchase of the OBO SACHUEST in April 2004. The Company
          also
          paid BHM standard industry chartering commissions of $333,000 in 2005 in
          respect
          of certain time charters in effect during those periods. Clearwater Chartering
          Corporation, a company affiliated through common ownership, was paid $1,194,000
          in 2005, $980,000 in 2004 and $1,390,000 in 2003 for standard industry
          chartering commissions. Brokerage commissions are included in voyage expenses
          in
          the Consolidated Statements of Operations.
 
 During
          2005, 2004 and 2003, the Company paid fees of $60,000, $205,000 and $240,000
          to
          J.V. Equities, Inc. for consulting services rendered. J.V. Equities is
          controlled by John LeFrere, a director of the Company.  In December, 2004,
          in a restructuring of the Company’s consulting arrangement, J.V. Equities
          terminated a consulting arrangement providing for payments of $240,000
          per year,
          surrendered an option to purchase 307,000 shares of Company common stock
          exercisable at $1.00 per share, and received a fee of $644,000 as consideration
          for canceling the options, which was recorded as a charge to paid in capital
          in
          the Company’s Consolidated Balance Sheets at December 31, 2004.  J. V.
          Equities will receive additional payments aggregating $1,396,000, consisting
          of
          $5,000 per month paid in 2005, and $41,750 per month from January 2006
          through August 2008.
 During
        2005, 2004 and 2003, the Company paid fees of $49,334, $27,000 and $58,000,
        respectively, to Dean Investments for consulting services rendered. Dean
        Investments is controlled by R. Anthony Dalzell, the Chief Financial Officer,
        Vice President and a director of the Company.
 
 During
        1998, the Company’s Board of Directors approved an agreement with BHM whereby up
        to 110,022 shares of common stock of the Company will be issued to BHM for
        distribution to individual members of management, contingent upon certain
        performance criteria. The Company will issue the shares of common stock to
        BHM
        at such time as the specific requirements of the agreement are met. During
        2005,
        an additional 8,065 shares, bringing the total to 48,391 shares, have been
        issued from treasury stock where
        these shares were held for this purpose. Compensation cost of $102,000, $89,000
        and $35,000 based on the market price of the shares at the date of issue
        was included as management fees to related parties in the Consolidated Statement
        of Operations as of December 31, 2005, 2004 and 2003 respectively.
 
 Effective
        December 31, 2000, the Company granted 600,000 stock options, with a value
        of
        $78,000 to BHM as payment for services in connection with the acquisition
        of the
        Notes. The exercise price is the fair market value at the date of grant and
        the
        options are exercisable over a ten-year period.
 
 Information
        regarding these stock options is as follows:
 Shares
                
                Option
                    PriceOutstanding
                    at January 1, 2005
                
                293,000
                
                $
                    1.00Granted
                
                
                -
                
                
                -Exercised
                
                
                61,540
                
                
                -Canceled
                
                
                -Outstanding
                    at December 31, 2005
                
                
                231,460
                
                $
                1.00
  As
          a
          result of BHM's possible future management of other shipowning companies
          and
          BHM's possible future involvement for its own account in other shipping
          ventures, BHM may be subject to conflicts of interest in connection with
          its
          management of the Company. To avoid any potential conflict of interest,
          the
          management agreement between BHM and the Company provides that BHM must
          provide
          the Company with full disclosure of any disposition of handysize bulk carriers
          by BHM or any of its affiliates on behalf of persons other than the Company.
 
 For
        the
        policy period ending February 20, 2006, the Company placed 100% of
        its  Hull and Machinery (“H&M”) insurance in excess of claims
        of $125,000 each incident with Northampton
        Assurance Ltd. (“NAL”) up to a maximum of an average of $64,750 each
        incident on  one  vessel, up to  an average of $42,500
        each incident on six  vessels and up to an average of $61,250 each incident
        on one vessel. In addition, the Company placed  (a) 75% of its
        H&M insurance in excess of between $125,000
        and  $220,000 each incident  and (b) 100% of its Loss
        of Hire insurance in excess of 14 or 21 days deductible with NAL,
        which risks NAL fully reinsured with third party carriers.
 
 For
        the
        policy period ending February 20, 2005, the Company placed 100% of its H&M
        insurance in excess of claims of $125,000 each incident with NAL up to a
        maximum
        of an average of $76,250 each incident on two vessels, up to an average of
        $47,500 each incident on seven vessels and up to an average of $55,000 each
        incident on one vessel. In addition, the Company placed 70% of its H&M
        insurance in excess of between $125,000 and $175,000 each incident with NAL,
        which risk NAL fully reinsured.
 
 For
        the
        policy period ending February 20, 2004, the Company placed 35% of its H&M
        insurance in excess of claims of $125,000 each incident with NAL up to a
        maximum
        of $125,000 each incident on three vessels and up to a maximum of $50,000
        each
        incident on four vessels. In addition, the Company placed 55% of its H&M
        insurance in excess of $125,000 each incident with NAL, which risk NAL fully
        reinsured. Further it placed 100% of its Increased Value insurance with NAL,
        which risk NAL also fully reinsured.
 
 For
        the
        periods ending December 31, 2005, 2004 and 2003, vessel operating expenses
        on
        the Consolidated Statements of Operations include approximately $780,000,
        $900,000 and $1,033,000, respectively, of insurance premiums paid to NAL
        (of
        which $637,000, $684,000 and $851,000, respectively, was ceded to reinsurers)
        and approximately $123,000, $133,000 and $189,000, respectively, of brokerage
        commissions paid to NAL. The Company had accounts payable to NAL at December
        31,
        2005 of $340,000 and at December 31, 2004 of $339,000. NAL paid consulting
        fees
        of $174,000 during each of the three years ending December 31, 2005 to R.
        Anthony Dalzell and a company controlled by Mr. Dalzell.
 
 The
        Company believes that the terms of all transactions between the Company and
        the
        existing officers, directors, shareholders and any of their affiliates described
        above are no less favorable to the Company than terms that could have been
        obtained from third parties.
 
 On
        June
        1, 2003, the Company borrowed $1,050,000 from Providence Tankers Ltd., a
        company
        affiliated with the Company through common ownership. The note can be repaid
        at
        any time prior to the maturity date, April 1, 2005. Interest of 6.5% on the
        note
        is payable at maturity. At December 31, 2005, the the note was paid in
        full.
 
 **NOTE
        6-MORTGAGE PAYABLE:**
 
 On
        February 23, 2005, the Company, through certain wholly-owned subsidiaries,
        entered into a $102,000,000 floating rate loan facility (the “facility”). The agreement was
        entered into for the purpose of acquiring three OBOs.
 
 On
        October 18, 2005 the Company, through certain wholly-owned subsidiaries entered
        into a $138,100,000 Reducing Revolving and Term Loan Facilities Agreement which
        amended the agreement entered into on February 23, 2005. The amendment made
        available an additional $43.0 million for the purpose of acquiring the OBO
        ROGER
        M JONES and the M/T SAGAMORE.
 
 The
        facility is apportioned into two tranches, a Senior and a Junior portion.
        The
        Senior tranche is payable in twenty-one quarterly installments as
        follows:
 
 a.
                  Installment
                  1
              $
              2,900,000b.
                  Installment 2 through 5
              
              4,463,000c.
                  Installment 6 through 13
              
              
              4,775,000d.
                  Installment 14 through 20
              
              
              4,275,000e.
                  Ballon due on September 15, 2010
              
              
              21,100,000f.
                  Balloon due on December 15, 2010
              
              
              10,748,000The
                  junior tranche is payable in sixteen quarterly installments beginning
                  on
                  June 14, 2005 as follows:a.
                  Installment 1 through 4
              $
              
              2,000,000b.
                  Installment 5 through 8
              
              
              1,250,000c.
                  Installment 9 through 12
              
              
              1,000,000d.
                  Installment 13 through 16
              
              
              750,000
 Interest
        on the Senior tranche of the facility is equal to LIBOR plus 1.0%. The Junior
        tranche carries interest of LIBOR plus 2.25%. Expenses associated with the
        loan
        of $1.3 million were capitalized and will be amortized over the 5 year term
        of
        the loan.
 
 The
        facility contains certain restrictive covenants on the Company, which among
        other things, restrict the payment of dividends and restrict leverage,
        investment and capital expenditures without consent of the lender. In addition,
        the agreement requires mandatory prepayment in the event of the total loss
        or
        sale of a vessel. The loan to vessel value clause described below has been
        suspended for three years; however, the Company is required to ensure that
        consolidated EBITDA is always at least 1.25 times consolidated fixed charges.
        The Company is also required to maintain liquid assets, as defined, in an
        amount
        equal to the greater of $5.0 million and 6% of the aggregate indebtedness
        of the
        Company on a consolidated basis. At the end of three years, and in the event
        that the fair market value of the vessels acquired in March 2005 falls below
        110% of the Senior tranche in years 1 through 3, 120% of the Senior tranche
        thereafter and 100% of the total outstanding at any time thereafter, the
        agreement requires mandatory prepayment. At December 31, 2005, the Company
        was
        in compliance with these covenants.
 
 On
        April
        29, 2004, the Company entered into an amended
        and restated $36,000,000 floating rate loan facility (the
        “amended loan facility”) .
        The
        amended loan facility made available an additional $19.0 million for the
        purpose
        of acquiring the OBO SACHUEST.
 
 The
        amended loan facility is apportioned into two tranches with Tranche 1
        attributable to the Existing Vessel fleet and Tranche 2 attributable to the
        OBO
        SACHUEST. Tranche 1 is payable in twelve quarterly installments of $1.2 million
        commencing on July 29, 2004, the twelfth installment being a balloon payment
        in
        an amount necessary to repay the tranche in full. Interest on the facility,
        which was reduced as of August 2005, is equal to LIBOR plus 1.0%. Tranche
        2 is
        payable in twenty quarterly installments. The first eight installments of
        $1.5
        million are followed by eleven installments of $0.6 million and a final
        installment of $0.4 million is due on the maturity date.
 
 Expenses
        associated with the amended loan facility include arrangement fees of $360,000,
        which are capitalized and are being amortized over the five-year period of
        the
        loan.
 
 The amended
        loan facility contains
        certain restrictive covenants on the Company, which among other things, require
        minimum collateral coverage, restrict the payment of dividends and restrict
        leverage, investment and capital expenditures without consent of the lender.
        In
        addition, the agreement requires mandatory prepayment or delivery of additional
        security in the event of the total loss or sale of a vessel and in the event
        that the fair market value of the vessels acquired falls below 140% of the
        Tranche 1 balance outstanding, or the fair market value of the OBO SACHUEST
        falls below 110% of the Tranche 2 balance outstanding. The Company is also
        required to maintain liquid assets, as defined, in an amount equal to the
        greater of (a) $2.0 million and (b) six percent (6%) of the aggregate amount
        of
        indebtedness of the Company on a consolidated basis. At December 31, December
        31, 2005, the Company was in compliance with these covenants.
 
 As
        of
        December 31, 2005, the aggregate maturities, including an estimate of the
        interest payable are as follows:
 **Principal**
                
                **Interest****1**
                
                **Total**2006
                
                $
                32,602,000
                
                $
                7,596,000
                
                $
                40,198,0002007
                
                
                29,415,000
                
                
                5,819,000
                
                $
                35,234,0002008
                
                
                23,500,000
                
                
                4,310,000
                
                $
                27,810,0002009
                
                
                18,100,000
                
                
                3,133,000
                
                $
                21,233,0002010
                
                
                46,048,000
                
                
                1,887,000
                
                $
                47,935,000$
                149,665,000
                
                $
                22,745,000
                
                $
                172,410,000
 1 Interest
        is calculated using the LIBOR rate at December 31, 2005, and the average
        balance
        outstanding for the period.
 
 **NOTE
        7-COMMITMENTS AND CONTINGENCIES:**
 
 As
        discussed in NOTE 5, the Company’s Board of Directors approved an agreement with
        BHM whereby up to 110,022 shares of common stock of the Company will be issued
        to BHM for distribution to individual members of management, contingent upon
        certain performance criteria. The Company will issue the shares of common
        stock
        to BHM at such time as the specific requirements of the agreement are met.
        During 2005, an additional 8,065 shares, bringing the total to 48,391 shares,
        have been issued from treasury stock being held for this purpose.
 
 The
        company has entered into a contract for the conversion of its six single
        hull MR
        Product Tankers to fully double hull, Marpol compliant vessels suitable
        for trading in petroleum products and vegetable oils. Carrying
        out such a conversion will completely eliminate the present regulatory
        phaseout dates applicable to these vessels. The Company will carry out this
        conversion project one vessel at a time, commencing in June 2006, with the
        completion of the sixth vessel in late 2007.
 
 **NOTE 8
        DERIVATIVE FINANCIAL INSTRUMENTS**
 
 All
        derivatives are recognized on the Company’s consolidated balance sheets at their
        fair values. The Company has entered into interest rate swap agreements.
        We use
        these as economic hedges, but we have not designated these as hedges for
        accounting purposes and, as such, changes in the fair value of the swaps
        are
        recorded to the Company’s consolidated statements of operations each reporting
        period.
 
 The
        Company entered into two interest rate swaps during 2005 to manage interest
        costs and the risk associated with increasing LIBOR interest rates. As of
        December 31, 2005 we had interest rate swaps aggregating notional amounts
        of
        $102 million with related loans they are designated to hedge on debt tranches
        within a range of 3.86% to 5.07%, expiring from December 2009 to December
        2010.
        The Company pays fixed-rate interest amounts and receives floating rate interest
        amounts based on three month LIBOR settings (for a term equal to the swaps’
reset periods). As of December 31, 2005, the fair values of such swaps were
        not
        material.
 
 The
        Company is exposed to credit loss in the event of non-perfomrance by the
        counter
        party to the interest rate swap agreements; however, the Company does not
        anticipate non-performance by the counter party.
 
 **NOTE
        9-SUPPLEMENTAL CASH FLOW INFORMATION:**
 
 The
        Company re-issued 8,065 shares from treasury stock in 2005 and 2004 and 4,755
        shares in 2003 in accordance with the agreement discussed in NOTE 5.
        Compensation cost of $102,000, $89,000 and $35,000 based on the market price
        of
        the shares at the date of issue was included as management fees to related
        parties in the accompanying Consolidated Statements of Operations during
        the
        years ended December 31, 2005, 2004, and 2003, respectively. The excess of
        the
        market value of the shares at the date of issuance over the cost of the shares
        to the Company was charged to paid in capital.
  Cash
        paid
        for interest was $5,347,000, $1,110,000, and $2,323,000 during the years
        ended
        December 31, 2005, 2004 and 2003, respectively.
 
 **NOTE
        10—SUBSEQUENT EVENTS:**
 
 In
        January 2006, the Company acquired a 1993-built, 83,000 DWT Combination Carrier
        for $36.4 million. The purchase also reflects the continuation of a five-year
        Time Charter which commenced in October 2005. The purchase was effected through
        an existing tax lease structure with the Company as disponent owner through
        a
        bareboat charter party.
 
 Also
        in
        January 2006, the Company acquired a 50% disponent owner interest in another
        vessel, a 1992-built 75,000 DWT Combination Carrier. This purchase was also
        effected through an existing tax lease structure. The Company acquired its
        50%
        interest in an entity which is the disponent owner through a bareboat charter
        party. The terms of the transaction were based on a vessel value of $30.4
        million and include a three-year charter which commenced in February 2006.
        The
        charter includes a 50% profit sharing arrangement above a guaranteed minimum
        daily rate.
 
 Due
        to
        the existing tax lease structures on these two vessels, no additional mortgage
        financing would be needed to fund the transactions.
 
 On
        April
        12, 2006, the Company obtained a listing on the Oslo Stock Exchange.